Iridium Communications Inc.
Iridium Communications Inc. (Form: 10-Q, Received: 08/02/2012 07:01:28)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

 

FORM 10-Q

 

 

(Mark One) 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2012

 

OR

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-33963

 

 

    

Iridium Communications Inc.

(Exact name of registrant as specified in its charter)

 

 

   

DELAWARE 26-1344998
(State of incorporation) (I.R.S. Employer Identification No.)
   
1750 Tysons Boulevard, Suite 1400, McLean, Virginia 22102
(Address of principal executive offices) (Zip code)

 

703-287-7400

(Registrant’s telephone number, including area code)  

 

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes   x     No   ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ¨ Accelerated filer x
Non-accelerated filer ¨    (Do not check if a smaller reporting company) Smaller reporting company ¨

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   ¨     No   x

 

The number of shares of the registrant’s common stock, par value $0.001 per share, outstanding as of July 25, 2012 was 74,010,232. 

 

 
 

  

IRIDIUM COMMUNICATIONS INC.

 

TABLE OF CONTENTS

 

ITEM
No.
  PAGE
     
Part I. Financial Information  
   
1. Financial Statements  
     
  Condensed Consolidated Balance Sheets 3
  Condensed Consolidated Statements of Operations and Comprehensive Income 4
  Condensed Consolidated Statements of Cash Flows 5
  Notes to Condensed Consolidated Financial Statements 6
     
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 12
     
3. Quantitative and Qualitative Disclosures About Market Risk 21
     
4. Controls and Procedures 21
     
Part II. Other Information  
   
1. Legal Proceedings 22
     
1A. Risk Factors 22
     
2. Unregistered Sales of Equity Securities and Use of Proceeds 24
     
3. Defaults Upon Senior Securities 24
     
4. Mine Safety Disclosures 24
     
5. Other Information 25
     
6. Exhibits 25
     
  Signatures 26

  

2
 

 

PART I.

 

Iridium Communications Inc.

Condensed Consolidated Balance Sheets

(In thousands, except per share data)

 

    June 30, 2012     December 31, 2011  
    (Unaudited)        
Assets                
Current assets:                
Cash and cash equivalents   $ 166,662     $ 136,366  
Accounts receivable, net     59,378       57,418  
Inventory     18,571       15,077  
Deferred tax assets, net     9,435       9,435  
Income tax receivable     4,347       4,330  
Prepaid expenses and other current assets     6,318       4,616  
Total current assets     264,711       227,242  
Property and equipment, net     1,008,636       843,092  
Restricted cash     40,664       27,154  
Other assets     585       584  
Intangible assets, net     77,027       83,552  
Deferred financing costs     114,227       105,523  
Goodwill     87,039       87,039  
Total assets   $ 1,592,889     $ 1,374,186  
                 
Liabilities and stockholders' equity                
Current liabilities:                
Accounts payable   $ 48,274     $ 24,816  
Accrued expenses and other current liabilities     31,453       29,791  
Interest payable     4,397       5,838  
Deferred revenue     38,878       35,445  
Total current liabilities     123,002       95,890  
Accrued satellite operations and maintenance expense, net of current portion     18,396       19,065  
Credit facility     567,988       417,133  
Deferred tax liabilities, net     134,251       127,297  
Other long-term liabilities     13,974       13,534  
Total liabilities     857,611       672,919  
                 
Commitments and contingencies                
                 
Stockholders' equity                
Preferred stock, $0.0001 par value, 2,000 shares authorized, none issued and outstanding     -       -  
Common stock, $0.001 par value, 300,000 shares authorized, 73,210 shares issued and outstanding at June 30, 2012, and 73,205 shares issued and outstanding at December 31, 2011     73       73  
Additional paid-in capital     685,796       681,781  
Retained earnings     49,719       19,638  
Accumulated other comprehensive loss, net of taxes     (310 )     (225 )
Total stockholders' equity     735,278       701,267  
Total liabilities and stockholders' equity   $ 1,592,889     $ 1,374,186  

 

See notes to unaudited condensed consolidated financial statements

 

3
 

 

Iridium Communications Inc.

Condensed Consolidated Statements of Operations and Comprehensive Income

(In thousands, except per share amounts)

(Unaudited)

 

    Three Months Ended June 30,     Six Months Ended June 30,  
    2012     2011     2012     2011  
                         
Revenue:                                
Services   $ 68,485     $ 65,156     $ 135,333     $ 126,326  
Subscriber equipment     23,914       21,913       45,454       46,323  
Engineering and support services     4,922       8,834       10,008       14,557  
Total revenue     97,321       95,903       190,795       187,206  
                                 
Operating expenses:                                
Cost of services (exclusive of depreciation                                
 and amortization)     15,988       19,758       33,991       36,697  
Cost of subscriber equipment     13,292       12,062       26,634       25,107  
Research and development     3,429       3,379       9,118       7,647  
Selling, general and administrative     17,970       16,297       36,118       33,716  
Depreciation and amortization     18,368       23,664       42,572       46,995  
Total operating expenses     69,047       75,160       148,433       150,162  
                                 
Operating income     28,274       20,743       42,362       37,044  
                                 
Other income (expense):                                
Interest income, net     121       262       189       547  
Undrawn credit facility fees     (2,582 )     (3,204 )     (5,361 )     (7,503 )
Other income (expense), net     (31 )     36       61       (41 )
Total other expense     (2,492 )     (2,906 )     (5,111 )     (6,997 )
Income before income taxes     25,782       17,837       37,251       30,047  
Provision for income taxes     (8,119 )     (6,154 )     (7,170 )     (10,065 )
Net income     17,663       11,683       30,081       19,982  
                                 
Foreign currency translation adjustments     (117 )     140       (85 )     171  
Comprehensive income   $ 17,546     $ 11,823     $ 29,996     $ 20,153  
                                 
Weighted average shares outstanding - basic     73,430       71,519       73,414       70,943  
Weighted average shares outstanding - diluted     76,061       73,653       75,738       73,164  
Net income per share - basic   $ 0.24     $ 0.16     $ 0.41     $ 0.28  
Net income per share - diluted   $ 0.23     $ 0.16     $ 0.40     $ 0.27  

 

See notes to unaudited condensed consolidated financial statements

 

4
 

 

Iridium Communications Inc.

  Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

    Six Months Ended June 30,  
    2012     2011  
Cash flows from operating activities:                
Net cash provided by operating activities   $ 89,389     $ 84,082  
                 
Cash flows from investing activities:                
Capital expenditures     (186,704 )     (170,871 )
Net cash used in investing activities     (186,704 )     (170,871 )
                 
Cash flows from financing activities:                
Borrowings under credit facility     150,855       130,127  
Payment of deferred financing fees     (9,778 )     (23,793 )
Cash restricted for debt service reserve     (13,510 )     (13,528 )
Proceeds from exercise of stock options and warrants     44       41  
Repayment of note payable     -       (22,223 )
Net cash provided by financing activities     127,611       70,624  
                 
Net increase (decrease) in cash and cash equivalents     30,296       (16,165 )
Cash and cash equivalents, beginning of period     136,366       119,932  
Cash and cash equivalents, end of period   $ 166,662     $ 103,767  
                 
Supplemental cash flow information:                
Interest paid   $ 2,907     $ -  
Income taxes paid   $ 254     $ -  
                 
Supplemental disclosure of non-cash investing activities:                
Property and equipment received but not paid for yet   $ 26,724     $ 41,384  
Interest capitalized but not paid   $ 5,471     $ 1,832  
Stock-based compensation capitalized   $ 311     $ 282  

 

See notes to unaudited condensed consolidated financial statements

 

5
 

 

Iridium Communications Inc.

Notes to Condensed Consolidated Financial Statements

 

1. Organization and Basis of Presentation

 

Iridium Communications Inc. (the “Company”) was initially formed in 2007 as GHL Acquisition Corp., a special purpose acquisition company. The Company acquired, directly and indirectly, all the outstanding equity of Iridium Holdings LLC in a transaction accounted for as a business combination on September 29, 2009 (the “Acquisition”). In accounting for the Acquisition, the Company was deemed the legal and accounting acquirer. On September 29, 2009, as a result of the Acquisition, the Company changed its name to Iridium Communications Inc.

 

The Company is a provider of mobile voice and data communications services on a global basis using a constellation of low-earth orbiting satellites. The Company holds various licenses and authorizations from the U.S. Federal Communications Commission (the “FCC”) and from foreign regulatory bodies that permit the Company to conduct its business, including the operation of its satellite constellation.

 

2. Significant Accounting Policies

 

Principles of Consolidation

 

The Company has prepared its condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The accompanying condensed consolidated financial statements include the accounts of (i) the Company, (ii) its wholly owned subsidiaries, and (iii) all less than wholly owned subsidiaries that the Company controls. All material intercompany transactions and balances have been eliminated.

 

In the opinion of management, the condensed consolidated financial statements reflect all normal recurring adjustments that the Company considers necessary for the fair presentation of its results of operations and cash flows for the interim periods covered, and of the financial position of the Company at the date of the interim condensed consolidated balance sheet. The operating results for interim periods are not necessarily indicative of the operating results for the entire year. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to instructions, rules and regulations prescribed by the U.S. Securities and Exchange Commission (“SEC”). While the Company believes that the disclosures are adequate to make the information not misleading, these interim condensed consolidated financial statements should be read in conjunction with the 2011 annual consolidated financial statements and notes included in its Form 10-K filed with the SEC on March 6, 2012.

 

Cash, Cash Equivalents and Restricted Cash

 

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. The cash and cash equivalents balances at June 30, 2012 and December 31, 2011 consisted of cash deposited in institutional money market funds, regular interest bearing and non-interest bearing depository accounts and certificates of deposit with commercial banks. The Company is required to maintain a minimum cash reserve for debt service related to the $1.8 billion loan facility (the “Credit Facility”). As of June 30, 2012 and December 31, 2011, the Company’s restricted cash balance, which represents a minimum cash reserve for debt service related to the Credit Facility and any interest earned on these amounts, was $40.7 million and $27.2 million, respectively.

 

Depreciation Expense

 

The Company calculates depreciation expense using the straight line method and evaluates the appropriateness of the useful life used in this calculation on a quarterly basis.  During the second quarter of 2012, the Company updated its analysis of the current satellite constellation’s health and remaining useful life. Based on the results of this analysis, the Company estimates that its current constellation of satellites will be operational for longer than previously expected.  As a result, the estimated useful life of the current constellation has been extended and is consistent with the expected deployment of the Company’s next-generation satellite constellation (“Iridium NEXT”). This change in estimated useful life resulted in a decrease in depreciation expense compared to the prior-year periods. The change in accounting estimate reduced the depreciation expense by $6.6 million for the three and six months ended June 30, 2012 and increased basic and diluted net income per share by $0.05 for the three and six months ended June 30, 2012.  The Company will continue to evaluate the useful life of its current constellation of satellites on an ongoing basis through full deployment and activation of Iridium NEXT.

 

6
 

 

Fair Value Measurements

 

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value.

 

The fair values of short-term financial instruments (primarily cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and other liabilities, and deferred revenue) approximated their carrying values as of the dates of the accompanying condensed consolidated balance sheets because of their short-term nature.

 

Stock-Based Compensation

 

The Company accounts for stock-based compensation at fair value. The fair value of stock options is determined at the grant date using the Black-Scholes option pricing model. The fair value of restricted stock units (“RSUs”) is equal to the closing price of the underlying common stock on the grant date. The fair value of an award that is ultimately expected to vest is recognized on a straight-line basis over the requisite service or performance period and is classified in the statement of operations in a manner consistent with the classification of the employee’s or non-employee director’s compensation. Stock-based awards to non-employee consultants are expensed at their fair value as services are provided according to the terms of their agreements and are classified in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations and comprehensive income.

 

Warranty Expense

 

The Company provides the first end-user purchaser of its subscriber equipment a warranty for one to five years from the date of purchase by such first end-user, depending on the product. The Company maintains a warranty reserve based on historical experience of warranty costs and expected occurrences of warranty claims on equipment. Costs associated with warranties, including equipment replacements, repairs, freight, and program administration, are recorded as cost of subscriber equipment in the accompanying condensed consolidated statements of operations and comprehensive income. During the six months ended June 30, 2012, certain production issues were identified related to the Iridium Extreme ® satellite handset. A reserve for the remediation of these issues contributed $1.2 million to the warranty provision during the six months ended June 30, 2012. Changes in the warranty reserve during the six months ended June 30, 2012 were as follows:

 

    Six Months Ended  
    June 30, 2012  
    (in thousands)  
Balance at beginning of the period   $ 4,101  
Provision     2,570  
Utilization     (1,718 )
Balance at end of the period   $ 4,953  

 

3. Commitments and Contingencies

 

Commitments

 

Thales

 

In June 2010, the Company executed a primarily fixed-price full-scale development contract (the “FSD”) with Thales Alenia Space France (“Thales”) for the design and build of satellites for Iridium NEXT. The total price under the FSD is $2.2 billion, and the Company expects payment obligations under the FSD to extend into the third quarter of 2017. As of June 30, 2012, the Company had made aggregate payments of $611.4 million to Thales, which were capitalized as construction in progress within property and equipment, net in the accompanying condensed consolidated balance sheet.

 

7
 

 

SpaceX

 

In March 2010, the Company entered into an agreement with Space Exploration Technologies Corp. (“SpaceX”) to secure SpaceX as the primary launch services provider for Iridium NEXT (the “SpaceX Agreement”). As of June 30, 2012, the Company had made aggregate payments of $43.9 million to SpaceX, which were capitalized as construction in progress within property and equipment, net in the accompanying condensed consolidated balance sheet.

 

In August 2012, the Company entered into an amendment to the SpaceX Agreement (the “SpaceX Amendment”). The SpaceX Amendment reduced the number of contracted launches and increased the number of satellites to be carried on each launch vehicle. The SpaceX Amendment also reduced the maximum price under the SpaceX Agreement from $492.0 million to $453.1 million. The Company's obligations to SpaceX under the SpaceX Amendment for the six months ending December 31, 2012 and the years ending December 31, 2013, 2014, 2015, 2016 and 2017 are $21.2 million, $4.6 million, $83.5 million, $169.1 million, $109.0 million and $21.8 million, respectively.

 

Kosmotras

 

In June 2011, the Company entered into an agreement with International Space Company Kosmotras (“Kosmotras”) as a supplemental launch service provider for Iridium NEXT (the “Kosmotras Agreement”). The Kosmotras Agreement provides for the purchase of up to six launches with options to purchase additional launches. Each launch can carry two satellites.  If all six launches are purchased, the Company will pay Kosmotras a total of $184.3 million. As of June 30, 2012, the Company had made aggregate payments of $11.2 million to Kosmotras, which were capitalized as construction in progress within property and equipment, net in the accompanying condensed consolidated balance sheet. If the Company elects to purchase all six launches, the remaining amounts owed under the contract will be paid through 2015 or 2016, depending on the launch schedule.

 

Based on the terms of the Kosmotras Agreement, if the Company does not purchase any launches by March 31, 2013, the Kosmotras Agreement will terminate and any amounts paid by the Company to Kosmotras in excess of $15.1 million will be refunded.    

 

Harris

 

In June 2012, Aireon LLC (“Aireon”), an indirect wholly owned subsidiary of the Company, entered into an agreement with Harris Corporation for the design, development and production of the payload for each of the planned Iridium NEXT satellites (the “Harris Agreement”). The Harris Agreement does not provide for any guarantee of payment by Iridium Communications Inc. or Iridium Satellite LLC, but the Company intends to make available an equity injection into Aireon in the form of up to $10 million worth of airtime credits to be used to satisfy a portion of the payments to be made by Aireon under the Harris Agreement in the event that Aireon cannot make such payments. Aireon’s obligations to Harris Corporation under the Harris Agreement for the six months ending December 31, 2012 and the years ending December 31, 2013, 2014, 2015, 2016 and 2017 are $9.5 million, $27.5 million, $49.0 million, $20.9 million, $6.2 million and $1.6 million, respectively.

 

Credit Facility

 

In October 2010, the Company entered into a $1.8 billion loan facility (the “Credit Facility”) with a syndicate of bank lenders (the “Lenders”). The Company had borrowed an aggregate total of $568.0 million as of June 30, 2012. The unused portion of the Credit Facility as of June 30, 2012 was $1.2 billion. Pursuant to the Credit Facility, the Company maintains a minimum cash reserve for repayment. As of June 30, 2012, the minimum required cash reserve balance was $40.5 million. This amount is included in restricted cash in the accompanying condensed consolidated balance sheet. This minimum cash reserve requirement will increase over the term of the Credit Facility and will be $189.0 million at the beginning of the repayment period, which is expected to begin in 2017.

 

Interest costs incurred under the Credit Facility were $6.1 million and $11.1 million for the three and six months ended June 30, 2012, respectively. All interest costs incurred related to the Credit Facility have been capitalized during the construction period of the Iridium NEXT assets. The Company pays interest on each semi-annual due date through a combination of a cash payment and a deemed additional loan. The $11.1 million in interest incurred during the six months ended June 30, 2012 consisted of $3.4 million payable in cash, of which $2.1 million was paid during the period and $1.3 million was accrued at period-end, and $7.7 million payable by deemed loans, of which $4.6 million was paid during the period and $3.1 million was accrued at period-end. The $6.1 million in interest incurred during the three months ended June 30, 2012 consisted of $1.9 million payable in cash and $4.2 million payable by deemed loans; no payments were made during the quarter. Total interest payable associated with the Credit Facility was $4.4 million and is included in interest payable in the accompanying condensed consolidated balance sheet as of June 30, 2012.

 

8
 

 

The Company also pays a commitment fee of 0.80% per year, in semi-annual installments, on any undrawn portion of the Credit Facility. The total commitment fee payable on the undrawn portion of the Credit Facility was $2.5 million and is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet as of June 30, 2012.

 

In August 2012, the Company entered into a supplemental agreement (the “Supplemental Agreement”) with the Lenders under the Credit Facility, to amend and restate the Credit Facility. The Credit Facility, as amended by the Supplemental Agreement, authorizes the Company to fund and operate Aireon for the purpose of establishing a space-based Automatic Dependent Surveillance-Broadcast business. Specifically, the amended Credit Facility excludes Aireon from the group of companies (Iridium Communications Inc. and its material subsidiaries) that are obligors under the Credit Facility and from the Company’s consolidated financial results for purposes of calculating compliance with the financial covenants. The amended Credit Facility allows the Company to make a $12.5 million investment in Aireon, the equity injection of up to $10 million worth of airtime credits in connection with the Harris Agreement described above, if needed, and an additional investment of up to $15 million raised from issuances of the Company’s common equity. The amended Credit Facility requires the Company to use any net distributions received from Aireon to repay its debt obligations under the Credit Facility and to grant the Lenders a security interest in the Company’s ownership interest in Aireon. The Supplemental Agreement does not modify the principal amount, interest rates, repayment dates, or maturity of the Credit Facility. The amended Credit Facility includes revised financial covenant levels to reflect changes in timing of expected receipts of cashflows from secondary payloads and other changing business conditions and revised launch and backup launch requirements to permit the amendment to the Company’s launch services agreement with SpaceX. Also, the Supplemental Agreement requires the Company to raise convertible preferred or common equity by April 30, 2013 in an amount approximately equal to any unexercised portion of the warrants to purchase the Company’s common stock at a price of $7.00 per share, which expire in February 2013.

 

Contingencies

 

From time to time, in the normal course of business, the Company is party to various pending claims and lawsuits. The Company is not aware of any such actions that it would expect to have a material adverse impact on its business, financial results or financial condition.

 

4. Stock-Based Compensation

 

During 2009, the Company’s stockholders approved a stock incentive plan (the “2009 Stock Incentive Plan”) to provide stock-based awards, including nonqualified stock options, incentive stock options, restricted stock and other equity securities, as incentives and rewards for employees, consultants and non-employee directors. As of December 31, 2011, 8.0 million shares of common stock were authorized for issuance as awards under the 2009 Stock Incentive Plan. In May 2012, the Company’s stockholders approved a new stock incentive plan (the “2012 Stock Incentive Plan”). The 2012 Stock Incentive Plan is intended as the successor to and continuation of the 2009 Stock Incentive Plan. Following the adoption of the 2012 Stock Incentive Plan, no additional stock awards may be granted under the 2009 Stock Incentive Plan. The aggregate number of shares of common stock initially authorized for issuance under the 2012 Stock Incentive Plan is 13,416,019 shares, which represents the sum of (A) 5,423,206 newly authorized shares, plus (B) the number of shares available for issuance under the 2009 Stock Incentive Plan prior to adoption of the 2012 Stock Incentive Plan, in an amount not to exceed 1,576,794 shares, plus (C) up to 6,416,019 shares subject to grants made for issuance under the 2009 Stock Incentive Plan that may become available for issuance under the 2012 Stock Incentive Plan from time to time as a result of expiration or termination of outstanding awards under the 2009 Stock Incentive Plan prior to exercise or vesting.

 

Non-employee directors elected to receive a portion of their 2012 annual compensation in the form of equity awards, in an aggregate of approximately 106,000 stock options and 106,000 RSUs. These stock options and RSUs were granted in January 2012 and vest over the remainder of 2012 with 25% vesting on the last day of each calendar quarter. The estimated aggregate grant-date fair value of the stock options was $0.3 million. The estimated aggregate grant-date fair value of the RSUs was $0.8 million.

 

During the three months ended June 30, 2012, the Company granted approximately 147,000 stock options to its employees. During the six months ended June 30, 2012, the Company granted approximately 745,000 stock options, 570,000 service-based RSUs, and 234,000 performance-based RSUs to its employees. Employee stock options and service-based RSUs generally vest over a four-year service period with 25% vesting on the first anniversary of the grant date and the remainder vesting ratably on a quarterly basis thereafter. The performance-based RSUs were awarded to the Company’s executives. Vesting of the performance-based RSUs is dependent upon the Company’s achievement of certain performance goals over a two-year measurement period. The number of performance-based RSUs that will ultimately vest may range from 0% to 150% of the original grant based on the level of achievement of the performance goals. Provided that the Company achieves the performance goals, 50% of the RSU awards will vest after two years and the remaining 50% after the third year. The Company records stock-based compensation expense related to performance-based RSUs when it is considered probable that the performance conditions will be met. The estimated aggregate grant-date fair values of the stock options granted to employees during the three months ended June 30, 2012 was $0.5 million. The estimated aggregate grant-date fair values of the stock options, service-based RSUs, and performance-based RSUs granted to employees during the six months ended June 30, 2012 were $2.5 million, $4.3 million, and $1.8 million, respectively.

 

9
 

 

During the three months ended June 30, 2012, the Company granted approximately 75,000 stock options to consultants. The consultant options vest over a two-year period with ratable quarterly vesting. The aggregate estimated grant-date fair value of the consultant stock options was approximately $0.3 million.

 

5. Equity Transactions

 

Private Warrant Exchanges

 

During 2011, the Company entered into several private transactions (the “Private Warrant Exchanges”) to exchange shares of its common stock for outstanding stock purchase warrants to purchase its common stock at an exercise price of $11.50 per share (the “$11.50 Warrants”). As a result of these transactions, the Company issued an aggregate of 1,643,453 shares of its common stock in exchange for an aggregate of 8,167,541 of the $11.50 Warrants.

 

Tender Offer Warrant Exchange

 

During 2011, the Company initiated and completed a tender offer to exchange outstanding $11.50 Warrants for shares of its common stock (the “Tender Offer Warrant Exchange”). As a result of the Tender Offer Warrant Exchange, the Company issued an aggregate of 1,303,267 shares of its common stock in exchange for an aggregate of 5,923,963 of the $11.50 Warrants.

 

As a result of the Private Warrant Exchanges and the Tender Offer Warrant Exchange, approximately 277,000 of the $11.50 Warrants remained outstanding as of June 30, 2012.

 

6. Net Income Per Share

 

The computations of basic and diluted net income per share are set forth below:

 

    Three Months Ended June 30,  
    2012     2011  
    (in thousands, except per share data)  
Numerator:                
Net income   $ 17,663     $ 11,683  
Net income allocated to participating securities     (17 )     (10 )
Numerator for basic and diluted net income per share   $ 17,646     $ 11,673  
                 
Denominator:                
Denominator for basic net income per share - weighted                
average outstanding common shares     73,430       71,519  
Dilutive effect of stock options     6       1  
Dilutive effect of contingently issuable shares     23       -  
Dilutive effect of warrants     2,602       2,133  
Denominator for diluted net income per share     76,061       73,653  
                 
Net income per share - basic   $ 0.24     $ 0.16  
Net income per share - diluted   $ 0.23     $ 0.16  

 

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    Six Months Ended June 30,  
    2012     2011  
    (in thousands, except per share data)  
Numerator:                
Net income   $ 30,081     $ 19,982  
Net income allocated to participating securities     (35 )     (21 )
Numerator for basic and diluted net income per share   $ 30,046     $ 19,961  
                 
Denominator:                
Denominator for basic net income per share - weighted                
average outstanding common shares     73,414       70,943  
Dilutive effect of stock options     6       2  
Dilutive effect of contingently issuable shares     37       -  
Dilutive effect of warrants     2,281       2,219  
Denominator for diluted net income per share     75,738       73,164  
                 
Net income per share - basic   $ 0.41     $ 0.28  
Net income per share - diluted   $ 0.40     $ 0.27  

  

For the three and six months ended June 30, 2012, warrants to purchase 0.3 million shares of common stock and stock options to purchase 2.1 million shares of common stock were not included in the computation of diluted net income per share as the effect would be anti-dilutive.

 

For the three and six months ended June 30, 2011, warrants to purchase 0.3 million shares of common stock and stock options to purchase 4.5 million shares of common stock were not included in the computation of diluted net income per share as the effect would be anti-dilutive.

  

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

You should read the following discussion along with our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed on March 6, 2012 with the Securities and Exchange Commission, or the SEC, as well as our condensed consolidated financial statements included in this Form 10-Q.

 

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Such forward-looking statements include those that express plans, anticipation, intent, contingencies, goals, targets or future development or otherwise are not statements of historical fact. Without limiting the foregoing, the words “believe,” “anticipate,” “plan,” “expect,” “intend” and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on our current expectations and projections about future events, and they are subject to risks and uncertainties, known and unknown, that could cause actual results and developments to differ materially from those expressed or implied in such statements. The important factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 6, 2012, and in this Form 10-Q, could cause actual results to differ materially from those indicated by forward-looking statements made herein. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Background

 

We were initially formed in 2007 as GHL Acquisition Corp., a special purpose acquisition company. We acquired, directly and indirectly, all the outstanding equity of Iridium Holdings LLC, or Iridium Holdings, in a transaction accounted for as a business combination on September 29, 2009. We refer to this transaction as the Acquisition. We refer to Iridium Holdings, together with its direct and indirect subsidiaries, as Iridium. In accounting for the Acquisition, we were deemed the legal and accounting acquirer and Iridium the legal and accounting acquiree. On September 29, 2009, as a result of the Acquisition, we changed our name to Iridium Communications Inc.

 

Overview of Our Business

 

We are engaged primarily in providing mobile voice and data communications services using a constellation of orbiting satellites. We are the second largest provider of satellite-based mobile voice and data communications services based on revenue, and the only commercial provider of communications services offering 100% global coverage. Our satellite network provides communications services to regions of the world where existing wireless or wireline networks do not exist or are impaired, including extremely remote or rural land areas, airways, open oceans, the polar regions and regions where the telecommunications infrastructure has been affected by political conflicts or natural disasters.

 

We provide voice and data communications services to businesses, the U.S. and foreign governments, non-governmental organizations and consumers. We provide these services using our constellation of in-orbit satellites and related ground infrastructure, including a primary commercial gateway. We utilize an interlinked, mesh architecture to route traffic across the satellite constellation using radio frequency crosslinks. This unique architecture minimizes the need for ground facilities to support the constellation, which facilitates the global reach of our services and allows us to offer services in countries and regions where we have no physical presence.

 

We sell our products and services to commercial end-users through a wholesale distribution network, encompassing over 71 service providers, 177 value-added resellers, or VARs, and 54 value-added manufacturers, who either sell directly to the end-user or indirectly through other service providers, VARs or dealers. These distributors often integrate our products and services with other complementary hardware and software and have developed a broad suite of applications for our products and services targeting specific vertical markets.

 

At June 30, 2012, we had approximately 576,000 billable subscribers worldwide, an increase of 21% from approximately 478,000 billable subscribers at June 30, 2011. We have a diverse customer base, with end-users in the following key business areas: land-based handset; maritime; aviation; machine-to-machine, or M2M; and government.

 

We expect a higher proportion of our future revenue will be derived from service revenue than in the past. Revenues from providing voice and M2M data service historically have generated higher gross margins than sales of subscriber equipment.

 

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We are currently devoting a substantial part of our resources to develop Iridium NEXT, our next-generation satellite constellation, and on hardware and software upgrades to our ground infrastructure in preparation for Iridium NEXT, the development of new product and service offerings, upgrades to our current services, and upgrades to our information technology systems. We estimate the aggregate costs associated with the design, build and launch of Iridium NEXT and related infrastructure upgrades through 2017 to be approximately $3 billion. We believe our $1.8 billion loan facility, or the Credit Facility, together with internally generated cash flows, including cash flows from hosted payloads and potential proceeds from our outstanding stock purchase warrants or convertible preferred or common equity issuances in lieu thereof, as required by our Credit Facility, will be sufficient to fully fund the aggregate costs associated with the design, build and launch of Iridium NEXT and related infrastructure upgrades through early 2017. As of July 27, 2012, we had borrowed a total of $588.9 million under the Credit Facility. For more information about our sources of funding, refer to “Liquidity and Capital Resources.”

 

Recent Developments

 

In June 2012, we announced our plans to host a payload to be developed by our subsidiary, Aireon LLC, as our primary hosted payload.  Aireon’s payload will be an Automatic Dependent Surveillance-Broadcast, or ADS-B, system to provide global air traffic monitoring data for sale to air navigation service providers such as the U.S. Federal Aviation Administration and NAV CANADA. Aireon’s success depends on its ability to raise funds to operate while the ADS-B system payloads are being constructed and on the development of the market for a space-based ADS-B service.  If successful, we expect Aireon to generate approximately $200 million in one-time hosting fees for the integration and launch of the payloads between 2014 and 2017.  We also expect to receive annual data fee revenue and have a significant retained interest in Aireon.

 

In August 2012, we entered into a supplemental agreement with the syndicate of bank lenders, or the Lenders, under the Credit Facility. The supplemental agreement, or Supplemental Agreement, amended and restated the Credit Facility. The Supplemental Agreement authorizes us to fund and operate Aireon for the purpose of establishing a space-based ADS-B business. Specifically, the Supplemental Agreement excludes Aireon from the group of companies (we and our material subsidiaries) that are obligors under the Credit Facility and from our consolidated financial results for purposes of calculating compliance with the financial covenants. The Supplemental Agreement allows us to make a $12.5 million investment in Aireon, the equity injection of up to $10 million worth of airtime credits into Aireon as provided for in Aireon’s agreement with Harris Corporation to build the ADS-B system payloads, if needed, and an additional investment of up to $15 million raised from issuances of our common equity. The Supplemental Agreement requires us to use any net distributions that we receive from Aireon to repay the debt under the Credit Facility and to issue the Lenders a security interest in our ownership interest in Aireon.

 

The Supplemental Agreement also includes revised financial covenant levels to reflect changes in timing of expected receipts of cash flows from secondary payloads and other changing business conditions and revised launch and backup launch requirements consistent with the amendment to our launch services agreement with Space Exploration Technologies Corp., or SpaceX, described below. Also, the Supplemental Agreement requires us to raise convertible preferred or common equity by April 30, 2013 in an amount approximately equal to any unexercised portion of the warrants to purchase the Company’s common stock at a price of $7.00 per share, which expire in February 2013, or the $7.00 Warrants. The amendment to the Credit Facility does not modify the principal amount, interest rates, repayment dates, or maturity of the Credit Facility.

 

In August 2012, we entered into an amendment to our launch services agreement with SpaceX. The amendment reduced the number of contracted launches and increased the number of satellites to be carried on each launch vehicle. The amendment also reduced the maximum price under the original SpaceX agreement from $492.0 million to $453.1 million.

 

Material Trends and Uncertainties

 

Our industry and customer base has historically grown as a result of: 

 

· demand for remote and reliable mobile communications services;

 

· increased demand for communications services by the U.S. Department of Defense, or DoD, disaster and relief agencies and emergency first responders;

 

· a broad and expanding wholesale distribution network with access to diverse and geographically dispersed niche markets;

 

· a growing number of new products and services and related applications;

 

· improved data transmission speeds for mobile satellite service offerings;

 

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· regulatory mandates requiring the use of mobile satellite services;

 

· a general reduction in prices of mobile satellite services and subscriber equipment; and

 

· geographic market expansion through the receipt of licenses to sell our services in additional countries.

 

Nonetheless, we face a number of challenges and uncertainties in operating our business, including:

 

· our ability to develop Iridium NEXT and related ground infrastructure, and to develop products and services for Iridium NEXT, including our ability to continue to access the Credit Facility to meet our future capital requirements for the design, build and launch of the Iridium NEXT satellites;

 

· our ability to obtain sufficient internally generated cash flows, including cash flows from hosted payloads and proceeds from our outstanding stock purchase warrants or equity issuances in lieu thereof, to fund a portion of the costs associated with Iridium NEXT and support ongoing business;

 

· our ability to raise convertible preferred or common equity in an amount approximately equal to any unexercised portion of the $7.00 Warrants, as required by the recent amendment to our Credit Facility;

 

· our ability to successfully fund, develop and market the space-based ADS-B global aviation monitoring service to be developed and deployed by Aireon and carried as a hosted payload on the Iridium NEXT system;

 

· our ability to maintain the health, capacity, control and level of service of our existing satellite network until and during the transition to Iridium NEXT;

 

· changes in general economic, business and industry conditions;

 

· our reliance on a single primary commercial gateway and a primary satellite network operations center;

 

· competition from other mobile satellite service providers and, to a lesser extent, from the expansion of terrestrial-based cellular phone systems and related pricing pressures;

 

· changes in demand from U.S. government customers, particularly the DoD;

 

· our ability to successfully negotiate a new contract with the DoD when it expires in 2013;

 

· market acceptance of our products;

 

· regulatory requirements, in existing and new geographic markets;

 

· rapid and significant technological changes in the telecommunications industry;

 

· reliance on our wholesale distribution network to market and sell our products, services and applications effectively;

 

· reliance on single source suppliers for some of the components required in the manufacture of our end-user subscriber equipment and our ability to purchase parts that are periodically subject to shortages resulting from surges in demand, natural disasters or other events; and

 

· reliance on a few significant customers for a substantial portion of our revenue, where the loss or decline in business with any of these customers may negatively impact our revenue and increase in our bad debt expense.

 

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Comparison of Our Results of Operations for the Three Months Ended June 30, 2012 and 2011

 

    Three Months Ended June 30,              
          % of Total           % of Total     Change  
($ in thousands)   2012     Revenue     2011     Revenue     Dollars     Percent  
Revenue:                                                
Services   $ 68,485       70 %   $ 65,156       68 %   $ 3,329       5 %
Subscriber equipment     23,914       25 %     21,913       23 %     2,001       9 %
Engineering and support services     4,922       5 %     8,834       9 %     (3,912 )     (44 )%
Total revenue     97,321       100 %     95,903       100 %     1,418       1 %
                                                 
Operating expenses:                                                
Cost of services (exclusive of depreciation and amortization)     15,988       16 %     19,758       20 %     (3,770 )     (19 )%
Cost of subscriber equipment     13,292       14 %     12,062       13 %     1,230       10 %
Research and development     3,429       4 %     3,379       3 %     50       1 %
Selling, general and administrative     17,970       18 %     16,297       17 %     1,673       10 %
Depreciation and amortization     18,368       19 %     23,664       25 %     (5,296 )     (22 )%
Total operating expenses     69,047       71 %     75,160       78 %     (6,113 )     (8 )%
Operating income   $ 28,274       29 %   $ 20,743       22 %   $ 7,531       36 %

   

Revenue

 

Total revenue increased by 1% to $97.3 million for the three months ended June 30, 2012 compared to the three months ended June 30, 2011.  This increase in revenue was primarily due to a 21% year-over-year increase in billable subscribers and an increase in sales volume of subscriber equipment.  These increases were partially offset by a decrease in average monthly revenue per unit, or ARPU, for voice services and a decrease in revenue from government-sponsored research and development contracts.

 

Service Revenue  

 

    Three Months Ended June 30, 2012     Three Months Ended June 30, 2011     Change  
    (Revenue in millions and subscribers in thousands)  
          Billable                 Billable                 Billable        
    Revenue     Subscribers  (1)     ARPU  (2)     Revenue     Subscribers  (1)     ARPU  (2)     Revenue     Subscribers     ARPU  
Commercial voice   $ 42.7       326     $ 45     $ 41.9       295     $ 49     $ 0.8       31     $ (4 )
Commercial M2M data     10.2       202       18       7.1       136       18       3.1       66       -  
Total     52.9       528               49.0       431               3.9       97          
Government voice     14.9       36       138       15.5       37       140       (0.6 )     (1 )     (2 )
Government M2M data     0.7       12       19       0.6       10       22       0.1       2       (3 )
Total     15.6       48               16.1       47               (0.5 )     1          
Total   $ 68.5       576             $ 65.1       478             $ 3.4       98          

 

 

(1) Billable subscriber numbers shown are at the end of the respective period.
(2) ARPU is calculated by dividing revenue in the respective period by the average of the number of billable subscribers at the beginning of the period and the number of billable subscribers at the end of the period and then dividing the result by the number of months in the period.

 

Service revenue increased by 5% for the three months ended June 30, 2012, compared to the prior year period, primarily due to growth in billable subscribers partially offset by decreases in ARPU for voice services.

 

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Commercial voice revenue increased principally due to an increase in revenue from prepaid services and subscriber growth in higher ARPU Iridium OpenPort ® , our broadband data maritime service. The decrease in commercial voice ARPU was due to a decline in average minutes of use per post-paid subscriber. Future growth in commercial voice revenue may be negatively affected by reductions in non-U.S. defense spending and deployed non-U.S. troop levels. Commercial M2M data revenue growth was driven principally by an increase in the billable subscriber base.

 

Government voice revenue decreased, principally due to a slight reduction in billable subscribers and ARPU. Government voice ARPU decreased due to a higher proportion of billable subscribers on lower priced plans for Netted Iridium SM , a service that provides beyond-line-of-sight, push-to-talk tactical radio service for user-defined groups. The increase in government M2M data revenue was driven primarily by billable subscriber growth. Government M2M data ARPU decreased compared to the prior year period, primarily due to growth in subscribers using plans that generate lower revenue per unit. We expect government voice ARPU to be lower for 2012 compared to 2011 as usage of lower priced Netted Iridium continues to grow as a percentage of overall government voice subscribers. Future government voice and M2M data billable subscribers and revenue may be negatively affected by reductions in U.S. defense spending and deployed troop levels, and a corresponding decrease in subscribers under our agreements with the U.S. government. These agreements account for a majority of our government services revenue. In addition, our agreement with the U.S. government expires in 2013. Future government voice and M2M data revenues will be dependent upon our ability to negotiate a favorable new agreement with the U.S. government.

 

Subscriber Equipment Revenue

 

Subscriber equipment revenue increased 9% for the three months ended June 30, 2012 from the prior year period. The increase in subscriber equipment revenue was primarily due to increased volume in unit sales of the Iridium Extreme ® satellite handset and increased volume in unit sales of Iridium 9602 short-burst data transceivers. These increases were partially offset by lower unit sales of both the Iridium 9555 and 9505A satellite handsets. Future subscriber equipment sales to the U.S. government through non-government distributors may be negatively affected by reductions in U.S. defense spending and deployed troop levels.

 

Engineering and Support Service Revenue

 

Engineering and support service revenue decreased 44% for the three months ended June 30, 2012 compared to the prior year period, primarily due to a decrease in revenue from government-sponsored research and development contracts.

 

Operating Expenses

 

Cost of Services (exclusive of depreciation and amortization)

 

Cost of services (exclusive of depreciation and amortization) includes the cost of network engineering and operations staff, including contractors, software maintenance, product support services and cost of services for government and commercial engineering and support service revenue.

 

Cost of services (exclusive of depreciation and amortization) decreased 19% for three months ended June 30, 2012 from the prior year period due to a decrease in government-sponsored research and development contracts with corresponding impacts to revenue and cost of services. Additionally, a decline in costs related to the operations and maintenance agreement with the Boeing Company for our current satellite constellation contributed to this decrease.

 

Cost of Subscriber Equipment

 

Cost of subscriber equipment includes the direct costs of equipment sold, which consists of manufacturing costs, allocation of overhead, and warranty costs.

 

Cost of subscriber equipment increased 10% for the three months ended June 30, 2012 compared to the prior year period. This increase was proportionate with the increase in subscriber equipment revenue and driven by increased unit sales of our Iridium Extreme satellite handset and Iridium 9602 short-burst data transceivers, partially offset by a decline in unit sales of both our Iridium 9555 and 9505A satellite handsets.

 

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Selling, General and Administrative

 

Selling, general and administrative expenses increased by 10% for the three months ended June 30, 2012 from the prior year period.  This increase was driven by a $0.7 million increase in bad debt expense related to a potentially uncollectible portion of an outstanding receivable balance. Future selling, general and administrative expenses may be negatively affected by our ability to collect amounts on accounts receivable with specific customers; we will continue to evaluate all receivables for collectability. Also, contributing to this increase was a $0.4 million increases in Aireon-related professional fees and a $0.5 million increase in Aireon-related sales and marketing costs.

 

Depreciation and Amortization

 

Depreciation and amortization expense decreased 22% for the three months ended June 30, 2012 from the prior year period. During the second quarter of 2012, we updated our analysis of the current satellite constellation’s health and the remaining useful life.  Based on the results of this analysis, we estimate that our current constellation of satellites will be operational for longer than previously expected. As a result, the estimated useful life of the current constellation has been extended and is consistent with the expected deployment of Iridium NEXT. The extension of the estimated useful life resulted in a decline in depreciation expense between the comparative periods. We will continue to evaluate the useful life of our current constellation of satellites on an ongoing basis through full deployment and activation of Iridium NEXT.

 

Undrawn Credit Facility Fees

 

Commitment fees on the undrawn portion of the Credit Facility were $2.6 million for the three months ended June 30, 2012 compared to $3.2 million for the prior year period. The decrease of the commitment fee on the undrawn portion is directly proportionate to the increase in the amounts borrowed under the Credit Facility as we finance the development of Iridium NEXT.

 

Provision for Income Taxes

 

For the three months ended June 30, 2012, our income tax provision was $8.1 million compared to $6.2 million for the prior year period. This increase principally resulted from the increase in income before taxes. Our effective tax rate was 31.5% for the three months ended June 30, 2012 compared to 34.5% for the three months ended June 30, 2011. The decrease in the rate is primarily due to the state tax impact of the change in the estimated of the useful life of our current constellation of satellites. As the current constellation of satellites will be depreciated over a longer period, the realization of the related deferred tax liability will extend into years in which the Arizona income tax rate will be lower.  This resulted in an estimated $0.9 million benefit during the three months ended June 30, 2012. As our current estimates change in future periods, the impact on the deferred tax assets and liabilities may change correspondingly.

 

Comparison of Our Results of Operations for the Six Months Ended June 30, 2012 and 2011  

 

    Six Months Ended June 30,              
          % of Total           % of Total     Change  
($ in thousands)   2012     Revenue     2011     Revenue     Dollars     Percent  
Revenue:                                                
Services   $ 135,333       71 %   $ 126,326       67 %   $ 9,007       7 %
Subscriber equipment     45,454       24 %     46,323       25 %     (869 )     (2 )%
Engineering and support services     10,008       5 %     14,557       8 %     (4,549 )     (31 )%
Total revenue     190,795       100 %     187,206       100 %     3,589       2 %
                                                 
Operating expenses:                                                
Cost of services (exclusive of depreciation and amortization)     33,991       18 %     36,697       20 %     (2,706 )     (7 )%
Cost of subscriber equipment     26,634       14 %     25,107       13 %     1,527       6 %
Research and development     9,118       5 %     7,647       4 %     1,471       19 %
Selling, general and administrative     36,118       19 %     33,716       18 %     2,402       7 %
Depreciation and amortization     42,572       22 %     46,995       25 %     (4,423 )     (9 )%
Total operating expenses     148,433       78 %     150,162       80 %     (1,729 )     (1 )%
Operating income   $ 42,362       22 %   $ 37,044       20 %   $ 5,318       14 %

  

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Revenue

 

Total revenue increased by 2% to $190.8 million for the six months ended June 30, 2012 compared to the six months ended June 30, 2011.  This increase in revenue was principally due to a 21% year-over-year increase in billable subscribers.  This increase was partially offset by a decrease in ARPU for voice and data services and a decrease in revenue from government-sponsored research and development contracts.

 

Service Revenue

 

    Six Months Ended June 30, 2012     Six Months Ended June 30, 2011     Change  
    (Revenue in millions and subscribers in thousands)  
          Billable                 Billable                 Billable        
    Revenue     Subscribers  (1)     ARPU  (2)     Revenue     Subscribers  (1)     ARPU  (2)     Revenue     Subscribers       ARPU  
Commercial voice   $ 84.6       326     $ 45     $ 80.8       295     $ 47     $ 3.8       31     $ (2 )
Commercial M2M data     19.4       202       17       13.5       136       18       5.9       66       (1 )
Total     104.0       528               94.3       431               9.7       97          
Government voice     30.0       36       137       30.9       37       140       (0.9 )     (1 )     (3 )
Government M2M data     1.3       12       19       1.1       10       22       0.2       2       (3 )
Total     31.3       48               32.0       47               (0.7 )     1          
Total   $ 135.3       576             $ 126.3       478             $ 9.0       98          

 

 

(1) Billable subscriber numbers shown are at the end of the respective period.
(2) ARPU is calculated by dividing revenue in the respective period by the average of the number of billable subscribers at the beginning of the period and the number of billable subscribers at the end of the period and then dividing the result by the number of months in the period.

 

Service revenue increased by 7% for the six months ended June 30, 2012, compared to the prior year period, primarily due to growth in billable subscribers partially offset by decreases in ARPU for voice and data services.

 

Commercial voice revenue increased principally due to billable subscriber growth, including subscriber growth related to Iridium OpenPort and increased revenue from prepaid services. The increase in revenue driven from subscriber growth was partially offset by a decrease in ARPU for commercial voice. The decrease in commercial voice ARPU was due to a decline in average minutes of use per post-paid subscriber, partially offset by growth in the higher-ARPU Iridium OpenPort service.

 

Commercial M2M data revenue growth was driven principally by an increase in the billable subscriber base. Commercial M2M data ARPU decreased slightly compared to the prior year period due to an increase in lower-ARPU data plans for new subscribers.

 

Government voice revenue decreased, principally due to a small decline in billable subscribers combined with a decrease in ARPU. Government voice ARPU decreased due to a higher proportion of billable subscribers on the lower priced plans for Netted Iridium. The increase in government M2M data revenue was driven primarily by billable subscriber growth. Government M2M data ARPU decreased compared to the prior year period, primarily due to growth in subscribers using plans that generate lower revenue per unit.

 

Subscriber Equipment Revenue

 

Subscriber equipment revenue decreased 2% for the six months ended June 30, 2012 from the prior year period. The decrease in subscriber equipment revenue was primarily due to lower unit sales of the Iridium 9555 satellite handsets. During the first quarter of 2011, certain incentive pricing was available for bulk customer orders. Similar incentive pricing was not available in the first quarter of 2012. Also contributing to the decline in subscriber equipment revenue was the lower unit sales of the Iridium 9505A satellite handsets. These declines were partially offset by increased volume in unit sales of the new Iridium Extreme satellite handset, which was introduced in September 2011, and an increased volume in unit sales of the Iridium 9602 short-burst data transceiver.

 

Engineering and Support Service Revenue

 

Engineering and support service revenue decreased 31% for the six months ended June 30, 2012 compared to the prior year period, primarily due to a decrease in revenue from government-sponsored research and development contracts.

 

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Operating Expenses

 

Cost of Services (exclusive of depreciation and amortization)

 

Cost of services (exclusive of depreciation and amortization) decreased 7% for the six months ended June 30, 2012 from the prior year period due to a decrease in government-sponsored research and development contracts with corresponding impacts to revenue and cost of services.

 

Cost of Subscriber Equipment

 

Cost of subscriber equipment increased 6% for the six months ended June 30, 2012 compared to the prior year period. This increase was driven by a $1.2 million increase in our warranty reserve during the first half of 2012 due to certain production issues related to the Iridium Extreme satellite handset. Excluding this warranty provision, the cost of subscriber equipment declined by 1% from the prior year period due to a decline in satellite handset unit sales and a shift in product mix to the higher cost Iridium Extreme satellite handset.

 

Research and Development

 

Research and development expense increased 19% for the six months ended June 30, 2012 from the prior year period. The increase was primarily driven by an increase in research and development associated with Iridium NEXT projects.

 

Selling, General and Administrative

 

Selling, general and administrative expenses increased by 7% for the six months ended June 30, 2012 from the prior year period. This increase was driven by a $0.7 million increase in bad debt expense related to a potentially uncollectible portion of an outstanding receivable balance. Future selling, general and administrative expenses may be negatively affected by our ability to collect amounts on accounts receivable with specific customers; we will continue evaluate all receivables for collectability. The increase was also driven by a $1.4 million increase in sales and marketing costs.

 

Depreciation and Amortization

 

Depreciation and amortization expense decreased 9% for the six months ended June 30, 2012 from the prior year period. The decrease was driven by the increase in the estimated useful life of our satellites.

 

Undrawn Credit Facility Fees

 

Commitment fees on the undrawn portion of the Credit Facility were $5.4 million for the six months ended June 30, 2012 compared to $7.5 million for the prior year period. The decrease of the commitment fee on the undrawn portion is directly proportionate to the increase in the amounts borrowed under the Credit Facility as we finance the development of Iridium NEXT.

 

Provision for Income Taxes

 

For the six months ended June 30, 2012, our income tax provision was $7.2 million compared to $10.1 million for the prior year period.  Our effective tax rate was approximately 19.2% for the six months ended June 30, 2012 compared to 33.5% for the prior year period.  The decrease in both our income tax provision and our effective tax rate primarily resulted from a benefit in our 2012 year-to-date income tax expense of $5.2 million related to the impact on our historical deferred tax assets and liabilities of a change in the Arizona tax law enacted in the first quarter of 2012.  For the income tax provision, this decrease was partially offset by an increase in income. As our current estimates change in future periods, the impact on the deferred tax assets and liabilities may change correspondingly.

 

Our 2012 effective tax rate differs from the statutory U.S. Federal tax rate of 35% due primarily to the changes in the Arizona tax laws enacted in 2012.  Our 2011 effective tax rate differs from the statutory U.S. Federal tax rate of 35% due primarily to the second quarter 2011 reduction in the Arizona corporate income tax rate offset by non-deductible permanent differences and foreign withholding taxes.

 

Liquidity and Capital Resources

 

As of June 30, 2012, our total cash and cash equivalents balance was $166.7 million. Our principal sources of liquidity are existing cash, internally generated cash flows, and the Credit Facility. Our principal liquidity requirements are to meet capital expenditure needs, including the design, build and launch of Iridium NEXT, working capital and research and development expenses.

 

19
 

 

We expect to fund $1.8 billion of the costs of Iridium NEXT with the Credit Facility, with the remainder to be funded from internally generated cash flows, including potential cash flows from hosted payloads on our Iridium NEXT satellites and proceeds from our outstanding $7.00 Warrants or convertible preferred or common equity issuances in lieu thereof. As of June 30, 2012, the full exercise of our outstanding $7.00 Warrants would have provided us with $95.6 million of proceeds.

 

The Credit Facility contains borrowing restrictions, including financial performance covenants and covenants relating to hosted payloads, and there can be no assurance that we will be able to continue to borrow funds under the Credit Facility. There can also be no assurance that our internally generated cash flows, including those from hosted payloads on our Iridium NEXT satellites, will meet our current expectations, that our outstanding stock purchase warrants will be exercised for cash or that we will be able to raise cash through the issuance of convertible preferred or common equity in lieu of warrant exercises, as required by the recent amendment to the Credit Facility. If we do not have access to those expected sources of liquidity, or if the cost of implementing Iridium NEXT or the other elements of our business plan is higher than anticipated, we will require even more external funding than planned. Our ability to obtain additional funding may be adversely affected by a number of factors, including the global economic downturn and related tightening of the credit markets, and we cannot assure you that we will be able to obtain such funding on reasonable terms, or at all. If we are not able to secure such funding in a timely manner, our ability to maintain our network, to design, build and launch Iridium NEXT and related ground infrastructure, products and services, and to pursue additional growth opportunities will be impaired, and we would likely need to delay some elements of our Iridium NEXT development. Our liquidity and our ability to fund our liquidity requirements are also dependent on our future financial performance, which is subject to general economic, financial, regulatory and other factors that are beyond our control.

 

The recent amendment to the Credit Facility allow us to make a $12.5 million investment in Aireon, the equity injection of up to $10 million worth of airtime credits into Aireon as provided for in Aireon’s agreement with Harris Corporation to build the ADS-B system payloads, if needed, and an additional investment of up to an additional $15 million raised from the issuance of our equity. The amended Credit Facility requires us to use any net distributions that we receive from Aireon to repay the debt under the Credit Facility and to grant the Lenders a security interest in our ownership interest in Aireon. The amendment does not modify the principal amount, interest rates, repayment dates, or maturity of the Credit Facility. The amended Credit Facility includes revised financial covenant levels to reflect changes in timing of expected receipts of cash flows from secondary payloads and other changing business conditions and revised launch and backup launch requirements to permit the amendment to our launch services agreement with SpaceX. Also, the Supplemental Agreement requires us to raise convertible preferred or common equity by April 30, 2013 in an amount approximately equal to any unexercised portion of the $7.00 Warrants, which expire in February 2013.

 

As of June 30, 2012, we had borrowed a total of $568.0 million under the Credit Facility. The unused portion of the Credit Facility as of June 30, 2012 was $1.2 billion. Under the terms of the Credit Facility, we were required to maintain a minimum cash reserve for debt service of $40.5 million as of June 30, 2012, which is classified as restricted cash on the accompanying condensed consolidated balance sheet. This minimum cash reserve requirement will increase over the term of the Credit Facility to $189.0 million at the beginning of the repayment period, which is expected to begin in 2017. We believe that our liquidity sources will provide sufficient funds for us to meet our liquidity requirements for at least the next 12 months.

 

Cash Flows

 

The following section highlights our cash flows for the six months ended June 30, 2012 and 2011:

 

    2012     2011     Change  
    (in thousands)  
Cash provided by operating activities   $ 89,389     $ 84,082     $ 5,307  
Cash used in investing activities   $ (186,704 )   $ (170,871 )   $ (15,833 )
Cash provided by financing activities   $ 127,611     $ 70,624     $ 56,987  

  

Cash Flows from Operating Activities

 

The increase in cash provided by operating activities for the six months ended June 30, 2012 compared to the year ago period was primarily driven by a $10.1 million increase in net income partially offset by a $5.6 million decrease in non-cash items included in net income.

 

20
 

 

Cash Flows from Investing Activities

 

Net cash used in investing activities for the six months ended June 30, 2012 increased compared to the same period in the prior year due to increased capital expenditures related to Iridium NEXT, including payments related to the purchase of equipment and software for our satellite, network and gateway operations.

 

Cash Flows from Financing Activities

 

Net cash provided by financing activities for the six months ended June 30, 2012 increased by $57.0 million compared to the same period in the prior year primarily due to a $22.2 million payment in 2011 which represented satisfaction in full of our promissory note to Motorola Solutions, Inc. and which did not recur in 2012, a $14.0 million decrease in payments of financing fees incurred in conjunction with obtaining the Credit Facility, and a $20.7 million increase in borrowings under the Credit Facility compared to the prior year period.

 

Off-Balance Sheet Arrangements

 

We do not currently have any off-balance sheet arrangements, as such term is defined in Item 303(a)(4)(ii) of the SEC’s Regulation S-K, that have or are reasonably likely to have a material current or future effect on our financial condition, results of operations, liquidity or capital resources.

 

Seasonality

 

Our results of operations have been subject to seasonal usage changes for commercial customers, and we expect that our results will be affected by similar seasonality effects in the future. March through October are typically the peak months for commercial voice services revenue and related subscriber equipment sales. U.S. government revenue and commercial M2M revenue have been less subject to seasonal usage changes.

 

Accounting Developments

 

None.

 

ITEM  3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

Interest income earned on our cash and cash equivalents balance is subject to interest rate fluctuations. For the three and six months ended June 30, 2012, a one-half percentage point increase or decrease in interest rates would not have had a material effect on our interest income.

 

We entered into the Credit Facility in October 2010 and had borrowed $568.0 million under the Credit Facility as of June 30, 2012. A portion of the draws we make under the Credit Facility bear interest at a floating rate equal to the London Interbank Offered Rate, or LIBOR, plus 1.95% and will, accordingly, subject us to interest rate fluctuations in future periods. However, had the currently outstanding borrowings under the Credit Facility been outstanding throughout the six months ended June 30, 2012, a one-half percentage point increase or decrease in the LIBOR would not have had a material effect on our interest cost.

 

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and accounts payable. We maintain our cash and cash equivalents with financial institutions with high credit ratings and at times maintain the balance of our deposits in excess of federally insured (FDIC) limits. The majority of our cash is swept nightly into a money market fund invested in U.S. treasuries. Accounts receivable are due from both domestic and international customers. We perform credit evaluations of our customers’ financial condition and record reserves to provide for estimated credit losses. Accounts payable are owed to both domestic and international vendors.

 

ITEM  4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

Under the supervision and with the participation of our management, including our chief executive officer, who is our principal executive officer, and our chief financial officer, who is our principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of the end of the period covered by this report. In evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs. In addition, the design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.

 

21
 

 

Based on this evaluation, our chief executive officer and our chief financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

 

Changes in Internal Control Over Financial Reporting

 

During the quarter ended June 30, 2012, there were no changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II.

 

OTHER INFORMATION

 

ITEM  1. LEGAL PROCEEDINGS.

 

Neither we nor any of our subsidiaries are currently subject to any material legal proceeding, nor, to our knowledge, is any material legal proceeding threatened against us or any of our subsidiaries.

 

ITEM  1A. RISK FACTORS.

 

Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors discussed in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed with the Securities and Exchange Commission on March 6, 2012, as updated by the following risk factors.

 

Our business plan depends on increased demand for mobile satellite services and the success of our subsidiary, Aireon LLC, which is our primary hosted payload customer, among other factors.

 

Our business plan is predicated on growth in demand for mobile satellite services and the ability of our primary hosted payload customer to pay us to accommodate its hosted payloads on our next-generation satellite constellation, Iridium NEXT. Demand for mobile satellite services may not grow, or may even contract, either generally or in particular geographic markets, for particular types of services or during particular time periods. A lack of demand could impair our ability to sell products and services, develop and successfully market new products and services and could exert downward pressure on prices. Any decline in prices would decrease our revenue and profitability and negatively affect our ability to generate cash for investments and other working capital needs. Further, in June 2012 we announced our plans to host a payload to be developed by our subsidiary, Aireon LLC, as our primary hosted payload. Aireon’s payload will be an automatic dependent surveillance-broadcast, or ADS-B, system for global air traffic monitoring. Aireon’s success depends on its ability to raise funds to operate while the ADS-B system payloads are being constructed and on the development of the market for a space-based ADS-B service. If Aireon cannot successfully develop the payload or sell its services to air navigation service providers, it will not be able to pay us for the hosting costs.

 

Our ability to successfully implement our business plan will also depend on a number of other factors, including:

 

· our ability to maintain the health, capacity and control of our existing satellite constellation;
     
· our ability to complete the design, build and launch of Iridium NEXT and related ground infrastructure, products and services, and, once launched, our ability to maintain the health, capacity and control of such satellite constellation;
     
· the level of market acceptance and demand for our products and services;
     
· our ability to introduce innovative new products and services that satisfy market demand, including new service offerings on Iridium NEXT;
     
· our ability to obtain additional business using our existing spectrum resources both in the United States and internationally;
     
22
 
     
· our ability to sell our products and services in additional countries;
     
· our ability to maintain our relationship with U.S. government customers, particularly the Department of Defense;
     
· the ability of our distributors to market and distribute our products, services and applications effectively and their continued development of innovative and improved solutions and applications for our products and services;
     
· the effectiveness of our competitors in developing and offering similar services and products; and
     
· our ability to maintain competitive prices for our products and services and control costs.
     

We may need additional capital to design, build and launch Iridium NEXT and related ground infrastructure, products and services, and pursue additional growth opportunities. If we fail to maintain access to sufficient capital, we will not be able to successfully implement our business plan.

 

Our business plan calls for the development of Iridium NEXT, the development of new product and service offerings, upgrades to our current services, hardware and software upgrades to maintain our ground infrastructure and upgrades to our business systems. We estimate the costs associated with the design, build and launch of Iridium NEXT and related ground infrastructure upgrades through 2017 will be approximately $3 billion. While we expect to fund these costs with borrowings under our $1.8 billion loan facility, or the Credit Facility, together with internally generated cash flows, including potential revenues from hosted payloads and the proceeds from our outstanding stock purchase warrants or equity issuances in lieu thereof, it is possible that these sources will not be sufficient to fully fund Iridium NEXT. For example, our primary hosted payload customer is our subsidiary, Aireon. If Aireon is not successful and fails to pay its hosting costs, or if we fail to generate our expected cash flows from warrants or other sources, we might need to finance the remaining cost by raising additional debt or equity financing. In addition, we may need additional capital to design and launch new products and services on Iridium NEXT. Such additional financing may not be available on favorable terms, or at all.  

 

Our ability to make ongoing draws under the Credit Facility will depend upon our satisfaction of various borrowing conditions from time to time, some of which will be outside of our control. In addition, there can be no assurance that our internally generated cash flows will meet our current expectations, that our in-the-money warrants will remain in the money, or, even if they do remain in the money, that they will be exercised, or that we will not encounter increased costs. Among other factors leading to the uncertainty over our internally generated cash flows, Aireon may be unable to pay its hosting costs. If available funds from the Credit Facility, internally generated cash flows and the proceeds from our warrants are less than we expect, our ability to maintain our network, design, build and launch Iridium NEXT and related ground infrastructure, develop new products and services, and pursue additional growth opportunities will be impaired, which would significantly limit the development of our business and impair our ability to provide a commercially acceptable level of service. We expect to experience overall liquidity levels lower than our recent liquidity levels. Inadequate liquidity could compromise our ability to pursue our business plans and growth opportunities and make borrowings under the Credit Facility, delay the ultimate deployment of Iridium NEXT, and otherwise impair our business and financial position.

 

If we fail to satisfy the ongoing borrowing conditions of the Credit Facility, we may be unable to fund Iridium NEXT.

 

We plan to use borrowings under the Credit Facility to partially fund the construction of our Iridium NEXT satellites, including borrowing to capitalize interest otherwise due under the Credit Facility. Our ability to continue to draw funds under the Credit Facility over time will depend on the satisfaction of borrowing conditions, including:

 

· compliance with the covenants under the Credit Facility, including financial covenants and covenants relating to hosted payloads;
     
· accuracy of the representations we make under the Credit Facility;
     
· compliance with the other terms of the Credit Facility, including the absence of events of default; and
     
· maintenance of the insurance policy with Compagnie Française d’Assurance pour le Commerce Extérieur, or COFACE, the French export credit agency.

 

In addition, the August 2012 amendment to the Credit Facility added a requirement to raise convertible preferred or common equity in an amount approximately equal to any unexercised portion of our outstanding $7.00 stock purchase warrants. As of June 30, 2012, there were approximately 13.7 million unexercised $7.00 warrants outstanding.

 

Some of these borrowing conditions may be outside of our control or otherwise difficult to satisfy. If we do not continue to satisfy the borrowing conditions under the Credit Facility and cannot obtain a waiver from the Lenders, we would need to find other sources of financing. We would have to seek the permission of the Lenders under the Credit Facility in order to obtain many alternative sources of financing, and there can be no assurance that we would have access to other sources of financing on acceptable terms, or at all.

 

23
 

 

Iridium NEXT may not be completed on time, and the costs associated with it may be greater than expected.

 

We estimate the costs associated with the design, build and launch of Iridium NEXT and related ground infrastructure upgrades through 2017 will be approximately $3 billion, although our actual costs could substantially exceed this estimate. We may not complete Iridium NEXT and related ground infrastructure on time, on budget or at all. The design, manufacture and launch of satellite systems are highly complex and historically have been subject to delays and cost overruns. Development of Iridium NEXT may suffer from additional delays, interruptions or increased costs due to many factors, some of which may be beyond our control, including:

 

· lower than anticipated internally generated cash flows, including from Aireon;

 

· the failure to maintain our ability to make draws under the Credit Facility, including by reason of our failure to satisfy any ongoing financial or other condition to making draws;

 

· the failure of the holders of our stock purchase warrants to exercise the warrants;

 

· operating and other requirements imposed by the Lenders under the Credit Facility;

 

· engineering or manufacturing performance falling below expected levels of output or efficiency;

 

· interference between any hosted payload and our network;

 

· complex integration of our ground segment with the Iridium NEXT satellites and the transition from our current constellation;

 

· denial or delays in receipt of regulatory approvals or non-compliance with conditions imposed by regulatory authorities;

 

· the breakdown or failure of equipment or systems;

 

· non-performance by third-party contractors, including the prime system contractor;

 

· the inability to license necessary technology on commercially reasonable terms or at all;

 

· use of a new or unproven launch vehicle or the failure of the launch services provider to sustain its business;

 

· launch delays or failures or in-orbit satellite failures once launched or the decision to manufacture additional replacement satellites for future launches;

 

· labor disputes or disruptions in labor productivity or the unavailability of skilled labor;

 

· increases in the costs of materials;

 

· changes in project scope;

 

· additional requirements imposed by changes in laws; or

 

· severe weather or catastrophic events such as fires, earthquakes, storms or explosions.

 

In addition, there can be no assurance the ground infrastructure needed to complete Iridium NEXT will be completed on-time, on budget or at all. If the design, manufacture and deployment of Iridium NEXT costs more or takes longer than we anticipate, our ability to continue to develop Iridium NEXT and related ground infrastructure could be compromised.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

None.

 

ITEM  3. DEFAULTS UPON SENIOR SECURITIES.

 

None.

 

ITEM  4. MINE SAFETY DISCLOSURES.

 

Not applicable.

 

24
 

 

ITEM 5. OTHER INFORMATION.

 

None.

 

ITEM 6. EXHIBITS.

 

See the exhibit index.

 

25
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  IRIDIUM COMMUNICATIONS INC.
     
  By: /s/ Thomas J. Fitzpatrick
    Thomas J. Fitzpatrick
   

Chief Financial Officer

(as duly authorized officer and as principal financial officer of the registrant)

 

Date: August 2, 2012

 

26
 

 

EXHIBIT INDEX

 

Exhibit

 

Description

     
10.1††   Amendment No. 9 to the Full Scale System Development Contract No. IS-10-021 between Iridium Satellite LLC and Thales Alenia Space France for the Iridium NEXT System, dated June 19, 2012.
     
10.2††   Amendment No. 10 to the Full Scale System Development Contract No. IS-10-021 between Iridium Satellite LLC and Thales Alenia Space France for the Iridium NEXT System, dated June 19, 2012.
     
10.3††   Products and Services Agreement No. AIR-12-001 between Aireon LLC and Harris Corporation Government Communications Systems Division, dated as of June 19, 2012.
     
10.4   Iridium Communications Inc. 2012 Equity Incentive Plan, incorporated by reference to Appendix A to the Registrant’s Proxy Statement filed with the SEC on April 10, 2012.
     
10.5   Forms of Stock Option Grant Notice and Stock Option Agreement for use in connection with the Iridium Communications Inc. 2012 Equity Incentive Plan, incorporated by reference to Exhibit 99.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 23, 2012.
     
10.6   Forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement for use in connection with the Iridium Communications Inc. 2012 Equity Incentive Plan, incorporated by reference to Exhibit 99.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on May 23, 2012.
     
31.1   Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002.
     
31.2   Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of 1934, as adopted pursuant to section 302 of The Sarbanes-Oxley Act of 2002.
     
32.1*   Certifications of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(b) and 15d-14(b) promulgated under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to section 906 of The Sarbanes-Oxley Act of 2002.
     
101**   The following financial information from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, filed with the Securities and Exchange Commission on August 2, 2012, formatted in XBRL (eXtensible Business Reporting Language):
    (i) Condensed Consolidated Balance Sheets at June 30, 2012 and December 31, 2011;
    (ii) Condensed Consolidated Statements of Operations and Comprehensive Income for the three and six months ended June 30, 2012 and 2011;
    (iii) Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011; and
    (iv) Notes to Condensed Consolidated Financial Statements.

 

†† Confidential treatment has been requested for certain portions omitted from this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. Confidential portions of this exhibit have been separately filed with the Securities and Exchange Commission.

 

* These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

 

** Furnished electronically herewith. Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

 

27

 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

 

AMENDMENT N° 9

 

 

TO THE

 

 

FULL SCALE SYSTEM DEVELOPMENT CONTRACT

 

No. IS-10-021

 

Between

 

Iridium Satellite LLC

 

And

 

THALES ALENIA SPACE FRANCE

 

for the

 

IRIDIUM NEXT SYSTEM

 

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

PREAMBLE

 

This Amendment N° 9 (the “Amendment”) to the Full Scale System Development Contract No. IS-10-021 signed on June 1, 2010 between Iridium Satellite LLC and Thales Alenia Space France for the Iridium Next System, as amended, (the “Contract ) is entered into on this 19th day of June, 2012 by and between Thales Alenia Space France, a company organized and existing under the laws of France, having its registered office at 26 avenue Jean François Champollion 31100 Toulouse – FRANCE (“Contractor”), and Iridium Satellite LLC, a limited liability company organized under the laws of Delaware, having an office at 1750 Tysons Boulevard, Suite 1400, McLean, VA 22102 - USA (“Purchaser ).

 

RECITALS

 

WHEREAS , Purchaser issued a letter, dated [***], authorizing Contractor to proceed with work necessary to [***], which is superseded by this Amendment;

 

WHEREAS , the Parties have agreed to [***]; and

 

WHEREAS , the Parties have reached agreement on the total price for [***].

 

NOW, THEREFORE , in consideration of the premises and for good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

 

Article 1 : Capitalized terms used but not defined in this Amendment shall have the meanings ascribed thereto in the Contract or any amendments thereto, as the case may be.

 

Article 2 : Customer’s portion of the cost to [***] U.S. Dollars (US$[***]), shall be deducted from the Adjustment leaving a remaining Adjustment balance of [***] U.S. Dollars (US$[***]).

 

Article 3 : Contractor shall deliver to Customer the final details of any [***] for Customer’s review and consultation prior to proceeding with any [***].

 

Article 4 : If the Launch date of any Satellite Batch is delayed solely due to the [***], the Grace Period of such affected Satellite Batch will be extended by no more than [***].

 

Article 5 : This Amendment may be executed and delivered (including via facsimile or other electronic means) in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.

 

Article 6 : All other provisions of the Contract not expressly referred to in this Amendment remain in full force and effect.

 

IN WITNESS WHEREOF , the Parties have executed this Amendment by their duly authorized officers as of the date set forth in the Preamble.

 

IRIDIUM SATELLITE LLC   THALES ALENIA SPACE FRANCE
     
/s/ S. Scott Smith   /s/ Nathalie Smirnov
S. Scott Smith   Nathalie Smirnov
Executive Vice President,   Senior Vice President,
Satellite Development & Operations   System & Payload – Telecom

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

 

AMENDMENT N° 10

 

 

TO THE

 

 

FULL SCALE SYSTEM DEVELOPMENT CONTRACT

 

No. IS-10-021

 

Between

 

Iridium Satellite LLC

 

And

 

THALES ALENIA SPACE FRANCE

 

for the

 

IRIDIUM NEXT SYSTEM

 

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

PREAMBLE

 

This Amendment N° 10 (the “Amendment”) to the Full Scale System Development Contract No. IS-10-021 signed on June 1, 2010 between Iridium Satellite LLC and Thales Alenia Space France for the Iridium Next System, as amended, (the “Contract ) is entered into on this 19th day of June, 2012 by and between Thales Alenia Space France, a company organized and existing under the laws of France, having its registered office at 26 avenue Jean François Champollion 31100 Toulouse – FRANCE (“Contractor”), and Iridium Satellite LLC, a limited liability company organized under the laws of Delaware, having an office at 1750 Tysons Boulevard, Suite 1400, McLean, VA 22102 - USA (“Purchaser ).

 

RECITALS

 

WHEREAS , Purchaser has agreed to delete the requirement for Contractor to [***] from the SOW; such requirement to be completed by Purchaser;

 

WHEREAS , Contractor shall [***]; and

 

WHEREAS , the Parties have agreed to increase the Adjustment by the amount of [***] U.S. Dollars (US$[***]) as consideration for Purchaser removing the [***].

 

NOW, THEREFORE , in consideration of the premises and for good and valuable consideration, the receipt and adequacy of which are hereby expressly acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

 

Article 1 : Capitalized terms used but not defined in this Amendment shall have the meanings ascribed thereto in the Contract or any amendments thereto, as the case may be.

 

Article 2 : The [***] of Section [***] in the SOW is hereby deleted and replaced in its entirety with the following sentence.

 

“[***]”

 

Article 3 : The [***] set forth in Section [***] of the SOW for Contractor to [***] is hereby deleted from the SOW.

 

Article 3 : Contractor shall deliver the [***] to Customer by no later than [***]. The [***]:

 

[***]

 

Article 4 : The Adjustment is hereby increased by the amount of [***] U.S. Dollars (US$[***]) leaving a remaining Adjustment balance of [***] U.S. Dollars (US$[***]).

 

Article 5 : This Amendment may be executed and delivered (including via facsimile or other electronic means) in one or more counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement.

 

Article 6 : All other provisions of the Contract not expressly referred to in this Amendment remain in full force and effect.

 

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

IN WITNESS WHEREOF , the Parties have executed this Amendment by their duly authorized officers as of the date set forth in the Preamble.

 

IRIDIUM SATELLITE LLC   THALES ALENIA SPACE FRANCE
     
/s/ S. Scott Smith   /s/ Nathalie Smirnov
S. Scott Smith   Nathalie Smirnov
Executive Vice President,   Senior Vice President,
Satellite Development & Operations   System & Payload – Telecom

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

PRODUCTS AND SERVICES AGREEMENT NO. AIR-12-001

 

between

 

Aireon LLC

(“Aireon”)

 

and

 

Harris Corporation

Government Communications Systems Division

 

(“Contractor”)

 

for

 

Automatic Dependent Surveillance-Broadcast (ADS-B)

Payload Development

 

 

  

This Agreement and the information contained herein is proprietary to Aireon LLC and its Affiliate and shall not be published or disclosed to any third party except as permitted by the terms and conditions of this Agreement.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

1
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

Table of Contents

 

PREAMBLE 6
PURPOSE 6
ARTICLE 1 - DEFINITIONS 6
ARTICLE 2 - TERM 11
ARTICLE 3 - SCOPE OF AGREEMENT 11
3.1   Agreement Content and Order of Precedence 11
  3.1.1   Content 11
  3.1.2   Order of Precedence 12
3.2   Scope 12
  3.2.1   Products, Software and Services 12
3.3   Associate Contractors, Cooperation 13
3.4   Contractor Personnel 13
3.5   Aireon Customer Furnished Items (CFI) 13
ARTICLE 4 - PURCHASE OF OPTIONAL PRODUCTS AND SERVICES 14
4.1   Purchase of Optional [***] and [***] 14
4.2   Option for [***] 14
ARTICLE 5 – PRICES AND TAXES 14
5.1   Firm Fixed Price 14
5.2   Time and Material Price 15
5.3   Taxes 15
ARTICLE 6 – DELIVERABLES AND SHIPPING TERMS 16
6.1   Deliverables and Performance Milestones 16
6.2   Shipment Terms 16
6.3   Payload Packaging, Shipment and Storage Plan 16
ARTICLE 7 - PAYMENTS AND INVOICES 17
7.1   Timing of Payments 17
  7.1.1   General 17
  7.1.2   Milestone Payments 17
  7.1.3   Time and Material Payments and Funding 17
  7.1.4   Early Completion of Milestones 18
7.2   No Waiver 18
7.3   Terms of Payment 18
7.4   Invoicing Instructions 18
7.5   Disputed Amounts 18
7.6   Failure to Pay 19
7.7   Payment in Iridium Services 19
ARTICLE 8 – PAYLOAD PRE-INTEGRATION AND SHIP READINESS REVIEW AND DELIVERY 20
8.1   Payload Pre-Integration and Ship Readiness Review (PPSRR) 20
  8.1.1   Contractor to Conduct a Review of each Payload Prior to Shipment 20
  8.1.2   Time, Place and Notice of PPSRR 20
  8.1.3   Conduct and Purpose of PPSRR 20
  8.1.4   Waivers and Deviations 20
  8.1.5   PPSR Inspection 21
  8.1.6   PPSR Results 21
  8.1.7   Inspection Costs Borne by Aireon 21

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

2
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

  8.1.8 Correction of Deficiencies after PPSRR 21
ARTICLE 9 – ACCEPTANCE 22
9.1   Acceptance of Products and/or Work 22
9.2   Acceptance of Payload 22
9.3   Acceptance of Services 22
9.4   Acceptance of Documentation 22
9.5   Inspection Not Acceptance 23
9.6   Non-Release of Warranty Obligations Upon Acceptance 23
9.7   Aireon Recommendations 23
ARTICLE 10 – TRANSFER OF TITLE AND RISK OF LOSS 23
10.1   Payload 23
10.2   Deliverables Other Than the Payload 23
ARTICLE 11 - GENERAL WARRANTIES AND REPRESENTATIONS 24
11.1   Products and Services Warranty 24
11.2   Defects and Nonconforming Remedies 24
11.3   Payload Defects and Anomalies 24
  11.3.1   Notification 24
  11.3.2   Investigate and Correct 24
  11.3.3    Warranty Exclusions 25
11.4   Other Agreements 25
11.5   Software Warranty 25
11.6   Title 25
11.7   Intellectual Property Warranty 26
ARTICLE 12 - FACILITIES ACCESS AND INSURANCE 26
12.1   General Facilities Access 26
12.2   Site Access 26
12.3   Access to Work in Process 26
12.4   Residency 27
12.5   Insurance 27
12.6   Contractor Insurance Support 27
12.7   Contractor Claims Support 28
ARTICLE 13 - INTELLECTUAL PROPERTY 28
13.1   Proprietary Information 28
  13.1.1   Transmittal of Proprietary Information 28
  13.1.2   Use of Proprietary Information 28
  13.1.3   Protection of Proprietary Information 29
  13.1.4   Return of Proprietary Information 29
  13.1.5   Confidentiality Exceptions 29
  13.1.6   Disclosure to a Court 29
13.2   Intellectual Property Rights 30
  13.2.1.   Background Intellectual Property 30
  13.2.2   Foreground IP ( [***] Ownership and License) 30
  13.2.3   Additional Assistance to [***] 31
  13.2.4   Waiver of [***] 31
  13.2.5   Alternative Grant of [***] 31
13.3   Indemnification 31
ARTICLE 14 – CHANGES 32
14.1   Change Orders 32
14.2   Equitable Adjustments 32

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

3
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 15 - STOP WORK ORDER 33
15.1   Stop Work Order Notice 33
15.2   Period of Stopped Work 33
15.3   Equitable Stopped Work Compensation 33
ARTICLE 16 - LAWS AND REGULATIONS COMPLIANCE 33
16.1   General 33
16.2   Export and Other Regulations 34
  16.2.1   Compliance with Laws 34
  16.2.2   Export Approvals 34
  16.2.3   Effects of Approvals 34
  16.2.4   Required Permits 35
  16.2.5   Corrupt Practices 35
  16.2.6   Boycott 35
16.3   Inter-Party Waiver of Liability 35
16.3.1  Launch Services Agreement Inter-Party Waiver 35
16.3.2  Indemnity Related to the Inter-Party Waiver of Liability 35
16.4    Type and Government Approvals 36
16.5    Support Efforts 36
ARTICLE 17 – TERMINATION 37
17.1   Termination of the Agreement 37
  17.1.1   Termination for Default 37
  17.1.2   Termination for [***] 37
17.2   Consequences of Default Termination 37
  17.2.1   Termination by Aireon for default of the Contractor 37
  17.2.2   Termination for Bankruptcy 38
17.3   Disposition of Work 38
ARTICLE 18 – GROUND STORAGE 39
18.1   Storage. 39
18.2   Title and Risk of Loss 39
18.3   Notification of Intention to Launch a Previously Stored Payload 39
ARTICLE 19 - FORCE MAJEURE 39
ARTICLE 20 - DISPUTES RESOLUTION 40
20.1   Escalation 40
20.2   Resolution by a Court of Law 40
20.3   Continuing Performance 40
20.4   Injunctive Relief 40
ARTICLE 21 - GOVERNING LAW 40
21.1   Governing Law 40
ARTICLE 22 - LIMITATION OF LIABILITY 41
22.1   Disclaimer 41
22.2   Limitation of Liability 41
22.3  Indemnification 41
ARTICLE 23 - AUTHORIZED REPRESENTATIVES AND NOTICES 41
23.1   Authorized Representatives 41
23.2   Notices 42
ARTICLE 24 – ASSIGNMENT 42
24.1   Assignment Generally 42
24.2   Assignment to Affiliates 43
24.3   Assignment Due to Merger, Acquisition or Transfer of Assets 43

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

4
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 25 - GENERAL PROVISIONS 43
25.1   Entire Agreement 43
25.2   Amendments 43
25.3   Severability 43
25.4   Interpretation 44
25.5   Relationship of the Parties 44
25.6   Independent Contractors 44
25.7   Release of Information 44
25.7.1     Written Approval 44
25.7.2     Pre-Approval 44
25.8   Waiver, Amendment or Modification 45
25.9   Survival 45
25.10   Independent Audit Rights and Procedures 45
25.11   Parties Advised by Counsel 45
EXHIBIT A – STATEMENT OF WORK 47
EXHIBIT B – PERFORMANCE SPECIFICATIONS 48
EXHIBIT C – MILESTONE PAYMENT PLAN 49
EXHIBIT D - COMPLETION CERTIFICATION 50
EXHIBIT E – TERMINATION LIABILITY SCHEDULE 51
EXHIBIT F - CONTRACT BACKGROUND INTELLECTUAL PROPERTY SUBJECT TO CONTRACT ARTICLE 13 INTELLECTUAL PROPERTY 52
EXHIBIT G – TIME AND MATERIAL RATE TABLE 53
EXHIBIT H – SAMPLE TASK ORDER FORMAT 54

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

5
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

PREAMBLE

 

This Products and Services Agreement (including as amended, modified or supplemented from time to time hereafter, this “Agreement”) is entered into between:

 

Aireon LLC (hereinafter referred to as "Aireon"), a limited liability company organized in the state of Delaware, U.S.A., with offices located at 1750 Tysons Boulevard, Suite 1400, McLean, Virginia USA 22102, and

 

Harris Corporation, Government Communications Systems Division organized in the state of Delaware with offices located at 2400 Palm Bay Road NE, Palm Bay, Florida 32905 USA (hereinafter referred to as “Contractor”). In this Agreement, Aireon and Contractor shall each be referred to individually as “Party” and collectively as the “Parties.”

 

PURPOSE

 

The purpose of this Agreement is to establish a set of terms and conditions between Contractor and Aireon under which Contractor will sell to Aireon the necessary products and services for the ADS-B Payload (“Payload”) Development as defined in more detail in the attached SOW (Exhibit A) under this Agreement.

 

In consideration of the foregoing, and the mutual promises contained herein, the Parties agree as follows:

 

ARTICLE 1 - DEFINITIONS

 

As used throughout this Agreement, the following terms when written with initial capital letters shall have the meanings specified below. Capitalized terms used in this Agreement that are not defined in this Article, but which are defined in other Articles, the Exhibits, individual Task Order(s) and attachments referencing this Agreement shall have the meaning specified therein.

 

a)         “Acceptance” means, for the relevant Deliverables, Aireon’s acceptance in accordance with the terms set forth in Article 9, unless noted otherwise in the SOW.

 

b)          “Actual Hours” means labor hours charged directly to work scope associated with a directed change on a Time and Material basis.

 

c)          “ADS-B Payload” or “Payload” means the automatic dependent surveillance-broadcast compliant payload that is to be manufactured by Contractor and to be delivered to Aireon pursuant to this Agreement.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

6
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

  d)          “Aireon System” means a satellite-based global commercial aviation monitoring service utilizing automatic dependent surveillance-broadcast (ADS-B) technology, including any replacement system.

 

e)          “AIT Subcontractor” means the subcontractor that will be integrating each Payload with a satellite.

 

f)          “Affiliate” means, with respect to the Parties, any company, firm, joint venture, partnership, or other entity of which either party directly or indirectly owns or controls the power to vote a majority of the voting rights or over which either Party directly or indirectly has the power to exercise a controlling influence.

 

g)          “Anomaly” means, with respect to a Payload on-orbit, a known condition or occurrence that has or reasonably can be predicted to have an adverse impact on the performance, reliability or Operating Life of the Payload or result in such Payload failing to meet the requirements of this Agreement, including the Statement of Work. An isolated (non-recurring) condition or occurrence that does not adversely impact or cannot be reasonably predicted to adversely impact the performance, reliability or Operating Life of a Satellite shall not be considered an Anomaly.

 

h)          “Background Intellectual Property” means (i) with respect to Contractor, any Contractor Intellectual Property (“IP”) incorporated in the Deliverables, which is not Foreground IP , and (ii) with respect to Aireon, any IP of Aireon that is reasonably necessary for Contractor’s performance under this Agreement, which is not Foreground IP .

 

i)          “Background IP Rights” means intellectual property rights (“IPR”) pertaining to Background Intellectual Property.

 

j)          “Business Proprietary Information” means information disclosed in writing or graphic or model or machine readable form and prominently designated and identified by the disclosing Party in writing as proprietary information at the time of disclosure, with a suitable legend such as “Proprietary” or “Business Proprietary” or substantial equivalent, or, if disclosed orally, confirmed in writing by the disclosing Party within [***] after such disclosure. Nothing shall be construed as Business Proprietary Information which is: (i) published or otherwise becomes available to the public other than by breach of this Agreement; (ii) rightly received by one Party hereunder from a third party without confidential limitation; (iii) already known by the receiving Party; (iv) independently developed by the receiving Party without use of the disclosed information or breach of this Agreement; (v) approved for release by the providing Party without confidential limitation; or (vi) disclosed by public sale or disposition of software, circuits, apparatus, products or services of the providing Party, where the Business Proprietary Information is readily ascertainable from such software, circuits, apparatus, products or services without experimentation, reverse engineering or other technical analysis, without confidential limitations upon the receiving Party of such software, circuits, apparatus, products or services as evidenced by competent written proof to the receiving party.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

7
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

k)          “Conditional Acceptance” means Aireon’s conditional acceptance of the Payload in accordance with the terms set forth in Article 9, unless noted otherwise in the SOW.

 

l)          “Constructive Total Loss” shall have the meaning assigned to the term “Constructive Total Loss” in Aireon’s Launch and In-Orbit Insurance policy in place at the time of Launch. Aireon shall provide a copy of such definition to Contractor after the issuance of such Launch and In-Orbit Insurance policy.

 

m)          “Customer Furnished Items” or “CFI” means all equipment, facilities, documentation or other property that is required to be furnished to Contractor by Aireon pursuant to this Agreement and/or any applicable Task Order.

 

n)          “Defect” means with respect to the Payload, any deviation, discrepancy, non-conformance or failure to meet the applicable specifications of this Agreement, including failures due to [***] which affects adversely the operation or performance of a Payload. A deviation, discrepancy, non-conformance or failure to meet the applicable specifications of this Agreement that does not [***] or cannot be reasonably predicted to [***] shall not be considered a Defect.

 

o)          “Deliverable(s)” means collectively any of the items, data, documentation, Payloads, Products, Software or Services to be delivered pursuant to the requirements of this Agreement and including the schedules, milestones, pricing. the SOW, and/or any applicable Task Order, as may be amended from time to time in accordance with the terms hereof.

 

p)          “Delivery” shall have the meaning set forth in Article 6.

 

q)          “Exploit” means, with regard to a Party’s use of Intellectual Property, to reproduce, prepare derivative works of, modify, distribute, perform publicly, display, make, have made, use, manufacture, import, offer to sell and sell products, materials and services that embody any Intellectual Property Rights in such Intellectual Property and otherwise fully use, practice and exploit such Intellectual Property, and Intellectual Property Rights therein, or to have any third party exploit such Intellectual Property, and Intellectual Property Rights therein, on such Party’s behalf or for such Party’s benefit.

 

r)          "Final Acceptance" means Aireon’s final acceptance of the Payload in accordance with the terms set forth in Article 9, unless noted otherwise in the SOW.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

8
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

s)          “Foreground IP” of a Party means Intellectual Property developed, created, conceived and/or reduced to practice by such Party [***]. The Parties agree that Foreground IP, however DOES NOT include [***].

 

t)          “Foreground IP Rights” means IPR pertaining to Foreground IP .

 

u)          “Host” means Iridium Satellite LLC, with offices located at 1750 Tysons Boulevard, Suite 1400, McLean, Virginia 22102, and 2030 East ASU Circle, Tempe, Arizona 85284.

 

v)          “Intellectual Property” or “IP” means trade secrets, know-how, discoveries, improvements, inventions, technical data, documentation, designs, information, concepts, formulas, APIs, methods or processes, specifications, technology, Software and other works of authorship, know-how, patents and patents invention certificates, copyrights, trademarks and mask works (including any applications, reissues, continuations, continuations-in-part, revisions, extensions and reexaminations thereof, foreign equivalents thereof and whether or not patentable and whether or not reduced to practice), as well as all Business Proprietary Information.

 

w)          “Intellectual Property Rights” or “IPR” means all associated rights in and to, or in any way pertaining to Intellectual Property.

 

x)          “Launch” means, with respect to a Payload, intentional ignition followed by lift-off.

 

y)          “Launch Site” means the location that will be used by a Launch Services Provider for purposes of Launching Satellites.

 

z)          “Milestone Payment Plan” means Exhibit C to this Agreement.

 

aa)         “Milestone Success Criteria” means the criteria set forth in Appendix B of the Statement of Work providing for the Milestone acceptance requirements associated with the completion of a portion of the Work under this Agreement, including the Delivery of any Deliverables or performance of relevant Services.

 

bb)         “NEXT System” means the next generation Iridium satellite-based communications system comprised of the space segment, launch segment, subscriber equipment segment, teleport network segment, system control segment, ground gateway segment and all associated equipment, services, subsystems and system upgrades.

 

cc)         “On-Orbit Payload Acceptance Plan and Procedures” the On-Orbit Payload Acceptance Plan and Procedures Plan to be provided in accordance with this Agreement, including the Statement of Work

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

9
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

dd)         “Operating Life” means, with respect to a Payload, the operating life of any Payload extending through the earlier of [***] or [***].

 

ee)         “Other Payload” means any auxiliary payload that interfaces with the ADS-B Payload provided on any satellite which is part of the NEXT System, other than the Payload.

 

ff)            Payload Integration and Verification Plan” means the [***] to be produced and delivered by Contractor in accordance with this Agreement, including the Statement of Work.

 

gg)         “Payload Packaging, Shipment and Storage Plan” means the [***] to be produced and delivered by Contractor in accordance with this Agreement, including the Statement of Work.

 

hh)         “Performance Specification” means the applicable performance specifications for the Payload which are set forth in Exhibit B, as required by the Statement of Work, as such specification(s) may be amended from time to time in accordance with the terms hereof.

 

ii)         “PPSRR” means Payload Pre-Integration and Ship Readiness Review as further described in Article 8 herein.

 

jj)         “Products” means equipment and Software, including but not limited to, all related components, materials, documentation and Services to be provided by Contractor hereunder as more specifically defined in the SOW.

 

kk)         “Services” means all labor, support and necessary resources, including but not limited to the design, development, engineering, modifications, analysis, data, installation, integration, testing, simulators & tools, program management, warranty, maintenance & support services, training and any other services to be provided by Contractor hereunder as more specifically defined in the SOW.

 

ll)         “Software” means computer software programs and software systems in object code and source code form (including firmware, files, databases, interfaces and documentation, and any third party Software sublicensed by Contractor hereunder), as such Software is designed, developed, revised, upgraded, updated, corrected, modified, and enhanced from time to time and /or provided by Contractor hereunder.

 

mm)       “Statement of Work” or “SOW” means Exhibit A to this Agreement and/or any applicable Task Order .

 

nn)         “Stop Work Order” means a written order from Aireon to Contractor requesting Contractor cease, and cause its suppliers (as applicable) to cease, performance of all or part of the work for the period specified in such order, as such period may be extended in accordance with this Agreement, as set forth in Article 15.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

oo)         “Task Order” means a written order which sets forth the scope of work, specifications, requirements, Deliverables, prices, special terms and conditions and other services as agreed to by the Parties. A Task Order shall contain at least the information set forth in Exhibit H, unless agreed otherwise by the Parties.

 

pp)         “Total Loss” shall have the meaning assigned to the term “Total Loss” in Aireon’s Launch and In-Orbit Insurance policy in place at the time of Launch. Aireon shall provide a copy of such definition to Contractor after the issuance of such Launch and In-Orbit Insurance policy.

 

qq)         “Work” refers to the scope of work to be performed by Contractor under or pursuant to this Agreement including without limitation any Services, Deliverables, Work Product, or SOW.

 

rr)         “Work Product” means any scope of work, Statements of Work, Products, Software, Services, Deliverables, specifications, milestones, or other work arising under this Agreement , including any SOW .

 

ARTICLE 2 - TERM

 

The term of this Agreement shall commence on June 18, 2012 (“Effective Date”) and continue for a term of [***] (the “Term”) unless extended by the mutual written agreement of both Parties or unless terminated in accordance with Article 17.

 

ARTICLE 3 - SCOPE OF AGREEMENT

 

3.1           Agreement Content and Order of Precedence

 

3.1.1         Content

 

T he following documents are hereby incorporated into and made a part of this Agreement with the same force and effect as the provisions as stated in this Agreement.

 

Exhibit A  Statement of Work for ADS-B Hosted Payload Development supporting the Iridium Global Aircraft Monitoring (IGAM) Project, Version [***] dated [***]
Exhibit B Performance Specification
Exhibit C Milestone Payment Plan
Exhibit D Completion Certificate
Exhibit E Termination Liability Schedule
Exhibit F Contractor Background Intellectual Property
Exhibit G Time and Material Labor Rate Table
Exhibit H Sample Task Order Format

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

3.1.2         Order of Precedence

 

In the event of any inconsistency among or between the Articles and the Associated Exhibits to this Agreement, such inconsistency shall be resolved by giving precedence in the order of the parts as set forth below :

 

1.          The terms and conditions of this Agreement; and

2.          The Exhibits to this Agreement, in the order attached hereto.

 

3.2          Scope

 

Pursuant to this Agreement, Aireon will purchase from Contractor and Contractor will sell to Aireon the necessary Products and Services in support of the Payload Development as set forth in this Agreement and any applicable Task Order issued hereunder.

 

3.2.1        Products, Software and Services

 

Contractor shall provide the personnel, services, materials, equipment, and facilities necessary to complete the requirements set forth in this Agreement, including the SOW issued hereunder in a timely manner .
Ensure the Payload provided by Contractor is in compliance with the [***] and [***] and the reference documents in Section 2 of the Statement of Work (“SOW”).
Perform the services set forth in the SOW in accordance with the requirements of the SOW.
Deliver the data items set forth in the SOW and identified in Table A-1 Appendix A (Contract Data Requirements List (CDRL) and perform all Payload systems engineering, development, qualification and production services as delineated in the SOW.
Design, develop, produce and deliver eighty-one (81) Payloads for hosting on Iridium NEXT satellites.
Perform the services set forth in the SOW to include participation in the [***] for the [***] at the time and in the manner to enable Aireon to fulfill its obligations.
Adhere to the SOW schedule for performance of Contractor's responsibilities in Table 8-1 Proposed CLIN 001 Program Milestones and Milestone Reviews.
Perform mutually agreed upon time and material services outside the scope of the SOW at the hourly rates set forth in Exhibit G.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

The Contractor will promptly inform Aireon of any circumstances that may cause the Contractor to fail to meet the schedule set forth in the SOW and will keep Aireon regularly apprised of its progress regarding the schedule set forth in the SOW.

 

3.3           Associate Contractors, Cooperation

 

Contractor will work cooperatively and in good faith with third parties designated by Aireon as Associate Contractors engaged in development of the Payload, and when requested by Aireon shall, without limitation: (i) provide all required support, technical assistance, communication, and all other cooperative activities reasonably required by Aireon and/or such Associate Contractor for the successful development of the Payload; (ii) expressly agree that relevant Contractor Proprietary Information as described in Article 13, including all schedule and technical design information but excluding financial or other proprietary business information, may be made available by Aireon to Associate Contractors, provided that the Associate Contractor shall have a need to know such information for the purposes of their work for Aireon with respect to the Payload and provided such Associate Contractors have previously agreed to non-disclosure obligations no less restrictive than the requirements of Article 13 herein; and (iii) agree to use and protect the Proprietary Information of Associate Contractors in accordance with the requirements of Article 13 herein and as if such information was Aireon’s Proprietary Information.

 

3.4           Contractor Personnel

 

Contractor will assign only properly qualified and experienced personnel to the Work contemplated under this Agreement. Contractor shall use reasonable efforts to retain such personnel on the Work for its duration. At the reasonable request of Aireon, Contractor will replace personnel who in Aireon’s good faith opinion are not properly qualified and experienced to perform the Work contemplated under this Agreement from the project team of any Work as soon as practicable.

 

3.5           Aireon Customer Furnished Items (CFI)

 

Aireon shall provide to Contractor Customer Furnished Items as required in the SOW and/or in any applicable Task Order which CFI shall be adequate for its required purpose. Aireon shall be responsible for timely making available to Contractor the Aireon CFI in order to support Contractor’s performance in accordance with the delivery schedule set forth in this Agreement. Unless otherwise provided in a SOW and/or in any applicable Task Order, CFI shall also be made available free of charge for Contractor’s use during the agreed period of performance. Contractor shall assume risk of loss or damage to all Aireon CFI during its period of use as provided for in the SOW and/or in any applicable Task Order. Unless otherwise provided in a separate agreement, the CFI loaned to the Contractor will remain the property of Aireon and the Contractor will return such CFI in the same condition it was in when loaned to the Contractor upon the completion of the Services or earlier upon Aireon’s request, ordinary wear and tear excepted. The Contractor shall at all times during the duration of any such loan period maintain in full force and effect adequate insurance to replace the CFI and to protect both the Contractor and Aireon against claims for injury, death, property damage, or other loss alleged to have arisen from the use of the CFI. If the Contractor requires access to Aireon’s computer systems, networks and infrastructure as required in the SOW (the “Assets/Systems”), if any, access to such Assets/Systems is granted solely to facilitate the provision of the Services, and is limited to those specific Assets/Systems, time periods, and personnel designated by the Contractor as are separately agreed to by Aireon and the Contractor from time-to-time. Access is subject to business control and information protection policies, standards, and guidelines, as may be provided by Aireon. Use of any other Assets/Systems is expressly prohibited. This prohibition applies even when Assets/Systems which the Contractor is authorized to access serves as a gateway to other Assets/Systems outside the scope of the Contractor’s authorization. Use of Assets/Systems during other time periods or by individuals not authorized by Aireon is expressly prohibited.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 4 - PURCHASE OF OPTIONAL PRODUCTS AND SERVICES

 

4.1           Purchase of Optional [***] and [***]

 

Aireon may, at its sole option to be exercised by written notice to Contractor, order Contractor to [***] up to [***], in accordance with the SOW. All other terms not specified below relating to the performance of the Work associated with the [***] shall be in accordance with the terms of this Agreement, including the SOW.

 

a) Option Exercise . Aireon may exercise this option for [***]. Aireon’s order shall indicate [***].

 

b) Period of Performance . Any additional [***] ordered pursuant to Article 4.1 will be [***].

 

c) Price . The price for any [***] ordered pursuant to Article 4.1shall be [***].

 

d) Payment . Payment for any [***] ordered under Article 4.1 shall be [***] which may be adjusted depending on [***].

 

4.2           Option for [***]

 

In the event that Aireon notifies Contractor in writing of [***] in accordance with this Agreement, including the SOW, Contractor agrees to provide to Aireon [***].

 

ARTICLE 5 – PRICES AND TAXES

 

5.1           Firm Fixed Price

 

The total price to be paid by Aireon to Contractor for the Work to be performed under this Agreement, including all of the Deliverable set forth in the Statement of Work, shall be a total firm fixed price of One Hundred Fourteen Million Seven Hundred Thousand U.S. dollars (U.S. $114,700,000.00) (the “Firm Fixed Price”), to be paid in accordance with the Milestone Payment Plan. The firm fixed price set forth above includes [***].

 

The options available under this Agreement and described in Article 4 are [***]. To the extent any of the options provided for under Article 4 are exercised, [***] and the terms of this Agreement will be amended in accordance with Article 25.2.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

Notwithstanding any provision in this Agreement to the contrary, Aireon shall not be obligated to pay Contractor any amount [***] , for work performed under the SOW, [***] .

 

5.2           Time and Material Price

 

5.2.1           The Parties agree that Aireon may request the performance of Services outside the scope of this Agreement during the performance of this Agreement. Such Services will be performed only upon the mutual agreement of the Parties of a Time and Materials (“T&M”) Task Order. Such Task Order will include mutually agreeable labor category descriptions, hourly rates, and NTE Ceiling Price.

 

5.2.2           Notwithstanding any provision in this Agreement to the contrary, Aireon shall not be obligated to pay Contractor any amount in excess of the total NTE Ceiling Price reflected herein, or any amendments hereto, for work performed on a T&M basis under this Agreement, or termination costs in the event this Agreement is terminated by Contractor for default. All travel, reimbursable expenses and number of Contractor personnel traveling must be approved by Aireon.

 

5.2.3           The Parties agree that this Article shall not be applicable to changes that Contractor estimates to be greater than [***] as set forth in Article 14.2.

 

5.3           Taxes

 

5.3.1            Contractor Tax responsibilities. The base contract price shall include all applicable present and future taxes, including withholding taxes, fees, levies and duties (“Taxes”) imposed by the US government or any political subdivision thereof, in connection with Contractor’s performance of this contract including Taxes in connection with the performance of any portion of the Work by Contractor or Subcontractor (such as US corporate income tax, withholding taxes, or individual tax due by the Contractor), in each case other than present and future taxes, fees, levies and duties imposed on Aireon as a result of Aireon accepting title, ownership or possession of any Deliverable items under this contract (such as sales, use or similar taxes). The base contract price includes any applicable Taxes present and future imposed on Contractor’s acquisition of items and services from subcontractors and suppliers, or the performance of any portion of the work by subcontractors or suppliers wheresoever located in the performance of its obligations hereunder.

 

5.3.2            Aireon Tax Responsibilities. Aireon shall only be responsible for applicable present and future taxes, fees, levies and duties, after or in connection with the transfer of title to any and all equipment to Aireon, in particular with respect to sales taxes. Provided, however, that Aireon may be exempt from such taxes if Aireon provides Contractor with the appropriate reseller certification or similar documentation as may be required by the applicable state or municipality. In such case, Contractor shall not assess such taxes on Aireon.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 6 – DELIVERABLES AND SHIPPING TERMS

 

6.1           Deliverables and Performance Milestones

 

Product, Software, Services and Deliverables delivery dates and performance milestones shall be specified in the SOW and/or in any applicable Task Order . The Contractor shall complete each project (as such term is defined in the applicable Statement of Work) in accordance with the schedule set forth in the applicable Statement of Work, unless Aireon gives the Contractor a written extension of time . The Firm Fixed Price includes shipment of the [***] and eighty-one (81) Hosted Payloads in reusable shipping containers. The reusable shipping containers are to be returned by Aireon and available to the Contractor within [***] calendar days after the delivery of each shipset in order to support the Contractor’s delivery schedule.

 

6.2           Shipment Terms

 

Unless otherwise specified in the SOW or directed in writing by Aireon, “Delivery” of the Products, Software, and Services made by Contractor to Aireon shall be packaged or delivered in accordance with industry standards and shipped via ground transportation to an Aireon-designated destination (INCOTERMS [***] basis. The foregoing notwithstanding, title and licenses to the Software shall not pass to Aireon in conjunction with passage of title to the equipment, only title to the media containing the Software it being understood that title and licenses to the Software shall be governed by the Intellectual Property provisions of this Agreement. For the sake of clarity, if Aireon directs Contractor to ship the Qualification Payload and/or Payload Simulator to [***], Aireon will be the exporter of record and Contractor will be responsible for shipment to the designated non-U.S. location and bear the risk of loss.

 

6.3           Payload Packaging, Shipment and Storage Plan

 

The Contractor shall deliver a Payload Packaging, Shipment and Storage Plan [***] for Aireon approval in accordance with the SOW. This plan shall define the requirements, processes and procedures for the preservation, packaging, handling, shipment, and storage of Payloads and support equipment to the Iridium NEXT satellite assembly, integration and test (“AIT”) integration location and during transit between locations. All electrostatic discharge sensitive material shall be packaged in ESD-shielding in accordance with Aireon's preferred method/standard (i.e., EIA-541). Packaging constituents shall not contain amine based or ionic antistatic chemistry. All pink-poly is prohibited unless otherwise approved in advance by Aireon.

 

The Contractor shall provide details of the specific Payload inspections and tests and frequency of such inspections and tests while a Payload is in Contractor storage within the production facility as well as recertification inspections and tests of a Payload after coming out of storage and prior to shipment to the NEXT assembly, integration and test facility.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 7 - PAYMENTS AND INVOICES

 

7.1           Timing of Payments

 

Payments under this Contract shall be made as follows:

 

7.1.1          General

 

All payments due by Aireon to Contractor shall be invoiced in accordance with the Milestone Payment Plan and this Article 7.1. Payments associated with any Options exercised by Aireon shall be invoiced in accordance with the relevant payment plan for such Option(s) and Article 5.1.

 

7.1.2          Milestone Payments

 

Contractor shall be entitled to invoice Aireon immediately after completion of all of the following: (i) Contractor completion of an applicable milestone in accordance with the SOW, and (ii) Aireon’s written Acceptance of such milestone in accordance with Article 8 (unless agreed otherwise). A milestone shall not be regarded as completed, and no payment shall be made, until all the effort relevant to that milestone and all previous milestones (applicable to payment milestones 5 through 26) have been completed, documented and delivered to Aireon in accordance with the SOW specifications and requirements and Acceptance has been confirmed by Aireon in accordance with Article 8. Contractor invoices for [***] will be submitted [***].

 

7.1.3        Time and Material Payments and Funding

 

Task Orders established on a time and materials basis shall have authorized not-to-exceed level of budget funding and Contractor agrees to use reasonable efforts to perform the work specified in the Task Order within such funding allotted. If at any time Contractor has reason to believe that the hourly rate payments and material costs which will accrue in the performance of the Task Order in the next succeeding [***] days, when added to all other payments and costs previously accrued, will exceed [***] percent ([***]%) of the funding allotted in the Task Order, Contractor shall immediately notify Aireon to that effect giving the revised estimate of the total price to Aireon for the performance of the Task Order, together with supporting reasons and documentation.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

7.1.4        Early Completion of Milestones

 

In the event that Contractor delivers early, Aireon may elect to pay the associated milestone(s) at the time of delivery dependnent on available funding.

 

7.2          No Waiver

 

Payments made under this Agreement shall not waive any rights, either expressed or implied, as may exist as part of this Agreement, including but not limited to, Aireon’s right to hire an independent auditor as specified in Article 25.10.

 

7.3         Terms of Payment

 

Provided that Acceptance of the applicable Work Product has occurred, payment shall be made via Electronic Funds Transfer (EFT) by Aireon in total within [***] business days after Aireon’s receipt of Contractor’s valid and correct invoice.

 

EFT Payments shall be made to:

 

[***]

 

In the event Aireon does not make a payment on the due date, interest will accrue daily at an annual rate of [***] on balance due.

 

7.4          Invoicing Instructions

 

All invoices and supporting payment documents shall be clearly marked with the applicable SOW and shall be sent to the following address for payment:

 

[***]

 

7.5          Disputed Amounts

 

In the event Contractor submits an invoice to Aireon that is incomplete, the Deliverable has not been delivered, a milestone has not been completed or an invoice billing amount is inaccurate or not in accordance with the requirements of this Agreement, Aireon shall so notify Contractor in writing within [***] business days of receipt of said invoice or payment obligation or, to the extent that the basis for a disputed invoice could not have been reasonably ascertained within [***] business days then within a reasonable time after the basis for such disputed invoice should have been reasonably apparent to Aireon. Such notification shall state in reasonable detail the Agreement requirements associated with the applicable Deliverable item or milestone that have not been met. Upon correction of the noted discrepancy or discrepancies and delivery or completion of the milestone in accordance with this Agreement, the invoice shall be reinstated for payment. Failure to pay any amount subject to a reasonable good faith dispute shall not constitute a material breach under this Agreement until such underlying dispute is resolved by the Parties.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

7.6           Failure to Pay

 

Aireon’s failure to timely make payment in full on the Due Date(s) will constitute a material breach of this Agreement, and will result in Contractor having all rights and remedies available under this Agreement (which the parties understand and agree will include the right to stop work in Contractor’s discretion and the right to exercise the conversion option outlined below in Article 7.7) at law or in equity. Prior to any stop work resulting from a delayed payment, Contractor will work with Aireon toward a mutually acceptable resolution of delayed payments which, if needed, shall involve discussions between each Party’s senior management. More specifically, a panel of two senior executives of Harris and Aireon agree to meet within [***] days of receiving an invoice, in person or by teleconference, and confer in an effort to resolve anticipated non-payment issues. Each Party’s executives will be identified by notice to the other.

 

7.7          Payment in Iridium Services

 

In the event Aireon fails to timely make its initial or any other later payment in accordance with the terms of this Agreement, Aireon shall [***] take action to procure from Iridium Satellite LLC prepaid credits for services offered by Iridium (e.g., voice, data, open port, etc) in the disputed amount (credits) owed by Aireon to Contractor. The amount of Iridium Services to be transferred to Contractor shall equal the portion of the Unpaid Amount [***] up to ten million ($10,000,000) U.S. dollars. The credits will reflect the use of [***] and the Agreement will permit [***]. In addition, Aireon will also procure for Contractor the right to [***]; provided, however, that [***]. Aireon agrees that it will use its best efforts to negotiate and present to Contractor a fully [***] between [***] that reflects [***] within [***] of the [***] with the understanding that, notwithstanding the above, a [***] shall be presented to [***] no later than [***] from the[***] of this Agreement.

 

Alternatively, upon [***], Aireon may present [***] between [***] in which [***].

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 8 – PAYLOAD PRE-INTEGRATION AND SHIP READINESS REVIEW AND DELIVERY

 

Contractor shall perform the following tests and reviews:

 

8.1             Payload Pre-Integration and Ship Readiness Review (PPSRR)

 

8.1.1           Contractor to Conduct a Review of each Payload Prior to Shipment

 

Contractor shall conduct a detailed and comprehensive review of each Payload prior to Contractor’s shipment of the Payload [***]. This review shall be conducted in accordance with the terms of this Article 8 and the Statement of Work (a “Payload Pre-Integration and Ship Readiness Review or “PPSRR”). Contractor shall not ship or otherwise deliver to Aireon a Payload until such PPSRR has been satisfactorily completed.

 

8.1.2           Time, Place and Notice of PPSRR

 

The PPSRR shall take place at [***] or [***]. Contractor shall notify Aireon in writing on or before [***] prior to the date that the Payload(s) will be available for the PPSRR, which shall be the scheduled date for commencement of such PPSRR. If Aireon cannot attend the PPSRR on such initially scheduled date, Contractor shall reasonably accommodate Aireon’s scheduling requirements.

 

8.1.3           Conduct and Purpose of PPSRR

 

The PPSRR shall be conducted during normal business hours and in accordance with the terms of this Article 8 and the Statement of Work. The purpose of the PPSRR shall be to: (i) review test data and analyses for the Payload; (ii) demonstrate to Aireon’s satisfaction that [***]; (iii) demonstrate to Aireon’s satisfaction that [***]; (iv) determine whether the Payload meets the applicable Performance Specification requirements (except those that have been waived pursuant to Article 8.1.4 below) and is therefore ready for Delivery.

 

8.1.4           Waivers and Deviations

 

Contractor shall submit to Aireon, or Aireon may propose to Contractor, any request for a waiver of, or deviation from, provision(s) of the [***]. Aireon shall consider each such request in good faith in accordance with industry standard practices. A request for waiver or deviation shall be deemed granted only if it has been approved in writing by Aireon. Each such waiver or deviation approved by Aireon shall be deemed an amendment to the applicable [***] only with respect to such specified [***], permitting such waiver thereof, or deviation therefrom, effective on or after the date of such approval for such [***] or [***]. In the event that Aireon approves any waiver or deviation that has an impact or is reasonably expected to have an impact on the [***], Aireon shall be entitled to [***] with respect to such waiver to be negotiated in good faith by the Parties.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

8.1.5           PPSR Inspection

 

Contractor shall permit [***] pursuant to this Article 8.1.5; provided, however, that the provisions of Article 12.1 and Article 16 shall apply to any such [***]. At Aireon’s request, the Contractor shall reasonably accommodate [***] on a case by case basis subject to requirements of Article 16.

 

8.1.6           PPSR Results

 

In the event that the PPSRR demonstrates to Aireon’s satisfaction that [***], Aireon shall provide written confirmation to Contractor within [***] after Aireon receives written notice of completion of the PPSRR from Contractor) of its [***] (it being expressly understood that such [***]), and the Payload(s) shall be deemed ready for shipment to the facilities of the AIT Contractor.

 

In the event that such PPSRR discloses that the [***], Aireon shall provide written notification thereof [***] to Contractor within [***] after Aireon receives written notice of completion of the PPSRR from Contractor, which written notification shall state [***]. Contractor shall promptly [***] to demonstrate to Aireon’s satisfaction [***], after which Aireon within the applicable time frame specified above shall provide [***] or [***] (it being expressly understood that any such [***]. Contractor shall be required to repeat the process described in this Article 8.1.6 until Aireon provides Contractor with a confirmation pursuant to the requirements of this Article 8.1.6, unless otherwise agreed by the Parties. Aireon shall not unreasonably withhold or delay giving its notification hereunder.

 

Upon receipt of Aireon’s confirmation in accordance with this Article 8.1.6, Contractor shall provide, with respect to each applicable Payload, a certification to Aireon in accordance with the form attached as Exhibit D, Form of Contractor Payload Pre-Shipment Review Completion Certificate. Thereafter, Contractor shall [***] in accordance with [***].

 

8.1.7           Inspection Costs Borne by Aireon

 

All costs and expenses incurred by Aireon and its agents in the exercise of its inspection rights under this Article 8, including travel and living expenses, shall be borne solely by Aireon.

 

8.1.8           Correction of Deficiencies after PPSRR

 

If at any time following completion of PPSRR of a Payload and prior to Launch, it is discovered that [***] or otherwise fails to meet the requirements of Article 8, as may be modified as of such time pursuant to Article 8.1.4, Contractor shall correct, within the shortest time possible [***] in accordance with the applicable terms of this Contract, including the Statement of Work, at its own expense, and Contractor shall, on a reasonable efforts basis, [***].

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 9 – ACCEPTANCE

 

9.1           Acceptance of Products and/or Work

 

Acceptance of the Products and/or Work by Aireon and/or its designee, including but not limited to all related development, design, Services, Software and documentation, shall occur only upon (i) Contractor furnishing the Products and/or Work to Aireon at the delivery location specified in this Agreement and (ii) completion of Acceptance testing in accordance with the test plan to be mutually developed by the Parties and approved by Aireon in writing that the Product and/or Work is furnished in a condition fully conforming to the provisions, specifications and requirements of this Agreement and the SOW . If there is no test plan to be mutually developed by the Parties and approved by Aireon, then acceptance testing will be to the reasonable satisfaction of Aireon . If the Product and/or Work fail to meet the Acceptance requirements set forth in the SOW, Aireon shall, within [***] business days, notify Contractor in writing in which respects the Product and/or Work is defective. Contractor shall promptly correct the defects referred to therein and notify Aireon that the corrections have been made. The provisions of this Article 9.1 shall thereafter apply to the corrected Products and/or Work.

 

9.2           Acceptance of Payload

 

Conditional Acceptance of each Payload shall occur when Contractor demonstrates satisfaction of success criteria upon completion of the payload acceptance testing at Contractor’s facility for each Payload in accordance with the requirements of the SOW. Final Acceptance shall occur upon successful on-orbit acceptance testing and checkout in accordance with the On-Orbit Payload Acceptance Plan and Procedures, in conjunction with the on-orbit checkout milestone payment.

 

9.3           Acceptance of Services

 

Acceptance of Services, including but not limited to, maintenance, training and engineering support, pursuant to this Agreement shall occur following Contractor’s completion of the applicable Services specified and delivered and upon Aireon’s verification that such Services are in conformance with the requirements of the SOW unless agreed otherwise by the Parties.

 

9.4           Acceptance of Documentation

 

Acceptance of documentation shall occur as specified in Article 9.1 above. However, approval by Aireon of certain documentation as required by the SOW milestone Deliverables shall occur when such approval has been granted in writing by Aireon. Aireon shall notify Contractor in writing of its approval, or rejection, or comments to such Documentation within [***] business days after receipt of such documentation by Aireon unless agreed otherwise by the Parties. Contractor will reply within [***] business days or sooner with a revised CDRL incorporating the comments.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

9.5           Inspection Not Acceptance

 

The inspection, examination, or observation by Aireon with regard to any portion of Work Products produced under this Agreement shall not constitute any Acceptance thereof, nor shall it relieve Contractor from fulfilling its contractual obligations hereunder.

 

9.6           Non-Release of Warranty Obligations Upon Acceptance

 

In no event shall Contractor or its suppliers be released from any of its warranty obligations applicable to any Deliverable as a result of such Deliverable having been accepted as set forth in this Article 9 or the SOW.

 

9.7           Aireon Recommendations

 

The Contractor shall in good faith consider any recommendations of Aireon as to any aspect of the Work to be performed hereunder, but for the avoidance of doubt, the Contractor will remain solely responsible for the performance of the Work in accordance with the requirements of this Agreement, including the SOW and specifications, except as set forth in a Change Order in accordance with Article 14.

 

ARTICLE 10 – TRANSFER OF TITLE AND RISK OF LOSS

 

10.1         Payload

 

Title to a Payload shall pass from Contractor to Aireon after the Payload has successfully achieved Conditional Acceptance at Contractor’s facility. Risk of loss or damage for a Payload shall pass from Contractor to Aireon after the Payload has been delivered to a location as directed by Aireon.

 

10.2         Deliverables Other Than the Payload

 

Title to and risk of loss or damage for the Deliverables other than the Payloads shall pass from Contractor to Aireon upon Acceptance thereof pursuant to Article 9. Aireon’s rights in and to data and documentation (including, without exception, deliverable Software and Software integrated into hardware) are as set forth in Article 13.2.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 11 - GENERAL WARRANTIES AND REPRESENTATIONS

 

11.1           Products and Services Warranty

 

Contractor at no additional cost to Aireon, warrants that the Products and Services Deliverables covered by this Agreement (i) will conform to the requirements, design and specifications and to drawings, samples or other descriptions referred to in the SOW, (ii) will be free from defects in material and workmanship, (iii) to the extent that the Contractor knows or has reason to know of the purpose for which the Work, Products, Software, and Services Deliverables are intended, will be fit and sufficient for such purpose. This warranty shall extend for a period of eighteen (18) months from the date of Conditional Acceptance or up until the time of launch, whichever event occurs first (the “Warranty Period”). Notwithstanding the above, the warranty for software services performed under 11.3 below shall extend for a period of [***] from the date that such services are performed by Contractor and accepted by Aireon.

 

11.2            Defects and Nonconforming Remedies

 

During the warranty period, if the Products and Services delivered hereunder do not meet the warranties specified herein, Contractor shall, at Contractor’s discretion and cost, correct, repair, or replace the defective or nonconforming Products and Services Deliverables. If Contractor fails to, or refuses to correct, repair, or replace the defective or nonconforming Product and Services Deliverable under this Article 11, Aireon shall at its discretion, be entitled to (i) an equitable reduction in the price of such defective or nonconforming Product or Software Deliverable and such price reduction shall be remitted promptly by Contractor to Aireon, or (ii) have the defect repaired or replaced by a third party in which case Contractor shall be liable for the cost of repairing or replacing the Contractor’s Product and Service with a similar Product and Service from such third party, (iii) terminate this Agreement and pursue any available remedy at law or in equity.

 

11.3            Payload Defects and Anomalies

 

11.3.1            Notification

 

If at any time during the Term of this Agreement, it is discovered that a Payload has a Defect or is experiencing an Anomaly, Contractor shall be notified in writing by Aireon and Aireon shall provide to Contractor for the purpose of the investigation all reasonably available data and information related to the Payload.

 

11.3.2            Investigate and Correct

 

Contractor shall investigate any Payload Anomaly or Defect occurring on any Payload after Launch and during the period set forth in Article 11.3.1, whether known to it or as notified in writing by Aireon, and shall correct such Anomaly or Defect as promptly as possible in accordance with the Payload Anomaly resolution support services set forth in the Statement of Work. Such corrective measures shall be conducted to resolve Defects or Anomalies that are resolvable by on-ground means, including software patches or updates, or transmission by Contractor of commands to the Payload to eliminate or mitigate any adverse impact resulting from any such Anomalies, to establish work-around solutions, or to otherwise resolve such Defects or Anomalies that are resolvable. Contractor shall coordinate and consult with Aireon concerning such on-ground resolution of Defects or Anomalies in any Launched Payload.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

24
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

11.3.3         Warranty Exclusions

 

THIS WARRANTY DOES NOT APPLY IF THE HARDWARE AND/OR SOFTWARE DELIVERED HEREUNDER (A) HAS BEEN ALTERED OR MODIFIED, EXCEPT BY SELLER; (B) HAS NOT BEEN INSTALLED, OPERATED, REPAIRED, OR MAINTAINED IN ACCORDANCE WITH INSTRUCTIONS PROVIDED BY SELLER; (C) HAS BEEN SUBJECTED TO ABNORMAL PHYSICAL OR ELECTRICAL STRESS BEYOND LIMITS SPECIFIED IN THE SOW AND/OR SPECIFICATIONS, MISUSE, NEGLIGENCE, OR ACCIDENT.

 

11.4         Other Agreements

 

Contractor represents that Contractor is subject to no agreement which in any manner would interfere with Aireon's ownership or other property or license rights, including Intellectual Property Rights as granted with respect to the Products, Services and/or Deliverables provided under this Agreement.

 

11.5         Software Warranty

 

In addition to the warranties set forth in this Article 11, Contractor further represents and warrants that, under this Agreement, (i) all Software delivered hereunder is free of viruses or similar items as verified by testing such Software using commercially reasonable anti-viral software; (ii) it will not knowingly introduce into any delivered Software, without Aireon’s prior written approval, any code that would have the effect of disabling or otherwise shutting down all or any portion of the delivered Software or any other software, computer or technology of Aireon; and (iii) it will not seek to gain access to the work through any special programming devices or methods, including trapdoors or backdoors, to bypass, without Aireon’s prior written approval, any Aireon security measures protecting the work.

 

11.6         Title

 

Contractor represents and warrants that it shall provide [***] title to all [***] for which title shall pass to Aireon free and clear of [***], in accordance with the terms of this Agreement. Contractor shall not grant to third parties any lien, encumbrance or security interest of any nature on any [***].

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

25
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

11.7         Intellectual Property Warranty

 

The Contractor represents and warrants that: (a) Contractor will not, in providing Services or Deliverables, [***] ; (b) all Work Product delivered under this Agreement shall be free and clear of any liens, [***] of others; (c) Contractor is not bound by the terms of [***] to [***] which may be used in the course of his relationship with Aireon or to [***] ; (d) Contractor’s execution of this Agreement, relationship with Aireon and performance under this Agreement shall not constitute [***] ; and (e) the exercise of Aireon of the rights granted by this Agreement and use of the Work Product and Products will not [***] (collectively, (a) through (e) the “IP Warranty”).

 

ARTICLE 12 - FACILITIES ACCESS AND INSURANCE

 

12.1      General Facilities Access

 

Subject to the terms set forth herein, and in compliance with applicable export laws, as well as Aireon and Contractor’s normal and customary safety and security regulations and practices (or, if applicable, those of a third party supplier), Aireon and Contractor shall be allowed to access the other’s facilities as required to perform the Work unless agreed otherwise and such agreement will not be unreasonably denied. Such access shall be upon reasonable prior written notice on a non-interfering basis and shall occur during normal working hours or at such other hours as Work is being performed.

 

12.2      Site Access

 

The Contractor shall provide to Aireon and/or its designated representatives on-site access to the Contractor’s facilities being used for the performance of the Work required under this Agreement for review of technical, manufacturing, and schedule status. The Contractor shall provide unescorted access to Contractor-provided Aireon office space and Contractor common areas. The Contractor shall also provide access to technical areas consistent with Contractor security policies

 

12.3        Access to Work in Process

 

Subject to the terms set forth herein, and in compliance with applicable export laws, as well as Aireon and Contractor’s normal and customary safety and security regulations and practices (or, if applicable, those of a third party supplier) Aireon’s employees and/or personnel of Aireon’s associate contractor shall be allowed access to all Work being performed at Contractor’s or any subcontractor’s facility for the Product and other Deliverable items for the purpose of observing the progress of such Work in accordance with the requirements of this Agreement, including the SOW. Such access shall be upon reasonable prior written notice on a non-interfering basis and shall occur during normal working hours or at such other hours as Work is being performed.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

26
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

12.4       Residency

 

Aireon reserves the right to station full-time personnel at the Contractor’s facility as it deems necessary. These residents may be Aireon employee or its designated representatives. The Contractor shall supply suitable office facilities for Aireon residents, in accordance with this Agreement to enable monitoring of the Work performed under this Agreement. These residents shall have free and unrestricted access to the Contractor’s facilities associated with the execution of this Agreement. The office facilities shall contain unrestricted access to the internet and external telephone lines.

 

12.5     Insurance

 

The Contractor shall obtain and maintain, at its own expense, insurance coverage against all risks of loss, including earthquake and other natural disasters, and damage to or loss or destruction of any portion of the work or any Deliverable and/or its components in an amount sufficient to cover the greater of: (a) the Contractor’s full replacement value of each Deliverable; or (b) the amounts paid by Aireon with respect to such Deliverable. Such insurance shall provide: (i) coverage for all activities associated with performance of the work at Contractor’s facilities; (ii) coverage for removal of debris, and insuring the structures, machines, equipment, facilities, fixtures and other properties constituting part of the project, (iii) transit coverage, including ocean marine coverage (unless insured by the supplier), and (iv) off-site coverage for any key equipment. Prior to commencing the work and whenever requested by Aireon, Contractor agrees to furnish to Aireon certificates of insurance evidencing that insurance required under this Article is in full force and effect. Contractor agrees to notify Aireon in advance of any change to any material terms and conditions of said policies of insurance which are relevant to this Agreement, and, if any such change is made without Aireon’s consent (not to be unreasonably withheld), Contractor shall be obligated to procure supplemental insurance coverage, subject to availability, to comply with the insurance obligations set forth above. Contractor shal provide certificates of insurance evidencing the above coverage is in place.

 

12.6      Contractor Insurance Support

 

Contractor, at no additional charge to Aireon, shall furnish Aireon with such information regarding a Payload as is requested by the insurers and as is customary and normal to support and assist Aireon in obtaining and maintaining a Launch and In-Orbit Insurance Policy including but not limited to: (i) providing a comprehensive presentation package on the Aireon System, including the Payloads, suitable for presentation to the space insurance brokers, underwriters or consultants; (ii) supporting Aireon with all necessary presentations (oral, written or otherwise), including attendance and participation in such presentations where requested by Aireon; (iii) providing on a timely basis all reasonable and appropriate technical information, data and documentation; (iv) providing documentation and answers to insurer and underwriter inquiries; and (v) obtaining any agreements and other approvals that are required (e.g., those agreements and approvals required pursuant to Article 16.2.4) for Aireon’s potential insurance providers to have access to all information required by such potential providers.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

27
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

  

The Contractor shall ensure that full disclosure is made through the brokers to those insurance underwriters providing insurance cover in respect of any risk relating to this Agreement to the extent required and subject to appropriate confidentiality safeguards and compliance with governmental export control and security laws, regulations, policies and license conditions.

 

Notwithstanding Article 13.1 and Article 25.7, but subject to Article 16, Aireon may disclose this Agreement to its insurers, provided that Aireon has entered into binding agreements with such insurers that limit the disclosure and use of such Agreement on terms comparable to those contained herein.

 

12.7 Contractor Claims Support

 

Subject to Article 16 and Article 13.1, Contractor shall cooperate with and provide reasonable and customary support to Aireon in making and perfecting claims for insurance recovery and as to any legal proceeding as may be brought by Aireon associated with any claim for insurance recovery. Contractor shall furnish Aireon with any information that may be reasonably required to prepare and present any insurance claim.

 

ARTICLE 13 - INTELLECTUAL PROPERTY

 

13.1 Proprietary Information

 

13.1.1 Transmittal of Proprietary Information

 

Aireon desires to transmit to Contractor certain Proprietary Information relating to the Aireon System; and Contractor desires to transmit to Aireon certain Proprietary Information of Contractor in connection with its performance under this Agreement. The receiving Party agrees to maintain the confidentiality of the disclosing Party’s Proprietary Information and not disclose such information to any third party, except as authorized by the disclosing Party in writing, for a period of [***].

 

13.1.2 Use of Proprietary Information


The receiving Party shall use Proprietary Information of the disclosing Party only for [***] or [***] granted by the disclosing Party to the receiving Party under this Agreement and for no other purpose.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

28
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

13.1.3 Protection of Proprietary Information

 

The receiving Party agrees to restrict disclosure of the disclosing Party’s Proprietary Information to any person or entity except to its employees, Affiliates, subcontractors, agents or contractors (who are not direct competitors of the Disclosing party), who [***], and who [***]. The receiving Party agrees that such Proprietary Information shall be [***], but in no event [***]. Receiving Party’s shall also specifically inform and train their employees of their obligations under this Article 13.

 

Proprietary Information received by a Party may be subject to U.S. export laws and regulations and shall not be exported directly or indirectly by the receiving Party, except as provided in Article 16. The receiving Party agrees that the disclosing Party’s Proprietary Information is and shall at all times remain the property of the disclosing Party. The receiving Party further agrees that, except as expressly provided herein, no grant under the disclosing Party’s Intellectual Property Rights is hereby given or intended, in this Article 13.1.3, including any license implied or otherwise.

 

13.1.4 Return of Proprietary Information

 

Upon termination of this Agreement, all Proprietary Information transmitted to the receiving Party by the disclosing Party in [***], and any copies thereof made by the receiving Party shall be destroyed or, at the disclosing Party’s written request, returned to the disclosing Party, except that the receiving Party shall be entitled to retain [***] in order to [***]. This shall not apply for such information which has been retained by the other Party in order to enjoy the user rights granted hereunder.

 

13.1.5 Confidentiality Exceptions

 

Notwithstanding the foregoing, the provisions of Article 13.1 shall not apply to Proprietary Information that (a) is publicly available or in the public domain at the time disclosed; (b) is or becomes publicly available or enters the public domain through no fault of the recipient; (c) is rightfully communicated to the recipient by persons not bound by confidentiality obligations with respect thereto; (d) is already in the recipient’s possession free of any confidentiality obligations with respect thereto at the time of disclosure; (e) is independently developed by the recipient; or (f) is approved for release or disclosure by the disclosing Party without restriction.

 

13.1.6 Disclosure to a Court

 

Notwithstanding anything in this Agreement to the contrary, either Party may disclose Proprietary Information in response to an order of a court or other governmental body or is otherwise required by law or regulation to be disclosed, provided that the Party making the disclosure pursuant to the order shall first have given notice to the other Party and made a reasonable effort to obtain a protective order.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

29
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

13.2 Intellectual Property Rights

 

13.2.1. Background Intellectual Property

 

All Background Intellectual Property and all Background IP Rights which are (a) created, acquired or otherwise obtained [***], or (b) developed [***], shall remain the sole and exclusive property of the Party who developed and owned such Background Intellectual Property and Background IP Rights. Contractor hereby grants to Aireon a fully-paid, royalty-free, worldwide, non-exclusive, license right to, either directly, or through its duly authorized agents, representatives, and subcontractors, [***] any of Contractor’s Background IP Rights and Background IP provided, delivered, or utilized under this Agreement for [***]. Except as provided in Article 13, no other rights expressed or implied are granted to Contractor’s Background IP. The Contractor’s Background IP is detailed in Exhibit F of this Agreement. The Parties agree that, if necessary, Exhibit F may be updated as needed during the Term of the Agreement.

 

Aireon agrees that a violation of this License would cause irreparable injury to Contractor, and that Contractor shall be entitled, in addition to any other rights and remedies it may have, at law or in equity, to seek an injunction enjoining and restraining Aireon from doing or continuing to do any such act and any other violations or threatened violations this License.

 

THE PARTIES AGREE THAT THE INTELECUTAL PROPERTY LICENSES HEREIN TERMINATE IF THE PARTIES TERMINATE THIS AGREEMENT PURSUANT TO ARTICLE 17. UPON TERMINATION, CONTRACTOR SHALL HAVE THE RIGHT TO [***], AND AIREON SHALL IMMEDIATELY [***] AND [***].

 

For purposes of clarity, Contractor acknowledges and agrees that Aireon retains ownership of: (a) all of Aireon’s Proprietary Information; and (b) any [***]; and (c) Aireon Background IP and Background IP Rights (“Aireon Property”). No right or license in such Aireon Property is granted to the Contractor regarding such Aireon Property, except as necessary to perform the Contractor’s obligations under this Agreement.

 

13.2.2 Foreground IP ( [***] Ownership and License)

 

Aireon and Contractor agree that all Foreground IP created by , or on behalf of , Contractor whether or not patentable, shall be [***].

 

All Foreground IP shall constitute [***]. If [***] may be entitled to claim any other ownership interest in any of the Foreground IP, [***] hereby [***], under patent, copyright, trade secret and trademark law, in perpetuity or for the longest period otherwise permitted by law. [***] agrees to grant to [***] a fully paid, royalty free, non-exclusive, world-wide, irrevocable (except [***] ) and non-transferable right and license to use Foreground IP, with right to sublicense such right and license to Use to its Subcontractors/Affiliates only to the extent necessary to (i) [***] and (ii) [***] . No other right or license in such Foreground IP is granted to [***] without the prior written consent of [***] .

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

30
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

13.2.3 Additional Assistance to [***]

 

To the extent of the rights assigned herein, [***] will sign any necessary documents and will otherwise reasonably assist [***] , at [***] expense, in obtaining [***] . [***] will sign any necessary documents and will otherwise assist [***] , at [***] expense, in [***] . At no additional cost except for reasonable out-of-pocket expenses, [***] shall execute any documents reasonably requested by [***] and shall perform any and all further acts reasonably deemed necessary or desirable by [***] to [***] . If [***] fails to do so, [***] hereby authorizes [***] . [***] agrees to obtain [***] , from any subsidiary, subcontractor, or employee who creates, either in whole or part. [***] shall not [***] covering any of the [***] .

 

13.2.4 Waiver of [***]

 

To the extent permitted by law, [***] waives any [***] to the [***] , such as [***] .

 

13.2.5 Alternative Grant of [***]

 

If [***] has any right to the [***] or [***] that cannot be [***] or [***] , or if any [***] or [***] is found to not be [***] or otherwise [***] as contemplated above, [***] grants to [***] , for the life of the relevant [***] under applicable law the non-exclusive right [***] for all purposes except for those activities that [***] . (to be specified).

 

13.3 Indemnification

 

Contractor agrees that it shall, at its own expense and at its option, indemnify, defend or settle any claim, suit, or proceeding brought against Aireon or any customer of Aireon, based on an allegation that the product or services furnished under this Agreement constitute a [***] infringement of any patent, mask work, copyright or any other intellectual property right. Contractor’s obligations to defend and indemnify Aireon and the other persons referred to above are subject to Contractor being given (i) [***], (ii) all [***], and (iii) the right to [***]. This obligation shall be effective only if [***]. In the event of such notice, suit or action, Contractor shall at its sole option and its own expense, either: (a) [***]; or (b) [***]; or (c) [***]; or (d) If none of the above is reasonably available, [***].

 

The foregoing indemnity does not apply to the following: (1) [***]; (2) [***]; (3) [***]. The foregoing states the entire liability of Contractor with respect to violation of third party intellectual property rights in connection with products furnished under this Agreement.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

31
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 14 - CHANGES

 

14.1 Change Orders

 

Aireon may issue written change orders at any time or request a change to the work required by this Agreement such as additions or reductions in scope to the work required by this Agreement; revising the SOW, drawings, designs, materials or specifications; delaying, extending or otherwise changing the time or place of delivery; or extending the performance of the work, all within the general scope of this Agreement. Contractor will use reasonable efforts to mitigate all impacts and costs to Aireon resulting from such changes.

 

Within 10 business days of receipt of such change order, Contractor shall notify Aireon, if Contractor accepts the change order, or if modifications are required. If a modification to this Agreement is required then Contractor will provide a proposal to Aireon setting forth the required modifications as described in Article 14.2 below. Such change orders shall be signed by authorized representatives of Aireon according to Article 23.

 

14.2 Equitable Adjustments

 

Contractor shall use its commercially reasonable efforts to mitigate all costs or delays resulting from Aireon’s change order request. If after such efforts Contractor determines that the change will cause an increase or decrease in the cost of, or the time required for, performance under this Agreement, or otherwise affects any other provisions of this Agreement, whether expressly changed or not changed by any such change order by Aireon, Contractor shall provide Aireon a Time and Materials (T&M) Proposal for changes estimated at less than or equal to [***] U.S. dollars ($[***]). Contractor shall provide hours and price per labor category, consistent with the Time and Material rate table (Exhibit G). Contractor will provide a task list and cost details for travel, material, subcontracts, and other direct costs, as applicable for any particular change. Contractor will also provide backup data for the monthly invoices, once a change is authorized, to include actual labor hours incurred, as well as actual costs for travel, material, subcontracts, and other direct costs, as applicable from our Government-approved accounting system. The Contractor will propose a Firm Fixed Price (FFP) proposal for changes estimated to be greater than [***] U.S. dollars ($[***]). Contractor will provide a task list, Non-Recurring Engineering (NRE) and Recurring Engineering (RE) costs with its FFP proposal within [***] days from the date of receipt by Contractor of the notification of such intended change.

 

If Aireon accepts Contractor’s proposal pursuant to a change order request, Aireon shall so notify Contractor in writing and the Parties shall execute any necessary amendment to this Agreement at which time Contractor shall commence work associated with the agreed upon change.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

32
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 15 - STOP WORK ORDER

 

15.1 Stop Work Order Notice

 

Aireon may, at any time, by written notice to Contractor (“the Stop Work Order”), direct Contractor to suspend performance of any portion of the work pending further notice and instructions from Aireon. Such Stop Work Order shall specify the reason for the Stop Work Order, the portion of work and, as applicable, the Deliverables, including Services or data for which associated work is to be suspended, the date of suspension and the estimated duration of the suspension. Upon receiving any such Stop Work Order, Contractor shall promptly suspend further performance of the work to the extent specified, and during the period of such suspension, shall protect all work-in-process and materials, supplies, and equipment Contractor has on hand for performance of the work.

 

15.2 Period of Stopped Work

 

Aireon may, at any time during the period of time in which a Stop Work Order is in effect, either: (a) direct Contractor to resume performance of the work by written notice to Contractor, and Contractor shall resume diligent performance of the work, provided that (i) the Delivery schedule is adjusted to reflect the suspension of the work and the time required by Contractor to recommence performance, (ii) other affected provisions of this Agreement shall be adjusted, and (iii) Contractor is compensated for costs associated with the stop work order and subsequent start-up; or (b) terminate this Agreement pursuant to Article 17. The period for any such Stop Work Order shall not exceed [***] calendar days

 

15.3 Equitable Stopped Work Compensation

 

Contractor shall provide a Firm Fixed Price Proposal summarizing costs associated with the stop work notice and, if applicable, resumption of work. The parties agree to negotiate the proposal in good faith. Payment terms shall be net thirty in accordance with Article 7.3.

 

ARTICLE 16 - LAWS AND REGULATIONS COMPLIANCE

 

16.1 General

 

Except as provided for otherwise under this Agreement, each Party shall, at its expense, perform its obligations hereunder in accordance with all applicable laws, regulations, and policies of any federal, state, local, or foreign government and the conditions of all applicable federal, state, local, or foreign government approvals, permits, or licenses.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

33
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

16.2 Export and Other Regulations

 

16.2.1 Compliance with Laws

 

This Agreement and transactions hereunder are subject to applicable laws, regulations or orders governing or restricting the export of Products, repaired items, replacement equipment, Proprietary Information, related technical data or information or any direct product thereof.

 

(a) Aireon and Contractor will:

(i) comply with all such laws, regulations and orders to the extent that they are applicable to Aireon or Contractor; and

 

(ii) not export or re-export Proprietary Information, related technical information or any direct product thereof to any country for which the United States require an export license or other government approval, without first assuring that such license or governmental approval has been obtained; and

 

(iii) not export or re-export to any country to which transactions are prohibited by the U. S. Governments.

 

(b) Violation of the obligations of this Article shall constitute just cause for immediate termination of this Agreement by the non-violating Party without liability to the violating Party.

 

(c) Neither Party shall be in breach of this Agreement if any export license necessary cannot be obtained from the relevant authorities, provided that commercially reasonable efforts have been made by the responsible Party to acquire such export licenses.

 

16.2.2 Export Approvals

 

Contractor and Aireon will as necessary apply for export approval(s) jointly (e.g., third-party TAA) or on their own behalf for any export or re-export required hereunder. The Parties shall cooperate with each other to ensure Export Regulation compliance.

 

16.2.3 Effects of Approvals

 

The issuance of such approval and any other governmental approval for export or re-export shall constitute a condition precedent to either Party’s obligations under this Article.

  

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

34
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

16.2.4 Requi r ed Permits

 

Contractor will obtain all licenses and approvals required under and will otherwise comply with all laws governing.

 

16.2.5 Corrupt Practices

 

Contractor will comply with the U.S. Foreign Corrupt Practices Act and will not use any payment or other benefit derived from Aireon to offer, promise or pay any money, gift or any other thing of value to any person for the purpose of influencing official actions or decisions affecting the Agreement.

 

16.2.6 Boycott

 

Contractor will use its best efforts to not, directly or indirectly, take any action that would cause Aireon to be in violation of United States anti-boycott laws under the United States Export Administration Act or the United States Internal Revenue Code, or any regulation thereunder.

 

16.3 Inter-Party Waiver of Liability

 

16.3.1 Launch Services Agreement Inter-Party Waiver

 

In the event that Contractor performs Work at a Launch Site, Contractor hereby agrees to be bound by the no-fault, no-subrogation inter-party waiver of liability and related indemnity provisions required by the Launch Services Agreement with respect to each launch of a Satellite and to cause its contractors and subcontractors at any tier (including suppliers of any kind) that are involved in the performance of this Agreement and any other person having an interest in any Payload (including customers of Contractor) to accede to such waiver and indemnity, which in every case shall include claims against any Launch Services Provider, Host and its Associate Contractors and Subcontractors at any tier (including suppliers of any kind) and any provider of Other Payloads. Contractor shall execute and deliver any instrument that may be reasonably required by any Launch Services Provider to evidence Contractor's agreement to be bound by such waivers.

 

16.3.2 Indemnity Related to the Inter-Party Waiver of Liability

 

Contractor shall indemnify and hold harmless Aireon and/or its Associate Contractors and Subcontractors at any tier (including suppliers of any kind) and the provider of Other Payloads from and against any claim made by Contractor and/or any of its contractors and subcontractors (including suppliers of any kind) that are involved in the performance of this Agreement, or by any person having an interest in any Payload (including customers of Contractor), or by insurer(s), resulting from the failure of Contractor to waive any liability against, or to cause any other person Contractor is obligated to cause to waive any liability against, any Launch Services Provider, Aireon and its other Associate Contractors and Subcontractors at any time (including suppliers of any kind) and the provider of Other Payloads. Contractor shall execute and deliver any instrument that may be reasonably required by the Launch Services Provider to evidence Contractor's agreement to be bound by such indemnifications.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

35
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

16.4 Type and Government Approvals

 

All Products and Services purchased by Aireon from Contractor shall fully comply with and include the approval to import, export and be operated in accordance with all in-country government laws and regulations.

 

16.5 Support Efforts

 

Contractor shall, at no additional cost to Aireon or Host, perform technical analyses, generate technical reports, and prepare technical inputs for applications and other regulatory and International Telecommunication Union (ITU) filings, and conduct tests and/or certifications required by the U.S. Government (USG), any regulatory agency, or the ITU, to support USG and other licensing and regulatory requirements and ITU requirements applicable to the Products and Services purchased hereunder.

 

Specific support efforts shall include, but are not limited to: (a) preparing technical inputs required by USG licensing or other regulatory requirements and ITU requirements; (b) producing the necessary documentation, if any, needed to obtain approvals from the USG and other government entities, included but not limited to [***]; (c) all activities necessary to secure USG approvals for encryption and decryption; and (d) attending technical interchange meetings at Host’s request.

 

Contractor shall exercise reasonable best efforts in support of the preparation and prosecution of Host’s ITU filings, including without limitation in support of the preparation, submission, prosecution and maintenance (including attendance at any related meetings, multilateral or bilateral) of such ITU filings and radio frequency coordination efforts, and upon Host’s request, Contractor shall exercise reasonable best efforts in support of Host’s efforts to obtain all licenses, permits, and authorizations required by any regulatory agency or the ITU.

 

In the event any of the above effort requires the Contractor to expend unreasonable cost (at the sole determination of the Contractor), the Contractor shall notify Aireon in writing in advance of expending said cost and shall proceed in accordance with Article 14, Changes.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

36
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 17 - TERMINATION

 

17.1 Termination of the Agreement

 

17.1.1 Termination for Default

 

Either Party may terminate this Agreement if the other Party breaches a material obligation under this Agreement and such breach continues uncured for a period of [***] after written notice or (if the Parties mutually agree that the breach is not one which is capable of being cured within [***] ) the breaching Party or its Affiliate has failed to commence to cure the breach within [***] from the notice or failed to continue to do so diligently, or in any event, if the breach is not cured within [***] .

 

17.1.2 Termination for [***]

 

[***] may terminate this Agreement [***] for [***] upon providing a written notice to [***] no less than [***] prior to [***] . After such termination for [***] , neither Party shall have any further obligation(s) to the other under this Agreement except for payment or performance of any payments or obligations which are still due and outstanding as of the date of such termination or for any other obligations which expressly survive the termination of this Agreement.

 

17.2 Consequences of Default Termination

 

17.2.1 Termination by Aireon for default of the Contractor

 

In case of Aireon’s termination for default hereunder Aireon may take over the completion of the terminated Work by contract with a third party or otherwise and Contractor shall reimburse Aireon for additional costs and expenses in connection with such terminated work, including without limitation any additional costs Aireon incurred under the Host’s agreement with the launch provider, provided that Aireon shall use commercially reasonable efforts to mitigate such excess costs.

 

17.2.1 Termination by the Contractor for default of Aireon

 

In case of Contractor’s termination of this Agreement for Aireon’s default hereunder, Contractor has provided a Termination Liability Schedule in order to specify the costs to be recovered by Contractor. The Termination Liability Schedule may be found in Exhibit E of this Agreement. If Contractor terminates this Agreement for the default of Aireon, Aireon’s liability shall be the amount set forth in Exibit F at the date of termination, less all payments made by Aireon to Contractor up to the date of termination. As an example, if Contractor terminates this Agreement for the default of Aireon on May 14, 2014, Aireon’s aggregate termination liability shall be:

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

37
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

1. Amount from Exhibit E: [***] U.S. dollars (US$[***]) minus
2. Amounts Paid to Date: [***] U.S. dollars (US$[***]) =
3. Termination Due Contractor: [***] U.S. Dollars (US$[***])

  

17.2.2 Termination for Bankruptcy

 

Either Party may terminate all or any part of this Agreement by written notice to the other Party if the other Party: (i) has filed against it a petition in bankruptcy which it fails to discharge within five (5) business days of the date of filing; (ii) the other Party institutes or has instituted against it any action or proceeding whether voluntary or compulsory having for its object the winding up of the other Party, which action or proceeding is not discharged, stayed or otherwise rendered of no practical consequence within five (5) business days; (iii) the other Party becomes bankrupt or insolvent, executes a deed of assignment or deed of arrangement, and/or has any execution levied against it in respect of an unsatisfied judgment of a court; or (iv) the other Party is placed under official management or carries on its business under a receiver, trustee or manager for the benefit of its creditors. For purposes of calculating termination charges due to the other Party pursuant to termination under this Article 17.2.2, such termination shall be treated as a termination for default by the other Party.

  

17.3 Disposition of Work

 

At the time of payment by Aireon to Contractor of the termination liability amounts due under this Article and Exhibit E, subject to applicable U.S. Government export laws and license conditions, Aireon may direct Contractor to transfer to Aireon or any Affiliate, agent or representative of Aireon, in the manner and to the extent directed by Aireon, title to and risk of loss and possession of any items comprising the work terminated (including all work-in-process parts and materials, all inventories, licenses, and associated warranties but not including any portion of the work to which Contractor would not have otherwise been obligated to transfer title hereunder had this Agreement been completed). Contractor shall, upon direction of Aireon, protect and preserve property at Aireon’s expense in the possession of Contractor or its suppliers in which Aireon has an interest and shall facilitate access to and possession by Aireon of items comprising all or part of the work terminated. Alternatively, Aireon may request Contractor to make reasonable efforts to re-use or sell such items and, in the case of work Contractor can re-use, Contractor shall remit the mutually agreed cost of all such items to Aireon, and, in the case of sold items, remit any sales proceeds to Aireon less a deduction for Actual Costs of disposition reasonably incurred.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

38
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 18 – GROUND STORAGE

 

18.1 Storage.

 

In the event that any Payload(s) are placed in storage, all storage costs, including insurance, shall be borne by the Contractor. All costs for periodic Payload storage testing, re-verification testing, delta PPSRR testing, re-furbishing, and re-work, and all other costs associated with the testing and maintenance set forth in the Payload Packaging, Shipment and Storage Plan shall be borne byAireon.

 

18.2 Title and Risk of Loss

 

With respect to each Payload, title and risk of loss to a Payload delivered to storage shall remain with Aireon at the storage site for storage during the Term of the Agreement.

 

18.3 Notification of Intention to Launch a Previously Stored Payload

 

In the event a Payload is placed in storage, Aireon shall notify Contractor in writing when the Payload should be removed from storage and delivered to the AIT Subcontractor’s facility. This notification must be received by Contractor not less than [***] days prior to the scheduled shipment date to the AIT Subcontractor’s facility.

 

ARTICLE 19 - FORCE MAJEURE

 

Neither Party will be liable for any failure or delay in performing an obligation under this Agreement that is due to causes beyond its reasonable control, such as, without implied limitation: natural catastrophes, governmental acts or omissions including non-approval of an export license, change of or implementation of new laws or regulations, labor strikes or difficulties, transportation stoppages or slowdowns or the inability to procure parts or materials, such delay nevertheless shall not be excusable if the parts or materials were obtainable from other sources in sufficient time. If any force majeure condition occurs, the Party delayed or unable to perform shall give immediate notice to the other and shall proceed with reasonable diligence to remedy the consequences of the force majeure event.

 

Notwithstanding the foregoing, in the event the supplying Party is delayed in delivery of Deliverable as a result of an event of force majeure for a period of more than three (3) months, the other Party may terminate this Agreement and shall have the rights and obligations set forth in Article 17 upon such termination.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

39
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

  

ARTICLE 20 - DISPUTES RESOLUTION

 

20.1 Escalation

 

Each Party agrees that any dispute between the Parties relating to this Agreement will first be submitted in writing to a panel of two senior executives of Contractor and Aireon, who will promptly meet, in person or by teleconference, and confer in an effort to resolve such dispute. Each Party’s executives will be identified by notice to the other. Any agreed decisions of the executives will be final and binding on the Parties. In the event the executives are unable to resolve any dispute within [***] days after submission to them, either Party may then refer such dispute to arbitration in accordance with Article 20.2 hereunder.

 

20.2 Resolution by a Court of Law

 

Any controversy or claim arising out of or relating to this Agreement or the existence, validity, breach or termination thereof, whether during or after its term, and which cannot be settled through consultation and negotiation as described in Article 20.1 above will be finally settled by a non-jury trial conducted in the State of New York.

 

20.3 Continuing Performance

 

Pending any decision, appeal, suit, or claim pursuant to this Article 20.3, the Parties agree to proceed diligently with performance of this Agreement. However, Contractor is not waiving its right to recovery by continuing to work during the resolution of the dispute and the Contractor may submit an equitable adjustment following the resolution of the dispute.

 

20.4 Injunctive Relief

 

Nothing in this Article will prevent either Party from seeking injunctive relief against the other Party from any judicial or administrative authority pending the resolution of a controversy or claim by arbitration.

 

ARTICLE 21 - GOVERNING LAW

 

21.1 Governing Law

 

This Agreement shall be governed by and construed in accordance with the laws of the State of New York, USA, without regard to its conflict of laws provisions. The parties shall specifically disclaim the U.N. Convention on Contracts for the International Sale of Goods.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

40
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

ARTICLE 22 - LIMITATION OF LIABILITY

 

22.1 Disclaimer

 

[***] IN NO EVENT SHALL EITHER PARTY, ITS OFFICERS, DIRECTORS, SHAREHOLDERS, EMPLOYEES AND AGENTS UNDER THIS AGREEMENT BE LIABLE TO THE OTHER, WHETHER IN AGREEMENT, TORT OR OTHERWISE, FOR SPECIAL, INCIDENTAL, INDIRECT, OR CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFIT OR REVENUES, LOSS OF THE USE OF EQUIPMENT OR FACILITIES, OR FOR SUBSTITUTE EQUIPMENT OR FACILITIES REGARDLESS OF WHETHER THE CLAIM OR CLAIMS THEREFORE FOUND IN CONTRACT OR TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE AND REGARDLESS OF WHETHER THE PARTY TO BE CHARGED HAS BEEN NOTIFIED OF THE POSSIBILITY OR SHOULD HAVE FORESEEN THE POSSIBILITY OF SUCH DAMAGES.

22.2 Limitation of Liability

 

[***] each Party’s total aggregate liability to the other Party for claims arising out of or under this Agreement shall not exceed [***] . Neither Party will bring an action regardless of form related to Products nor Services delivered under this Agreement [***].

 

22.3 Indemnification

 

Subject to Limitation of Liability Clause 22.2, each party shall indemnify and hold harmless the other party, its affiliates, contractors and subcontractors and each of their respective officers, directors, agents employees, successors and assigns, from and against all actions, loss, liability, cost, expenses and damages (including, but not limited to, reasonable attorney’s fees and, to the extent permitted by law, any fines and penalties) arising from a party’s gross negligent acts or omission, willful misconduct or a breach of this Agreement. The indemnities set forth above are conditioned upon indemnified party providing to indemnifying party (i) [***], (ii) all [***], and (iii) the right to [***]. Indemnified party shall have the right to participate in the defense and/or settlement of such claims at indemnified party’s expense.

 

ARTICLE 23 - AUTHORIZED REPRESENTATIVES AND NOTICES

 

23.1 Authorized Representatives

 

The representatives of Aireon and Contractor authorized to make changes to this Agreement, to sign contractual documents, and to receive Notices under this Article are the following authorized representatives (or their designated representatives):

 

AIREON CONTRACTOR
[***] [***]
Chief Legal Officer  Contracts Manager

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

41
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

23.2 Notices

 

Any notice to be given hereunder shall be in writing and shall be sent by registered or certified mail, postage prepaid, or per facsimile transmission, to the Parties at the following addresses:

 

If to Aireon : If to Contractor:
Aireon LLC Harris Corporation, GCSD
1750 Tysons Boulevard, Suite 1400 2400 Palm Bay Road NE
McLean, Virginia, USA 22102 Palm Bay, Florida, USA 32905
Attn: Chief Legal Officer (Physical Address)
Tel No: [***] P.O. Box 37
Fax No: [***] Melbourne, Florida, USA 32902-0037 (USPS Mail Address)
  Attn: [***]
  Tel No: [***]
  Fax No: [***]
Copy to:  
Aireon LLC  
2030 East ASU Circle  
Tempe, Arizona  85284  
Attn: [***]  
Tel No: [***]  
Fax No: [***]  

 

Any notice to be provided by either Party shall be signed by an authorized representative of that Party. Either Party may change its aforementioned representatives at any time by providing written notice to the other Party.

 

ARTICLE 24 - ASSIGNMENT

 

24.1 Assignment Generally

 

Except as otherwise provided in this Article below, no assignment or other transfer in whole or in part of this Agreement or of any monies due or to become due hereunder shall be binding upon the other Party without written consent thereto by the other Party, which shall not be unreasonably withheld.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

42
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

24.2 Assignment to Affiliates

 

Notwithstanding Article 24.1 above, if either Party wishes to assign to any of its Affiliates its rights and obligations under this Agreement, such Party shall be able to do so upon providing prompt written notice to the other Party of its intended assignment to an Affiliate pursuant to this Article.

 

24.3 Assignment Due to Merger, Acquisition or Transfer of Assets

 

Notwithstanding Article 24.1 above, this Agreement may not be assigned by Aireon without the consent of the Contractor to a third party when required as the result of a merger, acquisition, re-capitalization or other similar capital event, or other legal transfer of Aireon’s partial or complete assets to such third party. Such consent shall not be unreasonably withheld.

  

ARTICLE 25 - GENERAL PROVISIONS

 

25.1 Entire Agreement

 

This Agreement constitutes the entire agreement between the Parties and supersedes all prior understandings, commitments, and representations with respect to the subject matter hereof.

 

25.2 Amendments

 

This Agreement may not be amended, modified, or terminated, other than as specifically provided herein, and none of its provisions may be waived, except in writing signed by an authorized representative of both Parties.

 

25.3 Severability

 

In the event any part of this Agreement is declared legally invalid or unenforceable by an authorized judicial body, this Agreement shall be ineffective only to the extent of such invalidity or unenforceability, and such invalidity or enforceability shall not affect the remaining provisions of this Agreement unless such invalidity or unenforceability affects a critical term hereof or would substantially deprive one or both of the Parties of the benefits to be realized hereunder, in which case this Agreement shall terminate upon the mutual agreement of the Parties in accordance with Article 17.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

43
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

25.4 Interpretation

 

This Agreement is the result of negotiation between the Parties. The Parties agree that neither Party shall be deemed to be the drafter of this Agreement, and further that in the event that this Agreement is ever construed by a court of law, such court shall not construe this Agreement or any provision of this Agreement against either Party as the drafter of this Agreement.

 

25.5 Relationship of the Parties

 

This Agreement shall not constitute, give effect to, or otherwise imply a joint venture, partnership, or formal business organization of any kind between the Parties, and the rights and obligations of both Parties shall be only those expressly set forth herein.

 

25.6 Independent Contractors

 

In performing any obligation created under this Agreement, the Parties agree that each Party is acting as an independent contractor and not as an employee or agent of the other Party. Neither Party has any authority hereunder to assume or create any obligation or responsibility, expressed or implied, on behalf or in the name of the other Party or to bind the other Party in any way whatsoever.

 

25.7 Release of Information

 

25.7.1 Written Approval

 

Except where required for compliance with law, neither Party shall, without the prior written consent of other, which consent shall not be unreasonably withheld: (a) use the name and trademarks of the other Party or any of its employees, or any adaptation thereof, in any publicity, advertising, press releases, marketing activities, annual reports, in-house newspapers, promotional or sales literature, or on any web site; or (b) use the other Party’s or any of its employees as a reference in any manner whatsoever to promote the Party’s products and capabilities.

 

25.7.2 Pre-Approval

 

Notwithstanding subparagraph (a) above, Aireon may use any deliverable reports prepared by Contractor, in their original form only, to seek financial investors, or in any prospectus, or in any financing application, or in public or private securities offering, or in any merger, sale or similar capital transaction, or as a part of any documents submitted to the U.S. Government or foreign governments.

 

Aireon shall adhere to Article 16.2, Export Regulations, and the provisions of Article 13.1, Confidential Proprietary Information.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

44
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

25.8 Waiver, Amendment or Modification

 

Any waiver, amendment or other modification of this Agreement shall not be effective unless made in writing and signed by both Parties. The failure by either Party to exercise any of its rights in one instance will not be deemed a waiver of such rights in the future or a waiver of any other rights under this Agreement.

 

25.9 Survival

 

Termination or expiration of this Agreement for any reason shall not release either Party from any liabilities or obligations set forth in this Agreement that remain to be performed or by their nature would be intended to be applicable following any such termination or expiration, including the following: Article 5.3 (Taxes); Article 25.10 (Independent Audit Rights); Article 16 (Compliance with Laws and Directives); Article11 (Warranties); Article 19 (Force Majeure); Article 13 (Intellectual Property Rights and Indemnity); Article 22.3 (Indemnification); Article 17 (Termination); Article 20 (Dispute Resolution); Article 22 (Limitation of Liability); Article 25.7 (Public Release of Information); Article 23 (Notices); Article 3.1.2 (Order of Precedence) and Article 25 (General).

 

25.10 Independent Audit Rights and Procedures

 

Contactor agrees that Aireon shall have the right to contract an independent auditor to audit Contractor’s applicable books and records and Actual Hours related to changes incurred under a Time & Material type proposal. Contractor shall have the right to approve the selection of the independent auditor, which approval shall not be unreasonably withheld. Under no circumstances shall the independent auditor have access to Contractor’s proprietary rate information. Contractor will keep such books and records at Contractor’s principal place of business for at least [***] following the end of the calendar quarter to which they pertain and make them available at all reasonable times for audit by an independent auditor reasonably acceptable to Aireon and Contractor. Upon request, Contractor will provide details of actual labor hours charged to internal research and development (IRAD) efforts that are attributed to Background IP development to a mutually approved third-party auditor. The independent auditor will be directed to report reasons for its findings, and the independent auditor’s findings will be binding upon Aireon and Contractor. All costs associated with any such audit shall be for the account of, and paid by, Aireon.

 

25.11 Parties Advised by Counsel

 

This Agreement has been negotiated between unrelated parties who are sophisticated and knowledgeable in the matters contained in this Agreement and who have acted in their own self interest. In addition, each party has been represented by legal counsel. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the purpose of the parties, and this Agreement shall not be interpreted or construed against any party to this Agreement because that party or any attorney or representative for that party drafted this Agreement or participated in the drafting of this Agreement.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

45
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

This Agreement, which comprises the body of this Agreement as well as all Exhibits and other attachments specified herein, is agreed to and accepted by each Party as of the date of execution by each Party as shown below.

  

AIREON LLC  

HARRIS CORPORATION

GOVERNMENT COMMUNICATIONS

SYSTEMS DIVISION

         
By: /s/ Donald L. Thoma __________   By: /s/ Janet Devlin
         
Name: Donald L. Thoma __________   Name: Janet Devlin
         
Title: President & CEO __________   Title: Sr. Contracts Manager
         
Date: 6/18/12 ____________________   Date: 6/19/12

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

46
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

EXHIBIT A – STATEMENT OF WORK

 

Statement of Work for ADS-B Hosted Payload Development supporting the Iridium Global Aircraft Monitoring (IGAM) Project, Version [***] dated [***]

 

[***]

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

47
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

EXHIBIT B – PERFORMANCE SPECIFICATIONS

 

1. IGAM System Requirements Document, Document No. [***]; and

 

2. IGAM Space Segment-ADS-B Payload Requirements Document No. [***].

 

[***] 

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

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Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

EXHIBIT C – MILESTONE PAYMENT PLAN

FIRM FIXED PRICE

 

Milestones and Milestone Reviews   [***]   Planned Date*
(Not Due Date)
  Payment Amount
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]
[***]           [***]
[***]           [***]

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

49
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

EXHIBIT D - COMPLETION CERTIFICATION

FORM OF CONTRACTOR PAYLOAD PRE- SHIPMENT

REVIEW COMPLETION CERTIFICATE

 

As of the date hereof, the Contractor certifies that:

 

(a) The Payload [FM #] has passed all qualification and acceptance tests made to date and fully meets the requirements of the Agreement, or a written and knowing waiver has been issued and agreed by Aireon, with such Aireon approvals attached in the attached list 1;

 

(b) To its best knowledge, it is not aware of any deficiencies of the Payload or any subsystem, equipment, and/or component therein, whether supplied by the Contractor or a Subcontractor, except as identified in the attached list 2 all of which have been fully investigated by the Contractor in accordance with the Contractor’s quality procedure(s) and the Contractor has acted in accordance with applicable quality procedure(s);

 

(c) Any anomaly(ies)/failure(s) or deviation(s) relevant to the Payload, other Payloads or similar payloads have been identified and fully investigated and the Contractor has taken all necessary steps to eliminate the risk of such anomaly(ies)/failure(s) or deviation(s) on the Payload in accordance with the Product Assurance Plan; and

 

(d) It has fully informed Aireon of the matters addressed in paragraphs (b) and (c) above.

 

This certificate and any information released in connection with it may be provided to Aireon ’s insurance underwriters and insurance brokers.

 

     
Date   Signature of the Contractor
    By its Chief Technical Officer

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

50
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

EXHIBIT E – TERMINATION LIABILITY SCHEDULE

 

[***]

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

51
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

  

EXHIBIT F - CONTRACT BACKGROUND INTELLECTUAL PROPERTY SUBJECT TO CONTRACT ARTICLE 13 INTELLECTUAL PROPERTY

 

Harris asserts for itself, or the person identified below, that the use, release or disclosure of the following technical data or computer software should be restricted:

 

Background Intellectual Property   Basis for assertion   Name of person
asserting restrictions
[***]   [***]   [***]
[***]   [***]   [***]
[***]   [***]   [***]
[***]   [***]   [***]
[***]   [***]   [***]
[***]   [***]   [***]
[***]   [***]   [***]

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

52
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

EXHIBIT G – TIME AND MATERIAL RATE TABLE 

 

      T&M Rates
    Engineering Overhead         Manufacturing Overhead
LBC   FY 13   FY 14   FY 15   FY 16     LBC   FY 13   FY 14   FY 15   FY 16
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
                                       
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
                                       
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
                                       
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
[***]   [***]   [***]   [***]   [***]     [***]   [***]   [***]   [***]   [***]
                                       
Non Labor Wrap Rates                                      
    FY 13   FY 14   FY 15   FY 16                      
[***]   [***]   [***]   [***]   [***]                      
[***]   [***]   [***]   [***]   [***]                      
[***]   [***]   [***]   [***]   [***]                      

 

Contractor may update these rates annually, as a result of changes to proposed U.S.Government rates or changes to our rate structure.

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

53
 

 

***Text Omitted and Filed Separately

Confidential Treatment Requested

Under 17 C.F.R. §§ 200.80(b)(4) and 240.24b-2

 

EXHIBIT H – SAMPLE TASK ORDER FORMAT 

 

Product and Services Agreement Number ______

TASK Order No. ___________ 

 

TASK ORDER AUTHORIZATION

Engineering Products and Services for Aireon LLC (“Aireon”)

Contractor Name and Address: __________________

Task Number __________

Title: ____________

 

1.0     Scope of Work/Technical Requirements: Contractor shall provide the personnel, services, materials, equipment, and facilities necessary for the proper accomplishment of the following Task: [INSERT DESCRIPTION/SOW ATTACHMENT]

2.0     Period of Performance: The anticipated period of performance is from ____ through ___.

3.0   Technical Interface: All technical interface/direction with Aireon shall be coordinated through the Aireon Technical POC identified below: Contractor will support technical Interchange meetings (TIMs) as required. Contractor technical point of contact for this activity is identified below.

4.0     Required Input Data (from Aireon to Contractor): [INSERT DESCRIPTION/REFERENCE ATTACHMENT]

5.0     Required Deliverable Data (from Contractor to Aireon): [INSERT DESCRIPTION/REFERENCE ATTACHMENT]

6.0     Price/Cost: Firm Fixed Price: [Time & Material Option as Approved by Aireon]

7.0     Deliverables/Schedule: [INSERT DESCRIPTION/REFERENCE ATTACHMENT]

8.0     Points of Contact/Key Personnel:

9.0     Special Task Order Terms and Conditions:

10.0   [OTHER]

 

Approvals    
     
AIREON  LLC   CONTRACTOR
     
By:   By:
Typed Name:    Typed Name:
Title:   Title:
Date:    Date:

 

*** Certain confidential information contained in this document, marked by brackets, has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended.

 

54

 

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002

 

I, Matthew J. Desch, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Iridium Communications Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 2, 2012 /s/ Matthew J. Desch
  Matthew J. Desch
  Chief Executive Officer
  (principal executive officer)

 

 

 

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002

 

I, Thomas J. Fitzpatrick, certify that:

 

1. I have reviewed this quarterly report on Form 10-Q of Iridium Communications Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

 

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: August 2, 2012 /s/ Thomas J. Fitzpatrick
  Thomas J. Fitzpatrick
  Chief Financial Officer
  (principal financial officer)

 

 

 

 

 

Exhibit 32.1

 

CERTIFICATIONS OF

PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the Chief Executive Officer and the Chief Financial Officer of Iridium Communications Inc. (the “Company”) each hereby certifies that, to the best of his knowledge:

 

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, to which this Certification is attached as Exhibit 32.1 (the “Quarterly Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

 

2. The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition of the Company at the end of the period covered by the Quarterly Report and results of operations of the Company for the periods covered in the financial statements in the Quarterly Report.

 

Dated: August 2, 2012

 

/s/ Matthew J. Desch   /s/ Thomas J. Fitzpatrick
Matthew J. Desch   Thomas J. Fitzpatrick
Chief Executive Officer   Chief Financial Officer

 

This certification accompanies the Quarterly Report and shall not be deemed “filed” by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.