Contribution And Membership Interest Purchase Agreement

EXHIBIT 10.1


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CONTRIBUTION AND MEMBERSHIP INTEREST PURCHASE AGREEMENT


AMONG


THE DIRECTV GROUP, INC.,


HUGHES NETWORK SYSTEMS, INC.,


SKYTERRA COMMUNICATIONS, INC.


AND


HUGHES NETWORK SYSTEMS, LLC


DATED AS OF


DECEMBER 3, 2004


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TABLE OF CONTENTS


TAB


1. DEFINITIONS..............................................................................................1


2. THE TRANSACTIONS.........................................................................................1


2.1 Contribution of Assets..........................................................................1


2.2 Description of Contributed Assets...............................................................1


2.3 Excluded Assets.................................................................................4


2.4 Assumption of Liabilities; Excluded Liabilities.................................................5


2.5 Disposition of Other HNS Businesses.............................................................8


2.6 Consents; Assignment of Contracts and Rights; Transition Services; Financial Support
Arrangements....................................................................................8


2.7 Financing; Payment of Purchase Price; Purchase and Sale of Membership Interests................11


2.8 Closing; Closing Date..........................................................................12


2.9 Allocation of Purchase Price...................................................................12


2.10 Working Capital Adjustment; Minimum Cash Balance...............................................13


2.11 No Set-Off.....................................................................................14


3. ADDITIONAL UNDERTAKINGS AND COVENANTS...................................................................14


3.1 Consents and Approvals.........................................................................14


3.2 Operation of the Business; Cancellation of Certain Intercompany Obligations....................15


3.3 Maintenance of Insurance Policies..............................................................19


3.4 Public Announcements...........................................................................20


3.5 Investor's Access to Information; Confidentiality..............................................20


3.6 Preservation of Records and HNS's Access to Information.......................................21


3.7 Agreements Regarding Tax Matters...............................................................22


3.8 United Kingdom Value Added Tax.................................................................23


3.9 Closing Conditions.............................................................................24


3.10 Audit; Cooperation.............................................................................25


3.11 Agreements with Respect to Spaceway and the Boeing Contract....................................25


3.12 Pre-Closing Payment of Certain Indebtedness....................................................28


3.13 Communications Licenses........................................................................28


3.14 ChinaCast......................................................................................28


3.15 Negotiation with Others; Disposition of Securities.............................................29


3.16 No Solicitation................................................................................29


4. REPRESENTATIONS AND WARRANTIES OF HNS...................................................................30


4.1 Organization, Standing; Transferred Subsidiaries...............................................30


4.2 Authorization..................................................................................30


4.3 Binding Obligation.............................................................................31


4.4 Noncontravention...............................................................................31


4.5 Taxes..........................................................................................31


4.6 Financial Statements; Undisclosed Liabilities..................................................33


4.7 Absence of Certain Changes.....................................................................34


4.8 Real Property Matters..........................................................................34


4.9 Intellectual Property..........................................................................35


4.10 Sufficiency of and Title to Assets.............................................................36


4.11 Litigation; Compliance with Laws...............................................................36


4.12 Insurance......................................................................................37


4.13 Governmental Approvals.........................................................................37


4.14 Foreign Benefit Matters........................................................................37


4.15 U.S. Employee Benefit Matters..................................................................39


4.16 Contracts......................................................................................39


4.17 Environmental Matters..........................................................................41


4.18 Licenses and Permits...........................................................................42


4.19 Labor..........................................................................................42


4.20 Brokers........................................................................................43


4.21 Affiliate Transactions.........................................................................43


4.22 Investment Representations.....................................................................43


4.23 Newco..........................................................................................43


4.24 Earth Stations and Ground Facility Rights......................................................44


5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR..........................................................44


5.1 Organization, Standing, Qualification..........................................................45


5.2 Authorization..................................................................................45


5.3 Binding Obligation.............................................................................45


5.4 Noncontravention...............................................................................45


5.5 Litigation; Compliance with Laws...............................................................45


5.6 Financing......................................................................................46


5.7 Qualifications to Hold Communications Licenses.................................................46


5.8 Condition of Business; Independent Investigation...............................................46


5.9 SEC Documents; Undisclosed Liabilities.........................................................46


5.10 SkyTerra Stock.................................................................................47


5.11 Brokers........................................................................................48


5.12 Purchaser Representations......................................................................48


6. FOREIGN EMPLOYEE MATTERS................................................................................48


7. U.S. EMPLOYEE MATTERS...................................................................................48


8. CLOSING.................................................................................................48


8.1 Conditions Precedent to Obligations of Each Party..............................................48


8.2 Conditions Precedent to Obligations of the Investor............................................49


8.3 Conditions Precedent to Obligation of Parent and HNS...........................................50


8.4 Updated Disclosure Schedule....................................................................51


8.5 Deliveries by HNS..............................................................................51


8.6 Deliveries by the Investor.....................................................................53


8.7 Deliveries by Newco............................................................................53


9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES..................................................54


9.1 Survival of Representations; Exclusive Remedy..................................................54


9.2 Agreement of Parent to Indemnify...............................................................55


9.3 Agreement of the Investor to Indemnify.........................................................55


9.4 Limits of Indemnification......................................................................55


9.5 Special Indemnification by Parent..............................................................56


9.6 Special Indemnification by Newco...............................................................56


9.7 Conditions of Indemnification..................................................................56


9.8 Tax Controversies; Assistance and Cooperation..................................................58


9.9 Notice of Breaches of Representations and Warranties...........................................58


10. TERMINATION.............................................................................................59


10.1 Termination....................................................................................59


10.2 Effect of Termination..........................................................................60


11. MISCELLANEOUS...........................................................................................60


11.1 Additional Actions and Documents...............................................................60


11.2 Expenses.......................................................................................60


11.3 Bulk Sales; Transfer Taxes.....................................................................60


11.4 Assignment.....................................................................................61


11.5 Entire Agreement; Amendment....................................................................61


11.6 Waiver.........................................................................................62


11.7 Severability...................................................................................62


11.8 Governing Law..................................................................................62


11.9 Notices........................................................................................62


11.10 Headings.......................................................................................64


11.11 Interpretation; Absence of Presumption.........................................................64


11.12 Execution in Counterparts......................................................................64


11.13 Limitation on Benefits.........................................................................65


11.14 Binding Effect.................................................................................65


11.15 Jurisdiction...................................................................................65


11.16 Provisional Relief; Specific Performance.......................................................65


11.17 Waiver of Jury Trial...........................................................................65


CONTRIBUTION AND MEMBERSHIP INTEREST PURCHASE AGREEMENT


THIS CONTRIBUTION AND MEMBERSHIP INTEREST PURCHASE AGREEMENT (this "CONTRIBUTION AGREEMENT") is entered into as of December 3, 2004 by and among The DIRECTV Group, Inc., a Delaware corporation ("PARENT"), Hughes Network Systems, Inc., a Delaware corporation ("HNS"), SkyTerra Communications, Inc., a Delaware corporation (the "INVESTOR") and Hughes Network Systems, LLC, a newly formed Delaware limited liability company ("NEWCO").


WHEREAS, HNS, a wholly-owned subsidiary of Parent, among other things, operates the Business, and desires to contribute to Newco, and Newco desires to acquire and accept from HNS, certain assets of the Business, and to assume certain liabilities associated therewith, for and in consideration of the purchase price and on the terms and conditions set forth herein;


WHEREAS, in connection with the contribution of the assets of the Business by HNS to Newco, Newco will acquire at Closing (by assignment, license or other means) rights to certain Intellectual Property attributable to the Business from Parent that as of the Closing Date are owned by Parent, and Parent will obtain a license back to the Intellectual Property transferred to Newco, pursuant to an Intellectual Property Agreement between Newco and Parent to be entered into at Closing;


WHEREAS, the parties desire to obtain debt financing for Newco, a portion of the proceeds of which will be used by Newco to pay the Purchase Price to HNS on the Closing Date as more fully set forth herein;


WHEREAS, after obtaining such debt financing, HNS desires to sell to the Investor, and the Investor desires to purchase from HNS, 50% of the membership interests in Newco; and


WHEREAS, the parties desire to enter into certain additional agreements and arrangements described herein.


NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants and agreements set forth herein, the parties, intending to be legally bound, hereby agree as follows:


1. DEFINITIONS. For all purposes of this Contribution Agreement, certain capitalized terms not otherwise defined herein shall have the meanings set forth on EXHIBIT A.


2. THE TRANSACTIONS.


2.1 CONTRIBUTION OF ASSETS. On the terms and subject to the conditions of this Contribution Agreement, Parent hereby agrees to cause HNS to, and HNS hereby agrees to, contribute, assign, transfer, convey and deliver, or cause one or more of Parent's Affiliates to contribute, assign, transfer, convey and deliver, to Newco, and Newco hereby agrees to acquire, assume and accept from HNS and one or more of Parent's Affiliates, if applicable, the Contributed Assets (as defined in SECTION 2.2). The contribution of the Contributed Assets shall be effected at Closing, as more fully set forth herein.


2.2 DESCRIPTION OF CONTRIBUTED ASSETS. The "CONTRIBUTED ASSETS" shall consist of (except for the Excluded Assets (as defined in SECTION 2.3)) the following Assets:


(a) All of HNS's right, title, and interest in the Assets of HNS used, held for use or intended to be used by HNS primarily in the conduct of the Business together with all such other Assets acquired by HNS after the date hereof and used by HNS primarily in the conduct of the Business less any such Assets disposed of by HNS after the date hereof in compliance with this Contribution Agreement, including all of HNS's right, title and interest in the following Assets, in each case to the extent used, held for use or intended to be used by HNS primarily in the conduct of the Business:


(i) All cash and cash equivalents included in the calculation of the Closing Cash Balance;


(ii) All Owned Real Property, including all buildings, structures, easements, appurtenances, improvements (including construction in progress) and fixtures located thereon;


(iii) All Contracts under which HNS leases, subleases, licenses, uses or occupies or has the right to use, occupy or purchase, now or in the future any real or personal property (except as listed on Section 2.3(d) of the Disclosure Schedule);


(iv) Other than Intellectual Property, all personal property and interests therein, including machinery, equipment, furniture, office equipment, computers and related components, earth stations and other communications equipment, vehicles, spare and replacement parts, office furnishings, supplies and other tangible personal property;


(v) All inventory (including raw materials, component parts, works-in-progress, finished goods, returned goods and packaging materials);


(vi) All Contracts with third parties, including confidentiality agreements with parties interested in acquiring the Business which shall be assigned by Parent to HNS prior to Closing, space segment Contracts, customer and supplier Contracts, reseller and other distribution Contracts;


(vii) All Contracts between HNS and its Affiliates that are for the provision or receipt of commercial services, including all receivables or other amounts owed to HNS thereunder provided that such Contracts are identified on Section 2.2(a)(vii) of the Disclosure Schedule;


(viii) All Contracts between or exclusively among HNS, HNS Europe, HNS UK and the Transferred Subsidiaries, to the extent such Contracts are not cancelled or terminated pursuant to SECTION 3.2(C);


(ix) All accounts, accounts receivable and notes receivable from third parties which are not Affiliates of HNS, whether or not billed or accrued, together with any unpaid interest, penalties or fees accrued thereon or other amounts due with respect thereto, and any security or collateral for any of the foregoing;


(x) All expenses (other than in respect of Taxes described in SECTION 2.4(B)(I)) that have been prepaid by HNS, including lease and rental payments;


(xi) All rights, claims, credits, causes of action, recoveries, refunds or rights of set-off (whether known or unknown, matured or unmatured, accrued or contingent) against Persons (other than if such right, claim, credit, cause of action, recovery, refund or right of set-off arises from a Contract between HNS and its Affiliates which is not identified on Section 2.2(a)(vii) of the Disclosure Schedule), including unliquidated rights under manufacturers' and vendors' warranties;


(xii) Copies of all books, files, catalogs, Documents, sales and promotional materials, surveys, property records, papers, agreements, correspondence, databases and records relating to the Contributed Assets or the Assumed Liabilities (excluding those relating to Excluded Assets or Excluded Liabilities, which shall remain the sole property of HNS; provided, however, that to the extent information in documents relating to Excluded Assets or Excluded Liabilities is reasonably likely to have a material impact on the future operations of Newco notwithstanding such Excluded Assets and Excluded Liabilities being retained by HNS (or applicable Affiliate), Newco shall be entitled to review such documents upon reasonable prior notice to and in accordance with reasonable procedures specified by HNS);


(xiii) All performance and other bonds, security and other deposits, advance payments, prepaid credits (other than in respect of Taxes), prepaid expenses, advances and deferred charges that have been prepaid by HNS, including lease and rental payments;


(xiv) To the extent transferable, all Governmental Approvals (and pending applications therefor), including all Communications Licenses (and pending applications therefor);


(xv) All goodwill (excluding goodwill associated with any trademarks or service marks of HNS or any of its Affiliates (other than the Transferred Subsidiaries) that are not part of the Intellectual Property conveyed to Newco pursuant to the Intellectual Property Agreement) generated by or associated with the Business;


(xvi) The rights to Intellectual Property set forth in the Intellectual Property Agreement;


(xvii) All telephone, telex and telecopier numbers used in the Business;


(xviii) All of the Assets reflected on the Latest Balance Sheet, other than those Assets disposed of (A) after June 30, 2004 and prior to the date hereof in the Ordinary Course of Business and (B) after the date hereof, in compliance with this Contribution Agreement;


(xix) Contributed Spaceway Assets;


(xx) The HNS UK Assets; and


(xxi) All rights to insurance proceeds, and all rights and claims on the part of HNS and its Affiliates for recoupment, reimbursement or coverage under insurance policies covering either (A) the Contributed Assets that have been damaged or destroyed prior to Closing to the extent such Contributed Assets have not on or prior to Closing been repaired or replaced with Contributed Assets of substantially equal value and utility to the Business or (B) any Liability that is included within the Assumed Liabilities.


(b) Additionally, the Contributed Assets shall consist of all of HNS's and its Affiliates' right, title and interest in the capital stock, capital or other equity interests in the entities listed on Section 2.2(b) of the Disclosure Schedule (the "ACQUIRED COMPANIES").


(c) Notwithstanding anything to the contrary contained herein, to the extent any Asset used, held for use or intended to be used by HNS primarily in the conduct of the Business is owned by any Affiliate of HNS and such Asset would have been a Contributed Asset if it were owned by HNS (excluding Intellectual Property which shall be transferred or otherwise dealt with in the Intellectual Property Agreement), such Asset shall be deemed to be a Contributed Asset for all purposes of this Contribution Agreement, and each of Parent and HNS shall do, and shall cause its Affiliates to take, such actions as are necessary to contribute, assign, transfer, convey and deliver such Asset to Newco in accordance with the terms hereof, including the actions set forth in SECTIONS 2.6 (A), (B), (I) AND 11.1.


2.3 EXCLUDED ASSETS. The "EXCLUDED ASSETS," which shall not be included in the Contributed Assets, shall consist of the following Assets:


(a) Subject to SECTION 2.10 and except as set forth in SECTION 2.2(A)(I), all cash and cash equivalents (including the Purchase Price, the Membership Interest Purchase Price and the proceeds of the sale of the San Diego Premises) or similar type investments, bank accounts, certificates of deposit, Treasury bills and marketable securities held by HNS or any of its Affiliates (other than any such Assets held by the Transferred Subsidiaries at Closing, but including any such Assets transferred by the Transferred Subsidiaries to HNS or any of its Affiliates prior to Closing), including all cash and cash equivalents of HNS and its Affiliates used as collateral for Financial Support Arrangements and deposits with utilities, insurance companies and other Persons;


(b) All original books and records which otherwise would be included in the Contributed Assets pursuant to SECTION 2.2(A)(XII) to the extent that HNS or any of its Affiliates (excluding the Transferred Subsidiaries) shall be required to retain the same pursuant to any applicable Law (in which case copies of such books and records shall be provided to Newco reasonably promptly upon request), or that contain information primarily relating to any Excluded Asset, Excluded Liability or any Excluded Business (subject to Newco's right to review the same under SECTION 2.2(A)(XII)), or any employee of HNS or any of its Affiliates that is not a Transferred Employee (in which case copies of such books and records to the extent used primarily in the Business (and unrelated to Excluded Assets or Excluded Liabilities, but subject to Newco's right to review the same under SECTION 2.2(A)(XII)) shall be provided to Newco reasonably promptly upon request);


(c) All real property at 10450 Pacific Center Court, San Diego, California, including all buildings, structures, easements, appurtenances, improvements (including construction in progress) and fixtures located thereon (except to the extent such fixtures owned by HNS have been removed by HNS in compliance with the lease for such real property) (the "SAN DIEGO PREMISES")


(d) The Contracts under which HNS leases, subleases, licenses, uses or occupies or has the right to use or occupy real property listed on Section 2.3(d) of the Disclosure Schedule (the "EXCLUDED REAL PROPERTY LEASES");


(e) All refunds (including, without duplication, any refunds payable to HNS pursuant to SECTION 3.7(E))of (or rebates related to) Income Taxes of HNS and all prepaid Income Taxes of HNS for any Tax year or portion thereof ending on or before the Closing Date;


(f) All insurance policies maintained by Parent or HNS with respect to the Business or otherwise, and all proceeds, rights or claims under any such policies (other than as described in SECTION 2.2(A)(XXI) or SECTION 3.3(B));


(g) All capital stock or other equity interests in each of the Excluded Subsidiaries, HNS and all of its Affiliates (other than the Transferr ...