IRIDIUM LLC, 424B4, 1999-01-25

IRIDIUM LLC
424B4, 1999-01-25
RADIOTELEPHONE COMMUNICATIONS

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<PAGE> 1
FILED PURSUANT TO RULE 424(b)(4)
REGISTRATION FILE NO. 333-65559

PROSPECTUS

7,500,000 SHARES

[IRIDIUM LOGO]
IRIDIUM WORLD COMMUNICATIONS LTD.
CLASS A COMMON STOCK

----------------------

The sole business of Iridium World Communications Ltd. is acting as a
member of Iridium LLC. Accordingly, this prospectus focuses on the business of
Iridium LLC.

Iridium World Communications Ltd. will receive the net proceeds from the
sale of the class A common stock and will invest those proceeds in Iridium LLC.
The U.S. underwriters will offer 6,000,000 shares in the United States and
Canada and the international managers will offer 1,500,000 shares outside the
United States and Canada. The class A common stock is quoted on the Nasdaq
National Market under the symbol IRIDF. The last reported sale price of the
class A common stock on January 21, 1999 was $37 3/8 per share.

SEE "RISK FACTORS" BEGINNING ON PAGE 15 TO READ ABOUT CERTAIN FACTORS YOU
SHOULD CONSIDER BEFORE BUYING SHARES OF CLASS A COMMON STOCK.

----------------------

<TABLE>
<CAPTION>
PER
SHARE TOTAL
------ -----
<S> <C> <C>
Public Offering Price....................................... $33.50 $251,250,000
Underwriting Discount....................................... $ 1.18 $8,850,000
Proceeds, before expenses, to Iridium World Communications
Ltd....................................................... $32.32 $242,400,000
</TABLE>

The U.S. underwriters may also purchase up to an additional 900,000 shares
of class A common stock at the public offering price, less the underwriting
discount, within 30 days from the date of this prospectus to cover
over-allotments. The international managers may similarly purchase up to an
aggregate of an additional 225,000 shares of class A common stock.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if the
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

The shares of class A common stock will be ready for delivery in New York,
New York on or about January 27, 1999.

----------------------

MERRILL LYNCH & CO.

GOLDMAN, SACHS & CO.

NATIONSBANC MONTGOMERY SECURITIES LLC

SALOMON SMITH BARNEY

SOUNDVIEW TECHNOLOGY GROUP
----------------------

The date of this prospectus is January 21, 1999.
<PAGE> 2
[PHOTO-PICTURES OF KYOCERA AND MOTOROLA PHONES AND PAGERS]

A DIFFERENT KIND OF

GLOBAL
REACH

The Iridium satellite telephone combines
unprecedented mobility with coverage that takes
you virtually anywhere around the globe.

THE IRIDIUM TELEPHONE
BY MOTOROLA

The Iridium "multi-mode"phone by Motorola doubles as
a satellite or cellular phone. Iridium World Roaming
Service customers can move between local networks by
inserting different Cellular Cassettes(TM) - each one com-
patible with a cellular protocol. Cellular Cassettes cur-
rently cover GSM 900 and CDMA/AMPS/N-AMPS 800
standards. Outside cellular coverage, the Iridium phone
connects Iridium World Satellite Service customers to
the Iridium satellite network.

THE IRIDIUM TELEPHONES
BY KYOCERA

The Kyocera Iridium "multi-mode" phone is expected to provide the
versatility of using either a cellular network or the Iridium satellite
network. Within cellular coverage areas, Iridium World Roaming Service
customers can use a Kyocera cellular (PDC, CDMA 800, GSM 900, or AMPS)
phone. Outside cellular coverage, Iridium World Satellite Service customers
are expected to be able to snap the Kyocera cellular phone into the Iridium
satellite attachment unit and be connected to the Iridium satellite
network. Iridium World Satellite Service customers also are expected to
have the option of a Kyocera satellite-only phone.

THE IRIDIUM PAGERS
BY MOTOROLA AND KYOCERA

Pairing an Iridium phone with the Iridium pager creates a
flexible global communications package that picks up mes-
sages worldwide. The Motorola and Kyocera pagers can
receive alphanumeric messages of up to 200 characters in
any one of 19 languages, and numeric messages of up to 20
digits virtually anywhere in the world.

THE IRIDIUM NAME AND LOGO ARE TRADEMARKS AND SERVICE MARKS OF IRIDIUM

<PAGE> 3

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ownership of Iridium LLC.................................... 4
Summary..................................................... 5
Where You Can Find More Information......................... 14
Risk Factors................................................ 15
Use of Proceeds............................................. 40
Price Range of Common Stock and Dividend Policy............. 40
Dilution.................................................... 41
Capitalization.............................................. 44
Selected Financial Data..................................... 46
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 48
Business.................................................... 57
Iridium's Investors and Principal Service Territories....... 70
Management of Iridium and IWCL.............................. 75
Certain Relationships and Related Transactions of Iridium... 81
Certain Regulations that Affect Iridium..................... 82
Description of Capital Stock................................ 89
Relationship Between IWCL and Iridium....................... 93
Tax Considerations.......................................... 96
Shares Eligible for Future Sale............................. 99
Underwriting................................................ 103
Validity of the Class A Common Stock........................ 106
Experts..................................................... 106
Glossary.................................................... A-1
Index to Financial Statements............................... F-1
</TABLE>

------------------------

FORWARD LOOKING STATEMENTS

Iridium LLC is transitioning from a development stage company into an
operating company. Accordingly, many statements contained in, or incorporated by
reference in, this prospectus are forward looking. Examples of such statements
include Iridium LLC's expectations about (i) its operations, (ii) its revenues,
(iii) its markets, (iv) the technical capabilities of the Iridium system, (v)
its funding needs, (vi) its funding sources, (vii) its prospects, (viii)
regulatory matters, (ix) the pricing of its services, (x) the availability and
distribution of its phones and pagers, (xi) its competitors and their services
and (xii) the actions of its equipment suppliers', gateway operators', service
providers' and roaming partners. Forward looking statements are inherently
predictive and speculative and we cannot assure you that any forward looking
statements will prove to be correct. Actual results and developments are likely
to be different, and may be materially different, from those expressed or
implied by forward looking statements. In particular, forward looking statements
are based on a number of assumptions about future events, including the
assumption that there will be a sufficient number of customers for, and usage
of, the Iridium system to generate revenues in the amounts and at the times
anticipated by Iridium. In reviewing the information contained in, or
incorporated by reference in, this prospectus (including the forward looking
statements) you should recognize that Iridium has no meaningful operating
history and must generate substantial revenues to satisfy its funding
requirements and, accordingly, there can be no assurance that Iridium will ever
be profitable. See "Risk Factors" for a discussion of various factors which,
among others, could result in the forward looking statements proving to be
inaccurate.
------------------------

You should rely only on the information contained in, or incorporated by
reference in, this prospectus. We have not, and the U.S. underwriters and
international managers have not, authorized any other person to provide you with
different information. If anyone provides you with different or inconsistent
information, you should not rely on it. We are not, and the U.S. underwriters
and international managers are not, making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted.

3
<PAGE> 4

OWNERSHIP OF IRIDIUM LLC

The sole business of Iridium World Communications Ltd., or "IWCL", is
acting as a member of Iridium LLC. Accordingly, this prospectus focuses on the
business of Iridium LLC. References to "Iridium" include Iridium LLC and its
direct and indirect subsidiaries unless the context otherwise requires. For a
description of the relationship between IWCL and Iridium, see "Relationship
Between IWCL and Iridium".

IWCL will receive the net proceeds from the sale of the class A common
stock and will use all of the net proceeds to purchase newly issued class 1
membership interests in Iridium. Class 1 membership interests are analogous to
common equity in Iridium with respect to voting and priority.

<TABLE>
<S> <C>
IRIDIUM WORLD IRIDIUM'S
COMMUNICATIONS LTD. ("IWCL") 20 STRATEGIC INVESTORS

- - issuer of the class A common stock - primarily providers of wireless
- - has no business other than its telecommunications services and
ownership and participation in the equipment, satellite systems and satellite
management of Iridium LLC launch services
</TABLE>

IRIDIUM LLC ("Iridium")

- issuer of class 1 interests
- owner of Iridium Operating LLC

IRIDIUM OPERATING LLC

- owner and operator of the Iridium System

At the completion of the U.S. and international offerings, collectively,
the "Offerings", IWCL will own approximately 13.2% of the outstanding class 1
interests in Iridium (13.9% if the U.S. underwriters' and international
managers' over-allotment options are exercised in full), with the remaining
approximately 86.8% (86.1% if the U.S. underwriters' and international managers'
over-allotment options are exercised in full) owned by Iridium's 20 strategic
investors. IWCL's percentage ownership interest in Iridium may be reduced as a
result of outstanding rights of Iridium's strategic investors and others to
purchase additional common equity interests in Iridium. See "Dilution".

IWCL is a Bermuda company, incorporated in 1996 under the Companies Act
1981 of Bermuda. Iridium is a Delaware limited liability company, formed in 1996
under the Delaware Limited Liability Company Act. IWCL's offices in Bermuda are
located at Clarendon House, 2 Church Street, Hamilton, and IWCL's and Iridium's
executive offices in the United States are located at 1575 Eye Street, N.W.,
Washington, D.C. 20005.

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<PAGE> 5

SUMMARY

The following information may not contain all the information that may be
important to you. Before making an investment decision, you should read this
entire prospectus, as well as the documents incorporated by reference herein.
Unless indicated otherwise, the information contained in this prospectus is
presented as of December 15, 1998 and assumes that the U.S. underwriters' and
international managers' over-allotment options are not exercised. All references
to "we" in this prospectus mean IWCL and Iridium unless the context otherwise
requires. See the Glossary included as Annex A hereto for the definitions of
certain terms used in this prospectus.

IRIDIUM

Iridium is the first global wireless telecommunications company. Iridium
offers its customers the ability to make and receive phone calls and receive
pages virtually anywhere in the world. Iridium accomplishes this by providing
access to the Iridium satellite constellation as well as the world's cellular
networks -- all with one phone, one phone number and one customer bill. Iridium
believes it will be the only wireless telecommunications company in operation
well into the year 2000 that will be able to offer this comprehensive global
communications service.

Iridium commenced commercial phone service on November 1, 1998 and
commercial paging service on November 15, 1998. Over the past 18 months, Iridium
has successfully launched, deployed and programmed over 75 satellites (including
orbiting spares). Iridium's satellites now orbit the Earth in a constellation
that provides 24 hours per day satellite phone and paging service to virtually
anywhere in the world.

SERVICE OFFERINGS

Iridium's strategy is to be the total mobile communications solution for
its target markets by offering flexible service packages that allow customers to
conveniently select the most attractive telecommunications alternative anywhere
in the world they travel. Iridium World Satellite Service is designed for
customers who need to receive or make phone calls in areas not currently served
by cellular service. Iridium World Roaming Service is designed for customers who
travel to areas where their "home" cellular service will not support roaming,
including areas served by cellular networks that use electronic languages, or
"protocols", that are not compatible with their home network's protocol. Iridium
World Page Service offers the ability to receive a message virtually anywhere in
the world. The Iridium World Calling Card provides customers with a cost-
effective means of accessing land-line services while traveling. By packaging
these services in various combinations, Iridium can meet the diverse needs of
its customers whether they travel to remote parts of the globe or to areas
served by cellular networks or both.

Iridium World Satellite Service

Iridium's satellites provide phone service to virtually anywhere on the
surface of the Earth where Iridium World Satellite Service is authorized.
Iridium World Satellite Service is available in more than 125 countries and
territories. Iridium's goal is for Iridium World Satellite Service to be
available in virtually all countries and territories. As of December 31, 1998,
Iridium had approximately 3,000 Iridium World Satellite Service customers.

Iridium World Satellite Service is a complement to, not a replacement for,
cellular service. The availability of cellular service is limited by the
geographic coverage of cellular systems. Iridium World Satellite Service is not
geographically constrained and, accordingly, extends mobile phone access to
areas not covered by cellular service. With a dual mode satellite/cellular
phone, or two separate phones, a customer can travel the globe and receive or
make phone calls from virtually anywhere in the world, including remote and
mid-ocean areas.

5
<PAGE> 6

services to be reliable in these environments, cellular and land-line services
are typically available in these areas, and Iridium provides its customers with
the ability to access land-line service, cellular service and satellite service
using the same phone number and customer bill.

Iridium World Roaming Service

Iridium World Roaming Service permits subscribers to roam among cellular
networks that have roaming agreements with Iridium. Iridium intends to create
the broadest global cellular roaming service available. Iridium has entered into
roaming agreements with more than 160 roaming partners and has integrated more
than 55 of those partners (including cellular networks in more than 30 countries
and territories) with the Iridium system. Iridium's business plan currently
calls for roaming agreements covering cellular networks in more than 150
countries and territories to be integrated with the Iridium system by 2002.

In providing Iridium World Roaming Service, Iridium acts either as the
customer's "home" system or as an interface between the visited cellular network
and the customer's home network when the visited and home networks use differing
protocols (e.g., IS-41 in North America and GSM in Europe). Iridium World
Roaming Service customers who travel between places that are served by different
wireless protocols can place calls and can be reached on one phone number by
using either a multi-mode phone that is compatible with multiple protocols or a
combination of cellular phones, one for each protocol.

Iridium World Page Service

Iridium is the first company to offer global paging to a belt-worn pager.
Iridium offers global paging both as a stand-alone service and bundled with its
voice service. The Iridium pager has significantly greater in-building
penetration than Iridium's satellite-based voice services and can receive
alphanumeric messages of up to 200 characters in any one of 19 languages and
numeric messages of up to 20 digits. Iridium World Page Service customers can be
paged in over 200 countries and territories and onboard aircraft.

Iridium World Calling Card

The Iridium World Calling Card adds land-line access to Iridium's array of
service offerings that can be linked by a single customer bill. The calling card
also provides discount voice mail retrieval for Iridium World Satellite Service
customers. Iridium believes its calling card rates are competitively priced with
other international calling card services. Iridium World Calling Card Service is
available in more than 55 countries and territories.

Iridium Aeronautical Service

Iridium intends to introduce satellite aeronautical phone service to
private and commercial aircraft by the end of 1999. In addition, on December 22,
1998, Iridium agreed to acquire Claircom Communications Group, Inc., a wholly
owned subsidiary of AT&T Wireless Services, Inc. and Rogers Cantel Inc., which
currently provides inflight phone service (generally under the AT&T brand) on a
total of approximately 1,750 commercial and executive aircraft. Upon completion
of the acquisition, Iridium intends to brand this service with the Iridium name.
This proposed acquisition is subject to regulatory approval and other
conditions.

TARGET MARKETS

Iridium's service offerings are primarily designed for customers who travel
frequently and place significant value on continuous communications access.
Iridium has conducted extensive market research and believes there is a
significant market of companies and individuals who need mobile wireless
services when they travel and are willing to pay for the flexibility and
virtually global coverage of Iridium's services.

6
<PAGE> 7

Iridium's marketing and distribution efforts are focused on five types of
customers and Iridium packages its services in different combinations to match
the needs of each of these target markets:

- GLOBAL TRAVELERS -- People who travel extensively outside their home
country and cellular coverage area and want one flexible, comprehensive
wireless service while traveling (candidates for all Iridium World
Services);

- INTERNATIONAL URBAN TRAVELERS -- People who frequently travel to areas
served by cellular networks that use different protocols but who rarely
travel outside cellular coverage (candidates for Iridium World Roaming,
Iridium World Page and Iridium World Calling Card Services);

- INDUSTRIAL USERS -- International companies engaged in businesses such
as oil and gas exploration, mining, shipping, power generation and the
media, whose employees are stationed in, or travel to, remote areas
outside cellular coverage (candidates for Iridium World Satellite and
Iridium World Page Services);

- PUBLIC SECTOR USERS -- Governments, multilateral development
institutions and disaster relief and humanitarian organizations that
need reliable communications anytime and anywhere (candidates for
Iridium World Satellite and Iridium World Page Services); and

- IN-COUNTRY USERS -- People who live in or travel to countries with
incomplete or overburdened cellular coverage (candidates for Iridium
World Satellite and Iridium World Page Services).

MARKETING, DISTRIBUTION AND PRICING

Iridium's marketing strategy is to be the premier brand in global wireless
communications services. Iridium believes that its principal target
markets -- Global Travelers, International Urban Travelers and Industrial
Users -- can be accessed through established marketing channels. Iridium
believes focusing on these market segments gives it an advantage compared to
mobile satellite systems targeting individuals in remote areas where marketing
opportunities and distribution channels are limited. Iridium is striving to
establish a global brand identity through a coordinated and comprehensive global
marketing strategy. Iridium coordinates with its gateway partners to determine
the optimum allocation of marketing expenditures and engages in direct marketing
to certain markets, including the utility, oil and gas, mining and maritime
industries.

Iridium's distribution strategy reflects its role as a wholesaler of
Iridium services. The retail distribution of Iridium services generally takes
place through Iridium's gateway operators, and is primarily designed to utilize
existing wireless retail distribution channels. Iridium's gateway operators
distribute Iridium services through their own distribution channels or through,
or in conjunction with, one or more existing wireless service providers
(including Iridium World Roaming Service roaming partners). As of December 31,
1998, Iridium and its gateway operators had agreements with more than 300 such
service providers and had integrated more than 60 of those service providers.
All Iridium service providers have primary responsibility for marketing Iridium
services within their territories in accordance with marketing policies and
programs established by Iridium and the gateway operators. In addition, Iridium
service providers are responsible for billing and collection and share customer
service responsibilities with Iridium. Iridium provides centralized customer
service principally through its three global customer care centers, which
operate 24 hours per day, seven days a week and support 13 languages.

aggregate of approximately 3,500 Motorola and Kyocera pagers have been produced
as of December 31, 1998, and aggregate production capacity was approximately
8,000 pagers per month. In addition, once phones and pagers are produced, they
must be distributed to service providers before a new customer can be added.
Distribution of customer equipment to certain parts of the world can require
substantial time. Iridium believes that one of its most significant challenges
is ensuring that phones and pagers are produced in sufficient quantities and are
timely distributed to the various parts of the world necessary to satisfy the
demand for Iridium's satellite-based services.

Iridium's wholesale pricing strategy for its voice services is similar to
the prevailing pricing structure for traditional cellular calls. Prices for
cellular calls generally reflect two components -- a charge based on the
land-line "dial-up" rate for a comparable call (primarily the long distance
charges) and a mobility premium for the convenience of wireless service
(including any roaming charges). Pricing for both Iridium World Satellite
Service and Iridium World Roaming Service is based on this structure. For
international Iridium World Satellite Service calls, which Iridium expects will
constitute the majority of calls over the Iridium satellite system, the
"dial-up" rate component is designed to approximate the rates for comparable
land-line point-to-point international long distance calls.

In addition to airtime charges based on the "dial-up" rate plus mobility
premium, Iridium subscribers generally pay a monthly fee in the same manner that
cellular customers pay monthly charges. Currently, Iridium paging subscribers
pay a fixed monthly subscription fee for up to 200 pages. The monthly paging
subscription fee is discounted for persons who are also subscribers to Iridium
voice services.

THE IRIDIUM SYSTEM

Iridium's ability to provide its services, either individually or in
various packages, is derived from the unique capabilities of the Iridium system.
The Iridium system has four principal components:

- THE SPACE SEGMENT, which includes Iridium's 66 low earth orbit satellite
constellation (plus orbiting spares) and the related ground control
facilities;

- THE 12 GROUND STATIONS OR "GATEWAYS", which link the satellites to
land-based communications systems;

- IRIDIUM PHONES, PAGERS AND SIM CARDS, which provide Iridium customers
with mobile access to the space segment and land-based cellular systems;
and

- IRIDIUM'S LAND-BASED INTERPROTOCOL ROAMING INFRASTRUCTURE, which
facilitates roaming among land-based cellular systems -- including
systems that use different protocols -- and the space segment.

Motorola, Inc., a leading international provider of wireless systems,
phones and pagers and other electronic equipment, designed, constructed and
currently operates the Iridium system. Motorola is also the principal strategic
investor in Iridium. Iridium's 19 other strategic investors include leading
wireless telecommunications service providers from around the world.

COMPETITIVE STRENGTHS

Iridium intends to achieve its objective of being the one source for the
mobile communications needs of its target markets by capitalizing on the
following competitive strengths:

- FIRST-TO-MARKET ADVANTAGE. Iridium believes that it will be the only
wireless communications system in operation well into the year 2000 that
will be able to offer global satellite phone and paging services.
Iridium intends to use this advantage to establish itself as the premier
mobile telecommunications provider for its target markets.

- GLOBAL COVERAGE. The reach of Iridium World Satellite Service and
Iridium World Page Service is not limited by the customer's proximity to
a gateway. Customers generally have worldwide wireless coverage wherever
Iridium's satellite services are authorized, including mid-ocean and
remote areas. Iridium believes this feature makes:

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- Iridium World Satellite Service a more attractive complement to
cellular services than many other satellite-based systems because
Iridium's service can cover virtually every area of the world where
cellular service is unavailable.

- Iridium World Page Service more valuable to people who travel than
today's land-based paging services which generally are geographically
limited.

- INTERPROTOCOL CELLULAR ROAMING. Iridium believes that the ability to add
worldwide cellular roaming makes its satellite voice and paging services
more attractive. Iridium is assembling the broadest cellular roaming
service available.

- FLEXIBLE SERVICE PACKAGES WITH ONE PHONE NUMBER AND ONE CUSTOMER BILL.
With one phone number and one customer bill, customers can conveniently
select the most attractive telecommunications alternative anywhere in
the world they travel. Iridium has a unique ability to provide customers
access to multiple satellite- and land-based telecommunications
services. Iridium is the only company that currently offers global,
mobile satellite phone and paging services. It also is one of only a few
companies that offers international cellular roaming. All of these
services and the Iridium World Calling Card can be linked by one phone
number and one customer bill.

- INTERSATELLITE LINKS. The Iridium system is configured to allow voice
and paging traffic to be passed from satellite-to-satellite across the
constellation. Iridium believes these intersatellite links provide
several advantages over satellite systems where traffic is routed from a
phone to a satellite and then immediately back to a ground station (or
from a ground station to a satellite and then immediately to a phone or
pager). On comparable international long distance calls, Iridium
generally expects to capture a greater portion of the total price of the
call because the portion of the call carried by the Iridium system, from
satellite-to-satellite, can be longer than the portion of the call that
a competing system without satellite links would be able to carry. In
addition, intersatellite links provide more flexibility in routing
traffic across the system and support global operations with fewer
gateways.

- IRIDIUM'S STRATEGIC INVESTORS. Iridium's strategic investors have
collectively invested, or committed to invest, approximately $3.7
billion in Iridium, including equity, commitments to purchase additional
equity, debt, guarantees and commitments to provide guarantees. Iridium
believes its strategic investors that have experience in providing
telecommunications services will use their regulatory and marketing
experience, distribution channels and other telecommunications-oriented
resources to distribute Iridium's services.

- GLOBAL CUSTOMER CARE. Iridium has three global customer care centers
that operate 24 hours per day, seven days per week and support 13
languages. Iridium believes that customer retention depends upon high
quality customer service, and that Iridium's commitment to customer
service will distinguish it from many of its competitors.

Iridium is transitioning from a development stage company into an operating
company and has significant indebtedness and no meaningful operating history
and, accordingly, will face many challenges. Iridium's principal challenge will
be generating sufficient revenues from operations to fund its operations and
repay its indebtedness. See "Risk Factors" for a description of some of the
factors that could adversely affect Iridium's ability to generate revenues from
operations.

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ESTIMATED FUNDING REQUIREMENTS -- SOURCES AND USES OF FUNDS BY IRIDIUM

In the fourth quarter of 1998, Iridium began the transition from a
development stage company into an operating company and, as a result, the
characteristics of its funding requirements are changing. Through year end 1998,
Iridium's funding requirements principally were driven by the cost of the
initial development and construction of the Iridium system. In contrast, Iridium
expects that its future funding requirements will be driven principally by the
costs of operating and maintaining the Iridium system and providing Iridium
services.

Sources and Uses of Funds Through Year End 1998

The following table summarizes Iridium's funding requirements, sources of
funds and uses of funds from July 29, 1993 (the inception of Iridium's
predecessor) through December 31, 1998. You should read the notes accompanying
this table and the more detailed information in "Management's Discussion and
Analysis of Financial Condition and Results of Operations".

(DOLLARS IN MILLIONS)

<TABLE>
<S> <C>
SOURCES OF FUNDS
Secured bank facility(1)............ $ 500
Motorola guaranteed bank
facilities(1)..................... 625
Vendor financing (O&M
contract)(2)...................... 86
Senior notes due 2005(3)............ 1,380
14 1/2% senior subordinated notes
due 2006.......................... 239
Series A class 2 interests.......... 31
Outstanding class 1 interests....... 1,951
------
$4,812
Deduct: cash balance at year end
1998.............................. 10
------
Total net sources.............. $4,802
======
USES OF FUNDS
Space system contract............... $3,380
Terrestrial network development
contract.......................... 226
O&M contract(2)..................... 86
Business support systems and related
expenditures...................... 242
Net interest and financing costs.... 345
Operating expenses and working
capital........................... 523
------
Total uses..................... $4,802
======
</TABLE>

- ---------------
(1) On December 23, 1998, Iridium closed on three new bank credit facilities
providing for up to approximately $1.55 billion of borrowings: (i) a senior
secured credit facility in the amount of $800 million (the "secured bank
facility") and (ii) two facilities guaranteed by Motorola -- a $475 million
term credit facility and a $275 million revolving credit facility
(collectively, the "Motorola guaranteed bank facilities"). Iridium used
approximately $682 million of the funds available under these new bank
facilities to repay its outstanding bank debt, of which approximately $410
million was due to mature on December 31, 1998. Borrowings under the secured
bank facility and the $475 million term portion of the Motorola guaranteed
bank facilities mature on December 29, 2000 and the $275 million revolving
portion of the Motorola guaranteed bank facilities matures on December 31,
2001. The secured bank facility is secured by, among other things,
substantially all of Iridium's assets and contains covenants that require
Iridium, among other things, to achieve certain revenue and subscriber
levels. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources -- Sources of
Funding". Pursuant to a memorandum of understanding with Motorola (the
"Motorola MOU"), and a related compensation agreement (the "Motorola ARG"),
Iridium is required to compensate Motorola with equity and cash for, among
other things, providing guarantees of Iridium's borrowings under the
Motorola guaranteed bank facilities.

(2) Iridium has entered into an operations and maintenance contract with
Motorola (the "O&M contract"), for the day-to-day management of the space
segment and Iridium expects the O&M contract to be Iridium's single most
significant use of funds during its initial operational stage. The O&M
contract is a fixed price contract (subject to certain adjustments) for the
operation and maintenance of the Iridium system. Payments under the O&M
contract are expected to aggregate approximately $2.88 billion over the
initial five year term of the contract ending in November 2003. Under the
Motorola MOU, Motorola

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<PAGE> 11

has agreed to permit Iridium to defer its obligations to pay up to an
aggregate of $400 million of payments until December 29, 2000. Iridium has
agreed with Motorola to use its best efforts to obtain, on or before October
1, 1999, a bank credit agreement (which Motorola has agreed to guarantee
pursuant to the Motorola MOU) to finance the payment of all such deferrals
by October 1, 1999. Pursuant to the Motorola ARG, Iridium is required to
compensate Motorola with equity and cash for, among other things, permitting
Iridium to defer payments under the O&M contract and any guarantee of
borrowings by Iridium to finance such payments. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations -- Liquidity
and Capital Resources -- Sources of Funding".

(3) Net proceeds received directly or indirectly by Iridium from the offerings
of four separate series of senior notes, all of which have substantially the
same terms (except for their respective interest rates) and are collectively
referred to as the "senior notes". The senior notes mature on July 15, 2005.

Estimated Sources and Uses of Funds For 1999

Iridium believes that it currently has sufficient external funding
available to meet its expected peak funding requirements. Iridium expects to
have available for 1999 aggregate sources of external funding of approximately
$1.336 billion, after giving effect to the Offerings. Iridium expects that its
cash needs for 1999 will be approximately $1.653 billion. Iridium expects that
if its revenues from operations exceed the difference between its actual cash
needs and its actual available sources of external funding (an estimated
difference of approximately $317 million), Iridium will reduce the commitments
of the lenders under its bank credit agreements. To the extent that Iridium's
revenues do not exceed this difference, Iridium will need to seek additional
financing.

The following table summarizes Iridium's estimates of its funding
requirements, sources of funds and uses of funds for 1999. You should read the
notes accompanying this table and the more detailed information in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

(DOLLARS IN MILLIONS)

<TABLE>
<S> <C>
SOURCES OF FUNDS
Cash balance at year end 1998....... $ 10
Additional amounts available under
the secured bank facility(1)...... 300
Additional amounts available under
the Motorola guaranteed bank
facilities(1)..................... 120
Additional vendor financing amounts
(O&M contract) or the O&M bank
facility(2)....................... 314
Additional Motorola guaranteed bank
facility(3)....................... 350
Net proceeds from the
Offerings(4)...................... 242
------
$1,336
Required revenues from operations or
funds from other sources(5)....... 317
------
Total estimated sources........ $1,653
======
USES OF FUNDS
Space system contract............... 55
Terrestrial network development
contract(6)....................... 130
O&M contract(2)..................... 537
Business support systems and related
expenditures...................... 100
Net interest and financing
costs(7).......................... 391
Acquisition of Claircom(8).......... 26
Operating expenses and working
capital........................... 414
------
Total estimated uses........... $1,653
======
</TABLE>

- ---------------
(1) See note (1) to the table under "-- Sources and Uses of Funds Through Year
End 1998".

(2) See note (2) to the table under "-- Sources and Uses of Funds Through Year
End 1998". Iridium expects to finance the payment of approximately $400
million of deferred payments under the O&M contract by obtaining a new bank
credit facility guaranteed by Motorola by October 1, 1999.

(3) Pursuant to the Motorola MOU, Motorola has committed to guarantee an
additional $350 million of borrowings under a bank credit agreement,
provided that Iridium requests such guarantee by October 1,

11
<PAGE> 12

1999 and that Iridium has complied with the terms of its various agreements
with Motorola. Pursuant to the Motorola ARG, Iridium would be required to
compensate Motorola with equity for providing such guarantee. See "Dilution"
and "Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources -- Sources of Funding".

(4) Assumes the U.S. underwriters' and international managers' over-allotment
options are not exercised.

(5) The secured bank facility contains covenants that require Iridium, among
other things, to achieve certain revenue levels, including having cumulative
accrued revenues of at least $470 million at September 30, 1999. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Sources of Funding".

(6) No payments are expected to be due under the terrestrial network development
contract after year end 1999.

(7) Based on the assumed interest payment obligations, interest rates and
borrowing levels and Iridium's estimates of related costs. Actual interest
and financing costs will depend upon applicable interest rates and the
amount and timing of actual borrowings.

(8) On December 22, 1998, Iridium entered into a stock purchase agreement with
AT&T Wireless Services, Inc., ATG I, Inc. and Rogers Cantel Inc., pursuant
to which Iridium agreed to purchase all of the outstanding capital stock of
Claircom Communications Group, Inc., a provider of in-flight phone service
for commercial and executive aircraft, for an estimated aggregate price of
approximately $65 million, consisting of approximately $25.6 million in cash
to be paid at closing and approximately $39.4 million of nine-year notes of
Claircom that will bear interest at a rate of 8% per year but will not
require payments during the first two years -- interest accrued during the
initial two-year period will be added to the principal amount of the notes.
The closing of this purchase is subject to regulatory approval and certain
other conditions.

Estimated Funding Requirements and Sources of Funding After Year End 1999

Iridium expects that its funding requirements for the operation of the
Iridium system for the two to three year period following year end 1999 will be
based upon uses similar in type to those expected for 1999: the costs of
operating and maintaining the Iridium system, including the O&M contract, and
providing Iridium's services; working capital; interest expense; and financing
costs. Following 1999, Iridium generally expects to fund these cash needs
through revenues from operations. In addition, before December 29, 2000, Iridium
will be required to repay at least approximately $1.27 billion in bank debt.
Iridium expects that on or prior to December 29, 2000, it will raise additional
financing and, if available, use revenues from operations to repay such bank
debt.

Iridium's Estimates Are Forward Looking

All of the statements regarding Iridium's funding requirements, sources of
funds and uses of funds for 1999 and thereafter are forward looking. Actual
results are likely to differ, and may differ materially, from the estimates in
such statements. These estimates are based on a number of assumptions, including
Iridium's expectations about its ability to generate revenues from operating,
and should be viewed in light of, among other things, the following facts: (i)
Iridium has no meaningful history of operations or revenues and there is no
operational service that provides a direct comparison to Iridium's services;
(ii) Iridium's estimates assume, among other things, that Iridium will
transition smoothly from a development stage company into an operating company
and that there will be a sufficient number of customers for, and usage of, the
Iridium system to generate revenues in the amounts and at the times anticipated
by Iridium; (iii) the availability of the additional sources of funding Iridium
expects to be able to use is not completely within Iridium's control and is
conditioned on Iridium satisfying certain conditions; and (iv) Iridium faces
many challenges and risks. It is likely that there would be a material adverse
effect on Iridium if Iridium's actual funding requirements (net of revenues from
operations) significantly exceed its current estimates. See "Risk Factors" for
further discussion of some of the factors that could cause actual results to
differ materially from those expressed or implied by the following discussion.

12
<PAGE> 13

THE OFFERINGS

<TABLE>
<S> <C>
Class A common stock offered by IWCL:
U.S. offering.............................. 6,000,000 shares
International offering..................... 1,500,000 shares
Total................................. 7,500,000 shares
Class A common stock of IWCL to be outstanding
immediately after the Offerings............... 19,680,648 shares (1)
Iridium class 1 interests to be outstanding
immediately after the Offerings............... 148,920,453 interests (1)
Iridium class 1 interests to be owned by IWCL
immediately after the Offerings............... 19,701,273 interests (1)
Use of Proceeds................................. The net proceeds of the Offerings, including the
net proceeds from any exercise of the U.S.
underwriters' and international managers' over-
allotment options, will be used by IWCL to purchase
class 1 interests in Iridium. Iridium expects to
use the proceeds from such sale of the class 1
interests for general corporate purposes, including
payments under the O&M contract. See "Use of
Proceeds"
Risk Factors.................................... See "Risk Factors" beginning on page 15 for a
discussion of certain factors that should be
considered by prospective investors in the class A
common stock
Voting Rights................................... All voting rights with respect to the affairs of
IWCL, except as otherwise required by law, are
vested in the holders of the class A common stock
NASDAQ National Market Symbol................... IRIDF
</TABLE>

- ---------------
(1) Based on class A common stock and class 1 interests outstanding on December
15, 1998 and assumes the U.S. underwriters' and international managers'
over-allotment options are not exercised. If the over-allotment options are
exercised in full, there would be 20,805,648 shares of class A common stock
and 150,024,828 class 1 interests outstanding (of which IWCL would own
20,805,648 class 1 interests). IWCL's holdings reflect 20,625 shares of
class B common stock outstanding and 20,625 class 1 interests purchased from
Iridium in respect of such shares. This amount does not give effect to the
issuance of any class 1 interests pursuant to options, warrants or
convertible interests or pursuant to the reserve capital call. See
"Dilution" and "Shares Eligible for Future Sale".

13
<PAGE> 14

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports and other information with
the SEC. These SEC filings are available to the public over the Internet at the
SEC's web site at http://www.sec.gov. You may also read and copy any document we
file at the SEC's public reference rooms in Washington, D.C., New York, New York
and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms.

The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings made by us with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934 until we and our related companies sell all of the securities that we
have registered.

- Annual Report on Form 10-K for the year ended December 31, 1997;

- Quarterly Reports on Form 10-Q for the quarters ended March 31, 1998,
June 30, 1998 and September 30, 1998;

- Current Reports on Form 8-K, filed November 4, 1998 and December 30,
1998; and

- Registration Statement on Form 8-A, filed June 2, 1997.

You may request a copy of these filings at no cost by writing or
telephoning us at the following:

Iridium World Communications Ltd.
1575 Eye Street, NW
Washington, D.C. 20005
Attention: F. Thomas Tuttle, Assistant Secretary, IWCL
(202) 408-3800

You should rely only on the information contained in, or incorporated by
reference in, this prospectus. We have not, and the U.S. underwriters and
international managers have not, authorized anyone else to provide you with
different information. We are not, and the underwriters are not, making an offer
of these securities in any state where the offer is not permitted. You should
not assume that the information incorporated in this prospectus is accurate as
of any date other than the date on the front of those documents.

14
<PAGE> 15

RISK FACTORS

An investment in the class A common stock offered hereby involves a high
degree of risk. Because the sole assets of IWCL are its class 1 interests and
rights to purchase class 1 interests and the sole business of IWCL is
participating in the management of Iridium, you should carefully consider the
following risks of Iridium's business and of the class A common stock, together
with the other information in, or incorporated by reference in, this prospectus,
prior to investing in the class A common stock.

<TABLE>
<S> <C>
RISK OF ERROR IN FORWARD LOOKING Iridium is transitioning from a development stage company
STATEMENTS into an operating company and has no meaningful operating
history. Accordingly, many statements contained in, or
Many of the statements in this incorporated by reference into, this prospectus are forward
prospectus are forward looking looking. Examples of these forward looking statements
and actual results may be include the statements concerning Iridium's expectations
materially different from those about its:
expressed or implied by these - operations;
statements. - revenues;
- markets;
In particular, you should - technical capabilities;
recognize that statements about - funding needs;
the following topics are forward - funding sources;
looking: - prospects;
- Iridium's estimate that it has - regulatory activities (including its ability to obtain or
sufficient external funding maintain the authority to operate its satellite services in
available to meet its expected virtually any country in the world);
peak funding requirements; - pricing of its services;
- Iridium's estimates of the - availability and distribution of phones and pagers;
amount of its funding needs; - competitors and their services; and
- Iridium's expectations about - equipment suppliers', gateway operators', service
its ability to obtain providers' and roaming partners' actions.
additional financing;
- Iridium's expectations about Forward looking statements are inherently predictive and
its ability to generate speculative and we cannot assure you that our forward
revenues from commercial looking statements will prove to be correct. Actual results
operations; and and developments are likely to be different, and may be
- Iridium's expectations about materially different, from those expressed or implied by
how much revenue it will these statements. You should carefully review the other risk
generate from commercial factors set forth herein for a discussion of some of the
operations. factors which could result in any forward looking statement
proving to be inaccurate.
The forward looking statements
are based on a number of In particular, you should recognize that forward looking
assumptions and one or more of statements are based on a number of assumptions about future
these assumptions is likely to events, many of which are beyond Iridium's control. For
be incorrect. example, many of the statements in this prospectus assume
that Iridium will transition smoothly from a development
stage company into an operating company and assume among
other things, that:
- there will be a sufficient number of customers for, and
usage of, the Iridium system to generate revenues in the
amounts and at the times anticipated by Iridium (this
assumption is reflected in many of the forward looking
statements included in, or incorporated by reference in,
this prospectus, including the statements in
"Summary -- Estimated Funding Requirements -- Sources and
Uses of Funds by Iridium");
- the Iridium system will provide service acceptable to the
market and will meet all systems specifications set forth in
its development contracts and will have service
characteristics across Iridium's various service offerings
that are at least as favorable as those that Iridium
expects;
</TABLE>

15
<PAGE> 16
<TABLE>
<S> <C>
- there will be no increased costs under the development and
maintenance contracts for the Iridium system;
- Motorola and Kyocera will manufacture, and Iridium and its
service providers will distribute, a sufficient number of
portable, hand-held phones and pagers for use with the
Iridium system on a timely basis, and Iridium will not
incur any significant additional expenses as a result of
any need to place orders for, or subsidize the sale of,
any Iridium phones and pagers;
- there will continue to be a sufficient number of
operational gateways to maintain the service quality and
system capacity Iridium expects;
- Iridium's satellite navigation software, communications
software and its business support systems software will
continue to function as expected under the various service
demands the Iridium system actually experiences;
- Iridium will contract with, and integrate into its various
operations, a sufficient group of roaming partners to ensure
that Iridium World Roaming Service meets Iridium's market
coverage expectations;
- Iridium will contract with a sufficient number of service
providers to ensure effective marketing and distribution of
its services;
- the operation of the Iridium system will not be impaired
by the loss of satellites or the need to put replacement
satellites in orbit and Iridium will not be required to
bear the costs of satellite replacement;
- in the various jurisdictions in which Iridium operates or
expects to operate, there will be no material change in
legislation or regulations or the administration thereof
that will have an adverse effect on the business of
Iridium, including Iridium's expectation that it will be
able to provide its services on a virtually global basis;
- there will be no material adverse changes in any of
Iridium's existing material contracts or the ability of
Iridium's various contractors to perform their obligations
(including Motorola's ability to perform under the O&M
contract); and
- the capacity of the Iridium system, as affected by, among
other things, spectrum allocation and customer usage
patterns, will meet or exceed Iridium's expectations.

One or more of these assumptions is likely to be incorrect
and, accordingly, actual results and developments are likely
to be different, and may be materially different from those
expressed or implied by any forward looking statements.

Iridium does not intend to publish updates or revisions of
the forward looking statements, including the projected
financial information, included in this prospectus or the
materials incorporated by reference in this prospectus or of
this discussion of some of the factors that could cause
actual results to differ from those expressed or implied in
the forward looking statements.

Documents incorporated by reference in this prospectus
contain information, including forward looking information,
as of various dates. You are cautioned that these statements
have not been revised to reflect subsequent events or
circumstances after the date on which they were made.
</TABLE>

16
<PAGE> 17
<TABLE>
<S> <C>
IRIDIUM IS TRANSITIONING FROM A Iridium is transitioning from a development stage company
DEVELOPMENT STAGE COMPANY INTO AN into an operating company. It is extremely important to
OPERATING COMPANY; IRIDIUM HAS NO Iridium's success that it effects this transition smoothly.
MEANINGFUL REVENUES OR HISTORY OF This will require Iridium to complete successfully a number
OPERATIONS; IRIDIUM'S FUTURE of complex tasks for the operation of Iridium's system while
REVENUES MAY NOT COVER ITS simultaneously attracting customers and ensuring that they
EXPENSES are satisfied with Iridium Services. Iridium has no
meaningful history of operations on which investors can
evaluate its performance and has no significant revenues. In
addition, many of the services Iridium offers are new and
there is no operational service that provides a direct
comparison. Further, Iridium has accumulated significant
losses in the development and construction of the Iridium
system and expects to continue to accumulate significant
losses until it has substantial revenues from operations.

Iridium is a start-up company Iridium has incurred significant indebtedness to fund the
with substantial debt and no development and construction of the Iridium system. Until
meaningful operating history or Iridium has substantial revenues from operations, it will
significant revenues. rely on additional indebtedness to pay its expenses and to
make payments on its indebtedness. We cannot give you any
assurance about:
- Whether or when Iridium will have sufficient customers or
revenues to satisfy its funding requirements or the
covenants in its bank facilities and debt securities.
- Whether Iridium will ever be profitable.

RISK OF HIGHLY LEVERAGED CAPITAL Iridium is a highly leveraged company and it expects to
STRUCTURE incur substantial additional indebtedness, including
indebtedness that is secured by its assets. Iridium
Iridium has borrowed ap- currently is not generating any meaningful revenues to fund
proximately $2.8 billion as of its operations or repay its indebtedness. The amount of debt
December 31, 1998 and expects to needed to finance the Iridium system could be increased by
borrow a substantial amount of one or more factors outside Iridium's control, including:
additional funds. Iridium is not - the inability to generate revenues in the amount and
currently generating any mean- within the time frame Iridium expects;
ingful revenues to fund its - cost increases for the construction or operation of the
operations or repay its in- Iridium system; and
debtedness. - increases in applicable interest rates.

Iridium's current and future debt service requirements could
have important consequences on its business, including:
- limiting Iridium's ability to obtain additional financing;
- reducing the amount of funds available for operations
because a substantial portion of Iridium's cash flow from
operations will be dedicated to the payment of principal
and interest on its indebtedness; and
- increasing Iridium's sensitivity to adverse economic
conditions.

IRIDIUM MAY BE UNABLE TO SATISFY In the secured bank facility, Iridium has covenanted, among
OR MAY BE ADVERSELY CONSTRAINED BY other things, that, as of a series of dates beginning with
THE COVENANTS IN ITS BANK March 31, 1999, it will satisfy certain minimum revenue and
FACILITIES AND DEBT SECURITIES subscriber levels, including the conditions that:
- at March 31, 1999 it have cumulative cash revenues of at
least $4 million, cumulative accrued revenues of at least
$30 million, at least 27,000 Iridium World Satellite
Service subscribers and at least 52,000 total subscribers;
</TABLE>

17
<PAGE> 18
<TABLE>
<S> <C>
- at June 30, 1999 it have cumulative cash revenues of at
least $50 million, cumulative accrued revenues of at least
$150 million, at least 88,000 Iridium World Satellite
Service subscribers and at least 213,000 total
subscribers; and
- at September 30, 1999 it have cumulative cash revenues of
at least $220 million, cumulative accrued revenues of at
least $470 million, at least 173,000 Iridium World
Satellite Service subscribers and at least 454,000 total
subscribers.

If Iridium is unable to sat- Other financial covenants in the secured bank facility
isfy the covenants in the require Iridium to comply with certain financial ratios as
secured bank facility, the of various dates, including maximum debt to total invested
lenders under the secured bank capital, maximum secured debt to earnings, maximum debt to
facility generally would have earnings and minimum interest expense to earnings. For
the right to declare a default Iridium to satisfy these covenants it will have to make a
and could pursue various timely and successful transition into an operating company
remedies, including enforcing and generate substantial demand for its services. While
their security interests in Iridium believes it will be able to satisfy these and the
substantially all of the as- other operations-based and financial covenants it is subject
sets of Iridium Operating LLC to, various factors, including those discussed in this Risk
(which include the Iridium Factor section, could prevent Iridium from satisfying these
system and represent covenants. If Iridium is unable to satisfy the covenants in
substantially all of the secured bank facility, the lenders under the secured
Iridium's assets) and Irid- bank facility generally would have the right to declare a
ium's investment in Iridium default and could pursue various remedies, including
Operating LLC. enforcing their security interests in substantially all of
the assets of Iridium Operating LLC (which include the
Iridium system and represent substantially all of Iridium's
assets) and Iridium's investment in Iridium Operating LLC.

In addition, Iridium's management is not able to make
decisions freely about certain business matters because the
secured bank facility, the Motorola guaranteed bank
facilities and the indentures relating to its senior notes
include certain covenants that, among other things, restrict
the ability of Iridium and its subsidiaries to:
- dispose of assets;
- incur additional indebtedness;
- incur guarantee obligations;
- prepay other indebtedness or amend other debt instruments;
- pay dividends;
- create liens on assets;
- make investments, loans or advances;
- make acquisitions;
- engage in mergers or consolidations;
- change the business conducted by Iridium;
- make certain asset or stock dispositions; and
- enter into certain transactions with affiliates and
related persons.
</TABLE>

18
<PAGE> 19
<TABLE>
<S> <C>
IRIDIUM MAY HAVE SIGNIFICANT Iridium estimates that its cash funding requirements for
ADDITIONAL FUNDING NEEDS 1999 will be approximately $1.65 billion and that following
1999 Iridium generally will fund its cash needs for the
Iridium's actual funding needs operation and maintenance of the Iridium system and the
may exceed its estimates, provision of its services through revenues from operations.
perhaps substantially, for a
number of reasons, including if These estimates are forward looking and Iridium's actual
Iridium is unable to generate funding requirements are likely to differ, and may differ
revenues in the amount and materially, from these estimates. Iridium's estimated
within the time frame it expects funding requirements should be viewed in light of the
or if Iridium has unexpected following facts:
cost increases. - Iridium has no meaningful history of operations or
revenues and there is no operational service that provides a
direct comparison to Iridium;
- Iridium's estimates assume, among other things, that
Iridium will transition smoothly from a development stage
company into an operating company and that there will be a
sufficient number of customers for, and usage of, the
Iridium system to generate revenues in the amounts and at
the times anticipated by Iridium;
- The availability of the additional sources of funding
Iridium expects to be able to use is not completely within
Iridium's control and is conditioned on Iridium satisfying
certain conditions; and
- Iridium faces challenges and risks.

Iridium's estimated funding requirements do not reflect any
contingency amounts and may increase, perhaps substantially,
in the event Iridium is unable to generate revenues in the
amount and within the time frame it expects or if Iridium
has unexpected cost increases. Many factors, including the
factors discussed in this section, could adversely affect
Iridium's ability to generate revenues and its costs of
operations.

If Iridium's actual funding requirements significantly
exceed its current estimates, it is likely that Iridium
would have to arrange for additional financing and there can
be no assurance that Iridium would be able to obtain such
additional financing on satisfactory terms or at all.

RISK OF LOW SERVICE DEMAND BECAUSE The Iridium system is not intended to provide communication
OF PRICING, SERVICE QUALITY, services that compete with land-line telecommunications and
EQUIPMENT CHARACTERISTICS, land-based cellular services. Instead, the Iridium system is
COMPETITION AND OTHER MARKET designed to complement such services. Iridium World
FACTORS Satellite Services is priced significantly higher than most
land-based phone services, and Iridium customers are not
expected to discontinue their use of land-based wireless
services.

Many market factors, including Iridium's estimates of its funding needs assume there will
pricing, could prevent Iridium be substantial demand for Iridium services beginning in
from generating revenue in the early 1999 and that Iridium will be able to charge a premium
amount and within the time frame over the cost of a land-based call for its satellite
it expects. services because such services provide global mobility.
Iridium currently expects that its wholesale usage fees for
international Iridium World Satellite Services calls between
two countries will result in suggested retail prices that,
in aggregate, are approximately 25% to 30% above the retail
prices for land-based voice calling options that traveling
customers could use for a similar call between the same two
countries (e.g., international calling card and
international cellular roaming rates). If demand for Iridium
services is not significant or if the market will not
support such a global mobility premium, Iridium may be
unable to generate sufficient revenues. In addition to
pricing, a number of other market factors, including service
quality, equipment characteristics and competition, could
adversely affect demand for Iridium services.
</TABLE>

19
<PAGE> 20
<TABLE>
<S> <C>
The price of Iridium's phones Motorola's multi-mode phone generally has an initial retail
and pagers may adversely affect price of at least $3,000 and Motorola's alphanumeric pager
customer demand for Iridium's generally has an initial retail price of at least $500.
services. Iridium expects the retail prices for Kyocera phones and
pagers to be similar to the retail prices for Motorola's
equipment. These prices substantially exceed current prices
for cellular phones and pagers and could adversely affect
the demand for Iridium's services because potential
customers may be unwilling to make such a significant
investment just to have access to a new service.

Iridium does not control its Under Iridium's pricing strategy it sets wholesale prices
retail prices and, if they are for its services and its service providers control the price
set too high, demand for to the customer. Service providers may price Iridium
Iridium's services may be services at a level that is too high, thereby reducing total
adversely affected. Prices in the demand without an offsetting increase in per minute revenue
telecommunications industry have to Iridium. Moreover, competition may force Iridium and its
been dropping, which may service providers to reduce prices below those assumed in
adversely affect Iridium's Iridium's revenue estimates. In addition, pricing for
ability to generate revenues. telecommunication services, including long distance rates,
has trended downward in recent years. This downward trend
may make it difficult for Iridium to maintain or raise its
wholesale prices.

The Iridium system does not afford the same voice quality,
signal strength and degree of building penetration as mature
land-based cellular or paging systems. This difference in
service quality could adversely affect demand for Iridium
services.

The larger sized Iridium phones The Kyocera and Motorola phones are larger and heavier than
and pagers may adversely affect today's pocket-sized cellular phones and have a
customer demand for Iridium significantly longer and thicker antenna. Motorola's pager
services. is slightly larger than today's standard alphanumeric
belt-worn pagers. The larger size of Iridium's phones and
pagers may adversely affect customer demand for Iridium
services.

In addition, competition, including competition from other
satellite systems and from the extension of land-based
telecommunications systems to areas that are currently not
serviced by landline or land-based wireless phone or paging
systems, could reduce demand that might otherwise exist for
Iridium's services.

FACTORS AFFECTING CUSTOMER Iridium's ability to generate sufficient operating revenues
ACCEPTANCE OF SATELLITE-BASED will depend upon customer satisfaction with Iridium
SERVICE services. Iridium believes that customer satisfaction will
depend on a variety of factors, including:
The use of satellites in the - price of its services, phones and pagers;
Iridium system expands cov- - the technical capabilities of Iridium's equipment;
erage but satellite voice and - the quality of the services Iridium offers, including
paging services have certain voice quality, call completion rates and dropped call rates;
service limitations that cus- and
tomers may not be willing to - the extent, availability and price of alternative
accept. telecommunications services.

Satellite-based communications over the Iridium system
experience degradation in service quality in certain places
and are completely unavailable in some places. In
particular:
- Satellite-based services are adversely affected in places
where obstructions, such as buildings and other natural and
man-made obstacles, are positioned between a satellite and
the user.
- These adverse effects on satellite calls increase as the
obstacles become larger and more densely spaced.
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- In densely packed urban areas or inside buildings with
steel construction and metal coated glass common in many
urban high rise buildings (including, in particular, in
most hotels and professional buildings), no meaningful
satellite voice service is available.
- Use of an Iridium phone in a moving automobile for a
satellite call makes the effect of obstructions temporary
but more pronounced because the structure of automobiles
tends to obstruct the satellite signal.
- The actual limitations on satellite-based services vary,
sometimes significantly, as conditions change and as the
satellites move in their orbits.

The Iridium satellite paging service also experiences
degradation in certain places. These limitations on
satellite-based services are more significant than current
limitations on service experienced by customers of
land-based cellular systems and traditional paging systems.

For Iridium to succeed, its customers must accept:
- the service limitations described above;
- higher prices for Iridium's satellite services than the
current prices for cellular and paging services; and
- heavier hand-held phones and larger pagers than those
currently used for most cellular and paging services.

Iridium's customers may not accept these limitations. These
limitations could result in significantly lower sales or
lower usage of Iridium's services than Iridium anticipates.

The Iridium system has not been designed to provide
high-speed data and facsimile transmission capability. As a
result, Iridium expects that the appeal of its facsimile and
data services (which are not expected to be available until
mid-1999) will be limited.

Also, the Iridium system lacks the operational capacity to
provide service to a very large number of customers in
concentrated areas using the system simultaneously.

POTENTIAL UNDERSUPPLY OF PHONES Iridium phones and pagers are an essential part of the
AND PAGERS; DISTRIBUTION CONCERNS Iridium system. Motorola has started commercial production
of the phones and pagers and Motorola has delivered phones
Insufficient supply of Iridium and pagers for commercial use. Kyocera has delivered phones
telephones and pagers could harm for customer trials but performance quality issues have
Iridium. delayed commercial availability. Motorola's or Kyocera's
inability to manufacture enough phones and pagers to meet
demand could constrain Iridium's commercial operations and
adversely affect its generation of meaningful revenues. In
addition, if enough phones and pagers are not available to
supply those people who want to become Iridium customers,
those people could develop a negative impression of Iridium
and decide not to become Iridium customers.
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There is currently a significant shortage of Iridium phones
and pagers. As of December 31, 1998 Motorola had produced
approximately 35,000 phones and was producing phones at a
rate of approximately 1,000 per day. Commercial shipments of
Kyocera phones are on hold because test results have not yet
met Iridium's quality standards for commercial use. While
Iridium expects that Kyocera phones will be approved for
commercial shipment in the first quarter of 1999, there can
be no assurance Kyocera will be able to meet Iridium's
quality standards within that time period. There can be no
assurance that the shortage of phones and pagers will not
have an adverse effect on Iridium or that sufficient
quantities of phones and pagers will be produced to meet
demand during Iridium's initial stages of commercial
service.

Distribution Concerns. The initial global distribution of
phones and pagers is one of Iridium's most significant
challenges as it transitions from a development stage
company into an operating company. While Iridium's service
providers, who are responsible for direct sales to
customers, are disparately located across the globe, there
are only two supply sources of phones and pagers. Getting
phones and pagers from production locations to a large
number of service providers spread over the globe is a
significant challenge. Hurdles that must be overcome include
customs and tax clearance in each of the countries to which
the phones and pagers are shipped and coordination with
numerous local and regional distribution channels. Iridium
must also train service providers in a number of countries
to identify potential Iridium customers, to accurately
inform such customers about Iridium's services, to market
Iridium phones and pagers and to distribute the equipment
once sold. There can be no assurance that Iridium and its
gateway operators and service providers will be able to
distribute phones and pagers to various parts of the world
on a timely basis. A failure to distribute phones and pagers
on a global and timely basis would adversely affect Iridium.

RISKS RELATING TO LOW DEMAND FOR There is a risk that sufficient demand for Iridium services
PAGERS AND PHONES; POTENTIAL NEED will not materialize in a timely manner unless Iridium and
FOR SUBSIDIES its gateway operators or service providers subsidize the
cost of Iridium phones and pagers. Neither Iridium nor, to
Iridium may have to subsidize Iridium's knowledge, its gateway owners and service
the price of phones and pagers providers currently plan to provide any such subsidies. The
to stimulate demand for its costs associated with those subsidies, including Iridium's
services. portion of those costs, could be significant. Iridium's
current projected funding needs do not reflect any costs
associated with subsidization.
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TECHNOLOGY IMPLEMENTATION RISKS For the Iridium system to operate properly, Motorola and its
subcontractors must make a number of sophisticated and
Integrating the Iridium sys- diverse technologies work together -- this is a complex task
tem's various technologies, that has not been attempted before. This task is further
including software and com- complicated by the following facts:
munications hardware, was an - the Iridium system is expected to operate 24 hours a day;
extremely complex task and - most of the Iridium system's hardware is in space; and
future operations could reveal - system-wide testing, maintenance and repair could
serious problems that cannot be adversely affect Iridium's ability to provide the service
corrected without adversely quality it anticipates.
affecting Iridium's services.
Iridium believes that the development and implementation of
the software for the Iridium system was one of the largest
and most complex software creation and integration tasks
ever undertaken in the telecommunications industry. The
Iridium system software, including the software that
controls the satellites and the on-the-ground business
support systems necessary for customer billing, has not been
subject to the demands of commercial operations at the
levels Iridium will need to be successful. This software
will have to be reprogrammed if errors are revealed.

POTENTIAL FOR DELAYED OR IM- The Iridium system is the first satellite-based global
PAIRED OPERATIONS personal communications system. However, other companies are
attempting to develop satellite-based systems to compete
If Iridium's transition from a with Iridium. A significant part of Iridium's strategy is to
development stage company into a capitalize on its first-to-market advantage. If Iridium's
company with substantial transition from a development stage company into an
commercial operations is delayed operating company is delayed or its ability to provide the
or its ability to provide the services it expects is impaired, there likely would be:
services it expects is impaired, - harm to the competitive advantage Iridium expects to
its ability to generate revenues achieve under its current strategy;
and its competitive position could - delay in Iridium's generation of revenue; and
be materially harmed. - a significant effect on Iridium's ability to repay its
indebtedness.

A significant delay in Iridium's transition to a company
with substantial commercial operations or a significant
impairment of its ability to provide the services it expects
could occur if:
- significant errors in the design and implementation of the
Iridium system are discovered during commercial operations;
- commercial operations reveal that significant improvements
in service quality are needed if Iridium services are to
generate the demand Iridium expects; or
- a significant number of satellites fail to operate for any
reason. See "-- Risks Related to the Satellites", below.
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LIMITED SATELLITE-BASED SERVICE Iridium's ability to supply satellite-based service depends
CAPACITY upon the capacity of the Iridium system. Various factors,
including customer usage patterns, have a significant effect
If Iridium experiences unex- on the Iridium system's capacity for a particular geographic
pected customer usage patterns area and on a system-wide basis. The most important factors
or its available spectrum is include:
fully utilized, the ability of - customer usage patterns; and
customers to place or receive - the amount of spectrum (the frequencies at which Iridium
calls may be adversely affected. is allowed to operate the Iridium system) available to the
Iridium system.

Iridium could experience unexpected customer usage patterns
that could exceed the capacity of the Iridium system at one
or more gateways -- similar to an overload of regional
circuits on a land-based system. If Iridium faces
significant capacity issues, its ability to acquire
additional spectrum (which can be thought of as similar to
adding more "lines" to a land-based system) is subject to
significant regulatory hurdles. If adverse usage patterns
occur or other significant constraints are placed on the
Iridium system, customers may have difficulty in placing or
receiving calls on the system, which could materially and
adversely affect Iridium.

RISKS RELATED TO THE SATELLITES A significant portion of Iridium's tangible assets are its
low earth orbit satellites and the related land-based
The risk of satellite loss or control facilities. Maintaining this equipment is a complex
damage is significant, and the and costly undertaking which has not been attempted
effect of satellite losses or previously on a commercial basis. In particular, the costs
damage could be substantial. of satellite loss or failure are significant.

The loss or failure of one or more satellites, including
temporary losses, that for whatever reason are not promptly
corrected by fixing or replacing the problem satellite,
could cause:
- gaps in service availability;
- significantly degraded service quality;
- increased costs; and
- losses of revenue for the period that service is
interrupted or impaired.

Accordingly, the loss or failure of any satellite or
satellites could materially and adversely affect Iridium. A
satellite can be lost or fail for a variety of reasons,
including:
- colliding with something, including space debris, another
man-made object or space phenomena such as comets or
meteors;
- mechanical anomalies or malfunctions; and
- failure of the rocket, by explosion or otherwise, that was
to place the satellite in orbit.

Space debris and other in-space risks. Iridium's satellites
operate in low earth orbit and, as a result, face a higher
risk of damage from space debris than satellites that
operate farther away from the earth. Because objects in low
earth orbit are moving at different speeds, the Iridium
satellites can be more readily hit by space debris -- which
can include sand, pebbles, dust and rocks shed by comets, as
well as the remains of man-made objects floating in space.
Even a very small piece of space debris can cause
significant damage to a satellite.
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Mechanical Anomalies and Malfunctions. During the initial
deployment of the Iridium system, Iridium experienced
problems or "anomalies" with several of its satellites.
Those anomalies, which in some cases included control
problems and the satellite's failure to function as
expected, caused those satellites to be excluded from
Iridium's initial constellation. You should note that:
- anomalies such as occurred with respect to those
satellites, or other anomalies with comparable effects,
could occur in the future;
- such anomalies could have a significant adverse effect on
Iridium;
- from time to time certain events could occur that may
cause Iridium or Motorola to conclude that one or more
malfunctioning satellites should not be included in the
satellite constellation, and the unavailability of such
satellite could have an adverse effect on the operation of
the Iridium system; and
- while Motorola has absorbed the direct financial
consequences of all satellite losses to date, there can be
no assurance Motorola will do so in the future.

The O&M contract with Motorola provides for the operation
and maintenance of Iridium's space assets (including the
satellite constellation) for Iridium's first five years of
operation. Iridium has the option to extend the O&M contract
for an additional two years. Under the O&M contract,
Motorola bears the risk of satellite malfunction, but
Iridium bears the risk of damage to satellites by the acts
of third parties, including the degradation or complete loss
of any satellite due to contact with space debris.

Launch-related risks. Motorola expects that it will need to
launch additional satellites from time to time to maintain
the Iridium system. Accordingly, a launch failure or
failures could have a material adverse effect on Iridium.
Satellites are launched on launch vehicles, or rockets.
Launches of satellites can fail because:
- a rocket crashes, aborts or explodes (which recently
happened to one of Iridium's competitors); or
- satellites are damaged as they are loaded into the rocket,
during the launch, or as they are deployed from the rocket.

In addition, launches can be delayed for many reasons,
including poor weather conditions, other launch failures or
government actions. Placing multiple satellites in each
Iridium launch vehicle significantly increases the risk that
a launch failure will have a material and adverse effect on
Iridium.
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Life Expectancy of the Satellites; Financial Effect of Loss
of Satellites. Iridium's business plan currently assumes
that each of the satellites will have an average useful life
of at least five years from its initial date of commercial
service. Iridium's satellites may not, however, remain in
operation for an average of at least five years as Iridium
expects. If a significant number of satellites do not remain
in operation for the full five years, Iridium's operations,
including its ability to provide service and generate
revenues, could be materially harmed and its costs of
operating will likely increase.

COMPETITION RISKS Certain sectors of the telecommunications industry are
highly competitive in the United States and other countries.
Iridium faces direct compe- The uncertainties and risks created by this competition are
tition from a variety of op- intensified by the continuous technological advances that
erating and planned satellite characterize the industry, regulatory developments that
systems and land-based ser- affect competition and alliances between industry
vices. participants.

Satellite Services Competitors. While Iridium is the only
company that currently serves the global satellite personal
communications market with hand-held phones and belt-worn
pagers, Iridium anticipates that more than one system may
serve this market in some fashion in the future. Iridium
believes that its most likely direct competition will come
from the planned ICO telecommunications service and from one
or more of the other Federal Communications Commission
licensed MSS applicants:
- Loral/Qualcomm Partnership, L.P. (on behalf of
Globalstar);
- MCHI (on behalf of Ellipso); and
- Constellation Communications Inc. (on behalf of
ECCO/Aries).

Iridium also expects to encounter competition from Inmarsat,
which currently serves the global satellite communications
market as well as from regional mobile satellite systems,
three of which have been launched (Asia Pacific Mobile
Telecommunications Satellite, Afro-Asian Satellite and PT
Asia Cellular Satellite) and several of which are in the
planning stage.

Other Competitors. Iridium's World Roaming Service offering,
which allows Iridium subscribers to roam onto a variety of
cellular networks, faces competition from existing and will
face additional competition from future land-based cellular
interprotocol roaming services, which provide roaming
services across similar cellular networks. GTE Mobilnet
("GTE") and Deutsche Telekom Mobil ("DeTeMobil") of Germany
currently offer GlobalRoam, a two-way cellular roaming
service between certain North American cellular networks and
cellular networks in certain European countries. AT&T
Wireless Service of the United States and Vodafone of the
United Kingdom offer CellCard, a service that is very
similar to GlobalRoam. Two other proposed mobile satellite
systems, ICO and Globalstar, and at least one regional
geostationary orbit satellite system, ACeS, have indicated
that they may also offer some form of dual-mode
satellite/cellular service, which may include interprotocol
roaming capabilities such as those expected to be offered by
Iridium. In addition, a number of rental services, primarily
in the United States, provide cellular phones to persons
traveling in countries with cellular standards that differ
from the traveler's home market.
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Currently, the world's large cellular network owners and
operators are considering adopting a coordinated standard
for future cellular networks. If such a coordinated standard
is agreed upon and new networks are built, Iridium's ability
to provide interprotocol roaming would cease to be an
advantage. Iridium does not expect that such systems would
be available on a global basis until sometime after 2002.

COMPETITION FOR SERVICE In addition to competing for customers for its service,
PROVIDERS AND SPECTRUM Iridium also expects to compete with various other
ALLOCATION communications services for local service providers. A
failure to effectively compete with these services could
materially and adversely affect Iridium's ability to
effectively market and distribute its services and
equipment.

Iridium will face competition Furthermore, ICO could have an advantage in obtaining
from other services for local spectrum allocations and local operating approvals in a
service providers number of countries because it is affiliated with Inmarsat,
an international satellite organization, and investors in
ICO and Inmarsat include many state-owned telecommunications
companies, which may have influence with the regulatory
authorities in their countries.

RISKS ASSOCIATED WITH The Iridium system's operation is subject to regulation by
LICENSING the United States and other national administrations. This
regulation is pervasive and largely outside Iridium's
Iridium cannot currently offer control. Iridium, Motorola and the various gateway owners
its services in every country. have made substantial progress in receiving the
authorizations necessary to operate the Iridium system, but
a significant number of regulatory authorizations necessary
for Iridium to meet its service coverage objectives have not
yet been obtained. In certain countries in which Iridium
expects its customers will want to use Iridium's services,
the authority to offer Iridium's services and operate
Iridium Satellite phones has not been received, and unless
Iridium receives such authorizations, service in those
countries will be limited or will not exist at all.

Iridium has covenanted in its In the secured bank facility, Iridium has covenanted, among
secured bank facility that it other things, that it will maintain, or cause to be
will maintain the authority to maintained, the regulatory authority to offer Iridium World
offer Iridium World Satellite Satellite Service in a minimum number of countries. While
Service in a minimum number of Iridium believes it will be able to satisfy this covenant,
countries. Failure to satisfy the regulation of satellite voice services generally is
this and other covenants would outside Iridium's control. If Iridium is unable to satisfy
give the lenders under secured this or certain other covenants in the secured bank
bank facility the right to facility, the lenders under the secured bank facility
declare an event of default. generally would have the right to declare a default and
could pursue various remedies, including enforcing their
security interests in substantially all of the assets of
Iridium Operating LLC (which include the Iridium system and
represent substantially all of Iridium's assets) and
Iridium's investment in Iridium Operating LLC.

You also should carefully consider the information discussed
in "Certain Regulations that Affect Iridium".
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RELIANCE ON MOTOROLA, GATEWAY Operation of the Iridium system. Iridium relies extensively
OWNERS AND OTHER THIRD PARTIES on third parties to perform functions critical to its
operations. Iridium does not independently have, and does
Iridium relies extensively on not intend to acquire, except by contracting with other
third parties to perform parties, the ability to:
functions critical to its oper- - develop or produce replacements for the components of the
ations. Iridium system;
- launch additional or replacement satellites; or
- operate and maintain the Iridium system.

Currently, Iridium relies on Motorola to provide these
critical functions.

Gateway Operators. Iridium is dependent on the activities of
its gateway operators for its success. Iridium has obtained
commitments from its investors who are gateway operators
that they will continue to use their reasonable best efforts
to perform certain critical functions including:
- obtaining the necessary licenses, if any, from the
jurisdictions in their gateway territories;
- operating their gateways;
- maintaining the connections between the Iridium system and
the PSTNs;
- marketing Iridium Services;
- contracting with, or acting as, service providers; and
- managing relationships with Iridium's customers either
directly or through service providers.

Distribution and Marketing of Iridium Services. Iridium's
success also depends upon the motivation and ability of its
service providers to generate current demand for Iridium
Services, phones and pagers. Service providers are
responsible for the sales of Iridium Services and of Iridium
subscriber equipment to the ultimate consumer. Service
providers are, or are selected by, Iridium's gateway
operators. Iridium's business plan assumes the service
providers will make substantial sales of Iridium phones,
pagers and services as Iridium transitions from a
development stage company into an operating company.
However, as a result of many factors, including the failure
of service providers to promote Iridium services
effectively, demand for Iridium services may not be
generated on a timely basis. See "-- Risk of Low Service
Demand Because of Pricing, Service Quality, Equipment
Characteristics, Competition and Other Market Factors" and
"-- Potential Undersupply of Phones and Pagers; Distribution
Concerns".

RISKS ASSOCIATED WITH PRINCIPAL Iridium has three principal supply contracts (each with
SUPPLY CONTRACTS Motorola):
- the space system contract for the design, development,
Iridium's major contracts construction and delivery in orbit of the space segment
relating to the Iridium system which has an aggregate cost of approximately $3.435
are of limited duration, and billion and is substantially complete;
Motorola's liability under them - the O&M contract, which runs for five years from November,
is significantly limited. 1998 (extendable, at Iridium's option, for an additional two
years), covers the operation of the space segment of the
Iridium system, including monitoring, upgrading and
replacing the hardware and software necessary to maintain
specified performance levels, and has an aggregate cost
(subject to certain adjustments) of approximately $2.88
billion over the initial five year term; and
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- the terrestrial network development contract for the
design and development of the gateway hardware and software,
which is expected to be complete by year end 1999 and has
an aggregate cost (subject to certain adjustments) of
approximately $356 million.

These contracts are of limited duration and Motorola's
liability under them is significantly limited. The contracts
provide that if Motorola has any liability to Iridium under
the space system contract, the O&M contract, the terrestrial
network development contract or any other contract between
Iridium and Motorola in connection with the Iridium system,
that liability may be limited to $100 million in the
aggregate in virtually all circumstances. In addition, under
the space system contract, Motorola is not required to
refund amounts Iridium previously paid to it. Subject to
certain exceptions, Iridium bears the risk, including
additional costs, if any, resulting from excusable delays
under the space system contract, as well as certain of the
risks of loss for satellites in orbit. The O&M contract and
the terrestrial network development contract have similar
provisions regarding excusable delays, waivers and
limitations on liability. See "Management's Discussion and
Analysis of Financial Condition and Results of Opera-
tions -- Liquidity and Capital Resources" for a description
of certain of Motorola's and Iridium's obligations under
these contracts.

The obligations Motorola is required to perform under these
contracts are highly specialized and, if Motorola becomes
unable to perform its obligations under these contracts, it
would be very difficult, if not impossible, for Iridium to
engage a replacement contractor in a timely manner or at
all. See "-- Reliance on Motorola, Gateway Owners and Other
Third Parties".

CONFLICTS OF INTEREST WITH MO- Motorola has and will have various conflicts of interest
TOROLA with Iridium. Motorola is:
- the creator and developer of the concept of the Iridium
Because of Motorola's varying system;
roles with respect to Iridium, - responsible for the design, construction, operation and
there are a number of maintenance of the Iridium system;
significant conflicts of in- - a founding, and the largest single, investor in Iridium;
terest between Iridium and - a gateway owner;
Motorola. - Iridium's largest class 1 interest holder (and potentially
the largest class A common stock holder in IWCL because
class 1 interests are exchangeable for class A common
stock);
- a holder of warrants to acquire additional membership
interests in Iridium;
- the guarantor of some of Iridium's borrowings; and
- entitled to receive significant additional equity and cash
from Iridium for guaranteeing Iridium's borrowings and
permitting Iridium to defer payments under the O&M
contract.

Motorola's Influence on Iridium. Motorola does not by itself
control the Iridium Board of Directors and it is not
permitted to participate in Iridium's decisions or other
actions concerning the space system contract, O&M contract
or the terrestrial network development contract. However,
Motorola could in certain situations exercise significant
influence over Iridium because:
- Motorola currently has the right to appoint 6 of the 27
members of the Iridium Board of Directors and its
representation could increase if it provides further
financial support to Iridium; and
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- Motorola could have control over Iridium similar to that
of a creditor through its position as a guarantor of some of
Iridium's borrowings and as a creditor under various
material contracts.

In addition, under the Motorola MOU and the Motorola ARG,
Iridium has agreed with Motorola that, among other things,
it will:
- compensate Motorola for providing guarantees, deferral
rights and other credit support (collectively, the "Motorola
exposure", which generally includes the aggregate amount
guaranteed by or permitted to be deferred by Motorola);
- use its best efforts to reduce the Motorola exposure to no
more than $275 million by the earliest possible date,
including obtaining bank credit agreements not guaranteed
by Motorola and using revenues from operations, if
available, to reduce the available borrowings under the
guaranteed credit facilities;
- not have outstanding in excess of (a) $1.7 billion of
indebtedness for borrowed money that is secured by the
assets of Iridium or (b) $1.62 billion of senior notes;
- not make certain acquisitions without Motorola's consent;
and
- provide Motorola with the right (in addition to Motorola's
rights to representation based on its holdings of class 1
interests) to appoint one additional director to the Board
of Directors of Iridium any time the Motorola exposure
exceeds $275 million and the right to appoint a second
additional director to the Board of Directors of Iridium
any time the Motorola exposure exceeds $750 million.

Motorola's Contractual Relations with Iridium. Motorola and
Iridium entered into the space system contract, the O&M
contract and the terrestrial network development contract
after extensive negotiations. The predecessor of Iridium
under those contracts, however, was a wholly owned
subsidiary of Motorola at the time the space system contract
and O&M contract were negotiated and therefore these
negotiations were not conducted on an arm's-length basis.
Moreover, although these agreements provide for specific
prices, Motorola's obligations and liabilities are subject
to certain limitations which allocate various risks to
Iridium and may have the effect of increasing the price paid
by Iridium. Iridium's payment obligations under these
agreements have comprised, and are expected to continue to
comprise, most of Iridium's expenses.

CONFLICTS OF INTEREST WITH GATEWAY The Iridium Board of Directors consists of representatives
OWNERS of certain of the world's leading telecommunications
companies. Almost all of the members of the Iridium Board of
Iridium has certain conflicts of Directors have been appointed by investors in Iridium who
interest with its gateway owners also are gateway owners and service providers. Because
and service providers. Iridium is a supplier to the gateways and the service
providers, the interests of Iridium are expected to conflict
in certain respects with the interests of its gateway owners
and the service providers. For example, this conflict of
interest is relevant when the wholesale prices that Iridium
will charge for satellite airtime and other Iridium Services
are set -- some gateway operators and service providers may
prefer prices that are higher or lower than the system
optional prices because their customers are less or more
price sensitive.
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YEAR 2000 READINESS DISCLOSURE Iridium has only recently begun addressing the Year 2000
issue. The "Year 2000 issue" refers to the fact that many
In a reasonably likely worst computer software application and operations programs
case scenario, the failure to (including embedded chips) written in the past may not
correct a material Year 2000 properly recognize dates ending in "00" as meaning 2000
problem could result in an rather than 1900. This could result in the incorrect
interruption in, or a failure performance of computer calculations and functionality
of, certain normal business involving dates. Such miscalculations could adversely affect
activities or operations in- Iridium's installed computer systems, network elements,
cluding operations that are software applications and other computer systems, network
essential to the provision of elements, software applications and other business systems
Iridium's services. Iridium has containing time sensitive programs. The Year 2000 issue may
established a program to assess also affect the systems and applications of Iridium's
and mitigate those risks, but roaming partners, service providers and other material
because Iridium has not yet distributors.
completed the risk assessment
phase, it cannot provide Iridium has established a Year 2000 Program to address
assurance that all actions information-technology, or "IT", and non-IT problems that
necessary to correct a Year 2000 may exist within Iridium's business, including with
problem will be completed in a Iridium's suppliers, roaming partners, service providers and
timely manner. other material distributors. The Y2K program encompasses
Iridium's space and ground facilities, as well as the
relevant operations of Iridium's material suppliers and
distributors, and addresses both IT and non-IT systems.

Iridium is in the process of performing an initial inventory
of all Iridium hardware, software and infrastructure, as
well as material vendors, to identify potential Year 2000
issues and to determine the action required, if any, to
correct the problem. Through the gateways, Iridium is
contacting its third party roaming partners and service
providers to determine the Year 2000 status of their
systems, as well as their plans to bring them into
compliance. Once Iridium identifies problem areas, it plans
to upgrade those systems under its direct control, and
verify, test and implement any modifications to them by the
third quarter of 1999. No current assessment of the
completion dates for material repairs, replacements and
renovations not under Iridium's direct control, and for
which third parties such as gateways, service providers and
roaming partners are responsible, is available.

In a reasonably likely worst case scenario, the failure to
correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business
activities or operations, including operations that are
essential to the provision of Iridium's services. Such
failures could materially and adversely affect Iridium's
results of operations, liquidity and financial condition.
Due to the general uncertainty inherent in the Year 2000
problem, resulting in major part from the present state of
Iridium's knowledge concerning the Year 2000 readiness of
third-parties such as its roaming partners and service
providers, Iridium is unable to determine at this time
whether the consequences of Year 2000 failures will have a
material impact on its results of operations, liquidity or
financial condition. Iridium believes that if the Y2K
Program is completed as scheduled, the potential of
significant interruptions of normal operations should be re-
duced. However, Iridium cannot assure you that its systems
and the systems of those third parties on which its
operation relies will be compliant in a timely manner or
that there will not be a material disruption of Iridium's
business or a material adverse effect on Iridium's
liquidity, financial condition or results of operations
because of a Year 2000 problem.

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RISKS ASSOCIATED WITH INTER- Iridium intends to make its services available in almost
NATIONAL OPERATIONS AND DE- every country. As a result, Iridium and its gateway
VELOPING MARKETS operators and service providers are subject to risks related
to each country's domestic and international policies and
Certain risks related to the risks related to economic conditions in many regions of the
domestic and international world, such as:
policies and economies of the - changes in domestic and foreign government regulations and
various countries in which Iridium telecommunications standards;
operates could adversely affect - licensing requirements, tariffs or taxes and other trade
Iridium. barriers;
- price, wage and exchange controls;
- political, social and economic instability;
- inflation; and
- interest rate and currency fluctuations.

Iridium, its gateway operators or service providers could be
adversely affected on a country-specific, regional or
system-wide basis by these factors. See "-- Potential
Undersupply of Phones and Pagers; Distribution Concerns" and
"-- Reliance on Motorola, Gateway Owners and Other Third
Parties".

DEPENDENCE ON KEY MANAGEMENT AND Iridium's success depends upon the efforts of its management
QUALIFIED PERSONNEL team and its ability to attract and retain qualified
management and personnel. Iridium has no employment contract
Iridium relies on key em- with any employee and is subject to the possibility of loss
ployees with whom it does not of one or more key employees at any time. Iridium also
have employment agreements. relies upon several employees of Motorola who play a key
role in the performance of Motorola's obligations under the
O&M contract. Iridium has no control over the relationship
between Motorola and its employees. The loss of one or more
of these key employees could adversely affect Iridium. In
addition, Iridium's success will be dependent in part upon
gateway operators having qualified personnel at the various
gateways to execute significant aspects of Iridium's
licensing, marketing and distribution efforts.

RISKS ASSOCIATED WITH GROWTH If significant and rapid growth in demand for Iridium World
Services is achieved it would require Iridium and its
Currently, the capacity of the gateways to make additions to personnel and management
Iridium system cannot grow above information systems to manage that growth while continuing
certain limits. to meet customer service expectations. In addition, because
Iridium's assigned spectrum (frequency band) and satellite
infrastructure characteristics set inherent capacity
limitations, growth above certain levels currently is not
possible.

RISKS OF THE CLASS A COMMON STOCK Because IWCL's sole asset is its class 1 interests in
DIVIDEND POLICY Iridium, it will receive cash only if Iridium pays dividends
or distributions on its class 1 interests. However, Iridium:
IWCL is unlikely to pay any - has never made distributions on its class 1 interests;
dividends on the class A common - does not anticipate paying any dividends or distributions
stock for the foreseeable on its class 1 interests until Iridium has demonstrated a
future. positive operating cash flow for a significant period of
time; and
- is effectively restricted under certain debt covenants
from paying any dividends on its class 1 interests and those
covenants (or similar covenants) are likely to be in
effect long after the time Iridium would otherwise have
funds available for distribution to its members.

You should note that:
- IWCL has never declared or paid any dividends on its class
A common stock; and

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- IWCL will be unable to pay or declare any dividends on its
capital stock until it receives distributions on its class 1
interests from Iridium, which is unlikely until long after
Iridium achieves a positive operating cash flow if at all.

THE PRICE OF CLASS A COMMON STOCK Sales of substantial amounts of class A common stock or
MAY DECLINE DUE TO SHARES ELIGIBLE class 1 interests, or the belief of market participants that
FOR FUTURE SALE substantial sales could occur, may cause the price of class
A common stock to decline for a variety of reasons,
Future sales of class A common including that those sales may, or may be expected to:
stock could adversely affect the - increase the supply of shares in the marketplace when
market price of class A common there is no offsetting increase in demand;
stock. There are many circum- - be perceived by the market as a signal that IWCL shares
stances under which sub- were too highly priced; or
stantial sales of class A common - reduce or "dilute" the indirect equity interest in Iridium
stock could occur. represented by each share of class A common stock.

In addition to the adverse effect a price decline could have
on holders of class A common stock, that decline would
likely impede the ability of IWCL to raise capital to fund
the construction and operation of the Iridium system through
the issuance of additional class A common stock or other
equity securities.

IWCL has issued class A common stock, warrants to purchase
class A common stock and class B common stock. With the
proceeds received by IWCL from the issuance of each share of
class A common stock and class B common stock, IWCL has
purchased one class 1 interest in Iridium, and with the
proceeds received by IWCL from the issuance of the warrants
to purchase class A common stock, IWCL has purchased a
warrant from Iridium that operates so that, when a class A
common stock warrant is exercised, IWCL uses the proceeds
received from its exercise to purchase one class 1 interest
in Iridium for each share of class A common stock issued
upon exercise of that class A common stock warrant. As of
December 15, 1998, warrants to purchase 1,461,200 shares of
class A common stock were outstanding.

At December 15, 1998, assuming all class A common stock
warrants were exercised on that date, there would have been
13,641,848 shares of class A common stock and 20,625 shares
of class B common stock outstanding. IWCL is authorized to
issue up to 50,000,000 shares of class A common stock and
2,500,000 shares of class B common stock. These authorized
amounts could be increased under certain conditions.

Shares Eligible for Future Sale Upon Direction of Iridium.
IWCL has agreed with Iridium in a contract called the "share
issuance agreement" that, under certain conditions, Iridium
can direct IWCL to sell shares of class A common stock (or
other securities) and be required to use the proceeds to
purchase class 1 interests (or other securities) in Iridium.
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Shares Eligible for Future Sale Upon Exchange of Class 1
Interests in Iridium. IWCL has agreed with Iridium in a
contract called the "interest exchange agreement" that,
under certain conditions, it will exchange shares of class A
common stock for class 1 interests at the rate of one share
of class A common stock for each class 1 interest (subject
to anti-dilution adjustments) and will register those shares
of class A common stock for sale with the Securities and
Exchange Commission. Holders of class 1 interests are not
permitted to exchange their class 1 interests for shares of
class A common stock prior to the day that is 90 days after
the first fiscal quarter in which Iridium achieves positive
earnings before interest, taxes, depreciation and
amortization. In addition, no exchanges will be permitted
unless they are approved by at least 66 2/3% of the Iridium
Board of Directors. Based upon the number of class 1
interests outstanding at December 15, 1998, a maximum of
129,219,180 shares of class A common stock would be issuable
upon such exchange. If all class 1 interests which could be
issuable in the future based upon warrants, options and
convertible securities outstanding at December 15, 1998 and
other outstanding commitments to members of Iridium
including certain reserve commitments to purchase class 1
interests by strategic investors in Iridium (excluding
warrants Motorola is expected to earn under the Motorola ARG
after December 15, 1998) are considered, a maximum of
173,304,941 shares of class A common stock would be issuable
upon such exchange. See "-- Risk that IWCL's Interest in
Iridium Will Be Diluted and that the Corresponding Indirect
Interest that Investors in Class A Common Stock Have in
Iridium Will Be Diluted", "Dilution" and "Shares Eligible
for Future Sale" for more information on the potential for
exchange of class 1 interests for class A common stock.

In addition, pursuant to the Motorola ARG, Motorola has
earned, and is expected to earn, substantial compensation in
the form of warrants to purchase class 1 interests (or,
under certain conditions, warrants to purchase class A
common stock) for providing guarantees, deferral rights and
other credit support to Iridium. Through December 15, 1998,
under these arrangements, Motorola had earned warrants to
purchase 7,741,346 class 1 interest at a price of
approximately $0.00013 per interest and warrants to purchase
39,828 class 1 interests at a price of $20.90 per interest.
Payments under the Motorola ARG are based on the amount and
duration of Motorola exposure (which generally includes the
aggregate amount guaranteed or permitted to be deferred).
The amount of daily warrant compensation due under the
Motorola ARG is significant and increases substantially
after October 1, 1999 any time the Motorola exposure is
greater than $275 million. While Iridium has agreed with
Motorola that it will use its best efforts to reduce the
Motorola exposure to $275 million or less as soon as
possible, Iridium's ability to repay or replace borrowings
guaranteed by Motorola or pay or finance (without a Motorola
guarantee) deferrals of amounts due to Motorola depends on a
variety of factors, including Iridium's ability to generate
revenues and factors beyond Iridium's control such as the
condition of the bank lending and securities markets. If
Iridium reduces the Motorola exposure to $275 million for
the period from October 1, 1999 through December 31, 2000
($275 million of Motorola exposure for approximately 15
months), Motorola would earn warrants to purchase
approximately 84,000 class 1 interests (or shares of class A
common stock) at a price of $20.90 per interest (or share)
plus
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<TABLE>
<S> <C>
cash interest. However, if Iridium draws all amounts
available under the $750 million guaranteed credit
facilities and defers the payment of an aggregate of $400
million under the O&M contract and this Motorola exposure
remains in place in full from October 1, 1999 through Decem-
ber 31, 2000 ($1.15 billion of Motorola exposure for
approximately 15 months), Motorola would earn warrants to
purchase approximately 12.9 million class 1 interests at a
price of approximately $0.00013 per interest pursuant to the
Motorola ARG and a substantial additional amount of class 1
interests would be available for exchange for shares of
class A common stock.

Shares Eligible for Future Sale Upon Conversion of Class B
Common Stock. IWCL has authorized the issuance of up to
2,500,000 shares of class B common stock at a price of
$13.33 per share, and has issued 20,625 shares of class B
common stock, in connection with Iridium's NOMAD program for
promoting the authorization and use of the Iridium system by
governments. Iridium expects that up to an aggregate of
1,750,000 shares of class B common stock will be issued in
connection with the NOMAD program. These shares of class B
common stock are exchangeable for class A common stock on a
share for share basis after the satisfaction of certain
conditions, but in no event earlier than one year after they
have been fully paid for by their purchaser.

Shares Eligible for Future Sale Upon Exercise of Options
Granted Under the Iridium Option Plan. Under the option
plan, employees and outside directors of Iridium may be
granted stock options that are exercisable for shares of
class A common stock. The exercise price of each option is
the fair market value of a share of the class A common stock
on the date the option was granted. A committee of the
Iridium Board of Directors administers the plan and may
establish the terms of the option grants, including the
number of shares for which an option may be exercised, the
term of the option (up to ten years), the vesting schedule,
and other terms and conditions. As of December 15, 1998,
options to purchase 2,472,109 shares of class A common stock
were outstanding, of which options to purchase 817,909
shares of class A common stock were exercisable. Currently,
additional options to purchase a maximum of 3,071,043 shares
of class A common stock may be issued under the option plan.
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<S> <C>
RISK THAT IWCL'S INTEREST IN IWCL will use the proceeds from the issuance of each share
IRIDIUM WILL BE DILUTED AND THAT of class A common stock in the Offerings to purchase one
THE CORRESPONDING INDIRECT class 1 interest in Iridium. IWCL will suffer immediate per
INTEREST THAT INVESTORS IN CLASS A interest dilution in respect of such interests in an amount
COMMON STOCK HAVE IN IRIDIUM WILL equal to the difference in the price paid per class 1
BE DILUTED interest (the price you paid per share of class A common
stock less the underwriting discount) and Iridium's net
Investors in class A common tangible book value per class 1 interest, after giving
stock will suffer immediate effect to the Offerings.
dilution. In addition, a class A
common stock investor's indirect Iridium expects that its net tangible book value will
interest in Iridium will be decrease substantially in the first quarter of 1999 as it
diluted by, among other things, transitions from a development stage company into an
sales of new Iridium class 1 operating company because it will have substantial
membership interests at a price depreciation without substantial offsetting revenues. In
below the price paid by the addition, the interest in Iridium that IWCL purchases with
investor. Iridium has the proceeds of its offering of class A common stock (and
substantial commitments to sell the corresponding indirect interest in Iridium of investors
new class 1 membership interests in the class A common stock) will be diluted whenever new
at prices that are substan- class 1 interests are sold at a price that is below the
tially below the price of class price paid by IWCL for the class 1 interests. See
A common stock. "Dilution".

At December 15, 1998 there were outstanding:
- warrants to purchase 4,997,281 class 1 interests at
approximately $0.00013 per class 1 interest issued in
connection with the issuance and sale of Iridium's 14 1/2%
senior subordinated notes due 2006;
- 45,732 series A class 2 interests that convert into
846,498 class 1 interests without any additional cash
investment; and
- a currently exercisable warrant to purchase up to the
number of series M convertible class 2 interests that would
be convertible into 2.5% of the number of outstanding
class 1 interests on the date of exercise, calculated on a
fully diluted basis, at the equivalent of approximately
$13.33 per underlying class 1 interest.

In addition to the warrants described above, under the
Motorola ARG, Iridium has a continuing obligation to issue
warrants to Motorola for providing guarantees, deferral
rights and other credit support to Iridium. Payments under
the Motorola ARG are based on the amount and duration of
Motorola exposure (which generally includes the aggregate
amount guaranteed or permitted to be deferred). Through
December 15, 1998, under these arrangements, Motorola had
earned warrants to purchase 7,741,346 class 1 interests at a
purchase price of approximately $0.00013 per class 1
interest and warrants to purchase 39,828 class 1 interests
at a price of $20.90 per class 1 interest. Under certain
conditions, Motorola may earn warrants to purchase class A
common stock rather than warrants to purchase class 1
interests. It is likely that Motorola will earn substantial
additional warrants to purchase class 1 interests or class A
common stock in the future. See "-- The Price of Class A
Common Stock May Decline Due to Shares Eligible for Future
Sale" and "Dilution".

The Iridium Board of Directors also has authorized the
issuance of warrants to purchase up to 9,165,000 class 1
interests at a purchase price of approximately $0.00013 per
class 1 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. Iridium estimates that the gateways and Motorola
have earned the right to receive warrants to purchase an
aggregate of approximately 3,300,000 class 1 interests
pursuant to this authorization.
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Up to 18,206,550 class 1 interests may be issued to existing
investors in Iridium at a purchase price of approximately
$13.33 per class 1 interest pursuant to their various
reserve commitments to purchase additional class 1 interests
under certain circumstances. These reserve commitments are
referred to collectively as the "reserve capital call".

VOLATILITY The market price of the class A common stock has been
volatile. The trading prices for the securities of many
The trading price of the class A development stage telecommunications companies like IWCL and
common stock has been volatile Iridium have experienced extreme price and volume
and may continue to be volatile fluctuations, which have at times been unrelated to their
in the future. operating performance. Factors that could have a significant
effect on the price of the class A common stock include:
- announcements of fluctuations in Iridium's or its
competitors' operating results;
- variations in Iridium's prospects and operating results;
- delays in obtaining service providers or regulatory
approvals in particular countries;
- satellite anomalies;
- general conditions in the telecommunications industry; and
- market conditions for growth stocks, technology stocks or
telecommunications in general.

RISKS ASSOCIATED WITH INCOR- IWCL is a Bermuda company. IWCL's Bermuda legal counsel has
PORATION UNDER BERMUDA LAW advised IWCL that uncertainty exists about whether Bermuda
courts will:
Bermuda law may not permit you - enforce judgments obtained in other jurisdictions
to sue IWCL for certain (including the United States) against IWCL or its officers
securities law claims, and you or directors under the securities laws of those
may not be able to enforce a jurisdictions; or
U.S. court's judgment against - entertain actions in Bermuda against IWCL or its officers
IWCL. or directors under the securities laws of other
jurisdictions.

There is no treaty in effect between the United States and
Bermuda providing for enforcement of U.S. judgments. In
addition, there are grounds upon which Bermuda courts may
refuse to enforce judgments of U.S. courts, and certain
remedies available under the U.S. federal securities laws
would not be allowed in Bermuda courts, as they may be
contrary to Bermuda's public policy.
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<S> <C>
RISK IWCL WILL LOSE MANAGEMENT Under the LLC agreement, IWCL has certain special rights
RIGHTS UPON A CHANGE IN CONTROL; including:
IRIDIUM'S INFLUENCE OVER THE IWCL - the right to designate two members of the Iridium Board of
BOARD OF DIRECTORS Directors, one of whom will act as a Vice Chairman of
Iridium; and
IWCL could lose its special - the right to block certain significant transactions
management rights in Iridium if involving Iridium.
there is change in control of
IWCL. 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
- there is a change in a majority of the members of IWCL's
Board of Directors over a two year period that is not
approved by a vote of 66 2/3% of the members of the IWCL
Board then still in office who were directors at the
beginning of the two year period or whose election or
nomination for election was previously so approved.

As a result of these provisions, holders of class A common
stock may effectively be precluded from replacing a majority
of the IWCL Board, which initially consisted of directors
selected by Iridium.

RISKS RELATED TO PASSIVE FOREIGN Whether IWCL is or is not a passive foreign investment
INVESTMENT COMPANY RULES company, or a "PFIC", is relevant to you only if you hold a
share of class A common stock and you are:
If IWCL is treated as a PFIC, - a citizen or resident of the United States;
then any gain that you recognize - a domestic corporation;
on the sale of your shares of - an estate, the income of which is subject to United States
class A common stock and federal income tax without regard to its source; or
distributions you receive in - a trust, if a court within the United States is able to
respect of your shares of class exercise primary supervision over the administration of the
A common stock may be subject to trust and one or more United States persons have the
greater tax liability. authority to control all substantial decisions of the
trust.

Generally, if IWCL were treated as a PFIC for any taxable
year during which you held a share of class A common stock,
the entire gain you recognize on a disposition of the share
would be allocated ratably to each day in your holding
period for the share. For example, if you acquired a share
of class A common stock on January 1, 1999 for $100 and sold
the share on December 31, 2000 for $200, $50 of the gain
would be allocated to 1999 and $50 of the gain would be
allocated to 2000. The amounts allocated to the taxable year
of 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. Continuing with the
previous example, the $50 of gain allocated to 2000 would be
taxed as ordinary income, the $50 of gain allocated to 1999
would be taxed at the highest ordinary income tax rates
applicable in 1999, and interest would be charged on the tax
on the gain allocated to 1999. All the tax and interest
would be included in your U.S. federal income tax liability
for the taxable year in which the disposition took place.
Further, any distribution in respect of shares of class A
common stock in excess of 125% of the average of the annual
distributions on shares of class A common stock you received
during the shorter of the preceding three years or the
portion of your holding period before the relevant taxable
year would be subject to taxation as described above. For
example, if you purchased a share of class A
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common stock in 1999 and received distributions in respect
of the share of $10 in 1999, and $15 in 2000, $2.50 of the
distribution would be allocated, taxed and charged interest
in the manner described above. You could avoid these
consequences by electing to include on a current basis your
share of IWCL's ordinary earnings and net capital gain for
each taxable year, or by electing to mark to market your
class A common stock at the end of each taxable year.

Under the PFIC rules, IWCL will generally be a PFIC in any
taxable year in which either at least 75% of its gross
income is "passive income" or at least 50% of its assets are
"passive assets". "Passive income" is generally income
derived from sources other than an active trade or business;
"passive assets" are assets that produce or are held for the
production of passive income. This discussion assumes that
IWCL should, under current law, be treated for the purposes
of determining IWCL's passive income and passive assets as
owning its share of Iridium's gross assets and as earning
directly its share of Iridium's gross income; IWCL would be
a PFIC if it were not permitted to be treated in this
manner. The determination of whether IWCL is 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%-or-more interest. IWCL does not
currently believe that it is a PFIC nor does it currently
anticipate becoming a PFIC; however, there can be no
assurance that IWCL will not be considered 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.
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USE OF PROCEEDS

The net proceeds from the Offerings after the underwriting discount and
expenses are estimated to be approximately $242 million ($278 million if the
U.S. underwriters' and international managers' over-allotment options are
exercised in full). The net proceeds of the Offerings (before expenses) will be
used by IWCL to purchase 7,500,000 class 1 interests (8,625,000 class 1
interests, if the U.S. underwriters' and international managers' over-allotment
options are exercised in full). Iridium expects to use the net proceeds from the
sale of class 1 interests to IWCL for general corporate purposes, including
payments under the O&M contract. Pending such use, Iridium may temporarily
reduce the amount outstanding under the $275 million revolving portion of the
Motorola guaranteed bank facilities or invest such proceeds in short-term
investment grade debt securities. See "Summary -- Estimated Funding
Requirements -- Sources and Uses of Funds by Iridium". The expenses of the
Offerings, estimated at $850,000, will be paid by Iridium.

PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY

PRICE RANGE OF THE CLASS A COMMON STOCK

The class A common stock is quoted on the Nasdaq National Market under the
symbol IRIDF. The following table sets forth the high and low sale prices of the
class A common stock for certain periods since its initial public offering on
June 9, 1997.

<TABLE>
<CAPTION>
QUARTERLY PERIOD HIGH LOW
---------------- -------- -------
<S> <C> <C>
1997
June 9 to June 30......................................... $23.125 $18.000
Third Quarter............................................. 45.000 17.000
Fourth Quarter............................................ 54.625 31.750
1998
First Quarter............................................. 68.250 30.500
Second Quarter............................................ 72.188 49.000
Third Quarter............................................. 61.625 31.000
Fourth Quarter............................................ 49.875 26.750
1999
First Quarter (through January 21)........................ 44.500 37.063
</TABLE>

The last reported sale price of the class A common stock on the Nasdaq
National Market on January 21, 1999 was $37 3/8 per share.

DIVIDEND POLICY

IWCL has never declared or paid any dividends on its class A common stock
or class B common stock, and Iridium has never made distributions on its class 1
interests. IWCL and, except as described below, Iridium do not currently
anticipate paying any such dividends or distributions until sometime
significantly after Iridium's achievement of positive operating cash flow, if at
all. In addition, Iridium is effectively restricted under certain debt covenants
from paying any dividends on its class 1 interests and those covenants (or
similar covenants) are likely to be in effect long after the time Iridium would
otherwise have funds available for distribution to its members.

IWCL's only assets are its class 1 interests and rights to acquire class 1
interests, and IWCL has no independent means of generating revenues. Iridium
pays IWCL's operating expenses, which expenses have not been, and are not
expected to be, material. To the extent permitted by applicable law and its
agreements relating to indebtedness, Iridium intends to distribute to its class
1 members, including IWCL, net cash, if any, received from its operations, less
amounts required to repay outstanding indebtedness, satisfy other liabilities
and fund capital expenditures and contingencies. Iridium's LLC agreement
requires the Iridium Board of Directors, to the extent of legally available
funds, to declare and pay a dividend sufficient to assure

40
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that each non-U.S. class 1 member receives an amount at least equal to the
amount of such member's United States federal, state and local income tax
liability resulting from allocations of Iridium's income to such member.

IWCL intends to promptly distribute as dividends to its shareholders the
distributions, if any, made to it by Iridium, less any amounts reasonably
required to be retained for payment of taxes, for repayment of any liabilities
and to fund any contingencies. Any dividend declared must be declared and paid
equally on the outstanding shares of class A common stock and class B common
stock. See "Description of Capital Stock -- Common Stock -- Dividend Rights".

DILUTION

When you purchase a share of class A common stock and IWCL uses the net
proceeds to make a corresponding purchase of a class 1 interest of Iridium, IWCL
will suffer immediate per interest "dilution" in respect of such interests in an
amount equal to the difference between the price paid per class 1 interest (the
price you paid per share of class A common stock, less the underwriting
discount) and Iridium's net tangible book value per class 1 interest, after
giving effect to the Offerings.

The following table illustrates the dilution in pro forma net tangible book
value on a per class 1 interest basis per share of class A common stock. The
price per class 1 interest paid by IWCL equals the price of the class A common
stock offered hereby less the underwriting discount per share. Net tangible book
value per class 1 interest is equal to Iridium's total tangible assets less
total liabilities as of September 30, 1998, divided by the number of class 1
interests outstanding at that date. Iridium expects that its net tangible book
value will decrease substantially in 1999 as it transitions from a development
stage company into an operating company because it will have substantial
depreciation without substantial offsetting revenues.

<TABLE>
<S> <C> <C>
Purchase price per class 1 interest purchased by IWCL with
the proceeds of the Offerings............................. $32.32
Net tangible book value per class 1 interest at September
30, 1998.................................................. $5.40
Increase in net tangible book value per class 1 interest
attributable to the use of the proceeds from the Offerings
to purchase class 1 interests............................. $1.35
-----
Pro forma net tangible book value per class 1 interest after
the Offerings............................................. $ 6.75
Pro forma dilution per class 1 interest to IWCL in
connection with the Offerings............................. $25.57
</TABLE>

The following table presents information with respect to the potential
issuances of class 1 interests pursuant to warrants, convertible interests and
purchase commitments outstanding on December 15, 1998,

41
<PAGE> 42

after giving effect to the Offerings and assuming the U.S. underwriters' and
international managers' over-allotment options are not exercised.

<TABLE>
<CAPTION>
CASH CONSIDERATION
CLASS 1 INTERESTS PAID OR PAYABLE
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Outstanding Class 1 Interests at December 15, 1998:
Iridium's strategic investors.......................... 129,219,180 $1,730,481
IWCL (1)............................................... 19,701,273 469,762
----------- ----------
Total outstanding................................. 148,920,453 2,200,243
=========== ==========
Outstanding Warrants and Convertible Interests at December
15, 1998:
Warrants issued under the Motorola ARG (2)............. 7,781,174 $ 833
Warrant to acquire series M class 2 interests (3)...... 4,252,305 56,683
Series A class 2 interests (4)......................... 1,159,978 31,550
Warrants issued with 14 1/2% senior subordinated notes
(5).................................................. 4,997,281 1
Warrants issued under gateway incentive program (6).... 3,300,000 --
Warrants issued with senior notes (7).................. 1,461,200 30,539
Management options (8)................................. 2,472,109 45,967
----------- ----------
Total potential issuances......................... 25,424,047 165,573
=========== ==========
</TABLE>

- ---------------
(1) Includes 19,680,648 class 1 interests purchased from Iridium in respect of
the 19,680,648 outstanding shares of class A common stock and 20,625 class 1
interests purchased from Iridium in respect of the 20,625 outstanding shares
of class B common stock. In connection with Iridium's NOMAD program for
promoting the authorization and use of the Iridium system by governments,
Iridium expects that up to 1,750,000 shares of class B common stock will be
issued at a price of approximately $13.33 per share. Subject to
anti-dilution adjustments, Iridium issues one class 1 interest to IWCL for
each share of class B common stock issued in connection with the NOMAD
program. These shares of class B common stock are exchangeable for class A
common stock on a share for share basis after the satisfaction of certain
conditions, but in no event earlier than one year after they have been fully
paid for by their purchaser.

(2) Represents warrants earned by Motorola under the Motorola ARG to purchase
(i) 7,741,346 class 1 interests at a price of approximately $0.00013 per
interest and (ii) 39,828 class 1 interests at a price of $20.90 per interest
for providing guarantees of Iridium's bank credit facilities and other
credit support. Payments under the Motorola ARG are based on the amount and
duration of Motorola exposure (which generally includes the aggregate amount
guaranteed or permitted to be deferred). It is likely that Motorola will
earn substantial additional warrants to purchase class 1 interests (or,
under certain conditions, warrants to purchase class A common stock) in the
future. In addition, the amount of daily warrant compensation due under the
Motorola ARG increases substantially after October 1, 1999 any time the
Motorola exposure is greater than $275 million. While Iridium has agreed
with Motorola that it will use its best efforts to reduce the Motorola
exposure to $275 million or less as soon as possible, Iridium's ability to
repay or replace borrowings guaranteed by Motorola or pay or finance
(without a Motorola guarantee) deferrals of amounts due to Motorola depends
on a variety of factors, including Iridium's ability to generate revenues
and factors beyond Iridium's control such as the condition of the bank
lending and securities markets. See "Risk Factors -- The Price of Class A
Common Stock May Decline Due to Shares Eligible For Future Sale" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Sources of Funding".

(3) Motorola holds a warrant to acquire series M class 2 interests in Iridium in
an amount that would be convertible into 2.5% of the fully diluted number of
class 1 interests outstanding at the time of exercise. The 4,252,305 class 1
interests reflected in the above table assumes that all potential issuances
of class 1 interests listed in the table have been made. The exercise price
is $1,000 per series M class 2 interest. Each series M class 2 interest is
currently convertible into 75 class 1 interests.

42
<PAGE> 43

(4) Each series A class 2 interest is convertible into 18.51 class 1 interests.
Assumes that future dividends permitted to be paid in additional series A
class 2 interests are paid in series A class 2 interests and not in cash.
The cash consideration represents the cash payment for the series A class 2
interests (including the liquidation preference of the series A class 2
interests issued in satisfaction of dividend obligations).

(5) Represents warrants to purchase 4,997,281 class 1 interests (at an exercise
price of approximately $0.00013 per class 1 interest) issued in connection
with the issuance and sale of Iridium's 14 1/2% senior subordinated notes
due 2006.

(6) Warrants to purchase up to 9,165,000 class 1 membership interests at a
purchase price of approximately $0.00013 per class 1 membership interest
have been authorized for issuance to gateway owners and to Motorola based on
satisfaction of certain performance criteria relating to the construction
and implementation of gateways and gateway services. Iridium estimates that
the gateways and Motorola have earned the right to receive warrants to
purchase an aggregate of approximately 3,300,000 class 1 interests pursuant
to this authorization.

(7) Represents outstanding warrants to purchase approximately 1,461,200 class 1
interests (at an exercise price of $20.90 per class 1 interest) held by IWCL
in connection with the offering of the 13% series A senior notes and
accompanying warrants to purchase 1,560,000 shares of class A common stock
(at an exercise price of $20.90 per share of class A common
stock -- warrants to purchase approximately 98,800 shares of class A common
stock (class 1 interests) have been exercised).

(8) Up to 5,625,000 class 1 interests may be issued in connection with Iridium's
option plan. At December 15, 1998, there were options to purchase
approximately 2,472,109 shares of class A common stock outstanding under the
Iridium option plan with an average exercise price of approximately $18.594
per share. Subject to anti-dilution adjustments, Iridium issues one class 1
interest to IWCL for each share of class A common stock issued pursuant to
the Iridium option plan.

In addition, Iridium may issue up to 18,206,550 class 1 interests at a
purchase price of approximately $13.33 per class 1 interest pursuant to the
reserve capital call. The reserve capital call is the commitment by 17 of
Iridium's strategic investors to purchase class 1 interests. The reserve capital
call currently is pledged as collateral to the lenders under the secured bank
facility.

43
<PAGE> 44

CAPITALIZATION

IRIDIUM

The following table sets forth as of September 30, 1998: (i) the
capitalization of Iridium, (ii) the pro forma capitalization of Iridium
reflecting the December 23, 1998 establishment of the secured bank facility and
the guaranteed bank facilities and the approximate amounts outstanding
thereunder at December 31, 1998 (Iridium used approximately $682 million of the
funds available thereunder to repay outstanding Iridium bank debt) and (iii) the
pro forma capitalization of Iridium, as adjusted to reflect the issuance and
sale of 7,500,000 class 1 interests by Iridium to IWCL in exchange for the
estimated net proceeds of the Offerings (less the expenses of the Offerings,
estimated at $850,000). See "Use of Proceeds".

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
---------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Secured credit facility (maturity 12/31/98)........... $ 410,000 $ -- $ --
Guaranteed credit facility (maturity 6/30/99)......... 271,500 -- --
Secured bank facility (maturity 12/29/00) (1)......... -- 500,000 500,000
Guaranteed bank facility ($475 million maturity
12/29/00; $275 million maturity 12/31/01) (2)....... -- 625,000 625,000
13% senior notes due 2005, series A (3)............... 277,796 277,796 277,796
14% senior notes due 2005, series B (3)............... 479,112 479,112 479,112
11 1/4% senior notes due 2005, series C............... 300,000 300,000 300,000
10 7/8% senior notes due 2005, series D (3)........... 347,834 347,834 347,834
14 1/2% senior subordinated notes due to Iridium's
members in 2006..................................... 310,149 310,149 310,149
----------- ----------- -----------
Total debt.................................. $ 2,396,391 $ 2,839,891 $ 2,839,891
Members' interests.................................... $ 2,076,241 $ 2,076,241 $ 2,317,791
Deferred class 1 interest compensation................ (1,242) (1,242) (1,242)
Deficit accumulated during the development stage...... (1,240,115) (1,240,115) (1,240,115)
Adjustment for minimum pension liability.............. (643) (643) (643)
----------- ----------- -----------
Total members' equity....................... 834,241 834,241 1,075,791
----------- ----------- -----------
Total capitalization................... $ 3,230,632 $ 3,674,132 $ 3,915,682
=========== =========== ===========
</TABLE>

- ---------------
(1) Iridium expects to borrow an additional $300 million, the remaining
available amount under the secured bank facility, prior to January 22, 1999.

(2) Does not reflect any temporary reduction in amounts outstanding under the
$275 million revolving portion of the guaranteed bank facilities. See "Use
of Proceeds".

(3) The series A notes, series B notes and series D notes were issued at a
discount to their principal amount. The series A notes have a principal
amount of $300 million, the series B notes have a principal amount of $500
million and the series D notes have a principal amount of $350 million.

44
<PAGE> 45

IWCL

The following table sets forth as of September 30, 1998: (i) the
capitalization of IWCL and (ii) the capitalization of IWCL as adjusted to
reflect the issuance and sale by IWCL of 7,500,000 shares of class A common
stock in the Offerings and the receipt of the estimated net proceeds therefrom.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Stockholders' equity:
Class A common stock, par value $.01 per share, 50,000,000
shares authorized; 12,175,690 and 19,675,690 shares issued
and outstanding as adjusted............................... $ 122 $ 197
Class B common stock, par value $.01 per share, 2,500,000
shares authorized; 20,625 and 20,625 shares issued and
outstanding............................................... -- --
Additional paid-in capital.................................. 245,980 488,305
Accumulated deficit......................................... (88,808) (88,808)
--------- ---------
Total stockholders' equity........................ 157,294 399,694
--------- ---------
Total capitalization......................... $ 157,294 $ 399,694
========= =========
</TABLE>

45
<PAGE> 46

SELECTED FINANCIAL DATA

The financial data in the following tables summarizes certain information
derived from Iridium's consolidated financial statements and IWCL's financial
statements. KPMG LLP, independent certified public accountants, audited those
financial statements except for the periods where the word "unaudited" appears
above a column. In the opinion of management of Iridium, such unaudited
condensed consolidated financial statements include all adjustments necessary
for a fair presentation of the financial position and the results of operations
as of and for such periods. You should read this data together with the
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations", which are included in this prospectus as
well as in the documents referred to under "Where You Can Find More
Information". Iridium is transitioning from a development stage company into an
operating company and, accordingly, you should not assume that Iridium's and
IWCL's results of operations for the nine months ended September 30, 1998 are
indicative of what their respective results will be for 1998 or any other
subsequent period.

IRIDIUM

<TABLE>
<CAPTION>
PERIOD PRIOR TO
INITIAL CAPITAL
CONTRIBUTION PERIODS FOLLOWING INITIAL
DATE(1) CAPITAL CONTRIBUTION DATE
--------------- ------------------------------------------------------------------
NINE MONTHS ENDED
JAN. 1, 1993 JULY 29, 1993 YEAR ENDED DEC. 31 SEPTEMBER 30,
TO TO -------------------------------------- -------------------------
JULY 28, 1993 DEC. 31, 1993 1994 1995 1996 1997 1997 1998
--------------- ------------- ------- ------- ------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER CLASS 1 INTEREST DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
LOSS DATA:
Revenues (2)............. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
Sales, general and
administrative......... 5,309 7,093 16,729 26,436 70,730 177,474 122,926 261,261
Depreciation and
amortization........... -- 48 832 751 674 119,124 46,539 378,276
Interest (income)
expense, net........... -- (390) (4,252) (5,226) (2,395) (3,045) (1,516) 173,185
Provision for income
taxes.................. -- 173 1,525 1,684 4,589 -- -- --
------ ------ ------- ------- ------- -------- -------- --------
Net loss................. $5,309 $6,924 $14,834 $23,645 $73,598 $293,553 $167,949 $812,722
====== ====== ======= ======= ======= ======== ======== ========
Net loss per class 1
interest............... $ -- $ .43 $ .38 $ .27 $ .64 $ 2.25 $ 1.33 $ 5.78
====== ====== ======= ======= ======= ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1998
---------------------------------------------------------- ---------------------------
PRO FORMA
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(3)
-------- -------- ---------- ---------- ---------- ---------- --------------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET
DATA:
Cash and cash equivalents.... $ 23,496 $202,391 $ 51,332 $ 1,889 $ 9,040 $ 65,207 $ 750,257
Restricted cash.............. -- -- -- -- 350,220 -- --
System under construction.... 275,000 646,000 1,448,000 2,376,884 1,625,054 523,739 523,739
Property and equipment,
net........................ 320 1,522 1,264 2,065 1,526,326 2,865,070 2,865,070
Total assets................. 299,886 851,809 1,505,383 2,434,081 3,645,687 3,564,602 4,249,652
Long-term debt............... -- -- -- 735,904 1,537,590 1,714,891 2,839,891
Total members' equity........ $294,308 $795,813 $1,404,610 $1,572,029 $1,634,637 $ 834,241 $1,075,791
</TABLE>

- ---------------
(1) These amounts reflect certain costs incurred by Motorola prior to July 29,
1993 that were reimbursed by Iridium.

(2) Iridium was a development stage company for the periods presented and,
accordingly, had no meaningful revenue for such periods.

(3) Pro forma to reflect the December 23, 1998 establishment of the secured bank
facility and the guaranteed bank facilities and the approximate amounts
expected to be outstanding thereunder at December 31, 1998 and as adjusted
for the issuance and sale of 7,500,000 class 1 interests by Iridium to IWCL
in exchange for the estimated net proceeds of the Offerings (less the
expenses of the Offerings, estimated at $850,000).

46
<PAGE> 47

IWCL

<TABLE>
<CAPTION>
PERIOD FROM NINE MONTHS ENDED
DECEMBER 12, 1996 SEPTEMBER 30,
(INCEPTION) TO YEAR ENDED --------------------
DECEMBER 31, 1996 DECEMBER 31, 1997 1997 1998
------------------ ------------------ -------- ---------
(DOLLARS IN THOUSANDS EXCEPT PER CLASS A COMMON STOCK DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
STATEMENT OF LOSS DATA:
Equity in loss of Iridium................. $ -- $18,834 $8,039 $69,974
------- ------- ------ -------
Loss before income taxes.................. -- 18,834 8,039 69,974
Income taxes.............................. -- -- -- --
------- ------- ------ -------
Net loss.................................. $ -- $18,834 $8,039 $69,974
======= ======= ====== =======
Net loss per class A common share -- basic
and diluted............................ $ -- $ 2.79 $ 1.62 $ 5.81
======= ======= ====== =======
</TABLE>

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1998
DECEMBER 31, ----------------------
------------------- AS
1996 1997 ACTUAL ADJUSTED(1)
-------- -------- -------- -----------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash............................................. $ -- $ -- $ -- $ --
Investment in Iridium............................ -- 223,922 157,294 399,694
-------- -------- -------- --------
Total assets.................................. $ -- $223,922 $157,294 $399,694
======== ======== ======== ========
Liabilities...................................... $ -- $ -- $ -- $ --
-------- -------- -------- --------
Total stockholders' equity....................... $ -- $223,922 $157,294 $399,694
======== ======== ======== ========
</TABLE>

- ---------------
(1) As adjusted to reflect the issuance and sale of 7,500,000 class 1 interests
by Iridium to IWCL in exchange for the estimated net proceeds of the
Offerings. See "Use of Proceeds".

47
<PAGE> 48

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

The following discussion and analysis of Iridium's financial condition and
results of operations is based upon, and in certain respects updates, the
discussion and analysis of financial condition and results of operations
included in Iridium's quarterly report on Form 10-Q for the quarter ended
September 30, 1998. The information under "-- Recent Developments" and its
effect on Iridium's business and financial condition is based upon the more
detailed information included in Iridium's current report on Form 8-K, filed
December 30, 1998. The secured bank facility, the guaranteed bank facilities,
the Motorola MOU, the Motorola ARG and the Claircom stock purchase agreement
were filed as exhibits to the Form 8-K filed December 30, 1998 and you are urged
to read the exhibits for a complete understanding of those agreements. See
"Where You Can Find More Information".

RECENT DEVELOPMENTS

Iridium commenced commercial satellite phone service on November 1, 1998
and commercial satellite paging service on November 15, 1998. Iridium is
currently offering all four of its principal services: Iridium World Satellite
Service, Iridium World Page Service, Iridium World Roaming Service and Iridium
World Calling Card Service.

On December 22, 1998, Iridium and Iridium Aero Acquisition Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of Iridium, entered into a
stock purchase agreement pursuant to which Iridium Aero agreed to acquire all of
the outstanding capital stock of Claircom Communications Group, Inc., a Delaware
corporation and a provider of in-flight phone service for commercial and
executive aircraft, from ATG I, Inc., a Delaware corporation and a wholly owned
subsidiary of AT&T Wireless Services, Inc., and Rogers Cantel Inc. Iridium Aero
agreed to acquire the Claircom shares for an estimated aggregate price of
approximately $65 million, consisting of approximately $25.6 million in cash to
be paid at closing and approximately $39.4 million of notes of Claircom which
will be guaranteed by Iridium and issued to the sellers of the Claircom shares
immediately prior to closing. The aggregate purchase price is subject to certain
adjustments, including working capital adjustments and adjustments for capital
expenditures made for the benefit of Claircom prior to the closing. The Claircom
notes issued to the sellers will have a term of nine years and will pay interest
at a rate of 8% per annum, but will not require any payments for the first two
years following their issuance -- interest accrued during the first two-year
period will be added to the principal amount of the notes. The Claircom notes
also will contain certain restrictive covenants, including restrictions on
dividends, and will be secured by substantially all of the assets of Claircom
and a pledge of the Claircom shares by Iridium Aero. The consummation of the
acquisition of the Claircom shares is subject to certain significant conditions,
including regulatory approval.

On December 23, 1998, Iridium closed on three new bank credit facilities
providing for an aggregate amount of up to approximately $1.55 billion of
borrowings -- (i) the $800 million secured bank facility due December 29, 2000
and (ii) the $750 million (collectively) Motorola guaranteed bank facilities
(which includes a $475 million term credit facility due December 29, 2000 and a
$275 million revolving credit facility due December 31, 2001). Iridium used (i)
approximately $682 million of the funds available under these new bank
facilities to repay its outstanding bank debt, of which $410 million was due to
mature on December 31, 1998, and (ii) approximately $370 million of such funds
to make payments under its various contracts with Motorola. The secured bank
facility is secured by, among other things, substantially all of Iridium's
assets. Borrowings under the Motorola guaranteed bank facilities are guaranteed
by Motorola. Pursuant to the Motorola MOU and the Motorola ARG, Iridium is
required to compensate Motorola with equity and cash for, among other things,
providing guarantees of Iridium's borrowings under the Motorola guaranteed bank
facilities.

For the fourth quarter ending December 31, 1998, Iridium recorded
(unaudited) a net loss of approximately $440 million, or a net loss of
approximately $3.12 per class 1 interest, reflecting revenues from its limited
commercial operations of approximately $186,000. Iridium recorded (unaudited) a
net loss of

48
<PAGE> 49

approximately $1,259 million, or a net loss of approximately $8.91 per class 1
interest for the 12 months ended December 31, 1998.

LIQUIDITY AND CAPITAL RESOURCES

Funding Requirements

General. In the fourth quarter of 1998, Iridium began its transition from
a development stage company into an operating company and, as a result, the
characteristics of its funding requirements are changing. Through year end 1998,
Iridium's funding requirements principally were driven by the cost of the
initial development and construction of the Iridium system. In contrast, Iridium
expects that its future funding requirements will be driven principally by the
costs of operating and maintaining the Iridium system and providing Iridium
services.

Iridium System Construction and Operation. With respect to the development
and construction of the Iridium system, Iridium and Motorola are parties to (i)
the space system contract for the design, development, production and delivery
in orbit of the space segment, (ii) the terrestrial network development contract
to design the gateway hardware and software, and (iii) the O&M contract to
provide day-to-day management of the space segment after deployment and to
monitor, upgrade and replace hardware and software of the space segment as
necessary to maintain performance specifications. Substantially all of the
initial capital raised by Iridium was used and will continue to be used to make
payments to Motorola under the space system contract, the terrestrial network
development contract and the O&M contract. The space system contract provides
for a fixed price of $3.45 billion (subject to certain adjustments), scheduled
to be paid by Iridium to Motorola over approximately a five-year period for
completion of milestones under the contract.

As of December 31, 1998, Iridium had paid approximately $3.380 billion of
the approximately $3.435 billion aggregate estimated cost of the space system
contract and expects that it will make the remaining $55 million payment in the
first quarter of 1999. As of December 31, 1998, Iridium had paid approximately
$226 million of the $356 million aggregate estimated cost of the terrestrial
network development contract. Iridium expects to make the remaining $130 million
of payments expected to be due under the terrestrial network development
contract prior to December 31, 1999.

Iridium expects the O&M contract to be the source of Iridium's single most
significant funding requirements during commercial operations. The O&M contract
has a five-year term (ending in November, 2003) and is extendable, at Iridium's
option, for an additional two years. Payments under the O&M contract are payable
quarterly and are expected to aggregate approximately $2.88 billion over the
initial five-year term of the contract. If Iridium exercises its option to
extend the O&M contract for an additional two years, the payments due for that
two-year extension are expected to aggregate approximately $1.33 billion. In
addition, Iridium is obligated to pay for certain spare satellites, if any, upon
the completion of the contract. The quarterly payments under the O&M contract
increase each year, ranging from payments of $129.4 million in 1998 to $157.4
million in 2003 and $171.4 million in 2005 (if extended).

Iridium's expected future cash requirements by year under its principal
contracts through December 31, 2000 are approximately as follows (in millions):

<TABLE>
<CAPTION>
1999 2000
---- ----
<S> <C> <C>
Space system contract....................................... $ 55 --
Terrestrial network development contract.................... 130 --
O&M contract(1)............................................. 537 $557
</TABLE>

- ---------------
(1) Does not reflect deferrals of payments due under the O&M contract. Under the
Motorola MOU, Motorola has agreed to permit Iridium to defer its obligations
to pay up to an aggregate of $400 million of payments due to Motorola under
the O&M contract until December 29, 2000. As of December 31, 1998, Iridium
had deferred payment of approximately $86 million of its obligations under
the O&M contract and it expects to defer an aggregate of $400 million of
such obligations prior to September 1, 1999.

49
<PAGE> 50

As a result of technological developments, changes in Iridium's product
mix, and scheduling adjustments, including the implementation of Iridium World
Roaming Services into Iridium's service offerings, there have been, and Iridium
anticipates there may be, amendments and interpretations of the terrestrial
network development contract and the O&M contract and other agreements and
letters with Motorola which may increase the total costs of these contracts.
While Iridium's estimate of the cost of anticipated amendments and
interpretations is reflected in Iridium's estimates of its funding requirements,
there can be no assurance that future amendments or interpretations will not
affect the price and terms of those agreements in a manner that is not reflected
in Iridium's funding estimates.

Claircom Acquisition. The expected acquisition of Claircom has an
estimated aggregate purchase price of approximately $65 million, consisting of
approximately $25.6 million in cash to be paid at closing and approximately
$39.4 million of notes of Claircom which will be guaranteed by Iridium and
issued to the sellers of the Claircom shares immediately prior to closing.

Working Capital, Financing Costs and Software Development. Iridium has
required, and will continue to require, funds for working capital, business
software development, interest on borrowings, financing costs and operating
expenses. Iridium estimates that through December 31, 1998 these costs
aggregated approximately $1.11 billion from July 29, 1993, the inception of
Iridium's predecessor. Iridium estimates that its costs in calendar year 1999
for (i) operating expenses and working capital, (ii) interest expense and
financing costs and (iii) business support systems and related expenditures will
aggregate approximately $905 million.

Sources of Funding

General. Through year end 1998, Iridium's funding requirements were
principally driven by the cost of the initial development and construction of
the Iridium system and Iridium expended approximately $4.8 billion over that
period.

At the date hereof, after giving effect to receipt of the net proceeds of
the Offerings, Iridium estimates that it will have available for 1999 aggregate
sources of external funding of approximately $1.336 billion. Iridium believes
that it currently has sufficient external funding available to meet its expected
peak funding requirements. Iridium expects that its cash needs for 1999 will be
approximately $1.653 billion. Iridium expects that if its 1999 revenues from
operations exceed the difference between its actual 1999 cash needs and its
actual 1999 available sources of external funding (an estimated difference of
approximately $317 million, after giving effect to the Offerings), Iridium will
reduce the commitments of the lenders under its bank credit agreements. To the
extent that Iridium's revenues do not exceed this difference, Iridium will need
to seek additional financing.

Following 1999, Iridium generally expects to fund the cash costs of
operating and maintaining the Iridium system (including the O&M contract),
providing Iridium's services, working capital, interest expense and financing
costs through revenues from operations.

Equity Investments and Debt Securities. As of December 31, 1998, Iridium
had received approximately $1.95 billion from the issuance of class 1 interests
and approximately $31 million for the issuance of series A class 2 interests. As
of December 31, 1998, Iridium had received approximately $1.62 billion from the
issuance of debt securities, including approximately $1.38 billion from the
issuance of senior notes due 2005 and approximately $239 million from the
issuance of senior subordinated notes due 2006.

Secured Bank Facility. As of December 31, 1998, Iridium had drawn $500
million under the $800 million secured bank facility. Iridium expects to borrow
an additional $300 million, the remaining available amount under the secured
bank facility, prior to January 22, 1999. Borrowings under the secured bank
facility mature on December 29, 2000. The parties to the secured bank facility
are Iridium Operating LLC, a wholly owned subsidiary of Iridium that owns
substantially all of Iridium's assets (including the Iridium system), Chase
Securities Inc. and Barclays Bank PLC, as Global Arrangers, The Chase Manhattan
Bank, as Administrative Agent, Barclays Bank PLC, as Documentation Agent,
Merrill Lynch, Pierce, Fenner & Smith, Inc., as Syndication Agent, and a
syndicate of lenders. Iridium Operating LLC's obligations under the secured bank
facility are secured by pledges of, and security interests in, substantially all
of Iridium

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Operating LLC's assets, Iridium's equity interest in Iridium Operating LLC and
the reserve capital call (the commitment of 17 of Iridium's strategic investors
to purchase up to 18,206,550 class 1 interests at a price of $13.33 per class 1
interest, representing an aggregate purchase price of up to approximately $243
million).

The secured bank facility contains various covenants. One group of
covenants requires Iridium to satisfy certain minimum revenue and subscriber
levels, including the conditions that (i) at March 31, 1999 it have cumulative
cash revenues of at least $4 million, cumulative accrued revenues of at least
$30 million, at least 27,000 Iridium World Satellite Service subscribers and at
least 52,000 total subscribers, (ii) at June 30, 1999 it have cumulative cash
revenues of at least $50 million, cumulative accrued revenues of at least $150
million, at least 88,000 Iridium World Satellite Service subscribers and at
least 213,000 total subscribers and (iii) at September 30, 1999 it have
cumulative cash revenues of at least $220 million, cumulative accrued revenues
of at least $470 million, at least 173,000 Iridium World Satellite Service
subscribers and at least 454,000 total subscribers. Other covenants in the
secured bank facility require Iridium to comply with certain financial ratios as
of various dates, including maximum debt to total invested capital, maximum
secured debt to earnings, maximum debt to earnings and minimum interest expense
to earnings. The secured bank facility also contains covenants related to, among
other things, the maintenance of insurance, the maintenance of regulatory
authority to offer Iridium World Satellite Service in a minimum number of
countries and the permitted uses of revenues from operations, borrowed funds and
proceeds from the issuance of securities. The secured bank facility also
restricts Iridium's ability to incur additional indebtedness, make dividend and
other payments and merge, consolidate or sell certain of its assets. In
addition, the secured bank facility requires mandatory prepayments in the event
that debt and equity issuances or cash flows exceed specified thresholds.

Guaranteed Bank Facilities. The guaranteed bank facilities consist of a
$475 million term credit facility that matures on December 29, 2000 and a $275
million revolving credit facility that matures on December 31, 2001, each with a
different, but partially overlapping, syndicate of lenders. As of December 31,
1998, Iridium had drawn an aggregate of approximately $625 million under these
facilities (approximately $470 million under the term facility and approximately
$155 million under the revolving facility). Pursuant to the terms of the
guaranteed bank facilities, Iridium cannot have access to more than an aggregate
of approximately $745 million of borrowings in order to ensure that the Motorola
$750 million guarantee covers additional obligations of Iridium to the lenders
under these facilities. The guaranteed bank facilities do not have covenants
that directly address minimum revenues or subscriber levels. Borrowings under
the guaranteed bank facilities are guaranteed by Motorola. Pursuant to the
Motorola MOU and the Motorola ARG, Iridium is required to compensate Motorola
with equity and cash interest for, among other things, guaranteeing borrowings
under the guaranteed bank facilities.

Motorola Vendor Financing and O&M Bank Facility Guarantee. Under the
Motorola MOU, Motorola has agreed to permit Iridium to defer its obligations to
pay up to an aggregate of $400 million of payments due to Motorola under the O&M
contract until December 29, 2000. Iridium currently is deferring payment of its
obligations under the O&M contract and expects to defer an aggregate of $400
million of such obligations prior to September 1, 1999.

Iridium has agreed under the Motorola MOU that it will use its best efforts
to obtain the Motorola guaranteed O&M bank facility to finance the payment of
all such deferrals prior to October 1, 1999. Motorola has conditionally
committed under the Motorola MOU to guarantee up to $400 million of borrowings
under such Motorola guaranteed O&M bank facility. Iridium intends to, and
expects that it will be able to, finance the payment of $400 million of deferred
amounts with the Motorola guaranteed O&M bank facility prior to October 1, 1999.
However, many factors, including changes in the bank lending market and
Iridium's ability to generate revenues from commercial operations could
adversely affect Iridium's ability to obtain the Motorola guaranteed O&M bank
facility. In addition, Motorola's commitment to guarantee the Motorola
guaranteed O&M bank facility is subject to certain conditions. Accordingly,
there can be no assurance that Iridium will be able to obtain the Motorola
guaranteed O&M bank facility or otherwise refinance its deferred obligations to
Motorola under the O&M contract. Iridium is required to compensate Motorola
pursuant to the Motorola ARG for Iridium's deferral of payments under the O&M
contract and for Motorola's guarantee of the Motorola guaranteed O&M bank
facility with cash and equity compensation, including warrants to purchase class
1 interests and warrants to purchase class A common stock.
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Motorola MOU. In connection with the establishment of the secured bank
facility and the guaranteed bank facilities, Motorola, Iridium and Iridium
Operating LLC entered into the Motorola MOU, which amended and restated a
previous memorandum of understanding. Under the MOU, Motorola has agreed to,
among other things, (i) guarantee up to $750 million of obligations under the
guaranteed bank facilities, (ii) consent to and agree to an amendment to the
guaranteed bank facilities and the related guarantee agreement (or to enter into
a new bank credit facility and guarantee agreement on the same terms (other than
pricing)) that together provide for a $350 million increase in the Motorola
guaranteed borrowings available thereunder, (iii) permit Iridium to defer its
obligations to pay up to an aggregate of $400 million of payments under the O&M
contract until December 29, 2000, (iv) guarantee up to $400 million of
additional borrowings under a bank credit facility with terms (other than
pricing) identical in all material respects to the guaranteed credit facilities
on the condition that such additional guaranteed borrowings be used exclusively
to make payments to Motorola for deferred obligations under the O&M contract (as
described in (iii) above), (v) subordinate certain of its claims vis-a-vis
Iridium Operating LLC to the lenders under the secured bank facility and (vi)
consent to an amendment to the $275 million revolving credit facility component
of the guaranteed bank facilities that would extend the maturity of such
facility to beyond the maturity of the senior notes (which are due July 15,
2005). Iridium has agreed under the Motorola MOU that it will compensate
Motorola for providing guarantees, deferral rights and other credit support
(collectively, the "Motorola exposure", which generally includes the aggregate
amount guaranteed, or permitted to be deferred, by Motorola) pursuant to the
Motorola ARG.

Iridium also has agreed under the Motorola MOU that it (i) will use its
best efforts to reduce the Motorola exposure to no more than $275 million by the
earliest possible date, including obtaining bank credit agreements not
guaranteed by Motorola, issuing debt and equity securities (under certain
conditions) and using revenues from operations, if available, to reduce the
available borrowings under credit facilities guaranteed by Motorola and to pay
amounts deferred under contracts with Motorola, (ii) use their best efforts to
obtain, on or before October 1, 1999, the Motorola guaranteed O&M bank facility
to finance the payment of all deferred amounts under the O&M contract, (iii)
will not have outstanding in excess of (a) $1.7 billion of indebtedness for
borrowed money that is secured by the assets of Iridium or (b) $1.62 billion in
aggregate principal amount of senior notes, (iv) will not make certain
acquisitions without Motorola's consent and (v) will provide Motorola with the
right (in addition to Motorola's rights to representation based on its holdings
of class 1 interests) to appoint one additional director to the Board of
Directors of Iridium any time the Motorola exposure exceeds $275 million and the
right to appoint a second additional director to the Board of Directors of
Iridium any time the Motorola exposure exceeds $750 million. In addition, while
Motorola has agreed to consent to (i) a $350 million increase in the amount of
guaranteed borrowings available under the guaranteed bank facilities (or a new
credit facility with terms (other than pricing) identical in all material
respects) and (ii) to an extension of the maturity of the $275 million revolving
credit facility component of the guaranteed bank facilities, there can be no
assurance that Iridium will satisfy the terms of the secured bank facility which
would terminate its conditional obligation to have Motorola guarantee borrowings
under the secured bank facility, that the lenders under the guaranteed credit
facilities would agree to such amendments or that such a new credit facility
would be available.

Motorola's obligation to defer receipt of up to $400 million in payment
under the O&M contract is unconditional. All of Motorola's other obligations
under the Motorola MOU, including, without limitation, its obligation to consent
to and agree to an amendment to the guaranteed bank facilities and the related
guarantee agreement (or to enter into a new bank credit facility and guarantee
agreement on the same material terms (other than principal)) that together
provide for a $350 million increase in the Motorola guaranteed borrowings
available thereunder, are conditioned on Iridium complying with the terms of the
Motorola MOU, Motorola ARG, the O&M contract and other agreements with Motorola,
including Iridium's payment obligations under each such agreement.

Motorola ARG. In connection with the establishment of the secured bank
facility and the guaranteed bank facilities, Motorola, Iridium and Iridium
Operating LLC also entered into the Motorola ARG, which amended and restated a
previous agreement. Payments under the Motorola ARG are based on the amount and
duration of Motorola exposure and are due and payable quarterly. Prior to
October 1, 1999, Iridium is

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required to pay Motorola cash interest on the amount deferred at an annual
interest rate of 12% for Motorola exposure relating to the deferred amounts
under the O&M contract. For Motorola exposure relating to guarantees of
borrowings under bank credit facilities that exists prior to October 1, 1999,
Iridium is required to compensate Motorola with cash interest and equity
(including warrants to purchase either class 1 interests or, under certain
conditions, class A common stock). Prior to October 1, 1999, Motorola's
compensation for Motorola exposure relating to the guaranteed bank facilities
and the Motorola guaranteed O&M bank facility (if available) is based on the
terms of the series A and series B senior notes. This "high yield based
compensation" equals (i) interest on the Motorola exposure at an annual interest
rate equal to the amount, if any, by which the interest rate on the relevant
bank facility is less than 13.625% (the weighted average interest rate on the
series A and series B senior notes) plus (ii) the payment of warrants to
purchase approximately 66.758 class 1 interests (or shares of class A common
stock) per day per each $100 million of Motorola exposure at a purchase price of
$20.90 per interest (or share) (the average daily warrant compensation payable
to holders of senior notes).

After October 1, 1999, Iridium is required to pay Motorola equity
compensation (in the form of warrants to purchase class 1 interests at a
purchase price of $0.00013 per interest) for all Motorola exposure unless the
aggregate Motorola exposure is less than or equal to $275 million, in which case
Iridium may pay Motorola high yield based compensation. During this period,
unless the Motorola exposure is less than $275 million, the amount of warrant
compensation payable per dollar of Motorola exposure increases substantially as
the Motorola exposure increases. In addition, Iridium is required to compensate
Motorola with warrants to purchase class 1 interests at a price of $0.00013 per
interest for any Motorola exposure resulting from Motorola making available any
part of the additional $350 million in guaranteed borrowings discussed above
regardless of when such Motorola exposure is incurred.

As of December 15, 1998, for providing guarantees of Iridium's bank credit
facilities and other credit support Motorola had earned warrants to purchase (i)
7,741,346 class 1 interests at a price of $.00013 per interest and (ii) 39,828
class 1 interests at a price of $20.90 per interest. The amount of equity
compensation Motorola will earn in the future depends upon the amount of future
Motorola exposure, is expected to be substantial and could increase
significantly for a variety of reasons, including if Iridium is unable to reduce
the Motorola exposure to $275 million or less prior to October 1, 1999. While
Iridium has agreed with Motorola that it will use its best efforts to reduce the
Motorola exposure to $275 million or less as soon as possible, Iridium's ability
to repay or replace borrowings guaranteed by Motorola or pay or finance (without
a Motorola guarantee) deferrals of amounts due to Motorola depends on a variety
of factors, including Iridium's ability to generate revenues and factors beyond
Iridium's control such as the condition of the bank lending and securities
markets. If Iridium reduces the Motorola exposure to $275 million for the period
from October 1, 1999 through December 31, 2000 ($275 million of Motorola
exposure for approximately 15 months), Motorola would earn warrants to purchase
approximately 84,000 class 1 interests (or shares of class A common stock) at a
purchase price of $20.90 per interest (or share) plus cash interest. However, if
Iridium draws all amounts available under the $750 million guaranteed credit
facilities and defers the payment of an aggregate of $400 million under the O&M
contract and this Motorola exposure remains in place in full from October 1,
1999 through December 31, 2000 ($1.15 billion of Motorola exposure for 15
months), Motorola would earn warrants to purchase approximately 12.9 million
class 1 interests at a purchase price of approximately $0.00013 per interest
pursuant to the Motorola ARG.

OPERATIONS

Iridium commenced commercial satellite phone service on November 1, 1998
and commercial satellite paging service on November 15, 1998. Prior to November
1, 1998, Iridium's only source of income was interest income on the cash and
investment balances from the proceeds of equity commitments in Iridium, which
interest income amounted to approximately $21.2 million from July 29, 1993 to
September 30, 1998. During the same period, Iridium recorded a net loss of
approximately $1.253 billion.

From September 30, 1997 to September 30, 1998, Iridium's aggregate net loss
increased substantially from $168 million to $813 million for the nine months
ended September 30, 1997 and 1998, respectively. This was primarily the result
of the following increases for the nine months ended September, 30 1998, as
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compared to the corresponding period in 1997: $138 million for sales, general
and administrative expenses due to increased activities associated with
commercial activation, $331 million for depreciation expense due to the
depreciation of a greater number of satellites and $176 million for increased
interest expense. See "-- Capitalization of Costs", "-- Operating Expenses" and
"-- Interest Expense".

CAPITALIZATION OF COSTS

All payments by Iridium under the space system contract have been
capitalized. These capitalized costs are being depreciated over the five-year
estimated life of the satellites. Depreciation expense is realized on a
satellite-by-satellite basis, commencing with the delivery of each satellite to
its mission orbit. Depreciation related to the ground control stations commences
with the placement in service of each such station. Losses from satellite
failures for which Iridium has financial responsibility under its contractual
arrangements with Motorola are recognized currently. Motorola bears the risk of
loss for launch failures and satellite failures before a satellite is placed
into service. Iridium has obtained a satellite insurance policy to cover certain
costs associated with the loss of a satellite. Capitalized amounts under the
space system contract and the terrestrial network development contract
aggregated approximately $3.45 billion through September 30, 1998. In addition,
costs incurred in connection with the issuance by Iridium of class 1 interests
are reflected as a reduction of Iridium's additional paid-in capital and
Iridium's debt issuance costs are deferred and amortized over the term of the
related indebtedness. Payment of these costs and charges has resulted in
significant negative operating cash flow. Certain interest costs also will be
capitalized through the date of commencement of commercial operations.

A portion of the payments made under the O&M contract will be capitalized
and depreciated. The amount so capitalized will be determined depending upon the
number of replacement satellites put into service. Any costs under the O&M
contract not capitalized will be expensed as incurred.

OPERATING EXPENSES

For the period from July 29, 1993 through September 30, 1998, total
operating expenses were approximately $1.06 billion. Iridium expects a
substantial increase in future operating expenses relating to sales, marketing
and other costs associated with commercialization.

INTEREST EXPENSE

Iridium has financed, and expects to continue to finance, a significant
portion of its capital requirements through borrowings. As a result of these
borrowings, Iridium has had, and expects it will have, significant interest
costs. Interest costs were capitalized while the Iridium system was under
construction and are now being depreciated. This resulted in all interest costs
being capitalized during 1995, 1996 and 1997. For the nine months ended
September 30, 1998, approximately $247.4 million of interest cost was incurred.
Interest expensed for the nine months ended September 30, 1998 was approximately
$168.2 million with the remaining approximately $79.2 million of interest
capitalized to the system under construction. Iridium anticipates that all
interest cost incurred in 1999 will be expensed. Some portion of interest
expense will not be paid in cash, including the interest expense related to
Iridium's 14 1/2% senior subordinated notes through March 1, 2001. Such non-cash
interest will be accrued and such accrual will increase outstanding indebtedness
on Iridium's consolidated balance sheets.

INCOME TAXES

Iridium reports its income as a partnership for United States federal
income tax purposes and accordingly, is not expected to be directly subject to
U. S. federal income tax. Iridium may, however, be subject to tax in some state,
local or foreign jurisdictions on portions of its income. IWCL is directly
subject to U.S. federal income tax on the portion of its income which is
effectively connected with the U.S. business of Iridium. IWCL pays no income tax
under Bermuda law. See "Tax Considerations".

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YEAR 2000 READINESS DISCLOSURE

Iridium has established a Year 2000 Program, the "Y2K Program", to address
information-technology, or "IT", and non-IT problems that may exist within the
Iridium system, including Iridium's suppliers, roaming partners, service
providers and other material distributors.

Until recently, only two digits were used to represent the year in dates
recorded in computer systems. This practice did not anticipate the problem
generated by the turn of the century, after which dates entered as "00" could be
understood by computers to mean 1900 instead of 2000. This and other date
handling processes could result in the incorrect performance of computer
calculations and functionality involving dates. Such miscalculations could
adversely affect Iridium's installed computer systems, network elements,
software applications and other business systems containing time sensitive
programs. The Year 2000 issue may also affect the systems and applications of
Iridium's roaming partners, service providers and other material distributors.

Y2K Program

The Y2K Program encompasses the Iridium space and ground facilities, as
well as the relevant operations of Iridium's material suppliers and
distributors, and addresses both IT and non-IT systems.

The Y2K Program is divided into five major phases -- Awareness, Inventory
and Risk Assessment, Repair, Replacement and Renovation, Verification and
Validation, and Implementation and Monitoring. The Awareness Phase is intended
to ensure the establishment of the Y2K Program and the awareness of potential
risks and Year 2000 issues. This phase, which involves communicating the status
and progress of the Y2K Program within Iridium and to third parties, is an
on-going activity and will continue as Iridium proceeds through the other
phases.

The Inventory and Risk Assessment Phase involves the performance of an
initial inventory of all Iridium hardware, software and infrastructure, as well
as material vendors, to identify potential Year 2000 issues and to determine the
action required, if any, to mitigate the risk to Iridium. Through the gateways,
Iridium is contacting its third party roaming partners and service providers to
determine the Year 2000 status of their systems, as well as their plans to bring
them into compliance. That process is on-going. Material items are those
believed by Iridium to have a significant impact on the business from a customer
service, financial or legal perspective. This phase is being performed by
Iridium's internal Y2K team. Iridium anticipates that this phase will be
substantially complete by the end of the first quarter of 1999.

The Repair, Replacement and Renovation Phase is intended to ensure that the
appropriate items as identified in the final inventory and risk assessment are
upgraded to meet Year 2000 compliance criteria. This may include software
updates, hardware upgrades, development of new processes, new business
practices, training programs, etc. While completion of the various elements of
this phase is tied to corresponding elements within the assessment phase,
Iridium anticipates that material repairs, replacements and renovations will be
substantially complete by mid-1999 for systems under the direct control of
Iridium. No current assessment of the completion dates for material repairs,
replacements and renovations not under Iridium's direct control, and for which
third parties such as gateways, service providers and roaming partners are
responsible, will be available until completion of that portion of the Inventory
and Risk Assessment phase.

The Verification and Validation Phase ensures that critical business
processes, systems and infrastructure are verified and tested to ensure Year
2000 issues will not cause major disruption in the on-going operation of the
Iridium business. Verification and testing of those systems under Iridium's
direct control will be performed by Iridium's internal Y2K team with the support
of its technicians and certain of the principal suppliers of those systems. This
phase is ongoing, but Iridium expects all testing of those systems under its
direct control to be substantially complete in the third quarter of 1999.

Finally, during the Implementation and Monitoring Phase, the Year 2000
upgrades will be installed into Iridium's operating systems, as necessary. In
addition, the monitoring activity will be employed in an effort to ensure that
unforeseen Year 2000 critical items are appropriately prioritized for
correction. While the

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implementation component of this phase is scheduled to be complete by the end of
the third quarter of 1999, Iridium's monitoring activities will be on-going.

State of Readiness. While there is general uncertainty inherent in the Year
2000 problem resulting in part from the uncertainty of the readiness of third
party distributors and vendors, Iridium's progress towards completing risk
assessment within the Iridium system is on schedule to be completed in the first
quarter 1999.

Although the remediation, testing and implementation phases have not yet
commenced, Iridium anticipates that these phases will proceed along the schedule
as contemplated by its Y2K Program.

Costs. The total cost associated with required modifications to become Year
2000 compliant is not expected to be material to Iridium's financial position or
results of operations. The current estimated total cost to Iridium of the Y2K
Program is $2 million. However, the accuracy of this estimate cannot be verified
until completion of the Inventory and Risk Assessment Phase. Factors which may
affect this $2 million estimate include unanticipated problems with Iridium's
systems or any of its suppliers' or distribution partners' systems. Iridium
estimates that the amount expended on the Y2K Program through December 31, 1998,
was approximately $304,000, all of which is expected to be expensed by Iridium,
with $24,000 of this amount incurred in the first nine months of 1998. This
estimate does not reflect all costs because, for example, the Iridium Business
Support Systems were developed from the outset to address Year 2000 issues, and
the cost of this capability was not separately identified by the supplier. Other
significant or critical non-Year 2000 information technology projects under
Iridium's direct control have not been materially delayed or impacted by Year
2000 initiatives.

Risks. In a reasonably likely worst case scenario, the failure to correct a
material Year 2000 problem could result in an interruption in, or a failure of,
certain normal business activities or operations, including operations that are
essential to the provision of Iridium's services. Such failures could materially
and adversely affect Iridium's results of operations, liquidity and financial
condition. Due to the general uncertainty inherent in the Year 2000 problem,
resulting in major part from the present state of Iridium's knowledge concerning
the Year 2000 readiness of third-parties such as its roaming partners and
service providers, Iridium is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on Iridium's
results of operations, liquidity or financial condition. The Y2K Program is
expected to significantly reduce Iridium's level of uncertainty about the Year
2000 problem and, in particular, about the Year 2000 compliance and readiness of
its material partners. Iridium believes that, with the completion of the Y2K
Program as scheduled, the potential of significant interruptions of normal
operations should be reduced.

Contingency Plans. After reviewing information gathered in the Inventory
and Risk Assessment Phase, and to prepare for the possibility that certain
information systems or third party partners and vendors will not be Year 2000
compliant, Iridium intends to develop contingency plans, as appropriate. These
plans may include the establishment of teams to monitor and correct disruptions,
utilization of back-up processes including data back-up and storage, and the
development of manual "work-around" solutions.

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BUSINESS

IRIDIUM SERVICES

General

Iridium's strategy is to be the total mobile communications solution for
its target markets by offering flexible service packages that allow customers to
conveniently select the most attractive telecommunications alternative anywhere
in the world they travel. Iridium World Satellite Service is designed for
customers who need to receive or make phone calls in areas not currently served
by cellular service. Iridium World Roaming Service is designed for customers who
travel to areas where their "home" cellular service will not support roaming,
including areas served by cellular networks that use electronic languages, or
"protocols", that are not compatible with their home network's protocol. Iridium
World Page Service offers the ability to receive a message virtually anywhere in
the world, including on aircraft. The Iridium World Calling Card provides
customers with a cost-effective means of accessing land-line services while
traveling. By packaging these services in various combinations, Iridium can meet
the diverse needs of its customers whether they travel to remote parts of the
globe or to areas served by cellular networks or both.

Iridium World Satellite Service

Iridium's satellites provide phone service to virtually anywhere on the
surface of the Earth where Iridium World Satellite Service is authorized. The
Iridium system is designed to provide a signal strength for voice communication
that averages approximately 16dB with an unobstructed view of the satellite,
which Iridium believes is a significantly higher signal strength than other
proposed mobile satellite systems. Iridium believes its greater signal strength
will enable it to better serve portable, hand-held phones than competing mobile
satellite systems. In the future, Iridium expects to be able to offer a full
array of calling features including call waiting, call hold, conference calling,
call forwarding and call barring. Iridium World Satellite Service is available
in more than 125 countries and territories. Iridium's goal is for Iridium World
Satellite Service to be available in virtually all countries and territories. As
of December 31, 1998, Iridium had approximately 3,000 IridiumWorld Satellite
Service customers.

Iridium World Satellite Service is a complement to, not a replacement for,
cellular service. The availability of cellular service is limited by the
geographic coverage of cellular systems. Iridium World Satellite Service is not
geographically constrained and, accordingly, extends mobile phone access to
areas not covered by cellular service. With a dual mode satellite/cellular
phone, or two separate phones, a customer can travel the globe and make or
receive phone calls from virtually anywhere in the world, including remote and
mid-ocean areas.

Iridium does not expect its customers to use Iridium World Satellite
Service where cellular services are available, because Iridium satellite voice
service is priced significantly higher than most cellular services and because
Iridium satellite voice service does not work as well as cellular services
within buildings and in urban areas where buildings are densely spaced. The
quality of a satellite call depends to a large extent on the strength of the
signal between the satellite and the phone. An obstruction between the satellite
and the phone reduces the signal strength and can result in poor call quality or
no service at all. See "Risk Factors -- Factors Affecting Customer Acceptance of
Satellite-Based Service" for a discussion of certain service limitations of
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Iridium World Satellite Service. Although Iridium customers should not expect
satellite-based voice services to be reliable in these environments, cellular
and land-line services are typically available in these areas, and Iridium
provides its customers with the ability to access land-line service, cellular
service and satellite service using the same phone number and customer bill.

Iridium World Roaming Service

Iridium World Roaming Service permits subscribers to roam among cellular
networks that have roaming agreements with Iridium. Iridium intends to create
the broadest global cellular roaming service available. Iridium has entered into
roaming agreements with more than 160 roaming partners and has integrated more
than 55 of those partners (including cellular networks in more than 30 countries
and territories) with the Iridium system. Iridium's business plan currently
calls for roaming agreements covering networks in more than 150 countries and
territories to be integrated with the Iridium system by 2002.

In providing Iridium World Roaming Service, Iridium acts either as the
customer's "home" system or as an interface between the visited cellular network
and the customer's home network, even if the visited and home networks use
differing protocols (e.g., IS-41 and GSM). Iridium World Roaming Service
customers who travel between places that are served by different wireless
protocols can place calls and can be reached on one phone number by using either
a multi-mode phone that is compatible with multiple protocols or with a
combination of cellular phones, one for each protocol.

Iridium World Page Service

Iridium is the first company to offer global paging to a belt-worn pager.
Iridium offers global paging both as a stand-alone service and bundled with its
voice service. The Iridium pager has a signal strength of approximately 26dB
(which provides significantly greater in-building penetration than
satellite-based voice services) and can receive alphanumeric messages of up to
200 characters in any one of 19 languages and numeric messages of up to 20
digits. Iridium World Page Service customers can be paged in over 200 countries
and territories and onboard aircraft.

To use the Iridium satellites efficiently, pages are sent to specified
message delivery areas, or "MDAs", rather than over the entire constellation
(and thus, the globe). The MDAs vary in size and shape and are designed to
encompass common travel routes and areas, including the air corridors between
New York and London and the eastern third of the United States. Iridium intends
to vary the size of each MDA in light of demand, capacity and competition.
Because the pager is a one-way device and cannot tell the network its location,
customers are required to choose up to three MDAs for normal delivery of
messages.

When traveling, Iridium World Satellite Service customers and Iridium World
Roaming Service customers who have Iridium as their "home" system have the
benefit of "follow-me paging". With "follow-me paging", customers are generally
able to register their location (at no charge) by briefly turning on their
Iridium phone or cellular phone. The Iridium system then can identify the
appropriate MDAs to send a page without further customer action. Customers who
are not subscribers to Iridium World Satellite Service or are not "homed" on
Iridium can update their MDAs via a touch-tone phone, operator assistance or the
Internet.

Iridium World Calling Card

Iridium Aeronautical Service

Iridium intends to introduce satellite aeronautical phone service to
private and commercial aircraft by the end of 1999. In addition, on December 22,
1998 Iridium agreed to acquire Claircom Communications Group,

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Inc., a wholly owned subsidiary of AT&T Wireless Services, Inc. and Rogers
Cantel Inc., which currently provides inflight phone service (generally under
the AT&T brand) on a total of approximately 1,750 commercial and executive
aircraft. Upon completion of the acquisition, Iridium intends to brand this
service with the Iridium name. This proposed acquisition is subject to
regulatory approval and other conditions.

TARGET MARKETS

Global Travelers and International Urban Travelers

The Global Travelers and International Urban Travelers market segments are
expected to represent a major market opportunity for Iridium. Currently, the
ability of land-based wireless service subscribers to communicate outside their
home territories or regions is limited by:

- the absence or unavailability of local cellular service in many regions,
particularly in lesser-developed regions of the world;

- the absence of roaming agreements between the user's local cellular
provider and the wireless providers in the country or region in which the
user is traveling; and

- the inability of the user's "home" system to support roaming to other
cellular systems that use a different wireless protocol than does the
user's "home" wireless system.

Iridium expects that its Iridium World Satellite Service, Iridium World
Roaming Service and Iridium World Page Service will appeal to Global Travelers,
and that its Iridium World Roaming Service and Iridium World Page Service will
appeal to International Urban Travelers who frequently travel to areas served by
cellular networks that use different protocols but who rarely travel outside
cellular coverage, as logical extensions of their existing telecommunications
services. In particular, Iridium believes that traveling professionals will use
the unique capabilities of the Iridium system to remain in contact with their
homes and offices.

Industrial Users

Iridium believes that the Industrial Users market segment constitutes a
significant and immediate opportunity for Iridium. For companies that have
multiple locations around the globe, or a requirement for remote communications,
the Iridium system provides a single communications solution. This market
segment includes national and multinational companies that have executives who
travel outside of their home cellular coverage area or who have a need for
satellite services in the regular course of business. The segment also includes
companies that are expected to demand satellite services at remote industrial
sites and on land and water transportation vehicles, such as utilities, oil and
mineral exploration, pipeline construction, engineering, fishing and forestry.
Iridium World Satellite Service and Iridium World Page Service are expected to
be used in this market segment for business communications and emergency backup
communications.

Iridium is focusing its initial marketing and distribution efforts on the
Industrial Users market segment because it believes many companies in this
segment have a significant current demand for mobile satellite communications
and will be heavy users of Iridium's services.

Public Sector Users

Currently, governments are significant users of satellite services, and
Iridium anticipates that the coverage and ease of portability of Iridium World
Satellite Service and Iridium World Page Service will make them attractive for a
variety of governmental applications. The government communications addressable
market includes governmental departments and agencies and international
organizations for civilian and military applications, including law enforcement,
official travel and disaster relief. In addition, governments require satellite
services for operations in areas where inadequate land-based communication
capability is common, such as for border patrols, customs operations,
communication with ships at sea and embassy communications.

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One of Iridium's 12 gateways is owned by the U.S. government and Iridium
expects that the U.S. government, including the U.S. military and agencies that
operate internationally, will be significant users of Iridium's services.

In-Country Users

The In-Country Users market segment is comprised of two subcategories:

- users in areas where potential demand for cellular service exists but
such services have yet to be deployed, or, if deployed, are of poor
quality, typically in rural areas of developed countries; and

- users in areas with inadequate or inconvenient access to any telephone
services, typically in developing countries.

Iridium World Satellite Service can be viewed as a precursor to a permanent
wired or land-based wireless service in many of these areas and as a long-term
telecommunications solution in those areas where no land-based system can be
economically justified. In-Country Users are also expected to be candidates for
Iridium World Page Service.

THE IRIDIUM SYSTEM AND HOW IRIDIUM'S SERVICES WORK

Iridium's ability to provide its services, either individually or in
packages, is derived from the unique capabilities of the Iridium system.
Development and deployment of the Iridium system, an 11-year project, was
completed in November 1998. The Iridium system has four principal components:

- THE SPACE SEGMENT, which includes Iridium's 66 low earth orbit satellite
constellation (plus orbiting spares) and the related control facilities;

- THE GROUND STATIONS, OR "GATEWAYS", which link the satellites to
land-based communications systems;

- IRIDIUM PHONES, PAGERS AND SIM CARDS, which provide mobile access to the
satellite constellation and land-based cellular systems; and

- IRIDIUM'S LAND-BASED WIRELESS ROAMING INFRASTRUCTURE, which facilitates
roaming among land-based cellular systems -- even systems that use
different protocols -- and the Iridium satellite system.

Iridium's service offerings use the Iridium system in different ways.

- IRIDIUM WORLD SATELLITE SERVICE -- An outgoing call travels from the
phone to an Iridium satellite. It is then passed from satellite to
satellite across the constellation and down to a gateway. The gateway
then transfers the call into the land-based public switched telephone
network, or "PSTN", where it is delivered to its destination as a call
originating from a land-based system would be. An incoming call travels
the same path in reverse.

- IRIDIUM WORLD PAGE SERVICE -- A page can be originated by calling the
customer's Iridium phone number (and finding them unavailable), by
calling a paging access number or via the Internet from Iridium's web
page: www.iridium.com. Once originated, an incoming page travels the same
path to the pager as an incoming satellite phone call travels to the
phone.

- IRIDIUM WORLD ROAMING SERVICE -- Iridium's roaming service is similar to
traditional roaming, except Iridium supports roaming among systems that
use different protocols, thereby allowing customers to use only one phone
number as they travel from system to system.

There are several common questions about how Iridium can link its various
service offerings to provide flexible service packages:

- HOW CAN A CUSTOMER USE THE SAME PHONE NUMBER WITH DIFFERENT PHONES AND
DIFFERENT IRIDIUM SERVICES? -- THE IRIDIUM SIM CARD. The Iridium phones
and pagers use SIM cards, a technology common to European and other GSM
cellular systems. Customer information is stored in a plastic SIM card
that is inserted into the phone. A customer with an IS-41 cellular phone
in New York with a

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New York phone number, for example, can switch to a GSM cellular phone in
London and be reached on the same New York phone number by inserting a
SIM card into the GSM phone. Similarly, a customer can switch to Iridium
World Satellite Service by inserting a SIM card into an Iridium satellite
phone. The flexibility of SIM cards allows industrial and public sector
users to share satellite and cellular phones among groups of employees
while each employee retains an individual phone number and billing
account. In the near future, Iridium intends to introduce a SIM card that
is also a calling card, thereby allowing customers to travel the globe
and have access to three modes of telecommunications -- satellite,
cellular and land-line -- all with a single card and a single phone
number.

- HOW CAN A CUSTOMER USE THE SAME PHONE FOR DIFFERENT IRIDIUM
SERVICES? -- MULTI-MODE PHONES. Instead of using a SIM card and several
phones, customers can purchase an Iridium multi-mode phone that provides
access to Iridium's satellite system and to cellular systems, including
systems that use different protocols. The Motorola multi-mode phone uses
protocol cassettes called "TRCs" that permit a customer to carry one
phone for differing cellular and satellite services. Cellular protocols
can be switched by inserting the appropriate TRC into the phone. The
Kyocera multi-mode phone, on the other hand, is configured as a satellite
phone casing into which the customer inserts a cellular phone, using
different cellular phones for each protocol.

- HOW DOES THE IRIDIUM SYSTEM KNOW WHERE TO SEND AN INCOMING PHONE CALL OR
PAGE? -- CUSTOMER TRACKING. The Iridium system tracks its satellite
customers in the same way cellular systems track customers. When the
phone is on it sends a signal to the satellite constellation (at no cost
to the customer), which periodically updates the customer's position.

- World Satellite Service -- Iridium's World Satellite Service works
like today's cellular technology. The call is sent to the system's
last known location for the customer.

- World Page Service -- Pages are sent to specified message delivery
areas or "MDAs". The MDAs vary in size and shape and are designed to
encompass common travel routes and areas, including the air corridors
between New York and London and the eastern third of the United
States. Customers can designate up to three MDAs which can be updated
by turning on their Iridium satellite phone or cellular phone if the
customer has Iridium as their "home" system (at no charge), via a
touch tone phone, through operator assistance or over the Internet.

- World Roaming Service -- Customers are tracked across different
cellular systems using Iridium's land-based wireless roaming
infrastructure. Iridium either acts as the customer's "home" system or
as an interface between the visited network and the customer's home
network. Customers "homed" on Iridium are able to update their paging
MDAs by turning on their cellular phones.

- HOW DOES THE CUSTOMER GET ONLY ONE BILL FOR IRIDIUM'S SERVICES? -- THE
IRIDIUM BUSINESS SUPPORT SYSTEM. Each call and page made using the
Iridium system is recorded by Iridium's business support systems. This
enables Iridium to share this information with its service providers on a
customer-by-customer basis and, accordingly, all charges for Iridium
services can be invoiced on a single bill. In addition, where the Iridium
service provider is also the customer's "home" cellular service provider,
the charges for Iridium services and home cellular service can be
invoiced on a single bill.

MARKETING AND DISTRIBUTION

Iridium's marketing strategy is to position Iridium as the premier brand in
global wireless communications services. Iridium believes that its principal
target markets can be reached effectively through established marketing
channels. Iridium believes focusing on these market segments gives it an
advantage over mobile satellite systems that target individuals in remote areas
where marketing opportunities and distribution channels are limited. Iridium is
striving to establish a global identity through a comprehensive global marketing
strategy. Iridium coordinates with its gateway partners to determine the optimum
allocation of marketing expenditures and engages in direct marketing to certain
markets, including the utility, oil and gas, mining and maritime industries.

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Iridium's distribution strategy reflects its role as a wholesaler of
Iridium services. The retail distribution of Iridium services generally takes
place through Iridium's gateway operators, and is designed primarily to utilize
existing wireless retail distribution channels. Iridium's gateway operators will
distribute Iridium services through their own distribution channels or through,
or in conjunction with, one or more existing wireless service providers
(including Iridium World Roaming Service roaming partners). As of December 31,
1998, Iridium and its gateway operators had agreements with more than 300 such
service providers and had integrated more than 60 of these service providers.
All Iridium service providers have primary responsibility for marketing Iridium
services within their territories in accordance with marketing policies and
programs established by Iridium and the gateway operators. In addition, Iridium
service providers are responsible for billing, collection and (with Iridium)
share customer service responsibilities. Iridium provides centralized customer
service principally through its three global customer care centers, which
operate 24 hours per day, seven days a week and support 13 languages.

The initial global distribution of phones and pagers is one of Iridium's
most significant challenges as it transitions to an operating company. While the
service providers, who are responsible for direct sales to customers, are
disparately located across the globe, there are limited supply sources of phones
and pagers. Getting phones and pagers from production locations to a large
number of service providers located all over the globe is a significant
challenge. Hurdles that must be overcome include customs and tax clearance in
each of the countries to which the phones and pagers are shipped and
coordination with numerous local and regional distribution channels. Iridium
must also train service providers in a number of countries to identify potential
Iridium customers, to accurately inform such customers about Iridium's services,
to market Iridium phones and pagers, to distribute the equipment and to provide
service support following sales.

Iridium's initial marketing efforts have yielded indications of interest
that Iridium believes are substantial and encouraging. However, Iridium phones
and pagers are an essential component of Iridium's satellite services and,
accordingly, Iridium can only add new Iridium World Satellite Service and
Iridium World Page Service customers to the extent that phones and pagers are
available for customer use. As of December 31, 1998, Motorola had produced
approximately 35,000 phones and was producing phones at a rate of approximately
1,000 per day. Late in 1998, Motorola began commercial shipments of cellular
cassettes which provide dual mode (satellite/cellular) capability for Motorola's
phones. Commercial shipments of Kyocera phones are on hold because test results
have not yet met Iridium's quality standards for commercial use. Iridium expects
Kyocera phones will be approved for commercial shipment in the first quarter of
1999. An aggregate of approximately 3,500 Motorola and Kyocera pagers have been
produced. In addition, once phones and pagers are produced, they must be
distributed to service providers before a new customer can be added.
Distribution of customer equipment to certain parts of the world can require
substantial time. Iridium believes that one of its most significant challenges
is ensuring that phones and pagers are produced in sufficient quantities and are
timely distributed to the various parts of the world necessary to satisfy the
demand for Iridium's satellite-based services.

PRICING

Iridium sets the wholesale prices for its services to allow for a suggested
retail price that approximates the "dial-up" rate plus the mobility premium.
Iridium's wholesale price is designed to compensate Iridium, as the network
provider, and the originating and terminating gateways, as well as to cover the
charges for the landline portion of the call (i.e., for an outbound satellite
call from the gateway to the person receiving the call). The charge for the
landline portion of the call is often referred to as the "PSTN tail charge",
where PSTN is an
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acronym for public switched telephone network. The home gateway marks up the
wholesale price and the service provider establishes the final retail price.
Iridium currently expects that its wholesale usage fees for international
Iridium World Satellite Service calls between two countries will result in
suggested retail prices that, in aggregate, are approximately 25% to 30% above
the retail prices for land-based voice calling options that traveling customers
could use for a similar call between the same two countries (e.g., international
calling card and international cellular roaming rates). Iridium expects such
prices will be competitive with other global mobile satellite systems. In
addition, from a regulatory approval perspective, in markets where the monopoly
telecommunications provider and the licensing authority are the same entity, a
pricing strategy that takes into account the "dial-up" alternatives allows
Iridium to respond to concerns that Iridium will capture the local monopoly
provider's long-distance revenues by undercutting land based "dial-up" rates.

For Iridium World Roaming Service pricing, the "dial-up" rate component is
primarily the long distance charge. The mobility premium compensates the parties
involved -- primarily the serving network for its airtime charges, the visited
gateway for customer authentication and Iridium for its protocol translation
services. The retail price includes the markup of the home gateway and service
provider. Iridium believes that its Iridium World Roaming Service suggested
retail prices are comparable to other cross-protocol roaming services.

In addition to airtime charges based on the "dial-up" rate plus mobility
premium, Iridium subscribers pay a monthly subscription fee in the same manner
that cellular customers pay monthly charges. Iridium permits its service
providers that are wireless network operators to offer Iridium's services as
additional features to their existing wireless services, which permits their
customers to remain customers of the wireless network and to roam onto the
Iridium system, including Iridium World Satellite Service and Iridium World
Roaming Service. Generally, these customers pay a feature charge to Iridium for
the roaming privilege that is below the Iridium monthly subscription fee, but
they pay an additional roaming premium for calls made over the Iridium system.

Currently, Iridium paging subscribers pay a fixed monthly subscription fee
for up to 200 pages. The monthly paging subscription fee is discounted for
persons who are also subscribers to Iridium voice services.

COMPONENTS OF THE IRIDIUM SYSTEM

The Iridium system has four principal components: the space segment, the
gateways, the Iridium phones, pagers and SIMs and the Iridium land-based
interprotocol roaming infrastructure. Iridium owns the space segment and the
interprotocol roaming infrastructure, and the gateway owners own and operate
their gateways.

Iridium believes that the capabilities and interplay of these four
components of the Iridium system allow Iridium to provide service features that
Iridium's principal target markets will find desirable and that will
differentiate Iridium from its competitors. The number and distribution of
satellites in the Iridium constellation enables Iridium to provide satellite
voice and paging services to virtually anywhere on the globe, including
mid-ocean and remote areas. Iridium believes that its satellite signal strength
allows it to provide better service to hand-held phones and a higher degree of
in-building penetration for pagers than competing mobile satellite systems will
be able to provide. In addition, Iridium believes that its satellite voice
quality is acceptable to customers as a substitute for cellular service when
they are outside cellular coverage.

Space Segment

The space segment, including the initial deployment of the satellite
constellation and the build out of the ground control facilities, was completed
in November 1998.

The satellite constellation of the space segment consists of a
constellation of 66 low earth orbit satellites (plus orbiting spares) arranged
in six orbital planes. The satellites fly at an altitude of approximately 780
kilometers from the Earth and complete an orbit every 100 minutes. The
satellites have three antennas and communicate with phones and pagers on the
ground using main mission antennas, with gateways using gateway link antennas
and with other Iridium satellites in space using cross-link antennas.

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The main mission antennas communicate with phones and pagers through
tightly focused antenna beams forming a continuous pattern on the Earth's
surface. The main mission antenna subsystem of each satellite includes three
phased array antennas, each containing an array of transmit/receive modules.
Collectively, the 48 beams produced by a single satellite combine to cover a
circular area of the Earth with a diameter of approximately 4,340 kilometers.
The Iridium system architecture incorporates certain features, such as call
hand-off, which allows the space segment communications link with phones to be
transferred from satellite to satellite as the satellites move over the area
where the customer is located.

The cross-link antennas permit satellites in the constellation to
communicate with each other. Each Iridium satellite has four cross-link antennas
to allow it to communicate and route traffic to the two satellites that are in
front and in back of it in the same orbital plane, as well as neighboring
satellites in the orbital planes to its right and left. This intersatellite
networking capability is a significant distinguishing feature of the Iridium
system and provides a number of benefits. These intersatellite links, which
enable the satellites to function as switches in the sky, allow the Iridium
system to:

- capture a greater portion of revenues for long distance satellite calls
than competitors that do not have intersatellite links -- on comparable
international long distance calls, Iridium generally expects to capture a
greater portion of the total price of the call because the portion of the
call carried by the Iridium system, from satellite to satellite, can be
longer than the portion of the call that a competing system without
intersatellite links would be able to carry;

- select the optimal ground-to-satellite and satellite-to-ground path for
each call, thereby enhancing system reliability and capacity while
reducing the costs associated with the use of land-based phone systems;

- provide service to customers in all areas (including mid-ocean and remote
areas) regardless of their proximity to a gateway;

- provide full global service with a relatively small number of gateways,
thereby lowering total ground segment build-out and operating costs; and

- provide enhanced ability to track the location of a voice customer,
allowing Iridium to "follow" customers as they travel globally.

Operation of the satellites is monitored, managed and controlled by the
Satellite and Network Operations Center, or the "SNOC", located in Virginia. A
back-up operations center is located in Italy, and additional control stations
are located in northern Canada and Hawaii, with an additional transportable
control system currently located in Iceland. These facilities manage the
performance and status of each of the satellites. The SNOC also manages the
network by developing and distributing routing tables for use by the satellites
and gateways, directing traffic routing through the network and controlling the
formation of coverage areas by the satellites' main mission antennas.

Maintenance of the Constellation. Iridium has contracted with Motorola to
maintain the space segment pursuant to the O&M contract. This contract has a
fixed price for five years and is extendable, at Iridium's option, for an
additional two years. Motorola's maintenance obligations include the placement
into orbit of satellites for the replacement of failed or degraded satellites.

Motorola has contracted with the China Great Wall Industry Corporation,
utilizing its Long March 2C/2D vehicle, and the Boeing Corporation, utilizing
its Delta II launch vehicle, to perform the O&M contract maintenance launches.
Motorola expects that a number of other launch systems currently available or
under development also could be used to satisfy maintenance launch requirements.
See "Risk Factors -- Risks Related to the Satellites" for a discussion of
various risks associated with the satellites and replacement launches required
for constellation maintenance, and "Certain Regulations that Affect
Iridium -- United States International Traffic in Arms Regulations; Export
Administrations Act" for a discussion of regulations that control the export and
import of articles and services, including certain satellites.

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Gateways

Gateway earth stations provide call-processing services, such as subscriber
validation and the interconnection between the world's PSTNs and the Iridium
system, by connecting calls made through the Iridium system to and from the
local PSTN through an international switching center. Gateways communicate with
the space segment via gateway link antennas on the satellites and ground-based
antennas, or earth terminals, at each gateway facility. Each gateway also
includes a subscriber database used in call-processing activities such as
subscriber validation. Gateways generate call detail records that are used by
the Iridium business support systems to generate billing and other information.

Subscriber Equipment

Motorola and Kyocera are the suppliers of Iridium phones and pagers. The
initial retail price for phones and pagers generally is at least $3,000 and
$500, respectively. Iridium generally does not expect to act as a distributor of
subscriber equipment or derive any income from the sale of Iridium subscriber
equipment.

The Iridium system phones are larger and heavier than today's pocket-sized,
hand-held cellular telephones and have longer and thicker antennas than
hand-held cellular telephones. The Iridium pager is slightly larger than today's
standard alphanumeric belt-worn pagers. See "Risk Factors -- Risk of Low Service
Demand Because of Pricing, Service Quality, Equipment Characteristics,
Competition and Other Market Factors".

The Iridium phones and pagers are the first commercially marketed personal
telecommunications equipment to carry a mark authorized by the International
Telecommunications Union, or "ITU". Iridium believes this mark will facilitate
the free flow of Iridium phones and pagers across international borders.

Business Support Systems

The Iridium business support systems provide the "back office" business
functions required by Iridium, its gateway operators, and its service providers,
including a clearinghouse operated by Iridium, to calculate the amounts owed to
and from Iridium and each gateway operator and service provider. These business
support functions also include customer service support and billing and
collection. These functions are provided by means of computer and manual
processes at each gateway and service provider location and at a central
processing point. In addition, the gateways are required to enter into
settlement agreements with service providers, on behalf of Iridium, in order to
account for and settle calls made using Iridium World Roaming Service and the
other non-satellite services offered by Iridium.

The coordination of business support functions among Iridium, the gateways
and the service providers necessary to the provision of Iridium's various
services is a large and complex undertaking which requires comprehensive data
exchange capabilities and the negotiation and execution of hundreds of
settlement agreements with gateway operators and service providers. See "Risk
Factors -- Reliance on Motorola, Gateway Owners and Other Third Parties".

Global Customer Care Centers

Iridium believes that customers in its target markets place significant
value on their time and, accordingly, customer retention will depend upon high
quality customer service. Iridium has three global customer care centers that
operate 24 hours per day, seven days per week and support 13 languages. Iridium
believes this commitment to customer service will distinguish it from many of
its competitors. Iridium believes providing comprehensive customer care is
particularly important as Iridium transitions from a development stage company
into an operating company.

Land-Based Interprotocol Roaming Infrastructure

The key to Iridium World Roaming Service is the ability of Iridium's
wireless roaming infrastructure to support communications between networks that
use incompatible protocols. Similar protocol networks can communicate easily
with one another by sending signals between the networks in a standard language
that is
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understood by both networks. However, different protocol networks require a
translator in order to communicate with each other. Iridium's Interprotocol
Roaming Infrastructure provides this translation service.

Currently, many wireless systems, including systems covering large portions
of South America, use a form of cellular technology, known as
"non-authenticating" IS-41, that does not permit sufficient anti-fraud security
or certain international dialing. Iridium does not currently provide Iridium
World Roaming Service with networks that use this type of technology and,
accordingly, Iridium World Roaming Service does not currently extend to large
portions of South America. However, Iridium has developed technology for, and is
seeking a patent that covers, a technical solution to this anti-fraud security
problem, and expects to begin service in these markets by year end 1999.

In addition, Iridium World Roaming Service is expected to be available in
Japan by year end 1999.

COMPETITION

Certain sectors of the telecommunications industry are highly competitive
in the United States and other countries. The uncertainties and risks created by
this competition are intensified by the continuous technological advances that
characterize the industry, regulatory developments that affect competition and
alliances between industry participants. While Iridium is the only company that
currently serves the global satellite personal communications market, it
anticipates that more than one system may serve this market in some fashion in
the future. Iridium believes that its most likely direct competition will come
from the planned ICO telecommunications service and from one or more of the
other Federal Communications Commission licensed MSS
applicants -- Loral/Qualcomm Partnership, L.P., on behalf of Globalstar; MCHI,
on behalf of Ellipso; and Constellation Communications Inc., on behalf of
ICHO/Aries.

Iridium believes that its ability to compete successfully in the market for
global satellite personal communications will depend primarily on its ability to
capitalize on being the first commercially operational company, the
technological qualities of the Iridium system, including its global coverage,
signal strength, dependability and capacity, and the market appeal of Iridium's
service offerings, including Iridium World Roaming Service. Successful
competition will also depend on the cost of service to subscribers and the
success of the marketing, distribution and customer service efforts of gateway
operators and service providers. See "Risk Factors -- Risk of Low Service Demand
Because of Pricing, Service Quality, Equipment Characteristics, Competition and
Other Market Factors" and "Risk Factors -- Reliance on Motorola, Gateway Owners
and Other Third Parties".

Iridium believes that the features which distinguish the Iridium system
from its anticipated competitors include:

- HIGHER SIGNAL STRENGTH FOR IRIDIUM WORLD SATELLITE SERVICE, which Iridium
believes will afford both better voice quality to handheld phones and a
higher degree of in-building penetration to belt-worn pagers;

- INTERSATELLITE NETWORKING CAPABILITY, which permits virtually global
coverage, reduces the number of gateways required to provide global
coverage, enhances system reliability and capacity and reduces "tail
charges" incurred for the land-line portion of telephone calls; and

- THE ABILITY TO COMBINE VARIOUS SERVICES, which enables Iridium to offer
virtually world-wide satellite, cellular and paging service with one
phone, one phone number and one customer bill.

Iridium believes that these distinguishing features will make its services
better suited, compared with other potential mobile satellite system
competitors, to meet the global coverage and service quality demands of its
target markets.

Mobile Satellite Systems

Inmarsat currently operates a world-wide geostationary orbit system that is
capable of providing fixed and mobile voice and data to laptop-sized "Mini-M"
terminals and car-mounted units.

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ICO, a public company affiliated with Inmarsat, has announced plans for a
12-satellite system. This system is expected to operate in the 2 GHz band. Many
of the investors in Inmarsat, including numerous state-owned telecommunications
companies, participate in the ownership of the new venture and ICO has announced
the receipt of significant equity commitments from these investors. Iridium
believes that ICO will be the most direct competitor to Iridium in many of
Iridium's target markets. However, ICO has announced that the full constellation
will not be operational before the year 2000, which Iridium believes will result
in a significant first-to-market advantage for Iridium.

Globalstar, a 48-satellite low earth orbit system, has been proposed by
Loral/Qualcomm. It will offer both fixed and mobile satellite telecommunications
services, and will employ CDMA digital modulation technology. Globalstar has
announced an expected commencement of service in 2000 and a principal target
market that, like the regional geostationary orbit systems described below,
covers persons who lack telephone service or are underserved or not served by
existing or future cellular systems.

Ellipso, a 17-satellite system, has been proposed by MCHI and ECCO/Aries, a
54-satellite system, has been proposed by Constellation Communications Inc. Both
systems would offer mobile satellite service globally and would use CDMA digital
modulation technology. The licenses for each of the Ellipso and Constellation
systems require that the system be fully operational by July 2003. MCHI has
announced that it intends to begin operation of its system by 2000, while
Constellation has stated that it plans to begin operations in 2001.

Iridium also expects to encounter competition from regional mobile
satellite systems, three of which have been launched and several of which are in
the planning stage. In April 1995, AMSC launched a geostationary orbit satellite
covering the continental United States, Alaska, Hawaii, Puerto Rico, the U.S.
Virgin Islands and U.S. coastal waters to provide fixed and mobile voice and
data services to mobile terminals and car-mounted units. TMI, a spinoff of
Telsat Canada, launched a satellite, virtually identical to AMSC's, in 1996 to
cover Canada and other parts of the Caribbean not served by AMSC and to provide
the same type of service to similar terminals. AMSC and TMI subsequently agreed
to transfer AMSC's traffic to TMI's satellite. In addition, AMSC announced plans
to lease its satellite to ACTel, which plans to reposition the satellite over
Africa to offer services there.

Mobilesat, launched in 1994, is a geostationary orbit satellite covering
Australia, New Zealand and parts of the Pacific Basin providing mobile and
fixed, voice and data services to mobile terminals and car-mounted units. ACeS
has proposed a one- or two-satellite geostationary orbit satellite system
covering Asia, including Thailand, Indonesia and the Philippines, and offering
mobile voice and data telecommunications to handheld units. APMT has proposed a
two-satellite geostationary orbit satellite system covering India, China and
certain Southeast Asian nations, offering mobile telecommunications to
dual-mode, handheld terminals. Satphone and Thuraya are two consortia proposing
geostationary orbit systems to serve the North Africa/ Middle East region with
dual-mode hand-held phones. EAST is a hybrid system proposed by Matra-Marconi to
provide fixed services and mobile services to hand-held units, with a
geostationary orbit satellite covering Europe, the Middle East and Africa.
Afro-Asian Satellite Communications has proposed a two geostationary orbit
satellite system covering 55 countries in the Middle East, the Asia Pacific
region and eventually Africa, serving dual-mode, hand-held terminals.
Elekon-Stir is a proposed Russian low earth orbit system consisting of seven
satellites offering store and forward mobile data services and offering limited
voice capabilities.

Other regional systems that may be established could also provide services
that compete with Iridium World Satellite Service. The regional geostationary
orbit systems do not provide full global coverage and, therefore, are expected
to generally target persons not currently served by land-line or cellular
telephone service. It is possible that one or more regional mobile satellite
services could enter into agreements to provide intersystem roaming that could
be global or nearly global in scope.

Land-based Telecommunications Systems

Iridium World Satellite Service is a complement to, not a substitute for,
cellular service. Iridium does not intend for Iridium World Satellite Service to
compete with land-based cellular systems for the vast majority of mobile
personal communications services, because, among other reasons, Iridium
satellite voice services are
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<PAGE> 68

priced significantly higher than most land-based cellular services, the Iridium
system lacks the operational capacity to provide local service to large numbers
of subscribers in concentrated areas and Iridium's satellite system does not
afford the same voice quality, signal strength, or ability to penetrate various
environments (such as buildings) as land-based cellular systems. Rather, Iridium
expects its subscribers to use Iridium World Satellite Service in areas or
situations where local cellular systems operate on a protocol incompatible with
that of users' home markets or where land-based service is unavailable,
inconvenient, of poor quality or unreliable. Iridium expects that as land-based
cellular systems expand their geographical penetration, particularly outside of
major urban and suburban areas and improve the quality of coverage in
already-served areas, potential customers for Iridium World Satellite Service
and other satellite-based services will be lost. Moreover, the advent of near
global land-based cellular roaming described below will represent a significant
competitive threat to Iridium's satellite-based service and Iridium World
Roaming Service, particularly with respect to traveling professionals who spend
most of their time in regions that are well served by land-based wireless
services.

Land-based Cellular Interprotocol Roaming Service

Iridium's World Roaming Service offering, which allows Iridium subscribers
to roam onto a variety of cellular networks, faces competition from existing and
will face additional competition from future land-based cellular interprotocol
roaming services, which provide roaming services across similar cellular
networks.

GTE Mobilnet ("GTE") and Deutsche Telekom Mobil ("DeTeMobil") of Germany
currently offer GlobalRoam, a two-way cellular roaming service between certain
North American AMPS cellular networks and GSM cellular networks in certain
European countries. AT&T Wireless Service of the United States and Vodafone of
the United Kingdom offer CellCard, a service that is very similar to GlobalRoam
and provides roaming services from certain North American AMPS networks to
certain GSM networks in certain countries which have roaming agreements with
Vodafone.

Two other proposed mobile satellite systems, ICO and Globalstar, and at
least one regional geostationary orbit satellite system, ACeS, have indicated
that they may also offer some form of dual-mode satellite/cellular service,
which may include interprotocol roaming capabilities such as those expected to
be offered by Iridium.

In addition, a number of rental services, primarily in the United States,
provide cellular phones to persons traveling in countries with cellular
standards that differ from the traveler's home market. For example, Worldcell
provides United States travelers GSM phones for travel to Europe, while Shared
Technologies Cellular, in conjunction with United Airlines, provides AMPS phones
for visitors to the United States. These businesses often have rental locations
at airports, hotels and auto rental locations and also deliver phones by mail
service. These companies' services may compete with Iridium World Roaming
Service and Iridium World Satellite Service.

Currently, a number of the world's major cellular network owners and
operators are considering adopting a coordinated standard for future cellular
networks. If such a coordinated standard is agreed upon and new networks are
built, Iridium's ability to provide interprotocol roaming would cease to be an
advantage. Iridium does not expect that such systems would be available on a
global basis until sometime after 2002.

Paging

In addition to competing with paging services offered by proposed regional
mobile satellite systems in the future, Iridium World Page Service currently
faces competition from regional and nationwide land-based paging services, and
from SkyTel's service, which as of November 1998 provided paging services to
over 20 countries around the world. SkyTel operates by forwarding paging
messages via international circuits to a foreign paging network that
subsequently transmits the message over its local network. Also, in 1995
Inmarsat introduced an international satellite-based one-way messaging service.
Iridium believes that the relatively higher link margins of the Iridium World
Page Service will provide superior performance to any proposed satellite paging
systems and that Iridium will be the only global paging service using a
belt-worn pager before 2000.

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<PAGE> 69

Competition Related to New Technologies and New Satellite Systems

Iridium may also face competition in the future from companies using new
technologies and new satellite systems which could render the Iridium system
obsolete or less competitive. Such new technologies, even if not ultimately
successful, could have a material and adverse effect on Iridium as a result of
associated initial marketing efforts.

RESEARCH AND DEVELOPMENT

Iridium expects that its satellites will have an average useful life of at
least five years, and Iridium intends to replace its satellites as necessary
pursuant to the O&M contract, which has a five year term and is extendable, at
Iridium's option, for an additional two years. Iridium has engaged in
preliminary discussions with Motorola regarding possible long-term enhancements
to the Iridium system, including upgrades to new satellites placed in the
current constellation and a possible second generation of Iridium satellites. In
September 1997 Iridium filed an application with the FCC for authorization to
operate a satellite system in the 2GHz band, the band in which ICO plans to
operate. Such actions are only preliminary steps in the research and development
process and Iridium has made no significant financial commitment to long-term
enhancements.

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<PAGE> 70

IRIDIUM'S INVESTORS AND PRINCIPAL SERVICE TERRITORIES

Set forth below is a summary of the investors in Iridium, the number of
class 1 interest owned by each investor at December 15, 1998, the percentage
ownership of outstanding class 1 interests held by each investor (i) at December
15, 1998 and (ii) as adjusted for the Offerings and, if applicable, the service
territories of each investor:

<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF OWNERSHIP(2)
CLASS 1 --------------------
INTERESTS AS PRINCIPAL GATEWAY SERVICE
INVESTOR OWNED(1) ACTUAL ADJUSTED(3) TERRITORY
-------- ---------- ------ ----------- -----------------------------
<S> <C> <C> <C> <C>
IWCL......................... 12,201,273/(3) 8.62 13.22 Not Applicable
19,701,273
AIG affiliated companies..... 4,193,490 2.97 2.81 Not Applicable
Iridium Africa Corporation... 4,500,000 3.18 3.02 Africa (excluding Morocco and
Egypt) and Turkey
Iridium Andes -- Caribe...... 4,906,425 3.47 3.29 South America and
Caribbean(4)
Iridium Brasil Ltda.......... 2,824,755 2.00 1.89 South America and
Caribbean(4)
Iridium Canada, Inc.......... 5,250,000(5) 3.71 3.53 North America(6)
Iridium China (Hong Kong)
Ltd........................ 5,250,000 3.71 3.53 China, Mongolia, Hong Kong
Iridium India Telecom and Macu
Limited.................... 5,250,000 3.71 3.53 Indian Subcontinent
Iridium Italia S.p.A......... 5,550,000 3.93 3.72 Certain countries in Europe
including Belgium, Denmark,
France, Greece, Italy,
Luxembourg, the Netherlands
and Switzerland(4)
Iridium Middle East
Corporation.................. 6,000,000 4.24 4.03 Middle East, Morocco, Egypt
and Central Asia
Khrunichev State Research and
Production Center.......... 6,133,125 4.34 4.12 Russia and eight other
republics of the Commonwealth
of Independent States
Motorola, Inc................ 24,477,000(5) 17.31 16.44 North America(6), Mexico(7)
and Central America, South
American and Caribbean(4)
Nippon Iridium (Bermuda)
Limited.................... 15,750,000 11.14 10.58 Japan

Pacific Asia Communications
Ltd........................ 5,250,000 3.71 3.53 Indonesia, Brunei, Papua New
Guinea, the Philippines and
Taiwan

SK Telecom................... 5,250,000(5) 3.71 3.53 North Korea and South Korea
South Pacific Iridium
Holdings................... 3,306,510 2.34 2.22 Certain countries in the
South Pacific region
including Australia and New
Zealand
Sprint Iridium, Inc.......... 5,250,000 3.71 3.53 North America(6)
Thai Satellite
Telecommunications Co.,
Ltd........................ 5,250,000 3.71 3.53 Southeast Asia
</TABLE>

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<PAGE> 71

- ---------------
(1) Represents each investor's direct holdings of outstanding class 1 interests
at December 15, 1998, does not include class 1 interests issuable upon
exercise of outstanding options or warrants (including the LLC interest
warrants) or the conversion of outstanding convertible securities (and
assumes the U.S. underwriters' and international managers' over-allotment
options are not exercised).

(2) The percentages do not give effect to the class 1 interests that IWCL may
have acquired or will acquire as a result of the application of the proceeds
from the sale of shares of IWCL's non-voting class B common stock, par value
$.01 per share (the "class B common stock") pursuant to the NOMAD Program.
See "Relationship Between IWCL and Iridium".

(3) As adjusted to reflect the issuance and sale of 7,500,000 shares of class A
common stock in connection with the Offerings and the application of the net
proceeds therefrom to the purchase of approximately 7,500,000 class 1
interests from Iridium.

(4) The South America and Caribbean gateway service territory is owned and
operated by Iridium SudAmerica. Iridium SudAmerica is owned by Iridium
Brasil, Iridium Andes-Caribe (and affiliated companies), Motorola
International Development Corporation, a wholly owned subsidiary of
Motorola, and Iridium Italia.

(5) As of December 15, 1998, SK Telecom and Sprint Iridium, Inc. each owned
17,068 series A class 2 interests in addition to the class 1 interests set
forth above. Similarly, Motorola, Inc. also owns 1 series B class 2 interest
and 75 series C class 2 interests. BCE Mobile Communications, Inc., an
affiliate of Iridium Canada, Inc., owns 11,596 series class 2 interests.

(6) The North American gateway service territory, principally consisting of the
United States and Canada, is shared by Iridium Canada, Motorola and Sprint
Corporation.

(7) The Mexico gateway service territory is being served by the North America
gateway equipment.

IRIDIUM'S INVESTORS

IWCL

IWCL was incorporated by Iridium as a Bermuda company on December 12, 1996.
IWCL was formed for the purpose of acting as a member of Iridium. IWCL will use
the net proceeds of the Offerings to acquire class 1 interests in Iridium. Upon
consummation of the Offerings and application of the proceeds therefrom to the
purchase of class 1 interests, IWCL will own approximately 13.2% of the
outstanding class 1 interests (approximately 13.9% if the U.S. underwriters' and
international managers' over-allotment options are exercised in full). The
expenses of the Offerings, estimated at $850,000, will be paid by Iridium.
IWCL's only assets are its interests in, and its rights to acquire interests in,
Iridium and its only activity is participating in the management of Iridium. See
"Relationship Between IWCL and Iridium".

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<PAGE> 72

Iridium's Strategic Investors

Iridium's strategic investors include market leaders in providing wireless
telecommunications services, manufacturing telecommunications equipment and
satellite systems and supplying satellite launch services. Iridium's strategic
investors have collectively invested, or committed to invest, approximately $3.7
billion in Iridium, including equity, commitments to purchase additional equity,
debt, guarantees and commitments to provide guarantees. This amount does not
include investments that Iridium's gateway owners have made to construct and
operate their respective gateways or market and distribute Iridium's services.

AIG AFFILIATED COMPANIES includes American International Underwriters
Overseas, Ltd., a wholly-owned subsidiary of American International Group, Inc.,
or "AIG" and AIG Asian Infrastructure Fund LP. AIG is a leading U.S.-based
international insurance organization and among the largest underwriters of
commercial and industrial insurance in the United States. The AIG Asian
Infrastructure Fund, which is sponsored AIG, makes equity and convertible debt
investments in infrastructure and related industries throughout Asia.

IRIDIUM AFRICA CORPORATION was formed by Mawarid Overseas Company Limited
to invest in Iridium. Mawarid Overseas Company Limited is related to the Mawarid
Group, one of the largest industrial groups in Saudi Arabia, with operations in
satellite broadcasting, financial services, trading, manufacturing,
construction, telecommunications, and municipal and health care services.
Iridium Africa Corporation coordinates the provision of Iridium's services in a
gateway service territory consisting of over 50 countries located primarily in
or near Africa (excluding Morocco and Egypt) and Turkey.

IRIDIUM CANADA, INC. is a corporation owned one-third by a Motorola
subsidiary and one-third each by two subsidiaries of BCE, Inc. -- BCE Mobile
Communications, Inc. and Bell Canada International, Inc. BCE, Inc. is Canada's
largest telecommunications company. BCE Mobile provides a variety of wireless
telecommunications services to the Canadian market, including cellular, paging,
data and air-to-ground communications services. Iridium Canada, Inc., Motorola
and Sprint Corporation share the North American gateway service territory,
consisting of Canada, St. Pierre and Miquelon, Bermuda, Puerto Rico and the
United States.

IRIDIUM CHINA (HONG KONG) LTD. is a wholly owned subsidiary of China
Aerospace, a major diversified industrial group based in China which is also the
parent company of China Great Wall Industries Corporation, the previous owner of
all Iridium China equity interests in Iridium. China Great Wall has been, and is
expected to be, a subcontractor to Motorola for the launch of Iridium satellites
on its Long March 2C rocket. Iridium China coordinates the provision of
Iridium's services in a gateway service territory consisting of China, Mongolia,
Hong Kong and Macau.

IRIDIUM INDIA TELECOM LIMITED is a consortium of Indian financial
institutions that invested in Iridium initially through Infrastructure Leasing &
Financial Services Limited ("IL&FS"). The consortium includes: The Industrial
Development Bank of India, IL&FS, Exim Bank of India, State Bank of India, The
Industrial Credit and Investment Corporation of India Limited, General Insurance
Corporation of India, Housing Development Finance Corporation Limited, IL&FS
Venture Fund, Life Insurance Corporation of India, SCICI Ltd. and Unit Trust of
India. A wholly owned subsidiary of Motorola is also a member of the consortium.
Iridium India Telecom Ltd. coordinates the provision of Iridium's services in a
gateway service territory consisting of India, Bangladesh, Bhutan, Nepal, Sri
Lanka and Maldives.

IRIDIUM ITALIA S.P.A. is an affiliate of Telecom Italia. Telecom Italia, is
a principal provider of voice and data telecommunications services in Italy and
is the world's fifth largest telecom operator by number of subscribers. Telecom
Italia (together with its affiliated companies) has provided, and is expected to
provide, engineering support services to Motorola as part of the procurement and
operation of the Iridium system. Motorola has entered into several agreements
with an affiliate of Telecom Italia, Telespazio, for work related to the backup
system control facility, gateways and other portions of the Iridium system.
Iridium Italia coordinates the provision of Iridium's services in a gateway
service territory consisting of certain countries in Europe including Belgium,
Denmark, France, Greece, Italy, Luxembourg, the Netherlands and Switzerland.

IRIDIUM MIDDLE EAST CORPORATION is owned one-half by Mawarid Overseas
Company Limited and one-half by Trinford Investments S.A. Trinford Investments
is a company affiliated with the Saudi Binladin
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<PAGE> 73

Group. Binladin is also one of the largest diversified industrial groups in
Saudi Arabia, with operations covering major construction projects, airport
maintenance and operation, telecommunications and hotels. Both Mawarid and
Binladin operate internationally. Iridium Middle East Corporation coordinates
the provision of Iridium's services in a gateway service territory consisting of
over 20 countries located in the Middle East and Central Asia, as well as
Morocco and Egypt.

IRIDIUM SUDAMERICA CORPORATION is owned by Iridium Andes-Caribe, Iridium
Brasil Ltda., Iridium Italia and a wholly owned subsidiary of Motorola. Iridium
Andes-Caribe is a consortium of private Venezuelan investors with experience in
consumer foodstuffs, communications, construction, finance and retailing.
Inepar, the majority owner of Iridium Brasil, is a diversified Brazilian
corporation with operations in telecommunications, electrical current control
equipment and services, mass transport, vehicle distribution and financial
markets. Iridium SudAmerica coordinates the provision of Iridium's services in a
gateway service territory consisting of approximately 40 countries located
primarily in South America and the Caribbean.

KHRUNICHEV STATE RESEARCH AND PRODUCTION SPACE CENTER is a state-owned
aerospace engineering and manufacturing company in the Russian Federation.
Khrunichev has been engaged in the manufacture of launch vehicles, orbital
stations and other space equipment for more than 30 years. Khrunichev has
contracted to provide launch services to Motorola with the Proton rocket as part
of the deployment of the space segment. Khrunichev coordinates the provision of
Iridium's services in a gateway service territory consisting of Belarus,
Estonia, Georgia, Kazakhstan, Latvia, Lithuania, Moldova, the Russian Federation
and Uzbekistan.

MOTOROLA, INC. is one of the world's leading providers of wireless
communications and electronic equipment, systems, components and services for
worldwide markets. Motorola products include two-way radios, pagers, personal
communications systems, cellular telephones and systems, discrete semiconductors
and integrated circuits, defense and aerospace electronics, automotive and
industrial electronics, data communications, and information processing and
handling equipment. Motorola is the primary contractor to Iridium and the
Iridium gateway operators for the procurement of components of the Iridium
system. Motorola also has: (i) a share of the North American gateway service
territory along with Iridium Canada, Inc. and Sprint Corporation; (ii) the
entire Mexican/Central American gateway service territory; (iii) an interest in
Iridium SudAmerica, which coordinates the provision of Iridium's services in the
gateway service territory including South America and the Caribbean; and (iv) an
interest in Iridium India Telecom Limited, which coordinates the provision of
Iridium's services in the gateway service territory for the Indian subcontinent.

NIPPON IRIDIUM (BERMUDA) LIMITED is a wholly owned subsidiary of Nippon
Iridium Corporation which is a consortium company formed in Bermuda by DDI
Corporation, a leading Japanese independent telecommunications company and a
provider of cellular, PHS and long distance telephone service, and Kyocera
Corporation, a supplier of ceramic integrated circuit packages, electronic
components and electronic equipment. Investors in Nippon Iridium Corporation
include Kansai Cellular Telephone Co., Ltd., Ushio Inc., SECOM Co., Ltd., Sony
Corporation, Mitsui & Co., Ltd., Kyushu Cellular Telephone Co., Ltd., Chugoku
Cellular Telephone Co., Ltd., Shikoku Cellular Telephone Co., Ltd., Tohoku
Cellular Telephone Co., Ltd., Hokuriku Cellular Telephone Co., Ltd., Hokkaido
Cellular Telephone Co., Ltd., The Sanwa Bank Limited, Daiwa Securities Co.,
Ltd., The Industrial Bank of Japan, Limited, The Long-Term Credit Bank of Japan,
Ltd., and Mitsubishi Corporation. Nippon Iridium Corporation coordinates the
provision of Iridium's services in the Japan gateway service territory.

PACIFIC ASIA COMMUNICATIONS LTD. "PACL" is a subsidiary of Pacific Electric
Wire & Cable Co., Ltd., "PEWC", a diversified international corporation with
interests in telecommunications services, property development, banking and
financial services and securities investment. PEWC is the largest producer of
telecommunications and power cable in Taiwan. PACL coordinates the provision of
Iridium's services in a gateway service territory consisting of Taiwan,
Indonesia, Brunei, Papua New Guinea and the Philippines.

SK TELECOM was formed by Korea Mobile Telecommunications Corporation to
provide cellular and paging services in the Republic of Korea. Management
control of Korea Mobile Telecommunications Corporation is held by Sunkyong
Business Group, a large Korean conglomerate. Korea Mobile Telecommuni-

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<PAGE> 74

cations Corporation coordinates the provision of Iridium's services in the
gateway service territory consisting of North Korea and South Korea.

SOUTH PACIFIC IRIDIUM HOLDINGS LIMITED AND SOUTH PACIFIC IRIDIUM HOLDINGS
II LIMITED are each a subsidiary of P.T. Bakrie & Brothers ("Bakrie"), a major
Indonesian conglomerate, with operations in plantations, rubber trading,
infrastructure support and telecommunications. Through subsidiaries, including
P.T. Bakrie Communications Corporation, Bakrie provides cellular services in
Indonesia (Ratelindo), Australia (Link Communications) and fixed wire services
in Vietnam and Uzbekistan. In connection with its investment in Iridium, South
Pacific Iridium Holdings Limited obtained the right to provide Iridium's
services in the South Pacific gateway service territory.

SPRINT IRIDIUM, INC. is an indirect wholly owned subsidiary of Sprint
Corporation. Sprint Corporation is a diversified telecommunications company with
the only nationwide all-digital fiber-optic network in the United States. Its
divisions provide global voice, data and video conferencing services and related
products. Sprint Corporation has a share of the North American gateway service
territory along with Iridium Canada, Inc. and Motorola.

THAI SATELLITE TELECOMMUNICATIONS CO., LTD. is a company formed by United
Communications Industry Co., Ltd. of Thailand ("UCOM") to invest in Iridium.
UCOM is one of the largest cellular and paging operators in Thailand and is also
a reseller of communications equipment. Thai Satellite Telecommunications Co.,
Ltd. coordinates the provision of Iridium's services in a gateway service
territory consisting of Cambodia, Laos, Malaysia, Myanmar, Singapore, Thailand
and Vietnam.

VEBACOM HOLDINGS, INC., a wholly owned subsidiary of o.tel.o communications
GmbH & Co., which is owned by VEBA AG, RWE AG and Lehman Brothers Bankhaus
Aktiengesellschaft (as a fiduciary). VEBA AG, the indirect owner of o.tel.o
communications GmbH & Co., together with its subsidiaries, is one of the largest
corporations in Germany. Its telecommunications branch offers a wide variety of
telecommunications services including mobile communications, satellite
communications services, network management, cable television and paging
services. Iridium Communications Germany, a subsidiary of o.tel.o, coordinates
the provision of Iridium's services in a gateway service territory consisting of
countries in or near Europe including Austria, Bulgaria, the Czech Republic,
Finland, Germany, Hungary, Ireland, Israel, Norway, Poland, Portugal, Romania,
Spain, Sweden, Slovakia, Ukraine and the United Kingdom.

LOCKHEED MARTIN CORPORATION is a world leader in defense and space systems
technology, designing and producing military aircraft, missiles, electronic
systems and satellites, as well as providing a wide range of government and
commercial aeronautical, space, environmental and engineering services. Lockheed
Martin is a principal subcontractor to Motorola in the construction of Iridium
satellites.

RAYTHEON COMPANY is engaged in the conception, development, manufacture and
sale of electronic systems, equipment and components for government and
commercial use. Raytheon also has operations in aircraft products and energy and
environmental services. Raytheon is a principal subcontractor to Motorola in the
construction of the Iridium system and is primarily responsible for providing
the main mission antennas for the satellites.

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MANAGEMENT OF IRIDIUM AND IWCL

Set forth below is information concerning each Director and executive
officer of Iridium and of IWCL, including each individual's principal occupation
and employment. The exclusive right to elect members of the IWCL Board is vested
with the holders of class A common stock. The next annual meeting of
shareholders of IWCL is scheduled for May 18, 1999. There are no family
relationships between any officers and Directors of Iridium or IWCL.

The following table sets forth information concerning the executive
officers and Directors of Iridium and, where indicated in parentheses, IWCL, as
of December 15, 1998.

<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
Robert W. Kinzie(1)................................ 65 Chairman (Director of IWCL)
Edward F. Staiano.................................. 62 Vice Chairman and Chief Executive Officer
(Chairman of the Board and Chief Executive
Officer of IWCL)
Mauro Sentinelli................................... 51 Executive Vice President -- Marketing and
Distribution
Leo Mondale........................................ 39 Senior Vice President -- Strategic Planning
and Business Development
O. Bruce Dale...................................... 56 Senior Vice President -- Network Operations
Lauri J. Fitz-Pegado............................... 43 Vice President -- Global Gateway Relations
Mark Gercenstein................................... 47 Vice President -- Business Operations
Roy Grant.......................................... 41 Vice President -- Chief Financial Officer
(Chief Financial Officer of IWCL)
F. Thomas Tuttle................................... 56 Vice President, General Counsel and
Secretary (Assistant Secretary of IWCL)
Richard L. Lesher(2)(3)(4)(5)...................... 63 Vice Chairman and Independent Company
Director (Independent Director of IWCL)
Aburizal Bakrie(4)................................. 50 Director (designated by South Pacific
Iridium Holdings, Inc.)
Hasan M. Binladin(4)............................... 50 Director (designated by Iridium Middle East)
Herbert Brenke(4).................................. 61 Director (designated by Vebacom Holdings,
Inc.)
Gordon J. Comerford(2)............................. 60 Director (designated by Motorola)
Atilano de Oms Sobrinho(2)(4)...................... 54 Director (designated by Iridium SudAmerica)
Robert A. Ferchat(4)............................... 64 Director (designated by Iridium Canada)
Alberto Finol(1)(3)(4)............................. 62 Director (designated by Iridium SudAmerica)
(Deputy Chairman and Director of IWCL)
Edward Gams(1)..................................... 49 Director (designated by Motorola)
Durrell Hillis..................................... 58 Director (designated by Motorola)
Kazuo Inamori(4)................................... 66 Director (designated by Nippon Iridium)
S. H. Khan(4)...................................... 60 Director (designated by Iridium India)
Anatoly I. Kiselev(4).............................. 58 Director (designated by Khrunichev)
John F. Mitchell(3)................................ 70 Director (designated by Motorola)
Jung L. Mok(3)(4).................................. 49 Director (designated by SK Telecom)
Giuseppe Morganti(1)(2)(4)......................... 66 Director (designated by Iridium Italia)
J. Michael Norris.................................. 52 Director (designated by Motorola)
Yusai Okuyama(2)(4)................................ 67 Director (designated by Nippon Iridium)
John A. Richardson................................. 55 Director (designated by Iridium Africa)
Theodore H. Schell(1)(4)........................... 54 Director (designated by Sprint)
</TABLE>

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<PAGE> 76

<TABLE>
<CAPTION>
NAME AGE POSITIONS
---- --- ---------
<S> <C> <C>
William A. Schreyer(1)(4)(5)....................... 71 Independent Company Director (Independent
Director of IWCL)
Sribhumi Sukhanetr(1)(3)(4)........................ 66 Director (designated by Thai Satellite)
Tao-Tsun Sun(2)(4)................................. 47 Director (designated by Pacific Iridium
Telecommunications Corporation)
Yoshiharu Yasuda(1)(3)(4).......................... 58 Director (designated by Nippon Iridium)
(Director of IWCL)
Wang Mei Yue(3)(4)................................. 57 Director (designated by Iridium China)
Peter Zaboji(1)(4)................................. 54 Director (designated by Vebacom Holdings,
Inc.)
Wayne Morgan....................................... 54 (Secretary of IWCL)
</TABLE>

- ---------------
(1) Members of the Banking and Financing Committee of the Iridium Board of
Directors

(2) Members of the Audit Committee of the Iridium Board of Directors

(3) Members of the Compensation Committee of the Iridium Board of Directors

(4) Members of the Related Party Contracts Committee of the Iridium Board of
Directors

(5) Members of the Audit Committee of the IWCL Board of Directors

Pursuant to the LLC Agreement of Iridium and the Motorola MOU, on December
23, 1998 when Iridium closed on the guaranteed bank facilities, Motorola
obtained the right to appoint an additional Director to the Iridium Board of
Directors and an additional member of the Banking and Financing Committee of the
Iridium Board of Directors. As of December 31, 1998, Motorola had not made such
appointment. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and "Certain Relationships and Related Transactions
of Iridium".

EXECUTIVE OFFICERS OF IRIDIUM AND IWCL

Set forth below is information concerning each director and executive
officer of Iridium and IWCL, including each individual's principal occupation
and employment. Unless otherwise indicated, each executive officer holds office
until a successor is duly elected and qualified.

Unless otherwise noted, dates of service refer to positions with Iridium.

EDWARD F. STAIANO -- Vice Chairman and Chief Executive Officer since
January 2, 1997 and Director since October 1994. Chairman of the Board of IWCL
since May 1997 and Chief Executive Officer of IWCL since March 1997. Dr. Staiano
served Motorola as Executive Vice President, President and General Manager of
the General Systems Sector (comprised of the cellular subscriber group, cellular
infrastructure group, network ventures division, personal communications and the
computer group) from 1989 to December 1996.

MAURO SENTINELLI -- Executive Vice President -- Marketing and Distribution
since August 1, 1997. Prior thereto, Mr. Sentinelli was Deputy Director General
in charge of Strategic Planning, Strategic Marketing and International Affairs
for Telecom Italia Mobile from 1995 to 1997 and Deputy Managing Director for
1994 to 1995. He joined SIP, Telecom Italia's predecessor, in 1974, and held
various positions in engineering, marketing and strategic planning. He became
head of Business Development the Mobile Service Department in 1988 and launched
Telecom Italia's cellular service.

LEO MONDALE -- Senior Vice President -- Strategic Planning and Business
Development since January 1995. From July 1993 until January 1995, Mr. Mondale
served as Vice President, Government Affairs and Strategic Planning and from
January 1991 to July 1993 as Vice President -- International Relations of
Iridium. From July 1, 1990 to January 31, 1992, he was Director of International
Relations for the Satellite Communications unit of Motorola. Before joining
Motorola, Mr. Mondale served as Vice President of the Fairchild Space & Defense
Corporation, where he was responsible for the international and commercial
activities of Fairchild Space from 1989 to 1990. Prior to joining Fairchild, Mr.
Mondale was Legal Counsel to the then Space Division of Matra, S.A. (now Matra-
Marconi Space, N.V.), based in Paris, France, following several years of private
legal practice in Washington, D.C.

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O. BRUCE DALE -- Senior Vice President -- Network Operations since April
1995. Prior thereto, Mr. Dale served in a number of positions at Bell
Communications Research ("Bellcore") including, General Manager, Service
Assurance Systems and General Manager, Planning & Engineering System from March
1993 to April 1995, Vice President, Customer Service Center from January 1992 to
March 1993, and Assistant Vice President, Provisioning Systems Laboratory from
January 1990 to January 1992. From March 1982 to December 1989, Mr. Dale served
as Director of Data Network Systems Development Laboratory for AT&T Bell
Laboratories.

LAURI J. FITZ-PEGADO -- Vice President -- Global Gateway Relations since
May 1997. Prior thereto, Ms. Fitz-Pegado served at the U.S. Department of
Commerce as the Director General and Assistant Secretary of the U.S. & Foreign
Commercial Service (US&FCS) International Trade Administration from June 1994 to
June 1997 and as a Special Advisor to the Secretary of Commerce from June 1993
to June 1994. From June 1982 to June 1993, Ms. Fitz-Pegado worked at Hill &
Knowlton Public Affairs Worldwide, most recently as Managing Director and Senior
Vice President.

MARK GERCENSTEIN -- Vice President -- Business Operations since August
1992. Prior thereto, Mr. Gercenstein was Director of Marketing of Motorola
Satellite Communications from 1990 to 1992. Prior to assuming that position, Mr.
Gercenstein held various marketing and engineering assignments at Motorola
Government Electronics Group from 1984 to 1990, Spar Aerospace from 1985 to 1987
and Bendix Aerospace from 1975 to 1982.

ROY GRANT -- Vice President -- Chief Financial Officer since April 30, 1997
and Vice President--Treasurer from November 1996 to July 1997. Chief Financial
Officer of IWCL since April 1997. Prior thereto, Mr. Grant served from 1992 to
1996 as Finance Director for Edison Mission Energy, the largest independent
power developer in the United States. Mr. Grant also worked for Marriott
Corporation from 1988 to 1992 in its corporate and project finance areas and at
American Airlines from 1980 to 1988, most recently as its Managing
Director -- Banking where he was responsible for all of the airline's banking
relationships.

WAYNE MORGAN -- Secretary of IWCL. Mr. Morgan has been employed as a
corporate manger by Codan Services Ltd. in Bermuda since August 1996. Prior
thereto, Mr. Morgan served Johnson & Higgins (Bermuda) Limited from 1980 to 1996
in a number of positions including Vice President and Manager of Support
Services, Senior Vice President, Client Account Management and Senior Vice
President, Principal Branch Manager. Prior to joining Johnson & Higgins, Mr.
Morgan was the Deputy Accountant General for the Government of Bermuda from 1975
to 1980. Mr. Morgan has served as the Secretary of IWCL since December 1996.

F. THOMAS TUTTLE -- Vice President, General Counsel and Secretary since
April 1996. Mr. Tuttle had been employed by Iridium as Assistant Secretary since
January 1994 and as Deputy General Counsel since November 1993. Assistant
Secretary of IWCL since December 1996. Prior thereto, Mr. Tuttle was in private
law practice in Washington, D.C. from 1986 to 1994. Prior thereto, he served as
Vice President, Regulatory and Industry Relations with Satellite Business
Systems and held senior legal positions with COMSAT Corporation.

DIRECTORS OF IRIDIUM AND IWCL

Unless otherwise noted, dates of service refer to directorships of Iridium.

ROBERT W. KINZIE -- Chairman of the Board since October 1991; member of the
Banking and Financing Committee. Chief Executive Officer from October 1991 to
January 1, 1997. Director of IWCL since December 1996. Prior thereto, Mr. Kinzie
was the Director of Strategic Planning for Intelsat from 1987 to 1991. Prior to
joining Intelsat, Mr. Kinzie worked from 1966 to 1987 in a number of positions
with COMSAT Corporation including President, Communications Services Division
and President of COMSAT General Corporation. Prior to joining COMSAT Corporation
in 1966, Mr. Kinzie was an economist with the Federal Communications Commission
from 1962 to 1965.

RICHARD L. LESHER -- Vice Chairman of the Board and Independent Director
since June 1997; member of the Audit Committee, the Compensation Committee and
the Related Party Contract Committee. Director of
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IWCL since June 1996. Dr. Lesher was appointed Vice Chairman of the Board and
Independent Company Director upon consummation of the initial public offering of
IWCL in June 1997. Dr. Lesher served as the President of the Chamber of Commerce
of the United States, the world's largest association of business organizations,
from 1975 to 1977, when he retired.

ABURIZAL BAKRIE -- Director since July 1997; member of the Related Party
Contracts Committee. Since 1992 Mr. Bakrie has been Chairman of the Bakrie Group
of Companies, a diversified corporation engaged in manufacturing, fabrication,
telecommunications, mining, real estate, financial services, agri-business and
trading activities. Mr. Bakrie is the President of ASEAN Chamber of Commerce and
Industry and President of the Indonesian Chamber of Commerce and Industry. Mr.
Bakrie has served as a member of the People's Consultative Assembly of the
Republic of Indonesia since 1987.

HASAN M. BINLADIN -- Director since January 1996; member of the Related
Party Contract Committee. During the past five years, Mr. Binladin has served as
Senior Vice President of the Saudi Binladin Group.

HERBERT BRENKE -- Director since September 1998; member of the Related
Party Contracts Committee. Mr. Brenke served as the Chairman of the Board of
E-Plus Mobilefunk GmbH from 1993 to 1998 and as Chairman of the Executive Board
of Thysen Rheinstahl Technik GmbH from 1982 to 1994.

GORDON J. COMERFORD -- Director since July 1993; Chairman of the Audit
Committee. Mr. Comerford is a member of the Board of Directors of Iridium
SudAmerica Corporation and Iridium Canada, Inc. Mr. Comerford recently retired
from Motorola, where he had served as a Senior Vice President since 1989. He
joined Motorola's communications sector in 1974 as a Director of Business
Management and became a Corporate Vice President in 1980.

ATILANO DE OMS SOBRINHO -- Director since June 1996; member of the Audit
Committee and the Related Party Contracts Committee. Mr. Oms is Chairman of the
Board, President and CEO of Inepar S.A., a diversified Brazilian corporation
with operations in telecommunications, electrical current control equipment and
services, mass transport, vehicle distribution and financial markets. Mr. Oms is
a member of the Board of Directors SudAmerica and Iridium Brasil. He also serves
on the Boards of the National Confederation of Industries (CNI), ABINEE-National
Association of Electro-Electronic Industries and the Federation of Industries of
Parana State.

ROBERT A. FERCHAT -- Director since January 1995; member of the Related
Party Contracts Committee. Mr. Ferchat has served as Chairman and Executive
Officer since May 1995 and as Chairman, President and Chief Executive Officer
from November 1994 to May 1995 at BCE Mobile Communications Inc. Prior thereto
he served as Chairman, President and Chief Executive Officer of TMI
Communications, a satellite communications company, from 1992 to 1994. He also
served as President of Northern Telecom Canada Ltd. from 1985 to 1990. Mr.
Ferchat has also served as a director at BCE Mobile Communications Inc. since
1994.

ALBERTO FINOL -- Director since July 1993; Chairman of the Banking and
Financing Committees; member of the Compensation Committee and the Related Party
Contracts Committee. Deputy Chairman and Director of IWCL since December 1996.
Mr. Finol has been the President of Ilapeca, a Venezuelan holding company with
interests in dairy products, supermarkets, pharmaceuticals and communications,
since 1990 and has served as a Director since 1966. He is the Chairman of
Iridium SudAmerica and the Chairman and a major shareholder of Iridium
Andes-Caribe Ltd., one of the owners of Iridium SudAmerica. He has also served
as the Director of Group Zuliano, a major Venezuelan petrochemical holding
group. He represented his native region of Zulia on the Venezuelan Congress from
1969 to 1993.

EDWARD GAMS -- Director since July 1993; member of the Banking and
Financing Committee. Mr. Gams has served as Corporate Vice President and
Director of Investor Relations of Motorola since 1996 and Vice President and
Director of Investor Relations of Motorola since 1991. He was first employed by
Motorola in 1979, and has held a variety of positions in operational and
corporate finance, including service as Director of Corporate Financial Planning
from February 1991 to August 1991 and as manager of Corporate Financial Planning
from December 1989 to February 1991.

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DURRELL HILLIS -- Director since April 1998. Mr. Hillis is currently Senior
Vice President and General Manager of the Space Systems Technology Group
Division of Motorola.

KAZUO INAMORI -- Director since July 1993; member of the Related Party
Contracts Committee. Dr. Inamori has been Chairman of the Board of DDI
Corporation since 1984, of Kansai Cellular Telephone Co., Ltd. since 1988, of
Taitoh Corporation since 1990, of Nippon Iridium Corporation since 1993, of DDI
Tokyo Pocket Telephone Inc. since 1994, of DDI Kansai Pocket Telephone Co., Ltd.
since 1994, Kyocera Multimedia Corporation since 1995 and at Kyocera DDI
Institute of Future Telecommunications Inc. since 1996. Dr. Inamori established
Kyocera Corporation in 1959 and has been Chairman of the Board since 1986.

S. H. KHAN -- Director since October 1994; member of the Related Party
Contracts Committee. Mr. Khan has served as Chairman and Managing Director of
the Industrial Development Bank of India since December 1993. Prior thereto,
from 1966, he served in various positions with the Industrial Development Bank
of India, including Managing Director from February 1992 to December 1993 and
Executive Director from 1986 to 1992. He also serves as Chairman of the Small
Industries Development Bank of India, Credit Analysis & Research Ltd., National
Securities Depository Ltd. and National Stock Exchange of India Ltd. He is also
Director on the Boards of Export-Import Bank of India, IDBI Bank Ltd., Life
Insurance Corporation of India, General Insurance Corporation of India, Discount
and Finance House of India Ltd., Deposit Insurance and Credit Guarantee
Corporation and Securities Trading Corporation of India Ltd., India Growth Fund
Inc., as a Trustee of Unit Trust of India ("UTI"), and as a member of the
Advisory Board of UTI Mutual Fund and India Fund.

ANATOLY I. KISELEV -- Director since July 1993; member of the Related Party
Contracts Committee. Mr. Kiselev has served as Director General of the facility
that has produced the Salyut, Almaz and Mir space stations, the Proton rocket,
and other spacecraft since 1993. Mr. Kiselev has been employed by Khrunichev,
and its predecessor organizations since 1956, including as Khrunichev Enterprise
Director from 1975 to 1993.

JOHN F. MITCHELL -- Director since July 1993; Chairman of the Compensation
Committee since July 1993. Mr. Mitchell has served as Vice Chairman of the Board
of Motorola since 1988 and served as Officer of the Board from 1988 to 1995. He
was employed by Motorola from 1953 to 1995 and served as President from 1980 to
1986 and as Chief Operating Officer from 1986 to 1988.

JUNG L. MOK -- Director since October 1994; member of the Compensation
Committee and the Related Party Contracts Committee. Mr. Mok has served as a
director and as the Senior Executive Vice President of SK Telecom since 1994.
Prior thereto, Mr. Mok served as Senior Managing Director and Chief Operating
Officer of Taehan Telecom Limited from 1991 to 1994 and as Managing Director at
USA, Inc. since 1989.

GIUSEPPE MORGANTI -- Director since April 1996; member of the Banking and
Financing Committee, the Audit Committee and the Related Party Contracts
Committee. Since August 1996, Ing. Morganti has served as Chief Executive
Officer and Managing Director of Iridium Italia S.p.A. Ing. Morganti has been
with STET (now Telecom Italia) since 1984 in various management positions within
the Planning and Strategic Control Department, most recently as the head of the
Telecommunications Services Division.

J. MICHAEL NORRIS -- Director since July 1996; Mr. Norris is a Senior Vice
President of Motorola and has been with Motorola for 24 years. He is currently
the Senior Vice President and General Manager of the Network Management Group,
responsible for all Motorola cellular joint ventures and Iridium gateway
operations worldwide. He also sits on the boards of Hutchinson Telephone Company
Ltd. (Hong Kong), World Telecom Holding Company, Ltd. (Thailand) and Pelephone
(Israel).

YUSAI OKUYAMA -- Director since July 1996; member of the Audit Committee
and Related Party Contracts Committee. Mr. Okuyama has been President of DDI
Corporation since 1993 and President of Nippon Iridium (Bermuda) Ltd. since
1995. Mr. Okuyama has been Chairman of the Board at seven of the DDI Pocket
Telephone Companies since 1994 and at five of the DDI Cellular Telephone
companies since 1995. Mr. Okuyama retired from MPT in 1989 as a deputy secretary
of MPT and served at MPT related enterprises as President before joining DDI
Corporation in 1993.

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JOHN A. RICHARDSON -- Director since March 1998; Mr. Richardson has been
the Chief Executive Officer of Iridium Africa since January 1998. He previously
was Chairman and CEO of Barclays -- BZW Asia and prior thereto was CEO of
Hutchison Whampoa Ltd. from 1979 to 1984.

THEODORE H. SCHELL -- Director since July 1993; member of the Banking and
Financing Committee and member of the Related Party Contract Committee. Mr.
Schell has served as Senior Vice President -- Strategic Planning and Corporate
Development at Sprint since 1990. Prior thereto, he served as President and
Chief Executive Officer of RealCom Communications Corporation, an IBM
subsidiary.

WILLIAM A. SCHREYER -- Independent Director; member of the Banking and
Financing Committee and the Related Party Contracts Committee. Mr. Schreyer was
appointed Independent Director, upon consummation of the initial public offering
of IWCL in June 1997. Director of IWCL since June 1997. Mr. Schreyer is Chairman
Emeritus of Merrill Lynch & Co., Inc. and has served as Chairman of the Board
from April 1985 through June 1993 and as Chief Executive Officer from July 1984
through April 1992. Mr. Schreyer is currently a Director of Callaway Golf
Company, Deere & Company, True North Communications Inc., Schering-Plough
Corporation and Willis Corroon Group.

SRIBHUMI SUKHANETR -- Director since July 1993; member of the Banking and
Financing Committee, the Compensation Committee and the Related Party Contracts
Committee. Since 1992, Mr. Sukhanetr has been the Chairman of United
Communication Industry Co., Ltd. ("UCOM") and of Thai Satellite
Telecommunications Co., Ltd., a subsidiary of UCOM. Prior thereto, he served as
advisor to the Prime Minister's Office in Thailand from February 1991 to
September 1992 and as Permanent Secretary to the Ministry of Transport and
Communications from 1988 to February 1991.

TAO-TSUN SUN -- Director since January 1994; member of the Audit Committee
and the Related Party Contracts Committee. Mr. Sun has been Executive Director
and President of Pacific Electric Wire & Cable Co., Ltd., the Iridium of Pacific
Iridium Telecommunications Corporation since 1986. Since 1996, he has served as
Executive Director of Taiwan Electric Wire & Cable Ind. Assoc. and of Chinese
National Federation of Industries, and as Honorary Chairman of the Council for
Industry and Commercial Development. He has also served as Chairman of Taiwan
Aerospace Corporation since 1994, Executive Director of Walsin Lihwa Corp. and
Executive Vice Chairman of Charoong Thai Wire & Cable Co., Ltd. since 1993 and
Director of Pacific Construction Co., Ltd. since 1995.

YOSHIHARU YASUDA -- Director since January 1996; member of the Banking and
Financing Committee, the Compensation Committee and the Related Party Contracts
Committee. Director of IWCL since December 1996. Mr. Yasuda is currently Vice
President of Nippon Iridium Corporation and has been a Director since June 1995.
Mr. Yasuda was Vice President of Nippon Iridium Corporation from June 1996
through 1997. Mr. Yasuda was Director of DDI Corporation from 1992 to 1995.
Prior to joining DDI Corporation, Mr. Yasuda was with the Sanwa Research
Institute.

WANG MEI YUE -- Director since October 1995; member of the Compensation
Committee and the Related Party Contracts Committee. Dr. Wang has served as
Chairman and President of Iridium China (Hong Kong) Ltd. since September 1995,
as Chairman and President of China Aerospace International Holdings Ltd., Hong
Kong since 1993 and as Chairman of China Southern Telecommunication Co., Ltd.
since 1991. From 1988 to 1993 Dr. Wang served as Vice Chairman of the Board at
Conic Investment Co. Ltd.

PETER ZABOJI -- Director since May 1998; member of the Banking and Finance
Committee and the Related Party Contracts Committee. Prior thereto, Mr. Zaboji
served in several positions for Siemans, from 1977 to 1990, as Managing Director
and Vice Chairman of GPT Communications Systems Ltd., from 1991 to 1993, and as
Managing Partner of Scholler International Group, from 1994 to 1996. Mr. Zaboji
is currently a Managing Director of o.tel.o Communications GmbH & Co.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF IRIDIUM

CERTAIN MOTOROLA RELATED MATTERS

Motorola is one of the world's leading providers of electronic equipment,
systems, components and services. Its products include two-way radios, pagers,
cellular telephones and systems, semiconductors, defense and aerospace
electronics, automotive and industrial electronics and data communications and
information processing equipment.

Motorola created and developed the concept of the Iridium system and
Iridium's initial technical and business plans. Motorola is a founding investor,
has been allocated gateway service territories, shares a gateway service
territory and has additional interests in other entities which have been
allocated gateway service territories. Motorola is Iridium's largest holder of
class 1 interests. The directors and officers of Iridium include numerous
current and former Motorola employees. Motorola is also Iridium's principal
supplier through the space system contract, the O&M contract and the terrestrial
network development contract.

Motorola MOU and Motorola ARG

Under the Motorola MOU, Motorola has agreed to provide various guarantees,
deferral rights and other credit support to Iridium and Iridium has agreed that
it will compensate Motorola for Motorola exposure with cash interest and equity
pursuant to the Motorola ARG. Iridium has also agreed under the Motorola MOU
that it (i) will use its best efforts to reduce the Motorola exposure to no more
than $275 million by the earliest possible date, (ii) will not have more than
certain amounts of indebtedness outstanding, (iii) will not make certain
acquisitions without Motorola's consent and (iv) will provide Motorola with the
right (in addition to Motorola's rights to representation based on its holdings
of class 1 interests) to appoint one additional director to the Board of
Directors of Iridium any time the Motorola exposure exceeds $275 million and the
right to appoint a second additional director to the Board of Directors of
Iridium any time the Motorola exposure exceeds $750 million. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Sources of Funding".

Motorola Conflicts of Interest

Motorola has and may have various conflicts of interest with Iridium and
with other members of Iridium. See "Risk Factors -- Conflicts of Interest with
Motorola". Motorola is the principal supplier to Iridium as well as the actual
or prospective supplier and licensor to gateway owners and operators, service
providers, subscriber equipment manufacturers and individual subscribers. See
"Risk Factors -- Reliance on Motorola, Gateway Owners and Other Third Parties".
Motorola has asserted and may assert positions on the space system contract, O&M
contract, the terrestrial network development contract, the Motorola MOU and the
Motorola ARG that are contrary to those asserted by Iridium. To help ameliorate
these conflicts under the space system contract, the O&M contract and the
terrestrial network development contract, Iridium maintains a Related Party
Contracts Committee of the Iridium Board of Directors which consists of all
Board members other than any Board members who are directors, officers,
employees or persons nominated to serve on the Board of Directors by Motorola
(so long as Motorola is a party to the space system contract, the O&M contract
or the terrestrial network development contract), Lockheed Martin or Raytheon
(so long as Lockheed Martin or Raytheon, as the case may be, are subcontractors
to Motorola under the space system contract or the O&M contract). The Related
Party Contracts Committee has authority to review and monitor the space system
contract, the O&M contract and the terrestrial network development contract and,
as it deems appropriate, cause Iridium to enforce its rights thereunder and
propose amendments and waivers to these contracts. Iridium's payment obligations
under these contracts have comprised, and are expected to compromise, most of
Iridium's expenses.

Motorola has been involved in the manufacture of components for satellites
for over thirty years. Motorola has informed Iridium that it has under
consideration future space-based data and communications systems and ventures.
Motorola has also informed Iridium that Motorola may decide to undertake further
development of one or more such systems or ventures but no decision has been
made as to whether Iridium

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would be a participant in any such system or venture. It is possible that any
such system could be competitive to some degree with the Iridium system.
Motorola has agreed in the space system contract that, without Iridium's
consent, it will not produce for itself or others a similar satellite-based
space system or a global communication system for commercial use prior to the
earlier of July 31, 2003 or the termination date of the space system contract.
Motorola has applied to the Federal Communications Commission for licenses to
construct, launch and operate satellite-based systems designed to provide
fixed-broadband, fixed-data transmissions.

OTHER MATTERS

Iridium Services Deutschland, a wholly owned subsidiary of o.tel.o
communications GmbH & Co., the parent of Vebacom Holdings, Inc., a holder of
approximately 8.8% of the class 1 interests, was allocated a gateway service
territory consisting of several countries in or near Europe. Nippon Iridium
Corporation, an affiliate of Nippon Iridium (Bermuda) Corporation, a holder of
approximately 11.2% of the class 1 interests, was allocated the Japan gateway
service territory. Each of o.tel.o communications GmbH & Co. and Nippon Iridium
Corporation have entered into a Gateway Authorization Agreement, pursuant to
which they, or their affiliates, will operate their respective Gateway service
territory and provide gateway services. In addition, o.tel.o communications GmbH
& Co. and Nippon Iridium Corporation will serve as service providers to their
respective gateway territory and, as such, will be entitled to payments
associated with sales of Iridium's services.

Certain of the directors of IWCL are, or have been within the past year,
executive officers of suppliers of Iridium. In addition, certain of the
directors of Iridium are executive officers of gateway owners and service
providers. See "Management of Iridium and IWCL" and "Risk Factors -- Conflicts
of Interest with Gateway Owners".

CERTAIN REGULATIONS THAT AFFECT IRIDIUM

Iridium's operations, including the operation of the Iridium system and the
distribution of Iridium's services, are subject to significant U.S. and non-U.S.
regulation. This regulation is pervasive and largely outside Iridium's control.
The following is a summary of certain of the regulations that affect Iridium.
You should also review the documents incorporated by reference in this
prospectus for further discussion of regulations that affect Iridium. See "Where
You Can Find More Information".

TELECOMMUNICATIONS REGULATION AND SPECTRUM ALLOCATION: OVERVIEW

The allocation and use of the radio frequency spectrum for the provision of
communications services are subject to regulation by international organizations
and many nations and other jurisdictions. The implementation and operation of
the Iridium system, like those of all other satellite and wireless systems, are
dependent upon obtaining licenses and other approvals.

The international regulatory framework for spectrum allocation and use is
established by the International Telecommunication Union, or "ITU". The ITU,
which is composed of representatives from most of the countries of the world,
meets officially at conferences known as World Radio Conferences, or "WRCs", to
decide the radio services that should be permitted to operate in various radio
bands and the rules for operating in those bands.

The national administration of each country decides how the radio
frequencies that the ITU has allocated to particular communications services
should be allocated and assigned domestically to specific radio systems. In
addition, the provision of communications services in most countries is subject
to regulatory controls by the national governments of each country.

In the United States, the Federal Communications Commission, or "FCC", is
the regulatory agency responsible for allocating spectrum and for licensing and
regulating communication systems, facilities, and services. The FCC regulates
satellites in accordance with laws passed by the United States Congress,

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particularly the Communications Act of 1934, as amended, or the "Communications
Act", regulations adopted pursuant to those laws, and judicial opinions rendered
by U.S. courts.

The Iridium system links phones to Iridium satellites capable of using up
to 10.5 MHz of spectrum in L-band frequencies from 1616-1626.5 MHz on a
bi-directional time division basis, Earth-to-space and space-to-Earth. The
system also is capable of operating "feeder" links in the frequencies 19.4-19.6
GHz and 29.1-29.3 GHz (connecting satellites to ground earth station gateway
facilities) and intersatellite links in the frequencies 23.18-23.38 GHz (linking
the satellites in the constellation to each other).

The licensing requirements for the Iridium system include: (i) the FCC
license for the space segment; (ii) the licenses in each country where there is
a gateway or control facility for the satellite constellation; and (iii) the
licenses in each country for Iridium phones, Iridium's service and for the use
of required frequencies. In addition, the Iridium system must be coordinated
with other users of spectrum that have rights to use the same or adjacent
frequencies to the frequencies assigned to the Iridium system. It is only
necessary for one country to license the space segment, which includes
authorizing the construction, launch, and operation of the satellites, including
the use of the intersatellite links and the operation of the primary satellite
control center in that country.

The gateways provide the feeder link between the satellite network and the
PSTNs around the world. A radio license to operate a gateway earth station in a
significant portion of the 29.1-29.3 GHz (Uplink) and 19.4-19.6 GHz (Downlink)
frequency bands has been issued by the appropriate governmental authority of
each of the countries in which an Iridium gateway is located. Similar
authorizations have been obtained in the United States and Canada to operate the
control facilities for the satellite constellation.

Each country in which Iridium provides Iridium World Satellite Service must
authorize the use of the frequencies linking the phones to the satellites. At a
minimum, the Iridium system needs exclusive use of the frequencies
1621.35-1626.5 MHz for this purpose, with authority to operate bi-directionally
within that band. In order to operate the Iridium phones and pagers in a
country, a certificate of type approval must be obtained. The licensing
procedures vary in different countries. Generally there are three aspects to the
required license(s): (i) authorization for the use of the frequencies requested;
(ii) authorization for the equipment to be marketed and used (including
subscriber equipment that may circulate from country to country); and (iii)
authorization for the service to be provided.

LICENSING STATUS

General

Iridium, Motorola, and Iridium's gateway owners have made substantial
progress in taking the regulatory steps needed for Iridium to operate its
services on the scope assumed in its business plan, but certain additional
regulatory approvals within and outside the United States remain to be obtained.
Each gateway has been licensed by the jurisdiction in which it is located. The
licenses that have been received by the gateways are subject to conditions that
relate to the provision of technical information to regulatory authorities.
While Iridium believes the conditions specified in the final gateway licenses
that have been received can be satisfied, there can be no assurance that such
conditions will be satisfied or that conditions to licenses received in the
future will be satisfied.

As of December 15, 1998, approximately 125 administrations had given all or
a substantial portion of the authorizations necessary to provide Iridium World
Satellite Service in their territories. These countries and territories include,
inter alia: United States, Italy, Argentina, China, Thailand, Malaysia, Brazil,
Japan, South Korea, Austria, Germany, Canada, Australia, Venezuela, Sweden,
Iceland, Russia, Uruguay, New Zealand, Chile, the United Kingdom, India, Turkey,
France, Colombia, Saudi Arabia, Belarus, Kazakhstan and Suriname. Iridium is
seeking licenses throughout the world.

The licenses and authorizations that have been received generally are
subject to conditions relating to, among other things, (i) confining operations
to the scope of the license, (ii) complying with applicable electronic
surveillance laws and (iii) the continued operation of the Iridium system. While
substantial progress has been made in obtaining authorization for Iridium's
satellite-based services and Iridium expects

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that it will receive authorizations in additional jurisdictions, there can be no
assurance that sufficient licenses for Iridium to obtain the coverage assumed in
its business plan will be obtained or maintained.

Spectrum Allocation

At the 1992 WRC, the ITU allocated to the MSS service: (i) on a primary
basis, 16.5 MHz of spectrum in the 1610-1626.5 MHz band (Earth-to-space); and
(ii) on a secondary basis, 12.7 MHz of spectrum in the 1613.8-1626.5 MHz band
(space-to-Earth). The ITU had previously authorized the other frequency bands
used in the Iridium system for the purpose for which Iridium intends to use
them. At the 1995 WRC, the ITU defined the coordination procedure for systems
operating in the bands proposed to be used by Iridium for its feeder links. The
ITU's role in allocating frequencies necessary for the operation of the first
generation Iridium system is essentially complete.

United States Licensing

The space segment of the Iridium system, including the use of the
intersatellite frequency band (23.18 to 23.38 GHz), has been licensed by the FCC
in the United States. The license has a term of ten years and contains other
conditions typical of satellite system licenses granted by the FCC. The license
term began on or about May 5, 1997, the date the first satellite was in orbit
and the first transmission occurred. Although the FCC has stated that it will
renew the Iridium system authorization unless extraordinary circumstances
prevent it from doing so, there can be no assurance that the Iridium system
license will be renewed. The license is held by Space System License, Inc. a
wholly owned subsidiary of Motorola, which is contractually bound to operate the
system for the exclusive benefit of Iridium. As a result, Motorola, rather than
Iridium, has the responsibility to operate and maintain the Iridium system in
accordance with the terms of the license. Any request to renew or modify the
license must be filed and prosecuted by Motorola. If the O&M contract is
terminated or not renewed, Motorola would have to assign the Iridium license to
Iridium or a third party. Any such assignment would be subject to FCC approval.

Under both the ITU's rules and the terms of the Iridium system license, the
Iridium system must be coordinated with all other domestic and foreign users of
the frequency bands assigned to the Iridium system. The United States has
essentially completed the process of registering the Iridium space segment
operations with the ITU. It has submitted the advance publication and
coordination materials to the ITU and coordinated the use of the space segment
with most of those administrations expressing concerns that the system might
cause or receive interference to their systems. On this basis, the United States
has requested the ITU to notify the Iridium system in the ITU's Master Frequency
Register, which will give it a legal right to protection from interference from
future systems. The request has been published and administrations that have
previously engaged in coordination with the United States regarding the Iridium
system may file comments on the claim that coordination is complete. Any
comments will need to be resolved before the Iridium system will be listed in
the Master Frequency Register. Iridium believes that coordination will be
completed successfully between the Iridium system and all existing or planned
systems that have been identified under the coordination process. Currently,
there is no other action required from any other country to license the space
segment.

Under the FCC's rules and the terms of the license, prior to commencing
operations Motorola must enter into coordination agreements with U.S. radio
astronomy sites and complete consultations with the Inmarsat and Intelsat
systems. Both of these have been accomplished. See "-- Consultations and
Coordinations".

In the United States, frequencies have been assigned to the Iridium system
feeder links in the 29.1-29.25 and 19.4-19.6 GHz bands. The 29.1-29.25 GHz
frequencies are shared with the local multipoint distribution service ("LMDS"),
and the FCC has adopted restrictions on LMDS operations that are designed to
protect MSS feeder links from interference. The 19.4-19.6 GHz frequencies are
shared with terrestrial microwave stations and each gateway must be coordinated
in advance with licensed microwave stations. The FCC has granted a license for
the gateways located in Hawaii and Tempe, Arizona. Licenses have also been
granted in the United States for the ground control facilities in Virginia,
Arizona and Hawaii.

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The United States license authorizing construction, launch and operation of
the space segment includes the use of 1621.35 to 1626.5 MHz radio frequency band
in the United States exclusively for the Iridium subscriber links. This
frequency assignment may be increased if no more than one CDMA satellite system
becomes operational in the adjacent frequency band. In addition, the FCC has
issued a license permitting 200,000 Iridium mobile phones to be used in the
United States.

In December 1996, Motorola submitted a request to the FCC to authorize the
Iridium System to provide Aeronautical MobileSatellite Route Service ("AMS(R)S")
in its authorized band. The Iridium System is the only mobile satellite system,
licensed or in development, that can provide a communication capability that is
virtually global, while using spectrum already allocated for AMS(R)S. Several
parties filed comments with and have petitioned the FCC to deny Motorola's
application to provide AMS(R)S service. Among other arguments, petitioners claim
that the AMS(R)S proposal is inconsistent with ITU and FCC rules and
allocations. In addition to FCC approval, approval is needed from the FAA, which
must certify that the avionics satisfy other international certification
requirements. There can be no assurance that the FCC application will be
granted, or that the avionics certification requirements will be satisfied at
all, or in a timely fashion. Assuming all necessary authorizations are obtained,
Iridium expects to provide both the FCC required "safety" communications
capabilities to the flightdeck and passenger communications, including voice and
facsimile. An individual aircraft may be served by multiple satellite
communications carriers. In addition, before Iridium terminals can be installed
on aircraft for either flightdeck or passenger communications, the FCC will have
to type approve such equipment and may have to change its rules (Part 87) to
accommodate such equipment in the frequencies used by the Iridium system. While
Iridium expects its aircraft terminals will receive this approval and, if
necessary, the rule change will be made, there can be no assurance that such
approval or change will occur on a timely basis or at all.

Licensing Outside the United States

In countries other than the United States, the significant regulatory
matters include: (i) in each country in which a gateway or space segment control
terminal is located, maintaining authorization to operate those facilities,
including necessary gateway feeder link spectrum assignment; (ii) in each
country in which Iridium subscriber equipment operates, obtaining and
maintaining the necessary authorization to use the necessary user link spectrum
(the satellite to phone link); (iii) in each country in which Iridium subscriber
equipment operates, authority to market and operate that equipment must be
maintained or obtained; and (iv) coordination of the use of the frequencies to
be used by the Iridium system must be achieved. As discussed under "-- General",
applications for authorizations are in varying stages of processing in countries
other than the United States. Of the gateway and subscriber authorizations
granted to date, many have conditions attached to them concerning their
operation and there can be no assurance that these conditions will be satisfied.
If the initial spectrum assignments prove insufficient as demand for Iridium's
services increases over time, there can be no assurance Iridium will be able to
obtain additional spectrum from the FCC or other administrations.

In order to bring Iridium terminal equipment into a country, the terminal
equipment must have type approval certification. Iridium has obtained
authorization from the ITU to place a specially designed mark on each of its
phones and pagers. The Iridium phones and pagers are the first commercially
marketed personal telecommunications equipment to carry this mark, which
facilitates the free flow of equipment bearing the mark across international
borders. To date, approximately 75 countries have either issued type approval
certification for the Iridium terminal equipment or recognize type approval
certification that has been issued by the ITU or some other national
administration. Although Iridium fully expects to eventually receive type
approval certification for Iridium phones, pagers and other subscriber equipment
in all markets, there can be no assurance as to when this process will be
complete.

In connection with Iridium's efforts to obtain worldwide regulatory
approval for Iridium World Satellite Service, governmental, political and
security concerns have arisen. One such concern resulted in the authorization of
Iridium World Satellite Service by many countries being contingent upon Iridium
providing such countries with the ability to legally monitor calls made to or
from their respective territories. Iridium believes that it has been able to
satisfactorily address this concern for many of these countries. However, there
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can be no assurance that these countries will find Iridium's efforts
satisfactory over time or that the emergence of governmental or political
concerns will not impair the ability to obtain or maintain licenses or offer
Iridium World Satellite Service.

CONSULTATIONS AND COORDINATIONS

Intelsat and Inmarsat are international organizations that own and operate
satellite systems. International obligations undertaken by the nations which
have signed the international agreements creating Intelsat and Inmarsat,
including the United States, require the United States to consult with both
Intelsat and Inmarsat prior to authorizing any international satellite system to
ensure that the system will not cause significant economic or technical harm to
the Intelsat system or significant technical harm to the Inmarsat system. The
consultations with Intelsat and Inmarsat have been successfully completed.

Currently, the Russian global navigation satellite system, GLONASS,
operates in a frequency band that partially overlaps the 1610-1626.5 MHz MSS
band. When operating co-channel with GLONASS, MSS systems are required to
coordinate their operations with the previously registered operations of
GLONASS. In addition, even when not operating co-channel, they are required to
protect GLONASS operations from harmful interference. Iridium believes that a
bilateral coordination agreement between Russia and the United States is in
negotiation, under which Russia would agree to move the GLONASS system's
operations to frequencies below 1610 MHz sometime after January 1, 1999, and to
frequencies below approximately 1605 MHz by the year 2005. The FCC has
conditioned the Iridium blanket subscriber license upon compliance with a level
of protection from interference to the GLONASS system. During the interim period
following the shift below 1610 MHz and prior to the shift below 1605 MHz,
Iridium believes it will be able to satisfy any reasonable level of protection
that is required although there can be no assurance as to what level of
protection will be required. While that level of protection has not been
determined, Motorola has committed to meeting a protection level of -70 dBW/MHz
at 1605 MHz and below. Certain aeronautical interests, including the Federal
Aviation Administration, the U.S. Department of Transportation, and the U.S. GPS
Industry Council have strongly encouraged the FCC to set technical standards
that provide a more stringent protection level than -70 dBW/MHz. At this time,
it is uncertain whether Motorola can meet a more stringent protection level.
Iridium believes that it can meet the protection requested for GLONASS when
GLONASS shifts down in frequency to below 1605 MHz by January 1, 2005. Other
administrations will also need to coordinate with the Russian Federation
concerning the level of protection that will be afforded to GLONASS in their
territory. In Russia itself, additional restrictions may be imposed which may
limit the amount of spectrum available to Iridium in Russia. There can be no
assurance that sufficient spectrum will be available to meet subscriber demand
in Russia or any other country that requires a higher level of protection for
GLONASS than the United States. Moreover, there can be no assurance that CDMA
systems will be able to meet the levels of protection required for GLONASS,
either in the United States, Russia or elsewhere. If such systems do not meet
the protection requirements, the FCC and/or other countries' regulatory
authorities might consider requests to reassign the CDMA systems to higher
frequencies within the 1610-1626.5 MHz allocation in order to protect GLONASS.
This development might in turn reduce the amount of spectrum available to
Iridium. See "-- Competition".

Under the FCC's rules, the Iridium system also must protect U.S. radio
astronomy sites during periods when they are observing in the 1610.6-1613.8 MHz
band. Coordination agreements have been entered into with respect to all 15 U.S.
radio astronomy sites. There can be no assurance that the technical assumptions
underlying the coordination agreements with the U.S. radio astronomy sites will
not differ from the manner in which the Iridium system performs over time.

Other administrations also require that the Iridium system be coordinated
with radio astronomy sites that observe in the 1.6 GHz band. These are Canada,
Australia, India and several EU member countries. Iridium and Motorola have
reached preliminary agreements with radio astronomers in all these countries
which have enabled the Iridium system to be licensed in these countries.
However, additional negotiation with the radio astronomers are still necessary
in a number of these countries. Although Iridium believes these negotiations
will be successful, there can be no assurance that these negotiations will be
concluded successfully. Failure to successfully conclude these negotiations
could jeopardize the licenses which have been granted in these countries.
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In addition to potential interference between MSS systems and other users
of the 1.6 GHz band, there is a potential for intersystem interference among the
MSS systems themselves. Emissions standards have been developed in various
international forums which would limit out-of-band emissions into the Iridium
system to a level which Iridium believes would not cause harmful interference to
the operation of the Iridium system. These standards would apply to all CDMA MSS
systems, including any subsequent CDMA MSS systems which are authorized to use
the 1610-1621.35 MHz band. There can be no assurance, however, that the
standards adopted would not cause harmful interference to the operation of the
Iridium system.

The Iridium system MSS downlinks operate on a secondary basis. Under the
rules of the ITU and the FCC, these secondary downlinks may not cause harmful
interference to any primary spectrum user that is operating co-frequency and
must accept any interference caused to them by such primary spectrum users. In
light of the secondary nature of Iridium's MSS downlinks, the failure by an MSS
operator to implement an acceptable CDMA emissions mask could significantly
reduce the total capacity of the Iridium system. Furthermore, the downlinks of
the Iridium system may need to accept interference from Inmarsat terminals,
including Inmarsat aeronautical and land mobile terminals, when they are in the
vicinity of an Iridium terminal.

UNITED STATES ELECTRONIC SURVEILLANCE LAWS

The Communications Assistance for Law Enforcement Act of 1994, or "CALEA",
was enacted on October 25, 1994. CALEA requires that telecommunications carriers
deploy equipment, facilities and services that meet certain electronic
surveillance requirements identified in the statute. Penalties of $10,000 a day
for each wire tap order not fulfilled could be imposed under CALEA as well as an
order of compliance in the case of a failure to comply, and other unspecified
penalties, including injunctions, might otherwise be imposed. The U.S.
government has indicated that CALEA imposes requirements on the Iridium system
similar to the requirements that the U.S. government has requested of the
cellular industry. Because the U.S. government has not identified its capacity
or capability requirements for satellite systems and because of legal challenges
filed by the government concerning the cellular industry's standard for CALEA
wiretap capabilities, there is uncertainty as to the scope of the wiretap
capabilities that may ultimately be required for the Iridium system. On
September 11, 1998, the FCC extended the deadline for compliance with the CALEA
capability requirements to June 30, 2000. See "-- Licensing Status -- Licensing
Status Outside the United States" for a description of the surveillance
requirements of countries outside the United States.

UNITED STATES INTERNATIONAL TRAFFIC IN ARMS REGULATIONS; EXPORT ADMINISTRATIONS
ACT

The United States International Traffic in Arms Regulations under the
United States Arms Export Control Act authorize the President of the United
States to control the export and import of articles and services that can be
used in the production of arms. Among other things, these regulations limit the
ability to export certain articles and related technical data to certain
nations. The scope of these regulations is very broad and extends to certain
spacecraft, including certain satellites. Certain information involved in the
performance of Iridium's operations falls within the scope of these regulations.

The Export Administrations Act and the regulations thereunder control the
export and re-export of United States-origin technology and commodities capable
of both civilian and military applications (so-called "dual use" items). These
regulations may prohibit or limit export and re-export of certain
telecommunications equipment and related technology which are not affected by
the International Traffic in Arms Regulations by requiring a license from the
Department of Commerce before controlled items may be exported or re-exported to
certain destinations. The export or re-export of certain Iridium equipment,
e.g., Iridium phones and pagers, earth stations and technical data, may be
subject to these regulations, if such equipment is manufactured in the United
States and then exported or re-exported. These regulations may also affect the
export, from one country outside the United States to another, of United
States-origin technical data or the direct products of such technical data.

Motorola has contracted with the China Great Wall Industries Corporation,
utilizing its Long March 2C/2D vehicle, and the Boeing Corporation, utilizing
its Delta II launch vehicle, to perform maintenance

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launches pursuant to the O&M contract. Motorola expects that a number of other
launch systems currently available or under development could be used to satisfy
any maintenance launch requirements. Motorola has obtained authorization from
the Department of Commerce to export Iridium replacement satellites, including
associated launch support equipment, for any maintenance launches needed through
the end of 1999 on the China Great Wall Long March 2C/2D launch vehicle. No
license from the Department of Commerce is required for replacement launches on
the Delta II launch vehicle.

COMPETITION

At the time that the FCC authorized the construction of the Iridium system,
it also authorized other competitive MSS systems to operate in the 1610-1626.5
MHz band. This was the Globalstar system, proposed by Loral/Qualcomm
Partnership, L.P., and the Odyssey system, proposed by TRW. Subsequently, TRW
turned in its license. Globalstar, Odyssey and the Iridium system were the only
Big LEO systems initially licensed by the FCC. While the Iridium system was
granted exclusive use of the 1621.35-1626.5 MHz band in the United States,
Globalstar was granted shared use of the bands 1610-1621.35 MHz and 2483.5-2500
MHz.

At the same time the FCC authorized the Iridium and Globalstar systems, the
FCC afforded three other applicants (that had initially failed to establish
their qualifications) additional time in which to demonstrate that they were
financially qualified. These were MCHI, Constellation and AMSC. In September
1996, AMSC chose not to proceed and the FCC dismissed its application.

Following the submission of updated financial information by MCHI and
Constellation to the FCC, by orders released July 1, 1997, the FCC's
International Bureau granted licenses for the Ellipso system proposed by MCHI
and the Aries system proposed by Constellation. These orders, which are subject
to review by the full FCC, increase to four the number of U.S.-licensed global
MSS systems (including the Iridium system) and may result in increased
competition for the Iridium system.

MCHI and Constellation previously had filed challenges to the FCC's
determination that they were each not financially qualified with the United
States Court of Appeals for the District of Columbia Circuit, which included an
appeal from the FCC's decision to license the Iridium and Globalstar Systems.
This court action has been placed in abeyance pending a final FCC decision on
applications for review of the decision by the FCC's International Bureau to
waive the financial qualification rules and grant licenses to MCHI and
Constellation.

The licensing of the MCHI and Constellation Code Division Multiple Access,
or "CDMA", systems reduces the possibility that only one CDMA system will become
operational in the 1610-1621.35 MHz frequency band adjacent to the Iridium
system's frequency assignment. This in turn reduces the likelihood that the FCC
will increase the frequency assignment for the Iridium system. In addition,
MCHI's and Constellation's licenses may cause the CDMA based global systems to
have less capacity available for their use and thereby make it more difficult
for them to accept the protection levels required for GLONASS, either in the
United States, Russia or elsewhere. This could lead to requests to reassign the
CDMA systems to higher frequencies within the 1610-1626.5 MHz allocation to
protect GLONASS. This development might in turn reduce the amount of spectrum
available to Iridium. Furthermore, the possibility that two more CDMA systems
may become operational may increase the risk of harmful interference into the
Iridium system's MSS downlinks.

Competition with the Iridium system is also expected from ICO, the private
company affiliated with Inmarsat to provide a mobile satellite service using
satellites to be positioned in medium earth orbit. ICO's system is expected to
become a significant competitor of the Iridium system. ICO's proposed service
will not operate in the same set of user link frequencies in which the Iridium
and Globalstar systems are proposed to operate.

INTERCONNECTION AND COUNTRY CODES

For Iridium to provide outbound (i.e., initiated by an Iridium phone)
satellite voice services on a global basis, each gateway needs to interconnect
with international carriers who can link the gateway with the

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national and local public switched telephone networks, or "PSTNs", in each of
the countries Iridium serves. Some gateways may be required to achieve carrier
status in their countries of origin in order to enter into such agreements. As
of December 15, 1998, not all interconnection agreements had been obtained. In
the absence of an interconnection agreement, it may not be possible to complete
calls between an Iridium handset and a wireline phone in a given country. There
can be no assurances that the necessary interconnection agreement will be
concluded in any given country.

For Iridium to provide inbound (i.e., a call to an Iridium phone) satellite
voice services on a global basis, each gateway needs to interconnect with the
PSTNs in the countries that are close to it (so that each country is
interconnected with at least one gateway). In addition, since the Iridium system
will be treated like a "country" with a dedicated country code, each PSTN must
route traffic based on that country code to the Iridium gateway. To route
Iridium system traffic properly, the PSTN operators in each country must program
their international switches (and domestic ones, if necessary) to include the
Iridium country code and signaling point codes.

In May 1996, Study Group 2 of the ITU Telecommunication Standardization
Bureau decided that the Iridium system, ICO, Globalstar and Odyssey should share
a country code and allocated code "881" for this purpose, with each eligible
system to receive two values of the digit following the code 881. The Iridium
system uses codes 8816 and 8817, which enables Iridium to identify approximately
200 million subscribers.

The four-digit country code must be used by domestic and international
carriers in each country to route calls to the Iridium system and to recognize
those calls for billing purposes as calls to the Iridium network. Although the
typical three-digit country code is supported by all carriers for the call
routing and billing systems, it is expected that some carriers will have to
modify their routing and billing systems, and in some cases, enhance their
switch capacity, to be able to route and bill for calls destined for the four
digit codes assigned to the Iridium system and other mobile satellite systems.
It is possible that some carriers will not agree to make the necessary
modifications, to make them in a timely fashion, or to make them without Iridium
and other mobile satellite system operators paying for some or all of the costs
of such modifications. It is generally expected that resistance to making the
modifications is most likely to occur in developing countries that employ less
modern switching equipment.

DESCRIPTION OF CAPITAL STOCK

The following discussion is based upon the advice of Conyers Dill &
Pearman, Bermuda counsel for IWCL.

IWCL was incorporated as an exempted company under the Companies Act 1981
of Bermuda, as amended from time to time (the "Bermuda Act"), and the rights of
its shareholders, including those persons who will become shareholders of IWCL
in connection with the Offerings, are governed by Bermuda law and IWCL's
Memorandum of Association and Bye-Laws. The following is a summary of certain
provisions of Bermuda law and IWCL's organizational documents. This summary is
not a comprehensive description of such laws and documents and is qualified in
its entirety by appropriate reference to Bermuda law and to the organizational
documents of IWCL. Reference is made to IWCL's Memorandum of Association and
Bye-Laws, copies of which have been filed as exhibits to our Annual Report on
Form 10-K for the year ended December 31, 1997, and prospective investors are
urged to read these exhibits for a complete understanding of the terms of the
Memorandum of Association and Bye-Laws. See "Where You Can Find More
Information".

The authorized capital of IWCL consists of 50,000,000 shares of class A
common stock and 2,500,000 shares of class B common stock. At December 15, 1998,
assuming all class A common stock warrants were exercised on that date, there
would have been 13,641,848 shares of class A common stock and 20,625 shares of
class B common stock outstanding. See "Shares Eligible for Future Sale". After
giving pro forma effect to the Offerings, the number of shares of class A common
stock outstanding as of December 15, 1998 would have been 19,680,648 (20,805,648
shares if the U.S. underwriters' and international managers' over-allotment
options are exercised in full).

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COMMON STOCK

Voting Rights

Under Bermuda law, questions brought before a general meeting of
shareholders are decided by a majority vote of shareholders present at the
meeting and entitled to vote (or by such majority as the Bermuda Act or the
Bye-Laws of IWCL prescribe), each shareholder owning shares entitled to vote
having one vote, irrespective of the number of shares held, unless a poll is
requested. IWCL's Bye-Laws provide that, subject to the provisions of the
Bermuda Act, any questions proposed for the consideration of the shareholders
will be decided by a simple majority of the votes cast, with each shareholder
that is entitled to vote and present, in person or by proxy, entitled to one
vote. If a poll is requested, each shareholder that is entitled to vote and
present in person or by proxy has one vote for each share of stock entitled to
vote on such question. A poll may only be requested under IWCL's Bye-Laws by (i)
the chairman of the meeting, (ii) at least three shareholders present in person
and entitled to vote or represented by proxy, (iii) any shareholder or
shareholders, present in person or by proxy, holding between them not less that
10% of the total voting rights of all shareholders having the right to vote at
such meeting or (iv) a shareholder or shareholders present in person or by proxy
holding voting shares in IWCL on which an aggregate sum has been paid-up equal
to not less than 10% of the total sum paid-up on all such voting shares. The
holders of class A common stock are entitled to one vote per share. The holders
of class B common stock have no voting rights, except as required by Bermuda law
in connection with matters involving a variation in terms of the class B common
stock.

Dividend Rights

Under Bermuda law, a company may pay such dividends as are declared from
time to time by its board of directors unless there are reasonable grounds for
believing that the company is or would, after the payment, be unable to pay its
liabilities as they become due or that the realizable value of its assets would
thereby be less than the aggregate of its liabilities and issued share capital
and share premium accounts. Each share of class A common stock and class B
common stock is entitled to dividends if, as and when dividends are declared by
the IWCL Board of Directors. Any dividend declared and payable in cash, capital
stock or other property must be paid equally on a share-for-share basis on the
class A common stock and the class B common stock, except as described below.
Dividends and distributions payable in shares of class A common stock may only
be paid on class A common stock, and dividends and distributions payable in
shares of class B common stock may only be paid on class B common stock. If a
dividend or distribution payable in shares of class A common stock is made on
the class A common stock, a simultaneous and equivalent dividend or distribution
in shares of class B common stock must be made on the class B common stock. If a
dividend or distribution payable in shares of class B common stock is made on
class B common stock, a simultaneous and equivalent dividend or distribution in
shares of class A common stock must be made on the class A common stock.

Conversion Rights

The class A common stock is not convertible. Each share of class B common
stock is exchangeable into one share of class A common stock on the terms set by
the IWCL Board of Directors. The shares of class B common stock to be issued in
connection with IWCL's NOMAD program are the only shares of class B common stock
authorized by the IWCL Board of Directors. The exchange rights set by the IWCL
Board of Directors for such shares of class B common stock are described under
"Shares Eligible for Future Sale".

Preemptive Rights

Neither the holders of class A common stock nor the holders of class B
common stock have preemptive rights to purchase any shares of IWCL's capital
stock.

Transfer Restrictions

Shares of class A common stock are not subject to restrictions on transfer
under IWCL's Memorandum of Association and Bye-Laws. Shares of class B common
stock are subject to any transfer restrictions set by the IWCL Board of
Directors. The shares of class B common stock issued in connection with IWCL's
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NOMAD are subject to significant restrictions on transfer until at least one
year after IWCL has received their full purchase price.

Rights in Liquidation

Under Bermuda law, in the event of liquidation, dissolution or winding-up
of a company, after satisfaction in full of all claims of creditors and subject
to the preferential rights accorded to any series of preferred stock, the
proceeds of such liquidation, dissolution or winding-up are distributed pro rata
among the holders of common stock in accordance with IWCL's Bye-Laws. The
holders of the class A common stock and the holders of the class B common stock
are entitled to participate equally on a share-for-share basis in all
distributions to holders of common stock in any liquidation, dissolution or
winding-up of IWCL.

Meetings of Shareholders

Under Bermuda law, a company is required to convene at least one general
shareholders' meeting per calendar year. Bermuda law provides that a special
general meeting may be called by the board of directors of a company and must be
called upon the request of shareholders holding not less than 10% of the paid-up
capital of the company carrying the right to vote. Bermuda law also requires
that shareholders be given at least five days' advance notice of a general
meeting but the accidental omission of notice to any person does not invalidate
the proceedings at a meeting. The Bye-Laws of IWCL provide that the President or
the Chairman or any two Directors or any Director and the Secretary may convene
a special general meeting of IWCL whenever in their judgment such a meeting is
necessary. Under the Bye-Laws of IWCL, at least ten days' notice of the annual
general meeting and at least five days' notice of any special general meeting
must be given to each shareholder entitled to vote thereat, unless it is agreed
that the meeting has been properly called by (i) in the case of an annual
general meeting, all of the shareholders entitled to attend and vote at such
meeting or (ii) in the case of a special general meeting, shareholders holding
at least 95% of the shares given the right to attend and vote at such meeting.

Under Bermuda law, the number of shareholders constituting a quorum at any
general meeting of shareholders is determined by the Bye-laws of a company.
IWCL's Bye-Laws provide that the presence of two persons present in person and
representing in person or by proxy in excess of 50% of the total issued voting
shares in IWCL throughout the meeting shall constitute a quorum.

Access to Books and Records and Dissemination of Information

Members of the general public have the right to inspect the public
documents of a company available at the office of the Registrar of Companies in
Bermuda. These documents include IWCL's Memorandum of Association (including its
objects and powers) and any alteration to IWCL's Memorandum of Association. The
shareholders have the additional right to inspect the Bye-Laws of IWCL, minutes
of general meetings and IWCL's audited financial statements, which must be
presented at the annual general meeting. The register of shareholders of a
company is also open to inspection by shareholders without charge and to members
of the general public on the payment of a fee. A company is required to maintain
its share register in Bermuda but may, subject to the provisions of the Bermuda
Act, establish a branch register outside Bermuda. A company is required to keep
at its registered office a register of its directors and officers which is open
for inspection for not less than two hours in each day by members of the public
without charge. Bermuda law does not, however, provide a general right for
shareholders to inspect or obtain copies of any other corporate records.

Election or Removal of Directors

Under Bermuda law and IWCL's Bye-Laws, directors are elected at the annual
general meeting or at any special general meeting called for the purpose and
shall hold office for such term as the shareholders may determine, or in the
absence of such determination, until the next annual general meeting or until
their successors are elected or appointed, unless they are earlier removed or
resign.

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Under Bermuda law and the Bye-Laws of IWCL, a Director may be removed at a
special general meeting of shareholders specifically called for that purpose,
provided that the director was served with at least 14 days' notice. The
Director has a right to be heard at the meeting. Any vacancy created by the
removal of a Director at a special general meeting may be filled at such meeting
by the election of another director in his or her place or, in the absence of
any such election, by the IWCL Board of Directors.

Amendment of Memorandum of Association and Bye-Laws

Bermuda law provides that the Memorandum of Association of a company may be
amended by a resolution passed at a general meeting of shareholders of which due
notice has been given. An amendment to the Memorandum of Association other than
an amendment which alters or reduces a company's share capital as provided in
the Bermuda Act, also requires the approval of the Bermuda Minister of Finance,
who may grant or withhold approval at his discretion. The Bye-Laws of IWCL
provide that no Bye-Law shall be rescinded, altered or amended and no new
Bye-Law shall be made unless it has been approved by a resolution of the IWCL
Board of Directors and by a resolution of the shareholders.

Under Bermuda law, the holders of an aggregate or not less than 20% in par
value of a company's issued share capital have the right to apply to a court of
appropriate jurisdiction in Bermuda (a "Bermuda Court") for an annulment of any
amendment of the Memorandum of Association adopted by shareholders at any
general meeting, other than an amendment which alters or reduces a company's
share capital as provided in the Bermuda Act. Where such an application is made,
the amendment becomes effective only to the extent that it is confirmed by the
Bermuda Court. An application for amendment of the Memorandum of Association
must be made within 21 days after the date on which the resolution altering
IWCL's Memorandum of Association is passed and may be made on behalf of the
persons entitled to make the application by one or more of their number as they
may appoint in writing for the purpose. No such application may be made by
persons voting in favor of the amendment.

Appraisal Rights and Shareholder Suits

Under Bermuda law, in the event of an amalgamation of two Bermuda
companies, a shareholder who is not satisfied that fair value has been paid for
his shares may apply to a Bermuda Court to appraise the fair value of his
shares. The amalgamation of a company with another company requires the
amalgamation agreement to be approved by the board of directors and by a meeting
of the holders of shares of the amalgamating company of which they are directors
and of the holders of each class of such shares. Under Bermuda law, an
amalgamation also requires the consent of the Bermuda Minister of Finance, who
may grant or withhold consent at his discretion.

Class actions and derivative actions are generally not available to
shareholders under Bermuda law. The Bermuda Courts, however, would ordinarily be
expected to permit a shareholder to commence an action in the name of a company
to remedy a wrong done to the company where the act complained of is alleged to
be beyond the corporate power of the company or is illegal or would result in
the violation of the company's Memorandum of Association or Bye-Laws.
Furthermore, consideration would be given by a Bermuda Court to acts that are
alleged to constitute a fraud against the minority shareholders or, for
instance, where an act requires the approval of a greater percentage of the
company's shareholders than those who actually approved it.

When the affairs of a company are being conducted in a manner oppressive or
prejudicial to the interests of some part of the shareholders, one or more
shareholders may apply to a Bermuda Court for an order regulating the company's
conduct of affairs in the future or ordering the purchase of the shares by any
shareholder, by other shareholders or by the company.

REGISTRAR AND TRANSFER AGENT

A register of holders of the class A common stock is maintained by Codan
Services Limited in Bermuda and by the Bank of New York in the United States.
The Bank of the New York acts as transfer agent with respect to the class A
common stock.
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CERTAIN PROVISIONS OF BERMUDA LAW

IWCL has been designated as a non-resident under the Exchange Control Act
of 1972 (the "Control Act") by the Bermuda Monetary Authority (the "Authority")
whose permission for the issue of shares of class A common stock of IWCL has
been obtained. This designation allows IWCL to engage in transactions in
currencies other than the Bermuda dollar. Approvals or permissions received from
the Authority do not constitute a guarantee by the Authority as to the
performance or creditworthiness of IWCL.

Prior to the Offerings, this prospectus will be filed with the Registrar of
Companies in Bermuda in accordance with Bermuda law.

In granting such permission and in accepting this prospectus for filing,
neither the Authority nor the Registrar of Companies in Bermuda accepts any
responsibility for the financial soundness of IWCL or the correctness of any of
the statements made or opinions expressed in this prospectus.

The transfer of shares between persons regarded as resident outside Bermuda
for exchange control purposes and the issue of shares after the completion of
the Offerings to or by such persons may be effected without specific consent
under the Control Act and regulations thereunder. Issues and transfers of shares
involving any person regarded as resident in Bermuda for exchange control
purposes require specific prior approval under the Control Act.

Non-Bermuda owners of IWCL's shares of class A common stock are not
restricted in the exercise of the rights to hold or vote their shares. Because
IWCL has been designated as a non-resident for Bermuda exchange control
purposes, IWCL is permitted to engage in transaction in all currencies other
than the Bermuda dollar and there are no restrictions on its ability to transfer
funds (other than funds denominated in Bermuda dollars) in and out of Bermuda or
to pay dividends to United States residents who are holders of IWCL's class A
common stock.

In accordance with Bermuda law, share certificates are only issued in the
names of corporations, partnerships or individuals. In the case of an applicant
acting in a special capacity (for example as a trustee), certificates may, at
the request of the applicant, record the capacity in which the applicant is
acting. Notwithstanding the recording of any such special capacity IWCL is not
bound to investigate or incur any responsibility in respect of the proper
administration of any such trust.

IWCL will take no notice of any trust applicable to any of its shares
whether or not it had notice of such trust.

As an "exempted company", IWCL is exempt from Bermuda laws which restrict
the percentage of share capital that may be held by non-Bermudians, but as an
exempted company IWCL may not participate in certain business transactions
including: (i) the acquisition or holding of land in Bermuda (except that
required for its business and held by way of lease or tenancy for terms of not
more than 21 years); (ii) the taking of mortgages on land in Bermuda to secure
an amount in excess of $50,000 without the consent of the Minister of Finance of
Bermuda; (iii) the acquisition of securities created or issued by, or any
interest in any local company or business, other than certain types of Bermuda
government securities of another "exempted" company, partnership or other
corporation resident in Bermuda but incorporated abroad; or (iv) the carrying on
of business of any kind in Bermuda, except in furtherance of the business of
IWCL carried on outside Bermuda or under a license granted by the Minister of
Finance of Bermuda.

RELATIONSHIP BETWEEN IWCL AND IRIDIUM

The following is a summary of certain aspects of the relationship between
IWCL and Iridium. You should review the documents incorporated by reference in
this prospectus for further discussion of the rights of IWCL stockholders, the
rights of Iridium class 1 interest holders and the various contractual
relationships between IWCL and Iridium. See "Where You Can Find More
Information".

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GOVERNANCE OF IWCL

The power and authority to conduct and manage the business of IWCL is
vested in IWCL's Board of Directors, which is comprised of seven members, a
majority of whom also are executive officers of Iridium or one of Iridium's
members. At least two members of the IWCL Board of Directors will at all times
be persons not currently employed by Iridium or affiliated with Motorola or any
other member of Iridium owning more than five percent of the outstanding class 1
interests. These Directors are referred to as the "independent directors".

IWCL'S PARTICIPATION IN THE GOVERNANCE OF IRIDIUM

Iridium is governed by the Iridium Board of Directors. 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 beyond
their investment in their interests in Iridium. Notwithstanding IWCL's unlimited
liability with respect to Iridium, the holders of class A common stock do 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.

IWCL was formed to act as a special-purpose member of Iridium. Iridium's
LLC agreement provides that IWCL has certain special membership rights during
the period that commenced on the first date that IWCL's class 1 interests
represent five percent or more of the total outstanding class 1 interests (which
was June 13, 1997, the date IWCL's initial public offering was consummated) and
ending on the date of delivery by Iridium of notice of the termination of IWCL's
special rights following (i) the sale or other disposition by IWCL of class 1
interests, if, as a result of such sale or other disposition, IWCL's class 1
interests represent less than five percent of the total outstanding class 1
interests or (ii) following the occurrence of a change in control. A change of
control means an event or series of events not approved either by members of
Iridium owning a majority of the class 1 interests or by a majority of the
Iridium Board of Directors, at a time when IWCL owns class 1 interests
representing less than 50% of the outstanding class 1 interests, as a result of
which (a) any "person" or "group" (as such terms are defined in Section 12(d)
and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")) other
than Iridium becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5
under the Exchange Act), directly or indirectly, of more than 30% of IWCL's
outstanding common stock (or equivalent securities), (b) IWCL consolidates with
or merges into another corporation or conveys, transfers or leases all or
substantially all of its assets to any person, or any corporation consolidates
with or merges into IWCL, in either event pursuant to a transaction in which
IWCL's outstanding common stock is changed into or exchanged for cash,
securities or other property, other than any transaction (i) between IWCL and
either Iridium, an affiliate of Iridium or a wholly-owned subsidiary of Iridium,
or (ii) after which the shareholders who beneficially owned IWCL's common stock
immediately before such transaction beneficially own at least 50% of the
outstanding voting stock of the surviving entity and no person beneficially owns
more than 30% of the outstanding voting stock of the surviving entity, or (c)
during any period of two consecutive years, individuals who at the beginning of
such period constituted IWCL Board of Directors (together with any new directors
whose election by IWCL Board of Directors or whose nomination for election was
approved by a vote of 66 2/3% of the members of IWCL Board of Directors 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 IWCL Board of Directors then in office.

During the IWCL's special rights period (i) IWCL is entitled to designate
two independent directors as Directors of Iridium, (ii) one Director of Iridium
designated by IWCL must be elected Vice Chairman of the Iridium Board of
Directors and (iii) one Director of Iridium designated by IWCL must be a member
of each committee of the Iridium Board of Directors. Pursuant to Iridium's LLC
agreement, IWCL is not entitled to appoint more than two Directors to the
Iridium Board of Directors 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 has under Iridium's LLC agreement, under the
Delaware Limited Liability Company Act or
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otherwise, during the IWCL's 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 independent directors: (i) make any
material amendments or modifications to the LLC agreement; (ii) approve any
business plan of Iridium that would result in any material change in the purpose
of Iridium as set forth in the LLC agreement or otherwise change Iridium's
business so that it varies materially from the business purpose contemplated by
the LLC agreement; (iii) acquire, other than in the ordinary course of business
of Iridium, (a) a controlling interest or a majority of the voting stock or
equity of, any corporation or other entity that would be a Significant
Subsidiary (as such term is defined in the rules under the Securities Act of
1933) or (b) any other assets if the aggregate fair market value thereof is
greater than $50 million; (iv) sell, lease (as lessor), exchange or otherwise
dispose of all or substantially all of the assets of Iridium (other than to a
person controlled by Iridium); (v) cause the dissolution and/or liquidation of
Iridium; or (vi) take certain bankruptcy or insolvency related actions with
respect to Iridium.

EXCHANGE RIGHTS OF IRIDIUM MEMBERS

Pursuant to an interest exchange agreement between Iridium and IWCL (the
"exchange agreement"), IWCL has agreed that after the exchange date (defined
below) and subject to the restrictions on transfer in the LLC agreement it will
permit holders of class 1 interests of Iridium to exchange those interests for
shares of class A common stock at a ratio of one share of class A common stock
for each class 1 interest (subject to anti-dilution adjustments). No exchange
may take place unless it is approved by Iridium, pursuant to authorization of
Directors representing at least 66 2/3% of the Iridium Board of Directors. 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 exchange agreement, a
holder of class 1 interests and its affiliates must be in full compliance with
the LLC agreement.

Under the 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 exchange agreement, representing not less than
5% of the fully diluted class A shares (defined below), file 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 such 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 exchange agreement in exchange
for class 1 interests at the then applicable exchange rate, whether or not the
class 1 interests are then exchangeable. At the request of Iridium, acting
pursuant to authorization of Directors representing at least 66 2/3% of the
Iridium Board of Directors, IWCL will take all reasonable steps to register
pursuant to these provisions any other shares of class A common stock acquired
under the exchange agreement specified by Iridium. See "Shares Eligible For
Future Sale".

MANAGEMENT SERVICES AGREEMENT

IWCL and Iridium are parties to a management services agreement pursuant to
which Iridium supervises and manages the day-to-day operations of IWCL and IWCL
allows Iridium to do so. Iridium implements or causes to be implemented all
policy decisions relating to the operations of IWCL approved by the IWCL Board
of Directors and conducts or causes to be conducted the ordinary and usual
business and affairs of IWCL. The IWCL Board of Directors 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 is
responsible for administering the following functions of IWCL: treasury,
accounting, legal, tax, insurance, licenses and permits, investor relations,
public relations and securities law compliance and stock listing compliance.
Iridium has no authority under the management services agreement to give any
notice or to approve any matter under the LLC agreement on behalf of IWCL,
including, but not limited to IWCL's special rights consent. Iridium also
advances funds to IWCL, under certain conditions, to enable IWCL to pay any
income tax liability that

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cannot be satisfied by distributions to IWCL on its class 1 interests. Iridium
receives no fees or expense reimbursement for its services under the management
services agreement. The management services agreement is only terminable with
the consent of both Iridium and IWCL, except that Iridium has the right to
terminate the agreement after the occurrence of an IWCL change of control.

TAX CONSIDERATIONS

UNITED STATES FEDERAL INCOME TAXATION

The following is a summary of certain United States federal income tax
consequences of the ownership of class A common stock by an investor that
purchases such class A common stock in connection with the Offerings and holds
the class A common stock as capital assets. This summary does not purport to
address all material tax consequences of the ownership of 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, banks, investors liable for alternative minimum tax,
investors that actually or constructively own 10% or more of the voting stock of
IWCL, investors that hold 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 any aspects of
United States taxation other than federal income taxation. 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 class A common stock.

For purposes of this discussion, a "U.S. holder" is any beneficial owner of
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 class A common stock that is not a United States person for United States
federal income tax purposes.

U.S. HOLDERS

Taxation of Dividends and Stock Distributions

Under the United States federal income tax laws, and subject to the passive
foreign investment company, or "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

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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.

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 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.

IWCL believes that shares of class A common stock should not be treated as
stock in a PFIC for United States federal income tax purposes. 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.

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 to each day in 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 portion of the U.S. holder's holding
period before the relevant taxable year, whichever is shorter, would be subject
to taxation as described above.
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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 the information necessary to make a QEF election upon the
request of any U.S. holder.

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.

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 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, 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 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.

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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 shares of class A
common stock to or through a United States office of a broker is subject to both
United States backup withholding and information reporting unless the holder or
beneficial owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption. United States information
reporting and backup withholding generally will not apply to a payment made
outside the United States of the proceeds of a sale of shares of class A common
stock through an office outside the United States of a non-United States broker.
However, United States information reporting requirements (but not backup
withholding) will apply to a payment made outside the United States of the
proceeds of a sale of shares of class A common stock through an office outside
the United States of a broker (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.

TAXATION OF IWCL

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.

SHARES ELIGIBLE FOR FUTURE SALE

After giving pro forma effect to the Offerings, the number of shares of
class A common stock outstanding as of December 15, 1998 would have been
19,680,648 (20,805,648 shares if the U.S. underwriters' and international
managers' over-allotment options are exercised in full).

In addition to the shares of class A common stock outstanding on December
15, 1998, there are outstanding options and warrants to purchase IWCL class A
common stock, class B common stock that is convertible into class A common
stock, interests in Iridium that are convertible into class A common stock

99
<PAGE> 100

and outstanding warrants to purchase interest in Iridium that would be
convertible into class A commons stock, as described below. IWCL is authorized
to issue up to 50,000,000 shares of class A common stock. This authorization may
be increased under certain conditions.

IWCL Warrants to Purchase Class A Common Stock

As of December 15, 1998, there were outstanding 1,461,200 warrants to
purchase 1,461,200 shares of class A common stock of IWCL at an exercise price
of $20.90 per share of class A common stock. In connection with the original
issuance of the IWCL warrants, IWCL purchased a warrant from Iridium that
operates so that, when an IWCL warrant is exercised, IWCL uses the proceeds
received from its exercise to purchase one class 1 interest in Iridium for each
share of class A common stock issued upon exercise of the IWCL warrant. These
warrants expire on July 15, 2005.

Shares Eligible for Future Sale Upon Exchange of Class 1 Interests in Iridium

IWCL has agreed with Iridium in a contract called the interest exchange
agreement that, under certain conditions, it will exchange shares of class A
common stock for class 1 interests at the rate of one share of class A common
stock for each class 1 interest (subject to anti-dilution adjustments) and will
register those shares of class A common stock for sale with the Securities and
Exchange Commission. Holders of class 1 interests are not permitted to exchange
their class 1 interests for shares of class A common stock prior to the day that
is 90 days after the first fiscal quarter in which Iridium achieves positive
earnings before interest, taxes, depreciation and amortization (the "exchange
date"). In addition, no exchanges will be permitted unless they are approved by
at least 66 2/3% of the Iridium Board of Directors. Based upon the number of
class 1 interests outstanding at December 15, 1998, a maximum of 129,219,180
shares of class A common stock would be issuable upon such exchange. If all
class 1 interests which could be issuable in the future based upon warrants,
options and convertible interests outstanding at December 15, 1998 and other
outstanding commitments to members of Iridium (excluding warrants Motorola is
expected to earn under the Motorola ARG after December 15, 1998) are considered,
a maximum of 173,304,941 shares of class A common stock would be issuable.

In addition, pursuant to the Motorola ARG, Motorola has earned, and is
expected to earn, substantial compensation in the form of warrants to purchase
class 1 interests (or, under certain conditions, warrants to purchase class A
common stock) for providing guarantees, deferral rights and other credit support
to Iridium. Through December 15, 1998, under these arrangements, Motorola had
earned warrants to purchase 7,741,346 class 1 interest at a price of
approximately $0.00013 per interest and warrants to purchase 39,828 class 1
interests at a price of $20.90 per interest. Payments under the Motorola ARG are
based on the amount and duration of Motorola exposure (which generally includes
the aggregate amount guaranteed or permitted to be deferred). The amount of
daily warrant compensation due under the Motorola ARG is significant and
increases substantially after October 1, 1999 any time the Motorola exposure is
greater than $275 million. While Iridium has agreed with Motorola that it will
use its best efforts to reduce the Motorola exposure to $275 million or less as
soon as possible, Iridium's ability to repay or replace borrowings guaranteed by
Motorola or pay or finance (without a Motorola guarantee) deferrals of amounts
due to Motorola depends on a variety of factors, including Iridium's ability to
generate revenues and factors beyond Iridium's control such as the condition of
the bank lending and securities markets. If Iridium reduces the Motorola
exposure to $275 million for the period from October 1, 1999 through December
31, 2000 ($275 million of Motorola exposure for approximately 15 months),
Motorola would earn warrants to purchase approximately 84,000 class 1 interests
(or shares of class A common stock) at a price of $20.90 per interest (or share)
plus cash interest. However, if Iridium draws all amounts available under the
$750 million guaranteed credit facilities and defers the payment of an aggregate
of $400 million under the O&M contract and this Motorola exposure remains in
place in full from October 1, 1999 through December 31, 2000 ($1.15 billion of
Motorola exposure for approximately 15 months), Motorola would earn warrants to
purchase approximately 12.9 million class 1 interests at a price of
approximately $0.00013 per interest pursuant to the Motorola ARG and a
substantial additional amount of class 1 interests would be available for
exchange for shares of class A common stock.

100
<PAGE> 101

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 two percent of the class A common stock (on a fully
diluted basis), file with the Securities and Exchange Commission a registration
statement and use its reasonable best efforts to have that registration
statement remain effective for a period of up to six months, permitting such
holders to sell shares of class A common stock in the manner specified by those
holders. If the shares of class A common stock issuable upon exchange are so
registered, the shares will be freely transferable. See "Relationship Between
IWCL and Iridium -- Exchange Rights of Iridium Members".

Shares Eligible for Future Sale Upon Conversion of Class B Common Stock (the
NOMAD Program)

IWCL has authorized the issuance of up to 2,500,000 shares of class B
common stock at a price of $13.33 per share, and has issued 20,625 shares of
class B common stock in connection with Iridium's NOMAD program for promoting
the authorization and use of the Iridium system by governments. Iridium expects
that up to an aggregate of 1,750,000 shares of class B common stock will be
issued in connection with the NOMAD program. These shares of class B common
stock are exchangeable for class A common stock on a share for share basis
(subject to anti-dilution adjustments) after the satisfaction of certain
conditions, but in no event earlier than one year after they have been fully
paid for by their purchaser. Iridium has issued to IWCL one class 1 interest in
respect of each share of class B common stock issued in the NOMAD program and
has agreed to issue class 1 interests on a one-for-one basis (subject to
anti-dilution adjustments) in respect of future issuances of shares of class B
common stock in the NOMAD program.

Shares Eligible for Future Sale Upon Exercise of Options Granted Under the
Iridium Option Plan

Under the option plan, employees and outside directors of Iridium have
been, and may be, granted stock options that are exercisable for shares of class
A common stock. The exercise price of each option is the fair market value of a
share of the class A common stock on the date of grant. A committee of the
Iridium Board of Directors administers the plan and may establish the terms of
the option grants, including the number of shares for which an option may be
exercised, the term of the option (up to ten years), the vesting schedule, and
other terms and conditions. As of December 15, 1998, options to purchase
2,472,109 shares of class A common stock were outstanding, and exercisable
options covered 817,909 shares of class A common stock. Additional options to
purchase a maximum of 3,071,043 shares of class A common stock may be issued
under the option plan.

Shares Eligible for Future Sale Upon Direction of Iridium

IWCL has agreed with Iridium in a contract called a share issuance
agreement that, under certain conditions, Iridium can direct IWCL to sell shares
of class A common stock (or other securities) and be required to use the
proceeds to purchase class 1 interests (or other securities) in Iridium.

Restrictions on Certain Class A Common Stock Received on Exchange

The class A common stock acquired upon exchange of class 1 interests and
upon exchange of class B common stock will constitute "restricted securities"
within the meaning of Rule 144 and unless registered under the Securities Act
may only be sold if an exemption from registration is available. Pursuant to
Rule 144 under the Securities Act, a person, including an "affiliate" (as that
term is defined in Rule 144) of the issuer, may sell restricted securities if a
minimum of one year has elapsed between the later of the date of acquisition of
the restricted securities from the issuer or from an affiliate of the issuer.
Such a person will be entitled to sell, within any three-month period, a number
of shares that does not exceed the greater of (i) the average weekly trading
volume of the class of stock being sold during the four calendar weeks preceding
the filing of a notice of sale with the Securities and Exchange Commission or,
if no such notice is required, the sale date or (ii) one percent of the then
outstanding shares of the class of stock being sold. Sales pursuant to Rule 144
are also subject to certain requirements as to the manner of sale, notice filing
and availability of current public
101
<PAGE> 102

information about IWCL. A person who is deemed not to have been an affiliate of
IWCL at any time during the 90 days preceding a sale by such person and who has
beneficially owned the restricted securities for at least two years is entitled
to sell those shares under Rule 144 without regard to the volume limitation,
manner of sale restrictions or notice filing requirements of Rule 144. In
certain circumstances, a holder may "tack" the holding period for the restricted
securities converted into or exchanged for the restricted securities for
purposes of computing the one year and two year holding periods. Shares of class
A common stock may also be sold pursuant to any exemption from registration
which might be available without compliance with the requirements of Rule 144.

Issuances of substantial amounts of class A common stock, or the
expectation of such issuances, could adversely affect the market price of the
class A common stock. See "Risk Factors -- The Price of Class A Common Stock May
Decline Due to Shares Eligible for Future Sale".

Restrictions on Sale of Class A Common Stock

Subject to certain limited exceptions, the Chairman of the Board and Chief
Executive Officer of IWCL has agreed not to sell, offer to sell or otherwise
dispose of any shares of class A common stock without the prior written consent
of Merrill Lynch, Pierce, Fenner & Smith Incorporated for a period of 120 days
after the date of this prospectus.

102
<PAGE> 103

UNDERWRITING

Merrill Lynch, Pierce, Fenner & Smith Incorporated, Goldman, Sachs & Co.,
NationsBanc Montgomery Securities LLC, Salomon Smith Barney Inc. and SoundView
Technology Group, Inc. are acting as representatives of the U.S. underwriters.
Subject to the terms and conditions contained in a U.S. purchase agreement among
IWCL, Iridium LLC, Iridium Operating LLC and each of the U.S. underwriters named
below, and concurrently with the sale of 1,500,000 shares of class A common
stock to the international managers as discussed below, we have agreed to sell
to each of the U.S. underwriters, and each of the U.S. underwriters severally
has agreed to purchase from us, the number of shares of class A common stock set
forth opposite its name below.

<TABLE>
<CAPTION>
NUMBER OF
U.S. UNDERWRITERS SHARES
----------------- ---------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 1,540,000
Goldman, Sachs & Co......................................... 990,000
NationsBanc Montgomery Securities LLC....................... 770,000
Salomon Smith Barney Inc.................................... 770,000
SoundView Technology Group, Inc............................. 330,000
ABN AMRO Incorporated....................................... 80,000
BancBoston Robertson Stephens............................... 80,000
CIBC Oppenheimer Corp....................................... 80,000
Chase Securities Inc........................................ 80,000
Credit Suisse First Boston Corporation...................... 80,000
Deutsche Bank Securities Inc................................ 80,000
Donaldson, Lufkin & Jenrette Securities Corporation......... 80,000
Dresdner Kleinwort Benson North America LLC................. 80,000
Lazard Freres & Co. LLC..................................... 80,000
Lehman Brothers Inc......................................... 80,000
Morgan Stanley & Co. Incorporated........................... 80,000
C.E. Unterberg, Towbin, a California Limited Partnership.... 80,000
Wasserstein Perella Securities, Inc......................... 80,000
Arnhold and S. Bleichroeder, Inc............................ 40,000
Dain Rauscher, Wessels, a division of Dain Rauscher
Incorporated.............................................. 40,000
Friedman, Billings, Ramsey & Co., Inc....................... 40,000
Gabelli & Company, Inc...................................... 40,000
Gerard Klauer Mattison & Co., Inc........................... 40,000
Jefferies & Company, Inc.................................... 40,000
Johnston, Lemon & Co. Incorporated.......................... 40,000
Legg Mason Wood Walker, Incorporated........................ 40,000
Ormes Capital Markets, Inc.................................. 40,000
Brad Peery Inc.............................................. 40,000
Pryor, McClendon, Counts & Co., Inc......................... 40,000
Ragen MacKenzie Incorporated................................ 40,000
Southeast Research Partners, Inc............................ 40,000
Utendahl Capital Partners, L.P.............................. 40,000
---------
Total.......................................... 6,000,000
=========
</TABLE>

IWCL, Iridium LLC and Iridium Operating LLC have also entered into a
purchase agreement with certain underwriters outside the United States and
Canada, collectively the international managers, for whom Merrill Lynch
International, Goldman Sachs International, NationsBanc Montgomery Securities
LLC, Salomon Brothers International Limited and SoundView Technology Group, Inc.
are acting as representatives. Subject to the terms and conditions set forth in
the international purchase agreement, and concurrently

103
<PAGE> 104

with the sale of 6,000,000 shares of class A common stock to the U.S.
underwriters pursuant to the U.S. purchase agreement, IWCL has agreed to sell to
the international managers, and the international managers have severally agreed
to purchase from IWCL, an aggregate of 1,500,000 shares of class A common stock.
The public offering price per share of class A common stock and the underwriting
discount per share of class A common stock are identical under the U.S. purchase
agreement and the international purchase agreement.

In the U.S. purchase agreement and the international purchase agreement,
the several U.S. underwriters and the several international managers,
respectively, have agreed, subject to the terms and conditions set forth
therein, to purchase all of the shares of class A common stock being sold
pursuant to each such agreement if any of the shares of class A common stock
being sold pursuant to such agreement are purchased. Under certain
circumstances, the commitments of non-defaulting U.S. underwriters or
international managers (as the case may be) may be increased. The purchase of
shares of class A common stock by the U.S. underwriters is conditioned upon the
purchase of shares of class A common stock by the international managers, and
vice versa.

The U.S. underwriters and the international managers have entered into an
intersyndicate agreement to coordinate their activities. The U.S. underwriters
and international managers are permitted to sell shares of class A common stock
to each other for purposes of resale at the public offering price, less an
amount not greater than the selling concession. Under the terms of the
intersyndicate agreement, the U.S. underwriters and any dealer to whom they sell
shares of class A common stock will not offer to sell or sell shares of class A
common stock to persons who are non-U.S. or non-Canadian persons or to persons
they believe intend to resell to persons who are non-U.S. or non-Canadian
persons, and the international managers and any dealer to whom they sell shares
of class A common stock will not offer to sell or sell shares of class A common
stock to U.S. persons or to Canadian persons or to persons they believe intend
to resell to U.S. persons or Canadian persons, except in the case of
transactions pursuant to the intersyndicate agreement.

The U.S. representatives have advised IWCL, Iridium LLC and Iridium
Operating LLC that the U.S. underwriters propose initially to offer the class A
common stock to the public at the public offering price set forth on the cover
page of this prospectus, and to certain dealers at such price less a concession
not in excess of $.68 per share. The U.S. underwriters may allow, and such
dealers may reallow, a discount not in excess of $.10 per share to certain other
dealers. After the public offering, the public offering price, concession and
discount may be changed.

IWCL and Iridium LLC have granted an option to the U.S. underwriters,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to an aggregate of 900,000 additional shares of class A common stock
at the public offering price set forth on the cover page of this prospectus,
less the underwriting discount. The U.S. underwriters may exercise this option
only to cover over-allotments, if any. To the extent that the U.S. underwriters
exercise this option, each U.S. underwriter will be obligated, subject to
certain conditions, to purchase a number of additional shares of class A common
stock proportionate to such U.S. underwriter's initial amount reflected in the
foregoing table. We have also granted an option to the international managers,
exercisable within 30 days after the date of this prospectus, to purchase up to
an aggregate of 225,000 additional shares of class A common stock to cover
over-allotments, if any, on terms similar to those granted to the U.S.
underwriters.

The following table shows the per share and total underwriting discount we
will pay to the U.S. underwriters and international managers. The amounts are
shown assuming both no exercise and full exercise of the U.S. underwriters' and
international managers' options to purchase 1,125,000 additional shares of class
A common stock.

<TABLE>
<CAPTION>
WITHOUT WITH
PER SHARE OPTION OPTION
--------- ------------ ------------
<S> <C> <C> <C>
Public Offering Price................................... $33.50 $251,250,000 $288,937,500
Underwriting Discount................................... $ 1.18 $ 8,850,000 $ 10,177,500
</TABLE>

Iridium LLC expects to incur expenses of approximately $850,000 in
connection with the Offerings.

104
<PAGE> 105

Until the distribution of the shares of class A common stock is completed,
certain rules of the Securities and Exchange Commission may limit the ability of
the underwriters to bid for and purchase shares of class A common stock. As an
exception to these rules, the representatives are permitted to engage in certain
transactions that stabilize the price of the class A common stock. Such
transactions consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of the class A common stock.

If the U.S. underwriters or the international managers create a short
position in the class A common stock in connection with this offering (i.e., if
they sell more shares of class A common stock than are set forth on the cover
page of this prospectus), the representatives may reduce that short position by
purchasing shares in the open market. The representatives may also elect to
reduce any short position through the exercise of all or part of the
over-allotment option described above.

In general, purchases of a security for the purpose of stabilization or to
reduce a short position could cause the price of the security to be higher than
it might be in the absence of such purchases.

Neither IWCL, Iridium LLC or Iridium Operating LLC nor the U.S.
underwriters or international managers makes any representation or prediction as
to the direction or magnitude of any effect that the transactions described
above might have on the price of the shares. In addition, neither IWCL, Iridium
LLC or Iridium Operating LLC nor any of the U.S. underwriters or the
international managers make any representation that the representatives will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.

IWCL, Iridium LLC and Iridium Operating LLC have agreed to indemnify the
U.S. underwriters and the international managers against certain liabilities,
including liabilities under the Securities Act of 1933, as amended, or if
indemnification is not allowed, to contribute to payments the underwriters may
be required to make because of those liabilities.

The U.S. underwriters have agreed to reimburse Iridium Operating LLC for
certain expenses associated with the Offerings.

IWCL and Iridium LLC have agreed, without the prior written consent of
Merrill Lynch, for a period of 120 days after the date of this prospectus, not
to, directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of any
shares of the class A common stock or any securities convertible into or
exchangeable or exercisable for class A common stock or file any registration
statement under the Securities Act, with respect to any of the foregoing or (ii)
enter into any swap or any other agreement or any transaction that transfers, in
whole or in part, directly or indirectly, the economic consequence of ownership
of the class A common stock, whether any such swap or transaction is to be
settled by delivery of class A common stock or other securities, in cash or
otherwise. The foregoing restriction does not apply to the shares of class A
common stock to be sold in the Offerings, under the NOMAD program, the Iridium
benefit plans, to fund pending acquisitions or the issuance of warrants to
purchase class A common stock in connection with an offering of debt securities
by certain affiliates of Iridium LLC under certain circumstances. See "Shares
Eligible for Future Sale" for a discussion of certain limitations on the rights
of holders of interests in Iridium to exchange such interests for shares of
class A common stock.

Certain of the U.S. underwriters and the international managers or their
affiliates from time to time provide investment banking and financial advisory
services to us and our affiliates, including Iridium and Motorola. Certain of
the U.S. underwriters and the international managers also acted as a
representative of various other underwriters in connection with public and
private offerings of our class A common stock and debt securities of our
affiliates.

Merrill Lynch, Pierce, Fenner & Smith, Inc., is the syndication agent and
its affiliates, Merrill Lynch Capital Corporation, Merrill Lynch Prime Rate
Portfolio, Merrill Lynch Global Investment Series: Income Strategy Portfolio and
Merrill Lynch Senior Floating Rate Fund, Inc., are lenders under the secured
bank facility. Goldman Sachs Credit Partners, L.P., an affiliate of Goldman,
Sachs & Co., is a lender under the secured bank facility. Bank of America
National Trust and Savings Association, an affiliate of NationsBanc Montgomery
Securities LLC, is a lender under the secured bank facility and the guaranteed
bank facilities.
105
<PAGE> 106

Citibank, N.A., an affiliate of Salomon Smith Barney Inc., is a lender under the
secured bank facility and the guaranteed bank facilities. The Chase Manhattan
Bank, an affiliate of Chase Securities Inc., is the administrative agent and a
lender under the secured bank facility and the guaranteed bank facilities.
Affiliates of certain other U.S. underwriters are also lenders under the secured
bank facility and guaranteed bank facilities. Each of the above-mentioned
parties will receive customary fees under the secured bank facility and the
guaranteed bank facilities, as applicable. Additionally, Bank of America
National Trust and Savings Association, Citibank, N.A., The Chase Manhattan Bank
and the affiliates of any other U.S. underwriters that are lenders under the
revolving portion of the guaranteed bank facilities will receive a proportionate
share of the temporary repayment by Iridium of amounts outstanding under the
facilities. See "Use of Proceeds".

Under Conduct Rule 2710(c)(8) ("Rule 2710(c)(8)") of the National
Association of Security Dealers, Inc. ("NASD"), where more than 10% of the net
offering proceeds, not including underwriting compensation, are intended to be
paid to members participating in the distribution of the offering or associated
or affiliated persons of such members, such offering must be conducted in
accordance with the applicable provisions of Rule 2710(c)(8). A portion of the
proceeds from the Offerings may be used to temporarily reduce borrowings under
the revolving portion of the guaranteed bank facilities. This may result in more
than 10% of the net proceeds of the Offerings being paid to NASD members or
associated or affiliated persons of such members. Consequently, the Offerings
are being conducted in accordance with the applicable provisions of Rule
2710(c)(8).

VALIDITY OF THE CLASS A COMMON STOCK

The validity of the class A common stock offered hereby will be passed upon
for IWCL and Iridium by Conyers Dill & Pearman, Bermuda. IWCL and Iridium also
are being represented by Sullivan & Cromwell, New York, New York. Certain legal
matters will be passed upon for the U.S. underwriters and international managers
by Milbank, Tweed, Hadley & McCloy, New York, New York.

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
and schedule 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 into this prospectus and included herein and in the registration
statement of which this prospectus forms a part in reliance upon the reports of
KPMG LLP, independent certified public accountants, and upon the authority of
said firm as experts in accounting and auditing.

106
<PAGE> 107

ANNEX A

GLOSSARY

<TABLE>
<S> <C>
"AMPS"....................................... Advanced Mobile Phone Service -- a
transmission protocol used by some cellular
operators primarily in the Americas
"antenna beams".............................. tightly focused radio beams transmitted by
the Iridium satellites
"Big LEO".................................... LEO MSS systems operating in the bands
1610-1626.5 MHZ/2483.5-2500 MHZ
"CDMA"....................................... Code Division Multiple Access -- a
transmission protocol used by some cellular
networks that is derived from spread spectrum
techniques of the military
"cellular"................................... land-based terrestrial wireless services,
including GSM, PCS and IS-41 networks
"coordination"............................... the process of negotiation and agreement
between ITU member nations by which cases of
potential harmful interference by services
duly authorized by ITU member nations are
resolved
"cross-link antennas"........................ antennas used by the satellites to
communicate with one another
"dB"......................................... decibel -- a unit used to express relative
difference in power
"earth terminals"............................ land based units which communicate with the
Iridium satellite constellation
"excusable delay"............................ has the meaning assigned thereto in the space
system contract
"feeder links"............................... communications links between gateways and
satellites used to relay message data; these
links use the K-Band on the Iridium system;
sometimes referred to as "gateway links"
FDMA/TDMA.................................... Frequency Division Multiple Access/Time
Division Multiple Access -- a transmission
protocol used by some cellular networks
"gateways"................................... terrestrial interconnection points between
the Iridium satellite constellation and PSTNs
"gateway links".............................. communications links between gateways and
satellites used to relay message data; these
links use the K-Band on the Iridium system;
sometimes referred to as "feeder links"
"GHz"........................................ gigahertz -- one billion cycles per second
"global roaming"............................. the ability to travel worldwide, subject to
certain limitations, and receive and make
telephone calls from a handheld mobile phone
"GMPCS"...................................... Global Mobile Personal Communication Services
"GSM"........................................ Global System for Mobile Communications -- a
transmission protocol used by cellular
networks including most of Europe and parts
of Asia
"Inmarsat"................................... the International Maritime Satellite
Organization
</TABLE>

A-1
<PAGE> 108
<TABLE>
<S> <C>
"Intelsat"................................... the International Telecommunications
Satellite Organization
"intersatellite links"....................... communications links among the satellites in
the Iridium satellite constellation
"IS-41"...................................... International Standard-41 -- a transmission
protocol used by cellular networks including
most of North America and South America
"ITU"........................................ International Telecommunication Union
"landline"................................... terrestrially-based telephone line
"LEO" (low earth orbit)...................... earth orbit at a relatively low (e.g., 780
kilometers)altitude
"link margin"................................ the amount (usually expressed in dB) by which
a received signal exceeds a predetermined
lower limit for desired message quality
"main mission antennas'...................... the antennas used by Iridium satellites to
communicate with subscriber equipment (phased
array antennas)
"MHz"........................................ megahertz -- one million cycles per second
"MSS"........................................ mobile satellite services
"multi-mode phone"........................... a phone designed to operate both with a
cellular system and with the Iridium system;
Motorola is designing a multi-mode phone
which, through the use of interchangeable
TRCs will work with various different
cellular networks
"orbital plane".............................. generally, the flight path of a satellite
"L-Band".....................................
"phone"...................................... a handset that can be used to provide Iridium
voice services
"primary".................................... in the context of spectrum allocation, an
allocation to a service that is granted
protection from harmful interference from
stations of a secondary service
"protocol"................................... technical standard used by a wireless
communications system permitting
communications, customer authentication and
billing
"PSTN"....................................... public switched telephone network
"secondary".................................. in the context of spectrum allocation, an
allocation to a service that (i) cannot cause
harmful interference to stations of primary
or permitted services to which frequencies
are already assigned or to which frequencies
may be assigned at a later date and (ii)
cannot claim protection from harmful
interference from stations of a primary or
permitted service to which frequencies are
already assigned or may be assigned at a
later date
"service provider"........................... the retail link in the Iridium system
distribution chain -- Iridium service
providers are expected to market Iridium
World Services to, provide services for, and
ultimately bill the consumers of, Iridium
World Services. Gateway operators may or may
not act as service providers
"SIM Card"................................... a subscriber identity module which, when
inserted into a phone, will permit the phone
to identify a subscriber to the Iridium
system
</TABLE>

A-2
<PAGE> 109
<TABLE>
<S> <C>
"SNOC"....................................... the Satellite and Network Operations Center,
the primary facility from which the Iridium
constellation of satellites and the Iridium
system are managed
"spectrum"................................... the radio frequency spectrum
"tail charge"................................ the cost charged by local telephone systems
for connecting a telephone call
"TDMA"....................................... Time Division Multiple Access -- a
transmission protocol used by some cellular
networks
"telemetry".................................. the science of automatic measurement and
transmission of data from remote sources for
recording and analysis
"TRCs"....................................... Terrestrial Radio Cassettes being designed by
Motorola for use with multi-mode phones to
permit those phones to operate with one or
more cellular protocols
"WRCs"....................................... World Radiocommunication Conferences
(formerly known as World Administrative Radio
Conferences -- WARCs)
</TABLE>

A-3
<PAGE> 110

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
IRIDIUM WORLD COMMUNICATIONS LTD.
Independent Auditors' Report................................ F-2
Balance Sheets as of December 31, 1996 and 1997............. F-3
Statements of Loss for the year ended December 31, 1997, and
for the period December 12, 1996 (Inception) through
December 31, 1996......................................... F-4
Statements of Stockholders' Equity for the period from
December 12, 1996 (Inception) through December 31, 1996,
and the year ended December 31, 1997...................... F-5
Statements of Cash Flows for the period from December 12,
1996 (Inception) through December 31, 1996 and for the
year ended December 31, 1997.............................. F-6
Notes to Financial Statements............................... F-7
Condensed Balance Sheets as of December 31, 1997 and
September 30, 1998 (unaudited)............................ F-11
Unaudited Condensed Statements of Loss for the three and
nine months ended September 30,
1997 and 1998............................................. F-12
Unaudited Condensed Statements of Cash Flows for the nine
months ended September 30, 1997 and 1998.................. F-13
Notes to Unaudited Condensed Financial Statements........... F-14
IRIDIUM LLC
Independent Auditors' Report................................ F-16
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-17
Consolidated Statements of Loss for each of the years in the
three-year period ended December 31, 1997, and for the
period from June 14, 1991 (Inception) through December 31,
1997...................................................... F-18
Consolidated Statements of Members' Equity (Deficit) for
each of the years in the three-year period ended December
31, 1997 and for the period from June 14, 1991 (Inception)
through December 31, 1997................................. F-19
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997, and the period from June
14, 1991 (Inception) through December 31, 1997............ F-20
Notes to Consolidated Financial Statements.................. F-21
Condensed Consolidated Balance Sheets as of December 31,
1997 and
September 30, 1998 (unaudited)............................ F-39
Unaudited Condensed Consolidated Statements of Loss for the
three and nine months ended September 30, 1997 and 1998
and for the period from June 14, 1991 (Inception) through
September 30, 1998........................................ F-40
Unaudited Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997 and 1998 and
for the period from June 14, 1991 (Inception) through
September 30, 1998........................................ F-41
Notes to Unaudited Condensed Consolidated Financial
Statements................................................ F-42
</TABLE>

F-1
<PAGE> 111

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Stockholders
Iridium World Communications Ltd.:

We have audited the accompanying balance sheets of Iridium World
Communications Ltd. as of December 31, 1997 and 1996, and the related statements
of loss, stockholders' equity, and cash flows for the year ended December 31,
1997 and for the period December 12, 1996 (inception) through December 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Iridium World Communications
Ltd. as of December 31, 1997 and 1996, and the results of its operations and its
cash flows for the year ended December 31, 1997, and for the period December 12,
1996 (inception) through December 31, 1996, in conformity with generally
accepted accounting principles.

KPMG LLP

McLean, Virginia
January 16, 1998

F-2
<PAGE> 112

IRIDIUM WORLD COMMUNICATIONS LTD.

BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
----- --------
<S> <C> <C>
ASSETS
Cash........................................................ $-- $ --
Investment in Iridium LLC................................... -- 223,922
----- --------
Total Assets...................................... $-- $223,922
===== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities................................................. $-- $ --
Stockholders' equity:
Class B Common Stock, non-voting, par value $0.01;
2,500,000 shares authorized; none issued or
outstanding............................................ -- --
Class A Common stock, voting, par value $0.01; 50,000,000
shares authorized; 1,200,000 and 12,003,262 issued and
outstanding............................................ 12 120
Additional paid-in-capital.................................. -- 242,636
Subscription receivable..................................... (12) --
Accumulated deficit......................................... -- (18,834)
----- --------
Total liabilities and stockholders' equity........ $-- $223,922
===== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-3
<PAGE> 113

IRIDIUM WORLD COMMUNICATIONS LTD.

STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 12, 1996
(INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
----------------- -----------------
<S> <C> <C>
Equity in loss of Iridium LLC............................... $ -- $ 18,834
----- ----------
Loss before income taxes.................................... -- $ 18,834
Income taxes................................................ -- --
----- ----------
Net loss.................................................... $ -- $ 18,834
===== ==========
Net loss per Class A Common share -- basic and diluted...... $ -- $ 2.79
----- ----------
Weighted average shares used in computing net loss per Class
A Common share -- basic and diluted....................... -- 6,739,726
===== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE> 114

IRIDIUM WORLD COMMUNICATIONS LTD.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
CLASS A
COMMON STOCK
------------------- ADDITIONAL
PAID-IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT TOTAL
---------- ------ ---------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Inception, December 12,
1996........................ -- $-- $ -- $ -- $ -- $ --
Class A Common Stock
subscribed.................. 1,200,000 12 -- (12) -- --
---------- ---- -------- -------- -------- --------
BALANCE, December 31, 1996.... 1,200,000 12 -- 12 -- --
Retire subscribed Class A
Common Stock................ (1,200,000) (12) -- 12 -- --
Equity offering............... 12,000,000 120 225,480 -- -- 225,600
Warrants issued in conjunction
with Iridium LLC Series A
Senior Notes................ -- -- 17,113 -- -- 17,113
Exercise of stock options..... 3,262 -- 43 -- -- 43
Net loss...................... -- -- -- -- (18,834) (18,834)
---------- ---- -------- -------- -------- --------
BALANCE, December 31, 1997.... 12,003,262 $120 $242,636 $ -- $(18,834) $223,922
========== ==== ======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE> 115

IRIDIUM WORLD COMMUNICATIONS LTD.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 12, 1996
(INCEPTION) TO YEAR ENDED
DECEMBER 31, DECEMBER 31,
1996 1997
----------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................... $-- $ (18,834)
Adjustments to reconcile net loss to net cash used in
operating activities--
Equity in loss of Iridium LLC............................... -- 18,834
--------- ---------
Net cash used in operating activities....................... -- --
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Iridium LLC.................................. -- (242,756)
--------- ---------
Net cash used in investing activities....................... -- (242,756)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from equity offering........................... -- 225,600
Proceeds from Warrants issued in conjunction with Iridium
LLC, Series A Senior Notes................................ -- 17,113
Proceeds from Class A Common Stock subscribed............... -- 12
Retirement and cancellation of Class A Common Stock......... -- (12)
Proceeds from exercise of stock options..................... -- 43
--------- ---------
Net cash provided by financing activities................... -- 242,756
--------- ---------
Increase (decrease) in cash................................. -- --
CASH, beginning of period................................... -- --
--------- ---------
CASH, end of period......................................... $-- $ --
========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-6
<PAGE> 116

IRIDIUM WORLD COMMUNICATIONS LTD.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Iridium World Communications Ltd. ("IWCL") was incorporated under the laws
of Bermuda on December 12, 1996. At inception, IWCL was wholly owned by Iridium
LLC, a limited liability company. In June 1997, IWCL registered with the
Securities and Exchange Commission a total of 13,800,000 shares of its Class A
Common Stock ("Class A Common Stock") for sale in an initial public offering
(the "Offering"), and on June 13, 1997 IWCL consummated the Offering and issued
12,000,000 shares of Class A Common Stock. Pursuant to the 1997 Subscription
Agreement between IWCL and Iridium LLC, approximately $225 million in net
proceeds from the Offering were invested in Class 1 Membership Interests of
Iridium LLC ("Class 1 Interests"), at which time the outstanding shares of Class
A Common Stock held by Iridium LLC were retired, and IWCL became a member of
Iridium LLC.

Iridium LLC through its wholly-owned subsidiary Iridium Operating LLC
("Iridium"), a Delaware limited liability company, is currently devoting
substantially all of its efforts to establishing and commercializing the IRIDIUM
communications system (the "IRIDIUM System").

IWCL's sole asset is its investment in Iridium LLC. At December 31, 1997,
IWCL's investment was approximately 8.5% of the total outstanding Membership
Interests in Iridium LLC.

2. SIGNIFICANT ACCOUNTING POLICIES

INVESTMENT IN IRIDIUM LLC

The investment in Iridium LLC is accounted for using the equity method. In
accordance with the equity method of accounting, IWCL's carrying amount of the
investment in an affiliate is initially recorded at cost and is increased to
reflect its share of the affiliate's income and is reduced to reflect its share
of the affiliate's losses each period since the initial investment.

At December 31, 1997, Iridium LLC had total assets, total liabilities and
total members' equity of approximately $3,646,000,000, $2,011,000,000 and
$1,635,000,000, respectively. At December 31, 1996, Iridium LLC had total
assets, total liabilities and total members' equity of $2,434,000,000,
$862,000,000 and $1,572,000,000, respectively. Iridium LLC reported a net loss
of $293,553,000 and $73,598,000 for the years ended December 31, 1997 and 1996,
respectively.

MANAGEMENT ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results could differ from those estimates.

INCOME TAXES

IWCL recognizes income taxes using the asset and liability method. Under
the asset and liability method, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

F-7
<PAGE> 117
IRIDIUM WORLD COMMUNICATIONS LTD.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. STOCKHOLDERS' EQUITY

On July 16, 1997, Iridium LLC and Iridium Capital Corporation, a wholly
owned subsidiary of Iridium, completed an offering (the "High Yield Offering")
of (i) 300,000 units, each consisting of $1,000 principal amount of Iridium LLC
13% Senior Notes due 2005, Series A ("Series A Notes"), and one IWCL Warrant,
representing the right to purchase 5.2 shares of Class A Common Stock of IWCL
and (ii) $500 million aggregate principal amount of Iridium LLC 14% Senior Notes
due 2005, Series B ("Series B Notes"). Iridium was subsequently substituted for
Iridium LLC as obligor under the Series A Notes and the Series B Notes. The
Series A Notes and Series B Notes are guaranteed by Iridium Roaming LLC and
Iridium IP LLC, also wholly-owned subsidiaries of Iridium. IWCL is not an
obligor or guarantor of the Series A Notes or Series B Notes. The IWCL Warrants
represent, in aggregate, the right to purchase 1,560,000 shares of Class A
Common Stock of IWCL. Approximately $17,113,000 of the proceeds of the High
Yield Offering was allocated to the fair value of the purchase price of the IWCL
Warrants. The exercise price of each IWCL Warrant is $20.90 per share. The IWCL
Warrants are exercisable at anytime on or after one year from the date of
original issuance and expire on July 15, 2005. Concurrent with the issuance of
the IWCL Warrants in the High Yield Offering, Iridium LLC issued to IWCL
1,560,000 LLC Interest Warrants, each exercisable for one Iridium LLC Class 1
Interest at an exercise price of $20.90 per LLC Interest Warrant. IWCL and
Iridium LLC have agreed that IWCL will exercise one LLC Interest Warrant upon
the exercise of each IWCL Warrant.

EXCHANGE RIGHTS OF IRIDIUM LLC MEMBERS

Concurrent with the Offering, IWCL and Iridium LLC executed an Interest
Exchange Agreement that conditionally permits holders of Class 1 Interests in
Iridium LLC to exchange those interests, subject to the restrictions on transfer
in the Iridium LLC Limited Liability Agreement, for shares of Class A Common
Stock in IWCL at a ratio of one share of Class A Common Stock for each Iridium
LLC Class 1 Interest, subject to anti-dilution adjustments. Under the Interest
Exchange Agreement no exchanges of Iridium LLC Class 1 Interests are permitted
until 90 days after Iridium LLC has achieved one full quarter of positive
earnings before interest, taxes, depreciation and amortization. In addition, no
exchange shall take place unless approved pursuant to authorization of Directors
representing at least 66 2/3% of the Iridium LLC Board of Directors.

GLOBAL OWNERSHIP PROGRAM

IWCL and Iridium LLC intend to commence a Global Ownership Program which is
designed to offer up to an aggregate of 2,500,000 shares of IWCL's Class B
Common Stock at a purchase price of $13.33 per share to certain governmental
telecommunication administrations and related entities as part of a
comprehensive program to enhance market access, improve the competitive standing
of the Iridium System and achieve appropriate regulatory approvals. At the time
of issuance, purchasers of Class B Common Stock will be required to pay only an
amount equal to the per share par value of the Class B Common Stock; $.01 per
share. The balance of the purchase price will be payable through the withholding
of dividends, if any, which would otherwise be payable on the shares of Class B
Common Stock. A holder of Class B Common Stock may elect to pay the purchase
price in cash at any time. Class B Common Stock is convertible to Class A Common
Stock on a one-for-one basis, subject to anti-dilution adjustments, once certain
conditions are met, including full payment for the shares and expiration of a
minimum holding period. The proceeds generated from each sale of Class B Common
Stock will be used to purchase Class 1 Interests in Iridium LLC. The payment
terms with respect to such Iridium LLC Class 1 Interests will mirror the payment
terms on the Class B Common Stock. As of December 31, 1997, no shares of Class B
Common Stock had been issued under this program.

F-8
<PAGE> 118
IRIDIUM WORLD COMMUNICATIONS LTD.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

3. STOCKHOLDERS' EQUITY -- (CONTINUED)
SHARE ISSUANCE AGREEMENT

IWCL and Iridium LLC have also executed a Share Issuance Agreement which
provides that all net proceeds from future primary offerings of securities by
IWCL will be invested in Class 1 Interests in Iridium LLC.

VOTING RIGHTS

The holders of Class A Common Stock are entitled to one vote per share. The
holders of Class B Common Stock have no voting rights, except as required by
Bermuda law in connection with matters involving a variation in terms of the
Class B Common Stock.

PARTICIPATION IN THE GOVERNANCE OF IRIDIUM

Providing that IWCL's Interest in Iridium LLC represents five percent or
more of the total outstanding Class 1 Interests of Iridium LLC (which occurred
upon the consummation of the IWCL IPO), IWCL shall be entitled to designate two
Independent Company Directors as Directors of Iridium LLC.

STOCK OPTION PLAN OF IRIDIUM LLC

Iridium LLC has established a plan under which executive officers, managers
and independent directors of Iridium LLC are awarded options to purchase Class A
Common Stock of IWCL (the "Option Plan"). The Option Plan covers 2,625,000
shares of Class A Common Stock. The Option Plan also permits the award of stock
appreciation rights in connection with any grant of options. As of December 31,
1997, options covering 2,004,556 shares of Class A Common Stock are outstanding
with exercise prices ranging from $13.33 to $52.50. As of December 31, 1997,
there are 397,145 options exercisable at a weighted average exercise price of
$13.33. As of that date no stock appreciation rights had been granted. The right
to exercise the options vest, pro rata, over a period of five years. Pursuant to
the Share Issuance Agreement, IWCL has agreed that upon the exercise of any
options, it will issue to Iridium LLC, for delivery to an exercising option
holder, the number of shares of Class A Common Stock covered by the exercised
options and Iridium LLC has agreed to simultaneously deliver to IWCL a like
number of Iridium LLC Class 1 Interests, subject to anti-dilution adjustments.
The exercise price of the option is paid to Iridium LLC and represents payment
for the Class A Common Stock by the exercising option holder and for the Iridium
LLC Class 1 Interests by IWCL. During the year ended December 31, 1997, options
to acquire 3,262 shares of Class A Common Stock were exercised. IWCL issued such
shares in the names of the optionees and Iridium LLC issued 3,262 Class 1
Interests to IWCL.

MANAGEMENT SERVICES AGREEMENT

In connection with the IWCL IPO, Iridium LLC and IWCL entered into a
Management Services Agreement. Pursuant to the Management Services Agreement,
Iridium LLC has agreed to supervise and manage the day-to-day operations of
IWCL. Among other things, Iridium LLC is responsible for administering the
following functions of IWCL: treasury, accounting, legal, tax, insurance,
licenses and permits and securities law compliance. Iridium LLC receives no fees
or reimbursement from IWCL for its services to IWCL under the Management
Services Agreement. Operating costs incurred by IWCL during the period since
inception and paid for by Iridium LLC have not been significant.

4. EARNINGS PER SHARE

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share ("Statement 128"). Statement 128 supersedes
Accounting Principles Board Opinion No. 15, Earnings
F-9
<PAGE> 119
IRIDIUM WORLD COMMUNICATIONS LTD.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

4. EARNINGS PER SHARE -- (CONTINUED)
per Share ("APB 15") and its related interpretations, and promulgates new
accounting standards for the computation and manner of presentation of earnings
(loss) per share data. Statement 128 requires the presentation of basic and
diluted earnings (loss) per share data. Basic earnings (loss) per Class A Common
share is calculated by dividing net income (loss) by the weighted average number
of Class A Common shares outstanding during the period. Diluted earnings (loss)
per share is calculated by dividing net income (loss) by the weighted average
number of Class A Common shares and, to the extent dilutive, other potentially
dilutive securities outstanding during the period. Potentially dilutive
securities are comprised of warrants to purchase Class A Common Stock issued in
conjunction with the Series A Notes and stock options. Due to the loss incurred
during the year ended December 31, 1997, the impact of the warrants and stock
options is anti-dilutive and is not included in the diluted earnings (loss) per
share calculation. The adoption of Statement 128 had no effect on earnings
(loss) per share as previously presented.

5. INCOME TAXES

IWCL is subject to income taxation based on its ratable portion of Iridium
LLC's income or loss. During the year ended December 31, 1997 and the period
December 12, 1996 (inception) to December 31, 1996, IWCL recognized no current
or deferred income tax expense or benefit. As of December 31, 1997, IWCL's only
deferred tax asset relates entirely to its investment in Iridium LLC and
amounted to approximately $7,446,000 for which a full valuation allowance has
been established.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
asset will be realized. The ultimate realization of the deferred tax asset is
dependent upon the generation of future taxable income during the periods in
which temporary differences become deductible. Management considers scheduled
reversals of deferred tax liabilities, projected future taxable income, and tax
planning strategies that can be implemented in making this assessment.

F-10
<PAGE> 120

IRIDIUM WORLD COMMUNICATIONS LTD.

CONDENSED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash........................................................ $ -- $ --
Investment in Iridium LLC................................... 223,922 157,294
-------- --------
Total assets...................................... $$223,922 $157,294
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities................................................. $ -- $ --
Stockholders' equity:
Class B Common Stock, non-voting par value $0.01;
2,500,000 shares authorized; none and 20,625 issued and
outstanding............................................ -- --
Class A Common stock, voting par value $0.01; 50,000,000
shares authorized; 12,003,262 and 12,175,690 issued and
outstanding............................................ 120 122
Additional paid-in-capital.................................. 242,636 245,980
-------- --------
Accumulated deficit......................................... (18,834) (88,808)
-------- --------
Total liabilities and stockholders' equity........ $223,922 $157,294
======== ========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
financial statements.

F-11
<PAGE> 121

IRIDIUM WORLD COMMUNICATIONS LTD.

UNAUDITED CONDENSED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- ------------------------
1997 1998 1997 1998
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Equity in loss of Iridium LLC.............. $ 7,260 $ 31,615 $ 8,039 $ 69,974
----------- ----------- ---------- -----------
Loss before income taxes................... 7,260 31,615 8,039 69,974
Income taxes............................... -- -- -- --
----------- ----------- ---------- -----------
Net loss................................... $ 7,260 $ 31,615 $ 8,039 $ 69,974
=========== =========== ========== ===========
Net loss per Class A Common share -- basic
and diluted.............................. $ 0.61 $ 2.62 $ 1.62 $ 5.81
----------- ----------- ---------- -----------
Weighted average shares used in computing
net loss per Class A Common share --basic
and diluted.............................. 12,000,000 12,084,446 4,967,033 12,050,913
=========== =========== ========== ===========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
financial statements.

F-12
<PAGE> 122

IRIDIUM WORLD COMMUNICATIONS LTD.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
1997 1998
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (8,039) $(69,974)
Adjustments to reconcile net loss to net cash used in
operating activities --................................... 8,039 69,974
--------- --------
Equity in loss of Iridium LLC............................. -- --
--------- --------
Net cash used in operating activities....................... -- --
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in Iridium LLC.................................. (242,713) (3,346)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from equity offering......................... 225,600 --
Proceeds from Class B Common Stock........................ -- 275
Proceeds from Class A Common Stock subscribed............. 12 --
Retirement of Class A Common Stock........................ (12) --
Proceeds from warrants issued in conjunction with Iridium
LLC Series A
Senior Notes............................................ 17,113 --
Proceeds from warrants exercised in conjunction with
Iridium LLC Series A
Senior Notes............................................ -- 2,065
Proceeds from exercise of stock options................... -- 1,006
--------- --------
Net cash provided by financing activities................... 242,713 3,346
--------- --------
Increase (decrease) in cash................................. -- --
CASH, beginning of period................................... -- --
--------- --------
CASH, end of period......................................... $ -- $ --
========= ========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
financial statements.

F-13
<PAGE> 123

IRIDIUM WORLD COMMUNICATIONS LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Iridium World Communications Ltd. ("IWCL") was incorporated under the laws
of Bermuda on December 12, 1996. At inception, IWCL was wholly owned by Iridium
LLC, which was a development stage limited liability company at that time. In
June 1997, IWCL registered with the Securities and Exchange Commission a total
of 13,800,000 shares of its Class A Common Stock ("Class A Common Stock") for
sale in an initial public offering (the "Offering"), and on June 13, 1997, IWCL
consummated the Offering and issued 12,000,000 shares of Class A Common Stock.
Pursuant to the 1997 Subscription Agreement between IWCL and Iridium LLC,
approximately $225 million in net proceeds from the Offering was invested in
12,000,000 Class 1 Membership Interests of Iridium LLC ("Class 1 Interests"), at
which time the outstanding shares of Class A Common Stock held by Iridium LLC
were retired, and IWCL became a member of Iridium LLC.

On July 13, 1997, in connection with the issuance of Series A Notes by
Iridium LLC, IWCL issued 300,000 warrants to purchase up to 1,560,000 shares of
Class A Common Stock and applied the net proceeds to purchase warrants to
acquire up to 1,560,000 Class 1 Interests from Iridium LLC. When a warrant to
purchase Class A Common Stock is exercised, IWCL is required to exercise a
corresponding warrant to purchase Class 1 Interests. As of September 30, 1998,
19,000 warrants were exercised to purchase 98,800 shares of Class A Common Stock
resulting in net proceeds of approximately $2 million to IWCL. The net proceeds
from the exercise of these 19,000 warrants were used by IWCL to exercise
warrants to purchase 98,800 Class 1 Interests of Iridium LLC.

Iridium LLC through its wholly-owned subsidiary Iridium Operating LLC
("Iridium"), a Delaware limited liability company, is devoting substantially all
of its efforts to commercializing the Iridium communications system (the
"Iridium System").

IWCL's sole assets are its investments in Iridium LLC. At September 30,
1998, IWCL owned approximately 8.62% of the total outstanding Class 1 Interests
in Iridium LLC.

2. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments necessary for a fair presentation
of the financial position of IWCL as of September 30, 1998 and its results of
operations for the three and nine month periods ended September 30, 1998 and
1997, and its cash flows for the nine month periods ended September 30, 1998 and
1997. These condensed financial statements are unaudited and do not include all
related footnote disclosures. These financial statements should be read in
conjunction with the audited financial statements of IWCL and footnotes thereto
included in the Annual Report on Form 10-K and the audited consolidated
financial statements of Iridium LLC and the footnotes thereto included in the
Annual Report on Form 10-K.

Since its inception on December 12, 1996 through September 30, 1998, IWCL
has not entered into any operating transactions or incurred any operating
expenses. The results of operations for the three and nine months ended
September 30, 1998 are not necessarily indicative of the results of operations
expected in the future.

3. STOCKHOLDERS' EQUITY

NOMAD PROGRAM

IWCL and Iridium LLC have commenced a NOMAD Program which is designed to
offer up to an aggregate of 2,500,000 shares of IWCL's Class B Common Stock at a
purchase price of $13.33 per share to certain governmental telecommunication
administrations and related entities as part of a comprehensive program to
enhance market access, improve the competitive standing of the Iridium System
and achieve

F-14
<PAGE> 124
IRIDIUM WORLD COMMUNICATIONS LTD.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS -- (CONTINUED)

3. STOCKHOLDERS' EQUITY -- (CONTINUED)
appropriate regulatory approvals. At the time of issuance, purchasers of Class B
Common Stock are required to pay only a minimum amount equal to the per share
par value of the Class B Common Stock; $.01 per share. The balance of the
purchase price is payable through the withholding of dividends, if any, which
would otherwise be payable on the shares of Class B Common Stock. However, a
holder of Class B Common Stock may elect to pay the entire purchase price in
cash at any time. Class B Common Stock is convertible to Class A Common Stock on
a one-for-one basis, subject to anti-dilution adjustments, once certain
conditions are met, including full payment for the shares and expiration of a
minimum holding period. The proceeds generated from each sale of Class B Common
Stock are used to purchase Class 1 Interests in Iridium LLC. The payment terms
with respect to such Iridium LLC Class 1 Interests mirror the payment terms on
the Class B Common Stock. As of September 30, 1998, 20,625 shares of Class B
Common Stock had been issued under this program resulting in net proceeds of
$275,000 to IWCL. The shares were recognized at a fair value of $33.88 per share
(the trading price of the Class A Common Stock at the date of issue) with a
corresponding increase in IWCL's investment in Iridium LLC. In accordance with
the Share Issuance Agreement, the net proceeds were invested in Class 1
Interests of Iridium LLC.

4. EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per Class A Common share is calculated by dividing
net income (loss) by the weighted average number of Class A Common shares
outstanding during the period. Diluted earnings (loss) per share is calculated
by dividing net income (loss) by the weighted average number of Class A Common
shares and, to the extent dilutive, other potentially dilutive securities
outstanding during the period. Potentially dilutive securities are comprised of
warrants to purchase Class A Common Stock issued in conjunction with the Series
A Notes, stock options and Class B Common Stock. Due to the losses incurred
during the three and nine months ended September 30, 1998 and 1997, the impact
of the warrants, stock options and Class B Common Stock is anti-dilutive and is
not included in the diluted earnings (loss) per share calculations.

F-15
<PAGE> 125

INDEPENDENT AUDITORS' REPORT

The Board of Directors and Members
Iridium LLC and subsidiaries:

We have audited the accompanying consolidated balance sheets of Iridium LLC
and subsidiaries (a development stage limited liability company) as of December
3l, 1997 and 1996, and the related consolidated statements of loss, members'
equity (deficit), and cash flows for each of the years in the three-year period
ended December 31, 1997, and for the period June 14, 1991 (inception) through
December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Iridium LLC
and subsidiaries (a development stage limited liability company) as of December
31, 1997 and 1996, and the results of their operations and their cash flows for
each of the years in the three-year period ended December 31, 1997, and for the
period June 14, 1991 (inception) through December 31, 1997, in conformity with
generally accepted accounting principles.

KPMG LLP

McLean, Virginia
January 16, 1998

F-16
<PAGE> 126

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1997
------------ ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 1,889 $ 9,040
Restricted cash (Note 2)............................... -- 350,220
Due from affiliates.................................... 3,476 13,604
Prepaid expenses and other current assets.............. 7,154 6,612
---------- ----------
Total current assets.............................. 12,519 379,476
Property and equipment, net (Note 4)........................ 2,065 1,526,326
System under construction (Note 7).......................... 2,388,320 1,625,054
Other assets (Note 2)....................................... 31,177 114,831
---------- ----------
Total assets...................................... $2,434,081 $3,645,687
========== ==========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.................. $ 17,937 $ 106,794
Accounts payable to Member (Note 7).................... 100,563 10,601
Bank facilities, current portion (Note 5).............. -- 350,000
---------- ----------
Total current liabilities......................... 118,500 467,395
Bank facilities, net of current portion (Note 5)............ 505,000 210,000
Long-term debt due to Members (Note 5)...................... 230,904 273,302
Notes payable, $1,000,000 principal amount (Note 5)......... -- 1,054,288
Other liabilities (Note 8).................................. 7,648 6,065
---------- ----------
Total liabilities................................. 862,052 2,011,050
---------- ----------
Commitments and Contingencies (Notes 1, 3, 5, 7, 8 and 10)
Members' equity (Notes 1, 3, 5, 7 and 8):
Class 2 Interests, authorized 50,000 interests for
Series M; authorized an aggregate of 300,000 interests
for Series A, Series B and Series C:
Series M, convertible, no interests issued and
outstanding..................................... -- --
Series A, redeemable, convertible, 46,977 and
39,907 interests issued and outstanding;
liquidation value of $46,977 and $39,907........ 46,977 39,907
Series B, redeemable, 1 interest issued and
outstanding..................................... -- --
Series C, redeemable, 75 interests issued and
outstanding..................................... -- --
Class 1 Interests, authorized 225,000,000 interests,
120,836,025 and 141,222,442 interests issued and
outstanding........................................... 1,659,625 2,024,220
Deferred Class 1 Interest compensation...................... -- (1,454)
Adjustment for minimum pension liability (Note 8)........... (733) (643)
Deficit accumulated during the development stage............ (133,840) (427,393)
---------- ----------
Total members' equity............................. 1,572,029 1,634,637
---------- ----------
Total liabilities and members' equity............. $2,434,081 $3,645,687
========== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-17
<PAGE> 127

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 14, 1991
(INCEPTION)
YEAR ENDED DECEMBER 31, THROUGH
-------------------------------------- DECEMBER 31,
1995 1996 1997 1997
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
OPERATING EXPENSES
Sales, general and administrative (Notes 5, 7,
8 and 10).................................... $ 26,436 $ 70,730 $ 177,474 $313,301
Depreciation and amortization.................. 751 674 119,124 121,429
---------- ----------- ----------- --------
Total operating expenses.............. 27,187 71,404 296,598 434,730
========== =========== =========== ========
OTHER INCOME --
Interest income................................ 5,226 2,395 3,045 15,308
---------- ----------- ----------- --------
Loss before provision for income taxes......... 21,961 69,009 293,553 419,422
Provision for income taxes (Note 6)............ 1,684 4,589 -- 7,971
---------- ----------- ----------- --------
Net loss....................................... 23,645 73,598 293,553 427,393
========== =========== =========== ========
Preferred dividend requirement (Note 3)........ -- 3,652 5,703
---------- ----------- -----------
Net loss applicable to Class 1
Interests.................................... $ 23,645 $ 77,250 $ 299,256
========== =========== ===========
Net loss per Class 1 Interest -- basic and
diluted...................................... $ 0.27 $ 0.64 $ 2.25
========== =========== ===========
Weighted average interests used in computing
net loss per Class 1 Interest -- basic and
diluted...................................... 88,162,875 120,115,575 132,879,976
========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-18
<PAGE> 128

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY (DEFICIT)
(IN THOUSANDS EXCEPT INTEREST DATA)
<TABLE>
<CAPTION>
CLASS 2 DEFERRED
INTERESTS, CLASS 1 CLASS 1
ALL SERIES INTERESTS INTERESTS
-------------------- ------------------------ ------------
NUMBER NUMBER
OF OF
INTERESTS AMOUNT INTERESTS AMOUNT COMPENSATION
--------- -------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Inception June 14, 1991................................ -- $ -- -- $ -- $ --
Net loss............................................... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, December 31, 1991............................. -- -- -- -- --
Net loss............................................... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, December 31, 1992............................. -- -- -- -- --
Net loss............................................... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, July 29, 1993................................. -- -- -- -- --
Class 1 Interests subscribed, July 29, 1993............ -- -- 60,000,000 -- --
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- -- 324,167 --
Costs of raising equity................................ -- -- -- (8,096) --
Net loss............................................... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, December 31, 1993............................. -- -- 60,000,000 316,071 --
Class 1 Interests subscribed........................... -- -- 59,458,350 -- --
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- -- 518,202 --
Costs of raising equity................................ -- -- -- (1,863) --
Net loss............................................... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, December 31, 1994............................. -- -- 119,458,350 832,410 --
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- -- 633,514 --
Cost of raising equity................................. -- -- -- (7) --
Net loss............................................... -- -- -- -- --
Adjustment for minimum pension liability............... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, December 31, 1995............................. -- -- 119,458,350 1,465,917 --
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- 1,377,675 140,131 --
Class 2 interest issued for cash at $13.33 per
interest............................................. 43,401 43,325 -- -- --
Series A, Class 2 Interests issued in dividends........ 3,652 3,652 -- (3,652) --
Costs of raising equity................................ -- -- -- (251) --
Warrants to purchase Class 1 Interests issued in
connection with 14.5% Senior subordinated notes...... -- -- -- 31,761 --
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee....................... -- -- -- 25,719 --
Net loss............................................... -- -- -- -- --
Adjustment for minimum pension liability............... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, December 31, 1996............................. 47,053 46,977 120,836,025 1,659,625 --
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- 7,500,00 59,248 --
Exercise of employee stock options..................... -- -- 3,262 43 --
Initial Public offering................................ 12,000,000 240,000 --
Class 2 Interests converted to Class 1 Interests....... (12,773) (12,773) 883,155 12,773 --
Series A, Class 2 Interests issued in dividends........ 5,703 5,703 -- (5,703) --
Costs of raising equity................................ -- -- -- (16,100) --
Warrants to purchase Class 1 Interests issued in
connection with 13% Senior notes, Series A........... -- -- -- 17,113 --
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee....................... -- -- -- 55,615 --
Deferred Class 1 Interests compensation................ -- -- -- 1,606 (1,454)
Net loss............................................... -- -- -- -- --
Adjustment for minimum pension liability............... -- -- -- -- --
------- -------- ----------- ---------- -------
BALANCE, December 31, 1997............................. 39,983 $ 39,907 141,222,442 $2,024,220 $(1,454)
======= ======== =========== ========== =======

DEFICIT
ADJUSTMENT ACCUMULATED
FOR MINIMUM DURING THE
PENSION DEVELOPMENT
LIABILITY STAGE TOTAL
----------- ----------- ----------
<S> <C> <C> <C>
Inception June 14, 1991................................ $ -- $ -- $ --
Net loss............................................... -- (757) (757)
------- --------- ----------
BALANCE, December 31, 1991............................. -- (757) (757)
Net loss............................................... -- (8,773) (8,773)
------- --------- ----------
BALANCE, December 31, 1992............................. -- (9,530) (9,530)
Net loss............................................... -- (5,309) (5,309)
------- --------- ----------
BALANCE, July 29, 1993................................. -- (14,839) (14,839)
Class 1 Interests subscribed, July 29, 1993............ -- -- --
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- 324,167
Costs of raising equity................................ -- -- (8,096)
Net loss............................................... -- (6,924) (6,924)
------- --------- ----------
BALANCE, December 31, 1993............................. -- (21,763) 294,308
Class 1 Interests subscribed........................... -- -- --
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- 518,202
Costs of raising equity................................ -- -- (1,863)
Net loss............................................... -- (14,834) (14,834)
------- --------- ----------
BALANCE, December 31, 1994............................. -- (36,597) 795,813
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- 633,514
Cost of raising equity................................. -- -- (7)
Net loss............................................... -- (23,645) (23,645)
Adjustment for minimum pension liability............... (1,065) -- (1,065)
------- --------- ----------
BALANCE, December 31, 1995............................. (1,065) (60,242) 1,404,610
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- 140,131
Class 2 interest issued for cash at $13.33 per
interest............................................. -- -- 43,325
Series A, Class 2 Interests issued in dividends........ -- -- --
Costs of raising equity................................ -- -- (251)
Warrants to purchase Class 1 Interests issued in
connection with 14.5% Senior subordinated notes...... -- -- 31,761
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee....................... -- -- 25,719
Net loss............................................... -- (73,598) (73,598)
Adjustment for minimum pension liability............... 332 -- 332
------- --------- ----------
BALANCE, December 31, 1996............................. (733) (133,840) 1,572,029
Subscribed Class 1 Interests issued for cash at $13.33
per interest......................................... -- -- 59,248
Exercise of employee stock options..................... -- -- 43
Initial Public offering................................ -- -- 240,000
Class 2 Interests converted to Class 1 Interests....... -- -- --
Series A, Class 2 Interests issued in dividends........ -- -- --
Costs of raising equity................................ -- -- (16,100)
Warrants to purchase Class 1 Interests issued in
connection with 13% Senior notes, Series A........... -- -- 17,113
Warrants to purchase Class 1 Interests issued in
connection with debt guarantee....................... -- -- 55,615
Deferred Class 1 Interests compensation................ -- -- 152
Net loss............................................... -- (293,553) (293,5453)
Adjustment for minimum pension liability............... 90 -- 90
------- --------- ----------
BALANCE, December 31, 1997............................. $ (643) $(427,393) $1,634,637
======= ========= ==========
</TABLE>

F-19
<PAGE> 129

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 14, 1991
(INCEPTION)
THROUGH
DECEMBER 31,
1995 1996 1997 1997
--------- --------- ---------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................................ $ (23,645) $ (73,598) $ (293,553) $ (427,393)
Adjustment to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization......................... 751 674 119,124 121,429
Expense recognized for warrants issued in connection
with debt guarantee................................. -- 25,719 55,615 81,334
Employee Class 1 Interests Compensation............... -- -- 152 152
Loss on disposal of assets............................ -- -- 87 87
Changes in assets and liabilities:
Decrease (Increase) in prepaid expenses and other
current assets.................................... (171) (6,281) 542 (6,612)
Increase in due from affiliates..................... -- (3,476) (10,128) (13,604)
Increase in other assets............................ (1,633) (4,079) (2,286) (18,659)
Increase in accounts payable and accrued expenses... 1,586 12,968 30,857 48,794
(Decrease) Increase in other liabilities............ 2,126 2,739 (1,493) 5,985
--------- --------- ---------- -----------
Net cash used in operating activities........... (20,986) (45,334) (101,083) (208,487)
--------- --------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment..................... (493) (1,475) (18,885) (23,255)
Additions to system under construction.................. (762,000) (900,757) (842,678) (3,091,435)
--------- --------- ---------- -----------
Net cash used in investing activities........... (762,493) (902,232) (861,563) (3,114,690)
--------- --------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Class 1 and Class 2
Interests............................................. 633,514 183,205 283,191 1,932,319
Net proceeds from issuance of senior notes and
warrants.............................................. -- 238,453 1,039,189 1,277,642
Borrowings under guaranteed bank line of credit......... -- 505,000 655,000 1,160,000
Payments under guaranteed bank line of credit........... -- -- (950,000) (950,000)
Borrowings under senior secured line of credit.......... -- -- 350,000 350,000
Increase in restricted cash............................. -- -- (350,220) (350,220)
Deferred financing costs................................ (1,094) (28,535) (57,363) (87,524)
--------- --------- ---------- -----------
Net cash provided by financing activities........... 632,420 898,123 969,797 3,332,217
--------- --------- ---------- -----------
Increase(decrease) in cash and cash equivalents......... (151,059) (49,443) 7,151 9,040
CASH AND CASH EQUIVALENTS beginning of period............... 202,391 51,332 1,889 --
--------- --------- ---------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 51,332 $ 1,889 $ 9,040 $ 9,040
========= ========= ========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-20
<PAGE> 130

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Iridium LLC (the "Parent") and its subsidiaries are devoting their present
efforts to developing and commercializing a global wireless system -- the
Iridium(R) Communications System (the "IRIDIUM System") -- that will enable
subscribers to send and receive telephone calls virtually anywhere in the
world -- all with one phone, one phone number and one customer bill.

Iridium, Inc. was incorporated on June 14, 1991. Iridium, Inc. operated as
a wholly-owned subsidiary of Motorola, Inc. ("Motorola") until July 29, 1993. On
July 29, 1993, Iridium, Inc. closed on, and had its first capital draw under, a
private placement of shares of Common Stock, subscribed to by U.S. and foreign
investors. As a result of three private placements of equity, five supplemental
private placements with certain additional equity investors and proceeds
received from the initial public offering of common stock of Iridium World
Communications Ltd. ("IWCL") (See Note 3), Motorola's direct and indirect Class
1 Membership Interest in the Parent has been reduced to approximately 18% as of
December 31, 1997, before considering unexercised warrants held by Motorola.

On July 29, 1996, the Parent was formed as a limited liability company,
under the terms and conditions of the limited liability agreement ("LLC
Agreement"), pursuant to the provisions of the Delaware limited liability
company act. Also on July 29, 1996, Iridium, Inc. was merged with and into the
Parent, with the Parent as the surviving entity. Concurrent with the merger, all
shares of Common Stock of Iridium, Inc. were exchanged for Class 1 membership
interests in the Parent ("Class 1 Interests").

On December 18, 1997, the Parent entered into an asset drop-down
transaction (the "Asset Drop-Down Transaction") with Iridium Operating LLC
("Iridium"), a newly formed wholly-owned subsidiary of the Parent. Pursuant to
the Asset Drop-Down Transaction, substantially all of the assets and liabilities
of the Parent were transferred to Iridium, including, without limitation, all
liabilities with respect to the outstanding 13% Senior Notes due 2005, Series A
and 14% Senior Notes due 2005, Series B and the 11 1/4% Senior Notes due 2005,
Series C (collectively, the "Senior Notes"). Pursuant to the indentures relating
to the Senior Notes, Iridium has been substituted for the Parent, and the Parent
has been released from all obligations under the indentures relating to the
Senior Notes. All assets and liabilities were transferred to Iridium at the
Parent's carrying value. Accordingly, unless otherwise specified, references
within these notes to Iridium that relate to any action prior to the date of the
Asset Drop-Down Transaction should be construed as references to Parent, as
predecessor of Iridium. As a result of the Asset Drop-Down Transaction, the
Parent's only significant asset is its investment in Iridium.

Iridium has contracted with Motorola to design, develop, produce and
deliver into orbit the space segment component of the IRIDIUM System. The
scheduled date for delivery of the $3.45 billion space segment is in 1998.
Iridium plans to begin its commercial operations in September 1998. During 1997,
46 of the 66 satellites in the IRIDIUM System were successfully placed in orbit.

The Iridium Communications System is subject to regulation by the Federal
Communications Commission ("FCC"), and by foreign administrations and regulatory
bodies. On January 31, 1995, Motorola obtained a license from the FCC to
construct, launch and operate the Iridium System, subject to certain conditions.

2. SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION

The consolidated financial statements include the accounts of the Parent
and its wholly-owned subsidiary, Iridium, and Iridium's wholly-owned
subsidiaries, Iridium Capital Corporation, Iridium Roaming LLC and Iridium IP
LLC. All significant intercompany transactions have been eliminated.

F-21
<PAGE> 131
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
DEVELOPMENT STAGE ENTERPRISE

The Parent, through Iridium, is currently devoting its entire efforts to
establishing and commercializing the IRIDIUM System. On December 18, 1997, the
Parent and Iridium entered into an Asset Drop-Down Transaction whereby
substantially all of the assets and liabilities of the Parent were transferred
to Iridium. The purpose of the Asset Drop-Down Transaction was to facilitate the
pledge of substantially all of the assets of the Parent in connection with the
establishment of secured bank financing for the development and construction of
the IRIDIUM System. At December 31, 1997, the Parent's ownership interest in
Iridium constituted substantially all of the Parent's assets. Accordingly,
Iridium's current principal activities relate to managing the design,
construction and development of the system and preparing for its day-to-day
operations.

MANAGEMENT ESTIMATES

The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Parent considers all highly liquid investments with an original
maturity of three months or less at the date of purchase to be cash equivalents.

RESTRICTED CASH

Restricted cash consists of the first stage of borrowing under the $1
billion secured credit facility with a syndicate of lenders, led by Chase
Securities, Inc., and Barclays Capital, a division of Barclays Bank PLC. The
funds are restricted subject to Iridium meeting specified milestones.

PROPERTY AND EQUIPMENT

Property and equipment is carried at historical cost less accumulated
depreciation and amortization. Depreciation and amortization is calculated using
the straight-line method over the following estimated useful lives:

<TABLE>
<S> <C>
Satellites in service....................................... 5 years
Furniture, fixtures and equipment........................... 5 years
Leasehold improvements...................................... Shorter of 5 years or
remaining lease term
</TABLE>

The costs of constructing and placing satellites into service are
capitalized. Losses from satellite failures for which Iridium has financial
responsibility under its contractual arrangements with Motorola are recognized
currently. Motorola bears the risk of loss for launch failures and satellite
failures before a satellite is placed into service.

SYSTEM UNDER CONSTRUCTION

System under construction includes all costs incurred related to the
construction of the space and ground components of the IRIDIUM System.
Depreciation expense is recognized on a satellite-by-satellite basis as

F-22
<PAGE> 132
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
the satellites are placed into service following delivery of each satellite to
its mission orbit. Depreciation related to the ground control stations will
commence with the placement in service of each such station.

Interest costs incurred during the construction of the IRIDIUM System are
capitalized. Total interest cost incurred and capitalized for the years ended
December 31, 1996 and 1997 was approximately $28,127,000 and $163,747,000,
respectively. Interest paid for the years ended December 31, 1996 and 1997 was
approximately $1,485,000 and $30,191,000, respectively. No interest was
incurred, paid or capitalized for the year ended December 31, 1995.

During 1996, the Parent adopted Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed of ("Statement 121"). Statement 121 requires that
long-lived assets to be held and used be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. An impairment loss is recognized when the undiscounted net
cash flows associated with the asset are less than the asset's carrying amount.
Impairment losses, if any, are measured as the excess of the carrying amount of
the asset over its estimated fair market valued. The adoption of Statement 121
did not have a material impact on the Parent's results of operations for the
years ended December 31, 1996 and 1997.

MEMBER INTEREST-BASED COMPENSATION

During 1996, the Parent adopted Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation ("Statement 123"), which
encourages, but does not require, the recognition of member interest-based
employee compensation at fair value. The Parent has elected to continue to
account for member interest-based employee compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees and related interpretations.
Accordingly, compensation cost for options to purchase Class A Common Stock of
IWCL granted to employees is measured as the excess, if any, of the fair value
of Class 1 Interests at the date of the grant over the exercise price an
employee must pay to acquire the interest. Compensation expense, if any, is
recognized over the period earned by the employee and was $152,000 for the year
ended December 31, 1997. No compensation expense was recognized for the year
ended December 31, 1996 as all options to acquire Class 1 Interests were granted
at an exercise price equal to the fair market value as of the date of grant.

Warrants or options to purchase member interests granted to other than
employees as consideration for goods or services rendered are recognized at fair
market value.

EQUITY ISSUANCE COSTS

The Parent classifies all costs incurred in connection with the issuance of
equity as a reduction of members' equity. These costs include fees paid to
investment bankers, attorneys and others in connection with the issuance of
equity.

DEFERRED FINANCING COSTS

All costs incurred in connection with securing debt financing have been
deferred and are amortized over the terms of the related debt in a manner that
approximates the effective yield method. Costs for future debt financing are
also deferred and are included in other non-current assets in the accompanying
consolidated balance sheets. Total deferred financing costs are approximately
$30,200,000 and $113,394,000 at December 31, 1996 and 1997, respectively.

F-23
<PAGE> 133
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
During October 1995, the Parent withdrew an intended public offering of
certain subordinated debt financing. Accordingly, the Parent wrote-off
approximately $3,200,000 of deferred costs associated with the intended
financing. Such costs are included in operating expenses in the accompanying
consolidated statement of loss for the year ended December 31, 1995.

INCOME TAXES

Iridium, Inc. was subject to Federal, state and local income taxes
directly. As a result of the merger of Iridium, Inc. with and into the Parent,
the Parent became a limited liability company. As a limited liability company,
the Parent is no longer subject to U. S. federal income tax directly. Rather,
each Class 1 member is subject to U.S. federal income taxation based on its
ratable portion of the Parent's income or loss. However, the Parent's primary
operations are in the District of Columbia which does not recognize the limited
liability status for tax purposes. Accordingly, the Parent is subject to
District of Columbia franchise taxes directly. The Parent recognizes its
provision for income taxes under the asset and liability method. Under the asset
and liability method deferred tax assets and deferred tax liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using tax rates expected to apply to taxable income in the years in which these
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.

NET INCOME (LOSS) PER CLASS 1 INTEREST

In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share ("Statement 128"). Statement 128, supersedes
Accounting Principles Board Opinion No. 15, Earnings per Share ("APB 15") and
its related interpretations, and promulgates new accounting standards for the
computation and manner of presentation of the Parent's loss per Class 1 Interest
data. Statement 128 requires the presentation of basic and diluted earnings
(loss) per interest data. Basic earnings (loss) per Class 1 interest is
calculated by dividing net income (loss), after considering required dividends
on Class 2 Interests, by the weighted average number of Class 1 Interests
outstanding during the period. Diluted earnings (loss) per share is calculated
by dividing net income (loss), after considering required dividends on Class 2
Interests, by the weighted average number of Class 1 Interests and, to the
extent dilutive, other potentially dilutive securities outstanding during the
period. Potentially dilutive securities are comprised of options, warrants, and
convertible Class 2 Interests. Due to the losses incurred during the years ended
December 31, 1995, 1996, and 1997, the impact of other potentially dilutive
securities is anti-dilutive and is not included in the diluted earnings (loss)
per Class 1 Interest calculation. The adoption of Statement 128 had no effect on
earnings (loss) per Class 1 Interest as previously presented.

NEW ACCOUNTING PRONOUNCEMENT

In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income ("Statement 130"). Statement 130 establishes
standards for the reporting and display of comprehensive income and its
components in the consolidated financial statements. The Parent is required to
adopt the provisions of Statement 130 for the year ending December 31, 1998.
Earlier application is permitted; however, upon adoption of Statement 130, the
Parent will be required to reclassify previously reported annual and interim
consolidated financial statements. The disclosure of comprehensive income in
accordance with the provisions of Statement 130 will impact the manner of
presentation of the Parent's consolidated financial statements as currently and
previously reported.

F-24
<PAGE> 134
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED)
RECLASSIFICATIONS

Certain 1995 and 1996 amounts have been reclassified to conform to the 1997
presentation.

3. MEMBERS' EQUITY

CLASSES OF MEMBERSHIP INTERESTS

The members' interests in the Parent are divided into two classes: Class 1
Interests which represent the common equity and Class 2 Interests which
represent the preferred equity. The LLC Agreement authorizes the Parent to issue
225,000,000 Class 1 Interests, 50,000 Series M Class 2 Interests, and 300,000
additional Class 2 Interests. A description of each of the classes of membership
interests follows:

CLASS 1 INTERESTS. Subject to the rights of holders of any series of
Class 2 Interests, all voting rights of the members are vested in the Class
1 Interests. Each member is entitled to appoint one Director for each
5,250,000 Class 1 Interests owned. Class 1 members in any aggregate any or
all of their Class 1 Interests with other Class 1 members and appoint one
Director for each 5,250,000 Class 1 Interests owned in the aggregate. The
members may manage the Parent only through their designated Directors and
have no authority, in their capacity as members, to act on behalf of or
bind the Parent.

The LLC Agreement contains a reserve capital call provision under
which certain members have agreed to purchase additional Class 1 Interests
(the "Reserve Capital Call"). If the Board elects to exercise this option,
the Parent could raise up to an additional $243 million for 18,206,550
Class 1 Interests. However, the Reserve Capital Call is pledged to secure
the Secured Bank Facility (See Note 5).

SERIES M CLASS 2 INTERESTS. Motorola owns a warrant to purchase
Series M Class 2 Interests in an amount that is convertible into 2.5% of
the outstanding Class 1 Interests at the time of exercise of the warrant
(calculated on a fully diluted basis) at a price of $1,000 per Series M
Class 2 Interest. Each Series M Class 2 Interest is non-voting and
currently convertible into 75 Class 1 Interests. The initial Series M
Conversion Price is $13.33, but is subject to anti-dilution adjustments
from time to time. Dividends on Series M Class 2 Interests are cumulative
and accrue at the rate of 8% per annum. No Series M Class 2 Interests are
outstanding.

SERIES A CLASS 2 INTERESTS. The Series A Class 2 Interests are
convertible preferred interests that pay dividends at a rate of 14 1/2% per
annum. Dividends on the Series A Class 2 Interests are payable, either
in-kind or in cash, at the option of the Parent, through February 28, 2001.
Commencing March 1, 2001, dividends on the Series A Class 2 Interests are
payable only in cash. Dividends in the Series A Class 2 Interests accrue
whether or not they have been declared and whether or not there are profits
or other funds of the Parent legally available for the payment of such
dividends. No dividend may be declared and paid on the Class 1 Interests
unless all accrued dividends on the Series A Class 2 Interests have been
paid in full. The Series A Class 2 Interests are non-voting and convertible
Class 1 Interests at any time at the option of the holder. Currently each
Series A Class 2 Interest may be converted into 18.51 Class 1 Interests.
The Series A Class 2 Interests are redeemable, at the option of the Parent,
at anytime after March 1, 2001, subject to a Premium if redeemed prior to
March 1, 2005.

SERIES B AND SERIES C CLASS 2 INTERESTS. In connection with
Motorola's guarantee of the $450 million credit facility (the "Guarantee
Agreement") (See Note 5), the Parent issued to Motorola one Series B Class
2 Interest and 75 Series C Class 2 Interests. The Series B Class 2 Interest
and Series C Class 2 Interests do not pay any dividends. The Series B Class
2 Interest entitles Motorola to one seat on the Board of Directors in
addition to Directors it may appoint as the owner of Class 1
F-25
<PAGE> 135
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. MEMBERS' EQUITY -- (CONTINUED)
interests and Series M Class 2 Interests. The Series C Class 2 Interests
entitle Motorola to appoint a majority of the Board of Directors in the
event of certain events of default. The Series B and Series C Class 2
Interests are redeemable at the option of the Parent at $.01 per interest
upon the later of (i) the termination or expiration of the Guarantee
Agreement and (ii) the reimbursement of any payments made by Motorola
pursuant to the Guarantee Agreement (See Note 5).

The LLC Agreement provides that the Parent may merge or consolidate
with one or more limited liability companies, corporations, or similar
entities provided that the transaction is approved by the Board of
Directors and Class 1 members holding not less than 66 2/3% of the
outstanding Class 1 Interests. In the event of a merger, members who hold
interests and do not vote in favor of, or consent in writing to, the merger
are entitled to appraisal and repurchase rights of their interests as
specified in the LLC Agreement.

DIVIDEND AND LIQUIDATION RIGHTS

Class 1 members are entitled to receive dividends, as and when declared by
the Board of Directors, in its discretion. Class 2 members are entitled to
receive dividends, if any, in accordance with the terms of the relevant series
of Class 2 Interests, as and when declared by the Board of Directors. The Class
2 Interests rank senior to the Class 1 Interests as to dividends and
distributions upon the liquidation, dissolution and winding-up of the Parent.

The LLC Agreement requires the Board of Directors, to the extent of legally
available funds, to declare and pay a dividend sufficient to assure that each
non-U. S. Class 1 Member receives an amount at least equal to the amount of such
member's U. S. federal, state and local income tax liability resulting from
allocations of the Parent's taxable income to such member. Parent's only current
source of funds is from dividend distributions from Iridium, and Iridium is
required to declare and pay a dividend to the Parent in the same amount as
required by the LLC Agreement. However, Iridium is restricted by the terms of
certain of its debt obligations from declaring and paying dividends in excess of
those required to be made to the Parent.

The LLC Agreement contains significant restrictions on the ability of a
member to transfer any interests in the Parent, including but not limited to the
conditions that: (i) a majority of the Directors approve the transfer, and (ii)
the transfer not result in any member beneficially owning, or having the right
to beneficially own, more than 45% of the outstanding Class 1 Interests.

EXCHANGE RIGHTS OF IRIDIUM LLC MEMBERS

Concurrent with the initial public offering, IWCL and Iridium LLC executed
an Interest Exchange Agreement that conditionally permits holders of Class 1
Interests in Iridium LLC to exchange those interests, subject to the
restrictions on transfer in the Iridium LLC Limited Liability Agreement, for
shares of Class A Common Stock in IWCL at a ratio of one share of Class A Common
Stock for each Iridium LLC Class 1 Interest, subject to anti-dilution
adjustments. Under the Interest Exchange Agreement no exchanges of Iridium LLC
Class 1 Interests are permitted until 90 days after Iridium has achieved one
full quarter of positive earnings before interest, taxes, depreciation and
amortization. In addition, no exchange shall take place unless approved pursuant
to authorization of Directors representing at least 66 2/3% of the Iridium LLC
Board of Directors.

GLOBAL OWNERSHIP PROGRAM

The Parent, in conjunction with IWCL, has commenced a Global Ownership
Program which is designed to offer up to an aggregate of 2,500,000 shares of
IWCL's Class B Common Stock at a purchase price of
F-26
<PAGE> 136
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. MEMBERS' EQUITY -- (CONTINUED)
$13.33 per share to certain governmental telecommunication administrations and
related entities as part of a comprehensive program to enhance market access,
improve the competitive standing of the IRIDIUM System and achieve appropriate
regulatory approvals. As of December 31, 1997, no shares had been issued under
this program.

LIMITATIONS ON LIABILITY

Members are generally not liable for the debts, obligations or liabilities
of the Parent.

RECENT EQUITY TRANSACTIONS

On April 16, 1997, the LLC Agreement was amended to increase the authorized
number of Class 1 Interests from 3,000,000 to 225,000,000. On May 9, 1997, the
Parent effected a 75 for 1 subdivision of its Class 1 Membership Interests
whereby each existing Class 1 Interest was subdivided into 75 Class 1 Interests.
All interest and per interest data appearing in the consolidated financial
statements and notes thereto have been retroactively adjusted for the
subdivision.

On May 9, 1997, the Parent entered into a definitive agreement with South
Pacific Iridium Holdings Limited ("SPI"), an affiliate of P. T. Bakrie
Communications Corporation, pursuant to which SPI acquired from Parent 7,500,000
Class 1 Interests at $13.33 per interest. The transaction closed on May 30, 1997
with 40% of the total purchase price paid on that date and the remainder due on
or before May 1998. Through December 31, 1997, the Parent has received an
aggregate of $59.2 million from SPI in satisfaction of the commitment.

On June 13,1997, IWCL, a wholly-owned subsidiary of the Parent as of that
date, consummated an initial public offering (the "Offering") of 12,000,000
shares of its Class A Common Stock which resulted in proceeds of approximately
$225 million to IWCL (expenses of the offering were paid by the Parent).
Pursuant to the 1997 Subscription Agreement between the Parent and IWCL, such
proceeds were used to purchase 12,000,000 Class 1 Interests in the Parent. Upon
consummation of the Offering, all of the outstanding shares of IWCL held by the
Parent were retired and canceled, and IWCL became a member of the Parent.

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 1996 and 1997, consists of the
following (in thousands):

<TABLE>
<CAPTION>
1996 1997
------- ----------
<S> <C> <C>
Space System in service................................ $ -- $1,624,120
Office equipment and furniture......................... 3,113 13,920
Trade show booth....................................... 826 --
Leasehold improvements................................. 405 8,424
------- ----------
4,344 1,646,464
Less -- accumulated depreciation and amortization...... (2,279) (120,138)
------- ----------
Property and equipment, net............................ $ 2,065 $1,526,326
======= ==========
</TABLE>

F-27
<PAGE> 137
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT

GUARANTEED BANK FACILITY

On August 21, 1996, the Parent entered into a $750 million credit agreement
with a group of banks led by The Chase Manhattan Bank, NA and Barclays Bank,
PLC. On the same date, the Parent entered into the Guarantee Agreement whereby
Motorola agreed to guarantee the entire $750 million commitment amount (the
"Motorola Guarantee"). In connection with the Asset Drop-Down Transaction, the
Parent's obligations under the Guaranteed Bank Facility were assigned to
Iridium. The Guaranteed Bank Facility provides that Iridium may elect to borrow
amounts at the then current short-term Eurodollar rate plus 1/4% or at the then
current Base Rate (generally, the higher of the Federal Funds Rate as
established by the Federal Reserve Bank of New York plus 0.50% or The Chase
Manhattan Bank's prime commercial lending rate). Iridium also pays a commitment
fee of 1/10 of 1% on any unused portion of the $750 million credit facility.
Interest rates on the Guaranteed Bank Facility ranged from 5.63% to 8.50% during
1997 and from 5.75% to 5.94% during 1996. On July 21, 1997, the commitment of
the bank lenders under the Guaranteed Bank Facility was permanently reduced from
$750 million to $655 million. On October 22, 1997, the commitment of the bank
lenders under the Guaranteed Bank Facility was further permanently reduced to
$450 million. Depending on market conditions, Iridium may make additional senior
note offerings in order to further reduce the Guaranteed Bank Facility. The
Guaranteed Bank Facility matures on June 30, 1999.

Under the Guarantee Agreement, the Parent is required to issue warrants to
Motorola to purchase up to 150,000 Class 1 Interests. As consideration for its
guarantee, Motorola earns 82,500 warrants for each year the $750 million
guarantee is outstanding. As a result of the permanent reductions in the
Guaranteed Bank Facility, the maximum number of warrants Motorola may earn as
compensation for their guarantee of that facility until maturity in June 1999 is
131,377 warrants to purchase approximately 9,853,275 Class 1 Interests. Warrants
earned are issued to Motorola on a quarterly basis. Each warrant entitles
Motorola to purchase 75 Class 1 Interests at an exercise price of $.01 per
interest, subject to anti-dilution adjustments. The warrants may be exercised
after five years from date of issuance and expire ten years from date of
issuance. Motorola earned 29,836 and 64,518 warrants to purchase Class 1
Interests in accordance with the Guarantee Agreement during the years ended
December 31, 1996 and 1997, respectively. The Parent recognized $25,719,000 and
$55,615,000 as an expense to reflect the fair market value of the warrants
earned by Motorola for the years ended December 31, 1996 and 1997, respectively.
At December 31, 1996 and 1997, $505,000,000 and $210,000,000, respectively, was
outstanding under the Guaranteed Bank Facility.

SENIOR SECURED BANK LINE OF CREDIT

Iridium has entered into a Credit Agreement with Chase Securities Inc., The
Chase Manhattan Bank, Barclays Bank PLC and Barclays Capital, the investment
banking division of Barclays Bank PLC, and a syndicate of lenders (the "Secured
Lenders") for a senior bank facility in a principal amount of $1 billion (the
"Secured Bank Facility"), of which $250 million is not available for borrowings
prior to the commercial activation date. The Secured Bank Facility is secured by
substantially all of Iridium's assets. The Secured Bank Facility is further
secured by the Reserve Capital Call and all of the Parent's membership interests
in Iridium. The availability of the Secured Bank Facility is subject to
significant conditions, including technical conditions relating to the IRIDIUM
System, conditions relating to regulatory approvals and conditions relating to
other financing sources. Borrowings under the Secured Bank Facility mature on
September 30, 1998, subject to Iridium's right to extend such maturity until up
to June 30, 1999 if it can demonstrate by July 1, 1998 that it has sufficient
available or committed financing for its budgeted project costs through such
extended maturity. At December 31, 1997, $350,000,000 was outstanding under the
Secured Bank Facility.

F-28
<PAGE> 138
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT -- (CONTINUED)
NOTES PAYABLE

On July 16, 1997, the Parent, IWCL and Iridium Capital Corporation
completed an offering (the "High Yield Offering") of (i) 300,000 units, each
consisting of $1,000 principal amount of 13% Senior Notes due 2005, Series A
("Series A Notes"), and one IWCL Warrant representing the right to purchase 5.2
shares of Class A Common Stock of IWCL, and (ii) $500 million aggregate
principal amount of 14% Senior Notes due 2005, Series B ("Series B Notes").
Concurrent with the Asset Drop-Down Transaction, the Parent's obligations under
the Series A Notes and Series B Notes were assigned to Iridium. The Series A
Notes and Series B Notes are guaranteed by Iridium Roaming LLC and Iridium IP
LLC. The aggregate net proceeds received was approximately $746 million.
Interest on the Series A Notes and Series B Notes is payable in cash
semi-annually on January 15th and July 15th of each year, commencing on January
15, 1998. The notes are redeemable at the option of Iridium, in whole or in
part, at any time on or after July 15, 2002. The Series A and Series B Notes
mature on July 15, 2005. The IWCL Warrants represent, in aggregate, the right to
purchase 1,560,000 shares of Class A Common Stock of IWCL. The exercise price of
each IWCL Warrant is $20.90 per share. The IWCL Warrants are exercisable at any
time on or after one year from the date of the original issuance and expire on
July 15, 2005. Concurrent with the issuance of IWCL Warrants in the High Yield
Offering, the Parent issued to IWCL 1,560,000 LLC Interest Warrants, each
exercisable for one Class 1 Interest at an exercise price of $20.90 per LLC
Interest Warrant. IWCL and the Parent have agreed that one LLC Interest Warrant
must be exercised upon the exercise of each IWCL Warrant. Approximately
$17,113,000 of the proceeds of the High Yield Offering was allocated to the
purchase price of the LLC Interest Warrants.

On October 17, 1997, the Parent and Iridium Capital Corporation completed
an offering of $300 million principal amount of 11 1/4% Senior Notes due 2005,
Series C ("Series C Notes"). Concurrent with the Asset Drop-Down Transaction,
the Parent's obligations under the Series C Notes were assigned to Iridium. The
Series C Notes are guaranteed by Iridium Roaming LLC and Iridium IP LLC. The net
proceeds received were approximately $293 million. Interest on the Series C
Notes is payable in cash semi-annually on January 15th and July 15th of each
year, commencing on January 15, 1998. The Series C Notes are redeemable at the
option of Iridium, in whole or in part, at any time on or after July 15, 2002.
The Series C Notes mature on July 15, 2005.

Notes payable, net of discounts, for the year ended December 31, 1997
consists of the following (in thousands):

<TABLE>
<CAPTION>
1997
----------
<S> <C>
13% Senior Notes due 2005, Series A......................... $ 276,439
14% Senior Notes due 2005, Series B......................... 477,849
11 1/4% Senior Notes due 2005, Series C..................... 300,000
----------
$1,054,288
==========
</TABLE>

LONG-TERM DEBT DUE TO MEMBERS

During 1996, the Parent sold units to certain of its members and their
affiliates; each unit consisting of $1,000 principal amount at maturity 14 1/2%
Senior Subordinated Discount Notes due 2006 (the "Notes") and one warrant to
purchase 10.40775 Class 1 Interests, for aggregate proceeds of approximately
$238,453,000. Concurrent with the Asset Drop-Down Transaction, the Parent's
obligations under the Notes were assigned to Iridium. The Notes are unsecured
and are subordinate to all senior debt of Iridium. The Notes fully accrete to an
aggregate face value of $480,150,000 on March 1, 2001 and mature on March 1,
2006. Each Note accrues

F-29
<PAGE> 139
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. DEBT -- (CONTINUED)
cash interest at a rate of 14 1/2% per annum, payable semi-annually commencing
on September 1, 2001. The Notes will be subject to redemption, at the option of
Iridium, at any time on or after March 1, 2001. The warrants entitle the holder
to purchase Class 1 Interests at an exercise price of $.01 per interest, are
exercisable on March 1, 2001 and expire on March 1, 2006. The Parent recognized
the estimated fair market value of these warrants of $31,761,000 as an addition
to members' equity.

6. INCOME TAXES

From inception through July 29, 1996, Iridium, Inc. was subject to U.S.
federal and state and local income taxes directly, and accordingly, recognized
provisions for income taxes for U.S. federal and for all state and local
jurisdictions. Subsequent to the merger of Iridium, Inc. into a limited
liability company, the Parent is no longer subject to U.S. federal income tax
directly; however, the Parent is subject to District of Columbia franchise
taxes.

The Parent's provision for income taxes for the years ended December 31,
1995, 1996, and 1997 consists of the following (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current
- -- Federal.......................................... $1,258 $3,435 $ --
- -- State and Local.................................. 426 1,154 --
Deferred
- -- Federal.......................................... -- -- --
- -- State and Local.................................. -- -- --
------ ------ ------
$1,684 $4,589 $ --
====== ====== ======
</TABLE>

The primary reconciling differences between income tax expense and the
amount of tax benefit that would be expected to result by applying the Federal
statutory rate of 35% to the loss before income taxes for the years ended
December 31, 1995 and the period from January 1, 1996 to July 29, 1996 (the date
of the merger of Iridium, Inc. into Iridium) relate primarily to the
capitalization for tax purposes of certain start-up expenditures, and state and
local taxes. The capitalization of start-up expenditures resulted in Iridium,
Inc.'s only significant deferred tax asset of $19,944,000 at December 31, 1995,
for which a 100% valuation allowance was established. Subsequent to the date of
the merger of Iridium, Inc. into the Parent, the Parent recognizes deferred
taxes for those jurisdictions for which the Parent is taxed directly, resulting
in a deferred tax asset for capitalized start-up expenditures of $4,774,000 and
$34,599,000 at December 31, 1996 and 1997, respectively, for which a 100%
valuation allowance has been established.

F-30
<PAGE> 140
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. TRANSACTIONS WITH MEMBERS

MANAGEMENT SERVICES AGREEMENT

In connection with the IWCL IPO, the Parent and IWCL entered into a
Management Services Agreement. The Management Services Agreement was amended and
restated in connection with the Asset Drop-Down Transaction to add Iridium as a
party.

Pursuant to the Management Services Agreement, the Parent has agreed to
supervise and manage the day-to-day activities of Iridium. Among other things,
the Parent is responsible for administering the following functions of Iridium:
contract administration (including the Space System Contract, the TNDC and the
O&M Contract), treasury, accounting, legal, tax, insurance, licenses and permits
and securities law compliance. The Parent similarly has agreed to supervise and
manage the day-to-day operations of IWCL. Among other things, the Parent is
responsible for administering the following functions of IWCL: treasury,
accounting, legal, tax, insurance, licenses and permits and securities law
compliance. In addition, Parent has agreed to advance funds to IWCL in the event
that IWCL does not have sufficient funds to pay income or similar taxes. The
Parent does not receive fees or reimbursement from IWCL for its services to IWCL
under the Management Services Agreement; however, the cost of such services
provided to IWCL to date is not significant.

In return for such services, Iridium has agreed to provide sufficient
funds, on a cost reimbursable basis, to the Parent to enable the Parent to
manage the business and operations of each of Iridium and IWCL, including
payments of Parent's obligations to its employees, consultants and directors,
and payments for Parent's office space and equipment, sales, general operating
and administrative expenses, insurance and its obligations under certain
contracts.

SUPPORT AGREEMENT

Under a Support Agreement, Motorola provides certain general and
administrative support to the Parent and its subsidiaries. On a cost
reimbursable basis, Motorola has provided payroll processing and related
benefits to the Parent employees, processed payments to certain contractors
providing support to the Parent, and provided other administrative support. In
connection with the Asset Drop-Down Transaction, the Parent assigned the Support
Agreement to Iridium. The amounts and nature of such costs for the years ended
December 31, 1995, 1996 and 1997 consist of the following (in thousands):

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Consulting.............................................. $603 $826 $643
Other................................................... 1 26 5
---- ---- ----
$604 $852 $648
==== ==== ====
</TABLE>

As of December 31, 1996, and 1997, the balance payable to Motorola under
the Support Agreement was approximately $563,000 and $0, respectively.

SPACE SYSTEM CONTRACT

The Parent entered into the Space System Contract with Motorola to design,
develop, produce and deliver the Space Segment component of the IRIDIUM System.
In connection with the Asset Drop-Down Transaction, the Parent assigned the
Space System Contract to Iridium. Under this fixed priced contract, Motorola
will construct the space vehicles and place them into low-earth orbits for a
contract price of $3.45 billion (subject to certain adjustments). The scheduled
date of commencement of commercial operations is September 1998. For the years
ended December 31, 1995, 1996 and 1997, $802 million,

F-31
<PAGE> 141
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. TRANSACTIONS WITH MEMBERS -- (CONTINUED)
$836 million, and $577 million, respectively, was incurred under the Space
System Contract. Such costs are capitalized as system under construction in the
accompanying consolidated balance sheets and are transferred to property and
equipment as the underlying assets are placed into service. As of December 31,
1996 and 1997, the balance payable to Motorola under the Space System Contract
was $100 million and $0, respectively.

The aggregate fixed and determinable portion of all remaining obligations
under the Space System Contract is $589 million expected to be payable in 1998.

TERRESTRIAL NETWORK DEVELOPMENT CONTRACT

The Parent entered into the Terrestrial Network Development Contract
("TNDC") with Motorola for an original amount of $160 million. In connection
with the Asset Drop-Down Transaction, the Parent assigned the TNDC to Iridium.
Under the TNDC, Motorola is designing and developing the terrestrial gateway
hardware and software. The payments under the original contract are tied to the
completion of milestones specified in the contract. During 1996, the TNDC was
amended to obligate Motorola to provide additional services and support under
the TNDC in exchange for an additional $18.9 million. In lieu of a cash payment
for the $18.9 million from Iridium, the Parent may, at its election, issue 5,545
warrants to purchase Class 1 Interests to Motorola. The warrants, if issued,
have an exercise price of $.01 and may be exercised beginning March 1, 2001 and
will expire on March 1, 2006. During 1997, the TNDC was further amended to
obligate Motorola to provide additional services and support bringing the total
contract price of the TNDC to $284 million. Certain of the Parent's members will
own the individual gateways and will have no obligation to Iridium or the Parent
for any of the amounts due to Motorola under the TNDC. For the years ended
December 31, 1996 and 1997, Iridium incurred $64 million and $74 million,
respectively, under the TNDC. Such costs are capitalized as system under
construction in the accompanying consolidated balance sheets. As of December 31,
1996 and 1997, the balance payable to Motorola under the TNDC was $0 and $11
million, respectively.

The aggregate fixed and determinable portion of all remaining obligations
under the TNDC, assuming that all obligations are settled in cash, is as follows
(in thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
------------------------
<S> <C>
1998........................................................ $139,405
1999........................................................ 6,000
--------
$145,405
--------
</TABLE>

OPERATIONS AND MAINTENANCE CONTRACT

To provide for the operations and maintenance of the space segment upon
completion of the Space System Contract, the Parent entered into the Operations
and Maintenance Contract ("O&M") with Motorola. In connection with the Asset
Drop-Down Transaction, the Parent assigned the O&M contract to Iridium. This
contract obligates Motorola for a period of five years after completion of the
final milestone under the Space System Contract to operate the Space System, and
to exert its best efforts to monitor, upgrade and replace hardware and software
of the space segment (including the individual space vehicles) at specified
levels, in exchange for specified quarterly payments. Such payments are expected
to begin in 1998 and to aggregate approximately $2.88 billion. During 1996, a
two-year option agreement was entered into for the extension of the O&M contract
with Motorola after the completion of the initial five-year term. If such option
is exercised, Iridium will be obligated to make quarterly payments expected to
aggregate an additional $1.33 billion. Upon commencement of the O&M, Iridium
will capitalize the portion of the costs incurred that

F-32
<PAGE> 142
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. TRANSACTIONS WITH MEMBERS -- (CONTINUED)
pertain to hardware and software components of the space segment that extend its
useful life. The portion of the costs of the O&M associated with day-to-day
operations will be expensed as incurred. Assuming that commercial operations
commence in September 1998, the aggregate fixed and determinable portion of all
obligations under the O&M is expected to be as follows (in thousands):

<TABLE>
<CAPTION>
AMOUNT
----------
YEAR ENDING DECEMBER 31,
- ------------------------------------------------------------
<S> <C>
1998........................................................ $ 129,000
1999........................................................ 537,000
2000........................................................ 558,000
2001........................................................ 581,000
2002........................................................ 605,000
2003........................................................ 472,000
----------
$2,882,000
==========
</TABLE>

GATEWAY OWNERS INCENTIVES

The Parent has agreed to issue warrants to purchase 300,000 Class 1
Interests to each gateway owner whose specified gateway activities are completed
on schedule, and warrants to purchase 7,500 Class 1 Interests for each $1
million of cumulative IRIDIUM System service revenue generated within 15 months
of commercial activation, but in no event will warrants to purchase more than an
aggregate of 9,165,000 Class 1 Interests be issued to all gateway owners. The
warrants will have terms identical to those issued to Motorola under the
Guarantee Agreement (see Note 5). IWCL and Iridium LLC have executed a Share
Issuance Agreement which provides that all net proceeds from future primary
offerings of securities by IWCL will be invested in Class 1 Interests in Iridium
LLC.

8. EMPLOYEE BENEFITS

The Parent has adopted a comprehensive performance incentive and retirement
benefit package. The performance incentive program became effective in 1993,
while the various retirement plans became effective on February 1, 1994.

INCENTIVE PROGRAMS

The Parent has established short and long-term incentive plans primarily
based on employee performance. Effective December 3l, 1995, the Parent
terminated the long-term incentive plan. The remaining liability of the
long-term incentive plan is approximately $2,426,000 and $1,738,000 as of
December 31, 1996 and 1997, respectively, and is expected to be paid in 1999.
Under these plans, the Parent incurred expenses of approximately $1,300,000,
$1,252,000 and $3,412,000 for the years ended December 31, 1995, 1996, and 1997,
respectively.

401(K) EMPLOYEE RETIREMENT SAVINGS PLAN

The Parent adopted a 401(k) employee retirement savings plan in 1994
covering all employees. The Parent makes matching contributions to this
qualified plan on behalf of participating employees up to 3% of employees'
compensation. Employee contributions to the plan vest immediately. The Parent's
contributions vest ratably over a seven-year period, including service credit
for any prior employment with Motorola. Under

F-33
<PAGE> 143
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. EMPLOYEE BENEFITS -- (CONTINUED)
this plan, the Parent has incurred approximately $161,000, $288,000 and $558,000
during the years ended December 31, 1995, 1996 and 1997, respectively.

RETIREMENT PLANS

All employees of the Parent are covered by a non-contributory defined
benefit retirement plan. Vesting in plan benefits generally occurs after five
years. Benefits under the plan are based on years of credited service (including
any prior employment with Motorola), age at retirement and the average earnings
over the last four years. The plan is funded annually in accordance with the
Employee Retirement Income Security Act of 1974.

In early 1995, the Parent adopted a non-qualified defined benefit plan
covering employees earnings in excess of the maximum amounts which may be
considered under the qualified plan, excluding those executives participating in
the supplemental executive plans described below, who also participate in the
qualified defined benefit plan.

SUPPLEMENTAL EXECUTIVE PLANS

The Parent maintains a non-qualified benefit plan for selected senior
officers. Vesting in these plans generally occurs upon the attainment of age 55
with five years of service. Benefits under these plans are based on average
annual compensation prior to retirement. The Parent has also agreed to provide
for the payment of certain taxes associated with plan benefits. The supplemental
executive plans are not funded. The net periodic pension cost recognized under
the plans was approximately $1,256,000, $1,925,000, and $2,420,000 for the years
ended December 31, 1995, 1996, and 1997, respectively. For the years ended
December 31, 1996 and 1997, the amounts provided to cover taxes associated with
the plan benefits were $736,000 and $639,000, respectively. In addition, the
Parent recorded an additional minimum pension liability adjustment of $332,000
and $90,000 for the years ended December 31, 1996 and 1997, respectively, for
its non-qualified plans. The additional minimum pension liability is included as
a reduction to members' equity.

SUMMARY OF DEFINED BENEFIT PLANS

Pension cost for the qualified and non-qualified defined benefit plans in
total for the years ended December 31, 1995, 1996 and 1997, are as follows (in
thousands):

<TABLE>
<CAPTION>
1995 1996 1997
--------------------- --------------------- ---------------------
NON- NON- NON-
QUALIFIED QUALIFIED QUALIFIED QUALIFIED QUALIFIED QUALIFIED
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service cost............ $372 $377 $789 $ 438 $1,292 $ 512
Interest cost on
projected benefit
obligation............ 70 246 133 339 206 285
Actual return on
assets................ (66) -- (82) -- (138) --
Amortization of
actuarial loss........ -- -- -- 51 -- 6
Amortization of
transition
obligation............ 19 238 19 238 19 238
---- ---- ---- ------ ------ ------
Net periodic cost....... $395 $861 $859 $1,066 $1,379 $1,041
==== ==== ==== ====== ====== ======
</TABLE>

F-34
<PAGE> 144
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. EMPLOYEE BENEFITS -- (CONTINUED)
The following table describes the funded status of the plans at December
31, 1996 and 1997 (in thousands). The actuarial calculations were determined by
the Parent's consulting actuaries:

<TABLE>
<CAPTION>
1996 1997
--------------------- ---------------------
NON- NON-
QUALIFIED QUALIFIED QUALIFIED QUALIFIED
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Accumulated present value of
obligations:
Accumulated benefit obligation,
including vested benefits............. $(1,828) $(2,746) $(3,334) $(2,269)
======= ======= ======= =======
Projected benefit obligation for service
rendered to date...................... $(2,554) $(5,179) $(4,772) $(5,039)
Plan assets at fair value............... 1,931 -- 3,757 --
------- ------- ------- -------
Projected benefit obligation in excess
of plan assets........................ (623) (5,179) (965) (5,039)
Unrecognized transition obligation...... 320 2,360 302 2,123
Unrecognized net (gain) loss............ (227) 609 118 870
------- ------- ------- -------
Accrued pension cost.................... (530) (2,210) (545) (2,046)
Adjustment required to recognize minimum
liability............................. -- (733) -- (643)
------- ------- ------- -------
Pension liability....................... $ (530) $(2,943) $ (545) $(2,689)
======= ======= ======= =======
Actuarial assumptions:
Discount rate........................... 7.5% 7.5% 7% 7%
Long-term rate of return................ 8% 8% 8% 8%
Salary increases........................ 5% 7.5% 5% 7.5%
</TABLE>

OPTION PLAN OF IRIDIUM LLC

The Parent has established a plan under which executive officers and
managers of the Parent are awarded options to purchase Class A Common Stock (the
"Option Plan") of IWCL. The Option Plan covers 2,625,000 shares of Class A
Common Stock of IWCL. The Option Plan also permits the award of stock
appreciation rights in connection with any grant of options. As of December 31,
1997, options covering 2,004,556 shares of Class A Common Stock of IWCL had been
granted. As of that date, no stock appreciation awards had been granted. The
right to exercise the options vests, pro rata, over a period of five years.
Pursuant to the Share Issuance Agreement, IWCL has agreed that upon the exercise
of any options, it will issue to the Parent, for delivery to an exercising
option holder, the number of shares of Class A Common Stock of IWCL covered by
the exercised options and the Parent has agreed to simultaneously deliver to
IWCL a like number of Class 1 Interests, subject to anti-dilution adjustments.
The exercise price of the option will be paid to the Parent and will represent
payment for the Class A Common Stock by the exercising option holder and for the
Class 1 Interests by IWCL.

As of December 31, 1996 and 1997, 2,625,000 Class 1 Interests have been
reserved for issuance to IWCL in connection with the Option Plan. As permitted
by Statement 123, the Parent applies the intrinsic value method in accounting
for compensation cost under this plan. Accordingly, no compensation expense is
recognized for options to acquire Class A Common Stock of IWCL granted at an
exercise price equal to or exceeding the fair market value as of the date of
grant. For the year ended December 31, 1997, the Parent recognized $152,000 in
compensation expense for options to acquire Class A Common Stock of IWCL

F-35
<PAGE> 145
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. EMPLOYEE BENEFITS -- (CONTINUED)
granted at an exercise price that was below fair market value at the date of
grant. Had compensation cost been determined consistent with the fair value
method of Statement 123, the parent's net loss and net loss per Class 1 Interest
would have been increased to the pro forma amounts indicated below (in thousands
except per interest data) for the years ended December 31, 1996 and 1997:

<TABLE>
<CAPTION>
1996 1997
-------- ---------
<S> <C> <C>
Net loss
As reported....................................... $(73,598) $(293,553)
Pro forma......................................... (74,172) (296,132)
Net loss per Class 1 Interest
As reported....................................... $ .64 $ 2.25
Pro forma......................................... .65 2.27
</TABLE>

During 1996 and 1997, the fair value of options granted are estimated on
the dates of the grants using the Black-Scholes Option Pricing Model with the
following weighted-average assumptions: dividend yield of 0.0%, expected
volatility of 45%, risk-free interest rates from 5.97% to 6.76%, and expected
life of five years. The effects on compensation cost as determined under
Statement 123 on net loss in 1996 and 1997 may not be representative of the
effects on pro forma net income (loss) for future periods. The weighted-average
contractual life for options outstanding at December 31, 1996 and 1997 was 9.39
and 8.92 years, respectively.

A summary of the Parent's stock option activity, and related information
for the years ended December 31, 1996 and 1997 follows:

<TABLE>
<CAPTION>
WEIGHTED WEIGHTED
INTERESTS AVERAGE INTERESTS AVERAGE
UNDER EXERCISE UNDER EXERCISE
OPTION PRICE OPTION PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding -- beginning of year....... -- -- 729,750 $13.33
Granted.............................. 729,750 $13.33 1,309,775 14.24
Exercised............................ -- -- (3,262) 13.33
Forfeited............................ -- -- (31,707) 13.33
------- ------ -------- ------
Outstanding -- end of year............. 729,750 $13.33 2,004,556 $13.92
======= ====== ======== ======
Options exercisable at end of year..... -- -- 397,145 $13.33
Weighted-average fair value of options
during the year...................... $ 6.50 $ 8.35
</TABLE>

The range of exercise prices of options outstanding at December 31, 1997
was $13.33 to $52.50.

9. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following table presents the carrying amounts and estimated fair values
of financial instruments as of December 31, 1996 and 1997 (in thousands):

<TABLE>
<CAPTION>
1996 1997
--------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Bank facilities.................. $505,000 $505,000 $ 560,000 $ 560,000
Long-term debt due to Members.... 230,904 230,904 273,302 273,302
Senior Notes, Series A, B, and
C.............................. -- -- 1,054,288 1,156,000
</TABLE>

F-36
<PAGE> 146
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. FAIR VALUE OF FINANCIAL INSTRUMENTS -- (CONTINUED)
The fair value of long-term debt is estimated based on the current rates
offered for similar debt. The carrying amounts of due from affiliates and
accounts payable and accrued expenses approximate their fair market value as of
December 31, 1996 and 1997 because of the relatively short duration of these
assets.

10. OPERATING LEASE COMMITMENTS

The Parent leases its corporate headquarters office space and other office
space and equipment under non-cancelable operating lease agreements. The initial
lease term for the corporate headquarters office space is seven years. Future
minimum payments under all operating lease arrangements are as follows (in
thousands):

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ -------
<S> <C>
1998........................................................ $ 8,417
1999........................................................ 8,459
2000........................................................ 8,440
2001........................................................ 5,755
2002........................................................ 4,951
2003 and beyond............................................. 7,985
-------
$44,007
=======
</TABLE>

Rental expense under operating leases for the years ended December 31,
1995, 1996 and 1997 was approximately $1,025,000, $1,194,000, and $7,821,000,
respectively.

11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

In thousands, except member interest data:

The following is a summary of results of operations for each of the fiscal
quarters during 1995:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating expenses..................... $5,753 $6,083 $5,911 $9,440 $27,187
Net loss............................... 4,528 5,033 5,092 8,992 23,645
Net loss applicable to Class 1
Interests............................ 4,528 5,033 5,092 8,992 23,645
Net loss per Class 1 Interest.......... 0.07 0.07 0.06 0.09 0.27
</TABLE>

The following is a summary of results of operations for each of the fiscal
quarters during 1996:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Operating expenses.................. $8,410 $10,321 $19,621 $33,052 $71,404
Net loss............................ 7,663 9,840 24,232 31,863 73,598
Net loss applicable to Class 1
Interests......................... 7,663 10,679 25,812 33,096 77,250
Net loss per Class 1 Interest....... 0.07 0.09 0.21 0.28 0.64
</TABLE>

F-37
<PAGE> 147
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) -- (CONTINUED)
The following is a summary of results of operations for each of the fiscal
quarters during 1997:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH TOTAL
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating expenses............... $36,054 $48,414 $84,997 $127,133 $296,598
Net loss......................... 35,928 47,926 84,095 125,604 293,553
Net loss applicable to Class 1
Interests...................... 37,602 49,242 85,412 127,000 299,256
Net loss per Class 1 Interest.... 0.31 0.40 0.60 0.90 2.25
</TABLE>

F-38
<PAGE> 148

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
------------ -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 9,040 $ 65,207
Restricted cash........................................ 350,220 --
Due from affiliates.................................... 13,604 20,667
Prepaid expenses and other current assets.............. 6,612 18,407
---------- -----------
Total current assets.............................. $ 379,476 $ 104,281
Property and equipment, net................................. 1,526,326 2,865,070
System under construction................................... 1,625,054 523,739
Other assets................................................ 114,831 71,512
---------- -----------
Total assets...................................... $3,645,687 $ 3,564,602
========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses.................. $ 106,794 $ 101,036
Accounts payable to Member............................. 10,601 221,765
Bank facilities, current portion....................... 350,000 681,500
---------- -----------
Total current liabilities......................... $ 467,395 $ 1,004,301
Bank facilities, net of current portion..................... 210,000 --
Long-term debt due to Members............................... 273,302 310,149
Notes payable, $1,450,000 principal amount as of September
30, 1998.................................................. 1,054,288 1,404,742
Other liabilities........................................... 6,065 11,169
---------- -----------
Total liabilities................................. $2,011,050 $ 2,730,361
---------- -----------
Commitments and Contingencies
Members' equity:
Class 2 Interests, authorized 50,000 interests for
Series M; authorized an aggregate of 300,000 interests
for Series A, Series B and Series C:
Series M, convertible, no interests issued and
outstanding..................................... -- --
Series A, redeemable, convertible, 39,907 and
$44,406 interest issued and outstanding;
liquidation value of $39,907 and $44,406........ 39,907 44,406
Series B, redeemable, 1 interest and
outstanding..................................... -- --
Series C, redeemable, 79 interests issued and
outstanding..................................... -- --
Class 1 Interests, authorized 225,000,000 interests,
141,222,442 and 141,415,495 interest issued and
outstanding........................................... 2,024,220 2,031,835
Deferred Class 1 Interest compensation................. (1,454) (1,242)
Adjustment for minimum pension liability............... (643) (643)
Deficit accumulated during the development stage....... (427,393) (1,240,115)
---------- -----------
Total members' equity............................. 1,634,637 834,241
---------- -----------
Total liabilities and members' equity............. $3,645,687 $ 3,564,602
========== ===========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

F-39
<PAGE> 149

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF LOSS
(IN THOUSANDS EXCEPT MEMBER INTEREST DATA)

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 14, 1991
THREE MONTHS ENDED NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, SEPTEMBER 30, THROUGH
------------------------- ------------------------- SEPTEMBER 30,
1997 1998 1997 1998 1998
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES
Sales, general and
administrative.............. $ 39,061 $ 129,099 $ 122,926 $ 261,261 $ 574,652
Depreciation and
amortization................ 45,936 152,627 46,539 378,276 499,705
----------- ----------- ----------- ----------- ----------
Total operating
expenses............... 84,997 281,726 169,465 639,537 1,074,267
OTHER INCOME
Interest expense (income),
net......................... (902) 82,655 (1,516) 173,185 157,877
----------- ----------- ----------- ----------- ----------
Loss before provision for
income taxes................ 84,095 364,381 167,949 812,722 1,232,144
Provision for income taxes.... -- -- -- -- 7,971
----------- ----------- ----------- ----------- ----------
Net loss...................... $ 84,095 $ 364,381 $ 167,949 $ 812,722 $1,240,115
=========== =========== =========== =========== ==========
Preferred dividend
requirement................. 1,317 1,553 4,924 4,499
Net Loss applicable to Class 1
Interests................... $ 85,412 $ 365,934 $ 172,873 $ 817,221
=========== =========== =========== ===========
Net loss per Class 1
Interest -- basic and
diluted..................... $ 0.60 $ 2.59 $ 1.33 $ 5.78
=========== =========== =========== ===========
Weighted average interest used
in computing net loss per
Class 1 Interest -- basic
and diluted................. 141,219,180 141,324,251 130,065,304 141,289,887
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

F-40
<PAGE> 150

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
PERIOD FROM
JUNE 14, 1991
NINE MONTHS ENDED (INCEPTION)
SEPTEMBER 30, THROUGH
--------------------- SEPTEMBER 30,
1997 1998 1998
--------- --------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $(167,949) (812,722) $(1,240,115)
Adjustments to reconcile net loss to net cash used in
operating activities -
Depreciation and amortization........................... 46,539 378,276 499,705
Interest converted to additional debt................... -- 52,570 52,570
Expense recognized for warrants issued in connection
with debt guarantee.................................. 48,631 8,344 89,678
Employee Class 1 Interest compensation.................. 38 212 364
Loss on disposal of assets.............................. -- -- 87
Changes in assets and liabilities:
Increase in prepaid expenses and other current
assets............................................. (7,699) (4,266) (10,878)
Increase in due from affiliates...................... (10,142) (7,063) (20,667)
Decrease (Increase) in other assets.................. (36,825) (582) (19,241)
(Decrease) Increase in accounts payable and accrued
expenses........................................... 33,232 5,278 54,072
Increase (Decrease) in other liabilities............. (676) 5,104 11,089
--------- --------- -----------
Net cash used in operating activities.............. (94,851) (374,849) (583,336)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (4,189) (15,954) (39,209)
Additions to system under construction.................... (614,045) (365,386) (3,456,821)
--------- --------- -----------
Net cash used in investing activities.............. (618,234) (381,340) (3,496,030)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of Class 1 and Class 2
Interests............................................... 283,666 3,346 1,935,665
Net proceeds from issuance of senior notes and warrants... 745,939 341,742 1,619,384
Borrowings under guaranteed bank line of credit........... 410,000 346,500 1,506,500
Payments under guaranteed bank line of credit............. (680,000) (285,000) (1,235,000)
Borrowings under senior secured line of credit............ -- 60,000 410,000
Decrease in restricted cash............................... -- 350,220 --
Deferred financing costs.................................. (39,220) (4,452) (91,976)
--------- --------- -----------
Net cash provided by financing activities.......... 720,385 812,356 4,144,573
--------- --------- -----------
Increase in cash and cash equivalents....................... 7,300 56,167 65,207
CASH AND CASH EQUIVALENTS, beginning of period.............. 1,889 9,040 --
--------- --------- -----------
CASH AND CASH EQUIVALENTS, end of period.................... $ 9,189 $ 65,207 $ 65,207
========= ========= ===========
</TABLE>

The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

F-41
<PAGE> 151

IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION AND BUSINESS

Iridium LLC (the "Parent") and its subsidiaries are devoting substantially
all of their efforts to establishing and commercializing a global wireless
system -- the Iridium(R) Communications System (the "Iridium System") -- that
will enable subscribers to send and receive telephone calls virtually anywhere
in the world -- all with one phone, one phone number and one customer bill.

Iridium, Inc. was incorporated on June 14, 1991. Iridium, Inc. operated as
a wholly-owned subsidiary of Motorola, Inc. ("Motorola") until July 29, 1993. On
July 29, 1993, Iridium, Inc. closed on, and had its first capital draw under, a
private placement of shares of Common Stock, subscribed to by U.S. and foreign
investors. As a result of three private placements of equity, five supplemental
private placements with certain additional equity investors and proceeds
received from the initial public offering of common stock of Iridium World
Communications Ltd. ("IWCL"), Motorola's direct and indirect Class 1 Membership
Interest in the Parent has been reduced to approximately 19.3% as of September
30, 1998, before considering unexercised warrants held by Motorola.

On July 29, 1996, the Parent was formed as a limited liability company,
under the terms and conditions of the limited liability agreement ("LLC
Agreement"), pursuant to the provisions of the Delaware limited liability
company act. Also on July 29, 1996, Iridium, Inc. was merged with and into the
Parent, with the Parent as the surviving entity. Concurrent with the merger, all
shares of Common Stock of Iridium, Inc. were exchanged for Class 1 Membership
Interests in the Parent ("Class 1 Interests").

On December 18, 1997, the Parent entered into an asset drop-down
transaction ("the Asset Drop-Down Transaction") with Iridium Operating LLC
("Iridium"), a newly formed wholly-owned subsidiary of the Parent. Pursuant to
the Asset Drop-Down Transaction, substantially all of the assets and liabilities
of the Parent were transferred to Iridium, including, without limitation, all
liabilities with respect to the outstanding 13% Senior Notes due 2005, Series A
and 14% Senior Notes due 2005, Series B and the 11/4% Senior Notes due 2005,
Series C (collectively, the "Senior Notes"). Pursuant to the indentures relating
to the Senior Notes, Iridium has been substituted for the Parent, and the Parent
has been released from all obligations under the indentures relating to the
Senior Notes. All assets and liabilities were transferred to Iridium at the
Parent's carrying value. Accordingly, unless otherwise specified, references
within these notes to Iridium that relate to any action prior to the date of the
Asset Drop-Down Transaction should be construed as references to Parent, as
predecessor of Iridium. As a result of the Asset Drop-Down Transaction, the
Parent's only significant asset is its investment in Iridium.

2. BASIS OF PRESENTATION

In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments, consisting of only
normal recurring accruals, necessary for a fair presentation of the financial
position of the Parent and subsidiaries as of September 30, 1998, and the
results of their operations for the three and nine month periods ended September
30, 1998 and 1997, and the period from June 14, 1991 (inception) through
September 30, 1998, and their cash flows for the nine month periods ended
September 30, 1998 and 1997, and the period from June 14, 1991 (inception)
through September 30, 1998. These condensed consolidated financial statements
are unaudited, and do not include all related footnote disclosures. The results
of operations for the three and nine months ended September 30, 1998 are not
necessarily indicative of the results of operations expected in the future,
although the Parent continued to be a development stage limited liability
company until the commencement of commercial operations and anticipates a net
loss for the year. These financial statements should be read in conjunction with
the Parent's audited consolidated financial statements and footnotes thereto
included in the Annual Report on Form 10-K.

F-42
<PAGE> 152
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

3. MEMBERS' EQUITY

The Parent declared approximately $1,553,000 and $1,317,000 of in-kind
dividends to holders of Series A Class 2 Membership interests during the three
month periods ended September 30, 1998 and 1997, respectively, and $4,499,000
and $4,924,000 for the nine month periods ended September 30, 1998 and 1997,
respectively.

NOMAD PROGRAM

The Parent, in conjunction with IWCL, has commenced a NOMAD Program which
is designed to offer up to an aggregate of 2,500,000 shares of IWCL's Class B
Common Stock at a purchase price of $13.33 per share to certain governmental
telecommunication administrations and related entities as part of a
comprehensive program to enhance market access, improve the competitive standing
of the Iridium System and achieve appropriate regulatory approvals. As of
September 30, 1998, 20,625 shares of Class B Common Stock had been issued under
this program resulting in net proceeds of $275,000 to IWCL. In accordance with
the Share Issuance Agreement, IWCL invested the net proceeds in Parent in
exchange for 20,625 Class 1 Interests. The shares were recognized at a fair
value of $33.88 per share (the trading price of IWCL's Class A Common Stock at
the date of issue) with the difference between the purchase price and fair value
capitalized as license costs. During the nine months ended September 30, 1998,
$424,000 was capitalized to license costs under this program. No amounts were
capitalized during the nine months ended September 30, 1997.

4. SUPPLEMENTAL CASH FLOW INFORMATION

During the nine months ended September 30, 1998 and 1997, $247,438,000 and
$80,970,000, respectively, of interest costs were incurred. Interest expensed
for the nine months ended September 30, 1998 was $168,169,000 with the remaining
interest capitalized to the system under construction. For the nine months ended
September 30, 1997, all interest expense was capitalized to the system under
construction. Interest paid was $181,422,000 and $24,344,000 during the nine
months ended September 30, 1998 and 1997, respectively.

5. TRANSACTIONS WITH MEMBERS

GUARANTEED BANK FACILITY

In accordance with the Second Amended and Restated Agreement Regarding
Guarantee, dated May 11, 1998, among the Parent, Iridium and Motorola, pursuant
to which Motorola guaranteed Iridium's obligations under the Guaranteed Bank
Facility, an additional 9,209 and 56,416 warrants to purchase 690,675 and
4,231,200 Class 1 Interests, respectively, were earned by Motorola during the
nine months ended September 30, 1998 and 1997, respectively. The Parent
recognized $8,344,000 and $48,631,000 as expense during the nine months ended
September 30, 1998 and 1997, respectively, in connection with the warrants
earned by Motorola. Warrant expense for the three months ended September 30,
1998 and 1997 was $459,000 and $13,364,000, respectively.

The Second Amended and Restated Agreement Regarding Guarantee provides
that, when the Guaranteed Bank Facility and Motorola's Guarantee have been
permanently reduced to $275 million or less, the Parent and Iridium have the
option to compensate Motorola for its Guarantee by having the Parent continue to
pay warrant compensation at the existing rate or (i) having Iridium pay 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 and
Series B Senior Notes plus (ii) having the Parent pay substantially reduced
warrant compensation based on the number of warrants issued in connection with
the offering of the Series A Notes

F-43
<PAGE> 153
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. TRANSACTIONS WITH MEMBERS -- (CONTINUED)
(the "High Yield Compensation"). Interest incurred on the guaranteed amount was
$5,094,000 and $7,927,000 for the three and nine months ended September 30,
1998, respectively.

On May 13, 1998, Iridium permanently reduced the commitment of the bank
lenders under the Guaranteed Bank Facility from $450 million to $275 million. As
a result of the reduction, the maximum number of warrants Motorola is expected
to earn as compensation for their guarantee of that facility from inception
until the expected maturity in June 1999 is 104,229 warrants to purchase
approximately 7,817,000 Class 1 Interests (assuming Iridium and Parent pay High
Yield Compensation, including interest on the guaranteed amount, through
maturity).

Currently, Iridium and the Parent have elected to pay Motorola High Yield
Compensation. While the Parent and Iridium expect that electing to pay High
Yield Compensation will reduce the effective cost of the Motorola Guarantee,
there can be no assurance that such expectation will prove correct or that the
Motorola Guarantee will not exceed $275 million.

STANDBY PURCHASE AGREEMENT

In an effort to ensure that sufficient quantities of hand-held phones and
pagers are available for distribution in advance of the commencement of
commercial operations, Parent has signed with Motorola and intends to enter into
with Kyocera Corporation, standby commitments to purchase an aggregate of up to
$400 million in subscriber equipment. The Motorola commitment would be triggered
on or after January 1, 1999, but only to the extent such subscriber equipment is
not purchased by and shipped to gateway operators or service providers prior to
January 1, 1999, and the Kyocera commitment is expected to contain similar
provisions triggered on or after February 8, 1999.

6. LONG TERM DEBT

On May 13, 1998, Iridium and Iridium Capital Corporation completed an
offering of $350 million principal amount of 10 7/8% Senior Notes due 2005,
Series D ("Series D Notes"). The Series D Notes are guaranteed by Iridium
Roaming LLC Iridium IP LLC and Iridium Facilities Corporation. The Series D
Notes have substantially the same terms as the Senior Notes other than interest
rate and issue date. The net proceeds received were approximately $342 million.
Interest on the Series D Notes is payable in cash semi-annually on January 15
and July 15 of each year, commencing on July 15, 1998. The Series D Notes are
redeemable at the option of Iridium, in whole or in part, at any time on or
after July 15, 2002. The Series D Notes mature on July 15, 2005.

7. EARNINGS PER SHARE

Basic earnings (loss) per Class 1 Interest is calculated by dividing net
income (loss), after considering required dividends on Class 2 Interests, by the
weighted average number of Class 1 Interests outstanding during the period.
Diluted earnings (loss) per share is calculated by dividing net income (loss),
after considering required dividends on Class 2 Interests, by the weighted
average number of Class 1 Interests and, to the extend dilutive, other
potentially dilutive securities outstanding during the period. Potentially
dilutive securities are comprised of options, warrants, and convertible Class 2
Interests. Due to the losses incurred during the three and nine months ended
September 30, 1998, the impact of other potentially dilutive securities is
anti-dilutive and is not included in the diluted earnings (loss) per Class 1
Interest calculations.

F-44
<PAGE> 154
IRIDIUM LLC
(A DEVELOPMENT STAGE LIMITED LIABILITY COMPANY)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

8. COMPREHENSIVE INCOME

In June 1997, the Financial Accounting Standards Board issued Statement No.
130, Reporting Comprehensive Income. Accumulated other comprehensive income
(loss) consists entirely of the minimum pension liability. The new disclosure
requirements with respect to comprehensive income are as follows:

<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
-------------------- ---------------------
1997 1998 1997 1998
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Comprehensive income (loss):
Net loss, as reported............ $(84,095) $(364,381) $(167,949) $(812,722)
Other comprehensive income
(loss)......................... -- -- -- --
-------- --------- --------- ---------
Total.................. $(84,095) $(364,381) $(167,949) $(812,722)
======== ========= ========= =========
Accumulated other comprehensive
income (loss):
Beginning of period.............. $ (733) $ (643) $ (733) $ (643)
======== ========= ========= =========
End of period.................... $ (733) $ (643) $ (733) $ (643)
======== ========= ========= =========
</TABLE>

9. IRIDIUM SUBSIDIARIES

Iridium Promotions, Inc. ("Promotions"), a Delaware Corporation and a
wholly-owned subsidiary of the Parent, was formed on September 11, 1998. Iridium
Geolink LLC ("Geolink"), a Delaware limited liability company and a wholly-owned
subsidiary of the Parent, was formed on August 25, 1998. Promotions and Geolink
have no assets or liabilities and have not engaged in any business activities.

F-45
<PAGE> 155

[PHOTO-PICTURE OF BRIEFCASE CONTAINING IRIDIUM PHONE BY MOTOROLA;
FOREGROUND INCLUDES IRIDIUM PAGER BY MOTOROLA AND VARIOUS ITEMS
USUALLY FOUND IN A BRIEFCASE]

THE GLOBAL BRIEFCASE

It used to be that when you left the office on a
long-distance business trip, you said goodbye to
productivity and connectivity. Now the business
traveler's mobile productivity has been enhanced by
a new level of connectivity. The Iridium global
mobile-phone, global pager, and world calling card
now enable you to stay in touch virtually anywhere
on Earth.

<PAGE> 156

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7,500,000 SHARES

[IRIDIUM LOGO]

IRIDIUM WORLD COMMUNICATIONS LTD.

CLASS A COMMON STOCK

-----------------------
PROSPECTUS
-----------------------

MERRILL LYNCH & CO.
GOLDMAN, SACHS & CO.
NATIONSBANC MONTGOMERY SECURITIES LLC
SALOMON SMITH BARNEY
SOUNDVIEW TECHNOLOGY GROUP

JANUARY 21, 1999

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