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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 30, 1998
REGISTRATION NO. 333-56385
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 2
TO
FORM S-3
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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IRIDIUM WORLD COMMUNICATIONS LTD.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
BERMUDA 4812 52-2025291
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
CLARENDON HOUSE, 2 CHURCH STREET, HAMILTON HM 11, BERMUDA
(441) 295-5950
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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IRIDIUM LLC
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 4800 52-1984342
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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F. THOMAS TUTTLE, ESQ.
IRIDIUM WORLD COMMUNICATIONS LTD., 1575 EYE STREET, N.W., WASHINGTON, D.C. 20005
(202) 408-3800
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with copies to:
DENNIS C. SULLIVAN, ESQ.
SULLIVAN & CROMWELL
1701 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006
(202) 956-7500
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If 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. [ ]
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY
NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION, DATED JULY 30, 1998
[IRIDIUM WORLD COMMUNICATIONS LTD. LOGO]
300,000 WARRANTS TO PURCHASE
1,560,000 SHARES OF CLASS A COMMON STOCK
IRIDIUM WORLD COMMUNICATIONS LTD.
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This Prospectus relates to (i) the resale by the holders thereof of 300,000
warrants (the "Warrants") of Iridium World Communications Ltd. ("IWCL") and (ii)
the issuance of 1,560,000 shares of IWCL Class A Common Stock, $.01 par value
(the "Class A Common Stock"), that may be acquired upon the exercise of the
Warrants (the "Warrant Shares" and, together with the Warrants, the
"Securities"). Each Warrant currently entitles the holder thereof to purchase,
on or after July 16, 1998, 5.2 Warrant Shares at an exercise price of $20.90 per
share, subject to adjustment in certain circumstances. The Warrants will, unless
exercised, automatically expire on July 15, 2005. See "Description of Warrants."
The Class A Common Stock is listed on the Nasdaq National Market (the "NNM")
under the symbol "IRIDF." On July 29, 1998, the closing price of the Class A
Common Stock on the NNM was $44 5/8 per share.
The Warrants are part of the 300,000 units (the "Units") that were
originally sold on July 16, 1997, by IWCL, Iridium LLC ("Iridium") and Iridium
Capital Corporation ("Capital") to the initial purchasers thereof. Each Unit
consisted of $1,000 principal amount of 13% Senior Notes due 2005, Series A (the
"Series A Notes") of Iridium and Capital and one Warrant. On September 8, 1997,
the Units were split into Warrants and Series A Notes and the Warrants and
Series A Notes have traded separately since that date.
The Securities may be offered and sold from time to time by the holders
named in this Prospectus (including any supplement hereto) or by their
transferees, pledgees, donees or their successors (collectively, the "Selling
Holders") pursuant to this Prospectus. The Securities may be sold by the Selling
Holders from time to time directly to purchasers or through agents, underwriters
or dealers. See "Plan of Distribution" and "Selling Holders." If required, the
names of any such agents or underwriters involved in the sale of the Securities
and the applicable agent's commission, dealer's purchase price or underwriter's
discount, if any, will be set forth in an accompanying supplement to this
Prospectus (the "Prospectus Supplement"). The Selling Holders will receive all
the net proceeds from any sale of the Securities and will pay all underwriting
discounts, selling commissions and related fees, if any, applicable to such
sale. Iridium is responsible for payment of all other expenses incident to the
registration of the Warrants and the Warrant Shares pursuant hereto, or
otherwise incident to the performance of or compliance with the Warrant
Agreement (as defined below). See "Governance of IWCL and Relationship with
Iridium -- Management Services Agreement." The Selling Holders and any
broker-dealers, agents or underwriters that participate in the distribution of
the Securities may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any commission
received by them and any profit on the resale of Securities purchased by them
may be deemed to be underwriting commissions or discounts under the Securities
Act. See "Plan of Distribution."
The Warrants have not been registered for sale under the securities laws of
any state or jurisdiction as of the date of this Prospectus. Brokers or dealers
effecting transactions in the Warrants should confirm the registration thereof
under the securities laws of the state in which such transactions occur, or the
existence of any exemption from registration.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN WARRANTS AND CLASS A
COMMON STOCK.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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The date of this Prospectus is , 1998
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AVAILABLE INFORMATION
IWCL and Iridium are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by IWCL and Iridium can be inspected and
copied at public reference facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549; Seven World Trade Center, 13th Floor, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission's Washington, D.C. office at prescribed
rates. The Commission maintains a Web site at http://www.sec.gov that contains
reports, proxy and information statements and other information regarding IWCL
and Iridium. The Class A Common Stock is quoted on the NNM, and copies of the
reports, proxy statements and other information filed by IWCL with the
Commission may also be inspected at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
IWCL and Iridium have filed with the Commission a Registration Statement on
Form S-3 (together with all exhibits and amendments, the "Registration
Statement") under the Securities Act, with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain portions
of which are omitted as permitted by the rules and regulations of the
Commission. For further information with respect to IWCL, Iridium and the
securities offered hereby, reference is made to the Registration Statement,
including the exhibits and schedules. The Registration Statement may be
inspected, without charge, at the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549, and also at the regional offices of the
Commission listed above. Copies of such material may also be obtained from the
Commission upon the payment of prescribed rates.
Statements contained in the Prospectus as to any contracts, agreements or
other documents filed as an exhibit to the Registration Statement are not
necessarily complete, and in each instance reference is hereby made to the copy
of such contract, agreement or other document filed as an exhibit to the
Registration Statement for a full statement of the provisions thereof, and each
such statement in the Prospectus is qualified in all respects by such reference.
INCORPORATION BY REFERENCE
The following documents have been filed by IWCL or Iridium with the
Commission pursuant to the Exchange Act and are hereby incorporated by reference
into this Prospectus:
(a) The Annual Report on Form 10-K of IWCL, Iridium, and certain of
Iridium's direct and indirect subsidiaries for the year ended December 31,
1997 (the "Form 10-K");
(b) The Quarterly Report on Form 10-Q of IWCL, Iridium and certain of
Iridium's direct and indirect subsidiaries for the quarter ended March 31,
1998;
(c) IWCL's Proxy Statement relating to the 1998 Annual Meeting of
Stockholders; and
(d) The description of IWCL's Class A Common Stock contained in IWCL's
Registration Statement on Form 8-A filed under the Exchange Act and any
amendments or reports filed for the purpose of updating such description.
All documents filed by IWCL or Iridium pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Warrants and the Class A Common Stock offered
hereby shall be deemed to be incorporated by reference into this Prospectus and
to be a part hereof from the date of filing such documents (provided, however,
that the information referred to in Item 402(a)(8) of Regulation S-K of the
Commission shall not be deemed specifically incorporated by reference herein).
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
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document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement as modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
IWCL and Iridium will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus has been delivered, upon the
written or oral request of any person, a copy of any and all of the information
that has been incorporated by reference in this Prospectus (other than exhibits
and schedules thereto, unless such exhibits or schedules are specifically
incorporated by reference into the information that this Prospectus
incorporates). Written or oral requests for copies of these documents should be
directed to Iridium World Communications Ltd., 1575 Eye Street, N.W.,
Washington, D.C. 20005, Attention: F. Thomas Tuttle, Assistant Secretary
(Telephone (202) 408-3800).
FORWARD-LOOKING STATEMENTS
Iridium is a development stage company with no operating history, and IWCL
has no business other than business related to its interests in Iridium.
Accordingly, many statements in this Prospectus or incorporated by reference
herein are forward-looking. Examples of such forward-looking statements include,
but are not limited to, the statements concerning Iridium's operations,
prospects, markets, technical capabilities, funding needs, financing sources,
pricing, launch schedule, commercial operations schedule, estimates of the size
of addressable markets for mobile satellite services, estimates of customer
counts, the last year in which Iridium will have negative cash flow and a net
increase in year-end borrowings, and future regulatory approvals, as well as
information concerning expected characteristics of competing systems and
expected actions of third parties, including but not limited to, systems
contractors, equipment suppliers, gateways operators, service providers and
roaming partners. These forward-looking statements are based on a number of
assumptions and are inherently predictive and speculative. One or more of the
assumptions underlying such forward-looking statements is likely to be
incorrect. Therefore, actual results may be materially different from those
expressed or implied by such statements.
Factors which may cause IWCL's or Iridium's results to differ materially
from those expressed or implied by such forward-looking statements include, but
are not limited to, (i) Iridium's absence of current revenues, highly leveraged
capital structure and significant additional funding needs, (ii) delays and cost
overruns related to the construction and deployment of the Iridium
communications system (the "Iridium System"), (iii) technological risks related
to the development and implementation of the various components of the Iridium
System, (iv) customer acceptance of Iridium World Services, (v) satellite
launch, operation and maintenance risks, (vi) risks associated with the need to
obtain operating licenses in the numerous countries where Iridium assumes it
will provide its services, (vii) competition from satellite and terrestrial
communications services and (viii) Iridium's dependence on Motorola and other
members of Iridium for the construction and operation of the Iridium System and
the distribution and marketing of Iridium World Services. These factors, and
other factors that may materially affect Iridium's operations, are described in
greater detail in the Securities and Exchange Commission filings of IWCL and
Iridium. See "Risk Factors" and the risk factors set forth in Exhibit 99 to the
Form 10-K under "Certain Factors Which May Affect Forward-Looking Statements."
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and financial statements and the notes thereto incorporated by
reference in this Prospectus. Unless otherwise specified or the context
otherwise requires, references in this Prospectus to "dollars" and "$" are to
United States dollars.
IWCL AND IRIDIUM
Iridium is developing and commercializing a global mobile wireless
communications system that will enable subscribers to send and receive telephone
calls virtually anywhere in the world -- all with one phone, one phone number
and one customer bill. The Iridium communications system (the "Iridium System")
will combine the convenience of a terrestrial wireless system with the global
reach of Iridium's satellite system. The Iridium System encompasses four
components: the "space segment," which will include the low earth orbit
satellite constellation and the related control facilities; the ground stations
or "gateways," which will link the satellites to terrestrial communications
systems; the Iridium subscriber equipment, which will provide mobile access to
the satellite system and terrestrial wireless systems; and the terrestrial
wireless interprotocol roaming infrastructure, which will facilitate roaming
among the Iridium satellite system and multiple terrestrial wireless systems
that use different wireless protocols. Iridium expects to commence operations in
September 1998. The satellite constellation was designed, assembled and
delivered in orbit by Motorola, Inc. ("Motorola"), a leading international
provider of wireless communications systems, phones and pagers, semiconductors
and other electronic equipment. Motorola also is the principal investor in
Iridium. Other strategic investors include leading wireless communications
service providers from around the world, as well as experienced satellite
manufacturers and experienced launch providers.
IWCL, a Bermuda company, was organized to act as a member of Iridium and to
have no other business. See "Governance of IWCL and Relationship with Iridium."
THE OFFERING
Issuer..................... IWCL acts as the publicly-held member of Iridium,
and IWCL's only assets are its Class 1 Membership
Interests and its rights to acquire Class 1
Membership Interests. IWCL was registered as a
Bermuda company on December 12, 1996 and has its
principal offices at Clarendon House, 2 Church
Street, Hamilton HM11, Bermuda and its telephone
number is (441) 295-5950.
Securities Subject
to the Offering.......... 300,000 Warrants and up to 1,560,000 shares of
Class A Common Stock issuable upon exercise of the
Warrants.
Total Number of Warrants... 300,000 Warrants, which when exercised would
entitle the holders thereof to acquire an aggregate
of up to 1,560,000 Warrant Shares. See "Description
of Warrants."
Warrant Expiration Date.... July 15, 2005.
Exercise................... Each Warrant entitles the holder thereof to
purchase 5.2 shares of Class A Common Stock at an
exercise price of $20.90 per share. The number of
shares of Class A Common Stock for which, and the
price per share at which, a Warrant is exercisable
are subject to adjustment upon the occurrence of
certain events as provided in the Warrant
Agreement. The Warrants will be exercisable on or
after July 16, 1998. See "Description of Warrants."
Listing of Class A
Common Stock............. The Class A Common Stock currently trades on the
NNM under the symbol "IRIDF".
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LLC Interest Warrants...... IWCL paid the net proceeds it received from the
sale of the Warrants to Iridium to purchase a
corresponding number of warrants to purchase Class
1 Membership Interests from Iridium (the "LLC
Interest Warrants") having the same tenor and terms
as the Warrants. The LLC Interest Warrants entitle
IWCL to purchase, in the aggregate, a number of
Class 1 Membership Interests equal to the aggregate
number of Warrant Shares issuable in respect of the
Warrants. The LLC Interest Warrants provide that
upon the exercise of any Warrant and the payment of
the exercise price therefor to IWCL, IWCL will
purchase from Iridium, and Iridium will sell to
IWCL, a number of Class 1 Membership Interests
equal to the number of Warrant Shares issuable upon
such exercise for a purchase price equal to the
exercise price of such Warrant, subject to
adjustment in certain circumstances. See
"Description of Warrants -- General."
Registration Rights........ IWCL is required under the Warrant Agreement to use
its reasonable efforts to cause the Registration
Statement of which this Prospectus forms a part to
remain effective until (i) as to the Warrants, the
earliest of (x) such time as all the Warrants have
been sold thereunder, (y) two years after its
effective date and (z) such time as the Warrants
can be sold by non-affiliates of IWCL without
restriction under the Securities Act, and (ii) as
to the Warrant Shares, the earlier of (a) such time
as all Warrants have been exercised and (b) July
15, 2005. IWCL's registration rights obligations
are subject to certain conditions, including IWCL's
right to suspend the availability of the
Registration Statement for two 45 consecutive-day
periods in any 365-day period. See "Description of
Warrants -- Registration Rights."
Use of Proceeds............ Neither IWCL nor Iridium will receive any proceeds
from the sale of the Securities by the Selling
Holders. All proceeds will be received by the
Selling Holders. Upon exercise of any Warrant, IWCL
will receive $20.90 for each Warrant Share issued.
Pursuant to the terms of the Share Issuance
Agreement, IWCL will apply all of such exercise
price to the exercise of a corresponding number of
LLC Interest Warrants. Accordingly, Iridium will
indirectly receive all net cash paid in respect of
the exercise of Warrants.
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RISK FACTORS
Investors should consider the following risk factors and the risk factors
set forth in Exhibit 99 to the Form 10-K under "Certain Factors which May Affect
Forward-Looking Statements" which report is incorporated herein by reference, in
addition to the other information contained in this Prospectus, in evaluating
whether to purchase the Securities.
DIVIDEND POLICY
IWCL's sole asset is its Class 1 Membership Interests and IWCL has no
independent means of generating revenues. IWCL has never declared or paid any
dividends on its Class A Common Stock or non-voting Class B Common Stock, par
value $.01 per share ("Class B Common Stock") and Iridium has never made
distributions on its Class 1 Membership Interests. Iridium has no current source
of revenue and does not expect significant revenues until sometime after the
commencement of commercial operations, currently scheduled for September 23,
1998. IWCL and Iridium do not anticipate paying any dividends or distributions
until Iridium has demonstrated a positive operating cash flow for a significant
period of time. In addition, debt covenants applicable to subsidiaries of
Iridium impose significant restrictions on the ability of such subsidiaries to
make cash distributions to Iridium (and therefore effectively restrict the
ability of Iridium to make cash distributions). Such covenants or similar
covenants relating to replacement or other indebtedness are likely to be in
effect long after the achievement of positive operating cash flow.
Iridium is treated as a partnership for United States federal income tax
purposes. IWCL is responsible for paying the United States federal income tax on
its distributive share of the income of Iridium that is effectively connected
with the conduct of a trade or business in the United States. IWCL will have no
source of funds to pay United States federal income taxes other than
distributions from Iridium. The Iridium LLC Agreement (as defined below)
requires Iridium's Board of Directors (the "Iridium Board"), to the extent of
legally available funds, to declare and pay distributions sufficient to assure
that each non-U.S. Class 1 Member receives an amount at least equal to the
amount of such member's U.S. federal, state and local income tax liability
resulting from allocations of Iridium's income to such Member. Iridium Operating
LLC, a wholly-owned subsidiary of Iridium, also has agreed under the Management
Services Agreement (as defined below) to advance funds to IWCL, under certain
conditions, to enable IWCL to pay any income tax liability that cannot be
satisfied by distributions to IWCL on the Class 1 Membership Interests. If for
any reason Iridium were unable to comply with these undertakings, IWCL would be
unable to make required tax payments to the United States which would have a
material adverse effect on IWCL.
SHARES ELIGIBLE FOR FUTURE SALE
IWCL has authorized 50,000,000 shares of Class A Common Stock. Assuming the
exercise of all Warrants, the pro forma number of shares of Class A Common Stock
of IWCL outstanding at June 30, 1998 would have been 13,633,344 shares. IWCL has
agreed in the Interest Exchange Agreement (as defined below) that it will
exchange shares of Class A Common Stock for Class 1 Membership Interests at the
rate of one share of Class A Common Stock for each Class 1 Membership Interest
and to register with the Securities and Exchange Commission those shares for
sale. Pursuant to the Interest Exchange Agreement, the holders of Class 1
Membership Interests may not exchange such Interests for shares of Class A
Common Stock prior to 90 days after the first fiscal quarter in which Iridium
achieves positive earnings before interest, taxes, depreciation and
amortization. No exchanges shall take place unless approved by Iridium, pursuant
to the authorization of Directors representing at least 66 2/3% of the Iridium
Board. See "Governance of IWCL and Relationship with Iridium -- Exchange Rights
of Iridium Members." Based upon the number of Class 1 Membership Interests
outstanding as of June 30, 1998, 141,313,149 shares of Class A Common Stock
would be issuable upon such exchange. Including all Class 1 Membership Interests
which will be issuable in the future based upon warrants, options and
convertible securities outstanding on June 30, 1998 and other outstanding
commitments to members of Iridium (excluding the Reserve Capital Call and
warrants issuable to Motorola in respect of additional indebtedness not yet
incurred), an aggregate of 178,394,747 shares of Class A Common Stock would be
issuable upon such exchange. See "-- Dilution Risk."
In addition, IWCL has authorized 2,500,000 shares of Class B Common Stock
for issuance, and has issued 20,625 shares of Class B Common Stock, in the
Global Ownership Program (as defined below). These
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shares of Class B Common Stock will be exchangeable for Class A Common Stock on
a share for share basis after the satisfaction of certain conditions, but in no
event earlier than one year after issuance of, and full payment for, the
relevant shares of Class B Common Stock. Following such exchanges, and if
registered for resale with the Commission, the Class A Common Stock issuable on
exchange will be freely transferable if held by persons who are not affiliates.
Issuances of substantial amounts of Class A Common Stock, or the expectation of
such issuances, could adversely affect the market price of the Class A Common
Stock.
DILUTION RISK
Upon the purchase by IWCL of Class 1 Membership Interests with the proceeds
from the exercise of the Warrants, IWCL will not experience a substantial
dilution in pro forma net tangible book value per Class 1 Membership Interest.
However, IWCL will experience dilution in the future as a result of the purchase
and sale of Class 1 Membership Interests at prices below the price paid by IWCL
for its Class 1 Membership Interests. At June 30, 1998 there were outstanding
warrants to purchase 4,997,281 Class 1 Membership Interests at $.00013 per Class
1 Membership Interest issued in connection with the issuance and sale of
Iridium's 14 1/2% Senior Subordinated Notes due 2006; 42,853 Series A Class 2
Interests that convert into 793,209 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 the guarantee arrangements with Motorola,
Iridium has a continuing obligation to issue warrants to Motorola for so long as
Motorola has guaranteed borrowings of Iridium or any of its subsidiaries under
certain credit facilities. Motorola earned, for its guarantee of Iridium's
obligations under the Guaranteed Bank Facility (as defined), 7,741,346 Class 1
Membership Interests through May 13, 1998. Additionally, the Second Amended and
Restated Agreement Regarding Guarantee, dated May 11, 1998, provides that, when
the Guaranteed Bank Facility and Motorola's guarantee thereunder have been
permanently reduced to $275 million or less, Iridium has the option to
compensate Motorola for such guarantee by continuing to pay warrant compensation
at the existing rate or paying (i) interest on the guaranteed amount at a rate
based on the difference between the interest rate on the Guaranteed Bank
Facility and the interest rate on the Series A Notes and the 14% Series B Notes
of Iridium Operating LLC plus (ii) substantially reduced warrant compensation
based on the number of warrants issued in connection with the offering of the
Series A Notes (the "High Yield Equivalent Compensation"). The maximum number of
warrants Motorola may earn as High Yield Equivalent Compensation until June 30,
1999 (maturity of the Guaranteed Bank Facility) is 75,820 Class 1 Membership
Interests. Motorola also would be entitled to receive warrants to purchase up to
3,750,000 additional Class 1 Membership Interests at a price of $.00013 per
Class 1 Membership Interest in connection with the possible $350 million
increase in the Guaranteed Bank Facility. The Class 1 Membership Interests
acquired upon exercise of any such warrants issued on or prior to the commercial
activation date must be held for five years from the date of issuance of such
Interests. Up to 18,206,550 Class 1 Membership Interests may be issued to
existing investors in Iridium at a purchase price of $13.33 per Class 1
Membership Interest pursuant to the Reserve Capital Call (as defined below). 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.
There will be no immediate dilution to the purchasers of Class A Common
Stock with respect to the Warrant Shares. However, pursuant to the Interest
Exchange Agreement, IWCL has agreed to exchange shares of Class A Common Stock
for Class 1 Membership Interests at an exchange rate of one share of Class A
Common Stock for each Class 1 Membership Interest (subject to anti-dilution
adjustments) commencing 90 days after Iridium has achieved one full quarter of
positive earnings before interest, taxes, depreciation and amortization. No
exchange shall take place unless approved by Iridium pursuant to authorization
of Directors representing at least 66 2/3% of the Iridium Board. Also, IWCL has
authorized the issuance of up to 2,500,000 shares of Class B Common Stock in the
Global Ownership Program. These shares of Class B Common Stock will be
convertible into Class A Common Stock on a share for share basis. In
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addition, IWCL has agreed that in the future it will issue additional shares of
Class A Common Stock at the direction of Iridium and invest the net proceeds
thereof in exchange for one Class 1 Membership Interest for each share of Class
A Common Stock so issued (subject to anti-dilution adjustments).
The anti-dilution provisions of the Warrants do not provide for adjustment
in respect of issuances of Iridium Class 1 Membership Interests. See
"Description of Warrants -- Adjustments."
VOLATILITY
The market price of the Class A Common Stock has been volatile and the
price of the Warrants may also be volatile. In particular, the trading prices
for the common stock of many development stage technology companies like IWCL
and Iridium have experienced extreme price and volume fluctuations, which have
at times been unrelated to operating performance. Factors such as announcements
of fluctuations in Iridium's or its competitors' operating results and market
conditions for growth stocks or technology stocks in general could have a
significant effect on the future price of the Class A Common Stock or the
Warrants. In particular, the price of the Warrants or the Class A Common Stock
could be subject to significant fluctuations in response to variations in
Iridium's prospects and operating results which could be affected by delays in
the design, construction, deployment, customer acceptance and commercial
operation of the Iridium System, delays in obtaining service providers or
regulatory approvals in particular countries, satellite anomalies, general
conditions in the telecommunications industry, regulation, international events,
changes in interest rates and other factors. Such factors may have an adverse
effect on the price of the Warrants or the trading price Class A Common Stock
from time to time.
ABSENCE OF A PUBLIC MARKET FOR THE WARRANTS
There is no public market for the Warrants and IWCL does not intend to
apply for listing of the Warrants on any national securities exchange or for
quotation of the Warrants through the NNM. No assurance can be given as to the
liquidity of the trading market for the Warrants or that an active public market
for the Warrants will develop. If an active public market does not develop, the
market price and liquidity of the Warrants may be adversely affected.
EXPIRATION OF WARRANTS
The Warrants will not become exercisable until July 16, 1998 and will
expire on July 15, 2005. A Warrantholder who fails to exercise his Warrants
prior to expiration will lose all rights to acquire Class A Common Stock. Prior
to the exercise of the Warrants, the Warrantholders will not have any of the
rights of the holders of Class A Common Stock.
In the event a bankruptcy or reorganization proceeding is commenced by or
against IWCL, a bankruptcy court may hold that unexercised Warrants are
executory contracts which may not, even if sufficient funds are available, be
entitled to receive any consideration or may receive an amount less than they
would be entitled to have received if they had been exercised prior to the
commencement of any such bankruptcy or reorganization proceeding.
RISKS ASSOCIATED WITH INCORPORATION UNDER BERMUDA LAW
IWCL is incorporated under the Companies Act 1981 of Bermuda, as amended
from time to time (the "Bermuda Act"). As a result, the rights of holders of
Class A Common Stock will be governed by Bermuda law and IWCL's Memorandum of
Association and Bye-Laws. The rights of shareholders under Bermuda law may
differ from the rights of shareholders of companies incorporated in other
jurisdictions. IWCL has been advised by its Bermuda counsel, Conyers, Dill &
Pearman, that uncertainty exists as to whether courts in Bermuda will enforce
judgments obtained in other jurisdictions (including the United States) against
IWCL or officers or directors of IWCL under the securities laws of those
jurisdictions or 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 such enforcement,
and there are grounds upon which Bermuda courts may not enforce judgments of
United States courts. Certain remedies available under the United States federal
securities laws would not be allowed in Bermuda courts as contrary to that
jurisdiction's public policy.
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RISK OF LOSS OF MANAGEMENT RIGHTS UPON CHANGE IN CONTROL
Under the Iridium LLC Agreement, IWCL has certain special rights including
the right to designate two members of the Iridium Board, one of whom will act as
a Vice Chairman of Iridium, and the right to approve certain significant
transactions involving Iridium. See "Governance of IWCL and Relationship with
Iridium -- Participation in the Governance of Iridium." Iridium 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 becomes the
beneficial owner of more than 30% of IWCL's outstanding common stock or in which
there is a change in a majority of the members of IWCL's Board of Directors (the
"IWCL Board") over a two year period that was not approved by a vote of 66 2/3%
of the members of 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, as well as the
risks described below under "-- Risks Related to the Investment Company Act of
1940," holders of Class A Common Stock may effectively be precluded from
replacing a majority of the IWCL Board, which initially consisted of directors
selected by Iridium.
RISKS RELATED TO THE INVESTMENT COMPANY ACT OF 1940
Substantially all of the assets of IWCL consist of Class 1 Membership
Interests in Iridium. Under the United States Investment Company Act of 1940
(the "1940 Act"), IWCL could be deemed to be an "investment company" if the
Class 1 Membership Interests constitute "investment securities," as defined in
the 1940 Act. If IWCL were required to be registered as an investment company
under the 1940 Act, there would be a substantial risk that IWCL would be in
violation of the 1940 Act because non-United States companies cannot so register
without applying for and receiving an order from the Commission permitting such
registration. Reincorporation under the laws of a state in the United States
would impose substantial tax expense on IWCL. IWCL believes that it is not
required to register as an investment company under the 1940 Act. This decision
is based upon IWCL's belief that the Class 1 Membership Interests it holds are
not "securities" for purposes of the 1940 Act. This belief is based upon IWCL's
role in the affairs of Iridium. There is a risk that a court could reach a
contrary conclusion. This risk would be substantially increased if there were an
IWCL change in control that resulted in IWCL losing its special management
rights. See "Governance of IWCL and Relationship with Iridium."
RISKS RELATED TO PASSIVE FOREIGN INVESTMENT COMPANY RULES
Under the passive foreign investment company ("PFIC") rules, a foreign
corporation will generally be a PFIC in any taxable year of the foreign
corporation in which either at least 75 percent of its gross income is "passive
income" or at least 50 percent of its assets are "passive assets." The following
discussion assumes that IWCL should, under current law, be treated for these
purposes as owning its share of Iridium's gross assets and as earning directly
its share of Iridium gross income; IWCL would be a PFIC if it were not permitted
to be treated in this manner. The determination of whether the shares of Class A
Common Stock constitute shares of a PFIC must be made annually based upon the
composition of the income and assets of IWCL, Iridium and any corporation in
which IWCL or Iridium holds a 25-percent-or-more interest. IWCL does not
currently believe that its Class A Common Stock constitutes shares of a PFIC;
however, there can be no assurance that the shares of Class A Common Stock will
not be considered shares of a PFIC for any taxable year. Furthermore, if IWCL
were determined to be a PFIC in 1998, IWCL would be considered a PFIC for 1997
as well.
Generally, if a share of Class A Common Stock were treated as stock of a
PFIC for any taxable year during which a U.S. Holder held such share, the entire
gain recognized by such U.S. Holder on a sale or other disposition of the share
would be allocated ratably over the U.S. Holder's holding period for the share.
The amounts allocated to the taxable year of the sale or other disposition and
to any year before IWCL became a PFIC would be taxed as ordinary income. The
amount allocated to each other taxable year would be subject to tax at the
highest applicable ordinary income rate in effect for such taxable year, and an
interest charge would be imposed on the amount allocated to such taxable year.
All such tax and interest would be included in the U.S. Holder's U.S. federal
income tax liability for the taxable year in which the sale or other disposition
took
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place. Further, any distribution in respect of shares of Class A Common Stock in
excess of 125 percent of the average of the annual distributions on shares of
Class A Common Stock received by the U.S. Holder during the preceding three
years or the U.S. Holder's holding period, whichever is shorter, would be
subject to taxation as described above. A U.S. Holder could avoid these
consequences by electing to include on a current basis its share of IWCL's
ordinary earnings and net capital gain for each taxable year, or by electing to
mark to market its Class A Common Stock at the end of each taxable year. See
"Tax Considerations."
USE OF PROCEEDS
There will be no proceeds to IWCL or Iridium from the sale of the Warrants
or Warrant Shares by the Selling Holders. Upon the exercise of the Warrants,
IWCL will receive $20.90 for each Warrant Share issued. If all 1,560,000 Warrant
Shares are issued, IWCL would receive aggregate gross proceeds of approximately
$32,604,000. IWCL is required to use all proceeds received from each exercise of
Warrants to purchase from Iridium a number of Class 1 Membership Interests equal
to the number of Warrant Shares issued upon such exercise for a purchase price
equal to the exercise price of such Warrants. Iridium will use the proceeds from
such sales of Class 1 Membership Interests to IWCL for general corporate
purposes. However, there can be no assurance that IWCL or Iridium will receive
any proceeds from the exercise of the Warrants, as there can be no assurance
that any such Warrants will be exercised by the holders thereof.
RECENT DEVELOPMENTS
Iridium is developing and commercializing a global mobile wireless
communications system that will enable subscribers to send and receive telephone
calls virtually anywhere in the world -- all with one phone, one phone number
and one customer bill. The Iridium System will combine the convenience of a
terrestrial wireless system with the global reach of Iridium's satellite system.
The Iridium System encompasses four components: the "space segment," which will
include the low earth orbit satellite constellation and the related control
facilities; the ground stations or "gateways," which will link the satellites to
terrestrial communications systems; the Iridium subscriber equipment, which will
provide mobile access to the satellite system and terrestrial wireless systems;
and the terrestrial wireless interprotocol roaming infrastructure, which will
facilitate roaming among the Iridium satellite system and multiple terrestrial
wireless systems that use different wireless protocols. Iridium expects to
commence commercial operations in September 1998. The satellite constellation
was designed, assembled and delivered in orbit by Motorola, a leading
international provider of wireless communications systems, phones and pagers,
semiconductors and other electronic equipment. Motorola also is the principal
investor in Iridium. Other strategic investors include leading wireless
communications service providers from around the world, as well as experienced
satellite manufacturers and experienced launch providers.
PROGRESS TO DATE
Iridium, Motorola and the various gateway owners have made substantial
progress in the development and implementation of the Iridium System and related
activities and expect to commence commercial service on schedule in September
1998. As of July 20, 1998, Motorola had launched 72 Iridium satellites, 65 of
which are functioning properly. Motorola has contracted for two August 1998
maintenance launches, one with China Great Wall for two satellites and one with
Boeing for five satellites, which should increase the number of operational and
spare satellites to 72.
Installation of the final satellite software is scheduled to be completed
prior to September 23, 1998, the date commercial service is scheduled to
commence. However, delays in the development of this software have resulted in a
shortened schedule for subscriber trials. The delay in the availability of the
final constellation software has also affected Motorola's and Kyocera's ability
to test handsets, which could result in delays of handset deliveries,
particularly by Kyocera. Iridium believes that Motorola handsets will be
available in sufficient quantities to support the initial demand following
commercial activation, with Kyocera handsets available later in 1998.
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Motorola has completed construction of the terrestrial facilities necessary
to command the in-space movements of the Iridium System's satellites, including
the Satellite and Network Operations Center and the associated tracking,
telemetry and command facilities. Iridium expects to provide virtually global
service initially through up to 12 gateways and 15 business offices. The
construction of the 12 gateway facilities is complete and the telecommunications
equipment has been installed at 11 locations. Equipment for the gateway in China
has been shipped and its installation has commenced. Gateway ground station and
business office testing continues on the satellites, network, telephony, paging
and billing systems. Operations trials for voice services have been completed
successfully in 10 gateway territories. Business systems hardware and software
has been installed in 14 of the 15 business offices and nine business offices
have completed software acceptance testing.
Iridium has commenced the initial phase of the alpha trials, which focus on
business scenarios, including subscriber provisioning, SIM card validation and
call detail record processing. Constellation-based "network" alpha trials are
scheduled to begin on August 1, 1998. Beta tests, with subscriber participation,
are scheduled to commence in mid-September, and Iridium expects such tests to
continue through the scheduled commencement of commercial service.
In addition, Iridium has begun its $200 million 1998 global advertising
program. The global advertising program is designed to increase international
recognition of the Iridium brand and generate initial demand for Iridium
services.
Iridium has made significant progress to date in securing the worldwide
regulatory approvals necessary to build and operate the Iridium System. The
space segment of the Iridium System has been licensed by the United States, and
Iridium believes that international coordination has been completed successfully
between the Iridium System and all existing or planned systems that have been
identified through the coordination process. No other action is required from
any other country to license the space segment. With respect to the 12 gateways,
eight licenses and four experimental licenses to build and operate gateways have
been received. With respect to the subscriber units, each country in which
Iridium intends to operate must authorize use of Iridium subscriber equipment,
including allocation of subscriber link frequencies. The FCC licensed the
operation of Iridium handsets in the United States and, as of July 9, 1998, all
or a substantial portion of the authorizations necessary to operate the Iridium
System had been granted in an additional 88 jurisdictions. Iridium's gateway
owners are dedicating substantial effort to obtaining licensing for Iridium
services in the countries in their service territories with particular focus on
obtaining licenses by the commencement of commercial operations in those
countries which are expected to account for most of the demand for and usage of
Iridium services.
Iridium also has made significant progress in securing service providers
and roaming partners. As of June 30, 1998, Iridium or its gateway operators had
entered into over 200 service provider agreements and roaming agreements, which
collectively cover markets make up a majority of Iridium's business plan.
GOVERNANCE OF IWCL AND RELATIONSHIP WITH IRIDIUM
The power and authority to conduct and manage the business of IWCL is
vested in the IWCL Board. The IWCL Board is comprised of seven members, a
majority of whom also are executive officers of Iridium or one of Iridium's
other members. At least two members of the IWCL Board will at all times be
persons not currently employed by or affiliated with Iridium or Motorola or any
other member of Iridium owning more than five percent of the outstanding Class 1
Membership Interests (the "Independent Company Directors").
PARTICIPATION IN THE GOVERNANCE OF IRIDIUM
Iridium is governed by the Iridium Board. The members of Iridium may manage
Iridium only through their election of Directors, and have no authority, in
their capacity as members, to act on behalf of Iridium. IWCL has waived the
limitation on liability provided by the Delaware Limited Liability Company Act.
The other members of Iridium have not waived this limitation and do not have
liability with respect to the debts or obligations of Iridium in excess of their
investment in their interests in Iridium. Notwithstanding IWCL's
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unlimited liability with respect to Iridium, the holders of Class A Common Stock
will not have liability under Bermuda law with respect to their shares of Class
A Common Stock other than the possible loss in the value of those shares. See
"Description of Iridium LLC Limited Liability Company Agreement -- Limitations
on Liability."
IWCL was formed to act as a special-purpose member of Iridium. The Iridium
LLC Agreement provides that IWCL will have certain special membership rights
during the period (the "IWCL Special Rights Period") commencing on the first
date that IWCL's Class 1 Membership Interests represent five percent or more of
the total outstanding Class 1 Membership Interests (which occurred upon the
consummation of IWCL's initial public offering in June 1997) and ending on the
date and delivery by Iridium of notice of the termination of IWCL's special
rights following (i) the sale or other disposition by IWCL of Class 1 Membership
Interests, if, as a result of such sale or other disposition, IWCL's Class 1
Membership Interests represent less than five percent of the total outstanding
Class 1 Membership Interests or (ii) following the occurrence of an IWCL Change
in Control. "IWCL Change of Control" means an event or series of events not
approved either by members of Iridium owning a majority of the Class 1
Membership Interests or by a majority of the Iridium Board, at a time when IWCL
owns Class 1 Membership Interests representing less than 50% of the outstanding
Class 1 Membership Interests, as a result of which (a) any "person" or "group"
(as such terms are defined in Section 12(d) and 14(d) of the Securities Exchange
Act of 1934 (the "Exchange Act")) other than Iridium becomes the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or
indirectly, of more than 30% of IWCL's outstanding common stock (or equivalent
securities), (b) IWCL consolidates with or merges into another corporation or
conveys, transfers or leases all or substantially all of its assets to any
person, or any corporation consolidates with or merges into IWCL, in either
event pursuant to a transaction in which IWCL's outstanding common stock is
changed into or exchanged for cash, securities or other property, other than any
transaction (i) between IWCL and either Iridium, an affiliate of Iridium or a
wholly-owned subsidiary of Iridium, or (ii) after which the shareholders who
beneficially owned IWCL's common stock immediately before such transaction
beneficially own at least 50% of the outstanding voting stock of the surviving
entity and no person beneficially owns more than 30% of the outstanding voting
stock of the surviving entity, or (c) during any period of two consecutive
years, individuals who at the beginning of such period constituted the IWCL
Board (together with any new directors whose election by the IWCL Board or whose
nomination for election was approved by a vote of 66 2/3% of the members of the
IWCL Board then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the IWCL Board then
in office.
During the IWCL Special Rights Period (i) IWCL shall be entitled to
designate two Independent Company Directors as Directors of Iridium, (ii) one
Director of Iridium designated by IWCL shall be elected Vice Chairman of the
Iridium Board and (iii) one Director of Iridium designated by IWCL shall be a
member of each committee of the Iridium Board. Pursuant to the Iridium LLC
Agreement, IWCL will not be entitled to appoint more than two Directors to the
Iridium Board even if its ownership interests increases and it would otherwise
have been entitled to additional appointment rights. In addition to any other
voting rights which IWCL may have under the Iridium LLC Agreement, under the
Delaware Limited Liability Company Act or otherwise, during the IWCL Special
Rights Period, Iridium may not take any of the following actions, or permit any
of the following actions or events to occur, without the consent of one of the
Directors of Iridium designated by IWCL (the "IWCL Special Rights Consent"): (i)
make any material amendments or modifications to the Iridium LLC Agreement; (ii)
approve any business plan of Iridium that would result in any material change in
the purpose of Iridium as set forth in the Iridium LLC Agreement or otherwise
change Iridium's business so that it varies materially from the business purpose
contemplated by the Iridium LLC Agreement; (iii) acquire, other than in the
ordinary course of business Iridium, (a) a controlling interest or a majority of
the voting stock or equity of, any corporation or other entity that would be a
Significant Subsidiary (as such term is defined in the rules under the
Securities Act of 1933) or (b) any other assets if the aggregate fair market
value thereof is greater than $50 million; (iv) sell, lease (as lessor),
exchange or otherwise dispose of all or substantially all of the assets of
Iridium (other than to a person controlled by Iridium); (v) cause the
dissolution and/or liquidation of Iridium; or (vi) take certain bankruptcy or
insolvency related action with respect to Iridium.
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EXCHANGE RIGHTS OF IRIDIUM MEMBERS
Pursuant to an Interest Exchange Agreement (the "Interest Exchange
Agreement"), IWCL has agreed that after the Exchange Date (as defined below) and
subject to the restrictions on transfer in the Iridium LLC Agreement it will
permit holders of Class 1 Membership Interests of Iridium to exchange those
interests for shares of Class A Common Stock at a ratio of one share of Class A
Common Stock for each Class 1 Membership Interest (subject to anti-dilution
adjustments). See "Description of Iridium LLC Limited Liability Company
Agreement -- Issuance of Additional Interests; Restrictions on Transfer; Rights
of First Refusal" for a description of certain restrictions on transfer of the
Class 1 Membership Interests contained in the LLC Agreement. If a holder of
Class 1 Membership Interests (a "Class 1 Holder") desires to effect an exchange
of all or a portion of its Class 1 Membership Interests it must provide written
notice to IWCL and Iridium. No exchange shall take place unless approved by
Iridium, pursuant to authorization of Directors representing at least 66 2/3% of
the Iridium Board. The "Exchange Date" is the 90th day following the first
fiscal quarter in which Iridium has achieved positive earnings before interest,
taxes, depreciation and amortization. In order to exercise its rights under the
Interest Exchange Agreement, a holder of Class 1 Membership Interests and its
affiliates must be in full compliance with the Iridium LLC Agreement and any
Gateway Authorization Agreement to which it is a party. Iridium and IWCL have
the right to defer exchanges under the Interest Exchange Agreement if doing so
is in the best interests of Iridium or IWCL in light of possible or pending
financing transactions.
Under the Interest Exchange Agreement, IWCL has agreed that at any time
after the Exchange Date, IWCL will, at the request of Class 1 Holders and
holders of Class A Common Stock acquired under the Interest Exchange Agreement,
representing not less than 2% of the Fully Diluted Class A Shares (as defined
below), file with the Commission a registration statement and use its reasonable
best efforts to have that registration statement remain effective for a period
of up to six months, permitting such holders to sell shares of Class A Common
Stock in the manner specified by those holders. IWCL has certain rights to defer
the filing of a registration statement or to cause holders to stop distributing
securities under an effective registration statement. Registering holders are
required to pay their pro rata portion of the costs of registration. "Fully
Diluted Class A Shares" means all shares of Class A Common Stock actually
outstanding and the aggregate number of shares of Class A Common Stock issuable
under the Interest Exchange Agreement in exchange for Class 1 Interests at the
then applicable exchange rate, whether or not the Class 1 Membership Interests
are then exchangeable. At the request of Iridium, acting pursuant to
authorization of Directors representing at least 66 2/3% of the Iridium Board,
IWCL will take all reasonable steps to register pursuant to these provisions any
other shares of Class A Common Stock acquired under the Interest Exchange
Agreement specified by Iridium.
SHARE ISSUANCE AGREEMENT
IWCL and Iridium have entered into a Share Issuance Agreement governing
offerings of securities by IWCL. The Share Issuance Agreement provides that all
net proceeds from the sale of securities by IWCL will be invested by IWCL in
membership interests in Iridium. IWCL will not issue any securities except
pursuant to the Share Issuance Agreement (or pursuant to warrants issued in
accordance therewith), the Interest Exchange Agreement and the Global Ownership
Program described below. IWCL has agreed that if requested by Iridium it will
use its best efforts to sell securities of IWCL in compliance with all
applicable laws and will cease to do so, if requested by Iridium.
If IWCL sells Class A Common Stock pursuant to the Share Issuance
Agreement, Iridium will issue to IWCL, in exchange for the net proceeds of such
offering, one Class 1 Membership Interest for each share of Class A Common Stock
sold by IWCL (subject to anti-dilution adjustments). If Iridium directs IWCL to
issue securities other than Class A Common Stock, Iridium will issue to IWCL
interests in or securities of Iridium, in exchange for the net proceeds of such
offering, which replicate as nearly as possible the economic attributes of the
securities sold by IWCL.
Iridium has agreed to pay all expenses incurred by IWCL in connection with
any issuance of securities under the Share Issuance Agreement and to indemnify
IWCL and its officers, directors and employees against
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certain losses, claims, damages or liabilities. See "-- Management Services
Agreement." IWCL also has agreed to issue Class A Common Stock pursuant to the
Share Issuance Agreement in connection with Iridium's option plan for its
executive officers and managers (the "Iridium Option Plan"). Iridium will issue
to IWCL one Class 1 Membership Interest for each share of Class A Common Stock
issued by IWCL in connection with the Iridium Option Plan (subject to
anti-dilution adjustments).
GLOBAL OWNERSHIP PROGRAM
IWCL and Iridium have commenced a Global Ownership Program (the "Global
Ownership Program") which is designed to offer an equity investment opportunity
in IWCL to certain governmental telecommunication administrations and related
entities (the "Telecom Administrations") as part of a comprehensive program to
enhance market access, improve the competitive standing of the Iridium System
and achieve appropriate regulatory approvals. Under the Global Ownership
Program, IWCL will sell shares of its Class B Common Stock to Telecom
Administrations designated from time to time by Iridium. IWCL has authorized the
issuance of up to 2,500,000 shares of Class B Common Stock under the Global
Ownership Program. As of June 30, 1998, 20,625 shares of Class B Common Stock
are outstanding. The Class B Common Stock is sold to Telecom Administrations at
a price per share equal to $13.33. At the time of issuance, the purchasers in
the Global Ownership Program will only be required to pay an amount equal to the
par value per share of the Class B Common Stock -- $.01 per share. The balance
of the purchase price will be payable through the withholding of dividends, if
any, which would otherwise be payable on the shares of Class B Common Stock. A
purchaser will have the right but not the obligation to pay the purchase price
in cash at any time, except as otherwise required under Bermuda law (e.g., on
winding up). The Class B Common Stock will be nontransferable until the later of
(i) the date that is one year after the date on which the full purchase price of
the shares has been paid (through withheld dividends or otherwise), and (ii) the
date on which certain specified regulatory approvals have been obtained to the
satisfaction of Iridium. The Class B Common Stock is also subject to
restrictions on transfer under applicable securities laws and the purchasers
will agree not to transfer the Class B Common Stock to a U.S. Person (as
defined). IWCL will have the right to repurchase the Class B Common Stock from
any holder at a price equal to the portion of the purchase price paid through
the date of repurchase, if the specified regulatory approvals applicable to that
holder have not been obtained by a specified date. IWCL and the holder have the
right to cause the Class B Common Stock to be exchanged for Class A Common Stock
at any time after the Transferability Date. The initial exchange rate will be
one share of Class A Common Stock for each share of Class B Common Stock
exchanged and such rate is subject to anti-dilution adjustments. At the time of
issuance of any shares of Class B Common Stock, IWCL will acquire from Iridium
Class 1 Membership Interests at a rate of one Class 1 Membership Interest for
each share of Class B Common Stock issued (subject to anti-dilution
adjustments). The purchase price for the Class 1 Membership Interests will be
identical to the proceeds to IWCL from the issuance of the Class B Common Stock,
with all but a nominal amount deferred and paid through an offset against
distributions that would otherwise be payable on the Class 1 Membership
Interests acquired. The Iridium LLC Agreement provides that if any portion of
the purchase price for an interest in Iridium is payable after the issuance of
the interest, the Iridium Board may restrict the rights otherwise incident to
the holding of such interest. IWCL may require Iridium to repurchase Class 1
Membership Interests in an amount corresponding to any Class B Common Stock
repurchased by IWCL. Iridium has agreed to pay or reimburse IWCL for the payment
of all expenses incurred by IWCL in connection with the Global Ownership Program
and to indemnify IWCL and its officers, directors and employees against certain
losses, claims, damages or liabilities.
MANAGEMENT SERVICES AGREEMENT
Iridium and IWCL have entered into a Management Services Agreement, which
was amended and restated in December 1997 in connection with an asset drop-down
transaction (the "Asset Drop-Down Transaction") in which Iridium transferred
substantially all of its assets and liabilities to its wholly-owned subsidiary,
Iridium Operating LLC ("Operating"). The amendment, among things, added
Operating as a party. Pursuant to the Management Services Agreement, Iridium has
agreed to supervise and manage the day-to-day operations of IWCL and IWCL has
agreed to allow Iridium to do so. Iridium will implement or cause to be
implemented all policy decisions relating to the operations of IWCL approved by
the IWCL Board
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and to conduct or cause to be conducted the ordinary and usual business and
affairs of IWCL. The IWCL Board has the right to give Iridium written
instructions, not inconsistent with the terms of the Management Services
Agreement, with respect to matters arising under the agreement and Iridium is
required to follow such instructions. Among other things, Iridium will be
responsible for administering the following functions of IWCL: treasury,
accounting, legal, tax, insurance, licenses and permits, investor relations,
public relations and securities law compliance and stock listing compliance.
Iridium has no authority under the Management Services Agreement to give any
notice or to approve any matter under the Iridium LLC Agreement on behalf of
IWCL, including, but not limited to IWCL's Special Rights Consent. Iridium also
will advance funds to IWCL, under certain conditions, to enable IWCL to pay any
income tax liability that cannot be satisfied by distributions to IWCL on its
Class 1 Membership Interests. Iridium will receive no fees or expense
reimbursement from IWCL for its services under the Management Services
Agreement. The Management Services Agreement is terminable as to the duties of
Iridium to IWCL only with the consent of both Iridium and IWCL, except that
Iridium has the right to terminate the agreement after the occurrence of an IWCL
Change of Control.
Pursuant to the Management Services Agreement, Iridium also has agreed to
supervise and manage the day-to-day operations of Operating and Operating has
agreed to allow Iridium to do so. Iridium will implement or cause to be
implemented all policy decisions relating to the operations of Operating
approved by the Operating Board of Directors (the "Operating Board"), and
Iridium will conduct or cause to be conducted the ordinary and usual business
and affairs of Operating. The Operating Board has the right to give Iridium
written instructions, not inconsistent with the terms of the Management Services
Agreement, with respect to matters arising under the Agreement and Iridium is
required to follow such instructions. Pursuant to the Limited Liability Company
Agreement of Operating (the "Operating LLC Agreement"), the officers and
directors of Operating are identical in all respects to the officers and
directors of Iridium. Pursuant to the Management Services Agreement, all actions
taken by an officer of Iridium with respect to the business of Operating are
deemed to be actions of an officer of Operating. Pursuant to the Management
Services Agreement, among other things, Iridium will be responsible for
administering the following functions of Operating: contract administration,
treasury, accounting, legal, tax, insurance, licenses and permits, investor
relations, public relations and securities law compliance and stock listing
compliance. Iridium has no authority under the Management Services Agreement to
take action on any matter reserved for action by Operating alone under the
Operating LLC Agreement.
Pursuant to the Management Services Agreement, Operating will provide
sufficient funds to Iridium to enable Iridium to manage the business and
operations of Operating and IWCL, including payment of Iridium's obligations to
its employees, consultants and directors, and payments for Iridium's office
space and equipment, sales, general operating and administrative expenses,
insurance and its obligations under certain contracts transferred to Operating
by Iridium in connection with the Asset Drop-Down Transaction, subject to the
limitation that Operating will not be obligated to reimburse Iridium for the
physical construction, operation, maintenance or insurance of any satellite
system other than the satellite system to be delivered under the Space System
Contract and any other satellite system to be owned by Operating. In addition,
Operating will reimburse Iridium for payment obligations under the Share
Issuance Agreement, the Global Ownership Program and the Interest Exchange
Agreement. Any funds received by Iridium in respect of a Reserve Capital Call
shall be treated as a capital contribution from Iridium to Operating. See
"Description of Iridium Limited Liability Company Agreement." The Management
Services Agreement is terminable as to the duties of Iridium to Operating only
with the consent of both Iridium and Operating.
DESCRIPTION OF IRIDIUM LIMITED LIABILITY COMPANY AGREEMENT
The following is a summary of certain provisions of the Limited Liability
Company Agreement of Iridium, dated as of July 29, 1996, as amended (the
"Iridium LLC Agreement"). This summary does not purport to be a complete
description of the Iridium LLC Agreement, and is qualified in its entirety by
reference to the Iridium LLC Agreement which has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part and is available
upon request to Iridium at 1575 Eye Street N.W., Washington, D.C. 20005,
Attention: Secretary.
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ESTABLISHMENT; PURPOSE
Iridium was formed as a limited liability company pursuant to the
provisions of the Delaware Limited Liability Company Act (the "Delaware Act") on
July 16, 1996. Iridium, Inc., a Delaware corporation and the predecessor of
Iridium, was formed on June 14, 1991. On July 29, 1996, Iridium, Inc. was merged
with and into Iridium, with Iridium as the surviving entity. Iridium's purpose
is to acquire, own and manage the Iridium System, which it does through its
wholly-owned subsidiary, Iridium Operating LLC to acquire, own and manage any
successor or replacement system, to manage access to any use of such systems
(including use by Members, gateways, service providers and others) and to engage
in activities necessary, appropriate or incidental to the foregoing.
THE IRIDIUM BOARD; COMMITTEE STRUCTURE AND MANAGEMENT
Iridium is governed by the Iridium Board. The Members may manage Iridium
only through their designated directors and have no authority, in their capacity
as members, to act on behalf of Iridium. The day-to-day activities of Iridium
are managed by its officers, subject to the supervision of the Iridium Board.
The officers are nominated and elected by the Iridium Board. The Iridium LLC
Agreement requires that the Chairman of the Iridium Board be a director and that
the Vice Chairman and Chief Executive Officer be a director.
Each Member, other than IWCL, is entitled to appoint one director to the
Iridium Board for each 5,250,000 Class 1 Membership Interests owned. Class 1
Members, other than IWCL, may aggregate their Class 1 Membership Interests and
appoint one director for each 5,250,000 Class 1 Membership Interests owned in
the aggregate.
The Iridium Board may act through one or more committees established by the
Iridium LLC Agreement or by resolution, with each committee having the powers of
the Iridium Board to the extent provided in the Iridium LLC Agreement or the
relevant resolution. The Iridium LLC Agreement establishes the following four
committees, which are the only existing committees of the Iridium Board:
Banking and Financing Committee. This committee is authorized generally to
supervise matters relating to the financing of Iridium. The committee must
consist of not fewer than eight directors.
Related Party Contract Committee. This committee consists of all directors
of Iridium not designated by Motorola, Lockheed Martin Corporation and Raytheon
Company, which are the contracting and principal subcontracting Members,
respectively, under the three principal contracts for the development and
operation of the technical components of the Iridium System. The committee has
the authority to review, monitor and enforce Iridium's rights with respect to
such contracts. Directors appointed by Lockheed Martin and Raytheon will be
appointed to the committee when they cease to be subcontractors under the
contracts. Directors appointed by Motorola will be appointed to the committee
when Motorola ceases to be a party to the contracts.
Compensation Committee. This committee must consist of not fewer than
three directors, appointed by the Iridium Board, who are not officers or
employees of Iridium. The committee has the authority to review, and provide
recommendations relating to the compensation and benefits of managerial
employees and has authority to administer the Iridium Option Plan (unless the
Iridium Board appoints a substitute committee).
Audit Committee. This committee is required to review, and make
recommendations regarding, Iridium's internal accounting and financial controls,
including the preparation of financial statements and the engagement of
independent public accountants. The committee must consist of two or more
directors, appointed by the Iridium Board, who are not officers or employees of
Iridium. See "-- Classes of Membership Interests -- Series B and Series C Class
2 Interests" for certain special rights with respect to the Iridium Board and
its committees that have been granted to Motorola in connection with its
guarantee of the borrowings under the Guaranteed Bank Facility.
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SPECIAL RIGHTS OF IWCL IN THE GOVERNANCE OF IRIDIUM
The Iridium LLC Agreement provides that IWCL will have certain special
membership rights during the Special Rights Period (as defined). See "Governance
of IWCL and Relationship with Iridium." During the IWCL Special Rights Period
(i) IWCL shall be entitled to designate two Independent Company Directors as
directors of Iridium, (ii) one director of Iridium designated by IWCL shall be
elected Vice Chairman of the Iridium Board and (iii) one director of Iridium
designated by IWCL shall be a member of each committee of the Iridium Board.
Pursuant to the Iridium LLC Agreement, IWCL will not be entitled to appoint more
than two directors to the Iridium Board even if its ownership interest increases
and it would otherwise have been entitled to additional appointment rights. In
addition to any other voting rights which IWCL may have under the Iridium LLC
Agreement, under the Delaware Act or otherwise, during the IWCL Special Rights
Period, Iridium may not take any of the following actions, or permit any of the
following actions or events to occur, without the consent of one of the
directors of Iridium designated by IWCL: (i) make any material amendments or
modifications to the Iridium LLC Agreement; (ii) approve any business plan of
Iridium that would result in any material change in the purpose of Iridium as
set forth in the Iridium LLC Agreement or otherwise change Iridium's business so
that it varies materially from the business purpose contemplated by the Iridium
LLC Agreement; (iii) acquire, other than in the ordinary course of business of
Iridium, (a) a controlling interest or a majority of the voting stock or equity
of, any corporation or other entity that would be a Significant Subsidiary (as
such term is defined in the rules under the Securities Act) or (b) any other
assets if the aggregate fair market value thereof is greater than $50 million;
(iv) sell, lease (as lessor), exchange or otherwise dispose of all or
substantially all of the assets of Iridium (other than to a person controlled by
Iridium); (v) cause the dissolution and/or liquidation of Iridium; or (vi) take
certain bankruptcy or insolvency related actions with respect to Iridium.
CLASSES OF MEMBERSHIP INTERESTS
The Members' interests in Iridium are divided into two classes: "Class 1
Membership Interests" which represent the common equity of Iridium and "Class 2
Interests" which represent the preferred equity of Iridium. The Iridium LLC
Agreement authorizes Iridium to issue 225,000,000 Class 1 Membership Interests,
50,000 Series M Class 2 Interests and 300,000 additional Class 2 Interests. At
June 30, 1998 there were 141,313,149 Class 1 Membership Interests issued and
outstanding. There are three Series of Class 2 Interests outstanding.
Class 1 Membership Interests. Subject to the rights of holders of any
Series of Class 2 Interests, all voting rights of the Members are vested in the
Class 1 Membership Interests.
Series A Class 2 Interests. The Series A Class 2 Interests are convertible
preferred interests that are entitled to dividends at a rate of 14 1/2% per
annum from the Original Issue Date to, but not including, the relevant Series A
Redemption Date. The dividends on the Series A Class 2 Interests are payable,
either in kind or in cash, at the option of Iridium, through February 28, 2001.
Commencing March 1, 2001, dividends on the Series A Class 2 Interests are
payable only in cash. Dividends on the Series A Class 2 Interests accrue whether
or not they have been declared and whether or not there are profits or other
funds of Iridium legally available for the payment of such dividends. No
dividend may be declared and paid on the Class 1 Membership Interests unless all
accrued dividends on the Series A Class 2 Interests have been paid in full. The
Series A Class 2 Interests are convertible to Class 1 Membership Interests at
any time, at the option of the holder, at the Series A Conversion Price then in
effect. The Series A Conversion Price is adjusted from time to time to reflect,
among other things, distributions or reclassification of the Class 1 Membership
Interests. At June 30, 1998, each Series A Class 2 Interest was convertible into
18.51 Class 1 Membership Interests. The Series A Class 2 Interests are
redeemable, at the option of Iridium, at any time after March 1, 2001 at
redemption prices that adjust downward each March 1 for four years at a
proportionate rate from 107.5% of the Series A Liquidation Preference ($1,000
plus accrued and unpaid dividends) on March 1, 2001 to 100% of the Series A
Liquidation Preference on March 1, 2005. After March 1, 2005 the Series A Class
2 Interests are redeemable at 100% of the Series A Liquidation Preference. At
June 30, 1998 there were 42,853 Series A Class 2 Interests outstanding.
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Series B and Series C Class 2 Interests. In connection with Motorola's
guarantee of a certain credit facility available to Operating (the "Guaranteed
Bank Facility"), Iridium issued to Motorola one Series B Class 2 Interest and 75
Series C Class 2 Interests. These are the only issued and outstanding Series B
and Series C Class 2 Interests. The Series B Class 2 Interests and Series C
Class 2 Interests do not pay any dividends. The Series B Class 2 Interest
entitles Motorola to one seat on the Iridium Board in addition to Directors it
may otherwise appoint as the owner of Class 1 Membership Interests and Series M
Class 2 Interests. The Series C Class 2 Interests entitle Motorola to appoint a
majority of the Board of Directors (and of all committees other than the Related
Party Contract Committee) in the event of certain events of default relating to
the Guaranteed Bank Facility. The Series B and Series C Class 2 Interests are
redeemable by Iridium at $.01 per Interest upon the later of (i) the termination
or expiration of the Guarantee Agreement of Motorola and (ii) the reimbursement
of any payments made by Motorola pursuant to the Guarantee Agreement.
Series M Class 2 Interests. Motorola owns a warrant (the "Series M
Warrant") to purchase Series M Class 2 Interests in an amount that would be
convertible into 2.5% of the outstanding Class 1 Membership Interests at the
time of exercise of the Series M Warrant, calculated on a fully diluted basis,
at a price of $1,000 per Series M Class 2 Interest, subject to anti-dilution
adjustments. No Series M Class 2 Interests are currently outstanding. Dividends
on each Series M Class 2 Interest will accrue at the rate of 8.00% per annum of
the sum of the Liquidation Value thereof plus all accumulated and unpaid
dividends thereon, from and including the date of issuance of such Interest to
and including the date on which the Liquidation Value of such Interests is paid
or the date on which such Interest is converted into Class 1 Membership
Interests. Dividends accrue whether or not they have been declared and whether
or not there are profits or other funds of Iridium legally available for the
payment of dividends. Additionally, when dividends are declared or paid on the
Class 1 Membership Interests, the holders of Series M Class 2 Interests will be
entitled to participate in such dividends ratably. The Series M Class 2
Interests are convertible into Class 1 Membership Interests at any time at the
option of the holder. The number of Class 1 Membership Interests into which the
Series M Class 2 Interests are convertible is computed by multiplying the number
of Series M Class 2 Interests to be converted by $1,000 and dividing the result
by the Series M Conversion Price then in effect. The initial Series M Conversion
Price is $13.33, but is subject to anti-dilution adjustments from time to time,
and at the current Series M Conversion Price each Series M Class 2 Interest
would be convertible into 75 Class 1 Membership Interests. Upon the occurrence
of an Event of Noncompliance, defined as a failure by Iridium to pay when due
the full amount of dividends due to holders of Series M Class 2 Interests or the
occurrence of certain enumerated acts by Iridium related to bankruptcy or
insolvency, the holders can demand the immediate redemption of all interests at
Liquidation Value plus accumulated and unpaid interest and the number of seats
on the Iridium Board will be increased by one at the request of the holders of a
majority of the Series M Class 2 Interests then outstanding and the holders of
Series M Class 2 Interests will be entitled to elect an individual to fill such
newly created Director position. There are no Series M Class 2 Interests issued
or outstanding.
MERGER
The Iridium LLC Agreement provides that Iridium may merge or consolidate
with one or more limited liability companies, corporations, or similar entities
provided that the transaction is approved by the Iridium Board and Class 1
Members holding not less than 66 2/3% of the outstanding Class 1 Membership
Interests. In the event of a merger, Members who hold Interests and do not vote
in favor of, or consent in writing to, the merger are entitled to appraisal
rights subject to certain exceptions.
DIVIDEND AND LIQUIDATION RIGHTS
Class 1 Members are entitled to receive dividends, as and when declared by
the Iridium Board, in its discretion. Class 2 Members are entitled to receive
dividends, if any, in accordance with the terms of the relevant Series of Class
2 Interests, as and when declared by the Iridium Board. The Class 2 Interests
rank senior to the Class 1 Membership Interests as to dividends and
distributions upon the liquidation, dissolution and winding-up of Iridium.
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The Iridium LLC Agreement requires the Iridium Board, to the extent of
legally available funds, to declare and pay a pro rata dividend in an amount
which, when added to any prior dividends paid with respect to the profits of the
same year, is sufficient to assure that each non-U.S. Class 1 Member receives an
amount at least equal to the amount of such Member's U.S. federal, state and
local income tax liability resulting from allocations of Iridium's income to
such Member.
ISSUANCE OF ADDITIONAL INTERESTS; RESTRICTIONS ON TRANSFER; RIGHTS OF FIRST
REFUSAL
With the consent of Class 1 Members holding a majority of the Class 1
Membership Interests, the Iridium Board may, at any time, cause Iridium to admit
additional Members upon conditions determined by the Iridium Board. Subject to
certain exceptions, if Iridium authorizes the issuance or sale of any Class 1
Membership Interests, Iridium must first offer to sell to each Class 1 Member a
portion of such Class 1 Membership Interests that would prevent any dilution in
such Class 1 Member's holdings of Class 1 Membership Interests, provided that
upon exercise of such purchase rights, the number of Class 1 Membership
Interests of any holder of Class 1 Membership Interests may not exceed 45% of
the Class 1 Membership Interests deemed outstanding on such date.
The Iridium LLC Agreement contains significant restrictions on the ability
of a Member to transfer any Class 1 Membership Interests or Class 2 Interests in
Iridium. Prior to making any transfer of Class 1 Membership Interests or Class 2
Interests in Iridium (other than certain transfers to affiliates), the person
seeking to make such transfer must notify Iridium and all holders of Class 1 and
Class 2 Interests of the terms and conditions of the proposed transfer. In order
for the proposed transfer to be permitted, a number of conditions must be
satisfied, including but not limited to the conditions that (i) a majority of
the Iridium Board approve the transfer and (ii) the transfer not result in any
person (other then IWCL) beneficially owning, or having the right to
beneficially own, more than 45% of the outstanding Class 1 Membership Interests.
In addition, Iridium may elect to purchase all (but not less than all) of the
Class 1 and Class 2 Interests to be transferred upon the terms and conditions of
the proposed transfer and, if Iridium elects not to make such purchase, any of
the holders of Class 1 and Class 2 Interests may purchase all (but not less than
all) of the Class 1 and Class 2 Interests to be transferred on a pro rata basis.
The Iridium LLC Agreement provides that as long as Motorola is the
principal supplier to Iridium and/ or Motorola or one of its subsidiaries is the
holder for the benefit of Iridium of any FCC license to construct, operate or
launch the Iridium System, Motorola will not transfer (other than certain exempt
transfers) any of its Class 1 Membership Interests issued in respect of common
stock of Iridium, Inc. purchased under a 1993 stock purchase agreement. This
restriction does not apply to any Class 1 Membership Interests purchased
pursuant to the Reserve Capital Call. In addition, in the event that Motorola no
longer is the principal supplier to Iridium and neither Motorola nor one of its
subsidiaries is the holder for the benefit of Iridium of any FCC license to
construct, operate or launch the Iridium System, and Motorola desires to
transfer any Class 1 Membership Interests prior to July 19, 2003, Motorola is
required to offer all other holders of Class 1 Membership Interests the
opportunity to participate ratably in such sale at the same price and on the
same terms as Motorola.
CAPITAL CONTRIBUTIONS; RESERVE CAPITAL CALL
Contributions to the capital of Iridium, with respect to each Member who
purchases an Interest, are made in an amount equal to the net purchase price to
Iridium for such Interest (such amount being such Member's capital contribution
to Iridium). The Iridium LLC Agreement requires that the Class 1 Members cause
their Class 1 Membership Interests in the aggregate to be entitled to at least
21% of each item of the capital, income, gain, loss, deduction or credit
distributions of Iridium at all times. Members generally are not required to
make additional capital contributions to Iridium other than in connection with
the Reserve Capital Call.
Seventeen Members of Iridium have made varying Reserve Capital Call
commitments to purchase an aggregate of 18,206,550 additional Class 1 Membership
Interests at a purchase price of $13.33 per Class 1 Membership Interest, upon a
date thirty days after the date of the receipt of a funding notice from the
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treasurer of Iridium (the "Reserve Capital Call"). Subject to restrictions
imposed pursuant to a December 1997 secured bank facility (the "Secured Bank
Facility"), the treasurer of Iridium is required to provide such a notice on the
date on which the treasurer has first determined that Iridium will not have
available to it sufficient funds to meet its contractual obligations and other
funding requirements on the forty-fifth day thereafter absent exercise of the
Reserve Capital Call. The Iridium LLC Agreement provides Iridium with several
non-exclusive remedies in the event a Member fails to pay any of the amounts
required by a Reserve Capital Call, including redeeming the defaulting Member's
Class 1 Membership Interests for an amount equal to $13.33 per Class 1
Membership Interest. Pursuant to the Secured Bank Facility, Iridium pledged its
rights with respect to the Reserve Capital Call and will be restricted from
exercising the Reserve Capital Call.
LIMITATIONS ON LIABILITY
In accordance with the Delaware Act, Members are generally not liable for
the debts, obligations or liabilities of Iridium. Pursuant to the Iridium LLC
Agreement, and in accordance with the Delaware Act, IWCL has waived the
limitation on liability contained in the Delaware Act, provided that IWCL has no
liability to any person, including Iridium, for any debt, obligation or
liability of Iridium until all of the assets and capital of Iridium have first
been exhausted in satisfaction thereof. No Member or director has any liability
for any debts, obligations or liabilities, whether arising in contract, tort or
otherwise, of any other Member or director.
Members, directors and officers of Iridium have only the duties set forth
in the Iridium LLC Agreement. The Iridium LLC Agreement provides that the duties
and obligations owed to Iridium and to the Members by the directors and officers
of Iridium, and any duties and obligations that may be owed by any Member or by
any affiliates of any Member, are the same as the respective duties and
obligations owed to a corporation organized under the Delaware General
Corporation Law by its directors and officers and any such duties that may be
owed to a corporation by any similarly situated stockholder or affiliate
thereof, respectively. The Iridium LLC Agreement also provides that, to the
fullest extent permitted by the Delaware General Corporation Law, a director
shall not be liable to Iridium or the Members for monetary damages for a breach
of fiduciary duty as a director. Such limitation does not, however, limit
liability of directors (i) for any breach of the director's duty of loyalty to
Iridium, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for acts relating to
certain unlawful dividend payments or stock redemptions or repurchases and (iv)
for any transaction from which the director derived an improper personal
benefit.
The Iridium LLC Agreement provides that Iridium will indemnify the
directors, officers and other persons serving in similar capacities at the
request of Iridium for another entity against all expenses (including attorney's
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with any action, suit, or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of Iridium) by reason of the fact that such person was
serving in such capacity, provided that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of Iridium, and, with respect to any criminal action or proceedings,
had no reasonable cause to believe such person's conduct was unlawful. The
Iridium LLC Agreement further provides that Iridium will indemnify the
directors, officers and other persons serving in similar capacities at the
request of Iridium for another entity against expenses (including attorney's
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit by or in the right of Iridium by
reason of the fact that such person was serving in such capacity, provided that
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of Iridium, and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to Iridium unless
awarded pursuant to a court order.
ALLOCATIONS OF PROFITS AND LOSSES; TAX MATTERS PARTNER
The profits and losses of Iridium generally are, subject to certain tax
considerations, the Delaware Act and the rights of the Class 2 Members, to be
allocated entirely to the Class 1 Members pro rata in proportion
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to their percentage of ownership of all outstanding Class 1 Membership
Interests. The Iridium LLC Agreement provides:
Profits. Items of income and gain shall be allocated (i) first to the
Class 2 Members in amounts that match the distributions made to such Members in
accordance with the terms of the Class 2 Interest and (ii) second to the Class 1
Members pro rata in proportion to their percentage of ownership of all Class 1
Membership Interests.
Losses. All items of loss, deduction, expense or credit shall be allocated
to the Class 1 Members pro rata in proportion to their percentage ownership of
all Class 1 Membership Interests.
Motorola is the Tax Matters Partner of Iridium. The Tax Matters Partner
acts as the liaison between Iridium and the Members, on the one hand, and the
United States Internal Revenue Service, on the other, in connection with all
administrative and judicial proceedings involving tax controversies regarding
Iridium.
AMENDMENTS TO THE IRIDIUM LLC AGREEMENT; MEETINGS
The Iridium LLC Agreement may not be changed or amended, nor may the
observance of any provision of the Iridium LLC Agreement be waived, without the
consent of Class 1 Members holding not less than 66 2/3% of the outstanding
Class 1 Membership Interests. This general approval requirement for amendments
to the Iridium LLC Agreement is subject to certain exceptions including, among
others:
Iridium Board. The provision of the Iridium LLC Agreement granting to the
Members the right to elect members of the Iridium Board may not be amended
without the consent of Class 1 Members holding not less than 95% of the
outstanding Class 1 Membership Interests.
Related Party Contract Committee. The provisions of the Iridium LLC
Agreement relating to the Related Party Contract Committee (which reviews and
monitors the principal contracts between Iridium and certain of its Members) may
not be amended without the consent of (i) 66 2/3% of the directors serving on
the Related Party Contracts Committee and (ii) 66 2/3% of the non-interested
Members.
Capital Contributions. Certain provisions of the Iridium LLC Agreement
relating to the circumstances in which a Reserve Capital Call is automatically
triggered may only be amended by the affirmative vote of not less than 85% of
the entire Iridium Board, and other provisions of the Iridium LLC Agreement
covering Members' capital contributions may be amended only with the consent of
Iridium and each Member whose rights and obligations thereunder are directly
affected by such amendment.
Appraisal Rights. The provisions relating to the Member's appraisal rights
may not be amended without the unanimous consent of the Members.
An annual meeting for the Class 1 Members shall be held each year within
120 days after the close of the immediately preceding fiscal year of Iridium. At
such annual meeting each Member shall provide notice to Iridium and the other
Members of the names of any director or directors such Member is entitled to
appoint. Special meetings of Members may be called for any purpose stated in the
notice of such special meeting at any time by the Iridium Board, the chairman of
the Board of Directors, the vice chairman and chief executive officer, the
president or the holders of not less than a majority of the Class 1 Membership
Interests outstanding. Notice of any meeting shall be given to all Members
entitled to vote at such meeting and to each director not less than 10 nor more
than 60 days prior to the date of such meeting. The holders of a majority of the
Class 1 and Class 2 Interests entitled to vote on a particular item of business,
present in person or by proxy, shall constitute a quorum for purposes of the
transaction of such item of business. Each Member entitled to vote at a meeting
of Members or to express consent or dissent to any action in writing without a
meeting may authorize any person to act for it in such matters by proxy.
Unless otherwise provided by law, any action to be taken by the Members may
be taken without a meeting, without prior notice and without a vote, if consents
in writing, setting forth the action so taken, shall be signed by the Members
having not less than the minimum Interests that would be necessary to authorize
or take such action at a meeting at which all Members entitled to vote thereon
were present and voted and are delivered to Iridium.
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GATEWAY RIGHTS AND SPECTRUM ACCESS OBLIGATIONS
The exclusive right to own and operate the various gateway service
territories is assigned to Members pursuant to the Iridium LLC Agreement. As a
condition of the exclusive right to operate in their assigned territories
(including the exclusive right to act as, or select, the service provider for
such territory), each Member that has been assigned a service territory has
agreed (i) to use its best efforts to obtain the necessary authorizations to
provide gateway services in each of the jurisdictions included in its service
territory (the "Gateway Authorizations") and to construct and operate such
gateway on a timely basis consistent with the terms of such Member's Gateway
Authorization Agreement, (ii) to require any service provider within its service
territory to use its best efforts to obtain the necessary authorizations to act
as a service provider and (iii) use its best efforts to cause the relevant
authorities in their respective territories to ratify and adopt the spectrum
allocation and service definitions for low earth orbit systems adopted by the
World Administrative Radio Conference. The gateway and service provider rights
of Class 1 Members may be terminated without compensation if such a member fails
to (i) comply with its obligations regarding Gateway construction and spectrum
allocation or (ii) obtain the necessary Gateway Authorizations within the time
periods set forth in the Iridium LLC Agreement. In the event that such rights
are terminated in the member's principal country of operation as a result of the
Member's failure to obtain the relevant Gateway Authorizations, and the Member
used its best efforts to obtain the Gateway Authorizations, such member is
entitled to compensation for the loss of the gateway service territory on the
terms specified in the Iridium LLC Agreement.
DISSOLUTION; WINDING-UP
The Iridium LLC Agreement provides that Iridium shall be dissolved and its
affairs wound-up upon: (i) the adoption of a resolution by not less than 66 2/3%
of the entire Iridium Board that Iridium be dissolved and the approval of such
resolution by the affirmative vote of Class 1 Members holding not less than
66 2/3% of the Class 1 Membership Interests present at a meeting duly called for
such purpose; (ii) the death, retirement, resignation, bankruptcy or similar
occurrence which terminates the continued membership of any Member unless the
remaining Members exercise their right under the Iridium LLC Agreement to
continue the business of Iridium (such right to be exercised by the affirmative
consent of both (a) a majority of the Iridium Board and (b) a "majority in
interest" (as defined in IRS Revenue Procedure 94-46) of the remaining Members);
and (iii) December 31, 2095, subject to amendment by an affirmative vote of
Class 1 Members holding not less than 66 2/3% of the Class 1 Membership
Interests.
19
<PAGE> 24
SELLING HOLDERS
The Warrants were originally issued and sold by Iridium, as part of the
Units, in July 1997 to Chase Securities, Inc. and Merrill Lynch & Co. (the
"Initial Purchasers") in a private placement, and were resold by the Initial
Purchasers in transactions exempt from the registration requirements of the
Securities Act in the United States to qualified institutional buyers (as
defined in Rule 144A under the Securities Act) and outside the United States to
non-U.S. persons in offshore transactions in reliance on Regulation S under the
Securities Act. The Selling Holders may from time to time offer and sell the
Securities set forth below pursuant to this Prospectus.
The following table sets forth as of July 10, 1998, the respective number
of Warrants beneficially owned by each Selling Holder and the number of Warrant
Shares issuable upon the conversion of such Selling Holder's Warrants. The term
"Selling Holders" includes the holders of Securities listed below and the
beneficial owners of such Securities and their transferees, pledgees, donees or
other successors. Except as set forth below, other than as a result of the
ownership of the Securities, none of the Selling Holders has, or within the past
three years has had, any position, office or material relationship with IWCL or
any of its predecessors or affiliates. The table has been prepared based upon
information furnished to IWCL by or on behalf of the Selling Holders.
<TABLE>
<CAPTION>
SECURITIES OWNED PRIOR
TO THE OFFERING
-------------------------------
SELLING HOLDERS WARRANTS CLASS A COMMON STOCK
--------------- -------- --------------------
<S> <C> <C>
Chase Securities Inc. .................................. 28,383 147,691(1)
Continental Casualty Company............................ 19,000 98,800
High Yield Portfolio.................................... 17,150 89,180
United High Income Fund, Inc. .......................... 6,500 33,800
ING Barings (US) Capital Corp. ......................... 5,000 26,000
Northstar High Total Return Fund........................ 4,475 23,270
The Income Fund of America, Inc. ....................... 4,000 20,800
Putnam High Yield Managed Trust......................... 3,250 16,900
LB Series Fund, Inc., High Yield Portfolio.............. 3,000 15,600
United High Income Fund II, Inc. ....................... 3,000 15,600
Lutheran Brotherhood High Yield Fund.................... 2,000 10,400
MAS High Yield Portfolio................................ 1,920 9,984
National Financial Services Corp. ...................... 1,565 8,138
American Variable Asset Allocation Fund................. 1,500 7,800
FC CBO LTD.............................................. 1,500 7,800
ML CBO IV (Cayman) Ltd. ................................ 1,500 7,800
PamCo Cayman Ltd. ...................................... 1,500 7,800
Trustees of the University of Pennsylvania.............. 1,110 5,772
Dreyfus High Yield Securities........................... 1,000 5,200
Fortis Series Fund, Inc. -- Diversified Income Series... 1,000 5,200
Ranger Asset Management LP.............................. 1,000 5,200
McCann, Anthony D. and McCann, Mary C. JT/WROS.......... 950 4,940
Morgan Stanley High Yield Portfolio..................... 840 4,368
Caywood Capital Fund L.P. .............................. 700 3,640
Morgan Stanley Institutional Fund High Yield
Portfolio............................................. 605 3,146
Enterprise High Yield Bond Fund......................... 550 2,860
Northstar Balance Sheet Opportunities Fund.............. 500 2,600
Putnam High Yield Fixed Income Fund, LLC................ 500 2,600
TMK/United Funds, Inc. -- High Income Portfolio......... 500 2,600
Enterprise Accumulation Trust High Yield................ 450 2,340
Hamill, Robert B. ...................................... 400 3,080(2)
Horizon Strategic Income................................ 350 1,820
Forethought Life Insurance Company...................... 320 1,664
</TABLE>
20
<PAGE> 25
<TABLE>
<CAPTION>
SECURITIES OWNED PRIOR
TO THE OFFERING
-------------------------------
SELLING HOLDERS WARRANTS CLASS A COMMON STOCK
--------------- -------- --------------------
<S> <C> <C>
CentralSecured Investments, N.V. ....................... 310 1,612
Martindale, Wight Jr. .................................. 260 1,352
American Variable Bond Fund............................. 250 1,300
Anchor Pathway Fund Asset Allocation Series............. 250 1,300
Columbia/HCA............................................ 250 1,300
DeMoss Foundation....................................... 250 1,300
SunTrust Bank, South Florida, N.A., Trustee............. 250 1,300
Manufacturer's Life High Yield.......................... 240 1,248
Golden Rule Insurance High Yield........................ 200 1,040
SICAV U.S. High Yield Bond Fund......................... 185 962
IL Annuity & Insurance.................................. 150 780
William M. Keck Jr. Foundation.......................... 150 780
Chase Manhattan Private Bank (Switzerland).............. 117 608
MAS Multi-Asset Class Portfolio......................... 70 364
Calka, Joanna E. ....................................... 50 260
Panama, Solynieve....................................... 50 260
Wilson, John Mark....................................... 50 260
Northstar High Total Return II Fund..................... 25 130
Hess, Wendy E. and Hess, David A. JTWROS................ 20 104
Grambor, Diane M. ...................................... 10 52
Henley, Paul and Kimberley.............................. 10 52
</TABLE>
-------------------------
(1) Chase Securities Inc. ("CSI") is an affiliate of The Chase
Manhattan Bank, which is the Administrative Agent and a lender under a
guaranteed bank financing of Iridium and the Administrative Agent and
a lender under a secured bank financing of Iridium. CSI has acted as
Global Financial Advisor and a Global Arranger of such guaranteed bank
financing and secured bank financing.
(2) Includes 1,000 shares of Class A Common Stock beneficially owned
by such holder, which are not being offered hereby.
The information concerning the Selling Holders may change from time to
time. If required, such changes will be set forth in Prospectus Supplements. The
per share conversion price and, therefore, the number of shares of Class A
Common Stock issuable upon conversion of the Warrants, are subject to adjustment
under certain circumstances. Accordingly, the number of shares of Class A Common
Stock issuable upon conversion of Warrants may increase or decrease. Because the
Selling Holders may offer all or some portion of the Securities pursuant to this
Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of Securities, no estimate can be given
as to the amount of Securities that will be held by the Selling Holders upon
termination of this offering.
PLAN OF DISTRIBUTION
The Warrants offered hereby may be sold from time to time to purchasers
directly by the Selling Holders. Alternatively, the Selling Holders may from
time to time offer the Warrants to or through underwriters, broker-dealers or
agents, who may receive compensation in the form of underwriting discounts,
concessions or commissions from the Selling Holders or the purchasers of
Warrants, for whom they may act as agent. The Selling Holders and any
underwriters, broker-dealers or agents that participate in the distribution of
the Warrants may be deemed to be "underwriters" within the meaning of the
Securities Act and any profit on the sale of Warrants by them and any discounts,
commissions, concessions or other compensation received by any such underwriter,
broker-dealer or agent may be deemed to be underwriting discounts and
commissions under the Securities Act.
21
<PAGE> 26
The Warrants offered hereby may be sold from time to time in one or more
transactions at fixed prices, at prevailing market prices at the time of sale,
at varying prices determined at the time of sale or at negotiated prices. Such
prices will be determined by the Selling Holders or by agreement between the
Selling Holders and underwriters and dealers who may receive fees or commissions
in connection therewith. The sale of the Warrants may be effected in
transactions (which may involve crosses or block transactions) (i) on any
national securities exchange or quotation service on which the Warrants may be
listed or quoted at the time of sale, (ii) in the over-the-counter market, (iii)
in transactions otherwise than on such exchanges or in the over-the-counter
market or (iv) through the writing of options. At the time a particular offering
of Warrants is made, a Prospectus Supplement, if required, will be distributed
which will set forth the aggregate amount and type of Warrants being offered and
the terms of the offering, including the name or names of any underwriters,
broker-dealers or agents, any discounts, commissions and other terms
constituting compensation from the Selling Holders and any discounts,
commissions or concessions allowed or reallowed or paid to broker-dealers.
The outstanding Class A Common Stock is listed on the NNM, and IWCL has
applied for listing the Warrant Shares on the NNM. IWCL does not intend to apply
for listing of the Warrants on any securities exchange or authorization for
quotation of the Warrants on any quotation system. There is no assurance as to
the development or liquidity of any trading market that may develop for the
Warrants.
To comply with the securities laws of certain jurisdictions, if applicable,
the Warrants will be offered or sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain jurisdictions
the Warrants may not be offered or sold (unless they have been registered or
qualified for sale) in such jurisdictions or an exemption from registration or
qualification is available and is complied with.
Pursuant to the Warrant Agreement, all expenses of the registration of the
Securities will be paid by IWCL, including, without limitation, Commission
filing fees; provided, however, that the Selling Holders will pay all
underwriting discounts, selling commissions and related fees, if any. Holders of
Securities and IWCL have agreed to indemnify each other against certain
liabilities, including certain liabilities arising under the Securities Act.
The Warrant Shares offered hereby are offered upon exercise of the
Warrants. The offering of the Warrant Shares will terminate upon the earlier of
(i) such time as all the Warrants have been exercised and (ii) July 15, 2005.
DESCRIPTION OF WARRANTS
The Warrants were issued pursuant to a warrant agreement (the "Warrant
Agreement") between IWCL and State Street Bank and Trust Company, as Warrant
Agent (the "Warrant Agent"). The following is a summary of certain provisions of
the Warrant Agreement. This summary does not purport to be a complete
description of the Warrant Agreement, and is qualified in its entirety by
reference to the Warrant Agreement which has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and is available upon
request to Iridium at 1575 Eye Street, N.W., Washington, D.C. 20005, Attention:
Secretary.
GENERAL
Each Warrant, when exercised, will entitle the holder thereof to receive
5.2 fully paid and non-assessable shares of Class A Common Stock of IWCL (the
"Warrant Shares") at an exercise price of $20.90 per share (the "Exercise
Price"). In the aggregate, the Warrants entitle the holders thereof to purchase
1,560,000 shares of Class A Common Stock, representing, on a fully-diluted
basis, an aggregate indirect beneficial ownership of approximately 0.874 of
Iridium, as of June 30, 1998. The Exercise Price and the number of shares of
Class A Common Stock issuable upon exercise of a Warrant are both subject to
adjustment in certain circumstances described below.
The LLC Interest Warrants provide that upon the exercise of any Warrant,
IWCL will purchase from Iridium, and Iridium will sell to IWCL, a number of
Class 1 Membership Interests equal to the number of shares of Class A Common
Stock issuable upon such exercise for a purchase price equal to the exercise
price of such Warrant.
22
<PAGE> 27
The Warrants may be exercised at any time after July 16, 1998; provided,
however, that holders of Warrants will be able to exercise their Warrants only
if this Registration Statement is effective or the exercise of the Warrants is
exempt from the registration requirements of the Securities Act, and the
Warrants and the Warrant Shares are qualified for sale or exempt from
qualification under the applicable securities laws of the states or other
jurisdictions in which such holders reside. Unless earlier exercised, the
Warrants will expire on July 15, 2005 (the "Expiration Date"). IWCL will give
notice of expiration not less than 90 nor more than 120 days prior to the
Expiration Date to the registered holders of the then outstanding Warrants. If
IWCL fails to give such notice, the Warrants will nevertheless expire and become
void on the Expiration Date.
Pursuant to the terms of the Share Issuance Agreement, IWCL purchased from
Iridium, and Iridium sold to IWCL, a corresponding number of LLC Interest
Warrants of the same tenor and terms as the Warrants, entitling IWCL to
purchase, in the aggregate, a number of Class 1 Membership Interests equal to
the aggregate number of Warrant Shares issuable in respect of the Warrants,
subject to anti-dilution adjustments. Pursuant to the terms of the Share
Issuance Agreement and the LLC Interest Warrants, upon the due and valid
exercise of any Warrant and the issuance of Warrant Shares in respect thereof,
IWCL will purchase from Iridium, and Iridium will issue and sell to IWCL, a
number of Class 1 Membership Interests equal to the aggregate number of Warrant
Shares issuable in respect of the Warrants, subject to anti-dilution
adjustments.
The Warrants may be exercised by surrendering to the Warrant Agent the
certificates evidencing such Warrants with the accompanying form of election to
purchase, properly completed and executed, together with payment of the Exercise
Price. Payment of the Exercise Price may be made in the form of cash or a
certified or official bank check payable to the order of the IWCL or by wire
transfer of funds to an account designated by IWCL. Upon surrender of the
Warrant certificate and payment of the Exercise Price, IWCL will cause The Bank
of New York, as Transfer Agent of the Class A Common Stock, or any successor
thereto, to countersign and deliver, to or upon the written order of such
holder, certificates representing the number of whole Warrant Shares or other
securities or property to which such holder is entitled under the Warrants and
Warrant Agreement, including, without limitation, any cash payable to adjust for
fractional interests in Warrant Shares issuable upon such exercise. If at the
time prior to the Expiration Date less than all of the Warrants evidenced by a
Warrant certificate are surrendered for exercise, a new Warrant certificate will
be issued for the remaining number of Warrants.
No fractional Warrant shares will be issued upon exercise of any Warrants.
If any fraction of a Warrant Share would, except for the foregoing provision, be
issuable upon the exercise of any Warrants (or specified portion thereof), IWCL
will pay an amount in cash equal to the current market price per Warrant Share,
as determined on the day immediately preceding the date the Warrant is presented
for exercise, multiplied by such fraction, computed to the nearest whole cent.
The Warrants initially were issued as fully registered securities in global
form. No service charge will be made for registration of transfer or exchange
upon surrender of any Warrant certificate at the office of the Warrant Agent
maintained for that purpose. IWCL may require payment of a sum sufficient to
cover any tax or other governmental charge that may be imposed in connection
with any registration or transfer or exchange of Warrant certificates.
In the event a bankruptcy or reorganization proceeding is commenced by or
against IWCL, a bankruptcy court may hold that unexercised Warrants are
executory contracts which may not, even if sufficient funds are available, be
entitled to receive any consideration or may receive an amount less than they
would be entitled to have received if they had been exercised prior to the
commencement of any such bankruptcy or reorganization proceeding.
The holders of the Warrants have no right to vote on matters submitted to
the stockholders of IWCL, and have no right to receive cash dividends. The
holders of the Warrants have no preemptive rights and are not entitled to share
in the assets of IWCL in the event of the liquidation, dissolution or winding up
of IWCL's affairs.
23
<PAGE> 28
ADJUSTMENTS
The number of Warrant Shares that may be purchased upon the exercise of
each Warrant and the Exercise Price are both subject to adjustment in certain
events including: (i) the payment by IWCL of dividends (or other distributions)
on Class A Common Stock of IWCL payable in shares of such Class A Common Stock
or other shares of IWCL's capital stock, (ii) subdivisions, combinations and
certain reclassifications of Class A Common Stock, (iii) the issuance to all
holders of Class A Common Stock of rights, options or warrants entitling them to
subscribe for shares of Class A Common Stock, or of securities convertible into
or exchangeable for shares of Class A Common Stock, for a consideration per
share which is less than the current market price per share (as defined in the
Warrant Agreement) of the Class A Common Stock, and (iv) the dividend or
distribution to holders of the class A Common Stock of any of IWCL's assets,
debt securities or any rights or warrants to purchase securities (excluding
those rights and warrants referred to in clause (iii) above and excluding cash
dividends or cash distributions paid out of consolidated current or retained
earnings or earned surplus). In addition, the Exercise Price may be reduced in
the event of purchase of shares of the Class A Common Stock pursuant to a tender
or exchange offer made by IWCL or any subsidiary thereof at a price greater than
the current market price of the Class A Common Stock on the business day
immediately preceding the commencement of the tender or exchange offer.
Notwithstanding the foregoing, no such adjustment will be made, directly or
indirectly, as a direct or indirect result of the issuance, acceleration or
exercise of the warrants to compensate Motorola for issuance or modification of
its guarantee and conditional guarantees of certain obligations of Iridium or
Operating, or the issuance or other distribution of membership interests or
other capital stock by Iridium. In addition, certain events described above are
subject to certain exceptions described in the Warrant Agreement, including,
without limitation, certain bona fide public offerings and private placements
and certain issuances of Class A Common Stock pursuant to employee stock
incentive plans.
No adjustment in the Exercise Price or the number of Warrant Shares
issuable upon exercise of Warrants will be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Exercise
Price or the number of Warrant Shares issuable upon exercise of Warrants;
provided, however, that any adjustment which is not made will be carried forward
and taken into account in any subsequent adjustment.
In the case of certain reclassifications, redesignations, reorganizations
or changes in the number of outstanding shares of Class A Common Stock or
consolidations or mergers of IWCL or the sale of all or substantially all of the
assets of IWCL, each Warrant shall thereafter be exercisable for the right to
receive the kind and amount of shares of stock or other securities or property
to which such holder would have been entitled as a result of such consolidation,
merger or sale had the Warrants been exercised immediately prior thereto.
However, if (i) IWCL consolidates, merges or sells all or substantially all of
its assets to another person and, in connection therewith, the consideration
payable to the holder of Class A Common Stock in exchange for their shares is
payable solely in cash or (ii) there is a dissolution, liquidation or winding-up
of IWCL, then the holders of the Warrants will be entitled to receive, upon
surrender of their Warrant certificates, distributions on an equal basis with
the holders of IWCL Class A Common Stock or other securities issuable upon
exercise of the Warrants, as if the Warrants had been exercised immediately
prior to such event, less the Exercise Price. Upon receipt of such payment, if
any, the Warrants will expire and the rights of holders thereof will cease. In
the case of any such consolidation, merger or sale of assets, the surviving or
acquiring person and, in the event of any dissolution, liquidation or winding up
of IWCL, IWCL must deposit promptly with the Warrant Agent the funds, if any,
required to pay the holders of the Warrants. After such funds and the
surrendered Warrant certificate are received, the Warrant Agent is required to
deliver a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate) to
such persons as it may be directed in writing by the holders surrendering such
Warrants.
In the event of a taxable distribution to holders of Class A Common Stock
of IWCL which results in an adjustment to the number of shares of Class A Common
Stock or other consideration for which a Warrant
24
<PAGE> 29
may be exercised, the holders of the Warrants may, in certain circumstances, be
deemed to have received a distribution subject to United States Federal income
tax as a dividend. See "Tax Considerations."
RESERVATION OF SHARES
IWCL has authorized and reserved for issuance such number of shares of
Class A Common Stock as shall be issuable upon the exercise of all outstanding
Warrants. Such shares of Class A Common Stock, when paid for and issued, will be
duly and validly issued, fully paid and non-assessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issue thereof.
AMENDMENT
From time to time, IWCL and the Warrant Agent, without the consent of the
holders of the Warrants, may amend or supplement the Warrant Agreement for
certain purposes, including, without limitation, curing defects or
inconsistencies or making any change that does not adversely affect the rights
of any holder. Any amendment or supplement to the Warrant Agreement that has an
adverse effect on the interests of the holders of the Warrants will require the
written consent of the holders of a majority of the then outstanding Warrants
issued in the Offerings taken as a single class (excluding any Warrants held by
IWCL or any of its Affiliates). The consent of each holder of the Warrants
affected will be required for any amendment pursuant to which the Exercise Price
would be increased or the number of Warrant Shares purchasable upon exercise of
Warrants would be decreased (other than pursuant to adjustments provided in the
Warrant Agreement) or the exercise period with respect to the Warrants would be
shortened.
REPORTS
Whether or not required by the rules and regulations of the Commission, so
long as any of the Warrants remain outstanding, but only to the extent it is
required to send such documents to the holders of IWCL's outstanding Class A
Common Stock, IWCL will cause copies of the reports and other documents to be
filed with the Warrant Agent and mailed to the holders of the Warrants at their
addresses appearing in the register of Warrants maintained by the Warrant Agent.
REGISTRATION RIGHTS
Registration of Warrants
Under the Warrant Agreement, IWCL is obligated to use its reasonable
efforts to keep the Registration Statement of which this Prospectus is a part
effective until (i) as to the Warrants, the earliest of (x) such time as all the
Warrants have been sold thereunder, (y) two years after its effective date and
(z) such time as the Warrants can be sold by non-affiliates of IWCL without
restriction under the Securities Act, and (ii) as to the Warrant Shares, the
earlier of (a) such time as all Warrants have been exercised and (b) the
Expiration Date.
Each holder of Warrants that sells such Warrants pursuant to the
Registration Statement of which this Prospectus is a part generally will be
required to be named as a selling securityholder in the related prospectus and
to deliver a prospectus to the purchaser, will be subject to certain of the
civil liability provisions under the Securities Act in connection with such
sales and will be bound by certain provisions of the Warrant Agreement which are
applicable to such holder (including certain indemnification obligations).
During any consecutive 365-day period, IWCL shall be entitled to suspend
the availability of the Registration Statement of which this Prospectus is a
part for up to two 45 consecutive-day periods (except for the 45 consecutive-day
period immediately prior to the Expiration Date) if the IWCL Board determines in
the exercise of its reasonable judgment that there is a valid business purpose
for such suspension and provides notice that such determination was made to the
holders of the Warrants; provided, however, that in no event shall IWCL be
required to disclose the business purpose for such suspension if IWCL determines
in good faith that such business purpose must remain confidential. There can be
no assurance that IWCL will be able to keep the Registration Statement of which
this Prospectus is a part continuously effective until all of the Warrants have
been exercised or have expired.
25
<PAGE> 30
TAX CONSIDERATIONS
TAXATION OF THE ISSUER
Iridium is intended to be treated as a partnership for United States
federal income tax purposes. As a Class 1 Member of Iridium, IWCL will be
subject to United States federal income tax on its distributive share of the
income of Iridium that is effectively connected with the conduct of a trade or
business in the United States, without regard to whether any distribution has
been received from Iridium. IWCL's share of Iridium's effectively connected
income may also under certain circumstances be subject to "branch profits tax"
at a 30% rate. IWCL's ability to use net operating losses may be limited under
Section 382 of the Code as a result of subsequent issuances of IWCL stock.
UNITED STATES FEDERAL INCOME TAXATION
The following is a summary of certain United States federal income tax
consequences of the ownership of Warrants and Class A Common Stock by an
investor that holds the Warrants and Class A Common Stock as capital assets.
This summary does not purport to address all material tax consequences of the
ownership of Warrants and Class A Common Stock, and does not take into account
the specific circumstances of any particular investors (such as tax-exempt
entities, certain insurance companies, broker-dealers, regulated investment
companies, traders in securities that elect to mark to market, investors liable
for alternative minimum tax, investors that actually or constructively own 10%
or more of the voting stock of IWCL, investors that hold Warrants and Class A
Common Stock as part of a straddle or a hedging or conversion transaction or
investors whose functional currency is not the U.S. dollar), some of which may
be subject to special rules. This summary is based on the tax laws of the United
States (including the Internal Revenue Code of 1986, as amended, its legislative
history, existing and proposed regulations thereunder, published rulings and
court decisions) as in effect on the date hereof, all of which are subject to
change (or changes in interpretation), possibly with retroactive effect. This
summary does not address state or local taxes. Each holder should consult its
own tax advisor as to the United States federal, state and local tax
consequences of the ownership and disposition of Warrants and Class A Common
Stock.
For purposes of this discussion, a "U.S. Holder" is any beneficial owner of
Warrants and Class A Common Stock that is (i) a citizen or resident of the
United States, (ii) a corporation organized under the laws of the United States
or any State, (iii) an estate the income of which is subject to United States
federal income tax without regard to its source or (iv) a trust if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States persons have the
authority to control all substantial decisions of the trust. A "Non-U.S. Holder"
is any beneficial owner of Warrants and Class A Common Stock that is not a
United States person for United States federal income tax purposes.
U.S. HOLDERS
OWNERSHIP AND DISPOSITION OF WARRANTS
Sale of a Warrant. Generally, a U.S. Holder of a Warrant will recognize
gain or loss upon the sale of a Warrant in an amount equal to the difference
between the amount realized on the sale and the U.S. Holder's adjusted tax basis
for the Warrant. A U.S. Holder's adjusted tax basis in a Warrant will generally
equal its cost, increased by the amount of any constructive distributions to the
U.S. Holder in respect of the Warrants as a result of an adjustment to the
conversion ratio. See "-- Adjustments Under the Warrants," below. Gain or loss
attributable to the sale of an option to buy or sell property is considered gain
from the sale of the property that has the same character as the property to
which the option relates. Because the Warrants relate to stock, gains or losses
attributable to the sale of the Warrants will generally constitute capital gains
and losses if the stock would be a capital asset in the hands of the Warrant
holder and will be long term if the Warrants have been held for more than one
year.
Exercise of a Warrant, Disposition of Common Shares, and Dividends. In
general, no gain or loss will be recognized by a U.S. Holder upon the exercise
of a Warrant (except with respect to cash, if any, paid in
26
<PAGE> 31
lieu of the issuance of fractional shares of Class A Common Stock). Upon
exercise of a Warrant with cash, the holder's tax basis in the shares so
acquired will be the sum of (a) the holders' adjusted tax basis in the Warrant
and (b) the cash paid upon exercise of the Warrant. If any cash is received in
lieu of fractional shares of Class A Common Stock, the holder will recognize
gain or loss, and the character and amount of gain or loss will be determined as
if the holder had received such fractional shares and then immediately sold them
for cash.
Expiration of the Warrants. Upon the expiration of an unexercised Warrant,
the holder will recognize a loss equal to the adjusted tax basis of the Warrant
in the hands of the holder. The character of the loss realized upon the failure
to exercise an option is determined based on the character of the property to
which the option relates. Since the Warrants relate to stock, a loss realized
upon expiration of the Warrant will generally be a capital loss if the stock
would have been a capital asset in the hands of the Warrantholder and will be
long term if the Warrant was held for more than one year.
Adjustments Under the Warrants. Pursuant to the terms of the Warrants, the
number of shares of Class A Common Stock that may be purchased upon exercise of
the Warrants is subject to adjustment from time to time upon the occurrence of
certain events. In certain circumstances, a change in conversion ratio or any
transaction having a similar effect on the interest of a Warrant holder may be
treated as a distribution with respect to any Warrant holder whose proportionate
interest in the earnings and profits of the issuer is increased by such change
or transaction. Thus, under certain circumstances which may or may not occur,
such an adjustment pursuant to the terms of the Warrants may be treated as a
taxable distribution to the Warrant holders to the extent of the IWCL's current
or accumulated earnings and profits (as determined for United States federal
income tax purposes), without regard to whether the Warrant holders receive any
cash or other property. If the Warrant holders receive such a taxable
distribution, their tax bases in the Warrants will be increased by an amount
equal to the taxable distribution.
OWNERSHIP AND DISPOSITION OF SHARES OF CLASS A COMMON STOCK
Taxation of Dividends and Stock Distributions
Under the United States federal income tax laws, and subject to the passive
foreign investment company ("PFIC") rules discussed below, distributions by IWCL
with respect to its Class A Common Stock will be includible in the gross income
of a U.S. Holder as ordinary dividend income to the extent paid out of current
or accumulated earnings and profits of IWCL, as determined for United States
federal income tax purposes. Dividends will not be eligible for the dividends
received deduction generally allowed to U.S. Holders that are corporations.
Any dividends paid in foreign currency will be includible in the income of
a U.S. Holder in a U.S. dollar amount calculated by reference to the prevailing
market exchange rate in effect on the date the dividends become includible in
the U.S. Holder's income. Generally, any gain or loss resulting from currency
exchange fluctuations during the period from the date that the dividend becomes
includible in the U.S. Holder's income to the date that the foreign currency is
converted into U.S. dollars will be treated as ordinary income or loss.
If less than 25% of IWCL's gross income for the three years preceding the
year in which a dividend is declared (or for the portion of the three-year
period during which IWCL has been in existence, if shorter) was effectively
connected with the conduct of a U.S. trade or business, the dividend generally
will constitute foreign source "passive income" (or in the case of certain
holders, "financial services income") for U.S. foreign tax credit purposes. If
25% or more of IWCL's gross income for such period was "effectively connected"
income, the dividend will be United States source in the same proportion that
IWCL's "effectively connected" income for such period bears to IWCL's total
gross income for the period, and the remainder will constitute foreign source
"passive income" (or in the case of certain holders, "financial services
income") for U.S. foreign tax credit purposes.
Distributions of additional shares of Class A Common Stock to U.S. Holders
with respect to shares of Class A Common Stock that are part of a pro rata
distribution to all shareholders of IWCL generally will not be subject to U.S.
federal income tax.
27
<PAGE> 32
Taxation of Capital Gains
Subject to the PFIC rules discussed below, upon a sale or other disposition
of Class A Common Stock, a U.S. Holder will recognize gain or loss for United
States federal income tax purposes in an amount equal to the difference between
the U.S. dollar value of the amount realized and the U.S. Holder's tax basis
(determined in U.S. dollars) in such Class A Common Stock. Generally, such gain
or loss will be capital gain or loss, will be long-term capital gain or loss if
the U.S. Holder's holding period for such Class A Common Stock exceeds one year
and any such gain will be income from sources within the United States for
foreign tax credit limitation purposes.
Passive Foreign Investment Company Rules
Under the passive foreign investment company ("PFIC") rules, a foreign
corporation will generally be a PFIC in any taxable year of the foreign
corporation in which either at least 75 percent of its gross income is "passive
income" or at least 50 percent of its assets are "passive assets." For purposes
of the PFIC tests, passive income generally includes interest, dividends, rents
and royalties (other than rents and royalties derived in the active conduct of a
trade or business and not derived from a related person), annuities and gains
from the sale or disposition of assets that produce passive income, and passive
assets generally include assets producing or held for the production of such
income. The following discussion assumes that IWCL should, under current law, be
treated for the purposes of the PFIC tests as owning its share of Iridium's
gross assets and as earning directly its share of Iridium gross income. IWCL
would be a PFIC if it were not permitted to treat itself as owning its share of
Iridium's assets and earning directly its share of Iridium's gross income for
the purposes of the PFIC tests.
Because Iridium had substantial temporary investments in securities, more
than 75 percent of IWCL's gross income for 1997 was passive income for purposes
of the PFIC income test. Under the PFIC rules, however, a foreign corporation
will not be considered a PFIC in the first year in which it has gross income
(the start-up year) if (i) no predecessor of such corporation was a PFIC, (ii)
it is established to the satisfaction of the Internal Revenue Service that such
corporation will not be a PFIC for either of the first two taxable years
following the start-up year and (iii) such corporation is not in fact a PFIC for
either of the first two taxable years following the start-up year. Under this
exception to PFIC classification, IWCL does not expect that it will have been a
PFIC for 1997.
Moreover, based on the manner in which Iridium currently intends to operate
its business in future years, IWCL does not expect to be a PFIC for any future
year. However, since the determination of whether the shares of Class A Common
Stock constitute shares of a PFIC must be made annually based upon the
composition of the income and assets of IWCL, Iridium and any corporation in
which IWCL or Iridium holds a 25-percent-or-more interest, there can be no
assurance that the shares of Class A Common Stock will not be considered shares
of a PFIC for any taxable year. Furthermore, if IWCL were determined to be a
PFIC in 1998, the start-up exception outlined in the previous paragraph would be
inapplicable and IWCL would be considered a PFIC for 1997 as well.
Generally, if a share of Class A Common Stock were treated as stock of a
PFIC for any taxable year during which a U.S. Holder held such share, the entire
gain recognized by such U.S. Holder on a sale or other disposition of the share
would be allocated ratably over the U.S. Holder's holding period for the share.
The amounts allocated to the taxable year of the sale or other disposition and
to any year before IWCL became a PFIC would be taxed as ordinary income. The
amount allocated to each other taxable year would be subject to tax at the
highest applicable ordinary income rate in effect for such taxable year, and an
interest charge would be imposed on the amount allocated to such taxable year.
All such tax and interest would be included in the U.S. Holder's U.S. federal
income tax liability for the taxable year in which the sale or other disposition
took place. Further, any distribution in respect of shares of Class A Common
Stock in excess of 125 percent of the average of the annual distributions on
shares of Class A Common Stock received by the U.S. Holder during the preceding
three years or the U.S. Holder's holding period, whichever is shorter, would be
subject to taxation as described above.
28
<PAGE> 33
The special PFIC tax rules described above will not apply to a U.S. Holder
if (i) the U.S. Holder elects to have IWCL treated as a "qualified electing
fund" (a "QEF election") for each taxable year during the U.S. Holder's holding
period in which IWCL is a PFIC and (ii) IWCL provides certain information
necessary to enable the U.S. Holder to make a QEF election. IWCL currently
intends to provide upon the request of any U.S. Holder the information necessary
to make a QEF election.
A U.S. Holder that makes a QEF election generally will be currently taxable
on its pro rata share of IWCL's ordinary earnings and net capital gain (at
ordinary and capital gain rates, respectively) for each taxable year of IWCL,
regardless of whether or not distributions were received. However, a U.S. Holder
that makes a QEF election covering each taxable year of IWCL during the U.S.
Holder's holding period in which IWCL is a PFIC will not be currently taxable on
its pro rata share of IWCL's undistributed ordinary earnings and net capital
gain in any year in which IWCL is not a PFIC.
If a U.S. Holder is taxed on its pro rata share of IWCL's ordinary earnings
and net capital gain, the U.S. Holder's basis in shares of Class A Common Stock
will be increased to reflect taxed but undistributed income. Distributions that
have been taxed previously will result in a corresponding reduction of basis in
shares of Class A Common Stock and will not be taxed again as a distribution to
the U.S. Holder.
For taxable years beginning after 1997, a U.S. Holder of shares of stock in
a PFIC that are treated as "marketable stock" may also make a mark-to-market
election. An electing shareholder will not be subject to the PFIC rules
described above. Instead, in general, an electing shareholder will include in
each year as ordinary income the excess, if any, of the fair market value of the
Class A Common Stock at the end of the taxable year over its adjusted basis and
will be permitted an ordinary loss in respect of the excess, if any, of the
adjusted basis of the Class A Common Stock over its fair market value at the end
of the taxable year (but only to the extent of the net amount of previously
included income as a result of the mark-to-market election). The basis in the
Class A Common Stock of a U.S. Holder making the mark-to-market election will be
adjusted to reflect any such income or loss amounts.
A U.S. Holder who owns shares of Class A Common Stock during any year in
which IWCL is a PFIC must file Internal Revenue Service Form 8621.
NON-U.S. HOLDERS
A Non-U.S. Holder of Warrants or shares of Class A Common Stock will not be
subject to U.S. federal income tax on dividends paid with respect to, or gains
realized on the sale or other disposition of, Warrants or shares of Class A
Common Stock, unless (i) such dividend or gain is effectively connected with the
conduct by the holder of a trade or business in the United States (and is
attributable to a permanent establishment maintained in the United States by
such Non-U.S. Holder, if an applicable income tax treaty so requires as a
condition for such Non-U.S. Holder to be subject to U.S. taxation on a net
income basis in respect of income from or gain from the sale of Warrants or
shares of Class A Common Stock), in which case the Non-U.S. Holder generally
will be subject to tax in respect of such income or gains in the same manner as
a U.S. Holder, or (ii) in the case of gain realized by an individual holder, the
holder is present in the United States for 183 days or more during the taxable
year of the sale and certain other conditions are met. Effectively connected
income realized by a corporate Non-U.S. Holder may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty. If
dividends paid with respect to shares of Class A Common Stock are not subject to
U.S. federal income tax as described above, that portion of the dividends
received by a Non-U.S. Holder that is attributable to the conduct by Iridium of
a trade or business within the United States will be subject to a 30%
withholding tax if, for the three-year period ending with the close of IWCL's
taxable year preceding the declaration of such dividends, or for such part of
that period as IWCL was in existence, 25% or more of IWCL's gross income was
effectively connected with the conduct of a trade or business within the United
States, although IWCL believes that this 25% test will not be met and,
accordingly, that dividends paid to Non-U.S. Holders will not be subject to the
withholding tax described above.
29
<PAGE> 34
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to dividend
payments (or other taxable distributions) in respect of shares of Class A Common
Stock made within the United States to a non-corporate United States person, and
"backup withholding" at the rate of 31% will apply to such payments if the
holder or beneficial owner fails to provide an accurate taxpayer identification
number in the manner required by United States law and applicable regulations,
if there has been notification from the Internal Revenue Service of a failure by
the holder or beneficial owner to report all interest or dividends required to
be shown on its federal income tax returns or, in certain circumstances, if the
holder or beneficial owner fails to comply with applicable certification
requirements. Certain corporations and persons that are not United States
persons may be required to establish their exemption from information reporting
and backup withholding by certifying their status on Internal Revenue Service
Forms W-8 or W-9.
In general, payment of the proceeds from the sale of Warrants or shares of
Class A Common Stock to or through a United States office of a broker is subject
to both United States backup withholding and information reporting unless the
holder or beneficial owner certifies its non-United States status under
penalties of perjury or otherwise establishes an exemption. United States
information reporting and backup withholding generally will not apply to a
payment made outside the United States of the proceeds of a sale of Warrants or
shares of Class A Common Stock through an office outside the United States of a
non-United States broker. However, United States information reporting
requirements (but not backup withholding) will apply to a payment made outside
the United States of the proceeds of a sale of Warrants or shares of Class A
Common Stock through an office outside the United States of a broker (i) that is
a United States person, (ii) that derives 50% or more of its gross income for a
specified three-year period from the conduct of a trade or business in the
United States, (iii) that is a "controlled foreign corporation" as to the United
States, or (iv) with respect to payments made after December 31, 1999, that is a
foreign partnership, if at any time during its tax year, one or more of its
partners are U.S. persons (as defined in U.S. Treasury regulations) who in the
aggregate hold more than 50% of the income or capital interest in the
partnership or if, at any time during its tax year, such foreign partnership is
engaged in a United States trade or business, unless the broker has documentary
evidence in its files that the holder or beneficial owner is a non-United States
person or the holder or beneficial owner otherwise establishes an exemption.
Amounts withheld under the backup withholding rules may be credited against
a holder's tax liability, and a holder may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for
refund with the United States Internal Revenue Service.
VALIDITY OF THE WARRANTS AND WARRANT SHARES
The validity of the Warrant Shares offered hereby will be passed upon for
IWCL by Conyers, Dill & Pearman, Hamilton, Bermuda. The validity of the Warrants
offered hereby will be passed upon for IWCL by Sullivan & Cromwell, Washington,
D.C.
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 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, incorporated by reference
herein, and upon the authority of said firm as experts in accounting and
auditing.
30
<PAGE> 35
- ------------------------------------------------------
- ------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY IWCL, THE
SELLING HOLDERS OR ANY UNDERWRITER, DEALER OR AGENT. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF IWCL OR
IRIDIUM SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................. i
Incorporation By Reference............ i
Forward-Looking Statements............ ii
Prospectus Summary.................... 1
Risk Factors.......................... 3
Use of Proceeds....................... 7
Recent Developments................... 7
Governance of IWCL and Relationship
with Iridium........................ 8
Description of Iridium Limited
Liability Company Agreement......... 12
Selling Holders....................... 20
Plan of Distribution.................. 21
Description of Warrants............... 22
Tax Considerations.................... 26
Validity of the Warrants and
Warrant Shares...................... 30
Experts............................... 30
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
[IRIDIUM LOGO]
IRIDIUM WORLD
COMMUNICATIONS LTD.
------------------------
300,000 WARRANTS
TO PURCHASE
1,560,000 SHARES OF
CLASS A COMMON STOCK
, 1998
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 36
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
Registrant in connection with this offering, other than underwriting discounts
and commissions. All the amounts shown are estimates, except the SEC
registration fee:
<TABLE>
<S> <C>
SEC registration fee........................................ $ 25,024
Nasdaq National Market listing fee.......................... 17,500
Printing fees............................................... 25,000
Legal fees and expenses..................................... 50,000
Blue Sky fees and expenses (including legal fees)........... 12,000
Accounting fees and expenses................................ 20,000
Miscellaneous fees and expenses............................. 10,476
--------
Total....................................................... $160,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Bermuda law permits a company to indemnify its directors and officers,
except for any act of willful negligence, willful default, fraud or dishonesty.
The Registrant 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 the Registrant also permit the Registrant
to purchase insurance for the benefit of its directors and officers against any
liability incurred by them for the failure to exercise the requisite care,
diligence and skill in the exercise of their powers and the discharge of their
duties, or indemnifying them in respect of any loss arising or liability
incurred by them by reason of negligence, default, breach of duty or breach of
trust.
The Registrant has entered into indemnification agreements with its
officers and directors. To the extent permitted by law, the indemnification
agreements may require the Registrant, among other things, to indemnify such
officers and directors against certain liabilities that may arise by reason of
their status or service as directors (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
indemnified.
The Registrant maintains a directors' and officers' liability insurance
policy.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
3.1 Limited Liability Company Agreement of Iridium LLC, dated as
of July 29, 1996, as amended: Incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1 of
Iridium World Communications Ltd. and Iridium LLC
(Registration Nos. 333-23419 and 333-23419-01) (the "Form
S-1").
3.2 Memorandum of Association of Iridium World Communications
Ltd.: Incorporated by reference to Exhibit 3.1 to the Form
S-1.
3.3 Bye-Laws of Iridium World Communications Ltd.: Incorporated
by reference to Exhibit 3.2 to the Form S-1.
4.1.1 Warrant Agreement dated July 16, 1997.*
</TABLE>
II-1
<PAGE> 37
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
4.1.2 Form of Class A Common Stock Certificate: Incorporated by
reference to Exhibit 4.1 of the Form S-1.
5.1 Opinion of Conyers Dill & Pearman.*
5.2 Opinion of Sullivan & Cromwell.*
10.1 Form of Interest Exchange Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.2 to the Form
S-1.
10.2 Form of amended and restated Management Services Agreement
between IWCL, Iridium LLC and Iridium Operating LLC:
Incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-4 of Iridium Operating LLC,
Iridium Capital Corporation, Iridium Roaming LLC and Iridium
IP LLC (Registration No. 333-44349, - 01, -02, -03 and -04)
(the "1998 Form S-4").
10.3 Space System Contract between Iridium LLC and Motorola, Inc.
effective July 29, 1993, as amended and conformed on January
14, 1997: Incorporated by reference to Exhibit 10.6 to the
Form S-1.+
10.4 Communications System Operations & Maintenance Contract
between Iridium LLC and Motorola, Inc. effective July 29,
1993, as amended and conformed on January 14, 1997:
Incorporated by reference to Exhibit 10.7 to the Form S-1.+
10.5 Terrestrial Network Development Contract between Iridium LLC
and Motorola, Inc. effective January 1, 1993, as amended and
conformed on January 14, 1997: Incorporated by reference to
Exhibit 10.8 to the Form S-1.+
10.6 Amendment No. 3 to the Terrestrial Network Development
Contract between Iridium LLC and Motorola, Inc. effective
June 20, 1997: Incorporated by reference to Exhibit 10.7 to
the Registration Statement on Form S-4 of Iridium LLC,
Iridium Capital Corporation, Iridium Roaming LLC and Iridium
IP LLC (Registration Nos. 333-31741, -01, -02 and -03) (the
"1997 Form S-4").+
10.7 Amendment No. 4 to the Terrestrial Network Development
Contract between Iridium LLC and Motorola, Inc., effective
May 8, 1998.* ++
10.8 Support Agreement between Iridium LLC and Motorola, Inc.:
Incorporated by reference to Exhibit 10.9 to the Form S-1.
10.9 Agreement, executed as of December 16, 1996, between
Andersen Consulting LLC and Iridium LLC relating to the
development of business support systems: Incorporated by
reference to Exhibit 10.10 to the Form S-1.+
10.10 14 1/2% Senior Subordinated Discount Notes Due 2006 of
Iridium: Incorporated by reference to Exhibit 10.11 to the
Form S-1.
10.11 Form of Warrant issued in respect of 14 1/2% Senior
Subordinated Discount Notes: Incorporated by reference to
Exhibit 10.13 to the Form S-1.
10.12 Warrant to purchase Series M Class 2 Interests dated July
29, 1993, as amended: Incorporated by reference to Exhibit
10.13 to the Form S-1.
10.13 Form of Gateway Authorization Agreement: Incorporated by
reference to Exhibit 10.14 to the Form S-1.
10.14 Guaranteed Bank Facility: Incorporated by reference to
Exhibit 10.15 to the Form S-1.
10.15 Amendment dated December 19, 1997 to Guaranteed Bank
Facility: Incorporated by reference to Exhibit 10.15 of the
Report for the fiscal year ended December 31, 1997 on Form
10-K of IWCL, Iridium, and its subsidiaries (the "1997 Form
10-K").
10.16 Motorola Agreement regarding Guarantee: Incorporated by
reference to Exhibit 10.16 to the Form S-1.
10.17 Amended and Restated Agreement regarding Guarantee:
Incorporated by reference to Exhibit 10.17 to the 1997 Form
S-4.
10.18 Second Amended and Restated Agreement regarding Guarantee.*
10.19 Memorandum of Understanding with Motorola, Inc: Incorporated
by reference to Exhibit 10.18 to the 1997 Form S-4.
</TABLE>
II-2
<PAGE> 38
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
10.20 Form of Share Issuance Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.17 to the Form
S-1.
10.21 Iridium LLC Option Plan: Incorporated by reference to
Exhibit 10.5 to the Form S-1.
10.22 Iridium LLC Selected Senior Officers' Supplementary
Retirement Plan: Incorporated by reference to Exhibit 10.27
to the 1997 Form S-4.
10.23 Agreement between Dr. Staiano and Iridium LLC: Incorporated
by reference to Exhibit 10.28 to the 1997 Form S-4.
10.24 Asset Transfer Agreement: Incorporated by reference to
Exhibit 10.25 to the 1998 Form S-4.
10.25 Consent of Arthur Andersen LLP to Contract Assignment:
Incorporated by reference to Exhibit 10.26 to the 1998 Form
S-4.
10.26 Consent of Motorola Inc. to Contract Assignment:
Incorporated by reference to Exhibit 10.27 to the 1998 Form
S-4.
10.27 Form of Credit Agreement among Iridium Operating LLC, Chase
Securities Inc., Barclays Capital, The Chase Manhattan Bank
and Barclays Bank PLC: Incorporated by reference to Exhibit
10.28 of the 1997 Form 10-K.
10.28 Conditions Precedent to the Disbursement of the Term Loans
under Section 2.01(a) of the Credit Agreement: Incorporated
by reference to Exhibit 10.29 of the 1997 Form 10-K.
10.29 Regulatory and Technical Conditions Precedent to
availability of funding under the Credit Agreement:
Incorporated by reference to Exhibit 10.30 of the 1997 Form
10-K.
10.30 Form of Assignment and Acceptance under the Credit
Agreement: Incorporated by reference to Exhibit 10.31 of the
1997 Form 10-K.
10.31 Form of Pledge and Security Agreement among Iridium
Operating LLC, each of the Subsidiaries and The Chase
Manhattan Bank: Incorporated by reference to Exhibit 10.32
of the 1997 Form 10-K.
10.32 Form of Parent Security Agreement between Iridium Operating
LLC and The Chase Manhattan Bank: Incorporated by reference
to Exhibit 10.33 of the 1997 Form 10-K.
10.33 Form of Subsidiary Guarantee Agreement between each of the
Subsidiary Guarantors and The Chase Manhattan Bank:
Incorporated by reference to Exhibit 10.34 of the 1997 Form
10-K.
10.34 Form of Subsidiary Guarantee Assumption Agreement:
Incorporated by reference to Exhibit 10.35 of the 1997 Form
10-K.
10.35 Form of Depositary Agreement between Iridium Operating LLC
and The Chase Manhattan Bank: Incorporated by reference to
Exhibit 10.36 of the 1997 Form 10-K.
10.36 Form of Motorola Consent under the Credit Agreement among
Motorola, Iridium Operating LLC and The Chase Manhattan
Bank: Incorporated by reference to Exhibit 10.37 of the 1997
Form 10-K.
10.37 Form of Motorola Pledge Agreement between Motorola, Inc. and
The Chase Manhattan Bank: Incorporated by reference to
Exhibit 10.38 of the 1997 Form 10-K.
10.38 Form of Progress Certificate (Pre-Commercial Activation)
under the Credit Agreement: Incorporated by reference to
Exhibit 10.39 of the 1997 Form 10-K.
10.39 Form of Verification of Independent Technical Advisor under
the Credit Agreement: Incorporated by reference to Exhibit
10.40 of the 1997 Form 10-K.
10.40 Form of Progress Certificate (Post-Commercial Activation)
under the Credit Agreement: Incorporated by reference to
Exhibit 10.41 of the 1997 Form 10-K.
10.41 Form of Borrowing Request under the Credit Agreement:
Incorporated by reference to Exhibit 10.42 of the 1997 Form
10-K.
</TABLE>
II-3
<PAGE> 39
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
10.42 Form of Standby Purchase Agreement between Iridium Operating
LLC and Motorola, Inc.: Incorporated by reference to Exhibit
10.44 to the Registration Statement on Form S-1 of Iridium
Operating LLC, Iridium IP LLC, Iridium Roaming LLC, Iridium
Capital Corporation and Iridium Facilities Corporation
(Registration Nos. 333-51099, -01, -02, -03 and -04) (the
"1998 Form S-1").
10.43 Form of Standby Purchase Agreement between Iridium Operating
LLC and Kyocera Corporation: Incorporated by reference to
Exhibit 10.45 to the 1998 Form S-1.
23.1 Consent of KPMG Peat Marwick LLP.**
23.2 Consent of Conyers, Dill & Pearman (contained in Exhibit
5.1).
23.3 Consent of Sullivan & Cromwell (contained in Exhibit 5.2).
99 Certain Factors Which May Affect Forward Looking Statements:
Incorporated by reference to Exhibit 99 of the 1997 Form
10-K.
</TABLE>
- ---------------
* Filed previously.
** Filed herewith.
+ Confidential treatment previously granted.
++ Confidential treatment requested.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales 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 a 20% 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 information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the 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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective 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.
II-4
<PAGE> 40
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
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
the registrant pursuant to the provisions described under item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding), is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-5
<PAGE> 41
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrants
certify that they have reasonable grounds to believe that they meet all of the
requirements for filing on Form S-3 and have duly caused this Registration
Statement to be signed on their behalf by the undersigned, thereunto duly
authorized, in the City of Washington, District of Columbia on July 29, 1998.
IRIDIUM WORLD COMMUNICATIONS LTD.
By: /s/ EDWARD F. STAIANO
------------------------------------
Edward F. Staiano
Chairman and Chief Executive Officer
Date: July 30, 1998
IRIDIUM LLC
By: /s/ ROBERT W. KINZIE
------------------------------------
Robert W. Kinzie
Chairman
Date: July 30, 1998
II-6
<PAGE> 42
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>
* Director of Iridium World July 30, 1998
- ------------------------------------------------ Communications Ltd. and Chairman of
Robert W. Kinzie Iridium LLC
* Chairman and Chief Executive Officer July 30, 1998
- ------------------------------------------------ of Iridium World Communications Ltd.
Edward F. Staiano and Vice Chairman and Chief Executive
Officer of Iridium LLC
* Chief Financial Officer of Iridium July 30, 1998
- ------------------------------------------------ World Communications Ltd. and Vice
Roy Grant President-Chief Financial Officer of
Iridium LLC
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Aburizal Bakrie
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Hasan M. Binladin
Director of Iridium LLC July 1998
- ------------------------------------------------
Gordon J. Comerford
Director of Iridium LLC July 1998
- ------------------------------------------------
Atilano de Oms Sobrinho
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Robert A. Ferchat
Deputy Chairman and Director of July 1998
- ------------------------------------------------ Iridium World Communications Ltd. and
Alberto Finol Director of Iridium LLC
Director of Iridium LLC July 1998
- ------------------------------------------------
Edward Gams
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Durrell Hillis
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Kazuo Inamori
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
S. H. Khan
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Anatoly I. Kiselev
* Director of Iridium World July 30, 1998
- ------------------------------------------------ Communications Ltd. and Iridium LLC
Richard L. Lesher
Director of Iridium LLC July 1998
- ------------------------------------------------
John F. Mitchell
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Jung L. Mok
</TABLE>
II-7
<PAGE> 43
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<C> <S> <C>
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Giuseppe Morganti
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
J. Michael Norris
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Yusai Okuyama
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
John A. Richardson
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Theodore H. Schell
* Director of Iridium World July 30, 1998
- ------------------------------------------------ Communications Ltd. and Iridium LLC
William A. Schreyer
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Sribhumi Sukhanetr
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Tao-Tsun Sun
* Director of Iridium World July 30, 1998
- ------------------------------------------------ Communications Ltd. and Iridium LLC
Yoshiharu Yasuda
Director of Iridium LLC July 1998
- ------------------------------------------------
Wang Mei Yue
* Director of Iridium LLC July 30, 1998
- ------------------------------------------------
Peter Zaboji
*By: /s/ F. THOMAS TUTTLE
------------------------------------------
F. Thomas Tuttle
Attorney-In-Fact
</TABLE>
II-8
<PAGE> 44
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
3.1 Limited Liability Company Agreement of Iridium LLC, dated as
of July 29, 1996, as amended: Incorporated by reference to
Exhibit 10.1 to the Registration Statement on Form S-1 of
Iridium World Communications Ltd. and Iridium LLC
(Registration Nos. 333-23419 and 333-23419-01) (the "Form
S-1").
3.2 Memorandum of Association of Iridium World Communications
Ltd.: Incorporated by reference to Exhibit 3.1 to the Form
S-1.
3.3 Bye-Laws of Iridium World Communications Ltd.: Incorporated
by reference to Exhibit 3.2 to the Form S-1.
4.1.1 Warrant Agreement dated July 16, 1997.*
4.1.2 Form of Class A Common Stock Certificate: Incorporated by
reference to Exhibit 4.1 of the Form S-1.
5.1 Opinion of Conyers Dill & Pearman.*
5.2 Opinion of Sullivan & Cromwell.*
10.1 Form of Interest Exchange Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.2 to the Form
S-1.
10.2 Form of amended and restated Management Services Agreement
between IWCL, Iridium LLC and Iridium Operating LLC:
Incorporated by reference to Exhibit 10.2 to the
Registration Statement on Form S-4 of Iridium Operating LLC,
Iridium Capital Corporation, Iridium Roaming LLC and Iridium
IP LLC (Registration No. 333-44349, - 01, -02, -03 and -04)
(the "1998 Form S-4").
10.3 Space System Contract between Iridium LLC and Motorola, Inc.
effective July 29, 1993, as amended and conformed on January
14, 1997: Incorporated by reference to Exhibit 10.6 to the
Form S-1.+
10.4 Communications System Operations & Maintenance Contract
between Iridium LLC and Motorola, Inc. effective July 29,
1993, as amended and conformed on January 14, 1997:
Incorporated by reference to Exhibit 10.7 to the Form S-1.+
10.5 Terrestrial Network Development Contract between Iridium LLC
and Motorola, Inc. effective January 1, 1993, as amended and
conformed on January 14, 1997: Incorporated by reference to
Exhibit 10.8 to the Form S-1.+
10.6 Amendment No. 3 to the Terrestrial Network Development
Contract between Iridium LLC and Motorola, Inc. effective
June 20, 1997: Incorporated by reference to Exhibit 10.7 to
the Registration Statement on Form S-4 of Iridium LLC,
Iridium Capital Corporation, Iridium Roaming LLC and Iridium
IP LLC (Registration Nos. 333-31741, -01, -02 and -03) (the
"1997 Form S-4").+
10.7 Amendment No. 4 to the Terrestrial Network Development
Contract between Iridium LLC and Motorola, Inc., effective
May 8, 1998.** ++
10.8 Support Agreement between Iridium LLC and Motorola, Inc.:
Incorporated by reference to Exhibit 10.9 to the Form S-1.
10.9 Agreement, executed as of December 16, 1996, between
Andersen Consulting LLC and Iridium LLC relating to the
development of business support systems: Incorporated by
reference to Exhibit 10.10 to the Form S-1.+
10.10 14 1/2% Senior Subordinated Discount Notes Due 2006 of
Iridium: Incorporated by reference to Exhibit 10.11 to the
Form S-1.
10.11 Form of Warrant issued in respect of 14 1/2% Senior
Subordinated Discount Notes: Incorporated by reference to
Exhibit 10.13 to the Form S-1.
10.12 Warrant to purchase Series M Class 2 Interests dated July
29, 1993, as amended: Incorporated by reference to Exhibit
10.13 to the Form S-1.
10.13 Form of Gateway Authorization Agreement: Incorporated by
reference to Exhibit 10.14 to the Form S-1.
10.14 Guaranteed Bank Facility: Incorporated by reference to
Exhibit 10.15 to the Form S-1.
</TABLE>
<PAGE> 45
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
10.15 Amendment dated December 19, 1997 to Guaranteed Bank
Facility: Incorporated by reference to Exhibit 10.15 of the
Report for the fiscal year ended December 31, 1997 on Form
10-K of IWCL, Iridium, and its subsidiaries (the "1997 Form
10-K").
10.16 Motorola Agreement regarding Guarantee: Incorporated by
reference to Exhibit 10.16 to the Form S-1.
10.17 Amended and Restated Agreement regarding Guarantee:
Incorporated by reference to Exhibit 10.17 to the 1997 Form
S-4.
10.18 Second Amended and Restated Agreement regarding Guarantee.*
10.19 Memorandum of Understanding with Motorola, Inc: Incorporated
by reference to Exhibit 10.18 to the 1997 Form S-4.
10.20 Form of Share Issuance Agreement between IWCL and Iridium
LLC: Incorporated by reference to Exhibit 10.17 to the Form
S-1.
10.21 Iridium LLC Option Plan: Incorporated by reference to
Exhibit 10.5 to the Form S-1.
10.22 Iridium LLC Selected Senior Officers' Supplementary
Retirement Plan: Incorporated by reference to Exhibit 10.27
to the 1997 Form S-4.
10.23 Agreement between Dr. Staiano and Iridium LLC: Incorporated
by reference to Exhibit 10.28 to the 1997 Form S-4.
10.24 Asset Transfer Agreement: Incorporated by reference to
Exhibit 10.25 to the 1998 Form S-4.
10.25 Consent of Arthur Andersen LLP to Contract Assignment:
Incorporated by reference to Exhibit 10.26 to the 1998 Form
S-4.
10.26 Consent of Motorola Inc. to Contract Assignment:
Incorporated by reference to Exhibit 10.27 to the 1998 Form
S-4.
10.27 Form of Credit Agreement among Iridium Operating LLC, Chase
Securities Inc., Barclays Capital, The Chase Manhattan Bank
and Barclays Bank PLC: Incorporated by reference to Exhibit
10.28 of the 1997 Form 10-K.
10.28 Conditions Precedent to the Disbursement of the Term Loans
under Section 2.01(a) of the Credit Agreement: Incorporated
by reference to Exhibit 10.29 of the 1997 Form 10-K.
10.29 Regulatory and Technical Conditions Precedent to
availability of funding under the Credit Agreement:
Incorporated by reference to Exhibit 10.30 of the 1997 Form
10-K.
10.30 Form of Assignment and Acceptance under the Credit
Agreement: Incorporated by reference to Exhibit 10.31 of the
1997 Form 10-K.
10.31 Form of Pledge and Security Agreement among Iridium
Operating LLC, each of the Subsidiaries and The Chase
Manhattan Bank: Incorporated by reference to Exhibit 10.32
of the 1997 Form 10-K.
10.32 Form of Parent Security Agreement between Iridium Operating
LLC and The Chase Manhattan Bank: Incorporated by reference
to Exhibit 10.33 of the 1997 Form 10-K.
10.33 Form of Subsidiary Guarantee Agreement between each of the
Subsidiary Guarantors and The Chase Manhattan Bank:
Incorporated by reference to Exhibit 10.34 of the 1997 Form
10-K.
10.34 Form of Subsidiary Guarantee Assumption Agreement:
Incorporated by reference to Exhibit 10.35 of the 1997 Form
10-K.
10.35 Form of Depositary Agreement between Iridium Operating LLC
and The Chase Manhattan Bank: Incorporated by reference to
Exhibit 10.36 of the 1997 Form 10-K.
10.36 Form of Motorola Consent under the Credit Agreement among
Motorola, Iridium Operating LLC and The Chase Manhattan
Bank: Incorporated by reference to Exhibit 10.37 of the 1997
Form 10-K.
10.37 Form of Motorola Pledge Agreement between Motorola, Inc. and
The Chase Manhattan Bank: Incorporated by reference to
Exhibit 10.38 of the 1997 Form 10-K.
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<S> <C>
10.38 Form of Progress Certificate (Pre-Commercial Activation)
under the Credit Agreement: Incorporated by reference to
Exhibit 10.39 of the 1997 Form 10-K.
10.39 Form of Verification of Independent Technical Advisor under
the Credit Agreement: Incorporated by reference to Exhibit
10.40 of the 1997 Form 10-K.
10.40 Form of Progress Certificate (Post-Commercial Activation)
under the Credit Agreement: Incorporated by reference to
Exhibit 10.41 of the 1997 Form 10-K.
10.41 Form of Borrowing Request under the Credit Agreement:
Incorporated by reference to Exhibit 10.42 of the 1997 Form
10-K.
10.42 Form of Standby Purchase Agreement between Iridium Operating
LLC and Motorola, Inc.: Incorporated by reference to Exhibit
10.44 to the Registration Statement on Form S-1 of Iridium
Operating LLC, Iridium IP LLC, Iridium Roaming LLC, Iridium
Capital Corporation and Iridium Facilities Corporation
(Registration Nos. 333-51099, -01, -02, -03 and -04) (the
"1998 Form S-1").
10.43 Form of Standby Purchase Agreement between Iridium Operating
LLC and Kyocera Corporation: Incorporated by reference to
Exhibit 10.45 to the 1998 Form S-1.
23.1 Consent of KPMG Peat Marwick LLP.**
23.2 Consent of Conyers, Dill & Pearman (contained in Exhibit
5.1).
23.3 Consent of Sullivan & Cromwell (contained in Exhibit 5.2).
99 Certain Factors Which May Affect Forward Looking Statements:
Incorporated by reference to Exhibit 99 of the 1997 Form
10-K.
</TABLE>
- ---------------
* Previously filed.
** Filed herewith.
+ Confidential treatment previously granted.
++ Confidential treatment requested.
<PAGE> 1
Exhibit 23.1
Accountants' Consent
The Boards of Directors
Iridium World Communications Ltd. and Iridium LLC:
We consent to the use of our reports incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
McLean, Virginia
July 29, 1998
