ViaSat, Inc.
VIASAT INC (Form: 10-Q, Received: 02/06/2008 16:08:02)
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended December 28, 2007.
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the transition period from                      to                     
Commission File Number (0-21767)
ViaSat, Inc.
(Exact name of registrant as specified in its charter)
     
Delaware   33-0174996
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)
6155 El Camino Real
Carlsbad, California 92009
(760) 476-2200
(Address of principal executive offices and telephone number)
     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 (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer” and “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated filer o       Accelerated filer þ       Non-accelerated filer o       Smaller reporting company o
     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
     The number of shares outstanding of the registrant’s Common Stock, $0.0001 par value, as of February 1, 2008 was 30,465,339.
 
 

 


 

VIASAT, INC.
INDEX
         
    Page
       
       
    3  
    4  
    5  
    6  
    7  
    20  
    36  
    37  
       
    37  
    37  
    39  
    39  
    39  
    40  
  EXHIBIT 10.1
  EXHIBIT 10.2
  EXHIBIT 10.3
  EXHIBIT 31.1
  EXHIBIT 31.2
  EXHIBIT 32.1

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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
VIASAT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(In thousands)
                 
    As of     As of  
    December 28,     March 30,  
    2007     2007  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 121,073     $ 103,345  
Short-term investments
    11,953       47  
Accounts receivable, net
    147,356       139,789  
Inventories
    56,371       46,034  
Deferred income taxes
    15,821       9,721  
Prepaid expenses and other current assets
    20,907       9,218  
 
           
Total current assets
    373,481       308,154  
Goodwill
    67,210       65,988  
Other intangible assets, net
    28,726       33,601  
Property and equipment, net
    54,293       51,463  
Other assets
    19,744       24,733  
 
           
Total assets
  $ 543,454     $ 483,939  
 
           
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable
  $ 52,853     $ 43,516  
Accrued liabilities
    79,510       62,470  
Payables to former stockholders of acquired businesses
    1,101       14,762  
 
           
Total current liabilities
    133,464       120,748  
Other liabilities
    17,364       13,273  
 
           
Total liabilities
    150,828       134,021  
 
           
Commitments and contingencies (Note 8)
               
Minority interest in consolidated subsidiary
    2,234       1,123  
 
           
Stockholders’ equity:
               
Common stock
    3       3  
Paid in capital
    252,618       232,693  
Retained earnings
    138,618       115,969  
Common stock held in treasury
    (1,034 )      
Accumulated other comprehensive income
    187       130  
 
           
Total stockholders’ equity
    390,392       348,795  
 
           
Total liabilities and stockholders’ equity
  $ 543,454     $ 483,939  
 
           
See accompanying notes to condensed consolidated financial statements.

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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(In thousands, except per share amounts)
                                 
    Three months ended     Nine months ended  
    December 28,     December 29,     December 28,     December 29,  
    2007     2006     2007     2006  
Revenues
  $ 152,053     $ 124,336     $ 427,240     $ 384,538  
Operating expenses:
                               
Cost of revenues
    105,842       90,383       306,751       285,942  
Selling, general and administrative
    20,920       17,692       59,074       50,326  
Independent research and development
    8,405       5,557       24,215       15,181  
Amortization of intangible assets
    2,389       2,521       7,173       7,202  
 
                       
Income from operations
    14,497       8,183       30,027       25,887  
Other income (expense):
                               
Interest income
    1,578       553       4,462       1,302  
Interest expense
    (269 )     (92 )     (606 )     (383 )
 
                       
Income before income taxes
    15,806       8,644       33,883       26,806  
Provision (benefit) for income taxes
    4,803       (1,095 )     9,863       5,076  
Minority interest in net earnings of subsidiary, net of tax
    778       49       1,029       140  
 
                       
Net income
  $ 10,225     $ 9,690     $ 22,991     $ 21,590  
Basic net income per share
  $ .34     $ .34     $ .76     $ .76  
Diluted net income per share
  $ .32     $ .31     $ .71     $ .71  
Shares used in basic net income per share computation
    30,338       28,687       30,164       28,352  
Shares used in diluted net income per share computation
    32,458       30,773       32,309       30,422  
See accompanying notes to condensed consolidated financial statements.

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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
                 
    Nine months ended  
    December 28,     December 29,  
    2007     2006  
Cash flows from operating activities:
               
Net income
  $ 22,991     $ 21,590  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    11,660       10,457  
Amortization of intangible assets and capitalized software
    9,053       9,702  
Deferred income taxes
    1,440       (3,593 )
Incremental tax benefits from stock-based compensation
    (934 )     (1,202 )
Non-cash stock-based compensation
    5,550       3,603  
Other non-cash adjustments
    2,367       891  
Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of the effects of acquisitions:
               
Accounts receivable, net
    (7,417 )     (6,252 )
Inventories
    (9,772 )     445  
Other assets
    (9,888 )     (5,853 )
Accounts payable
    7,491       (7,409 )
Accrued liabilities
    12,085       18,439  
Other liabilities
    1,461       1,518  
 
           
Net cash provided by operating activities
    46,087       42,336  
Cash flows from investing activities:
               
Payments related to acquisitions of businesses, net of cash acquired
    (9,826 )     (281 )
Purchases of short-term investments held-to-maturity
    (11,835 )      
Purchases of property and equipment
    (13,584 )     (12,062 )
 
           
Net cash used in investing activities
    (35,245 )     (12,343 )
Cash flows from financing activities:
               
Proceeds from issuance of common stock, net of issuance costs
    6,763       8,509  
Purchase of common stock in treasury
    (1,034 )      
Incremental tax benefits from stock-based compensation
    934       1,202  
 
           
Net cash provided by financing activities
    6,663       9,711  
Effect of exchange rate changes on cash
    223       192  
 
           
Net increase in cash and cash equivalents
    17,728       39,896  
Cash and cash equivalents at beginning of period
    103,345       36,723  
 
           
Cash and cash equivalents at end of period
  $ 121,073     $ 76,619  
 
           
Non-cash investing and financing activities:
               
Issuance of stock in connection with acquisition (see Note 12)
  $ 452     $ 16,350  
Issuance of payables to former stockholders of acquired businesses (see Note 1)
  $ 800     $ 9,000  
Issuance of stock in satisfaction of a payable to former stockholders of an acquired business (see Note 1)
  $ 5,631     $  
See accompanying notes to condensed consolidated financial statements.

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VIASAT, INC.
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In thousands, except share data)
                                                                         
                                    Common Stock     Accumulated                
    Common Stock                     In Treasury     Other                
    Number of             Paid in     Retained     Number of             Comprehensive             Comprehensive  
    Shares     Amount     Capital     Earnings     Shares     Amount     Income (Loss)     Total     Income (Loss)  
Balance at March 30, 2007
    29,733,396     $ 3     $ 232,693     $ 115,969           $     $ 130     $ 348,795          
Cumulative effect of adopting FIN 48
                      (342 )                       (342 )        
Exercise of stock options
    367,592             5,494                               5,494          
Tax benefit from exercise of stock options and release of restricted stock unit (RSU) awards
                1,529                               1,529          
Issuance of stock under Employee Stock Purchase Plan
    50,211             1,269                               1,269          
Stock-based compensation expense
                5,550                               5,550          
Value of stock issued in connection with acquisition of a business
    14,424             452                               452          
Value of stock issued as additional consideration in connection with acquisition of a business, net of issuance costs
    170,763             5,631                               5,631          
RSU awards vesting
    94,165                                                    
Purchase of treasury shares pursuant to vesting of certain RSU agreements
                            (33,238 )     (1,034 )           (1,034 )        
Net income
                      22,991                         22,991     $ 22,991  
Hedging transactions, net of tax
                                        (11 )     (11 )     (11 )
Foreign currency translation, net of tax
                                        68       68       68  
 
                                                                     
Comprehensive income
                                                  $ 23,048  
 
                                                     
Balance at December 28, 2007
    30,430,551     $ 3     $ 252,618     $ 138,618       (33,238 )   $ (1,034 )   $ 187     $ 390,392          
 
                                                       
See accompanying notes to condensed consolidated financial statements.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 — Basis of Presentation
     The accompanying condensed consolidated balance sheet at December 28, 2007, the condensed consolidated statements of operations for the three and nine months ended December 28, 2007 and December 29, 2006, the condensed consolidated statements of cash flows for the nine months ended December 28, 2007 and December 29, 2006, and the condensed consolidated statement of stockholders’ equity for the nine months ended December 28, 2007 have been prepared by the management of ViaSat, Inc. (the “Company”), and have not been audited. These financial statements have been prepared on the same basis as the audited consolidated financial statements for the year ended March 30, 2007 and, in the opinion of management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations and cash flows for all periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended March 30, 2007 included in the Company’s 2007 Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year. The year-end condensed balance sheet data were derived from audited financial statements, but do not include all disclosures required by accounting principles generally accepted in the United States of America.
     The Company’s consolidated financial statements include the assets, liabilities and results of operations of TrellisWare Technologies, Inc., a majority owned subsidiary of the Company. All significant intercompany amounts have been eliminated.
     The Company’s fiscal year is the 52 or 53 weeks ending on the Friday closest to March 31 of the specified year. For example, references to fiscal year 2008 refer to the fiscal year ending on March 28, 2008. The Company’s quarters for fiscal year 2008 end on June 29, 2007, September 28, 2007, December 28, 2007 and March 28, 2008.
     During fiscal year 2007, the Company completed the acquisitions of Enerdyne Technologies, Inc. (Enerdyne) and Intelligent Compression Technologies, Inc. (ICT). During the Company’s second quarter of fiscal year 2008, the Company completed the acquisition of JAST, S.A., a Switzerland based, privately-held company (see Note 12). The acquisitions were accounted for as purchases and accordingly, the condensed consolidated financial statements include the operating results of Enerdyne, ICT and JAST from the dates of acquisition.
     The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Estimates have been prepared on the basis of the most current and best available information and actual results could differ from those estimates. Significant estimates made by management include revenue recognition, stock-based compensation, self-insurance reserves, allowance for doubtful accounts, warranty accrual, valuation of goodwill and other intangible assets, valuation of derivatives, long-lived assets and valuation allowance on deferred tax assets.
Marketable Securities
     The Company accounts for marketable securities in accordance with Statement of Financial Accounting Standards (SFAS) No. 115 (SFAS 115), “Accounting for Certain Investments in Debt and Equity Securities.” The Company determines the appropriate classification of all marketable securities as held-to-maturity, available-for-sale or trading at the time of purchase and re-evaluates such classification as of each balance sheet date. At December 28, 2007, marketable securities consisted primarily of commercial paper with original maturities greater than 90 days at the date of purchase but less than one year. At December 28, 2007 and March 30, 2007, all marketable securities were classified as held-to-maturity and recorded at amortized cost as the Company had the intent and ability to hold the securities to maturity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts from the date of purchase to maturity. Such amortization is included in interest income (expense) as an addition to or deduction from the coupon interest earned on the investments. The amortized cost of the Company’s marketable securities approximated fair value at December 28, 2007 and March 30, 2007.
     The Company regularly monitors and evaluates the realizable value of its marketable securities. When assessing marketable securities for other-than-temporary declines in value, the Company considers factors including: how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the performance of the investee’s stock price in relation to the stock price of its competitors within the industry, expected market volatility and the

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
market in general, any news or financial information that has been released specific to the investee and the outlook for the overall industry in which the investee operates. If events and circumstances indicate that a decline in the value of these assets has occurred and is other-than-temporary, the Company records a charge to interest income (expense). No such charges were incurred in the nine months ended December 28, 2007.
Derivatives
     The Company enters into foreign currency forward and option contracts to hedge certain forecasted foreign currency transactions. Gains and losses arising from foreign currency forward and option contracts not designated as hedging instruments are recorded in interest income (expense) as gains (losses) on derivative instruments. Gains and losses arising from the effective portion of foreign currency forward and option contracts that are designated as cash-flow hedging instruments are recorded in accumulated other comprehensive income (loss) as unrealized gains (losses) on derivative instruments until the underlying transaction affects the Company’s earnings at which time they are then recorded in the same income statement line as the underlying transaction.
Payables to Former Stockholders of Acquired Businesses
     On May 23, 2006, in connection with the Company’s Efficient Channel Coding, Inc. (ECC) acquisition, the Company agreed under the terms of the ECC acquisition agreement to pay the maximum additional consideration amount to the former ECC stockholders in the amount of $9.0 million which was accrued as of March 30, 2007. The $9.0 million was payable in cash or stock, at the Company’s option, in May 2007. Accordingly, on May 30, 2007, the Company paid approximately $9.0 million of additional cash consideration to the former stockholders of ECC. The additional purchase price consideration of $9.0 million was recorded as additional goodwill in the Satellite Networks product group in the commercial segment in the first quarter of fiscal year 2007.
     As of March 30, 2007, in connection with the Company’s Enerdyne acquisition and under the terms of the Enerdyne acquisition agreement, the Company owed an additional consideration amount to the former Enerdyne stockholders in the amount of $5.9 million which was accrued and recorded as additional goodwill in the government segment as of March 30, 2007. The $5.9 million was payable in cash and stock in accordance with certain terms of the agreement, in May 2007. Accordingly, on May 3, 2007, the Company paid $5.9 million of additional consideration to the former stockholders of Enerdyne, which was comprised of 170,763 shares of common stock and $260,000 in cash.
     On August 2, 2007, in connection with the terms of the Company’s JAST acquisition, the Company has an obligation to pay the remaining portion of the initial purchase price of approximately $800,000 on the first anniversary of the closing date of which $483,000 will be paid in cash and $317,000 will be paid in stock or cash, at the Company’s election. The $800,000 payable was accrued in current liabilities as of December 28, 2007.
Land Held-for-Sale
     In January 2006, the Company purchased approximately 10 acres of land adjacent to a leased facility for approximately $3.1 million. During the first quarter of fiscal year 2007, the Company signed a property listing agreement with the intention to sell the property. As of December 28, 2007, the Company reported the property in accordance with SFAS No. 144 (SFAS 144), “Accounting for the Impairment or Disposal of Long-Lived Assets,” as an asset held-for-sale at the lower of carrying value or fair value, less estimated costs to sell, which is estimated to be $3.1 million.
Self-Insurance Liabilities
     The Company has a self-insurance plan to retain a portion of the exposure for losses related to employee medical benefits. The Company also has a self-insurance plan for a portion of the exposure for losses related to workers’ compensation costs. The self-insured policies provide for both specific and aggregate stop-loss limits. The Company utilizes internal actuarial methods, as well as an independent third-party actuary for the purpose of estimating ultimate costs for a particular policy year. Based on these actuarial methods along with currently available information and insurance industry statistics, the Company recorded self-insurance liabilities as of December 28, 2007 and March 30, 2007 of $1.1 million and $883,000, respectively. The Company’s estimate, which is subject to inherent variability, is based on average claims experience in the Company’s industry and its own experience in terms of frequency and severity of claims, including asserted and unasserted claims incurred but not reported, with no explicit provision for adverse fluctuation from year to year. This variability may lead to ultimate payments being either greater or less than the amounts presented above. Self-insurance liabilities have been classified as current in accordance with the estimated timing of the projected payments.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Secured Borrowings
     Occasionally, the Company enters into secured borrowing arrangements in connection with customer financing in order to provide additional sources of funding. As of December 28, 2007 and March 30, 2007, the Company had one secured borrowing arrangement, under which the Company pledged a note receivable from a customer to serve as collateral for the obligation under the borrowing arrangement. The arrangement includes recourse to certain other assets of the Company in the event of customer default on the note receivable. No significant guarantees beyond the recourse provision exist. Payments under the arrangement consist of semi-annual principal payments of $590,000 plus accrued interest for five years with the first semi-annual payment being interest only. The interest rate resets semi-annually to the current LIBOR rate plus a margin of 2.5%. This secured borrowing arrangement does not qualify as a sale of assets under SFAS No. 140 (SFAS 140), “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities,” as the Company has continued involvement related to the recourse provision.
     During the third quarter of fiscal year 2008, due to a payment default, the Company wrote-down the note receivable by approximately $5.3 million related to the principal and interest accrued to date. Pursuant to a notes receivable insurance arrangement which provides for the recovery of principal and certain interest amounts of the note, the Company recorded a current asset of approximately $4.5 million as of December 28, 2007. As of December 28, 2007, the Company had $5.1 million of the secured borrowing recorded under accrued liabilities with a carrying value approximating the balance of the secured borrowing. As of March 30, 2007, the Company had $590,000 of the secured borrowing recorded under accrued liabilities and $4.1 million recorded under other long-term liabilities with a carrying value approximating the balance of the secured borrowing.
Indemnification Provisions
     In the ordinary course of business, the Company includes indemnification provisions within certain of its contracts, generally relating to parties with which the Company has commercial relations. Pursuant to these agreements, the Company will indemnify, hold harmless and agree to reimburse the indemnified party for losses suffered or incurred by the indemnified party, including but not limited to intellectual property indemnity. Historically, to date, there have not been any costs incurred in connection with such indemnification clauses. The Company’s insurance policies do not necessarily cover the cost of defending indemnification claims or providing indemnification, so if a claim was filed against the Company by any party the Company indemnifies, the Company could incur substantial legal costs and damages. A claim would be accrued when a loss is considered probable and the amount can be reasonably estimated. At December 28, 2007 and March 30, 2007, no such amounts were accrued.
Treasury Stock
     During the third quarter of fiscal year 2008, the Company delivered 94,165 shares of common stock based on the vesting terms of certain restricted stock unit agreements. In order for employees to satisfy minimum statutory employee tax withholding requirements related to the delivery of common stock underlying these restricted stock unit agreements, the Company repurchased 33,238 shares of common stock with a total value of $1.0 million in the first nine months of fiscal year 2008. There was no common stock held in treasury as of March 30, 2007.
Stock-Based Compensation
     The Company records compensation expense associated with stock options, restricted stock unit awards and other equity based compensation in accordance with SFAS No. 123 (revised 2004), “Share-Based Payment” (SFAS 123R), which the Company adopted on April 1, 2006. The Company recognizes these compensation costs on a straight-line basis over the requisite service period of the award. The Company recognized $1.9 million and $5.6 million of stock-based compensation expense related to the adoption of SFAS 123R for the three and nine months ended December 28, 2007, respectively, and $1.6 million and $2.4 million for the three and nine months ended December 29, 2006, respectively.
     The Company recorded incremental tax benefits from stock options exercised and restricted stock unit award vesting of $934,000 and $1.2 million for the nine months ended December 28, 2007 and December 29, 2006, respectively, which is classified as part of cash flows from financing activities in the condensed consolidated statements of cash flows. At December 28, 2007, the total unrecognized estimated compensation cost net of estimated forfeitures related to unvested stock options and restricted stock units, and the employee stock purchase plan was approximately $9.4 million, $6.8 million and $0, respectively. These costs are expected to be recognized over a weighted average period of 2.7 years, 2.8 years and 0 years, respectively.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Review of Stock Option Grant Procedures
     In August 2006, the Company commenced and completed a voluntary internal investigation, assisted by the Company’s outside legal counsel, of its historical stock option granting practices, stock option documentation and related accounting during the period from its initial public offering in December 1996 through June 30, 2006. At the conclusion of its investigation, the Company’s outside legal counsel and the Company determined that there was no evidence of a pattern of intentionally misdating stock option grants to achieve an accounting result, or that any officer, director, or senior executive at the Company willfully or knowingly engaged in stock options misdating, or had knowledge of others doing so.
     During the investigation, the Company identified certain accounting errors associated with stock options granted primarily to certain non-executive new hire employees during the ten-year period from December 1996 to June 30, 2006. Based on the results of the investigation, the Company identified that certain stock options to non-executive new hires had incorrectly been accounted for using an accounting measurement date prior to the date that the new hires commenced employment. The Company concluded, with the concurrence of the Audit Committee, that the financial impact of these errors was not material to its consolidated financial statements for any annual period in which the errors related. In accordance with Accounting Principles Board Opinion No. 28, “Interim Financial Reporting,” paragraph 29, the Company recorded a cumulative adjustment to compensation expense in the first quarter of fiscal year 2007 of $703,000, net of tax, because the effect of the correcting adjustment was not material to the Company’s fiscal year 2007 net income. This non-cash compensation expense adjustment will have no impact on future periods. There is no impact on revenue or net cash provided by operating activities as a result of recording the compensation expense adjustment.
Income Taxes
     Current income tax expense is the amount of income taxes expected to be payable for the current year. A deferred income tax asset or liability is established for the expected future tax consequences resulting from differences in the financial reporting and tax bases of assets and liabilities and for the expected future tax benefit to be derived from tax credit and loss carryforwards. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred income tax expense (benefit) is the net change during the year in the deferred income tax asset or liability.
Recent Accounting Pronouncements
     In September 2006, the FASB issued Statement No. 157 (SFAS 157), “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 (fiscal year 2009 for the Company), and interim periods within those fiscal years. The Company is currently assessing the impact SFAS 157 will have on its results of operations and financial position.
     In February 2007, the FASB issued Statement No. 159 (SFAS 159), “The Fair Value Option for Financial Assets and Financial Liabilities,” which permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. SFAS 159 will be effective for the Company in fiscal year 2009. The Company is currently evaluating the impact of adopting SFAS 159 on its financial position, cash flows, and results of operations.
     In June 2007, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 07-3 (EITF 07-3), “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities.” This issue provides that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as the related goods are delivered or the related services are performed. EITF 07-3 is effective for the Company’s fiscal year 2009. The adoption of EITF Issue No. 07-3 is not expected to have a material impact on the Company’s consolidated financial position, results of operations and cash flows.
     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141R). The purpose of issuing the statement is to replace current guidance in SFAS 141 to better represent the economic value of a business combination transaction. The changes to be effected with SFAS 141R from the current guidance include, but are not limited to: (1) acquisition costs will be recognized as expenses separately from the acquisition; (2) known contractual contingencies at the time of the acquisition will be considered part of the liabilities acquired measured at their fair value; all other contingencies will be part of the liabilities acquired measured at their fair value only if it is more likely than not that they meet the definition of a liability; (3) contingent consideration

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
based on the outcome of future events will be recognized and measured at the time of the acquisition; (4) business combinations achieved in stages (step acquisitions) will need to recognize the identifiable assets and liabilities, as well as non-controlling interests, in the acquiree, at the full amounts of their fair values; and (5) a bargain purchase (defined as a business combination in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any non-controlling interest in the acquiree) will require that excess to be recognized as a gain attributable to the acquirer. SFAS 141R will be effective for the Company in fiscal year 2010. The Company is currently evaluating the impact of SFAS 141R.
     In December 2007, the FASB issued SFAS No. 160 (SFAS 160), “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” SFAS 160, which changes the accounting and reporting for business acquisitions and non-controlling interests in subsidiaries, was issued to improve the relevance, comparability, and transparency of financial information provided to investors. Moreover, SFAS 160 eliminates the diversity that currently exists in accounting for transactions between an entity and non-controlling interests by requiring they be treated as equity transactions. SFAS 160 will be effective for the Company in fiscal year 2010. The Company is currently evaluating the impact that SFAS 160 will have on its financial statements and disclosures.
Note 2 — Revenue Recognition
     A substantial portion of the Company’s revenues are derived from long-term contracts requiring development and delivery of complex equipment built to customer specifications. Sales related to long-term contracts are accounted for under the percentage-of-completion method of accounting under the American Institute of Certified Public Accountants’ Statement of Position 81-1 (SOP 81-1), “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” Sales and earnings under these contracts are recorded either based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract or as products are shipped under the units-of-delivery method. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. Changes in estimates of profit or loss on contracts are included in earnings on a cumulative basis in the period the estimate is changed. During the three months ended December 28, 2007 and December 29, 2006, the Company recorded losses of approximately $3.0 million and $1.1 million, respectively, related to loss contracts. During the nine months ended December 28, 2007 and December 29, 2006, the Company recorded losses of approximately $6.5 million and $2.4 million, respectively, related to loss contracts.
     The Company also has contracts and purchase orders where revenue is recorded on delivery of products in accordance with SAB 104, “Staff Accounting Bulletin No. 104: Revenue Recognition.” In this situation, contracts and customer purchase orders are used to determine the existence of an arrangement. Shipping documents and customer acceptance, when applicable, are used to verify delivery. The Company assesses whether the sales price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment, and assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history.
     When a sale involves multiple elements, such as sales of products that include services, the entire fee from the arrangement is allocated to each respective element based on its relative fair value in accordance with EITF 00-21, “Accounting for Multiple Element Revenue Arrangements” and recognized when the applicable revenue recognition criteria for each element are met. The amount of product and service revenue recognized is impacted by the Company’s judgments as to whether an arrangement includes multiple elements and, if so, whether sufficient objective and reliable evidence of fair value exists for those elements. Changes to the elements in an arrangement and the Company’s ability to establish evidence for those elements could affect the timing of the revenue recognition.
     In accordance with EITF 00-10, “Accounting for Shipping and Handling Fees and Costs,” the Company records shipping and handling costs billed to customers as a component of revenues, and shipping and handling costs incurred by the Company for inbound and outbound freight are recorded as a component of cost of revenues.
     Collections in excess of revenues represent cash collected from customers in advance of revenue recognition.
     Contract costs on U.S. government contracts, including indirect costs, are subject to audit and negotiations with U.S. government representatives. These audits have been completed and agreed upon through fiscal year 2002. Contract revenues and accounts receivable are stated at amounts which are expected to be realized upon final settlement.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 3 — Earnings Per Share
     Potential common stock of 2,119,581 and 2,085,677 shares for the three months ended December 28, 2007 and December 29, 2006, respectively, and 2,145,112 and 2,069,757 shares for the nine months ended December 28, 2007 and December 29, 2006, respectively, were included in the calculation of diluted earnings per share. Antidilutive shares excluded from the calculation were 995,948 and 810,974 shares for the three months ended December 28, 2007 and December 29, 2006, respectively and 931,453 and 398,407 shares for the nine months ended December 28, 2007 and December 29, 2006, respectively. Potential common stock includes options granted and restricted stock units awarded under the Company’s equity compensation plan which are included in the earnings per share calculations using the treasury stock method and common shares expected to be issued under the Company’s employee stock purchase plan.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 4 — Composition of Certain Balance Sheet Captions (In thousands)
                 
    December 28, 2007     March 30, 2007  
Accounts receivable, net:
               
Billed
  $ 92,711     $ 89,645  
Unbilled
    55,844       51,358  
Allowance for doubtful accounts
    (1,199 )     (1,214 )
 
           
 
  $ 147,356     $ 139,789  
 
           
Inventories:
               
Raw materials
  $ 21,939     $ 19,840  
Work in process
    8,680       7,963  
Finished goods
    25,752       18,231  
 
           
 
  $ 56,371     $ 46,034  
 
           
Prepaid expenses and other current assets:
               
Prepaid expenses
  $ 12,064     $ 8,339  
Income tax receivable
    2,978        
Other
    5,865       879  
 
           
 
  $ 20,907     $ 9,218  
 
           
Other intangible assets, net:
               
Technology
  $ 44,392     $ 43,270  
Contracts and relationships
    19,758       18,766  
Non-compete agreement
    9,076       8,920  
Other intangibles
    9,323       9,295  
 
           
 
    82,549       80,251  
Less accumulated amortization
    (53,823 )     (46,650 )
 
           
 
  $ 28,726     $ 33,601  
 
           
Property and equipment, net:
               
Machinery and equipment
  $ 48,906     $ 48,439  
Computer equipment and software
    41,754       36,936  
Furniture and fixtures
    8,220       7,552  
Leasehold improvements
    12,885       12,983  
Land held-for-sale
    3,124       3,124  
Construction in progress
    3,422       2,440  
 
           
 
    118,311       111,474  
Less accumulated depreciation and amortization
    (64,018 )     (60,011 )
 
           
 
  $ 54,293     $ 51,463  
 
           
Other assets:
               
Capitalized software costs, net
  $ 1,713     $ 3,576  
Deferred income taxes
    11,298       13,328  
Other
    6,733       7,829  
 
           
 
  $ 19,744     $ 24,733  
 
           
Accrued liabilities:
               
Secured borrowings and accrued interest
  $ 5,111     $ 590  
Current portion of warranty reserve
    6,012       5,007  
Accrued vacation
    8,474       7,958  
Accrued wages and performance compensation
    9,866       10,678  
Collections in excess of revenues
    39,409       28,030  
Other
    10,638       10,207  
 
           
 
  $ 79,510     $ 62,470  
 
           
Other liabilities:
               
Unrecognized tax position liabilities
  $ 6,760     $  
Accrued warranty
    5,641       4,856  
Deferred rent, long-term portion
    3,874       3,514  
Secured borrowing, long-term portion
          4,130  
Other
    1,089       773  
 
           
 
  $ 17,364     $ 13,273  
 
           

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 5 — Accounting for Goodwill and Intangible Assets
     The Company accounts for its goodwill under SFAS No. 142 (SFAS 142), “Goodwill and Other Intangible Assets.” The SFAS 142 goodwill impairment model is a two-step process. First, it requires a comparison of the book value of net assets to the fair value of the reporting units that have goodwill assigned to them. Reporting units within the Company’s government and commercial segments have goodwill assigned to them. The Company estimates the fair values of the reporting units using discounted cash flows. The cash flow forecasts are adjusted by an appropriate discount rate. If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the fair value of the operations used in the first step, and is compared to its carrying value. The shortfall of the fair value below carrying value represents the amount of goodwill impairment.
     The Company will continue to make assessments of impairment on an annual basis in the fourth quarter of its fiscal year or more frequently if specific triggering events occur. In assessing the value of goodwill, the Company must make assumptions regarding estimated future cash flows and other factors to determine the fair value of the reporting units. If these estimates or their related assumptions change in the future, the Company may be required to record impairment charges that would negatively impact operating results.
     The intangible assets are amortized using the straight-line method over their estimated useful lives of eight months to ten years. The technology intangible asset has several components with estimated useful lives of five to nine years, the contracts and relationships intangible asset has several components with estimated useful lives of three to ten years, the non-compete agreements have useful lives of three to five years and other amortizable assets have several components with original estimated useful lives of eight months to ten years. The amortization expense was $2.4 million and $2.5 million for the three months ended December 28, 2007 and December 29, 2006, respectively, and $7.2 million for the nine months ended December 28, 2007 and December 29, 2006.
     The current and expected amortization expense for each of the following periods is as follows (in thousands):
         
    Amortization  
For the nine months ended December 28, 2007
  $ 7,173  
 
       
Expected for the remainder of fiscal year 2008
  $ 2,389  
Expected for fiscal year 2009
    9,020  
Expected for fiscal year 2010
    5,787  
Expected for fiscal year 2011
    5,024  
Expected for fiscal year 2012
    3,798  
Thereafter
    2,708  
 
     
 
  $ 28,726  
 
     
Note 6 — Notes Payable and Line of Credit
     On January 31, 2005, the Company entered into a three-year, $60 million revolving credit facility (the “Facility”) in the form of a Second Amended and Restated Revolving Loan Agreement. On January 25, 2008, the Company amended the Second Amended and Restated Revolving Loan Agreement extending the Facility’s current terms and conditions to April 30, 2008.
     Borrowings under the Facility are permitted up to a maximum amount of $60 million, including up to $15 million of letters of credit. Borrowings under the Facility bear interest, at the Company’s option, at either the lender’s prime rate or at LIBOR (London Interbank Offered Rate) plus, in each case, an applicable margin based on the ratio of the Company’s total funded debt to EBITDA (income from operations plus depreciation and amortization). The Facility is collateralized by substantially all of the Company’s personal property assets. At December 28, 2007, the Company had approximately $8.2 million outstanding under standby letters of credit leaving borrowing availability under the Facility of $51.8 million.
     The Facility contains financial covenants that set a minimum EBITDA limit for the twelve-month period ending on the last day of any fiscal quarter at $30.0 million, a minimum tangible net worth as of the last day of any fiscal quarter at $135.0 million and a minimum quick ratio (sum of cash and cash equivalents, accounts receivable and marketable securities, divided by current liabilities) as of the last day of any fiscal quarter at 1.50 to 1.00. The Company was in compliance with its loan covenants at December 28, 2007.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 7 — Product Warranty
     The Company provides limited warranties on most of its products for periods of up to five years. The Company records a liability for its warranty obligations when products are shipped based upon an estimate of expected warranty costs. Amounts expected to be incurred within twelve months are classified as a current liability. For mature products, the warranty cost estimates are based on historical experience with the particular product. For newer products that do not have a history of warranty costs, the Company bases its estimates on its experience with the technology involved and the types of failures that may occur. It is possible that the Company’s underlying assumptions will not reflect the actual experience and in that case, future adjustments will be made to the recorded warranty obligation. The following table reflects the change in the Company’s warranty accrual during the nine months ended December 28, 2007 and December 29, 2006 (in thousands).
                 
    For the nine months ended  
    December 28, 2007     December 29, 2006  
Balance, beginning of period
  $ 9,863     $ 8,369  
Change in liability for warranties issued in period
    5,900       5,207  
Settlements made (in cash or in kind) during the period
    (4,110 )     (3,408 )
 
           
Balance, end of period
  $ 11,653     $ 10,168  
 
           
Note 8 – Commitments, Contingencies
     The Company is a party to various claims and legal actions arising in the normal course of business. Although the ultimate outcome of such matters is not presently determinable, the Company believes that the resolution of all such matters, net of amounts accrued, will not have a material adverse effect on its financial position or liquidity; however, there can be no assurance that the ultimate resolution of these matters will not have a material impact on its results of operations in any period.
Note 9 — Derivatives
     During the three months ended December 28, 2007, the Company settled certain foreign exchange contracts recognizing a gain of approximately $205,000, recorded as cost of revenues based on the nature of the underlying transaction. During the nine months ended December 28, 2007, the Company entered into a foreign currency exchange contract intended to reduce the foreign currency risk for amounts payable to vendors in Euros which have a maturity of less than six months. The fair value of the outstanding foreign currency contract was approximately $11,000 and was recorded as a liability as of December 28, 2007. The Company had $1.4 million and $0 of notional value of foreign currency forward contracts outstanding as of December 28, 2007 and March 30, 2007, respectively. During the three months ended December 29, 2006, the Company settled certain foreign exchange contracts recognizing a gain of $7,000 recorded as cost of revenues based on the nature of the underlying transaction. During the nine months ended December 29, 2006, the Company settled certain foreign contracts recognizing a loss of $130,000 recorded as a cost of revenues based on the nature of the underlying transaction.
Note 10 — Income Taxes
     The effective income tax rate for the three and nine months ended December 28, 2007 was 30.4% and 29.1%, respectively, compared to the 18.2% annual effective tax rate for the fiscal year ended March 30, 2007, reflecting the December 31, 2007 expiration of the federal research and development tax credit. The estimated tax rate is different from the expected statutory rate due primarily to research and development tax credits and the manufacturing deduction.
     The Company’s estimated effective tax rate of 28.4% for fiscal year 2008 reflects the expiration of the federal research and development tax credit at December 31, 2007. If the federal research and development tax credit is reinstated, the Company will have a lower effective tax rate. In the event the federal research and development tax credit is reinstated, the amount of the reduction in the Company’s tax rate will depend on the effective date and terms of the reinstatement, as well as the amount of eligible research and development expenses in the reinstated period.
     In 2006, the FASB issued Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109,” which clarifies the accounting for uncertainty in tax positions. The Company adopted FIN 48 on March 31, 2007 and recognized a cumulative-effect adjustment of $342,000, decreasing beginning retained earnings. The Company also recorded unrecognized tax position liabilities of approximately $6.8 million that were previously offset against deferred tax assets.

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
     As of the beginning of fiscal year 2008, the total gross amount of unrecognized tax benefits was $28.8 million. Of that amount, $19.9 million, if recognized, would affect the Company’s effective tax rate. For the three and nine months ended December 28, 2007, the Company’s gross unrecognized tax benefits increased by $1.2 million and $2.6 million, respectively. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense. Prior to the adoption of FIN 48, the Company had recognized interest expense related to income tax matters as a component of interest expense. The gross amount of interest and penalties accrued as of the beginning of fiscal year 2008 was $892,000.
     The Company is subject to periodic audits by domestic and foreign tax authorities. The Internal Revenue Service (“IRS”) examination of the Company’s U.S. federal tax returns for fiscal years 2001-2004 was completed in the fourth quarter of fiscal year 2006 and agreement was reached with the IRS on the proposed adjustments. There was no material impact on income taxes or interest resulting from these audits and the Company considers those fiscal years to be effectively settled under FIN 48. By statute, the Company’s U.S. federal returns are subject to examination by the IRS for fiscal years 2005 through 2007. Additionally, tax credit carryovers that were generated in prior years and utilized in these years may also be subject to examination by the IRS. In July 2007, the Company was notified by the IRS of its intention to examine the Company’s fiscal year 2006 federal income tax return. With few exceptions, the fiscal years 2003 to 2007 remain open to examination by state and foreign taxing jurisdictions. The Company believes that it has appropriate support for the income tax positions taken and to be taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter. In the next twelve months it is reasonably possible that the amount of unrecognized tax benefits will decrease by $972,000 as a result of the expiration of the statute of limitations for previously filed tax returns.
Note 11 — Segment Information
     The Company’s commercial and government segments are primarily distinguished by the type of customer and the related contractual requirements. The more regulated government environment is subject to unique contractual requirements and possesses economic characteristics which differ from the commercial segment. Therefore, the Company is organized primarily on the basis of products with commercial and government (defense) communication applications. These product groups are distinguished from one another based upon their underlying technologies.  During the third quarter of fiscal year 2008, the Company made management and organization structure changes due to a shift in product marketing and development strategies and consequently realigned the way management organizes and evaluates financial information internally for making operating decisions and assessing performance in the Satellite Networks and Government reportable segments. Reporting segments are determined consistent with the way management currently organizes and evaluates financial information internally for making operating decisions and assessing performance. The following segment information, including prior periods, recasts this new organizational and reporting structure:
                                 
    Three months ended     Nine months ended  
    December 28,     December 29,     December 28,     December 29,  
(in thousands)   2007     2006     2007     2006  
Revenues
                               
Government
  $ 84,943     $ 69,045     $ 235,425     $ 207,340  
Commercial
                               
Satellite Networks
    52,234       46,821       152,420       147,948  
Antenna Systems
    14,876       8,470       39,395       29,250  
 
                       
 
    67,110       55,291       191,815       177,198  
Elimination of intersegment revenues
                       
 
                       
Total revenues
    152,053       124,336       427,240       384,538  
Operating profits (losses)
                               
Government
    15,610       8,786       33,656       33,691  
Commercial
                               
Satellite Networks
    (85 )     1,980       771       (54 )
Antenna Systems
    1,345       (41 )     3,013       (607 )
 
                       
 
    1,260       1,939       3,784       (661 )
Elimination of intersegment operating profits
    56             56        
 
                       
Segment operating profit before corporate and amortization
    16,926       10,725       37,496       33,030  
Corporate
    (40 )     (21 )     (296 )     59  
Amortization of intangible assets
    (2,389 )     (2,521 )     (7,173 )     (7,202 )
 
                       
Income from operations
  $ 14,497     $ 8,183     $ 30,027     $ 25,887  
 
                       

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Amortization of intangibles by segment for the three and nine months ended December 28, 2007 and December 29, 2006 is as follows:
                                 
    Three months ended     Nine months ended  
    December 28,     December 29,     December 28,     December 29,  
(in thousands)   2007     2006     2007     2006  
Government
  $ 272     $ 703     $ 815     $ 1,497  
Commercial
                               
Satellite Networks
    1,799       1,654       5,609       5,213  
Antenna Systems
    318       164       749       492  
 
                       
Total amortization of intangibles
  $ 2,389     $ 2,521     $ 7,173     $ 7,202  
 
                       
Assets identifiable to segments include: accounts receivable, unbilled accounts receivable, inventory, intangible assets and goodwill. Segment assets as of December 28, 2007 and March 30, 2007 are as follows:
                 
(in thousands)   December 28, 2007     March 30, 2007  
Segment assets
               
Government
  $ 133,398     $ 114,625  
Commercial
               
Satellite Networks
    141,739       148,526  
Antenna Systems
    24,707       22,704  
 
           
 
    166,446       171,230  
Corporate assets
    243,610       198,084  
 
           
Total
  $ 543,454     $ 483,939  
 
           
The management and organization structure changes in the third quarter of fiscal year 2008 resulted in reclassifications of approximately $5.9 million of goodwill for December 28, 2007 and March 30, 2007, and $299,000 and $345,000 of net intangible assets for December 28, 2007 and March 30, 2007, respectively, from the Satellite Networks segment to the Government segment. Net intangible assets and goodwill included in segment assets as of December 28, 2007 and March 30, 2007 are as follows:
                                 
    Net intangible assets     Goodwill  
    December 28,     March 30,     December 28,     March 30,  
(in thousands)   2007     2007     2007     2007  
Government
  $ 4,152     $ 4,967     $ 21,993     $ 21,993  
Commercial
                               
Satellite Networks
    21,666       27,275       40,367       40,367  
Antenna Systems
    2,908       1,359       4,850       3,628  
 
                       
Total
  $ 28,726     $ 33,601     $ 67,210     $ 65,988  
 
                       
Revenue information by geographic area for the three and nine month periods ended December 28, 2007 and December 29, 2006 is as follows:
                                 
    Three months ended     Nine months ended  
    December 28,     December 29,     December 28,     December 29,  
(in thousands)   2007     2006     2007     2006  
United States
  $ 125,164     $ 102,885     $ 349,196     $ 326,554  
Asia Pacific
    5,548       3,316       21,074       14,818  
Europe/Africa
    11,197       8,919       30,184       27,047  
North America other than United States
    9,067       3,568       22,901       9,179  
Latin America
    1,077       5,648       3,885       6,940  
 
                       
 
  $ 152,053     $ 124,336     $ 427,240     $ 384,538  
 
                       
     The Company distinguishes revenues from external customers by geographic areas based on customer location.
     The net book value of long-lived assets located outside the United States was $399,000 at December 28, 2007 and $313,000 at March 30, 2007.
Note 12 — Acquisition
     On August 2, 2007, the Company completed the acquisition of all of the outstanding capital stock of JAST, S.A., a Switzerland based, privately-held developer of microwave circuits and antennas for terrestrial and satellite applications, specializing in small, low-profile antennas for mobile satellite communications. The initial purchase price of approximately $2.1 million was comprised

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
primarily of $452,000 related to the fair value of 14,424 shares of the Company’s common stock issued at the closing date, $748,000 in cash consideration, the issuance of an $800,000 payable, and approximately $125,000 in direct acquisition costs. The $748,000 in cash consideration paid to the former JAST stockholders plus approximately $125,000 in direct acquisition costs less cash acquired of $22,000 resulted in a net cash outlay of approximately $851,000 as of September 28, 2007. The remaining $800,000 is payable on the first anniversary of the closing date, of which $483,000 will be paid in cash and $317,000 will be paid in stock or cash, at the Company’s election. Under the terms of the purchase agreement, up to an additional $4.5 million in consideration is payable in stock and/or cash, at the Company’s option, based on JAST achieving certain earnings performance and technology development targets during the two years following closing. No portion of this additional consideration is guaranteed. The additional consideration, if earned, is payable after JAST achieves specified earnings performance and technology development targets and will be recorded as additional purchase price.
     The preliminary allocation of purchase price of the acquired assets and assumed liabilities based on the estimated fair values is as follows:
         
    August 2, 2007  
    (In thousands)  
Current assets
  $ 169  
Identifiable intangible assets
    2,298  
Goodwill
    1,222  
 
     
Total assets acquired
    3,689  
Liabilities assumed
    (1,564 )
 
     
Total purchase price
  $ 2,125  
 
     
     Amounts assigned to other intangible assets are being amortized on a straight-line basis over their estimated useful lives ranging from two to five years and are as follows:
         
    (In thousands)  
Technology (3 year weighted average life)
  $ 1,122  
Customer relationships (5 year weighted average life)
    992  
Non-compete agreements (5 year weighted average life)
    156  
Backlog (2 year weighted average life)
    28  
 
     
Total identifiable intangible assets
  $ 2,298  
 
     
     The acquisition of JAST is beneficial to the Company because it adds complementary technologies and provides additional business opportunities, namely microwave circuits and antennas for terrestrial and satellite applications and small, low-profile antennas for mobile satellite communications. The benefit of these products can be offered to many of the Company’s consumer, enterprise or government customers. These benefits and additional opportunities were among the factors that contributed to a purchase price resulting in the recognition of goodwill which has been recorded within Antenna Systems product group in the commercial segment. The intangible assets and goodwill recognized will not be deductible for federal income tax purposes. The purchase price is preliminary due to resolution of certain tax and contractual matters.
     The condensed consolidated financial statements include the operating results of JAST from the date of acquisition in the Company’s Antenna Systems product group in the commercial segment. Pro forma results of operations have not been presented because the effect of the acquisition was insignificant to the financial statements for all periods presented.
Note 13 – Subsequent Event
     In January 2008, the Company entered into several agreements with Space Systems/Loral (SS/L), Loral Space & Communications (Loral) and Telesat Canada (Telesat) related to the Company’s high capacity satellite system. Under the satellite construction contract with SS/L, the Company will purchase a Ka-band satellite (ViaSat-1) for approximately $209.1 million, subject to purchase price adjustments based on satellite performance. The Company does not believe the purchase price paid by ViaSat to SS/L for the ViaSat-1 satellite will materially change. In addition, the Company entered into a beam sharing agreement with Loral (“Beam Sharing Agreement”), whereby Loral is responsible for contributing 15% of the total costs (estimated at approximately $60 million) associated with the ViaSat-1 satellite project. As part of this arrangement, Loral executed a separate contract with SS/L whereby Loral is purchasing the Canadian beams on the ViaSat-1 satellite (Loral Beams) for approximately $36.9 million (15% of the total satellite cost of $246.0 million). In addition, Loral remains responsible under the Beam Sharing Agreement to reimburse ViaSat for costs associated with

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VIASAT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
launch, launch and in-orbit insurance, and operating the satellite. The reimbursed costs to ViaSat from Loral for launch and launch and the first year of in-orbit insurance are expected to be approximately $23.1 million. Further, under the terms of the Beam Sharing Agreement, ViaSat is appointed the sole and exclusive supplier of end-user broadband terminals and hub equipment for broadband service operated over the Loral Beams. The Company also entered into an agreement with Telesat, whereby Telesat has agreed to transfer certain orbital slot license rights to the Company for ViaSat-1 satellite operation.
     Michael Targoff, a director of the Company since February 2003, currently serves as the Chief Executive Officer and the Vice Chairman of the board of directors of Loral Space & Communications, Inc., the parent of Space Systems/Loral, Inc. John Stenbit, a director of the Company since August 2004, also currently serves on the board of directors of Loral Space & Communications, Inc. The purchase of the ViaSat-1 satellite by the Company from SS/L was approved by the disinterested members of the Company’s Board of Directors.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
     The following information should be read in conjunction with the condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report and the audited consolidated financial statements and notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 30, 2007, filed with the Securities and Exchange Commission.
      Except for the historical information contained herein, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled “Risk Factors” and elsewhere in this Quarterly Report.
General
     We are a leading provider of advanced digital satellite communications and other wireless and secure networking and signal processing equipment and services to the government and commercial markets. Our internal growth to date has historically been driven largely by our success in meeting the need for advanced communications products for our government and commercial customers. By developing cost-effective communications solutions incorporating our advanced technologies, we have continued to grow the markets for our products and services. Our goal is to leverage our advanced technology and capabilities to capture a considerable share of the global satellite communications equipment and services segment for both government and commercial customers. ViaSat was incorporated in 1986 and completed its initial public offering in 1996.
     Our company is organized principally in two segments: government and commercial. Our government business encompasses specialized products principally serving defense customers and includes:
    Data links, including multifunction information distribution system (MIDS) terminals, joint tactical radio systems (JTRS) development and unmanned vehicle technologies,
 
    Information security and assurance products and services, which enable military and government users to communicate secure information over secure and non-secure networks, and
 
    Government satellite communication systems and products, including UHF DAMA satellite communications products consisting of modems, terminals and network control systems, and innovative broadband solutions to government customers to increase available bandwidth using existing satellite capacity.
Serving government customers with cost-effective products and solutions continues to be a critical and core element of our overall business strategy.
     In recent years approximately one-half of our revenues has been generated from satellite based communications products and systems solutions to address commercial market needs. Our commercial business accounted for approximately 44% of our revenues in the three months ended December 28, 2007 and December 29, 2006, respectively, 45% and 46% of our revenues in the nine months ended December 28, 2007 and December 29, 2006, respectively, and 46% of our revenues in fiscal year 2007 and 51% of our revenues in fiscal year 2006.

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     The commercial segment comprises two business product groups: satellite networks and antenna systems. Our commercial business offers an end-to-end capability to provide customers with a broad range of satellite communication and other wireless communications equipment solutions including:
    Consumer broadband products and solutions to customers based on DOCSIS and DVB-RCS based technologies,
 
    Mobile broadband products and systems for in-flight, maritime and ground mobile broadband applications,
 
    Enterprise VSAT networks products and services,
 
    Satellite networking systems design and technology development, and
 
    Antenna systems for commercial and defense applications and customers.
     With expertise in commercial satellite network engineering, gateway construction, and remote terminal manufacturing for all types of interactive communications services, we have the ability to take overall responsibility for designing, building, initially operating, and then handing over a fully operational, customized satellite network serving a variety of markets and applications.
     There are a number of large new business opportunities we are pursuing in fiscal year 2008. In the government segment, the opportunities include future MIDS LVT production orders, international MIDS LVT orders, new MIDS joint tactical radio system development and pre-production contracts, additional funding for current information assurance projects, new information assurance contracts using our HAIPE technology, and orders for our KG-250 and KG-255 products. In our commercial segment, the opportunities include development and production agreements for next generation consumer broadband systems, production orders for existing consumer and mobile broadband systems and equipment, and further penetration in the North American market for enterprise VSAT and antenna systems. The probability and timing of these orders is not entirely predictable, so our revenue may vary somewhat from quarter-to-quarter or even year-to-year.
     To date, our ability to grow and maintain our revenues has depended on our ability to identify and target markets where the customer places a high priority on the technology solution, and obtaining additional sizable contract awards from these customers. Due to the nature of this process, it is difficult to predict the probability and timing of obtaining awards in these markets.
     We expect that our capital needs for fiscal year 2008 will be similar to fiscal year 2007. In fiscal years 2006 and 2007, we initiated and completed facility expansion and modernization projects in Carlsbad, California and Gilbert, Arizona, as well as expanded our production test equipment and lab development equipment and information technology to meet customer program requirements and growth forecasts. In fiscal year 2008, we have additional facility projects under way in Carlsbad, California, as well as production test equipment and information technology projects to support our growth needs. Our facility needs have normally been met with long-term lease agreements, but we do anticipate additional tenant improvements over the next two fiscal years associated with our expansion. Additionally, as our employee base increases, the need for additional computers and other equipment will also increase.
     On August 2, 2007, we completed the acquisition of all of the outstanding capital stock of JAST, S.A., a Switzerland based, privately-held developer of microwave circuits and antennas for terrestrial and satellite applications, specializing in small, low-profile antennas for mobile satellite communications. The initial purchase price of approximately $2.1 million was comprised primarily of $452,000 related to the fair value of 14,424 shares of our common stock issued at the closing date, $748,000 in cash consideration, the issuance of an $800,000 payable, and approximately $125,000 in direct acquisition costs. The $748,000 in cash consideration paid to the former JAST stockholders plus approximately $125,000 in direct acquisition costs less cash acquired of $22,000 resulted in a net cash outlay of approximately $851,000. The remaining $800,000 is payable on the first anniversary of the closing date, of which $483,000 will be paid in cash and $317,000 will be paid in stock or cash, at our election. Under the terms of the purchase agreement, up to an additional $4.5 million in consideration is payable in stock and/or cash, at our option, based on JAST achieving certain earnings performance and technology development targets during the two years following closing. No portion of this additional consideration is guaranteed. The additional consideration, if earned, is payable after JAST achieves specified earnings performance and technology development targets and will be recorded as additional purchase price.

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Subsequent Event
     In January 2008, the Company entered into several agreements with Space Systems/Loral (SS/L), Loral Space & Communications (Loral) and Telesat Canada (Telesat) related to the Company’s high capacity satellite system. Under the satellite construction contract with SS/L, the Company will purchase a Ka-band satellite (ViaSat-1) for approximately $209.1 million, subject to purchase price adjustment based on satellite performance. The Company does not believe the purchase price paid by ViaSat to SS/L for the ViaSat-1 satellite will materially change. In addition, the Company entered into a beam sharing agreement with Loral (Beam Sharing Agreement), whereby Loral is responsible for contributing 15% of the total costs (estimated at approximately $60.0 million) associated with the ViaSat-1 satellite project. As part of this arrangement, Loral executed a separate contract with SS/L whereby Loral is purchasing the Canadian beams on the ViaSat-1 satellite (Loral Beams) for approximately $36.9 million (15% of the total satellite cost of $246.0 million). In addition, Loral remains responsible under the Beam Sharing Agreement to reimburse ViaSat for costs associated with launch, launch and in-orbit insurance, and operating the satellite. The reimbursed costs to ViaSat from Loral for launch and launch and the first year of in-orbit insurance are expected to be approximately $23.1 million. Further, under the terms of the Beam Sharing Agreement, ViaSat is appointed the sole and exclusive supplier of end-user broadband terminals and hub equipment for broadband service operated over the Loral Beams. The Company also entered into an agreement with Telesat, whereby Telesat has agreed to transfer certain orbital slot license rights to the Company for ViaSat-1 satellite operation.
Critical Accounting Policies and Estimates
     Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We consider the policies discussed below to be critical to an understanding of our financial statements because their application places the most significant demands on management’s judgment, with financial reporting results relying on estimation about the effect of matters that are inherently uncertain. We describe the specific risks for these critical accounting policies in the following paragraphs. For all of these policies, we caution that future events rarely develop exactly as forecast, and the best estimates routinely require adjustment.
Revenue recognition
     A substantial portion of our revenues are derived from long-term contracts requiring development and delivery of complex equipment built to customer specifications. Certain of these contracts are accounted for under the percentage-of-completion method of accounting under the American Institute of Certified Public Accountants’ Statement of Position 81-1 (SOP 81-1), “Accounting for Performance of Construction-Type and Certain Production-Type Contracts.” Sales and earnings under these contracts are recorded based on the ratio of actual costs incurred to date to total estimated costs expected to be incurred related to the contract or as products are shipped under the units-of-delivery method.
     The percentage-of-completion method of accounting requires management to estimate the profit margin for each individual contract and to apply that profit margin on a uniform basis as sales are recorded under the contract. The estimation of profit margins requires management to make projections of the total sales to be generated and the total costs that will be incurred under a contract. These projections require management to make numerous assumptions and estimates relating to items such as the complexity of design and related development costs, performance of subcontractors, availability and cost of materials, labor productivity and cost, overhead and capital costs, and manufacturing efficiency. These contracts often include purchase options for additional quantities and customer change orders for additional or revised product functionality. Purchase options and change orders are accounted for either as an integral part of the original contract or separately depending upon the nature and value of the item. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. During the three months ended December 28, 2007 and December 29, 2006, we recorded charges of approximately $3.0 million and $1.1 million, respectively, related to loss contracts. During the nine months ended December 28, 2007 and December 29, 2006, we recorded charges of approximately $6.5 million and $2.4 million, respectively, related to loss contracts.
     Assuming the initial estimates of sales and costs under a contract are accurate, the percentage-of-completion method results in the profit margin being recorded evenly as revenue is recognized under the contract. Changes in these underlying estimates due to revisions in sales and future cost estimates or the exercise of contract options may result in profit margins being recognized unevenly over a contract as such changes are accounted for on a cumulative basis in the period estimates are revised.

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     We believe we have established appropriate systems and processes to enable us to reasonably estimate future cost on our programs through regular quarterly evaluations of contract costs, scheduling and technical matters by business unit personnel and management. Historically, in the aggregate, we have not experienced significant deviations in actual costs from estimated program costs, and when deviations that result in significant adjustments arise, we disclose the related impact in Management’s Discussion and Analysis. However, a significant change in future cost estimates on one or more programs could have a material effect on our results of operations. For example, a one percent variance in our future cost estimates on open fixed-price contracts as of December 28, 2007 would change our income before income taxes by approximately $400,000.
     We also have contracts and purchase orders where revenue is recorded on delivery of products in accordance with SAB 104, “Staff Accounting Bulletin No. 104 Revenue Recognition.” In this situation, contracts and customer purchase orders are used to determine the existence of an arrangement. Shipping documents and customer acceptance, when applicable, are used to verify delivery. We assess whether the sales price is fixed or determinable based on the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment, and assesses collectibility based primarily on the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history.
     When a sale involves multiple elements, such as sales of products that include services, the entire fee from the arrangement is allocated to each respective element based on its relative fair value in accordance with EITF, 00-21, “Accounting for Multiple Element Revenue Arrangements,” and recognized when the applicable revenue recognition criteria for each element are met. The amount of product and service revenue recognized is impacted by our judgments as to whether an arrangement includes multiple elements and, if so, what sufficient objective and reliable evidence of fair value exists for those elements. Changes to the elements in an arrangement and our ability to establish evidence for those elements could affect the timing of revenue recognition.
Accounting for Stock-Based Compensation
     We grant options to purchase our common stock and award restricted stock units to our employees and directors under our equity compensation plans. Eligible employees can also purchase shares of our common stock at 85% of the lower of the fair market value on the first or the last day of each six-month offering period under our employee stock purchase plan. The benefits provided under these plans are stock-based payments subject to the provisions of revised Statement of Financial Accounting Standards (SFAS) No. 123 (SFAS 123R), “Share-Based Payment.” Effective April 1, 2006, we use the fair value method to apply the provisions of SFAS 123R with a modified prospective application which provides for certain changes to the method for estimating the value of stock-based compensation. The valuation provisions of SFAS 123R apply to new awards and to awards that are outstanding on the effective date, which are subsequently modified or cancelled. Under the modified prospective application method, prior periods are not revised for comparative purposes. Stock-based compensation expense recognized under SFAS 123R for the three months ended December 28, 2007 and December 29, 2006 was $1.9 million and $1.6 million, respectively. Stock-based compensation expense recognized under SFAS 123R for the nine months ended December 28, 2007 and December 29, 2006 was $5.6 million and $2.4 million, respectively. At December 28, 2007, total unrecognized estimated compensation cost including estimated forfeitures related to non-vested stock options and restricted stock units granted prior to that date, and employee stock purchase plan was $9.4 million, $6.8 million and $0, respectively, which are expected to be recognized over a weighted-average period of 2.7 years, 2.8 years and 0 years, respectively.
Review of Stock Option Grant Procedures
     In August 2006, we commenced and completed a voluntary internal investigation, assisted by our outside legal counsel, of our historical stock option granting practices, stock option documentation and related accounting during the period from our initial public offering in December 1996 through June 30, 2006. At the conclusion of our investigation, our outside legal counsel and the company determined that there was no evidence of a pattern of intentionally misdating stock option grants to achieve an accounting result, or that any officer, director, or senior executive at the company willfully or knowingly engaged in stock options misdating, or had knowledge of others doing so.
     During the investigation, we identified certain accounting errors associated with stock options granted primarily to certain non-executive new hire employees during the ten-year period from December 1996 to June 30, 2006. Based on the results of the investigation, we identified that certain stock options to non-executive new hires had incorrectly been accounted for using an accounting measurement date prior to the date that the new hires commenced employment. We concluded, with the concurrence of the Audit Committee, that the financial impact of these errors was not material to our consolidated financial statements for any annual period in which the errors related. In accordance with Accounting Principles Board Opinion No. 28, “Interim Financial Reporting,” paragraph 29, we recorded a cumulative adjustment to compensation expense in the first quarter of fiscal year 2007 of $703,000, net

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of tax, because the effect of the correcting adjustment was not material to our fiscal year 2007 net income. This non-cash compensation expense adjustment will have no impact on future periods. There is no impact on revenue or net cash provided by operating activities as a result of recording the compensation expense adjustment.
Allowance for doubtful accounts
     We make estimates of the collectibility of our accounts receivable based on historical bad debts, customer credit-worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. Historically, our bad debts have been minimal; a contributing factor to this is that a significant portion of our sales has been to the U.S. government. In recent years, commercial customers have comprised a larger part of our revenues. Our accounts receivable balance was $147.4 million, net of allowance for doubtful accounts of $1.2 million as of December 28, 2007, and our accounts receivable balance was $139.8 million, net of allowance for doubtful accounts of $1.2 million as of March 30, 2007.
Warranty reserves
     We provide limited warranties on a majority of our products for periods of up to five years. We record a liability for our warranty obligations when we ship the products based upon an estimate of expected warranty costs. We classify the amounts we expect to incur within twelve months as a current liability. For mature products, we estimate the warranty costs based on historical experience with the particular product. For newer products that do not have a history of warranty costs, we base our estimates on our experience with the technology involved and the types of failure that may occur. It is possible that our underlying assumptions will not reflect the actual experience, and in that case, we will make future adjustments to the recorded warranty obligation.
Goodwill and other intangible assets
     We account for our goodwill under SFAS No. 142 (SFAS 142) “Goodwill and Other Intangible Assets.” The SFAS 142 goodwill impairment model is a two-step process. First, it requires a comparison of the book value of net assets to the fair value of the reporting units that have goodwill assigned to them. If the fair value is determined to be less than book value, a second step is performed to compute the amount of the impairment. In this process, a fair value for goodwill is estimated, based in part on the fair value of the reporting unit used in the first step, and is compared to its carrying value. The shortfall of the value below carrying value represents the amount of goodwill impairment. We test goodwill for impairment during the fourth quarter every fiscal year, and when an event occurs or circumstances change such that it is reasonably possible that an impairment may exist.
     We estimate the fair values of the related operations using discounted cash flows and other indicators of fair value. We base the forecast of future cash flows on our best estimate of the future revenues and operating costs, which we derive primarily from existing firm orders, expected future orders, contracts with suppliers, labor agreements, and general market conditions. Changes in these forecasts could cause a particular reporting unit to either pass or fail the first step in the SFAS 142 goodwill impairment model, which could significantly influence whether an impairment of goodwill needs to be recorded. We adjust the cash flow forecasts by an appropriate discount rate derived from our market capitalization plus a suitable control premium at the date of evaluation.
Impairment of long-lived assets (Property and equipment and other intangible assets)
     We adopted SFAS No. 144 (SFAS 144) “Accounting for the Impairment or Disposal of Long-Lived Assets” on April 1, 2002. In accordance with SFAS 144, we assess potential impairments to our long-lived assets, including property and equipment and other intangible assets, when there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. We recognize an impairment loss when the undiscounted cash flows expected to be generated by an asset (or group of assets) are less than the asset’s carrying value. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value, and would be recorded as a reduction in the carrying value of the related asset and charged to results of operations. We have not identified any such impairments.
Income taxes
     Management evaluates the realizability of our deferred tax assets and assesses the need for a valuation allowance on a quarterly basis. In accordance with SFAS No. 109 (SFAS 109), “Accounting for Income Taxes,” net deferred tax assets are reduced by a

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valuation allowance if, based on all the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
     On March 31, 2007, we adopted the provisions of Financial Accounting Standards Board (FASB) Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.
     We are subject to income taxes in the United States and numerous foreign jurisdictions. In the ordinary course of our business there are calculations and transactions where the ultimate tax determination is uncertain. In addition, changes in tax laws and regulations as well as adverse judicial rulings could adversely affect the income tax provision. We believe we have adequately provided for income tax issues not yet resolved with federal, state and foreign tax authorities. However, if these provided amounts prove to be more than what is necessary, the reversal of the reserves would result in tax benefits being recognized in the period in which we determine that provision for the liabilities is no longer necessary. If an ultimate tax assessment exceeds our estimate of tax liabilities, an additional charge to expense would result.
Derivatives
     We enter into foreign currency forward and option contracts to hedge certain forecasted foreign currency transactions. Gains and losses arising from foreign currency forward and option contracts not designated as hedging instruments are recorded in investment income (expense) as gains (losses) on derivative instruments. Gains and losses arising from the effective portion of foreign currency forward and option contracts that are designated as cash-flow hedging instruments are recorded in accumulated other comprehensive income (loss) as unrealized gains (losses) on derivative instruments and accrued liabilities until the underlying transaction affects our earnings and are then recorded in the same income statement line as the underlying transaction. We had $1.4 million of notional value of foreign currency forward contracts outstanding at December 28, 2007. We had $0 of notional value of foreign currency forward contracts outstanding at March 30, 2007.
Self-insurance liabilities
     We self-insure a portion of the exposure for losses related to workers’ compensation costs and employee medical benefits. Accounting for workers’ compensation expense and employee medical benefits require the use of estimates and assumptions regarding numerous factors, including ultimate severity of injuries, the timeliness of reporting injuries, and health care cost increases. We insure for workers’ compensation and employee medical benefit liabilities under a large deductible program where losses are incurred up to certain specific and aggregate amounts. Accruals for claims under this self-insurance program are recorded as claims are incurred. We estimate our liability for claims incurred but not paid, including claims incurred but not recorded, based on the total incurred claims and paid claims, adjusted for ultimate losses as determined by our insurance carrier. We evaluate the estimated liability on a continuing basis and adjust accordingly. To date, workers’ compensation expense and employee medical benefits expense have been within the range of managements’ expectations.

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Results of Operations
     The following table presents, as a percentage of total revenues, income statement data for the periods indicated.
                                 
    Three months ended   Nine months ended
    December 28,   December 29,   December 28,   December 29,
    2007   2006   2007   2006
Revenues
    100.0 %     100.0 %     100.0 %     100.0 %
Operating expenses:
                               
Cost of revenues
    69.6       72.7       71.8       74.4  
Selling, general and administrative
    13.8       14.2       13.8       13.1  
Independent research and development
    5.5       4.5       5.7       3.9  
Amortization of intangible assets
    1.6       2.0       1.7       1.9  
 
                               
Income from operations
    9.5       6.6       7.0       6.7  
Income before income taxes
    10.4       7.0       7.9       7.0  
Net income
    6.7       7.8       5.4       5.6  
Three Months Ended December 28, 2007 vs. Three Months Ended December 29, 2006
Revenues
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Revenues
  $ 152.1     $ 124.3     $ 27.7       22.3 %
     The increase in revenues during the third quarter of fiscal year 2008 was due to our higher beginning backlog of $439.0 million, quarterly customer awards of $136.0 million and the conversion of certain backlog and awards into revenues. Revenue increases were experienced in both our government segment, increasing by $15.9 million, and commercial segment, increasing by $11.8 million. The revenue increase in the government segment was primarily derived from increased revenues of approximately $5.6 million in certain information assurance products, $6.9 million in next generation military satellite communication systems and $2.8 million from our majority owned subsidiary, TrellisWare Technologies, Inc. (TrellisWare). The revenue increase in the commercial segment was primarily derived from increased sales of consumer and mobile broadband products of approximately $13.4 million and $6.4 million in higher sales from our Antenna Systems product group offset by a $7.7 million reduction in enterprise VSAT product sales.
Cost of Revenues
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Cost of revenues
  $ 105.8     $ 90.4     $ 15.5       17.1 %
Percentage of revenues
    69.6 %     72.7 %                
     The increase in quarterly cost of revenues from $90.4 million to $105.8 million was primarily due to the increase in revenues. However, cost of revenues decreased as a percentage of revenues from 72.7% to 69.6% primarily due to product cost reductions in our consumer and mobile broadband products totaling approximately $2.2 million and better program performance in our Antenna Systems product group totaling approximately $1.3 million for the three months ended December 28, 2007 compared to the same period last year. We also experienced better program performance in our government segment, contributing approximately $4.9 million in cost of revenue reductions spread across various product groups. Cost of revenues for the three months ended December 28, 2007 and December 29, 2006 included approximately $485,000 and $423,000, respectively, in stock-based compensation expense related to our adoption of SFAS 123R. Cost of revenues may fluctuate in future quarters depending on the mix of products sold and services provided, competition, new product introduction costs and other factors.

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Selling, General and Administrative Expenses
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Selling, general and administrative
  $ 20.9     $ 17.7     $ 3.2       18.2 %
Percentage of revenues
    13.8 %     14.2 %                
     The increase in selling, general and administrative (SG&A) expenses in the third quarter of fiscal year 2008 compared to the third quarter of fiscal year 2007 was primarily attributable to higher support costs of approximately $1.8 million and higher selling and proposal costs of approximately $700,000 to support our anticipated future revenue growth. SG&A expenses consist primarily of personnel costs and expenses for business development, marketing and sales, bid and proposal, finance, contract administration and general management. Some SG&A expenses are difficult to predict and vary based on specific government and commercial sales opportunities.
Independent Research and Development
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Independent research and development
  $ 8.4     $ 5.6     $ 2.8       51.3 %
Percentage of revenues
    5.5 %     4.5 %                
     The increase in independent research and development (IR&D) expenses reflects the current fiscal year third quarter over prior fiscal year third quarter increases primarily in the government segment of approximately $1.8 million for planned development of next generation information assurance and unmanned aerial vehicle (UAV) technologies. The commercial segment contributed approximately $1.0 million in IR&D increases due to planned efforts related to next generation broadband equipment and mobile antenna technologies. The higher IR&D expenses reflect our recognition of certain opportunities in these markets and the need to invest in the development of new technologies to meet these opportunities.
      Amortization of Intangible Assets. The intangible assets from acquisitions occurring in fiscal years 2001, 2002, 2006, 2007 and 2008 are being amortized over original useful lives ranging from eight months to ten years. The amortization of intangible assets will decrease each year as the intangible assets with shorter lives become fully amortized.
     The current and expected amortization expense for each of the following periods is as follows (in thousands):
         
    Amortization  
For the nine months ended December 28, 2007
  $ 7,173  
 
       
Expected for the remainder of fiscal year 2008
  $ 2,389  
Expected for fiscal year 2009
    9,020  
Expected for fiscal year 2010
    5,787  
Expected for fiscal year 2011
    5,024  
Expected for fiscal year 2012
    3,798  
Thereafter
    2,708  
 
     
 
  $ 28,726  
 
     
      Interest Income. Interest income increased to $1.6 million for the three months ended December 28, 2007 from $553,000 for the three months ended December 29, 2006 due to higher average invested cash balances during the respective periods.
      Interest Expense. Interest expense increased to $269,000 for the three months ended December 28, 2007 from $92,000 for the three months ended December 29, 2006. The increase in interest expense for the third quarter of fiscal year 2008 compared to third quarter of fiscal year 2007 was mainly due to the accretion of interest on the secured borrowing agreement entered into in the fourth quarter of fiscal year 2007. Commitment fees on our line of credit availability remained the same for each period. We had no outstanding borrowings under our line of credit at December 28, 2007 or December 29, 2006.
      Provision (Benefit) for Income Taxes. Our effective tax rate for the three months ended December 28, 2007 was approximately 30.4%, which is approximately equal to the 28.4% estimated annual effective tax rate for the fiscal year 2008, compared to a tax

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benefit of 12.7% for the three months ended December 29, 2006. The income tax benefit of approximately 12.7% for the third quarter of fiscal 2007 is lower than the expected annual effective tax rate primarily due to the recording of research and development tax credits allowed for in the third quarter of fiscal 2007 by the Tax Relief and Health Care Act of 2006, enacted on December 20, 2006, extending the research and development tax credit from January 1, 2006 to December 31, 2007. In the first and second quarters of fiscal year 2007, our estimated annual effective income tax rate did not include the effect of the extension of the research and development tax credit, which resulted in a catch-up adjustment of approximately $2.0 million in the third quarter of fiscal year 2007. Also as a result of the extension of the research and development tax credit, approximately $1.3 million of research and development tax credit generated in the fourth quarter of fiscal 2006 was recognized as a discrete item in the third quarter of fiscal 2007. Our estimated effective tax rate of approximately 28.4% for fiscal year 2008 reflects the expiration of the federal research and development tax credit at December 31, 2007. If the federal research and development tax credit is reinstated, we will have a lower effective tax rate and the amount of the tax rate reduction will depend on the effective date, the terms of the reinstatement as well as the amount of eligible research and development expenses in the reinstated period.
Our Segment Results for the Three Months Ended December 28, 2007 vs. Three Months Ended December 29, 2006
Government Segment
Revenues
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Revenues
  $ 84.9     $ 69.0     $ 15.9       23.0 %
     The increase in government segment revenues related primarily to a higher beginning backlog and the receipt of $54.4 million in awards during the third quarter of fiscal year 2008. The increased revenues resulted primarily from higher sales of certain information assurance products of approximately $5.6 million, $6.9 million in next generation military satellite communication systems and $2.8 million from our majority owned subsidiary, TrellisWare.
Segment Operating Profit
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Operating profit
  $ 15.6     $ 8.8     $ 6.8       77.7 %
Percentage of government segment revenues
    18.4 %     12.7 %                
     The increase in government segment operating profit was primarily related to margin gains from increased revenues of $15.9 million and better program performance contributing approximately $4.9 million in cost of revenue reductions and approximately $840,000 in selling and support cost reductions spread across various product groups. This increase was offset by an increase in research and development expenses of $1.8 million.
Commercial Segment
Revenues
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Satellite Networks
                               
Revenues
  $ 52.2     $ 46.8     $ 5.4       11.6 %
Antenna Systems
                               
Revenues
  $ 14.9     $ 8.5     $ 6.4       75.6 %
Total Commercial Segment
                               
Revenues
  $ 67.1     $ 55.3     $ 11.8       21.4 %

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     Commercial segment revenues increased $11.8 million primarily due to higher sales of our consumer and mobile broadband products of approximately $13.4 million compared to the same period last year offset by a $7.7 million reduction in enterprise VSAT product sales. Antenna Systems product sales were also higher, increasing by approximately $6.4 million due to the higher awards levels and related program performance.
Segment Operating Profit
                                 
    Three months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Satellite Networks
                               
Satellite Networks operating (loss) profit
  $ (0.1 )   $ 2.0     $ (2.1 )     (104.3 )%
Percentage of Satellite Network revenues
    (0.2 )%     4.2 %                
Antenna Systems
                               
Antenna Systems operating profit (loss)
  $ 1.3     $ (0.1 )   $ 1.4       3,380.5 %
Percentage of Antenna Systems revenues
    9.0 %     (0.5 )%                
Total Commercial Segment
                               
Segment operating profit
  $ 1.3     $ 1.9     $ (0.7 )     (35.0 )%
Percentage of commercial segment revenues
    1.9 %     3.5 %                
     The commercial segment overall operating profit decrease of approximately $700,000 compared to the same period last year was primarily due to a $7.7 million reduction in enterprise VSAT product sales decreasing segment operating profits by approximately $3.9 million and additional costs related to the Company’s sales and marketing of wide area networking acceleration products of $890,000. This decrease was offset by a $3.4 million increase in operating profits relating to our consumer and mobile broadband products, primarily through product cost reductions, and a $1.4 million increase in operating profits relating to our Antenna System products, primarily through improved overall program performance year over year.
Nine Months Ended December 28, 2007 vs. Nine Months Ended December 29, 2006
Revenues
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Revenues
  $ 427.2     $ 384.5     $ 42.7       11.1 %
     The increase in revenues was due to our beginning backlog of $388.7 million and customer awards of $461.5 million for the first nine months of our fiscal year 2008 and the conversion of certain backlog and awards into revenues. Year to date revenue growth was experienced in both our government segment, increasing by $28.1 million, and commercial segment, increasing by $14.6 million. The revenue increase in the government segment was primarily derived from increased revenues of approximately $3.0 million in certain information assurance products, $20.8 million in next generation military satellite communication systems and $2.9 million from our majority owned subsidiary, TrellisWare. The revenue increase in the commercial segment was primarily derived from increased sales of consumer broadband products of approximately $23.3 million, various other satellite networks products of approximately $1.5 million and $10.1 million in higher sales from our Antenna Systems product group offset by a $20.3 million reduction in enterprise VSAT product sales.
Cost of Revenues
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Cost of revenues
  $ 306.8     $ 285.9     $ 20.8       7.3 %
Percentage of revenues
    71.8 %     74.4 %                
     The increase in cost of revenues from $285.9 million to $306.8 million was primarily due to an increase in our revenues. However, we experienced a decrease in the cost of revenues as a percentage of revenues from 74.4% to 71.8% primarily due to product cost reductions in our consumer and mobile broadband products totaling approximately $9.1 million and better program performance in our Antenna Systems product group totaling approximately $4.4 million for the nine months ended December 28, 2007 compared to

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the same period last year. We also experienced better program performance in our government segment, contributing approximately $1.1 million in cost of revenue reductions spread across various product groups. Cost of revenues for the nine months ended December 28, 2007 and December 29, 2006 included approximately $1.4 million and $730,000, respectively, in stock-based compensation expense related to our adoption of SFAS 123R. Cost of revenues may fluctuate in future quarters depending on the mix of products sold and services provided, competition, new product introduction costs and other factors.
Selling, General and Administrative Expenses
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Selling, general and administrative
  $ 59.1     $ 50.3     $ 8.7       17.4 %
Percentage of revenues
    13.8 %     13.1 %                
     The increase in SG&A expenses in the first nine months of fiscal year 2008 compared to the first nine months of fiscal year 2007 was primarily attributable to higher support costs of approximately $5.0 million and higher selling and proposal costs of approximately $2.8 million to support our anticipated future revenue growth and $3.7 million in stock-based compensation expense recorded in the first nine months of fiscal year 2008 compared to $1.6 million in stock-based compensation expense recorded in the first nine months of fiscal year 2007 related to our adoption of SFAS 123R. SG&A expenses consist primarily of personnel costs and expenses for business development, marketing and sales, bid and proposal, finance, contract administration and general management. Some SG&A expenses are difficult to predict and vary based on specific government and commercial sales opportunities.
Independent Research and Development
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Independent research and development
  $ 24.2     $ 15.2     $ 9.0       59.5 %
Percentage of revenues
    5.7 %     3.9 %                
     The increase in IR&D expenses reflects year over year increases primarily in the government segment of approximately $6.5 million for planned development of next generation information assurance and UAV technologies. The commercial segment contributed approximately $2.5 million in IR&D increases due to planned efforts related to next generation broadband equipment and mobile antenna technologies. The higher IR&D expenses reflect our recognition of certain opportunities in these markets and the need to invest in the development of new technologies to meet these opportunities.
      Amortization of Intangible Assets. The intangible assets from acquisitions occurring in fiscal years 2001, 2002, 2006, 2007 and 2008 are being amortized over original useful lives ranging from eight months to ten years. The amortization of intangible assets will decrease each year as the intangible assets with shorter lives become fully amortized.
     The current and expected amortization expense for each of the following periods is as follows (in thousands):
         
    Amortization  
For the nine months ended December 28, 2007
  $ 7,173  
 
       
Expected for the remainder of fiscal year 2008
  $ 2,389  
Expected for fiscal year 2009
    9,020  
Expected for fiscal year 2010
    5,787  
Expected for fiscal year 2011
    5,024  
Expected for fiscal year 2012
    3,798  
Thereafter
    2,708  
 
     
 
  $ 28,726  
 
     
      Interest Income. Interest income increased to $4.5 million for the nine months ended December 28, 2007 from $1.3 million for the nine months ended December 29, 2006 due to higher average invested cash balances year over year.
      Interest Expense. Interest expense increased to $606,000 for the nine months ended December 28, 2007 from $383,000 for the nine months ended December 29, 2006. The increase in interest expense was mainly due to the accretion of interest on the secured

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borrowing agreement entered into in the fourth quarter of fiscal year 2007. Commitment fees on our line of credit availability remained the same year over year. We had no outstanding borrowings under our line of credit at December 28, 2007 or December 29, 2006.
      Provision for Income Taxes. Our effective tax rate for the nine months ended December 28, 2007 was approximately 29.1%, which is approximately equal to the 28.4% estimated annual effective tax rate for the fiscal year 2008, compared to a 19.7% tax rate for the nine months ended December 29, 2006. The income tax provision for the nine months ended December 29, 2006 included approximately $1.3 million of research and development tax credit generated in the fourth quarter of fiscal 2006 recognized as a discrete tax benefit in the nine-month period ended December 29, 2006. Our estimated effective tax rate of approximately 28.4% for fiscal year 2008 reflects the expiration of the federal research and development tax credit at December 31, 2007. If the federal research and development tax credit is reinstated, we will have a lower effective tax rate and the amount of the tax rate reduction will depend on the effective date, the terms of the reinstatement as well as the amount of eligible research and development expenses in the reinstated period.
      Our Segment Results for the Nine Months Ended December 28, 2007 vs. Nine Months Ended December 29, 2006
Government Segment
Revenues
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Revenues
  $ 235.4     $ 207.3     $ 28.1       13.5 %
     The increase in government segment revenues related primarily to a higher beginning backlog and the receipt of $248.4 million in awards during first nine months of fiscal year 2008. The sales increase was principally from higher sales of our next generation military satellite communication systems of approximately $20.8 million, certain information assurance products of approximately $3.0 million and approximately $2.9 million from our majority owned subsidiary, TrellisWare.
Segment Operating Profit
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Operating profit
  $ 33.7     $ 33.7     $ 0.0       (0.1 )%
Percentage of government segment revenues
    14.3 %     16.2 %                
     The government segment operating profit was relatively flat year over year. We experienced increased revenues of $28.1 million and better program performance in our government segment, contributing approximately $1.1 million in cost of revenue reductions spread across various product groups. This increase was offset by increases in research and development expenses of $6.5 million and selling and support costs of $1.9 million when compared to the same period last year.
Commercial Segment
Revenues
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Satellite Networks
                               
Revenues
  $ 152.4     $ 147.9     $ 4.5       3.0 %
Antenna Systems
                               
Revenues
  $ 39.4     $ 29.3     $ 10.1       34.7 %
Total Commercial Segment
                               
Revenues
  $ 191.8     $ 177.2     $ 14.6       8.2 %
     Commercial segment revenues increased $14.6 million primarily due to higher sales of our consumer and mobile broadband products of approximately $23.3 million and various other satellite networks products of approximately $1.5 million compared to the

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same period last year offset by a $20.3 million reduction in enterprise VSAT product sales. Antenna Systems product sales increased by approximately $10.1 million due to higher awards levels and related program performance.
Segment Operating Profit
                                 
    Nine months ended   Dollar   Percentage
    December 28,   December 29,   Increase   Increase
(In millions, except percentages)   2007   2006   (Decrease)   (Decrease)
Satellite Networks
                               
Satellite Networks operating profit (loss)
  $ 0.8     $ (0.1 )   $ 0.8       1,527.8 %
Percentage of Satellite Network revenues
    0.5 %     0.0 %                
Antenna Systems
                               
Antenna Systems operating profit (loss)
  $ 3.0     $ (0.6 )   $ 3.6       596.4 %
Percentage of Antenna Systems revenues
    7.6 %     (2.1 )%                
Total Commercial Segment
                               
Segment operating profit (loss)
  $ 3.8     $ (0.7 )   $ 4.4       672.5 %
Percentage of commercial segment revenues
    2.0 %     (0.4 )%                
     The commercial segment overall operating profit increase of $4.4 million compared to the same period last year was primarily due to continued revenue growth of certain consumer and mobile broadband products combined with overall improved cost of revenues performance contributing an additional $9.1 million to commercial segment profits, offset by enterprise VSAT products and additional costs related to the Company’s sales and marketing of wide area networking acceleration products of $3.0 million. Additionally, our antenna products generated an additional $4.4 million in operating profits primarily through improved overall program performance year over year.
Backlog
     As reflected in the table below, both funded and firm (funded plus unfunded) backlog increased during the first nine months of fiscal year 2008 with increases coming from both our government and commercial segment.
                 
    December 28, 2007     March 30, 2007  
    (in millions)  
Firm backlog
               
Government segment
  $ 233.1     $ 220.0  
Commercial segment
    189.8       168.7  
 
           
Total
  $ 422.9     $ 388.7  
 
           
Funded backlog
               
Government segment
  $ 210.4     $ 193.2  
Commercial segment
    189.8       168.7  
 
           
Total
  $ 400.2     $ 361.9  
 
           
Contract options
  $ 39.3     $ 39.3  
 
           
     The firm backlog does not include contract options. Of the $422.9 million in firm backlog, approximately $116.2 million is expected to be delivered during the remaining three months of fiscal year 2008, and the balance is expected to be delivered in fiscal year 2009 and thereafter. We include in our backlog only those orders for which we have accepted purchase orders.
     Backlog is not necessarily indicative of future sales. A majority of our contracts can be terminated at the convenience of the customer since orders are often made substantially in advance of delivery, and our contracts typically provide that orders may be terminated with limited or no penalties. In addition, contracts may present product specifications that require us to complete additional product development. A failure to develop products meeting such specifications could lead to a termination of the related contacts.
     The backlog amounts as presented are comprised of funded and unfunded components. Funded backlog represents the sum of contract amounts for which funds have been specifically obligated by customers to contracts. Unfunded backlog (primarily associated with our government segment contracts) represents future amounts that customers may obligate over the specified contract performance periods. Our customers allocate funds for expenditures on long-term contracts on a periodic basis. Our ability to realize revenues from contracts in backlog is dependent upon adequate funding for such contracts. Although funding of our contracts is not within our control, our experience indicates that actual contract fundings have ultimately been approximately equal to the aggregate amounts of the contracts.

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Liquidity and Capital Resources
     We have financed our operations to date primarily with cash flows from operations, bank line of credit financing and equity financing. The general cash needs of our government and commercial segments can vary significantly and depend on the type and mix of contracts (i.e. product or service, development or production, timing of payments, etc.) in backlog, the quality of the customer (i.e. U.S. government or commercial, domestic or international) and the duration of the contract. In addition, for both of our segments, program performance significantly impacts the timing and amount of cash flows. If a program is performing and meeting its contractual requirements, then the cash flow requirements are usually lower.
     The cash needs of the government segment tend to be more of a function of the type of contract rather than customer quality. Also, U.S. government procurement regulations tend to restrict the timing of cash payments on the contract. In the commercial segment, our cash needs are driven primarily by the quality of the customer and the type of contract. The quality of the customer will typically affect the specific contract cash flow and whether financing instruments are required by the customer. In addition, the commercial environment tends to provide for more flexible payment terms with customers, including advance payments.
     Cash provided by operating activities for the first nine months of fiscal year 2008 was $46.1 million as compared to $42.3 million for the first nine months of fiscal year 2007. The $3.8 million increase in cash provided by operating activities for the first nine months of fiscal year 2008 as compared to the first nine months of fiscal year 2007 was primarily attributable to higher year over year net income of $1.4 million, increase in non-cash add-backs for depreciation of $1.2 million and $1.9 million in non-cash stock-based compensation offset by various other changes in operating assets net of liabilities. Accounts receivable increased by $7.6 million from year end primarily due to delayed payments from a government customer who changed payment systems and experienced difficulty in processing payments. We expect the delayed payments to be made in the fourth quarter of fiscal year 2008.
     Cash used in investing activities for the first nine months of fiscal year 2008 was $35.2 million as compared to $12.3 million for the first nine months of fiscal year 2007. The increase in cash used in investing activities primarily relates to the purchase of approximately $11.8 million of short-term investments classified as held-to-maturity, $8.7 million in cash paid to certain former Efficient Channel Coding, Inc. (ECC) stockholders under the terms of the acquisition agreement for ECC, $260,000 in cash paid to former stockholders of Enerdyne Technologies, Inc. (Enerdyne) under the terms of the Enerdyne acquisition agreement and approximately $851,000 in cash paid for the acquisition of JAST on the closing date under the terms of the JAST acquisition agreement. In addition approximately $13.6 million in cash outflow relates to capital expenditures for the first nine months of fiscal year 2008.
     Cash provided by financing activities for the first nine months of fiscal year 2008 was $6.7 million as compared to cash provided by financing activities for the first nine months of fiscal year 2007 of $9.7 million. The majority of the activity for both years is due to cash received from the exercise of employee stock options, stock purchases through our employee stock purchase plan and cash inflows related to the incremental tax benefit from stock option exercises slightly offset, in fiscal year 2008, by the repurchase of common stock related to net share settlement for certain employee tax liabilities in connection with the vesting of restricted stock unit awards during the third quarter of fiscal year 2008.
     In January 2008, we entered into several agreements with Space Systems/Loral (SS/L), Loral Space & Communications (Loral) and Telesat Canada (Telesat) related to the Company’s high capacity satellite system. Under the satellite construction contract with SS/L, the Company will purchase a Ka-band satellite (ViaSat-1) for approximately $209.1 million, subject to purchase price adjustment based on satellite performance. The Company does not believe the purchase price paid by ViaSat to SS/L for the ViaSat-1 satellite will materially change. In addition, the Company entered into a beam sharing agreement with Loral (Beam Sharing Agreement), whereby Loral is responsible for contributing 15% of the total costs (estimated at approximately $60 million) associated with the ViaSat-1 satellite project. As part of this arrangement, Loral executed a separate contract with SS/L whereby Loral is purchasing the Canadian beams on the ViaSat-1 satellite (Loral Beams) for approximately $36.9 million (15% of the total satellite cost of $246.0 million). In addition, Loral remains responsible under the Beam Sharing Agreement to reimburse ViaSat for costs associated with launch, launch and in-orbit insurance, and operating the satellite. The reimbursed costs to ViaSat from Loral for launch and launch and the first year of in-orbit insurance are expected to be approximately $23.1 million.
     On May 23, 2006, in connection with our ECC acquisition, we agreed under the terms of the ECC acquisition agreement to pay the maximum additional consideration amount to the former ECC stockholders in the amount of $9.0 million, which was accrued as of March 30, 2007. The $9.0 million was payable in cash or stock, at our option, in May 2007. Accordingly, on May 30, 2007, we paid approximately $9.0 million of additional cash consideration to the former stockholders of ECC. The additional purchase price consideration of $9.0 million was recorded as additional goodwill in the Satellite Networks product group in the commercial segment in the first quarter of fiscal year 2007.

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     As of March 30, 2007, in connection with our Enerdyne acquisition and under the terms of the Enerdyne acquisition agreement, we owed an additional consideration amount to the former Enerdyne stockholders in the amount of $5.9 million, which was accrued and recorded as additional goodwill in the government segment as of March 30, 2007. The $5.9 million was payable in cash and stock in accordance with certain terms of the arrangement, in May 2007. Accordingly, on May 3, 2007, we paid $5.9 million of additional consideration to the former stockholders of Enerdyne, which was comprised of 170,763 shares of common stock and $260,000 in cash.
     At December 28, 2007, we had $133.0 million in cash, cash equivalents and short-term investments, $240.0 million in working capital and no outstanding borrowings under our line of credit. At March 30, 2007, we had $103.4 million in cash and cash equivalents and short-term investments, $187.4 million in working capital and no outstanding borrowings under our line of credit.
     On January 31, 2005, we entered into a three-year, $60 million revolving credit facility (the Facility) which was amended on January 25, 2008, extending the term of the Facility to April 30, 2008. At December 28, 2007, we had $8.2 million outstanding under standby letters of credit leaving borrowing availability under the Facility of $51.8 million.
     Borrowings under the Facility are permitted up to a maximum amount of $60 million, including up to $15 million of letters of credit. Borrowings under the Facility bear interest, at our option, at either the lender’s prime rate or at LIBOR (London Interbank Offered Rate) plus, in each case, an applicable margin based on the ratio of our total funded debt to EBITDA (income from operations plus depreciation and amortization). The Facility is collateralized by substantially all of our personal property assets.
     The Facility contains financial covenants that set a minimum EBITDA limit for the twelve-month period ending on the last day of any fiscal quarter at $30 million, a minimum tangible net worth as of the last day of any fiscal quarter at $135 million and a minimum quick ratio (sum of cash and cash equivalents, accounts receivable and marketable securities, divided by current liabilities) as of the last day of any fiscal quarter at 1.50 to 1.00. We were in compliance with our loan covenants at December 28, 2007.
     In April 2007, we filed an updated universal shelf registration statement with the Securities and Exchange Commission for the future sale of up to $400 million of debt securities, common stock, preferred stock, depositary shares and warrants. The securities may be offered from time to time, separately or together, directly by us or through underwriters at amounts, prices, interest rates and other terms to be determined at the time of the offering. We currently intend to use the net proceeds from the sale of the securities under the shelf registration statement, if any, for general corporate purposes, including acquisitions, capital expenditures and working capital.
     Our future capital requirements will depend upon many factors, including the timing of cash required for the ViaSat-1 satellite project, expansion of our research and development and marketing efforts and the nature and timing of orders. Additionally, we will continue to evaluate possible acquisitions of, or investments in complementary businesses, products and technologies which may require the use of cash. We believe that our current cash balances and net cash expected to be provided by operating activities will be sufficient to meet our operating requirements for at least the next twelve months. However, we may sell additional equity or debt securities or obtain credit facilities to further enhance our liquidity position. The sale of additional securities could result in additional dilution of our stockholders. We invest our cash in excess of current operating requirements in short-term, interest-bearing, investment-grade securities.

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Contractual Obligations
     The following table sets forth a summary of our obligations under operating leases, irrevocable letters of credit, purchase commitments and other long-term liabilities for the periods indicated (in thousands):
                                         
            For the remainder of     For the fiscal years  
    Total     fiscal year 2008     2009-2010     2011-2012     After 2013  
Operating leases
  $ 124,869     $ 2,700     $ 26,103     $ 26,914     $ 69,152  
Standby letters of credit
    8,218       148       6,043       2,027        
Secured borrowings and accrued interest
    5,111       5,111                    
Purchase commitments
    124,799       50,110       74,689              
 
                             
Total
  $ 262,997     $ 58,069     $ 106,835     $ 28,941     $ 69,152  
 
                             
     We purchase components from a variety of suppliers and use several subcontractors and contract manufacturers to provide design and manufacturing services for our products. During the normal course of business, we enter into agreements with subcontractors, contract manufacturers and suppliers that either allow them to procure inventory based upon criteria as defined by us or that establish the parameters defining our requirements. In certain instances, these agreements allow us the option to cancel, reschedule and adjust our requirements based on our business needs prior to firm orders being placed. Consequently, only a portion of our reported purchase commitments arising from these agreements are firm, non-cancelable and unconditional commitments.
     Our Condensed Consolidated Balance Sheets as of December 28, 2007 and March 30, 2007 include $17.4 million and $13.3 million, respectively, classified as “Other liabilities.” This caption primarily consists of our long-term warranty obligations, deferred lease credits, long-term portion of our secured borrowing, and long-term unrecognized tax position liabilities. The secured borrowing obligations have been included in the table above based on the terms of the arrangement. These remaining liabilities have been excluded from the above table as the timing and/or the amount of any cash payment is uncertain. See Note 10 of the Notes to Consolidated Financial Statements for additional information regarding our income taxes and related tax positions and Note 7 for a discussion of our product warranties.
Subsequent Event
     In January 2008, the Company entered into several agreements with Space Systems/Loral (SS/L), Loral Space & Communications (Loral) and Telesat Canada (Telesat) related to the Company’s high capacity satellite system. Under the satellite construction contract with SS/L, the Company will purchase a Ka-band satellite (ViaSat-1) for approximately $209.1 million, subject to purchase price adjustment based on satellite performance. The Company does not believe the purchase price paid by ViaSat to SS/L for the ViaSat-1 satellite will materially change. In addition, the Company entered into a beam sharing agreement with Loral (Beam Sharing Agreement), whereby Loral is responsible for contributing 15% of the total costs (estimated at approximately $60.0 million) associated with the ViaSat-1 satellite project. As part of this arrangement, Loral executed a separate contract with SS/L whereby Loral is purchasing the Canadian beams on the ViaSat-1 satellite (Loral Beams) for approximately $36.9 million (15% of the total satellite cost of $246.0 million). In addition, Loral remains responsible under the Beam Sharing Agreement to reimburse ViaSat for costs associated with launch, launch and in-orbit insurance, and operating the satellite. The reimbursed costs to ViaSat from Loral for launch and launch and the first year of in-orbit insurance are expected to be approximately $23.1 million. Further, under the terms of the Beam Sharing Agreement, ViaSat is appointed the sole and exclusive supplier of end-user broadband terminals and hub equipment for broadband service operated over the Loral Beams. The Company also entered into an agreement with Telesat, whereby Telesat has agreed to transfer certain orbital slot license rights to the Company for ViaSat-1 satellite operation.
Recent Accounting Requirements
     In September 2006, the FASB issued Statement No. 157 (SFAS 157), “Fair Value Measurements.” SFAS 157 defines fair value, establishes a framework and gives guidance regarding the methods used for measuring fair value, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 (our fiscal year 2009), and interim periods within those fiscal years. We are currently assessing the impact SFAS 157 will have on our results of operations and financial position.
     In February 2007, the FASB issued Statement No. 159 (SFAS 159), “The Fair Value Option for Financial Assets and Financial Liabilities,” which permits entities to choose to measure many financial instruments and certain other items at fair value that are not

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currently required to be measured at fair value. SFAS 159 will be effective for us in fiscal year 2009. We are currently evaluating the impact of adopting SFAS 159 on our financial position, cash flows, and results of operations.
     In June 2007, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 07-3 (EITF 07-3), “Accounting for Nonrefundable Advance Payments for Goods or Services to Be Used in Future Research and Development Activities.” This issue provides that nonrefundable advance payments for goods or services that will be used or rendered for future research and development activities should be deferred and capitalized. Such amounts should be recognized as an expense as the related goods are delivered or the related services are performed. EITF 07-3 is effective for us in fiscal year 2009. The adoption of EITF Issue No. 07-3 is not expected to have a material impact on our consolidated financial position, results of operations and cash flows.
     In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (SFAS 141R). The purpose of issuing the statement is to replace current guidance in SFAS 141 to better represent the economic value of a business combination transaction. The changes to be effected with SFAS 141R from the current guidance include, but are not limited to: (1) acquisition costs will be recognized as expenses separately from the acquisition; (2) known contractual contingencies at the time of the acquisition will be considered part of the liabilities acquired measured at their fair value; all other contingencies will be part of the liabilities acquired measured at their fair value only if it is more likely than not that they meet the definition of a liability; (3) contingent consideration based on the outcome of future events will be recognized and measured at the time of the acquisition; (4) business combinations achieved in stages (step acquisitions) will need to recognize the identifiable assets and liabilities, as well as noncontrolling interests, in the acquiree, at the full amounts of their fair values; and (5) a bargain purchase (defined as a business combination in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree) will require that excess to be recognized as a gain attributable to the acquirer. SFAS 141R will be effective for us in fiscal year 2010. We are currently evaluating the impact of SFAS 141R.
     In December 2007, the FASB issued SFAS No. 160 (SFAS 160), “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51.” SFAS 160, which changes the accounting and reporting for business acquisitions and non-controlling interests in subsidiaries, was issued to improve the relevance, comparability, and transparency of financial information provided to investors. Moreover, SFAS 160 eliminates the diversity that currently exists in accounting for transactions between an entity and noncontrolling interests by requiring they be treated as equity transactions. SFAS 160 will be effective for us in fiscal year 2010. We are currently evaluating the impact that SFAS 160 will have on our financial statements and disclosures.
Off-Balance Sheet Arrangements
     We had no material off-balance sheet arrangements at December 28, 2007 as defined in Regulation S-K Item 303(a)(4) other than as discussed under Contractual Obligations above or disclosed in the notes to our financial statements included in this filing or in our 2007 Annual Report on Form 10-K.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
     Our financial instruments consist of cash and cash equivalents, short-term investments, trade accounts receivable, accounts payable, and short-term obligations including the revolving line of credit. We consider investments in highly liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents. Our exposure to market risk for changes in interest rates relates primarily to short-term investments and short-term obligations. As a result, we do not expect fluctuations in interest rates to have a material impact on the fair value of these securities.
     As of December 28, 2007, there were two foreign currency exchange contracts outstanding which are intended to reduce the foreign currency risk for amounts payable to vendors in Euros. The foreign exchange contracts with a notional amount of $1.4 million had a fair value of a net liability of approximately $11,000 as of December 28, 2007. The fair value of this foreign currency forward contract as of December 28, 2007 would have changed by $136,000 if the foreign currency exchange rate for the Euro to the U.S. dollar on this forward contract had changed by 10%.

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Item 4. Controls and Procedures
      We maintain disclosure controls and procedures designed to provide reasonable assurance of achieving the objective that information in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified and pursuant to the requirements of the Securities and Exchange Commission’s rules and forms. We carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of December 28, 2007, the end of the period covered by this Quarterly Report. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 28, 2007.
      During the period covered by this Quarterly Report, there have been no changes in our internal control over financial reporting 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
     A review of our current litigation is disclosed in the Notes to Condensed Consolidated Financial Statements. See “Notes to Condensed Consolidated Financial Statements - Note 8 - Commitments and Contingencies.”
Item 1A. Risk Factors
     In addition to the risk factors set forth in our Securities and Exchange Commission filings, including without limitation, our most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, we face new risks associated with our satellite project.

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     In January 2008, we executed an agreement to purchase ViaSat-1, our first broadband satellite. We also plan to develop next generation SurfBeam ground infrastructure and terminals for use with the satellite. We currently plan to launch our ViaSat-1 satellite in early 2011 and introduce service later in 2011. If we are unable to successfully launch this satellite and implement our satellite service business in a timely manner, or at all, including as a result of any of the following risks, we will be unable to realize the anticipated benefits from our satellite and associated service business, and our business, financial condition and results of operations could be materially adversely affected:
    Cost and Schedule Risks . The cost of completing the satellite and developing the associated next generation SurfBeam ground infrastructure may be more than anticipated and there may be delays in completing the satellite and SurfBeam infrastructure within the expected timeframe. We may be required to spend in excess of our current forecast for the completion, launch and launch insurance of the ViaSat-1 satellite or for the development associated with the next generation SurfBeam equipment. The construction and launch of satellites are often subject to delays, including satellite and launch vehicle construction delays, cost overruns, periodic unavailability of reliable launch opportunities, and delays in obtaining regulatory approvals. If the ViaSat-1 construction schedule is not met, there may be even further delays because there can be no assurance that a launch opportunity will be available at the time the satellite is ready to be launched and we may not be able to obtain or maintain regulatory authority or International Telecommunication Union (ITU) priority necessary to implement ViaSat-1 as proposed.
 
    Business Plan . We may be unsuccessful in implementing our business plan for the satellite service, or we may not be able to achieve the revenue that we expect from the satellite service. A failure to attract either distributors or customers in a sufficient number would result in lower revenues than anticipated. In addition, we will incur startup losses associated with the launch and operation of the satellite service until we acquire a sufficient number of customers, which may not occur as expected or at all.
 
    Regulatory Risk . If we do not obtain all requisite regulatory approvals for the construction, launch and operation of the ViaSat-1 satellite, or the licenses obtained impose operational restrictions on us, our ability to generate revenue and profits could be materially adversely affected. In addition, under certain circumstances, government licenses are subject to revocation or modification, and upon expiration, renewal may not be granted. In certain cases, satellite system operators are obligated by governmental regulation and procedures of the ITU to coordinate the operation of their systems with other users of the radio spectrum in order to avoid causing interference to those other users. Coordination may require a satellite system operator to reduce power, avoid operating on certain frequencies, relocate its satellite to another orbital location and/or otherwise modify planned or existing operations. Federal Communications Commission (FCC) satellite authorizations are customarily subject to conditions imposed by the FCC in addition to the FCC’s general authority to modify, cancel or revoke those authorizations. Failure to comply with such requirements, or comply in a timely manner, could lead to the loss of authorizations and could have a material adverse effect on our ability to generate revenue.
 
    Launch Risks . There are risks associated with the launch of satellites, including launch failure, damage or destruction during launch and improper orbital placement. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take up to 36 months, and obtain other launch opportunities. The overall historical loss rate in the satellite industry for all launches of commercial satellites in fixed orbits in the last five years is estimated by some industry participants to be 10% but could at any time be higher.
 
    In-Orbit Risks . The ViaSat-1 satellite will be subject to similar potential satellite failures or performance degradations as other satellites. Satellites are subject to in-orbit risks including malfunctions, commonly referred to as anomalies, and collisions with meteoroids, decommissioned spacecraft or other space debris. Anomalies occur as a result of various factors, such as satellite manufacturing errors, problems with the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh space environment. To the extent there is an anomaly or other in-orbit failure with respect to the ViaSat-1 satellite, we will not have a replacement satellite. Additionally, we could be required to reposition the antennas of our customers, which could require new or modified licenses from regulatory authorities.
 
    Minimum Design Life . Our ability to earn revenue depends on the usefulness of the ViaSat-1 satellite. Each satellite has a limited useful life. A number of factors affect the useful lives of the satellites, including, among other things, the quality of their construction, the durability of their component parts, the ability to continue to maintain proper orbit and control over the satellite’s functions, the efficiency of the launch vehicle used, and the remaining on-board fuel following orbit insertion. The minimum design life of ViaSat-1 is estimated to be 15 years. In addition, continued improvements in satellite technology

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      may obsolete the ViaSat-1 satellite prior to the end of its life. Therefore, we can provide no assurance as to the actual useful life of ViaSat-1.
 
    Insurance Risks . We intend to seek launch and in-orbit insurance for the ViaSat-1 satellite, but we may not be able to obtain insurance on reasonable economic terms or at all. If we are able to obtain insurance, it will contain customary exclusions and will not likely cover the full cost of constructing and launching the ViaSat-1 satellite, nor will it cover business interruptions or similar losses. In addition, the occurrence of any anomalies on other satellites, including Ka-band satellites, may materially adversely affect our ability to insure ViaSat-1 at commercially reasonable premiums, if at all.
Item 4. Submission of Matters to a Vote of Security Holders
At our 2007 annual meeting of stockholders held on October 3, 2007 the stockholders voted on the following proposal and cast their votes as follows:
                     
                 
    For   Withheld    
1. Election of Directors:
                   
B. Allen Lay
    26,300,947       1,390,376      
Dr. Jeffrey M. Nash
    25,151,164       2,540,159      
Item 5. Other Information
     In connection with a contract dated January 7, 2008 that we executed with Space Systems/Loral, Inc. (SS/L) for the construction by SS/L of a high capacity broadband satellite, we entered into a Beam Sharing Agreement dated January 11, 2008 with Loral Space & Communications Inc. (Loral), the parent of SS/L, pursuant to which Loral is investing in the Canadian coverage portion of the satellite. The Beam Sharing Agreement provides for, among other things, (1) the purchase by Loral of a portion of the satellite payload providing coverage into Canada, (2) payment by Loral of 15% of the total costs of the satellite, launch and associated services, launch insurance, and telemetry, tracking and command services for the satellite, and (3) the appointment of ViaSat as the sole and exclusive supplier of end-user broadband terminals and hub equipment for broadband service operated over the satellite payload providing coverage into Canada. The aggregate price to be paid by Loral for the foregoing is estimated to be approximately $60 million.
     On January 25, 2008, the Company amended the January 31, 2005 $60 million revolving Second Amended and Restated Revolving Loan Agreement extending the agreement’s current terms and conditions to April 30, 2008.
      The foregoing discussion does not purport to be complete and is qualified in its entirety by reference to the Beam Sharing Agreement and Second Amendment to Second Amended and Restated Revolving Loan Agreement, a copy of which is attached to this Quarterly Report as Exhibit 10.2 and Exhibit 10.3 and is incorporated herein by reference.
Item 6. Exhibits
      The Exhibit Index on page 41 is incorporated herein by reference as the list of exhibits required as part of this report.

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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.
         
  VIASAT, INC.
 
 
February 6, 2008  /s/ Mark D. Dankberg    
  Mark D. Dankberg   
  Chairman of the Board and Chief Executive Officer
(Principal Executive Officer) 
 
 
         
     
  /s/ Ronald G. Wangerin    
  Ronald G. Wangerin   
  Vice President, Chief Financial Officer
(Principal Financial and Accounting Officer) 
 
 

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EXHIBIT INDEX
     
Exhibit Number
  Description
10.1*
  Contract for the ViaSat Satellite Program dated as of January 7, 2008 between ViaSat, Inc. and Space Systems/Loral, Inc.
 
   
10.2
  Beam Sharing Agreement dated January 11, 2008 between ViaSat, Inc. and Loral Space & Communications, Inc.
 
   
10.3
  Second Amendment to Second Amended and Restated Revolving Loan Agreement dated January 25, 2008 between ViaSat,Inc. and Union Bank of California, N.A. and Comerica Bank.
 
   
31.1
  Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
31.2
  Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
   
32.1
  Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
*   Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for confidential treatment.

41

 

EXHIBIT 10.1
CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
CONTRACT
Between
ViaSat, Inc.
And
Space Systems/Loral, Inc.
for the
ViaSat Satellite Program
The attached Contract and information contained therein are confidential and proprietary to ViaSat, Inc. and Space Systems/Loral, Inc. and shall not be published or disclosed to any third party except as permitted by the terms and conditions of this Contract.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

 


 

TABLE OF CONTENTS
             
ARTICLE   PAGE
TABLE OF CONTENTS     i  
PREAMBLE     1  
RECITALS     2  
Article 1 -
  DEFINITIONS     3  
Article 2 -
  SCOPE OF WORK     16  
Article 3 -
  DELIVERABLE ITEMS AND DELIVERY SCHEDULE     26  
Article 4 -
  PRICE     28  
Article 5 -
  PAYMENTS     33  
Article 6 -
  PURCHASER-FURNISHED ITEMS     37  
Article 7 -
  COMPLIANCE WITH LAWS AND DIRECTIVES     40  
Article 8 -
  ACCESS TO WORK-IN-PROGRESS     43  
Article 9 -
  SATELLITE PRE-SHIPMENT REVIEW (SPSR) AND DELIVERY     47  
Article 10 -
  ACCEPTANCE OF SATELLITE, LAUNCH SUPPORT AND MISSION OPERATIONS SUPPORT    SERVICES AND IN-ORBIT TEST     51  
Article 11 -
  ACCEPTANCE OF DELIVERABLE ITEMS OTHER THAN THE SATELLITE     53  
Article 12 -
  TRANSFER OF TITLE AND RISK OF LOSS     58  
Article 13 -
  ORBITAL PERFORMANCE INCENTIVES     60  
Article 14 -
  CORRECTIVE MEASURES IN THE SATELLITE AND OTHER DELIVERABLE ITEMS     65  
Article 15 -
  REPRESENTATIONS AND WARRANTIES     66  
Article 16 -
  CHANGES     73  
Article 17 -
  FORCE MAJEURE     75  
Article 18 -
  PURCHASER DELAY OF WORK     78  
Article 19 -
  INTELLECTUAL PROPERTY INDEMNITY     79  
Article 20 -
  INDEMNIFICATION     81  
Article 21 -
  TERMINATION FOR CONVENIENCE     84  
Article 22 -
  LIQUIDATED DAMAGES     86  
Article 23 -
  TERMINATION FOR DEFAULT     94  
Article 24 -
  RESERVED     98  
Article 25 -
  DISPUTE RESOLUTION     99  
Article 26 -
  INTER-PARTY WAIVER OF LIABILITY FOR A LAUNCH     102  
Article 27 -
  LIMITATION OF LIABILITY     104  
Article 28 -
  DISCLOSURE AND HANDLING OF PROPRIETARY INFORMATION     106  
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

 


 

             
ARTICLE   PAGE
Article 29 -
  CONTRACT TECHNOLOGY ESCROW     109  
Article 30 -
  PUBLIC RELEASE OF INFORMATION     111  
Article 31 -
  NOTICES     112  
Article 32 -
  RISK MANAGEMENT SERVICES     114  
Article 33 -
  ORDER OF PRECEDENCE     118  
Article 34 -
  GENERAL     119  
Article 35 -
  GROUND STORAGE     124  
Article 36 -
  ORBIT MANEUVER [***] AND LAUNCH VEHICLE [***]     126  
Article 37 -
  CONTRACTOR PERSONNEL     128  
Article 38 -
  SUBCONTRACTS     130  
Article 39 -
  INTELLECTUAL PROPERTY     132  
Article 40 -
  LENDER REQUIREMENTS     134  
Article 41 -
  SECURITY INTEREST     135  
 
***   Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.
ii 

 


 

PREAMBLE
This Contract is entered into effective as of the 7th day of January, 2008 (the “Effective Date of Contract” or “EDC”), by and between ViaSat, Inc. (“ViaSat”), a corporation organized and existing under the laws of the state of Delaware having an office and place of business at 6155 El Camino Real, Carlsbad, CA 92009-1699 (hereinafter referred to as “Purchaser”), and Space Systems/Loral, Inc., a corporation organized and existing under the laws of the state of Delaware, having an office and place of business at 3825 Fabian Way, Palo Alto, CA 94303-4604 (hereafter referred to as “Contractor”, and Purchaser and Contractor are hereafter referred to collectively as the “Parties” or individually as a “Party”), regarding the ViaSat Satellite program.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

1


 

RECITALS
WHEREAS , Purchaser desires to procure a communications Satellite, a Dynamic Satellite Simulator, Launch Support Services, Mission Operations Support Services, Training services and other items and services to the extent and subject to the terms and conditions set forth herein, and
WHEREAS , Purchaser has entered into a CondoSat Agreement with Loral Space & Communications, Inc., a Delaware company, whereby the parties thereto intend that Purchaser will take title to the Satellite, except for the Loral Space Payload portion (to which CondoSat Associate will take title) at Intentional Ignition; however, except for certain limited rights to be identified in a separate agreement between CondoSat Associate and Contractor, Purchaser shall have the exclusive rights (including the exclusive rights of exercise) associated with the Satellite and other Deliverable Items as further set forth herein; and
WHEREAS , Contractor is willing to furnish such Satellite (including the transfer of title to the Loral Space Payload directly to CondoSat Associate per separate agreement), a Dynamic Satellite Simulator, Launch Support Services, Mission Operations Support Services, Training services and other items and services to the extent of and subject to the terms and conditions set forth herein, in consideration of the price and other valid consideration.
NOW, THEREFORE , in consideration of the price and other valid consideration and the mutual covenants and agreements contained herein and intending to be legally bound, the Parties agree as follows:
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

2


 

ARTICLE 1 — DEFINITIONS
Capitalized terms used and not otherwise defined herein shall have the following meanings:
  1.1   Acceptance ” (i) with respect to the Satellite shall be as provided in Article 10, and (ii) with respect to any Deliverable Item other than the Satellite shall be as provided in Article 11.
 
  1.2   [***] ” has the meaning set forth in Article 22.2.1.
 
  1.3   Actual Costs ” shall mean Contractor’s direct and actual costs as determined in accordance with Contractor’s standard accounting practices uniformly applied, including any indirect costs, but excluding any profit, margin, mark-up, or other fees.
 
  1.4   Additional Beams ” has the meaning set forth in Article 2.1(B).
 
  1.5   Affiliate ” means, with respect to an entity, any other entity, directly or indirectly, Controlling or Controlled by or under common Control with such first named entity.
 
  1.6   Anomaly ” means, with respect to a Satellite in-orbit, a known condition or occurrence that has or reasonably can be predicted to have an adverse impact on the Stated Life or performance of the Satellite, and includes those items listed in paragraph 2.5.8.2(f) of the SOW.
 
  1.7   Article” means an article of this Contract.
 
  1.8   Attachment(s) ” means any and all attachment(s) that are attached hereto or to any Exhibit and incorporated herein or therein, as may be amended from time to time in accordance with the terms hereof.
 
  1.9   [***] ” has the meaning set forth in Article 4.6.
 
  1.10   Business Day” means any day other than a Saturday, Sunday or any other day on which national banks are authorized to be closed in New York City, New York.
 
  1.11   Canadian Beams ” has the meaning set forth in Article 2.1(B).
 
  1.12   Candidate Launch Vehicles” has the meaning set forth in Article 3.3.
 
  1.13   [***]” has the meaning set forth in Article 2.1(B).
 
  1.14   [***]” has the meaning set forth in Article 4.6.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  1.15   “Certification” has the meaning set forth in Article 9.1.6.
 
  1.16   “Collateral” has the meaning set forth in Article 41.1.1.
 
  1.17   “Competitor” means the following entities or any successors or assigns thereof that are in direct competition with Contractor for the manufacture and sale of commercial satellites: Orbital Sciences Corporation; Lockheed Martin Commercial Space Systems; Boeing Satellite Systems; Thales Alenia Space; EADS Astrium; General Dynamics Spectrum Astro Space Systems; Mitsubishi Electric Corp. (MELCO); and Northrop Grumman Space Technology.
 
  1.18   “Component” means any unit, system, subsystem, or piece of equipment or hardware or software to be employed on a Satellite.
 
  1.19   “CondoSat Agreement” means the agreement between ViaSat, Inc. and Loral Space & Communications, Inc., dated of even date hereof.
 
  1.20   “CondoSat Associate” means Loral Space & Communications, Inc., and any permitted assigns or successors in interest thereto under the CondoSat Agreement.
 
  1.21   “CondoSat Associate Portion” has the meaning set forth in Article 4.1.
 
  1.22   “Configuration Period” has the meaning set forth in Article 2.1(B).
 
  1.23   “Configuration Process” has the meaning set forth in Article 2.1(B).
 
  1.24   Contract ” means the terms and conditions (Preamble, Recitals and Articles) of this executed contract, its Exhibits and its Attachment(s) as set forth in Articles 2.1 and 33, as may be amended from time to time in accordance with the terms hereof.
 
  1.25   Contractor ” has the meaning set forth in the Preamble and any successor or assignee permitted hereunder.
 
  1.26   Contractor Intellectual Property ” shall mean such Intellectual Property owned by Contractor and provided to Purchaser related to this Contract (before or after EDC) and all Intellectual Property Rights related thereto. Contractor Intellectual Property shall also include any derivatives, improvements, or modifications made by Purchaser or Contractor thereto, except for derivatives, improvements, or modifications that can be used by Purchaser without infringing or violating the pre-existing Intellectual Property Rights of Contractor.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  1.27   Contract Technology ” means all: (a) Software (in object code and source code format unless otherwise specified); and (b) data and documentation required for the performance, maintenance, or operation of any Deliverable Item.
 
  1.28   Control ” and its derivatives mean, with respect to an entity, (i) the legal, beneficial, or equitable ownership, directly or indirectly, of fifty percent (50%) or more of the capital stock (or other ownership interest if not a corporation) of such entity ordinarily having voting rights, or (ii) the power to direct, directly or indirectly, the management policies of such entity, whether through the ownership of voting stock, by contract, or otherwise.
 
  1.29   Cure Letter ” has the meaning set forth in Article 9.1.6.
 
  1.30   Daily Rate” has the meaning set forth in Article 13.
 
  1.31   Defect ” means (a) with respect to the Satellite, the DSS, the Satellite Control Facility Equipment (if the options therefor are exercised), and the Spares, any failure to meet the applicable specifications of this Contract, including failures due to non-compliant materials or workmanship, or (b) with respect to any Deliverable Data, Software, or Deliverable Services, any failure to meet the applicable requirements of this Contract.
 
  1.32   Deliverable Data ” means the data and documentation required to be delivered to Purchaser as specified in Article 3.1.
 
  1.33   Deliverable Item ” means any of the items or services listed in Article 3.1, as may be amended from time to time in accordance with the terms hereof and, collectively, the “ Deliverable Items.
 
  1.34   “Deliverable Services” means those services listed in Article 3.1, as may be amended from time to time in accordance with the terms hereof.
 
  1.35   Delivery ” has the meaning set forth in Article 3.2.
 
  1.36   “Dispute” has the meaning set forth in Article 25.
 
  1.37   “Dynamic Satellite Simulator” or “DSS” means the dynamic satellite simulator that is to be delivered to Purchaser pursuant to this Contract.
 
  1.38   Effective Date of Contract ” or “ EDC ” has the meaning set forth in the Preamble.
 
  1.39   Escrow Agreement ” has the meaning set forth in Article 29.1.
     
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ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  1.40   Eutelsat ” has the meaning set forth in Article 4.2.
 
  1.41   Exhibit(s) ” means the exhibit(s) identified in Article 2.1 and attached hereto and incorporated herein, as may be amended from time to time in accordance with the terms hereof.
 
  1.42   Exploit ” means with regard to Contractor Intellectual Property to use such Intellectual Property (1) to launch, use, operate and maintain the Satellite, and to sell, offer for sale, lease, market and rent capacity on, market and provide services with respect to, and otherwise obtain the benefits of, the Satellite, and, (2) to use, operate, reproduce, and maintain, as applicable, Deliverable Items in carrying out Purchaser’s business related to the Satellite.
 
  1.43   FCC ” means the Federal Communications Commission or any successor agency or governmental authority.
 
  1.44   Final Configuration ” has the meaning set forth in Article 2.1(B).
 
  1.45   Final Orbit Location ” has the meaning set forth in Article 2.1(B).
 
  1.46   Final Statement ” has the meaning set forth in Article 21.1.3.
 
  1.47   Financing Entity ” means any entity (other than Contractor or parties related to Contractor or a Competitor of Contractor), which has been specifically identified in a written notification to Contractor providing money to Purchaser to fund any portion of the Satellite or the Work.
 
  1.48   Firm Fixed Price ” has the meaning set forth in Article 4.1.
 
  1.49   Force Majeure ” has the meaning set forth in Article 17.
 
  1.50   [***] ” has the meaning set forth in Article 35.2.
 
  1.51   Ground Insurance ” has the meaning set forth in Article 32.5.
 
  1.52   “Ground Storage” means that period where the Satellite is held on the ground for an extended period prior to Launch.
 
  1.53   In-Orbit Testing ” or “ IOT ” means the testing of the Satellite in-orbit in accordance with Exhibit D, Satellite Program Test Plan.
 
  1.54   “IOT Complete Date” has the meaning set forth in Article 10.3.
 
***   Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  1.55   “Integration Activities” has the meaning set forth in Article 3.3.
 
  1.56   “Intellectual Property” means all designs, techniques, analyses, methods, concepts, formulae, layouts, software, inventions (whether or not patented or patentable), discoveries, improvements, processes, ideas, technical data and documentation, technical information, engineering, manufacturing and other drawings, specifications and similar matter in which an Intellectual Property Right subsists, regardless of whether any of the foregoing has been reduced to writing or practice.
 
  1.57   Intellectual Property Claim ” has the meaning set forth in Article 19.
 
  1.58   “Intellectual Property Right(s)” means all common law and statutory proprietary rights with respect to Intellectual Property, including patent, patent application, copyright, trademark, service mark, trade secret, mask work rights, data rights, moral rights, and similar rights existing from time to time under the intellectual property laws of the United States, any state or foreign jurisdiction, or international treaty regime, regardless of whether such rights exist as of the date hereof or arise or are required at any time in the future.
 
  1.59   Intentional Ignition ” means, with respect to the Satellite, the start of the ignition process of the Launch Vehicle for the purpose of Launch, which is the time at which the command signal is sent to the Launch Vehicle. This definition shall be modified to reflect the definition of “intentional ignition” in the Launch Services Agreement applicable to Launch of the Satellite.
 
  1.60   “Intermittent Failure” means a Transponder Failure for a period in excess of [***] continuous minutes or [***] cumulative minutes in any day during the Orbital Performance Incentive Period.
 
  1.61   “Junior Lien” has the meaning specified in Article 41.1.4.
 
  1.62   ITAR ” means 22 C.F.R. Sections 120 through 130, International Traffic in Arms Regulations, as amended.
 
  1.63   “Key Milestone Date(s)” has the meaning set forth in Article 22.1.
 
***   Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  1.64   Key Personnel ” has the meaning set forth in Article 37.2.
 
  1.65   Launch ” means, with respect to the Satellite, Intentional Ignition followed by lift-off. This definition shall be modified to incorporate the definition of “launch” from the Launch Services Agreement applicable to the Launch of the Satellite.
 
  1.66   Launch and In-Orbit Insurance Policy ” has the meaning set forth in Article 32.2.
 
  1.67   Launch Agency ” means the provider of Launch Services responsible for the Launch of the Satellite.
 
  1.68   Launch Services ” means those services provided by the Launch Agency for the Launch of the Satellite pursuant to the Launch Services Agreement.
 
  1.69   Launch Services Agreement ” means the contract between the Purchaser and the Launch Agency that provides Launch Services for the Satellite.
 
  1.70   Launch Site ” means the location that will be used by the Launch Agency for purposes of launching the Satellite, except in the case of Sea Launch it shall mean the home port located in Long Beach, CA.
 
  1.71   Launch Support ” or “ Launch Support Services ” means those services specified in Exhibit A, Statement of Work to be provided by Contractor in support of Launch Services.
 
  1.72   Launch Vehicle ” means the launch vehicle used to provide Launch Services for the Satellite.
 
  1.73   “Loral Space Payload” means that portion of the Satellite payload consisting of nine (9) Canadian Beams.
 
  1.74   “Loral Space Payload Contract” means the contract between Contractor and CondoSat Associate for provision of the Loral Space Payload, dated of even date hereof.
 
  1.75   “Losses” has the meaning set forth in Article 20.1.
 
  1.76   Major Subcontract ” has the meaning set forth in Article 38.1.
 
  1.77   Major Subcontractor ” means a Subcontractor who is a party to a Major Subcontract.
 
  1.78   “Milestone” means a portion of the Work upon completion of which a payment is to be made in accordance with Exhibit E, Payment Plan and Termination Liability
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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Schedule. Milestone completion criteria and processes are as set forth in Exhibit A, Statement of Work and/or Exhibit E, Payment Plan and Termination Liability Schedule, as applicable. Orbital Performance Incentives shall not constitute a Milestone.
  1.79   Mission Assurance Plan ” means the mission assurance plan attached as Exhibit C, as may be amended from time to time in accordance with the terms hereof.
 
  1.80   Mission Operations Support Services ” means the orbit-raising, IOT and related services specified in Exhibit A, Statement of Work, to be performed by Contractor for the Satellite.
 
  1.81   Notice of Non-Conformance ” has the meaning set forth in Article 9.1.6.
 
  1.82   NSP ” means “not separately priced” and included in the Firm Fixed Price.
 
  1.83   OML Payment ” has the meaning set forth in Article 36.
 
  1.84   Option Satellite ” has the meaning set forth in Article 2.2.
 
  1.85   Option Satellite Exercise Period ” has the meaning set forth in Article 2.2.
 
  1.86   Orbital Performance Incentive Period ” means, with respect to the Satellite, the period commencing at (and including) 12:01 a.m. Greenwich Mean Time on the first day following the IOT Complete Date for such Satellite and ending on the last day of the Stated Life.
 
  1.87   Orbital Performance Incentives ” means the amount set forth in Article 13.2, which may be earned by Contractor based on in-orbit performance of such Satellite as set forth in Article 13.
 
  1.88   Orbital Storage ” means, with respect to the Satellite, any period of time of intentional non-use by Purchaser of such Satellite after the IOT Complete Date, provided that such Satellite has been placed into orbit and is capable of performing in accordance with Exhibit B, Satellite Performance Specification.
 
  1.89   “Paragraph” means a paragraph under any Article hereof or section in an Exhibit or Attachment.
 
  1.90   “Partial Loss” means, with respect to the Satellite on or after Intentional Ignition, that Transponder Failures have occurred, but the Satellite is not a Total Loss.
 
  1.91   Party ” or “ Parties ” means Purchaser, Contractor or both, as the context requires.
     
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ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  1.92   Payment Plan and Termination Liability Schedule ” means the payment plan for the applicable Deliverable Item, and termination liability schedule for this Contract, as set forth in Exhibit E, Payment Plan and Termination Liability Schedule, as may be amended from time to time in accordance with the terms hereof.
 
  1.93   Performance Specification ” means the applicable performance specification for the Satellite or other Deliverable Item, as appropriate, in the context of the applicable clause, as such specification may be amended from time to time in accordance with the terms hereof.
 
  1.94   “Permitted Debt” has the meaning specified in Article 41.1.4.
 
  1.95   “Preamble” means the preamble section of this Contract.
 
  1.96   “Proceeds” has, for purposes of Article 41, the meaning ascribed to such term by the UCC.
 
  1.97   Proposal ” has the meaning set forth in Article 16.
 
  1.98   Proprietary Information ” has the meaning set forth in Article 28.
 
  1.99   Purchaser ” has the meaning set forth in the Preamble and any successor or assignee permitted hereunder.
 
  1.100   “Purchaser Delay” has the meaning set forth in Article 18.
 
  1.101   Purchaser Intellectual Property ” shall mean such Intellectual Property owned by Purchaser and provided to Contractor related to this Contract (before or after EDC) and all Intellectual Property Rights related thereto. Purchaser Intellectual Property shall also include any derivatives, improvements, or modifications made by Purchaser or Contractor thereto, except for derivatives, improvements, or modifications that can be used by Contractor without infringing or violating the pre-existing Intellectual Property Rights of Purchaser.
 
  1.102   “Reasonable Efforts” means standards, practices, methods, and procedures conforming to applicable law and that degree of effort, skill, diligence, prudence, and foresight that would reasonably and ordinarily be expected from a skilled and experienced commercial satellite contractor or commercial satellite owner, as the case may be.
 
  1.103   “Recitals” means the recitals section of this Contract.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  1.104   “Remaining OML” has the meaning set forth in Article 36.
 
  1.105   “Replacement Satellite” has the meaning set forth in Article 2.3.
 
  1.106   “Replacement Satellite Exercise Period” has the meaning set forth in Article 2.3.
 
  1.107   Satellite ” means the communications satellite that is to be manufactured by Contractor and to be delivered to Purchaser pursuant to this Contract, and includes the Loral Space Payload. The Satellite is also referred to as the “Primary Satellite.”
 
  1.108   Satellite Beams ” has the meaning set forth in Article 2.1(B).
 
  1.109   SCF ” means the Satellite Control Facility, which includes the Spares, as defined in Exhibit F.
 
  1.110   Satellite Control Facility Equipment ” or “SCF Equipment” means those items listed in section 3.1 of Exhibit F, Satellite Control Facility Requirement Specification.
 
  1.111   Satellite Payload Specifications ” means the payload portion of the Satellite Performance Specifications set forth in Section 3 of Exhibit B hereto.
 
  1.112   Satellite Performance Specification ” means the Satellite performance specification attached as Exhibit B, as may be amended from time to time in accordance with the terms hereof.
 
  1.113   Satellite Pre-Shipment Review ” or “ SPSR ” has the meaning set forth in Article 9.
 
  1.114   Satellite Program Test Plan ” means the Satellite program test plan attached as Exhibit D, as may be amended from time to time in accordance with the terms hereof.
 
  1.115   “Secured Obligations” means, collectively, all present and future obligations of the Contractor to or for the benefit of Purchaser under this Contract, as well as all damages to which Purchaser may be entitled as a result of any breach of this Contract. All such obligations are “Secured Obligations”.
 
  1.116   “Security Interest” has the meaning set forth in Article 41.1.1.
 
  1.117   Selection Criteria ” has the meaning set forth in Article 2.1(B).
 
  1.118   Software ” means the machine readable computer programs (including firmware, files, databases, interfaces, documentation and other materials related thereto, and any third party Software sublicensed by Contractor hereunder), as such Software is
     
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ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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revised, upgraded, updated, corrected, modified, and enhanced from time-to-time and provided to Purchaser pursuant to this Contract.
  1.119   “Spare” means any spare part to be delivered with the Satellite Control Facility Equipment.
 
  1.120   Stated Life ” means, with respect to the Satellite, the contracted for life of fifteen (15) years for such Satellite, commencing upon the IOT Complete Date for such Satellite.
 
  1.121   Statement of Work ” or “ SOW ” means the statement of work attached as Exhibit A, as may be amended from time to time in accordance with the terms hereof.
 
  1.122   Storage Costs ” has the meaning set forth in Article 35.2.
 
  1.123   Subcontract ” means a contract or purchase order awarded by Contractor to a Subcontractor or a contract or purchase order awarded by a Subcontractor at any tier for performance of any of the Work.
 
  1.124   Subcontractor ” means any person or business entity that has been awarded a Subcontract.
 
  1.125   “Substantially Similar Satellite” means a satellite that is identical to the Satellite (but does not include the nine (9) Canadian Beams of the Loral Space Payload and, further, CondoSat Associate will have no right, title or interest in such Substantially Similar Satellite) in the following parameters:
    number of user beams;
 
    number of gateway beams;
 
    antenna assembly quantity, aperture size and optics;
 
    antenna feed design types;
 
    antenna allowable interface to the rest of the Satellite bus (except for RF pathway connection to/from repeater);
 
    repeater (same TWTA quantity and types, same LNA quantity, etc.);
 
    frequency plan (same frequency converter and filter quantity and types); and
 
    bus (solar array, battery, thermal, propulsion, autotrack, etc).
The following parameters may be different:
    CONUS orbital slot;
 
    CONUS user beam locations; and
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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    CONUS gateway beam locations.
For the Substantially Similar Satellite, Contractor will optimize EIRP, G/T and C/I performance with the same types of repeater and antenna Component design corresponding to the new orbital slot, new coverage and new beam plan, which may result in performance difference from the Satellite.
  1.126   [***] Coverage ” has the meaning set forth in Article 2.1(B).
 
  1.127   TCC ” has the meaning set forth in Article 38.3.
 
  1.128   “Technical Assistance Agreement” has the meaning set forth in section §120.22 of the U.S. International Traffic in Arms Regulations, 22 CFR §120 — 130.
 
  1.129   Terminated Ignition ” means that, following the time when the electronic signal is sent to command the opening of any first stage propellant valves, the first stage engines of the Launch Vehicle shut down for any reason before the hold down mechanism is released and the Launch pad is declared safe by the Launch Agency. This definition shall be modified to incorporate the definition of “terminated ignition” (or other similar term) from the Launch Service Agreement applicable to the Launch of the Satellite.
 
  1.130   Total Combined Price ” has the meaning set forth in Article 4.1.
 
  1.131   Total Loss ” means with respect to the Satellite on or after Intentional Ignition (i) the complete loss, destruction or failure of such Satellite, or (ii) as defined in Purchaser’s Launch and In-Orbit Insurance Policy if defined differently therein.
 
  1.132   “Training” means the training to be provided by Contractor in accordance with Exhibit A, Statement of Work.
 
  1.133   Transponder ” means any one of the primary designated Ka-Band transponders specified in Exhibit B, Satellite Performance Specification, including both forward and return transponders. A forward transponder receives signals from a single gateway location and radiates those signals to a single user beam. A return transponder receives signals from a single user beam and radiates those signals to a single gateway location.
 
***   Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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\

  1.134   “Transponder Failure ” means, with respect to a forward Transponder, the failure (including permanent or Intermittent Failures) to meet: (a) the G/T value for the applicable gateway location, as set forth in Table 2 of Exhibit B, Satellite Performance Specification; or (b) the EIRP value for the applicable beam, as set forth in Table 3 of Exhibit B, Satellite Performance Specification. With respect to a return Transponder, “ Transponder Failure ” means the failure (including permanent or Intermittent Failures) to meet: (a) the EIRP value for the applicable gateway location, as set forth in Table 2 of Exhibit B, Satellite Performance Specification; or (b) the G/T value for the applicable beam, as set forth in Table 3 of Exhibit B, Satellite Performance Specification. When a Transponder is operating with redundant and/or spare components and meets the EIRP and G/T values set forth above, it shall not be considered to be experiencing a Transponder Failure.
 
  1.135   “TWTs” has the meaning set forth in Article 38.3.
 
  1.136   “UCC” means the Uniform Commercial Code as in effect in the State of New York, as it may be amended from time to time.
 
  1.137   U.S. Beams ” has the meaning set forth in Article 2.1(B).
 
  1.138   Work ” means all design, development, construction, manufacturing, labor, and services, including tests to be performed, and any and all Deliverable Items, including the Satellite, the DSS, Deliverable Data, Mission Operations Support Services, Launch Support Services, Training, and equipment, materials, articles, matters, services, and things to be furnished to Purchaser under this Contract.
 
  1.139   “Work-in-Process” means the following goods, services, and rights to be provided to Purchaser by Contractor under this Contract but in the case of goods only such goods as have been designated for use under this Contract under Contractor’s internal material resource planning system and have been installed: (a) the Satellite, (b) the DSS, (c) the Satellite Components, (d) all other Deliverable Items, including items purchased pursuant to exercised options set forth herein, (e) all parts, materials, inventories, and associated warranties, and (f) the rights in Intellectual Property as set forth in Article 39, and Proprietary Information as set forth in Article 28. The foregoing shall constitute Work-in-Process as the same shall be in the process of performance, manufacture, testing, integration, delivery or completion at any given point in time.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 2 — SCOPE OF WORK
2.1   Provision of Services and Materials
A.   General
 
    Contractor shall provide Purchaser with the Deliverable Items completed in all respects in accordance with the provisions of this Contract. Without limiting the generality of the foregoing, the Contractor shall provide the necessary personnel, material, services, and facilities to design, manufacture, test and ship the Satellite, together with all other Deliverable Items referred to in Article 3.1. Contractor shall furnish and perform the Work in accordance with the provisions of this Contract, including the following Exhibits, which are attached hereto and made a part hereof:
  2.1.1   Exhibit A, Statement of Work, dated January 7, 2008
 
  2.1.2   Exhibit B, Satellite Performance Specification, dated January 7, 2008, including all Annexes thereto
 
  2.1.3   Exhibit C, Mission Assurance Plan, dated September 22, 2006
 
  2.1.4   Exhibit D, Satellite Program Test Plan, dated January 7, 2008
 
  2.1.5   Exhibit E, Payment Plan and Termination Liability Schedule, dated January 7, 2008
 
  2.1.6   Exhibit F, Satellite Control Facility Requirements Document, dated January 7, 2008
 
  2.1.7   Exhibit G, Escrow Agreement
 
  2.1.8   Exhibit H, Dynamic Satellite Simulator Statement of Work and Functional Requirements Document dated January 7, 2008
 
  2.1.9   Exhibit I, Guaranty Agreement
 
  2.1.10   Exhibit J, [***] Escrow Agreement
 
  2.1.11   Exhibit K, Default Configuration
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
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ViaSat Contract
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B.   Finalization of the Satellite Configuration
 
    As of EDC, the Satellite configuration has not been finally defined, but the Parties agree it will consist of nine (9) Canadian service beams with three 2 GHz fixed gateway locations (provided that in the event Purchaser and CondoSat Assocaite share a gateway under section 2.8 of the CondoSat Agreement, then there shall only be two 2 Ghz gateways) (“Canadian Beams”), sixty (60) U.S. service beams with thirteen 2 Ghz fixed gateway locations and three 1.5 Ghz fixed gateway locations (“U.S. Beams”) (all of the foregoing as set forth in Exhibit K, Default Configuration) plus, potentially, three (3) additional service beams and one (1) associated gateway (“Additional Beams”), the location of such Additional Beams to be established as set forth below. Through February 3, 2008 (the “Configuration Period”), the Parties will work together to complete an optimal Satellite configuration for Purchaser (the “Configuration Process”), consisting of the following:
  (i)   The Parties shall use reasonable best efforts during the Configuration Period to develop an optimal configuration of the U.S. Beams, the Canadian Beams and Additional Beams (together, the “Satellite Beams”) for Purchaser. The objectives in developing the optimal Satellite configuration for Purchaser shall, among other things, include: (1) calculated [***] (as calculated using the [***] defined in Article 4.6) equal to or higher than [***] (not including the Canadian Beams); (2) user beams located in coverage areas which are, in Purchaser’s reasonable opinion, desirable for its intended services; (3) gateway locations with reasonable economical access to sufficient existing fiber backhaul; (4) limited overlap between the user beams; (5) complete inter-beam coverage for user beams (no “[***] Coverage” as exemplified in Attachment A hererto, unless otherwise approved by Purchaser); and (6) optimal number of gateways for Purchaser’s business plan, but not less than the number of gateways reflected in Exhibit K, Default Configuration (items (1) through (6) immediately above the “Selection Criteria”). The Parties shall at a minimum complete the following actions in an effort to develop a final Satellite configuration for Purchaser:
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  a.   On or before 4, January 2008, Contractor will submit to Purchaser the antenna performance files, beam laydown (including coverage map, antenna-beam mapping, and frequencies assigned to each beam) and gateway location information (“[***]”) defined in Annex B to Exhibit B, Satellite Performance Specification, separately for; (i) the Canadian Beams; (ii) the U.S. Beams; and (iii) multiple configurations of the Additional Beams (consistent with the criteria below). In the event Contractor proposes a Satellite configuration to Purchaser that leads to any [***] (“[***] Coverage”), Purchaser will notify Contractor (and provide Contractor with reasonable guidance on rectifying such [***] Coverage), and Contractor will adjust the proposed Satellite configuration in order to [***] as part of the process described below (even if removing such [***] reduces Satellite [***]).
 
  b.   On or before 8 January 2008, Purchaser will provide Contractor with initial comments and feedback on Contractor’s proposed configuration for the Satellite Beams (including alternative candidate locations in the US and/or Mexico for the Additional Beams).
 
  c.   On or before 11 January 2008, Purchaser shall identify up to three (3) alternative Satellite configurations for the Additional Beams to be considered by Purchaser and Contractor for the final Satellite configuration.
    The locations to be considered by the Purchaser for location of the user beams for the Additional Beams are, in order of priority:
  °   Major metropolitan areas of the central U.S. not covered by the U.S. Beams, including locations in Denver, Colorado, Salt Lake City, UT, and Phoenix/Tucson AZ;
 
  °   Mexico; and
 
  °   overlay on three (3) of the sixty (60) U.S. service beams.
  d.   On or before 18 January 2008, Contractor shall provide [***] for two (2) of the three (3) alternative configurations identified by Purchaser
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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      for the Additional Beams and within seven (7) days thereafter shall provide [***] for the final alternative configuration identified by Purchaser for the Additional Beams as provided above, for assessment of [***] (using the [***]).
  e.   On or before 25 January 2008, Purchaser and Contractor will determine if any further improvements to the proposed Satellite configurations should be considered, and, provided that Contractor is reasonably able to provide updated [***] on such improvements by 31 January 2007, Contractor will update the [***] accordingly.
 
  f.   On 3 February 2008, Purchaser shall select the final Satellite configuration (“Final Configuration”) from among the above proposed Satellite configurations (including Exhibit K, Default Configuration) in accordance with the following principles:
    In the event Purchaser selects a Satellite configuration consisting of only the U.S. Beams and the Canadian Beams, Purchaser shall select the Satellite configuration based on the Selection Criteria and, which in Purchaser’s reasonable judgment optimizes its business prospects, while also considering in good faith the configuration that maximizes the calculated [***] (as calculated using the [***] defined in Article 4.6). In the event that Purchaser chooses a configuration that does not provide the maximum calculated [***] as provided above, Purchaser shall provide Contractor with the rationale therefor, which rationale shall be consistent with the optimization of Purchaser’s business prospects and the Selection Criteria. For the purpose of clarification, in the event that Purchaser reasonably determines that the benefits associated with the Additional Beams does not exceed the costs associated with the Additional Beams, Purchaser may elect to reject the Additional Beams and select the Satellite configuration in accordance with the terms of this paragraph, and shall provide Contractor with the rationale therefor.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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    In the event Purchaser selects a Satellite configuration consisting of the U.S. Beams, the Canadian Beams and Additional Beams, Purchaser shall select the Satellite configuration which, in its reasonable judgment, optimizes its business prospects, while also considering in good faith the configuration that maximizes the calculated [***] (as calculated using the [***] defined in Article 4.6).
 
    In the case of the Canadian Beams, Purchaser shall elect the coverage locations which, in its reasonable judgment, optimizes the Canadian capacity/coverage area.
  (ii)   In the event, for any reason, Contractor has not provided the [***] to Purchaser on or prior to the dates set forth above, except for delays excused due to Force Majeure events or Purchaser-caused delays, then Purchaser shall be entitled to select the Exhibit K Default Configuration consisting of only the U.S. Beams and the Canadian Beams (i.e., without the Additional Beams).
 
  (iii)   Contractor acknowledges that, as part of Purchaser’s finalization of the Satellite configuration, Purchaser will need to offset the station-keeping box from the 115.0 WL position (between 114.7 and 115.3 WL) (the “Final Orbit Location”) so that it will not overlap the station-keeping box of any other satellite in accordance with FCC regulations. No later than twenty-one (21) days after EDC, Purchaser will provide the Final Orbit Location. For purposes of clarification, the [***] of the Final Configuration will be calculated pursuant to Article 4.6 assuming use of the 115.0 WL position, and the [***] calculated pursuant to Article 22.2.1 assuming use of the Final Orbit Location.
 
  (iv)   Upon Purchaser selection of the Final Configuration: (1) the [***] of the Final Configuration will be calculated (using the [***]) and the Firm Fixed Price shall be subject to adjustment, up or down, pursuant to Article 4.6; and (2) Exhibit B, Satellite Performance Specification, will be updated accordingly, including the following:
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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(A) Section 3.3, Coverage Area, will be updated with the resulting polygon area, gateway locations, and beam locations associated with the selected configuration;
(B) Table 2 and Table 3, Gateway Locations and User Beam Locations, will be updated based upon the data files provided during the Configuration Process for the Final Configuration selected by Purchaser. The values incorporated into the tables shall be the values set forth in the data files, taking into account pointing error consistent with Section 3.6.1 of Exhibit B, Satellite Performance Specification, minus 0.5 dB; and
(C) Tx and Rx performance (specifically, the EIRP, G/T, and C/I values specified in Tables 4, 5, 8, 9, 10, 11, 12, 13, 16, and 17) will be updated based upon the data files provided during the Configuration Process for the Final Configuration selected by Purchaser. The [***], which provides distributions on all relevant parameters, will be used to generate the cumulative distributions on the metrics set forth in sections 3.6.3, Forward Uplink (from Gateway), 3.6.4, Forward Downlink (to User), 3.6.5, Return Uplink (from User), and 3.6.6, Return Downlink (to Gateway).
2.2   Option Satellite
Contractor hereby grants to Purchaser an option to purchase one (1) additional Substantially Similar Satellite (including a DSS, updates to Deliverable Data, as required, Launch Support Services and Mission Operations Support Services) (the “Option Satellite”) at the optional pricing set forth in the table below (to be established following the process defined in Article 2.1 above, and to reflect the adjustments necessary to convert from the Primary Satellite configuration to a sixty (60) U.S. beam only configuration, with such pricing to be provided no later than March 2, 2008). Delivery for the Option Satellite shall be no later than the later to occur of: (i) thirty six (36) months after execution of the second contract or Contract amendment identified below; and (ii) four (4) months after Delivery of the Primary Satellite. Commencing upon
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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the date of execution of such second contract or Contract amendment, Contractor shall immediately proceed with all Work necessary to build such Option Satellite.
The option shall remain valid from EDC until two (2) years from EDC (the “Option Satellite Exercise Period”), provided that Purchaser may require Contractor to extend the validity of the option and/or change the design and/or specifications of the Option Satellite under a change order pursuant to Article 16. If Purchaser wishes to exercise such option, it may do so by providing notice to Contractor at any time prior to the expiration of the Option Satellite Exercise Period. In such event, the Parties shall document Purchaser’s agreement to purchase the Option Satellite and Contractor’s agreement to build and deliver such satellite by entering into either, at Purchaser’s option, an amendment to this Contract or a second contract that has terms and conditions identical in all relevant material respects to this Contract except for such differences as are reasonably necessary or appropriate to indicate that the second contract applies to the Option Satellite. Only upon execution of such second contract or Contract amendment shall Purchaser be financially obligated to Contractor with respect to the Option Satellite and shall Contractor be obligated to perform with respect thereto.
     
    Firm Fixed Price of Option
Satellite Option Exercised   Satellite (i)
Within EDC + 6 months
  TBD
 
   
Between EDC + 6 months and EDC + 12 months
  TBD
 
   
Between EDC + 12 months and EDC + 18 months
  TBD
 
   
Between EDC + 18 months and EDC + 24 months
  TBD
 
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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(i)   [***]% of the Firm Fixed Price of Option Satellite constitutes the maximum Orbital Performance Incentives earnable for the Option Satellite. Firm Fixed Price of Option Satellite includes Deliverable Data, Training, Launch Support Services (as they may be adjusted pursuant to Article 4.3), Mission Operations Support Services, and a DSS.
2.3   Replacement Satellite
Contractor hereby grants to Purchaser an option to purchase one (1) replacement satellite identical to the Primary Satellite provided hereunder (including a DSS, updates to Deliverable Data, as required, Launch Support Services and Mission Operations Support Services) (the “Replacement Satellite”). The price for such Replacement Satellite shall be [***] U.S. dollars ($[***]) as adjusted pursuant to Article 4.6 ([***] percent ([***]%) of which constitutes the maximum Orbital Performance Incentives Contractor may earn with respect to the Replacement Satellite) and apportioned as follows: (i) [***] U.S. dollars (U.S.$ [***] is the portion of the Replacement Satellite price to be paid by Purchaser hereunder; and [***] U.S. dollars (U.S.$[***]) is the portion of the Replacement Satellite to be paid by [***]. Delivery for the Replacement Satellite shall be no later than the later to occur of: (i) thirty-four (34) months after execution of the second contract or Contract amendment identified below and (ii) four (4) months after Delivery of the Satellite). Commencing upon the date of execution of such second contract or Contract amendment, Contractor shall immediately proceed with all Work necessary to build such Replacement Satellite. The option shall remain valid until one (1) year from Delivery of the Satellite (the “Replacement Satellite Exercise Period”), provided that Purchaser may require Contractor to extend the validity of the option and/or change the design and/or specifications of the Replacement Satellite under a change order pursuant to Article 16. If Purchaser wishes to exercise such option, it may do so by providing notice to Contractor at any time prior to the expiration of the Replacement Satellite Exercise Period. In such event, the Parties shall document Purchaser’s agreement to purchase the Replacement Satellite and Contractor’s agreement to build and deliver such satellite by entering into either, at Purchaser’s option, an amendment to this Contract or a second contract that has terms and conditions identical in all relevant material respects to this Contract except for such differences as are reasonably necessary or appropriate to indicate that the second contract applies to the Replacement Satellite. Only upon execution of such second contract or Contract amendment shall Purchaser be financially obligated to Contractor
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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with respect to the Replacement Satellite and shall Contractor be obligated to perform with respect thereto.
2.4   SCF Equipment
Contractor hereby grants to Purchaser an option to purchase the SCF Equipment (including the Spares) listed in Exhibit F, Satellite Control Facility Requirement Specification. The Parties acknowledge that, as of EDC, the Parties are updating Exhibit F, Satellite Control Facility Requirements Document, to be consistent with SCF requirements agreed-to between the Parties, and which updates are within the agreed scope of Work hereunder so as not to constitute a change hereunder; the Parties will continue to work in good faith to complete the revisions to Exhibit F, Satellite Control Facility Requirements Document no later than EDC plus thirty (30) days. The price for such SCF Equipment shall be [***] U.S. dollars ($[***]). This option shall remain valid until 6 months from EDC (the “SCF Equipment Exercise Period”), provided that Purchaser may require Contractor to extend the validity of the option and/or change the design and/or specifications of the SCF Equipment under a change order pursuant to Article 16. If Purchaser wishes to exercise such option, it may do so by providing notice to Contractor at any time prior to the expiration of the SCF Equipment Exercise Period. Delivery for the SCF Equipment shall be no later than August 1, 2010. Payment for the SCF Equipment shall be due upon Acceptance of the SCF Equipment.
2.5.   Cooperation with Launch Agency
Contractor shall provide all reasonably necessary assistance to, and shall fully communicate and cooperate with, the Launch Agency so as to ensure successful, on-time completion of the Work and integration of the Satellite with the Launch Vehicle in accordance with the terms of this Contract and the Launch Services Agreement. Purchaser shall provide all reasonably necessary assistance to Contractor so as to ensure Contractor and any affected Subcontractors have the necessary access and information from the Launch Agency to perform as specified. All communications of Contractor and its Subcontractors with the Launch Agency are subject to any required export authorizations.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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2.6   Relationship to Loral Space Payload Contract
Except as to certain rights related to refunds, termination, access and title transfer associated with the Loral Space Payload that are set forth in the Loral Space Payload Contract, Purchaser shall have the exclusive rights (including all exclusive rights of exercise) associated with the Satellite and other Deliverable Items to be provided hereunder. CondoSat Associate shall have no right or authority to give Contractor direction as to the Satellite, including as to the Loral Space Payload, and the Loral Space Payload Contract shall reflect that CondoSat Associate agrees to, and shall be bound by, all acts and decisions of the Purchaser under this Contract as regards the Satellite, including the Loral Space Payload. Purchaser agrees that any action related to the Satellite, including the Loral Space Payload portion thereof, other than as regards payment and refunds, shall be the responsibility of Purchaser and Purchaser shall act on behalf of Purchaser and CondoSat Associate, with no direct right of action or enforcement against Contractor by CondoSat Associate. Purchaser retains all rights associated with Deliverable Items 2 through 6 set forth in Article 3.1, except that CondoSat Associate shall be entitled to copies of the Deliverable Data for information purposes only, and subject to restrictions on use and disclosure substantially similar to those contained herein. Contractor agrees to place the Loral Space Payload Contract on terms reflecting the foregoing.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 3 — DELIVERABLE ITEMS AND DELIVERY SCHEDULE
  3.1   Deliverable Items
Subject to the other terms and conditions of this Contract, the items to be delivered under this Contract are specified below (each a “Deliverable Item”). Contractor shall deliver such Items on or before the corresponding Delivery dates and at locations specified as follows:
             
Item   Description   Delivery Date   Delivery Location
1.
  Satellite   Delivery to the
Launch Site on EDC
+ 36 months
  Per Article 3.2
 
           
2.
  Deliverable Data   Per SOW, Exhibit A   Per SOW, Exhibit A
 
           
3.
  Training   Per SOW, Exhibit A   Per SOW, Exhibit A
 
           
4.
  Launch Support Services   Per SOW, Exhibit A   Per SOW, Exhibit A
 
           
5.
  Mission Operations
Support Services
  Per SOW, Exhibit A   Per SOW, Exhibit A
 
           
6.
  DSS   Per Exhibit H   Purchaser’s SCF
  3.2   Delivery
Delivery of each Deliverable Item shall occur upon arrival of such Deliverable Item at the location required by this Article 3, after having successfully completed any required reviews and testing. In the case of the Satellite, Delivery shall occur upon delivery of the Satellite to the Launch Site or upon placement in Ground Storage.
  3.3   Selection of Launch Vehicle
Purchaser shall be responsible for providing the Launch Services for Launch of the Satellite(s). Contractor shall provide, at no additional cost to Purchaser, engineering, Launch Vehicle integration activities, and other customary services to maintain compatibility of the Satellite for Launch (including but not limited to environmental analysis, mission planning, and Launch Vehicle electrical and mechanical interfaces) (collectively, “Integration Activities”) with the list of candidate Launch Vehicles set forth in Paragraph 2.4 of Exhibit B, Satellite Performance Specification (the “Candidate Launch
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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Vehicles”) up to eighteen (18) months prior to the scheduled Delivery date of the Satellite set forth in Article 3.1. On or before eighteen (18) months prior to the then-currently scheduled Delivery date of the Satellite set forth in Article 3.1, Purchaser shall provide a written notification to Contractor of two (2) Launch Vehicles that may be used for such Satellite. Provided that Purchaser has entered into the necessary agreements with the potential Launch Agencies to reasonably support Contractor’s Integration Activities, Contractor shall perform dual Integration Activities up through twelve (12) months prior to the start of SPSR, at which time Purchaser shall designate its final Launch Vehicle selection. Failure to notify Contractor of its Launch Vehicle selection(s) by the date(s) set forth in this Paragraph shall be a Purchaser delay of Work subject to Article 18, and any change to the Launch Vehicle selection thereafter shall be subject to Article 16.
3.4   Avoidance and Mitigation of Delays
Contractor shall notify Purchaser promptly by telephone and confirm in writing any event, circumstance or development that will likely result in a material non-conformance of the Work or any part thereof with the requirements of this Contract or the Delivery dates established therefor. Contractor shall use Reasonable Efforts to avoid and/or mitigate the effect of such event, circumstance, or development. Within ten (10) Business Days of any notification hereunder, Contractor shall provide written notice to Purchaser of any affected Work, as well as a proposed work-around. The work-around plan shall: (a) set forth Contractor’s Reasonable Efforts to mitigate the effect of any such event, circumstance, or development and include a schedule for such mitigation; and (b) contain sufficient detail for Purchaser to be able to evaluate such plan. If appropriate, such work-around plan shall use work-around schedules, payment of expedited fees, twenty four (24) hour operations, and the use of alternate Subcontractors (to be approved by Purchaser if required under this Contract).
3.5.   Packing and Shipping
Packing and shipping shall be in accordance with all applicable laws, rules, and regulations, and standard commercial practices in the aerospace industry.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 4 — PRICE
  4.1   Firm Fixed Price
The total price to be paid by Purchaser and CondoSat Associate to Contractor for the Work, including but not limited to Deliverable Items 1 through 6 set forth in Article 3.1 hereof, as detailed in Exhibit A, Statement of Work, shall be a total firm fixed price of two hundred and forty-six million U.S. dollars (U.S. $246,000,000) (the “Total Combined Price”) which is apportioned as follows: (i) two hundred and nine million, one hundred thousand U.S. dollars (U.S.$209,100,000) is the portion of the Total Combined Price to be paid by Purchaser hereunder (the “Firm Fixed Price”); and thirty-six million, nine hundred thousand U.S. dollars (U.S.$36,900,000) is the portion of the Total Combined Price for which CondoSat Associate is responsible pursuant to the Loral Space Payload Contract (the “CondoSat Associate Portion”). Both the Total Combined Price and the Firm Fixed Price are subject to the [***] adjustment set forth in Article 4.6, below (however, the price of the Loral Space Payload Contract is not subject to adjustment pursuant to Article 4.6 below). Purchaser does not guarantee payment of the CondoSat Associate Portion, and Contractor agrees to look solely and exclusively to CondoSat Associate for payment of the CondoSat Associate Portion. Failure of CondoSat Associate to make any payment of the CondoSat Associate Portion when due shall not be considered a breach or default of this Contract and Contractor shall nonetheless remain obligated to perform its obligations and duties under this Contract. Contractor acknowledges and agrees that Purchaser shall have no liability to Contractor whatsoever in the event that CondoSat Associate fails to make timely payment of the CondoSat Associate Portion, and that Contractor shall have no recourse whatsoever against Purchaser in such case.
Except as otherwise expressly provided in Articles 2.2 and 2.3 (only if Purchaser elects to effectuate its purchase of the Option Satellite or the Replacement Satellite by means of an amendment to this Contract rather than by means of another contract), and Articles 2.4, 4.2, 4.3, 4.6, 6.2, 6.3, 6.5, 12.1(B), 15.4, 16, 18, 35, and any options set forth in this Contract, the Firm Fixed Price is not subject to any escalation or to any adjustment or revision. The price for those items subject to an option under this Contract, if any, are described in the particular Articles that set forth such options.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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The itemization of the Firm Fixed Price is as follows:
         
Item   Description   Amount
1.
  Satellite (excludes the Loral Space Payload price and Orbital Performance Incentives)   [***] percent ([***]%) of the Firm Fixed Price (as of EDC, this amount is U.S. $ [***])
 
1(a).
  Maximum Orbital Performance
Incentives
  [***] percent ([***]%) of the Firm Fixed Price (as of EDC, this amount is U.S. $[***])
 
2.
  Deliverable Data   NSP
 
3.
  Training   NSP
 
4.
  Launch Support Services   NSP (i)
 
5.
  Mission Operations Support Services   NSP
 
7.
  DSS   NSP
 
       
 
  Total Firm Fixed Price   U.S. $209,100,000 (ii)
(i) The price for the Launch Support Services shall be modified by the amount set forth for such services in Article 4.3, based upon Purchaser’s selection of Launch Vehicle for the Launch of the Satellite.
(ii) Not including the price for any incremental Launch Support Services per Article 4.3, or long-term Ground Storage per Article 35. Firm Fixed Price includes SPT thrusters, but does not include the Caribou command link (TT&C) encryption or Ferrite switches. Purchaser may elect to include the Caribou command link (TT&C) encryption at the price of $[***], so long as Purchaser provides written notice of its election no later than February 3, 2008, and Purchaser may also elect to include Ferrite switches at the price of $[***], so long as Purchaser provides written notice of its election no later than February 3, 2008. If Purchaser elects to include the Caribou command link (TT&C), then all unpaid Milestone payments associated with the Satellite shall automatically be increased by a pro rata amount such that the applicable increase is applied across all remaining, unpaid Milestone payments on the Satellite.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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4.2   Discount for Purchase of a Eutelsat Satellite
In the event Eutelsat or any of its Affiliates (Eutelsat and its Affiliates shall collectively be referred to as “Eutelsat”) (or a joint venture consisting of Purchaser and Eutelsat) enters into a contract with Contractor for the purchase of a Ka-band spot beam satellite on or before 1 March 2008, (“Eutelsat Satellite”), the Firm Fixed Price for the Primary Satellite set forth above shall be reduced by [***] U.S. dollars (USD$[***]). If Purchaser is entitled to such reduction, then all unpaid Milestone payments associated with the Satellite shall automatically be reduced by a pro rata amount such that the applicable discount is applied across all remaining, unpaid Milestone payments on the Satellite.
4.3   Launch Support Services
Upon Purchaser’s selection of the Launch Vehicle for the Launch of the Satellite as provided in Article 3.3 above, the Firm Fixed Price of the Contract shall be increased or decreased in the following applicable amount to reflect the Launch Support Services associated with the selected Launch Vehicle. Such increase or decrease shall be applied on a pro-rata basis to those Milestone payments specified in Exhibit E, Payment Plan and Termination Liability Schedule remaining to be paid as of the date of Purchaser’s selection.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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    Adjustment to Firm Fixed
Selected Launch Vehicle   Price
Atlas
  (U.S. $[***]([***])
 
   
Proton
  U.S. $[***]([***])
 
   
Sea Launch
  (U.S. $[***]) ([***])
 
   
Ariane
  U.S. $[***]([***])
4.4   Fees and Other Expenses
The Firm Fixed Price stated above includes all fees, charges, expenses, costs, and other amounts payable by Purchaser for any portion of the Work, including but not limited to the design, manufacturing, tests, the Satellite, the DSS, Deliverable Data, Training, Orbital Performance Incentives, Mission Operations Support Services, Launch Support Services, risk management services as required by Article 32, packing and transport of the Satellite to the Launch Site, transit insurance and such other insurance as is required by Article 32, but does not include such amounts payable for Launch Services, or the Launch and In-Orbit Insurance Policy (the responsibility for which shall reside exclusively with Purchaser). Under no circumstances will Purchaser be obligated to pay any fees, charges, expenses, costs or other amounts in connection with any portion of the Work other than the amounts set forth in this Paragraph, as adjusted in accordance with those Articles set forth in Article 4.1.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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4.5   Taxes
The Firm Fixed Price includes, and Contractor shall remit when due, all applicable federal, state, local and foreign taxes duties, assessments, and similar liabilities (including interest, fines, penalties, or additions attributable to, or imposed on, or with respect to, any such taxes, duties and similar liabilities) imposed by any federal, state, local, or foreign government in connection with the Work, including those related to the export or import of any Satellite from or into any jurisdiction for Launch, all imposts, and all sales, use, excise, value added, import and export taxes levied in connection with Contractor’s performance of the Work, wherever the Work is being carried out under this Contract.
4.6   [***] Adjustment
Promptly upon finalization of the Satellite configuration pursuant to Article 2.1(B), Purchaser shall calculate, and Contractor shall have the opportunity to verify (pursuant to the licenses and limitations set forth in Article 22.2), the [***] of the U.S. Beams and the Additional Beams, if any, (but not including the Canadian Beams) (and the resulting calculated [***] shall be the “[***]”) using the version of Purchaser’s proprietary software program in existence as of EDC (operating in the mode that [***]) (the “[***]”); provided, however, that in the event that Purchaser elects to include Mexico coverage for any of the Additional Beams in the Final Configuration, then [***] contributed by such beam(s) will be considered in determining the [***], unless all necessary landing rights and any other rights necessary for Purchaser to offer its intended service in Mexico have been obtained. Contractor acknowledges that the Satellite Final Configuration [***] for the U.S. Beams and the Additional Beams will be measured assuming the use of the [***] frequencies and such [***] calculation shall not assume the use of the [***] frequencies. Based on that calculation, the [***] as follows (with such amounts to be pro-rated): [***] For example, if the [***]. By way of further example, if the [***]. All Milestones shall be updated on a pro-rata basis to account for [***].
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 5 — PAYMENTS
  5.1   Payment Plan
Payments by Purchaser to Contractor of the Firm Fixed Price set forth in Article 4 and of the amounts for options, if any, exercised by Purchaser pursuant to this Contract shall be in accordance with Exhibit E, Payment Plan and Termination Liability Schedule, as applicable thereto.
  5.2   Payment Conditions
  5.2.1   Time Payments . The “Effective Date of Contract” time payment due from Purchaser shall be paid no later than the due date specified in Exhibit E, Payment Plan and Termination Liability Schedule. Contractor shall submit to Purchaser an invoice in accordance with the requirements of this Contract with respect to such payment prior to such payment being due.
 
  5.2.2   Milestone Payments . Each Milestone payment specified in Exhibit E, Payment Plan and Termination Liability Schedule shall in each case become payable upon Contractor’s completion of each Milestone in accordance with the Contract and satisfaction of the Conditions for Milestone Completion and Payment set forth in Exhibit E, after which Contractor shall submit an invoice for payment, provided however, that Contractor shall not invoice any amount which when cumulated with other Milestone payments previously made hereunder, exceeds the cumulative Milestone payment amounts due as of such date as reflected in such Exhibit E. A Milestone shall not be deemed completed until all Work relevant to the Milestone has been completed and documented in accordance with Exhibit A, Statement of Work and/or Exhibit E, Payment Plan and Termination Liability Schedule, as applicable.
 
      Purchaser shall only be responsible for paying those amounts set forth in the “Firm Fixed Price (paid by ViaSat)” column of Exhibit E, Payment Plan and Termination Liability Schedule. All payments due from Purchaser upon the completion of a Milestone described in Exhibit E, Payment Plan and Termination Liability Schedule, shall be paid no later than thirty (30) days after the receipt by Purchaser of an invoice and certification in the form attached hereto as Attachment A that the Milestone has been completed in accordance with the
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
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      requirements of this Contract, together with the necessary or appropriate supporting data and documentation as required hereunder, if any, or as Purchaser may reasonably request within ten (10) Business Days of receipt of invoice. Notwithstanding the foregoing, and without prejudice to Purchaser’s rights under Article 5.6, Purchaser, in its sole discretion, may agree to make a partial payment to Contractor for partial completion of a Milestone or for completion of a Milestone prior to the applicable Milestone Date.
 
      Purchaser shall pay in full all undisputed amounts payable hereunder within thirty (30) days after receipt of an invoice therefor completed in accordance with this Article 5.2.
  5.2.3   Orbital Performance Incentives . The Orbital Performance Incentives payments due from Purchaser pursuant to Article 13 shall be due and payable no later than thirty (30) days after receipt of an invoice completed in accordance with Article 5.4.
 
  5.2.4   Non-Warranty and Other Payments . Subject to Article 5.6, and without prejudice to Purchaser’s audit rights set forth in Article 5.8, below, all amounts payable to Contractor with respect to non-warranty work performed pursuant to Article 15.4 or for any other payments to be made pursuant to this Contract and not otherwise subject to Article 5.2.1 through 5.2.3 above shall be paid no later than thirty (30) days after receipt of Contractor’s invoice completed in accordance with Article 5 therefor.
  5.3   Late Payment
  5.3.1   Interest . Except in the case of a payment disputed pursuant to Article 5.6, below, in the event that any payment due under this Contract is not made when due hereunder, without prejudice to the other rights and remedies of the Party entitled to such payment, such Party shall also be entitled to interest at the rate of [***] percent ([***]%) per annum, compounded monthly, on the unpaid balance thereof from ten (10) days after the date that the non-paying Party receives written notice to cure a delinquent payment until such payment is made.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  5.4   Invoices
Invoices required to be delivered by Contractor hereunder shall be submitted by facsimile and air mail to Purchaser (original plus one (1) copy) at the following address:
             
 
      ViaSat, Inc.    
         
 
  Attn.:   David Abrahamian    
 
           
 
      6155 El Camino Real    
 
      Carlsbad, California 92009    
 
           
 
  Fax:   760-795-1045    
 
           
or to such other address as Purchaser may specify in writing to Contractor.
  5.5   Payment Bank
All payments made to Contractor hereunder shall be in U.S. currency and shall be made by electronic funds transfer to the following account:
SPACE SYSTEMS/LORAL, INC.
ACCOUNT NO. [***]
or such other account or accounts as Contractor may specify in writing to Purchaser.
  5.6   Disputed Amounts
If the event covered by a Milestone payment has not been completed in accordance with the requirements of this Contract, Purchaser shall so notify Contractor in writing within fifteen (15) days of receipt of the applicable invoice and may withhold some or all of the applicable payment in good faith. Such notification shall state in reasonable detail the Contract requirements associated with the applicable Milestone event that have not been met. Upon correction of the noted discrepancy(ies) and completion of the Milestone in accordance with Contract requirements, the Milestone 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 Contract until resolved by the Parties.
  5.7   Right of Offset
In the event that one Party has not paid the second Party any amount that is due and payable to the second Party under this Contract, without prejudice to other rights and
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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remedies, such second Party shall have the right to set off such amount against any payment(s) due and payable or to become due and payable to the first Party under this Contract, provided, however, any amount being disputed under Article 5.6 hereof shall not be considered due and payable until the dispute is finally resolved.
In addition, Purchaser shall be entitled to offset against Milestone payments due to Contractor under this Contract, all undisputed amounts due from CondoSat Associate to Purchaser pursuant to the CondoSat Agreement for (1) Launch Services and (2) the Initial Insurance (as defined in the CondoSat Agreement), but only to the extent such amounts remain unpaid and in default after expiration of all time periods allowed for payment thereunder, including time periods to cure such default. As a condition to exercising any rights of offset under this provision, Purchaser shall assign to Contractor, including by way of subrogation, its rights against CondoSat Associate to such payments and all associated remedies.
5.8   Audit Rights and Procedures
Contractor shall keep complete, true and accurate books of account and records pursuant to its standard accounting system for the purpose of showing the derivation of all Actual Costs where any payments to be made by Purchaser are based on Actual Costs. Contractor will keep such books and records at Contractor’s principal place of business for at least five (5) years 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 Purchaser and Contractor. Purchaser may direct an audit of any Actual Costs claimed by Contractor pursuant to this Contract to be performed by an industry recogized independent certified public accounting firm reasonably acceptable to Contractor. Any such audits will be at the expense of Purchaser unless the audit shows that Contractor has overcharged amounts due hereunder during the audited period by more than five percent (5%). In such case, the expense of the audit will be paid by Contractor. Contractor will promptly pay Purchaser the full amount of any overpayment, together with interest at the annual rate of [***] percent ([***]%), compounded monthly, from the date such payment was to have been made. The independent auditor will be directed to report reasons for its findings, and the independent auditor’s findings will be binding upon Purchaser and Contractor, provided
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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that Contractor shall have the right to redact any detailed rate information from any report or finding provided by the independent auditor to Purchaser.
ARTICLE 6 — PURCHASER-FURNISHED ITEMS
  6.1   Purchaser-Furnished Support
To enable Contractor to perform Launch Support and Mission Operations Support Services, Purchaser shall be responsible for timely making available to Contractor the Purchaser-furnished equipment, facilities and services described in Paragraph 2.6 of Exhibit A, Statement of Work. Such equipment, facilities and services shall be in good working condition and adequate for the required purposes and, for the Launch of the Satellite hereunder, shall be made available free of charge for Contractor’s use during the period commencing on the date established therefore at the technical interchange meetings described in Paragraph 2.6.1 of Exhibit A, Statement of Work and continuing through the IOT Complete Date for the Satellite. Purchaser and Contractor will conduct an interface meeting on the date established therefor at the technical interchange meeting described in Paragraph 2.6.1 of Exhibit A, Statement of Work to confirm the availability and adequacy of such Purchaser-furnished equipment, facilities and services.
  6.2   Communications Authorizations
Purchaser shall be responsible, at its cost and expense, for preparing, coordinating and filing all applications, registrations, reports, licenses, permits and authorizations with the FCC if required to do so and with any other national governmental agencies having jurisdiction over Purchaser, for the construction, Launch and operation of the Satellite. Contractor shall, at no additional cost to Purchaser, provide all cooperation reasonably necessary in support of Purchaser’s preparation, coordination and filing of such applications, registrations, reports, licenses, permits and authorizations, and upon Purchaser’s request, Contractor shall actively provide reasonable support to Purchaser’s efforts to obtain any licenses, permits, and aurthorizations required by any cognizant regulatory agency. Nothing in this Article 6.2 shall be used to interpret or prejudice any of the rights under the CondoSat Agreement.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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  6.3   Radio Frequency Coordination
Purchaser shall be responsible for the timely preparation and submission of all filings required by the International Telecommunication Union (or any successor agency thereto) and all relevant domestic communications regulatory authorities regarding radio frequency and orbital position coordination. Such filings shall be made in accordance with the Radio Regulations of the International Telecommunication Union (or any successor agency) and the laws and regulations of all domestic communications regulatory authorities having jurisdiction over Purchaser. Contractor shall, at no additional cost to Purchaser provide all cooperation reasonably necessary in support of Purchaser’s efforts in the preparation and submission of such filings, and upon Purchaser’s request, Contractor shall actively provide reasonable support to Purchaser’s efforts to obtain any licenses, permits, and aurthorizations required by any cognizant regulatory agency. Nothing in this Article 6.3 shall be used to interpret or prejudice any of the rights under the CondoSat Agreement.
  6.4   Satellite Performance Data
Commencing with the first full calendar month following the IOT Complete Date, Purchaser shall provide a report to Contractor describing the general health and operating status of the Satellite. Such report shall be provided to Contractor on a monthly basis thereafter, delivered to Contractor promptly after the end of each month during the Satellite Stated Life. In the event of a Satellite Anomaly that occurs during the Satellite Stated Life, Purchaser shall timely provide Contractor with or give Contractor access to any of Purchaser’s data Contractor may reasonably require to investigate and correct (per Article 15.3 hereof) such Satellite Anomaly and/or support Purchaser in making and perfecting claims for insurance recovery relating to such Satellite Anomaly as set forth in Article 32.
  6.5   Late Delivery of Purchaser-Furnished Items or Services
Exhibit A, Statement of Work, paragraph 2.6 sets forth a complete listing of all Purchaser-furnished items or services and the delivery date for such items and services. The late delivery of Purchaser-furnished items or services, individually or combined, shall be considered an event beyond the reasonable control of Contractor, and Contractor shall be entitled to adjustments in the Firm Fixed Price and schedule and other materially affected terms of the Contract, in accordance with Article 18, provided
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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that: (a) such late delivery of Purchaser-furnished items or services was substantially due to no fault of Contractor; (b) Contractor promptly notifies Purchaser in writing of any applicable late delivery of Purchaser-furnished items or services and the expected impacts therefor; and (c) Contractor uses Reasonable Efforts to avoid and/or mitigate the effect of the late delivery of Purchaser-furnished items or services.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 7 — COMPLIANCE WITH LAWS AND DIRECTIVES
  7.1   General
Each Party shall, at its expense, perform its obligations hereunder in accordance with all applicable laws, regulations, and policies of the any federal, state, local, or foreign government and the conditions of all applicable federal, state, local, or foreign government approvals, permits, or licenses.
  7.2   Compliance with U.S. Export Control Laws
Any obligation of a Party hereunder to provide hardware, software, Deliverable Data, other technical information, technical services, Training, or any access to facilities of the other Party and its personnel and/or its representatives shall be subject to applicable U.S. Government export control and security laws, regulations, policies and license conditions. The Parties shall work cooperatively and in good faith to implement this Contract in compliance with such laws, regulations, policies and license conditions. If and to the extent required by U.S. law, the Parties and their personnel and/or representatives shall enter into U.S. Government-approved agreement(s), including a Technical Assistance Agreement(s), separate from this Contract, governing the provision of hardware, software, Deliverable Data, other technical information, technical services, Training, or access to facilities in connection with this Contract.
  7.3   Licenses and Other Approvals
Contractor shall use Reasonable Efforts to obtain and shall maintain all applicable approvals, permits, and licenses as may be required by any government, foreign or domestic, for the performance of the Work, including but not limited to all authorizations required for the import or export of any Deliverable Item, or any part thereof, as well as any agreements and other approvals of the U.S. Government that are required for Purchaser and “foreign person” personnel and/or representatives of Purchaser (including, but not limited to, Eutelsat, foreign subsidiaries and related entities of Purchaser involved with the procurement) as well as Purchaser’s insurance providers, to have access to Contractor facilities, hardware, software, Deliverable Data, Training, other technical information or technical services in connection with the performance of this Contract. In addition, Contractor shall provide reasonable support to Purchaser in obtaining any necessary approvals, permits, and licenses for the performance of Purchaser’s obligations hereunder. A “foreign person” shall be as defined in the U.S.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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International Traffic in Arms Regulations, 22 C.F.R. §120.16. As early as practicable, and in no event later than ninety (90) days after EDC, Purchaser shall provide Contractor with a list of countries (if other than the U.S.) of which “foreign person” personnel and/or representatives of Purchaser (including, but not limited to foreign subsidiaries and related entities of Purchaser involved with the procurement) as well as Purchaser’s insurance providers, if such personnel, representatives, insurance providers will or may have access to U.S. export-controlled items or services under this Contract. Purchaser shall provide such reasonable cooperation and support as necessary for Contractor to apply for and maintain such required U.S. export licenses, agreements and other approvals, and shall promptly notify Contractor of any occurrence or change in circumstances of which it becomes aware that is relevant to or affects such export licenses, agreements and approvals. Contractor shall review with Purchaser any application Contractor makes to any government department, agency or entity for any permit, license, agreement or approval that will be signed by Purchaser as may be required for performance of the Work, prior to submission of such application. Contractor shall provide Purchaser a minimum of five (5) Business Days to review such application prior to submission to such governmental entity, and Contractor shall in good faith consider any comments and proposed revisions made by Purchaser for incorporation into such application. At Purchaser’s request, Contractor shall include Purchaser (and related entities involved with the procurement) as a named party in any application for approval of such U.S. export licenses, agreements and other approvals so as to permit Purchaser to be present during any discussion with or meetings where Purchaser’s foreign subsidiaries/related entities, or insurance providers, may receive from, or discuss, with Contractor any U.S. export-controlled items and/or services. Contractor shall provide the parties to such U.S. export licenses and agreements copies of the export licenses and agreements, including any U.S. Government provisos related to same
NOTWITHSTANDING ANY PROVISION IN THIS CONTRACT, IN NO EVENT SHALL EITHER PARTY BE OBLIGATED UNDER THIS CONTRACT TO PROVIDE ACCESS TO THE OTHER PARTY’S FACILITIES OR SUBCONTRACTOR FACILITIES, PROVIDE ACCESS TO OR FURNISH HARDWARE, SOFTWARE, DELIVERABLE DATA OR OTHER TECHNICAL INFORMATION, OR PROVIDE TECHNICAL/DEFENSE SERVICES OR TRAINING, TO ANY PERSON EXCEPT IN COMPLIANCE WITH
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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APPLICABLE U.S. EXPORT CONTROL LAWS, REGULATIONS, POLICIES AND LICENSE CONDITIONS.
  7.4   No Unauthorized Exports or Retransfers
NEITHER PARTY SHALL RE-EXPORT OR RE-TRANSFER TO ANY THIRD PARTY ANY HARDWARE, SOFTWARE, DELIVERABLE DATA, OTHER TECHNICAL INFORMATION, TECHNICAL SERVICES, OR OTHER ITEMS FURNISHED HEREUNDER, EXCEPT AS EXPRESSLY AUTHORIZED BY THE U.S. GOVERNMENT IN ACCORDANCE WITH THE EXPORT LICENSES, AGREEMENTS AND OTHER APPROVALS REFERENCED IN THIS ARTICLE 7 OR AS OTHERWISE EXPRESSLY AUTHORIZED UNDER U.S. EXPORT CONTROL LAWS.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 8 — ACCESS TO WORK-IN-PROGRESS
  8.1   Work in Progress at Contractor’s or Major Subcontractor’s Facility
 
      Subject to Article 7, compliance with Contractor’s normal and customary safety and security regulations and practices (or, if applicable, those of a Major Subcontractor), which shall be provided in writing to Purchaser upon Purchaser’s request prior to any facility visit, and the protection of third party proprietary information, Purchaser personnel (such term to include Eutelsat and Purchaser’s duly appointed consultants and agents) shall be allowed access to all Work being performed at Contractor’s or any Major Subcontractor’s facility for the Satellite and other Deliverable Items, for the purpose of observing the progress of such Work; provided, however, access by Purchaser personnel to any Major Subcontractor facility shall require such Major Subcontractor’s prior written consent, which Contractor shall employ Reasonable Efforts to obtain, and Contractor shall be entitled to accompany any Purchaser personnel to the facility. Such access shall be upon reasonable prior written notice to Contractor and shall occur during normal working hours or at such other hours as Contractor may agree. Subject to Article 7, compliance with Contractor’s normal and customary safety and security regulations and practices (or, if applicable, those of a Major Subcontractor), which shall be provided in writing to Purchaser upon Purchaser’s request prior to any facility visit, and the protection of third party proprietary information, Purchaser personnel will have reasonable access for evaluation, inspection, and use in connection with the planned operation of the Satellite to (i) Deliverable Data; (ii) work-in-progress and technical and schedule data and documentation relevant to the Work; (iii) drawings, circuit diagrams/schematics, specifications, standards or process descriptions applicable to the Work; and (iv) data and documentation provided to Contractor by its Subcontractors applicable to the Work. Contractor shall provide Purchaser access to a program web site (from which Purchaser will be permitted to download, print, and save documents) to serve as a repository for such information and Contractor shall provide a typical site map or index to the contents of that web site. All Purchaser personnel (and Purchaser’s duly appointed consultants and agents) who are “U.S. persons” under the ITAR and otherwise meet the requirements for access set forth in this Article shall be provided non-escort badges to agreed work areas while the Work is being performed, though such access may be restricted to relevant buildings and areas where the subject Work in Progress resides. Contractor will use Reasonable Efforts to obtain similar access to
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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      Work that is being performed at the facilities of Contractor’s Major Subcontractors subject to the conditions set forth in the first sentence of this Paragraph. For the avoidance of doubt, any communications between Purchaser personnel and any foreign Subcontractor shall be conducted through Contractor.
 
  8.2   Electronically-Generated Information
 
      With regard to electronically generated information, Contractor will provide Purchaser with an electronic copy thereof and/or electronic access (via the internet or Purchaser e-mail) to information regarding program performance and documentation that will advise Purchaser, on a current basis, of program specific issues, decisions and problems. Contractor shall establish data links between its and Purchaser’s facilities such that Purchaser has remote electronic access to those project-related documents identified in Exhibit A, Satellite Statement of Work. Contractor will also provide Purchaser personnel with “real time” access to all measured data, when feasible, for the Work on a non-interference, no-cost basis.
 
  8.3   On-Site Facilities for Purchaser’s Personnel
 
      For the purpose of monitoring the progress of the Work being performed by Contractor hereunder, Contractor shall provide office facilities at Contractor’s plant for resident Purchaser personnel (and/or Purchaser’s duly appointed consultants and agents) through the IOT Complete Date. The office facilities to be provided shall include a reasonable amount of office space, office furniture, local telephone service, reasonable long-distance telephone usage, access to copy machines, facsimile machines, internet account and access, reasonable clerical support, and meeting rooms to the extent necessary to enable Purchaser personnel to monitor the progress of Work under this Contract. Contractor will use Reasonable Efforts to obtain similar office facilities at the plants of Contractor’s Major Subcontractors for visits and meetings of Purchaser and Contractor to such plants.
 
  8.4   Purchaser Personnel as Competitors/Foreign Persons
 
      Purchaser shall use Reasonable Efforts to verify that Purchaser’s consultants and agents used in connection with this Contract are not currently employed by companies or entities that are Competitors of Contractor. Purchaser shall notify Contractor in writing of the name, title or function, business relationship, employer, citizenship status
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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      under U.S. export laws and such other information as may be reasonably requested by Contractor, with respect to each of its intended consultants and agents, and cause each such consultant and agent (except for attorneys and other professionals who are already bound by obligations of confidentiality) to: (i) execute a confidentiality agreement directly with Contractor in form and substance reasonably satisfactory to Contractor and containing terms substantially the same as those set forth in Article 28; and, (ii) pursuant to Article 7, execute a Technical Assistance Agreement or other agreement to ensure compliance with applicable U.S. export control laws and regulations to the extent required by applicable U.S export laws or regulations. Without prejudice to Contractor’s rights and obligations under Article 7, Contractor may in its reasonable discretion deny any consultant or agent of Purchaser access to Contractor or a Subcontractor’s facilities, products or information if such consultant or agent is currently employed by a Competitor, or if such consultant or agent fails to execute any of the agreements identified in (i) and (ii) above, where necessary. Notwithstanding the foregoing, Purchaser consultants or agents who are also employed or engaged by Contractor Competitors shall not be denied access to Contractor or a Subcontractor’s facilities, products or information if Purchaser notifies Contractor of the identity of such consultants or agents, identifies the Competitor(s) that such consultant(s) or agent(s) are employed by, and Purchaser implements appropriate protective measures (firewalls) to safeguard the confidentiality of Contractor’s data, documentation and information as required by this Contract.
 
  8.5   Meetings and Presentations
 
      Purchaser shall be entitled to reasonable notice of and to attend: (a) all formal program- specific meetings; and (b) reviews required in Exhibit A, Statement of Work. Purchaser shall have the right to participate in and to make recommendations in all such meetings and reviews at the system, subsystem and unit level. In addition, Contractor and Purchaser shall mutually agree on which informal program-specific meetings to which Purchaser will be invited to attend.
 
      Copies of presentations or other documents utilized during these meetings shall be furnished or made available to Purchaser and Purchaser’s consultants. Purchaser’s management personnel, as may be deemed appropriate by Purchaser, shall be invited to the Quarterly Summary Executive Reviews. Contractor shall be represented by its
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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      Program Manager and such other personnel as are required to support the particular presentation.
 
  8.6   Interference with Operations
 
      Purchaser shall exercise its rights under this Article 8 in a manner that does not unreasonably interfere with Contractor’s or its Subcontractors’ normal business operations or Contractor’s performance of its obligations under this Contract or any agreement between Contractor and its Subcontractors.
 
  8.7   Purchaser Inspection Not Acceptance
 
      The inspection, examination, or observation by Purchaser with regard to any portion of Work produced under this Contract shall not constitute any Acceptance thereof, nor shall it relieve Contractor from fulfilling its contractual obligations hereunder.
 
  8.8   CondoSat Associate
 
      Purchaser agrees that Contractor may provide the same access to the Work as provided to Purchaser hereunder to CondoSat Associate personnel and representatives on the same terms and with the same restrictions as set forth herein. In the event that Purchaser desires that any CondoSat Associate personnel and/or representatives be denied such access, Purchaser shall so notify Contractor in writing, including the name of CondoSat Associate personnel and/or representative, and thereafter Contractor shall notify CondoSat Associate of the restriction and deny access to such persons.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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      ARTICLE 9 — SATELLITE PRE-SHIPMENT REVIEW (SPSR) AND DELIVERY
  9.1   Satellite Pre-Shipment Review (SPSR)
  9.1.1   Contractor to Conduct a Review of the Satellite Prior to Shipment . Contractor shall conduct a detailed and comprehensive review of the Satellite prior to Contractor’s shipment of the Satellite to the Launch Site or its entering into storage. This review shall be conducted in accordance with the terms of this Article 9 and Paragraph 2.4.5 of Exhibit A, Statement of Work (a “Satellite Pre-Shipment Review” or “SPSR”).
 
  9.1.2   Time, Place and Notice of SPSR . The SPSR shall take place at Contractor’s facility. Contractor shall notify Purchaser in writing on or before thirty (30) days prior to the date that the Satellite will be available for the SPSR, which shall be the scheduled date for commencement of such SPSR. If Purchaser cannot attend the SPSR on such initially scheduled date, Contractor shall make Reasonable Efforts to accommodate Purchaser’s scheduling requirements. Purchaser agrees that CondoSat Associate personnel and/or representatives shall be allowed to attend the SPSR, but that Purchaser shall have final approval of the list of non-Contractor attendees.
 
  9.1.3   Conduct and Purpose of SPSR . The SPSR shall be conducted in accordance with the terms of this Article 9 and Paragraph 2.4.5 of Exhibit A, Statement of Work. The purpose of the SPSR shall be to: (i) review test data and analyses for the Satellite; (ii) demonstrate testing has been completed in accordance with the applicable portions of Exhibit D, Satellite Program Test Plan: and, (iii) determine whether the Satellite meets applicable Exhibit B, Satellite Performance Specification requirements (except those that have been waived pursuant to Article 9.1.4 below) and is therefore ready for shipment to the Launch Site.
 
  9.1.4   Waivers and Deviations . Contractor shall submit to Purchaser any request for a waiver of, or deviation from, provisions(s) of the Performance Specification applicable to the Satellite or other Deliverable Item. Purchaser shall consider each such request in good faith in accordance with industry
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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      standard practices. A request for waiver or deviation shall be deemed granted only if it has been approved in writing by a duly authorized representative of Purchaser (as defined in Article 31.3). Each such waiver or deviation approved by Purchaser shall be deemed an amendment to the Performance Specification for such Satellite or Deliverable Item, permitting such waiver thereof, or deviation therefrom, effective on or after the date of such approval for such Satellite or Deliverable Item. In the event that Purchaser approves any waiver or deviation under this paragraph, Purchaser shall be entitled to an equitable reduction in the Firm Fixed Price and Contractor shall be entitled to an equivalent reduction in the [***], if applicable.
 
  9.1.5   Purchaser’s Inspection Agents . Purchaser may, subject to prior written notice to Contractor, cause any Purchaser personnel, consultant or agent designated by Purchaser to observe the SPSR pursuant to this Article 9; provided, however, that the provisions of Article 7 and Article 8.4 shall apply to any such agent.
 
  9.1.6   SPSR Results . In the event that the SPSR demonstrates that: (i) testing has been performed in accordance with Section 5.2 of Exhibit D, Satellite Program Test Plan, and (ii) such Satellite conforms to the applicable requirements of Exhibit B, Satellite Performance Specification (including any waivers or deviations approved by Purchaser pursuant to Article 9.1.4), Purchaser shall provide written certification (a “Certification”) to Contractor (within 72 hours after Purchaser receives written notice of completion of the SPSR from Contractor) of its concurrence with the results of the SPSR (including any waiver of its right to compel correction of those non-conformances to the requirements of Exhibit B, Satellite Performance Specification, specified by Purchaser in such notice), and the Satellite shall be deemed ready for shipment to the Launch Site.
 
      In the event that such SPSR discloses (i) any failure to conduct testing in accordance with Section 5.2 of Exhibit D, Satellite Program Test Plan, or (ii) any non-conformance of such Satellite to the requirements of Exhibit B, Satellite Performance Specification, either of which is not the subject of any waivers or deviations approved by Purchaser pursuant to Article 9.1.4, Purchaser shall
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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      provide written notification thereof (a “Notice of Non-Conformance”) to Contractor within 72 hours after Purchaser receives written notice of completion of the SPSR from Contractor, which written notification shall state each such non-conformance Purchaser requires to be corrected or repaired (with reference to the specific provision of Exhibit D, Satellite Program Test Plan, or Exhibit B, Satellite Performance Specification, deemed not met). Contractor shall correct or repair each non-conformance with all deliberate speed and thereafter conduct additional testing and/or a “delta” SPSR, in accordance with the provisions of this Article 9, to the extent necessary to demonstrate that the Satellite conforms to the requirements of Exhibit B, Satellite Performance Specification, after which Purchaser shall provide a Certification or Notice of Non-Conformance within the applicable time frame specified above. Contractor shall be required to repeat the process described in this Paragraph until Purchaser provides Contractor with a Certification pursuant to the requirements of this Article 9.
 
      If Purchaser fails to provide a written Certification or Notice of Non-Conformance as required by either of the preceding Paragraphs of this Article 9.1.6 within the time specified, and Contractor has provided written notice advising Purchaser of such (a “Cure Letter”), the SPSR shall be deemed to have been successfully completed if Purchaser has still not submitted a written Certification or Notice of Non-Conformance within one (1) Business Day of Purchaser’s receipt of the Cure Letter and the Satellite shall be deemed ready for shipment to the Launch Site.
 
      Upon receipt of Purchaser’s Certification in accordance with this Article 9, Contractor shall thereafter transport such Satellite in accordance with Contractor’s standard commercial practices to the Launch Site (and shall be deemed Delivered when received at the Launch Site), and proceed to prepare the Satellite for Launch. Contractor shall not ship the Satellite to the Launch Site until all non-conformances are corrected, repaired or have a Purchaser-approved waiver or deviation.
 
  9.1.7   Inspection Costs Borne by Purchaser . All costs and expenses incurred by Purchaser and its agents in the exercise of its inspection rights under this Article 9, including travel and living expenses, shall be borne solely by Purchaser.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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  9.1.8   Correction of Deficiencies after SPSR . If at any time following completion of SPSR of the Satellite and prior to Intentional Ignition (or in the event of a Terminated Ignition, prior to any subsequent Intentional Ignition), it is discovered that such Satellite has a Defect or fails to meet the requirements of Exhibit B, Satellite Performance Specification, as they may be modified as of such time pursuant to Article 9.1.4, Contractor shall promptly correct such deficiencies prior to Intentional Ignition (or in the case of a Terminated Ignition, prior to any subsequent Intentional Ignition) in accordance with the applicable terms of this Contract, including price and/or schedule adjustments for which Contractor may be entitled pursuant to Article 12.1(B). Contractor shall use Reasonable Efforts to avoid and minimize delays associated with any such Defects as further described in Article 3.4. In the event of a Terminated Ignition, Contractor and Purchaser shall proceed in accordance with Article 12.1(B) for those actions necessary to prepare the Satellite for relaunch.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 10 — ACCEPTANCE OF SATELLITE, LAUNCH SUPPORT AND MISSION
OPERATIONS SUPPORT SERVICES AND IN-ORBIT TEST
  10.1   Satellite Acceptance
 
      Acceptance of the Satellite by Purchaser (including the Loral Space Payload on behalf of CondoSat Associate) shall occur finally and irrevocably for all purposes hereunder upon the earlier to occur of: (i) the IOT Complete Date (as defined in Article 10.3. below); or (ii) the instant immediately prior to an event on or after Intentional Ignition resulting in the Total Loss of the Satellite (or the Satellite being reasonably determined to be a Total Loss).
 
  10.2   Launch Support and Mission Operations Support Services
 
      Upon arrival of the Satellite at the Launch Site, Contractor shall proceed with the provision of Launch Support Services in accordance with Exhibit A, Statement of Work. After Launch of the Satellite by the Launch Agency, Contractor shall proceed with the provision of Mission Operations Support Services in accordance with Exhibit A, Statement of Work.
 
  10.3   In-Orbit Testing (IOT)
 
      Thirty (30) days prior to the scheduled Launch of the Satellite, Contractor shall notify Purchaser in writing of the IOT schedule with respect to such Satellite. Purchaser personnel, including but not limited to its contractors and agents may, at Purchaser’s election and subject to Article 7 and Article 8.4, observe such IOT at either Purchaser’s or Contractor’s facilities. CondoSat Associate personnel and/or representatives shall also be allowed to observe such IOT at Contractor’s facilities, if so authorized by Purchaser.
 
      After the Satellite has been placed in its orbital slot, Contractor shall perform IOT in accordance with Exhibit D, Satellite Program Test Plan, and conduct an IOT review with Purchaser and CondoSat Associate within three (3) days of completing IOT (with a summary IOT report being submitted at least 24 hours prior to conducting the IOT review), all in accordance with the applicable provisions of Exhibit A, Statement of Work, and Exhibit D, Satellite Program Test Plan. Upon the completion of the IOT review, Purchaser shall be deemed to have accepted the IOT results (the “IOT Complete Date”).
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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  10.4   Orbital Performance Incentives
 
      From and after the IOT Complete Date, Contractor shall have the right to earn Orbital Performance Incentives in accordance with Article 13.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 11 — ACCEPTANCE OF DELIVERABLE ITEMS OTHER THAN THE SATELLITE
  11.1   DSS
  11.1.1   With respect to the DSS (including Software integrated into the DSS), Contractor shall conduct an inspection and test the DSS in accordance with Exhibit H, Dynamic Satellite Simulator Statement of Work and Functional Requirements Document, in coordination with Purchaser or Purchaser’s representative. If the tests establish that the DSS meets the requirements of Exhibit H, Contractor shall deliver the test results and provide a certification to Purchaser that the DSS meets the requirements of this Contract. Based upon this Contractor’s certification and the inspection and test results, and the results of any additional inspection or testing that Purchaser may reasonably conduct in coordination with Contractor, Purchaser shall either Accept the same in writing (“Acceptance” with respect to the DSS) or notify Contractor in writing of those particulars in which the DSS is unacceptable. Should Purchaser fail to notify Contractor in writing of those particulars in which the DSS is unacceptable within ten (10) Business Days of certification, the DSS shall be deemed Accepted by Purchaser. Upon receipt of a notice that the DSS is unacceptable to Purchaser, which notice shall state the particulars relating to such unacceptability, Contractor shall remedy the non-conformances, conduct additional testing as appropriate, and schedule another test of the DSS as appropriate in the presence of Purchaser or Purchaser’s representative. When such particulars have been remedied to conform to all applicable requirements of Exhibit H, the DSS shall be promptly Accepted by Purchaser in writing. Contractor shall be required to repeat the process described in this Paragraph until the DSS shall have been Accepted by the Purchaser in writing pursuant to the criteria of this Paragraph. Contractor shall take all appropriate measures to ensure that Acceptance of the DSS is achieved prior to Acceptance of the Satellite. In the event that Acceptance of the Satellite occurs prior to Acceptance of the DSS, Contractor shall, at Contractor’s sole cost and expense, and at Purchaser’s option, (i) continue to operate such Satellite for Purchaser until the time of Acceptance of such DSS and (ii) expeditiously complete the tasks necessary to facilitate Acceptance of the DSS.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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  11.2   Deliverable Data
 
      For any Deliverable Data (including Deliverable Items of Software but excluding Software integrated into the DSS and Satellite, which are subject to Article 11.1 and Article 10.1, respectively) that requires Purchaser approval pursuant to Exhibit A, Statement of Work, Purchaser shall, within ten (10) Business Days of Delivery, notify Contractor in writing that such Deliverable Data has either been: (i) Accepted, or (ii) that such Deliverable Data does not comply with the requirements of Exhibit A, Statement of Work, identifying each such non-conformance. If Purchaser notifies Contractor of any non-conformance pursuant to the foregoing, Contractor shall promptly correct any non-compliant aspect of such Deliverable Data identified in such notice from Purchaser, and re-submit the Deliverable Data to Purchaser for a subsequent inspection to verify that Contractor has corrected the previously-identified non-compliance and that the Deliverable Data complies with the requirements of Exhibit A, Statement of Work. If Purchaser fails to provide notice within the time specified above, Acceptance shall be deemed to have occurred with respect to such Deliverable Data. Contractor shall be required to repeat the process described in this Paragraph until such time as the relevant Deliverable Data has either been Accepted by Purchaser in writing, or has been deemed Accepted, in accordance with this Paragraph. For Deliverable Data that does not require Purchaser approval pursuant to Exhibit A, Statement of Work, Acceptance of such Deliverable Data shall be deemed to have occurred upon Delivery, provided that such Deliverable Data complies with the requirements of Exhibit A, Statement of Work and further provided that in the event of any non-compliance, Purchaser shall have the remedies set forth in Article 15.2.4.
 
  11.3   Training
 
      Acceptance of Training, or any part thereof, required by Exhibit A, Statement of Work shall occur in accordance with this Article 11.3. Training, or any part thereof, furnished to Purchaser shall be accompanied by written notice from Contractor specifying that portion of the Training being furnished. Acceptance of Training, or any part thereof, shall be deemed to occur ten (10) Business Days after completion of such Training or part thereof unless within such time Purchaser provides a written notice to Contractor that the Training, or part thereof, does not meet Purchaser’s reasonable satisfaction with reference to the requirements of Exhibit A, Statement of Work, identifying each non-conformance. In the event that Purchaser does not Accept Training, or any part thereof,
     
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ViaSat Contract
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      as set forth in this Paragraph, Contractor shall repeat the Training, or relevant part thereof.
 
  11.4   Deliverable Services
 
      Acceptance of Deliverable Services, or any part thereof, shall occur in accordance with this Article 11.4. To the extent feasible, Deliverable Services furnished to Purchaser shall be accompanied by written notice from Contractor specifying that portion of the Deliverable Services being furnished. Acceptance of Deliverable Services, or any part thereof, shall be deemed to occur: (a) in a case where re-performance of the Deliverable Services is not practical (for example, Launch Support Services are performed real-time), upon completion of such Deliverable Services or part thereof; or (b) in a case where re-performance of the Deliverable Services is practicable, ten (10) Business Days after completion of such Deliverable Services or part thereof, unless within such time Purchaser provides a written notice to Contractor that the Deliverable Services, or part thereof, do not meet the requirements of Exhibit A, Statement of Work, identifying each non-conformance.
 
  11.5   Reserved
 
  11.6   Satellite Control Facility Equipment
 
      If Purchaser exercises its option set forth in Article 2.4, upon completion of the installation of the Satellite Control Facility equipment (not including the DSS, which is subject to Article 11.1), Contractor shall conduct an inspection and test the Satellite Control Facility equipment in accordance with Exhibit F, Satellite Control Facility Requirements Document, in coordination with Purchaser or Purchaser’s representative. If such inspection and tests, and data resulting from such inspection and tests, establish that the Satellite Control Facility equipment meets the requirements of Exhibit F, Satellite Control Facility Requirements Document, Contractor shall deliver the inspection and test results and associated data and provide a certification to Purchaser that the Satellite Control Facility equipment meets the requirements of this Contract, together with a notification of the period in which Purchaser may provide Acceptance or notice of non-conformance for the equipment. Based upon such Contractor certification and the inspection and test results, and any inspection or testing that Purchaser may reasonably conduct in coordination with Contractor, Purchaser shall either Accept the same in writing or notify Contractor in writing of those particulars in which the Satellite Control
     
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ViaSat Contract
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      Facility equipment is unacceptable. Should Purchaser fail to notify Contractor in writing of those particulars in which the Satellite Control Facility Equipment is unacceptable within ten (10) Business Days of certification, and Contractor has provided written notice advising Purchaser of such, the Satellite Control Facility equipment shall be deemed Accepted by Purchaser. Upon receipt of a notice that the Satellite Control Facility equipment is unacceptable to Purchaser, which notice shall state the particulars relating to such unacceptability, Contractor shall remedy the non-conformances, conduct additional testing as appropriate, and schedule another test of the Satellite Control Facility equipment as appropriate in the presence of Purchaser or Purchaser’s representative. Upon remedy of such particulars to conform to all applicable requirements of Exhibit F, Satellite Control Facility Requirements Document, the Satellite Control Facility Equipment shall be Accepted by Purchaser in writing. Contractor shall be required to repeat the process described in this Paragraph until the Satellite Control Facility equipment shall have been Accepted by the Purchaser in writing as set forth in this Paragraph. Contractor shall take all appropriate measures to ensure that Acceptance of the Satellite Control Facility Equipment is achieved prior to Acceptance of the Satellite. In the event that Acceptance of the Satellite occurs prior to Acceptance of the Satellite Control Facility Equipment, Contractor shall, at Contractor’s sole cost and expense, and at Purchaser’s option, (i) continue to operate such Satellite for Purchaser until the time of Acceptance of such Satellite Control Facility Equipment and (ii) expeditiously complete the tasks necessary to facilitate Acceptance of the Satellite Control Facility Equipment.
 
  11.7   Purchaser’s Inspection Agents
 
      Purchaser may, upon giving prior written notice to Contractor, cause any Purchaser consultant or agent designated by Purchaser to observe or conduct the acceptance inspection pursuant to this Article 11 in whole or in part; provided, however, that the provisions of Article 7 and Article 8.4 shall apply to any such consultant or agent and such consultant or agent shall comply with Contractor’s normal and customary safety and security regulations provided to Purchaser in writing in advance of such inspection.
 
  11.8   Waivers and Deviations
 
      Waivers of or deviations from the Performance Specification applicable to any Deliverable Item subject to acceptance inspection pursuant to this Article 11 shall be addressed as set forth in Article 9.1.4.
     
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ViaSat Contract
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  11.9   Inspection Costs Borne by Purchaser
 
      All costs and expenses incurred by Purchaser or its consultants or agents in the performance of its inspection rights under this Article 11, including travel and living expenses, shall be borne solely by Purchaser.
 
  11.10   Warranty Obligations
 
      In no event shall Contractor be released from any of its warranty obligations applicable to any Deliverable Item as a result of such Deliverable Item having been Accepted as set forth in this Article 11.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 12 — TRANSFER OF TITLE AND RISK OF LOSS
  12.1   Satellite
(A) Title to and risk of loss or damage for the Satellite, except for the Loral Space Payload, shall pass from Contractor to Purchaser (and title to the Loral Space Payload portion will pass to CondoSat Associate simultaneously, pursuant to the Loral Space Payload Contract) at the time of Intentional Ignition. In the event of a Terminated Ignition not resulting in Total Loss, title to and risk of loss or damage for the Satellite (including the Loral Space Payload portions of the Satellite) shall revert to Contractor upon such Terminated Ignition. If Contractor re-acquires title and risk of loss or damage as set forth in the immediately preceding sentence, title to and risk of loss or damage for the Satellite, except for the Loral Space Payload, shall again pass to Purchaser (title to the Loral Space Payload portion of the Satellite will again pass to CondoSat Associate simultaneously, pursuant to the Loral Space Payload Contract) upon the subsequent Intentional Ignition. Prior to Intentional Ignition, the Parties shall agree to appropriate revisions to certain definitions (i.e., Intentional Ignition, Launch, Terminated Ignition, and other related provisions) as required to ensure that risk of loss transfers from Contractor to Purchaser in a manner that does not result in a lack (or gap in time) of insurance coverage for the Satellite at any time between the time period covered by the Ground Insurance to be provided by Contractor pursuant to Article 32.5 and the applicable coverage start date for any Launch and In-Orbit Insurance Policy.
(B) In the event of a Terminated Ignition, once the launch pad has been declared safe and the Launch Agency authorizes the start of the demating operations, Contractor shall, at Purchaser’s request, immediately take all necessary actions to prepare the Satellite for a relaunch, including: (a) supporting the Launch Agency in demating the Satellite from the Launch Vehicle and conducting defueling operations; (b) directly performing inspection and testing, refurbishment, storage, repair and replacement of damaged Component(s), and transportation of the Satellite to and from the Launch Site; and (c) providing additional Launch support services for the subsequent Launch of the Satellite. Such actions shall be handled as a change pursuant to Article 16.1, and for the avoidance of doubt is not considered to be performance of Work pursuant to the terms of the warranty set forth in Article 15.2.1. Promptly after a Terminated Ignition, the Parties shall establish a new due date for the repaired/refurbished Satellite. In the event of a
     
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Terminated Ignition that results in the Total Loss of the Satellite, title to and risk of loss or damage for the Satellite shall remain with Purchaser.
(C) EXCEPT WITH RESPECT TO WILLFUL MISCONDUCT OR GROSS NEGLIGENCE, UPON AND AFTER INTENTIONAL IGNITION, UNLESS AND TO THE EXTENT OF A TERMINATED IGNITION WHERE CONTRACTOR RE-ACQUIRES TITLE TO AND RISK OF LOSS OR DAMAGE FOR THE SATELLITE AS PROVIDED IN ARTICLE 12.1, CONTRACTOR’S SOLE OBLIGATION, LIABILITY OR FINANCIAL RISK, AND THE SOLE AND EXCLUSIVE REMEDIES OF PURCHASER OR ANY PARTY ASSOCIATED WITH PURCHASER, WITH RESPECT TO THE SATELLITE’S DESIGN, WORKMANSHIP, CONFORMITY TO SPECIFICATION, USE OR PERFORMANCE OF SUCH SATELLITE, INCLUDING ANY ASSISTANCE OR ADVICE (ACTUAL OR ATTEMPTED) PROVIDED OR OMITTED AS CONTEMPLATED BY ARTICLES 15.3 AND 32 HEREOF (INCLUDING WITH RESPECT TO ANY ACTUAL OR CLAIMED DEFECT CAUSED OR ALLEGED TO BE CAUSED AT ANY TIME, WHETHER BEFORE OR AFTER INTENTIONAL IGNITION, BY CONTRACTOR’S OR ANY OF ITS SUBCONTRACTORS’ NEGLIGENCE) SHALL BE AS SET FORTH IN ARTICLES 5.2.2 (WITH RESPECT POST-LAUNCH MILESTONE PAYMENTS), 13, 15.3, 19, AND 32, IN ALL CASES SUBJECT TO THE LIMITATION OF LIABILITY SET FORTH IN ARTICLE 27. THE FOREGOING SHALL NOT PREJUDICE OR LIMIT EITHER PARTY’S RIGHTS AND REMEDIES WITH RESPECT TO ARTICLE 28, DISCLOSURE AND HANDLING OF PROPRIETARY INFORMATION AND ARTICLE 39, INTELLECTUAL PROPERTY.
  12.2   Deliverable Items Other Than the Satellite
 
      Title to and risk of loss or damage for the DSS and the Satellite Control Facility Equipment (including the Spares), shall pass from Contractor to Purchaser upon Acceptance thereof pursuant to Article 11.1 and Article 11.6, respectively. Purchaser’s rights in and to Deliverable Data (including, without exception, Deliverable Items of Software and Software integrated into hardware) are as set forth in Article 39, Intellectual Property.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 13 — ORBITAL PERFORMANCE INCENTIVES
  13.1   General
 
      Contractor may earn, and Purchaser shall pay, if earned, Orbital Performance Incentives with respect to the Satellite in the amounts set forth in Article 13.2. Contractor may earn and accrue the Orbital Performance Incentives over the Orbital Performance Incentive Period with respect thereto. All measurements, computations and analyses made pursuant to this Article 13 shall be made in accordance with good engineering practice applying standards generally applicable in the aerospace industry.
 
  13.2   Daily Rate of Orbital Performance Incentives
 
      Contractor shall be entitled to earn Orbital Performance Incentives in the cumulative amount of [***] percent ([***]%) of the Firm Fixed Price (after all Firm Fixed Price adjustments made to this Contract) over the Orbital Performance Incentive Period at a daily rate calculated by dividing the total amount of Orbital Performance Incentives by 5,479 (as of EDC, the daily rate is $[***]/ 5,479 = $[***]) for each day that there is no Transponder Failure (the “Daily Rate”).
 
      For each day (or any portion thereof) during the Orbital Performance Incentive Period that there are one or more Transponder Failures, the Daily Rate shall be adjusted in accordance with the following formula:
ADR = D x (T/N)
Where:
ADR = Adjusted Daily Rate;
D = Daily Rate;
N = Number of Transponders (which shall be two times the number of the U.S. Beams and Additional Beams set forth in Exhibit B, Satellite Performance Specification); and
T = number of Transponders that have not experienced a Transponder Failure
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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during the day. For the purposes of determining “T”, the term “Transponder” and “Transponder Failure” shall not include transponders allocated to the Loral Space Payload.
      For example, assuming N=126, for each Transponder Failure that occurs in any day during the Orbital Performance Incentive Period, the Daily Rate for that day is reduced by U.S. $[***](U.S. $[***]).
 
  13.3   On-Board Redundancy; Spares
 
      On-board redundancy and/or spare Components shall be taken into consideration to maintain service on a Satellite, and such use shall be deemed normal operating procedure for purposes of this Article 13 so long as the applicable criteria of Exhibit B are met by such Satellite, as the case may be.
 
  13.4   Orbital Storage
 
      If Purchaser places the Satellite in Orbital Storage (other than due to the inability to operate the Satellite for unexcused causes attributable to Contractor), Contractor shall continue to earn Orbital Performance Incentives at the same Daily Rate as Contractor would be earning such incentives if the Satellite were in service.
 
  13.5   Total Loss of the Satellite During Orbital Performance Incentive Period
 
      In the event that the Satellite becomes a Total Loss during the Orbital Performance Incentive Period, and such Total Loss is not attributable to Purchaser or Purchaser’s representatives, consultants or subcontractors as set forth in Article 13.10, Contractor shall not be entitled to earn any further Orbital Performance Incentives with respect to such Satellite and shall have no further claim against Purchaser regarding such Orbital Performance Incentives. Contractor shall not lose any Orbital Performance Incentives earned prior to time that the Satellite becomes a Total Loss as provided above.
 
  13.6   Total Loss or Partial Loss Not Attributable to Contractor
 
      If, after Intentional Ignition, the Satellite is determined to be a Total Loss, or if a Partial Loss has occurred (unless and to the extent of a Terminated Ignition as provided in Article 12.1) and, in either case, such loss is due to causes not attributable to Contractor
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
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ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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      (for avoidance of doubt, causes attributable to the Launch Agency shall not be considered causes attributable to Contractor), Contractor shall be deemed to have earned immediately the corresponding amount of Orbital Performance Incentives that would otherwise be lost pursuant to this Article 13, provided that Contractor shall only be entitled to the interest payments set forth in Article 13.9 through the date of payment for the corresponding amounts of Total Loss or Partial Loss.
 
  13.7   Purchaser Operation of the Satellite
 
      If, the Satellite operates in a manner that is not in accordance with any requirements of Exhibit B, Satellite Performance Specification, and to the extent such operation is due to any act or omission on the part of Purchaser or Purchaser’s representatives, consultants or subcontractors in the operation of, testing of, or communication with, the Satellite (unless such act or omission was performed in accordance with directions or instructions provided by Contractor), Contractor shall continue to earn Orbital Performance Incentives with respect to such Satellite at the rate that applied prior to the act or omission resulting in degraded performance (subject to later adjustments pursuant to this Article with respect to failures to meet the requirements of Exhibit B, Satellite Performance Specification, not resulting from any such act or omission on the part of Purchaser or Purchaser’s representatives, consultants or subcontractors).
 
  13.8   Contractor Access
 
      During the Orbital Performance Incentive Period, Contractor shall have reasonable access to applicable performance data of the Satellite for purposes of evaluating any degradation in the performance of the Satellite.
 
  13.9   Payment
 
      Payment of amounts earned under this Article 13 plus interest thereon calculated from the first day of the Orbital Performance Incentive Period until the date of payment, at an annual rate of [***] percent ([***]%), compounded monthly, shall be paid as follows: (a) the first payment shall be due no later than the end of the first full month following the month in which occurred successful completion of In-Orbit Testing, and shall cover the first partial month of earned Orbital Performance Incentives, if any; and (b) thereafter, all
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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      subsequent payments shall be due no later than thirty (30) days following the end of each calendar month for the prior month’s earned Orbital Performance Incentives.
 
  13.10   Complete Loss of Unearned Incentives
 
      Contractor shall no longer be entitled to earn any remaining unearned Orbital Performance Incentives if: (a) Purchaser permanently withdraws the Satellite from operational service or is unable to operate the Satellite for the purpose of operating a broadband internet subscriber service, prior to the end of the Stated Life, due to performance problems attributable to the Contractor; (b) pointing errors exceed the values set forth in Exhibit B, Satellite Performance Specification by more than [***] percent ([***]%) and Contractor is unable to fix such errors using Reasonable Efforts; or (c) Contractor has lost or is reasonably predicted to lose more than [***] percent ([***]%) of the Orbital Performance Incentives.
 
  13.11   Ground Storage
 
      If after Satellite Pre-Shipment Review of a Satellite, Purchaser places such Satellite in Ground Storage for a period of [***] for reasons not primarily due to the fault of Contractor, Purchaser shall pay Contractor interest on the full amount of the Orbital Performance Incentives at an annual rate of [***] percent ([***]%), compounded monthly, commencing on the first day of the seventh month of Ground Storage and ending upon the date of shipment of the Satellite to the Launch Site.
 
  13.12   Insurance on Orbital Performance Incentives
 
      Contractor agrees that it will not obtain insurance covering the Orbital Performance Incentives.
 
  13.13   Contention with Canadian Beam Transponders
 
      Purchaser acknowledges that Contractor is entitled to earn additional orbital performance incentives under the Loral Space Payload Contract based on the performance of the Transponders allocated to the Loral Space Payload. Nevertheless, in the event that the overall Satellite experiences any Anomaly which will affect the use of the Satellite or one (1) or more Transponders, Purchaser has the sole right to
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
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      determine which portion of the Satellite or Transponder(s) shall be affected, which decision shall be binding hereunder, and Purchaser shall advise Contractor accordingly. Contractor agrees to reflect Purchaser’s rights contained in this Article 13.13 in the Loral Space Payload Contract.
     
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ARTICLE 14 — CORRECTIVE MEASURES IN THE SATELLITE AND OTHER DELIVERABLE ITEMS
If the data available from any satellite manufactured by Contractor (whether in-orbit or on the ground) or other information known to Contractor shows that the unlaunched Satellite to be delivered under this Contract contains or is predicted to contain a Defect, Contractor shall: (i) provide Purchaser prompt written notice thereof, provided Contractor shall not be required to disclose to Purchaser information that is confidential to any third party, and (ii) at Contractor’s sole cost, correct such Defect or potential Defect notwithstanding that a payment may have been made in respect thereof, and regardless of prior reviews, inspections, or approvals. Contractor shall use its Reasonable Efforts to avoid and minimize delays as provided in Article 3.4. If the data available from any satellite manufactured by Contractor (whether in-orbit or on the ground) or other information known to Contractor shows that the launched Satellite delivered under this Contract contains or is predicted to contain a Defect or Anomaly, Contractor shall proceed in accordance with Article 15.3.
     
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ARTICLE 15 — REPRESENTATIONS AND WARRANTIES
15.1 Representations
Each Party represents that, as of the EDC:
  1.   It is a corporation duly organized in the State of Delaware.
 
  2.   It has all requisite corporate power and authority to own and operate its material properties and assets and to carry on its business as now conducted in all material respects.
 
  3.   It is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on the other Party.
 
  4.   It has all requisite corporate power and authority to enter into this Contract and to carry out the transactions contemplated by this Contract.
 
  5.   The execution, delivery and performance of this Contract and the consummation of the transactions contemplated by this Contract have been duly authorized by the requisite corporate action and do not conflict with any material agreement or obligation to which it is a party or which binds its assets.
 
  6.   This Contract is a valid and binding obligation, enforceable against each Party making this representation in accordance with its terms.
 
  7.   No suit, claim, action, arbitration, legal, administrative, or other proceeding is pending, or to the best of each Party’s knowledge, threatened against it that would likely affect the validity or enforceability of this Contract, or the ability of each Party making this representation to fulfill its commitments hereunder in any material respect.
15.2 Terms and Period of Warranty
  15.2.1   Satellite . Contractor warrants that, from completion of SPSR up to Intentional Ignition of the Launch Vehicle (unless and to the extent of a Terminated Ignition where Contractor reacquires title and risk of loss for the Satellite as provided in Article 12.1 (A), in which case the warranty obligation will reattach but, as to any damaged Component, only after repair and replacement of such damaged Component pursuant to Article 12.1 (B) and the warranty period shall continue through the subsequent Intentional Ignition), the Satellite shall be free of any Defects and shall be manufactured and will perform in conformity with applicable requirements of Exhibit B, Satellite Performance
      
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      Specification (as modified by any waiver and/or deviation pursuant to Article 9.1.4). If the Satellite or any part thereof (including Software integrated into the Satellite) does not conform to the above warranty, Contractor shall at any time during the applicable warranty period and irrespective of prior inspections proceed in accordance with Article 9.1.8 hereof and Contractor’s only liability under the preceding sentence shall be as and to the extent set forth in such Article 9.1.8.
  15.2.2   DSS And SCF Equipment
    (A)  DSS. Contractor warrants that the DSS (including the Software integrated into the DSS) delivered under this Contract shall be manufactured and/or developed in conformity with the applicable requirements of Exhibit H (as modified by any waiver and/or deviation pursuant to Article 11.8) and will be free from Defects during the period commencing on the date of Acceptance of such DSS pursuant to Article 11 and ending on the later of the first anniversary of: (a) the Launch of the Satellite; or (b) Acceptance of the DSS.
 
    During the period specified above, as Purchaser’s sole and exclusive remedy for any non-conformance or defect in the DSS of which Purchaser notifies Contractor in writing, such non-conformance or Defect shall be remedied by Contractor at Contractor’s expense by repair or replacement of the defective Component (at Contractor’s election). For any such non-conformance or Defect, Contractor shall determine if repair or replacement is required to be performed at Contractor’s plant. If required, Purchaser shall ship the DSS to Contractor’s designated facility. Contractor shall be responsible for the cost of shipment (including transportation, transit insurance, taxes and/or duties), and the cost of return shipment (including transportation, transit insurance, taxes and duties) to Purchaser at the location designated in Article 3.1. Risk of loss for the DSS shall transfer to Contractor upon delivery of the DSS to the shipping carrier by Purchaser, and risk of loss to the DSS shall transfer again to Purchaser once such DSS is repaired or replaced pursuant to this Article 15.2.2, upon receipt thereof by Purchaser at the location designated therefor in Article 3.1. After the expiration of the period specified above and through the Stated Life, a failure of the software integrated into the DSS to meet the applicable requirements of Exhibit H, Dynamic Satellite Simulator Statement of Work and Functional Requirements Document will, if such failure results in
      
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    a Satellite Anomaly, be resolved in the response to the Satellite Anomaly pursuant to Article 15.3, below.
 
    (B)  SCF Equipment . If Purchaser exercises its option set forth in Article 2.4, Contractor warrants that the SCF Equipment (for purposes of this Article 15.2.2, “SCF Equipment” shall include the Software integrated into the SCF and the Spares) delivered under this Contract shall be manufactured in conformity with the applicable requirements of Exhibit F (as modified by any waiver and/or deviation pursuant to Article 11.8) and will be free from Defects during the period commencing on the date of Acceptance of such SCF Equipment pursuant to Article 11 and ending on the later of the first anniversary of: (a) the Launch of the Satellite; or (b) Acceptance of the SCF Equipment.
 
    During the period specified above, as Purchaser’s sole and exclusive remedy for any non-conformance or defect in such SCF Equipment of which Purchaser notifies Contractor in writing, such non-conformance or Defect shall be remedied by Contractor at Contractor’s expense by repair or replacement of the defective Component (at Contractor’s election). For any such non-conformance or Defect, Contractor shall determine if repair or replacement is required to be performed at Contractor’s plant. If required, Purchaser shall ship the SCF Equipment to Contractor’s designated facility. Contractor shall be responsible for the cost of shipment (including transportation, transit insurance, taxes and/or duties), and the cost of return shipment (including transportation, transit insurance, taxes and duties) to Purchaser at the location designated in Article 3.1. Risk of loss for the SCF Equipment shall transfer to Contractor upon delivery of the SCF Equipment to the shipping carrier by Purchaser, and risk of loss to the SCF Equipment shall transfer again to Purchaser once such SCF Equipment is repaired or replaced pursuant to this Article 15.2.2, upon receipt thereof by Purchaser at the location designated therefor in Article 3.1. After the expiration of the period specified above and through the Stated Life, a failure of the software integrated into the SCF and the Spares to meet the applicable requirements of Exhibit F, Satellite Control Facility Requirement Specification will, if such failure results in a Satellite Anomaly, be resolved in the response to the Satellite Anomaly pursuant to Article 15.3, below.
  15.2.3   Training, Mission Operations Support Services and Launch Support Services . Contractor warrants that the Training, Mission Operations Support Services and Launch Support Services Purchaser accepts pursuant to this Contract will, upon Acceptance, conform to the highest professional standards for
      
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      the commercial satellite communications industry for work similar in type, scope, and complexity to the Work at the time such Work is provided. In the event Contractor breaches this warranty and is so notified by Purchaser within twenty (20) Business Days of Acceptance or as soon as possible where time is of the essence, as Purchaser’s sole and exclusive remedy, Contractor shall correct the deficiencies in the provision of such Training, Launch Support Services and Mission Operations Support Services where it is possible to do so (e.g., Contractor cannot correct deficiencies in, or re-perform, Launch Support Services from and after Launch).
 
  15.2.4   Deliverable Data . Upon Acceptance, each item of Deliverable Data shall be complete, up-to-date, and shall otherwise conform with the requirements of this Contract. In the event the Contractor breaches this warranty and is so notified by Purchaser, as Purchaser’s sole and exclusive remedy, Contractor shall correct the deficiencies in the Deliverable Data and resubmit such Deliverable Data to Purchaser.
 
  15.2.5   Software. In addition to the warranties set forth in Articles 15.2.2 (A) and (B), Contractor further represents and warrants that, through the Stated Life of the Satellite, Contractor shall: (i)  demonstrate that all PC based-Software delivered hereunder is free of viruses or similar items by testing such Software using commercially reasonable anti-viral software; (ii) not introduce into any delivered Software, without Purchaser’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 (an exception to the foregoing is licensed software that will be included in some delivered Software; such license software will prevent any unlicensed copies of delivered Software from running); and (iii)  not seek to gain access to the Work through any special programming devices or methods, including trapdoors or backdoors, to bypass, without Purchaser’s prior written approval, any Purchaser security measures protecting the Work. Although the Parties contemplate that all necessary software support will be provided pursuant to Article 15.3, below, Purchaser shall have the option to purchase additional maintenance and support of the Software at commercially reasonable terms and prices.
      
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  15.2.6.   Title. Contractor represents and warrants that it shall provide good and marketable title to all Deliverable Items for which title shall pass in accordance with Article 12 free and clear of any liens and encumbrances of any kind (except those, if any, of Purchaser), at the time title passes to Purchaser.
 
  15.2.7.   Reserved
 
  15.2.8   Disclaimer . EXCEPT AND TO THE EXTENT EXPRESSLY PROVIDED IN THIS ARTICLE 15, CONTRACTOR HAS NOT MADE NOR DOES IT HEREBY MAKE ANY REPRESENTATION OR WARRANTY, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF DESIGN, OPERATION, CONDITION, QUALITY, SUITABILITY OR MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR PURPOSE, ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, WITH REGARD TO THE SATELLITE, ANY OTHER DELIVERABLE ITEM OR ANY OTHER WORK. CONTRACTOR MAKES NO WARRANTY WITH RESPECT TO LAUNCH SERVICES OR THE CONDITION, USE OR PERFORMANCE OF ANY LAUNCH VEHICLE.
15.3 Satellite Anomalies
In addition to Purchaser’s warranty remedy set forth in Article 15.2.1 hereof, Contractor shall investigate any Satellite Anomaly or Defect occurring on the Satellite after Launch and during the Stated Life of such Satellite and known to it or as notified in writing by Purchaser, and shall use Reasonable Efforts to correct such Anomaly or Defect as promptly as possible in accordance with the Satellite Anomaly resolution support services set forth in Paragraph 2.5.8.2 of Exhibit A, Statement of Work. Such Reasonable Efforts shall be conducted at Contractor’s expense to resolve Defects or Anomalies by on-ground means, including software patches or updates, or transmission by Contractor of commands to the Satellite 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. Contractor shall coordinate and consult with Purchaser concerning such on-ground resolution of Defects or Anomalies in the launched Satellite. If for any reason any such Satellite Defect or Anomaly cannot be or is not corrected as set forth above, and as a result thereof, such Satellite suffers any loss, including loss of Transponders or becomes a Total Loss, Purchaser shall look
      
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solely to its Launch and In-Orbit Insurance Policy and any subsequent insurance policy for the Satellite procured by Purchaser to compensate it for its loss and any consequences therefrom, and Contractor shall have no liability or obligation to Purchaser or any other person in respect of such loss, except as set forth in Article 13 and to provide the services set forth in 32, subject to the conditions and limitations of such Articles and in all cases subject to the limitation of liability stated in Article 27. In the event and to the extent that the occurrence of a Satellite Defect or Anomaly is due to causes attributable to Purchaser, or Purchaser’s agents, contractors and subcontractors (not including Contractor), Purchaser shall pay Contractor the Actual Costs reasonably incurred of all services provided by Contractor associated with such Satellite Anomaly services, plus a markup of [***] percent ([***]%) of such costs, which costs and markup shall be invoiced and paid pursuant to the provisions of Article 5.
15.4 Use Conditions Not Covered by Warranty
With respect to the DSS and SCF Equipment (including the Software integrated into the SCF Equipment and the DSS, and Spares), the warranty under this Article 15 shall not apply to the extent that any adjustment, repair or parts replacement is required as a result, directly or indirectly, of accident not attributable to Contractor, unusual physical or electrical stress beyond the item’s design tolerances, Purchaser or third party negligence or misuse, failure of environmental control prescribed in operations and maintenance manuals, or repair or alterations by any party other than Contractor without Contractor’s advance written consent, or by causes other than normal and ordinary use. The warranty provided pursuant to this Article 15 is conditioned upon Contractor being given reasonable access, if required, to Deliverable Items delivered at Purchaser’s facility or as otherwise directed by Purchaser in order to effect any repair or replacement thereof. If the Defect repaired or remedied by Contractor is not covered by the warranty provided pursuant to this Article 15, Purchaser shall pay Contractor the Actual Costs reasonably incurred of such repair or replacement plus a markup of [***] percent ([***]%) of such costs, which costs and markup shall be invoiced and paid pursuant to the provisions of Article 5.
 
***   Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
      
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15.5   Subcontractor Warranties
 
    Contractor shall pass on or assign to Purchaser all applicable warranties on goods or services given by Subcontractors to the extent to which Contractor is permitted by the terms of its purchase contracts with such suppliers or manufacturers, and further to the extent that is such assignment does not interfere with Contractor’s performance if its obligations hereunder.
      
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ARTICLE 16 — CHANGES
16.1 Change Orders
Purchaser may, at any time between the EDC and the completion of this Contract, direct a change within the general scope of this Contract (which includes the Loral Space Payload) in drawings, designs, specifications, method of shipment or packing, quantities of items to be furnished, place of Delivery, postpone Delivery under a stop-work order (but not more than, in the cumulative, eighteen (18) months), require additional Work, or direct the omission of Work. In the event Purchaser directs a change, Contractor shall: (a) immediately proceed with the Work as changed; and (b) within thirty (30) days of Purchaser’s direction, submit to Purchaser a written proposal of the effect of such a change on the Firm Fixed Price, specification, payment plan, time required for performance and/or other affected terms and conditions, including any effect to the [***] (the “Proposal”).
Prior to directing such change, Purchaser may issue a request to Contractor for a Proposal. Within thirty (30) days of receipt of such request for the Proposal, Contractor shall provide Purchaser with the Proposal.
If any change directed by Purchaser causes an increase or decrease in costs of, or the time required for, the performance of this Contract, and/or other terms and conditions, an equitable adjustment shall be made in the Firm Fixed Price, Delivery schedule, and/or other terms and conditions, this Contract shall be modified in writing accordingly. Firm Fixed Price adjustments shall account only for the net impact on the Actual Costs incurred by Contractor as a result of the change including a reasonable profit thereon not to exceed [***] percent ([***]%). Such Actual Costs shall be determined in accordance with Contractor’s standard accounting practices, and, if requested by Purchaser, Contractor will provide reasonably detailed back-up data to support its claim for equitable adjustment. If the cost of supplies or materials made obsolete or excess as a result of a change is included in Contractor’s claim for adjustment, Purchaser shall have the right to prescribe the manner of disposition of such supplies or materials. If Purchaser directs the omission of Work and, as a result, it causes an increase in the cost of the remaining Work to be performed hereunder, such increase in cost shall constitute an allowable element of Contractor’s claim for equitable adjustment.
 
***   Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
      
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Upon receipt of Contractor’s Proposal, the Parties shall commence good faith negotiations concerning the appropriate equitable adjustment to the Contract. In the event that the Parties have not reached agreement on the amount and manner of Contractor’s compensation within sixty (60) days of Purchaser’s direction for change, Purchaser shall pay to Contractor the agreed-upon portions of the proposed changes to the Firm Fixed Price and the Payment Plan and Termination Liability Schedule, and, pending agreement or other resolution, deposit the balance of the amount set forth in the Proposal with a recognized escrow agent selected by Purchaser on standard terms. The Parties shall exert all good faith efforts to reach resolution of the appropriate equitable adjustment within (30) days after Purchaser makes such deposit into escrow.
This Article shall not apply to [***] set forth in Article [***].
 
***   Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
      
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ARTICLE 17 — FORCE MAJEURE
17.1 Force Majeure Defined
Contractor shall not be responsible for late Delivery or delay of the final completion date or nonperformance of its contractual obligations due to Force Majeure. Force Majeure shall be any event beyond the reasonable control of Contractor or its suppliers and subcontractors and shall include but not be limited to: (1) acts of God; (2) acts of a public enemy; (3) acts of a government in its sovereign capacity or subject to the DPAS regulations (including any action or inaction affecting the import or export of items); (4) war and warlike events; (5) catastrophic weather conditions such as hurricanes, tornadoes and typhoons; (6) fire, earthquakes, floods, epidemics, quarantine restrictions; (7) actions taken in response to GIDEP direction concerning technical problems generally affecting the telecommunications industry; and (8) sabotage, riot and embargoes. (“Force Majeure”). For an event to qualify for Force Majeure relief hereunder: (1) the event must be beyond the control and without fault or negligence of a Party or its subcontractors hereunder; (2) the resulting delay cannot be circumvented by Reasonable Efforts to establish work-around plans, payment of expedited fees, alternate sources, or other means; and (3) Contractor must provide Purchaser with written notice thereof as soon as possible but in no event later than within ten (10) Business Days after Contractor’s performance hereunder is impacted by such an event. Notwithstanding anything to the foregoing, any failure by a Subcontractor to meet its obligations to Contractor, or any delay due to labor shortages, defective tooling, transportation difficulties, equipment failure or breakdowns, lockouts, or inability to obtain materials shall not constitute a Force Majeure event (except where such circumstance is itself caused by a Force Majeure event), and shall not relieve Contractor from meeting any of its obligations under this Contract. Contractor shall use Reasonable Efforts to minimize the effect of any Force Majeure event. In the event Contractor claims a Force Majeure event, Contractor’s written notice called for above shall include a detailed description of the portion of the Work known to be affected by such delay, as well as a proposed work-around plan reasonably satisfactory to Purchaser. The work-around plan shall: (1) set forth Contractor’s Reasonable Efforts to mitigate the effect of any such Force Majeure event and include a schedule for such mitigation; and (2) contain sufficient detail for Purchaser to be able to evaluate such plan. If appropriate, such work-around plan shall use work-around schedules, payment of expedited fees, twenty four (24) hour
      
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operations, and the use of alternate Subcontractors (to be approved by Purchaser if required under this Contract). In the event of a Force Majeure event, the Delivery requirement shall be extended for such period as is supported by the evidence provided; provided, however, the occurrence of a Force Majeure event shall in no event entitle Contractor to an increase in the price for the Work. Any adjustment of time appropriate under this Article shall be formalized promptly by the execution of a mutually acceptable amendment to this Contract.
17.2   Termination for Force Majeure
 
    Purchaser may, upon written notice to Contractor, terminate this Contract immediately in whole or in part if and when the cumulative aggregate of Force Majeure events exceeds twelve (12) months. In the event of such a termination, Contractor shall submit a final invoice to Purchaser within sixty (60) days after the termination date, which shall specify the amount due to Contractor from Purchaser pursuant to this Article 17.2. Purchaser shall pay such invoice, to the extent undisputed by Purchaser, within sixty (60) days after receipt. Notwithstanding the foregoing, Purchaser may dispute the amount of such invoice by giving Contractor notice of such dispute within sixty (60) days after receipt of the invoice. Contractor’s invoice shall be in an amount equal to the sum of: (i) for each Milestone accepted, the respective Milestone payment; and (ii) for each Milestone not accepted, a percentage of the Milestone payment, where such percentage equals the percentage of the Milestone completed, both less the sum of all amounts received by Contractor under this Contract. Concurrently with such payment, Contractor shall promptly deliver in the manner and to the extent directed by Purchaser all completed Work and work-in-progress to Purchaser or Purchaser’s designee (including all applicable licenses and warranties). Alternatively, Purchaser may request Contractor to purchase any such Work or work-in-progress that Contractor believes can be re-used or use Reasonable Efforts to sell any such items, in which case Contractor shall remit any sales proceeds to Purchaser, less, where Contractor sells such items on behalf of Purchaser, a deduction for the Actual Costs of disposition (without mark-up, margin or administrative charges) reasonably incurred by Contractor for such efforts. Payment of the amount payable by Purchaser under this Article shall constitute a total discharge of Purchaser’s liabilities to Contractor under this Contract. If this Contract is terminated as provided in this Article, Contractor shall protect and preserve property in the possession
      
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of Contractor in which Purchaser has an interest. Nothing in this paragraph shall limit Purchaser’s rights to terminate this contract for convenience pursuant to Article 21.
      
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ARTICLE 18 — PURCHASER DELAY OF WORK
If the performance of all or any part of the Work required of Contractor under this Contract is materially delayed or interrupted by Purchaser’s failure to perform its contractual obligations set forth in paragraph 2.6 of the SOW within the time specified in this Contract or within a reasonable time if no time is specified, or by an act or failure to act of Purchaser or its agents, consultants or subcontractors (including, without limitation, the Launch Agency) that unreasonably interferes with and/or materially delays Contractor’s performance of its obligations under this Contract (each a “Purchaser Delay”), Purchaser shall be responsible for any additional Actual Costs incurred by Contractor as a result thereof, and the Firm Fixed Price shall be modified accordingly. In addition, Contractor shall be entitled to an equitable adjustment in performance requirements, Delivery schedules, and any other terms of this Contract affected by such Purchaser Delay. The Parties will formalize all such adjustments by executing an appropriate amendment to this Contract. To qualify as a Purchaser Delay hereunder, (a) Contractor must notify Purchaser in writing of any applicable Purchaser Delay no later than five (5) Business Days after Contractor becomes aware of a possible impact due to the Purchaser Delay; and (b) Contractor must use Reasonable Efforts to avoid and/or mitigate the effect of such Purchaser Delay.
      
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ARTICLE 19 — INTELLECTUAL PROPERTY INDEMNITY
19.1 Indemnification
Contractor, at its own expense, hereby agrees to defend or, at Contractor’s sole option, to settle, and to indemnify and hold harmless Purchaser, and its respective shareholders, officers, directors and employees from and against any claim or suit based on an allegation that Contractor’s performance of the Work hereunder or the manufacture of any Deliverable Item or any part thereof or the normal intended use, lease or sale of any Deliverable Item or any part thereof infringes any third party‘s Intellectual Property Right (“Intellectual Property Claim”), and shall pay any royalties and other liabilities adjudicated (or provided in settlement of the matter) to be owing to the third party claimant as well as costs and expenses incurred in defending or settling such Intellectual Property Claim. Contractor’s obligations under this Article 19.1 shall be subject to the conditions to indemnification set forth in Article 20.3.
19.2 Infringing Equipment
If Contractor’s performance of the Work or the manufacture of any Deliverable Item or any part thereof or the normal intended use, manufacture, lease sale, or other disposition of any Deliverable Item or any part thereof under this Contract is enjoined or otherwise prohibited as a result of an Intellectual Property Claim, Contractor shall, at its option and expense (i) resolve the matter so that the injunction or prohibition no longer pertains, (ii) procure for Purchaser the right to use the infringing item, and/or (iii) modify the infringing item so that it becomes non-infringing while remaining in compliance with the Performance Specification (as such may be modified or waived pursuant to Article 9.1.4 or Article 11.8, as applicable). Purchaser shall reasonably cooperate with Contractor to mitigate or remove any infringement. If Contractor is unable to accomplish (i), (ii) or (iii) as stated above, Purchaser shall have the right to terminate this Contract, in whole or in part, and receive [***].
19.3 Combinations and Modifications
Contractor shall have no liability under this Article 19 for any Intellectual Property Claim to the extent arising from (i) use of any Deliverable Item in combination with other items not provided, recommended, or approved by Contractor, or (ii) modifications of any
 
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Deliverable Item after Delivery by a person or entity other than Contractor unless authorized by written directive or instructions furnished by Contractor to Purchaser under this Contract or (iii) the manufacture, delivery or use of any Deliverable Item in compliance with the design, specification or instructions of Purchaser.
19.4 Sole Remedies
The remedies set forth in this Article 19 are Purchaser’s sole and exclusive remedies for, or related to, any Intellectual Property Claim.
      
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ARTICLE 20 — INDEMNIFICATION
20.1 Contractor’s Indemnities
  a.   Contractor, at its own expense, shall defend, indemnify and hold harmless Purchaser and its respective shareholders, directors, officers and employees, from and against any losses, damages, and other liabilities adjudicated (or provided for in settlement of the matter) to be owing to a third party claimant as well as costs and expenses, including court costs and reasonable attorneys’ fees (collectively, “Losses”) incurred in connection with any third party claim or suit alleging personal injury, death, or damage to the property of a third party, but only if such Losses were caused by, or resulted from, a negligent act or omission or willful misconduct of Contractor or its employees or representatives. For the avoidance of doubt, the Satellite in any stage of manufacture or operation shall not be considered as property subject to coverage under this Article 20.1, and the CondoSat Associate is not considered a third party subject to coverage under this Article 20.1.
 
  b.   Contractor, at its own expense, shall defend, indemnify and hold harmless Purchaser and its respective shareholders, directors, officers and employees, from and against all range support and de-stacking charges to the extent not otherwise covered under a Purchaser policy of insurance, if any (including without limitation charges assessed to de-erect, place and maintain in storage, re-erect and re-process the Launch Vehicle and Satellite and to re-integrate the Satellite), levied against Purchaser by the Launch Agency for the Satellite due to Launch delays caused by Contractor and/or its Subcontractors, agents or representatives at any tier, or any of them, up to a cumulative maximum of [***] U.S. dollars (U.S. $[***]). Purchaser shall use Reasonable Efforts to cause the Launch Agency not to incur range support costs or de-stack a Launch Vehicle after Purchaser has been notified by Contractor that such a delay may occur.
 
  c.   Contractor, at its own expense, shall defend, indemnify and hold harmless Purchaser and its respective shareholders, directors, officers and employees, from and against all Losses in connection with claims arising out of, or relating to, Contractor’s breaches of its obligations in Article 4.5.
 
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20.2 Purchaser’s Indemnity
Purchaser, at its own expense, shall defend, indemnify and hold harmless Contractor, and its respective directors, officers and employees from and against any Losses incurred in connection with any third party claim or suit alleging personal injury, death, or damage to the property of a third party claimant, but only if such Losses were caused by, or resulted from, negligent acts or omissions or willful misconduct of Purchaser or its employees or representatives.
20.3 Conditions to Indemnification
The right to any indemnity specified in Article 19, Article 20.1 and Article 20.2 shall be subject to the following conditions:
A. The Party seeking indemnification shall promptly advise the other Party in writing of the filing of any suit or of any written claim upon receipt thereof and shall provide the other Party, at its request and at the indemnifying Party’s expense, with copies of all documentation and reasonable assistance relevant to such suit or claim. Notwithstanding anything to the foregoing, a delay in providing written notice of a suit or written claim shall not relieve a Party from its indemnity obligations unless such delay materially prejudices a Party’s ability to defend the suit or claim.
B. The Party seeking indemnification shall not reach a compromise or settlement without the prior written approval of the other Party, which approval shall not be unreasonably withheld or delayed, provided that the indemnifying Party has agreed in writing and without limitation to defend the applicable claim.
C. The indemnifying Party shall assume the defense of any claim or suit thereof and shall satisfy any judgments rendered by a court of competent jurisdiction in such suits and shall make all settlement payments. The Party seeking indemnification may participate in any defense at its own expense, using counsel reasonably acceptable to the indemnifying Party.
      
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20.4 Waiver of Subrogation
Each Party shall use Reasonable Efforts to obtain a waiver of subrogation and release of any right of recovery against the other Party and its Affiliates, contractors and subcontractors at any tier (including suppliers of any kind) and their respective directors, officers, employees, shareholders and agents, that are involved in the performance of this Contract and from any insurer providing coverage for the risks subject to indemnification by the insured Party under this Article 20.
      
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ARTICLE 21 — TERMINATION FOR CONVENIENCE
21.1 Reimbursement of Contractor
  21.1.1   Right to Terminate . Purchaser may terminate this Contract without cause, in whole or in part, upon giving Contractor written notice; provided, however, Purchaser may not terminate this Contract after Delivery of the Satellite in accordance with Article 3.2. Upon receipt of Purchaser’s notice of termination for convenience, Contractor shall: (i) stop the terminated Work under this Contract; (ii) place no further orders or subcontracts for materials, services or facilities to the extent that they relate to the performance of the terminated Work; (iii) terminate orders and subcontracts to the extent that they relate to the performance of the terminated Work; and (iv) settle all outstanding liabilities and all claims arising out of such termination of orders and subcontracts.
 
  21.1.2   Termination Liability . If Purchaser terminates Work pursuant to this Article 21, Contractor shall be entitled to the Actual Costs reasonably incurred by Contractor with respect to: (a) terminated Work performed hereunder, plus a reasonable profit not to exceed [***] percent on such Actual Costs; and (b) Actual Costs of termination and settlement with all vendors and subcontractors (provided that Contractor shall undertake Reasonable Efforts to minimize any such costs). In the event of termination by the Purchaser of any of the Work, it is agreed that the termination charges shall be negotiated pursuant to Article 21.1.3 below, but shall not exceed the lesser of: (i) the Firm Fixed Price; or (ii) the termination liability amount (in the “ViaSat TL” column) corresponding to the amount of the most recently completed Milestone on Exhibit E, Payment Plan and Termination Liability Schedule, and in the case of both (i) and (ii) less the amount of any payments made by Purchaser to Contractor pursuant to this Contract. Notwithstanding the above, in the event of a termination in part as provided above, if such termination causes an increase in the Actual Costs of performing the remaining non-terminated Work, Contractor shall be entitled to a corresponding increase (including a [***] percent profit) in the price of the non-terminated Work.
 
  21.1.3.   Determination of Termination Liability. Contractor shall submit a proposal to
 
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    Purchaser within sixty (60) days after the effectiveness of the termination, which proposal shall specify the amount due to Contractor from Purchaser pursuant to this Article (the “Final Statement”). The Final Statement shall be a complete statement of all amounts that are due to Contractor hereunder as of the termination date for the terminated Work. In the event that Purchaser is not in agreement with the Final Statement, the Parties shall negotiate an agreed upon Final Statement. After agreeing on the Final Statement, Contractor shall invoice Purchaser and Purchaser shall pay such invoice within thirty (30) days after Purchaser’s receipt of the invoice.
21.2   Disposition of Work
 
    At the time of payment by Purchaser to Contractor of the termination liability amounts due under this Article, subject to applicable U.S. Government export laws and license conditions, Purchaser may direct Contractor to transfer to Purchaser, in the manner and to the extent directed by Purchaser, title to and risk of loss and possession of any items comprising the Work terminated (including all Work-in-progress, 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 the Contract been completed). Contractor shall, upon direction of Purchaser, protect and preserve property at Purchaser’s expense in the possession of Contractor or its Subcontractors in which Purchaser has an interest and shall facilitate access to and possession by Purchaser of items comprising all or part of the Work terminated. Alternatively, Purchaser 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 Purchaser, and, in the case of sold items, remit any sales proceeds to Purchaser less a deduction for Actual Costs of disposition reasonably incurred.
21.3 Sole Remedy
The remedy set forth in this Article shall be the sole remedy to which Contractor is entitled for termination of Work under this Article. In the event of a termination for convenience of the entire Contract, Payment of the amount payable by Purchaser to Contractor pursuant to this Article shall constitute a total discharge of Purchaser’s liabilities to Contractor under this Contract, except for those liabilities and/or obligations that survive pursuant to Article 34.13.
      
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ARTICLE 22 — LIQUIDATED DAMAGES
22.1   Liquidated Damages – Schedule/Delivery
 
    The Parties acknowledge and agree that failure to complete the Milestones listed below in this Article by the corresponding indicated dates may cause substantial financial loss to Purchaser (the “Key Milestone Dates”). The Parties further acknowledge and agree that the following liquidated damages represent a genuine and reasonable estimate of all losses that would be suffered by Purchaser by reason of any such delay (which losses would be difficult or impossible to calculate with certainty) in meeting the Key Milestone Dates.
 
    For the purposes of this Article only, the Satellite will not be deemed “Delivered” if the Satellite is placed into Ground Storage for reasons primarily due to the fault of Contractor. In such case, the time period of such Ground Storage will be included for purposes of calculation of liquidated damages for delay under this Article 22; provided that Contractor shall not be liable for, or assessed any liquidated damages for, any period of such Ground Storage associated with any failure by Purchaser to schedule with the Launch Agency the next available Launch opportunity that is reasonably satisfactory to Purchaser and which is consistent with the Satellite’s availability for Launch. If, as of the Satellite Delivery dates specified in Article 3.1 (as such date may be extended as provided in this Contract), the Launch Vehicle is unavailable for reasons that are not attributable to Contractor, or if the Satellite is delivered for purposes of Ground Storage for reasons that are not primarily due to the fault of Contractor, such that Purchaser is not materially harmed or prejudiced by a delay in Satellite Delivery, then the assessment of liquidated damages for failure to meet Key Milestone 4 (Satellite Delivery) shall be suspended/forgiven on a day-to day basis commensurate with the period of unavailability of the Launch Vehicle or storage after the Satellite Delivery date set forth in Article 3.1, as the case may be, and no payment by Contractor will be required for such period.
 
    In the event Contractor fails to meet the Key Milestones Dates set forth below, as such Dates may be adjusted in accordance with this Contract, Contractor shall pay Purchaser, as liquidated damages and not as a penalty, up to a cumulative maximum of [***] U.S. dollars (U.S. $[***]), the following incremental amounts with the damages period
 
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    beginning on the day after the applicable Key Milestone Date (as such Date(s) may be adjusted in accordance with this Contract):
  1.   Key Milestone 1: [***]
             
    Daily Amount of        
Days Late   Liquidated Damages   Period Total   Cumulative Total
1-30
  [***]   [***]   [***]
31-60
  [***]   [***]   [***]
61-90
  [***]   [***]   [***]
  2.   Key Milestone 2: [***]
             
    Daily Amount of        
Days Late   Liquidated Damages   Period Total   Cumulative Total
1-30
  [***]   [***]   [***]
31-60
  [***]   [***]   [***]
61-90
  [***]   [***]   [***]
  3.   Key Milestone 3: [***]
             
    Daily Amount of        
Days Late   Liquidated Damages   Period Total   Cumulative Total
1-30
  [***]   [***]   [***]
31-60
  [***]   [***]   [***]
61-90
  [***]   [***]   [***]
  4.   Key Milestone 4: [***]
             
    Daily Amount of        
Days Late   Liquidated Damages   Period Total   Cumulative Total
1-30
  [***]   [***]   [***]
31-60
  [***]   [***]   [***]
61-90
  [***]   [***]   [***]
91-120
  [***]   [***]   [***]
121-180
  [***]   [***]   [***]
    Any amounts due in accordance with this Article 22 shall be, at Purchaser’s election, either (i) credited to Purchaser against any outstanding or future invoices hereunder or (ii) paid by Contractor to Purchaser within thirty (30) days of issuance of an invoice from Purchaser. Purchaser’s failure to invoice or offset shall not constitute a waiver by Purchaser with respect to any amount of liquidated damages due and owing hereunder.
 
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    Notwithstanding the foregoing, in the event that liquidated damages are assessed against Contractor pursuant to the foregoing for delays in meeting Key Milestone Date 1 ([***]) and/or Key Milestone Date 2 ([***]) and/or Key Milestone Date 3 ([***]), but nevertheless Contractor Delivers the Satellite on or before the date set forth in Article 3.1 (as such date may be adjusted in accordance with this Contract), [***] percent ([***]%) of the liquidated damages assessed and paid pursuant to the foregoing shall be waived and forgiven, and Purchaser shall reimburse Contractor for any such liquidated damages actually paid.
 
22.2   Liquidated Damages/Incentives Based Upon [***]
  22.2.1   [***]. Upon the earlier to occur of: (a) thirty-six (36) months after EDC, or (b) the conclusion of SPSR, the [***] of the U.S. Beams plus the Additional Beams (but not including the Canadian Beams) on the Satellite shall again be calculated using the data from SPSR and [***] (and the resulting calculated [***] being the “[***]”) that has been placed in the escrow described in Article 22.2.2, and Contractor shall be entitled to an incentive payment or shall incur liquidated damamages as provided in the [***] table set forth below. In the event that the [***] is measured at thirty-six (36) months rather than at the conclusion of SPSR, the calculation shall be done based upon all available data and an engineering anaylsis performed in accordance with good engineering practices applying standards generally applicable in the aerospace industry. In determining [***], if Mexico service beams are included as any of the Additional Beams, then [***] contributed by such beam(s) will be considered in determining the [***]; provided that upon Purchaser obtaining all necessary landing rights and any other rights necessary for Purchaser to offer its intended service in Mexico, the [***] shall be recalculated and Contractor shall receive payment for the remaining [***] of the Mexican [***] within thirty (30) days of Purchaser’s receipt of an invoice therefor. Purchaser shall have a good faith obligation to exert Reasonable Efforts to obtain such landing and other rights to provide its intended service in Mexico.
 
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      Contractor acknowledges that the Satellite [***], not including the Canadian Beams, will be calculated assuming the use of the [***] frequencies and such [***] calculation shall not assume the use of the [***] frequencies. If the [***] is different than the then-current [***] Contractor shall be subject to liquidated damages or incentive payments as follows (with such amounts to be pro-rated):
     
    Liquidated Damages or Incentive
[***]   Payment
Greater than [***], and greater than [***]
  Incentive payment of [***] dollars (U.S. $[***]) for each [***] (or portion thereof) greater than [***] (up to [***]), adjusted as follows: (i) [***] then the incentive payment shall be decreased by the amount of [***]; or (ii) [***] then the incentive payment shall be increased by the amount of [***]
 
   
Greater than [***], but less than [***]
  Liquidated damages of [***] U.S. dollars (U.S.$[***]) for each [***] (or portion thereof) difference between the [***] and the [***]
 
   
Greater than [***], and the same as [***]
  No incentive payments and no liquidated damages
 
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Less than [***], but greater than [***]
  Incentive payment of [***] dollars (U.S. $[***]) for each [***] (or portion thereof) difference between the [***] and [***]
 
   
Less than [***], and less than [***]
  Liquidated damages of [***] dollars (U.S. $[***]) for each [***] (or portion thereof) less than [***], adjusted as follows:
 
  (i) [***] then the liquidated damages shall be increased by the amount of [***]; or (ii) [***] then the liquidated damages shall be reduced by the amount of [***]
 
   
Less than [***], and the same as [***]
  No liquidated damages and no incentive payments
 
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Less than [***] but greater than [***], but [***] is greater than [***] or less than [***]
  (i)[***] then the liquidated damages shall be assessed in the amount of [***] or (ii) [***] then an incentive payment shall be made in the amount of [***]
    For example, if [***] is [***] and [***] is [***], Contractor would be obligated to pay Purchaser [***]. For another example, if [***] is [***] and [***] is [***], Purchaser would be obligated to pay Contractor [***]. For another example, if [***] is [***] and [***] is [***], Contractor would be obligated to pay Purchaser liquidated damages equal to [***]. For another example if [***] is [***] and [***] is [***], Purchaser would be obligated to pay Contractor an incentive payment equal to [***]. For another example [***] is [***] and [***] is [***], Contractor would be obligated to pay Purchaser liquidated damages equal to [***].
 
    In the event that Contractor owes liquidated damages to Purchaser pursuant to the operation of this Article 22.2.1, at Purchaser’s election, such liquidated damages shall either be (i) credited to Purchaser against any outstanding or future invoices hereunder or (ii) paid by Contractor to Purchaser within thirty (30) days of issuance of an invoice from Purchaser. In the event that Purchaser owes Contractor an incentive payment pursuant to operation of this Article 22.2.1, Purchaser shall make such payment to Contractor within thirty (30) days of issuance of an invoice from Contractor.
  22.2.2   Escrow of [***]. For the purpose of ensuring that all [***] made hereunder are done with the version of the [***] utilized to establish the [***], Purchaser shall, no later than fifteen (15) days after establishing the [***] pursuant to Article 4.6,
 
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      place the [***] used to establish the [***] into escrow pursuant to the escrow agreement attached hereto as Exhibit J. The version of the [***] placed into escrow shall not be updated, unless otherwise agreed by the Parties. The Parties shall share equally all costs associated with establishing and maintaining the escrow.
  22.2.3.   Contractor’s Access to [***] and License. Subject to the terms of the license set forth below, Contractor shall have reasonable access to Purchaser’s [***] until the determination of [***] as provided in Article 22.2.2 above (at which time the license described in this Paragraph shall also automatically terminate). Purchaser hereby grants to Contractor a non-exclusive, non-transferable, non-assignable, non-sublicensable, revocable, limited license to possess and use a single copy of the [***] during the time period described above solely for purposes of Contractor’s measurement of the [***] of the Satellite to be provided under this Contract. Contractor agrees that, upon termination of the license, Contractor will either destroy (or permanently erase) all copies of the [***], or return the original [***] to Purchaser. Purchaser makes no warranties, express or implied, with respect to the [***].
 
  22.2.4.   Limitations on Use. Contractor acknowledges that Purchaser retains exclusive ownership of all Intellectual Property Rights in Purchaser’s [***]. Contractor is not granted any rights in Purchaser’s [***] other than the license rights expressly set forth above. Contractor agrees that it will not modify, adapt, create a derivative work of, merge, translate, decompile, disassemble, or otherwise reverse engineer Purchaser’s [***].
22.3   Remedy
 
    Contractor and Purchaser agree that the actual damages that Purchaser would suffer as a result of the late Delivery of the Satellite [***] are, in the nature of this transaction, difficult and impracticable to fix, that the liquidated damages set forth herein are reasonable amounts to compensate Purchaser for such failures and delays, and that the payment of liquidated damages is in lieu of payment of actual damages for such failures and delays. Such liquidated damages shall be Purchaser’s sole and exclusive remedy and compensation for Contractor delays with respect to late Delivery of Deliverable
 
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      Items [***], provided that the [***] does not drop below [***]; and further provided, however, Purchaser retains all rights and remedies under Article 17.2 regarding termination for Force Majeure, Article 21 regarding termination for convenience and Article 23 regarding termination for default. Contractor hereby waives, to the extent permitted by applicable law, any defense as to the validity of any liquidated damages in this Contract on the grounds that such liquidated damages are void as penalties.
 
  22.4   Incentives for Early Delivery
 
      If Delivery of a Satellite occurs before the date specified in Article 3.1 (as such date may be extended as provided in this Contract), then Purchaser shall pay Contractor, within thirty (30) days of receipt of invoice, an amount not to exceed [***] U.S. dollars (U.S. $[***]), as specified below, as an early delivery incentive for Contractor’s early Delivery:
             
    Daily Amount of        
Days Early   Incentives   Period Total   Cumulative Total
1-30
  [***]   [***]   [***]
31-60
  [***]   [***]   [***]
61-90
  [***]   [***]   [***]
91-120
  [***]   [***]   [***]
121-180
  [***]   [***]   [***]
 
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ARTICLE 23 — TERMINATION FOR DEFAULT
23.1   Purchaser Rights of Termination
  23.1.1   Right to Terminate . Subject to Article 17, Article 18 and Article 23.1.4 below, Purchaser may terminate this Contract in whole or in part by written notice to Contractor if: (i) Contractor fails to Deliver the Satellite within the time specified therefor in Article 3.1 (as such date may be extended in accordance with the terms of this Contract) plus [***] days (or such longer time as may be agreed to in writing by Purchaser); (ii) Contractor fails to make progress (including due to failure to meet specification requirements) so as to endanger performance of this Contract that it is reasonably likely Contractor will fail to Deliver the Satellite within the time period set forth in subclause (i) immediately above, and fails, within [***] days (or such longer period as may be agreed to in writing by Purchaser) after receipt from Purchaser of written notice thereof, to cure such breach or correct such failure; or (iii) except for failures covered by items (i) and (ii) above, Contractor fails to perform any material provision of this Contract and does not correct such failure within a period of [***] days (or such longer period as Purchaser may authorize in writing) after receipt of notice from Purchaser specifying such failure.
 
  23.1.2   Termination Liability . In the event of termination pursuant to this Article 23.1, Purchaser shall be entitled to: (i) a refund by Contractor of all payments made by Purchaser to Contractor for the terminated Work plus interest thereon at the interest rate stipulated in Article 5.3.1 hereof from the date payment was received by Contractor to the date the refund is made to Purchaser; and/or (ii) to retain and/or obtain Work as set forth in Article 23.1.3, provided that Purchaser shall remain liable for payment of all amounts for such Work as set forth in Article 23.1.3. In addition, Purchaser shall be entitled to any liquidated damages for delay accrued pursuant to Article 22 prior to the effective date of termination. In addition, Purchaser shall be entitled to [***]. Contractor shall pay the foregoing amounts no later than thirty (30) days after Contractor’s receipt of Purchaser’s written notice requesting such amounts pursuant to subclause (i) above.
 
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      Payment of such amounts, or transfer of Work as set forth in Article 23.1.3, shall be Purchaser’s sole and exclusive remedy in the event of a termination for default.
  23.1.3   Contractor’s Reimbursement for Terminated Work . In the event Purchaser terminates the Contract pursuant to this Article 23.1, Purchaser shall have the option to obtain title to the Deliverable Items provided for under this Contract or associated Work-in-progress (but not including Deliverable Data) or any other portion of the Work to which Contractor would not have otherwise been obligated to transfer title hereunder had the Contract been completed, including, if requested by Purchaser in writing (and subject to any approvals required by the associated Subcontractors and receipt by Contractor of associated reasonable releases and indemnifications in favor of Contractor), assignment of Subcontracts, subject to payment: (i) at the price set forth in this Contract for delivered items for which an itemized price is set forth herein and (ii) at the Actual Costs incurred by Contractor for (a) such items for which no itemized price is set forth herein and (b) partially completed items or services and Work-in-progress. This sum shall be offset by amounts paid by Purchaser and received by Contractor for Deliverable Items and Work-in-progress retained by Purchaser, and Contractor shall protect and preserve property in the possession of Contractor in which Purchaser has an interest. Purchaser shall pay amounts due hereunder no later than sixty (60) days after issuance of its written notice pursuant to Article 23.1.2. Upon settlement and payment of amounts due hereunder, Contractor, subject to applicable U.S. Government export control laws, shall promptly, at Contractor’s or Subcontractor’s plant, transfer title and risk of loss to Purchaser for the applicable Deliverable Items and Work-in-progress.
 
  23.1.4   Special Provision Limiting Purchaser’s Remedies . Purchaser’s sole and exclusive remedy with respect to delays in Delivery shall be as specified in Article 22 and this Article 23.1. Purchaser shall have no right to terminate this Contract pursuant to this Article 23.1 above on or after Intentional Ignition (unless and to the extent of a Terminated Ignition pursuant to Article 12.1).
 
  23.1.5   Disposition of the Work . Except for items obtained by Purchaser as set forth in Article 23.1.3, Contractor shall retain title to any and all Work, Work-in-progress,
     
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      parts or other material, inventories, and any associated warranties, and any subcontracted items Contractor has specifically produced, acquired, or subcontracted for in accordance with this Contract.
  23.1.6   Invalid Default Termination . If, after termination pursuant to this Article 23.1, it is finally determined pursuant to Article 25 or written agreement of Purchaser that Contractor was not in default under Article 23.1.1, or that the default was excusable under the Contract, the rights and obligations of the Parties shall be the same as if the termination had occurred under Article 21.
23.2   Contractor Rights of Termination
  23.2.1   Right to Terminate . Contractor may terminate this Contract upon written notice to Purchaser if Purchaser fails to make any payment required under this Contract, and Purchaser shall fail to cure such failure within thirty (30) days after receiving written notice thereof from Contractor (or such longer period as may be agreed to in writing by Contractor). For purposes of clarification, Contractor shall not be entitled to terminate this Contract for Purchaser’s failure to make payment hereunder to the extent Purchaser has disputed such payment in good faith pursuant to Article 5.6.
 
  23.2.2   Termination Liability . In the event of termination pursuant to this Article 23.2, Contractor shall be paid as if such termination were for convenience pursuant to Article 21. Further, if Purchaser’s failure to perform is a failure to pay Contractor invoiced amounts when due, Contractor shall be entitled to late payment interest pursuant to Article 5.3. Payment of the total amounts payable by Purchaser pursuant to this Article 23.2.2 shall constitute a total discharge of Purchaser’s liabilities to Contractor for termination pursuant to this Article 23.2.
 
  23.2.3   Disposition of the Work . Upon completion of all payments to Contractor in accordance with this Article 23.2, Purchaser may, subject to Article 7 hereof, require Contractor to transfer to Purchaser in the manner and to the extent directed by Purchaser, title to and possession of any items comprising all or any part of the Work terminated (including all Work-in-progress, but not including any Deliverable Data or any other portion of the Work to which Contractor would not have otherwise been obligated to transfer title hereunder had the Contract been completed) not used or disposed of by Contractor pursuant to the foregoing
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
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      sentence. Contractor shall, upon direction of Purchaser, protect and preserve such items at Purchaser’s expense in the possession of Contractor or its Subcontractors and shall facilitate access to and possession by Purchaser of items comprising all or part of the Work terminated. Alternatively, Purchaser may request Contractor to undertake Reasonable Efforts to re-use or sell such items and, in the case of Work Contractor can re-use, remit the agreed-upon cost of such items to Purchaser, and, in the case of sold items, remit any sales proceeds to Purchaser less a deduction for Actual Costs of disposition reasonably incurred by Contractor for such efforts. Contractor shall, if requested by Purchaser in writing, assign to Purchaser or its designee such Subcontracts as requested by Purchaser (subject to any approvals required by the associated Subcontractors and receipt by Contractor of associated reasonable releases and indemnifications in favor of Contractor).
 
  23.2.4   Invalid Default Termination . If, after termination pursuant to this Article 23.2, it is finally determined pursuant to Article 25 or written agreement of Contractor that Purchaser was not in default under Article 23.2.1, Contractor shall be liable to Purchaser for direct damages resulting from such termination of this Contract (in no event exceeding amounts payable to Purchaser pursuant to Article 23.1, and subject to the limitation of liability set forth in Article 27).
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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ARTICLE 24 — RESERVED
[THIS SPACE INTENTIONALLY LEFT BLANK]
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
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ARTICLE 25 — DISPUTE RESOLUTION
Any dispute, claim, or controversy between the Parties arising out of or relating to this Contract (“Dispute”), including any Dispute with respect to the interpretation, performance, termination, or breach of this Contract or any provision thereof shall be resolved as provided in this Article 25.
25.1   Informal Dispute Resolution
      Prior to the initiation of formal dispute resolution procedures, the Parties shall first attempt to resolve their Dispute informally, in a timely and cost-effective manner, as follows:
  A.   If, during the course of the Work, a Party believes it has a Dispute with the other Party, the disputing Party shall give written notice thereof, which notice will describe the Dispute and may recommend corrective action to be taken by the other Party. Contractor’s program manager shall promptly consult with Purchaser’s contract manager in an effort to reach an agreement to resolve the Dispute.
 
  B   In the event that agreement cannot be reached within ten (10) days of receipt of written notice, either Party may request that the Dispute be escalated, and the respective positions of the Parties shall be forwarded to an executive level higher than that under Paragraph A above for resolution of the Dispute.
 
  C.   In the event agreement cannot be reached within twenty (20) days of receipt of written notice, either Party may request that the Dispute be escalated, and the respective positions of the Parties shall be forwarded to the Chief Executive Officer (CEO) or equivalent of each Party for resolution of the Dispute.
 
  D.   In the event agreement cannot be reached as provided in Paragraphs A, B, or C above within a total of sixty (60) days after receipt of the written notice described in Paragraph A above either Party may proceed in accordance with Article 25.2.
      Each phase of the dispute resolution process shall require the Parties to meet in person at least one time.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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25.2   Litigation
      If any Dispute arising between the Parties cannot be settled pursuant to Article 25.1 (or, if a Party makes a good faith determination that (i) a breach by the other Party is such that a temporary restraining order or other preliminary injunctive relief to enforce its rights or the other Party’s obligations under the provisions of this Contract is necessary or (ii) litigation is appropriate to avoid the expiration of an applicable limitations period or to preserve a superior position with respect to creditors), either Party shall have the right to bring suit.
 
      Any suit brought shall be brought in any court of competent jurisdiction in the state of California, and the Parties hereby waive any objection to that venue and that court’s exercise of personal jurisdiction over the case. The Parties hereby irrevocably consent to the exercise of personal jurisdiction by the state and federal courts in the State of California concerning any Dispute between the Parties. If, for any reason, neither the state nor federal courts in California will exercise jurisdiction over the Dispute, then litigation as permitted herein may be brought in any court of competent jurisdiction in the United States of America.
 
      If a dispute arises as to whether or not a Party has committed or acted with gross negligence or willful misconduct, that issue alone shall be resolved by the court without a jury, and the court shall resolve such issue by applying the laws of the State of New York without regard to its conflict of law rules. THE PARTIES EXPRESSLY WAIVE THEIR RIGHT TO A JURY IN CONNECTION WITH SUCH DISPUTE.
 
      Nothing in this Contract precludes a Party that prevails on any claim from initiating litigation in any appropriate forum to enter or enforce a judgment based on the court’s award on that claim.
 
      Pending final resolution of any dispute (including the informal dispute resolution process and litigation), Contractor shall, unless otherwise directed by Purchaser in writing, perform all its obligations under this Contract, provided that Purchaser continues to make undisputed payments as they come due. For purposes of clarification, Contractor shall not be entitled to stop work under this Contract for Purchaser’s failure to make payment hereunder to the extent Purchaser has disputed such payments in good faith pursuant to Article 5.6. Without prejudice to Purchaser’s other rights and remedies set
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
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      forth in this Contract, in the event that Contractor stops work (unless otherwise permitted under this Contract) which results in delays in Delivery, [***].
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 26 — INTER-PARTY WAIVER OF LIABILITY FOR A LAUNCH
26.1   Launch Services Agreement Inter-Party Waiver of Liability
  26.1.1   Inter-Party Waiver . Each Party 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 the Launch and to cause their respective contractors and Subcontractors at any tier (including suppliers of any kind) that are involved in the performance of this Contract and any other person having an interest in the Satellite or any Transponder thereon (including customers of Purchaser) to accede to such waiver and indemnity, which in every case shall include claims against the Launch Agency, either Party and their respective contractors and subcontractors at any tier (including suppliers of any kind) that are involved in the performance of this Contract. The Parties shall execute and deliver any instrument that may be reasonably required by the Launch Agency to evidence their respective agreements to be bound by such waivers.
 
  26.1.2   Waiver of Subrogation . The Parties also shall use Reasonable Efforts to obtain from their respective insurers, and shall require their respective contractors and subcontractors at any tier (including suppliers of any kind) that are involved in the performance of this Contract and any other person having an interest in the Satellite or any Transponder thereon (including non-consumer customers of Purchaser), to use Reasonable Efforts to obtain from their respective insurers, an express waiver of such insurers’ rights of subrogation with respect to any and all claims that have been waived pursuant to this Article 26.
26.2   Indemnity Related to the Inter-Party Waiver of Liability
      Each Party shall indemnify against and hold harmless the other Party and/or its contractors and Subcontractors at any tier (including suppliers of any kind) that are involved in the performance of this Contract, from and against any claim made by the indemnifying Party and/or any of its contractors and Subcontractors (including suppliers of any kind) that are involved in the performance of the Contract, or by any person having an interest in the Satellite or Transponder thereon (including customers of Purchaser), or by insurer(s) identified in Article 26.1, resulting from the failure of the
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
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      indemnifying Party to waive any liability against, or to cause any other person the indemnifying Party is obligated to cause to waive any liability against, the Launch Agency, the other Party or either of their contractors and subcontractors at any tier (including suppliers of any kind) involved in the performance of this Contract. The Parties shall execute and deliver any instrument that may be reasonably required by the Launch Agency to evidence their respective agreements to be bound by such indemnifications.
26.3   Survival of Obligations
 
    The waiver, indemnification and hold harmless obligations provided in this Article 26 shall survive and remain in full force and effect, notwithstanding the expiration or termination of this Contract.
 
26.4   Third Party Claims Coverage
 
    With respect to third party liability for death or bodily injury of for the loss or damage to property that may be sustained, and any consequences thereof, resulting from, or arising in connection with the performance of the Launch Services for the Satellite, Purchaser shall use Reasonable Efforts to require the Launch Agency to include Contractor (and any other party or entity as Contractor may request) as an additional named insured under all policies of third party claims coverage (or any other program of third party claims coverage, including coverage provided by agencies of any government) that are provided or required to be provided by or through the Launch Agency.
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 27 — LIMITATION OF LIABILITY
27.1   Limitation
 
    EXCEPT AS PROVIDED OTHERWISE IN ARTICLES 27.3 AND 27.4, NEITHER PARTY SHALL BE LIABLE DIRECTLY OR INDIRECTLY TO THE OTHER PARTY, TO ITS OFFICERS, DIRECTORS, EMPLOYEES, CONTRACTORS OR SUBCONTRACTORS AT ANY TIER (INCLUDING SUPPLIERS OF ANY KIND), AGENTS OR CUSTOMERS, TO ITS PERMITTED ASSIGNEES OR SUCCESSOR OWNERS OF ANY SATELLITE OR OTHER DELIVERABLE ITEM OR TO ANY OTHER PERSON CLAIMING BY OR THROUGH SUCH OTHER PARTY, FOR ANY AMOUNTS REPRESENTING LOSS OF PROFITS, LOSS OF BUSINESS, OR INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS, LOST REVENUES OR COSTS OF RECOVERING A SATELLITE POST-LAUNCH, ARISING FROM OR RELATING TO THE PERFORMANCE OR NONPERFORMANCE OF THIS CONTRACT OR ANY ACTS OR OMISSIONS ASSOCIATED THEREWITH OR RELATED TO THE USE OF ANY ITEMS DELIVERED OR SERVICES FURNISHED HEREUNDER, WHETHER THE BASIS OF SUCH LIABILITY IS BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE OF ANY TYPE (EXCEPT AS PROVIDED IN ARTICLE 27.3 BELOW) AND STRICT LIABILITY), STATUTE OR OTHER LEGAL OR EQUITABLE THEORY.
 
27.2   Liability
 
    EXCEPT AS PROVIDED OTHERWISE IN ARTICLES 27.3 AND 27.4, IN NO EVENT WILL CONTRACTOR’S TOTAL LIABILITY ARISING OUT OF OR RELATED TO THIS CONTRACT EXCEED THE SUM OF: (i) ALL PAYMENTS PREVIOUSLY MADE TO CONTRACTOR UNDER THIS CONTRACT; AND (ii) ANY LIQUIDATED DAMAGES ACTUALLY INCURRED PURSUANT TO ARTICLE 22.1; AND (iii) [***]. EXCEPT AS PROVIDED OTHERWISE IN ARTICLE 27.3, IN NO EVENT WILL PURCHASER’S TOTAL LIABILITY ARISING OUT OF OR IN CONNECTION WITH THIS CONTRACT EXCEED [***].
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
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27.3   Gross Negligence and Willful Misconduct
 
    ARTICLE 27.1 SHALL NOT APPLY IN THE EVENT OF A PARTY’S GROSS NEGLIGENCE AND/OR WILLFUL MISCONDUCT IN WHICH CASE SUCH PARTY MAY BE LIABLE AND RESPONSIBLE FOR AMOUNTS REPRESENTING LOST PROFITS, LOSS OF BUSINESS AND THE OTHER DAMAGES DESCRIBED IN ARTICLE 27.1 UP TO AN AMOUNT NOT TO EXCEED IN THE CUMULATIVE MAXIMUM, [***] UNITED STATES DOLLARS (US$[***]). THE FOREGOING AMOUNT SHALL BE IN EXCESS OF ANY LIABILITIES SUBJECT TO ARTICLE 27.2.
 
27.4   Indemnities
 
    ARTICLES 27.1 AND 27.2 SHALL NOT APPLY TO LIABILITY ARISING UNDER ARTICLES 19 (INTELLECTUAL PROPERTY INDEMNITY), 20 (INDEMNIFICATION) (AND IN BOTH CASES ONLY AS TO LIABILITIES ADJUDICATED (OR PROVIDED IN SETTLEMENT OF THE MATTER) TO BE OWING TO THE THIRD PARTY CLAIMANT AS WELL AS COSTS AND EXPENSES INCURRED IN DEFENDING OR SETTLING SUCH CLAIMS), AND 26.2 (INDEMNITY RELATED TO THE INTER-PARTY WAIVER OF LIABILITY). NOTHING IN THIS ARTICLE 27 SHALL BE DEEMED AS A WAIVER OF ANY RIGHTS OF EITHER PARTY UNDER THE NONDISCLOSURE AGREEMENT DATED MARCH 8, 2006 (AS AMENDED ON APRIL 27, 2007).
 
27.5   Survival
 
    THIS ARTICLE 27 SHALL SURVIVE THE EXPIRATION OR TERMINATION OF THIS CONTRACT FOR WHATEVER CAUSE.
 
***Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions
     
(SPACE SYSTEMS LORAL LOGO)   SS/L-TP20701
ViaSat Contract
Use or disclosure of the data and information contained on this sheet is subject to the restriction on the title page.

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ARTICLE 28 — DISCLOSURE AND HANDLING OF PROPRIETARY INFORMATION
28.1   Definition of Proprietary Information
 
    For the purpose of this Contract, “Proprietary Information” means all confidential and proprietary information (other than Deliverable Data, which is subject to the provisions of Article 39) in whatever form transmitted, that is disclosed or made available directly or indirectly by such Party (hereinafter referred to as the “disclosing party”) to the other Party hereto (hereinafter referred to as the “receiving party”) and: (i) is identified as proprietary by means of a written legend thereon or (ii) if disclosed orally, is identified as proprietary at the time of initial disclosure and then summarized in a written document, with the Proprietary Information specifically identified, that is supplied to the receiving party within ten (10) days of initial disclosure. Notes and memoranda prepared by the receiving party (but not the receiving party’s attorneys) that include the disclosing party’s Proprietary Information shall be considered the disclosing party’s Proprietary Information for all purposes of this Article. Proprietary Information shall not include any information disclosed by a Party that (i) is already known to the receiving party at the time of its disclosure, as evidenced by written records of the receiving party, without an obligation of confidentiality at the time of disclosure; (ii) is or becomes publicly known through no wrongful act of the receiving party; (iii) is independently developed by the receiving party as evidenced by written records of the receiving party; or (iv) is rightfully obtained by the receiving party from any third party without restriction and without breach of any confidentiality obligation by such third party.
 
28.2   Terms for Handling and Use of Proprietary Information
 
    Subject to Article 28.1, for a period of ten (10) years after receipt of any Proprietary Information, the receiving party shall not disclose Proprietary Information that it obtains from the disclosing party to any person or entity except its employees, Affiliates (who are not direct competitors of the disclosing party), attorneys, agents, Financing Entities, potential and actual joint venture partners, and consultants (who, in all cases, are not direct competitors of the disclosing party) who have a need to know, who have been informed of and have agreed in writing (or are otherwise subject to confidentiality obligations consistent with the obligations set forth herein) to abide by the receiving party’s obligations under this Article 28, and who are authorized pursuant to applicable U.S. export control laws and licenses or other approvals to receive such information. The receiving party shall use not less than the same degree of care to avoid disclosure
     
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      of such Proprietary Information as it uses for its own Proprietary Information of like importance; but in no event less than a reasonable degree of care. Proprietary Information shall be used only for the purpose of performing the obligations under this Contract, or as the disclosing party otherwise authorizes in writing.
28.3   Legally Required Disclosures
 
    Notwithstanding the foregoing, in the event that the receiving party becomes legally compelled to disclose Proprietary Information of the disclosing party (including disclosures necessary or in good faith determined to be reasonably necessary under the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended), the receiving party shall, to the extent practicable under the circumstances, provide the disclosing party with written notice thereof so that the disclosing party may seek a protective order or other appropriate remedy, or to allow the disclosing party to redact such portions of the Proprietary Information as the disclosing party deems appropriate. In any such event, the receiving party will disclose only such information as is legally required, and will cooperate with the disclosing party (at the disclosing party’s expense) to obtain proprietary treatment for any Proprietary Information being disclosed.
 
28.4   Return of Confidential Information
 
    Upon the request of the Party having proprietary rights to Proprietary Information, the other Party in possession of such Proprietary Information shall promptly return such Proprietary Information (and any copies, extracts, and summaries thereof) to the requesting Party, or, with the requesting Party’s written consent, shall promptly destroy such materials (and any copies, extracts, and summaries thereof), except for one (1) copy which may be retained for legal archive purposes, and shall further provide the requesting Party with written confirmation of same; provided, however, where both Parties have proprietary rights in the same Proprietary Information, a Party shall not be required to return such information to the other Party. Nothing in this Article 28.4 shall require a Party to return or destroy computer files or records containing Proprietary Information but only if and to the extent such files or records were created in the ordinary course of business pursuant to such Party’s automatic archiving and back-up procedures for computerized or word-processed records. The rights and