EXHIBIT 10.1
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CONTRIBUTION AND MEMBERSHIP INTEREST PURCHASE AGREEMENT
AMONG
THE DIRECTV GROUP, INC.,
▇▇▇▇▇▇ NETWORK SYSTEMS, INC.,
SKYTERRA COMMUNICATIONS, INC.
AND
▇▇▇▇▇▇ 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"), ▇▇▇▇▇▇ Network
Systems, Inc., a Delaware corporation ("HNS"), SkyTerra Communications, Inc., a
Delaware corporation (the "INVESTOR") and ▇▇▇▇▇▇ 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 ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, 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
Transferred Subsidiaries and the other entities listed on Section 2.2(b) of the
Disclosure Schedule);
(h) All intercompany receivables (including intercompany
promissory notes) (whether or not billed or accrued) or other amounts owed to
HNS by any of HNS's Affiliates (other than receivables or other amounts owed
arising out of Contracts between HNS and its Affiliates for the provision or
receipt of commercial products or services that are included in the Contributed
Assets and other than those described in SECTION 2.2(A)(VIII));
(i) All Assets used, held for use or intended to be used
(including Assets currently in construction or under development) by HNS
primarily in the conduct of the Excluded Businesses (including the Assets set
forth on Section 2.3(i) of the Disclosure Schedule) and all Assets of the
Excluded Subsidiaries;
(j) Other than the Intellectual Property that is being
transferred to Newco pursuant to the Intellectual Property Agreement, all of
the Intellectual Property of Parent, HNS or the Excluded Subsidiaries;
(k) All rights, claims, credits, causes of action or rights of
set-off related to the Transaction Documents;
(l) All rights, claims, credits, causes of action or rights of
set-off related to Excluded Liabilities;
(m) Excluded Spaceway Assets; and
(n) Other Assets of HNS or its Affiliates (other than the
Transferred Subsidiaries and the other entities listed on Section 2.2(b) of the
Disclosure Schedule if such entities would be considered Affiliates) which are
not used, held for use or intended to be used by HNS primarily in the conduct
of the Business or specifically identified as "CONTRIBUTED ASSETS" in SECTION
2.2.
2.4 ASSUMPTION OF LIABILITIES; EXCLUDED LIABILITIES.
(a) Subject to the terms and conditions of this Contribution
Agreement, effective at Closing, HNS shall transfer, or cause one of Parent's
Affiliates to transfer to Newco, and Newco shall assume and accept from HNS and
one or more of Parent's Affiliates, if applicable, the Assumed Liabilities. The
"ASSUMED LIABILITIES" shall mean all Liabilities (other than Excluded
Liabilities) of HNS of any kind, character or description, whether liquidated
or unliquidated, known or unknown, fixed or contingent, accrued or unaccrued,
absolute, determined, determinable or indeterminable, or otherwise, whether
presently in existence or arising hereafter, to the extent relating to or
arising out of the operation, affairs or conduct of the Business or the
Contributed Assets, including the following:
(i) All Liabilities that (A) are set forth on or reflected in
the Latest Balance Sheet or the notes thereto or are otherwise incurred after
June 30, 2004 and before the date hereof in the Ordinary Course of Business or
after the date hereof in accordance with this Contribution Agreement, but only
to the extent such Liabilities are not Excluded Liabilities, (B) are clearly
identified on any of the Disclosure Schedules delivered hereunder (as opposed
to identified within any Contract referenced therein), but only to the extent
such Liabilities are not Excluded Liabilities, or (C) are otherwise a Liability
that Newco expressly is assuming pursuant to this Contribution Agreement;
(ii) All Liabilities relating to or arising under Contributed
Assets, including Contracts (including transition services, procurement and
other Contracts which are listed on Section 2.4(a)(ii) of the Disclosure
Schedule but not any Contracts with any Affiliate of HNS which are not
identified on Section 2.2(a)(vii) of the Disclosure Schedule), whether or not
the Contracts have been completed or terminated prior to the Closing Date,
whether arising prior to, on or after the Closing Date, including Liabilities
arising from or relating to the performance or non-performance of Contracts by
HNS, any Transferred Subsidiary or any other Person;
(iii) All Liabilities under Equipment Lease Arrangements;
(iv) All accounts, accounts payable and notes payable to
third parties which are not Affiliates of HNS, whether or not billed or
accrued, together with any unpaid interest or fees accrued thereon or other
amounts due with respect thereto;
(v) All Liabilities in respect of employees of the Business
(except as set forth in SECTION 2.4(B)(VII)), and beneficiaries of employees of
the Business, including Liabilities under or relating to the Worker Adjustment
and Retraining Notification Act, as amended (the "WARN ACT"), or any similar
state or local Law, except to the extent that the same constitute Excluded
Liabilities or as otherwise provided in EXHIBIT I or J to be retained by HNS;
(vi) All Liabilities relating to errors or omissions or
allegations of errors or omissions or claims of design or other defects with
respect to any product sold or service provided by the Business prior to, on or
after the Closing Date;
(vii) All Liabilities relating to warranty obligations or
services with respect to any product sold or service provided by the Business
prior to, on or after the Closing Date;
(viii) All Legal Compliance Liabilities, to the extent
relating to or arising out of any action of Newco after the Closing Date;
provided, however, that Newco shall have no liability for a Release of a
Hazardous Substance that occurred on or prior to the Closing Date except to the
extent it has Knowledge of such Release and fails to mitigate its damages
arising therefrom or is negligent with respect to such Release;
(ix) All Liabilities relating to the Real Property (except
Legal Compliance Liabilities as set forth in the proviso to SECTION
2.4(A)(VIII)) included in the Contributed Assets, whether arising prior to, on
or after the Closing Date;
(x) All Liabilities for any Taxes arising from or with
respect to the Contributed Assets or the operations of the Business prior to,
on or after the Closing Date, other than Taxes as set forth in SECTION
2.4(B)(I);
(xi) All Liabilities (except to the extent they constitute
Legal Compliance Liabilities, which shall be governed by SECTION 2.4(A)(VIII))
relating to applicable Laws and any regulations, decisions or orders
promulgated thereunder arising prior to, on or after the Closing Date;
(xii) All Liabilities arising from or relating to Proceedings
listed on Section 2.4(a)(xii) of the Disclosure Schedule;
(xiii) All Liabilities under Contracts between HNS and its
Affiliates that are for the provision or receipt of commercial products or
services, including payables and other amounts owed thereunder provided that
such Contracts are identified on Section 2.2(a)(vii) of the Disclosure
Schedule;
(xiv) The HNS UK Liabilities;
(xv) All Liabilities incurred between the date hereof and the
Closing Date by HNS at the written request or with the written consent of the
Investor; and
(xvi) All Liabilities created or incurred on or after Closing
in connection with the operation of the Business after Closing, including
Liabilities relating to the ownership by Newco or any of its successors or
assigns of the Contributed Assets, or relating to the Transferred Employees, or
the conduct of the Business or any other business, in each case, from and after
the Closing Date, including any and all Proceedings in respect thereof.
(b) Notwithstanding any other provision set forth herein,
Newco shall not assume or accept and shall not be liable or responsible for,
and HNS shall retain and be responsible for, any Liability of any kind,
character or description, whether liquidated or unliquidated, known or unknown,
identified in any section of the Disclosure Schedule or not so identified,
fixed or contingent, accrued or unaccrued, existing in HNS, HNS Europe, HNS UK
or any Transferred Subsidiary, absolute, determined, determinable or
indeterminable, or otherwise, whether presently in existence or arising
hereafter from, relating to, in connection with or attributable to the
following (collectively, the "EXCLUDED LIABILITIES"):
(i) All Liabilities for Taxes of HNS, HNS Europe, HNS UK or
the Transferred Subsidiaries, or relating to the Business or the Contributed
Assets, for (A) any Tax period that ends on or prior to the Closing Date and
(B) the portion of any Straddle Period that ends on the Closing Date, in each
case, except to the extent such Taxes are reflected as a liability that is
taken into account in the calculation of the Final Working Capital Amount under
SECTION 2.10;
(ii) All Liabilities of the Excluded Businesses and Excluded
Assets (including the Excluded Real Property Leases);
(iii) All Legal Compliance Liabilities (including Legal
Compliance Liabilities relating to or arising under Contracts included in the
Contributed Assets) other than those arising under Environmental, Safety and
Health Laws, to the extent relating to or arising out of any action or inaction
of Parent, HNS, the Transferred Subsidiaries and their respective Affiliates on
or prior to the Closing Date;
(iv) All Legal Compliance Liabilities arising under
Environmental, Safety and Health Laws on or prior to the Closing Date (but
excluding any new or increased Liabilities to the extent resulting from or
arising out of any action of Newco or any Person other than Parent, HNS or
their respective Affiliates after Closing or failure of such parties to take
action with respect to conditions of which they have Knowledge), provided,
however, that Newco shall have no liability for a Release of a Hazardous
Substance that occurred prior to the Closing Date except to the extent it has
Knowledge of such Release and fails to mitigate its damages arising therefrom
or is negligent with respect to such Release;
(v) Other than as contemplated by SECTION 11.2, all
Liabilities, whether presently in existence or arising after the date of this
Contribution Agreement, relating to fees, commissions or expenses owed to any
broker, finder, investment banker, accountant, attorney or other intermediary
or advisor employed by HNS or its Affiliates in connection with the
Contemplated Transactions;
(vi) All intercompany payables (including intercompany
promissory notes) (whether or not billed or accrued) or other amounts owed by
HNS to any of its Affiliates (other than payables or other amounts owed arising
out of Contracts between HNS and its Affiliates for the provision or receipt of
commercial products or services or between or exclusively among HNS and the
Transferred Subsidiaries that are included in the Assumed Liabilities);
(vii) All Liabilities (including Taxes and penalties) under,
related to or arising out of (including those imposed by statute) Employee
Benefit Plans or the UK Plan, except to the extent otherwise provided in
EXHIBIT J to be assumed by Newco;
(viii) All Liabilities of HNS and Parent under the
Transaction Documents;
(ix) All Liabilities arising out of Proceedings against HNS
and its Affiliates involving the Business initiated prior to the Closing Date
and not listed on Section 2.4(a)(xii) of the Disclosure Schedule as being
assumed by Newco; and
(x) All Liabilities relating to Indebtedness.
2.5 DISPOSITION OF OTHER HNS BUSINESSES.
The parties hereto acknowledge that (i) the Business does not
include the Excluded Businesses and therefore, the Business does not represent
the entire business and operations of HNS as it previously has been conducted,
(ii) the Financial Statements only reflect the operations of the VSAT Business
and do not reflect the results of operations of the Excluded Businesses, and
(iii) HNS and its Subsidiaries have sold or transferred, certain of their
Assets which do not constitute part of the Business, including the Excluded
Businesses.
2.6 CONSENTS; ASSIGNMENT OF CONTRACTS AND RIGHTS; TRANSITION SERVICES;
FINANCIAL SUPPORT ARRANGEMENTS.
(a) HNS will use commercially reasonable efforts to obtain, and
will cause its Affiliates to use commercially reasonable efforts to obtain,
prior to Closing all Consents under any Contracts or other agreements that
constitute Business Assets as may be required in connection with the
Contemplated Transactions so as to preserve all rights of and benefits to HNS
and its Affiliates thereunder. The Investor and Newco shall provide HNS with
such reasonable assistance and information as is reasonably requested by HNS to
obtain such Consents. All costs and expenses incurred in obtaining the Consents
shall be borne by the party incurring the costs and expenses.
(b) Notwithstanding anything herein to the contrary, this
Contribution Agreement shall not constitute an agreement to assign or otherwise
contribute, convey or transfer any Contributed Asset, or any claim, right or
benefit arising thereunder or resulting therefrom, or to enter into any other
agreement or arrangement with respect thereto, if an attempted assignment,
contribution, conveyance or transfer thereof, or entering into any such
agreement or arrangement, without the Consent of a third party, would
constitute a breach of, or other contravention under, any Contract to which HNS
is a party, be ineffective with respect to any party thereto or violate
applicable Law (a "TRANSFER RESTRICTED ASSET"). In the event that any Contract
or Governmental Approval requiring the Consent of one or more of the other
parties thereto to transfer such Contract or Governmental Approval is not
obtained prior to Closing, Newco and HNS shall use, and HNS shall cause its
Affiliates to use, commercially reasonable efforts from and after Closing to
obtain the Consent of the other parties to any such Contract or Governmental
Approval; provided, that nothing herein shall require the parties hereto to
obtain the Consent of the other parties to any commercial "off-the-shelf"
software licenses with an original acquisition cost to HNS of less than $50,000
and nothing herein shall require the parties hereto to pay any money or
otherwise give value to any Person from whom Consent is requested to obtain
such Consent. Upon receipt of each such Consent in form and substance
reasonably acceptable to Newco, the corresponding Transfer Restricted Asset
shall automatically, without further action necessary on the part of Newco or
HNS, become a Contributed Asset. Newco and the Investor shall cooperate
reasonably with HNS in obtaining such Consents; provided, that neither Newco
nor the Investor shall be required to, as a condition to HNS's obtaining any
Consent, (i) agree to any material changes in any Contract or Contributed
Asset, or the imposition of any material condition to the transfer to Newco of
any Contract or other Contributed Assets, or (ii) dispose of or make any
material changes to the Business. If such Consent is not obtained with respect
to any such Contract or Governmental Approval for which HNS is required by this
Contribution Agreement to seek Consent, Newco and HNS shall effect an
alternative arrangement, to the extent permitted by Law (a "PASS THROUGH
ARRANGEMENT"), in the form of a license, sublease, operating agreement or other
arrangement which results in Newco's receiving all the benefits and bearing
(and HNS being reimbursed or made whole for) all third party costs and
obligations with respect to each Transfer Restricted Asset; provided, that to
the extent HNS shall be permitted to pass through any benefit in connection
with a Governmental Approval for which Consent to transfer has not been
obtained, HNS shall not be required to pass through such benefit beyond six
months after Closing if such Governmental Approval is not material to the
Business. Upon Newco's written request from time to time after Closing, HNS
will contribute, convey and transfer to Newco, and Newco will acquire, assume
and accept from HNS those Transfer Restricted Assets then subject to a Pass
Through Arrangement as specified in Newco's written request, and upon such
contribution, conveyance and transfer, any remaining obligation of HNS, Parent
or their Affiliates to effect a Pass Through Arrangement with respect to the
conveyed items shall cease and HNS, Parent and their Affiliates shall have no
Liability with respect to any failure to obtain Consent for such contribution,
conveyance and transfer.
(c) The parties hereto acknowledge and agree that from and after
Closing (i) Newco will need the transition services from HNS and Parent
described on EXHIBIT B and (ii) Parent and HNS will need the transition
services from Newco described on EXHIBIT B. The party providing the transition
services shall be reimbursed for its costs of providing such services
(including a reasonable allocation of overhead) plus all reasonable
out-of-pocket expenses incurred by such party in connection with the provision
of such transition services, which costs and expenses shall be paid by the
party receiving such services. The parties hereto agree to enter into a
transition services agreement in the form attached hereto as EXHIBIT B to
provide for the provision of the transition services described on EXHIBIT B in
accordance with this SECTION 2.6(C) and EXHIBIT B (the "TRANSITION SERVICES
AGREEMENT"). The parties agree to negotiate in good faith to develop a
reasonably detailed statement of services to be attached to the Transition
Services Agreement as Schedule A consistent with the outline of services
described on EXHIBIT B. In the event that the Transition Services Agreement has
not been executed by Closing, (i) the parties agree to continue to negotiate in
good faith and finalize such Schedule A to the Transition Services Agreement as
soon as practicable after Closing, and (ii) Parent, Newco and HNS will continue
to provide the transition services described on EXHIBIT B that are currently
provided, in each case, in a manner and quality that are substantially
consistent with past practice in performing such services and the party
receiving such services will be obligated to reimburse the party performing the
services consistent with the second sentence of this SECTION 2.6(C); provided
that the obligation to provide services pursuant to this clause (ii) shall
terminate on the earlier of the time that the Transition Services Agreement has
been entered into and one hundred eighty (180) days after Closing.
(d) The parties hereto agree to negotiate in good faith the terms
of and enter into an agreement to provide for the provision of services in
accordance with the terms set forth on EXHIBIT C (the "DIRECWAY AGREEMENT"). In
the event that the DirecWay Agreement has not been executed by Closing, (i) the
parties agree to continue to negotiate in good faith such DirecWay Agreement
and to execute the same as soon as practicable after Closing, and (ii) Parent
will provide the services contemplated by EXHIBIT C which Parent is providing
on the date hereof in a manner and quality that are substantially consistent
with past practice in performing such services for HNS, and Newco will be
obligated to pay Parent for such services consistent with past practice;
provided that the obligation of Parent to provide services pursuant to this
clause (ii) shall terminate on the earlier of the time that the DirecWay
Agreement has been entered into and 180 days after Closing.
(e) Parent and HNS shall deliver an updated schedule of the
Financial Support Arrangements outstanding as of Closing. Newco shall use
commercially reasonable efforts to cause the Financial Support Arrangements to
be terminated by the date that is 90 days after the Closing Date. In
furtherance of the foregoing, the parties hereto agree to use commercially
reasonable efforts to cause Newco to provide substitute Financial Support
Arrangements, reasonably acceptable to the Persons for whose benefit the
Financial Support Arrangements were made, on or prior to the 90th day following
the Closing Date, to replace guarantees, letters of support or similar
instruments made by HNS for the benefit of the Transferred Subsidiaries not
requiring any cash or other collateral and to provide financial information
concerning Newco reasonably requested by those Persons for whose benefit the
Financial Support Arrangements were made. The obligation to use commercially
reasonable efforts under this SECTION 2.6(E) shall not require Newco (i) to
make any payment to any Person or (ii) to provide or deliver to any Person any
collateral (including cash, marketable securities or similar instruments), in
each case in support of, or as a condition to, the replacement termination or
release of any Financial Support Arrangements maintained by Parent, HNS or its
Affiliates. All collateral which is not included in the Contributed Assets that
is supporting or securing in whole or in part any Financial Support
Arrangements shall be delivered to Parent promptly upon the release or
termination of such Financial Support Arrangements.
(f) If at any time after the Closing Date, (i) any amounts are
drawn on or paid under any Financial Support Arrangement (excluding amounts
paid on or prior to the Closing Date or any amounts which would be an Excluded
Liability) pursuant to which Parent, HNS or any of its Affiliates are obligated
to reimburse the Person making such payment or collateralized by Assets of
Parent, HNS or any of its Affiliates, or (ii) Parent, HNS or any of its
Affiliates pay any amounts under, or any fees, costs or expenses relating to,
any Financial Support Arrangement (excluding amounts paid on or prior to the
Closing Date or any amounts which would be an Excluded Liability), Newco shall
reimburse Parent or HNS for the full amount promptly after receipt from Parent
or HNS of notice thereof accompanied by written evidence of the underlying
obligation and amounts drawn or paid.
(g) In no event shall Parent, HNS or its Affiliates have any
obligation to extend or renew or post any additional collateral for any
Financial Support Arrangements after the Closing Date, or to keep any Financial
Support Arrangements or collateral supporting such arrangements in place after
the expiration of such Financial Support Arrangement. In the event that Newco
fails to cause such Financial Support Arrangements to be terminated, Newco
shall continue to use commercially reasonable efforts to cause such Financial
Support Arrangements to be terminated in a manner reasonably acceptable to
Parent as soon as possible after Closing.
(h) Promptly following execution of this Contribution Agreement,
HNS and the Investor shall, and HNS shall cause its Affiliates to, negotiate in
good faith to agree upon the terms of any further transfer documents and
agreements as may be required to consummate the Contemplated Transactions. In
the event that at any time after Closing, (i) any of Parent, HNS or Newco
becomes aware that any Contributed Asset was not transferred to Newco at
Closing, such party shall promptly notify the other parties to that effect and
shall cooperate with the other parties to cause such Contributed Asset to be
transferred to Newco, or (ii) any of Parent, HNS or Newco becomes aware that
any Assumed Liability was not transferred to and assumed by Newco at Closing,
such party shall promptly notify the other parties to that effect and shall
cooperate with the other parties to cause Newco to assume such Assumed
Liability.
(i) If the FCC consent to the Contemplated Transactions does not
become a Final Order on or prior to the Closing Date and the FCC subsequently
rescinds its consent and requires the parties to unwind the Contemplated
Transactions at Closing by an Order whose effectiveness has not been stayed,
the parties shall, to the extent permitted by Law, reconstitute the
transactions by effectuating a mutually acceptable alternative arrangement,
which allows Newco to operate the Business, but allows HNS to retain the
requisite control over the operation of the facilities authorized under any
Governmental Approvals that constitute Contributed Assets.
2.7 FINANCING; PAYMENT OF PURCHASE PRICE; PURCHASE AND SALE OF
MEMBERSHIP INTERESTS.
(a) The parties acknowledge that as of the date hereof, HNS has
executed a Limited Liability Company Agreement of Newco in the form attached
hereto as EXHIBIT D (the "ORIGINAL LLC AGREEMENT") evidencing the 100%
membership interest in Newco held by HNS.
(b) HNS and the Investor shall use their commercially reasonable
efforts to secure, as soon as possible following the date of this Contribution
Agreement, debt financing for Newco of at least Three Hundred Seventy
Five-Million Dollars ($375,000,000) with principal terms that are not
materially less favorable, taken as a whole, to Newco than the terms outlined
in the commitment letters attached hereto as EXHIBIT E and otherwise on such
terms and conditions as are customary for debt financings of such type (the
"FINANCING").
(c) At Closing, the Investor shall purchase from HNS, and HNS
shall sell to the Investor, free and clear of all Encumbrances (except for any
restrictions imposed by applicable securities Laws), a 50% membership interest
in Newco (the "INVESTOR INTEREST") in consideration of (the "MEMBERSHIP
INTEREST PURCHASE PRICE") (x) a payment in cash of Fifty Million Dollars
($50,000,000) and (y) 300,000 shares of SkyTerra Stock. The number of shares of
SkyTerra Stock to be issued to HNS pursuant to SECTION 2.7(C)(Y) shall be
adjusted proportionately to reflect any stock splits, combinations, reverse
splits, recapitalizations or the like consummated after the date hereof and on
or prior to the Closing Date. At Closing, (i) the cash portion of the
Membership Interest Purchase Price shall be delivered by the Investor to HNS by
wire transfer of immediately available funds to an account or accounts which
shall be designated by HNS at least two (2) business days prior to the Closing
Date and (ii) the shares of SkyTerra Stock shall be issued to HNS, free and
clear of all Encumbrances (except for any restrictions imposed by applicable
securities Laws).
(d) At Closing, immediately after the purchase and sale of the
Investor Interest, HNS and the Investor each shall deliver to the other an
executed counterpart copy of the Amended and Restated Limited Liability Company
Agreement of Newco (the "RESTATED LLC AGREEMENT") in substantially the form
attached hereto as EXHIBIT F evidencing the 50% membership interest held by HNS
and the 50% membership interest held by the Investor.
(e) At Closing, for and in consideration of the conveyances
described herein, Newco agrees to pay to HNS (using the proceeds of the
Financing), and HNS agrees to accept from Newco, the amount of Two Hundred One
Million Dollars ($201,000,000), (i) plus or minus, as applicable, the Severance
Cap Adjustment, if any, (ii) plus the Prepaid Spaceway Amounts, if any, and
(iii) plus or minus, as applicable, the amount, if any, as determined under
SECTION 2.10 (the "PURCHASE PRICE"). At Closing, the Purchase Price shall be
delivered by Newco to HNS by wire transfer of immediately available funds to an
account or accounts which shall be designated by HNS at least two (2) business
days prior to the Closing Date.
(f) Any and all payments under this Contribution Agreement,
including the payment of the Purchase Price and the cash portion of the
Membership Interest Purchase Price, shall be paid in United States Dollars.
(g) The parties (i) acknowledge that, for tax structuring
reasons, to assist in the Financing and for other reasons, Newco will need to
establish Subsidiaries to acquire and hold certain of the Business Assets and
Transferred Subsidiaries and (ii) shall cooperate to determine and implement
the corporate structure of Newco and such Subsidiaries.
2.8 CLOSING; CLOSING DATE.
(a) The closing of the Contemplated Transactions ("CLOSING" and
the date thereof being sometimes hereinafter referred to as the "CLOSING DATE")
shall take place as soon as reasonably practicable (and in any event no later
than three (3) business days) after the satisfaction or waiver of the
conditions precedent set forth in SECTION 8.1 through SECTION 8.3 (other than
conditions which, by their nature, are to be satisfied on the Closing Date).
Closing shall be held at the offices of Parent's counsel in Washington, D.C.,
or at such other location as the parties may mutually agree upon.
(b) At Closing, the following transactions shall be deemed to
occur in the following order:
(1) The conveyances contemplated by SECTION 2.1 and
SECTION 2.4 hereof;
(2) The consummation of the Financing (including the
funding of the Financing);
(3) The purchase and sale of the Investor Interest
pursuant to SECTION 2.7(C); and
(4) The payment of the Purchase Price to HNS.
2.9 ALLOCATION OF PURCHASE PRICE.
(a) As of the Closing Date, and pursuant to Revenue Ruling 99-5,
the following shall be deemed to occur: the Investor shall purchase a
percentage (the "PERCENTAGE") of the Business Assets equal to the quotient of
the sum of (x) $50,000,000 plus (y) the value of the SkyTerra Stock
Consideration on the Closing Date (and, if applicable, the amount of the
reduction in the Severance Cap by the SkyTerra Stock Shortfall Amount), divided
by the value of Newco's assets on the Closing Date, for an amount equal to (x)
$50,000,000 plus (y) the SkyTerra Stock Consideration (and, if applicable, the
amount of the reduction in the Severance Cap by the SkyTerra Stock Shortfall
Amount), the Investor shall contribute its purchased portion of the Business
Assets, and HNS shall contribute to Newco the Percentage of the Business Assets
and shall sell the remainder of the Business Assets (subject to Liabilities) to
Newco, which will constitute a newly formed partnership for Federal income tax
purposes, as described in Section 721 of the Code, and Treas. Reg. ss. 1.707-3.
Each party hereto agrees to make all Tax filings consistent with such
treatment.
(b) The purchase price of the Business Assets (and those assumed
liabilities treated as purchase price for Tax purposes) shall be allocated to
the portion of the Business Assets deemed purchased by Newco as set forth in
this SECTION 2.9.
(c) The parties agree to allocate the Purchase Price (and all
other capitalized costs) under the principles of Section 1060 of the Code, and
shall cooperate in making such allocation and executing such forms as are
reasonably necessary in connection therewith.
(d) Except as otherwise agreed by the Investor and Parent, the
parties agree to work together in good faith prior to Closing to structure the
ownership of any Assets acquired from HNS UK in a manner that is Tax efficient
to Newco and its members.
2.10 WORKING CAPITAL ADJUSTMENT; MINIMUM CASH BALANCE.
(a) Within five (5) business days prior to the Closing Date, HNS
shall deliver to the Investor a reasonable, good faith written estimate of (i)
the Working Capital of the VSAT Business as calculated in accordance with
EXHIBIT G-1(the "ESTIMATED WORKING CAPITAL AMOUNT") as of the Closing Date (the
"ESTIMATED WORKING CAPITAL STATEMENT") and (ii) the amount of cash and cash
equivalents of the Transferred Subsidiaries and any cash and cash equivalents
otherwise included in the Business Assets (which, for this purpose, does not
include any Assets included in the calculation of Working Capital) (the
"CLOSING CASH BALANCE") as of the Closing Date. HNS shall cause at least Five
Million Dollars ($5,000,000) of the Closing Cash Balance to be in accounts in
banks located in the United States.
(b) If (A) the Estimated Working Capital Amount is more than (B)
the sum of the applicable amount specified in EXHIBIT G-2 (the "WORKING CAPITAL
TARGET AMOUNT") plus $15,000,000 (such sum, the "UPPER COLLAR AMOUNT"), then
the difference between the Estimated Working Capital Amount and the Upper
Collar Amount shall be added to the Purchase Price. If (A) the Estimated
Working Capital Amount is less than (B) the result of the Working Capital
Target Amount minus $15,000,000 (such result, the "LOWER COLLAR AMOUNT"), then
the difference between the Lower Collar Amount and the Estimated Working
Capital Amount shall be subtracted from the Purchase Price.
(c) If the Closing Cash Balance is less than Ten Million Dollars
($10,000,000) (the "CASH TARGET AMOUNT"), the difference between the Cash
Target Amount and the Closing Cash Balance shall be subtracted from the
Purchase Price.
(d) As promptly as practicable following the Closing Date (but in
no event later than ninety (90) days following the Closing Date), HNS shall
prepare and deliver to Newco, or cause to be prepared and delivered to Newco,
an unaudited statement setting forth the Working Capital of the VSAT Business
as calculated in accordance with EXHIBIT G-1 (the "FINAL WORKING CAPITAL
AMOUNT") as of the close of business on the Closing Date (such statement, the
"FINAL WORKING CAPITAL STATEMENT").
(e) If by using the Final Working Capital Amount (as finally
determined following any dispute resolution process initiated under SECTION
2.10(F)) instead of the Estimated Working Capital Amount for purposes of the
Purchase Price adjustment pursuant to SECTION 2.10(B), the Purchase Price paid
to HNS at Closing would have increased, then the amount of such increase shall
be paid to HNS by Newco. If by using the Final Working Capital Amount (as
finally determined following any dispute resolution process initiated under
SECTION 2.10(F)) instead of the Estimated Working Capital Amount for purposes
of the Purchase Price adjustment pursuant to Section 2.10(b), the Purchase
Price paid to HNS at Closing would have decreased, then the amount of such
decrease shall be paid to Newco by HNS. Any such payment shall be made in
immediately available funds not later than five (5) business days after the
final determination of the Final Working Capital Amount by wire transfer to a
bank account designated in writing by the party entitled to receive the
payment.
(f) In the event Newco believes the proposed Final Working
Capital Statement as delivered by HNS is incorrect, Newco shall notify HNS in
writing of its objections within sixty (60) days after receipt of the Final
Working Capital Statement, and shall set forth, in writing and in reasonable
detail, (i) the reasons for Newco's objections, (ii) the items in dispute
described with reasonable specificity, and (iii) the amount in dispute and the
basis for the calculation of such amount. To the extent Newco does not object
in writing and in reasonable detail as required and within such sixty (60) day
period to the proposed Final Working Capital Statement as delivered by HNS,
Newco shall be deemed to have accepted such Final Working Capital Statement and
the Final Working Capital Amount set forth therein shall be deemed the finally
determined Final Working Capital Amount. HNS and Newco shall endeavor, and
shall, if requested, cause their respective accountants to endeavor, in good
faith to resolve any dispute regarding the Final Working Capital Statement
within thirty (30) days after HNS's receipt of Newco's notice of objections. If
HNS and Newco are unable to resolve the disputed matters within such thirty
(30) day period, HNS and Newco shall select a nationally known independent
accounting firm (which firm shall not be the then-regular auditors of Parent,
HNS, Newco or the Investor) to resolve the matters in dispute (in a manner
consistent with this SECTION 2.10 and consistent with any matters not in
dispute), and the determination of such firm in respect of the correctness of
each matter remaining in dispute shall be conclusive and binding on Parent,
HNS, Newco and the Investor. The fees and expenses, if any, of the accounting
firm selected to resolve any disputes between HNS and Newco in accordance with
this SECTION 2.10(F) shall be paid one-half by HNS and one-half by Newco.
(g) HNS shall make available to Newco and, upon request, to the
independent accountants selected pursuant to SECTION 2.10(F), the books,
records and Documents used or created in the preparation of the Final Working
Capital Statement. Newco shall make available to HNS and, upon request, to the
independent accountants selected pursuant to SECTION 2.10(F), the books,
records and Documents used, created or prepared by or for Newco in connection
with the review of the Final Working Capital Statement.
2.11 NO SET-OFF. No party hereto shall have the right to set off
any amount to which such party is entitled hereunder for indemnification or
otherwise against any payment such party is required to make hereunder or under
any other Transaction Documents.
3. ADDITIONAL UNDERTAKINGS AND COVENANTS. The parties hereto hereby
covenant and agree as follows:
3.1 CONSENTS AND APPROVALS.
(a) The parties hereto shall use commercially reasonable efforts
to, as promptly as practicable, make the filings, if any, required under
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ and shall as promptly as practicable make the filings
required under any other Antitrust Laws (and not later than thirty (30) days
after the date hereof in the case of any filings required under the Antitrust
Laws of the Republic of Korea). In addition, as promptly as practicable, Newco
shall use commercially reasonable efforts to make an application with the
Department of State relating to registration as an exporter under International
Traffic in Arms Regulations, 22 C.F.R. Parts 120-130 ("ITAR"). Subject to
SECTION 11.2(B), each party shall pay any filing fees associated with such
filings made by such party (other than fees associated with ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
which shall be payable solely by the Investor and reimbursed by Newco at
Closing). The parties hereto shall comply at the earliest practicable date with
any request for additional information, documents, or other materials received
from the Federal Trade Commission or the Department of Justice or any other
Governmental Authority, including international competition authorities.
(b) The parties hereto shall as promptly as practicable and in
any event within fifteen (15) business days after the date hereof, and HNS
shall cause its Affiliates to, file the necessary Communications Applications
at the FCC, make the other filings, if any, required under the Communications
Act, and within thirty (30) days after the date hereof, shall make the filings
required under any other Communications Laws. The parties shall cooperate with
one another in filing the Communications Applications and such other filings
required under any other Communications Laws. Subject to SECTION 11.2(B), the
cost of any fees payable to a Governmental Authority associated with such
filings shall be borne equally by the Investor and HNS. The parties hereto also
shall comply at the earliest practicable date with any request for additional
information, documents, or other materials received from the FCC or from any
other Governmental Authority responsible for communications matters.
(c) The parties hereto shall: (i) use their commercially
reasonable efforts to obtain prompt termination of any waiting period under
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ (including any extension of the initial thirty (30) day
waiting period with respect to the Contemplated Transactions); (ii) furnish to
the other parties such information and assistance as such parties reasonably
may request as may be reasonably necessary in connection with the preparation
of any submissions to, or agency proceedings by, any Governmental Authority
under any applicable Antitrust Law; (iii) keep the other parties promptly
apprised of any material communications with, and inquiries or requests for
information from, such Governmental Authorities in connection therewith; (iv)
permit the other parties to review any material communication given by it to,
and consult with the other parties in advance of any meeting or conference with
any such Governmental Authority or, in connection with any Proceeding by a
private party, with any other Person; and (v) use their commercially reasonable
efforts to cause the condition set forth in SECTION 8.1(A) to be satisfied.
(d) The parties hereto shall: (i) use their commercially
reasonable efforts to provide all requisite filings and notifications to the
FCC and foreign Governmental Authorities, (ii) furnish to the other parties
such information and assistance as such parties reasonably may request as may
be reasonably necessary in connection with the preparation or prosecution of
any such filings and notifications, (iii) keep the other parties promptly
apprised of any communications with, and inquiries or requests for information
from, such Governmental Authorities with respect to the Contemplated
Transactions, (iv) keep the other parties apprised of the status of all
applications filed with the FCC and all other Governmental Authorities
responsible for communications matters, (v) permit the other parties to review
any material communication given by it to, and consult with the other parties
in advance of any meeting or conference with any such Governmental Authority
and (vi) use its commercially reasonable efforts to cause the condition set
forth in SECTION 8.1(C) and SECTION 8.1(E) of this Contribution Agreement to be
satisfied.
(e) The Investor and HNS shall, and HNS shall cause its
Affiliates to, use their commercially reasonable efforts to secure all such
other Consents of any Governmental Authority required in order to consummate
the Contemplated Transactions.
(f) In furtherance and not in limitation of the covenants of the
parties contained in SECTION 3.1(C), the Investor shall use its commercially
reasonable efforts to resolve objections, if any, which may be asserted by any
Governmental Authority with respect to the Contemplated Transactions under
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ and any other Antitrust Laws.
(g) In addition to the obligations set forth in SECTION 3.1(A),
the parties shall promptly, but in no event later than sixty (60) days prior to
Closing, make the filings required under the ITAR to notify the State
Department regarding the Contemplated Transactions. The parties hereto shall
also use commercially reasonable efforts to comply at the earliest practicable
date with any request for additional information, documents, or other materials
received from the State Department with respect to such filings.
3.2 OPERATION OF THE BUSINESS; CANCELLATION OF CERTAIN
INTERCOMPANY OBLIGATIONS.
(a) Except as otherwise contemplated by this Contribution
Agreement, from the date of this Contribution Agreement until Closing, HNS
shall, and shall cause HNS Europe, HNS UK and each Transferred Subsidiary to,
unless the Investor otherwise consents in writing (such consent not to be
unreasonably withheld):
(i) to the extent affecting the Business, Business Assets or
Assumed Liabilities, operate and conduct the Business in all material respects
in the Ordinary Course of Business including: (A) using its commercially
reasonable efforts to keep available the services of its present officers and
key employees of the Business generally; (B) using its commercially reasonable
efforts to maintain the Business Assets in accordance with historic practices
of the Business; (C) using its commercially reasonable efforts to maintain and
preserve all relationships with suppliers, customers and other Persons, in each
case having material business relationships with the Business; and (D)
continuing to make capital expenditures in the Ordinary Course of Business and
consistent with the current budget for the Business;
(ii) use all commercially reasonable efforts to (A) maintain
Governmental Approvals and Communications Licenses necessary for the conduct of
the Business as presently conducted and the operation of the Business Assets
and (B) diligently prosecute all pending applications for Communications
Licenses before Governmental Authorities and Proceedings with the FCC, except
in each case for actions taken in the Ordinary Course of Business that would
not reasonably be expected to have a Material Adverse Effect on the Business;
(iii) use all commercially reasonable efforts to maintain the
Material Contracts in the Ordinary Course of Business;
(iv) continue to maintain and, to the extent necessary,
pursue coordination and negotiation with respect to its ITU filings identified
in Section 4.18 of the Disclosure Schedule and associated frequency
registrations and intersystem coordination agreements in the Ordinary Course of
Business; and
(v) pay or otherwise satisfy all of their Liabilities and
Taxes with respect to the Business and the Business Assets when due, except to
the extent contested in good faith by appropriate proceedings.
(b) Except as otherwise contemplated by this Contribution
Agreement, from the date of this Contribution Agreement until Closing, HNS
shall not, and shall cause HNS Europe, HNS UK and each Transferred Subsidiary
not to, unless the Investor otherwise consents in writing (such consent not to
be unreasonably withheld):
(i) take any action that would constitute a breach of the
representations and warranties of HNS set forth herein or in another
Transaction Document (the operation of this section shall in no way impair or
affect the representations and warranties herein);
(ii) (A) except in the Ordinary Course of Business, transfer,
lease, or license to any other party, or otherwise dispose of, any single
Business Asset having a book value in excess of $50,000 or any Business Assets
having an aggregate book value in excess of $500,000, or (B) take any action
that would violate any applicable Law, which violation would reasonably be
expected to have a material adverse impact on the operations of the Business;
(iii) except in the Ordinary Course of Business, enter into
any Contract that is expected by HNS to have aggregate revenue or aggregate
obligations valued in excess of $250,000 (other than a customer Contract) which
is or would be a Business Asset or Assumed Liability, or terminate, materially
amend or intentionally fail to renew or default under (or intentionally take or
intentionally omit to take any actions that, with or without the giving of
notice or the passage of time or both, would constitute a default under), any
Material Contract which is or would be a Business Asset or Assumed Liability;
(iv) create any Encumbrance on any Business Assets other than
Permitted Encumbrances and such other Encumbrances which will be released on or
prior to Closing;
(v) make any material change in its policies or practices
with respect to collection of accounts receivable or payment of accounts
payable of the Business and the Business Assets;
(vi) reduce the amount of inventory below those amounts
maintained by HNS, HNS Europe, HNS UK or any Transferred Subsidiary in the
Ordinary Course of Business;
(vii) fail to use commercially reasonable efforts to maintain
the confidentiality of all Confidential Information related to the Business,
the Business Assets and the Assumed Liabilities in accordance with its historic
practices;
(viii) (A) increase the rate of compensation payable or to
become payable to or any benefits provided to or on behalf of, any Prospective
Newco Employee other than in the Ordinary Course of Business; (B) materially
amend any employment, severance or similar or related agreement with any
Prospective Newco Employee; (C) adopt any new foreign benefit plan if such plan
would result in new or increased costs to Newco or constitute a Business Asset
or Assumed Liability; (D) allow any Prospective Newco Employee to be eligible
for any newly adopted Employee Benefit Plan, except as required by Law; (E)
amend any existing Foreign Employee Benefit Plan or Employee Benefit Plan,
except as otherwise required by Law, if such amendment would result in new or
increased costs to Newco; or (F) enter into any new collective bargaining
agreement, employment Contract or other Contract with any labor union or
similar organization that applies to or covers Prospective Newco Employees, in
any such case, that will be an Assumed Liability; provided, however, that with
respect to clauses (C) and (E), HNS shall consult with the Investor prior to
such action and HNS and the Investor shall have discussed in good faith
desirable communications with Prospective Newco Employees with respect to such
action;
(ix) (A) permit any Transferred Subsidiary to merge or
consolidate with any Person, (B) acquire any material interest in any Person
which will be part of the Business Assets or Assumed Liabilities, (C) acquire a
substantial portion of the Assets of any Person which will be part of the
Business Assets or Assumed Liabilities, (D) acquire any division or line of
business of any Person which will be part of the Business Assets or Assumed
Liabilities, or (E) otherwise acquire any material Asset outside the Ordinary
Course of Business that is accompanied by an Assumed Liability in excess of
$1,000,000;
(x) issue, deliver, pledge, encumber or sell, or authorize
the issuance, delivery, encumbrance or sale, to any Person any capital stock or
other equity securities of any Transferred Subsidiary, or any option, warrant
or other right to acquire equity securities in any Transferred Subsidiary;
(xi) take or omit to take any action which would reasonably
be expected have a Material Adverse Effect on the Business, the Business Assets
or any Transferred Subsidiary;
(xii) take any action that would prevent it from performing
or cause it not to perform its agreements, covenants or other obligations
hereunder or under the other Transaction Documents or fail to satisfy its
Closing conditions;
(xiii) effectuate a "plant closing" or "mass layoff" as those
terms are defined in the WARN Act or any similar Law, with respect to the
Business, without complying with the notice requirements and all other
provisions of the WARN Act and any similar Law;
(xiv) make any material Tax election, other than in the
Ordinary Course of Business, that could reasonably be expected to effect any
Tax Liability related to the Business in any period after the Closing Date or
settle, or cause HNS Europe, HNS UK or any Transferred Subsidiary to settle,
any Tax Liability or controversy;
(xv) settle or cause HNS Europe, HNS UK or any Transferred
Subsidiary to settle any material litigation which is an Assumed Liability or
relates to the Business Assets, if such settlement would reasonably be expected
to have a material adverse impact on the operations of the Business following
Closing;
(xvi) other than investments in the Transferred Subsidiaries,
enter into or make investments in any Persons (including through joint venture
relationships) in excess of $500,000 in the aggregate; and
(xvii) enter into any Contract to or otherwise agree to, in
writing or otherwise, take any of the actions described above in this SECTION
3.2(B).
(c) Notwithstanding the provisions of this SECTION 3.2, HNS and
its Affiliates (including the Excluded Subsidiaries) are permitted to repay,
offset, cancel or otherwise eliminate all intercompany accounts and
intercompany obligations (including accounts payable, accounts receivable, and
profit and loss sharing obligations) in existence between HNS (or any of its
Affiliates, including the Excluded Subsidiaries) and any of the Transferred
Subsidiaries, on or before the Closing Date; provided that the foregoing shall
not apply to accounts and obligations that arise out of the Contracts between
HNS and any of its Affiliates listed on Section 2.2(a)(vii) of the Disclosure
Schedule that are for the provision or receipt of commercial products or
services (which Contracts shall remain in place). Notwithstanding the
provisions of this SECTION 3.2, HNS and its Affiliates shall, if and to the
extent requested by the Investor, repay, offset, cancel or otherwise eliminate
all intercompany accounts and intercompany obligations (including accounts
payable, accounts receivable, and profit and loss sharing obligations) in
existence between or exclusively among HNS, HNS Europe, HNS UK and the
Transferred Subsidiaries, on or before the Closing Date. Notwithstanding the
provisions of this SECTION 3.2, HNS is permitted to cause any and all of the
Transferred Subsidiaries to transfer to HNS or its Affiliates (as directed by
HNS) all cash and cash equivalents or similar type investments, bank accounts,
certificates of deposit, Treasury bills, and marketable securities held by the
Transferred Subsidiaries, through and until the Closing Date. Such transfers
may be effected by a cash dividend or distribution or repayment of intercompany
indebtedness or similar means. The parties hereto agree that, effective from
and after Closing, (i) Newco and the Transferred Subsidiaries shall be released
automatically and without any further action from any and all (A) Liabilities
under each Contract with HNS and its Affiliates other than the Contracts set
forth on Section 2.2(a)(vii) of the Disclosure Schedule, (B) Liabilities for
breach of contract claims of HNS and its Affiliates existing as of the Closing
Date, whether known or unknown, with respect to the Contracts set forth on
Section 2.2(a)(vii) of the Disclosure Schedule (except with respect to claims
for rights to payment for services thereunder) and (C) tort claims of HNS and
its Affiliates existing as of the Closing Date, whether known or unknown; and
(ii) HNS and its Affiliates shall be released automatically and without any
further action from any and all (A) Liabilities under each Contract with the
Transferred Subsidiaries other than the Contracts set forth on Section
2.2(a)(vii) of the Disclosure Schedule, (B) Liabilities for breach of contract
claims of the Transferred Subsidiaries existing as of the Closing Date, whether
known or unknown, with respect to the Contracts set forth on Section
2.2(a)(vii) of the Disclosure Schedule (except with respect to claims for
rights to payment for services thereunder) and (C) tort claims of the
Transferred Subsidiaries existing as of the Closing Date, whether known or
unknown.
(d) Prior to Closing, Parent shall cause Newco not to (i) conduct
any business operations whatsoever or (ii) enter into any Contract of any kind
or acquire any Asset or incur any Liability, except as may be specifically
contemplated by this Contribution Agreement or as the parties may otherwise
agree.
3.3 MAINTENANCE OF INSURANCE POLICIES.
(a) Prior to Closing, Parent has maintained insurance programs
which provide certain coverage for HNS and its Affiliates. From and after
Closing, Newco shall be responsible for obtaining and maintaining its own
insurance programs separately from Parent and/or HNS insurance programs.
Notwithstanding the foregoing, (i) Parent and HNS, upon the request of Newco,
shall cooperate with and use commercially reasonable efforts to assist Newco in
the transition to its own separate insurance coverage from and after Closing,
and shall provide Newco with any information that is in the possession of
Parent and is reasonably available and necessary to obtain such insurance
coverage, (ii) each of the parties hereto, upon the request of one party, shall
cooperate with and use commercially reasonable efforts to assist the other in
the collection of proceeds from insurance claims made under any Insurance
Policy (as defined below) for the benefit of any insured party and (iii) each
of the parties hereto shall use commercially reasonable efforts not to take any
action that would jeopardize or otherwise interfere with any party's ability to
collect any proceeds payable pursuant to any Insurance Policy.
(b) With respect to any claims in respect of the Business Assets
arising out of events, acts or omissions occurring prior to Closing, for which
Newco or other covered parties may be entitled to assert a claim for recovery
under any policy of insurance maintained by Parent or HNS prior to Closing,
other than a directors & officers liability insurance policy (an "INSURANCE
POLICY"), in accordance with the terms thereof, Parent and HNS, at the request
of Newco, shall use commercially reasonable efforts in asserting, or assisting
Newco in asserting, such claims under any such Insurance Policy; provided that
in all cases (except with respect to insurance proceeds included in the
Business Assets pursuant to SECTION 2.2(A)(XXI)): (i) Newco shall promptly pay
or reimburse Parent or HNS, as the case may be, for all reasonable costs and
expenses incurred by Parent or HNS in connection with such claims (whether such
claims were made before or are made after Closing), (ii) Newco shall be
obligated to pay or reimburse Parent or HNS for any obligations with respect to
any retrospective premium adjustments to the extent but only to the extent that
such premiums are actually paid and directly result from claims made
post-Closing by Newco for pre-Closing Assumed Liabilities under "claims made"
insurance policies, (iii) to the full extent permitted by Contract and Law, the
control and administration of such Insurance Policies shall remain with Parent,
(iv) such claims shall be subject to (and recovery thereon shall be reduced by
the amount of) any applicable deductibles, retentions, self-insurance
provisions or any payment or reimbursement obligations (including out-of-pocket
legal and administrative costs and attorney's fees under such Insurance
Policies) of Parent or HNS in respect thereof, (v) with respect to claims made
Insurance Policies, such claims must have been reported within the time frames
required by such policies, and (vi) Newco shall promptly report to Parent and
HNS any such claims and keep Parent and HNS reasonably informed with regard to
the status thereof. Parent (or, in the event that the primary economic burden
is to be borne by Newco by virtue of deductibles, retentions and retrospective
premium adjustments, Parent and Newco) and Parent's insurers shall have the
right to control the investigation, defense and settlement of all claims, but
no such settlement may be effected without the consent of Newco, which consent
shall not unreasonably be withheld or delayed. Notwithstanding anything to the
contrary contained herein, Newco shall have the right to assert claims under
Insurance Policies at any time to the extent that such claim arises from,
relates to or is otherwise in connection with the Business Assets or the
Assumed Liabilities. Notwithstanding anything to the contrary herein, in no
event shall Parent or any of its Affiliates be obligated to maintain or extend
any Insurance Policy or coverage after Closing or purchase any supplemental or
tail coverage.
3.4 PUBLIC ANNOUNCEMENTS. From the date hereof, Parent, HNS,
Newco and the Investor shall cooperate in good faith to jointly prepare all
press releases and public announcements pertaining to this Contribution
Agreement and the Contemplated Transactions, and none of Parent, HNS, Newco,
the Investor nor their respective Affiliates, shall issue or otherwise make any
public announcement or communication pertaining to this Contribution Agreement
or the Contemplated Transactions without the prior consent of the Investor (in
the case of Parent, Newco, HNS and their Affiliates) or Parent (in the case of
the Investor and its Affiliates), except as required by Law or by any U.S.
Governmental Authority (including the FCC) or by the rules and regulations of,
or pursuant to any agreement with, any stock exchange. None of the foregoing
parties shall unreasonably withhold approval from the other with respect to any
such press release or public announcement. If any party determines, with the
advice of counsel, that it is required by Law to make this Contribution
Agreement, the other Transaction Documents or any terms hereof or thereof
public or otherwise issue a press release or make a similar public disclosure
with respect thereto, it shall, at a reasonable time before making any public
disclosure, consult with the other parties regarding such disclosure, seek
confidential treatment for such terms or portions of this Contribution
Agreement or the other Transaction Documents as may be requested by the other
parties (other than in connection with the filings with the FCC) and disclose
only such information as is legally compelled to be disclosed. For the
avoidance of doubt, the restrictions set forth in this section shall not apply
to communications by any party to employees, customers, potential customers and
other third parties of the Business in connection with performance of this
Contribution Agreement and the Transaction Documents.
3.5 INVESTOR'S ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) From the date hereof until Closing and as permitted by Law,
HNS shall, and HNS shall cause its Affiliates to: (i) provide the Investor and
its Representatives with prompt and reasonable access during regular business
hours, and in a manner so as not to interfere with the normal business
operations of HNS or its Affiliates, to all premises, properties, key
personnel, accountants and auditors, books, records (including Tax records),
Contracts, and Documents of or pertaining to the Business, the Business Assets
and the Assumed Liabilities to the extent that the same do not relate to the
Excluded Assets or Excluded Liabilities (except to the extent that 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)), including with respect to any Transferred
Subsidiary; (ii) furnish the Investor and its Representatives with all
financial, operating and other data and information related to the Business,
the Business Assets and the Assumed Liabilities (including copies thereof) to
the extent that the same do not relate to the Excluded Assets or Excluded
Liabilities (except to the extent that 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)), as
the Investor may reasonably request; and (iii) otherwise cooperate and assist,
to the extent reasonably requested by the Investor, with the Investor's
investigation of the Business, the Business Assets and the Assumed Liabilities,
and to the extent that it would have a material impact on the future operations
of Newco, the Excluded Assets and Excluded Liabilities. Parent and HNS shall,
and shall cause their respective Representatives to, provide the potential
sources of the Financing with the same access to information as is afforded the
Investor hereunder. Parent and HNS shall assist and cooperate with the
potential sources of Financing, which assistance and cooperation shall include
using their respective commercially reasonable efforts to cause (i) HNS or its
legal counsel to provide customary legal opinions to the extent requested by
the Persons providing the Financing, (ii) HNS's auditors to (x) cooperate
generally with the Investor and, to the extent provided by auditors under
applicable accounting practices, to provide "cold comfort" letters to the
extent requested by Persons providing the Financing and (y) consent to the
inclusion of HNS's VSAT Business audit reports in any offering or private
placement memorandum and (iii) HNS's senior management employees to participate
in the marketing of any debt or equity securities, including going on a "road
show."
(b) The parties acknowledge that Apollo Management, L.P. or one
of its Affiliate(s) and HNS and one or more of its Affiliates previously have
each executed a Confidentiality Agreement, which Confidentiality Agreements
will continue in full force and effect in accordance with their terms. Prior to
Closing, the Investor, HNS and Parent will hold, and will use commercially
reasonable efforts to cause its directors, officers, employees, agents and
advisors (including attorneys, accountants, consultants, bankers and financial
advisors) to hold, any Confidential Information confidential in accordance with
the terms of the Confidentiality Agreement; provided, that notwithstanding
anything to the contrary in the Confidentiality Agreement (other than the
provisions thereof relating to compliance with applicable Laws, including
export Laws), the parties hereto shall be permitted to talk to and share
Confidential Information with any Person providing the Financing (including
such Person's Representatives) and any potential Permitted Person that will
take equity, general or limited partner or member, voting, profit sharing or
other form of co-investment interest in the transaction so long as such Person
agrees in writing to be bound by the terms of the Confidentiality Agreement.
(c) Notwithstanding anything to the contrary herein, Parent and
HNS, on one hand, and the Investor, on the other, shall be entitled to seek
equitable relief (including injunctive relief) to protect their interest in any
of their Confidential Information.
3.6 PRESERVATION OF RECORDS AND HNS'S ACCESS TO INFORMATION.
(a) On and after the Closing Date, Newco shall preserve all books
and records of the Business that it receives from HNS at Closing for a period
of six (6) years commencing on the Closing Date (or in the case of books and
records relating to Tax, employment and employee benefits matters, until the
expiration of the applicable statutes of limitations to which such records
relate).
(b) On and after the Closing Date, if HNS or any of its
Affiliates is subject to a Proceeding with any Person other than the Investor
or Newco which is not an Excluded Liability, Newco shall afford HNS and its
Affiliates and their Representatives reasonable access upon reasonable prior
notice during normal business hours and in a manner so as not to interfere with
the normal operations of Newco to all employees, offices, properties,
agreements, records, books and affairs of Newco and any Transferred Subsidiary
reasonably related to the operations of the Business that are the subject
matter of such Proceeding prior to Closing and provide copies of such
information concerning the Business as HNS or its Affiliates may reasonably
request to enable HNS and its Affiliates to investigate reasonably the subject
matter of any such Proceeding and respond to any claims or discovery requests
related thereto; provided, however, that Newco shall not be required to provide
any information to HNS or its Affiliates which could constitute a waiver of any
attorney-client privilege or violate any contractual obligation of Newco or any
Transferred Subsidiary other than any such contractual obligation entered into
after the date of this Contribution Agreement. Any such access shall be
conditioned upon (i) the execution by HNS and any applicable Affiliates or
representatives of a confidentiality agreement reasonably acceptable to Newco
and (ii) the prompt reimbursement by HNS of reasonable, out-of-pocket fees,
costs and expenses (including legal fees) incurred by Newco to comply with such
requests.
(c) On and after the Closing Date, with respect to any Proceeding
asserted by any Person other than the Investor or Newco which is an Excluded
Liability, whether pending or arising on or after the Closing Date, Newco shall
cooperate with and reasonably assist HNS in the investigation, defense,
prosecution or settlement of any such Proceeding, including providing whatever
information, support, evidence and witnesses as are reasonably available and
necessary for the investigation, defense, prosecution or settlement of any such
Proceeding. Parent shall reimburse Newco for all reasonable out-of-pocket fees,
costs and expenses incurred by Newco in connection with such cooperation and
assistance.
3.7 AGREEMENTS REGARDING TAX MATTERS.
(a) With respect to the Business Assets, the Transferred
Subsidiaries and the Business, each of HNS, the Investor and Newco shall (i)
provide the others with such assistance as may be reasonably requested in
connection with the preparation of any Tax Return or any audit or other
examination by any tax authority or Proceeding involving any Governmental
Authority relating to liability for Taxes, (ii) retain and provide to the other
all records and other information that may be relevant to any such Tax Return,
audit or examination, Proceeding or determination and (iii) provide the other
with any final determination of any such audit or examination, Proceeding or
determination that affects any amount required to be shown on any Tax Return of
the other for any period. Without limiting the generality of the foregoing,
each party shall retain, until the expiration of the applicable statutes of
limitation (including any extensions thereof), copies of all Tax Returns,
supporting work schedules and other records relating to Tax periods or portions
thereof ending on or prior to the Closing Date.
(b) HNS shall be responsible for filing all Tax Returns relating
to the Business Assets, the Transferred Subsidiaries or the Business for
periods ending on or before the Closing Date; provided, that such Tax Returns
shall be reasonably acceptable to Newco, and a copy of such Tax Returns shall
be delivered to Newco when filed. Newco shall be responsible for filing all Tax
Returns relating to the Business Assets, the Transferred Subsidiaries or the
Business for periods beginning after the Closing Date. If permitted by a
Governmental Authority, Newco and HNS shall file separate Tax Returns and
separately pay their respective Taxes for their respective portions of any
Straddle Period. If separate Tax Returns with respect to a Straddle Period are
not permitted, Newco shall prepare and file or cause to be prepared and filed
the applicable Tax Return relating to such Straddle Period. Newco shall provide
HNS with a draft of each Straddle Period Tax Return referred to in the
immediately preceding sentence and shall consider in good faith revisions to
such Tax Return that are reasonably requested by HNS that are in accordance
with applicable Law and HNS's past practices. Newco and HNS shall be
responsible for paying Taxes as set forth in SECTION 2.4(A)(X), SECTION
2.4(B)(I) and SECTION 3.7(C). HNS shall pay to Newco the amount of Taxes it is
responsible for paying at least ten (10) business days prior to the date such
Taxes are due and payable.
(c) For purposes of SECTION 3.7(B), HNS shall be responsible for
paying and shall indemnify Newco against all Pre-Closing Taxes. "PRE-CLOSING
TAXES" shall be all Taxes of HNS, HNS Europe, HNS UK or any Transferred
Subsidiary or related to the Business Assets that are not Assumed Liabilities.
In the case of a Straddle Period, "Pre-Closing Taxes" shall include (i) all
Income Taxes of such Straddle Period measured as if such Straddle Period ended
as of the end of the Closing Date (and including the Contemplated Transaction)
and (ii) taxes other than Income Taxes, shall be apportioned on a daily basis,
with HNS responsible for a proportion of such Taxes based on a fraction, the
numerator of which shall be the number of days in the applicable tax period
ending on and including the Closing Date, and the denominator of which shall be
the total number of days in such tax period.
(d) Each of Newco and HNS shall provide reimbursement for any
Straddle Period Tax which is the responsibility of such party pursuant to this
SECTION 3.7 and which is paid by the other party hereto within thirty (30) days
following the receipt of notice of the Tax payable and the portion that is the
liability of such party.
(e) If Newco or any Transferred Subsidiary receives a refund of
(or credit or rebate in lieu of a refund related to) (i) any Tax of HNS or any
Transferred Subsidiary arising in a period ending on or before the Closing Date
or (ii) any prepaid Tax of HNS or any Transferred Subsidiary (including for
foreign, federal, state and local excise, sales, use and value added Taxes paid
on a monthly basis) with respect to sales and operations prior to the Closing
Date, Newco shall pay or cause to be paid, within the thirty (30) days
following the receipt of such Tax refund, the amount of such Tax refund to HNS.
If Newco or any Transferred Subsidiary receives a refund of (or rebate in lieu
of a refund related to) any other Tax of HNS or any Transferred Subsidiary
arising in a Straddle Period, Newco shall pay or cause to be paid, within the
thirty (30) days following the receipt of such Tax refund, the portion of such
Tax refund that relates to Taxes that were the responsibility of HNS pursuant
to SECTION 3.7(C). Newco shall not be obligated to pay any amounts to HNS as a
consequence of the carryback of a Tax loss or other Tax assets generated after
the Closing Date to a period ending on or before the Closing Date.
(f) HNS, the Investor and Newco agree, upon request, to use their
commercially reasonable efforts to obtain any certificate or other
documentation from any Governmental Authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including with respect to the Contemplated Transactions).
(g) All Tax sharing agreements and similar agreements currently
in effect with respect to or involving the Business Assets, the Transferred
Subsidiaries or the Business shall be terminated as of the Closing Date insofar
as they relate to such Business Assets, Transferred Subsidiaries or the
Business. After the Closing Date, Newco and the Transferred Subsidiaries shall
not be bound by any such Tax sharing agreements or have any liability
thereunder.
3.8 UNITED KINGDOM VALUE ADDED TAX.
(a) HNS, Newco and the Investor intend that article 5 of the
United Kingdom Value Added Tax (Special Provisions) Order 1995 ("ARTICLE 5")
shall apply to the sale of the Business Assets, so that the sale is treated as
neither a supply of goods nor a supply of services.
(b) If nevertheless any United Kingdom Value Added Tax ("UK VAT")
is payable on any supply by HNS under this Contribution Agreement, Newco shall
pay the amount of that UK VAT in addition to the price (and indemnify HNS for
any interest and penalties imposed by HM Customs & Excise ("CUSTOMS") arising
out of the treatment by HNS and Newco of the sale as described in SECTION
3.8(A)) and HNS shall issue to Newco a proper UK VAT invoice in respect of that
UK VAT.
(c) Without limiting SECTION 3.8(B), UK VAT shall be treated as
payable if Customs rule that it is payable. If Customs so rule on or before the
Closing Date, the UK VAT shall be payable by Newco at Closing provided that a
valid UK VAT invoice is provided at that time. If Customs so rule on or after
the Closing Date, the UK VAT shall be payable by Newco within five days after
HNS gives Newco written notice of the ruling and issues a valid invoice in
respect of such UK VAT.
(d) If Newco fails to pay the amount of UK VAT before the end of
the period specified under SECTION 3.8(C), it shall pay interest on that amount
from the latest date in that period until actual payment (excluding any period
for which interest indemnified under SECTION 3.8(B) runs) at a rate equal to
the Adjustment Interest Rate.
(e) With a view to procuring that Article 5 applies, the parties
hereto (i) shall ensure that Newco becomes registered for UK VAT not later than
the Closing Date; (ii) warrant that the Business Assets are to be used by Newco
in carrying on the same kind of business as that carried on by HNS; (iii)
warrant that Newco has, or shall by the Relevant Date have, properly made an
election to waive exemption in respect of any United Kingdom freehold or
leasehold land being transferred under this Contribution Agreement, with effect
from a day not later than the Relevant Date (having obtained the written
permission of Customs if necessary) and has, or shall by that date have, duly
given to Customs the written notification of the election required to make the
election effective; (iv) covenant that Newco shall not revoke the election
within three months after the Relevant Date; and (v) warrant that Newco has, or
shall by the Relevant Date have, notified HNS that the election to waive
exemption referred to in clause (iii) of this SECTION 3.8(E) will not be
disapplied as a result of VATA 1994 Schedule 10 paragraph 2(3AA). In this
SECTION 3.8(E), "RELEVANT DATE" shall have the same meaning as in paragraph 3
of Article 5.
(f) In respect of any United Kingdom freehold or leasehold land
under this Contribution Agreement mentioned in SECTION 3.8(E)(III), either (i)
without prejudice to that Section, Newco shall on or before the Closing Date
give to HNS evidence reasonably satisfactory to HNS and Parent that the
election has been made and written notification duly given in accordance with
that Section; or (ii) if Newco does not give that evidence, it shall be assumed
that those things have not been done and notwithstanding SECTION 3.8(E)(III),
Newco shall on the Closing Date pay to HNS the amount of UK VAT chargeable upon
production of a valid UK VAT invoice in respect of any United Kingdom freehold
or leasehold land being transferred under this Contribution Agreement on that
assumption but any forbearance of HNS to insist on its rights under this
SECTION 3.8(F) shall be without prejudice to its rights under the preceding
provisions of this SECTION 3.8(F).
(g) References in SECTIONS 3.8(E)(I) through 3.8(E)(V) to Newco
shall be construed as references to the transferee within the meaning of the
corresponding provision of Article 5.
(h) The parties hereto intend that section 49 of the Value Added
Tax Act 1994 shall apply to the sale of the HNS UK Assets under this
Contribution Agreement and accordingly: (i) HNS shall on the Closing Date
deliver to Newco all records referred to in section 49; (ii) HNS shall not make
any request to Customs for those records to be preserved by HNS rather than
Newco; (iii) Newco shall preserve those records for such period as may be
required by Law, and shall do so in the United Kingdom; (iv) Newco shall during
that period or such longer period as it retains the records permit HNS
reasonable access to them in the United Kingdom to inspect or make copies of
them; (v) Newco shall not cease to retain the records without first giving HNS
a reasonable opportunity to inspect and remove such of them as HNS wishes; and
(vi) HNS (or any Person for the time being nominated under this clause) may by
written notice to Newco nominate another Person for the purpose of sub-Sections
(iv) and (v) of this SECTION 3.8(H) in which case the reference in those
sub-Sections to HNS shall be read as a reference to the Person nominated.
(i) If any of the UK Assets being transferred are considered to
be Capital Items as defined in Part XV of the Value Added Tax Regulations of
1995 (the "CAPITAL ITEMS SCHEME") and those Capital Items are within the period
of adjustment specified by the Capital Items Scheme, then HNS shall deliver to
Newco all details of the VAT relating to the original acquisition of those
Assets and details of the Capital Items Scheme calculations and adjustments
made during the period covered by the Capital Items Scheme.
(j) Notwithstanding any provision herein to the contrary, this
SECTION 3.8 shall apply only to a sale of assets within the United Kingdom, if
any.
3.9 CLOSING CONDITIONS.
From the date of this Contribution Agreement until the
earlier of Closing or termination of this Contribution Agreement pursuant to
SECTION 10, each of HNS, the Investor and its respective Subsidiaries shall use
their respective commercially reasonable efforts to cause to be fulfilled and
satisfied all of the other party's (and the mutual) conditions to Closing set
forth in SECTION 8.
3.10 AUDIT; COOPERATION.
(a) Promptly following the date hereof, HNS shall use
commercially reasonable efforts to retain Deloitte & Touche to conduct a
Statement of Auditing Standards 100 ("SAS 100") review of the unaudited balance
sheet for the VSAT Business at and as of June 30, 2004, together with
statements of operations and cash flows and notes thereto for the six-month
period ended June 30, 2004 (the "INTERIM STATEMENTS") and to conduct an audit
of the balance sheet for the VSAT Business at and as of December 31, 2003,
December 31 2002 and December 31, 2001, together with statements of operations
and cash flows and notes thereto (the "ANNUAL STATEMENTS"). The Interim
Statements and the Annual Statements are to be prepared by HNS in accordance
with GAAP and in conformity with Articles 3-01 and 3-02 of Regulation S-X as
well as any other applicable Securities Laws (together, the "RELEVANT
ACCOUNTING Rules"). HNS shall use commercially reasonable efforts to assist
Deloitte & Touche in connection with the SAS 100 review of the Interim
Statements and the audit of the Annual Statements, including providing Deloitte
& Touche with such information and assistance as it may reasonably request in
connection with the completion of the SAS 100 review and audit, subject to
compliance with applicable Law and the terms and conditions of the engagement
letter with Deloitte & Touche, if any. HNS shall deliver to the Investor the
Interim Statements and the Annual Statements together with Deloitte & Touche's
SAS 100 review and audit reports relating thereto as soon as reasonably
practical, but in no event later than February 28, 2005. Similarly, promptly
following the date hereof, HNS shall use commercially reasonable efforts to
engage Deloitte & Touche to conduct a SAS 100 review of the unaudited balance
sheet of the VSAT Business at and as of September 30, 2004, December 31, 2004,
and, if necessary to consummate the Financing, at and as of March 31, 2005,
together with the related statements of operations and cash flows and notes
thereto for the applicable quarter and year to date periods, and HNS shall
prepare such financial statements in accordance with the Relevant Accounting
Rules. HNS shall deliver to the Investor the applicable unaudited financial
statements and the review report(s) of Deloitte & Touche with respect to its
SAS 100 review(s), subject to compliance with applicable Law, as soon as
reasonably practical. Within 30 days after the end of each full calendar month
between the date hereof and Closing, HNS shall deliver to the Investor the
balance sheet of the VSAT Business as of the end of each such month, along with
the statement of operations for such month, which financial statements shall be
of the type prepared by HNS in the Ordinary Course of Business (and which will
not be in accordance with GAAP).
(b) HNS shall be responsible for any and all fees or expenses of
Deloitte & Touche and any other fees or expenses incurred in connection with
the preparation and audit or review of financial statements or otherwise
pursuant to this SECTION 3.10.
(c) As soon as practicable following January 1, 2005, HNS shall
use commercially reasonable efforts to retain Deloitte & Touche to audit and to
deliver to the Investor not later than April 30, 2005 an audited balance sheet
for the Business at and as of December 31, 2004, December 31, 2003 and December
31, 2002, together with statements of operations and cash flows and notes
thereto for the fiscal years ending on such dates in accordance with GAAP and
in conformity with the Relevant Accounting Rules.
3.11 AGREEMENTS WITH RESPECT TO SPACEWAY AND THE BOEING CONTRACT.
(a) The Investor and Newco acknowledge that HNS and/or Parent is
retaining the following Assets (the "EXCLUDED SPACEWAY ASSETS"): (i) all rights
to and associated with Spaceway 1 and Spaceway 2, as and when constructed and
launched pursuant to the Boeing Contract, and (ii) all rights described on
Section 2.3(m) of the Disclosure Schedule.
(b) HNS and Parent acknowledge that Newco is acquiring the
following Assets (the "CONTRIBUTED SPACEWAY Assets") at Closing: (i) all rights
to and associated with Spaceway 3, as and when constructed pursuant to the
Boeing Contract, including the benefit of all payments previously made by HNS
and/or Parent to Boeing in connection with the construction of Spaceway 3, and
the option for the launch of Spaceway 3, (ii) all rights associated with any
replacement or additional satellites ordered by Newco in accordance with the
Boeing Contract, including a proposed additional satellite to be ordered by
Newco and to serve as part of the Spaceway Business as operated by Newco
("SPACEWAY 4"), (iii) the Ground Facility Rights described on Section
2.2(a)(xix) of the Disclosure Schedule (the rights described in clauses (i),
(ii) and (iii) of this paragraph being referred to collectively as the
"ASSIGNED BOEING RIGHTS"), and (iv) the other rights described on Section
2.2(a)(xix) of the Disclosure Schedule.
(c) From and after Closing, Newco shall be responsible for all
costs and obligations associated with the Contributed Spaceway Assets,
including those incurred under the Boeing Contract with respect to the
remaining payments with regard to Spaceway 3 and payments with respect to the
launch option relating to Spaceway 3, any replacement or additional satellites
such as Spaceway 4 obtained under the Boeing Contract at Newco's request and
any expansion or extension of the Ground Facility Rights obtained under the
Boeing Contract at Newco's request. Newco will be responsible for all
continuing software, hardware, development integration, testing and any other
costs associated with Spaceway 3 and any replacement or additional satellites
such as Spaceway 4 ordered by Newco, including payments remaining under the
Boeing Contract, costs of completing manufacture, integration, testing and
commencement of service, and all launch and insurance costs with respect
thereto. Newco shall reimburse and indemnify Parent and HNS against any cost
and obligation arising out of the Assigned Boeing Rights.
(d) Unless the modifications to the Boeing Contract referred to
in the next paragraph have been completed by the Closing Date, in order to
effect the transfer of the Contributed Spaceway Assets at Closing to Newco
while permitting HNS and/or Parent to retain the Excluded Spaceway Assets,
commencing on the Closing Date Parent will pass through to Newco the benefit of
the Assigned Boeing Rights and following Closing Newco will bear (and Parent
will be reimbursed or made whole for) all third party costs and obligations
associated therewith. Until the modifications to the Boeing Contract referred
to in the next paragraph have become effective, (A) Parent and HNS will not
agree to any material modifications of the Assigned Boeing Rights, and (B)
following Closing, Parent and HNS will (i) seek approval from Boeing for
representatives of Newco to exercise the rights of the customer with respect to
Spaceway 3 and any replacement or additional satellites such as Spaceway 4
ordered by Newco under the Boeing Contract, including attending meetings at
Boeing facilities, monitoring progress under the Boeing Contract, receiving
copies of reports and other information and having access to Boeing personnel,
and (ii) enforce the Assigned Boeing Rights against Boeing on behalf of Newco,
at Newco's reasonable direction and for Newco's account and at Newco's expense.
If Spaceway 3 is delivered pursuant to the Boeing Contract while Parent is the
only customer thereunder, Newco (rather than Parent) will take title to
Spaceway 3 upon its delivery in accordance with the terms of the Boeing
Contract.
The parties shall cooperate in good faith to negotiate with
Boeing suitable modifications and/or new provisions to the Boeing Contract, to
be effective on and after the Closing Date, to effect the intent of the parties
hereto set forth in this SECTION 3.11 and with respect to the rights to be
retained by HNS and Parent under the Boeing Contract and the Assigned Boeing
Rights to be conveyed to (and Liabilities assumed by) Newco.
(e) At Closing, the parties will enter into the Spaceway Services
Agreement in substantially the form attached hereto as EXHIBIT H for the
provision of the services described on EXHIBIT H (the "SPACEWAY SERVICES
AGREEMENT"). The parties agree to negotiate in good faith to develop a
reasonably detailed Statement of Work to be attached to the Spaceway Services
Agreement consistent with the outline of services described on EXHIBIT H within
forty-five (45) days after the date hereof, or such longer period as Parent and
the Investor shall mutually agree.
(f) If at any time or from time to time following Closing, Parent
(or any Affiliate of Parent then holding the relevant rights thereto) decides
to sell, lease all or substantially all of the capacity on, transfer or
otherwise dispose of, directly or indirectly (collectively, "TRANSFER"), either
(or both) Spaceway 1 or Spaceway 2 (the "PARENT OFFERED ASSETS") to a third
party who is not an Affiliate of Parent, then Newco will have the irrevocable
option (the "NEWCO PURCHASE OPTION") to acquire the Parent Offered Assets upon
the following terms and conditions: Prior to any Transfer of any of the Parent
Offered Assets to a third party who is not an Affiliate of Parent, Parent shall
deliver a written offer notice (the "PARENT OFFER NOTICE") to Newco identifying
the price and other terms and conditions of the proposed Transfer in such
detail as to provide a reasonable person with sufficient information to
determine whether to exercise the Newco Purchase Option and offering (the
"PARENT OFFER") to Transfer the Parent Offered Assets to Newco for such price
and on such other terms and conditions. Newco shall have the right, exercisable
by delivery of written notice to Parent within 90 days (the "NEWCO FIRST NINETY
DAY PERIOD") after delivery of the Parent Offer Notice, to accept or reject the
Parent Offer. Newco shall deliver notice of its acceptance or rejection of the
Parent Offer to Parent prior to the expiration of the Newco First Ninety Day
Period. If Newco fails to deliver notice of its acceptance or rejection of the
Parent Offer prior to the expiration of the Newco First Ninety Day Period,
Newco shall be deemed to have rejected the Parent Offer. If Newco accepts the
Parent Offer, subject to the receipt of any necessary Governmental Approvals,
the closing of the Transfer of the Parent Offered Assets to Newco shall take
place on a date mutually agreeable to the parties but not later than 120 days
after Newco's delivery of notice of acceptance of the Parent Offer. In the
event that Newco does not exercise the Newco Purchase Option within the Newco
First Ninety Day Period, Parent may, within a period of 90 days commencing upon
the expiration of the Newco First Ninety Day Period, enter into an agreement to
Transfer the Parent Offered Assets to one or more third parties (none of which
is a Newco Specified Person) at a price not less than the price specified in
the Parent Offer Notice and on other terms no less favorable to Parent than the
terms and conditions set forth in the Parent Offer Notice, with closing to
occur not later than 120 days following the parties entering into such
agreement. If such an agreement is not entered into within 90 days after the
expiration of the Newco First Ninety Day Period and the Transfer is not
consummated within the 120 days following the date such agreement is executed,
the proposed Transfer of such Parent Offered Assets shall again be subject to
the provisions of this paragraph (f). As a condition to any Affiliate of Parent
acquiring the Parent Offered Assets, such Affiliate shall, and Parent shall
cause such Affiliate to, execute an agreement with Newco acknowledging the
foregoing obligations and agreeing to be bound by the foregoing obligations as
if such Affiliate were "Parent" pursuant to this SECTION 3.11(F). Newco shall
be permitted to assign its right set forth in this SECTION 3.11(F) to any of
its Affiliates.
(g) If at any time or from time to time following Closing, Newco
(or any Affiliate of Newco then holding the relevant rights thereto) decides to
Transfer any or all of Spaceway 3 or Spaceway 4 (the "NEWCO OFFERED ASSETS") to
a third party who is not an Affiliate of Newco, then Parent will have the
irrevocable option (the "PARENT PURCHASE OPTION") to acquire the Newco Offered
Assets upon the following terms and conditions: Prior to any Transfer of any of
the Newco Offered Assets to a third party who is not an Affiliate of Newco,
Newco shall deliver a written offer notice (the "NEWCO OFFER NOTICE") to Parent
identifying the price and other terms and conditions of the proposed Transfer
in such detail as to provide a reasonable person with sufficient information to
determine whether to exercise the Parent Purchase Option and offering (the
"NEWCO OFFER") to Transfer the Newco Offered Assets to Parent for such price
and on such other terms and conditions. Parent shall have the right,
exercisable by delivery of written notice to Newco within 90 days (the "PARENT
FIRST NINETY DAY PERIOD") after delivery of the Newco Offer Notice, to accept
or reject the Newco Offer. Parent shall deliver notice of its acceptance or
rejection of the Newco Offer to Newco prior to the expiration of the Parent
First Ninety Day Period. If Parent fails to deliver notice of its acceptance or
rejection of the Newco Offer prior to the expiration of the Parent First Ninety
Day Period, Parent shall be deemed to have rejected the Newco Offer. If Parent
accepts the Newco Offer, subject to the receipt of any necessary Governmental
Approvals, the closing of the Transfer of the Newco Offered Assets to Parent
shall take place on a date mutually agreeable to the parties but not later than
120 days after Parent's delivery of notice of acceptance of the Newco Offer. In
the event that Parent does not exercise the Parent Purchase Option within the
Parent First Ninety Day Period, Newco may, within a period of 90 days
commencing upon the expiration of the Parent First Ninety Day Period, enter
into an agreement to Transfer the Newco Offered Assets to one or more third
parties (none of which is a Parent Specified Person) at a price not less than
the price specified in the Newco Offer Notice and on other terms no less
favorable to Newco than the terms and conditions set forth in the Newco Offer
Notice, with closing to occur not later than 120 days following the parties
entering into such agreement. If such an agreement is not entered into within
90 days after the expiration of the Parent First Ninety Day Period and the
Transfer is not consummated within the 120 days following the date such
agreement is executed, the proposed Transfer of such Newco Offered Assets shall
again be subject to the provisions of this paragraph (g). As a condition to any
Affiliate of Newco acquiring the Newco Offered Assets, such Affiliate shall,
and Newco shall cause such Affiliate to, execute an agreement with Parent
acknowledging the foregoing obligations and agreeing to be bound by the
foregoing obligations as if such Affiliate were "Newco" pursuant to this
SECTION 3.11(G). Parent shall be permitted to assign its right set forth in
this SECTION 3.11(G) to any of its Affiliates.
(h) Notwithstanding the foregoing, the provisions set forth in
SECTION 3.11(G) shall not apply to a Transfer (i) that would constitute a
Drag-Along Transaction (as defined in the Investor Rights Agreement) or (ii)
that is otherwise subject to the provisions of the Investor Rights Agreement.
3.12 PRE-CLOSING PAYMENT OF CERTAIN INDEBTEDNESS.
Prior to Closing, HNS shall or shall cause one or more of its
Affiliates to repay in full or otherwise discharge, terminate or cancel all
outstanding Indebtedness. Notwithstanding the foregoing, in no event shall HNS
or its Affiliates have any obligation to repay, discharge, terminate or cancel
any Equipment Lease Arrangements.
3.13 COMMUNICATIONS LICENSES. In the event HNS or any Transferred
Subsidiary learns of any Proceeding before any Governmental Authority to
revoke, suspend, cancel, refuse to renew or modify, or impose a forfeiture or
other sanction with respect to, any of the Communications Licenses identified
on Section 4.18 of the Disclosure Schedule, HNS or such Transferred Subsidiary
promptly will notify the Investor of the same in writing and, except for any
such Proceeding that would not reasonably be expected to have a Material
Adverse Effect on the Business, will take all reasonable measures to contest in
good faith any such Proceeding.
3.14 CHINACAST. The parties acknowledge and agree that the shares of
ChinaCast Communication Holdings Limited held by or on behalf of HNS as of the
date hereof (the "CHINACAST SHARES") will be transferred to Newco at Closing
(or as promptly as practicable thereafter) because of certain commercial
advantages available to Newco as a result of Newco holding the ChinaCast
Shares. Newco shall hold the ChinaCast Shares for the account and for the
economic benefit of HNS. During such time as Newco holds the ChinaCast Shares
in trust for HNS, Newco shall (i) be entitled to register the shares in the
name of Newco, (ii) be entitled to vote the ChinaCast Shares in its discretion,
(iii) not pledge or otherwise permit any Encumbrance to exist with respect to
the ChinaCast Shares (except for restrictions imposed by applicable securities
Laws and for Encumbrances existing on the date hereof) and (iv) not be
permitted to sell, transfer, assign or otherwise dispose of the ChinaCast
Shares, except that Newco may sell all or part of the ChinaCast shares at fair
market value to one or more third Persons (who are not Affiliates of Newco or
the Investor) in one or more transactions. In the event that Newco sells the
ChinaCast Shares in accordance with clause (iv) of the immediately preceding
sentence, Newco will deliver the proceeds of such sale (net of any transaction
costs, Taxes required to be withheld, sales commissions or broker fees) to HNS
promptly (and in any event within five (5) days after the date of any such
sale). On the date that is the three (3) year anniversary of the Closing Date
(or the next business day if such date is not a business day), Newco will
assign, transfer, convey and deliver all of the ChinaCast Shares held by Newco,
if any, back to HNS. Newco and HNS agree to execute all transfer documents,
proxies and similar instruments reasonably requested by the other to implement
the provisions of this SECTION 3.14. For the avoidance of doubt, the ChinaCast
Shares shall be Excluded Assets for all purposes under this Contribution
Agreement.
3.15 NEGOTIATION WITH OTHERS; DISPOSITION OF SECURITIES. From the date
of this Contribution Agreement until Closing or earlier termination of this
Contribution Agreement pursuant to the terms hereof, Parent, HNS, Newco and
their Representatives shall, and HNS shall cause its Affiliates to, deal
exclusively with the Investor and its Affiliates and Representatives regarding
the acquisition of or investment in the Business, the Business Assets and the
Investor Interest, whether by way of merger, purchase of equity interests,
purchase of Assets or otherwise (a "POTENTIAL TRANSACTION") and, without the
prior written consent of the Investor, neither Parent, HNS, Newco nor their
respective Representatives shall, and HNS shall cause its Affiliates not to,
directly or indirectly: (i) solicit, initiate discussions with or engage in
negotiations with any Person (whether such negotiations are initiated by
Parent, HNS, Newco or otherwise), other than the Investor or its Affiliates or
a party designated by the Investor, with respect to a Potential Transaction;
(ii) provide information or documentation with respect to Parent, HNS, Newco or
their respective Affiliates to any Person, other than the Investor and its
Representatives and Affiliates or a party designated by the Investor, with
respect to a Potential Transaction; or (iii) enter into an agreement with any
Person, other than the Investor or its Affiliates, providing for any Potential
Transaction. If Parent, HNS, Newco their respective Affiliates or their
respective Representatives receives an inquiry, offer or proposal relating to
any of the above (unsolicited or otherwise), HNS shall immediately notify the
Investor in writing of the identities of the Persons making such inquiry, offer
or proposal and the terms of such inquiry, offer or proposal to the extent that
the same does not violate any contractual obligation or other obligation of
confidentiality existing on the date hereof. Promptly following the execution
and delivery of this Contribution Agreement, Parent, HNS, Newco and their
respective Representatives shall (i) immediately cease all discussions,
negotiations and communications with all other Persons regarding any Potential
Transaction and (ii) use their respective commercially reasonable efforts to
enforce any contractual rights HNS may have to cause to be returned to HNS or
destroyed all materials relating to HNS previously distributed to prospective
purchasers or otherwise in connection with any Potential Transaction.
3.16 NO SOLICITATION. From the Closing Date through and including the
second anniversary of the Closing Date, none of Parent, HNS or their
Subsidiaries shall solicit, directly or indirectly, any Transferred Employee
then in the employ of Newco to become employed by Parent, HNS or any of their
Subsidiaries; provided, however, that the following activities of Parent, HNS
and their Subsidiaries shall not be deemed to be direct or indirect
solicitation of any Transferred Employees: (i) placing public advertisements in
print, video or electronic media (including advertisements in trade media) that
are not targeted or focused on Newco specifically, (ii) engaging firms to
conduct searches for employees that are not targeted or focused on Newco
specifically, or (iii) offering to employ or employing any Transferred Employee
who (A) initiates discussions regarding such employment prior to any direct or
indirect solicitation by Parent, HNS or their Subsidiaries, (B) responds to any
advertisement of the type identified in clause (i) or responds to any inquiries
from searches of the type identified in clause (ii), or (C) has been terminated
by Newco or its Subsidiaries prior to commencement of employment discussions
between Parent, HNS or their Subsidiaries and such Transferred Employee.
4. REPRESENTATIONS AND WARRANTIES OF HNS. Except as set forth on the
Disclosure Schedule (or the Updated Disclosure Schedule with respect to
representations and warranties made as of the Closing Date), HNS hereby
represents and warrants to the Investor, as of the date hereof and as of the
Closing Date, as follows:
4.1 ORGANIZATION, STANDING; TRANSFERRED SUBSIDIARIES.
(a) HNS is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and each Transferred
Subsidiary is duly organized, validly existing and in good standing (to the
extent such concept is applicable to such Transferred Subsidiary) under the
Laws of its jurisdiction of organization, and, in the case of any Transferred
Subsidiary registered in the United Kingdom, is up to date in respect of all
filings required by Law and its statutory books are true, complete and up to
date in all material respects. HNS and each Transferred Subsidiary are duly
qualified to do business in each jurisdiction where the character of the
property owned or leased by them or the nature of their activities makes such
qualification necessary to carry on the Business as now conducted, except where
the failure to be so qualified has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Business. Each of Parent and
HNS has full corporate power and authority, and each Transferred Subsidiary has
all requisite power and authority to conduct the Business as presently
conducted. Each of Parent and HNS has the full corporate power and authority to
execute and deliver this Contribution Agreement and the other Transaction
Documents to which it is a party and to carry out the Contemplated
Transactions.
(b) Section 4.1(b) of the Disclosure Schedule sets forth a
complete list of the Transferred Subsidiaries, the portion of the issued and
outstanding securities of each Transferred Subsidiary held by HNS and the
jurisdiction of organization of each such Transferred Subsidiary. HNS directly
or indirectly owns the shares or other equity interests of each Transferred
Subsidiary and each other entity listed on Section 2.2(b) of the Disclosure
Schedule free and clear of all Encumbrances, except for Permitted Encumbrances
and except for restrictions imposed by applicable securities Laws. The
Transferred Subsidiaries are direct or indirect wholly-owned Subsidiaries of
HNS (except for qualifying shares held by employees or directors as required by
applicable Law). Section 2.2(b) of the Disclosure Schedule sets forth the
percentage ownership that such shares or other equity interest represents in
such Transferred Subsidiary or, to the Knowledge of HNS, such other entity.
There are no outstanding securities of the Transferred Subsidiaries convertible
into or exchangeable or exercisable for shares or other equity interests or
ownership interests in any Transferred Subsidiary, or options, warrants or
other rights to acquire shares or other equity interests or ownership interests
in any Transferred Subsidiary. All shares or other equity interests of the
Transferred Subsidiaries have been validly issued and are fully paid and
non-assessable (where applicable) and there has been no violation of any
preemptive rights or similar rights with respect to such shares or equity
interests. In respect of any Transferred Subsidiary organized under the laws of
the People's Republic of China, the full amount of the registered capital
thereof has been duly contributed and such contribution has been registered
with appropriate Governmental Authorities. The shares of capital stock or other
equity interests of the Transferred Subsidiaries are not subject to any voting
trust agreement or any other Contract relating to the voting, dividend rights
or disposition of the capital stock or other equity interests of the
Transferred Subsidiaries, other than this Contribution Agreement.
4.2 AUTHORIZATION. The execution and delivery of, and performance
by HNS and Parent of the Transaction Documents has been duly authorized by all
necessary corporate action on the part of HNS and Parent, and no other
corporate proceedings on the part of HNS or Parent are necessary to authorize
the Transaction Documents, or to consummate the Contemplated Transactions.
4.3 BINDING OBLIGATION. This Contribution Agreement and each other
Transaction Document executed or to be executed by Parent, HNS or their
respective Affiliates pursuant hereto, have been or will be at Closing executed
and delivered in accordance with the provisions thereof, and (assuming such
agreements constitute the legal and binding obligations of the Investor or each
other party thereto other than Parent, HNS and its Affiliates) shall each
constitute a valid and binding obligation of Parent, HNS or such Affiliates
enforceable in accordance with its terms (i) except to the extent that
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar Laws now or hereinafter in effect relating to or
affecting creditors' rights generally, including statutory and other Laws
regarding fraudulent conveyances or preferential transfers, and (ii) subject to
the limitations imposed by general equitable principles regardless of whether
such enforceability is considered in a Proceeding at law or in equity.
4.4 NONCONTRAVENTION. Neither the execution and the delivery of this
Contribution Agreement or the other Transaction Documents, nor the consummation
of the Contemplated Transactions, will, in any material respect, (a) violate
any provision of the organizational documents of Parent, HNS, HNS Europe, HNS
UK or any Transferred Subsidiary, (b) violate any provision of applicable Law
binding upon Parent, HNS, HNS Europe, HNS UK or any Transferred Subsidiary that
is applicable to the Business or any of the Business Assets, (c) conflict with,
result in a breach of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any Material Contract, or (d)
give rise under the requirements of any applicable Laws of the United Kingdom
or the terms or provisions governing any Foreign Employee Benefit Plan operated
in the United Kingdom to (i) any Liability of HNS Europe or HNS UK to pay a
debt in respect of any funding shortfall in any pension scheme under Section
4.14 of the Disclosure Schedule, or (ii) any right on the part of the trustees
of any pension scheme set forth on Section 4.14 of the Disclosure Schedule to
be able to call for payment of such a debt in respect of a funding shortfall
which may exist at Closing, except with respect to clauses (b), (c) and (d) for
such conflicts or violations which would not reasonably be expected to have a
Material Adverse Effect on the Business or a material adverse effect on the
ability of HNS or Parent to consummate the Contemplated Transactions.
4.5 TAXES.
(a) All material Tax Returns required to be filed by HNS, its
Affiliates or any of the Acquired Companies by or with respect to the Business
or the Business Assets or with respect to which Newco or an Acquired Company
(collectively, the "TAX GROUP") could have liability have been or will be
timely filed (taking into account any extensions validly obtained) and all such
Tax Returns are complete and accurate in all material respects.
(b) All Taxes (i) shown to be due on such Tax Returns (or payable
pursuant to any assessments with respect to such Tax Returns) and (ii) that
have become due and for which any member of the Tax Group could be liable have
been timely paid. None of the Business Assets are subject to any lien for
Taxes.
(c) There is no material action, suit, claim, assessment,
investigation or audit pending against any Acquired Company or with respect to
Taxes in respect of the Business or the Business Assets.
(d) Each member of the Tax Group has complied in all material
respects with all applicable Laws relating to the collection and withholding of
Taxes (including sales Taxes, employee-related Taxes and VAT) for which any
member of the Tax Group could be held liable.
(e) Each Acquired Company is not, and has not been, a "personal
holding company" within the meaning of Section 542 of the Code.
(f) No material deficiency for any Tax or claim for additional
Taxes has been asserted, assessed or proposed against any Acquired Company in
writing, and none of the Acquired Companies has granted any waiver of any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency. No Acquired Company has
incurred any material Taxes after the date of the Financial Statements, other
than in the Ordinary Course of Business.
(g) None of HNS Europe, HNS UK or any Transferred Subsidiary is a
party to any Tax sharing indemnity or similar agreement allocating Tax
liability that has not or will not be terminated on the Closing Date without
any future liability.
(h) No Acquired Company has incurred any liability to make or
possibly make any payments, either alone or in conjunction with any other
payments, that:
(i) are non-deductible under, or would otherwise constitute a
"parachute payment" within the meaning of, Section 280G of the Code (or any
corresponding provision of state, local or foreign income Tax law); or
(ii) are or may be subject to the imposition of an excise Tax
under Section 4999 of the Code.
(i) No Acquired Company is, or has ever been, a "United States
real property holding corporation" within the meaning of Section 897(c)(2) of
the Code.
(j) No Acquired Company will be required to include in income
during a taxable period that ends after the Closing Date any income that
economically accrued and was accounted for prior to the Closing Date by reason
of the installment method of accounting or the completed contract method of
accounting. None of the Parent, HNS nor any Transferred Subsidiary (nor any of
their Affiliates) has or will make any election for U.S. tax purposes that
could materially affect the tax liability of any Transferred Subsidiary, or
cause any Transferred Subsidiary to waive the use of net operating losses or
deductions in any foreign jurisdiction.
(k) No Acquired Company has agreed to, and no Acquired Company is
required to, make any adjustments or changes either on, before or after the
Closing Date, to its accounting methods pursuant to Section 481 of the Code (or
similar provisions of state, local or foreign law), and neither the Internal
Revenue Service nor any other Tax authority has proposed any such adjustments
or changes in accounting methods;
(l) No Acquired Company has ever been a member of a combined,
consolidated, affiliated or unitary group for Tax filing purposes, other than
the group in which it currently is a member, that can reasonably be expected to
affect the tax liability of Newco;
(m) The Tax Liability for the Transferred Subsidiaries for all
tax periods that end on or prior to the Closing Date, and for the portion of
any Straddle Period that is before the period beginning on the day after the
Closing Date, is fully reserved on the Latest Balance Sheet;
(n) Newco is, and at all times since its formation has been,
treated as disregarded for U.S. Federal income tax purposes.
4.6 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES.
(a) Section 4.6(a) of the Disclosure Schedule sets forth the
consolidated unaudited balance sheet of the VSAT Business as of June 30, 2004
(the "LATEST BALANCE SHEET") and as of December 31, 2003, December 31, 2002 and
December 31, 2001 and the related consolidated unaudited statements of
operations and cash flow of the VSAT Business for the six-month period ended
June 30, 2004 and for the three years ended December 31, 2003, December 31,
2002 and December 31, 2001 (collectively, the "FINANCIAL STATEMENTS"). The
Financial Statements have been prepared from, and are in accordance with, the
books and records of HNS on a basis consistent in all material respects with
the manner in which the businesses of HNS have been reported (other than
adjustments relating to the treatment of Equipment Lease Arrangements, the
exclusion of businesses other than the VSAT Business or the treatment of
intercompany transactions) for inclusion in the consolidated financial
statements of Parent, which consolidated financial statements of Parent were
prepared in accordance with GAAP consistently applied. The Financial Statements
(including any related notes or schedules) present fairly in all material
respects the financial position and results of operations and cash flow of the
VSAT Business for the periods set forth therein.
(b) There are no Liabilities of HNS, HNS Europe, HNS UK or the
Transferred Subsidiaries relating to the VSAT Business of any nature, whether
accrued, contingent, absolute, determined, determinable or otherwise, that
would be required to be shown on a balance sheet prepared in accordance with
GAAP and that constitute Assumed Liabilities and that in the aggregate would
reasonably be expected to have a Material Adverse Effect on the Business, other
than: (i) Liabilities disclosed in the Financial Statements or clearly
identified in notes thereto, (ii) Liabilities under any Contract, lease or
license disclosed in the Disclosure Schedule (other than any Liabilities
arising out of breaches of contract required to be disclosed in the Disclosure
Schedule and not disclosed) and (iii) Liabilities incurred in the Ordinary
Course of Business since June 30, 2004.
(c) The most recently filed audit accounts of the Transferred
Subsidiaries registered in the United Kingdom have been prepared and audited in
accordance with accounting principles, standards and practices which are
generally accepted in the United Kingdom and give a true and fair view of the
state of affairs of each such Transferred Subsidiary and of its profits and
losses for the period to which such accounts relate.
(d) Section 4.6(d) of the Disclosure Schedule sets forth all
outstanding Indebtedness of the Business as of the date hereof.
(e) When delivered in accordance with the terms hereof, the Final
Working Capital Statement shall have been prepared from, and in accordance
with, the books and records of HNS. The Final Working Capital Statement, when
delivered in accordance with the terms hereof, shall be prepared and calculated
in accordance with EXHIBIT G-1 and consistent with the preparation of the
Estimated Working Capital Statement. Any disputes relating to the Final Working
Capital Statement shall be governed by SECTION 2.10(F).
4.7 ABSENCE OF CERTAIN CHANGES. Except for matters that would be
permitted in accordance with SECTION 3.2 if they occurred after the date of
this Contribution Agreement, since June 30, 2004 to the date of this
Contribution Agreement there has not been:
(a) any event or occurrence that would reasonably be expected to
have a Material Adverse Effect on the Business or the Business Assets and has
not been rectified or repaired;
(b) any transaction or commitment made, or any Material Contract
entered into, by HNS or any of its Affiliates relating primarily to the
Business or any Assets that would constitute Business Assets, or any
termination or amendment by HNS or its Affiliates of any Material Contract or
other right relating primarily to the Business, in any case, which would
reasonably be expected to have a Material Adverse Effect on the Business, other
than commitments in the Ordinary Course of Business and the Contemplated
Transactions;
(c) any increase in the compensation of any current employee of
the Business at a vice president level or above, other than compensation
increases in the Ordinary Course of Business or nondiscretionary increases
pursuant to Employee Benefit Plans disclosed in Section 4.15 of the Disclosure
Schedule or referenced in EXHIBIT J; and
(d) any event or occurrence described in SECTION 3.2(B).
4.8 REAL PROPERTY MATTERS.
(a) Section 4.8(a) of the Disclosure Schedule contains a true and
complete list of all the real property owned in fee by HNS or any of its
Affiliates used primarily in connection with the Business (the "OWNED REAL
PROPERTY"). HNS and its Affiliates, as the case may be, has good, valid, fee
simple and marketable title to each parcel of Owned Real Property, including
all buildings, structures, fixtures and improvements located thereon, in each
case, free and clear of all Encumbrances, except (i) Permitted Encumbrances,
(ii) liens for Taxes and general and special assessments not in default and
payable without penalty and interest or which are being contested in good faith
by appropriate proceedings, and (iii) other Encumbrances which, individually or
in the aggregate, would not reasonably be expected to materially interfere with
HNS's or the Affiliates', as the case may be, use and enjoyment of such Owned
Real Property for the Business. There are no outstanding contracts for the sale
of any of the Owned Real Property. There are no leases, subleases, licenses,
concessions or any other Contracts, options or rights of first refusal or
agreements granting to any Person other than HNS, or its Affiliates, as the
case may be, any right to the possession, use, occupancy or enjoyment of any of
the Owned Real Property or any portion thereof. No Owned Real Property is
subject to any pending or, to the Knowledge of HNS, threatened condemnation
Proceeding by any Governmental Authority.
(b) Except for the Excluded Real Property Leases, Section 4.8(b)
of the Disclosure Schedule contains a true and complete list of all leases,
subleases, sub-subleases, licenses and other agreements under which HNS or any
of its Affiliates leases, subleases, licenses, uses or occupies (whether as
landlord, tenant, sublandlord, subtenant or by other occupancy arrangement) or
has the right to use, occupy, or purchase, now or in the future, any real
property that is used primarily in connection with the Business (collectively,
the "REAL PROPERTY Leases," and the property subject to the Real Property
Leases together with the Owned Real Property, the "REAL PROPERTY"). HNS has
furnished to the Investor, or otherwise made available for the Investor's
review in HNS's data room, true, correct and complete copies of all Real
Property Leases or has furnished the material terms thereof if no true and
complete copy is available. Each Real Property Lease is in full force and
effect and constitutes the valid and legally binding obligation of HNS or one
of its Affiliates, as the case may be, enforceable against HNS or such
Affiliate, in accordance with its terms (except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereafter in effect relating to or affecting creditors' rights
generally, including the effect of statutory and other Laws regarding
fraudulent conveyances and preferential transfers, and subject to the
limitations imposed by general equitable principles regardless of whether such
enforceability is considered in a proceeding at law or in equity). Except as
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Business, with respect to each Real Property
Lease (i) there is no default or event which, with notice or lapse of time or
both, would constitute a default on the part of HNS or such Affiliate, as the
case may be, or, to the Knowledge of HNS, any other party thereto and (ii)
neither HNS nor such Affiliate, as the case may be, has assigned, sublet or
transferred its leasehold interest. HNS or the applicable Affiliate has a good
and valid leasehold interest in each Real Property Lease free and clear of all
Encumbrances, except (i) Permitted Encumbrances, (ii) liens for Taxes and
general and special assessments not in default and payable without penalty or
interest or which are being contested in good faith by appropriate proceedings
and (iii) other liens which do not materially interfere with HNS's or such
Affiliate's use and enjoyment of such Real Property Lease for the Business.
4.9 INTELLECTUAL PROPERTY.
To HNS's Knowledge, HNS or Parent owns or has adequate licenses
or other rights to use and otherwise exploit the Intellectual Property used or
intended to be used by HNS to conduct the Business (for purposes of this
SECTION 4.9, "intended to be used" is as of the Closing Date). Parent owns,
controls or otherwise has the right to transfer the Assigned Patents, Assigned
Marks and Other Intellectual Property (as such terms are defined in the
Intellectual Property Agreement), and is free to and has the authority to
assign or transfer them to Newco. To HNS's Knowledge, each of the Assigned
Patents and Licensed Patents (as defined in the Intellectual Property
Agreement) is valid and enforceable. The Intellectual Property that has been
assigned or licensed to Newco pursuant to this Contribution Agreement or the
Intellectual Property Agreement, together with the Intellectual Property that
is subject to the "covenant not to assert" specified in Section 4.1 of the
Intellectual Property Agreement, constitute all of the Intellectual Property
that is owned or controlled by Parent or HNS and used or intended to be used by
HNS to conduct the Business. Parent or HNS or its Subsidiaries, as applicable,
have used commercially reasonable efforts to maintain and protect their rights
in and to the material Intellectual Property owned or licensed by Parent or HNS
or its Subsidiaries that is used or intended to be used in the Business or
intended to be used in that portion of the Spaceway Business to be transferred
to Newco pursuant to this Contribution Agreement. To the Knowledge of HNS, (i)
neither Parent nor HNS nor its Subsidiaries has infringed or is now infringing
on any Intellectual Property belonging to another Person in connection with the
operations of the Business , (ii) neither Parent nor HNS nor its Subsidiaries
has received any written claim or notice, or otherwise has Knowledge, of
infringement, misappropriation or claims of breach or other violation of the
Intellectual Property rights of others in connection with HNS's or its
Subsidiaries' operation of the Business, and (iii) neither HNS nor its
Subsidiaries nor Parent has provided any third party any written claim or
notice that such third party has infringed upon, misappropriated or breached,
or otherwise violated their rights in any Intellectual Property used or
intended to be used in connection with the Business. Other than the
Intellectual Property that is assigned, licensed or otherwise made available to
Newco under the Intellectual Property Agreement and the Contribution Agreement,
neither Parent nor HNS nor its Subsidiaries has any rights in any Intellectual
Property (other than certain trademarks or service marks) that either Parent or
HNS or its Subsidiaries currently own or have the right to grant a sublicense
to or other rights in, and that is currently used or intended to be used by HNS
in the Business or that HNS intends to use in that portion of the Spaceway
Business to be transferred to Newco pursuant to this Contribution Agreement. No
Intellectual Property being assigned, licensed or otherwise made available to
Newco in the Intellectual Property Agreement is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting the use or
exploitation thereof in the Business, or restricting the licensing thereof by
HNS, its Subsidiaries or Parent to any Person, other than such which would not
reasonably be expected to have, individually and collectively, a Material
Adverse Effect on the Business. Neither Parent nor HNS or its Subsidiaries has
assigned, licensed or otherwise made available to a third party any substantial
portion of the Intellectual Property that is assigned, licensed or otherwise
made available to Newco in the Intellectual Property Agreement or Contribution
Agreement, that has the effect of materially enabling such third party to
compete with any material Business of Newco as of the date of the Contribution
Agreement. This SECTION 4.9 contains the only representations and warranties of
HNS or Parent in this Contribution Agreement, or any other Contract executed in
connection with this Contribution Agreement, regarding the Intellectual
Property used by HNS in the Business, and no other provision hereof or thereof
shall be construed to contain any such representation or warranty.
4.10 SUFFICIENCY OF AND TITLE TO ASSETS.
(a) HNS or one or more of its Subsidiaries has good and valid
title in and to, or a valid leasehold interest in, or a valid license for, each
of the Contributed Assets free and clear of any and all Encumbrances, except
for Permitted Encumbrances and such other Encumbrances which will be released
on or prior to Closing. Subject to the receipt of any Consents of the third
parties listed on Section 4.4 of the Disclosure Schedule, HNS and its
Subsidiaries, as applicable, has the right and power to contribute, convey,
assign, transfer and deliver to Newco good and valid title in and to, or a
valid leasehold interest in, or a valid license for, all of the Contributed
Assets, free and clear of any and all Encumbrances, except for Permitted
Encumbrances, and except as would not reasonably be expected to have a Material
Adverse Effect on the Business.
(b) The Transferred Subsidiaries have good and valid title in and
to, or a valid leasehold interest in, or a valid license for, the Transferred
Subsidiary Assets, free and clear of any and all Encumbrances, except for
Permitted Encumbrances and such other Encumbrances which will be released on or
prior to Closing. None of the Transferred Subsidiary Assets constitutes
state-owned assets as such term is understood under the Laws of the People's
Republic of China, except for the Assets leased or licensed from state-owned
companies.
(c) Except for the Financial Support Arrangements and except for
Intellectual Property, the Business Assets, together with the services to be
provided under the Transition Services Agreement and the services to be
provided under the Spaceway Services Agreement, constitute, and on the Closing
Date, will constitute, all of the Assets and services which HNS and its
Affiliates, currently use in connection with the VSAT Business or which are
currently being developed as part of the Spaceway Business, and shall be
sufficient to enable Newco to operate the Business in the same manner as it was
operated on the date hereof and at Closing.
4.11 LITIGATION; COMPLIANCE WITH LAWS.
(a) Except for rulemaking proceedings or other Proceedings of
general applicability, there are no Proceedings pending, or to the Knowledge of
HNS, threatened, against HNS or any of its Affiliates with respect to the
Business, Business Assets, the Contemplated Transactions, or any Transferred
Subsidiary at law or in equity, or before or by any court or arbitrator,
domestic or foreign, or any other Governmental Authority that would reasonably
be expected to have a Material Adverse Effect on the Business. HNS and the
Transferred Subsidiaries are not operating under, subject to or in default with
respect to any material Order of any court, arbitrator or any other
Governmental Authority with respect to the Business or the Business Assets that
would reasonably be expected to have a Material Adverse Effect on the Business.
(b) HNS, HNS Europe, HNS UK and each Transferred Subsidiary have
complied and are in compliance with all applicable Laws to which the Business,
the Business Assets or the Assumed Liabilities are subject, except for any
failure to comply that would not reasonably be expected to have a Material
Adverse Effect on the Business. Neither HNS nor any Transferred Subsidiary has
received any notice from any Person regarding any actual or alleged violation
of any Law with respect to the Business or the Business Assets, except for any
alleged violation that would not reasonably be expected to have a Material
Adverse Effect on the Business.
4.12 INSURANCE.
(a) HNS, HNS Europe, HNS UK and the Transferred Subsidiaries
maintain or are the beneficiaries of valid and currently effective insurance
policies or binders of insurance or programs of self-insurance with respect to
the Business in such types and amounts as are consistent with customary
practices and standards of similar companies.
(b) Section 4.12(b) of the Disclosure Schedule sets forth a list
of the policies of insurance currently maintained by HNS and its Affiliates
with respect to the Business Assets and the Business, with respect to the
products, properties, Assets and operations of the Business, and all such
policies are in full force and effect. None of the limits or caps on the
insurance policies listed on Section 4.12(b) of the Disclosure Schedule have
been exhausted or diminished to a level that the remaining coverage would not
be customary for similarly situated companies.
4.13 GOVERNMENTAL APPROVALS. The execution, delivery and
performance by HNS and Parent of the Transaction Documents to which such Person
is a party requires no action by or in respect of, or consent or approval of,
or filing with, any Governmental Authority other than:
(a) compliance with any applicable requirements of
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ and other Antitrust Laws and competition Laws and the rules
and regulations thereunder;
(b) compliance with any applicable requirements of the
Communications Act and other Communications Laws and the rules and regulations
thereunder;
(c) notifications to, or applications for consent from,
Governmental Authorities required with respect to the HNS Permits; and
(d) such other Consents the failure to obtain or make would not
have, individually or in the aggregate, a Material Adverse Effect on the
Business or the Business Assets.
4.14 FOREIGN BENEFIT MATTERS.
(a) This SECTION 4.14 relates to employee benefit matters for (i)
Acquired Companies located outside the United States (each a "FOREIGN
OPERATION") with personnel who are directly employed by the applicable Foreign
Operation ("FOREIGN EMPLOYEES") or personnel who are employed by a services
company ("FOREIGN SERVICES COMPANY") and who are assigned to work at any
Foreign Operation pursuant to the terms of a services agreement with such
Foreign Operation ("FOREIGN CONTRACT EMPLOYEES") and (ii) personnel directly
employed by HNS UK or personnel who are employed by a services company and who
are assigned to work at HNS UK pursuant to the terms of a services agreement
with HNS UK ("HNS UK EMPLOYEES").
(b) Except as required by the Laws of Brazil, the People's
Republic of China, the Czech Republic, France, Germany, India, Indonesia,
Italy, Mexico, the Russian Federation, South Africa, the United Arab Emirates,
and the United Kingdom (collectively, the "LAWS OF THE HNS COUNTRIES OF
OPERATION"), the Foreign Operations and HNS UK do not maintain, contribute to
or participate in any material employee benefit plan, program, pension,
deferred compensation, retirement, superannuation, life assurance or other
similar plan, agreement, commitment or arrangement, whether directly or
indirectly (collectively, "FOREIGN EMPLOYEE BENEFIT PLANS"). HNS has furnished
or otherwise made available for the Investor's review in HNS's data room true
and complete copies of each Foreign Employee Benefit Plan or a summary of such
plan including all material information of each Foreign Employee Benefit Plan
required to permit the Investor to form a reasonably accurate view of such
Foreign Employee Benefit Plan and the benefits (including contingent benefits)
provided or to be provided under them.
(c) To HNS's Knowledge, the Foreign Operations and HNS UK are in
compliance, in all material respects, with the payment to all social insurance,
pension, health care and profit sharing programs required under the Laws of the
HNS Countries of Operation applicable to the employment of the Foreign
Employees or HNS UK Employees. There are no unsatisfied Liabilities with
respect to the Foreign Employees or HNS UK Employees that would have a Material
Adverse Effect on Newco. There are no unsatisfied Liabilities with respect to
the UK Plan that would have an adverse effect on Newco nor will the
Contemplated Transactions result in any Liability with respect to the UK Plan
that would have an adverse effect on Newco.
(d) The employee side letter dated the date hereof sets forth for
each Foreign Employee and each HNS UK Employee the location, job title, 2004
annual base salary, 2003 bonus, years of service and details of those employees
on maternity, paternity or parental leave or who are absent because of
disability or long-term leave of absence and who may have a statutory or
contractual right to return to work. HNS has made available to the Investor
complete copies of all the material written employment agreements and offer
letters entered into and with current Foreign Employees and HNS UK Employees,
as set forth in the employee side letter dated the date hereof.
(e) The employee side letter dated the date hereof sets forth a
complete list of all current Foreign Contract Employees. HNS has furnished or
otherwise made available for the Investor's review in HNS's data room true,
correct and complete copies of the agreements with each Foreign Services
Company ("FOREIGN SERVICES AGREEMENTS"). Each Foreign Services Company is in
material compliance with (i) its respective Foreign Services Agreement and (ii)
all applicable Laws of the HNS Country of Operation as they apply to services
in connection with the Foreign Services Agreement.
(f) (i) The Foreign Operations and HNS UK are in material
compliance with all employment practices, terms and conditions of employment,
wages and hours described in the agreements and contracts entered into with
Foreign Employees and HNS UK Employees; (ii) each Foreign Employee Benefit Plan
has been operated and administered in all material respects in accordance with
its terms or provisions and with the requirements of all applicable Laws of the
HNS Countries of Operation and there are no material practices, agreements or
commitments, undertakings or assurances (whether or not constituting a legally
binding commitment) relating to benefits which are not referred to in the
documents disclosed; (iii) the Foreign Operations and HNS UK have not received
written communication of any intention by any Governmental Authority
responsible for the enforcement of labor or employment Laws to conduct any
proceeding affecting the Foreign Operations or HNS UK; (iv) no labor strike,
material slowdown, material work stoppage, material lockout, or material
complaint, claim or petition in any proceeding is actually pending or, to HNS's
Knowledge, threatened against or affecting the Foreign Operations or HNS UK;
(v) the Foreign Operations and HNS UK have not experienced any strike, material
slowdown or material work stoppage, lockout or other collective labor action by
or with respect to the Foreign Employees of the Foreign Operations or the HNS
UK Employees of HNS UK that could have, individually or in the aggregate, a
Material Adverse Effect on the Business; (vi) none of the Foreign Operations
operates a pension plan which is a defined benefit plan as such term is defined
in section 3(35) of ERISA; (vii) no HNS UK Employee has transferred to HNS UK
under the United Kingdom Transfer of Undertakings (Protection of Employment)
Regulations 1981; and (viii) no Foreign Employee Benefit Plan operated in the
United Kingdom is contracted out within the meaning of the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇.
4.15 U.S. EMPLOYEE BENEFIT MATTERS.
(a) In this Contribution Agreement, the term "EMPLOYEE BENEFIT
PLAN" means any of the following: an "employee pension benefit plan," as
defined in Section 3(2) of ERISA, each material "employee welfare benefit
plan," as defined in Section 3(1) of ERISA, an employment, consulting,
severance or similar contract, plan, program, arrangement or policy and any
other plan, program, policy or arrangement providing for benefits,
compensation, retention payments, bonuses, fees, profit-sharing, stock option,
stock purchase or other stock related rights or other forms of incentive or
deferred compensation, change in control benefits, vacation benefits, insurance
(including any self-insured arrangements), health or medical benefits, employee
assistance programs, disability or sick leave benefits, workers' compensation,
supplemental unemployment benefits, severance benefits and post-employment or
retirement benefits that is maintained, administered or contributed to by HNS
or any of its ERISA Affiliates and covers any current or former Business
Employee or any current or former U.S. full-time employee who was employed by
HNS or any of its Affiliates on or after December 22, 2003 and whose services
were primarily related to the Business. Section 4.15(a) of the Disclosure
Schedule sets forth a complete list of each Employee Benefit Plan that is an
"employee pension benefit plan," as defined in Section 3(2) of ERISA, and each
other material Employee Benefit Plan that covers any current or former employed
Business Employee or any current or former U.S. full time employee who was
employed by HNS or any of its Affiliates on or after December 22, 2003 and
whose services were primarily related to the Business.
(b) The employee side letter dated the date hereof sets forth the
location, job title, current annual base salary, 2003 bonus and 2003
commissions provided to each of the Business Employees whose services are
primarily related to the Business, such Business Employee's years of service,
and whether such Business Employee is actively at work or on leave of absence,
disability or medical leave.
(c) HNS has furnished or otherwise made available for the
Investor's review in HNS's data room true and complete copies of each Employee
Benefit Plan disclosed, or required to be disclosed, on Section 4.15(a) of the
Disclosure Schedule or a summary of such plan.
(d) Neither HNS nor any ERISA Affiliate has incurred any
unsatisfied Liability (other than Pension Benefit Guaranty Corporation ("PBGC")
premiums) to the PBGC, the Internal Revenue Service or any other individual or
entity under Title IV of ERISA, Sections 412 or 4980B of the Code or Part 6 of
Title I of ERISA and no event or condition exists that could result in the
imposition of any liability on HNS or any ERISA Affiliate under such provisions
that could reasonably have an adverse effect on Newco.
4.16 CONTRACTS.
(a) Except for Contracts that do not constitute Assumed
Liabilities, HNS, HNS Europe, HNS UK and the Transferred Subsidiaries, with
respect to the Business and the Business Assets, are not parties to or
otherwise bound by or subject to (such Contracts that fit within the following
categories shall be referred to herein as the "MATERIAL CONTRACTS"):
(i) any Contracts which would be "material contracts" (as
such term is defined in Item 601(b)(10) of Regulation S-K promulgated under the
Exchange Act) of HNS, HNS Europe, HNS UK and the Transferred Subsidiaries,
taken as a whole, if HNS were a reporting company under the Exchange Act;
(ii) any Contract containing any covenant limiting the
freedom of HNS, HNS Europe, HNS UK or any Transferred Subsidiary, in respect of
the Business or the operations of the Business, to compete with any Person in
any geographic area in any material respect if such Contract will be binding on
Newco after Closing;
(iii) any Contract in effect on the date of this Contribution
Agreement relating to the disposition or acquisition of any material Assets of,
or any interest in, any business enterprise which forms a part of the Business
other than in the Ordinary Course of Business;
(iv) any Indebtedness;
(v) any Financial Support Arrangements;
(vi) any Contract with a customer, distributor or reseller of
the Business that had aggregate revenue in calendar year 2003 greater than
$1,000,000 or is expected by HNS to have aggregate revenue in calendar year
2004 greater than $1,000,000;
(vii) any Contract with a trade supplier to the Business
pursuant to which HNS or any Transferred Subsidiary made aggregate payments in
calendar year 2003 greater than $1,000,000 or pursuant to which HNS or any
Transferred Subsidiary is expected by HNS to make payments in calendar year
2004 greater than $1,000,000;
(viii) any Contract relating to any joint venture or
partnership arrangement with any third party involving an investment
requirement for the period following Closing of greater than $500,000; and
(ix) any Contract (other than a commercial Contract) with any
U.S. Governmental Authority that is not subject to an obligation of
confidentiality and involves commitments of HNS greater than $500,000.
(b) Each Material Contract is a legal, valid and binding
obligation of HNS, HNS Europe, HNS UK or the applicable Transferred Subsidiary,
enforceable against HNS, HNS Europe, HNS UK or the applicable Transferred
Subsidiary, and, to HNS's Knowledge, the other party to such contract, in
accordance with its terms (except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar Laws now or
hereafter in effect relating to or affecting creditors' rights generally,
including the effect of statutory and other Laws regarding fraudulent
conveyances and preferential transfers, and subject to the limitations imposed
by general equitable principles regardless of whether such enforceability is
considered in a proceeding at law or in equity), and HNS, HNS Europe, HNS UK or
the applicable Transferred Subsidiary is not in default and has not failed to
perform any material obligation thereunder, and, to the Knowledge of HNS, there
does not exist any event, condition or omission which would constitute a breach
or default (whether by lapse of time or notice or both) by any other Person
under a Material Contract, in each case which would reasonably be expected to
result in the termination of such Material Contract or result in a Liability in
excess of $500,000. HNS has furnished to the Investor, or otherwise made
available for the Investor's review in HNS's data room, true and complete
copies of all Material Contracts, including all amendments thereto, or has
furnished the material terms thereof if no true or complete copy is available.
(c) For each Contract with a U.S. Governmental Authority being
performed in whole or part by HNS or its Affiliates which is or will be a
Business Asset, neither a U.S. Governmental Authority nor any prime contractor
or subcontractor to HNS or any of its Affiliates has notified HNS or its
Affiliates that HNS or its Affiliates has breached or violated any Laws, and
neither an uncured material breach of contract nor a violation of Laws in
connection with such Contracts with U.S. Governmental Authorities has occurred;
no termination for default, cure notice or show cause notice is in effect; and
no U.S. Governmental Authority has issued any written notice of any material
claim against HNS or its Affiliates. None of HNS, the Transferred Subsidiaries
or, to the Knowledge of HNS, any of their respective officers, directors,
employees or consultants are under criminal or civil investigation by any U.S.
Governmental Authority relating to any activity or obligation under any
Contract with a U.S. Governmental Authority being performed in whole or part by
HNS or its Affiliates. None of HNS, the Transferred Subsidiaries or, to the
Knowledge of HNS, any of their respective officers, directors, employees or
consultants have notice of any qui tam complaint, with respect to any alleged
irregularity, misstatement, omission or any other matter with respect to a
Contract with a U.S. Governmental Authority performed or being performed in
whole or part by HNS or any of its Affiliates. None of HNS and its Affiliates,
or, to the Knowledge of HNS, their officers, directors, employees or
consultants, has been debarred or suspended, or received a notice of proposed
debarment or suspension, from any U.S. governmental procurement programs in the
past three years and no such actions are pending, and none of the foregoing
entities or persons are on the list of parties excluded from procurement
programs in the United States, in each case to the extent the same would
reasonably be expected to have a material adverse impact on the operations of
the Business following Closing.
(d) Each of Parent and HNS hereby represents and warrants that
the Investor has been provided copies or reproductions of all provisions
(including relevant specifications) contained in the Boeing Contract or any
other Contract between Parent or one of its Subsidiaries, on the one hand, and
Boeing or one of its Affiliates, on the other hand, that relate to or are
otherwise applicable to Spaceway 3.
4.17 ENVIRONMENTAL MATTERS. Except with respect to any Excluded
Liabilities: (a) the Business Assets and HNS's, HNS Europe's, HNS UK's and the
Transferred Subsidiaries' operation of the Business do not violate any
Environmental, Safety and Health Laws, except for any failure to comply that
would not reasonably be expected to have a Material Adverse Effect on the
Business; (b) HNS, HNS Europe, HNS UK and the Transferred Subsidiaries maintain
and comply with all permits required under Environmental, Safety and Health
Laws that are necessary to use the Business Assets and operate the Business as
currently used and operated, except for any failure to maintain or comply that
would not reasonably be expected to have a Material Adverse Effect on the
Business; (c) there are no past, pending or threatened Environmental Claims
against HNS, HNS Europe, HNS UK and the Transferred Subsidiaries, and, to the
Knowledge of HNS, there are no facts or circumstances that would reasonably be
expected to form the basis of an Environmental Claim against HNS, HNS Europe,
HNS UK and the Transferred Subsidiaries, except in each case as would not
reasonably be expected to have a Material Adverse Effect on the Business; (d)
to the Knowledge of HNS, during the period of its ownership, operation or
tenancy, no Releases of Hazardous Substances have occurred at, from, in, to,
on, or under any Site and no Hazardous Substances are present in, on, about or
migrating to or from any Site that would reasonably be expected to give rise to
an Environmental Claim against HNS, HNS Europe, HNS UK or the Transferred
Subsidiaries; (e) none of HNS, HNS Europe, HNS UK or any of the Transferred
Subsidiaries, nor any of their respective predecessors, nor any entity
previously owned by them, has transported or arranged for the treatment,
storage, handling, disposal, or transportation of any Hazardous Substance to
any off-Site location which would reasonably be expected to result in an
Environmental Claim against HNS, HNS Europe, HNS UK or the Transferred
Subsidiaries; (f) there are no underground storage tanks, active or abandoned,
polychlorinated biphenyl containing equipment, or asbestos containing material
(i) at the Owned Real Property, (ii) at any property subject to a Real Property
Lease if HNS has leased a substantial majority of such property for at least
five (5) years and HNS has conducted manufacturing activities at such property
within five (5) years prior to the date hereof, or (iii) to the Knowledge of
HNS, at any property subject to a Real Property Lease (and not described in the
immediately preceding clause (ii)); and (g) except as have been provided to the
Investor or otherwise made available for the Investor's review in HNS's data
room, HNS, HNS Europe, HNS UK and the Transferred Subsidiaries are not in
possession of any reports, studies, analyses, tests or monitoring pertaining to
Hazardous Substances in, on or under any property relating to the Business
Assets or pertaining to compliance with Environmental, Safety and Health Laws.
4.18 LICENSES AND PERMITS. HNS, HNS Europe, HNS UK and the Transferred
Subsidiaries have all of the Communications Licenses necessary for the lawful
conduct of the Business in substantially the same manner as the Business is
currently conducted, except where the failure to have the same would reasonably
be expected to have a Material Adverse Effect on the Business. Section 4.18 of
the Disclosure Schedule sets forth a list of all material HNS Permits that are
Communications Licenses and all material pending applications related to such
Communications Licenses or related to the acquisition of new HNS Permits that
would be Communications Licenses. HNS or one of its Affiliates is the holder of
the Communications Licenses identified in Section 4.18 of the Disclosure
Schedule. Section 4.18 of the Disclosure Schedule identifies the Communications
Licenses with respect to which Governmental Approval is required in connection
with the consummation of the Contemplated Transactions. Complete and correct
copies of the Communications Licenses identified on Section 4.18 of the
Disclosure Schedule have been delivered or made available to the Investor.
Except as would not reasonably be expected to have a Material Adverse
Effect on the Business: (i) each Communications License identified on Section
4.18 of the Disclosure Schedule is validly issued and in full force and effect;
(ii) none of HNS, HNS Europe, HNS UK or any Transferred Subsidiary is a party
to and none of HNS, HNS Europe, HNS UK or any Transferred Subsidiary has any
Knowledge of any Proceeding before any Governmental Authority to revoke,
suspend, cancel, refuse to renew or modify, or impose a forfeiture or other
sanction with respect to, any of the Communications Licenses identified on
Section 4.18 of the Disclosure Schedule; (iii) HNS has no reason to believe
that any of the Communications Licenses identified in Section 4.18 of the
Disclosure Schedule will not be renewed in the Ordinary Course of Business;
(iv) HNS, HNS Europe, HNS UK and the Transferred Subsidiaries are operating the
facilities authorized under the Communications Licenses set forth in Section
4.18 of the Disclosure Schedule in accordance with their terms and such
operation is in compliance with the Communications Laws; and (v) no event has
occurred which, after notice or lapse of time or both, reasonably would be
expected to result in revocation, suspension, adverse modification, non-renewal
or termination of, or any order of forfeiture with respect to, any
Communications License set forth on Section 4.18 of the Disclosure Schedule.
Section 4.18 of the Disclosure Schedule sets forth a description of certain
other licensing matters, which description is accurate and complete in all
material respects.
4.19 LABOR. None of HNS, HNS Europe, HNS UK or any of the Transferred
Subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to Persons employed by HNS or any of the Transferred
Subsidiaries, nor, to the Knowledge of HNS, HNS Europe or HNS UK are there any
activities or proceedings of any labor union to organize any such employees, or
of employees to join any labor union or commence collective bargaining in any
form.
4.20 BROKERS. Except for HNS's arrangement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, none
of HNS, any Transferred Subsidiary or any of their respective Affiliates has
retained any broker or finder or incurred any Liability for any brokerage fees,
commissions or finder's fees with respect to this Contribution Agreement, the
other Transaction Documents or the Contemplated Transactions.
4.21 AFFILIATE TRANSACTIONS. Except for compensation paid or payable
by HNS or the Transferred Subsidiaries to bona fide employees of HNS or the
Transferred Subsidiaries in the Ordinary Course of Business, none of (a) HNS,
any current executive officer or shareholder of HNS holding in excess of 5% of
the outstanding share capital of HNS, or any of their respective relatives or
spouses or (b) any Transferred Subsidiary, any current executive officer or
shareholder of any Transferred Subsidiary holding in excess of 5% of the
outstanding share capital of HNS, or any of their respective relatives or
spouses, is now, or has been during the last three (3) years, (x) a party to
any transaction or Contract with HNS, any Transferred Subsidiary, or any of
their respective employees or Affiliates which will be part of the Business,
(y) the direct or indirect owner of an interest in any Person which is a
present competitor, major supplier or major customer of HNS or any Transferred
Subsidiary (other than beneficial holdings of less than 5% in publicly-held
companies) or (z) a recipient of any benefit or payment in excess of $50,000
from HNS or a Transferred Subsidiary.
4.22 INVESTMENT REPRESENTATIONS.
(a) HNS acknowledges that the membership interests in Newco and
the shares of SkyTerra Stock to be received hereunder have not been and will
not be registered or qualified under the Securities Act, or any state
securities Laws and are offered in reliance upon an exemption from registration
under the Securities Act and state securities Laws. Except for the transfer to
the Investor contemplated by SECTION 2.7, the membership interests in Newco and
the shares of SkyTerra Stock to be received by HNS hereunder shall be held by
HNS for investment purposes only for its own account, and not with a view to or
for sale in connection with any distribution of the membership interests in
Newco or the shares of SkyTerra Stock, and HNS acknowledges that the membership
interests in Newco and the shares of SkyTerra Stock that it will retain cannot
be sold or otherwise disposed of unless they are registered under the
Securities Act or pursuant to an exemption therefrom. Except for the transfer
to the Investor contemplated by SECTION 2.7, HNS has no contract,
understanding, agreement or arrangement with any Person to sell, transfer or
grant a participation to such Person or any other Person, with respect to any
or all of the membership interests in Newco or the shares of SkyTerra Stock it
will receive in accordance with the provisions hereof.
(b) HNS is an "accredited investor" within the meaning of Rule
501 promulgated under the Securities Act and has knowledge and experience in
financial and business matters such that it is capable of evaluating the merits
and risks of receiving and owning the membership interests in Newco and the
shares of SkyTerra Stock, and HNS is able to bear the economic risk of such
ownership and understands that an investment in the membership interests in
Newco and the shares of SkyTerra Stock involves substantial risks.
4.23 NEWCO.
Newco is a limited liability company duly organized, validly
existing and in good standing under the Laws of the State of Delaware. Since
its formation, Newco has not engaged in any activity, other than such actions
in connection with (a) its organization and (b) the preparation, negotiation
and execution of this Contribution Agreement, the other Transaction Documents
and the other matters related to the Contemplated Transactions. Newco has no
operations, has not generated any revenues, and has no material Liabilities
(other than those Liabilities incurred in connection with the foregoing). HNS
owns all of the membership interests in Newco free and clear of all
Encumbrances, except those arising under applicable securities Laws or as a
result of this Contribution Agreement. Upon the sale of the Investor Interest
to the Investor against payment therefor in accordance with SECTION 2.7, the
Investor will acquire a 50% membership interest (on a fully diluted basis) in
Newco as provided in Schedule A of the Restated LLC Agreement free and clear of
all Encumbrances (except for any restrictions imposed by applicable securities
Laws, the Restated LLC Agreement and the Investor Rights Agreement).
4.24 EARTH STATIONS AND GROUND FACILITY RIGHTS.
Section 2.2(a)(xiv) of the Disclosure Schedule and Section 4.18
of the Disclosure Schedule set forth a list, as of the date hereof, of all
material Network Operation and Control Centers and transmitting and/or receive
teleport earth station facilities located on Real Property (together, the
"EARTH STATIONS"). Except as have not had, and would not reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on the
Business, the improvements to each Earth Station and all items of equipment
used in connection therewith are (a) in good operating condition and repair and
are suitable for their intended purposes and (b) supported by a back-up
generator capable of generating power sufficient to meet the requirements of
the operations conducted at the Earth Station. To the Knowledge of HNS, no
other radio communications facility is causing harmful interference to the
transmission from or the receipt of signals by any Earth Station, except for
any instances of harmful interference that have not had, and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Business.
5. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Except as set forth
on the Investor Disclosure Schedule (or the Updated Investor Disclosure
Schedule with respect to representations and warranties made as of the Closing
Date), the Investor hereby represents and warrants to Parent and HNS, as of the
date hereof and as of the Closing Date, as follows:
5.1 ORGANIZATION, STANDING, QUALIFICATION. The Investor is a
corporation duly organized, validly existing and in good standing under the
Laws of the State of Delaware. The Investor has the full corporate power and
authority to carry on its business as presently conducted and to execute and
deliver this Contribution Agreement and the other Transaction Documents to
which it is a party and to carry out the Contemplated Transactions.
5.2 AUTHORIZATION. The execution and delivery of, and performance by
the Investor under, this Contribution Agreement and the other Transaction
Documents to which it is a party and the consummation by the Investor of the
Contemplated Transactions have been duly authorized by all necessary corporate
action on the part of the Investor and no other corporate proceedings on the
part of the Investor are necessary to authorize this Contribution Agreement and
such other Transactions Documents, or to consummate the Contemplated
Transactions.
5.3 BINDING OBLIGATION. This Contribution Agreement, and each other
Transaction Document to be executed by the Investor pursuant hereto, have been
or will be at Closing executed and delivered in accordance with the provisions
thereof, and (assuming such agreements constitute the legal and binding
obligations of Parent, HNS, Newco or its Affiliates, as the case may be) shall
each constitute a valid and binding obligation of the Investor enforceable in
accordance with its terms (a) except to the extent that enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or other similar
Laws now or hereinafter in effect relating to or affecting creditors' rights
generally, including statutory and other Laws regarding fraudulent conveyances
or preferential transfers, and (b) subject to the limitations imposed by
general equitable principles regardless of whether such enforceability is
considered in a Proceeding at Law or in equity.
5.4 NONCONTRAVENTION. Neither the execution and the delivery of this
Contribution Agreement or the other Transaction Documents, nor the consummation
of the Contemplated Transactions, will, in any material respect, (a) violate
any provision of the organizational documents of the Investor, (b) violate any
provision of applicable Law binding upon the Investor, or (c) conflict with,
result in a breach of, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material Contract, lease,
license, instrument, note, bond, mortgage or deed of trust to which the
Investor is a party, except with respect to clauses (b) and (c) for such
conflicts or violations which would not reasonably be expected to have a
material adverse effect on the ability of the Investor to consummate the
Contemplated Transactions.
5.5 LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as set forth in the SEC Documents and except for
rulemaking proceedings or other Proceedings of general applicability, there are
no Proceedings pending, or to the Knowledge of the Investor, threatened,
against the Investor or any of its Subsidiaries at law or in equity, or before
or by any court, arbitrator, domestic or foreign, or any other Governmental
Authority that would reasonably be expected to have a Material Adverse Effect
on the Investor. The Investor and its Subsidiaries are not operating under,
subject to or in default with respect to any Order of any court, arbitrator or
Governmental Authority that would reasonably be expected to have a Material
Adverse Effect on the Investor.
(b) The Investor and each of its Subsidiaries have complied and
are in compliance with all applicable Laws to which any of them are subject
(including the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002), except for any failure to comply
that would not reasonably be expected to have a Material Adverse Effect on the
Investor. Neither the Investor nor any of its Subsidiaries has received any
notice from any Person regarding any actual or alleged violation of any Law by
the Investor or any such Subsidiary, except for any alleged violation that
would not reasonably be expected to have a Material Adverse Effect on the
Investor.
5.6 FINANCING. The Investor has, and at Closing will have,
sufficient cash, marketable securities or other investments or available
sources of credit to enable the Investor to consummate the Contemplated
Transactions on the terms and conditions set forth in the Transaction
Documents. Simultaneously with the execution and delivery of this Contribution
Agreement, the Investor has delivered to Parent a true and correct copy of a
pro forma balance sheet demonstrating that the Investor has and will have
sufficient funds to allow the Investor to pay the cash portion of the
Membership Interest Purchase Price.
5.7 QUALIFICATIONS TO HOLD COMMUNICATIONS LICENSES. The Investor is
not aware of any reason that its ownership interest in Newco as contemplated by
this Contribution Agreement would prevent Newco from being legally, financially
and otherwise qualified under the Communications Act and other applicable U.S.
and foreign Communications Laws to be the licensee of and to own and operate
the Business and to perform its obligations hereunder in all material respects.
To the Investor's Knowledge, no fact or circumstance exists relating to the
qualifications or otherwise of the Investor as it relates to its proposed
ownership interest in Newco as contemplated by this Contribution Agreement that
(a) would reasonably be expected to prevent or delay, in any material respect,
the FCC or other Governmental Authorities from granting approval of the
Communications Applications; or (b) would reasonably be expected to prevent or
delay, in any material respect, or otherwise disqualify Newco as the licensee,
owner, operator or transferee of the Business in any jurisdiction.
5.8 CONDITION OF BUSINESS; INDEPENDENT INVESTIGATION. The Investor is
an informed and sophisticated participant in the Contemplated Transactions, and
has engaged expert advisors experienced in the evaluation and purchase of
securities similar to the Investor Interest. The Investor has undertaken an
investigation, has been provided with, has evaluated and has relied upon
certain documents and information to assist it in making an informed and
intelligent decision with respect to the execution of the Transaction
Documents. The Investor acknowledges that neither Parent nor HNS makes any
representation or warranty as to the prospects, financial or otherwise, or
future revenues or results of the Business, and that any projections, estimates
or forecasts of future revenues or results or events provided by or on behalf
of Parent or HNS are subject to uncertainty and to the assumptions used in
their preparation. The Investor is not relying on any representation or
warranty of any Person with respect to the Contemplated Transactions, other
than those representations and warranties specifically set forth in this
Contribution Agreement, the other Transaction Documents and any certificates
delivered in connection herewith or therewith that are made by HNS, Newco or
the Parent. The Investor agrees that Newco shall accept the Contributed Assets
and the Assumed Liabilities as they exist on the Closing Date based on the
Investor's inspection, examination and determination with respect thereto as to
all matters, and without reliance upon any express or implied representations
or warranties of any nature, whether in writing, orally or otherwise, made by
or on behalf of or imputed to Parent, HNS or any of their Affiliates, except as
expressly set forth in the Transaction Documents.
5.9 SEC DOCUMENTS; UNDISCLOSED LIABILITIES.
(a) The Investor has filed all required reports, schedules,
statements, forms and other documents with the Securities and Exchange
Commission (the "SEC") since January 1, 2002 (the "SEC DOCUMENTS"). As of their
respective dates of filing with the SEC (or, if amended or superseded by a
filing prior to the date hereof, as of the date of such amendment or
superseding filing), the SEC Documents complied in all material respects with
the requirements of the Securities Act or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such SEC
Documents, and none of the SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The financial
statements of the Investor included in the SEC Documents fairly present in all
material respects the consolidated financial position of the Investor and its
consolidated Subsidiaries and the consolidated results of operations and cash
flows of such companies as of the dates and for the periods shown. As of the
date hereof, there are no outstanding written comments from the SEC with
respect to any of the SEC Documents.
(b) There are no Liabilities of the Investor or its Subsidiaries
of any nature, whether accrued, contingent, absolute, determined, determinable
or otherwise, that are required to be reflected in the Investor's financial
statements in accordance with GAAP and that in the aggregate would reasonably
be expected to have a Material Adverse Effect on the Investor, other than (i)
Liabilities that are appropriately reflected or reserved for in the
consolidated financial statements of the Investor included in its Quarterly
Report on Form 10-Q for the fiscal quarter ended September 30, 2004, as filed
with the SEC prior to the date hereof, (ii) Liabilities incurred since
September 30, 2004 in the ordinary course of business consistent with past
practice, (iii) Liabilities incurred pursuant to the Contemplated Transactions,
and (iv) Liabilities discharged or paid in full prior to the date hereof in the
ordinary course of business consistent with past practice.
5.10 SKYTERRA STOCK.
(a) The shares of SkyTerra Stock to be issued to HNS in
accordance with the terms hereof, when issued, shall be duly authorized and
validly issued, fully paid and non-assessable and free of all Encumbrances
(except for any restrictions imposed by applicable securities Laws).
(b) The authorized capital stock of the Investor consists of: (i)
200,000,000 shares of Common Stock, par value $.01 per share (the "SKYTERRA
COMMON STOCK"); (ii) 100,000,000 shares of Non-voting Common Stock, par value
$.01 per share (the "SKYTERRA NON-VOTING COMMON STOCK"); and (iii) 10,000,000
shares of Preferred Stock, par value $.01 per share (the "SKYTERRA PREFERRED
STOCK"). As of the close of business on September 30, 2004, (A) 6,077,309
shares of SkyTerra Common Stock were issued and outstanding and 1,301,760
shares of SkyTerra Common Stock were reserved for issuance upon the exercise or
payment of outstanding stock options, stock units or other awards or pursuant
to any plans of the Investor under which any award, grant or other form of
compensation issuable in the form of, or based in whole or in part on the value
of, SkyTerra Common Stock, has been conferred on any Person (such stock
options, units and other awards and plans, collectively, the "SKYTERRA STOCK
PLANS"), (B) 8,990,212 shares of SkyTerra Non-voting Common Stock were issued
and outstanding, and (C) 1,199,007 shares of SkyTerra Preferred Stock
designated as Series A Convertible Preferred Stock were issued and outstanding.
All outstanding shares of SkyTerra Common Stock, SkyTerra Non-voting Common
Stock and SkyTerra Preferred Stock have been duly authorized and validly issued
and are fully paid and non-assessable and are not subject to preemptive rights
(except in the case of SkyTerra Preferred Stock).
(c) No bonds, debentures, notes or other indebtedness generally
having the right to vote on any matters on which stockholders of the Investor
may vote are issued or outstanding.
5.11 BROKERS. Except for the Investor's arrangement with Bear ▇▇▇▇▇▇▇,
neither the Investor nor any of its Affiliates has retained any broker or
finder or incurred any Liability or obligation for any brokerage fees,
commissions or finder's fees with respect to this Contribution Agreement, the
other Transaction Documents to which it is a party or the Contemplated
Transactions.
5.12 PURCHASER REPRESENTATIONS. (a) The Investor acknowledges that the
membership interests in Newco to be received hereunder have not been and will
not be registered or qualified under the Securities Act, or any state
securities Laws and are offered in reliance upon an exemption from registration
under the Securities Act and state securities Laws. The membership interests in
Newco to be received by the Investor hereunder shall be held by the Investor
for investment purposes only for its own account, and not with a view to or for
sale in connection with any distribution of the membership interests in Newco,
and the Investor acknowledges that the membership interests in Newco that it
will receive cannot be sold or otherwise disposed of unless they are registered
under the Securities Act or pursuant to an exemption therefrom. The Investor
does not have any contract, understanding, agreement or arrangement with any
Person to sell, transfer or grant a participation to such Person or any other
Person, with respect to any or all of the membership interests in Newco it will
receive in accordance with the provisions hereof.
(b) The Investor is an "accredited investor" within the meaning
of Rule 501 promulgated under the Securities Act and has knowledge and
experience in financial and business matters such that it is capable of
evaluating the merits and risks of receiving and owning the membership
interests in Newco, and the Investor is able to bear the economic risk of such
ownership and understands that an investment in the membership interests in
Newco involves substantial risks.
6. FOREIGN EMPLOYEE MATTERS. Newco and HNS hereby agree as to the
foreign employee and employee benefit matters set forth in EXHIBIT I.
7. U.S. EMPLOYEE MATTERS. Newco and HNS hereby agree as to U.S.
employee and employee benefit matters set forth in EXHIBIT J.
8. CLOSING.
8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EACH PARTY. The obligations
of Parent, HNS and the Investor to consummate Closing are subject to the
satisfaction (or waiver by each of the Investor and Parent) of the following
conditions:
(a) Any applicable waiting period under ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
relating to the Contemplated Transactions shall have expired or been
terminated;
(b) The European Commission shall have taken any applicable
decision, whether or not conditional, that may be required under Article
6(1)(b) or, if the Commission has initiated proceedings pursuant to Article
6(1)(c), under Article 8(2) of Council Regulation (EC) No. 139/2004 (the
"REGULATION") declaring the Contemplated Transactions compatible with the
common market, or being deemed to have done so under Article 10(6) of the
Regulation.;
(c) (i) The FCC shall have granted the Communications
Applications filed with it pursuant to this Contribution Agreement and listed
such grant in a public notice issued by the FCC and (ii) five (5) days shall
have elapsed from the date of such public notice;
(d) A Financing meeting the requirements of SECTION 2.7(B) shall
have been consummated, either prior to or concurrently with Closing;
(e) The Governmental Authorities listed on Section 8.1(e) of the
Disclosure Schedule shall have granted the Communications Applications filed
with them pursuant to this Contribution Agreement; and
(f) No Order of any U.S. federal or state (but not local)
Governmental Authority or any Governmental Authority identified on Section
8.1(e) of the Disclosure Schedule that restrains, invalidates or prohibits the
Contemplated Transactions or compels Investor or any of its Affiliates to
dispose or hold separate any portion of the business or Assets of Investor or
any of its Affiliates as a result of the consummation of the Contemplated
Transaction shall be in effect.
8.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE INVESTOR. The
obligation of the Investor to consummate Closing is subject to the satisfaction
(or waiver by the Investor) of the following conditions:
(a) (i) Parent and HNS shall have performed and complied in all
material respects with their respective obligations under this Contribution
Agreement required to be performed or complied with by them at or prior to
Closing, except for such obligations which are qualified by materiality or
Material Adverse Effect in which case such obligations shall have been
performed and complied with in all respects (taking into account any
materiality or Material Adverse Effect qualifier contained therein), (ii) each
of the representations and warranties of HNS and Parent contained in this
Contribution Agreement, without regard to any materiality or Material Adverse
Effect qualifier contained therein, shall be true and correct at and as of the
date of this Contribution Agreement and as of the Closing Date, as if made at
and as of each such date, except that those representations and warranties
which by their express terms are made as of a different date shall be required
to be true and correct only as of such date, in each case except for
inaccuracies or omissions that in the aggregate would not reasonably be
expected to have a Material Adverse Effect on the Business, and (iii) the
Investor shall have received a certificate signed by an officer of HNS and
Parent to the foregoing effect;
(b) Since the date hereof, there shall not have occurred and
there shall not exist any event or circumstance that has had or is reasonably
likely to have a Material Adverse Effect on the Business or the Business
Assets;
(c) Newco and each Transferred Subsidiary shall have received all
Consents set forth on Section 8.2(c) of the Disclosure Schedule;
(d) Newco and HNS, or an Affiliate of HNS, as the case may be,
shall have executed and delivered, on or before the Closing Date, the
Transaction Documents that are required to be executed by Newco, HNS or such
Affiliate, and Newco, Parent and HNS shall have delivered or caused to be
delivered all other closing deliverables set forth in SECTION 8.5;
(e) Boeing and Parent shall have executed and delivered the
Spaceway 3 Amendment;
(f) Thirty (30) days shall have elapsed since the date that HNS
delivered to the Investor the Interim Statements and the Annual Statements
required by SECTION 3.10, and the Interim Statements and the 2003 Annual
Statements shall evidence financial or economic performance of the VSAT
Business similar to or better than, in all material respects, the financial or
economic performance of the VSAT Business evidenced by the Financial Statements
for the same periods, and no more than two of the following fourteen individual
balance sheet, statement of operations or cash flow items in the Interim
Statements and the 2003 Annual Statements shall differ by more than the
corresponding percentages (or dollar amounts in the case of (iii) below) set
forth below from the comparable items in the Financial Statements for the same
periods (after making adjustments to specific items on the Financial
Statements, if any, necessary to reflect any reclassifications resulting from
the SAS 100 review of the Interim Statements or the audit of the Annual
Statements, without regard to any movements between the specific periods to
which such items relate):
(i) 10% for (A) a decline in total assets less cash and cash
equivalents, (B) an increase in short-term borrowings and current portion of
long-term debt plus long-term debt, (C) a decline in revenues and (D) an
increase in total operating costs and expenses (exclusive of depreciation and
amortization expenses);
(ii) 15% for (A) a decline in revenues less cost of products
sold and (B) an increase in expenditures for property; and
(iii) (A) $10 million decline for net cash provided by (used
in) operating activities with respect to the Interim Statements and (B) $20
million decline for net cash provided by (used in) operating activities with
respect to the 2003 Annual Statements;
provided that to the extent that there are any items of the Spaceway Business
on the Financial Statements, items of such type will be deemed to be included
in the Interim Statements and 2003 Annual Statements in a consistent manner for
this purpose; and
(g) The condition set forth on Section 8.2(g) of the
Disclosure Schedule has been satisfied.
8.3 CONDITIONS PRECEDENT TO OBLIGATION OF PARENT AND HNS. The
obligation of Parent and HNS to consummate Closing is subject to the
satisfaction (or waiver by Parent) of the following conditions:
(a) (i) The Investor shall have performed and complied in all
material respects with their respective obligations under this Contribution
Agreement required to be performed or complied with by them at or prior to
Closing, except for such obligations which are qualified by materiality or
Material Adverse Effect in which case such obligations shall have been
performed and complied with in all respects (taking into account any
materiality or Material Adverse Effect qualifier contained therein), (ii) the
representations and warranties of the Investor contained in this Contribution
Agreement, without regard to any materiality or Material Adverse Effect
qualifier contained therein, shall be true and correct at and as of the date of
this Contribution Agreement and as of the Closing Date, as if made at and as of
each such date, except that those representations and warranties which by their
express terms are made as of a different date shall be required to be true and
correct only as of such date, in each case except for inaccuracies or omissions
that in the aggregate would not reasonably be expected to have a Material
Adverse Effect on the Investor; and (iii) Parent and HNS shall have received
certificates signed by an officer of the Investor to the foregoing effect;
(b) The Purchase Price shall have been paid to HNS as
contemplated by SECTION 2.7(E); and
(c) The Investor or its assignee, as the case may be, shall have
executed and delivered, on or before the Closing Date, the Transaction
Documents that are required to be executed by the Investor; and the Investor
shall have delivered or caused to be delivered all other closing deliverables
set forth in SECTION 8.6.
8.4 UPDATED DISCLOSURE SCHEDULE.
(a) At any time prior to Closing, HNS shall be entitled to
deliver to the Investor updates to, or substitutions of, the Disclosure
Schedule solely with respect to (i) matters related to SECTION 4 that arise
after the date hereof and (ii) Assumed Liabilities under SECTION 2.4(A)(XII)
arising from or relating to Proceedings initiated after the date hereof against
HNS or any of its Subsidiaries in the Ordinary Course of Business by any Person
who is or was (A) employed by HNS or such Subsidiary or (B) a direct or
indirect customer (or was associated with such customer) of HNS or such
Subsidiary, which updates or substitutions shall be clearly marked as such
(with such updates and substitutions, the "UPDATED DISCLOSURE SCHEDULE"). In
the event that HNS delivers an Updated Disclosure Schedule within three (3)
days of any scheduled Closing Date hereunder, the Investor shall be entitled to
extend, by written notice to HNS, the scheduled Closing Date to the third day
after it receives the Updated Disclosure Schedule and any information regarding
the updates reasonably requested by the Investor, or if such day is not a
business day, to the next business day. The delivery by HNS of the Updated
Disclosure Schedules shall not prejudice any rights of any Newco Indemnified
Person hereunder, including (i) the right to claim that the representations and
warranties of HNS, when made on the date hereof, were inaccurate or false, (ii)
the right to claim that the covenants and agreements of HNS and/or Parent
contained herein were breached or (iii) the right to seek indemnification
pursuant to SECTION 9 hereof. The Updated Disclosure Schedule shall be deemed
to qualify the representations and warranties made as of the Closing Date and
replace for such purpose, in whole or in part as the case may be, the
Disclosure Schedule previously delivered hereunder for such purposes.
(b) At any time prior to Closing, the Investor shall be entitled
to deliver to Parent updates to, or substitutions of, the Investor Disclosure
Schedule solely with respect to matters related to SECTION 5 that arise after
the date hereof, which updates or substitutions shall be clearly marked as such
(with such updates and substitutions, the "UPDATED INVESTOR DISCLOSURE
SCHEDULE"). In the event that the Investor delivers an Updated Investor
Disclosure Schedule within three (3) days of any scheduled Closing Date
hereunder, Parent shall be entitled to extend, by written notice to the
Investor, the scheduled Closing Date to the third day after it receives the
Updated Investor Disclosure Schedule and any information regarding the updates
reasonably requested by Parent, or if such day is not a business day, to the
next business day. The delivery by the Investor of the Updated Investor
Disclosure Schedules shall not prejudice any rights of any Parent Indemnified
Person hereunder, including (i) the right to claim that the representations and
warranties of the Investor, when made on the date hereof, were inaccurate or
false, (ii) the right to claim that the covenants and agreements of the
Investor contained herein were breached or (iii) the right to seek
indemnification pursuant to SECTION 9 hereof. The Updated Investor Disclosure
Schedule shall be deemed to qualify the representations and warranties made as
of the Closing Date and replace for such purpose, in whole or in part as the
case may be, the Investor Disclosure Schedule previously delivered hereunder
for such purposes.
8.5 DELIVERIES BY HNS. At Closing, HNS shall deliver, or cause to
be delivered, to the Investor the following:
(a) A ▇▇▇▇ of sale and assumption agreement in substantially the
form attached hereto as EXHIBIT K (the "▇▇▇▇ OF SALE AND ASSUMPTION
AGREEMENT"), and such other instruments and agreements customary in any
applicable foreign jurisdiction or required by any foreign Governmental
Authority as the Investor or HNS shall reasonably require to transfer to Newco
title to the Contributed Assets or evidence the assumption by Newco of the
Assumed Liabilities (collectively with the ▇▇▇▇ of Sale and Assumption
Agreement, the "TRANSFER INSTRUMENTS"));
(b) Copies of the board, stockholder (and any equivalent actions
for HNS Europe, HNS UK or any Transferred Subsidiary) and any other corporate
resolution required in order to approve the consummation of the Contemplated
Transactions, certified by an authorized officer of HNS, HNS Europe, HNS UK or
the Transferred Subsidiaries, as applicable;
(c) The certificates contemplated by SECTION 8.2(A) signed by an
executive officer of HNS and Parent;
(d) The Restated LLC Agreement executed by an authorized officer
of HNS;
(e) The Investor Rights Agreement executed by an authorized
officer of HNS;
(f) The Transition Services Agreement, if any, that has been
agreed pursuant to SECTION 2.6(C), executed by an authorized officer of HNS
and/or Parent, as appropriate;
(g) Special warranty deed, or comparable Transfer Instrument in
favor of Newco, in customary form for the applicable jurisdiction, with respect
to the Owned Real Property;
(h) The Intellectual Property Agreement, the Transition and Back
Up Trademark License Agreement attached thereto as Schedule D, and the
Confirmatory Intellectual Property Sublicense Agreement attached thereto as
Schedule E, in each case, executed by an authorized officer of Parent;
(i) A Non-Competition Agreement in substantially the form
attached hereto as EXHIBIT L (the "NON-COMPETITION AGREEMENT") executed by an
authorized officer of Parent and HNS;
(j) The Spaceway Services Agreement executed by an authorized
officer of Parent and HNS;
(k) The DirecWay Agreement, if any, that has been agreed pursuant
to SECTION 2.6(D), executed by an authorized officer of Parent;
(l) The Registration Rights Agreement executed by an authorized
officer of HNS or, if applicable, its designee;
(m) Share certificates or other evidence representing all of the
capital stock or equity interests in each Transferred Subsidiary and each of
the other entities listed on Section 2.2(b) of the Disclosure Schedule, duly
endorsed or accompanied by duly executed assignments separate from certificates
in form suitable for transfer of such capital stock or equity interests to
Newco effective as of the Closing Date;
(n) Duly executed copies of all Consents set forth on Section
8.2(c) of the Disclosure Schedule reasonably acceptable to the Investor;
(o) A certificate of HNS complying with the Code and treasury
regulations promulgated thereunder, in form and substance reasonably acceptable
to the Investor, certifying that the Contemplated Transactions hereby are
exempt from withholding under Section 1445 of the Code; and
(p) Such other documents as the Investor may reasonably request
in accordance herewith to consummate the Contemplated Transactions.
8.6 DELIVERIES BY THE INVESTOR. At Closing, the Investor or its
assignee, as the case may be, shall deliver to HNS the following:
(a) Payment of the cash portion of the Membership Interest
Purchase Price in immediately available funds;
(b) Delivery of certificates in the name of HNS or its designee
representing the shares of SkyTerra Stock to be issued pursuant to SECTION
2.7(C)(Y);
(c) Copies of the resolutions of the Investor and, if applicable,
its assignee, approving the consummation of the Contemplated Transactions
certified by an authorized officer of the Investor and, if applicable, its
assignee;
(d) The certificate contemplated by SECTION 8.3(A) signed by an
executive officer of the Investor;
(e) The Restated LLC Agreement executed by an authorized officer
of the Investor or its assignee, as the case may be;
(f) The Investor Rights Agreement executed by an authorized
officer of the Investor or its assignee, as the case may be;
(g) The Registration Rights Agreement executed by an authorized
officer of the Investor; and
(h) Such other documents as HNS or Parent may reasonably request
in accordance herewith to consummate the Contemplated Transactions.
8.7 DELIVERIES BY NEWCO. At Closing, Parent, HNS and the Investor
(and its assignee, if applicable) shall cause Newco to deliver the following:
(a) Payment of the Purchase Price to HNS in immediately available
funds;
(b) The Intellectual Property Agreement, the Transition and Back
Up Trademark License Agreement attached thereto as Schedule D, and the
Confirmatory Intellectual Property Sublicense Agreement attached thereto as
Schedule E, in each case, executed by an authorized officer of Newco;
(c) The ▇▇▇▇ of Sale and Assumption Agreement and any other
Transfer Instruments (to the extent required to be executed by Newco);
(d) The Investor Rights Agreement executed by an authorized
officer of Newco;
(e) The Transition Services Agreement, if any, that has been
agreed pursuant to SECTION 2.6(C), executed by an authorized officer of Newco;
(f) The Non-Competition Agreement executed by an authorized
officer of Newco;
(g) The Spaceway Services Agreement executed by an authorized
officer of Newco;
(h) The DirecWay Agreement, if any, that has been agreed pursuant
to SECTION 2.6(D), executed by an authorized officer of Newco;
(i) Copies of the board of manager, member and any other limited
liability company resolution required in order to approve the consummation of
the Contemplated Transactions, certified by the sole member of Newco; and
(j) Such other documents as Parent, HNS or the Investor may
reasonably request in accordance herewith to consummate the Contemplated
Transactions.
9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION; REMEDIES.
9.1 SURVIVAL OF REPRESENTATIONS; EXCLUSIVE REMEDY.
(a) All representations and warranties of HNS, on one hand, and
the Investor on the other, in this Contribution Agreement, any other
Transaction Document or any certificate delivered in connection with the
Contemplated Transactions (i) shall survive Closing, any investigation at any
time made and the consummation of the Contemplated Transactions and (ii) shall
terminate and expire thirty (30) days after the receipt by Newco of the final,
audited financial statements for the year ended December 31, 2005, but not
later than April 30, 2006, except with respect to (A) any claims as to which
written notice identifying such claim and the basis thereof with reasonable
specificity shall have been delivered pursuant to the applicable provisions of
this Contribution Agreement on or prior to such date, in which case, such
claims shall survive until the final resolution thereof, (B) any claims related
to fraud or willful misconduct, or (C) as set forth in subsection (d) below.
(b) The covenants and agreements (but for the avoidance of doubt,
not the representations and warranties) of the parties set forth herein and in
any other Transaction Document shall survive Closing and any investigation at
any time made and the consummation of the Contemplated Transactions until fully
performed, unless limited by their terms or purpose.
(c) Except as set forth in SECTION 10.2, upon expiration or
termination of this Contribution Agreement, the representations, warranties and
covenants set forth herein shall be of no further force or effect, except with
respect to any claim as to which written notice identifying such claim and the
basis thereof with reasonable specificity shall have been delivered pursuant to
the applicable provisions of this Contribution Agreement on or prior to
expiration or termination.
(d) (i) HNS's representations and warranties with respect to
SECTIONS 4.1, 4.2, 4.3, 4.5, 4.10(A), 4.20 and 4.23 (the "EXCLUDED HNS
REPRESENTATIONS") and the Investor's representations and warranties with
respect to SECTIONS 5.1, 5.2, 5.3, 5.10(A) and 5.11 (the "EXCLUDED INVESTOR
REPRESENTATIONS") shall survive until the expiration of the applicable statute
of limitations, (ii) HNS's representations and warranties with respect to the
second sentence of SECTION 4.9 shall survive until the expiration of the
applicable statute of limitations, and (iii) HNS's representations and
warranties with respect to SECTIONS 4.14, 4.15 and 4.17 shall survive until the
earlier of (A) expiration of the applicable statute of limitations and (B) the
date that is the ten (10) year anniversary of the Closing Date, except in each
case with respect to any claim as to which written notice identifying such
claim and the basis thereof with reasonable specificity shall have been
delivered pursuant to the applicable provisions of this Contribution Agreement
on or prior to such date, in which case, such claim shall survive until the
final resolution thereof.
(e) Subject to specific performance and other injunctive relief
pursuant to SECTION 11.16, and subject to the provisions of SECTION 3.7,
indemnification pursuant to this SECTION 9 shall be the sole and exclusive
remedy for any breach of representations and warranties or of any covenant or
agreement in this Contribution Agreement by any party or any other matter
pertaining to this Contribution Agreement or the Contemplated Transactions,
provided that the forgoing limitation shall not apply with respect to claims of
fraud or willful misconduct. Without limiting the generality of the foregoing,
the Newco Indemnified Persons shall have no recourse against HNS or its
subsidiaries from and after Closing with respect to this Contribution Agreement
(other than recourse with respect to the remedies provided in SECTION 11.16),
it being understood that, following Closing, the sole recourse of any Newco
Indemnified Person for any post-Closing Liability under this Contribution
Agreement shall be against Parent.
9.2 AGREEMENT OF PARENT TO INDEMNIFY. Subject to SECTION 9.4,
Parent shall indemnify, defend and hold harmless the Newco Indemnified Persons
from and against any and all Damages incurred or suffered by the Newco
Indemnified Persons arising out of, relating to or in connection with any (a)
breach of any representation or warranty, determined without regard to any
materiality or Material Adverse Effect qualifiers contained therein, or (b)
noncompliance with any covenant or other written agreements, in each case,
given or made by HNS or Parent in this Contribution Agreement, in any other
Transaction Document including HNS's obligations pursuant to SECTION 3.7 or in
any certificate delivered in connection herewith or therewith; provided that
none of the Investor, its assignee or Affiliates shall be entitled to seek
indemnification for Damages under this SECTION 9.2 based on any Damages
incurred or suffered by Newco or any of its Subsidiaries, it being understood
that any of the Newco Indemnified Persons (other than such Persons) shall be
entitled to seek such indemnification.
9.3 AGREEMENT OF THE INVESTOR TO INDEMNIFY. The Investor shall
indemnify, defend and hold harmless the Parent Indemnified Persons from and
against any and all Damages incurred or suffered by the Parent Indemnified
Persons arising out of, relating to or in connection with any (a) breach of any
representation or warranty, determined without regard to any materiality or
Material Adverse Effect qualifiers contained therein, or (b) noncompliance with
any covenants or other written agreements, in each case, given or made by the
Investor in this Contribution Agreement, in any other Transaction Document or
in any certificate delivered in connection herewith or therewith.
9.4 LIMITS OF INDEMNIFICATION.
(a) HNS and Parent shall not be liable to the Newco Indemnified
Persons in respect of any indemnification pursuant to SECTION 9.2(A) until the
aggregate Damages of the Newco Indemnified Persons exceed an amount equal to
Five Million Dollars ($5,000,000) (the "BASKET AMOUNT"), and then Newco
Indemnified Persons shall only be entitled to the aggregate Damages in excess
of the Basket Amount; provided, however, that the Basket Amount shall not apply
to claims for indemnification based on (i) breaches of Excluded HNS
Representations or (ii) fraud or willful misconduct.
(b) The parties acknowledge and agree that the maximum aggregate
liability of HNS and Parent pursuant to SECTION 9.2(A) shall not exceed an
amount equal to Sixty Million Dollars ($60,000,000) (the "CAP AMOUNT");
provided, however, that the Cap Amount shall not apply to claims for
indemnification based on (i) breaches of Excluded HNS Representations or (ii)
fraud or willful misconduct.
(c) The Investor shall not be liable to the Parent Indemnified
Persons in respect of any indemnification pursuant to SECTION 9.3(A) until the
aggregate Damages of the Parent Indemnified Persons exceed an amount equal to
the Basket Amount, and then Parent Indemnified Persons shall only be entitled
to the aggregate Damages in excess of the Basket Amount; provided, however,
that the Basket Amount shall not apply to claims for indemnification based on
(i) breaches of Excluded Investor Representations or (ii) fraud or willful
misconduct.
(d) The parties acknowledge and agree that the maximum aggregate
liability of the Investor pursuant to SECTION 9.3(A) shall not exceed an amount
equal to the Cap Amount; provided, however, that the Cap Amount shall not apply
to claims for indemnification based on (i) Excluded Investor Representations or
(ii) fraud or willful misconduct.
9.5 SPECIAL INDEMNIFICATION BY PARENT.
(a) Notwithstanding SECTION 9.4, Parent shall indemnify, defend
and hold harmless, without regard to any limitations or any materiality,
Material Adverse Effect, Knowledge or other qualifications in the
representations, warranties, covenants or other agreements or in the Disclosure
Schedule, the Newco Indemnified Persons from and against any and all Damages,
whether or not involving a Third-Party Claim, arising out of, relating to or
resulting from (i) the Excluded Assets and (ii) the Excluded Liabilities
(without duplication for amounts otherwise provided for in SECTION 3.7).
(b) The special indemnities in this SECTION 9.5 shall not
terminate or expire, shall survive for an unlimited period, and for the
avoidance of doubt shall not be subject to the limitations set forth in
SECTION 9.4.
9.6 SPECIAL INDEMNIFICATION BY NEWCO.
(a) Newco shall indemnify, defend and hold harmless, without
regard to any limitations or any materiality, Material Adverse Effect,
Knowledge or other qualifications in the representations, warranties, covenants
or other agreements or in the Disclosure Schedule, the Parent Indemnified
Persons from and against any and all Damages, whether or not involving a
Third-Party Claim, arising out of, relating to or resulting from (i)
noncompliance with any covenants or other written agreements, in each case,
given or made by Newco in this Contribution Agreement, in any other Transaction
Document or in any certificate delivered in connection herewith or therewith,
only to the extent such non-compliance occurs after Closing, (ii) operation of
the Contributed Assets from and after Closing, and (iii) the Assumed
Liabilities. The foregoing obligations of Newco shall not in any way relieve
Parent of its obligation to indemnify, defend or hold harmless the Newco
Indemnified Persons under SECTIONS 9.2 AND 9.5.
(b) The special indemnities in this SECTION 9.6 shall not
terminate or expire, shall survive for an unlimited period, and for the
avoidance of doubt shall not be subject to the limitations set forth in
SECTION 9.4.
9.7 CONDITIONS OF INDEMNIFICATION.
(a) Except as provided in SECTION 9.8, if any Newco Indemnified
Person shall seek indemnification pursuant to SECTION 9.2 or SECTION 9.5, or if
any Parent Indemnified Person, shall seek indemnification pursuant to SECTION
9.3 or SECTION 9.6, the party seeking indemnification (the "INDEMNIFIED PARTY")
shall give written notice to the party from whom such indemnification is sought
(the "INDEMNIFYING PARTY") promptly (and in any event within 60 days) after the
Indemnified Party (or, if the Indemnified Party is a corporation, any officer
or director of the Indemnified Party) becomes aware that a claim for
indemnification (an "INDEMNIFIED CLAIM") may be made, specifying in reasonable
detail the factual basis of the Indemnified Claim, stating the amount of the
Damages, if known, the method of computation thereof, containing a reference to
the provision of this Contribution Agreement in respect of which such
Indemnified Claim arises and demanding indemnification therefor. The failure of
an Indemnified Party to provide notice in accordance with this SECTION 9.7, or
any delay in providing such notice, shall not constitute a waiver of that
party's claims to indemnification pursuant to this SECTION 9, except to the
extent that (i) any such failure or delay in giving notice causes the amounts
paid or to be paid by the Indemnifying Party to be greater than they otherwise
would have been (in which case, only the excess amount of such claim resulting
from such delay shall be waived) or otherwise results in prejudice to the
Indemnifying Party or (ii) if such notice is not delivered to the Indemnifying
Party prior to the expiration of the applicable survival period, if any, set
forth in SECTION 9.1. If the Indemnified Claim arises from the assertion of any
claim, or the commencement of any Proceeding brought by a Person that is not a
party hereto (a "THIRD PARTY CLAIM"), any such notice to the Indemnifying Party
shall be accompanied by a copy of any Documents theretofore served on or
delivered to the Indemnified Party in connection with such Third Party Claim (a
"THIRD PARTY CLAIM NOTICE").
(b) The Indemnifying Party shall have 20 days from delivery of
the Third Party Claim Notice to notify the Indemnified Party whether or not the
Indemnifying Party elects to defend the Indemnified Party against such Third
Party Claim. In the event that the Indemnifying Party notifies the Indemnified
Party that it elects to defend the Indemnified Party against such Third Party
Claim and acknowledges its obligations to indemnify the Indemnified Party in
full hereunder in connection with such Third Party Claim, the Indemnifying
Party shall have the right to defend the Indemnified Party by appropriate
proceedings and shall control such defense at the Indemnifying Party's expense
unless (i) the claim seeks only an injunction or other equitable relief, (ii)
the Indemnified Party shall have been advised by counsel that there are one or
more legal or equitable defenses available to it which are different from or in
addition to those available to the Indemnifying Party and, in the reasonable
opinion of the Indemnified Party, counsel for the Indemnifying Party could not
adequately represent the interests of the Indemnified Party because such
interests could be in conflict with those of the Indemnifying Party, (iii) such
Proceeding could have a material effect on any material matter beyond the scope
of the indemnification obligation of the Indemnifying Party or (iv) the
Indemnifying Party shall not have assumed the defense of the third party claim
within the foregoing 20 day period. After notice to the Indemnified Party of
the Indemnifying Party's election to assume the defense of such Third Party
Claim, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal expenses subsequently incurred by the Indemnified Party in connection
with the defense thereof unless the Indemnifying Party fails to diligently
pursue the defense of such Third Party Claim; provided that the Indemnified
Party shall have the right to employ counsel to represent it. If the
Indemnifying Party elects not to defend the Indemnified Party against such
Third Party Claim, then the Indemnified Party may (but is not obligated to)
defend such Third Party Claim by appropriate Proceedings and may (but is not
obligated to) control such defense, at the expense of the Indemnifying Party.
(c) The parties shall render to each other such assistance as may
reasonably be requested in order to insure the proper and adequate defense of
any such Third Party Claim, including making employees available (with
reasonable prior notice) during normal business hours to provide additional
information and explanation of any relevant materials or to testify at any
Proceedings relating to such Third Party Claim and giving the other party
reasonable access to any books, records and other documents and information
relating to the defense of such Third Party Claim. The Indemnifying Party shall
reimburse the out-of-pocket costs and expenses reasonably incurred by the
Indemnified Party in providing such assistance.
(d) The Indemnifying Party will not consent to the entry of any
Order or enter into any settlement with respect to a Third Party Claim without
the prior written consent of the Indemnified Party, unless the Order (x)
involves only the payment of money damages and (y) includes as an unconditional
term thereof the giving by the claimant or plaintiff to the Indemnified Party
of an unconditional release from all Liability in respect of the Third Party
Claim.
(e) Any obligation by an Indemnifying Party to indemnify an
Indemnified Party shall be satisfied in cash. Parent and HNS hereby waive any
right to seek indemnification or contribution from any Transferred Subsidiary
for Damages as a result of any breach by HNS or any Transferred Subsidiary of
any representation, warranty or any covenant or other agreement to be performed
prior to Closing contained in this Contribution Agreement or any other
Transaction Document.
9.8 TAX CONTROVERSIES; ASSISTANCE AND COOPERATION.
(a) In the event any Tax authority informs any Newco Indemnified
Person or any Parent Indemnified Person of any notice of proposed audit, claim,
assessment or other dispute concerning a Tax with respect to which the other
party may incur liability hereunder, the party so informed shall notify the
other party of such matter. Such notice shall contain factual information (to
the extent known) describing any asserted Tax liability in reasonable detail
and shall be accompanied by copies of any notice or other documents received
from any Tax authority with respect to such matter. If an Indemnified Party has
Knowledge of an asserted Tax liability with respect to a matter for which it is
to be indemnified hereunder and such Indemnified Party fails to provide the
Indemnifying Party notice as provided herein, then the obligation of the
Indemnifying Party to indemnify the Indemnified Party under this SECTION 9.8(A)
shall be reduced or eliminated to the extent such Indemnifying Party is
prejudiced by such failure.
(b) The Indemnifying Party shall, at its own expense, control any
audits, disputes, administrative, judicial or other proceedings related to
Taxes with respect to which it may incur liability hereunder. Subject to the
immediately preceding sentence, in the event an adverse determination may
result in a party having responsibility for any increased amount of Taxes
hereunder, each party shall be entitled to fully participate, at its own
expense, in that portion of the proceedings relating to the Taxes with respect
to which it may incur liability hereunder, including participation in
conferences, meetings or proceedings with any Tax authority, participation in
appearances before any court or tribunal, participation in the submission and
determination of the content of the documentation, protests, memoranda of fact
and law, briefs, and the conduct of oral arguments and presentations.
(c) No Indemnifying Party shall agree to settle any Tax liability
or compromise any claim with respect to Taxes, which settlement or compromise
may affect the liability for Taxes (or right to tax benefit) of the other
party, without such other party's consent (which consent shall not be
unreasonably withheld or delayed).
9.9 NOTICE OF BREACHES OF REPRESENTATIONS AND WARRANTIES. (a) As
of the date hereof, the Investor has no Knowledge of any inaccuracy of any
representation or warranty of Parent or HNS contained in this Contribution
Agreement that is sufficient to allow the Investor to bring a claim for
indemnification against Parent pursuant to SECTION 9.2(A) hereof following
Closing (without taking into account the Basket Amount). For purposes of this
Section, "KNOWLEDGE" of the Investor means the actual knowledge of ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇. Nothing set forth in this Section shall
limit or otherwise affect the ability of any Newco Indemnified Person to seek
indemnification pursuant to SECTION 9.2(A) hereof unless Parent can demonstrate
that, based on information provided by HNS or Parent to the Investor, the
Investor had Knowledge as of the date hereof that such representation and
warranty was not true and correct.
(b) As of the date hereof, neither Parent nor HNS has any
Knowledge of any inaccuracy of any representation or warranty of the Investor
contained in this Contribution Agreement that is sufficient to allow Parent or
HNS to bring a claim for indemnification against the Investor pursuant to
SECTION 9.3(A) hereof following Closing (without taking into account the Basket
Amount). Nothing set forth in this Section shall limit or otherwise affect the
ability of any Parent Indemnified Person to seek indemnification pursuant to
SECTION 9.3(A) hereof unless the Investor can demonstrate that, based on
information provided by the Investor to Parent or HNS, Parent or HNS had
Knowledge as of the date hereof that such representation and warranty was not
true and correct.
10. TERMINATION.
10.1 TERMINATION. This Contribution Agreement may be terminated
at any time prior to Closing:
(a) by the Investor if (i) a material breach of any provision of
this Contribution Agreement has been committed by Parent, Newco or HNS and such
breach has not been (A) cured by Parent, Newco or HNS within thirty (30) days
after notice thereof given by the Investor to HNS to the extent that such
breach is capable of being cured or (B) waived in writing by the Investor, (ii)
there has been any update to the Disclosure Schedule pursuant to SECTION 8.4
that could reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Business, or (iii) if any of the conditions set
forth in SECTIONS 8.1 or 8.2 shall have been incapable of fulfillment and shall
not have been waived by the Investor;
(b) by Parent if (i) a material breach of any provision of this
Contribution Agreement has been committed by the Investor and such breach has
not been (A) cured by the Investor within thirty (30) days after notice thereof
given by Parent to the Investor to the extent that such breach is capable of
being cured or, (B) waived in writing by Parent, (ii) there has been any update
to the Investor Disclosure Schedule pursuant to SECTION 8.4 that could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Investor, or (iii) any of the conditions set forth in
SECTIONS 8.1 or 8.3 shall have been incapable of fulfillment and shall not have
been waived by Parent;
(c) by mutual written consent of the Investor and Parent;
(d) by the Investor, if Closing has not occurred on or before
June 30, 2005 or such later date as the parties may agree upon in writing,
unless the Investor is in material breach of this Contribution Agreement;
(e) by Parent, if Closing has not occurred on or before June 30,
2005 or such later date as the parties may agree upon in writing, unless Parent
or HNS is in material breach of this Contribution Agreement; or
(f) by either Parent or the Investor, if:
(i) the FCC shall have denied any Communications Application,
or shall have designated any Communications Application for hearing, except any
denials or designations with respect to Governmental Approvals that are
immaterial to the Business taken as a whole; or
(ii) five (5) business days shall have elapsed following such
time as any permanent injunction or other similar order of a court of competent
jurisdiction or other competent U.S. federal or state (but not local)
Governmental Authority (other than the FCC) preventing the consummation of the
Contemplated Transactions shall have been entered (so long as such permanent
injunction or similar order is still in effect at the expiration of such five
(5) business day period), regardless of whether such order is appealable or has
been appealed and, prior to such termination, the parties shall have used
commercially reasonable efforts to resist, resolve or lift, as applicable, such
injunction or other similar order.
Any party hereto desiring to terminate this Contribution
Agreement pursuant to this SECTION 10.1 shall give written notice of such
termination to the other parties hereto.
10.2 EFFECT OF TERMINATION. If this Contribution Agreement is
terminated as permitted by SECTION 10.1, (a) this Contribution Agreement shall
forthwith become void and of no further force and effect, except for the
following provisions, which shall remain in full force and effect: SECTION 3.4
(Public Announcements), SECTION 3.5 (B) and (C) (Confidentiality), SECTION 10
(Termination) and SECTION 11 (Miscellaneous); and (b) such termination shall be
without Liability of any party hereto (or any Affiliate, stockholder,
consultant or Representative of such party) to the other parties to this
Contribution Agreement; provided, however, that if the Contemplated
Transactions fail to close as a result of a breach of the provisions of this
Contribution Agreement by any party hereto, such party shall be liable for any
and all Damages incurred or suffered by the other parties as a result of all
such breaches. The rights and remedies provided in this SECTION 10.2 shall be
cumulative and not exclusive of any rights or remedies provided by applicable
Law.
11. MISCELLANEOUS.
11.1 ADDITIONAL ACTIONS AND DOCUMENTS. Each party hereto hereby agrees
that, from time to time, whether before, at or after Closing, such party will
take or cause to be taken such further reasonable actions and to execute,
deliver and file or cause to be executed, delivered and filed such further
reasonable documents, in each case, in order to fully effectuate the purposes,
intents, terms and conditions of this Contribution Agreement; provided,
however, no party shall be required to make any additional representations or
warranties or incur any burden or obligation to incur any material expense or
potential exposure to legal liability pursuant to this section.
11.2 EXPENSES.
(a) Subject to the indemnity provisions of SECTION 9 and the
provisions of SECTION 3.1, SECTION 11.2(B), SECTION 11.3(B) and SECTION
11.3(C), each party hereto shall pay its own expenses incident to this
Contribution Agreement, the other Transaction Documents and the Contemplated
Transactions, including all legal and accounting fees and disbursements.
(b) Any costs, fees or expenses paid or incurred by or on behalf
of (i) the Investor or any of its Affiliates in connection with the preparation
and negotiation of the Transaction Documents and in connection with the
Contemplated Transactions shall be reimbursed by or assumed and paid by Newco
at Closing, (ii) Parent or any of its Affiliates in connection with the
preparation and negotiation of the Transaction Documents and in connection with
the Contemplated Transactions in an amount not to exceed Five Million Dollars
($5,000,000) shall be reimbursed by or assumed and paid by Newco at Closing,
and (iii) Newco in connection with the Financing shall be the responsibility of
Newco, and any party incurring costs, fees or expenses on behalf of Newco shall
be reimbursed by or assumed and paid by Newco at Closing.
11.3 BULK SALES; TRANSFER TAXES.
(a) Each of Newco and HNS and its Affiliates hereby waive
compliance with all bulk transfer Laws that may be applicable to them in
connection with the Contemplated Transactions.
(b) Newco shall bear all sales (including bulk sales), use, value
added, stamp, documentary, filing, gross receipts, registration, excise,
license recording, transfer, conveyance or similar fees or Taxes or
governmental charges as levied by any Governmental Authority in connection with
the Contemplated Transactions (other than Taxes measured by or with respect to
income imposed on Newco or HNS or their respective Affiliates).
(c) HNS shall bear all capital gains tax (if any), to be levied
on a withholding basis under the name of the Foreign Enterprise Income Tax
under Chinese Law, arising from or in connection with the direct transfer to
Newco of equity interests in the Transferred Subsidiaries organized under the
under the Laws of the People's Republic of China.
11.4 ASSIGNMENT. No party hereto shall assign its rights and
obligations under this Contribution Agreement, in whole or in part, whether by
operation of law or otherwise, without the prior written consent of each of the
other parties hereto, except that (i) the Investor may assign its rights under
this Contribution Agreement and the other Transaction Documents, in whole or in
part, to one or more of its wholly-owned Subsidiaries that has no material
Liabilities and that would not reasonably be expected to result in any
additional regulatory filings (other than ministerial filings) or delay Closing
and (ii) HNS may assign its rights and obligations under this Contribution
Agreement to Parent; provided that no such assignment shall (x) prior to the
consummation of the Contemplated Transactions, relieve the Investor of its
obligations hereunder including its obligation to pay the cash portion of the
Membership Interest Purchase Price and deliver shares of SkyTerra Stock in
accordance with the terms of this Contribution Agreement (it being understood
that from and after Closing the Investor shall have no further obligations
under this Contribution Agreement provided that the assignee Subsidiary of the
Investor shall have expressly assumed in writing the obligations of the
Investor hereunder) or (y) relieve HNS of its obligations hereunder including
its obligation to deliver the Contributed Assets in accordance with the terms
of this Contribution Agreement. Any purported assignment or other disposition,
except as permitted herein, shall be null and void. Except as provided above in
clause (x) with respect to the Investor, in no event shall the assignment by
HNS or the Investor of such party's respective rights or obligations under this
Contribution Agreement, whether before, at or after Closing, release such party
from such party's respective liabilities and obligations hereunder.
11.5 ENTIRE AGREEMENT; AMENDMENT.
(a) All exhibits and schedules (including the Disclosure Schedule
and the Investor Disclosure Schedule and including the covenants contained in
the Exhibits that by their terms are meant to be complied with on or prior to
Closing, including the covenants in Schedule B of the Intellectual Property
Agreement) to this Contribution Agreement are hereby incorporated by reference
into, and made a part of, this Contribution Agreement. This Contribution
Agreement, including the Disclosure Schedule and the Investor Disclosure
Schedule, the exhibits, schedules and other Transaction Documents referred to
herein or furnished pursuant hereto, constitute the entire agreement among the
parties hereto with respect to the Contemplated Transactions and supersede all
prior oral or written agreements, commitments or understandings, including the
Confidentiality Agreement, with respect to the matters provided for herein.
(b) THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT NO
REPRESENTATION, WARRANTY, PROMISE, INDUCEMENT, UNDERSTANDING, COVENANT OR
AGREEMENT HAS BEEN MADE OR RELIED UPON BY ANY PARTY HERETO OTHER THAN THOSE
EXPRESSLY SET FORTH IN THE TRANSACTION DOCUMENTS OR ANY CERTIFICATES DELIVERED
AT CLOSING HEREUNDER. WITHOUT LIMITING THE GENERALITY OF THE DISCLAIMER SET
FORTH IN THE IMMEDIATELY PRECEDING SENTENCE, (I) NEITHER HNS NOR ANY OF ITS
AFFILIATES HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATIONS OR
WARRANTIES, IN ANY PRESENTATION OR WRITTEN INFORMATION RELATING TO THE BUSINESS
GIVEN OR TO BE GIVEN IN CONNECTION WITH THE CONTEMPLATED TRANSACTIONS, IN ANY
FILING MADE OR TO BE MADE BY OR ON BEHALF OF HNS OR ANY OF ITS AFFILIATES WITH
ANY GOVERNMENTAL AUTHORITY, AND NO STATEMENT MADE IN ANY SUCH PRESENTATION OR
WRITTEN MATERIALS, MADE IN ANY SUCH FILING OR CONTAINED IN ANY SUCH OTHER
INFORMATION SHALL BE DEEMED A REPRESENTATION OR WARRANTY HEREUNDER OR
OTHERWISE, AND (II) NEWCO AND THE INVESTOR, ON THEIR OWN BEHALF AND ON BEHALF
OF THEIR RESPECTIVE AFFILIATES EXPRESSLY DISCLAIM ANY IMPLIED WARRANTIES,
INCLUDING WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF
MERCHANTABILITY. THE INVESTOR ACKNOWLEDGES THAT HNS HAS INFORMED IT THAT NO
PERSON HAS BEEN AUTHORIZED BY HNS OR ANY OF ITS AFFILIATES TO MAKE ANY
REPRESENTATION OR WARRANTY IN RESPECT OF THE BUSINESS OR IN CONNECTION WITH THE
CONTEMPLATED TRANSACTIONS, UNLESS IN WRITING AND CONTAINED IN THIS CONTRIBUTION
AGREEMENT OR IN ANY OF THE TRANSACTION DOCUMENTS TO WHICH IT IS A PARTY.
(c) No amendment, modification or discharge of this Contribution
Agreement shall be valid or binding unless set forth in writing and duly
executed and delivered by each of the parties hereto.
11.6 WAIVER. No delay or failure on the part of any party hereto
in exercising any right, power or privilege under this Contribution Agreement
or under any other Documents furnished in connection with or pursuant to this
Contribution Agreement (including the other Transaction Documents) shall impair
any such right, power or privilege or be construed as a waiver of any default
or any acquiescence therein. No single or partial exercise of any such right,
power or privilege shall preclude the further exercise of such right, power or
privilege, or the exercise of any other right, power or privilege. No waiver
shall be valid against any party hereto unless made in writing and signed by
the party against whom enforcement of such waiver is sought and then only to
the extent expressly specified therein. To the extent that the consent of
Parent, HNS or the Investor is required pursuant to this Contribution
Agreement, such consent may not be unreasonably withheld, conditioned or
delayed; provided that the parties hereto agree that Parent, HNS and the
Investor shall be permitted to make such decision taking into account its
position as a direct or indirect equity owner (or potential equity owner, in
the case of the Investor prior to Closing) of Newco.
11.7 SEVERABILITY. If any part of any provision of this Contribution
Agreement or any other agreement or Document given pursuant to or in connection
with this Contribution Agreement (including the other Transaction Documents)
shall be invalid or unenforceable in any respect, such part shall be
ineffective to the extent of such invalidity or unenforceability only, without
in any way affecting the remaining parts of such provision or the remaining
provisions of this Contribution Agreement or other such Document.
11.8 GOVERNING LAW. This Contribution Agreement, the rights and
obligations of the parties hereto, and any claims or disputes relating thereto,
shall be governed by and construed in accordance with the Laws of the State of
New York (excluding the choice of law rules thereof, other than Section 5-1401
of the New York General Obligations Law).
11.9 NOTICES. All notices, demands, requests, or other communications
which may be or are required to be given, served, or sent by any party to any
other party pursuant to this Contribution Agreement or another Transaction
Document shall be in writing and shall be hand delivered, sent by overnight
courier or mailed by first-class, registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(i) If to HNS or, prior to Closing, Newco:
▇▇▇▇▇▇ Network Systems, Inc.
c/o The DIRECTV Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with copies (which shall not constitute notice) to:
▇▇▇▇▇▇ Network Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telecopy No.: 301-428-2818
and
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(ii) If to Parent:
The DIRECTV Group, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy (which shall not constitute notice) to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(iii) If to the Investor:
SkyTerra Communications, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
with copies (which shall not constitute notice) to:
Apollo Management, L.P.
▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
and
O'Melveny & ▇▇▇▇▇ LLP
Times Square Tower
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn.: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: ▇▇▇-▇▇▇-▇▇▇▇
(iv) If after Closing, to Newco, to each of Parent and the
Investor as set forth above.
Each party may designate by notice in writing a new address
to which any notice, demand, request or communication may thereafter be so
given, served or sent. Each notice, demand, request, or communication which
shall be hand delivered, sent or mailed in the manner described above shall be
deemed sufficiently given, served, sent, received or delivered for all purposes
at such time as it is delivered to the addressee (with the return receipt or
the delivery receipt being deemed conclusive, but not exclusive, evidence of
such delivery) or at such time as delivery is refused by the addressee upon
presentation.
11.10 HEADINGS. Section headings contained in this Contribution
Agreement are inserted for convenience of reference only, shall not be deemed
to be a part of this Contribution Agreement for any purpose, and shall not in
any way define or affect the meaning, construction or scope of any of the
provisions hereof.
11.11 INTERPRETATION; ABSENCE OF PRESUMPTION.
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender shall be held
to include the other gender as the context requires, (ii) the terms "hereof,"
"herein," and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Contribution Agreement as a whole
(including all of the exhibits and schedules hereto) and not to any particular
provision of this Contribution Agreement, and article, section, paragraph,
exhibit and schedule references are to the articles, sections, paragraphs,
exhibits and schedules of this Contribution Agreement unless otherwise
specified, (iii) the word "including" and words of similar import when used in
this Contribution Agreement shall mean "including, without limitation," unless
the context otherwise requires or unless otherwise specified, (iv) the word
"or" shall not be exclusive, (v) where specific language is used to clarify or
illustrate by example a general statement contained herein, such specific
language shall not be deemed to modify, limit or restrict the construction of
the general statement which is being clarified or illustrated and (vi) "the
date hereof" means December 3, 2004.
(b) This Contribution Agreement shall be construed without regard
to any presumption or rule requiring construction or interpretation against the
party drafting or causing any agreement, instrument or document to be drafted.
11.12 EXECUTION IN COUNTERPARTS. To facilitate execution, this
Contribution Agreement may be executed in as many counterparts as may be
required. It shall not be necessary that the signatures of, or on behalf of,
each party, or that the signatures of all Persons required to bind any party,
appear on each counterpart; but it shall be sufficient that the signature of,
or on behalf of, each party, or that the signatures of the Persons required to
bind any party, appear on one or more of the counterparts. All counterparts
shall collectively constitute a single agreement. It shall not be necessary in
making proof of this Contribution Agreement to produce or account for more than
a number of counterparts containing the respective signatures of, or on behalf
of, all of the parties hereto. This Contribution Agreement may be executed
through delivery of duly executed signature pages by facsimile or electronic
mail.
11.13 LIMITATION ON BENEFITS. The covenants, undertakings and
agreements set forth in this Contribution Agreement shall be solely for the
benefit of, and shall be enforceable only by, the parties hereto and their
respective successors, heirs, executors, administrators, legal representatives
and permitted assigns, except that the agreements set forth in SECTION 9 also
shall be for the benefit of, and enforceable by, Newco Indemnified Persons,
Parent Indemnified Persons and their respective successors, heirs, executors,
administrators, legal representatives and permitted assigns.
11.14 BINDING EFFECT. Subject to SECTION 11.4, this Contribution
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors, heirs, executors, administrators, legal
representatives and assigns.
11.15 JURISDICTION. This Contribution Agreement and the duties and
obligations of the parties hereto and each of the other Transaction Documents
referred to herein shall be enforceable against the parties hereto in the
courts of the United States of America, and of the State of New York, having
jurisdiction over New York County, New York. For such purpose, the parties
hereto hereby irrevocably submit to the non-exclusive jurisdiction of such
courts, and agree that all claims in respect of this Contribution Agreement and
such other Transaction Documents may be heard and determined in any of such
courts. The parties hereto hereby irrevocably agree that a final judgment of
any of the courts specified above in any action or proceeding relating to this
Contribution Agreement or to any of the other Documents referred to herein
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by Law.
11.16 PROVISIONAL RELIEF; SPECIFIC PERFORMANCE. Notwithstanding
anything to the contrary herein, the parties agree that irreparable damage
would occur in the event that any of the provisions of this Contribution
Agreement or the other Transaction Documents are not performed in accordance
with their specific terms or were otherwise breached. Accordingly, it is agreed
that the parties shall be entitled to seek an injunction or injunctions to
prevent breaches of this Contribution Agreement or the other Transaction
Documents and to enforce specifically the terms and provisions of this
Contribution Agreement or the other Transaction Documents in any state or
federal court of the State of New York, in addition to any other remedy to
which they are entitled at law or in equity, and the parties hereby submit to
the jurisdiction of such courts.
11.17 WAIVER OF JURY TRIAL.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT
MAY ARISE UNDER THIS CONTRIBUTION AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT
IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS CONTRIBUTION AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR THE
CONTEMPLATED TRANSACTIONS.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Contribution Agreement, or have caused this Contribution Agreement to be duly
executed on their behalf, as of the day and year first above written.
HNS:
▇▇▇▇▇▇ NETWORK SYSTEMS, INC.
By: /s/▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: General Counsel
PARENT:
THE DIRECTV GROUP, INC.
By: /s/ J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
INVESTOR:
SKYTERRA COMMUNICATIONS, INC.
By: /s/▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: CEO
NEWCO:
▇▇▇▇▇▇ NETWORK SYSTEMS, LLC
By: /s/J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------
Name: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
LIST OF EXHIBITS
Exhibit Reference
------- ---------
A Definitions
B-1 List of Transition Services
B-2 Form of Transition Services Agreement
C DirecWay Agreement Term Sheet
D Form of Original LLC Agreement
E Commitment Letters
F Form of Restated LLC Agreement
G Calculation of Working Capital
G Working Capital Target Amount
H Form of Spaceway Services Agreement
H List of Spaceway Services
I Foreign Employee Matters
J U.S. Employee Matters
K Form of ▇▇▇▇ of Sale and Assumption Agreement
L Form of Non-Competition Agreement
M Form of Intellectual Property Agreement
N Form of Investor Rights Agreement
O HNS Knowledge Persons
P Form of Registration Rights Agreement
EXHIBIT A
DEFINITIONS
"ADJUSTMENT INTEREST RATE" means the per annum interest rate announced
as of the close of business on the day immediately prior to the Closing Date by
Citibank, N.A. as its prime rate.
"AFFILIATE" means, with respect to any Person: (a) with respect to an
individual, any member of such individual's family; (b) with respect to an
entity, any officer, director, stockholder, partner, member or investor of or
in such entity or of or in any affiliate of such entity; and (c) also with
respect to an entity, any Person which directly or indirectly, through one or
more intermediaries, Controls, is Controlled by, or is under common Control
with such Person or entity; provided that with respect to Newco, only Newco's
Subsidiaries shall be considered Affiliates of Newco; provided, further, that
The News Corporation Limited and its Subsidiaries (other than Parent and its
Subsidiaries) shall not be considered Affiliates of Parent or HNS.
"ANTITRUST LAWS" means all United States federal and state, and any
foreign (including those of the European Union), statutes, rules, regulations,
Orders, administrative and judicial doctrines, and other Laws relating to
antitrust or competition matters, including ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇, the ▇▇▇▇▇▇▇ Act,
as amended, the ▇▇▇▇▇▇▇ Act, as amended, the Federal Trade Commission Act, as
amended, and all other federal, state and foreign (including those of the
European Union) statutes, rules, regulations, Orders, administrative and
judicial doctrines and other Laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade or lessening of competition through merger or acquisition.
"ASSETS" means assets of every kind, including tangibles and
intangibles and real and personal property.
"BOEING CONTRACT" means the HSCII Agreement between Parent and Boeing
Satellite Systems International, Inc., dated December 17, 1999, as amended, and
the related contracts, agreements, schedules and exhibits associated with that
agreement.
"BUSINESS" means (i) the business, including the operations and assets
thereof, conducted by HNS, whether directly or through its Subsidiaries or
other investments, of providing broadband satellite networks and services to
enterprises, including its and their core enterprise Very Small Aperture
Terminal (or "VSAT") business, and its and their consumer VSAT, mobile
satellite and carrier network and services ancillary businesses (collectively,
the "VSAT BUSINESS") and (ii) the Spaceway Business; provided that the terms
"Business" and "VSAT Business" do not include (A) any of the Excluded
Businesses and (B) any Excluded Assets or Excluded Liabilities.
"BUSINESS ASSETS" means, collectively, the Contributed Assets and the
Transferred Subsidiary Assets.
"BUSINESS EMPLOYEE" means any employee who is working in the United
States or is on HNS's United States payroll, who is employed by, or associated
with, HNS or any of its Subsidiaries in connection with the Business, and (i)
whose services are primarily related to the Business and (ii) who is listed on
Section 4.15(b) of the Disclosure Schedule.
"CAPITAL LEASE OBLIGATIONS" means, as to any Person, the obligations
of such Person under a lease that are required to be classified and accounted
for as capital lease obligations under GAAP.
"CODE" means the Internal Revenue Code of 1986, as amended, and all
Laws promulgated pursuant thereto or in connection therewith.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended.
"COMMUNICATIONS APPLICATIONS" means the applications to the FCC and
other Governmental Authorities responsible for communications matters for
authority to assign to Newco each of the communications, earth station and
similar licenses and authorizations of HNS, HNS UK and the Transferred
Subsidiaries that are primarily related to the Business under Titles II and III
of the Communications Act and other Communications Laws, and to transfer
control to Newco of the Transferred Subsidiaries.
"COMMUNICATIONS LAWS" means all United States federal and state, and
any foreign (including those of the European Union), statutes, rules,
regulations, Orders, administrative and judicial doctrines, and other Laws that
are designed or intended to regulate the communications or telecommunications
industry, including the Communications Act, the Telecommunications Act of 1996,
as amended, any rule, regulation or policy of the FCC, and/or any statute,
rule, regulation or policy of any other Governmental Authority with respect to
the operation of channels of radio communication and/or the provision of
communications or telecommunications services.
"COMMUNICATIONS LICENSES" means the communications, earth station and
similar licenses and authorizations of HNS and its Subsidiaries that are
related to the Business under Titles II and III of the Communications Act and
other Communications Laws.
"CONFIDENTIAL INFORMATION" means all Trade Secrets and other
confidential or proprietary information of a Person, including information
derived from reports, investigations, research, work in progress, codes,
marketing and sales programs, financial projections, cost summaries, pricing
formulas, contract analyses, financial information, projections, confidential
filings with any Governmental Authority, and all other confidential concepts,
methods of doing business, ideas, materials or information prepared or
performed for, by or on behalf of such Person by its Representatives or
consultants.
"CONFIDENTIALITY AGREEMENT" means (a) the letter agreement dated May
12, 2004 between Apollo Management, L.P. and HNS and (b) the letter agreement
dated as of November 9, 2004 between Parent, Apollo Management, L.P. and the
Investor.
"CONSENT" means any (i) approval, authorization, certificate,
concession, consent, declaration, grant, exemption, license, permit, variance,
vote or waiver, (ii) registration or filing or (iii) report or notice,
including all renewals, amendments and extensions of any of the foregoing and
any similar matters.
"CONTEMPLATED TRANSACTIONS" means the transactions contemplated by the
Transaction Documents.
"CONTRACT" means any agreement, contract, note, bond, mortgage,
indenture, consensual obligation, promise, understanding, arrangement,
commitment or undertaking of any nature (whether written or oral and whether
express or implied) which is legally binding, and including any amendment,
modification, side letter, supplement or other agreement or change with respect
to the foregoing, whether written or oral; provided that the foregoing shall
not include Governmental Approvals.
"CONTROL" (including as used in the terms "controlling," "controlled
by" and "under common control with") means possession, directly or indirectly,
of (i) more than fifty percent (50%) of the securities or other ownership
interests in a Person or the voting power of a Person or (ii) the power to
direct or cause the direction of management or policies (whether through
ownership of voting securities, by agreement or otherwise) of a Person.
"DAMAGES" means all claims, actions or causes of action, assessments,
losses, damages, costs, Taxes, expenses, Liabilities, judgments, awards,
sanctions, penalties, charges and amounts paid in settlement, including
reasonable costs, fees and expenses of attorneys, experts, accountants,
appraisers, consultants, witnesses, investigators and any other agents or
representatives of such Person, but specifically excluding (i) any costs
incurred by or allocated to an Indemnified Party with respect to time spent by
employees of the Indemnified Party or any of its Affiliates and (ii) any
exemplary or punitive damages and any special, incidental or consequential
damages, losses or expenses, including lost profits or opportunity costs;
provided, that, if such damages, losses or expenses are assessed in connection
with a Third-Party Claim with respect to which the Person against which such
damages are assessed is entitled to indemnification hereunder, then such
damages, losses or expenses shall be included as Damages.
"DISCLOSURE SCHEDULE" means the disclosure schedule identified as the
Disclosure Schedule to this Contribution Agreement.
"DOCUMENTS" means any paper or other material (including computer
storage media) on which is recorded (by letters, numbers or other marks)
information that may be evidentially used, including legal opinions, mortgages,
indentures, notes, instruments, leases, agreements, insurance policies,
reports, studies, written financial information, schedules, certificates,
charts, maps, plans, photographs, letters, memoranda and all similar materials.
"ENCUMBRANCES" means any lien, encumbrance, hypothecation, charge,
mortgage, equity, trust, equitable interest, claim, preference, right of
possession, lease, tenancy, license, covenant, interference, proxy, right of
first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, limitation, impairment, imperfection of title or
restriction of any nature (including any restrictions on the voting of any
security, any restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any Asset, any
restriction on the use of any Asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any Asset).
"ENVIRONMENT" means all air, surface water, groundwater, or land,
including land surface or subsurface, including all fish, wildlife, biota and
all other natural resources.
"ENVIRONMENTAL CLAIM" means any and all administrative or judicial
actions, suits, orders, claims, liens, notices, notices of violations,
investigations, complaints, requests for information, proceedings, or other
communication (written or oral), whether criminal or civil, pursuant to any
applicable Environmental, Safety and Health Law by any Person (including any
Governmental Authority, private Person and citizens' group) based upon,
alleging, asserting, or claiming any actual or potential (i) violation of or
liability under any Environmental, Safety and Health Law, (ii) violation of any
environmental permit, or (iii) liability for investigatory costs, cleanup
costs, removal costs, remedial costs, response costs, natural resource damages,
property damage, personal injury, fines, or penalties arising out of, based on
or resulting from the presence, Release, or threatened Release into the
Environment, of any Hazardous Substances at any location, including any
off-Site location to which Hazardous Substances or materials containing
Hazardous Substances were sent for handling, storage, treatment, or disposal.
"ENVIRONMENTAL, SAFETY AND HEALTH LAWS" means any and all applicable
Laws that relate to protection of the environment, the protection of employees
from exposure to Hazardous Substances or that impose Liability for, or
standards of conduct concerning, the manufacture, processing, generation,
distribution, use, treatment, storage, disposal, Release, cleanup, transport or
handling of Hazardous Substances including the Resource Conservation and
Recovery Act of 1976, as amended, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Toxic Substances
Control Act, as amended, any other so-called "Superfund" or "Superlien" Laws,
and the Occupational Safety and Health Act of 1970, as amended, to the extent
it relates to the handling of and exposure to hazardous or toxic chemicals, and
the state analogues thereto, and any common law doctrine, including negligence,
nuisance, trespass, personal injury, or property damage related to or arising
out of the presence, Release, or exposure to a Hazardous Substance.
"EQUIPMENT LEASE ARRANGEMENTS" means the Contracts entered into by HNS
and its Affiliates from time to time pursuant to which HNS and its Affiliates
sell equipment related to the VSAT Business to one or more financing sources
and such equipment related to the VSAT Business subsequently is leased to a
customer of the Business.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" of any entity means any other entity (whether or not
incorporated) that, together with such entity, would be treated as a single
employer under Section 414 of the Code or Section 4001 of ERISA.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCLUDED BUSINESSES" means the businesses, joint ventures and
investments of HNS other than the Business, including (i) the Set-Top Box
Business and (ii) the equity and debt interests of HNS in the Excluded
Subsidiaries and all other investments of HNS or any of the Excluded
Subsidiaries, including the investment in ▇▇▇▇▇▇ Software Systems Limited and
Tata Teleservices (Maharashtra) Limited (India).
"EXCLUDED SUBSIDIARIES" means (a) each Subsidiary identified on
Section 2.3(g) of the Disclosure Schedule and (b) each other Subsidiary or
other company in which HNS or any of its Affiliates owns any equity interests
other than: (i) the Transferred Subsidiaries, (ii) the other entities listed on
Section 2.2(b) of the Disclosure Schedule, (iii) Ukranian Wave Ltd., (iv)
Shanghai ▇▇▇▇▇▇ Network Systems, Co., Ltd. and (v) ▇▇▇▇▇▇ Escorts
Communications Limited.
"FCC" means the United States Federal Communications Commission.
"FINAL ORDER" means a grant by the FCC of the Communications
Applications filed with the FCC at such time as each of the following shall
have occurred with respect thereto (i) the grant shall have been listed in a
public notice issued by the FCC, (ii) the 30-day period following publication
of such notice, as provided for under the Communications Laws, for parties to
file petitions for reconsideration, applications for review or similar filings
with respect to such grant shall have expired without the filing of any
petition for reconsideration, application for review or similar filing and
(iii) a further 10-day period shall have passed without the FCC giving notice
to the parties of its intent to review such grant sua sponte.
"FINANCIAL SUPPORT ARRANGEMENTS" means the Liabilities of HNS, Parent
or any of their respective Affiliates (other than the Transferred
Subsidiaries), contingent or otherwise, in respect of any indebtedness or
Liability (including assumed indebtedness or contingent obligations or
Liabilities) of the Business, of the following types: letters of credit and
standby letters of credit (including any related reimbursement or indemnity
agreements), direct or indirect guarantees, letters of comfort, performance
bonds, indemnity agreements, recourse agreements, agreements to maintain
solvency, assets, level of income or other financial condition, agreements to
make payment other than for value received and any other financial
accommodations of the type listed on Section 4.16(a)(v) of the Disclosure
Schedule.
"GAAP" means generally accepted accounting principles in the United
States of America as set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as have been
approved by a significant segment of the accounting profession.
"GOVERNMENTAL APPROVAL" means any: (a) permit, license, certificate,
concession, approval, Consent, ratification, permission, clearance,
confirmation, exemption, waiver, franchise, certification, designation, rating,
registration, variance, qualification, accreditation or authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Authority or pursuant to any Law; (b) right under any Contract
with any Governmental Authority, and (c) notice required to be given to any
Government Authority.
"GOVERNMENTAL AUTHORITY" means any foreign (including those of the
European Union), domestic, federal, territorial, state or local governmental
authority, quasi-governmental authority, instrumentality, court, arbitrator,
government or self-regulatory organization, commission, tribunal or
organization or any regulatory, administrative or other agency, or any
political or other subdivision, department or branch of any of the foregoing.
"GROUND FACILITY RIGHTS" means all rights (which may include title,
rights to use, or rights to receive service, as the case may be, under the
applicable portion of the Boeing Contract and the Satellite Operations
Contract) to and associated with (other than Intellectual Property rights) the
satellite control facilities, network operations center facilities and other
ground facilities to be constructed and all related Spaceway Business hardware.
"HANDLE" means to use, process, manufacture, produce, generate,
handle, store, treat, recycle, dispose of or transport.
"▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and all Laws promulgated pursuant thereto or in
connection therewith.
"HAZARDOUS SUBSTANCE" means any material, substance, waste, compound,
pollutant or contaminant listed, defined, designated or classified as
hazardous, toxic, flammable, explosive, reactive, corrosive, infectious,
carcinogenic, mutagenic or radioactive or otherwise regulated by any
Governmental Authority or under any Environmental, Safety and Health Law,
including petroleum or petroleum products (including crude oil) and any
derivative or by-product thereof, natural gas, synthetic gas and any mixture
thereof, or any substance that is or contains polychlorinated biphenyls (PCBs),
radon gas, urea formaldehyde, asbestos-containing materials (ACMs) or lead, and
for the avoidance of doubt, excluding radio frequencies.
"HNS PERMITS" means all permits, approvals, authorizations,
certificates, consents, franchises, licenses, concessions and rights issued or
authorized by any Governmental Authority (as amended or modified) to, or held
by, HNS, HNS Europe, HNS UK or any of the Transferred Subsidiaries, in
connection with the Business.
"HNS UK ASSETS" means (a) all Assets of ▇▇▇▇▇▇ Network Systems
Limited, a UK company ("HNS UK"), an indirect wholly-owned Subsidiary of HNS,
but excluding the UK Plan Assets and (b) all Assets of ▇▇▇▇▇▇ Network Systems
Europe Limited, a UK company ("HNS EUROPE"), a direct wholly-owned Subsidiary
of HNS.
"HNS UK LIABILITIES" means (a) all Liabilities of HNS UK, but
excluding the UK Plan Liabilities and (b) all Liabilities of HNS Europe.
"INCOME TAX" shall mean any Tax based upon, measured by, or calculated
with respect to net income or profits (including, any alternative minimum,
capital gains, franchise or similar Tax), including any interest, penalties, or
additions to tax imposed thereon or in connection therewith.
"INDEBTEDNESS" means (A) all outstanding indebtedness for borrowed
money of HNS, HNS Europe, HNS UK and the Transferred Subsidiaries relating to
the Business listed on Section 4.6(d) of the Disclosure Schedule and all
indebtedness for borrowed money of HNS, HNS Europe, HNS UK and the Transferred
Subsidiaries relating to the Business incurred between the date hereof and
Closing, in each case, including interest expense accrued but unpaid, and all
prepayment premiums and penalties, fees and charges on, or relating to, any of
such indebtedness, (B) indebtedness of the type described in clause (A) above
guaranteed by HNS, HNS Europe, HNS UK or the Transferred Subsidiaries or in
effect guaranteed, directly or indirectly, in any manner by HNS, HNS Europe,
HNS UK or the Transferred Subsidiaries through an agreement, contingent or
otherwise, to supply funds to, or in any other manner invest in, the debtor, or
to purchase indebtedness, or to purchase and pay for property if not delivered
or pay for services if not performed, primarily or exclusively, for the purpose
of enabling the debtor to make payment of the indebtedness or to insure the
owners of the indebtedness against loss, but excluding endorsements of checks
and other instruments in the ordinary course, and (C) all Capital Lease
Obligations of HNS, HNS Europe, HNS UK and the Transferred Subsidiaries
relating to the Business listed on Section 4.6(d) of the Disclosure Schedule
and any Capital Lease Obligations of HNS, HNS Europe, HNS UK and the
Transferred Subsidiaries relating to the Business incurred after the date
hereof; provided that items related to Equipment Lease Arrangements shall not
be included in Indebtedness.
"INTELLECTUAL PROPERTY" shall have the meaning given such term in the
Intellectual Property Agreement.
"INTELLECTUAL PROPERTY AGREEMENT" means the agreement between Newco
and Parent to be entered into at Closing in the form attached as EXHIBIT M,
pursuant to which Newco will acquire at Closing certain Intellectual Property
that is used in the Business from Parent and Parent will retain a license under
certain Intellectual Property.
"INTERNATIONAL TRADE LAWS" shall mean the following statutes and
regulations, as amended: Angola (UNITA) Sanctions Regulations, 31 C.F.R. Part
590; Anti-Terrorism and Effective Death Penalty Act, Pub. L. 104-132 (Apr. 24,
1996); Arms Export Control Act, 22 U.S.C. ss. 2751 et seq.; Burmese Sanctions
Regulations, 31 C.F.R. Part 537; Cuban Assets Control Regulations, 31 C.F.R.
Part 515; Cuban Democracy Act, 22 U.S.C. ▇▇.▇▇. 6001-6010; Cuban Liberty and
Democratic Solidarity Act, 22 U.S.C. ss. 6021 et seq.; Export ▇▇▇▇▇▇▇▇▇▇▇▇▇▇
▇▇▇, ▇▇ U.S.C. ▇▇.▇▇. 2401-2420 (2000); Export Administration Regulations, 15
C.F.R. Parts 730 et seq.; Federal Republic of Yugoslavia (Serbia and
Montenegro) and Bosnian Serb-Controlled Areas of the Republic of Bosnia and
Herzegovina Sanctions Regulations, 31 C.F.R. Part 585; Federal Republic of
Yugoslavia (Serbia and Montenegro) Kosovo Sanctions Regulations, 31 C.F.R. Part
586; Federal Republic of Yugoslavia (Serbia and Montenegro) ▇▇▇▇▇▇▇▇▇ Sanctions
Regulations, 31 C.F.R. Part 587; Foreign Assets Control Regulation 31 C.F.R.
Part 500; Foreign Corrupt Practices Act, 15 U.S.C. ▇▇.▇▇. 78dd-1 to 78dd-3;
Foreign Terrorist Organizations Sanctions Regulations, 31 C.F.R. Part 597;
Global Terrorism Sanctions Regulations, 31 C.F.R. Part 594; Highly Enriched
Uranium Agreement Assets Control Regulations, 31 C.F.R. 540; ILSA Extension Act
of 2001, 50 U.S.C. ss. 1701 note; International Emergency Economic Powers Act,
50 U.S.C. ▇▇.▇▇. 1701-1706 (2000); International Traffic in Arms Regulations,
22 C.F.R. Parts 120-130; Iran and Libya Sanctions Act, Pub. L. 104-172 (Aug. 5,
1996); Iranian Assets Control Regulations, 31 C.F.R. Part 535; Iranian
Transactions Regulations, 31 C.F.R. Part 560; Iran-Iraq Arms Nonproliferation
Act, Pub. L. 102-484 (Oct. 23, 1992); Iraqi Sanctions Regulations, 31 C.F.R.
Part 575; Iraq Sanctions Act, Pub. L. 101-513 (Nov. 5, 1990); Libya Sanctions
Regulations, 31 C.F.R. Part 550; Narcotics Trafficking Sanctions Regulations,
31 C.F.R. Part 536; Nuclear Non-Proliferation Act, 22 U.S.C. ▇▇.▇▇. 3201 et
seq.; Nuclear Proliferation Prevention Act of 1994, Pub. L. 103-236 (Apr. 30,
1994); Rough Diamonds (Sierra Leone and Liberia) Sanctions Regulations, 31
C.F.R. Part 591; Sudanese Sanctions Regulations, 31 C.F.R. Part 538; Syria
Accountability and Lebanese Sovereignty Restoration Act of 2003, Public Law
108-175; Taliban (Afghanistan) Sanctions Regulations, 31 C.F.R. Part 545;
Terrorism List Governments Sanctions Regulations 31 C.F.R. Part 596; Terrorism
Sanctions Regulations, 31 C.F.R. Part 595; Tiananmen Square Sanctions, Pub. L.
101-246, Title IX (Feb. 16, 1990); Trade Sanctions Reform and Export
Enhancement Act of 2000, 22 U.S.C. ▇▇.▇▇. 7201-7209; Trading With the Enemy
Act, 50 U.S.C. App. 5(b); Weapons of Mass Destruction Trade Control
Regulations, 31 C.F.R. 539; Western Balkans Stabilization Regulations, 31
C.F.R. 588; the Money Laundering Control Act of 1986, 18 U.S.C. ▇▇.▇▇.
1956-1957; and the Bank Secrecy Act, 31 U.S.C. ▇▇.▇▇. 5311-5332, 12 U.S.C.
▇▇.▇▇. 1818(s), 1829(b) and 1951-1959.
"INVESTOR DISCLOSURE SCHEDULE" means the disclosure schedule
identified as the Investor Disclosure Schedule to this Contribution Agreement.
"INVESTOR RIGHTS AGREEMENT" means the agreement among Newco, HNS and
the Investor to be entered into at Closing in the form attached as EXHIBIT N.
"KNOWLEDGE" means any fact or matter with respect to a Person, the
current actual knowledge of such Person, if such Person is an individual or the
current actual knowledge of any of such Person's senior executive officers or
members of its board of directors or board of managers if such Person is an
entity. With respect to HNS, Knowledge of HNS shall mean the Knowledge of the
employees of HNS listed on EXHIBIT O.
"LAWS" means all foreign, federal, state and local statutes, laws,
ordinances, regulations, principles of law or equity, rules, governmental and
regulatory policies and practices, resolutions and Orders, applicable to the
specified Persons or to the businesses and assets thereof (including any of the
foregoing relating to (i) securities registration and regulation; (ii) the
sale, leasing, ownership or management of real property; (iii) employment
practices, terms and conditions, and wages and hours; building standards, land
use and zoning; (iv) safety, health and fire prevention; (v) environmental
protection; and (vi) operation, marketing, sales and distribution of Products
and Services).
"LEGAL COMPLIANCE LIABILITIES" means (a) all Liabilities to the extent
arising in connection with or in any way relating to the Business or Business
Assets or HNS's or any of its Affiliate's use or ownership thereof, whether
vested or unvested, contingent or fixed, actual or potential, which arise under
or relate to (i) Environmental, Safety and Health Laws, (ii) Securities Laws or
(iii) International Trade Laws, and (b) all Liabilities to make payments to the
FCC for fines or forfeitures.
"LIABILITY" means any debt, obligation, duty or liability of any
nature (including any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious, derivative, joint,
several or secondary liability), regardless of whether such debt, obligation,
duty or liability would be required to be disclosed on a balance sheet prepared
in accordance with generally accepted accounting principles and regardless of
whether such debt, obligation, duty or liability is immediately due and
payable.
"MATERIAL ADVERSE EFFECT" means (i) with respect to the Business or
the Business Assets, any occurrence, event or omission, as applicable, that
would reasonably be expected to have a material adverse effect on the assets,
financial condition or results of operations of the Business and the Business
Assets taken as a whole, or (ii) with respect to any other Person, a material
adverse effect on the assets, financial condition or results of operations of
such Person and its Subsidiaries taken as a whole; provided, however, that the
following shall be deemed not to constitute and shall not be taken into account
in determining the occurrence of a Material Adverse Effect with respect to the
Business or the Business Assets: (i) any effect arising from or relating to
general economic, financial or political conditions or conditions affecting the
communications data networks industry, provided that the effect does not affect
the Business or the Business Assets in a materially disproportionate manner
compared to similarly situated companies in such industry; (ii) any effect
arising from or relating to any change in Law that applies to HNS or its
Subsidiaries, (iii) any effect arising from a change in GAAP or interpretations
thereof that apply to HNS or its Subsidiaries, (iv) any effect arising out of
any condition or conditions to the extent affecting the Excluded Business or
any Excluded Assets or Excluded Liabilities and to the extent not affecting the
Contributed Assets and the Assumed Liabilities; (v) any effect arising out of
any actions specifically required to be taken pursuant to the terms of this
Contribution Agreement in furtherance of the Contemplated Transactions; or (vi)
any effect arising out of the announcement of this Contribution Agreement or
the Contemplated Transactions.
"NEWCO INDEMNIFIED PERSONS" means the Investor, Newco and its
Subsidiaries and Representatives from time to time (including persons who were
formerly employees, officers and directors of HNS or any of its Affiliates).
"NEWCO SPECIFIED PERSON" means one, but not more than one, Person
designated as the "Newco Specified Person" in a notice of rejection of a Parent
Offer given prior to the expiration of the applicable Newco First Ninety Day
Period, any successor (by merger, consolidation, transfer or otherwise, and in
one transaction or a series of transactions) to all or substantially all of the
assets of such Person, or any Affiliate or Subsidiary of such Person or its
successor. For the avoidance of doubt, Newco may not specify more than one
Newco Specified Person.
"ORDER" shall mean any: (a) temporary, preliminary or permanent order,
judgment, injunction, edict, decree, ruling, pronouncement, determination,
decision, opinion, verdict, sentence, stipulation, subpoena, writ or award that
is or has been issued, made, entered, rendered or otherwise put into effect by
or under the authority of any court, administrative agency or other
Governmental Authority or any arbitrator or arbitration panel; or (b) Contract
with any Governmental Authority that is or has been entered into in connection
with any Proceeding.
"ORDINARY COURSE OF BUSINESS" means the historical or customary
practices of HNS, HNS Europe, HNS UK and the Transferred Subsidiaries.
"PARENT INDEMNIFIED PERSONS" means Parent, HNS and their respective
Affiliates and Representatives from time to time (including persons who were
formerly employees, officers and directors of HNS or any of its Affiliates).
"PARENT SPECIFIED PERSON" means one, but not more than one, Person
designated as the "Parent Specified Person" in a notice of rejection of a Newco
Offer given prior to the expiration of the applicable Parent First Ninety Day
Period, any successor (by merger, consolidation, transfer or otherwise, and in
one transaction or a series of transactions) to all or substantially all of the
assets of such Person, or any Affiliate or Subsidiary of such Person or its
successor. For the avoidance of doubt, Parent may not specify more than one
Parent Specified Person.
"PATENTS" means all United States and foreign patents and utility
models and applications therefor and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof, and equivalent or similar rights anywhere in the world in inventions
and discoveries.
"PERMITTED ENCUMBRANCES" means any of the following (i) Encumbrances
for Taxes that (x) are not yet due or delinquent or (y) are being contested in
good faith by appropriate proceedings in accordance with applicable Laws, (ii)
statutory Encumbrances of landlords and Encumbrances of carriers, warehousemen,
mechanics, materialmen and other Encumbrances imposed by Law, in each case, for
amounts not yet due or amounts being contested in good faith by appropriate
proceedings in accordance with applicable Laws, (iii) Encumbrances incurred or
deposits made in the Ordinary Course of Business in connection with worker's
compensation, unemployment insurance or other types of social security, (iv)
leases or subleases granted to other Persons that do not materially interfere
with the conduct of the Business, (v) Encumbrances in favor of a customer of
the Business arising in the Ordinary Course of Business, (vi) with respect to
any of the properties underlying the Real Property Leases, any Encumbrance
affecting the interest of the landlord thereunder, (vii) Encumbrances that do
not materially interfere with the use by HNS or its Subsidiaries of the
Business Assets or the operation of the Business, (viii) rights of the third
party owners or licensors of software that is licensed from such third parties
for use in the Business, (ix) Encumbrances created by or in favor of Newco, (x)
Encumbrances that will be released prior to or as of Closing, (xi) Encumbrances
arising under this Contribution Agreement or the other Transaction Documents,
(xii) Encumbrances arising out of any Governmental Approvals or HNS Permits and
(xiii) Encumbrances clearly identified in the Disclosure Schedules.
"PERMITTED PERSON" means any Person that (x) is not in the business of
directly or indirectly owning or operating satellites or providing satellite
networks or satellite services, (y) is not a non-U.S. Person (i.e., a Person
that is not a U.S. citizen or a legal entity established or organized under the
Laws of a State or the United States) and (z) would own, directly or
indirectly, individually or in the aggregate with all other Permitted Persons,
a majority of the equity securities of Newco or any other company holding the
Contributed Assets after Closing.
"PERSON" means an individual, a corporation, a general partnership, a
limited partnership, a limited liability company, a limited liability
partnership, an association, a trust or any other entity or organization,
including a Governmental Authority.
"PREPAID SPACEWAY AMOUNTS" means the aggregate of all amounts paid by
Parent or HNS to Boeing prior to Closing pursuant to the Spaceway 3 Amendment
(which includes any payments made by Parent prior to the date hereof); provided
that Parent provides documentation evidencing such payments.
"PROCEEDING" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation that is or has been commenced, brought, conducted
or heard at law or in equity or before any Governmental Authority or any
arbitrator or arbitration panel.
"PRODUCTS AND SERVICES" means all hardware, Software, integrated
systems or other products or services manufactured, made, designed, maintained,
supported, developed, sold, licensed, marketed, or otherwise distributed or
provided (or planned or envisioned to be manufactured, made, designed,
maintained, supported, developed, sold, licensed, marketed, or otherwise
distributed or provided) (including all versions and releases thereof, whether
already distributed or provided, under development, planned or conceived, or
otherwise), together with any related materials, information or data, including
the names, numbers (e.g., part numbers) and packaging associated with such
products and services.
"REGISTRATION RIGHTS AGREEMENT" means the agreement among Parent, HNS
and the Investor to be entered into at Closing in the form attached as EXHIBIT
P.
"RELEASE" means any releasing, spilling, leaking, pumping, pouring,
placing, emitting, emptying, discharging, injecting, escaping, leaching,
disposing, or dumping into the environment, whether intentional or
unintentional, negligent or non-negligent, sudden or non-sudden, accidental or
non-accidental.
"REPRESENTATIVES" shall mean officers, directors, employees,
attorneys, accountants, advisors, agents, distributors, licensees,
shareholders, subsidiaries and lenders of a party and their Affiliates. In
addition, all Affiliates of HNS shall be deemed to be "Representatives" of HNS,
all Affiliates of the Investor shall be deemed to be "Representatives" of the
Investor, and all Affiliates of Newco shall be deemed to be "Representatives"
of Newco.
"SATELLITE OPERATIONS CONTRACT" means the contract between Parent and
The Boeing Company, dated April 15, 2001, for the satellite control facilities,
telemetry tacking and control equipment, satellite operations and maintenance.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SECURITIES LAWS" shall mean the Securities Act and the Exchange Act,
and the rules and regulations promulgated thereunder.
"SET-TOP BOX BUSINESS" means the Assets of the set-top box
manufacturing, assembly, production, warehousing, shipping and distribution
business of HNS which were sold to pursuant to the Asset Purchase Agreement
dated May 11, 2004 among HNS, Parent and Thomson Inc.
"SEVERANCE CAP" means an amount equal to Twelve Million Dollars
($12,000,000) minus the SkyTerra Stock Shortfall Amount, if any.
"SEVERANCE CAP ADJUSTMENT" means the amount by which HNS' total
expenditures for the Severance Amount and the Foreign Severance Amount through
the Closing Date are greater than or less than the Severance Cap.
"SITE" means any of the real properties currently or previously owned,
leased or operated by HNS or the Transferred Subsidiaries, any of their
respective predecessors, or any entities previously owned by HNS or the
Transferred Subsidiaries, including all soil, subsoil, surface waters and
groundwater thereat.
"SKYTERRA STOCK" means the common stock of the Investor, $0.01 par
value per share.
"SKYTERRA STOCK AVERAGE TRADING PRICE" means the closing price of one
share of SkyTerra Stock quoted on the OTC Bulletin Board, which trades are
reported by the National Quotation Bureau, Incorporated or a similar successor
organization, or, if not reported thereby, as reported in another authoritative
source selected by Parent and the Investor, averaged over a period of twenty
Trading Days ending two Trading Days prior to the Closing Date and beginning on
the twenty-third Trading Day prior to the Closing Date.
"SKYTERRA STOCK CONSIDERATION" means an amount equal to the product of
(x) the SkyTerra Stock Average Trading Price and (y) the number of shares of
SkyTerra Stock to be issued to HNS pursuant to SECTION 2.7(C)(Y).
"SKYTERRA STOCK SHORTFALL AMOUNT" means the difference between (x)
$4,500,000 and (y) the SkyTerra Stock Consideration; provided that in no case
may the SkyTerra Stock Shortfall Amount be less than zero.
"SPACEWAY 1" means the planned geostationary Ka-Band satellite known
as Spaceway 1 (or SW1) currently under construction that is intended to be the
first satellite to be provided under the Boeing Contract (or any replacement
satellite ordered by Parent or HNS under the Boeing Contract due to the failure
to successfully launch the original Spaceway 1 or the inability to make the
original Spaceway 1 suitable for commercial operation).
"SPACEWAY 2" means the planned geostationary Ka-Band satellite known
as Spaceway 2 (or SW2) currently under construction that is intended to be the
second satellite to be provided under the Boeing Contract (or any replacement
satellite ordered by Parent or HNS under the Boeing Contract due to the failure
to successfully launch the original Spaceway 2 or the inability to make the
original Spaceway 2 suitable for commercial operation).
"SPACEWAY 3" means the planned geostationary Ka-Band satellite known
as Spaceway 3 (or SW3) currently under construction that is intended to be the
third satellite to be provided under the Boeing Contract or the first satellite
to be provided under the Boeing Contract Separation Amendment (or any
replacement satellite ordered by Newco under the Boeing Contract or Boeing
Contract Separation Amendment due to the failure to successfully launch the
original Spaceway 3 or the inability to make the original Spaceway 3 suitable
for commercial operation).
"SPACEWAY 3 AMENDMENT" means Amendment No. 11, dated December 3, 2004,
to the Boeing Contract.
"SPACEWAY BUSINESS" is the developmental stage business of HNS, HNS
Europe, HNS UK and the Transferred Subsidiaries known as Spaceway for the
designing, developing, operating, and providing communications services in
North America via a Ka-band satellite telecommunications system.
"STRADDLE PERIOD" means a taxable period beginning prior to and ending
after the Closing Date.
"SUBSIDIARY" of a specified Person means a Person Controlled by such
Person directly, or indirectly through one or more intermediaries.
"TAX LIABILITIES" means any Proceeding or claim pending or threatened
in respect of any Taxes for which HNS is or may become liable, or any
deficiency or claim for any such Taxes that has been to HNS's Knowledge
proposed, asserted or threatened.
"TAX RETURNS" means all federal, state, local, foreign and other
applicable tax returns, declarations of estimated tax reports required to be
filed by such Person.
"TAXES" means all federal, state, local and foreign taxes (including
income, profit, franchise, sales, use, real property, personal property, ad
valorem, excise, employment, social security and wage withholding taxes) and
installments of estimated taxes, assessments, deficiencies, levies, imposts,
duties, withholdings, or other similar charges of every kind, character or
description imposed by any Governmental Authority, and any interest, penalties
or additions to tax imposed thereon or in connection therewith.
"TRADEMARKS" means any and all U.S. and foreign trademarks, service
marks, logos, trade names, corporate names, and Internet domain names and
addresses, and all goodwill associated therewith throughout the world.
"TRADE SECRETS" means all trade secrets under applicable Law and other
rights in know-how and confidential or proprietary information, processing,
manufacturing or marketing information, including new developments, inventions,
processes, ideas or other proprietary information that provides advantages over
competitors who do not know or use it and documentation thereof (including
related papers, blueprints, drawings, chemical compositions, formulae, diaries,
notebooks, specifications, designs, methods of manufacture and data processing
Software and compilations of information) and all claims and rights related
thereto.
"TRADING DAY" means a day during which trading in the SkyTerra Stock
generally occurs and trades are reported on the OTC Bulletin Board or a similar
successor organization, or, if not reported thereby, as reported in another
authoritative source selected by Parent and the Investor (provided that the
following will not count as a Trading Day: (x) a day on which trading of the
SkyTerra Stock is suspended; (y) a day on which no closing price is reported,
and (z) a day on which the Investor (or any of its Affiliates) buys or sells
any shares of SkyTerra Stock).
"TRANSACTION DOCUMENTS" means this Contribution Agreement, the
Intellectual Property Agreement, the Restated LLC Agreement, the Transition
Services Agreement, the DirecWay Agreement, the Investor Rights Agreement, the
Spaceway Services Agreement, the Non-Competition Agreement, the Registration
Rights Agreement, the Transfer Instruments, any related agreements and
documents, and any exhibits or attachments to any of the foregoing, as the same
may be amended from time to time.
"TRANSFERRED SUBSIDIARIES" means each direct or indirect subsidiary of
HNS or other company in which HNS owns shares or other equity interests listed
on Section 4.1(b) of the Disclosure Schedule.
"TRANSFERRED SUBSIDIARY ASSETS" means all Assets of the Transferred
Subsidiaries as of the date hereof, and anything which becomes (in accordance
with the terms of this Contribution Agreement) an Asset of the Transferred
Subsidiaries between the date hereof and the Closing Date.
"UK PLAN" means the ▇▇▇▇▇▇ Network Systems Ltd. Pension and Life
Assurance Scheme.
"UK PLAN ASSETS" means all Assets relating to the UK Plan.
"UK PLAN LIABILITIES" means all Liabilities relating to the UK Plan.
Each of the following terms is defined in the Section of this
Contribution Agreement set forth opposite each such term below:
Term Section
---- -------
Acquired Companies...............................................2.2
Annual Statements...............................................3.10
Article 5........................................................3.8
Assigned Boeing Rights..........................................3.11
Assumed Liabilities..............................................2.4
Basket Amount....................................................9.4
▇▇▇▇ of Sale and Assumption Agreement............................8.5
Cap Amount.......................................................9.4
Capital Items Scheme.............................................3.8
Cash Target Amount..............................................2.10
ChinaCast Shares ...............................................3.14
CIC Agreements.................................................Ex. J
CIC Continued Welfare Coverage.................................Ex. J
CIC Outplacement Services......................................Ex. J
CIC Severance Amount...........................................Ex. J
Closing .........................................................2.8
Closing Cash Balance............................................2.10
Closing Date.....................................................2.8
Contributed Assets ..............................................2.2
Contributed Spaceway Assets ....................................3.11
Contribution Agreement......................................Preamble
Customs..........................................................3.8
DirecWay Agreement...............................................2.6
Earth Stations..................................................4.24
Employee Benefit Plans..........................................4.15
Enhanced Pension Benefit.......................................Ex. J
Estimated Working Capital Amount ...............................2.10
Estimated Working Capital Statement ............................2.10
ETA Plan.......................................................Ex. J
ETA COBRA Benefit..............................................Ex. J
ETA Outplacement Services......................................Ex. J
ETA Severance Amount...........................................Ex. J
ETA Tuition Reimbursement......................................Ex. J
Excluded Assets .................................................2.3
Excluded HNS Representations.....................................9.1
Excluded Investor Representations................................9.1
Excluded Liabilities.............................................2.4
Excluded Real Property Leases....................................2.3
Excluded Spaceway Assets........................................3.11
Final Working Capital Amount ...................................2.10
Final Working Capital Statement ................................2.10
Financing........................................................2.7
Financial Statements.............................................4.6
Foreign Contract Employees......................................4.14
Foreign Employee Benefit Plans..................................4.14
Foreign Employees...............................................4.14
Foreign Operations..............................................4.14
Foreign Services Agreements.....................................4.14
Foreign Services Company........................................4.14
Foreign Severance Amount.......................................Ex. J
HNS.........................................................Preamble
HNS Europe.....................................................Ex. A
HNS UK.........................................................Ex. A
Indemnified Claim................................................9.7
Indemnified Party................................................9.7
Indemnifying Party...............................................9.7
Insurance Policy.................................................3.3
Interim Statements..............................................3.10
Investor Interest................................................2.7
ITAR.............................................................3.1
Latest Balance Sheet.............................................4.6
Laws of the HNS Countries of Operation..........................4.14
Lower Collar Amount.............................................2.10
Material Contracts..............................................4.16
Membership Interest Purchase Price...............................2.7
Newco.......................................................Preamble
Newco First Ninety Day Period...................................3.11
Newco Offer.....................................................3.11
Newco Offer Notice..............................................3.11
Newco Offered Assets............................................3.11
Newco Purchase Option...........................................3.11
Non-Competition Agreement........................................8.5
Original LLC Agreement...........................................2.7
Owned Real Property..............................................4.8
Parent......................................................Preamble
Parent First Ninety Day Period..................................3.11
Parent Offer....................................................3.11
Parent Offer Notice.............................................3.11
Parent Offered Assets...........................................3.11
Parent Purchase Option..........................................3.11
Pass Through Arrangement.........................................2.6
PBGC............................................................4.15
Percentage.......................................................2.9
Potential Transaction...........................................3.15
Pre-Closing Taxes................................................3.7
Prospective Newco Employee.....................................Ex. J
Purchase Price...................................................2.7
Real Property Leases.............................................4.8
Real Property....................................................4.8
Regulation.......................................................8.1
Relevant Accounting Rules.......................................3.10
Restated LLC Agreement...........................................2.7
Relevant Date....................................................3.8
San Diego Premises...............................................2.3
SAS 100.........................................................3.10
SEC..............................................................5.9
SEC Documents....................................................5.9
Severance Amount...............................................Ex. J
SkyTerra Common Stock...........................................5.10
SkyTerra Non-voting Common Stock................................5.10
SkyTerra Preferred Stock........................................5.10
SkyTerra Stock Plans............................................5.10
South Africa Manpower Agreement................................Ex. I
Spaceway 4......................................................3.11
Spaceway Services Agreement.....................................3.11
Tax Group........................................................4.5
Terminated Employee............................................Ex. J
Transfer........................................................3.11
Third Party Claim................................................9.7
Third Party Claim Notice.........................................9.7
Transfer Instruments.............................................8.5
Transfer Restricted Asset........................................2.6
Transferred Employee...........................................Ex. J
Transition Services Agreement....................................2.6
UK VAT...........................................................3.8
Updated Disclosure Schedule......................................8.4
Updated Investor Disclosure Schedule.............................8.4
Upper Collar Amount.............................................2.10
VSAT...........................................................Ex. A
VSAT Business..................................................Ex. A
WARN Act.........................................................2.4
Working Capital................................................Ex. G
Working Capital Target Amount...................................2.10