-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, F5r8OY12GinQ67GtxkieVFC61k1BVi3g0ybVhrevqJqZ76Jdulu3jOfmPon6ZJm8 9ppXWpjzYZDzxbAIKixcxw== 0001341004-06-000007.txt : 20060104 0001341004-06-000007.hdr.sgml : 20060104 20060103202954 ACCESSION NUMBER: 0001341004-06-000007 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20051230 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Completion of Acquisition or Disposition of Assets ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060104 DATE AS OF CHANGE: 20060103 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SKYTERRA COMMUNICATIONS INC CENTRAL INDEX KEY: 0000756502 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 232368845 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13865 FILM NUMBER: 06504251 BUSINESS ADDRESS: STREET 1: 19 WEST 44TH STREET STREET 2: SUITE 507 CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 212-730-7540 MAIL ADDRESS: STREET 1: 19 WEST 44TH STREET STREET 2: SUITE 507 CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: RARE MEDIUM GROUP INC DATE OF NAME CHANGE: 19990414 FORMER COMPANY: FORMER CONFORMED NAME: ICC TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL COGENERATION CORP DATE OF NAME CHANGE: 19891005 8-K 1 ny1053905-4.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): January 3, 2006 (December 30, 2005) SkyTerra Communications, Inc. (Exact name of registrant as specified in its charter) Delaware 000-13865 23-2368845 (State or Other (Commission File Number) (IRS Employer Jurisdiction of Identification Number) Incorporation 19 West 44th Street, Suite 507, New York, New York 10036 (Address of principal executive offices, including zip code) (212) 730-7540 (Registrant's telephone number, including area code) N/A (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Section 1 - Registrant's Business and Operations Item 1.01. Entry into a Material Definitive Agreement. On December 30, 2005, SkyTerra Communications, Inc. (the "Company") entered into a separation agreement with its wholly-owned subsidiary Hughes Communications, Inc. ("Hughes") to facilitate the previously announced proposed special dividend distribution of Hughes to the Company's stockholders. The separation agreement effected the transfer, by way of contribution on December 31, 2005, from the Company to Hughes of substantially all of the assets and liabilities of the Company other than its interest in Mobile Satellite Ventures LP ("MSV"), Terrestar Networks, Inc. ("TerreStar") and certain designated cash. The separation agreement also contains agreements relating to indemnification and access to information, facilities, information technology and communications equipment. A copy of the separation agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by reference. On December 30, 2005, the Company also entered into a tax sharing agreement with Hughes under which Hughes has generally agreed to be responsible for, and to indemnify the Company and its subsidiaries against, all tax liabilities imposed on or attributable to (i) Hughes and any of its subsidiaries relating to all taxable periods and (ii) the Company and any of its subsidiaries for all taxable periods or portions thereof ending on or prior to a change of control of SkyTerra, in each case, after taking into account any tax attributes of the Company or any of its subsidiaries that are available to offset such tax liabilities. Notwithstanding the foregoing, Hughes is not responsible for any taxes relating to MSV, TerreStar or such a change of control. Additionally, under the tax sharing agreement, the Company is responsible for, and indemnifies Hughes and its subsidiaries against, all tax liabilities imposed on or attributable to such a change of control of the Company, MSV and TerreStar relating to all taxable periods, and the Company and any of its subsidiaries relating to all taxable periods or portions thereof beginning and ending after such a change of control. The tax sharing agreement also generally provides for the preparing and filing of tax returns and the handling, settling and contesting of tax liabilities for all taxable periods. A copy of the tax sharing agreement is filed as Exhibit 10.2 to this Current Report on Form 8-K and is incorporated herein by reference. On December 30, 2005, Hughes and Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. ("Apollo"), stockholders of the Company, entered into a note purchase agreement and issued notes on January 1, 2006 pursuant to which Hughes borrowed $100 million in order to finance Hughes' purchase of the remaining 50 percent of the class A membership interests of HNS from The DIRECTV Group, Inc. ("DTV") (See Item 2.01 below.) The loan bears interest at a rate of 8% per annum and has a final maturity date of January 1, 2007. Pursuant to the note purchase agreement, following the special dividend distribution, Hughes is required to use best efforts to consummate its previously announced proposed rights offering so as to generate sufficient proceeds to repay the loan. Apollo has agreed to exercise its rights (including its over-subscription privileges) so that it purchases all of the shares of Hughes not subscribed for by other stockholders in the rights offering, up to the total unpaid principal and interest on the loan. Upon consummation of the proposed rights offering, the loan will automatically convert into common stock of Hughes based on the rights offering subscription price. The principal and interest under the loan that is not converted in the rights offering will be repaid in cash from proceeds from the rights offering. The loan is secured by a security interest in the cash proceeds of the rights offering that Hughes receives from stockholders other than Apollo. A copy of the note purchase agreement is filed as Exhibit 10.3 to this Current Report on Form 8-K and is incorporated herein by reference. 2 On January 1, 2006, in connection with the transactions contemplated by the note purchase agreement, Hughes and Apollo entered into a security agreement pursuant to which Hughes granted Apollo a security interest in the proceeds of the proposed rights offering, other than with respect to subscriptions by Apollo as a result of the automatic conversion of the loan under the terms of the note purchase agreement. A copy of the security agreement is filed as Exhibit 10.4 to this Current Report on Form 8-K and is incorporated herein by reference. On January 1, 2006, in connection with the transactions contemplated by the note purchase agreement, Hughes, Apollo and certain affiliates of Apollo also entered into a registration rights agreement providing for, among other things, various demand and piggyback registration rights to Apollo relating to the resale of the shares of common stock that are issued to Apollo and its affiliates in connection with the proposed rights offering and special dividend distribution. A copy of the registration rights agreement is filed as Exhibit 10.5 to this Current Report on Form 8-K and is incorporated herein by reference. Section 2 - Financial Information Item 2.01. Completion of Acquisition or Disposition of Assets. Effective January 1, 2006, Hughes completed the purchase of the remaining 50 percent of the class A membership interests of HNS from DTV for $100 million in cash. To finance the transaction, effective January 1, 2006, Hughes borrowed $100 million from Apollo, stockholders of the Company. Concurrently, with the funding of the purchase from DTV, HNS paid DIRECTV $10 million to resolve certain post-closing adjustments related to the initial purchase by the Company of its 50 percent interest in HNS. On January 3, 2006, the Company issued a press release announcing the consummation of the purchase of the remaining 50 percent of the class A membership interests of HNS from DTV for $100 million in cash. A copy of the press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. On December 30, 2005, Hughes and Apollo entered into a note purchase agreement pursuant to which Hughes borrowed $100 million, effective January 1, 2006, in order to finance Hughes' purchase of the remaining 50 percent of the class A membership interests of HNS from DTV, the material terms and conditions of which are described in Item 1.01 above and are incorporated herein by reference. Section 9 - Financial Statements and Exhibits Item 9.01 Financial Statements and Exhibits (c) Exhibits. The exhibits to this Current Report on Form 8-K are listed on the Exhibit Index on page 5 hereof, which is incorporated by reference in this Item 9.01(c). 3 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 hereto duly authorized. Date: January 3, 2006 By: /s/ ROBERT C. LEWIS ------------------------------------- Name: Robert C. Lewis Title: Senior Vice President, General Counsel and Secretary 4 EXHIBIT INDEX Number Description - ------ ----------- 4.1 Form of 8% Senior Secured Note due 2007. 10.1 Separation Agreement, dated as of December 30, 2005, by and between Hughes Communications, Inc. and SkyTerra Communications, Inc. 10.2 Tax Sharing Agreement, dated as of December 30, 2005, by and between Hughes Communications, Inc. and SkyTerra Communications, Inc. 10.3 Note Purchase Agreement, dated as of December 30, 2005, by and among Hughes Communications, Inc., Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P. 10.4 Security Agreement, dated as of January 1, 2006, by and between Hughes Communications, Inc. and Apollo Investment Fund IV, L.P., as Collateral Agent and Secured Party. 10.5 Registration Rights Agreement, dated as of January 1, 2006, by and among Hughes Communications, Inc., Apollo Investment Fund IV, L.P., Apollo Overseas Partners IV, L.P., AIF IV/RRRR LLC, AP/RM Acquisition LLC and ST/RRRR LLC. 99.1 Press Release of SkyTerra Communications, Inc., dated January 3, 2006. 5 EX-4 2 nyc1066840.txt EXHIBIT 4.1 - FORM OF 8% SR SECURED NOTE DUE '07 Exhibit 4.1 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE NOTE PURCHASE AGREEMENT DATED AS OF DECEMBER 30, 2005, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES THERETO. UPON THE FULFILLMENT OF CERTAIN CONDITIONS, THE ISSUER HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER HEREOF. 8% Senior Secured Note due 2007 No. 1 U.S. $[ ] Dated: January 1, 2006 FOR VALUE RECEIVED, the undersigned, Hughes Communications, Inc., a Delaware corporation (the "Issuer"), HEREBY PROMISES TO PAY to [ ] (the "Holder") or its successors or assigns the principal sum of [ ] ($[ ]), or such greater or lesser principal amount of this Note then outstanding, on January 1, 2007. Interest shall accrue from the date of the transfer of funds to the Issuer pursuant to Section 2.2 of the Note Purchase Agreement (as hereinafter defined) on the unpaid balance hereof at the rate of 8.0% per annum ("Deferred Interest") and the outstanding principal hereof shall be automatically increased by an amount equal to the Deferred Interest on each Deferred Interest Payment Date. Deferred Interest shall be calculated on the basis of a year of 360 days, consisting of twelve, 30-day months. This Note is one of the Notes (herein called the "Notes") issued pursuant to the Note Purchase Agreement, dated as of December 30, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the "Note Purchase Agreement"), among the Issuer and the other parties thereto, and is subject to the terms thereof. All capitalized terms used but not defined herein shall have the meanings given to such terms in the Note Purchase Agreement. So long as any Event of Default shall have occurred and be continuing, the Issuer shall pay, in cash on demand from time to time, interest to the extent permitted by Law at a rate per annum equal to 4.0% above the Stated Rate on the outstanding principal amount hereof and any unpaid interest then due and payable hereon. Payments of principal of, interest on and premium, if any, with respect to this Note are to be made in lawful money of the United States of America, in immediately available funds, to such account as the holder of this Note shall have specified by written notice to the Issuer as provided in the Note Purchase Agreement. Pursuant to Section 3.5 of the Note Purchase Agreement and subject to the limitations specified therein, upon consummation of the Rights Offering, this Note, if held by an Initial Noteholder, shall automatically convert to the number of shares of Common Stock determined by dividing the aggregate principal amount outstanding on this Note, plus any accrued and unpaid interest, by the per share subscription price of Common Stock in the Rights Offering. This Note is a registered Note and, as provided in the Note Purchase Agreement, upon surrender of this Note for registration of Transfer, duly endorsed, or accompanied by a written instrument of Transfer duly executed, by the registered Holder hereof or such Holder's attorney duly authorized in writing, and compliance with the other provisions of the Note Purchase Agreement, a new Note for the appropriate principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of Transfer, the Issuer may treat the Person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Issuer will not be affected by any notice to the contrary. This Note is subject to prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreement, but not otherwise. If an Event of Default under the Note Purchase Agreement occurs and is continuing, the principal of and accrued but unpaid interest and liquidated damages, if any, on this Note may be declared or otherwise become due and payable in the manner and with the effect provided in the Note Purchase Agreement. Demand, presentment, protest and notice of non-payment and protest are hereby waived by the Issuer. This Note shall be governed by, and construed and interpreted in accordance with, the laws of the State of New York. ******* IN WITNESS WHEREOF, the Issuer has caused this Note to be executed by its duly authorized officer as of the date first set forth above. HUGHES COMMUNICATIONS, INC. By: ----------------------------------- Name: Title: EX-10 3 nyc1040347.txt EXHIBIT 10.1 - SEPARATION AGREEMENT Exhibit 10.1 =============================================================================== SEPARATION AGREEMENT between SKYTERRA COMMUNICATIONS, INC. and HUGHES COMMUNICATIONS, INC. Dated as of December 30, 2005 ================================================================================ TABLE OF CONTENTS Page ---- ARTICLE I DOCUMENTS AND ITEMS TO BE DELIVERED ON THE EFFECTIVE DATE Section 1.1 Documents to be Delivered by SkyTerra........................1 Section 1.2 Documents to be Delivered by Divco...........................2 ARTICLE II ASSIGNMENT AND ASSUMPTION Section 2.1 Assignment of SkyTerra Assets................................2 Section 2.2 Assumption of SkyTerra Liabilities...........................2 ARTICLE III EXCLUDED CASH Section 3.1 Permitted Uses of Excluded Cash..............................3 ARTICLE IV FACILITIES Section 4.1 Facilities Occupancy and Services............................3 Section 4.2 Compensation.................................................4 Section 4.3 Billing and Payment Terms....................................4 Section 4.4 Interruption of Services.....................................4 Section 4.5 Means of Providing the Other Office Services.................4 ARTICLE V COSTS AND EXPENSES RELATED TO THE DISTRIBUTION Section 5.1 Allocation of Costs and Expenses.............................5 ARTICLE VI MUTUAL OBLIGATIONS; COVENANTS Section 6.1 Further Assurances...........................................5 Section 6.2 Legal Actions................................................6 Section 6.3 Public Announcements.........................................6 Section 6.4 Amounts Received.............................................6 ARTICLE VII TAX MATTERS Section 7.1 Tax Sharing Agreement........................................6 ARTICLE VIII ACCESS TO INFORMATION, PERSONNEL AND HISTORICAL RECORDS Section 8.1 Information and Personnel Shared Historical Records..........6 Section 8.2 Access to Information........................................7 Section 8.3 Litigation Cooperation.......................................7 Section 8.4 Attorney Client Privilege....................................7 ARTICLE IX CONFIDENTIALITY Section 9.1 Confidential Information.....................................7 Section 9.2 Exceptions...................................................8 Section 9.3 Additional Responsibilities..................................8 ARTICLE X DISCLAIMER AND LIMITATION OF LIABILITY Section 10.1 No Representation or Warranty................................8 Section 10.2 Limitation of Liability......................................9 ARTICLE XI BUSINESS AND REGISTRATION STATEMENT INDEMNIFICATION Section 11.1 General Cross Indemnification................................9 Section 11.2 Registration Statement Indemnification......................10 Section 11.3 Contribution................................................10 Section 11.4 Procedure...................................................11 Section 11.5 Other Matters...............................................11 Section 11.6 Treatment of Indemnity Payments.............................12 ARTICLE XII TERMINATION Section 12.1 Termination.................................................12 Section 12.2 Survival....................................................13 ARTICLE XIII MISCELLANEOUS Section 13.1 Force Majeure...............................................13 Section 13.2 Assignment..................................................13 Section 13.3 Relationship of the Parties.................................13 Section 13.4 Governing Law and Submission to Exclusive Jurisdiction......13 Section 13.5 Entire Agreement............................................14 Section 13.6 Notices.....................................................14 Section 13.7 Negotiation and Mediation...................................15 Section 13.8 Conflicting Provisions......................................16 Section 13.9 Severability................................................16 Section 13.10 Interpretation..............................................16 Section 13.11 Counterparts................................................16 Section 13.12 Further Cooperation.........................................16 Section 13.13 Amendment and Waiver........................................17 Section 13.14 Duly Authorized Signatories.................................17 Section 13.15 Waiver of Trial By Jury.....................................17 Section 13.16 Specific Performance........................................17 Section 13.17 Descriptive Headings........................................17 Section 13.18 No Third Party Beneficiaries................................17 Section 13.19 Binding Nature of Agreement.................................17 Section 13.20 Certain Definitions.........................................17 Schedule I - Assets Schedule II - Excluded Assets Schedule III - Excluded Cash Schedule IV - Schedule IV Assets Schedule V - Excluded Liabilities Exhibit A - Tax Sharing Agreement Exhibit B - Form of Assignment and Assumption Agreement Exhibit C - Form of Contribution Agreement Exhibit D - Form of Certificate of Secretary of SkyTerra Exhibit E - Form of Certificate of Secretary of Divco SEPARATION AGREEMENT (this "Agreement"), dated as of December 30, 2005, by and between SkyTerra Communications, Inc., a Delaware corporation ("SkyTerra"), and Hughes Communications, Inc., a Delaware corporation ("Divco"). Each of SkyTerra and Divco is sometimes referred to herein as a "Party" and collectively, as the "Parties." W I T N E S S E T H: - - - - - - - - - - WHEREAS, SkyTerra is the owner of all of the issued and outstanding capital stock, consisting of one (1) share of common stock, par value $0.001 per share (the "Common Stock"), of Divco immediately prior to the date hereof. NOW, THEREFORE, in contemplation of Divco ceasing to be owned by SkyTerra and the covenants and agreements set forth herein, the Parties, intending to be legally bound hereby, agree as follows: ARTICLE I DOCUMENTS AND ITEMS TO BE DELIVERED ON THE EFFECTIVE DATE Section 1.1 Documents to be Delivered by SkyTerra. On the Effective Date, SkyTerra will deliver to Divco each of the following items and agreements: (a) A duly executed Tax Sharing Agreement substantially in the form attached hereto as Exhibit A (the "Tax Sharing Agreement"); (b) A duly executed Assignment and Assumption Agreement, substantially in the form attached hereto as Exhibit B (the "Assignment and Assumption Agreement"); (c) A duly executed Contribution Agreement substantially in the form attached hereto as Exhibit C (the "Contribution Agreement"); (d) Such deeds, bills of sale, contribution agreements, endorsements, consents, assignments (including, without limitation, trademark, trade name, patent and domain name assignments), stock certificates executed in blank and such other instruments of transfer, conveyance, assignment, substitution and confirmation (the "Conveyance Documents") as either Party shall deem reasonably necessary or appropriate (i) to vest in Divco good and valid title in and to the Assets (other than the Schedule IV Assets, to the extent described herein), free and clear of all liens and (ii) to have Divco fully and unconditionally assume and discharge the Assumed Liabilities and to relieve SkyTerra of any liability or obligation with respect thereto; and (e) A certificate of the Secretary of SkyTerra, substantially in the form attached to this Agreement as Exhibit D. Section 1.2 Documents to be Delivered by Divco. On the Effective Date, Divco will deliver to SkyTerra each of the following items and agreements: (a) In each case where Divco is a party to any agreement or instrument referred to in Section 1.1, a duly executed counterpart of such agreement or instrument; and (b) A certificate of the Secretary of Divco, substantially in the form attached to this Agreement as Exhibit E. ARTICLE II ASSIGNMENT AND ASSUMPTION Section 2.1 Assignment of SkyTerra Assets. (a) On the Effective Date, SkyTerra shall assign, transfer, convey and deliver to Divco, and Divco shall accept and take from SkyTerra, all of SkyTerra's right, title and interest in and to the Assets. (b) Anything in this Agreement to the contrary notwithstanding, this Agreement shall not constitute an assignment, or an agreement to assign, any Assets described on Schedule IV hereto (the "Schedule IV Assets") or any claim or right or any benefit arising thereunder or resulting therefrom if an attempted assignment thereof, without consent of a third party having rights in respect thereof, would constitute a breach or other contravention of any agreement in favor of such third party or in any way adversely affect the rights of SkyTerra or Divco. SkyTerra will use its reasonable efforts (but without any requirement to commence any legal proceeding), which efforts shall be at the sole cost and expense of Divco, and Divco will actively assist SkyTerra, to obtain the consent of any such third parties to the assignment of any such Asset (including any Schedule IV Asset, except those Schedule IV Assets listed in Part B of Schedule IV, with regard to which the Parties agree no such consent shall be sought) or claim or right or any benefit arising thereunder for the assignment thereof to Divco. If consent is not obtained with respect to any Schedule IV Asset, or if an attempted assignment thereof would be ineffective or would adversely affect the rights of SkyTerra thereunder so that Divco would not in fact receive all such rights, SkyTerra and Divco will cooperate in a mutually agreeable arrangement under which Divco would, as between SkyTerra and Divco, obtain the benefits and assume the obligations thereunder in accordance with this Agreement, including, without limitation, subcontracting, sub-licensing, or subleasing to Divco, or under which SkyTerra would enforce for the benefit of Divco, with Divco assuming SkyTerra's obligations, any and all rights of SkyTerra against a third party thereto, and any amount received by SkyTerra in respect thereof shall be held for and promptly paid over to Divco; provided, that Divco shall reimburse SkyTerra for all reasonable and documented costs and expenses borne by SkyTerra under any such arrangement. Section 2.2 Assumption of SkyTerra Liabilities. (a) (x) On the Effective Date, Divco shall assume any and all liabilities (fixed or contingent) of SkyTerra, other than Excluded Liabilities, that encumber or are otherwise attributable to the Assets, including those related to the Schedule IV Assets, and (y) upon a Change of Control, Divco shall assume any and all other liabilities of SkyTerra (fixed or contingent) that arose following the Effective Date, other than the Excluded Liabilities (the liabilities described in clauses (i) and (ii) are referred to herein as the "Assumed Liabilities"), provided, that: (i) SkyTerra shall use its commercially reasonable efforts, at Divco's sole cost and expense, to make insurance, indemnification or reimbursement claims relating to any applicable Assumed Liability. SkyTerra shall remit to Divco any insurance proceeds, indemnification payments or similar reimbursement payments received by SkyTerra in respect of any Assumed Liability; provided, that Divco shall reimburse SkyTerra for all reasonable and documented costs and expenses borne by SkyTerra in obtaining and remitting such insurance proceeds, indemnification payments or similar reimbursement payments; and (ii) SkyTerra shall not, and shall not permit any other member of the SkyTerra Group to, enter into any contract, agreement, commitment or arrangement, or take any action, with respect to any Asset or Assumed Liability that is intended or would reasonably be expected to be adverse to Divco or otherwise result in any obligation of Divco pursuant to the terms set forth in ARTICLE XI. ARTICLE III EXCLUDED CASH Section 3.1 Uses of Cash. Upon a Change of Control, SkyTerra shall remit to Divco all Excluded Cash, net of any amounts that have been dispensed by SkyTerra; provided that SkyTerra and Divco shall treat any payments of Excluded Cash by SkyTerra to Divco made pursuant to this Section 3.1 as occurring immediately prior to the Distribution. ARTICLE IV FACILITIES Section 4.1 Facilities Occupancy and Services. (a) SkyTerra hereby grants to Divco a license to use the Shared Facilities (the "Facilities License"), commencing on January 1, 2006 and continuing until a Change of Control (the "License Term"), provided, that the use of the Shared Facilities by Divco pursuant to the Facilities License shall be limited in all material respects to the operation of Divco substantially in the manner the businesses of SkyTerra and Divco were conducted by SkyTerra during the three-month period prior to the Effective Date. (b) For the duration of the License Term, Divco shall be entitled to utilize and operate the Furniture and Equipment substantially as such Furniture and Equipment was used in the operation of the Divco and SkyTerra as conducted during the three-month period prior to the Effective Date. Without the consent of SkyTerra, Divco shall not remove any item of Furniture or Equipment from the Shared Facilities. Divco and SkyTerra shall each use its commercially reasonable efforts to keep the Shared Facilities and the Furniture and Equipment in substantially the same condition as the Shared Facilities and the Furniture and Equipment were in prior to the Effective Date, ordinary wear and tear excepted. (c) For the duration of the License Term, SkyTerra shall provide Divco such general office and building support services ("Other Office Services") substantially as were used to support the operation of SkyTerra and Divco during the three-month period prior to Effective Date. Section 4.2 Compensation. As consideration for the Facility License, Divco shall pay SkyTerra, in accordance with Section 4.3, an amount equal to $7,500 per month in connection with the Facilities License and Other Office Services (the "Facilities Payables") during the License Term. Section 4.3 Billing and Payment Terms. On the first of each month during the License Term Divco shall pay SkyTerra, on a monthly basis, the Facilities Payables relating to the License Term. Amounts not paid within 15 days of such date in accordance with this Section 4.3(a) shall accumulate interest at the rate of 6 percent per annum or the maximum lawful rate, whichever is less (such rate being referred to herein as the "Interest Rate"). Upon the termination of Facilities License, SkyTerra will invoice Divco for Facilities Payables incurred or other applicable charges since the last invoice in accordance with the terms and conditions set forth herein. Section 4.4 Interruption of Services. (a) Except as otherwise provided herein, SkyTerra will use its commercially reasonable efforts to provide uninterrupted access to and usage of the Shared Facilities and deliver the Other Office Services through the License Term. In the event, however, that Divco is wholly or partially prevented from using the Shared Facilities or if access to or use of the Shared Facilities is interrupted or suspended, in either case by reason of any force majeure event set forth in Section 13.1, or SkyTerra shall deem it reasonably necessary to suspend access to or usage of the Shared Facilities or delivery of any of the Other Office Services hereunder for purposes of maintenance, repair or replacement of equipment parts or structures, SkyTerra shall not be obligated to deliver such access, usage or services during such periods, provided, that SkyTerra: (i) has given, whenever possible, written notice of the interruption in accordance with Section 13.6 within a reasonable period of time, explaining the reason, purpose and likely duration thereof; and (ii) uses commercially reasonable efforts to minimize the duration and impact of the interruption. Section 4.5 Means of Providing the Other Office Services. With respect to the Other Office Services to be provided hereunder, SkyTerra shall determine the means and resources used to provide such Other Office Services in accordance with its prudent business judgment. ARTICLE V COSTS AND EXPENSES RELATED TO THE DISTRIBUTION Section 5.1 Allocation of Costs and Expenses. Divco shall pay for all fees, costs and expenses directly related to (i) the Distribution, including, but not limited to, any and all fees, costs and expenses related to (a) the preparation and negotiation of this Agreement and of all of the documentation related to the Distribution, (b) the preparation and execution or filing of any and all further documents, agreements, forms, applications, contracts or consents associated with the Distribution, (c) Divco's organizational documents, (d) the preparation, printing and filing of any Registration Statement, including all fees and expenses of complying with applicable federal, state or foreign securities laws and domestic or foreign securities exchange rules and regulations, together with fees and expenses of counsel retained to effect such compliance, (e) the preparation, printing and distribution of each of the prospectuses for the Distribution and (f) the preparation, prior to the Closing Date, of the documentation related to implementing Divco's employee benefit plans, retirement plans and equity-based plans as a result of the Distribution. In the event that SkyTerra voluntarily pays any of the above fees prior to a Change in Control, SkyTerra shall not be entitled to reimbursement from Divco. ARTICLE VI MUTUAL OBLIGATIONS; COVENANTS Section 6.1 Further Assurances. (a) Subject to the terms and conditions of this Agreement, each Party will use its commercially reasonable efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under applicable law to consummate the transactions contemplated by this Agreement. At the request of Divco, and without further consideration, SkyTerra will execute and deliver to Divco such other instruments of transfer, conveyance, assignment, substitution and confirmation and take such action as Divco may reasonably deem necessary or desirable in order to more effectively transfer, convey and assign to Divco and confirm Divco's title to all of the Assets, to put the Divco Group in actual possession and operating control thereof and to permit the Divco Group to exercise all rights with respect thereto (including, without limitation, rights under contracts and other arrangements as to which the consent of any third party to the transfer thereof shall not have previously been obtained). At the request of SkyTerra and without further consideration, Divco will execute and deliver to SkyTerra all instruments, assumptions, novations, undertakings, substitutions or other documents and take such other action as SkyTerra may reasonably deem necessary or desirable in order to have Divco fully and unconditionally assume and discharge the Assumed Liabilities and to relieve the SkyTerra Group of any liability or obligation with respect thereto and evidence the same to third parties. Furthermore, each Party, at the request of the other Party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of the Distribution and transactions contemplated hereby. (b) The Parties shall cooperate with one another in determining whether any action by, or in respect of, or filing with, and governmental agency is required in connection with the Distribution and this Agreement, and in taking such action or making any such filings and furnishing information required in connection therewith. Section 6.2 Legal Actions. (a) Within five Business Days of either Party becoming a party to, or threatened with, or otherwise receives notice of, any legal or regulatory proceeding or investigation (including inquiries or complaints from any federal agency, state attorney general's office, from a legislator on behalf of a constituent or from any Better Business Bureau or similar organization) (in each case, a "Proceeding") arising out of or in connection with this Agreement or the Distribution, it is agreed that such Party will promptly provide written notification of such event to the other Party and, to the extent reasonably requested or appropriate, the other Party will cooperate with such Party to defend, settle, compromise or otherwise resolve such Proceeding. (b) No Party shall have the authority to institute, prosecute or maintain any Proceeding on behalf of the other Party without the prior written consent of the other Party. (c) This Section 6.2 shall not apply to the extent provided otherwise by the provisions of Article XI. Section 6.3 Public Announcements. Neither SkyTerra nor Divco shall issue a press release or other public announcement making reference to the other Party, the other Party's products or the Services provided hereunder, other than in the Registration Statement or Prospectus or otherwise required by law, unless such Party has received the written approval of the other Party with respect to the proposed text of such press release or announcement, which approval shall not be unreasonably withheld or delayed, and neither Party shall make or publish any statement that is, or may be reasonably considered to be, disparaging of the other Party or its affiliates, directors, employees, products or services. Section 6.4 Amounts Received. Within five Business Days of either Party receiving payments from third parties due to the other Party, such party shall remit such amounts to the Party entitled such payment, provided, that SkyTerra shall remit to Divco all amounts due to SkyTerra or Divco prior to the Distribution Date that are received by SkyTerra on or after the Distribution Date. ARTICLE VII TAX MATTERS Section 7.1 Tax Sharing Agreement. Notwithstanding anything to the contrary in this Agreement, all matters relating to taxes shall be governed exclusively by the Tax Sharing Agreement. ARTICLE VIII ACCESS TO INFORMATION, PERSONNEL AND HISTORICAL RECORDS Section 8.1 Information and Personnel Shared Historical Records. Within 30 days of the Distribution Date, SkyTerra shall deliver to Divco, at Divco's sole cost and expense, copies of all historical records, including but not limited to, the books, records, and such other records, files, information and/or data, or portions thereof (the "Records"), related primarily to the business of the Divco Group; provided, however, that the Parties shall have no obligation to provide such records in the event that the provision of such records is prohibited by applicable law. The provision of any Records shall not be deemed a waiver of any Privilege and the parties shall use reasonable efforts to maintain and protect such Privileges with reasonable prior notice and in consultation with the other parties. Section 8.2 Access to Information. Subject to the confidentiality provisions set forth in Article IX below and any other restrictions contained in this Agreement: (a) SkyTerra and Divco shall provide, upon written request, any information within such Party's possession that the requesting Party reasonably needs (i) to comply with requirements imposed on the requesting Party by a governmental authority; (ii) for use by such requesting Party in any proceeding or to satisfy audit, accounting or similar requirements; or (iii) to comply with such requesting Party's obligations under this Agreement or any other agreement executed by SkyTerra and Divco in connection with this Agreement or the Distribution. (b) SkyTerra and Divco shall provide, upon written request, all financial and other data and information that the requesting Party determines is necessary and advisable in the preparation of its financial statements and any reports or filings with any governmental agency. Section 8.3 Litigation Cooperation. The Parties agree to the extent reasonably necessary to cooperate and consult in the defense and settlement of any threatened or filed third-party action, claim or dispute which jointly involves the SkyTerra Group or the Divco Group ("Third Party Action") which primarily relates to matters, actions, events or occurrences taking place prior to any Change of Control. In addition, both SkyTerra and Divco will use their reasonable best efforts to provide assistance to the other Party with respect to any Third Party Action, and to make available to the other Party directors, officers, other employees and agents of such assisting Party as witnesses in legal, administrative or other proceedings. The Party providing information, consulting or witness services under this Section 8.3 shall be entitled to reimbursement from the other Party for reasonable and documented expenses. This Section 8.3 shall not apply to the extent provided otherwise by the provisions of Article XI. Section 8.4 Attorney Client Privilege. Neither SkyTerra nor Divco will be required to provide any information pursuant to this Agreement if the provision of such information would serve as a waiver of any Privilege afforded such information. ARTICLE IX CONFIDENTIALITY Section 9.1 Confidential Information. For purposes of this Agreement, "Confidential Information" means any information disclosed by a Party (the "Providing Party") to the other Party (the "Receiving Party") pursuant to this Agreement relating to the business, finances, technology or operations of the Providing Party. The Receiving Party will (a) treat as confidential all Confidential Information of the Providing Party, (b) not use such Confidential Information except to exercise its rights and perform its obligations under this Agreement, and (c) not disclose such Confidential Information to any third party. Each Party will use at least the same degree of care (and not less than a reasonable degree of care) it uses to prevent the disclosure of its own confidential information of like importance, to prevent the disclosure of the Providing Party's Confidential Information including the execution of confidentiality agreements with its employees and consultants having access to such Confidential Information. Each Receiving Party will promptly notify the Providing Party of any actual or suspected misuse or unauthorized disclosure of the Providing Party's Confidential Information. Section 9.2 Exceptions. Confidential Information excludes information that: (a) was in the public domain at the time it was disclosed or has become in the public domain through no fault of the Receiving Party; (b) becomes known to the Receiving Party through lawful means, at the time of disclosure, and was acquired by such Receiving Party after the Effective Date as demonstrated by the Receiving Party; (c) was independently developed by the Receiving Party without any use of the Confidential Information; or (d) becomes known to the Receiving Party, without restriction, from a source other than the Providing Party; provided that such information was provided (i) under the circumstances of disclosure that the Receiving Party does not have a duty of non-disclosure owed to such third party, (ii) to the Receiving Party's knowledge, the disclosing party's disclosure is not violative of a duty of non-disclosure owed to another, including the Receiving Party, and (iii) the disclosure by the third party is not otherwise unlawful. In the event that the Receiving Party, or any of its representatives, becomes legally compelled by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar judicial or administrative process to disclose any Providing Party's Confidential Information, the Receiving Party shall provide prompt prior written notice of such requirement and cooperate with the Providing Party to obtain a protective order or similar remedy to cause the Providing Party's Confidential Information not to be disclosed, including interposing all available objections thereto. In the event that such protective order or other similar remedy is not obtained, the Receiving Party shall furnish only that portion of the Providing Party's Confidential Information that has been legally compelled and shall exercise reasonable best efforts to obtain assurance that "highly confidential" treatment will be accorded such Confidential Information. Section 9.3 Additional Responsibilities. Each Party will inform its employees, agents and consultants having access to Confidential Information of the other Party of the confidentiality provisions hereof, and will diligently enforce such provisions, and will be responsible for actions of such employees, agents and consultants in this respect. ARTICLE X DISCLAIMER AND LIMITATION OF LIABILITY Section 10.1 No Representation or Warranty. SkyTerra does not, in this Agreement or any other agreement, instrument or document contemplated by this Agreement, make any representation as to, warranty of or covenant with respect to: (a) its title or rights in and to, or the value of, any asset or thing of value transferred, or to be transferred, to Divco or the amount or potential liability with respect to any Assumed Liability; provided, that after the Effective Date, SkyTerra shall not challenge Divco's title or right in and to or the value of any asset or thing of value transferred to Divco pursuant to this Agreement; or (b) the absence of defenses or freedom from counterclaims with respect to any Assumed Liability. Section 10.2 Limitation of Liability. IN NO EVENT SHALL ANY OFFICER, DIRECTOR OR STOCKHOLDER OF EITHER PARTY, OR A PARTY ITSELF, BE LIABLE TO ANY OTHER OFFICER, DIRECTOR OR STOCKHOLDER OF EITHER PARTY, OR THE OTHER PARTY ITSELF, FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, THAT THE FOREGOING LIMITATIONS SHALL NOT APPLY TO ANY ASSUMED LIABILITIES TO THE EXTENT SUCH ASSUMED LIABILITIES INCLUDE ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS. ARTICLE XI BUSINESS AND REGISTRATION STATEMENT INDEMNIFICATION Section 11.1 General Cross Indemnification. (a) SkyTerra shall indemnify and hold harmless each member of the Divco Group and each of the officers, directors, employees and agents of each member of the Divco Group against any and all costs and expenses arising out of claims (including, without limitation, reasonable attorneys' fees, interest, penalties and costs of investigation or preparation for defense), judgments, fines, losses, claims, damages, liabilities, demands, assessments and amounts paid in settlement (collectively, "Losses"), in each case, based on, arising out of, resulting from or in connection with any claim, action, cause of action, suit, proceeding or investigation, whether civil, criminal, administrative, investigative or other (collectively, "Actions"), based on, arising out of, pertaining to or in connection with (i) any breach by SkyTerra of this Agreement or any other agreement between any member of the Divco Group on the one hand and any member of the SkyTerra Group on the other hand, (ii) the failure to honor any of the Excluded Liabilities, or (iii) the ownership or the operation of the assets or properties of MSV or TerreStar, or the operation or conduct of the business of, including contracts entered into by, MSV or TerreStar, whether before, on or after the date hereof. (b) Divco shall indemnify and hold harmless each member of the SkyTerra Group and each of the officers, directors, employees and agents of each member of the SkyTerra Group against any and all Losses, in each case, based on, arising out of, resulting from or in connection with any Actions, based on, arising out of, pertaining to or in connection with (i) any activities, action or inaction on the part of any member of the Divco Group or any of their officers, directors, employees, affiliates acting as such (other than a member of the SkyTerra Group acting as such), fiduciaries or agents, (ii) any breach by Divco of this Agreement or by any member of the Divco Group of any other agreement between any member of the Divco Group on the one hand and any member of the SkyTerra Group on the other hand, (iii) the failure to honor any Assumed Liabilities, (iv) the ownership or the operation of the Assets, and the operation or conduct of the business of, including contracts entered into by, the Divco Group, whether before, on or after the Distribution Date, (v) any guaranty, keepwell or financial condition maintenance agreement of or by SkyTerra provided to any person with respect to any actual or contingent obligation of any member of the Divco Group or (vi) any violations under the Securities Act or Exchange Act that arise out of or relate to the business of SkyTerra, provided, that any claim pursuant to this clause (vi) is initiated prior to a Change of Control, or within such reasonable and finite period following a Change of Control as Divco and SkyTerra shall mutually agree in writing, and provided, further, that in no case shall indemnification under this clause (vi) include claims, (A) arising out of information furnished to SkyTerra by MSV or TerreStar or on behalf of MSV or TerreStar and (B) for which SkyTerra has expressly agreed to indemnify Divco. (c) The indemnities contained in Sections 11.1(a) and (b) shall be applicable whether or not any Action or the facts or transactions giving rise to such Action arose prior to, on or subsequent to the date of this Agreement. Section 11.2 Registration Statement Indemnification. (a) Divco shall indemnify and hold harmless each member of the SkyTerra Group and each of the officers, directors, employees and agents of each member of the SkyTerra Group (collectively, the "Registration Indemnitees") from and against any and all Losses arising out of or based upon any Offering Document, including any untrue statement or alleged untrue statement of a material fact contained in any Offering Document, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; except insofar as such Losses arise out of or are based upon any untrue statement or omission or alleged untrue statement or omission which has been made therein or omitted therefrom in reliance upon and in conformity with (i) information relating to MSV or TerreStar furnished in writing to Divco by or on behalf of such MSV or TerreStar or (ii) financial information, if any, provided by or on behalf of MSV or TerreStar in writing to Divco. (b) SkyTerra shall indemnify and hold harmless each member of the Divco Group and each of the officers, directors, employees and agents of each member of the Divco Group, to the same extent as the foregoing indemnity from Divco to each Registration Indemnitee, but only with respect to (i) information relating to MSV or TerreStar furnished in writing to Divco by or on behalf of MSV or TerreStar and (ii) financial information, if any, provided by MSV or TerreStar in writing to Divco. If any Action shall be brought against Divco, any of its directors, officers, employees or agents based on any Offering Document and in respect of which indemnity may be sought against SkyTerra pursuant to this paragraph (b), SkyTerra shall have the rights and duties given to Divco by Section 11.4 hereof (except that if Divco shall have assumed the defense thereof SkyTerra shall not be required to do so, but may employ separate counsel therein and participate in the defense thereof, but the fees and expenses of such counsel shall be at SkyTerra's expense), and Divco, its directors, officers, employees and agents shall have the rights and duties given to such Registration Indemnitee by Section 11.4 hereof. Section 11.3 Contribution. (a) If the indemnification provided for in this Article XI is unavailable to an indemnified party under Section 11.2 hereof in respect of any Losses referred to therein, then an indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses in such proportion as is appropriate to reflect the relative fault of Divco on the one hand and the applicable Registration Indemnitee on the other in connection with the statements or omissions that resulted in such Losses. The relative fault of Divco on the one hand and the applicable Registration Indemnitee on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by Divco on the one hand or by such Registration Indemnitee on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (b) No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Section 11.4 Procedure. If any Action shall be brought against a Registration Indemnitee or any other person entitled to indemnification pursuant to this Article XI (collectively with the Registration Indemnitees, the "Indemnitees") in respect of which indemnity may be sought against Divco or SkyTerra, as applicable (the applicable party referred to herein as the "Indemnifying Party"), such Indemnitee shall promptly notify the Indemnifying Party, and the Indemnifying Party shall assume the defense thereof, including the employment of counsel and payment of all fees and expenses. Such Indemnitee shall have the right to employ separate counsel in any such action, suit or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of such person unless (i) the Indemnifying Party has agreed in writing to pay such fees and expenses, (ii) the Indemnifying Party has failed to assume the defense and employ counsel, or (iii) the named parties to an Action (including any impleaded parties) include both an Indemnitee and the Indemnifying Party and such Indemnitee shall have been advised by its counsel that representation of such indemnified party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct (whether or not such representation by the same counsel has been proposed) due to actual or potential differing interests between them (in which case the Indemnifying Party shall not have the right to assume the defense of such Action on behalf of such Indemnitee). It is understood, however, that the Indemnifying Party shall, in connection with any one such Action or separate but substantially similar or related Actions in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of only one separate firm of attorneys (in addition to any local counsel) at any time for all such indemnified persons not having actual or potential differing interests among themselves, and that all such fees and expenses shall be reimbursed as they are incurred. the Indemnifying Party shall not be liable for any settlement of any such Action effected without its written consent, but if settled with such written consent, or if there be a final judgment for the plaintiff in any such Action, the Indemnifying Party shall indemnify and hold harmless each Indemnitee, to the extent provided in the preceding paragraph, from and against any Losses by reason of such settlement or judgment. Section 11.5 Other Matters. (a) No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened Action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such Action. (b) Any Losses for which an indemnified party is entitled to indemnification or contribution under this Article XI shall be paid by the indemnifying party to the indemnified party as such Losses are incurred. The indemnity and contribution agreements contained in this Article XI shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee, Divco, its directors, officers, employees or agents and (ii) any termination of this Agreement. (c) The Parties shall, and shall cause their respective subsidiaries to, cooperate with each other in a reasonable manner with respect to access to unprivileged information and similar matters in connection with any Action. The provisions of this Article XI are for the benefit of, and are intended to create third party beneficiary rights in favor of, each of the indemnified parties referred to herein. (d) Divco shall reimburse SkyTerra and its subsidiaries for all costs associated with subpoenas for discovery, including e-discovery, in connection with any suit, proceeding or investigation against Divco and any of its subsidiaries. Section 11.6 Treatment of Indemnity Payments. SkyTerra and Divco shall treat any payments made by an Indemnifying Party pursuant to this Article XI as occurring immediately prior to the Distribution. ARTICLE XII TERMINATION Section 12.1 Termination. (a) Each Facility License and any Other Office Service or Services provided hereunder may be terminated (x) by mutual written agreement of the Parties, (y) by the Party providing such License or Other Office Service or Services upon written notice to the other Party if performance has been rendered impossible or impracticable by reason of the occurrence of any of the events described in Section 13.1 or (z) by either Party upon written notice to the other Party if: (i) the other Party fails to adequately perform in any material respect any of its obligations under this Agreement or otherwise breaches a material obligation under this Agreement (the "Defaulting Party") and such failure to perform or breach of an obligation is not cured within 30 days of the date on which written notice is received by the Defaulting Party setting forth in reasonable detail the manner in which the Defaulting Party failed to perform its obligations hereunder; or (ii) the other Party makes a general assignment for the benefit of creditors, becomes insolvent, a receiver is appointed, or a court approves reorganization or arrangement proceedings. Any termination notice delivered by either Party shall specify the effective date of termination and, where applicable, in detail the Other Office Service or Services to be terminated. Section 12.2 Survival. Expiration or termination of this Agreement or any part hereof for any reason shall not terminate the other obligations of the Parties hereunder, which shall survive any such termination. Subject to the foregoing, expiration or termination of this Agreement or any part hereof for any reason shall not terminate either Party's obligations and rights arising out of any willful misconduct or gross negligence of the other Party occurring prior to such termination or expiration, including the obligation to pay any money owed hereunder up to or as a result of the termination of this Agreement or any part hereof. ARTICLE XIII MISCELLANEOUS Section 13.1 Force Majeure. Neither Party shall be responsible for the delay in the performance of any obligation hereunder due to labor disturbances, accidents, fires, storms, floods, earthquake, explosion, wars, acts of terrorism, riots, rebellions, insurrections, blockages, strike or labor disruption, acts of governments, governmental requirements and regulations, restrictions imposed by law or any other similar conditions, beyond the reasonable control and without the fault or negligence of such Party, and the time for performance by such Party shall be extended by the period of such delay. Notwithstanding the foregoing, in no event shall Divco be relieved of its payment obligations to SkyTerra with regard to the Assumed Liabilities or for prior access or use of the Shared Facilities or Other Office Services delivered. Section 13.2 Assignment. Except as otherwise provided in this Agreement, including but not limited to a Change of Control, neither this Agreement nor any of the rights, interests or obligations of any Party hereto under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by either of the Parties without the prior written consent of the other Party. Any assignment in violation of the preceding sentence shall be void. Subject to the preceding two sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns. Other than the indemnities under Articles XI, nothing in this Agreement shall be construed to grant any person or entity not a Party any rights or powers whatsoever, and except as provided in Section 13.18, no person or entity shall be a third party beneficiary of this Agreement. Nothing in this Section 13.2 affects the ability of either Party to terminate the Agreement or any part hereof in accordance with the provisions of herein. Section 13.3 Relationship of the Parties. Neither Party is an agent of the other Party and neither Party has any authority to bind the other Party, transact any business in the other Party's name or on its behalf, or make any promises or representations on behalf of the other Party unless agreed to in writing. Each Party will perform all of its respective obligations under this Agreement as an independent contractor, and no joint venture, partnership or other relationship shall be created or implied by this Agreement. Section 13.4 Governing Law and Submission to Exclusive Jurisdiction. This Agreement shall be governed by, enforced under and construed in accordance with the laws of the State of New York, without giving effect (to the fullest extent provided by law) to any choice or conflict of law provision or rule thereof which might result in the application of the laws of any other jurisdiction. Subject to Section 13.7, each of the Parties hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the courts of the State of New York and of the United States of America in each case located in the County of New York for any litigation arising out of or relating to this Agreement (and agrees not to commence any litigation relating thereto except in such courts) and further agrees that service of any process, summons, notice or document by U.S. certified or registered mail to its respective address set forth in Section 13.6 (or to such other address for notice that such Party has given the other Party written notice of in accordance with Section 13.6) shall be effective service of process for any litigation brought against it in any such court. Each Party hereby irrevocably and unconditionally waives any objection to the laying of exclusive venue of any litigation arising out of this Agreement in the courts of the State of New York or of the United States of America in each case located in the County of New York and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such litigation brought in any such court has been brought in an inconvenient forum. Section 13.5 Entire Agreement. This Agreement and the Schedules and Exhibits referred to in this Agreement, which Schedules and Exhibits as such Schedules and Exhibits, may be amended from time to time, are incorporated and made a part of this Agreement by reference, constitute the entire agreement between SkyTerra and Divco relating to the Distribution and obligations to be provided by the parties, and there are no further agreements or understandings, written or oral, between the Parties with respect thereto. Section 13.6 Notices. All notices, requests, claims, consents, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, by facsimile (that is confirmed) or sent by overnight courier (providing proof of delivery) to the Parties at the following addresses: if to SkyTerra: SkyTerra Communications, Inc. 19 West 44th Street, Suite 507 New York, New York 10036 Facsimile: (212) 730-7523 Attention: Robert C. Lewis, Senior Vice President, Secretary and General Counsel if to Divco: SkyTerra Holdings, Inc. 19 West 44th Street, Suite 507 New York, New York 10036 Facsimile: (212) 730-7523 Attention: Robert C. Lewis, Senior Vice President, Secretary and General Counsel copies of all notices (which shall not constitute notice) hereunder shall be delivered to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Facsimile: (212) 735-2000 Attention: Gregory A. Fernicola, Esq. or at such other address as the parties may specify by written notice to the others, and each such notice, request, consent and other communication shall for all purposes of this Agreement be treated as being effective or having been given when delivered if delivered personally, upon receipt of facsimile confirmation if transmitted by facsimile or on the next Business Day if dispatched by overnight courier or. Section 13.7 Negotiation and Mediation. (a) Negotiation. In the event of any dispute, controversy or claim arising out of or relating to this Agreement or the breach, termination or validity thereof, or the transactions contemplated hereby (a "Dispute"), upon the written notice of either Party hereto, the Parties shall attempt in good faith to negotiate a resolution of the Dispute. If the Parties are unable for any reason to resolve a Dispute within 30 days after the receipt of such notice, the Dispute shall be submitted to mediation in accordance with Section 13.7(b) hereof. (b) Mediation. Any Dispute not resolved pursuant to Section 13.7(a) hereof shall, at the request (the "Mediation Request") of either Party (the "Disputing Party"), be submitted to mediation in accordance with the then-prevailing Commercial Mediation Rules of the American Arbitration Association, as modified herein (the "Rules"). The mediation shall be held in New York, New York. The Parties shall have twenty (20) days from receipt by a party of a Mediation Request to agree on a mediator. If no mediator has been agreed upon by the Parties within twenty (20) days of receipt by a Disputing Party (or Parties) of a Mediation Request, then any Party may request (on written notice to the other Party), that the American Arbitration Association appoint a mediator in accordance with the Rules. All mediation pursuant to this Section 13.7(b) shall be confidential and shall be treated as compromise and settlement negotiations, and no oral or documentary representations made by the Parties during such mediation shall be admissible for any purpose in any subsequent proceedings. Neither Party shall disclose or permit the disclosure of any information about the evidence adduced or the documents produced by the other Party in the mediation proceedings or about the existence, contents or results of the mediation award without the prior written consent of such other Party except in the course of a judicial or regulatory proceeding or as may be required by law, rule or regulation or requested by a governmental authority or securities exchange. Before making any disclosure permitted by the preceding sentence, the Party intending to make such disclosure shall give the other Party a reasonable opportunity to protect its interests. If the Dispute has not been resolved within sixty (60) days of the appointment of a Mediator, or within ninety (90) days of receipt by a Disputing Party of notice in accordance with Section 13.6 (whichever occurs sooner) or within such longer period as the Parties may agree to in writing, then any Party may file an action on the Dispute in any court having jurisdiction in accordance with Section 13.4 herein. Section 13.8 Conflicting Provisions. In the event any provision of any exhibit hereto conflicts with the provisions of this Agreement, the provisions of this Agreement shall be controlling; provided that the provisions of the Tax Sharing Agreement shall be controlling with respect to all matters relating to taxes. Section 13.9 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby are not affected in any manner materially adverse to a Party. Upon such determination that any term or other provisions are invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions be consummated as originally contemplated to the fullest extent possible. Section 13.10 Interpretation. (a) When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. (b) The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any provisions of this Agreement. Section 13.11 Counterparts. This Agreement may be executed in any number of counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by all Parties and delivered to the other Party. Section 13.12 Further Cooperation. Each Party shall cooperate with the other, at any other Party's request, to execute any and all documents or instruments, or to obtain any consent, in order to assign, transfer, perfect, record, maintain, enforce or otherwise carry out the intent of the terms of this Agreement. Section 13.13 Amendment and Waiver. This Agreement may not be amended or modified except by a writing signed by an authorized signatory of each Party. No waiver by any Party or any breach or default hereunder shall be deemed to be a waiver of any preceding or subsequent breach or default. Section 13.14 Duly Authorized Signatories. Each Party represents and warrants that its signatory whose signature appears below has been and is on the date of this Agreement duly authorized by all necessary corporate or other appropriate action to execute this Agreement. Section 13.15 Waiver of Trial By Jury. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HERETO IRREVOCABLE WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER. Section 13.16 Specific Performance. In addition to any other remedies that any Party hereto may have at law or in equity, the Parties hereby acknowledge that the transactions contemplated by this Agreement are unique, and that the harm to a Party resulting from any breach by the other Party of its obligations under this Agreement cannot be adequately compensated by damages. Accordingly, the non-breaching Party shall have the right to have all obligations, undertakings, agreements, covenants and other provisions of this Agreement specifically performed by the breaching Party, and the non-breaching Party shall have the right to obtain an order or decree of such specific performance in any of the courts set forth in Section 13.4. Section 13.17 Descriptive Headings. The descriptive headings of the several articles and sections of this Agreement are inserted for reference only and shall not limit or otherwise affect the meaning hereof. Section 13.18 No Third Party Beneficiaries. Other than (i) the indemnities under Article XI and (ii) with respect to a successor of SkyTerra in the event of a Change of Control, nothing in this Agreement shall convey any rights upon any person or entity, which is not a party or a permitted assignee of a party to this Agreement. Section 13.19 Binding Nature of Agreement. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto or their successors in interest, except as expressly otherwise provided herein. Section 13.20 Certain Definitions. For purposes of this Agreement: (a) "Actions" has the meaning set forth in Section 11.1(a). (b) "Affiliate" or "affiliate" of any person means another person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first person, where "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise. (c) "Agreement" has the meaning set forth in the preamble to this Agreement. (d) "Assets" means those items described on Schedule I hereto. (e) "Assignment and Assumption Agreement" has the meaning set forth in Section 1.1(b). (f) "Assumed Liabilities" has the meaning set forth in Section 2.2. (g) "Business Day" or "business day" means each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are authorized or obligated by law or executive order to close. (h) "Change of Control" means any combination of shares, sale of assets, merger or consolidation with or into any non-affiliate of SkyTerra or any other transaction involving SkyTerra and the consolidation of a majority of the direct or indirect equity interests of MSV. (i) "Change of Control Payables" shall mean any amount payable to any employee, agent, financial advisor, law firm, independent accounting firm, vendor or consultant by SkyTerra or any other member of the SkyTerra Group (i) pursuant to a contractual obligation arising upon a Change of Control, pursuant to the terms of a written agreement between SkyTerra or any other member of the SkyTerra Group and one or more third parties, or (ii) for services rendered in connection with a contemplated or realized Change in Control. (j) "Code" means the Internal Revenue Code of 1986 (or any successor statute), as amended from time to time, and the regulations promulgated thereunder. (k) "Common Stock" has the meaning set forth in the preamble. (l) "Confidential Information" has the meaning set forth in Section 9.1. (m) Contribution Agreement" has the meaning set forth in Section 1.1(b). (n) "Conveyance Documents" has the meaning set forth in Section 1.1(d). (o) "Defaulting Party" has the meaning set forth in Section 12.1(b). (p) "Dispute" has the meaning set forth in Section 13.7(a). (q) "Disputing Party" has the meaning set forth in Section 13.7(b). (r) "Distribution" means the separation of Divco and SkyTerra by means of a dividend distribution by SkyTerra of all of the shares of Common Stock to the holders of capital stock, certain warrants and certain options to purchase common stock of SkyTerra. (s) "Distribution Date" means the date the Distribution is consummated. (t) "Divco" has the meaning set forth in the preamble. (u) "Divco Group" means Divco, together with the group of entities that will be subsidiaries of Divco immediately after the Effective Date, and any corporation or other entity which may become a member of such group from time to time. (v) "Effective Date" means December 31, 2005. (w) "Exchange Act" means the Securities Exchange Act of 1934, as amended. (x) "Excluded Assets" means those items described on Schedule II hereto. (y) "Excluded Cash" means $12,500,000, held in the account set forth on Schedule III hereto. (z) "Excluded Liabilities" means those liabilities described on Schedule V hereto. (aa) "Facilities Payables" has the meaning set forth in Section 4.2. (bb) "Facilities License" has the meaning set forth in Section 4.3(a). (cc) "Furniture and Equipment" means the furniture, fixtures and other tangible personal property (including computers and software installed thereon, computer peripherals, network equipment, telephone equipment, facsimile machines and photocopy machines) that are located in the Shared Facilities on the Effective Date. (dd) "Indemnitees" has the meaning set forth in Section 11.4. (ee) "Indemnifying Party" has the meaning set forth in Section 11.4. (ff) "Interest Rate" has the meaning set forth in Section 4.3(a). (gg) "License Term" has the meaning set forth in Section 4.1(a). (hh) "Losses" has the meaning set forth in Section 11.1(a). (ii) "Mediation Request" has the meaning set forth in Section 13.7(b). (jj) "MSV" means Mobile Satellite Ventures LP, a Delaware limited partnership. (kk) "Non-Paying Party" has the meaning set forth in Section 4.3(c). (ll) "Offering Document" means any Registration Statement and the Prospectus relating thereto, as applicable, as well as any other disclosure document or other information provided to prospective investors used in connection with the Distribution. (mm) "Other Office Services" has the meaning set forth in Section 4.1(c). (nn) "Party" or "Parties" has the meaning set forth in the preamble. (oo) "Privilege" means any privilege, including privileges arising under or related to the attorney-client or attorney work product privileges. (pp) "Proceeding" has the meaning set forth in Section 6.3(a). (qq) "Prospectus" means the prospectus or prospectuses, including any free writing prospectus, included in any Registration Statement, as amended or supplemented by any prospectus supplement and by all other amendments and supplements to such prospectus, including post-effective amendments and all material incorporated by reference in such prospectus or prospectuses. (rr) "Providing Party" has the meaning set forth in Section 9.1. (ss) "Receiving Party" has the meaning set forth in Section 9.1. (tt) "Records" has the meaning set forth in Section 7.1. (uu) "Registration Indemnitee" has the meaning set forth in Section 11.2(a). (vv) "Registration Statement" means any registration statement filed by Divco or any other member of the Divco Group under the Securities Act or the Exchange Act including, in each such case, the Prospectus relating thereto, and amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference in such Registration Statement and Prospectus. (ww) "Rules" has the meaning set forth in Section 13.7(b). (xx) "Schedule IV Assets" has the meaning set forth in Section 2.1(b). (yy) "Securities Act" means the Securities Act of 1933, as amended. (zz) "Shared Facilities" shall mean the current offices of SkyTerra Communications, Inc., located at 19 West 44th Street, Suite 507, New York, New York 10036 and 6340 Sugarloaf Parkway, Suite 200, Duluth, Georgia 30097. (aaa) "SkyTerra" has the meaning set forth in the preamble. (bbb) "SkyTerra Group" means SkyTerra, together with the subsidiaries of SkyTerra and any corporation or other entity which may be, may have been or may become a member of such group from time to time, but excluding any member of the Divco Group. (ccc) "Subsidiary" or "subsidiary" of shall include all corporations, partnerships, joint ventures, limited liability companies, associations and other entities (a) in which SkyTerra or Divco, as applicable, owns (directly or indirectly) 50% or more of the outstanding voting stock, voting power, partnership interests or similar ownership interests, (b) of which SkyTerra or Divco, as applicable, otherwise directly or indirectly controls or directs the policies or operations and (c) which would be considered subsidiaries of SkyTerra or Divco, as applicable, within the meaning of Regulation S-K or Regulation S-X of the General Rules and Regulations under the Securities Act. (ddd) "Tax Sharing Agreement" has the meaning set forth in Section 1.1(a). (eee) "Terrestar" means TerreStar Networks, Inc., a Delaware corporation. (fff) "Third Party Action" has the meaning set forth in Section 7.3. [Execution Page Follows] IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf on the day and year first above written. HUGHES COMMUNICATIONS, INC. By: /s/ ROBERT C. LEWIS ------------------------------------ Name: Robert C. Lewis Title: Senior Vice President, General Counsel and Secretary SKYTERRA COMMUNICATIONS, INC. By: /s/ ROBERT C. LEWIS ------------------------------------ Name: Robert C. Lewis Title: Senior Vice President, General Counsel and Secretary EX-10 4 nyc528817.txt EXHIBIT 10.2 - TAX SHARING AGREEMENT Exhibit 10.2 TAX SHARING AGREEMENT This TAX SHARING AGREEMENT (this "Agreement"), dated as of December 30, 2005, by and between SkyTerra Communications, Inc., a Delaware corporation ("SkyTerra") and Hughes Communications, Inc., a Delaware corporation and a wholly owned subsidiary of SkyTerra ("Divco"). Each of SkyTerra and Divco is sometimes referred to herein as a "Party" and collectively, as the "Parties." WITNESSETH WHEREAS, SkyTerra and Divco have entered into a Separation Agreement, dated as of December 30, 2005 (the "Separation Agreement"); WHEREAS, SkyTerra intends to distribute all of the shares of Common Stock(1) of Divco to the holders of capital stock, certain warrants and certain options to purchase common stock of SkyTerra in the Distribution; WHEREAS, at the close of business on the Distribution Date, the taxable year of the Divco Consolidated Group (as defined below) shall close for U.S. federal income tax purposes, and Divco and its Subsidiaries shall leave the SkyTerra Consolidated Group (as defined below); and WHEREAS, the Parties hereto wish to provide for the payment of Taxes (each as defined below) and entitlement to Refunds (as defined below) thereof, allocate responsibility for and provide for cooperation in connection with the filing of returns in respect of Taxes, and provide for certain other matters relating to Taxes; NOW, THEREFORE, in consideration of the premises and the representations, covenants and agreements herein contained and intending to be legally bound hereby, the Parties hereto agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings set forth below: "Actually Realized" shall mean, for purposes of determining the timing of the realization of a Refund or Tax Attribute by a Person in respect of any payment, transaction, occurrence or event, the time at which the amount of Taxes paid or Refund realized by such Person is reduced below the amount of Taxes that such Person would have been required to pay but for such payment, transaction, occurrence or event (calculated, for these purposes, without regard to the availability of any net operating loss, net capital loss, unused investment credit, unused foreign Tax credit or any other Tax Attribute). "Carryback" shall mean the carryback of a Tax Attribute by Divco from a Post-Distribution Taxable Period to a Pre-Distribution Taxable Period. "Carryback Benefit" shall mean, in respect of a Person or group of Persons for any taxable period, the excess of (a) the hypothetical Tax Liability of such Person or group of Persons for such taxable period, calculated as if the Carryback had not occurred but with all other facts unchanged, over (b) the actual Tax Liability of such Person or group of Persons for such taxable period, calculated taking into account the Carryback (and treating any Refund as a negative Tax Liability and taking into account credits, if any, for purposes of such calculation). "Code" shall mean the Internal Revenue Code of 1986, as amended. "Combined Return" shall mean a consolidated, combined or unitary Tax Return that actually includes, by election or otherwise, one or more members of the SkyTerra Group together with Divco and/or any member of the Divco Group. "Divco Consolidated Group" shall mean the affiliated group of corporations (within the meaning of Section 1504(a) of the Code) of which Divco is the common parent immediately after the Distribution (and any predecessor or successor to such affiliated group). "Divco Group" shall mean (a) Divco and each Person that is a direct or indirect Subsidiary of Divco (including any Subsidiary of Divco that is disregarded for U.S. federal income Tax purposes (or for purposes of any state, local, or foreign Tax law)) immediately after the Distribution, (b) any corporation (or other Person) that shall have merged or liquidated with or into Divco or any such Subsidiary and (c) any predecessor or successor to any Person otherwise described in this definition. "Divco Separate Return" shall mean any Tax Return required to be filed by any member of the Divco Group that does not include any member of the SkyTerra Group. "Final Determination" shall mean the final resolution of liability for any Tax, which resolution may be for a specific issue or adjustment or for a taxable period, (a) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a state, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for Refund or the right of the Taxing Jurisdiction to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (b) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (c) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Code, or a comparable agreement under the laws of a state, local, or foreign Taxing Jurisdiction; (d) by any allowance of a Refund or credit in respect of an overpayment of Tax, but only after the expiration of all periods during which such Refund may be recovered (including by way of offset) by the Taxing Jurisdiction imposing such Tax; or (e) by any other final disposition, including by reason of the expiration of the applicable statute of limitations or by mutual agreement of the Parties. "Indemnified Party" shall mean any Person seeking indemnification pursuant to the provisions of this Agreement. "Indemnifying Party" shall mean any Party hereto from which any Indemnified Party is seeking indemnification pursuant to the provisions of this Agreement. "Person" shall mean any individual, partnership, joint venture, limited liability company, corporation, association, joint stock company, trust, unincorporated organization or similar entity or a governmental authority or any department or agency or other unit thereof. "Post-Distribution Taxable Period" shall mean a taxable period that begins after the Distribution Date. "Pre-Distribution Taxable Period" shall mean a taxable period that ends on or before the Distribution Date. "Post-Change of Control Taxable Period" shall mean a taxable period that begins after the closing date of a Change of Control. "Pre-Change of Control Taxable Period" shall mean a taxable period that ends on or before the closing date of a Change of Control. "Proceeding" shall mean any audit or other examination, or judicial or administrative proceeding relating to liability for, or Refunds or adjustments with respect to, Taxes. "Refund" shall mean any refund of Taxes, including any reduction in Tax Liabilities by means of a credit, offset or otherwise. "Representative" shall mean with respect to a Person, such Person's officers, directors, employees and other authorized agents. "Separation Agreement" shall have the meaning set forth in the recitals of this Agreement. "SkyTerra Consolidated Group" shall mean the affiliated group of corporations (within the meaning of Section 1504(a) of the Code) of which SkyTerra is the common parent (and any predecessor or successor to such affiliated group). "SkyTerra Group" shall mean (a) SkyTerra and each Person that is a direct or indirect Subsidiary of SkyTerra (including any Subsidiary of SkyTerra that is disregarded for U.S. federal income Tax purposes (or for purposes of any state, local, or foreign Tax law)) immediately after the Distribution, (b) any corporation (or other Person) that shall have merged or liquidated with or into SkyTerra or any such Subsidiary and (c) any predecessor or successor to any Person otherwise described in this definition. "SkyTerra Separate Return" shall mean any Tax Return required to be filed by any member of the SkyTerra Group that does not include any member of the Divco Group. "Straddle Period" shall mean any taxable period commencing on or prior to, and ending after, the closing date of a Change of Control. "Tax or Taxes" (a) means any and all federal, state, local, foreign or other tax of any kind (together with any and all interest, penalties, fines, additions to tax and additional amounts imposed with respect thereto) imposed by any Taxing Jurisdiction, including taxes on or with respect to income, alternative minimum, accumulated earnings, personal holding company, capital, transfer, stamp, franchises, windfall or other profits, gross receipts, property, sales, use, capital stock, payroll, employment, unemployment, social security, workers' compensation or net worth, and taxes in the nature of excise, withholding, ad valorem or value added and (b) shall include any transferee liability in respect of an amount described in clause (a) of this definition. "Tax Attribute" shall mean any net operating loss, net capital loss, unused investment credit, unused foreign Tax credit, excess charitable contribution, minimum Tax credit or general business credit, in each case, with respect to the current year and any carryover. "Tax Liabilities" shall mean all liabilities for Taxes. "Tax Return" shall mean any return, report, filing, statement, questionnaire, declaration or other document required to be filed with a Taxing Jurisdiction in respect of Taxes, including any attachments thereto, and any information return, claim for refund, amended return or declaration of estimated Taxes. "Taxing Jurisdiction" a governmental authority (foreign or domestic) or any subdivision, agency, commission or authority thereof having jurisdiction over the assessment, determination, collection or imposition of any Tax (including, without limitation, the IRS) on SkyTerra, Divco or any of their respective Affiliates. "Underpayment Rate" shall mean the annual rate of interest described in Section 6621(c) of the Code for large corporate underpayments of income Tax (or similar provision of state, local, or foreign income Tax law, as applicable), as determined from time to time. 2. Filing of Tax Returns; Payment of Taxes. a. Combined Returns, SkyTerra Consolidated Group Returns and SkyTerra Separate Returns. (i) SkyTerra shall prepare and file (or cause to be prepared and filed) (A) all Combined Returns, (B) all other consolidated Tax Returns of the SkyTerra Consolidated Group and (C) all SkyTerra Separate Returns. SkyTerra shall pay (or cause to be paid) any and all Taxes due with respect to such Combined Returns, other consolidated Tax Returns of the SkyTerra Consolidated Group and SkyTerra Separate Returns; provided that, with respect to any payments of such Taxes made after the Distribution Date, Divco shall be liable for (A) all Taxes shown due on such Combined Returns (including all Tax Liabilities resulting from the Distribution and the restructuring related thereto) other than any Taxes that directly or indirectly relate to MSV or Terrestar and (B) all Taxes shown due on such other consolidated Tax Returns of the SkyTerra Consolidated Group and SkyTerra Separate Returns for all Pre-Change of Control Taxable Periods and, with respect to any Straddle Period, the portion of such Straddle Period ending on the closing date of the Change of Control, in all cases, other than any Taxes that directly or indirectly related to MSV, Terrestar or a Change of Control; and provided further that, Divco shall not be liable for any Taxes with respect to such Combined Returns, other consolidated Tax Returns of the SkyTerra Consolidated Group and SkyTerra Separate Returns to the extent any Tax Attribute is available to any member of the SkyTerra Group to reduce the amount of any such Taxes. (ii) The allocation of Taxes for a Straddle Period shall be apportioned between the Pre-Change of Control Taxable Period and the Post-Change of Control Taxable Period based on a closing of the books method as if the closing date of the Change of Control was the end of the taxable period. (iii) With respect to any member of the Divco Group that is included in both a Divco Separate Return pursuant to Section 2(b) and a Combined Return, Divco shall provide to SkyTerra a schedule setting forth the items of income, gain, loss, deduction and credit of such member with respect to such Combined Return no later than forty-five (45) days prior to the due date (including extensions) for the filing of such Combined Return, and SkyTerra shall prepare such Combined Return in accordance with the schedule Divco so provides. (iv) All Combined Returns, other consolidated Tax Returns of the SkyTerra Consolidated Group and SkyTerra Separate Returns that include Taxes for which Divco is liable shall be (A) prepared by SkyTerra, in a manner consistent with past practice, to the extent permissible under applicable law and (B) duly and timely filed by SkyTerra in accordance with all applicable laws. All such Tax Returns shall be submitted to Divco no later than thirty (30) days prior to the due date (including extensions) for filing of such Tax Returns (or if such due date is within forty-five (45) days following the Distribution Date, as promptly as practicable following the Distribution Date). Divco shall have the right to review such Tax Returns and all work papers and procedures used to prepare such Tax Returns. Within ten (10) days after delivery of any such Tax Return, Divco shall notify SkyTerra in writing if it objects to any of the items in such Tax Return which items could reasonably be expected to adversely impact any member of the Divco Group. If Divco does not so notify SkyTerra of any objection, Divco shall be considered to have consented to the filing of such Tax Return. If Divco objects to any such item on such a Tax Return, SkyTerra and Divco shall attempt in good faith to resolve the dispute and, if they are unable to do so, the disputed items shall be resolved (within a reasonable time, taking into account the deadline for filing such Tax Return) in accordance with Section 10(d). Upon resolution of all such items, the relevant Tax Return shall be filed on that basis. Divco shall pay to SkyTerra the Taxes for which it is liable no later than five (5) Business Days prior to the due date for the payment of such Taxes. b. Divco Separate Returns. Divco shall prepare and file (or cause to be prepared and filed) all Divco Separate Returns. Divco shall pay (or cause to be paid) and shall be solely liable for any and all Taxes due with respect to such Tax Returns. c. Apportionment of Tax Attributes. Without limiting the provisions of Section 7, SkyTerra shall provide to Divco on or prior to the earlier of a Change of Control or September 1, 2006 (i) a Tax basis balance sheet for Divco setting forth the Tax basis of all of the assets of Divco as of the Distribution Date and (ii) a schedule allocating to Divco its appropriate share of Tax Attributes in all Taxing Jurisdictions in which Divco is subject to Taxes. SkyTerra and Divco shall prepare and file all Tax Returns in a manner consistent with the allocations in the immediately preceding sentence and shall not otherwise take any position inconsistent with such allocations in any Tax Return, any Proceeding or otherwise. d. Tax Sharing Agreements. Other than with respect to this Agreement, all Tax sharing agreements or similar arrangements or agreements with respect to or involving any member of the Divco Group and any other Person (other than a member of the Divco Group) shall be terminated as of the Distribution Date and, after the Distribution Date, Divco shall not be bound thereby or have any liability thereunder. e. Transfer Taxes. Divco shall bear any and all stamp, duty, transfer, sales and use or similar Taxes ("Transfer Taxes") incurred in connection with the Distribution. 3. Indemnification for Taxes. a. Indemnification by SkyTerra. SkyTerra shall indemnify, defend and hold harmless Divco and each member of the Divco Group and each of their respective Representatives and Affiliates (and the successors and assigns of any of them), without duplication, from and against any Taxes and any reasonable out-of-pocket expenses (other than any expenses relating to any Proceeding as described in Section 5(a)(i)) attributable to or arising from or related to all Taxes imposed on or attributable to SkyTerra or any member of the SkyTerra Group pursuant to Section 2. b. Indemnification by Divco. Divco shall indemnify, defend and hold harmless SkyTerra and each member of the SkyTerra Group and each of their respective Representatives and Affiliates (and the successors and assigns of any of them), without duplication, from and against any Taxes and any reasonable out-of-pocket expenses (other than any expenses relating to any Proceeding as described in Section 5(b)(i)) attributable to or arising from or related to (i) all Taxes imposed on or attributable to Divco or any member of the Divco Group pursuant to Section 2 (including, without limitation, all Tax Liabilities resulting from the Distribution and the restructuring related thereto), (ii) all Taxes of any member of an affiliated, consolidated, combined or unitary group of which any member of the SkyTerra Consolidated Group was a member prior to the closing date of any Change of Control pursuant to Treasury Regulations Section 1.1502-6 or analogous or similar state, local, or foreign law or regulation and (iii) all Transfer Taxes for which Divco is responsible for pursuant to Section 2(e). Notwithstanding anything in this Agreement to the contrary, Divco shall not be liable for any Tax Liability attributable to or arising from or related to any Change of Control. c. Timing of Indemnification. Any payment and indemnification made pursuant to this Section 3 shall be made by the Indemnifying Party promptly, but, in any event, no later than: (i) in the case of an indemnification obligation with respect to any Tax Liabilities, five (5) Business Days prior to the date the Indemnified Party makes a payment of Taxes to the applicable Taxing Jurisdiction (including a payment with respect to a proposed adjustment of Taxes or an assessment of Tax deficiency asserted or made by any Taxing Jurisdiction or a payment made in settlement of an asserted Tax deficiency) or realizes a reduced Refund; and (ii) in the case of any payment or indemnification of any reasonable out-of-pocket expenses not otherwise described in clause (i) of this Section 3(c) (including, but not limited to, any attorneys' fees and expenses), five (5) Business Days prior to the date the Indemnified Party makes a payment thereof. 4. Refunds. a. Any Refund attributable to any Tax Liabilities for which any member of the Divco Group is responsible for pursuant to Section 2 shall be for the account of Divco. To the extent SkyTerra receives a Refund referred to in the immediately preceding sentence, SkyTerra shall promptly pay the amount of the Refund to Divco. Any Refund attributable to any Tax Liabilities for which any member of the SkyTerra Group is responsible for pursuant to Section 2 shall be for the account of SkyTerra. To the extent Divco receives a Refund referred to in the immediately preceding sentence, Divco shall promptly pay or cause to be paid the amount of the Refund to SkyTerra. b. Each Party shall, if reasonably requested by the other Party, cause the relevant entity to file for and use its reasonable best efforts to obtain and expedite the receipt of any Refund to which such requesting Party is entitled under Section 4(a). 5. Tax Contests. a. Tax Contests With Respect to the SkyTerra Group. SkyTerra (or such member of the SkyTerra Group as SkyTerra shall designate) shall have the right to control and represent the interests of the members of the SkyTerra Group and to employ counsel of its choice at its expense in any Proceeding for any matter resulting in any asserted Tax Liability with respect to which SkyTerra provides indemnification under Section 3; provided however, with respect to any Proceeding that could reasonably be expected to adversely impact Divco or any member of the Divco Group, (i) Divco (or such member of the Divco Group as Divco shall designate) shall have the right to participate and to employ counsel of its choice at its expense in such Proceeding and (ii) SkyTerra shall not settle any such Proceeding without Divco's prior written consent, which consent shall not be unreasonably withheld or delayed. b. Tax Contests With Respect to the Divco Group. Divco (or such member of the Divco Group as Divco shall designate) shall have the right to control and represent the interests of the members of the Divco Group and to employ counsel of its choice at its expense in any Proceeding for any matter resulting in any asserted Tax Liability with respect to which Divco provides indemnification under Section 3; provided however, with respect to any Proceeding that could reasonably be expected to adversely impact SkyTerra or any member of the SkyTerra Group, (i) SkyTerra (or such member of the SkyTerra Group as SkyTerra shall designate) shall have the right to participate and to employ counsel of its choice at its expense in such Proceeding and (ii) Divco shall not settle any such Proceeding without SkyTerra's prior written consent, which consent shall not be unreasonably withheld or delayed. c. Notification. With respect to any indemnification which may be claimed pursuant to the provisions of Section 3, (i) the Indemnified Party shall notify the Indemnifying Party (or cause the Indemnifying Party to be notified) within ten (10) days of receipt of any written communication by the Indemnified Party from or with any Taxing Jurisdiction and (ii) the Indemnified Party shall notify the Indemnifying Party (or cause the Indemnifying Party to be notified) at least ten (10) days prior to the date the Indemnified Party intends to make a payment of any Taxes. The failure by the Indemnified Party to notify the Indemnifying Party pursuant to this Section 5(c) shall not constitute a waiver of any of the Indemnified Party's claims to indemnification except to the extent of material prejudice to the Indemnifying Party. 6. Carrybacks. a. Carrybacks. Upon Divco's request, SkyTerra shall file for all Carrybacks and use its best efforts to obtain and expedite the receipt of any Refunds or CarryBack Benefits resulting from such Carrybacks. SkyTerra shall promptly forward, in all cases no later than five (5) days after such Refund or Carryback Benefit is Actually Realized, to Divco (i) all Refunds resulting from any Carryback (including any interest thereon) received from a Taxing Jurisdiction and (ii) the amount of any Carryback Benefit Actually Realized by a member of the SkyTerra Group, to the extent attributable to a Carryback. 7. Cooperation and Exchange of Information. a. Cooperation and Exchange of Information. Each of SkyTerra and Divco, on behalf of itself and each member of the SkyTerra Group and the Divco Group, respectively, shall provide the other Party (or its designee) with such cooperation or information as such other Party (or its designee) reasonably shall request in connection with the preparation or filing of any Tax Return, claim for Refund, the conduct of any Proceeding or any other matter related to Taxes. Such cooperation and information shall include, without limitation, upon reasonable notice (i) making employees and facilities available on a mutually convenient basis to provide such assistance as might reasonably be required and (ii) providing, or causing to be provided, such information as might reasonably be required in connection with any such Tax Return, claim for Refund, Proceeding, including, without limitation, records, Tax Returns, documents, work papers or other relevant materials and (iii) executing any document that may be necessary in connection with the filing of a Tax Return, a claim for a Refund or any Proceeding, including such waivers, consents or powers of attorney as may be necessary for SkyTerra. Any information obtained under this Section 7 shall be kept confidential, except as otherwise reasonably may be necessary in connection with the filing of Tax Returns or claims for Refund or in conducting any Proceeding. b. Retention of Records. Each of SkyTerra and Divco shall retain all Tax Returns, workpapers, and all material records and other documents existing on the date hereof or created in respect of (i) any taxable period that ends on or before or includes the Distribution Date or (ii) any taxable period that may be subject to a claim hereunder until the later of (A) the expiration of the statute of limitations (including extensions) for the taxable periods to which such Tax Returns and other documents relate, (B) if a Tax Attribute may be carried from a Pre-Distribution Taxable Period to a Post-Distribution Taxable Period, the expiration of the statute of limitations (including extensions) for the earlier of (x) the year to which the Tax Attribute may be carried or (y) the year to which the Tax Attribute is actually carried and (C) the Final Determination of any payments that may be required in respect of such taxable periods under this Agreement. From and after the end of the period described in the immediately preceding sentence, (A) if a member of the SkyTerra Group wishes to dispose of any such records and documents, then SkyTerra shall provide written notice thereof to Divco and shall provide Divco the opportunity to take possession of any such records and documents within 90 days after such notice is delivered; provided, however, that if Divco does not, within such 90-day period, confirm its intention to take possession of such records and documents, SkyTerra may destroy or otherwise dispose of such records and documents and (B) if a member of the Divco Group wishes to dispose of any such records or documents that relate to any Tax Attributes of any member of the SkyTerra Group, then Divco shall provide written notice thereof to SkyTerra and shall provide SkyTerra the opportunity to take possession of any such records and documents within 90 days after such notice is delivered; provided, however, that if SkyTerra does not, within such 90-day period, confirm its intention to take possession of such records and documents, Divco may destroy or otherwise dispose of such records and documents. 8. Payments. a. Method of Payment. All payments required by this Agreement shall be made by (i) wire transfer to the appropriate bank account as may from time to time be designated by the Parties for such purpose; provided that, on the date of such wire transfer, notice of the transfer is given to the recipient thereof in accordance with Section 10(c), or (ii) any other method agreed to by the Parties. All payments due under this Agreement shall be deemed to be paid when available funds are actually received by the payee. b. Interest. Any payment required by this Agreement that is not made on or before the date required hereunder shall bear interest, from and after such date through the date of payment, at the Underpayment Rate. c. Characterization of Payments. For all Tax purposes, the Parties hereto shall treat, and cause their respective Affiliates to treat, (i) any payment required by this Agreement or by Article XI of the Separation Agreement as either a contribution by SkyTerra to Divco or a distribution by Divco to SkyTerra, as the case may be, occurring immediately prior to the Distribution and (ii) any payment of interest or non-federal income Taxes by or to a Taxing Jurisdiction as taxable or deductible, as the case may be, to the Party entitled under this Agreement to retain such payment or required under this Agreement to make such payment, in either case, except as otherwise required by applicable law. 9. Designation of Affiliate. Each of SkyTerra on the one hand and Divco on the other hand may assign any of its rights or obligations under this Agreement to any member of the SkyTerra Group or the Divco Group, respectively, as it shall designate; provided, however, that no such assignment shall relieve SkyTerra on the one hand or Divco on the other hand of any obligation to make a payment hereunder to the extent such designee fails to make such payment. 10. Miscellaneous. a. Entire Agreement. This Agreement constitutes the entire agreement among the Parties with respect to the subject matter of this Agreement and shall supersede all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter of this Agreement. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any Party to enter this Agreement. This Agreement shall not be modified or terminated except by a termination of the Separation Agreement or by a writing duly signed by each of the Parties hereto, and no waiver of any provisions of this Agreement shall be effective unless in a writing duly signed by the Party sought to be bound. If, and to the extent, the provisions of this Agreement conflict with the Separation Agreement, or any other agreement entered into in connection with the Distribution, the provisions of this Agreement shall control. b. Governing Law. This Agreement shall be construed in accordance with the laws of New York applicable to contracts made and wholly performed within such state, without regard to principles of choice of law. c. Notices. Notices, offers, requests or other communications required or permitted to be given by either Party pursuant to the terms of this Agreement shall be given in writing to the respective Parties to the following addresses: if to SkyTerra: SkyTerra Communications, Inc. 19 West 44th Street, Suite 507 New York, New York 10036 Facsimile: 212-730-7523 Attention: Robert C. Lewis, Senior Vice President and General Counsel if to Divco: Hughes Communications, Inc. 19 West 44th Street, Suite 507 New York, New York 10036 Attention: Robert C. Lewis, copies of all notices (which shall not constitute notice) hereunder shall be delivered to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, New York 10036 Facsimile: (212) 735-2000 Attention: Stuart M. Finkelstein, Esq. or to such other address as the Party to whom notice is given may have previously furnished in writing as provided herein. Any notice involving non-performance, termination, or renewal shall be sent by hand delivery, recognized overnight courier or, within the United States, may also be sent via certified mail, return receipt requested. All other notices may also be sent by fax, confirmed by first class mail. All notices shall be deemed to have been given and received on the earlier of actual delivery or three (3) Business Days from the date of postmark. d. Disputes. If Divco and SkyTerra cannot agree as to the calculation of any liability under this Agreement or as to the proper interpretation of any provision of this Agreement, any such matter in dispute shall be resolved by a nationally recognized accounting firm acceptable to both Divco and SkyTerra. The decision of such firm shall be final and binding. The fees and expenses of such accounting firm incurred in connection with the resolution of any such dispute shall be borne by the Parties in proportion to their respective liabilities. e. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which shall constitute one and the same agreement. f. Binding Effect; Assignment. This Agreement shall inure to the benefit of and be binding upon the Parties and their respective legal representatives and successors, and nothing in this Agreement, express or implied, is intended to confer upon any other Person any rights or remedies of any nature whatsoever under or by reason of this Agreement. Except as set forth in Section 9 neither Party may assign this Agreement or any rights or obligations under this Agreement without the prior written consent of the others and any such assignment shall be void. g. Severability. If any term or other provision of this is determined by a governmental authority to be invalid, illegal or incapable of being enforced by any applicable law, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated by this Agreement is not materially affected. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated by this Agreement are fulfilled to the fullest extent possible. h. Failure or Indulgence Not Waiver: Remedies Cumulative. No failure or delay on the part of any Party in the exercise of any right under this Agreement shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement in this Agreement, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. i. Amendment. No change or amendment will be made to this Agreement except by an instrument in writing signed on behalf of each of the Parties to this Agreement. j. Authority. Each of the Parties represents to the others that (a) it has the corporate or other requisite power and authority to execute, deliver and perform this Agreement, (b) the execution, delivery and performance of this Agreement by it have been duly authorized by all necessary corporate or other actions, (c) it has duly and validly executed and delivered this Agreement, and (d) this Agreement is a legal, valid and binding obligation, enforceable against it in accordance with its terms. k. Interpretation. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. When a reference is made in this Agreement to a Section such reference shall be to a Section of this Agreement unless otherwise indicated. Nothing in this Agreement shall be interpreted as imposing an obligation on SkyTerra or the members of the SkyTerra Group, Divco or the members of the Divco Group that is in violation of applicable law. l. Survival. Notwithstanding anything in this Agreement to the contrary, any claim for indemnification to be made under this Agreement must relate to a claim with respect to Taxes, the written notice of which is received by at least one of the Parties from a Taxing Jurisdiction within the four-year period beginning on the Distribution Date. [EXECUTION PAGE FOLLOWS] IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the day and year first written above. SKYTERRA COMMUNICATIONS, INC. By: /s/ ROBERT C. LEWIS ------------------------------------ Name: Robert C. Lewis Title: Senior Vice President, General Counsel and Secretary HUGHES COMMUNICATIONS, INC. By: /s/ ROBERT C. LEWIS ------------------------------------ Name: Robert C. Lewis Title: Senior Vice President, General Counsel and Secretary - ------------------------------------ (1) Capitalized terms used but not otherwise defined herein shall have the respective meanings assigned to them in the Separation Agreement. EX-10 5 nyc1066191.txt EXHIBIT 10.3 - NOTE PURCHASE AGREEMENT Exhibit 10.3 NOTE PURCHASE AGREEMENT dated as of December 30, 2005, among HUGHES COMMUNICATIONS, INC., a Delaware corporation formerly known as SkyTerra Holdings, Inc. (the "Issuer"); APOLLO INVESTMENT FUND IV, L.P., a Delaware limited partnership; and APOLLO OVERSEAS PARTNERS IV, L.P., a Delaware limited partnership (together with Apollo Investment Fund IV, L.P., the "Initial Noteholders"). RECITALS WHEREAS, the Issuer has entered into the Membership Interest Purchase Agreement dated as of November 10, 2005 (as amended or otherwise modified through the date hereof, the "Purchase Agreement"), by and among DTV Network Systems, Inc., The DIRECTV Group, Inc., the Issuer, Parent and Hughes Network Systems, LLC ("HNS"), pursuant to which the Issuer will acquire the remaining 50% of the issued and outstanding Class A Units of HNS (the "Acquisition") that will not be transferred to the Issuer pursuant to the Separation Agreement (as defined below) immediately prior to the Closing in exchange for the purchase price (the "Purchase Price") of $100,000,000 in cash; WHEREAS, on the Closing Date the Issuer desires to issue to the Initial Noteholders and the Initial Noteholders desire to purchase from the Issuer the Notes (as defined below) in the aggregate original principal amount of $100,000,000, upon the terms and subject to the conditions set forth in this Agreement; and WHEREAS, it is intended that the Issuer will consummate a sale of shares of its Common Stock to its stockholders, including the Initial Noteholders and certain of their Affiliates, pursuant to a rights offering (the "Rights Offering") made to all but not less than all of the Issuer's existing stockholders, substantially on the terms described in the draft Form S-1 Registration Statement attached hereto as Exhibit E, and any amendments thereto, generating aggregate net proceeds sufficient to repay the Notes. NOW THEREFORE, the parties to this Agreement hereby agree as set forth below. ARTICLE I DEFINITIONS 1.1 Defined Terms. As used in this Agreement, the terms set forth in this Section 1.1 shall have the respective meanings assigned hereto. "Acquisition" has the meaning given to such term in the preamble to this Agreement. "Affiliate" means, with respect to any Person, (a) any other Person that directly or indirectly through one or more intermediaries Controls, is Controlled by or is under common Control with such Person; (b) any Person owning, beneficially or of record, 5.0% or more of the voting stock of such Person; (c) any director or executive officer of such Person; and (d) with respect to a Person who is an individual, any relative, spouse or former relative or spouse of such Persons; provided however, that the Initial Noteholders shall not be deemed to be Affiliates of Issuer or Parent. "Agreement" means this Agreement, together with all schedules, exhibits and annexes attached hereto, as amended, modified, supplemented or restated from time to time. "Applicable Law" means all provisions of Laws of any Governmental Authority applicable to the Person in question or any of its Property, and all Orders in proceedings or actions in which the Person in question is a party or by which any of its Properties are bound. "Board" means, with respect to any Person, the board of directors, board of managers or other governing body of such Person or any duly authorized committee thereof. "Business" has the meaning given to such term in Section 4.17. "Business Day" means any day other than (a) a Saturday or Sunday or (b) a day on which banks are authorized or required to be closed in New York, New York; provided, however, that any determination of a Business Day relating to a Securities exchange or other Securities market means a Business Day on which such exchange or market is open for trading. "Capital Lease" means any lease of Property by the Issuer which, in accordance with GAAP, is required to be reflected as a capital lease on the balance sheet of such Person in accordance with GAAP and the amount of such obligation shall be the capitalized amount thereof determined in accordance with GAAP. "Change of Control" means the occurrence of any of the following events without the consent of the Noteholders: (i) any transaction or series of transactions in which the Issuer ceases to own 100.0% of the outstanding Class A Units of HNS; (ii) the sale of all or substantially all of the assets of Issuer; or (iii) the liquidation of Issuer; provided, that, notwithstanding anything to the contrary contained herein, neither the Rights Offering nor the Special Dividend Distribution shall be deemed a Change of Control. "Closing" means the issuance and purchase of the Notes on the Closing Date. "Closing Date" has the meaning given to such term in Section 2.2(a). "Collateral Agent" has the meaning set forth in the Security Agreement. "Code" means the Internal Revenue Code of 1986, as amended, and the rules and regulations issued thereunder, as from time to time in effect, or any successor thereto. "Commission" means the Securities and Exchange Commission (or a successor thereto). "Common Stock" means the common stock of the Issuer, $0.001 par value per share. "Control" (including the terms "Controlling," "Controlled by" and "under common Control with") means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting Securities, by contract or otherwise. "Convertible Amount" has the meaning given to such term in Section 3.5(a). "Default" means any event or condition the occurrence of which would, with the lapse of time or the giving of notice, or both, become an Event of Default. "Deferred Interest" has the meaning given to such term in Section 3.3(a). "Disqualified Stock" means any capital stock that, by its terms (or by the terms of any Security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the capital stock), or upon the happening of any event matures for cash or is mandatorily redeemable in cash, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder of the capital stock, in whole or in part in cash, on or prior to April 1, 2007. "Distribution" means, in respect of any Person, (a) the payment or making of any dividend or other distribution of Property in respect of Equity Interests of such Person or (b) the redemption or other acquisition of any Equity Interests of such Person. "Environmental Laws" means all Federal, state or local Laws, Orders, directed duties, licenses, authorizations and permits of, and agreements with, any Governmental Authority, in each case relating to environmental, health, safety and land use matters. "Equity Interests" means any capital stock, partnership or limited liability company interest or other equity or voting interest or any security or evidence of indebtedness convertible into or exchangeable for any capital stock, partnership or limited liability company interest or other equity interest, or any right, warrant or option to acquire any of the foregoing. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, and all rules and regulations from time to time promulgated thereunder. "ERISA Affiliate" means any trade or business (whether or not incorporated) under common Control with the Issuer or its Subsidiaries within the meaning of Section 414(b) or 414(c) of the Code (and Sections 414(m) and 414(o) of the Code for purposes of provisions relating to Section 412 of the Code). "ERISA Event" means (a) a Reportable Event with respect to a Pension Plan; (b) a withdrawal by the Issuer or any ERISA Affiliate from a Pension Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA; (c) a complete or partial withdrawal by the Issuer or any ERISA Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization; (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Pension Plan or Multiemployer Plan; (e) an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Pension Plan or Multiemployer Plan; or (f) the imposition of any liability under Title IV of ERISA, other than PBGC premiums due but not delinquent under Section 4007 of ERISA, upon the Issuer or any ERISA Affiliate of such Persons. "Event of Default" has the meaning given to such term in Section 10.1(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations issued thereunder, as from time to time in effect, or any successor thereto. "Final Maturity Date" means January 1, 2007. "Financial Data" has the meaning given to such term in Section 4.5(a). "Financial Officer" of any Person means its chief financial officer or principal accounting officer or treasurer. "Fiscal Year" means a fiscal year for financial accounting purposes commencing on January 1 and ending on December 31. The current Fiscal Year of the Issuer will end on December 31, 2005. "GAAP" means generally accepted accounting principles in the United States in effect from time to time. "Governing Documents" means as to any Person, its articles or certificate of incorporation and by-laws, its partnership agreement, its certificate of formation and operating agreement and/or the other organizational or governing documents of such Person. "Governmental Authority" means any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality, or any court, in each case whether of the United States or any political subdivision thereof, or of any other country. "Guarantee" of or by any Person (the "Guarantor") means any obligation, contingent or otherwise, of the Guarantor guaranteeing or having the economic effect of guaranteeing any Indebtedness or other obligation of any other Person (the "Primary Obligor") in any manner, whether directly or indirectly, and including any obligation of the Guarantor, direct or indirect, (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation or to purchase (or to advance or supply funds for the purchase of) any security for the payment thereof; (b) to purchase or lease Property, Securities or services for the purpose of assuring the owner of such Indebtedness or other obligation of the payment thereof; (c) to maintain working capital, equity or any other financial statement condition or liquidity of the Primary Obligor so as to enable the Primary Obligor to pay such Indebtedness or other obligation; or (d) as an account party in respect of any letter of credit or letter of guarantee issued to support such Indebtedness or obligation. "HNS" has the meaning given to such term in the preamble to this Agreement. "HNS Pledges" means the HNS First Lien Pledge and the HNS Second Lien Pledge. "HNS First Lien Pledge" means the First Lien Parent Pledge Agreement, dated as of April 22, 2005, made by SkyTerra Communications, Inc. and Hughes Network Systems, Inc., in favor of JPMorgan Chase Bank, N.A., as administrative agent for the lenders parties to the Credit Agreement, dated as of April 22, 2005, among Hughes Network Systems, LLC, as borrower, the lenders party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, Bear Stearns Corporate Lending Inc., as Syndication Agent, and J.P. Morgan Securities Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint bookrunners, as amended, restated, supplemented or otherwise modified from time to time. "HNS Second Lien Pledge" means the Second Lien Parent Pledge Agreement, dated as of April 22, 2005, made by SkyTerra Communications, Inc. and Hughes Network Systems, Inc. in favor of Bear Stearns Corporate Lending Inc., as administrative agent, for the lenders parties to the Second Lien Credit Agreement, dated as of April 22, 2005 among Hughes Network Systems, LLC, as borrower, the lenders parties thereto, Bear Stearns Corporate Lending, Inc., as administrative agent, JPMorgan Chase Bank, N.A., as syndication agent, and J.P. Morgan Securities Inc. and Bear, Stearns & Co. Inc., as joint lead arrangers and joint book managers, as amended, restated, supplemented or otherwise modified from time to time. "Indebtedness" of any Person means, without duplication, (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person under conditional sale or other title retention agreements relating to Property acquired by such Person; (d) all obligations of such Person in respect of the deferred purchase price of Property or services (excluding accounts payable incurred in the ordinary course of business not past due by more than 90 days or being contested in good faith); (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on Property owned or acquired by such Person, whether or not the Indebtedness secured thereby has been assumed; (f) all Guarantees by such Person of Indebtedness of others; (g) all Capital Leases of such Person; (h) all reimbursement obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guarantee; and (i) all monetary obligations of each Person under Swap Agreements. The Indebtedness of any Person shall include the Indebtedness of any other Person (including any partnership in which such Person is a general partner) to the extent such Person is liable therefor as a result of such Person's ownership interest in or other relationship with such entity, except to the extent the terms of such Indebtedness provide that such Person is not liable therefor. "Indemnified Person" has the meaning given to such term in Section 11.5. "Initial Noteholders" has the meaning given to such term in the preamble to this Agreement. "Interest Payment Date" means March 31, June 30, September 30 and December 31, of each year until principal and all accrued interest on the Notes are paid in full in accordance with this Agreement. The first Interest Payment Date shall be March 31, 2006. "Investment Act" means the Investment Company Act of 1940, as amended. "Issuer" has the meaning given to such term in the preamble to this Agreement. "Issuer Securities" means the Notes and the Common Stock acquired by the Noteholders upon conversion of the Notes. "Joint Venture" means, as to a Person, any corporation, partnership or other legal entity or arrangement in which such Person has any direct or indirect Equity Interest and that is not a Subsidiary of such Person. "Law" means any law, statute, common law requirement, treaty, rule, directive, ordinance, code or regulation or Order of any Governmental Authority. "Lien" means, with respect to any asset, (a) any mortgage, deed of trust, lien, pledge, hypothecation, encumbrance, charge or security interest in, on or of such asset; (b) the interest of a vendor or a lessor under any conditional sale agreement, Capital Lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; and (c) in the case of Securities, any purchase option, call or similar right of a third party with respect to such Securities. "Losses" has the meaning given to such term in Section 11.5. "Margin Stock" means "margin stock" as such term is defined in Regulation U of the Federal Reserve Board. "Material Adverse Effect" means (a) a material adverse change in, or a material adverse effect upon, the operations, business, Properties, condition (financial or otherwise) or prospects of the Issuer; (b) a material impairment of the ability of the Issuer to perform under any Note Document and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability against the Issuer of any Note Document. "Maximum Lawful Rate" has the meaning given such term in Section 3.3(d). "Multiemployer Plan" has the meaning set forth in Section 4001(a)(3) of ERISA. "Non-Qualified Plan" means any Plan described in Section 301(a)(3) of ERISA. "Note Documents" means this Agreement, the Notes, the Security Agreement, the Registration Rights Agreement and any other document or instrument executed and delivered by the Issuer in connection with the Notes or this Agreement. "Note Register" has the meaning given to such term in Section 3.8(a). "Noteholders" means the Persons holding Notes from time to time. "Notes" means the $100,000,000 aggregate original principal amount of 8% Senior Secured Notes due 2007 dated as of the Closing Date, in substantially the form of Exhibit B hereto. "Obligations" means the due and punctual payment of the principal of and interest on the Notes, and other monetary obligations of the Issuer to the Noteholders, howsoever created, arising or evidenced, whether direct or indirect, joint or several, absolute or contingent, primary or secondary, due or to become due, or now existing or hereafter arising, under this Agreement or any other Note Document. "Order" means judgments, writs, decrees, compliance agreements, injunctions or orders of any Governmental Authority or arbitrator. "Other Taxes" means any present or future stamp or documentary Taxes or any other excise or property Taxes, charges or similar levies which arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any other Note Document. "Parent" means SkyTerra Communications, Inc., a Delaware corporation. "PBGC" means the Pension Benefit Guarantee Corporation or any Governmental Authority succeeding to the functions thereof. "Pension Plan" means a pension plan (as defined in Section 3(2) of ERISA) subject to Title IV of ERISA which the Issuer sponsors, maintains, or to which it makes, is making, or is obligated to make contributions, or in the case of a Multiemployer Plan has made contributions at any time during the immediately preceding five (5) plan years. "Permits" shall mean all licenses, permits, exceptions, franchises, accreditations, privileges, rights, variances, waivers, approvals and other authorizations (including, without limitation, those relating to environmental matters) of, by or from Governmental Authorities necessary for the conduct of the business of the Issuer. "Permitted Acquisition" means the acquisition, by merger or otherwise, by the Issuer of all or substantially all of the assets of, or all the Equity Interests (other than directors' qualifying shares) in a Person, division or line of business of a Person, all the assets of which are located in the United States so long as (a) immediately after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom; (b) all transactions related thereto shall be consummated in accordance with Applicable Laws; (c) in case of an acquisition of assets, such assets are to be used, and in the case of an acquisition of Equity Interests, the Person so acquired is engaged, in the same or similar line of business as is currently conducted by the Issuer or any of its Subsidiaries; and (d) a Responsible Officer of the Issuer shall have executed and delivered to the Noteholders any applicable calculations certifying as to the matters set forth in the foregoing clauses (a) and (c). "Permitted Investments" means (a) direct obligations of, or obligations the principal of and interest on which are unconditionally guaranteed by, the United States (or by any agency thereof to the extent such obligations are backed by the full faith and credit of the United States), in each case maturing within one year from the date of acquisition thereof; (b) investments in commercial paper maturing within 270 days from the date of acquisition thereof and having, at such date of acquisition, the highest credit rating obtainable from S&P or from Moody's; (c) investments in certificates of deposit, banker's acceptances and time deposits maturing within 180 days from the date of acquisition thereof issued or guaranteed by or placed with, and money market deposit accounts issued or offered by, any domestic office of any commercial bank organized under the Laws of the United States or any state thereof that has a combined capital and surplus and undivided profits of not less than $500,000,000; (d) fully collateralized repurchase agreements with a term of not more than 30 days for Securities described in clause (a) above and entered into with a financial institution satisfying the criteria described in clause (c) above; and (e) shares of funds registered under the Investment Company Act of 1940, as amended, that have assets of at least $500,000,000 and invest primarily in obligations described in clauses (a) through (c) above to the extent that such shares are rated by Moody's or S&P in one of the two highest rating categories assigned by such agency for shares of such nature. "Permitted Liens" means (a) Liens imposed by Law for taxes or other governmental charges that are not yet due or are being contested in compliance with Section 7.1(b); (b) carriers', warehousemen's, mechanics', materialmen's, repairmen's and other like Liens imposed by Law, arising in the ordinary course of business and securing obligations that are not overdue by more than 30 days or are being contested in compliance with Section 7.1(b); (c) pledges and deposits made in the ordinary course of business in compliance with workers' compensation, unemployment insurance and other social security Laws or regulations; (d) deposits to secure the performance of bids, trade contracts, leases, statutory obligations, surety and appeal bonds, performance bonds and other obligations of a like nature, in each case in the ordinary course of business; (e) judgment liens in respect of judgments that do not constitute an Event of Default under Section 10.1(a)(xiii); (f) easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by Law or arising in the ordinary course of business that do not secure any monetary obligations and do not materially detract from the value of the affected property or interfere with the ordinary conduct of business of the Issuer; (g) any interest of a landlord in or to property of the tenant imposed by Law, arising in the ordinary course of business and securing lease obligations that are not overdue by more than 30 days or are being contested in compliance with Section 7.1(b), or any possessory rights of a lessee to the leased property under the provisions of any lease permitted by the terms of this Agreement; and (h) Liens of a collection bank arising in the ordinary course of business under ss.4-208 or ss.4-210 of the Uniform Commercial Code in effect in the relevant jurisdiction; (i) Liens permitted under the HNS Pledges; (j) Liens securing any purchase money Indebtedness in an aggregate amount not to exceed at any time $50,000 (including any Indebtedness acquired in connection with a Permitted Acquisition); provided, any such Indebtedness shall be secured only by the asset acquired in connection with the incurrence of such Indebtedness; and (k) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases of personal property entered into in the ordinary course of business. "Person" shall be construed as broadly as possible and includes natural person, corporation, limited liability company, partnership, Joint Venture, trust, unincorporated association or other organization and a Governmental Authority. "Plan" means an employee benefit plan (as defined in Section 3(3) of ERISA) which the Issuer sponsors or maintains or to which the Issuer makes, is making, or is obligated to make contributions and includes any Pension Plan and Non-Qualified Plan. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Proprietary Rights" means permits, licenses, franchises, patents, patent rights, copyrights, works which are the subject matter of copyrights, trademarks, service marks, trade names, trade styles, patent, trademark and service mark applications and all licenses and rights related to any of the foregoing, and all rights to sue for past, present and future infringement of any of the foregoing. "Purchase Agreement" has the meaning given to such term in the preamble to this Agreement. "Purchase Price" has the meaning given to such term in the preamble to this Agreement. "Registration Rights Agreement" means the Registration Rights Agreement substantially in the form attached hereto as Exhibit F dated as of January 1, 2006 among the Issuer and the other Persons party thereto, as amended, modified, supplemented or restated from time to time. "Reportable Event" means, any of the events set forth in Section 4043(b) of ERISA or the regulations thereunder, other than any such event for which the 30-day notice requirement under ERISA has been waived in regulations issued by the PBGC. "Requisite Noteholders" means Noteholders representing a majority of the then outstanding principal balance of the Notes. "Responsible Officer" of any Person, means the chief executive officer or a Financial Officer of such Person. "Restricted Payment" means any Distribution (whether in cash, Securities or other Property) with respect to any Equity Interests of the Issuer, or any payment (whether in cash, Securities or other Property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests of the Issuer; provided, that, notwithstanding anything to the contrary contained herein, the distribution of Rights in the Rights Offering shall not be deemed a Restricted Payment. "Restricted Securities" means the Issuer Securities to the extent the Issuer Securities have not then been sold to the public pursuant to (a) registration under the Securities Act or (b) Rule 144 (or similar or successor rule) promulgated under the Securities Act. "Rights" means the rights of stockholders of the Issuer to purchase Common Stock in the Rights Offering. "Rights Offering" has the meaning given to such term in the preamble to this Agreement. "Securities" has meaning given to such term in the Securities Act. "Securities Act" means the Securities Act of 1933, as amended. "Security Agreement" means the Security Agreement substantially in the form attached as Exhibit B hereto dated as of January 1, 2006 among the Issuer, the Collateral Agent and the other Persons party thereto from time to time, as amended, modified, supplemented or restated from time to time. "Separation Agreement" means the Separation Agreement between Issuer and Parent, in substantially the form of Exhibit C hereto. "Special Dividend Distribution" means the "Distribution" as defined in the Separation Agreement. "Stated Rate" means 8.0% per annum. "Subsidiary" means, with respect to any Person, any other Person of which 50.0% or more of the Equity Interests entitled to vote in the election of directors or comparable Persons performing similar functions are at the time owned or Controlled, directly or indirectly through one or more Subsidiaries, by such Person. "Swap Agreement" means any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions. "Taxes" means any and all present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities with respect thereto, excluding, in the case of the Noteholders, such taxes (including income taxes or franchise taxes) as are imposed on or measured by the Noteholders' net income by the jurisdiction (or any political subdivision thereof) under the Laws of which such Noteholder is organized or maintains an office. "Transfer" means any sale, transfer, assignment, or other disposition of any interest in, with or without consideration, any security, including any disposition of any security or of any interest therein which would constitute a sale thereof within the meaning of the Securities Act. "Unfunded Pension Liability" means the excess of a Pension Plan's benefit liabilities under Section 4001(a)(16) of ERISA, over the current value of that Pension Plan's assets, determined in accordance with the assumptions used for funding the Pension Plan pursuant to Section 412 of the Code for the applicable plan year. "United States" means the United States of America. "United States Dollars" means lawful currency of the United States. 1.2 Terms Generally. The definitions in Section 1.1 shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be followed by the phrase "without limitation." 1.3 Use of Defined Terms. Terms defined in this Agreement and used in any exhibit, schedule, certificate, annex, other Note Document or other document delivered in connection with this Agreement, shall have the meanings assigned herein unless otherwise defined. 1.4 Cross-References. Unless otherwise specified, references in this Agreement or any other Note Document to any article or section are references to such article or section of this Agreement or such Note Document, as the case may be, and references in any article, section or definition to any clause are references to such clause of such section, article or definition. 1.5 Currency; Amounts. Unless otherwise specified herein, all statements or references to dollar amounts or "$" set forth herein or in any other Note Document shall refer to United States Dollars. Any reference to the principal amount of the Notes shall include all increases to the principal amount of the Notes for Deferred Interest pursuant to Section 3.3(a). 1.6 Accounting Terms; GAAP. Except as otherwise expressly provided herein, any accounting term used in this Agreement shall have, unless otherwise specifically provided herein, the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed, unless otherwise specifically provided herein, in accordance with GAAP consistently applied. That certain terms or computations are explicitly modified by the phrase "in accordance with GAAP" shall in no way be construed to limit the foregoing. ARTICLE II PURCHASE AND SALE OF THE NOTES 2.1 Issuance and Purchase of the Notes. On the Closing Date, upon the terms and subject to the conditions set forth in this Agreement and the other Note Documents, the Issuer shall sell to the Initial Noteholders, and the Initial Noteholders shall purchase from the Issuer, one or more Notes in an aggregate principal amount equal to the amount set forth opposite the Initial Noteholder's name on Schedule I for the purchase price set forth opposite its name on Schedule I. 2.2 Closing. (a) The Closing shall take place at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York 10036 on January 1, 2006 (the "Closing Date"), provided, however, that it is understood and agreed that the delivery by each Initial Noteholder by wire transfer of immediately available funds to an account or accounts designated by the Issuer contemplated by Section 6.2(a) shall not take place until January 3, 2006 and interest shall not accrue under the Notes until such transfer of funds has occurred; provided, further, that notwithstanding anything in this Agreement or otherwise to the contrary, upon such delivery by wire transfer of immediately available funds, the Closing Date shall be deemed to have occurred on January 1, 2006 for all purposes other than the accrual of interest as stated above. (b) At the Closing, the Issuer shall deliver to each Initial Noteholder or its nominee duly executed Notes payable to the order and registered in the name of such Initial Noteholder or its nominee dated the Closing Date in an aggregate principal amount equal to the amount set forth as the principal amount opposite such Initial Noteholder's name on Schedule I. 2.3 Use of Proceeds. The proceeds received by the Issuer from the sale of the Notes shall be used by the Issuer solely to pay the Purchase Price contemplated by the Purchase Agreement. ARTICLE III PROVISIONS OF THE NOTES 3.1 The Notes. The Notes shall be in the aggregate original principal amount of $100,000,000. The Notes shall be dated the Closing Date. The aggregate amount of the Notes shall, subject to the provisions for mandatory and optional prepayment and acceleration contained herein, mature and be payable in full, together with all interest, accrued thereon, on the Final Maturity Date. 3.2 General Provisions As To Payments. (a) The Issuer shall make each cash payment due in respect of the principal of, or accrued interest on the Notes, or any other amount due to the Noteholders under this Agreement or any other Note Document, not later than 2:00 p.m. in New York, New York, on the day when due, to the Noteholders as provided in the Notes or in such other manner as instructed from time to time in writing by the Noteholders. All cash payments due under this Section 3.2 shall be made in United States Dollars by wire transfer of immediately available funds. (b) Whenever any payment (including principal of, or interest on the Notes or other amount) hereunder or under any other Note Document shall become due, or otherwise would occur, on a day that is not a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of such interest if applicable. (c) The Issuer hereby authorizes the Noteholders to make appropriate notations on the grid attached to the Notes, including the date, outstanding principal amount (including Deferred Interest, if any) and any prepayment thereof, which notations shall be conclusive evidence of such date, outstanding principal and prepayment absent manifest error; provided, however, that the failure of the Noteholders to make such notation or any error on the Notes shall not affect the obligation of the Issuer to repay, in accordance with the terms of the Notes and this Agreement, the principal amount of the Notes together with all interest, and other amounts due hereunder. (d) The Issuer shall not, and shall not permit any of its Subsidiaries to purchase, redeem or otherwise acquire any Notes from any Noteholder thereof except upon payment or prepayment thereof in accordance with the specific terms thereof and of this Agreement. Any Notes so purchased, redeemed or otherwise acquired by the Issuer shall be cancelled and not be deemed outstanding for any purpose under this Agreement. (e) The Issuer shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Noteholder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Agreement, the other Note Documents or the Notes unless such consideration is offered to be paid (pro rata according to principal amount) to all Noteholders who so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. (f) Except to the extent otherwise provided herein, each payment of principal of the Notes by the Issuer shall be made for the account of the Noteholders thereof pro rata in accordance with the respective unpaid principal amounts of the Notes held by them and each payment of interest on the Notes shall be made for the account of the Noteholders thereof pro rata in accordance with the amounts of interest on such Notes then due and payable to the respective Noteholder. 3.3 Interest. (a) Interest at a fixed rate per annum equal to 8.0% ("Deferred Interest") shall be payable on the principal amount of the Notes and the outstanding principal amount of the Notes shall be automatically deemed to be increased by an amount equal to the Deferred Interest owing on each Interest Payment Date. (b) Interest on the Notes shall accrue from day to day and shall be payable (as provided in Section 3.3(a)) on (i) each Interest Payment Date, in arrears; (ii) the date of any prepayment in accordance with Section 3.6; and (iii) maturity of the Notes, whether by acceleration or otherwise. All computations of interest hereunder shall be made on the basis of a 360-day year consisting of twelve 30-day months. (c) The Noteholders and the Issuer intend to contract in strict compliance with applicable usury Law from time to time in effect. In furtherance thereof such Persons stipulate and agree that none of the terms and provisions contained in the Note Documents shall ever be construed to create a contract to pay, for the use, forbearance or detention of money, interest in excess of the maximum amount of interest permitted to be charged by applicable law from time to time in effect (the "Maximum Lawful Rate"). Neither the Issuer, nor any present or future guarantors, endorsers, or other Persons hereafter becoming liable for payment of any Obligation shall ever be liable for unearned interest thereon or shall ever be required to pay interest thereon in excess of the Maximum Lawful Rate, and the provisions of this Section 3.3(d) shall control over all other provisions of the Note Documents which may be in conflict or apparent conflict herewith. The Noteholders expressly disavow any intention to charge or collect excessive unearned interest or finance charges in the event the maturity of any Obligation is accelerated. If (i) the maturity of any Obligation is accelerated for any reason; (ii) any Obligation is prepaid and as a result any amounts held to constitute interest are determined to be in excess of the Maximum Lawful Rate; or (iii) any Noteholder or any other holder of any or all of the Obligations shall otherwise collect money which is determined to constitute interest which would otherwise increase the interest on any or all of the Obligations to an amount in excess of the Maximum Lawful Rate, then all sums determined to constitute interest in excess of such legal limit shall, without penalty, be promptly applied to reduce the then outstanding principal of the related Obligations or, at such Noteholder's option, promptly returned to the Issuer or the other payor thereof upon such determination. In determining whether or not the interest paid or payable, under any specific circumstance, exceeds the Maximum Lawful Rate, the Issuer and the Noteholders (and any other payors thereof) shall to the greatest extent permitted under applicable law, (i) characterize any non-principal payment as an expense, fee or premium rather than as interest; (ii) exclude voluntary prepayments and the effects thereof; and (iii) amortize, prorate, allocate, and spread the total amount of interest throughout the entire contemplated term of the instruments evidencing the Obligations in accordance with the amounts outstanding from time to time thereunder. Notwithstanding anything to the contrary set forth in this Section 3.3 or Section 3.4, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the Maximum Lawful Rate, then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, the Issuer shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by the Noteholders, is equal to the total interest which would have been received had the interest rate payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement. Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in Sections 3.3 and 3.4, unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply. In no event shall the total interest received by any Noteholder pursuant to the terms hereof exceed the amount which such Noteholder could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate. If the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made. As used in this Section 3.3(d) only the term "applicable law" means the Laws of the State of New York or the Laws of the United States, whichever Laws allow the greater interest, as such Laws now exist or may be changed or amended or come into effect in the future. 3.4 Interest on Overdue Amounts. So long as any Event of Default shall have occurred and be continuing, the Issuer shall pay, in cash on demand from time to time, interest to the extent permitted by Law at a rate per annum equal to 4.0% above the Stated Rate on the outstanding principal amount of the Notes and any unpaid interest then due and payable thereon. 3.5 Conversion; Rights Offering; Scheduled Repayment. (a) Conversion. The Initial Noteholders shall exercise their respective Rights in full (including their over-subscription privileges) such that the Initial Noteholders shall purchase (to the extent permitted by the terms of the Rights Offering) all of the shares of Common Stock allocated to them as well as those not subscribed for by other stockholders of the Issuer in the Rights Offering; provided that the maximum aggregate subscription price to be paid by the Initial Noteholders pursuant to this Section 3.5(a) shall not exceed the then aggregate principal amount outstanding of the Notes plus accrued but unpaid interest thereon. Upon consummation of the Rights Offering, the Notes held by the Initial Noteholders bearing an aggregate principal amount plus accrued but unpaid interest thereon equal to the aggregate subscription price of the Rights exercised in the Rights Offering by the Initial Noteholders pursuant to this Section 3.5(a) (the aggregate amount of such principal plus accrued but unpaid interest, the "Convertible Amount"), shall automatically convert to the number of shares of Common Stock determined by dividing the Convertible Amount by the per share subscription price of Common Stock in the Rights Offering. In the event that the Convertible Amount is less than the aggregate principal amount outstanding of the Notes plus accrued but unpaid interest thereon held by the Initial Noteholders immediately prior to the consummation of the Rights Offering, then the Common Stock issued pursuant to such conversion shall be distributed, and the corresponding principal amount of Notes plus accrued but unpaid interest thereon cancelled, pro rata among the Initial Noteholders. (b) Consummation of Rights Offering. Promptly upon the consummation of the Rights Offering (and in any event no later than one Business Day after the consummation of the Rights Offering), any and all principal of the Notes remaining unpaid thereon after the conversion described in Section 3.5(a), together with all interest accrued but unpaid thereon, automatically and unconditionally shall be due and payable in cash. (c) Final Maturity. Any and all principal of the Notes remaining unpaid and unconverted, together with all interest accrued but unpaid thereon automatically and unconditionally shall be due and payable in full in cash on the Final Maturity Date. 3.6 Optional Prepayments. (a) The Issuer may, at any time, at its option, prepay the Notes in whole and from time to time in part. (b) Each prepayment pursuant to this Section 3.6 shall be in an aggregate principal amount not less than $1,000,000 or integral multiples of $1,000,000 in excess thereof. Each prepayment of the Notes shall be made at a purchase price in cash equal to 100% of the principal amount of such Notes, plus all interest accrued on such Notes through the date of prepayment. In the case of each partial prepayment of the Notes, the principal amount of the Notes to be prepaid shall be allocated pro rata among all of the Notes outstanding at such time in proportion to their respective unpaid principal amounts. (c) Each notice of prepayment pursuant to this Section 3.6 shall specify (i) the proposed date of such prepayment; (ii) the principal amount of the Notes to be prepaid; and (iii) the interest owing on such principal amount. (d) Upon surrender of a Note that is redeemed in part, the Issuer shall execute for such Noteholder (at the Issuer's expense) a new Note equal in principal amount to the unredeemed portion of the Note surrendered. (e) The Issuer shall comply with all Applicable Laws in connection with the purchase of the Notes pursuant to this Section 3.6. 3.7 Taxes. (a) On or prior to the Closing Date (in the case of each Initial Noteholder) and on or prior to the date it becomes a transferee under Article IX of this Agreement after the Closing Date, each Noteholder shall execute and deliver to the Issuer (i) if it is not a "United States person" (as such term is defined in Section 7701(a)(30) of the Code), two original copies (or more, as the Issuer may reasonably request) of the applicable Internal Revenue Service Form W-8 or other applicable form, certificate or document prescribed by the United States Internal Revenue Service certifying as to such Noteholder's entitlement to an exemption from or entitlement to a reduced rate of withholding or deduction of Taxes and (ii) if it is a "United States person" (as such term is defined in Section 7701(a)(30) of the Code), two original copies (or more, as the Issuer may reasonably request) of Internal Revenue Service Form W-9 (or substitute or successor form). Each Noteholder represents and warrants that all information provided on any such form that the Noteholder is required to provide to the Issuer pursuant to this Section 3.7(a) is true, correct and complete in all material respects, and if any facts change with respect to such Noteholder's status, such Noteholder will promptly provide such information to the Issuer. Notwithstanding anything contrary in this Section 3.7, if (i) the form provided by a Noteholder at the time such Noteholder first becomes a party to this Agreement indicates a withholding tax rate in excess of zero or (ii) a Noteholder has failed to provide the Issuer with the appropriate form or forms described in this Section 3.7(a) for any period, then the Issuer shall be entitled to deduct any Taxes imposed by any Governmental Authority from or in respect of any sum payable under this Agreement, the Notes or any other Note Document to any Noteholder and shall not be required to pay any additional amounts to such Noteholder pursuant to this Section 3.7 with respect to such Taxes. (b) If, due to a change in Applicable Law occurring subsequent to the date a Noteholder first becomes a party to this Agreement, the Issuer shall be required to deduct any Taxes imposed by any Governmental Authority from or in respect of any sum payable under this Agreement, the Notes or any other Note Document to any Noteholder, the sum payable to such Noteholder shall be increased as may be necessary so that after making all required deductions (including deductions applicable to additional sums payable under this Section 3.7) such Noteholder receives an amount equal to the sum it would have received under Section 3.7(a) had no such deductions been required as a result of the change in Applicable law. In addition, the Issuer agrees to pay any Other Taxes that arise from any payment made under this Agreement, the Notes or any other Note Document or from the execution, delivery, enforcement or registration of, or otherwise with respect to, this Agreement, the Notes or any other Note Document, other than any transfer Taxes payable in connection with a change in the registered Noteholder. Within 30 days after the date of any payment of Taxes or Other Taxes, the Issuer will furnish to the applicable Noteholder the original or a certified copy of any receipt evidencing payment thereof. (c) To the extent a Tax or Other Tax is imposed due to a change in Applicable Law occurring subsequent to the date a Noteholder first becomes a party to this Agreement, the Issuer will indemnify the Noteholder (and in the case of a Noteholder that is a partnership, each partner of the partnership) for the full amount of Taxes or Other Taxes imposed by any taxing authority or other Governmental Authority and paid by such Noteholder or partner, as applicable, and any liability (including penalties, additions to Tax, interest and expenses) arising from such change in Applicable Law, whether or not such Taxes or Other Taxes were correctly or legally asserted. This indemnification shall be made within twenty (20) Business Days from the date a Noteholder or partner, as applicable, makes written demand therefor. (d) Without prejudice to the survival of any other agreement contained herein, the agreements and obligations contained in this Section 3.7 shall survive the payment in full of principal, premium, interest, fees and any other amounts payable hereunder (other than amounts payable pursuant to this Section 3.7). 3.8 Note Register. (a) The Issuer shall cause to be kept at its principal office a register for the registration and transfer of the Notes (the "Note Register"). The names and addresses of the Noteholders, the transfer of the Notes and the names and addresses of the transferees of the Notes shall be registered in the Note Register. (b) The Person in whose name any registered Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes of this Agreement and the Issuer shall not be affected by any notice to the contrary, until due presentment of such Note for registration of transfer so provided in this Section 3.8. Payment of or on account of the principal, interest and any other amount paid on any registered Note shall be made to (or based upon the written order of) such registered holder. (c) Upon surrender of any Note for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), subject to compliance by the transferor and the transferee with the conditions contained in Article IX hereof, the Issuer shall duly execute and deliver, at the Issuer's expense, one or more new Notes (as requested by the Noteholder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be in the form of Exhibit B. Each such new Note shall be dated the date of the surrendered Note. 3.9 Lost, Destroyed or Mutilated Securities. Upon receipt of evidence reasonably satisfactory to the Issuer (an affidavit of a Noteholder being satisfactory) of the ownership and the loss, theft, destruction or mutilation of any Note, and in the case of any such loss, theft or destruction, upon receipt of an indemnity, bond or other form of security reasonably satisfactory to the Issuer (if the Noteholder is a financial institution or other institutional investor, its own agreement being satisfactory) or, in the case of any such mutilation, upon surrender for cancellation of such Note, the Issuer shall, without charge, issue, register and deliver in lieu of such Note a new Note of like kind representing the same rights represented by and dated the date of such lost, stolen, destroyed or mutilated Note. Any such new Note shall constitute an original contractual obligation of the Issuer, whether or not the allegedly lost, stolen, mutilated or destroyed Note shall be at any time enforceable by any Person. 3.10 Remedies Independent. The amounts payable by the Issuer at any time hereunder and under the Notes to the Noteholders shall be separate and independent debt and, subject to the provisions of Articles X and XI, each Noteholder shall be entitled to protect and enforce its rights arising out of this Agreement and the Notes held by it and it shall not be necessary for any other Noteholder to consent to or be joined as an additional party in, any proceedings for such purposes. ARTICLE IV REPRESENTATIONS AND WARRANTIES The Issuer represents and warrants to the Noteholders as of the date hereof and as of the Closing Date as set forth below. 4.1 Organization; Powers. The Issuer (a) is duly organized, validly existing and in good standing under the Laws of one of the States of the United States; (b) has all requisite power and authority to own its Properties and to carry on its business as now conducted; and (c) except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, is qualified to do business in, and is in good standing in, every jurisdiction where such qualification is required. 4.2 Authorization; Enforceability. The Note Documents to be entered into by the Issuer are within the Issuer's corporate powers and have been duly authorized by all necessary corporate action. This Agreement has been duly executed and delivered by the Issuer and constitutes, and each other Note Document to which the Issuer is to be a party, when executed and delivered by the Issuer and the other parties thereto, will constitute, a legal, valid and binding obligation of the Issuer enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other Laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. 4.3 Governmental Approvals; No Conflicts or Liens. The execution and delivery by the Issuer of the Note Documents (a) does not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except such as have been obtained or made and are in full force and effect; (b) will not violate any Applicable Law or the Governing Documents of the Issuer, or any Order of any Governmental Authority; (c) will not violate or result in a default under any indenture, agreement or other instrument binding upon the Issuer, or its Properties, or give rise to a right thereunder to require any payment to be made by the Issuer; and (d) will not result in the creation or imposition of any Lien (other than any Lien expressly permitted by Section 8.2) on any Property of the Issuer. 4.4 Capitalization. (a) The authorized capital stock of the Issuer consists of (i) 64,000,000 shares of Common Stock, of which one share is validly issued and outstanding, fully paid and non-assessable and is owned beneficially and of record by Parent; and (ii) 1,000,000 shares of Preferred Stock of which no shares are outstanding. (b) The name, address and jurisdiction of incorporation of each of the Issuer's Subsidiaries, other than Subsidiaries of Hughes Network Systems, LLC, is set forth on Schedule 4.4(b), which Schedule also sets forth the percentage of the outstanding Equity Interests of such Subsidiary owned by the Issuer. All such Equity Interests listed on Schedule 4.4(b) are duly authorized, validly issued, fully paid and non-assessable, and all of which are owned beneficially and of record by the Issuer or one of its Subsidiaries, other than with respect to Hughes Network Systems, LLC, as provided on Schedule 4.4(b). (c) Except as contemplated by this Agreement and the Rights Offering, or as set forth on Schedule 4.4(c), there are no Securities outstanding which are convertible into, exchangeable for, or carrying the right to acquire, Equity Interests of the Issuer or the Subsidiaries of the Issuer listed on Schedule 4.4(b), or subscriptions, warrants, options, calls, puts, convertible Securities, registration or other rights, arrangements or commitments obligating the Issuer or the Subsidiaries of the Issuer listed on Schedule 4.4(b) to issue, sell, register, purchase or redeem any of its Equity Interests or any ownership interest or rights therein. Except as specifically contemplated by this Agreement and as set forth on Schedule 4.4(c), there are no voting trusts or other agreements or understandings to which the Issuer or the Subsidiaries listed on Schedule 4.4(b) is bound with respect to the voting of any Equity Interests of the Issuer or its Subsidiaries. Except as disclosed on Schedule 4.4(c), there are no stock appreciation rights, phantom stock rights or similar rights or arrangements outstanding with respect to the Issuer or the Subsidiaries listed on Schedule 4.4(b), and no derivative instruments issued by the Issuer exist, the underlying security of which is an Equity Interest of the Issuer or the Subsidiaries of the Issuer listed on Schedule 4.4(b). Except as specifically contemplated by this Agreement, the Separation Agreement, the Rights Offering and the Special Dividend Distribution, and as set forth in Schedule 4.4(c), there are no contracts, commitments, arrangements, understandings or restrictions to which the Issuer or the Subsidiaries of the Issuer listed on Schedule 4.4(b) is bound relating in any way to any Equity Interest of the Issuer or the Subsidiaries of the Issuer listed on Schedule 4.4(b), including any rights of first refusal and any rights of first offer. 4.5 Financial Statements. The Issuer has delivered to the Initial Noteholders true, correct and complete copies of (i) the audited balance sheet and statements of income, stockholders' equity and cash flows of the Issuer and its consolidated Subsidiaries for the fiscal years ended December 31, 2003 and 2004 and (ii) the unaudited balance sheet of the Issuer and its consolidated Subsidiaries as of September 30, 2005 and the related statements of income, stockholders' equity and cash flows for the period then ended ((i) and (ii) collectively referred to as the "Financial Data"). The Financial Data (i) are in accordance with the books and records of the Issuer; (ii) have been prepared in accordance with GAAP consistently applied throughout the periods indicated thereby; and (iii) present fairly, in all material respects, the financial position and the results of operations and cash flows of the business presently being conducted by the Issuer and its consolidated Subsidiaries as at the dates thereof and their results of operations for the periods then ended. Since December 31, 2004, there has been no event, development or circumstance that has had or could reasonably be expected to have a Material Adverse Effect. 4.6 Solvency. Immediately after the consummation of the transactions to occur on the Closing Date and immediately after giving effect to the application of the proceeds from the issuance of the Notes, (a) the value of the assets of the Issuer, at a fair valuation, will exceed its debts and liabilities, subordinated, contingent or otherwise; (b) the Issuer will be able to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (c) the Issuer will not have unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted following the Closing Date. 4.7 Indebtedness. (a) After giving effect to the Obligations to be incurred pursuant to this Agreement and the other Note Documents, the Issuer will have no Indebtedness except (i) the Obligations; (ii) Indebtedness permitted under the HNS Pledges; (iii) Indebtedness described on Schedule 4.7(a); and (iv) trade payables and other contractual obligations arising in the ordinary course of business. (b) The Issuer is not in default and no waiver of default is currently in effect in the payment of any principal or interest on any Indebtedness of the Issuer and no event or condition exists with respect to any Indebtedness of the Issuer that would permit (with notice or the lapse of time, or both) one or more Persons to cause such Indebtedness to become due and payable prior to its stated maturity or before its regularly scheduled dates of payment. 4.8 Properties. (a) The Issuer has good title to, or valid leasehold interests in, all its Properties material to its business, in each case free and clean of all Liens other than Permitted Liens. (b) The Issuer has complied with all material obligations under all leases to which it is a party and that are material to the Issuer taken as a whole and all such leases are in full force and effect. The Issuer enjoys peaceful and undisturbed possession under all such material leases in which such Person is a lessee. 4.9 Proprietary Rights. The Issuer owns or possesses adequate licenses for all of the Proprietary Rights that are necessary for the operation of its respective businesses as presently conducted and as currently proposed to be conducted, except where the failure to own or possess a license or other right to use any of the foregoing items could not reasonably be expected to have a Material Adverse Effect. No claim is pending or, to the knowledge of the Issuer, threatened to the effect that the Issuer infringes upon or conflicts with the asserted Proprietary Rights of any other Person. No claim is pending or, to the knowledge of the Issuer, threatened against the Issuer to the effect that any such Proprietary Rights owned or licensed by the Issuer is invalid or unenforceable by the Issuer. 4.10 Litigation. There are no actions, suits or proceedings by or before any arbitrator or Governmental Authority pending against or, to the knowledge of the Issuer, threatened against or affecting the Issuer (a) as to which there is a reasonable possibility of an adverse determination and that, if adversely determined, could reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect or (b) that involve any Note Document. 4.11 Taxes. The Issuer has timely filed or caused to be filed all Tax returns and reports required to have been filed and has paid or caused to be paid all material Taxes required to have been paid by it. No material Liens have been filed and no material claims are being asserted with respect to any Taxes. All material Taxes for which the Issuer could be held liable as a consequence of being a member of a combined, consolidated, unitary, affiliated or similar tax group or otherwise, have been paid. The charges, accruals and reserves on the books of the Issuer in respect of Federal, state or other Taxes for all fiscal periods are adequate in accordance with GAAP. 4.12 Material Agreements. Each of the Issuer's material agreements and contracts is in full force and effect and the Issuer is not in breach or violation of any of the terms, conditions or provisions of such agreements or contracts, except for such breaches or violations which could not be reasonably be expected to result in a Material Adverse Effect. 4.13 ERISA Compliance. No ERISA Event has occurred or is reasonably expected to occur that, when taken together with all other such ERISA Events for which liability is reasonably expected to occur, could reasonably be expected to result in a Material Adverse Effect. The present value of all accumulated benefit obligations under each Plan (other than any Non-Qualified Plan) (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all Plans (including all Non-Qualified Plans) (based on the assumptions used for purposes of Statement of Financial Accounting Standards No. 87) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such Plans by an amount that would be reasonably likely to result in a Material Adverse Effect. No plan, agreement or arrangement exists (contingent or otherwise) to pay or provide for benefits under any Non-Qualified Plan from a source other than (a) the general assets of the Issuer, or (b) a trust that under no circumstance could cause such Non-Qualified Plan to cease to be considered a Non-Qualified Plan. 4.14 Environmental Matters. Except for any matter that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect, the Issuer (a) has not failed to comply with any Environmental Law or to obtain, maintain or comply with any Permit required under any Environmental Law; (b) has not become subject to any liability with respect to any Environmental Law; (c) has not received notice of any claim with respect to any Environmental Law; and (d) does not know of any basis for any liability relating to any Environmental Law. 4.15 Compliance with Laws. The Issuer is in compliance with all Laws and Orders applicable to it or its Property, except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 4.16 Insurance. The Issuer maintains or is covered by insurance covering the respective operating risks of the Issuer of such types and in such amounts and with such deductibles as are customary for other companies engaged in similar lines of business. All insurance policies held by the Issuer are in full force and effect. 4.17 Description and Location of Operations. The principal trade and business (the "Business") of the Issuer is a holding company for communications businesses. The principal place of business of the Issuer is in the United States. 4.18 Regulated Entities. Neither the Issuer nor any Subsidiary of the Issuer will be, on the Closing Date, an "Investment Company" within the meaning of the Investment Act or a company that would be an "Investment Company" but for an exemption under Section 3(c) of the Investment Act. Neither the Issuer nor any of its Subsidiaries is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other Law limiting its ability to incur non-convertible Indebtedness. 4.19 Federal Reserve Regulations. (a) Neither the Issuer nor any of its Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying Margin Stock. (b) No part of the proceeds from the issuance of the Notes will be used, whether directly or indirectly, and whether immediately, incidentally or ultimately, for any purpose that entails a violation of, or that is inconsistent with, the provisions of the Regulations of the Federal Reserve Board, including Regulation T, U or X. (c) Neither the Issuer nor any of its Subsidiaries owns any class of Margin Stock with respect to which a broker or dealer may extend margin credit. 4.20 No Default or Breach. No Default has occurred and is continuing except for any Default that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 4.21 Offering of Securities. Neither the Issuer nor any Affiliate of the Issuer, nor any Person acting on its behalf has, directly or indirectly, engaged in any form of general solicitation or general advertising with respect to any security or made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the offering or issuance of the Notes pursuant to this Agreement and the Note Documents to be integrated with prior offerings by the Issuer for purposes of the Securities Act, which would cause an exemption from registration or qualification requirements of applicable federal or state securities laws to be unavailable, or would cause any applicable federal or state securities laws exemptions or any applicable stockholder exemptions to be unavailable, nor will the Issuer take any action or steps that would cause the offering or the issuance of the Notes pursuant to this Agreement and the Note Documents to be integrated with other offerings. The Issuer makes no representation or warranty in this Section 4.21, however, as to any of the activities of the Initial Noteholders or any Affiliate thereof. 4.22 Broker's or Finder's Commissions. No broker's or finder's fee or commission or financial advisory or similar fees will be payable by the Issuer with respect to the issuance and sale of the Notes. 4.23 Security Interests. The execution and delivery of the Security Agreement and the filing of the UCC-1 financing statement referred to in the Schedule of Documents with the State of Delaware creates, as security for the Secured Obligations (as defined in the Security Agreement), a valid and enforceable perfected security interest in and Lien on all of the Collateral (as defined in the Security Agreement), superior to and prior to the rights of all third Persons (other than superior and prior Liens consisting of Permitted Liens), and subject to no other Liens (except for Permitted Liens relating thereto), in favor of the Collateral Agent, for the ratable benefit of the Noteholders. No filings or recordings are required in order to perfect and/or render enforceable as against third parties the security interests created under the Security Agreement except for filings or recordings required in connection with the Security Agreement which shall have been made on or prior to the Closing Date or delivered to the Collateral Agent for filing. ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE INITIAL NOTEHOLDERS Each of the Initial Noteholders represents and warrants (severally and not jointly) to the Issuer as of the date hereof and as of the Closing Date as set forth below. 5.1 Purchase for its Own Account. Each of the Initial Noteholders is acquiring the Issuer Securities for its own account, without a view to the distribution thereof in violation of the Securities Act, all without prejudice, however, to the right of each Initial Noteholder at any time, in accordance with this Agreement or the other Note Documents, lawfully to sell or otherwise to dispose of all or any part of the Issuer Securities held by it. No Initial Noteholder has any contract, undertaking, agreement, understanding or arrangement with any person to sell, transfer or pledge to any Person any part or all of the Issuer Securities which such Initial Noteholder is acquiring, or any interest therein, nor has any present plans to enter into the same. Each Initial Noteholder agrees that it will not transfer any Notes or any interest therein except in compliance with the conditions contained in Article IX hereof. 5.2 Accredited Initial Noteholders. Each Initial Noteholder is an "accredited investor" within the meaning of Regulation D under the Securities Act and was not organized solely for the purpose of acquiring any of the Issuer Securities. Each Initial Noteholder has adequate means of providing for its current needs and contingencies, has no need now, and anticipates no need in the foreseeable future, to sell the Issuer Securities, and currently has sufficient net worth and financial liquidity to afford a complete loss of its investment in the Issuer. Each Initial Noteholder has such knowledge and experience in financial and business matters so that such Initial Noteholder is capable of evaluating the merits and risks of an investment in the Issuer and has made such evaluation. Each Initial Noteholder fully understands that the Issuer Securities are speculative investments which involve a high degree of risk of loss of such Initial Noteholder's entire investment. No person or entity, other than the Issuer or its authorized representatives, has offered the Issuer Securities to such Initial Noteholder. Such Initial Noteholder is able to bear the economic risk of an investment in the Issuer Securities. 5.3 Authority, Etc. Each Initial Noteholder has the power and authority to enter into and perform this Agreement and the other Note Documents to which it is a party and the execution and performance hereof have been duly authorized by all proper and necessary action. This Agreement and the other Note Documents to which each Initial Noteholder is a party constitute the valid and legally binding obligation of such Initial Noteholder, enforceable against it in accordance with its terms, except as limited by bankruptcy, insolvency or other similar Laws now or hereafter in effect affecting the enforcement of creditors' rights and the application of equitable principles. 5.4 Securities Not Registered. Each Initial Noteholder understands that the Issuer Securities issued hereunder have not been registered under the Securities Act, by reason of their issuance by the Issuer in a transaction exempt from the registration requirements of the Securities Act, and that the Issuer Securities issued hereunder must continue to be held by such Initial Noteholder unless a subsequent disposition thereof is registered under the Securities Act or is exempt from such registration. Each Initial Noteholder understands that the exemptions from registration afforded by Rule 144 (the provisions of which are known to it) promulgated under the Securities Act depend on the satisfaction of various conditions, and that, if applicable, Rule 144 may afford the basis for sales only in limited amounts. Each Initial Noteholder has had an opportunity to ask questions of and receive answers from the management and authorized representatives of the Issuer, and to review any other relevant documents and records concerning the business of the Issuer and the terms and conditions of this investment, and that any such questions have been answered to such Initial Noteholder's full satisfaction (it being agreed that this sentence shall have no effect on the Issuer's representations and warranties made in any Note Document). Such Initial Noteholder understands that no federal or state agency has passed upon or made any recommendation or endorsement of an investment in the Issuer Securities. 5.5 No Violation. Neither the execution, delivery and performance by each Initial Noteholder of this Agreement and the other Note Documents nor compliance with the terms and provisions hereof and thereof by such Initial Noteholder (a) will contravene any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or Governmental Authority, except as would not have a material adverse effect on such Initial Noteholder's ability to consummate the transactions contemplated hereby; or (b) will violate any provision of the organizational documents of such Initial Noteholder, except as would not have a material adverse effect on such Initial Noteholder's ability to consummate the transactions contemplated hereby. 5.6 Consents. All consents, approvals, orders and authorizations required on the part of each Initial Noteholder in connection with the execution, delivery or performance of this Agreement and the consummation of the transactions contemplated herein have been obtained and are effective as of the date hereof. ARTICLE VI CONDITIONS TO PURCHASE AND ISSUANCE 6.1 Conditions to Obligations of Initial Noteholder on the Closing Date. The obligations of each Initial Noteholder to purchase the Notes hereunder is subject to the satisfaction of conditions set forth below. (a) Note Documents. The Initial Noteholders shall have received, in form and substance satisfactory to them and their counsel, a duly executed copy of each Note Document, together with such additional documents, instruments, certificates as each Initial Noteholder and its counsel shall reasonably require in connection therewith, including those listed in the Schedule of Documents attached hereto as Annex I and incorporated herein, each dated as of the Closing Date and in form and substance reasonably satisfactory to each Initial Noteholder and its counsel. (b) Legal Opinion. The Initial Noteholders shall have received the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Issuer, substantially in the form of Exhibit D hereto. (c) Consummation of the Acquisition. The Acquisition (except the payment of the Purchase Price contemplated thereby) shall be consummated prior to or simultaneously with the closing under this Agreement in accordance with applicable law and the terms and conditions of the Purchase Agreement (without a waiver of such terms and conditions, unless consented to by the Initial Noteholders). (d) No Default. On the Closing Date and after giving effect to the transactions contemplated by the Note Documents, no Default or Event of Default shall have occurred and be continuing except for any Default that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. (e) No Litigation. There shall exist no actions, suits or proceedings at law or in equity by or before any Governmental Authority or arbitrator now pending or threatened against or affecting the Issuer or its business, assets or rights which challenge any of the transactions contemplated by the Note Documents. (f) Payment of Fees and Expenses. All fees and expenses due and owing as of the Closing Date by the Issuer to each Initial Noteholder under the terms of this Agreement, including without limitation Section 11.4 hereof or any other Note Document or any other document executed in connection herewith or therewith shall have been paid to each Initial Noteholder or other party to whom owed on the Closing Date, to the extent invoiced prior to the Closing Date. (g) Requisite Approvals. The Issuer and its Subsidiaries shall have obtained copies of all required governmental and non-governmental consents and Permits relating to the transactions contemplated by the Note Documents and the Acquisition, which consents and Permits shall be in form and substance reasonably acceptable to the Initial Noteholders and their counsel. (h) Representations and Warranties; Performance of Covenants. The representations and warranties of the Issuer contained in each Note Document and in any certificate or other instrument delivered pursuant to any of the foregoing shall be true and correct in all material respects. The Issuer shall have satisfied each of the conditions precedent set forth in each Note Document on and as of the Closing Date. (i) HNS Class A Units. All the Class A Units of HNS owned by Parent shall have been transferred to the Issuer pursuant to the terms of the Separation Agreement. 6.2 Conditions to Obligations of the Issuer on the Closing Date. The obligation of the Issuer to issue the Notes hereunder is subject to the conditions set forth below. (a) Payment. Each Initial Noteholder shall have delivered by wire transfer of immediately available funds to an account or accounts designated by the Issuer an aggregate amount equal to the purchase price for the Notes being purchased by each Initial Noteholder; provided, however, that it is understood and agreed that such wire transfers of immediately available funds shall not occur until January 3, 2006 but that the Closing Date shall be deemed to occur on January 1, 2006. (b) Note Documents. The Issuer shall have received, in form and substance satisfactory to it and its counsel, a duly executed copy of each Note Document. (c) Consummation of the Acquisition. The Acquisition (except the payment of the Purchase Price contemplated thereby) shall be consummated prior to or simultaneously with the closing under this Agreement in accordance with applicable law and the terms and conditions of the Purchase Agreement. (d) No Litigation. There shall exist no actions, suits or proceedings at law or in equity by or before any Governmental Authority or arbitrator now pending or threatened against or affecting the Issuer or its business, assets or rights which challenge any of the transactions contemplated by the Note Documents. ARTICLE VII AFFIRMATIVE COVENANTS Until payment in full of all Obligations in accordance with the terms hereof, unless the Requisite Noteholders shall otherwise consent in writing, the Issuer covenants and agrees with each Noteholder as set forth below. 7.1 Satisfaction of Obligations. (a) The Issuer shall promptly pay the Obligations on the dates and in the manner provided in the Notes and this Agreement. (b) The Issuer will (i) pay all lawful claims (including all Taxes) which, if unpaid, would by Law become a Lien upon its Property prohibited by Section 8.2 except where (A) the validity or amount thereof is being contested in good faith by appropriate proceedings, (B) it has set aside on its books adequate reserves with respect thereto in accordance with GAAP and (C) such contest effectively suspends collection of the contested obligation and the enforcement of any Lien securing such obligation; and (ii) perform all obligations under any contractual obligation (including obligations with respect to mortgages, indentures, security agreements and other debt instruments) to which it is bound, or to which any of its Properties is subject, except where the failure to satisfy such obligations, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 7.2 Corporate Existence and Good Standing. Except as otherwise permitted by Section 8.3, the Issuer will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, rights, franchises and privileges in the jurisdiction of its organization and remain qualified to conduct its business in all jurisdictions in which the nature of its Properties or business requires such qualification except where the failure to do so, individually or the in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 7.3 Compliance with Law; Maintenance of Licenses. The Issuer will comply with all Applicable Law (including without limitation Environmental Laws and ERISA) of any Governmental Authority having jurisdiction over it, its Properties or its business except where the failure to do so, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. The Issuer will obtain and maintain all licenses and Permits necessary to own its Property and to conduct its business. 7.4 Maintenance of Property; Casualty and Condemnation. The Issuer will keep and maintain all Property material to the conduct of its business in good working order and condition, ordinary wear and tear excepted and from time to time make or cause to be made all appropriate repairs, renewals, replacements, additions and improvements thereto. 7.5 Insurance. The Issuer will at all times maintain in full force and effect, with financially sound and reputable insurance companies, adequate liability and casualty insurance for its Properties and business, all to such extent and against such risks, including fire and business interruption, as is customary with companies in the same or similar businesses operating in the same or similar locations, and will furnish to the Noteholders, upon written request from any Noteholder, information presented in reasonable detail as to the insurance so carried. 7.6 Books and Records; Inspection Rights. The Issuer will keep proper books of record and account in which full, true and correct entries in all material respects are made of all dealings and transactions in relation to its business and activities, all in accordance with GAAP consistently applied. The Issuer will permit any representatives designated by any Noteholder, upon reasonable prior notice, to visit and inspect its Properties, to examine and make extracts from its books and records, and to discuss its affairs, finances and condition with its employees, officers and independent accountants, all at such reasonable times and as often as reasonably requested. 7.7 Financial Statements and Other Information. The Issuer will furnish to each Noteholder: (a) within ninety (90) days after the end of its Fiscal Year its audited consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such year, setting forth in each case in comparative form the figures for the previous Fiscal Year, all reported on by the registered independent accounting firm retained by the Board of the Issuer (without a "going concern" or like qualification or exception and without any qualification or exception as to the scope of such audit) to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of the Issuer and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; (b) within forty-five (45) days after the end of each of the first three fiscal quarters of its Fiscal Year, its consolidated balance sheet and related statements of operations, stockholders' equity and cash flows as of the end of and for such fiscal quarter and the then elapsed portion of its Fiscal Year, setting forth in each case in comparative form the figures for the corresponding period or periods of the previous Fiscal Year, all certified by a Financial Officer of the Issuer as presenting fairly in all material respects the financial condition and results of operations of the Issuer and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP consistently applied, subject to normal year-end audit adjustments and the absence of footnotes; (c) concurrently with any delivery of financial statements under Section 7.7(a) or 7.7(b), a certificate of the chief executive officer of the Issuer or Financial Officer of the Issuer certifying as to whether a Default has occurred and, if a Default has occurred, specifying the details thereof and any action taken or proposed to be taken with respect thereto; and (d) such other information or documentation, financial or otherwise, that any Noteholder may reasonably request from time to time. 7.8 Notice of Material Events. The Issuer will furnish to each Noteholder prompt written notice of (a) the occurrence of any material Default; (b) the filing or commencement of any action, suit or proceeding by or before any arbitrator or Governmental Authority against or affecting the Issuer, its Subsidiaries or any Affiliate thereof that, if adversely determined, could reasonably be expected to result in a Material Adverse Effect; (c) the termination, amendment, restatement, supplementation or other modification of the HNS Pledges; and (d) any other development that results in, or could reasonably be expected to result in, a Material Adverse Effect. Each notice delivered under this Section 7.8 shall be accompanied by a statement of an officer of the Issuer and a Financial Officer of the Issuer setting forth the details of the event or development requiring such notice and any action taken or proposed to be taken with respect thereto. 7.9 Collateral. The Issuer will make, execute, endorse, acknowledge, file and/or deliver to the Noteholders from time to time such vouchers, invoices, schedules, confirmatory assignments, conveyances, financing statements, transfer endorsements, powers of attorney, certificates, reports and other assurances or instruments and take such further steps relating to the collateral covered by the Security Agreement as the Noteholders may reasonably require. Furthermore, the Issuer shall cause to be delivered to the Noteholders such opinions of counsel and other related documents as may be reasonably requested by the Noteholders to assure itself that this Section 7.9 has been complied with. 7.10 Further Assurances. The Issuer will execute any and all further documents, agreements and instruments, and take all such further actions that may be required under any Applicable Law, or which the Requisite Noteholders may reasonably request, to effectuate the transactions contemplated by the Note Documents, all at the expense the Issuer. 7.11 Rights Offering. The Issuer will use its best efforts to consummate the Rights Offering with proceeds sufficient to pay off the Notes (including all accrued and unpaid interest thereon) as soon as practicable. The Issuer will price the shares of its Common Stock to be offered in the Rights Offering in good faith to encourage subscription by its stockholders, taking into account the Purchase Price paid in connection with the transactions contemplated by the Purchase Agreement. The Initial Noteholders acknowledge that, as of the date hereof, the Board of the Company has not authorized or approved the Rights Offering. ARTICLE VIII NEGATIVE COVENANTS Until payment in full of all Obligations in accordance with the terms hereof, unless the Requisite Noteholders shall otherwise consent in writing, the Issuer covenants and agrees with each Noteholder as set forth below. 8.1 Indebtedness; Preferred Stock. (a) The Issuer will not create, incur, assume or permit to exist any Indebtedness, except: (i) the Obligations; (ii) Indebtedness permitted under the HNS Pledges; and (iii) Indebtedness existing on the date hereof and set forth in Schedule 4.7(a) and extensions and renewals of any such Indebtedness that do not increase the outstanding principal amount thereof or result in an earlier maturity date or decreased weighted average life thereof. (b) The Issuer will not voluntarily prepay, redeem or acquire any Indebtedness, except the prepayment of the Obligations in accordance with the terms of this Agreement. (c) The Issuer will not issue any Disqualified Stock. (d) The Issuer will not enter into any hedging or swap arrangements with respect to any Indebtedness. 8.2 Liens. The Issuer will not create, incur, assume or permit to exist any Lien on any Property now owned or hereafter acquired by it, except: (a) Permitted Liens; (b) any Lien on any Property of the Issuer existing on the date hereof and set forth in Schedule 8.2(a), provided that such Lien shall secure only those obligations that it secures on the date hereof and extensions and renewals thereof that do not increase the outstanding principal amount thereof; and (c) Liens created pursuant to the Security Agreement. 8.3 Fundamental Changes; Business of the Issuer. (a) The Issuer will not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or liquidate or dissolve, except mergers or consolidations with or into any wholly-owned Subsidiary of the Issuer, so long as the Issuer is the surviving party in such merger or consolidation. (b) The Issuer will not engage in any business other than the Business and businesses reasonably related thereto. The Issuer will not move its domicile or principal place of business outside of the United States. 8.4 Investments, Loans, Advances, Guarantees and Permitted Acquisitions. The Issuer will not purchase, hold or acquire any Equity Interests, evidences of Indebtedness or other Securities of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any other Person, or purchase or otherwise acquire (in one transaction or a series of transactions) any Property of any other Person constituting a business unit, except: (a) Permitted Investments; (b) Permitted Acquisitions; (c) investments existing or contemplated on the date hereof and set forth on Schedule 8.4(c), to the extent such investments would not be permitted under any other clause of this Section 8.4; (d) investments or payments, including but not limited to, payments under any guarantee or indemnification, made pursuant to the Separation Agreement or the Rights Offering; (e) investments in the capital stock of its majority-owned Subsidiaries not exceeding $250,000 in the aggregate amount outstanding at any one time; (f) loans or advances to its majority-owned Subsidiaries not exceeding $250,000 in the aggregate amount outstanding at any one time; (g) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course; (h) loans or advances to employees made in the ordinary course of business and not exceeding $50,000 in the aggregate outstanding at any one time; and (i) other investments in an aggregate amount outstanding at any time not to exceed $500,000. 8.5 Asset Sales. The Issuer will not sell, transfer, lease or otherwise dispose of any Property, including any Equity Interests, or issue any additional Equity Interests except: (a) sales in the ordinary course of business; (b) grants of options to purchase Common Stock made to employees or service providers to the Issuer in the ordinary course of business and the issuance of shares of Common Stock upon the exercise of any such options; (c) in connection with the Rights Offering; (d) in connection with the Special Dividend Distribution; and (e) other sales, transfers, leases or other dispositions of Property in an aggregate amount not to exceed $500,000. provided that all sales, transfers, leases and other dispositions permitted by this Section 8.5 shall be made for fair value. 8.6 Restricted Payments. The Issuer will not declare or make, or agree to pay or make, directly or indirectly, any Restricted Payment, except (a) the Issuer may pay interest on any Indebtedness (including the Notes); (b) the Issuer may declare and pay dividends with respect to its capital stock payable solely in additional shares of its Common Stock; (c) the Issuer may make any purchase, repurchase, redemption, retirement or other acquisition for value of shares of, capital stock or membership interests of the Issuer or any of its Subsidiaries from employees, former employees, directors or former directors, members or former members of the Board of the Issuer or any of its Subsidiaries (or permitted transferees of such Persons) pursuant to the terms of agreements (including employment agreements) or plans (or amendments thereto) approved by the Board under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such capital stock or membership interest or upon the death, resignation or termination of employment; (d) the Issuer may make repurchases of capital stock or membership interests of the Issuer or any of its Subsidiaries upon the exercise of options if such capital stock or membership interests represents a portion of the exercise price thereof; (e) the Issuer may make payments in connection with the Rights Offering; and (f) the Issuer may make any prepayment under the Notes made to any Initial Noteholder or Affiliate thereof. 8.7 Transactions with Affiliates. The Issuer will not sell, lease or otherwise transfer any Property to, or purchase, lease or otherwise acquire any Property from, or otherwise engage in any other transactions with, any of its Affiliates (other than its majority-owned Subsidiaries with respect to any such transactions not exceeding $250,000 in the aggregate), except (a) as described in the Separation Agreement and (b) at prices and on terms and conditions that are on an arm's length basis and otherwise are fair and reasonable. 8.8 Restrictive Agreements. The Issuer will not directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon the ability of it to make or repay loans or advances; provided that (a) the foregoing shall not apply to restrictions and conditions imposed by any Note Document or the HNS Pledges; and (b) the foregoing shall not apply to restrictions and conditions existing on the date hereof identified on Schedule 8.8 (but shall apply to any extension or renewal of, or any amendment or modification expanding the scope of, any such restriction or condition). 8.9 Amendment of Material Documents. The Issuer will not (i) amend, restate, supplement, modify or waive any of its rights under its Governing Documents, except as is reasonably necessary to effect the Special Dividend Distribution or the Rights Offering; or (ii) enter into any transaction which would be reasonably expected to have a Material Adverse Effect. 8.10 Fiscal Year. The Issuer will not change its Fiscal Year. 8.11 Use of Proceeds. The Issuer will not nor will permit its Subsidiaries to, use any portion of the proceeds from the sale of the Notes, directly or indirectly, (a) to purchase or carry Margin Stock; (b) to repay or otherwise refinance Indebtedness of the Issuer or others incurred to purchase or carry Margin Stock; (c) to extend credit for the purpose of purchasing or carrying any Margin Stock; or (d) to acquire any Security in any transaction that is subject to Section 13 or 14 of the Exchange Act. 8.12 Changes to Legal Names and Jurisdiction or Type of Organization. The Issuer will not change, or permit any change to, its legal name until (a) shall have given to each Noteholder not less than ten days prior written notice of its intention to do so, clearly describing such new name and providing other information in connection therewith as the Collateral Agent may reasonably request and (b) with respect to such new name, it shall have taken all action reasonably requested by the Collateral Agent to maintain the security interest of the Noteholders in the Property intended to be granted pursuant to the Security Agreement at all times fully perfected and in full force and effect. Furthermore other than in connection with the Special Dividend Distribution, it will not merge, consolidate, or change its jurisdiction of organization or its type of organization until (a) it shall have given to each Noteholder not less than ten days prior written notice of its intention to do so, clearly describing such merger, consolidation, new jurisdiction of organization and/or type of organization and providing such other information in connection therewith as the Collateral Agent may reasonably request and (b) with respect to such merger, consolidation, new jurisdiction and/or type of organization, it shall have taken all actions reasonably requested by the Collateral Agent to maintain the security interest of the Noteholders in the Property intended to be granted pursuant to the Security Agreement at all times fully perfected and in full force and effect. 8.13 Investment Company. The Issuer will not nor will permit its Subsidiaries to, become an "Investment Company" within the meaning of the Investment Act or a company that would be an "Investment Company" but for an exemption under Section 3(c) of the Investment Act. ARTICLE IX TRANSFER OF SECURITIES 9.1 Restriction on Transfer. The Restricted Securities shall not be transferable except a holder of Restricted Securities may Transfer such Restricted Securities (a) to an Affiliate of such holder or (b) to any other Person, in the case of this clause (b), upon the conditions specified in this Article IX, which conditions are intended solely to ensure compliance with the provisions of the Securities Act in respect of the Transfer thereof. 9.2 Restrictive Legends. Each certificate for the Restricted Securities, and each certificate for any such Securities issued to subsequent transferees of any such certificate shall (unless otherwise permitted by the provisions of Section 9.3 hereof) be stamped or otherwise imprinted with a legend in substantially the following form: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE NOTES PURCHASE AGREEMENT DATED AS OF DECEMBER 30, 2005, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES THERETO. UPON THE FULFILLMENT OF CERTAIN CONDITIONS, THE ISSUER HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE ISSUER HEREOF." 9.3 Notice of Transfer. (a) Each holder shall, prior to any Transfer of any Restricted Securities (other than a Transfer referenced in Section 9.1), give three Business Days prior written notice (or, if such three Business Day notice period is not reasonably practicable, such notice as is reasonably practicable), to the Issuer of such holder's intention to effect such Transfer and to comply in all other respects with the provisions of this Section 9.3 in making such proposed Transfer. Each such notice shall reasonably describe the manner and circumstances of the proposed Transfer. Upon the reasonable request of the Issuer, the holder delivering such notice shall deliver a written opinion, addressed to the Issuer, of counsel for such holder (which may be in-house counsel for such holder), stating that in the opinion of such counsel (which opinion shall be reasonably satisfactory to the Issuer) such proposed Transfer does not involve a transaction requiring registration of such Restricted Securities under the Securities Act; provided, however, that (i) in the case of a holder of Restricted Securities which is a partnership or a limited liability company, no such opinion of counsel shall be necessary for a transfer by such holder of Restricted Securities to a partner or member of such holder of Restricted Securities, or a retired partner or member of such holder who retires after the date hereof, or the estate of any such partner or member or retired partner or member, if in each case such transfer involves no consideration and the transferee agrees in writing to be subject to the terms of this Article IX to the same extent as if such transferee were originally a signatory to this Agreement; and (ii) in the case of a holder of Restricted Securities which is a corporation or a limited liability company, no such opinion of counsel shall be necessary for a transfer by such holder of Restricted Securities to an Affiliate, officer, director, member or manager of such entity, if in each case such transfer involves no consideration and the transferee agrees in writing to be subject to the terms of this Article IX to the same extent as if such transferee were originally a signatory to this Agreement and (iii) no such opinion shall be required in connection with a transfer pursuant to Rule 144 (as amended from time to time) promulgated under the Securities Act (or successor rule thereto). Such holder shall be entitled to Transfer the Restricted Securities in accordance with the terms of the notice delivered to the Issuer, if the Issuer does not request such opinion, within three days after delivery of such notice or, if the Issuer does request such opinion, upon its receipt thereof. Each certificate or other instrument evidencing the Securities issued upon the Transfer of any Restricted Securities (and each certificate or other instrument evidencing any untransferred balance of such Restricted Securities) shall bear the applicable legend set forth in Section 9.2 unless (i) such opinion of counsel is to the effect that registration of any future Transfer is not required by the applicable provisions of the Securities Act or (ii) the Issuer shall have waived the requirement of such legend. (b) Notwithstanding the foregoing provisions of this Section 9.3, the restrictions imposed by Section 9.3(a) upon the transferability of any Restricted Securities shall cease and terminate when (i) such Restricted Securities are sold or otherwise disposed of pursuant to an effective registration statement under the Securities Act or as otherwise contemplated by Section 9.3(a) in a manner that does not require that the Restricted Securities so transferred continue to bear the legends set forth in Section 9.2 or (ii) the holder of such Restricted Securities has met the requirements for Transfer of such Restricted Securities under Rule 144(k). Whenever the restrictions imposed by this Section 9.3 shall terminate, upon the written request of the holder of any Restricted Securities as to which such restrictions have terminated, as promptly as practicable but in any event within five Business Days of receipt of such request, the Issuer shall, without charge, issue, register and deliver a new instrument not bearing the restrictive legends set forth in Section 9.2 and not containing any other reference to the restrictions imposed by this Section 9.3. 9.4 Private Placement Number If requested by any Noteholder, the Issuer will obtain a private placement number for the Notes from Standard & Poor's CUSIP Service Bureau. ARTICLE X EVENTS OF DEFAULT 10.1 Defaults. (a) The occurrence of one or more of the events set forth below shall constitute an "Event of Default." (i) Payment of Principal. The Issuer shall fail to make any payment of principal on the Notes, when and as the same shall become due and payable including at the due date thereof, by acceleration, required redemption or repurchase or otherwise. (ii) Payment of Interest and Fees. The Issuer shall fail to make any payment of interest on any Note, or any fee, expense reimbursement or any other amount payable hereunder or under the Note Documents when and as the same shall become due and payable including at the due date thereof, by acceleration or otherwise, and such failure shall continue unremedied for thirty (30) calendar days after the due date thereof. (iii) Covenant Defaults. The Issuer shall default in the due observance or performance of any covenant, condition or agreement to be observed or performed under this Agreement or any other Note Document (other than a covenant default which is dealt with specifically elsewhere in this Section 10.1(a)) and such default shall continue unremedied for a period of ten calendar days after the earlier to occur of (A) notice thereof from any Noteholder to the Issuer and (B) the Issuer's knowledge thereof. (iv) Specific Covenant Defaults. The Issuer shall default in the due observance or performance of any covenant or agreement contained in Sections 5, 6 or 12 of the Security Agreement. (v) Misrepresentations. Any representation, warranty, certification or other statement made or furnished to the Noteholders by or on behalf of the Issuer in this Agreement, any other Note Document or any instrument, certificate or financial statement furnished (in compliance with or in reference thereto) proves to be false, incorrect, breached or misleading in any material respect when made or furnished. (vi) Cross Defaults. The Issuer shall be in default in the repayment of any Indebtedness which is outstanding in a principal amount in excess of $1,000,000 in the aggregate beyond any applicable period of grace, or if any event shall occur or condition shall exist in respect of any Indebtedness which is outstanding in a principal amount in excess of $1,000,000 in the aggregate or under any evidence of any such Indebtedness or of any mortgage, indenture or other agreement relating thereto, which shall have caused the acceleration of the payment of such Indebtedness and such Indebtedness shall not have been paid in full within two Business Days of the date of such acceleration. (vii) Voluntary Insolvency and Related Proceedings. The Issuer shall (A) voluntarily commence any proceeding or file any petition seeking relief under Title 11 of the United States Bankruptcy Code, or any other bankruptcy, insolvency or similar Law; (B) consent to the institution of, or fail to controvert in a timely and appropriate manner, any such proceeding or the filing of any such petition; (C) apply for, consent to the appointment of, or a court of competent jurisdiction shall enter an order appointing, a receiver, trustee, custodian, sequestrator or officer with similar powers of itself or for any substantial part of its Property; (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (E) make a general assignment for the benefit of creditors; (F) fail generally to pay its debts as they become due; (G) shall be adjudicated insolvent; or (H) take any action in furtherance of any of the foregoing. (viii) Involuntary Insolvency and Related Proceedings. (A) An involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (1) relief in respect of the Issuer or of any substantial part of their Property, under Title 11 of the United States Bankruptcy Code or any other bankruptcy, insolvency or similar Law, (2) the appointment of a receiver, trustee, custodian, sequestrator or similar official for any such Person or for any substantial part of its Property or (3) the winding-up or liquidation of any such Person, and any such proceeding, petition or Order shall continue unstayed and in effect for a period of sixty consecutive days; or (B) a warrant of attachment, execution or similar process shall be issued against any substantial part of the Property of the Issuer and the enforcement of such attachment, execution or similar process is not stayed pending appeal. (ix) Change of Control. A Change of Control shall occur. (x) Business Disruption; Condemnation. (A) There shall occur a cessation of a substantial part of the business of the Issuer for a period which significantly affects the Issuer's capacity to continue its business or (B) the Issuer shall be enjoined, restrained or in any way prevented by any Order from conducting all or any material part of its business affairs, in each case to such an extent that could reasonably be expected to cause a Material Adverse Effect. (xi) ERISA. (A) An ERISA Event shall occur with respect to a Pension Plan or Multiemployer Plan which has resulted or could reasonably be expected to result in liability of the Issuer under Title IV of ERISA to the Pension Plan, Multiemployer Plan or the PBGC in an aggregate amount in excess of $1,000,000; (B) the aggregate amount of Unfunded Pension Liability among all Pension Plans at any time exceeds $1,000,000; or (C) the Issuer or any ERISA Affiliate shall fail to pay when due, after the expiration of any applicable grace period, any installment payment with respect to its withdrawal liability under Section 4201 of ERISA under a Multiemployer Plan in an aggregate amount in excess of $1,000,000. (xii) Challenge to Agreement. This Agreement or any other Note Document, including without limitation, the Note Guarantee, shall cease to be in full force and effect and enforceable in accordance with its terms or the Issuer shall assert the invalidity of, or deny or disaffirm their obligations under, any of the foregoing. (xiii) Judgments. A judgment or judgments for the payment of money in excess of $1,000,000 in the aggregate shall be rendered against the Issuer and the same shall not (A) be fully covered by insurance or other comparable bond or (B) within sixty (60) days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within sixty (60) days after the expiration of any such stay. (b) The Issuer shall deliver to the Noteholders, immediately upon, and in any event within five Business Days of the occurrence thereof, written notice of any event which is, or with the giving of notice or the lapse of time or both would become, an Event of Default, its status and what action the Issuer is taking or proposing to take with respect thereto; provided, that for clarification purposes, such five-day period shall not be deemed to extend any otherwise applicable grace period. 10.2 Acceleration. If an Event of Default occurs (other than an Event of Default pursuant to Section 10.1(a)(vii) or 10.1(a)(viii)), at any time thereafter during the continuance of such event, the Requisite Noteholders may take any of the following actions and at the same or different times: (i) declare the Notes (if outstanding) to be forthwith due and payable, whereupon the entire unpaid principal of the Notes, together with accrued but unpaid interest thereon and all other Obligations (including any fees), shall become forthwith due and payable in full in cash, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by the Issuer, anything contained herein or in any other Note Document to the contrary notwithstanding or (ii) exercise any and all other remedies provided under any Note Document upon the occurrence and continuance of an Event of Default; provided, however, that with respect to the occurrence of an Event of Default described in Section 10.1(a)(vii) or 10.1(a)(viii), the principal of the Notes, together with accrued but unpaid interest and fees thereon, and any other liabilities of the Issuer accrued hereunder or in any other Note Document, shall automatically become due and payable in full in cash, all without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by each Issuer, anything contained in this Agreement or in any other Note Document to the contrary notwithstanding. 10.3 Waiver of Past Defaults. The Requisite Noteholders by notice to the Issuer may waive an existing Event of Default and its consequences except (a) a Default in the payment of the principal of or interest on a Note; (b) an Event of Default arising from the failure to redeem or purchase any Note when required pursuant to the terms of this Agreement; or (c) an Event of Default in respect of a provision that under Section 11.8 cannot be amended without the consent of each Noteholder affected. When an Event of Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Event of Default or impair any consequent right. 10.4 Control by Majority. The Requisite Noteholders may direct the time, method and place of conducting any proceeding for any remedy available to the Noteholders or of exercising any trust or power conferred on the Noteholders. 10.5 Waiver of Stay or Extension Laws. The Issuer (to the extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension Law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of the Note Documents and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such Law, and shall not hinder, delay or impede the execution of any power herein granted to the Noteholders, but shall suffer and permit the execution of every such power as though no such Law had been enacted. ARTICLE XI MISCELLANEOUS 11.1 Notices. All notices, demands and requests of any kind to be delivered to any party hereto in connection with this Agreement shall be (a) delivered personally; (b) sent by nationally-recognized overnight courier guarantying next Business Day delivery; (c) sent by first class, registered or certified mail, postage prepaid, return receipt requested; or (d) sent by telecopier, in each case to such party at its address as follows: (i) if to the Issuer to: Hughes Communications, Inc. 19 West 44th Street, Suite 507 New York, NY 10036 Attention: Robert C. Lewis, Esq. Telephone No.: 212-730-7524 Telecopier No.: 212-730-7523 with a copy (which shall not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 Attention: Gregory A. Fernicola, Esq. Telephone No.: 212-735-3000 Telecopier No.: 212-735-2000; and (ii) if to any Noteholder, to the Noteholder's address set forth on Schedule I hereto: with copies to: Apollo Management, L.P. 9 West 57th Street New York, NY 10019 Attention: Aaron Stone Telephone No.: 212-515-3200 Telecopier No.: 212-515-3264; and O'Melveny & Myers LLP Times Square Tower 7 Times Square New York, New York 10036 Attention: Brad J. Finkelstein, Esq. Telephone No.: 212-326-2000 Telecopier No.: 212-326-2061. Any notice, demand or request so delivered shall constitute valid notice under this Agreement and shall be deemed to have been received (a) on the day of actual delivery in the case of personal delivery; (b) on the next Business Day after the date when sent in the case of delivery by nationally-recognized overnight courier; (c) on the fifth Business Day after the date of deposit in the U.S. mail in the case of mailing; or (d) upon receipt in the case of a telecopier transmission or the next Business Day if such day is not a Business Day. Any party hereto may from time to time by notice in writing served upon the other in accordance with this Section 11.1 specify a different mailing address or a different person to which all such notices, demands or requests thereafter are to be addressed. 11.2 Survival of Agreement. (a) All agreements, covenants, representations and warranties contained herein or made in writing by or on behalf of the Issuer in connection with the transactions contemplated hereby shall survive the execution and delivery of this Agreement and the Note Documents without limit. No termination or cancellation (regardless of cause or procedure) of this Agreement shall in any way affect or impair the powers, obligations, duties, rights and liabilities of the parties hereto in any way with respect to any transaction or event occurring prior to such termination or cancellation, or any of the representations contained in this Agreement and the other Note Documents and all such undertakings, agreements, covenants, warranties and representations shall survive such termination or cancellation as provided above. The Noteholders shall be entitled to rely upon, and shall be deemed to have relied upon, all representations, warranties and covenants to be performed prior to the Closing Date contained in this Agreement or any other Note Document, notwithstanding any knowledge of the Noteholders to the contrary, or any contrary information delivered to the Noteholders by the Issuer or any other Person. (b) The Issuer further agrees that to the extent the Issuer makes a payment or payments to the Noteholders under this Agreement or any Note Document, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, receiver or any other party under any bankruptcy, insolvency or similar state or Federal Law, then, to the extent of such payment or repayment, the Obligation or part thereof intended to be satisfied shall be revived, reinstated and continued in full force and effect as if such payment had not been received by the Noteholders. 11.3 Successors and Assigns. Whenever in this Agreement any of the parties hereto is referred to, such reference shall be deemed to include the successors and permitted assigns of such party, and all covenants, promises and agreements by or on behalf of the Issuer or the Noteholders that are contained in this Agreement or any other Note Document shall bind and inure to the benefit of their respective successors and permitted assigns except that the Issuer shall not assign its rights or obligations hereunder without the prior written consent of the Requisite Noteholders. Each Noteholder shall have the right, subject to the provisions of Article IX hereof, to assign or otherwise transfer its rights under the Note Documents or any Notes held by it. 11.4 Expenses of the Initial Noteholders. (a) The Issuer agrees to reimburse the Initial Noteholders (i) all reasonable and documented out-of-pocket expenses incurred by the Initial Noteholders (including, without limitation, the reasonable fees, charges and disbursements of O'Melveny & Myers LLP, counsel for the Initial Noteholders) in connection with (A) the preparation, execution and delivery of this Agreement and the Note Documents; (B) the purchase of the Notes hereunder (including the Initial Noteholders' due diligence investigation in connection therewith); and (C) any amendments, modifications or waivers of the provisions of this Agreement or any Note Document; (ii) all reasonable and documented out-of-pocket expenses incurred by the Noteholders, including the fees, charges and disbursements of counsel for the Noteholders, and any auditors, accountants, appraisers, consultants, advisors and agents employed or retained by the Noteholders, in connection with the enforcement or protection of the Noteholders' rights under the provisions of this Agreement or any other Note Document; and (iii) any Other Taxes which may be determined to be payable in connection with the execution, delivery or performance of this Agreement or any Note Document and any issue Taxes in respect of the issuance of the any Notes to the Noteholders. (b) All amounts due under this Section 11.4 shall be payable promptly after written demand therefor; provided, however, that the expenses described in Sections 11.4(a)(i)(A) and 11.4(a)(i)(B) shall be paid on the Closing Date upon submission of invoices therefor. 11.5 Indemnification. (a) In addition to all rights and remedies available to the Noteholders at law or in equity, the Issuer shall indemnify the Noteholders, the Collateral Agent, each subsequent holder of the Notes and their respective affiliates, stockholders, officers, directors, employees, agents, representatives, counsel, successors and permitted assigns (collectively, the "Indemnified Persons") and save and hold each of them harmless against and pay on behalf of or reimburse such party as and when incurred for any loss (including, without limitation, diminutions in value and consequential damages), liability, demand, claim, action, cause of action, cost, damage, deficiency, fine or expense, whether or not arising out of any claims by or on behalf of the Issuer or any third party, including interest, penalties, reasonable attorneys' fees and expenses and all amounts paid in investigation, defense or settlement of any of the foregoing (collectively, "Losses") which any such party may suffer, sustain or become subject to, as a result of, in connection with, relating or incidental to or by virtue of: (i) any misrepresentation or breach of a representation or warranty on the part of the Issuer under this Agreement or any other Note Document; (ii) without duplication of Section 11.5(a)(i), any misrepresentation in or omission from any of the representations, warranties, statements, schedules and exhibits hereto, certificates or other instruments or documents furnished to the Noteholders by or on behalf of the Issuer made in or pursuant to this Agreement or any other Note Document; (iii) any non-fulfillment or breach of any covenant or agreement on the part of the Issuer under this Agreement or any other Note Document; (iv) any action, demand, proceeding, investigation or claim by any third party (including, without limitation, any Governmental Authority) against or affecting the Issuer which, if successful, would give rise to or evidence the existence of or relate to a breach of the Issuer's representations, warranties or covenants set forth in this Agreement or in any other Note Document; (v) any action, demand, proceeding, investigation, claim, by a third party, relating to or arising from Environmental Laws (including without limitation relating to or arising from any hazardous substance, hazardous waste, or hazardous material) against the Issuer; and (vi) any claim (whenever made) relating in any way to the Issuer and any claim (whenever made) arising out of, relating to, resulting from or caused by any transaction, status, event, condition, occurrence or situation relating to, arising out of or in connection with (A) the execution, delivery and performance of this Agreement or the other Note Documents and the documents and agreements contemplated hereby or thereby or (B) any actions taken by or omitted to be taken by any of the other Indemnified Persons in connection with this Agreement or any other Note Document or the documents and agreements contemplated hereby and thereby. (b) All indemnification rights hereunder shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby without limit, regardless of any investigation, inquiry or examination made for or on behalf of, or any knowledge of the Noteholders, their advisors and/or any of the Indemnified Persons or the acceptance by the Noteholders of any certificate or opinion. (c) If for any reason the indemnity provided for in this Section 11.5 is unavailable to any Indemnified Person or is insufficient to hold each such Indemnified Person harmless from all such Losses arising with respect to the transactions contemplated by this Agreement, then the Issuer shall contribute to the amount paid or payable for such Losses in such proportion as is appropriate to reflect not only the relative benefits received by the Issuer on the one hand and such Indemnified Person on the other but also the relative fault of the Issuer and the Indemnified Person as well as any relevant equitable considerations. In addition, the Issuer agrees to reimburse any Indemnified Person upon demand for all reasonable expenses (including reasonable fees of one legal counsel) incurred by such Indemnified Person in connection with investigating, preparing or defending any such action or claim; provided, however, that such Indemnified Person is entitled to be indemnified hereunder with respect to such claim. The indemnity, contribution and expenses reimbursement obligations that the Issuer has under this Section 11.5 shall be in addition to any liability that the Issuer may otherwise have at law or in equity. The Issuer further agrees that the indemnification and reimbursement commitments set forth in this Agreement shall apply whether or not the Indemnified Person is a formal party to any such lawsuits, claims or other proceedings. (d) Any indemnification of the Noteholders or any other Indemnified Person by the Issuer pursuant to this Section 11.5 shall be effected by wire transfer of immediately available funds from the Issuer to an account designated by the Noteholders or any other Indemnified Person within ten Business Days after the determination thereof. 11.6 Governing Law; Exclusive Jurisdiction and Venue. (a) ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED EXCLUSIVELY BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK. (b) THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT SHALL EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE COUNTY OF NEW YORK IN THE STATE OF NEW YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES HERETO IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. (c) THE ISSUER HEREBY AGREES THAT SERVICE UPON IT BY REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED) SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW NOR SHALL IT LIMIT THE RIGHT OF THE NOTEHOLDERS TO BRING PROCEEDINGS AGAINST THE ISSUER IN THE COURTS OF ANY OTHER JURISDICTION. 11.7 Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY NOTE DOCUMENT OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT OR ANY OTHER NOTE DOCUMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY. 11.8 Waivers; Amendments. (a) No failure or delay of the Noteholders in exercising any power or right in this Agreement or in any other Note Document shall operate as a waiver hereof or thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise of any other right or power. No waiver of any provision of this Agreement or any other Note Document or consent to any departure by the Issuer therefrom shall in any event be effective unless the same shall be authorized as provided for in Section 11.8(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice or demand on the Issuer in any case shall entitle the Issuer to any other or further notice or demand in similar or other circumstances. (b) Neither this Agreement nor any provision hereof may be waived, amended, restated or otherwise modified except pursuant to a written agreement entered into by the Issuer and the Requisite Noteholders; provided that no such amendment, waiver, restatement or modification shall (i) reduce the principal amount of any Note or reduce the rate of interest thereon, or reduce any other amounts payable hereunder; (ii) postpone the scheduled date of payment of the principal amount of any Note, or any interest thereon, or any other amounts payable hereunder, or reduce the amount of, waive or excuse any such payment; (iii) change Sections 3.2(e) or 3.2(f) in a manner that would alter the pro rata sharing of payments required thereby; (iv) change any of the provisions of this Section 11.8 or the definition of "Requisite Noteholder" or any other provision hereof specifying the number or percentage of Noteholders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder; or (v) increase the obligations of any Noteholder or otherwise disproportionately adversely affect any rights of any Noteholder under this Agreement, in each of the foregoing situations, without the prior written consent of each Noteholder affected thereby. 11.9 Public Announcements; Use of Name. The Issuer and each of the Initial Noteholders agree not to issue any press release or make any other public announcement, statement or filing with regard to this Agreement, any other Note Document or the transactions contemplated hereby or thereby without the prior approval of the Requisite Noteholders or the Issuer, respectively, such approval not to be unreasonably withheld. Except as otherwise provided for in this Section 11.9, the Issuer agrees to permit the Noteholders, and the Noteholders agree to permit the Issuer, to make reasonable use of the other's name in any public announcement, statement or filing, provided that such use occurs in a professional and business-like manner. 11.10 Remedies. Notwithstanding anything to the contrary contained herein, each Noteholder shall have and retain all other rights and remedies existing in its favor at law or equity, including, without limitation, any actions for specific performance and/or injunctive or other equitable relief (including, without limitation, the remedy of rescission) to enforce or prevent any violations of the provisions of this Agreement or any other Note Document. 11.11 Independence of Covenants, Representations and Warranties. All agreements and covenants hereunder shall be given independent effect so that if a certain action or condition constitutes a default under a certain agreement or covenant, the fact that such action or condition is permitted by another agreement or covenant shall not affect the occurrence of such default, unless expressly permitted under an exception to such initial covenant. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness or breach of a representation and warranty hereunder. 11.12 No Fiduciary Relationship. No provision in this Agreement or in any other Note Document and no course of dealing among the parties hereto shall be deemed to create any fiduciary duty by the Noteholders or any of their respective agents or Affiliates to the Issuer or its respective directors, officers, employees, agents, stockholders or Affiliates. 11.13 Construction. The Issuer and the Noteholders acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement and the other Note Documents with its legal counsel and that this Agreement and the other Note Documents shall be construed as if jointly drafted by the Noteholders and the Issuer. 11.14 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, void or otherwise unenforceable provisions shall be null and void. It is the intent of the parties, however, that any invalid, void or otherwise unenforceable provisions be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by Applicable Law. 11.15 Counterparts; Facsimile Execution. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement or any other Note Document that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement or such Note Document. 11.16 Headings. Article and section headings and the table of contents used herein are for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. 11.17 Entire Agreement. This Agreement (including the annexes, schedules and exhibits hereto) and the agreements and documents referred to herein contain the entire agreement of the parties and supersede any and all prior agreements among the parties with respect to the subject matter hereof. ARTICLE XII COLLATERAL AGENT 12.1 Appointment. (a) Apollo Investment Fund IV, L.P. is hereby appointed the Collateral Agent hereunder and under the other Note Documents. Each Noteholder hereby authorizes the Collateral Agent to act as its agent in accordance with the terms of this Agreement and the other Note Documents. The Collateral Agent agrees to act upon the express conditions contained in this Agreement and the other Note Documents, as applicable. The provisions of this Article XII are solely for the benefit of the Collateral Agent and the Noteholders and neither the Issuer nor any of its Subsidiaries shall have rights as a third party beneficiary of any of the provisions thereof. In performing its functions and duties under this Agreement, the Collateral Agent shall act solely as an agent of the Noteholders and does not assume and shall not be deemed to have assumed any obligation towards or relationship of agency or trust with or for the Issuer. (b) It is the purpose of this Agreement and the other Note Documents that there shall be no violation of any Law of any jurisdiction denying or restricting the right of banking corporations or associations to transact business as agent or trustee in such jurisdiction. It is recognized that in case of litigation under this Agreement or any of the other Note Documents, and in particular in case of the enforcement of any of the Note Documents, or in case the Collateral Agent deems that by reason of any present or future Law of any jurisdiction it may not exercise any of the rights, powers or remedies granted herein or in any of the other Note Documents or take any other action which may be desirable or necessary in connection therewith, it may be necessary that the Collateral Agent appoint an additional individual or institution as a separate trustee, co-trustee, collateral agent or collateral co-agent (any such additional individual or institution being referred to herein individually as, a "Supplemental Collateral Agent"). (i) In the event that the Collateral Agent appoints a Supplemental Collateral Agent with respect to any Collateral, (1) each and every right, power, privilege or duty expressed or intended by this Agreement or any of the other Note Documents to be exercised by or vested in or conveyed to the Collateral Agent with respect to such Collateral shall be exercisable by and vest in such Supplemental Collateral Agent to the extent, and only to the extent, necessary to enable such Supplemental Collateral Agent to exercise such rights, powers and privileges with respect to such Collateral and to perform such duties with respect to such Collateral, and every covenant and obligation contained in the Note Documents and necessary to the exercise or performance thereof by such Supplemental Collateral Agent shall run to and be enforceable by either the Collateral Agent or such Supplemental Collateral Agent, and (2) the provisions of this Article XII that refer to the Collateral Agent shall inure to the benefit of such Supplemental Collateral Agent and all references therein to the Collateral Agent shall be deemed to be references to the Collateral Agent and/or such Supplemental Collateral Agent, as the context may require. (ii) Should any instrument in writing from the Issuer be required by any Supplemental Collateral Agent so appointed by the Collateral Agent for more fully and certainly vesting in and confirming to him or it such rights, powers, privileges and duties, the Issuer shall execute, acknowledge and deliver any and all such instruments promptly upon reasonable request by the Collateral Agent. In case any Supplemental Collateral Agent, or a successor thereto, shall die, become incapable of acting, resign or be removed, all the rights, powers, privileges and duties of such Supplemental the Collateral Agent, to the extent permitted by law, shall vest in and be exercised by the Collateral Agent until the appointment of a new Supplemental Collateral Agent. 12.2 Powers and Duties; General Immunity. (a) Each Noteholder irrevocably authorizes the Collateral Agent to take such action on such Noteholder's behalf and to exercise such powers, rights and remedies hereunder and under the other Note Documents as are specifically delegated or granted to the Collateral Agent by the terms hereof and thereof, together with such powers, rights and remedies as are reasonably incidental thereto. The Collateral Agent shall have only those duties and responsibilities that are expressly specified in this Agreement and the other Note Documents. The Collateral Agent may exercise such powers, rights and remedies and perform such duties by or through its agents or employees. The Collateral Agent shall not have, by reason of this Agreement or any of the other Note Documents, a fiduciary relationship in respect of any Noteholder or the Issuer; and nothing in this Agreement or any of the other Note Documents, expressed or implied, is intended to or shall be so construed as to impose upon the Collateral Agent any obligations in respect of this Agreement or any of the other Note Documents except as expressly set forth herein or therein. (b) The Collateral Agent shall not be responsible to any Noteholder for the execution, effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Agreement or any other Note Document or for any representations, warranties, recitals or statements made herein or therein or made in any written or oral statements or in any financial or other statements, instruments, reports or certificates or any other documents furnished or made by the Collateral Agent to the Noteholders or by or on behalf of the Issuer to the Collateral Agent or any Noteholder in connection with the Note Documents and the transactions contemplated thereby or for the financial condition or business affairs of the Issuer or any other Person liable for the payment of any Obligations, nor shall the Collateral Agent be required to ascertain or inquire as to the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained in any of the Note Documents or as to the use of the proceeds of the Notes or as to the existence or possible existence of any Default or Event of Default. Anything contained in this Agreement to the contrary notwithstanding, the Collateral Agent shall not have any liability arising from confirmations of the amount of outstanding principal amount of the Notes or the component amounts thereof. (c) Neither the Collateral Agent nor any of its officers, directors, employees or agents shall be liable to the Noteholders for any action taken or omitted by the Collateral Agent under or in connection with any of the Note Documents except to the extent caused by the Collateral Agent's gross negligence or willful misconduct. The Collateral Agent shall be entitled to refrain from any act or the taking of any action (including the failure to take an action) in connection with this Agreement or any of the other Note Documents or from the exercise of any power, discretion or authority vested in it hereunder or thereunder unless and until the Collateral Agent shall have received instructions in respect thereof from the Requisite Noteholders (or such other Noteholders as may be required to give such instructions under subsection 11.8) and, upon receipt of such instructions from the Requisite Noteholders (or such other Noteholders, as the case may be), the Collateral Agent shall be entitled to act or (where so instructed) refrain from acting, or to exercise such power, discretion or authority, in accordance with such instructions; provided that the Collateral Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Collateral Agent to liability or that is contrary to any Note Document or Applicable Law. Without prejudice to the generality of the foregoing, (i) the Collateral Agent shall be entitled to rely, and shall be fully protected in relying, upon any communication (including any electronic message), instrument or document believed by it to be genuine and correct and to have been signed or sent by the proper Person, and shall be entitled to rely and shall be protected in relying on opinions and judgments of attorneys (who may be attorneys for the Issuer and its Subsidiaries), accountants, experts and other professional advisors selected by it; and (ii) no Noteholder shall have any right of action whatsoever against the Collateral Agent as a result of the Collateral Agent acting or (where so instructed) refraining from acting under this Agreement or any of the other Note Documents in accordance with the instructions of the Requisite Noteholders (or such other the Noteholders as may be required to give such instructions under subsection 11.8). 12.3 Independent Investigation by the Noteholders; No Responsibility For Appraisal of Creditworthiness. Each Noteholder agrees that it has made its own independent investigation of the financial condition and affairs of the Issuer and its Subsidiaries in connection with the purchase of the Notes and that it has made and shall continue to make its own appraisal of the creditworthiness of the Issuer and its Subsidiaries. The Collateral Agent shall not have any duty or responsibility, either initially or on a continuing basis, to make any such investigation or any such appraisal on behalf of the Noteholders or to provide any Noteholder with any credit or other information with respect thereto, whether coming into its possession before the Closing or at any time or times thereafter, and the Collateral Agent shall not have any responsibility with respect to the accuracy of or the completeness of any information provided to the Noteholders. 12.4 Right to Indemnity. Each Noteholder, in proportion to its pro rata share of the outstanding principal amount of the Notes held by such Noteholder, severally agrees to indemnify the Collateral Agent and its officers, directors, employees, agents, attorneys, professional advisors and Affiliates to the extent that any such Person shall not have been reimbursed by the Issuer, for and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including counsel fees and disbursements and fees and disbursements of any financial advisor engaged by the Collateral Agent) or disbursements of any kind or nature whatsoever which may be imposed on, incurred by or asserted against the Collateral Agent or such other Person in exercising the powers, rights and remedies of the Collateral Agent or performing duties of the Collateral Agent hereunder or under the other Note Documents or otherwise in its capacity as the Collateral Agent in any way relating to or arising out of this Agreement or the other Note Documents; provided that no Noteholder shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of the Collateral Agent resulting solely from the Collateral Agent's gross negligence or willful misconduct as determined by a final judgment of a court of competent jurisdiction. If any indemnity furnished to the Collateral Agent or any other such Person for any purpose shall, in the opinion of the Collateral Agent, be insufficient or become impaired, the Collateral Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished. 12.5 Resignation of Agents; Successor Collateral Agent. The Collateral Agent may resign at any time by giving thirty days' prior written notice thereof to the Noteholders and the Issuer. Upon any such notice of resignation by the Collateral Agent, the Requisite Noteholders shall have the right, upon five Business Days' notice to the Issuer, to appoint a successor the Collateral Agent. If no such successor shall have been so appointed by the Requisite Noteholders and shall have accepted such appointment within thirty days after the retiring Collateral Agent gives notice of its resignation, the retiring Collateral Agent may, on behalf of the Noteholders, appoint a successor Collateral Agent. If the Collateral Agent shall notify the Noteholders and the Issuer that no Person has accepted such appointment as successor Collateral Agent, such resignation shall nonetheless become effective in accordance with the Collateral Agent's notice and (a) the retiring Collateral Agent shall be discharged from its duties and obligations under the Note Documents, except that any Collateral held by the Collateral Agent will continue to be held by it until a Person shall have accepted the appointment of successor Collateral Agent, and (b) all payments, communications and determinations provided to be made by, to or through the Collateral Agent shall instead be made by, to or through each Noteholder directly, until such time as the Requisite Noteholders appoint a successor Collateral Agent in accordance with this Article 12.5. Upon the acceptance of any appointment as Collateral Agent hereunder by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring the Collateral Agent and the retiring Collateral Agent shall be discharged from its duties and obligations under this Agreement (if not already discharged as set forth above). After any retiring Collateral Agent's resignation hereunder, the provisions of this Article XII shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Collateral Agent under this Agreement. 12.6 Collateral Documents and Guaranties; Subordination Agreements. Each Noteholder hereby further authorizes the Collateral Agent, on behalf of and for the benefit of the Noteholders, to enter into each Collateral Document, and, except as set forth below, any amendment, modification or supplement thereto, as secured party and to be the agent for and representative of the Noteholders under the Note Guarantee, and each Noteholder agrees to be bound by the terms of each Collateral Document and the Note Guarantee; provided that the Collateral Agent shall not (a) enter into or consent to any material amendment, modification, termination or waiver of any provision contained in any Collateral Document or the Note Guarantee or (ii) release any Collateral (except as otherwise expressly permitted or required pursuant to the terms of this Agreement or the applicable Collateral Document), in each case without the prior consent of the Requisite Noteholders (or, if required pursuant to subsection 11.8, all the Noteholders); provided further, however, that, without further written consent or authorization from the Noteholders, the Collateral Agent may execute any documents or instruments necessary to release any Lien encumbering any item of Collateral that is the subject of a sale or other disposition of assets permitted by this Agreement or to which the Requisite Noteholders have otherwise consented. Anything contained in any of the Note Documents to the contrary notwithstanding, the Issuer, the Collateral Agent and each Noteholder hereby agree that (1) no Noteholder shall have any right individually to realize upon any of the Collateral under the Collateral Documents or to enforce the Note Guarantee, it being understood and agreed that all powers, rights and remedies under the Collateral Documents and the Note Guarantee may be exercised solely by the Collateral Agent for the benefit of the Noteholders in accordance with the terms thereof, and (2) in the event of a foreclosure by the Collateral Agent on any of the Collateral pursuant to a public or private sale, the Collateral Agent or any Noteholder may be the purchaser of any or all of such Collateral at any such sale and the Collateral Agent, as agent for and representative of the Noteholders (but not any Noteholder or the Noteholders in its or their respective individual capacities unless the Requisite Noteholders shall otherwise agree in writing) shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such public sale, to use and apply any of the Obligations as a credit on account of the purchase price for any Collateral payable by the Collateral Agent at such sale. 12.7 The Collateral Agent May File Proofs of Claim. (a) In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Issuer or its Subsidiaries, the Collateral Agent (irrespective of whether the Notes shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Collateral Agent shall have made any demand on the Issuer) shall be entitled and empowered, by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of principal and interest owing and unpaid in respect of the Notes and any other Obligations that are owing and unpaid and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Noteholders and the Collateral Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Noteholders and the Collateral Agent and their agents and counsel and all other amounts due the Noteholders and the Collateral Agent) allowed in such judicial proceeding and (ii) to collect and receive any moneys or other Property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Noteholder to make such payments to the Collateral Agent and, in the event that the Collateral Agent shall consent to the making of such payments directly to the Noteholders, to pay to the Collateral Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Collateral Agent and their agents and counsel, and any other amounts due the Collateral Agent. (b) Nothing herein contained shall be deemed to authorize the Collateral Agent to authorize or consent to or accept or adopt on behalf of any Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Noteholders or to authorize the Collateral Agent to vote in respect of the claim of any Noteholder in any such proceeding. [Signature page follows] IN WITNESS WHEREOF, the parties hereto have executed this Note Purchase Agreement as of the date first written above. ISSUER: ------- HUGHES COMMUNICATIONS, INC. By: /s/ ROBERT C. LEWIS ----------------------------------- Name: Robert C. Lewis Title: Senior Vice President and General Counsel INITIAL NOTEHOLDERS: -------------------- APOLLO INVESTMENT FUND IV, L.P. By: APOLLO ADVISORS IV, L.P., its general partner By: Apollo Capital Management, IV, INC., its general partner By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President APOLLO OVERSEAS PARTNERS IV, L.P. By: APOLLO ADVISORS IV, L.P., its general partner By: Apollo Capital Management, IV, INC., its general partner By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President ================================================================================ NOTE PURCHASE AGREEMENT AMONG HUGHES COMMUNICATIONS, INC. AND THE INITIAL NOTEHOLDERS IDENTIFIED ON SCHEDULE I HERETO DATED AS OF DECEMBER 30, 2005 ================================================================================ EXHIBITS - -------- Exhibit A - Form of Note Exhibit B - Form of Security Agreement Exhibit C - Form of Separation Agreement Exhibit D - Form of Opinions Exhibit E Form of Draft S-1 Registration Statement Exhibit F Form of Registration Rights Agreement ANNEX - ----- Annex I - Schedule of Documents SCHEDULES - --------- Schedule I - Noteholders, Notes and Notices Schedule 4.4(b) - Capitalization Schedule 4.4(c) - Options and Warrants Schedule 4.7(a) - Indebtedness Schedule 8.2(a) - Liens Schedule 8.4(c) - Investments Schedule 8.8 - Restrictive Agreements EX-10 6 nyc1067425.txt EXHIBIT 10.4 - SECURITY AGREEMENT Exhibit 10.4 SECURITY AGREEMENT This Security Agreement (this "Agreement") is dated as of January 1, 2006 and entered into by and between Hughes Communications, Inc., a Delaware corporation (the "Grantor"), and Apollo Investment Fund IV, L.P., as Collateral Agent for and representative of (in such capacity herein called the "Secured Party") the Noteholders (as hereinafter defined). PRELIMINARY STATEMENTS A. On the Closing Date, pursuant to the Note Purchase Agreement dated as of December 30, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the "Note Purchase Agreement"; the terms defined therein and not otherwise defined herein being used herein as therein defined), by and among the Grantor and the Initial Noteholders, the Initial Noteholders shall, subject to the terms and conditions set forth in the Note Purchase Agreement, purchase the Notes in an aggregate original principal amount of $100,000,000. B. It is intended that the Grantor will consummate a sale of shares of its Common Stock to its stockholders pursuant to a rights offering generating aggregate net proceeds sufficient to repay the Notes. NOW THEREFORE, the parties to this Agreement hereby agree as set forth below. SECTION 1. Grant of Security. The Grantor hereby assigns to the Secured Party and its successors and assigns, for the ratable benefit of the Noteholders, and hereby grants to the Secured Party and its successors and assigns, for the ratable benefit of the Noteholders a security interest in, all of the Grantor's right, title and interest, whether now existing or hereafter arising, in any and all rights to payment for the purchase of any shares of Common Stock sold by Grantor to any stockholder of Grantor pursuant to any Rights Offering and all Proceeds of the foregoing (collectively, the "Collateral"); provided, that the Collateral shall not include Excluded Collateral. "Rights Offering" shall mean a sale of new shares of common stock by distributing stock purchase rights to all but not less than all of Grantor's existing stockholders. "Excluded Collateral" shall mean any and all rights to payment for the purchase of any shares of Common Stock sold by Grantor to any stockholder of Grantor pursuant to any Rights Offering that are to be satisfied by converting the Notes (and accrued but unpaid interest thereon) into Common Stock pursuant to Section 3.5(a) of the Note Purchase Agreement. SECTION 2. Security for Obligations. This Agreement secures, and the Collateral is collateral security for, the prompt payment or performance in full when due, whether at stated maturity, by required prepayment, declaration, acceleration, demand or otherwise, of all Secured Obligations of the Grantor. "Secured Obligations" means (a) the Obligations (including interest accruing during the pendency of any Proceeding regardless of whether allowed or allowable in such Proceeding) and (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of the Grantor under or pursuant to the Note Purchase Agreement and the other Note Documents, provided, that upon consummation of the Rights Offering, the Secured Obligations shall not include the Convertible Amount. For purposes hereof, the term "Proceeding" shall mean any legal, administrative or arbitration action, suit, complaint, charge, hearing, inquiry, investigation or proceeding. SECTION 3. Grantor Remains Liable. Anything contained herein to the contrary notwithstanding, (a) the Grantor shall remain liable under any contracts and agreements included in the Collateral, to the extent set forth therein, to perform all of its duties and obligations thereunder to the same extent as if this Agreement had not been executed; (b) the exercise by the Secured Party of any of its rights hereunder shall not release the Grantor from any of its duties or obligations under the contracts and agreements included in the Collateral; and (c) the Secured Party shall not have any obligation or liability under any contracts and agreements included in the Collateral by reason of this Agreement, nor shall the Secured Party be obligated to perform any of the obligations or duties of the Grantor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. SECTION 4. Representations and Warranties. The Grantor represents and warrants as of the date hereof as set forth below: (a) Ownership of Collateral. Except as expressly permitted by the Note Purchase Agreement or created herein, the Grantor owns its interests in the Collateral free and clear of any Lien and no effective financing statement or other instrument similar in effect covering all or any part of the Collateral is on file in any filing or recording office. (b) Perfection. The security interests in the Collateral granted to the Secured Party for the ratable benefit of the Noteholders hereunder constitute valid security interests in the Collateral, securing the payment of the Secured Obligations. Upon the filing of a UCC financing statement naming the Grantor as "debtor", naming the Secured Party as "secured party" and describing the Collateral with the Secretary of State of the State of Delaware, the security interests in the Collateral granted to the Secured Party for the ratable benefit of the Noteholders will constitute perfected security interests therein prior to all other Liens (except for Liens permitted by the Note Purchase Agreement), and all filings and other actions necessary or desirable to perfect and protect such security interests have been, or promptly after the Closing Date will be, duly made or taken. (c) Office Locations; Type and Jurisdiction of Organization; Locations of Equipment and Inventory. The Grantor's name as it appears in official filings in the jurisdiction of its organization, type of organization (i.e. corporation, limited partnership, etc.), jurisdiction of organization, principal place of business, chief executive office, office where the Grantor keeps its Records regarding the Collateral, and organization number provided by the applicable Government Authority of the jurisdiction of organization are set forth on Schedule 3 annexed hereto. (d) Names. The Grantor (or predecessor by merger or otherwise of the Grantor) has not, since its incorporation, had a different name from the name of the Grantor listed on the signature pages hereof, except the names set forth on Schedule 5 annexed hereto. SECTION 5. Further Assurances. The Grantor agrees that from time to time, at the expense of the Grantor, the Grantor will promptly execute and deliver all further instruments and documents, and take all further action, that may be reasonably necessary or desirable, or that the Secured Party may reasonably request, in order to perfect and protect any security interest granted or purported to be granted hereby or to enable the Secured Party to exercise and enforce their rights and remedies hereunder with respect to any Collateral. The Grantor authorizes the filing of financing statements that describe the Collateral in a manner that is broader than described herein. SECTION 6. Certain Covenants of Grantor. The Grantor shall: (a) not use or permit any Collateral to be used unlawfully or in violation of any provision of this Agreement or any applicable statute, regulation or ordinance or any policy of insurance covering the Collateral; (b) give the Secured Party at least ten days' prior written notice of (i) any change in the Grantor's name, identity or corporate structure and (ii) any reincorporation, reorganization or other action that results in a change of the jurisdiction of organization of the Grantor; (c) if the Secured Party gives value to enable the Grantor to acquire rights in or the use of any Collateral, use such value for such purposes; (d) keep correct and accurate Records of Collateral at the locations described in Schedule 3 annexed hereto; and (e) permit representatives of the Secured Party, upon reasonable prior notice and during normal business hours, to inspect and make abstracts from such Records, and the Grantor agrees to render to the Secured Party, at the Grantor's cost and expense, such clerical and other assistance as may be reasonably requested with regard thereto. SECTION 7. Secured Party Appointed Attorney-in-Fact. The Grantor hereby irrevocably appoints the Secured Party as the Grantor's attorney-in-fact, with full authority in the place and stead of the Grantor and in the name of the Grantor, the Secured Party or otherwise, from time to time in the Secured Party's discretion to take any action and to execute any instrument that the Secured Party may deem reasonably necessary or advisable to accomplish the purposes of this Agreement, including, without limitation: (a) upon the occurrence and during the continuance of an Event of Default, to ask for, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any of the Collateral; (b) upon the occurrence and during the continuance of an Event of Default, to file any claims or take any action or institute any proceedings that the Secured Party may deem necessary or desirable for the collection of any of the Collateral or otherwise to enforce or protect the rights of the Secured Party with respect to any of the Collateral; (c) to pay or discharge Taxes or Liens (other than Taxes not required to be discharged pursuant to the Note Purchase Agreement and Liens permitted under this Agreement or the Note Purchase Agreement) levied or placed upon or threatened against the Collateral, the legality or validity thereof and the amounts necessary to discharge the same to be determined by the Secured Party in its sole discretion, any such payments made by the Secured Party to become obligations of the Grantor to the Secured Party, due and payable immediately without demand; and (d) upon the occurrence and during the continuance of an Event of Default, generally to sell, transfer, pledge, make any agreement with respect to or otherwise deal with any of the Collateral as fully and completely as though the Secured Party was the absolute owner thereof for all purposes, and to do, at the Secured Party's option and the Grantor's expense, at any time or from time to time, all acts and things that the Secured Party deem necessary to protect, preserve or realize upon the Collateral and the Secured Party's security interest therein in order to effect the intent of this Agreement, all as fully and effectively as the Grantor might do. SECTION 8. Secured Party May Perform. If the Grantor fails to perform any agreement contained herein, and such failure shall continue for a period exceeding five Business Days, the Secured Party may itself perform, or cause performance of, such agreement, and the expenses of the Secured Party incurred in connection therewith shall be payable by the Grantor under Section 12(b) hereof. SECTION 9. Standard of Care. The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the exercise of reasonable care in the custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of Collateral in its possession if such Collateral is accorded treatment substantially equal to that which the Secured Party accords its own property. SECTION 10. Remedies. (a) Generally. If any Event of Default shall have occurred and be continuing, the Secured Party may, subject to Section 14 hereof, exercise in respect of the Collateral, in addition to all other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party on default under the Uniform Commercial Code as it exists on the date of this Agreement, or as it may hereafter be amended, in the State of New York (the "UCC") (whether or not the UCC applies to the affected Collateral), and also may (i) require the Grantor to, and the Grantor hereby agrees that it will at its expense and upon request of the Secured Party forthwith, assemble all or part of the Collateral as directed by the Secured Party and make it available to the Secured Party at a place to be designated by the Secured Party that is reasonably convenient to both parties, (ii) without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any of the Secured Party's offices or elsewhere, for cash, on credit or for future delivery, at such time or times and at such price or prices and upon such other terms as the Secured Party may deem commercially reasonable. The Secured Party or any Noteholder may be the purchaser of any or all of the Collateral at any such public or, to the extent permitted under the UCC, private sale and the Secured Party shall be entitled, for the purpose of bidding and making settlement or payment of the purchase price for all or any portion of the Collateral sold at any such sale, to use and apply any of the Secured Obligations as a credit on account of the purchase price for any Collateral payable by the Secured Party at such sale. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right on the part of the Grantor, and the Grantor hereby waives (to the extent permitted by Applicable Law) all rights of redemption, stay and/or appraisal which it now has or may at any time in the future have under any Law now existing or hereafter enacted. The Grantor agrees that, to the extent notice of sale shall be required by Law, at least ten days' notice to the Grantor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. The Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. The Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. The Grantor hereby waives any claims against the Secured Party arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if the Secured Party accepts the first offer received and do not offer such Collateral to more than one offeree. If the proceeds of any sale or other disposition of the Collateral are insufficient to pay all the Secured Obligations, the Grantor shall be liable for the deficiency and the fees of any attorneys employed by the Secured Party to collect such deficiency. The Grantor further agrees that a breach of any of the covenants contained in this Section 10 will cause irreparable injury to the Secured Parties, that the Secured Party has no adequate remedy at Law in respect of such breach and, as a consequence, that each and every covenant contained in this Section shall be specifically enforceable against the Grantor, and the Grantor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants except for a defense that no default has occurred giving rise to the Secured Obligations becoming due and payable prior to their stated maturities. SECTION 11. Application of Proceeds. Except as expressly provided elsewhere in this Agreement, all proceeds received by the Secured Party in respect of any sale of, collection from, or other realization upon all or any part of the Collateral shall be applied in the following order of priority: FIRST: To the payment of all costs and expenses of such sale, collection or other realization, including reasonable compensation to the Secured Party's agents and counsel, and all other expenses, liabilities and advances made or incurred by the Secured Party in connection therewith, and all amounts for which the Secured Party is entitled to indemnification hereunder and all advances made by the Secured Party hereunder for the account of the Grantor, and to the payment of all costs and expenses paid or incurred by the Secured Party in connection with the exercise of any right or remedy hereunder; SECOND: To the payment of all other Secured Obligations (for the ratable benefit of the holders thereof) and, as to obligations arising under the Note Purchase Agreement, as provided in the Note Purchase Agreement; and THIRD: To the payment to or upon the order of the Grantor, or to whosoever may be lawfully entitled to receive the same or as a court of competent jurisdiction may direct, of any surplus then remaining from such proceeds. SECTION 12. Indemnity and Expenses. (a) The Grantor agrees to indemnify the Secured Party and each Noteholder from and against any and all claims, losses and liabilities in any way relating to, growing out of or resulting from this Agreement and the transactions contemplated hereby (including, without limitation, enforcement of this Agreement), except to the extent such claims, losses or liabilities result solely from the Secured Party's or such Noteholder's gross negligence or willful misconduct as finally determined by a court of competent jurisdiction. (b) The obligations of the Grantor in this Section 12 shall survive the termination of this Agreement and the discharge of the Grantor's other obligations under this Agreement, the Note Purchase Agreement and the other Note Documents. SECTION 13. Continuing Security Interest; Transfer of Loans; Termination and Release. (a) This Agreement shall create a continuing security interest in the Collateral and shall (i) remain in full force and effect until the payment in full of the Secured Obligations (other than claims with respect to fees or expenses or any contingent obligation to the extent no unsatisfied claim has been asserted in writing), (ii) be binding upon the Grantor and its successors and assigns, and (iii) inure, together with the rights and remedies of the Secured Party hereunder, to the benefit of the Secured Party and its successors, transferees and assigns. Without limiting the generality of the foregoing clause (iii), but subject to the provisions of Article IX and Section 11.3 of the Note Purchase Agreement, any Noteholder may assign or otherwise transfer any Notes held by it to any other Person, and such other Person shall thereupon become vested with all the benefits in respect thereof granted to Noteholders herein or otherwise. (b) Upon the payment in full of all Secured Obligations (other than claims with respect to fees or expenses or any contingent obligation to the extent no unsatisfied claim has been asserted in writing), the security interest granted hereby shall terminate and all rights to the Collateral shall revert to the Grantor. Upon any such termination the Secured Party will, at Grantor's expense, execute and deliver to the Grantor such documents as the Grantor shall reasonably request to evidence such termination. SECTION 14. Secured Party as Agent. (a) The Secured Party has been appointed to act as the Collateral Agent hereunder by Noteholders. The Collateral Agent shall be obligated, and shall have the right hereunder, to make demands, to give notices, to exercise or refrain from exercising any rights, and to take or refrain from taking any action (including, without limitation, the release or substitution of Collateral), solely in accordance with this Agreement and the Note Purchase Agreement; provided that the Secured Party shall exercise, or refrain from exercising, any remedies provided for in Section 10 hereof in accordance with the instructions of Requisite Noteholders. (b) Collateral Agent may resign at any time by giving 30 days' prior written notice thereof to Noteholders and the Grantor. Upon any such notice of resignation by Collateral Agent, Requisite Noteholders shall have the right, upon five Business Days' notice to the Grantor, to appoint a successor Collateral Agent. If no such successor shall have been so appointed by Requisite Noteholders and shall have accepted such appointment within 30 days after the retiring Collateral Agent gives notice of its resignation, the retiring Collateral Agent may, on behalf of Noteholders, appoint a successor Collateral Agent. If Collateral Agent shall notify Noteholders and the Grantor that no Person has accepted such appointment as successor Collateral Agent, such resignation shall nonetheless become effective in accordance with Collateral Agent's notice and (i) the retiring Collateral Agent shall be discharged from its duties and obligations under the Note Documents, except that any Collateral held by Collateral Agent will continue to be held by it until a Person shall have accepted the appointment of successor Collateral Agent, and (ii) all payments, communications and determinations provided to be made by, to or through Collateral Agent shall instead be made by, to or through each Noteholder directly, until such time as Requisite Noteholders appoint a successor Collateral Agent in accordance with this Section 14(b). Upon the acceptance of any appointment as Collateral Agent by a successor Collateral Agent, that successor Collateral Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Secured Party under this Agreement, and the retiring Secured Party under this Agreement shall promptly (i) transfer to such successor Secured Party all sums, securities and other items of Collateral held hereunder, together with all records and other documents necessary or appropriate in connection with the performance of the duties of the successor Secured Party under this Agreement, and (ii) execute (if necessary) and deliver to such successor Secured Party such amendments to financing statements, and take such other actions, as may be necessary or appropriate in connection with the assignment to such successor Secured Party of the security interests created hereunder, whereupon such retiring Secured Party shall be discharged from its duties and obligations under this Agreement. After any retiring Collateral Agent's resignation hereunder as the Secured Party, the provisions of this Agreement shall inure to its benefit as to any actions taken or omitted to be taken by it under this Agreement while it was the Secured Party hereunder. SECTION 15. Amendments; Etc. No amendment, modification, termination or waiver of any provision of this Agreement, and no consent to any departure by the Grantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Secured Party and, in the case of any such amendment or modification, by the Grantor. Any such waiver or consent shall be effective only in the specific instance and for the specific purpose for which it was given. SECTION 16. Notices. All notices, demands and requests of any kind to be delivered to any party hereto in connection with this Agreement shall be (a) delivered personally; (b) sent by nationally-recognized overnight courier guarantying next Business Day delivery; (c) sent by first class, registered or certified mail, postage prepaid, return receipt requested; or (d) sent by telecopier, in each case to such party at its address provided in Section 11.1 of the Note Purchase Agreement. Any party hereto may from time to time by notice in writing served upon the other in accordance with this Section 16 specify a different mailing address or a different person to which all such notices, demands or requests thereafter are to be addressed. Any notice, demand or request so delivered shall constitute valid notice under this Agreement and shall be deemed to have been received (a) on the day of actual delivery in the case of personal delivery; (b) on the next Business Day after the date when sent in the case of delivery by nationally-recognized overnight courier; (c) on the fifth Business Day after the date of deposit in the U.S. mail in the case of mailing; or (d) upon receipt in the case of a telecopier transmission or the next Business Day if such day is not a Business Day. SECTION 17. Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay on the part of the Secured Party in the exercise of any power, right or privilege hereunder shall impair such power, right or privilege or be construed to be a waiver of any default or acquiescence therein, nor shall any single or partial exercise of any such power, right or privilege preclude any other or further exercise thereof or of any other power, right or privilege. All rights and remedies existing under this Agreement are cumulative to, and not exclusive of, any rights or remedies otherwise available. SECTION 18. Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under Applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any Applicable Law in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, and such invalid, void or otherwise unenforceable provisions shall be null and void. It is the intent of the parties, however, that any invalid, void or otherwise unenforceable provisions be automatically replaced by other provisions which are as similar as possible in terms to such invalid, void or otherwise unenforceable provisions but are valid and enforceable to the fullest extent permitted by Applicable Law. SECTION 19. Headings. Section and subsection headings in this Agreement are included herein for convenience of reference only and are not to affect the construction of, or to be taken into consideration in interpreting, this Agreement. SECTION 20. Governing Law; Rules of Construction. ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND VALIDITY OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE (WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK, EXCEPT TO THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, IN WHICH CASE THE LAWS OF SUCH JURISDICTION SHALL GOVERN WITH RESPECT TO THE PERFECTION OF THE SECURITY INTEREST IN, OR THE REMEDIES WITH RESPECT TO, SUCH PARTICULAR COLLATERAL. The rules of construction set forth in Section 1.2 of the Note Purchase Agreement shall be applicable to this Agreement mutatis mutandis. SECTION 21. Consent to Exclusively Jurisdiction and Service of Process. (a) THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE IN ANY ACTION BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT SHALL EXCLUSIVELY LIE IN ANY FEDERAL OR STATE COURT LOCATED IN THE COUNTY OF NEW YORK IN THE STATE OF NEW YORK. BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THEMSELVES AND IN RESPECT OF THEIR PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES HERETO IRREVOCABLY AGREE THAT VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION. (b) THE GRANTOR HEREBY AGREES THAT SERVICE UPON IT BY REGISTERED OR CERTIFIED MAIL (RETURN RECEIPT REQUESTED) SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE NOTEHOLDERS TO BRING PROCEEDINGS AGAINST THE GRANTOR IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 22. Waiver of Jury Trial. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM IN RESPECT TO THIS AGREEMENT, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE. EACH PARTY HERETO HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT ANY PARTY MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHTS TO TRIAL BY JURY. SECTION 23. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered (by facsimile or otherwise) to the other party, it being understood that all parties need not sign the same counterpart. Any counterpart or other signature to this Agreement that is delivered by facsimile shall be deemed for all purposes as constituting good and valid execution and delivery by such party of this Agreement. SECTION 24. Definitions. Each capitalized term utilized in this Agreement that is not defined in the Note Purchase Agreement or in this Agreement, but that is defined in the UCC shall have the meaning set forth in Articles 1, 8 or 9 of the UCC. SECTION 25. Suretyship Waivers by Grantor, etc. (a) The Grantor agrees that its obligations hereunder are irrevocable, absolute, independent and unconditional and shall not be affected by any circumstance which constitutes a legal or equitable discharge of a guarantor or surety other than payment in full of the Secured Obligations. In furtherance of the foregoing (but only pursuant to the terms of the Note Purchase Agreement) and without limiting the generality thereof, the Grantor agrees as follows: (i) the Secured Party or any Noteholder may from time to time, without notice or demand and without affecting the validity or enforceability of this Agreement or giving rise to any limitation, impairment or discharge of the Grantor's liability hereunder, (A) renew, extend, accelerate or otherwise change the time, place, manner or terms of payment of the Secured Obligations, (B) settle, compromise, release or discharge, or accept or refuse any offer of performance with respect to, or substitutions for, the Secured Obligations or any agreement relating thereto and/or subordinate the payment of the same to the payment of any other obligations, (C) release, exchange, compromise, subordinate or modify, with or without consideration, any other security for payment of the Secured Obligations, any guaranties of the Secured Obligations, or any other obligation of any Person with respect to the Secured Obligations, (D) enforce and apply any other security now or hereafter held by or for the benefit of the Secured Party or any Noteholder in respect of the Secured Obligations and direct the order or manner of sale thereof, or exercise any other right or remedy that the Secured Party or Noteholders or any of them, may have against any such security, as the Secured Party may reasonably determine consistent with the Note Purchase Agreement and any applicable security agreement, including foreclosure on any such security pursuant to one or more judicial or nonjudicial sales, whether or not every aspect of any such sale is commercially reasonable, and (E) exercise any other rights available to the Secured Party or Noteholders or any of them, under the Note Documents, at Law or in equity; and (ii) this Agreement and the obligations of the Grantor hereunder shall be valid and enforceable and shall not be subject to any limitation, impairment or discharge for any reason (other than payment in full of the Secured Obligations), including, without limitation, the occurrence of any of the following, whether or not the Grantor shall have had notice or knowledge of any of them: (A) any failure to assert or enforce or agreement not to assert or enforce, or the stay or enjoining, by order of court, by operation of Law or otherwise, of the exercise or enforcement of, any claim or demand or any right, power or remedy with respect to the Secured Obligations or any agreement relating thereto, or with respect to any guaranty of or other security for the payment of the Secured Obligations, (B) any waiver, amendment or modification of, or any consent to departure from, any of the terms or provisions of the Note Purchase Agreement, any of the other Note Documents, or any agreement or instrument executed pursuant thereto, or of any guaranty or other security for the Secured Obligations, (C) the Secured Obligations, or any agreement relating thereto, at any time being found to be illegal, invalid or unenforceable in any respect, (D) the application of payments received from any source to the payment of indebtedness other than the Secured Obligations, even though the Secured Party or Noteholders or any of them, might have elected to apply such payment to any part or all of the Secured Obligations, (E) any failure to perfect or continue perfection of a security interest in any other collateral which secures any of the Secured Obligations, (F) any defenses, set-offs or counterclaims which the Grantor may allege or assert against the Secured Party or any Noteholder in respect of the Secured Obligations, including, without limitation, failure of consideration, breach of warranty, payment, statute of frauds, statute of limitations, accord and satisfaction and usury, and (G) any other act or thing or omission, or delay to do any other act or thing, which may or might in any manner or to any extent vary the risk of the Grantor as an obligor in respect of the Secured Obligations. (b) The Grantor hereby waives, for the benefit of Noteholders and the Secured Party: (i) any right to require the Secured Party or Noteholders as a condition of payment or performance by the Grantor, to (A) proceed against the Grantor or any other Person, (B) proceed against or exhaust any other security held from the Grantor, any guarantor of the Secured Obligations or any other Person, (C) proceed against or have resort to any balance of any deposit account or credit on the books of the Secured Party or any Noteholder in favor of the Grantor or any other Person, or (D) pursue any other remedy in the power of the Secured Party or any Noteholder whatsoever; (ii) any defense arising by reason of the incapacity, lack of authority or any disability or other defense of the Grantor including, without limitation, any defense based on or arising out of the lack of validity or the unenforceability of the Secured Obligations or any agreement or instrument relating thereto or by reason of the cessation of the liability of the Grantor from any cause other than payment in full of the Secured Obligations; (iii) any defense based upon any Law which provides that the obligation of a surety must be neither larger in amount nor in other respects more burdensome than that of the principal; (iv) any defense based upon the Secured Party's or any Noteholder's errors or omissions in the administration of the Secured Obligations, except behavior which amounts to bad faith; (v) (A) any principles or provisions of Law, statutory or otherwise, which are or might be in conflict with the terms of this Agreement and any legal or equitable discharge of the Grantor's obligations hereunder, (B) the benefit of any statute of limitations affecting the Grantor's liability hereunder or the enforcement hereof, (C) any rights to set-offs, recoupments and counterclaims, and (D) promptness, diligence and any requirement that the Secured Party or any Noteholder protect, secure, perfect or insure any other security interest or Lien or any property subject thereto; (vi) notices, demands, presentments, protests, notices of protest, notices of dishonor and notices of any action or inaction, notices of default under the Note Purchase Agreement or any agreement or instrument related thereto, notices of any renewal, extension or modification of the Secured Obligations or any agreement related thereto, notices of any extension of credit to the Grantor and notices of any of the matters referred to in the preceding paragraph and any right to consent to any thereof; and (vii) to the fullest extent permitted by Law, any defenses or benefits that may be derived from or afforded by Law which limit the liability of or exonerate guarantors or sureties, or which may conflict with the terms of this Agreement. [Remainder of page intentionally left blank] IN WITNESS WHEREOF, the Grantor and the Secured Party have caused this Security Agreement to be duly executed and delivered by their respective officers thereunto duly authorized as of the date first written above. GRANTOR: -------- HUGHES COMMUNICATIONS, INC. By: /s/ ROBERT C. LEWIS ------------------------------------ Name: Robert C. Lewis Title: Senior Vice President and General Counsel SECURED PARTY: -------------- APOLLO INVESTMENT FUND IV, L.P., as Collateral Agent and Secured Party By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President EX-10 7 nyc1072410.txt EXHIBIT 10.5 - REGISTRATION RIGHTS AGREEMENT Exhibit 10.5 ================================================================================ REGISTRATION RIGHTS AGREEMENT AMONG HUGHES COMMUNICATIONS, INC.; APOLLO INVESTMENT FUND IV, L.P.; APOLLO OVERSEAS PARTNERS IV, L.P.; AIF IV/RRRR LLC ; AP/RM ACQUISITION LLC ; AND ST/RRRR LLC DATED AS OF JANUARY 1, 2006 ================================================================================ TABLE OF CONTENTS Page -i- 1. DEFINITIONS................................................................1 2. DEMAND REGISTRATION........................................................3 3. PIGGYBACK REGISTRATION.....................................................5 4. S-3 REGISTRATIONS..........................................................6 5. EXPENSES...................................................................6 6. PREPARATION AND FILING.....................................................7 7. INDEMNIFICATION............................................................9 8. UNDERWRITING AGREEMENT....................................................12 9. AGREEMENTS OF THE SELLING INVESTORS.......................................12 10. EXCHANGE ACT COMPLIANCE...................................................12 11. NO CONFLICTING REGISTRATION RIGHTS........................................12 12. ENFORCEMENT...............................................................12 13. MISCELLANEOUS.............................................................13 2 REGISTRATION RIGHTS AGREEMENT dated as of January 1, 2006 (this "Agreement"), among HUGHES COMMUNICATIONS, INC., a Delaware corporation (the "Company") and the parties signatory hereto (collectively, the "Apollo Signatories"). WHEREAS, the Company and certain of the Apollo Holders are parties to the Note Purchase Agreement dated as of the date hereof (as amended, modified and supplemented from time to time, the "Note Purchase Agreement"); and WHEREAS, in connection with the execution and delivery of the Note Purchase Agreement, the parties hereto desire to enter into this Agreement in order to grant registration rights to the Holders as set forth below. NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as set forth below. 1. Definitions. As used in this Agreement, the following terms shall have the following respective meanings: "Apollo Holder" means any Apollo Signatory or any affiliate thereof who is the beneficial owner of Common Stock as a result of the sale, assignment or other transfer of Common Stock originally issued by the Company to an Apollo Signatory or issuable or issued upon the conversion or exercise of any securities originally issued by the Company to an Apollo Signatory which are convertible or exercisable into Common Stock. "Business Day" or "business day" means any day other than (a) a Saturday or Sunday or (b) a day on which banks are authorized or required to be closed in New York, New York; provided, however, that any determination of a Business Day relating to a securities exchange or other securities market means a Business Day on which such exchange or market is open for trading. "Common Stock" means the common stock of the Company, par value $0.001 per share. "Company" shall have the meaning assigned to it in the introductory paragraph. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Holder" means any Apollo Holder or any other Person that is the beneficial owner of Common Stock as a result of the sale, assignment or other transfer of Common Stock originally issued by the Company to an Apollo Holder or issuable or issued upon the conversion or exercise of any securities originally issued by the Company to an Apollo Holder which are convertible or exercisable into Common Stock. "Nasdaq" means the National Association of Securities Dealers Automated Quotation System. "Other Shares" means at any time those shares of Common Stock which do not constitute Primary Shares or Registrable Shares. "Person" shall include all natural persons, corporations, business trusts, associations, companies, partnerships, joint ventures and other entities and governments and agencies and political subdivisions thereof. "Primary Shares" means at any time the authorized but unissued shares of Common Stock or shares of Common Stock held by the Company in its treasury. "Registrable Shares" means at any time, with respect to any Holder, the shares of Common Stock beneficially owned by, or issuable to, such Holder. As to any particular Registrable Shares, once issued, such Registrable Shares shall cease to be Registrable Shares when (a) a registration statement with respect to the sale by a Holder of such securities shall have become effective under the Securities Act and such securities shall have been disposed of in accordance with such registration statement, (b) such securities shall have been distributed to the public pursuant to Rule 144 (or any successor provision) under the Securities Act, (c) such securities shall have been otherwise transferred, new certificates for such securities not bearing a legend restricting further transfer shall have been delivered by the Company and subsequent disposition of such securities shall not require registration or qualification of such securities under the Securities Act or any state securities or "blue sky" law then in force, or (d) such securities shall have ceased to be outstanding. "SEC" means the Securities and Exchange Commission. "Securities Act" or "Act" means the Securities Act of 1933, as amended. "Selling Investor" means any Holder that sells or proposes to sell Registrable Shares pursuant to a registration statement hereunder. "Selling Investors' Counsel" means counsel selected by the holders of a majority of the Registrable Shares to be sold by any Holder pursuant to a particular registration statement. "Subsidiary" means any corporation, association or other business entity (a) at least 50% of the outstanding voting securities of which are at the time owned or controlled directly or indirectly by the Company; or (b) with respect to which the Company possesses, directly or indirectly, the power to direct or cause the direction of the affairs or management of such Person. 2. Demand Registration. 2.1 If the Company shall be requested in writing by an Apollo Holder, or by Holders who beneficially own at least 1,000,000 Registrable Shares (as appropriately adjusted for any stock split, combination, reorganization, recapitalization, reclassification, stock dividend, stock distribution or similar event), to effect a registration under the Securities Act of Registrable Shares in accordance with this Section 2, then the Company shall promptly give written notice of such proposed registration to each Holder and shall offer to include (subject to the terms of this Agreement) in such proposed registration any Registrable Shares requested to be included in such proposed registration by such holders who respond in writing to the Company's notice within 15 days after delivery of such notice (which response shall specify the number of Registrable Shares proposed to be included in such registration and the intended method of distribution, which may be pursuant to a shelf registration). Such written registration request shall specify the approximate number of Registrable Shares requested to be registered and the anticipated per share price range for such offering. The Company shall promptly use its best efforts to effect such registration on an appropriate form under the Securities Act of the Registrable Shares which the Company has been so requested to register; provided, however, that the Company shall not be obligated to effect any registration under the Securities Act except in accordance with the following provisions: (a) the Company shall not be obligated to file more than (i) three registration statements in total pursuant to this Section 2 plus (ii) one additional registration statement registering all Registrable Shares then owned by the Apollo Holders, subject to Section 2.3; (b) the Company shall not be obligated to file or cause to be declared effective any registration statement during any period in which (i) any other registration statement (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto) pursuant to which Primary Shares are to be or were sold has been filed and not withdrawn or has been declared effective within the prior 180 days, provided, that the Company shall use reasonable efforts to achieve a shorter period or to have such restrictions released in less than 180 days or (ii) the Company has determined in good faith that the filing of a registration statement would require the disclosure of material information that the Company has a bona fide business purpose for preserving as confidential, such filing to be delayed until the date which is 90 days after such request for registration pursuant to this Section 2; provided, that the Company may only so delay the filing or effectiveness of a registration statement pursuant to this Section 2.1(b)(ii) on one occasion during any twelve month period; and (c) with respect to the registration pursuant to this Section 2, the Company may include in such registration any Primary Shares or Other Shares; provided, however, that if the managing underwriter advises the Company in writing that the inclusion of all Registrable Shares, Primary Shares and Other Shares proposed to be included in such registration would adversely affect the successful marketing (including pricing) of all such securities, then the number of Registrable Shares, Primary Shares and Other Shares proposed to be included in such registration shall be included in the following order: (i) First, the Registrable Shares held by all Selling Investors, pro rata based upon the number of Registrable Shares owned by each such Selling Investor at the time of such registration; (ii) Second, the Primary Shares; and (iii) Third, the Other Shares. 2.2 The Holder requesting a registration pursuant to this Section may, in the notice delivered pursuant to Section 2.1, elect that such registration cover an underwritten offering. Upon such election, such Holder shall elect one or more nationally recognized firms of investment banks to act as the managing underwriters and shall select any additional investment banks to be used in connection with such offering, provided that such investment banks must be reasonably satisfactory to the Company. The Company shall, together with Selling Investors, if it proposes to sell Primary Shares in such offering, enter into a customary underwriting agreement with such underwriters. 2.3 A requested registration under this Section 2 may be rescinded by written notice to the Company by the Selling Investors holding a majority of the Registrable Shares to be included in such registration under the following circumstances: (i) If such registration statement is rescinded prior to the filing date, such rescinded registration shall not count as a registration statement initiated pursuant to this Section 2 for purposes of Section 2.1; (ii) If such registration statement is rescinded after the filing date but prior to its effective date, such rescinded registration shall not count as a registration statement initiated pursuant to this Section 2 for purposes of Section 2.1 if the Selling Investors (x) have reimbursed the Company for all out-of-pocket expenses incurred by the Company in connection with such rescinded registration or (y) (1) reasonably believed that the registration statement contained an untrue statement of material fact or omitted to state a material fact required to be stated therein or necessary to make the statements made therein not misleading, (2) notified the Company of such fact and requested that the Company correct such alleged misstatement or omission and (3) the Company has refused to correct such alleged misstatement or omission; and (iii) A registration shall not count as a registration statement initiated pursuant to this Section 2 for purposes of Section 2.1 unless it becomes effective and either (1) the Selling Investors are able to sell at least 80% of the Registrable Shares sought to be included in such registration statement or (2) such registration statement is kept effective for at least 180 days prior to such rescission notice. 3. Piggyback Registration. If at any time the Company proposes for any reason to register Primary Shares or Other Shares under the Securities Act (other than on Form S-4 or Form S-8 promulgated under the Securities Act or any successor forms thereto and other than with respect to the registration statement on Form S-1 originally filed on December 5, 2005, as it may be amended from time to time) including, without limitation, any registration pursuant to the exercise of the demand registration rights of any Person other than a Holder, on any form that would also permit the registration of Registrable Shares, the Company shall promptly give written notice to each Holder of its intention to so register the Primary Shares or Other Shares and, upon the written request, given within 15 days after delivery of any such notice by the Company, of any Holder to include in such registration Registrable Shares held by such Holder (which request shall specify the number of Registrable Shares proposed to be included in such registration), the Company shall use its best efforts to cause all such Registrable Shares to be included in such registration on the same terms and conditions as the securities otherwise being sold in such registration; provided, however, that if at any time after giving written notice of its intention to register any securities, and prior to the effective date of the registration statement filed in connection with such registration, the Company shall determine for any reason not to proceed with the proposed registration of the securities to be sold by it, the Company may, at its election, give written notice of such determination to each Holder of Registrable Shares and, thereupon, shall be relieved of its obligation to register any Registrable Shares in connection with such registration; and, provided further, however, that if the managing underwriter advises the Company that the inclusion of all Registrable Shares or Other Shares proposed to be included in such registration would interfere with the successful marketing (including pricing) of the Primary Shares proposed to be registered by the Company, then the number of Primary Shares, Registrable Shares and Other Shares proposed to be included in such registration shall be included in the following order: 3.1 First, the Primary Shares; 3.2 Second, the Registrable Shares held by all Selling Investors, pro rata based upon the number of Registrable Shares owned by each such Selling Investor at the time of such registration; and 3.3 Third, the Other Shares. In connection with any underwritten offering under this Section 3, the Company shall not be required to include Registrable Shares in such underwritten offering unless the Holders of such Registrable Shares accept the terms of the underwriting of such offering that have been agreed upon between the Company and the underwriters selected by the Company, including without limitation, the underwriting agreement and the fees and expenses in connection therewith. 4. S-3 Registrations. If (i) at any time following the six-month anniversary of the date hereof any Apollo Holder or Holders who beneficially own at least 1,000,000 Registrable Shares (as appropriately adjusted for any stock split, combination, reorganization, recapitalization, reclassification, stock dividend, stock distribution or similar event) request that the Company file a registration statement on Form S-3 or any successor thereto for a public offering of all or any portion of the Registrable Shares held by such Holder, and (ii) the Company is entitled to use Form S-3 or any successor thereto to register such shares, then the Company shall use its best efforts to register under the Securities Act on Form S-3 or any successor thereto, for public sale in accordance with the method of disposition specified in such notice, the number of shares of Registrable Shares specified in such notice provided that, if so requested by any of any of the Apollo Holders, at all times from and after the date hereof, the Company shall maintain a registration statement on Form S-3 covering Common Stock with a market value of not less than $125,000,000. Whenever the Company is required by this Section 4 to use its best efforts to effect the registration of Registrable Shares, each of the procedures and requirements of Section 2 (including but not limited to the requirement that the Company notify all holders of Registrable Shares from whom notice has not been received and provide them with the opportunity to participate in the offering) shall apply to such registration. Notwithstanding anything to the contrary contained herein, no request may be made under this Section 4 within six months after the effective date of a registration statement filed by the Company covering a firm commitment underwritten public offering in which the holders of Registrable Shares shall have been entitled to join pursuant to Section 2 or 3 in which there shall have been effectively registered all Registrable Shares as to which registration shall have been requested, provided, that the Company shall use reasonable efforts to achieve a shorter period or have such restrictions released in less than six months. There is no limitation on the number of registrations pursuant to this Section 4 that the Company is obligated to effect. 5. Expenses. The Company shall bear the expense of any registrations effected pursuant to Sections 2, 3 and 4 of this Agreement including, without limitation, all registration and filing fees (including all expenses incident to filing with the NASD), fees and expenses of complying with securities and blue sky laws, printing expenses, and fees and expenses of the Company's counsel and accountants, and the reasonable and documented fees and expenses of the Selling Investors' Counsel, but excluding any underwriters' or brokers' discounts or commissions, transfer taxes (to the extent that such taxes are required by law to be paid by the Selling Investors) and the fees of any counsel to any Selling Investor, other than the Selling Investors' Counsel (it being understood that the fees and expenses of any underwriter and such underwriter's counsel shall be the responsibility of such underwriter and the Selling Investors). 6. Preparation and Filing. If and whenever the Company is under an obligation pursuant to the provisions of this Agreement to use its best efforts to effect the registration of any Registrable Shares under the Securities Act, the Company shall, as expeditiously as practicable: 6.1 with respect to a registration under Sections 2, 3 and 4 of this Agreement, use its best efforts to cause a registration statement that registers such Registrable Shares to become and remain effective for a period of 180 days or until all of such Registrable Shares have been disposed of (if earlier), provided, however, that the Company may discontinue any registration of its securities that is being effected pursuant to Section 3 hereof at any time prior to the effective date of the registration statement relating thereto; 6.2 furnish, at least five business days before filing a registration statement that registers such Registrable Shares, a prospectus relating thereto or any amendments or supplements relating to such a registration statement or prospectus, to each holder of Registrable Shares, to any Selling Investors and to the Selling Investors' Counsel, copies of all such documents proposed to be filed with the SEC (it being understood that such five-business-day period need not apply to successive drafts of the same document proposed to be filed so long as such successive drafts are supplied to such counsel in advance of the proposed filing by a period of time that is customary and reasonable under the circumstances); 6.3 prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for at least the periods set forth in this Agreement or until all of such Registrable Shares have been disposed of (if earlier) and to comply with the provisions of the Securities Act with respect to the registration of the sale or other disposition of such Registrable Shares; 6.4 notify in writing the Selling Investors promptly (i) of the receipt by the Company of any notification with respect to any comments by the SEC with respect to such registration statement or prospectus or any amendment or supplement thereto or any request by the SEC for the amending or supplementing thereof or for additional information with respect thereto, (ii) of the receipt by the Company of any notification with respect to the issuance by the SEC of any stop order suspending the effectiveness of such registration statement or prospectus or any amendment or supplement thereto or the initiation or threatening of any proceeding for that purpose and (iii) of the receipt by the Company of any notification with respect to the suspension of the qualification of such Registrable Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purposes; 6.5 use its best efforts to register or qualify such Registrable Shares covered by such registration statement under such other securities or blue sky laws of such jurisdictions as any Selling Investor reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such Selling Investor to consummate the disposition in such jurisdictions of the Registrable Shares owned by such Selling Investor; provided, however, that the Company will not be required to qualify generally to do business, subject itself to general taxation or consent to general service of process in any jurisdiction where it would not otherwise be required so to do but for this Section 6.5; 6.6 furnish to each Selling Investor on a timely basis, such number of copies of a summary prospectus or other prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as such Selling Investor may reasonably request in order to facilitate the public sale or other disposition of such Registrable Shares; provided, however, that the Company shall have no such obligation to furnish copies of a final prospectus if the conditions of Rule 172(c) under the Securities Act are satisfied by the Company; and provided further, that if a final prospectus is not timely filed by the Company with the SEC in accordance with Rule 172(c) (without regard to any cure period provided by such rule) then, upon the written request of the Selling Investor, the Company shall furnish such number of copies of a final prospectus as such Selling Investor shall reasonably request; 6.7 use its best efforts to cause such Registrable Shares to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the seller or sellers thereof to consummate the disposition of such Registrable Shares; 6.8 notify on a timely basis each Selling Investor at any time when a prospectus relating to such Registrable Shares is required to be delivered under the Securities Act within the appropriate period mentioned in Section 6.1, of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, included an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing and, at the request of such seller, prepare and furnish to such seller a reasonable number of copies of a supplement to or an amendment of such prospectus as may be necessary so that, as thereafter delivered to the offerees of such shares, such prospectus shall not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing; 6.9 make available for inspection by any counsel to any Selling Investor and the Selling Investors' Counsel or any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such underwriter (collectively, the "Inspectors"), all pertinent financial and other records, pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company's officers, directors and employees to supply all information (together with the Records, the "Information") reasonably requested by any such Inspector in connection with such registration statement. Any of the Information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspectors unless (i) the disclosure of such Information is necessary to avoid or correct a misstatement or omission of a material fact in the registration statement, (ii) the release of such Information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) such Information has otherwise been made generally available to the public. The Selling Investor agrees that it will, upon learning that disclosure of such Information is sought in a court of competent jurisdiction, give notice to the Company and allow the Company, at the Company's expense, to undertake appropriate action to prevent disclosure of the Information deemed confidential; 6.10 use its best efforts to obtain from its independent certified public accountants "comfort" letters in customary form and at customary times and covering matters of the type customarily covered by comfort letters; 6.11 use its best efforts to obtain from its counsel an opinion or opinions in customary form; 6.12 provide a transfer agent and registrar (which may be the same entity and which may not be the Company) for such Registrable Shares; 6.13 issue to any underwriter to which any Selling Investor may sell shares in such offering certificates evidencing such Registrable Shares; provided, however, that the Company shall have the right to approve any such underwriter in connection with an underwritten offering pursuant to Section 2 hereof, with such approval not to be unreasonably withheld, and the Company shall have the right to select such underwriter in connection with an underwritten offering pursuant to Section 3 hereof; 6.14 list such Registrable Shares on any national securities exchange on which any shares of the Common Stock are listed or on Nasdaq if then included, or if the Common Stock is not then listed on a national securities exchange or on Nasdaq, use its best efforts to qualify such Registrable Shares for inclusion on such national securities exchange or Nasdaq as the holders of a majority of such Registrable Shares shall request; 6.15 otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and, if required under such rules and regulations, make available to its security holders, as soon as reasonably practicable, earnings statements (which need not be audited) covering a period of 12 months beginning within three months after the effective date of the registration statement, which earnings statements shall satisfy the provisions of Section 11(a) of the Securities Act; 6.16 use its best efforts to take all other steps necessary to effect the registration of such Registrable Shares contemplated hereby; and 6.17 use its best efforts to make available its senior executive and financial officers to participate at the reasonable request of any underwriter in marketing presentations to potential investors. 7. Indemnification. 7.1 In connection with any registration of any Registrable Shares under the Securities Act pursuant to this Agreement, the Company shall indemnify and hold harmless each Selling Investor, its officers and directors, each underwriter, broker or any other person acting on behalf of such seller and each other person, if any, who controls any of the foregoing persons within the meaning of the Securities Act against any losses, claims, damages or liabilities, joint or several, (or actions in respect thereof) to which any of the foregoing persons may become subject under the Securities Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the registration statement under which such Registrable Shares were registered under the Securities Act, any preliminary prospectus or final prospectus contained therein or otherwise filed with the SEC, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such seller, such officer or director, such underwriter, such broker or such other person acting on behalf of such seller and each such controlling person for any legal or other expenses reasonably incurred by any of them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in said registration statement, preliminary prospectus, final prospectus, amendment, supplement or document incident to registration or qualification of any Registrable Shares in reliance upon and in conformity with written information furnished to the Company through an instrument duly executed by such seller or underwriter specifically for use in the preparation thereof or (ii) offers or sales by such Selling Investor "by means of" (as defined in Securities Act Rule 159A) a "free writing prospectus" (as defined in Securities Act Rule 405) that was not authorized in writing by the Company; provided, further, that with respect to any prospectus, the foregoing indemnity shall not inure to the benefit of (a) any underwriter or, in the case of a registration statement filed with respect to an offering which is not an underwritten offering, any Selling Investor, from whom the person asserting any losses, claims, damages and liabilities and judgments purchased Registrable Shares or (b) any person controlling such underwriter or Selling Investor, if (i) a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was required by law to have been delivered by such underwriter or Selling Investor (as applicable), (ii) the prospectus had not been sent or given by or on behalf of such underwriter or Selling Investor (as applicable), (iii) the prospectus had not been sent or given by or on behalf of such underwriter or Selling Investor (as applicable) to such person with or prior to entry into the contract of sale of the Registrable Shares with such person, (iv) the prospectus (as so amended and supplemented) would have cured the defect giving rise to such loss, claim, damage, liability or judgment and (v) such failure to deliver the prospectus (as so amended and supplemented) was not the result of noncompliance by the Company with Section 6.6 hereof. 7.2 In connection with any registration of Registrable Shares under the Securities Act pursuant to this Agreement, each Selling Investor shall indemnify and hold harmless (in the same manner and to the same extent as set forth in the preceding paragraph of this Section) the Company, each director of the Company, each officer of the Company who shall sign such registration statement, each underwriter, broker or other person acting on behalf of the Company or such seller, each person who controls any of the foregoing persons within the meaning of the Securities Act and each other Selling Investor under such registration statement (i) with respect to any statement or omission from such registration statement, any preliminary prospectus or final prospectus contained therein or otherwise filed with the SEC, any amendment or supplement thereto or any document incident to registration or qualification of any Registrable Shares, if such statement or omission was made in reliance upon and in conformity with written information furnished to the Company or such underwriter through an instrument duly executed by such seller specifically for use in connection with the preparation of such registration statement, preliminary prospectus, final prospectus, amendment, supplement or document, (ii) arises out of or is based upon offers or sales by such Selling Investor "by means of" (as defined in Securities Act Rule 159A) a "free writing prospectus" (as defined in Securities Act Rule 405) that was not authorized in writing by the Company and (iii) in the event that a copy of the prospectus (as then amended or supplemented if the Company shall have furnished any amendments or supplements thereto) was required by law to have been delivered by such Selling Investor and (A) the prospectus had not been sent or given by or on behalf of such Selling Investor, (B) the prospectus had not been sent or given by or on behalf of such Selling Investor to such person with or prior to entry into the contract of sale of the Registrable Shares with such person, (C) the prospectus (as so amended and supplemented) would have cured the defect giving rise to a loss, claim, damage, liability or judgment and (D) such failure to deliver the prospectus (as so amended and supplemented) was not the result of noncompliance by the Company with Section 6.6 hereof; provided, however, that the obligation to indemnify will be several, not joint and several, among such Selling Investors, and the maximum amount of liability in respect of such indemnification shall be in proportion to and limited to, in the case of each Selling Investor, an amount equal to the net proceeds actually received by such seller from the sale of Registrable Shares effected pursuant to such registration. 7.3 The Indemnification required by this Section 7 will be made by periodic payments during the course of the investigation or defense, as and when bills are received or expenses incurred, subject to prompt refund in the event any such payments are determined not to have been due and owing hereunder. 7.4 Promptly after receipt by an indemnified party of notice of the commencement of any action involving a claim referred to in the preceding paragraphs of this Section 7, such indemnified party will, if a claim in respect thereof is made against an indemnifying party, give written notice to the latter of the commencement of such action (it being understood that no delay in delivering or failure to deliver such notice shall relieve the indemnifying persons from any liability or obligation hereunder unless (and then solely to the extent that) the indemnifying person is prejudiced by such delay and/or failure). In case any such action is brought against an indemnified party, the indemnifying party will be entitled to participate in and to assume the defense thereof, jointly with any other indemnifying party similarly notified to the extent that it may wish, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party shall not be responsible for any legal or other expenses subsequently incurred by the latter in connection with the defense thereof; provided, however, that if any indemnified party shall have reasonably concluded that there may be one or more legal or equitable defenses available to such indemnified party which are additional to or conflict with those available to the indemnifying party, or that such claim or litigation involves or could have an effect upon matters beyond the scope of the indemnity agreement provided in this Section 7, the indemnifying party shall not have the right to assume the defense of such action on behalf of such indemnified party and such indemnifying party shall reimburse such indemnified party and any person controlling such indemnified party for that portion of the fees and expenses of any counsel retained by the indemnified party which is reasonably related to the matters covered by the indemnity agreement provided in this Section 7. 7.5 The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling person of such indemnified party and will survive the transfer of securities. 7.6 If the indemnification provided for in this Section 7 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, claim, damage, liability or action referred to herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amounts paid or payable by such indemnified party as a result of such loss, claim, damage, liability or action in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection with the statements or omissions which resulted in such loss, claim, damage or liability as well as any other relevant equitable considerations. The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Selling Investors agree that it would not be just and equitable if contributions pursuant to this paragraph were determined by pro rata allocation or by any other method of allocation which did not take into account the equitable considerations referred to herein. The amount paid or payable to an indemnified party as a result of the losses, claims, damages, liabilities or expenses referred to above shall be deemed to include, subject to the limitations set forth in Sections 7.2 and 7.1, any legal or other expenses reasonably incurred in connection with investigating or defending the same. Notwithstanding the foregoing, in no event shall the amount contributed by a Selling Investor exceed the aggregate net offering proceeds received by such seller from the sale of its Registrable Shares. 8. Underwriting Agreement. Notwithstanding the provisions of Section 6 and 7, to the extent that the Company and the Selling Investors shall enter into an underwriting or similar agreement, which agreement contains provisions covering one or more issues addressed in such Sections 6 or 7, the provisions contained in Sections 6 and 7 which address such issue or issues shall be superseded with respect to such registration by such other underwriting or similar agreement. 9. Agreements of the Selling Investors. 9.1 The Selling Investors shall furnish to the Company such written information regarding such Selling Investors and the distribution proposed by such Selling Investors as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. 9.2 No Selling Investor shall, nor shall any Selling Investor permit any officer, director, underwriter, broker or any other person acting on behalf of such Selling Investor to, use any free writing prospectus (as defined in Rule 405 under the Securities Act) in connection with any registration statement covering Registrable Shares, without the prior written consent of the Company. 10. Exchange Act Compliance. The Company shall comply with all of the reporting requirements of the Exchange Act and with all other public information reporting requirements of the SEC which are conditions to the availability of Rule 144 for the sale of the Common Stock. The Company shall cooperate with each Holder supplying such information as may be necessary for such Holder to complete and file any information reporting forms presently or hereafter required by the SEC as a condition to the availability of Rule 144. 11. No Conflicting Registration Rights. The Company represents and warrants to each Apollo Holder that the registration rights granted hereby do not conflict with any other registration rights granted by the Company. The Company shall not, after the date hereof, grant any registration rights which conflict with the registration rights granted hereby, or agree to any registration rights that restrict the ability of each Holder to piggy-back on other registration statements (except pursuant to standard cut-back provisions). 12. Enforcement. 12.1 Remedies at Law or in Equity. Each Holder, on the one hand, or the Company on the other hand, may proceed to protect and enforce its rights by suit in equity or action at law, whether for the specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any term contained in this Agreement, or to enforce any other legal or equitable right of such Holder, on the one hand, or the Company on the other hand, or to take any one or more of such actions. In the event a Holder brings such an action against the Company or the Company brings an action against a Holder arising under this Agreement, the prevailing party in such dispute shall be entitled to recover from the losing party all fees, costs and expenses of enforcing any right of such prevailing party under or with respect to this Agreement, including without limitation such reasonable fees and expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and expenses of appeals. 12.2 Cumulative Remedies. None of the rights, powers or remedies conferred upon a Holder on the one hand, or the Company on the other hand, shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to every other right, power or remedy, now or hereafter available at law, in equity, by statute or otherwise. 12.3 No Implied Waiver. Except as expressly provided in this Agreement, no course of dealing between the Company and a Holder and no delay in exercising any such right, power or remedy conferred hereby now or hereafter existing at law in equity, by statute or otherwise, shall operate as a waiver of, or otherwise prejudice, any such right, power or remedy. 13. Miscellaneous. Waivers and Amendments. Upon the approval of the Company and the written consent of the holders of a majority of the Registrable Securities the obligations of the Company and the rights of each Holder under this Agreement may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely). Upon the effectuation of each such waiver, the Company shall promptly give written notice thereof to each Holder who have not previously consented thereto in writing. Neither this Agreement, nor any provision hereof, may be changed, waived, discharged or terminated orally or by course of dealing, but only by a statement in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, except to the extent provided in this Section 13.1. 13.1 Notices. All notices, requests, consents and other communications required or permitted hereunder shall be in writing and shall be hand delivered or mailed postage prepaid by registered or certified mail, (a) If to the Apollo Holders: Apollo Investment Fund IV, L.P. c/o Apollo Management, L.P. 9 West 57th Street, 43rd Floor New York, NY 10019 Attention: Andrew D. Africk Telephone No.: (212) 515-3200 Telecopy No: (212) 515-3264 with a copy (which shall not constitute notice) to: O'Melveny & Myers LLP Times Square Tower 7 Times Square New York, NY 10036 Attention: Brad J. Finkelstein, Esq. Telephone No.: (212) 326-2000 Telecopy No.: (212) 326-2061 or (b) If to a Holder, to such address as is provided by the Holder to the Company, or (c) If to the Company: Hughes Communications, Inc. 19 West 44th Street, Suite 507 New York, NY 10036 Attention: Robert C. Lewis, Esq. Telephone No.: 212-730-7524 Telecopy No.: 212-730-7523 with a copy (which shall not constitute notice) to: Skadden, Arps, Slate, Meagher & Flom LLP Four Times Square New York, NY 10036 Attention: Gregory A. Fernicola, Esq. Telephone No.: 212-735-3000 Telecopy No.: 212-735-2000; and or at such other address as the Company or a Holder each may specify by written notice to the other, and each such notice, request, consent and other communication shall for all purposes of the Agreement be treated as being effective or having been given (i) when delivered if delivered personally, (ii) when sent, if sent by telecopy on a business day (or, if not sent on a business day, on the next business day after the date sent by telecopy), (iii) on the next business day after dispatch, if sent by a nationally recognized overnight courier guaranteeing next business day delivery, or, (iv) if sent by mail, at the earlier of its receipt or 72 hours after the same has been deposited in a regularly maintained receptacle for the deposit of United States mail, addressed and postage prepaid as aforesaid. 13.2 Termination of Agreement. This Agreement shall remain in effect until the later of (i) the date upon which no Registrable Shares shall remain outstanding and (ii) the date upon which all Registrable Shares eligible to be sold pursuant to a registration statement shall have been sold; provided, however, that Sections 5 and 7 shall survive the termination of this Agreement. 13.3 Severability. Should any one or more of the provisions of this Agreement or of any agreement entered into pursuant to this Agreement be determined to be illegal or unenforceable, all other provisions of this Agreement and of each other agreement entered into pursuant to this Agreement shall be given effect separately from the provision or provisions determined to be illegal or unenforceable and shall not be affected thereby. 13.4 Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective parties hereto, the successors and assigns of each Apollo Holder and the Company, whether so expressed or not, and any Holder that is not an Apollo Holder (each such non-Apollo Holder is expressly deemed to be a third party beneficiary hereunder). This Agreement shall not run to the benefit of or be enforceable by any other Person. 13.5 Headings. The headings of the Sections and paragraphs of this Agreement have been inserted for convenience of reference only and do not constitute a part of this Agreement. 13.6 Choice of Law. It is the intention of the parties that the internal laws, and not the laws of conflicts, of New York should govern the enforceability and validity of this Agreement, the construction of its terms and the interpretation of the rights and duties of the parties. 13.7 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. 13.8 Entire Agreement. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and such Agreement supersedes and replaces all prior agreements, written or oral, among the parties hereto with respect to the subject matter hereof. * * * * * 2 IN WITNESS WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the day and year first above written. HUGHES COMMUNICATIONS, INC. By: /s/ ROBERT C. LEWIS ------------------------------------ Name: Robert C. Lewis Title: Senior Vice President and General Counsel APOLLO INVESTMENT FUND IV, L.P. By: APOLLO ADVISORS IV, L.P., its general partner By: Apollo Capital Management IV, INC., its general partner By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President APOLLO OVERSEAS PARTNERS IV, L.P. By: APOLLO ADVISORS IV, L.P., its general partner By: Apollo Capital Management IV, INC., its general partner By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President AIF IV/RRRR LLC By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President AP/RM ACQUISITION LLC By: APOLLO MANAGEMENT IV, L.P., its manager By: AIF IV MANAGEMENT, INC., its general partner By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President ST/RRRR LLC By: APOLLO MANAGEMENT IV, L.P., its manager By: AIF IV MANAGEMENT, INC., its general partner By: /s/ ANDREW AFRICK ------------------------------------ Name: Andrew Africk Title: Vice President EX-99 8 skypr010306.txt EXHIBIT 99.1 - PRESS RELEASE Exhibit 99.1 SkyTerra Communications, Inc. Contact: 19 West 44th Street, Suite 507 Robert Lewis New York, New York 10036 Senior Vice President and General Counsel 212-730-7540 info@skyterracom.com SkyTerra Communications Acquires Remaining Interest in Hughes Network Systems LLC from The DIRECTV Group New York, NY, January 3, 2006, SkyTerra Communications, Inc. (OTCBB: SKYT) announced today that its wholly owned subsidiary, Hughes Communications, Inc. (Hughes), completed the previously announced purchase of the remaining 50 percent of Hughes Network Systems, LLC (HNS) from The DIRECTV Group, Inc. (NYSE:DTV) for $100 million in cash. To finance the transaction, Hughes borrowed $100 million from Apollo Investment Fund IV, L.P. and Apollo Overseas Partners IV, L.P., (Apollo), stockholders of SkyTerra. Concurrently, with the closing, HNS paid DIRECTV $10 million to resolve certain post-closing adjustments related to the initial purchase by SkyTerra of its 50 percent interest in HNS. Prior to the transactions, SkyTerra completed its previously announced internal restructuring by transferring substantially all of its assets and liabilities other than its interest in the MSV Joint Venture, Terrestar Networks, Inc. and certain designated cash, to Hughes, which SkyTerra has announced it expects to distribute to its stockholders as part of a special dividend distribution during the first quarter of 2006. Concurrent with the special dividend, Hughes is expected to conduct a rights offering to its stockholders in order to repay the loan from Apollo. In connection with such a rights offering, Apollo has agreed to subscribe for the maximum amount of shares of common stock allocated to it, including the exercise of pro rata over-subscription rights. The exercise by Apollo of its rights would occur by converting the unpaid principal and interest under the Apollo loan into a number of shares of common stock based on the subscription price in the rights offering, which has not yet been determined. The unconverted principal and interest obligations would be repaid in cash immediately following the consummation of the rights offering. The special dividend and the expected rights offering are subject to a number of conditions including clearance from the Securities and Exchange Commission, final approval and the setting of a record date by SkyTerra's Board of Directors and the setting of a record date and subscription price for the rights offering by Board of Directors of Hughes. A registration statement relating to the common stock issuable in connection with the rights offering has been filed with the Securities and Exchange Commission but has not yet become effective. These securities may not be sold nor may offers to buy be accepted prior to the time the registration statement becomes effective. The prospectuses relating to the common stock issuable in connection with the rights offering may be obtained, when available, by contacting Robert C. Lewis, c/o Hughes Communications, Inc., 19 West 44th Street, Suite 507, New York, New York 10036. FORWARD-LOOKING AND CAUTIONARY STATEMENTS This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act, with respect plans and other future event relating to SkyTerra and its subsidiaries, including Hughes Communications, Inc.. Such statements generally include words such as could, can, anticipate, believe, expect, seek, pursue, proposed, potential and similar words and terms, in connection with any discussion of future results, including SkyTerra's plans to distribute the special dividend, or the completion of the potential rights offering and other transactions referred to in this press release. Forward-looking statements involve a number of assumptions, risks, and uncertainties, any of which may cause actual results to differ materially from the anticipated, estimated, or projected results referenced in the forward-looking statements. In particular, the forward-looking statements of SkyTerra are subject to the following risks and uncertainties: difficulties, delays, unexpected costs or the inability to consummate, the special dividend, the rights offering or the other transactions referred to in this press release; the impact of legislative and regulatory actions, including without limitation, actions by the Securities and Exchange Commission and the foreign regulatory authorities. We assume no obligation to update or supplement our forward-looking statements. -----END PRIVACY-ENHANCED MESSAGE-----