##### Table of Contents



UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549





FORM 10-K





(Mark One)

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

For the Fiscal Year Ended December 31, 2009

or

| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
 TO
|- | ---------------------------------------------------------------------------------------------------------------------------

Commission file number: 333-138009





HUGHES NETWORK SYSTEMS, LLC

(Exact Name of Registrant as Specified
in Its Charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 11-3735091                          
|(State or Other Jurisdiction of Incorporation or Organization) |  | (I.R.S. Employer Identification No.)

11717 Exploration Lane, Germantown,
Maryland 20876

(Address of Principal Executive Offices and Zip Code)

(301) 428-5500

(Registrants Telephone Number, Including Area Code)





Securities
registered pursuant to Section 12(b) of the Act:

|                      |  |                                            
|--------------------- |  | -------------------------------------------
|N/A                   |  | N/A                                        
|(Title of Each Class) |  | (Name Of Each Exchange On Which Registered)

Securities registered pursuant to Section 12(g) of the Act:

None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  ̈ Yes x No

Indicate by
check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. x Yes  ̈ No

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. x

Indicate by check mark if the registrant is a
large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of
the Exchange Act.

Large accelerated filer   ̈                                  
                              Accelerated filer   ̈

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

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

The number
of the registrants membership interests outstanding as of March 1, 2010 was as follows:

|                                        |  |                                        |  |  |  | 
|--------------------------------------- |  | -------------------------------------- |  |  |  | 
|Class A Membership Interests:    95,000 |  | Class B Membership Interests:    3,330 |  | 

The aggregate market value of shares held by non-affiliates as of June 30, 2009
was $0.

DOCUMENTS INCORPORATED BY REFERENCE

None





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TABLE OF CONTENTS



|            |  |                                                                                                              |  |     
|----------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|            |  |                                                                                                              |  | Page
|PART I      |  | 1                                                                                                           
|Item 1.     |  | Business                                                                                                     |  | 2   
|Item 1A.    |  | Risk Factors                                                                                                 |  | 15  
|Item 1B.    |  | Unresolved Staff Comments                                                                                    |  | 25  
|Item 2.     |  | Properties                                                                                                   |  | 25  
|Item 3.     |  | Legal Proceedings                                                                                            |  | 26  
|Item 4.     |  | Reserved                                                                                                     |  | 26  
|PART II     |  | 27                                                                                                          
|Item 5.     |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 27  
|Item 6.     |  | Selected Financial Data                                                                                      |  | 27  
|Item 7.     |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 28  
|Item 7A.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 48  
|Item 8.     |  | Financial Statements and Supplementary Data                                                                  |  | 50  
|Item 9.     |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 89  
|Item 9A(T). |  | Controls and Procedures                                                                                      |  | 89  
|Item 9B.    |  | Other Information                                                                                            |  | 90  
|PART III    |  | 91                                                                                                          
|Item 10.    |  | Directors, Executive Officers and Corporate Governance                                                       |  | 91  
|Item 11.    |  | Executive Compensation                                                                                       |  | 95  
|Item 12.    |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 117 
|Item 13.    |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 119 
|Item 14.    |  | Principal Accountant Fees and Services                                                                       |  | 122 
|PART IV     |  | 124                                                                                                         
|Item 15.    |  | Exhibits and Financial Statement Schedules                                                                   |  | 124 
|SIGNATURES  |  | 128                                                                                                         



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PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements that involve risks and uncertainties within the meaning of various provisions of the Securities Act of 1933 and of the
Securities Exchange Act of 1934. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, financing needs and other information that is
not historical information and, in particular, appear in the sections entitled Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this report. When used
in this report, the words estimates, expects, anticipates, forecasts, plans, intends, believes, seeks, may, will,
should and variations of these words or similar expressions (or the negative versions of any of these words) are intended to identify forward-looking statements. All forward-looking statements, including, without limitation,
managements examination of historical operating trends, are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them.
However, we can give no assurance that managements expectations, beliefs and projections will be achieved.

There are a
number of risks and uncertainties that could cause our actual results to differ materially from the results referred to in the forward-looking statements contained in this report. Important factors that could cause our actual results to differ
materially from the results referred to in the forward-looking statements we make in this report are set forth elsewhere in this report, including under the heading Item 1A. Risk Factors.



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|Item 1. | Business
|------- | --------

Unless
otherwise indicated or the context requires otherwise, the terms HNS, the Company, we, us and our refer to Hughes Network Systems, LLC and its subsidiaries.

Overview

Hughes Network
Systems, LLC, a Delaware limited liability company, is a telecommunications company formed on November 12, 2004. The Company is a wholly-owned subsidiary of Hughes Communications, Inc. (HCI or Parent). We are the
worlds leading provider of broadband satellite network services and systems to the enterprise market. We are also the largest satellite Internet broadband access provider to North American consumers, which we refer to as the Consumer market.
In addition, we provide managed services to large enterprises that combine the use of satellite and terrestrial alternatives, thus offering solutions that are tailored and cost optimized to the specific customer requirements. We also provide
networking systems solutions to customers for mobile satellite, telematics and wireless backhaul systems.

Since our
deployment of the first very small aperture terminal (VSAT) network in 1983, we have been a leader in commercial digital satellite communications and have achieved extensive depth and experience in the development, manufacturing and
operation of satellite-based data, voice and video networks. Leveraging this expertise, we provide highly reliable, end-to-end communications with guaranteed quality of service to our enterprise customers regardless of the number of fixed or mobile
sites or their geographic location. We started in this business as an equipment and system supplier. During 1988, we became a service provider to medium and large enterprises, including Fortune 1000 companies. In the early part of this decade, we
leveraged our experience with our enterprise customers to expand our business into other growing market areas such as providing broadband Internet service to the Consumer market. In addition, we have strategically used our technology base and
expertise in satellite communication to provide turnkey satellite ground systems and user terminal equipment to mobile system operators.

In August 2007, we launched our SPACEWAYTM3 satellite (SPACEWAY 3) to support the market growth in our North American enterprise and consumer businesses, and in April 2008, we introduced service in North America on the SPACEWAY
network. The commencement of service on the SPACEWAY network enables us to expand our business by increasing our addressable markets in North America.

In June 2009, we entered into an agreement for the design and manufacturing of a next-generation, high throughput geostationary satellite (Jupiter). Jupiter will employ a multi-spot beam, bent
pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We anticipate launching Jupiter in the first half of 2012.

Industry Overview

The emergence of VSATs in the 1980s marked the
beginning of a new era in satellite communication. The use of smaller antennas meant that the benefits of satellite-based communication could be made commercially viable in a wide range of applications, whereas previous uses were generally limited
to government and large commercial installations. A VSAT network operates by connecting multiple, geographically-dispersed communication sites through a satellite to a single point (the network hub) and from there to the customers data center.
VSAT operators typically either lease transponder capacity from a third-party fixed satellite service provider or they construct and launch their own satellite. VSAT networks can operate independently or as a complete overlay to terrestrial networks
and can, therefore, provide a single source solution for a particular customers communication requirements. Other benefits include a highly secure and reliable network and service availability across a single or multiple regions. In addition,
due to the shared nature of the satellite communications resource, VSATs provide attractive economics for multi-site applications that have various levels of traffic requirements at any one site. VSAT networks can support a full spectrum of
capabilities and customer applications including email, Internet-based virtual private networks, video/voice, Internet access, Internet telephony, distance learning, content distribution and financial transactions.

VSAT networks allow every site in a network to have access to consistent service levels, sometimes with a guaranteed minimum level of
quality, compared with terrestrial networks in which service levels across areas may differ both within a single network and across different networks. In addition, VSAT networks have multiple layers of redundancy, including multiple network
operation centers and arrangements to shift loads to backup satellites or transponders in the event of a particular satellite and/or transponders failure. Another advantage of VSAT satellite solutions is that due to their wireless



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nature, they are able to be deployed more rapidly than terrestrial services. The VSAT solution provides users with the ability to multicast and broadcast under the same economic model that has
enabled the rapid growth in direct-to-home satellite television. As a result, tasks such as the distribution of training videos are achieved efficiently and economically via a VSAT satellite solution.

Business Segments

We
currently operate in four business segments(i) the North America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; and (iv) the Corporate segment. Within the North America
Broadband segment, sales are attributed to the Consumer group, which delivers broadband internet service to consumer customers, and the Enterprise group, which provides satellite, wire line and wireless communication networks and services to
enterprises in North America. The International Broadband segment consists of our international service companies and services sold directly to international enterprise customers. The International Enterprise group provides managed networks services
and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite Systems group, the Telematics group, and the Terrestrial Microwave group. The Mobile Satellite Systems
group provides turnkey satellite ground segment systems to mobile system operators. The Telematics group provides development engineering and manufacturing services to Hughes Telematics, Inc. (HTI). We expect our future revenue from the
Telematics group to be insignificant. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for cellular backhaul solutions. The Corporate segment includes our corporate offices and assets not
specifically related to another business segment. Due to the complementary nature and common architecture of our services and products across our business segments, we are able to leverage our expertise and resources within our various operating
units to yield significant cost efficiencies.

See Note 17Segment Data and Geographic Data to the Companys audited
consolidated financial statements included in Item 8 of this report for financial information by operating segment and by geographic location.



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The following chart summarizes the key elements of our markets comprising our business
segments, excluding our Corporate segment, each of which is discussed in further detail below:



|                                |  |                                  |  |                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|------------------------------- |  | -------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                |  | North America Broadband Segment  |  | InternationalBroadband Segment                                                                                                                                                                                                                                           |  | Telecom Systems Segment                                                                                                                                                                                                                                                                                          
|                                |  | Consumer                         |  | Enterprise                                                                                                                                                                                                                                                               |  | Enterprise                                                                                                                                                                                                                                                                                                        |  | Mobile Satellite Systems                                                                                                                                                                      |  | Telematics                    |  | Terrestrial Microwave                                                                                                                                                                     
|Customer Base                   |  |   Consumersubscription services |  |   Enterprises, governmentand local governmentagencies in NorthAmerica                                                                                                                                                                                                   |  |   Enterprises, Telecomcarriers andgovernmentagencies locatedoutside of NorthAmerica                                                                                                                                                                                                                              |  |   Mobile satellite-based voice anddata serviceoperators                                                                                                                                      |  |   Telematics seviceproviders |  |   Cellular mobileoperators and localexchange carriers                                                                                                                                    
|                                |  |                                  |  |                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                  
|2009 Revenues (in millions)     |  |   $420                          |  |   $271                                                                                                                                                                                                                                                                  |  |   $204                                                                                                                                                                                                                                                                                                           |  |   $77                                                                                                                                                                                        |  |   $24                        |  |   $12                                                                                                                                                                                    
|                                |  |                                  |  |                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                  
|Products/Service Application(s) |  |   Internet accessand equipment  |  |   VSAT equipment                                                                                                                                                                                                                                                        |  |   VSAT equipment                                                                                                                                                                                                                                                                                                 |  |   Turnkey mobilenetwork solutionsincludinggateways/terminals                                                                                                                                 |  |   Telematicsdevelopment      |  |   Microwave- based networking equipment                                                                                                                                                  
|                                |  |                                  |  |                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                  
|                                |  |   ISP services includinge-mail  |  |   Intranet/Internet access                                                                                                                                                                                                                                              |  |   Intranet/Internetaccess                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                               |  |                               |  |   Wireless backhaul equipment for cellular service providers                                                                                                                             
|                                |  |                                  |  |                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                  
|                                |  |   IP VPN                        |  |   IP VPN                                                                                                                                                                                                                                                                |  |   IP VPN                                                                                                                                                                                                                                                                                                         |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |   Multicast filedelivery/videostreaming                                                                                                                                                                                                                                 |  |   Multicast filedelivery/videostreaming                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |   Customized businesssolutions                                                                                                                                                                                                                                          |  |   Customizedbusiness solutions                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |   Turnkey managed network services                                                                                                                                                                                                                                      |  |   Turnkey managed network services                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  | -     Program and Installation                                                                                                                                                                                                                                           |  | -     Program and Installation                                                                                                                                                                                                                                                                                    |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  | -     Management                                                                                                                                                                                                                                                         |  | -     Management                                                                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  | -     Maintenance                                                                                                                                                                                                                                                        |  | -     Maintenance                                                                                                                                                                                                                                                                                                 |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  | -     Customer care                                                                                                                                                                                                                                                      |  | -     Customer care                                                                                                                                                                                                                                                                                               |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |   Inventory management                                                                                                                                                                                                                                                  |  |   Inventory management                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |   Content distribution                                                                                                                                                                                                                                                  |  |   Content distribution                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |   Online Learning                                                                                                                                                                                                                                                       |  |   Online Learning                                                                                                                                                                                                                                                                                                |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |   Satellite and Terrestrialtransport                                                                                                                                                                                                                                    |  |   VoIP                                                                                                                                                                                                                                                                                                           |  |                                                                                                                                                                                               |  |                               |  |                                                                                                                                                                                           
|                                |  |                                  |  |                                                                                                                                                                                                                                                                          |  |                                                                                                                                                                                                                                                                                                                  
|Representative Customers        |  |                                  |  |   ExxonMobil Corporation, Blockbuster, Inc., GTECH Corporation, Lowe's, Wendy's International, BP,
Wyndham Worldwide Corportion, Chevron Corporation, Shell, Walgreen Co., Rite Aid, YUM Brands, Social Security Adminstration, Burger King Corporation, ConocoPhillips |  |   Avanti Communications Group plc, VISA International Service Association, World Bank,
Communications and Transport Ministry of México (SCT) , Telefonica, Afsat, the Ministry of Foreign Affairs of Saudi Arabia, State Bank of India, Camelot Group plc, Bentley Walker, TIM BRASIL, VIVO, Telemar Norte
Leste |  |   Globalstar, Inc., ICO Global Communications Ltd., Inmarsat Ltd., SkyTerra Communications,
Inc., TerreStar Networks, Inc., Thuraya Telecommunications Company, Iridium Communications, Inc. |  |   Hughes Telematics, Inc.    |  |   Nokia Siemens Networks,VodafoneItaly/Portugal /Greece, Wind Italy /Greece, Vodacom South Africa,
PTC Poland, BTC Bulgaria,T-Mobile Czech, Crowley Poland, Covad USA, GTS Central Europe



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North America Broadband Segment

Business Overview

In August 2007, we launched our SPACEWAY 3 satellite
and introduced service in North America on the SPACEWAY network in April 2008. SPACEWAY 3 was designed and developed as the next generation Ka-band broadband satellite system with a unique architecture for broadband data communications. Because
SPACEWAY 3 supports higher data rates and offers direct user-to-user network connectivity, we are able to offer our North American enterprise and consumer customers faster communication rates, reduce our operating costs substantially through the
reduction of third-party transponder capacity expenses as we utilize the additional capacity of SPACEWAY 3, and as a result, significantly improve our margins.

In June 2009, we entered into a contract with Space Systems/Loral, Inc. (SS/L) to build our Jupiter satellite, which is anticipated to be launched in the first half of 2012. Jupiter will
provide additional capacity for the HughesNet service in North America.

We believe that our satellites will provide us the
opportunity to grow our Consumer business and provide specialized services aimed at expanding our offerings to large enterprises, allowing us to compete more effectively in the enterprise wide area networking market.

Consumer Group

Our Consumer group was launched in 2001. Utilizing our VSAT data networking capabilities, we have developed a consumer service that reaches all 50 states, Puerto Rico and parts of Canada. With the advent of competing low-cost cable modem
and Digital Subscriber Line (DSL) services, we have focused our marketing and sales efforts on the underserved markets that would be less likely to receive terrestrial broadband service. These markets include rural and suburban areas. We
deliver broadband internet service with an accompanying set of internet service provider (ISP) services such as e-mail and web hosting and offer various service plans to appeal to particular market segments.

The user terminal for our consumer customers consists of a 0.74m or 0.98m antenna and radio transceiver located on the roof or side of a
home and a satellite modem located indoors near the users computer or router. Our third-party contractors install the user terminals for our customers and have developed an extensive set of business processes and systems to maintain the
quality and timeliness of our installations. We use gateways throughout the United States to communicate with the consumer terminals. From these gateway locations, we connect directly to the public internet and host our ISP services. Our network
operations center in Germantown, Maryland, manages the delivery of our service and maintains our quality and performance. Our network operations center also provides advanced engineering support to our customer call centers.

We modify our service offerings from time to time to provide packages that are attractive to our customers. Currently, our service package
provides our customers the option to purchase the equipment up front or to rent the equipment with a 24-month service contract with a monthly service fee that varies depending on the level of service selected and includes the following:



| |  |  | satellite-based Internet access;
| | - |  | --------------------------------



| |  |  | live technical support that is available 24 hours per day, seven days per week;
| | - |  | -------------------------------------------------------------------------------



| |  |  | multiple e-mail accounts;
| | - |  | -------------------------



| |  |  | professional standard installation; and
| | - |  | ---------------------------------------



| |  |  | a commercial-grade antenna.
| | - |  | ---------------------------

Enterprise Group

We provide or enable a variety of network equipment and
services for uses such as private networking, intranet and Internet broadband access, voice services, connectivity to suppliers, franchisees and customers, credit authorization, inventory management, content delivery and video distribution to
enterprises. Our Enterprise group offers complete turnkey solutions and managed services to enterprises, including program management, installation, training and support services. In North America, we deliver services using not only our VSAT
satellite transport platforms, but also DSL and wireless



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transport platforms. We currently serve more than 200 companies, including Fortune 1000 companies, which have numerous widely dispersed operating units. Our enterprise customer base includes
industry leaders in the automotive, energy, hospitality, retail and services industries.

We maintain our market leadership
position by offering global large enterprises customizable and complete turnkey solutions. Enterprise customers typically enter into non-cancelable contracts with an average duration of three to five years. These contracts typically include
commitments for specific levels of service and bandwidth, as well as bundled packages consisting of hardware, services and capacity across our network that are tailored specifically to their needs.

Our networking capabilities have attracted a strong franchisee customer base that includes large national chains. We provide these customers
with a complete solution to enhance internal sales activities, develop brand-specific IP credit solutions, build secure branded websites and launch successful sales campaigns.

Sales, Marketing and Distribution

Our distribution strategy is designed
around a core sales team that has developed an extensive knowledge of our customers requirements. For our Enterprise group, the market coverage by our direct sales force is supplemented by additional distribution channels, including resellers,
retail, and direct-marketing, in order to maximize our potential customer base. For our Consumer group, we have an extensive independent nationwide retail distribution network consisting of distributors, dealers, sales agents and major retailers.
Our distribution channels reach across North America. Our distributors recruit and support dealers throughout the territory in their efforts to sell our services and also coordinate installation of the equipment for all our customers. Our sales and
marketing operations are based at our corporate headquarters in Germantown, Maryland. We also maintain other regional sales offices in North America. We will continue to grow our direct and indirect marketing and distribution channels through direct
mail, television advertising, dealers, sales agents and value added resellers.

Installation and Technical Support

We rely extensively on a third-party installation network covering all 50 U.S. states, Canada and Puerto Rico. Our network of installation
teams are trained and certified by us and are required to meet installation guidelines that we monitor. The installation services are managed and tracked on a web-based work order management system that provides the visibility and accountability to
manage installation and trouble resolution for each customer. Our installers and service contractors must complete a certification program and their work is subject to quality control audits.

We provide our customers with comprehensive support services, which may include a sales team that consists of a program manager, engineers
and account team members. We also provide our customers with a customer care web portal, which allows them to open trouble tickets and track problems or failures from start to resolution. Our maintenance support services are provided by a third
party that has many service sites throughout the U.S., including Alaska and Hawaii, Puerto Rico and Canada. These sites are staffed with technicians trained in accordance with standards that we establish. Additionally, our help desk and network
operations center provide 24-hour technical support. The customer service representatives at these call centers are also trained in accordance with standards that we establish. Our call center operations currently utilize both in-house and
outsourced support.

We have engaged several companies to provide call center support for our customers. Such companies are
organized to handle calls from our retail customers regarding service, billing and installation support, and they provide deep support to our wholesale customers. These centers are supervised by our customer service organization, and they process
most customer calls. We have a staff of technical support personnel that assist these centers with difficult or unusual problems.

International Broadband Segment

Business Overview

Enterprise Group

We provide satellite communication networks and services to customers worldwide. Our products and services are particularly well-suited to many of our international markets because of the geographic dispersion of our customers as well as



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the lack of local infrastructure. We have also shifted our international focus from providing only hardware to also providing shared-hub services, modeled in part on our North American enterprise
business. Shared-hub services are now available both via our own hubs covering Europe, Brazil, Northern Africa, India and the Middle East and through third party and joint venture operations.

We lease transponder capacity on satellites from multiple providers for our enterprise customers. We also maintain hub facilities, located
in Germany, India and Brazil that provide ground support to our international enterprise customers.

Our international
customers span a wide variety of industries and include state-owned operators as well as private businesses. Our service and product offerings in our International Enterprise group are substantially similar to those in our North American Enterprise
group. In addition, we have been successful in providing application solutions that are especially well-suited to emerging markets. Examples include satellite based distance learning and education services in Mexico and India, Internet access
centers available to populations in remote areas in India for e-governance and delivery of digitized cinema to movie theaters.

Sales,
Marketing and Distribution

Our equipment sales and marketing activities are performed directly through our sales offices
in the United States and other parts of the world. We currently have sales offices in Germantown, Maryland; Milton Keynes, United Kingdom; Griesheim, Germany; Rome, Italy; Sao Paulo, Brazil; Mexico City, Mexico; New Delhi, Mumbai and Bangalore in
India; Dubai, United Arab Emirates; Moscow, Russia; and Jakarta, Indonesia. In addition, depending on the need, we appoint sales representatives in various countries who are compensated on a commission basis. In other areas, notably Africa, the
Middle East, China, Japan, the Russian Federation, Australia, Indonesia and Malaysia, we provide our infrastructure equipment to independent service providers that in turn provide the satellite communications services to enterprise customers using
our equipment. We also pursue dedicated systems sales using a combination of our own sales staff and our sales representative channels.

We have established subsidiaries in Europe, India and Brazil that provide end-to-end communication services to customers in those regions. These subsidiaries are fully staffed with local sales, marketing,
support, administrative and management staff. Periodic training is provided to our sales staff and channels through regional seminars and training sessions at our Germantown, Maryland headquarters.

Installation and Technical Support

Our European, Indian and Brazilian operations provide VSAT installation services for our customers through a network of third-party installers, similar to our North American installation operations. In certain limited circumstances, we
provide installation services ourselves. In regions that are not covered by our services, our customers provide their own installation services. In all instances, hub equipment installation services are provided by our Germantown, Maryland or India
installation teams.

We provide hardware and software maintenance services through annual customer assistance center
maintenance agreements. On-site repair of VSATs and maintenance services are provided in Europe, India and Brazil through subcontractors. In other areas, our customers provide their own repair services to the end-users. Our customer assistance
center maintenance offerings include a customer assistance center that is operated 24 hours per day, 365 days per year, and is available to our customers worldwide, as well as assistance through regional support centers in India, Europe and Brazil.
In addition, an on-line trouble reporting and tracking system, functionally similar to our North American counterpart, is made available to our customers around the world.

Telecom Systems Segment

Business Overview

The Telecom Systems segment consists of the Mobile Satellite Systems group, the Telematics group, and the Terrestrial Microwave group. We
believe our Mobile Satellite Systems, Telematics and Terrestrial Microwave groups address strategic markets that have significant advantages. None of these groups requires substantial operating cash or working capital and each of them is a low
fixed-cost operation.



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Mobile Satellite Systems Group

Our Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators that include Globalstar,
Inc. (Globalstar), ICO Global Communications Ltd. (ICO), Inmarsat plc, SkyTerra, TerreStar Networks, Inc. (TerreStar), Thuraya Satellite Telecommunications Company and Iridium Communications, Inc.
(Iridium). As a part of these system solutions, we provide design and development engineering, terminals, Ground Based Beam Forming (GBBF) equipment, Base Station solutions, Radio Access Networks (RAN) and other
subsystems as may be required. These systems provide voice, data and fax services to handheld or transportable terminals. The Mobile Satellite Systems group generally has large, multi-year contracts with its customers.

We will continue to develop and leverage our satellite communication expertise in the Mobile Satellite Systems group on an opportunistic
basis. We also have been actively pursuing a number of opportunities in the area of hybrid satellite/terrestrial mobile networks. For example, we are currently under contract with Space Systems/Loral for development and deployment of GBBF equipment
for two different satellite systems and with SkyTerra, TerreStar and ICO for development of satellite base stations. Also, we are under contract with TerreStar for development of a satellite chipset and platform to enable the utilization of handheld
terminals and Globalstar to provide next generation RAN and user terminal chipset. In addition, we are under contract with Iridium to design and deploy a replacement of an Access Network Controller for their existing satellite communication system.
We believe that the Ancillary Terrestrial Component operator business is a growth area of the mobile satellite industry as it allows sharing of bandwidth between terrestrial and satellite applications.

The Mobile Satellite Systems group has been and will continue to be a complementary part of our core VSAT business. Our VSAT technology and
engineering teams support our mobile satellite efforts, which in turn contribute to advancing our technology in the VSAT arena with customer funded programs.

Telematics Group

We entered into an agreement with HTI to provide
development engineering and manufacturing services and an overall automotive telematics system for HTI, comprising the telematics system hub and the Telematics Control Unit. As a result of the adverse impact of the economy in the automobile
industry, one of HTIs customers filed bankruptcy. Consequently, HTI terminated substantially all of the development engineering and manufacturing services with us in August 2009. We expect our future revenue from the Telematics group to be
insignificant.

Terrestrial Microwave Group

We have developed a family of broadband products for point-to-multipoint (PMP) microwave radio network systems that enable
mobile operators to connect their cell sites and fixed operators to provide wireless broadband services quickly, cost-effectively and competitively. Our broadband PMP microwave systems have gained a reputation for technical excellence and have been
deployed in North America, South America, Europe, Africa, and Asia by well known operators.

Our current contracts require us
to either supply equipment along with support services on a turnkey basis, or simply supply equipment to the end customers or our distributors. Typically, contracts range from one to five years for the supply of equipment with corresponding periods
for equipment maintenance services. We do not anticipate significant expansion in the Terrestrial Microwave group; however, we will continue to assess customer opportunities on a project-by-project basis.

Corporate Segment

The Corporate segment consists of our corporate offices and assets not related to another business segment.

Our Strengths

Our strengths include the following:

Leading Satellite Internet Broadband Access Provider to Underserved Rural Consumer Markets in North AmericaWe focus our marketing and sales efforts on underserved markets that are less likely
to receive terrestrial broadband service. We believe that the existing or contemplated terrestrial broadband solutions are not likely to provide access to the Consumer



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market in the foreseeable future given the high costs associated with developing a terrestrial network and the lack of population density in some of these markets. Since we are one of the few
satellite broadband service providers to address this market, it represents a significant growth opportunity for us.

Leading Provider of Broadband Satellite Network Services and Systems to the Enterprise MarketOver the last 20 years, we have shipped more than 2.2 million VSAT terminals to customers in more than 100 countries. We have
maintained our leadership position in this market, which has allowed us to leverage our scale and expertise to offer a broader suite of enhanced managed services to our customers. Our enterprise customers include blue chip companies and leaders in
the retail, energy, financial, hospitality, automotive and services industries. Our customers typically have widely dispersed branches spread over a large geographic area, such as gas service stations (Shell International, ExxonMobil Corporation,
BP, ConocoPhillips and Chevron Corporation) and retailers (Lowes Companies, Inc. and Sears). Service contracts with these enterprises generally range from three to five years in duration and historically, we have experienced a high rate of
renewals. We also have many long term relationships with our customers, some of which exceed 20 years, which have contributed to a significant revenue backlog.

SPACEWAY 3 Provides Significant Additional Capacity and Operating LeverageSPACEWAY 3 satellite is one of the most technologically advanced satellite broadband services platforms in our
industry, optimized for data and designed to provide 10 gigabits per second of capacity and subscriber speeds comparable to DSL. SPACEWAY 3 enables us to more effectively offer bandwidth on demand through its dynamic capacity allocation and on board
routing capabilities. In addition, SPACEWAY 3 provides us with significant cost savings by decreasing transponder leasing expenses. We began service on SPACEWAY 3 in April 2008.

Market Leader in Technology and InnovationWe have been a leader in pioneering major advances in satellite data communication
technology since we developed the first VSAT network more than 20 years ago. Through our focused research and development efforts, we have developed industry-leading hardware and software technology that has proven critical to the development of
VSAT industry standards. We have designed a common platform for all of our existing broadband products which reduces costs for research and development, manufacturing, maintenance, customer support and network operations. The common platform also
allows us to develop solutions for new and different end markets.

Diversified Revenue StreamWe benefit from a
geographically diverse revenue stream that consists of a mix of services and hardware sales. In 2009, we derived approximately 70.5% of our global revenues from providing services and 29.5% from hardware sales and leases. We expect service revenues
to continue to exceed hardware revenues in the foreseeable future. Within the North America and International Broadband segments, our revenues are well diversified across our customer base and not concentrated in a few large customers.

Experienced Senior Management Team and Strong Controlling Private Equity StockholderOur senior management team has extensive
experience in the satellite communications industry, with an average industry experience of 30 years. HCI is majority-owned by various investment vehicles that are affiliated with Apollo Management, L.P., together with its affiliates
(Apollo). Apollo is a leading private equity investment firm with significant expertise in the satellite sector.

Our Business
Strategy

Our business strategy is to continue growing our revenue and cash flow generation capability by capitalizing on
the increasing demand for consumer satellite broadband and enterprise solutions, while lowering our costs and utilizing our industry expertise and technology leadership. Our strategy includes the following initiatives:



| |  |  | Continue our focus on being the technology leader and the low cost provider to facilitate our growth;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Continue to provide high levels of reliable and quality services with a stable enterprise market characterized by long-term contracts that have a high
renewal rate providing the base for us to grow;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Continue to expand our VSAT growth through our Consumer group in the North America Broadband segment and our service companies in the International
Broadband segment;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expand on the opportunities for growth in the Telecom System segment by extending our reach with mobile satellite projects;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | Continue to expand our vertical integration strategy from satellite to subscriber on a global basis; and
| | - |  | --------------------------------------------------------------------------------------------------------



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| |  |  | Lower our transponder leasing costs substantially and significantly improve our margins through the utilization of SPACEWAY 3 and Jupiter.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------

Consistent with our strategy to grow and improve our financial position, we also review our competitive
position on an ongoing basis and, from time to time, consider various acquisitions, strategic alliances, and divestitures, which we believe would be beneficial to our business.

Competition

The network communications industry is highly competitive. As
a provider of data network products and services in the United States and internationally, we compete with a large number of telecommunications service providers. This increasingly competitive environment has put pressure on prices and margins. To
compete effectively, we emphasize our network quality, our customization capability, our offering of networks as a turnkey managed service rather than as an equipment sale, our position as a single point of contact for products and services and our
competitive prices.

We face competition in our North American Consumer group on several fronts. The traditional
telecommunications and wireless carriers, as well as DSL and cable internet service providers offer competing services in many communities we seek to serve. Cost, speed and accessibility are key determining factors in the election of a service
provider by the consumer. In addition, we face direct competition from other satellite broadband providers in virtually all of our markets. Our primary satellite competitor is WildBlue Communications, Inc. (WildBlue), which was recently
acquired by Viasat, Inc. (ViaSat). To a much lesser extent, we compete with smaller satellite operators such as Spacenet, Inc., which is a subsidiary of Gilat Satellite Networks Ltd. (Gilat). We offer service throughout the
United States, as well as in Puerto Rico and Canada. We seek to differentiate ourselves based on our service quality, proprietary technology, distribution channels and the SPACEWAY 3 satellite network. Currently, we have capacity available for
expansion in all of our markets and expect this to be an advantage over WildBlue until sometime in 2011 when Viasat may expect to launch a new satellite for use by WildBlue. We believe that we will have sufficient capacity to grow our business and
that our capacity will grow significantly when we launch our next generation satellite, Jupiter, in the first half of 2012. However, faster subscriber growth rates than anticipated or increases in subscriber consumption of capacity beyond our
current expectations could force us to modify our marketing and business plans in some of our coverage regions, prior to the launch of Jupiter. The competitive dynamic between us and our competitors is constantly changing as we and our competitors
strive to improve our respective competitive position. While the current competitive dynamic provides us the opportunity to grow our business, we cannot be certain of its continuing effects on our business as our competitors modify or adapt their
strategies and service offerings.

We have encountered competition in our Enterprise groups from major established carriers
such as AT&T Corp., Verizon, Sprint Corporation, British Telecommunications plc, France Télécom, Deutsche Telekom AG and the global consortia of telecom operators and other major carriers, which provide international telephone,
private line and private network services using their national telephone networks and those of other carriers.

Our broadband
networks generally have an advantage over terrestrial networks where the network must reach many locations over large distances, where the customer has a last mile or congestion problem that cannot be solved easily with terrestrial
facilities and where there is a need for transmission to remote locations or emerging markets. By comparison, ground-based facilities (e.g., fiber optic cables) often have an advantage for carrying large amounts of bulk traffic between a small
number of fixed locations. However, because of a customers particular circumstances, the pricing offered by suppliers and the effectiveness of the marketing efforts of the competing suppliers also play a key role in this competitive
environment.

Our principal competitors in our Enterprise groups for the supply of VSAT satellite networks are Gilat, ViaSat
and iDirect Technologies (iDirect). Unlike Gilat, which offers a full line of broadband products and services for enterprise customers, ViaSat and iDirect offer enterprises only broadband products. In competing with Gilat, ViaSat and
iDirect, we emphasize particular technological features of our products and services, our ability to customize networks and perform desired development work, the quality of our customer service and our willingness to be flexible in structuring
arrangements for the customer. We are aware of other emerging competitors that supply networks, equipment and services. We also face competition from resellers and numerous local companies who purchase equipment and sell services to local customers.

The satellite market currently has two open technology standards for VSAT equipment: (i) Internet Protocol over
Satellite (IPoS), which is our own standard and is recognized by the European Telecommunications Standards Institute (ETSI), in Europe, the Telecommunications Industry Association in the United States and the International



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Telecommunication Union (ITU) and (ii) Digital Video Broadcast-Return Channel by Satellite (DVB-RCS), which is also recognized by the ETSI and the ITU. There are
several manufacturers providing and supporting DVB-RCS and some manufacturers are considering providing and supporting IPoS.

Government
Regulation

The provision of telecommunications is highly regulated. We are required to comply with the laws and
regulations of, and often obtain approvals from, national and local authorities in connection with most of the services that we provide. As a provider of communications services in the United States, we are subject to the regulatory authority of the
United States, primarily the Federal Communications Commission (FCC). We are also subject to the export control laws and regulations and trade and economic sanctions laws and regulations of the United States with respect to the export of
telecommunications equipment and services. Certain aspects of our business are subject to state and local regulation. The FCC has preempted many state and local regulations that impair the installation and use of VSATs. However, our business
nonetheless may be adversely affected by state and local regulation, including zoning regulations that impair the ability to install VSATs. In addition, we are subject to regulation by the national communications regulatory authorities of other
countries in which we, and under certain circumstances our resellers and distributors, provide service.

Regulation by the FCC

All commercial entities that use radio frequencies to provide communications services in the United States are subject to the
jurisdiction of the FCC under the Communications Act of 1934, as amended. The Communications Act prohibits the operation of certain satellite earth station facilities, such as those operated by us and certain of our customers, except under licenses
issued by the FCC. Changes in our FCC-licensed earth station operations require license modifications that generally must be approved by the FCC in advance. The earth station licenses we hold are granted for ten to fifteen year terms. The FCC also
has granted periodic requests by us for special temporary authorizations and experimental authorizations to operate new or modified facilities on a temporary basis. The FCC generally renews satellite earth station licenses routinely.

As a provider of telecommunications in the United States, we are presently required to contribute a percentage of our revenues from
telecommunications services to universal service support mechanisms that subsidize the provision of services to low-income consumers, high-cost areas, schools, libraries and rural health care providers. This percentage is set each calendar quarter
by the FCC. Current FCC rules permit us to pass this universal service contribution through to our customers.

The FCC also
requires broadband Internet access and Internet telephony service providers to comply with the requirements of the Federal Communications Assistance for Law Enforcement Act (CALEA). CALEA requires telecommunications carriers, including
satellite-based carriers, to ensure that law enforcement agencies are able to conduct lawfully-authorized surveillance of users of their services.

FCC Licensing of Satellites

We currently hold a license issued by the FCC to operate SPACEWAY 3 at
95° West Longitude. We also hold authorizations through the Office of Communications in the United Kingdom to operate satellites at certain locations on the geostationary arc, which we may use for SPACEWAY 3, Jupiter or any future satellites we
acquire.

Our spacecraft operations are subject to the licensing jurisdiction of, and conditions imposed by, the FCC and any
other government whose ITU filing we use to operate the satellite. Such conditions may include, for example, that we implement the satellite system in a manner consistent with certain milestones (such as for the satellite design and construction,
ground segment procurement, and launch and implementation of service), that the satellite control center be located in national territory, that a license be obtained prior to launching or operating the satellite or that a license be obtained before
interconnecting with the local switched telephone network.

ITU Frequency Registration

The orbital location and frequencies for our satellites are subject to the frequency registration and coordination process of the ITU. The
ITU Radio Regulations define the international rules and rights for a satellite to use specific radio frequencies at a specific orbital location. We have made filings with the ITU for SPACEWAY 3, Jupiter and for other potential future satellites we
acquire.



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International Regulation

We must comply with the applicable laws and regulations and, where required, obtain the approval of the regulatory authority of each country
in which we, or under certain circumstances our resellers, provide services or operate earth stations. The laws and regulatory requirements regulating access to satellite systems vary from country to country. In certain countries, a license is
required to provide our services and to operate satellite earth stations. The application procedure can be time-consuming and costly in some countries, and the terms of licenses vary for different countries. In some countries, there may be
restrictions on our ability to interconnect with the local switched telephone network. In addition, in certain countries, there are limitations on the fees that can be charged for the services we provide.

Many countries permit competition in the provision of voice, data or video services, the ownership of the equipment needed to provide
telecommunications services and the provision of transponder capacity to that country. We believe that this trend should continue due to commitments by many countries to open their satellite markets to competition. In other countries, however, a
single entity, often the government-owned telecommunications authority, may hold a monopoly on the ownership and operation of telecommunications facilities or on the provision of telecommunications to, from or within the country. In those cases, we
may be required to negotiate for access to service or equipment provided by that monopoly entity, and we may not be able to obtain favorable rates or other terms.

Export Control Requirements and Sanctions Regulations

In the
operation of our business, we must comply with all applicable export control and economic sanctions laws and regulations of the United States and other countries. Applicable United States laws and regulations include the Arms Export Control Act, the
International Traffic in Arms Regulations (ITAR), the Export Administration Regulations and the trade sanctions laws and regulations administered by the United States Department of the Treasurys Office of Foreign Assets Control
(OFAC).

The export of certain hardware, technical data and services relating to satellites to non-United States
persons is regulated by the United States Department of States Directorate of Defense Trade Controls, under the ITAR. Other items are controlled for export by the United States Department of Commerces Bureau of Industry and Security
(BIS), under the Export Administration Regulations. For example, BIS regulates our export of equipment for earth stations in ground networks located outside of the United States. In addition, we cannot provide certain equipment or
services to certain countries subject to United States trade sanctions unless we first obtain the necessary authorizations from OFAC. We are also subject to the Foreign Corrupt Practices Act that prohibits payment of bribes or giving anything of
value to foreign government officials for the purpose of obtaining or retaining business or gaining a competitive advantage.

Intellectual
Property

We currently rely on a combination of patent, trade secret, copyright and trademark law, together with licenses,
non-disclosure and confidentiality agreements and technical measures, to establish and protect proprietary rights in our products. We hold United States patents covering various aspects of our products and services, including patents covering
technologies that we believe will enable the production of lower cost satellite terminals and provide for significant acceleration of communication speeds and enhancement of throughput. By federal statute, the duration of each of our patents is 20
years from the earliest filing date. We have granted licenses to use our trademarks and service-marks to resellers worldwide, and we typically retain the right to monitor the use of those marks and impose significant restrictions on their use in
efforts to ensure a consistent brand identity. We protect our proprietary rights in our software through software licenses that, among other things, require that the software source code be maintained as confidential information and prohibit any
reverse-engineering of that code.

We believe that our patents are important to our business. We also believe that, in some
areas, the improvement of existing products and the development of new products, as well as reliance upon trade secrets and unpatented proprietary know-how, are important in establishing and maintaining a competitive advantage. We believe, to a
certain extent, that the value of our products and services are dependent upon our proprietary software, hardware and other technology, remaining trade secrets or subject to copyright protection. Generally, we enter into non-disclosure
and invention assignment agreements with our employees, subcontractors and certain customers and other business partners.



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Research and Development, Engineering and Manufacturing

We have a skilled and multi-disciplined engineering organization that develops our products and services. Our in-house technological
capability includes the complete set of skills required to develop the hardware, software and firmware required in our products and services. In addition to our product development skills, over the past 30 years, we have pioneered numerous advances
in the area of wireless communication techniques and methodologies. This 30-year history has resulted in the grant of over 500 patents to us and our predecessors, and the adoption of our techniques in numerous communication standards in both
satellite and terrestrial systems. Of these patents, we currently own over 240 patents. The remaining patents are subject to either a royalty-free perpetual license or a covenant not to assert from The DIRECTV Group, Inc.

With respect to hardware development, our skill-set includes complex digital designs, radio frequency and intermediate frequency analog
designs, advanced application-specific integrated circuit designs and sophisticated consumer and system level packaging designs. We also have extensive experience in developing products for high-volume, low-cost manufacturing for the consumer
industry, including satellite TV set-top receivers and dual mode satellite and cellular handsets.

As a complement to our
hardware development, we have developed extensive experience in designing reliable software systems as part of our telecommunication systems and services offerings. For example, our broadband product line for the enterprise market supports an
extensive range of protocols for data communications. Our software engineers have also developed many large turnkey systems for our customers by designing the overall solution, implementing the various subsystems, deploying the entire network and
user terminals, integrating and verifying the operational system and ultimately training the customers technicians and operators.

Our products are designed, manufactured and tested primarily at our facilities in Maryland; however, we outsource a significant portion of the manufacturing of our products to third parties. Our
manufacturing facilities, together with our third-party arrangements, have sufficient capacity to handle current demand. We continuously adjust our capacity based on our production requirements. We also work with third-party vendors for the
development and manufacture of components that are integrated into our products. We develop dual sourcing capabilities for critical parts when practical and we evaluate outsourced subcontract vendors on a periodic basis. We have implemented a
multifaceted strategy focused on meeting customer demand for our products and reducing production costs. Our operations group, together with our research and development group, work with our vendors and subcontractors to reduce development costs and
to increase production efficiency in order to obtain components at lower prices.

Subsidiaries

We own a number of subsidiaries. A complete list of our subsidiaries is filed as Exhibit 21.1 to this report.

Environmental

We are
subject to various federal, state and local laws relating to the protection of the environment, most significantly the Resource Conservation and Recovery Act (RCRA) and the Emergency Planning and Community Right-to-Know Act
(EPCRA). Our Safety, Health and Environmental Affairs department manages our compliance with all applicable federal and state environmental laws and regulations.

Under the RCRA, we are considered a small quantity generator. As such, we perform weekly inspections of any waste storage areas to ensure
that their integrity has not been breached and to ensure that the waste receptacles are intact. We also label all hazardous waste containers with appropriate signage identifying both the contents and the date the waste was generated, and we use a
third-party waste hauler to transport and dispose of such waste. Hazardous and other waste is manifested and shipped in accordance with Environmental Protection Agency, Department of Transportation and relevant state regulations.

As required by the EPCRA, we file periodic reports with regulators covering four areas: Emergency Planning, Emergency Release, Hazardous
Chemical Storage and Toxic Chemical Release. We maintain small quantities of hazardous materials on our premises and, therefore, have relatively modest reporting requirements under the EPCRA.



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Our environmental compliance costs to date have not been material, and we currently have no
reason to believe that such costs will become material in the foreseeable future.

Employees and Labor Relations

As of December 31, 2009, we had 1,924 employees, including 292 employees from our less than wholly-owned subsidiaries. Other than 54 of
our employees located in Italy and Brazil, none are represented by a union. We believe that our relations with our employees are good.

Generally, our employees are retained on an at-will basis. However, we have entered into employment and non-competition agreements with our Chief Executive Officer, Chief Financial Officer and each of our Executive Vice Presidents. We
require all at-will employees to sign at-will employee agreements which contain a confidentiality agreement and an agreement not to compete with the Company during their employment with us and for a period of two years following the termination of
their employment.

Additional Information

The Securities and Exchange Commission (the SEC) maintains an internet site (http://www.sec.gov) that contains periodic and other reports such as annual, quarterly and current reports
on Forms 10-K, 10-Q and 8-K, respectively, as well as proxy and information statements regarding the Company, Hughes Communications, Inc. and other companies that file electronically with the SEC. Copies of our SEC filings, including our annual
reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, are available on our website as soon as reasonably
practicable after we electronically file such reports with the SEC. Investors and other interested parties can also access these reports at www.hughes.com and follow the link to Investor Relations.



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|Item 1A. | Risk Factors
|-------- | ------------

This
section should be read carefully considering the risks described below as well as other information and data included in this report. Any of the following risks could materially and adversely affect our business, results of operations and financial
condition.

Risks Related to the Nature and Operation of Our Business

The enterprise network communications industry is highly competitive. We may be unsuccessful in competing effectively against other terrestrial and
satellite-based network providers in our Enterprise groups.

We operate in a highly competitive enterprise network
communications industry in the sale and lease of our products and services. Our industry is characterized by competitive pressures to provide enhanced functionality for the same or lower price with each new generation of technology. As the prices of
our products decrease, we will need to sell more products and/or reduce the per-unit costs to improve or maintain our results of operations. Our Enterprise groups face competition from providers of terrestrial-based networks, such as Digital
Subscriber Line (DSL), cable modem service, Multiprotocol Label Switching and Internet protocol-based virtual private networks, which may have advantages over satellite networks for certain customer applications. Terrestrial-based
networks are offered by telecommunications carriers and other large companies, many of which have substantially greater financial resources and greater name recognition than us.

The costs of a satellite network may exceed those of a terrestrial-based network, especially in areas that have experienced significant DSL
and cable internet build-out. It may become more difficult for us to compete with terrestrial providers as the number of these areas increase and the cost of their network and hardware services declines. In addition, government agencies are
increasingly considering and implementing subsidies for deployment of broadband access in underserved areas. Depending on how the particular programs are structured, these subsidies may favor, or in some cases be limited to, terrestrial-based
services. We also compete for enterprise clients with other satellite network providers, satellite providers that are targeting small and medium businesses and smaller independent systems integrators on procurement projects. In Asia and Latin
America, the build-out of terrestrial networks has adversely impacted demand for very small aperture terminal (VSAT) services and regulation and inequitable access remain barriers to new business.

The consumer network communications market is highly competitive. We may be unsuccessful in competing effectively against DSL and cable service
providers and other satellite broadband providers in the Consumer market.

We face competition in our Consumer group
primarily from DSL and cable internet service providers. Also, other satellite and wireless broadband companies have launched or are planning the launch of consumer satellite internet access services in competition with us in North America. Some of
these competitors offer consumer services and hardware at lower prices than ours. In addition, terrestrial alternatives do not require our external dish which may limit customer acceptance of our products.

We also may face competition from our former parent, The DIRECTV Group, Inc. (DIRECTV). For a description of this risk, see
DIRECTV may compete with us in certain sectors and subject to certain conditions. In addition, under the American Recovery and Reinvestment Act of 2009, substantial funds from the federal government have been earmarked for
promoting the deployment of broadband connectivity in rural, unserved and underserved areas. There can be no assurance as to how these funds will be spent or what, if any, impact such spending may have on the competitive landscape we face.

If we are unable to develop, introduce and market new products, applications and services on a cost effective and timely basis, or if
we are unable to sell our new products and services to existing and new customers, our business could be adversely affected.

The network communications market is characterized by rapid technological changes, frequent new product introductions and evolving industry standards. If we fail to develop new technology or keep pace with significant industry technological
changes, our existing products and technology could be rendered obsolete. Even if we keep up with technological innovation, we may not meet the demands of the network communications market. For example, our large enterprise customers may only choose
to renew services with us at substantially lower prices or for a decreased level of service. Many of our large enterprise customers have existing networks available to them and may opt to find alternatives to our VSAT services or may renew with us
solely as a backup network. If we are unable to respond to technological advances on a cost effective and timely basis, or if our products or applications are not accepted by the market, then our business, financial condition and results of
operations would be adversely affected.



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Economic factors may result in reduced demand and pricing pressure on our products and services.

Our business depends on the economic health and willingness of our customers and potential customers to make and
adhere to capital and financial commitments to purchase our products and services. The U.S. and world economic markets have been undergoing a period of slowdown or recession, and the future economic environment may continue to be unfavorable. In
addition, the telecommunications industry has been facing significant challenges resulting from excess capacity, new technologies and intense price competition. If the conditions in the U.S. and world economic markets continue to be volatile or
deteriorate further or if the telecommunications industry experiences future weaknesses, we could experience reduced demand for, and pricing pressure on, our products and services, which could lead to a reduction in our revenues and adversely affect
our business, financial condition and results of operations.

We face risks associated with our satellites.

If we are unable to continue to operate SPACEWAY 3, or to launch or operate Jupiter, as a result of any of the following risks, we will be
unable to realize the anticipated benefits from such satellites, and our business, financial condition and results of operations could be adversely affected:



| |  |  | Business planOur business plan may be unsuccessful, and we may not be able to achieve the cost savings that we expect from our satellites.
A failure to attract a sufficient number of customers would result in our inability to realize the cost savings that we expect to achieve from the anticipated lower costs of bandwidth associated with the capacity of our satellites. In addition, we
will continue to incur start-up losses associated with the launch and operation of our satellites until we acquire a sufficient number of customers.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Regulatory license riskOur satellites are primarily intended to provide services to North America. Spacecraft operations are subject to
compliance with the licensing conditions of the United States Federal Communications Commission (FCC) and those of any other government whose International Telecommunication Union filing we may use to operate our satellites in the
future. Satellite authorizations granted by the FCC or foreign regulatory agencies are typically subject to conditions imposed by such regulatory agency in addition to such agencys general authority to modify, cancel or revoke those
authorizations. Failure to comply with such requirements, or comply in a timely manner could lead to the loss of authorizations and could have an adverse effect on our business, financial condition and results of operations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In-orbit risksSPACEWAY 3 is, and Jupiter will be, subject to similar potential satellite failures or performance degradations as other
satellites. In-orbit risks similar to those described below under Satellite failures or degradations in satellite performance could affect our business, financial condition and results of operations apply to our satellites. To the
extent there is an anomaly or other in-orbit failure with respect to SPACEWAY 3, we do not currently have a replacement satellite or backup transponder capacity and would have to identify and lease alternative transponder capacity that may not be
available on economic terms or at all. Likewise, if we send erroneous or corrupted signals to one of our satellites from the ground, such errors or corruption may result in a temporary or permanent loss of ability to use some or all of the
communications capacity of such satellite. Additionally, we could be required to reposition the antennas of our customers, which would entail significant cost and could require new or modified licenses from regulatory authorities.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | InsuranceThe price, terms and availability of satellite insurance can fluctuate significantly. These policies may not continue to be
available on commercially reasonable terms or at all. In addition to higher premiums, insurance policies may provide for higher deductibles, shorter coverage periods and policy exclusions related to satellite health.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Novel designSPACEWAY 3 employs a complex and novel design intended for higher-speed data rates and greater bandwidth per network site. If
the enhanced features of the satellite design do not function to its specifications, we may not be able to offer the functionality or throughput of transmission service that we expect for SPACEWAY 3.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Launch risksThere are risks associated with the launch of satellites, including launch failure, damage or destruction during launch and
improper orbital placement. Launch failures result in significant delays in the deployment of satellites because of the need both to construct replacement satellites, which can take up to 36-48 months, and obtain other launch opportunities.
Only certain launch vehicles can lift and place into orbit
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | spacecraft in the mass range of the Jupiter satellite, which further limits the launch opportunities for the Jupiter satellite. The overall historical loss rate in the satellite industry for all
launches of commercial satellites in fixed orbits in the last five years is estimated by some industry participants to be 5% but may be higher. We expect to launch our Jupiter satellite in the first half of 2012. Currently, we have not signed a
contract with a launch service provider to launch our Jupiter satellite.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cost and schedule risksWe may be required to spend in excess of our current forecast for the launch and launch insurance for our Jupiter
satellite. The launch of satellites is often subject to delays resulting from launch vehicle construction delays, cost overruns, periodic unavailability of reliable launch opportunities and delays in obtaining regulatory approvals.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Satellite failures or degradations in satellite performance could affect our business, financial condition and
results of operations.

For many of our customers, we lease satellite transponder capacity from fixed satellite
service (FSS) providers in order to send and receive data communications to and from our VSAT networks. Beginning on April 3, 2008, we also began providing capacity on our SPACEWAY 3 satellite. Satellites are subject to in-orbit
risks including malfunctions, commonly referred to as anomalies, and collisions with meteoroids, decommissioned spacecraft or other space debris. Anomalies occur as a result of various factors, such as satellite manufacturing errors, problems with
the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh space environment.

For risks associated with anomalies affecting our satellites, see We face risks associated with our satellites. Any single anomaly or series of anomalies affecting the satellites
on which we lease transponder capacity could materially adversely affect our operations and revenues and our relationships with current customers, as well as our ability to attract new customers for our satellite services. Anomalies may also reduce
the expected useful life of a satellite, thereby creating additional expenses due to the need to provide replacement or backup capacity and potentially reduce revenues if service is interrupted on the satellites we utilize. We may not be able to
obtain backup capacity at similar prices, or at all. In addition, an increased frequency of anomalies could impact market acceptance of our services.

Any failure on our part to perform our VSAT service contracts or provide satellite broadband access as a result of satellite failures could result in: (i) a loss of revenue despite continued
obligations under our leasing arrangements; (ii) possible cancellation of our long-term contracts; (iii) inability to continue with our subscription-based customers; (iv) incurring additional expenses to reposition customer antennas
to alternative satellites; and (v) damaging our reputation, which could negatively affect our ability to retain existing customers or to gain new business. The cancellation of long-term contracts due to service disruptions is an exception to
the generally non-cancelable nature of our contracts, and such cancellation would reduce our revenue backlog described in this report. See The failure to adequately anticipate the need for transponder capacity or the inability to
obtain transponder capacity could harm our results of operations.

Our networks and those of our third-party service providers
may be vulnerable to security risks.

We expect the secure transmission of confidential information over public
networks to continue to be a critical element of our operations. Our networks and those of our third-party service providers and our customers may be vulnerable to unauthorized access, computer viruses and other security problems. Persons who
circumvent security measures could wrongfully obtain or use information on the network or cause interruptions, delays or malfunctions in our operations, any of which could have a material adverse effect on our business, financial condition and
results of operations. We may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems, including reputational harm and litigation, caused by any breaches. In addition, our customer
contracts, in general, do not contain provisions which would protect us against liability to third parties with whom our customers conduct business. Although we have implemented and intend to continue to implement industry-standard security
measures, these measures may prove to be inadequate and result in system failures and delays that could lower network operations center availability and have a material adverse effect on our business, financial condition and results of operations.

DIRECTV may compete with us in certain sectors and subject to certain conditions.

While we have entered into a non-competition agreement with DIRECTV in connection with our separation from DIRECTV in 2005, DIRECTV has
retained the right to compete with us in selling data services to consumers at all times and may compete with us in all areas after April 22, 2010. Until such time, while the non-competition agreement restricts



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DIRECTV from using the advanced on-board processing capabilities of its two SPACEWAY satellites for data service offerings that would directly compete with us, DIRECTV is not limited in such use
if the video capability of its SPACEWAY satellites does not remain capable of commercial operations. Moreover, DIRECTV is not restricted from competing with our business if such data services are incidental to DIRECTVs provision of a video
service to an enterprise customer and are an integral part of such video service or are available as an optional add-on to such video service. In any event, DIRECTV may compete with us after the non-competition agreement expires on April 22,
2010.

We are dependent upon suppliers of components, manufacturing outsourcing, installation and customer service, and our results of
operations may be materially affected if any of these third-party providers fail to appropriately deliver the contracted goods or services.

We are dependent upon third-party services and products provided to us, including the following:



| |  |  | ComponentsA limited number of suppliers manufacture some of the key components required to build our VSATs. These key components may not
be continually available and we may not be able to forecast our component requirements sufficiently in advance, which may have a detrimental effect on supply. If we are required to change suppliers for any reason, we would experience a delay in
manufacturing our products if another supplier is not able to meet our requirements on a timely basis. In addition, if we are unable to obtain the necessary volumes of components on favorable terms or prices on a timely basis, we may be unable to
produce our products at competitive prices and we may be unable to satisfy demand from our customers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Commodity Price RiskAll of our products contain components whose base raw materials have undergone dramatic cost fluctuations in the last
24 months. Fluctuations in pricing of raw materials have the ability to affect our product costs. Although we have been successful in offsetting or mitigating our exposure to these fluctuations, such changes could have an adverse impact on our
product costs.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Manufacturing outsourcingWhile we develop and manufacture prototypes for our products, we use contract manufacturers to produce a
significant portion of our hardware. If these contract manufacturers fail to provide products that meet our specifications in a timely manner, then our customer relationships may be harmed.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Installation and customer support serviceEach of our North American and international operations utilize a network of third-party
installers to deploy our hardware. In addition, a portion of our customer support and management is provided by offshore call centers. Since we provide customized services for our customers that are essential to their operations, a decline in levels
of service or attention to the needs of our customers or the occurrence of negligent and careless acts could adversely affect our reputation, renewal rates and ability to win new business.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The failure to adequately anticipate the need for transponder capacity or the inability to obtain transponder capacity could harm our results of
operations.

We have made substantial contractual commitments for transponder capacity based on our existing customer
contracts and backlog, as well as anticipated future business, to the extent our existing customers are not expected to utilize our SPACEWAY 3 satellite. If future demand does not meet our expectations, we will be committed to maintain excess
transponder capacity for which we will have no or insufficient revenues to cover our costs, which would have a negative impact on our margins and results of operations. Our transponder leases are generally for two to five years, and different leases
cover satellites with coverage of different geographical areas or support different applications and features, so we may not be able to quickly or easily adjust our capacity to changes in demand. If we only purchase transponder capacity based on
existing contracts and bookings, capacity for certain types of coverage in the future that cannot be readily served by SPACEWAY 3 may be unavailable to us and we may not be able to satisfy certain needs of our customers, which could result in a loss
of possible new business and could negatively impact the margins earned for those services. At present, until the launch and operation of additional satellites, there is limited availability of capacity on the Ku-band frequencies in North America.
In addition, the FSS industry has seen consolidation in the past decade, and today, the three main FSS providers in North America and a number of smaller regional providers own and operate the current satellites that are available for our capacity
needs. The failure of any of these FSS providers or a downturn in their industry as a whole could reduce or interrupt the Ku-band capacity available to us. If we are not able to renew our capacity leases at economically viable rates, or if capacity
is not available due to any problems of the FSS providers, our business and results of operations would be adversely affected, to the extent SPACEWAY 3 and Jupiter are unable to satisfy the associated demand.



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If our products contain defects, we could be subject to significant costs to correct such defects and
our product and network service contracts could be delayed or cancelled, which could expose us to significant liability and adversely affect our revenues.

The products and the networks we deploy are highly complex, and some may contain defects when first introduced or when new versions or enhancements are released, despite extensive testing and our quality
control procedures. In addition, many of our products and network services are designed to interface with our customers existing networks, each of which has different specifications and utilize multiple protocol standards. Our products and
services must interoperate with the other products and services within our customers networks, as well as with future products and services that might be added to these networks, to meet our customers requirements. Further, in the
consumer market, our products are usually installed in residential and other locations where there might be a higher likelihood of product liability claims relating to improper or unsafe products or installations. The occurrence of any defects,
errors or failures in our products or network services could result in: (i) additional costs to correct such defects; (ii) cancellation of orders; (iii) a reduction in revenue backlog; (iv) product returns or recalls;
(v) diversion of our resources; (vi) legal actions by our customers or our customers end users, including for damages caused by a defective product; and (vii) the issuance of credits to customers and other losses to us, our
customers or end users. Any of these occurrences could also result in the loss of or delay in market acceptance of our products and services and loss of sales, which would harm our reputation and our business and adversely affect our revenues and
profitability. In addition, our insurance would not cover the cost of correcting significant errors, defects, or security problems.

Our
failure to develop, obtain or protect our intellectual property rights could adversely affect our future performance and growth.

We rely on a combination of United States and foreign patent, trademark, copyright and trade secret laws as well as licenses, nondisclosure, confidentiality and other contractual agreements or
restrictions to protect our proprietary rights to the technologies and inventions used in our services and products, including proprietary VSAT technology and related services and products. We have registered trademarks and patents and have pending
trademark and patent applications in the United States and a number of foreign countries. However, our patent and trademark applications may not be allowed by the applicable governmental authorities to issue as patents or register as trademarks at
all, or in a form that will be advantageous to us. In addition, in some instances, we may not have registered important patent and trademark rights in these and other countries. If we fail to timely file a patent application in any such country, we
may be precluded from doing so at a later date. In addition, the laws of some countries do not protect and do not allow us to enforce our proprietary rights to the same extent as do the laws of the United States. Accordingly, we might not be able to
protect our proprietary products and technologies against unauthorized third-party copying or use, which could negatively affect our competitive position.

Furthermore, our intellectual property may prove inadequate to protect our proprietary rights, may be infringed or misappropriated by others, or may diminish in value over time. Our competitors may be
able to freely make use of our patented technology after our patents expire or may challenge the validity, enforceability or scope of our patents, trademarks or trade secrets. Competitors also may independently develop products or services that are
substantially equivalent or superior to our technology. In addition, it may be possible for third parties to reverse-engineer, otherwise obtain, copy and use information that we regard as proprietary. If we are unable to protect our services and
products through the enforcement of our intellectual property rights, our ability to compete based on our current market advantages may be harmed.

We also rely on unpatented proprietary technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into
confidentiality agreements. These agreements may not provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how
or other proprietary information. If we fail to prevent substantial unauthorized access to our trade secrets, we risk the loss of those intellectual property rights and whatever competitive advantage they provide us.

Claims that our services and products infringe the intellectual property rights of others could increase our costs and reduce our sales, which would
adversely affect our results of operations.

We have received, and may in the future receive, communications from
third parties claiming that we or our products infringe upon the intellectual property rights of third parties. In addition, we may be named in the future as a defendant in lawsuits claiming that our services or products infringe upon the
intellectual property rights of third parties. Litigation may be



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necessary to determine the validity and scope of third-party rights or to defend against claims of infringement. Litigation may also be necessary to enforce our intellectual property rights or to
defend against claims that our intellectual property rights are invalid or unenforceable. Such litigation, regardless of the outcome, could result in substantial costs and diversion of resources, including time and attention of management and other
key personnel, and could have a material adverse effect on our business, financial condition and results of operations. We expect to be increasingly subject to such claims as the number of products and competitors in our industry grows.

We may not be aware of all intellectual property rights that our services or products may potentially infringe. Further, without lengthy
litigation, it may not be possible to determine definitively whether a claim of infringement is valid. We cannot estimate the extent to which we may be required in the future to obtain intellectual property licenses or the availability and cost of
any such licenses. Those costs, and their impact on our earnings, could be material. Damages in patent infringement cases may also include treble damages in certain circumstances. If a third party holds intellectual property rights, it may not allow
us to use our intellectual property at any price, or on terms acceptable to us, which could materially adversely affect our competitive position. To the extent that we are required to pay royalties to third parties to whom we are not currently
making payments, these increased costs of doing business could materially adversely affect our results of operations. In addition, under some of our agreements with customers, we are not permitted to use all or some of the intellectual property
developed for that customer for other customers and in other cases, we have agreed not to provide similar services to such customers competitors. Further, our service agreements with our customers generally provide that we will defend and
indemnify them for claims against them relating to our alleged infringement of third-party intellectual property rights with respect to services and products we provide. Third parties may assert infringement claims against our customers. These
claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers or may be
required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonably terms, our customers may be forced to stop using our products.

In addition, our patents, trademarks and other proprietary rights may be subject to various attacks claiming they are invalid or
unenforceable. These attacks might invalidate, render unenforceable or otherwise limit the scope of the protection that our patents, trademarks and other rights afford us. If we lose the use of a product name or brand name, our efforts spent on
building that brand may be lost, and we will have to rebuild a brand for that product, which we may or may not be able to do, and which would cause us to incur new costs in connection with building such brand name. If we are involved in a patent
infringement suit, even if we prevail, there is no assurance that third parties will not be able to design around our patents, which could harm our competitive position.

If we are unable to license technology from third parties on satisfactory terms, our developmental costs could increase and we may not be able to deploy our services and products in a timely manner.

We depend, in part, on technology that we license from third parties on a non-exclusive basis and integrate into our
products and service offerings. Licenses for third-party technology that we use in our current products may be terminated or not renewed, and we may be unable to license third-party technology necessary for such products in the future. Furthermore,
we may be unable to renegotiate acceptable third-party license terms to reflect changes in our pricing models. Changes to or the loss of a third-party license could lead to an increase in the costs of licensing or inoperability of products or
network services. In addition, technology licensed from third parties may have undetected errors that impair the functionality or prevent the successful integration of our products or services. As a result of any such changes or loss, we may need to
incur additional development costs to ensure continued performance of our products or suffer delays until replacement technology, if available, can be obtained and integrated.

Our Parent is majority-owned by various investment vehicles affiliated with Apollo and Apollos interests as an equity holder may conflict with the interests of the holders of our Senior Notes.

At December 31, 2009, Apollo Management, L.P., together with its affiliates (Apollo) owned in the
aggregate 12,408,611 shares, or approximately 57.4%, of the issued and outstanding common stock of Hughes Communications, Inc. (HCI or Parent). Therefore, Apollo has control over HCIs management and policies, such as
the election of its directors, the appointment of new management and the approval of any other action requiring the approval of HCIs stockholders, including any amendments to its certificate of incorporation and mergers or sales of all or
substantially all of its assets. The interests of Apollo may not in all cases be aligned with those of the holders of our 9.50% senior notes issued in 2006 and 2009 (collectively, the Senior Notes). In addition, the level of
Apollos ownership of HCIs common stock could have the



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effect of discouraging or impeding an unsolicited acquisition proposal. Furthermore, Apollo may, in the future, own businesses that directly or indirectly compete with us. Apollo may also pursue
acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. Subject to limitations contained in our Limited Liability Company Agreement, the indentures governing
the Senior Notes, our $50.0 million revolving credit facility (the Revolving Credit Facility) and our $115.0 million term loan facility (the Term Loan Facility) regarding affiliate transactions, Apollo may cause us to enter
into transactions with their affiliates to buy or sell assets.

Our future success depends on our ability to retain our key employees.

We are dependent on the services of HCIs and our senior management team to remain competitive in our industry.
The loss of one or more members of HCIs or our senior management team could have an adverse effect on us until qualified replacements are found. We may not be able to quickly replace these individuals with persons of equal experience and
capabilities. In addition, technological innovation depends, to a significant extent, on the work of technically skilled employees. Competition for executive, managerial and skilled personnel in our industry is intense. We expect to face continued
increases in compensation costs in order to attract and retain senior executives, managers and skilled employees, especially if the current job market improves. We may not be able to retain our existing senior management, fill new positions or
vacancies created by expansion or turnover or attract or retain the management and personnel necessary to develop and market our products. We do not maintain key man life insurance on any of these individuals.

Risks Related to the Regulation of Our Business

We may face difficulties in obtaining regulatory approvals for our provision of telecommunications services, and we may face changes in regulation, each of which could adversely affect our operations.

In a number of countries where we operate, the provision of telecommunications services is highly regulated. In such countries, we are
required to obtain approvals from national and local authorities in connection with most of the services that we provide. In many jurisdictions, we must maintain such approvals through compliance with license conditions or payment of annual
regulatory fees.

While the governmental authorizations for our current business generally have not been difficult to obtain
in a timely manner, the need to obtain particular authorizations in the future may delay our provision of current and new services. Moreover, the imposition by a governmental entity of conditions on our authorizations, or the failure to obtain
authorizations necessary to launch and operate satellites or provide satellite service, could have a material adverse effect on our ability to generate revenue and conduct our business as currently planned. Violations of laws or regulations may
result in various sanctions including fines, loss of authorizations and the denial of applications for new authorizations or for the renewal of existing authorizations.

Future changes to the regulations under which we operate could make it difficult for us to obtain or maintain authorizations, increase our costs or make it easier or less expensive for our competitors to
compete with us.

We may face difficulties in accurately assessing and collecting contributions towards the Universal Service Fund.

As a provider of telecommunications in the United States, we are presently required to contribute a percentage of our
revenues from telecommunications services to universal service support mechanisms that subsidize the provision of services to low-income consumers, high-cost areas, schools, libraries and rural health care providers. This percentage is set each
calendar quarter by the FCC. Current FCC rules permit us to pass this universal service contribution onto our customers.

Because our customer contracts often include both telecommunications services, which create such support obligations, and other goods and services, which do not, it can be difficult to determine which portion of our revenues forms the basis
for this contribution and the amount that we can recover from our customers. If the FCC, which oversees the support mechanisms, or a court or other governmental entity were to determine that we computed our contribution obligation incorrectly or
passed the wrong amount onto our customers, we could become subject to additional assessments, liabilities, or other financial penalties. In addition, the FCC is considering substantial changes to its universal service contribution rules, and these
changes could impact our future contribution obligations and those of third parties that provide communication services to our business. Any such change to the universal service contribution rules could adversely affect our costs of providing
service to our customers.



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Our international sales and operations are subject to applicable laws relating to trade, export
controls and foreign corrupt practices, the violation of which could adversely affect our operations.

We must comply
with all applicable export control laws and regulations of the United States and other countries. United States laws and regulations applicable to us include the Arms Export Control Act, the International Traffic in Arms Regulations
(ITAR), the Export Administration Regulations (EAR) and the trade sanctions laws and regulations administered by the United States Department of the Treasurys Office of Foreign Assets Control (OFAC). The
export of certain hardware, technical data and services relating to satellites is regulated by the United States Department of States Directorate of Defense Trade Controls under ITAR. Other items are controlled for export by the United States
Department of Commerces Bureau of Industry and Security under the EAR. We cannot provide services to certain countries subject to United States trade sanctions unless we first obtain the necessary authorizations from OFAC. In addition, we are
subject to the Foreign Corrupt Practices Act, that, generally, bars bribes or unreasonable gifts to foreign governments or officials. See Item 1. BusinessGovernment Regulation.

Violations of these laws or regulations could result in significant sanctions including fines, more onerous compliance requirements,
debarments from export privileges or loss of authorizations needed to conduct aspects of our international business. A future violation of ITAR or the other regulations enumerated above could materially adversely affect our business, financial
condition and results of operations.

Our foreign operations expose us to regulatory risks and restrictions not present in our domestic
operations.

Our operations outside the United States accounted for approximately 23.2% of our revenues for the year
ended December 31, 2009, and we expect our foreign operations to continue to represent a significant portion of our business. We have operations in Brazil, Germany, India, Indonesia, Italy, Mexico, the Russian Federation, South Africa, the
United Arab Emirates and the United Kingdom, among other nations. Over the last 20 years, we have sold products in over 100 countries. Our foreign operations involve varying degrees of risks and uncertainties inherent in doing business abroad. Such
risks include:



| |  |  | Complications in complying with restrictions on foreign ownership and investment and limitations on repatriationWe may not be permitted to
own our operations in some countries and may have to enter into partnership or joint venture relationships. Many foreign legal regimes restrict our repatriation of earnings to the United States from our subsidiaries and joint venture entities. We
may also be limited in our ability to distribute or access our assets by the governing documents pertaining to such entities. In such event, we will not have access to the cash flow and assets of our joint ventures.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Difficulties in following a variety of foreign laws and regulations, such as those relating to data content retention, privacy and employee
welfareOur international operations are subject to the laws of many different jurisdictions that may differ significantly from United States law. For example, local political or intellectual property law may hold us responsible for the
data that is transmitted over our network by our customers. Also, other nations have more stringent employee welfare laws that guarantee perquisites that we must offer. Compliance with these laws may lead to increased operations costs, loss of
business opportunities or violations that result in fines or other penalties.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We face significant competition in our international marketsOutside North America, we have traditionally competed for VSAT hardware and
services sales primarily in Europe, Brazil and India and focused only on hardware sales in other regions. In Europe, we face intense competition which is not expected to abate in the near future.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in exchange rates between foreign currencies and the United States dollarWe conduct our business and incur costs in the local
currency of a number of the countries in which we operate. Accordingly, our results of operations are reported in the relevant local currency and then translated to United States dollars at the applicable currency exchange rate for inclusion in our
financial statements. These fluctuations in currency exchange rates have affected, and may in the future affect, revenue, profits and cash earned on international sales. In addition, we sell our products and services and acquire supplies and
components from countries that historically have been, and may continue to be, susceptible to recessions or currency devaluation.
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| |  |  | Greater exposure to the possibility of economic instability, the disruption of operations from labor and political disturbances, expropriation or
warAs we conduct operations throughout the world, we could be subject to regional or national economic downturns or instability, labor or political disturbances or conflicts of various sizes. Any of these disruptions could detrimentally
affect our sales in the affected region or country or lead to damage to, or expropriation of, our property or danger to our personnel.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Competition with large or state-owned enterprises and/or regulations that effectively limit our operations and favor local competitorsMany
of the countries in which we conduct business have traditionally had state owned or state granted monopolies on telecommunications services that favor an incumbent service provider. We face competition from these favored and entrenched companies in
countries that have not deregulated. The slower pace of deregulation in these countries, particularly in Asia and Latin America, has adversely affected the growth of our business in these regions.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Customer credit risksCustomer credit risks are exacerbated in foreign operations because there is often little information available about
the credit histories of customers in the foreign countries in which we operate.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Risks Related to Our Indebtedness

Our high level of indebtedness could adversely affect our ability to raise additional capital to fund our operations and could limit
our ability to react to changes in the economy or our industry and prevent us from meeting our obligations.

We are
significantly leveraged. The following table shows our level of indebtedness as of December 31, 2009 (in thousands):



|                          |  |                  |        
|------------------------- |  | ---------------- | -------
|                          |  | December 31,2009
|Senior Notes(1)           |  | $                | 587,874
|Term loans                |  |                  | 117,886
|VSAT hardware financing   |  |                  | 9,019  
|Revolving bank borrowings |  |                  | 1,547  
|Capital lease and other   |  |                  | 5,381  
|                          |  |                  |        
|Total debt                |  | $                | 721,707
|                          |  |                  |        



|(1) | Includes 2006 Senior Notes and 2009 Senior Notes.
|--- | -------------------------------------------------

Our substantial degree of leverage could have important consequences, including the following:



| |  |  | it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, debt service requirements,
acquisitions and general corporate or other purposes;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a substantial portion of our cash flows from operations will be dedicated to the payment of principal and interest on our indebtedness and will not be
available for other purposes, including our operations, capital expenditures, investments in new technologies and future business opportunities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the debt service requirements of our other indebtedness could make it more difficult for us to satisfy our financial obligations;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | our Revolving Credit Facility is at a variable rate of interest, exposing us to the risk of increased interest rates;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



| |  |  | it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that have less
debt or more financial resources; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may be vulnerable in a downturn in general economic condition or in our business, or we may be unable to carry out capital spending that is
important to our growth.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

We may not be able to generate cash to meet our debt service needs or to fund our
operations.

Our ability to make payments on or to refinance our indebtedness and to fund our operations will depend
on our ability to generate cash in the future, which is subject in part to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control.



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Our business may not generate sufficient cash flow from operations and future borrowings may
not be available to us under our Revolving Credit Facility or otherwise in amounts sufficient to enable us to service our indebtedness or to fund our operations or other liquidity needs. If we are unable to generate sufficient cash, we will be
forced to take actions such as revising or delaying our strategic plans, reducing or delaying capital expenditures, selling assets, restructuring or refinancing our debt or seeking additional equity capital. We may not be able to affect any of these
remedies on satisfactory terms, or at all. Each of our Revolving Credit Facility, Term Loan Facility, and the indentures governing the Senior Notes restrict our ability to dispose of assets and use the proceeds from such dispositions. Therefore, we
may not be able to consummate those dispositions or to use those proceeds to meet any debt service obligations when due.

If
we cannot make scheduled payments on our debt, we will be in default and, as a result:



| |  |  | our debt holders could declare all outstanding principal and interest to be due and payable;
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | the lenders under our Revolving Credit Facility could terminate their commitments to loan us money and foreclose against the assets securing their
borrowings; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we could be forced into bankruptcy or liquidation, which could result in the holders of the Senior Notes losing their investment.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------

Despite current indebtedness levels, we may still be able to incur substantially more debt. This could further
exacerbate the risks described above.

The terms of each of our Revolving Credit Facility, Term Loan Facility and the
indentures governing the Senior Notes contain restrictions on our ability and the ability of our subsidiaries to incur additional debt. These restrictions are subject to a number of important qualifications and exceptions and the amount of
indebtedness incurred in compliance with these restrictions could be substantial. Any incurrence of additional indebtedness could further exacerbate the risks described above.

Covenants in our debt agreements restrict our business in many ways.

Each of our Revolving Credit Facility, our Term Loan Facility and the indentures governing the Senior Notes contain various covenants that limit our ability and/or our restricted subsidiaries ability to, among other things:



| |  |  | incur, assume or guarantee additional indebtedness;
| | - |  | ---------------------------------------------------



| |  |  | issue redeemable stock and preferred stock;
| | - |  | -------------------------------------------



| |  |  | repurchase capital stock;
| | - |  | -------------------------



| |  |  | make other restricted payments including, without limitation, paying dividends and making investments;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | redeem debt that is junior in right of payment to the Senior Notes;
| | - |  | -------------------------------------------------------------------



| |  |  | create liens without securing the Senior Notes;
| | - |  | -----------------------------------------------



| |  |  | sell or otherwise dispose of assets, including capital stock of subsidiaries;
| | - |  | -----------------------------------------------------------------------------



| |  |  | enter into agreements that restrict dividends from subsidiaries;
| | - |  | ----------------------------------------------------------------



| |  |  | merge, consolidate and sell, or otherwise dispose of substantially all of its assets;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | enter into transactions with affiliates;
| | - |  | ----------------------------------------



| |  |  | guarantee indebtedness; and
| | - |  | ---------------------------



| |  |  | enter into new lines of business.
| | - |  | ---------------------------------

A breach of any of the covenants under the Revolving Credit Facility, the Term Loan Facility or the indentures governing the Senior Notes could result in a default under our Revolving Credit Facility, the
Term Loan Facility and the Senior Notes. Upon the occurrence of an event of default under our Revolving Credit Facility, the lenders could elect to declare all amounts outstanding under our Revolving Credit Facility to be immediately due and payable
and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under our Revolving Credit Facility could proceed against the collateral that secures that indebtedness. We have pledged a significant
portion of our assets as collateral under our Revolving Credit Facility. If the lenders under our Revolving Credit Facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our Revolving
Credit Facility and our other indebtedness.



24



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##### Table of Contents

|Item 1B. | Unresolved Staff Comments
|-------- | -------------------------

We have no unresolved comments from the Securities and Exchange Commission.



|Item 2. | Properties
|------- | ----------

Our
principal executive offices are located at 11717 Exploration Lane, Germantown, Maryland 20876. Our properties consist of design centers, manufacturing facilities, service facilities and sales and marketing offices and are located in the United
States, Latin America, Europe, Asia and Africa. Substantially all of our properties are used to support our North America and International Broadband segments. The following table sets forth our owned and leased properties as of December 31,
2009.



|                              |  |              |  |               |  |                                                                                               
|----------------------------- |  | ------------ |  | ------------- |  | ----------------------------------------------------------------------------------------------
|Location                      |  | Owned/Leased |  | SquareFootage |  | Function                                                                                      
|Germantown, Maryland(1)       |  | Owned        |  | 311,000       |  | Corporate headquartersoffice and engineering lab, network operations, shared hubs            
|Gaithersburg, Maryland        |  | Leased       |  | 107,500       |  | Manufacturing, test                                                                           
|Gaithersburg, Maryland        |  | Leased       |  | 80,000        |  | Engineering, office space                                                                     
|Gurgaon, India(1)             |  | Leased       |  | 43,600        |  | Corporate headquarters (India), shared hub, operations, warehouse                             
|Las Vegas, Nevada(1)          |  | Leased       |  | 43,600        |  | Shared hub, antennae yards, backup network operation and control center for SPACEWAY, gateways
|Griesheim, Germany(1)         |  | Leased       |  | 29,200        |  | Office space, shared hub, operations, warehouse                                               
|San Diego, California         |  | Leased       |  | 20,900        |  | Engineering, sales                                                                            
|Barueri, Brazil(1)            |  | Leased       |  | 16,400        |  | Warehouse, shared hub                                                                         
|Southfield, Michigan(1)       |  | Leased       |  | 15,000        |  | Shared hub                                                                                    
|Milton Keynes, United Kingdom |  | Leased       |  | 14,800        |  | Corporate headquarters (Europe) and operations                                                
|Bangalore, India(2)           |  | Leased       |  | 15,700        |  | Office, guest house                                                                           
|Kolkata, India(2)             |  | Leased       |  | 9,300         |  | Office space, warehouse, studio                                                               
|Lindon, Utah                  |  | Leased       |  | 7,900         |  | Office space                                                                                  
|Sao Paulo, Brazil             |  | Leased       |  | 6,700         |  | Office space                                                                                  
|New Delhi, India              |  | Leased       |  | 6,000         |  | Corporate headquarters                                                                        
|Mumbai, India(2)              |  | Leased       |  | 5,600         |  | Office space, warehouse                                                                       
|Alexandria, Virginia          |  | Leased       |  | 4,700         |  | Warehouse                                                                                     
|Gaithersburg, Maryland        |  | Leased       |  | 3,500         |  | Warehouse, garage                                                                             
|Rome, Italy                   |  | Leased       |  | 2,700         |  | Sales, marketing                                                                              
|Chicago, Illinois             |  | Leased       |  | 2,500         |  | Sales, marketing                                                                              
|Moscow, Russia                |  | Leased       |  | 1,100         |  | Sales, marketing                                                                              
|Dubai, United Arab Emirates   |  | Leased       |  | 500           |  | Sales                                                                                         
|Lomas de Chaputepec, Mexico   |  | Leased       |  | 450           |  | Sales, marketing, operations                                                                  
|Rockville, Maryland           |  | Leased       |  | 250           |  | Warehouse                                                                                     
|Fort Lauderdale, Florida      |  | Leased       |  | 160           |  | Sales                                                                                         
|Beijing, China                |  | Leased       |  | 160           |  | Sales                                                                                         



|(1) | We perform network services and customer support functions 24 hours a day, 7 days a week, 365 days a year at these locations.
|--- | -----------------------------------------------------------------------------------------------------------------------------

|(2) | Properties of subsidiaries that are less than wholly-owned by the Company.
|--- | --------------------------------------------------------------------------



25



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##### Table of Contents

|Item 3. | Legal Proceedings
|------- | -----------------

We
are periodically involved in litigation in the ordinary course of our business involving claims regarding intellectual property infringement, product liability, property damage, personal injury, contracts, employment and workers compensation.
We do not believe that there are any such pending or threatened legal proceedings, including ordinary litigation incidental to the conduct of our business and the ownership of our properties that, if adversely determined, would have a material
adverse effect on our business, financial condition, results of operations or liquidity.

In March 2009, we received an
arbitral award against Sea Launch Limited Partnership and Sea Launch Company, LLC (collectively, Sea Launch) entitling us to a full refund of $44.4 million (the Deposit) in payments made to Sea Launch, in addition to interest
of 10% per annum on the $44.4 million from July 10, 2007 until payment on the Deposit is received in full. This award resulted from an arbitration proceeding initiated by us on June 28, 2007 relating to our SPACEWAY 3 satellite.
Because of the material failure of a Sea Launch rocket that occurred on January 30, 2007, the launch of our SPACEWAY 3 satellite, scheduled for May 2007, was substantially delayed. We made alternative arrangements with another launch services
provider to launch SPACEWAY 3 in August 2007 and in accordance with the Launch Service Agreement (LSA), we sent a notice of termination to Sea Launch. Under the LSA we were entitled to terminate due to the launch delay and receive a
refund of the $44.4 million in payments made to Sea Launch in anticipation of the SPACEWAY 3 launch. Sea Launch refused to refund the Deposit and alleged that we had breached the LSA. The arbitration hearings were completed during the third quarter
of 2008, and the March 2009 arbitral award was the result of the arbitration panel rendering its decision in our favor.

On
June 22, 2009, Sea Launch filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware. As a result of this filing, our efforts to pursue collection of the
arbitral award from Sea Launch have been stayed under the bankruptcy laws. While we still intend to vigorously pursue the collection of our arbitral award, we will have to do so as part of Sea Launchs bankruptcy process and in accordance with
its timetable. Based upon information made available in the bankruptcy proceedings, including but not limited to, Sea Launchs credit information and its ability to continue its operations, we concluded that the value of the Deposit was
impaired and recorded an impairment loss of $44.4 million in Loss on impairment in the accompanying Consolidated Statements of Operations included in Item 8 of this report.

On May 18, 2009, the Company and HCI received notice of a complaint filed in the U.S. District Court for the Northern District of
California by two California subscribers to the HughesNet service. The plaintiffs complain about the speed of the HughesNet service, the Fair Access Policy, early termination fees and certain terms and conditions of the HughesNet subscriber
agreement. The plaintiffs seek to pursue their claims as a class action on behalf of other California subscribers. On June 4, 2009, the Company and HCI received notice of a similar complaint filed by another HughesNet subscriber in the Superior
Court of San Diego County, California. The plaintiff in this case also seeks to pursue his claims as a class action on behalf of other California subscribers. Both cases have been consolidated into a single case in the U.S. District Court for the
Northern District of California. Based on our investigation, we believe that the allegations in both complaints are not meritorious and we intend to vigorously defend these matters.

On December 18, 2009, the Company and HCI received notice of a complaint filed in the Cook County, Illinois, Circuit Court by a former
subscriber to the HughesNet service. The complaint seeks a declaration allowing the former subscriber to file a class arbitration challenging early termination fees under the subscriber agreement. Based on our investigation, we believe that the
allegations in this complaint are not meritorious and we intend to vigorously defend this matter.

No other material legal
proceedings have commenced or been terminated during the period covered by this report.



|Item 4. | Reserved
|------- | --------



26



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##### Table of Contents

PART II



|Item 5. | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | ------------------------------------------------------------------------------------------------------------

Not applicable.



|Item 6. | Selected Financial Data
|------- | -----------------------

As of January 1, 2006, we became a wholly-owned subsidiary of Hughes Communications, Inc. (HCI). Our financial statements since that date are consolidated by HCI and our assets and liabilities have been adjusted to reflect
the HCI basis in the Company in accordance with Financial Accounting Standards Board Accounting Standards Codification 805, Business Combinations. The selected financial data presented below should be read in conjunction with our
consolidated financial statements, the notes to our consolidated financial statements included in Item 8. Financial Statements and Supplementary Data and Item 7. Managements Discussion and Analysis of Financial Condition
and Results of Operations of this report.

Pursuant to the Contribution and Membership Interest Purchase Agreement dated
December 3, 2004, as amended, DTV Network Systems, Inc., (DTV Networks), prepared carved-out historical financial statements for its VSAT, mobile satellite and terrestrial microwave businesses and SPACEWAY as if they
comprised a separate limited liability company and on the basis of presentation described herein. The financial results of the Company for the period January 1, 2005 through April 22, 2005 are referred to herein as Prior
Predecessor results, the financial results for the period from April 23, 2005 through December 31, 2005 are referred to herein as Predecessor results, and the financial results for the years ended December 31, 2009,
2008, 2007 and 2006 are referred to herein as Successor results. Carryover of DTV Networks basis was used to establish the beginning balances of the Companys accounts.



|                                           |  |                         |           |                               |                                          |                             |                                         |      |  |      |           |      |   |           |  |   |         |  |   |         |  
|------------------------------------------ |  | ----------------------- | --------- | ----------------------------- | ---------------------------------------- | --------------------------- | --------------------------------------- | ---- |  | ---- | --------- | ---- | - | --------- |  | - | ------- |  | - | ------- | -
|                                           |  | Successor               |           | Predecessor                   |                                          | PriorPredecessor            |                                        
|                                           |  | Year Ended December 31, |           | April 23, toDecember 31, 2005 |                                          | January 1, toApril 22, 2005 |                                        
|                                           |  | 2009                    |           |                               | 2008                                     |                             |                                         | 2007 |  | 2006 |           |     
|                                           |  | (In thousands)          |          
|Consolidated statement of operations data: |  |                         |           |                               |                                          |                             |                                         |      |  |      |           |      |   |           |  |   |         |  |   |         |  
|Revenues                                   |  | $                       | 1,006,665 |                               |                                          | $                           | 1,059,891                               |      |  | $    | 970,075   |      | $ | 858,225   |  | $ | 583,468 |  | $ | 223,441 |  
|Income tax expense                         |  | $                       | 2,436     |                               |                                          | $                           | 7,588                                   |      |  | $    | 5,316     |      | $ | 3,276     |  | $ | 693     |  | $ | 180     |  
|Net income (loss) attributable to HNS      |  | $                       | (44,905   | )                             |                                          | $                           | 12,096                                  |      |  | $    | 49,801    |      | $ | 19,102    |  | $ | 46,571  |  | $ | (22,523 | )
|Net income (loss)                          |  | $                       | (43,557   | )                             |                                          | $                           | 12,375                                  |      |  | $    | 49,884    |      | $ | 19,265    |  | $ | 46,205  |  | $ | (22,754 | )
|                                           |  |                         |          
|                                           |  |                         |           |                               | Successor                                |                             | CombinedPredecessorand PriorPredecessor |     
|                                           |  |                         |           |                               | As of or For the Year Ended December 31, |                            
|                                           |  |                         |           |                               | 2009                                     |                             |                                         | 2008 |  | 2007 |           | 2006 |   | 2005      | 
|                                           |  |                         |           |                               | (Dollars in thousands)                   |                            
|Consolidated balance sheet data:           |  |                         |           |                               |                                          |                             |                                         |      |  |      |           |      |   |           |  |   |         |  |   |         |  
|Total assets                               |  |                         |           |                               |                                          | $                           | 1,195,298                               |      |  | $    | 1,080,107 |      | $ | 1,112,008 |  | $ | 912,390 |  | $ | 756,524 |  
|Long-term obligations                      |  |                         |           |                               |                                          | $                           | 731,148                                 |      |  | $    | 596,303   |      | $ | 584,287   |  | $ | 487,269 |  | $ | 345,900 |  
|Total equity                               |  |                         |           |                               |                                          | $                           | 205,961                                 |      |  | $    | 235,470   |      | $ | 252,820   |  | $ | 202,962 |  | $ | 171,186 |  
|Ratio of earnings to fixed charges         |  |                         |           |                               |                                          |                             | *                                       |      |  |      | 1.3x      |      |   | 1.7x      |  |   | 1.4x    |  |   | 1.8x    |  
|Deficiency of earnings to fixed changes    |  |                         |           |                               |                                          | $                           | (42,837                                 | )    |  |      |           |      |   |           |  |   |         |  |   |         |  



|* | Ratio not provided due to deficiency in the period.
|- | ---------------------------------------------------



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##### Table of Contents

|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

The following discussion and analysis of the Companys financial condition and results of operations are based upon financial
statements which have been prepared in accordance with accounting principles generally accepted in the United States of America and should each be read together with our consolidated financial statements and the notes to those consolidated financial
statements included elsewhere in this report. This report contains forward-looking statements that involve risks and uncertainties, including statements regarding our capital needs, business strategy, expectations and intentions within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which represent our expectations or beliefs concerning future events. We urge you to consider statements that use
the terms believe, do not believe, anticipate, expect, plan, may, estimate, strive, intend, will, should, and
variations of these words or similar expressions are intended to identify forward-looking statements. These statements reflect our current views with respect to future events and because our business is subject to numerous risks, and uncertainties,
our actual results could differ materially from those anticipated in the forward-looking statements, including those set forth below under this Item 7. Managements Discussion and Analysis of Financial Condition and Results of
Operations Special Note Regarding Forward-Looking Statements and contained elsewhere in this report. All forward-looking statements speak only as of the date of this report. Actual results will most likely differ from those
reflected in these forward-looking statements and the differences could be substantial. We disclaim any obligation to update these forward-looking statements or disclose any difference, except as may be required by securities laws, between our
actual results and those reflected in these statements. Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we can give no assurance that such
plans, intentions or expectations will be achieved.

Overview

Hughes Network Systems, LLC, a Delaware limited liability company, (HNS and, together with its consolidated subsidiaries, the
Company or we, us, and our) is a telecommunications company. The Company is a wholly-owned subsidiary of Hughes Communications, Inc. (HCI or Parent). We provide equipment and
services to the broadband communications marketplace. We have extensive technical expertise in satellite, wire line and wireless communications which we utilize in a number of product and service offerings. In particular, we offer a spectrum of
broadband equipment and services to the managed services market, which is comprised of enterprises with a requirement to connect a large number of geographically dispersed locations with reliable, scalable, and cost-effective applications, such as
credit card verification, inventory tracking and control, and broadcast video. We provide broadband network services and systems to the international and domestic enterprise markets and satellite Internet broadband access to North American
consumers, which we refer to as the Consumer market. In addition, we provide networking systems to customers for mobile satellite, telematics and wireless backhaul systems. These services are generally provided on a contract or project basis and may
involve the use of proprietary products engineered by us.

Strategic Initiatives and Their Impact on Our Results of Operations

For the year ended December 31, 2009, our net loss attributable to HNS was $44.9 million compared to net income
attributable to HNS of $12.1 million and $49.8 million for the years ended December 31, 2008 and 2007, respectively. Our net loss in 2009 was driven by two factors that did not exist in 2008 and 2007. The main factor related to the $44.4
million impairment loss recognized in the second quarter of 2009 associated with our prepaid deposit (the Deposit) paid to Sea Launch Company, LLC (Sea Launch). For further discussion of the impairment loss, see Note
9Other Assets to our audited consolidated financial statements included in Item 8 of this report. The second factor related to the issuance in May 2009 of $150 million of 9.50% senior notes maturing on April 15, 2014 (the 2009
Senior Notes), for which we recognized $9.9 million of interest expense.

TechnologyWe incorporate advances
in technology to reduce costs and to increase the functionality and reliability of our products and services. Through the usage of advanced spectrally efficient modulation and coding methodologies, such as DVB-S2, and proprietary software web
acceleration and compression techniques, we continue to improve the efficiency of our networks. In addition, we invest in technologies to enhance our system and network management capabilities, specifically our managed services for enterprises. We
also continue to invest in next generation technologies that can be applied to our future products and services.



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##### Table of Contents

Acquisitions, Strategic Alliances and DivestituresWe continue to focus on
expanding the identified markets for our products, services and network solutions in our North America Broadband, International Broadband and Telecom Systems segments. Consistent with our strategy to grow and improve our financial position, we also
review our competitive position on an ongoing basis and, from time to time, consider various acquisitions, strategic alliances and divestitures which we believe would be beneficial to our business. We, from time to time, consider various
alternatives related to the ownership structure of a new satellite, capacity features and other factors that would promote long term growth while meeting the needs of our customers.

In June 2009, we entered into an agreement with Space Systems/Loral (SS/L), Inc. to manufacture a next-generation, high
throughput geostationary satellite (Jupiter). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We are obligated to pay an aggregate of
approximately $252.0 million for the construction of Jupiter and have agreed to make payment to SS/L in installments upon the completion of each milestone as set forth in the agreement. We anticipate launching Jupiter in the first half of 2012. In
connection with the construction of Jupiter, we have entered into a contract with Barrett Xplore Inc. (Barrett), whereby Barrett has agreed to lease or acquire user beams, gateways and terminals for the Jupiter satellite that are
designed to operate in Canada.

On May 27, 2009, we, along with our subsidiary, HNS Finance Corp., as co-issuer,
completed the offering of the 2009 Senior Notes. The terms and covenants with respect to the 2009 Senior Notes are substantially identical to those of the 2006 Senior Notes. The 2009 Senior Notes are guaranteed on a senior unsecured basis by each of
our existing and future domestic subsidiaries that guarantee any of our indebtedness or indebtedness of our other subsidiary guarantors. Interest on the 2009 Senior Notes is accrued from April 15, 2009 and is paid semi-annually in arrears on
April 15 and October 15 of each year, beginning on October 15, 2009. After the original issue discount of $13.6 million and related offering expenses of approximately $4.5 million, we received net proceeds of approximately $133.6
million, including $1.7 million of prepaid interest received from the note holders, from the offering. We have used and intend to continue to use these net proceeds for general corporate purposes, which could include working capital needs, corporate
development opportunities (which may include acquisitions), capital expenditures and opportunistic satellite fleet expansion.

Key Business
Metrics

Business SegmentsWe divide our operations into four distinct segments(i) the North
America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; and (iv) the Corporate segment. Within the North America Broadband segment, sales are attributed to the Consumer group, which
delivers broadband internet service to consumer customers, and the Enterprise group, which provides satellite, wire line and wireless communication networks and services to enterprises. The International Broadband segment consists of our
international service companies and services sold directly to international enterprise customers. The International Enterprise group provides managed networks services and equipment to enterprise customers and broadband service providers worldwide.
The Telecom Systems segment consists of the Mobile Satellite Systems group, the Telematics group, and the Terrestrial Microwave group. The Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators.
The Telematics group provides development engineering and manufacturing services to Hughes Telematics, Inc. (HTI). The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for cellular
backhaul solutions. The Corporate segment includes our corporate offices and assets not specifically related to another business segment. Due to the complementary nature and common architecture of our services and products across our business
segments, we are able to leverage our expertise and resources within our various operating units to yield significant cost efficiencies.

RevenuesWe generate revenues from the sale and financing of hardware and the provision of services. In our North America and International Broadband segments, we generate revenues from
services and hardware. In our Telecom Systems segment, we generate revenues primarily from the development and sale of hardware. Some of our enterprise customers purchase equipment separately and operate their own networks. These customers include
large enterprises, incumbent local exchange carriers, governmental agencies and resellers. Contracts for our services vary in length depending on the customers requirements.



29



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##### Table of Contents

ServicesOur services revenue is varied in nature and includes total turnkey
communications services, terminal relocation, maintenance and changes, transponder capacity and multicast or broadcast services. Our services are offered on a contractual basis, which vary in length based on the particular end market. Typically, our
large enterprise customers enter into a three- to five-year contract, and our consumer customers enter into a 24-month contract. We bill and recognize service revenues on a monthly per site basis. For enterprise customers who receive services from
our network operations, our services include the following:



|                                   |  |             |  |                                                                                                                                                                                                                                                                                                                                                        
|---------------------------------- |  | ----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Service Type                       |  | Description
|Broadbandconnectivity              |  |           |  | Provides basic transport, intranet connectivity services and internet service provider services  Applications include high-speed internet access, IP VPN, multicast file delivery and
streaming, point- of-sale credit transactions, enterprise back-office communications, and satellite backup for frame relay service and other terrestrial networks
|                                   |  |            
|                                   |  |            
|Managed networkservices            |  |           |  | Provides one-stop turnkey suite of bundled services that include wireline and wireless satellite networks  Includes network design program management, installation management, network and
application engineering services, proactive network management, network operations, field maintenance and customer care                                    
|                                   |  |            
|                                   |  |            
|ISP services andhosted application |  |            |  | Provides internet connectivity and hosted customer-owned and managed applications on our network facilities                                                                                                                                                                                                                                            
|                                   |  |            
|                                   |  |            |  | Provides the customer application services developed by us or in conjunction with our service partners                                                                                                                                                                                                                                                 
|                                   |  |            
|                                   |  |            |  | Includes internet access, e-mail services, web hosting and online payments                                                                                                                                                                                                                                                                             
|                                   |  |            
|Digital mediaservices              |  |            |  | Digital content management and delivery including video, online learning and digital signage applications                                                                                                                                                                                                                                              
|                                   |  |            
|Customized businesssolutions       |  |            |  | Provides customized, industry-specific enterprise solutions that can be applied to multiple businesses in a given industry                                                                                                                                                                                                                             

Our services to enterprise customers are negotiated on a contract-by-contract basis with price varying based on numerous factors, including
number of sites, complexity of system and scope of services provided. We have the ability to integrate these service offerings to provide comprehensive solutions for our customers. We also provide managed services to our customers who operate their
own dedicated network facilities and charge them a management fee for the operation and support of their networks.

HardwareWe offer our enterprise customers the option to purchase their equipment up front or to finance the sale through a third-party leasing company as part of their service agreement under which payments are made over a
fixed term. Our consumer customers have the option to purchase the equipment up front or, beginning in September 2008, to rent the equipment with a 24-month service contract. Prior to September 2008, we offered our consumer customers the option to
pay for the purchased equipment over a 24-month period. Hardware revenues of the North American and International Enterprise groups are derived from: (i) network operating centers; (ii) radio frequency terminals (earth stations);
(iii) VSAT components including indoor units, outdoor units, and antennas; (iv) voice, video and data appliances; (v) routers and DSL modems; and (vi) system integration services to integrate all of the above into a system.

We also provide specialized equipment to our Mobile Satellite Systems and Terrestrial Microwave customers. Through large
multi-year contracts, we develop and supply turnkey networking and terminal systems for various operators who offer mobile satellite-based service. We also supply microwave-based networking equipment to mobile operators for back-hauling their data
from cellular telephone sites to their switching centers. In addition, local exchange carriers use our equipment for broadband access traffic from corporations bypassing local phone companies. The size and scope of these projects vary from year to
year by customer and do not follow a pattern that can be reasonably predicted.



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##### Table of Contents

Market trends impacting our revenuesThe following table presents our revenues
by end market for the years ended December 31, 2009, 2008 and 2007 (dollars in thousands):



|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------------------------------- | --------- | ------------- | - | ------------- |  | -------- | ------- |  | - | -------- | ------ |  | ------- |  | - | ------ |  | -----
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  | Variance
|                                                                                                                                                                                                           |  | Year Ended December 31,                  |           | 2009 vs. 2008 |   | 2008 vs. 2007
|                                                                                                                                                                                                           |  | 2009                                     |           | 2008          |   | 2007          |  | Amount   |         |  | % |          | Amount |  | %      
|Revenues:                                                                                                                                                                                                  |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Services revenues                                                                                                                                                                                          |  | $                                        | 709,558   |               | $ | 610,785       |  | $        | 537,115 |  | $ | 98,773   |        |  | 16.2%   |  | $ | 73,670 |  | 13.7%
|Hardware sales                                                                                                                                                                                             |  |                                          | 297,107   |               |   | 449,106       |  |          | 432,960 |  |   | (151,999 | )      |  | (33.8)% |  |   | 16,146 |  | 3.7% 
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Total revenues                                                                                                                                                                                             |  | $                                        | 1,006,665 |               | $ | 1,059,891     |  | $        | 970,075 |  | $ | (53,226  | )      |  | (5.0)%  |  | $ | 89,816 |  | 9.3% 
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Revenues by end market:                                                                                                                                                                                    |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|North America Broadband:                                                                                                                                                                                   |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Consumer                                                                                                                                                                                                   |  | $                                        | 419,563   |               | $ | 376,055       |  | $        | 331,129 |  | $ | 43,508   |        |  | 11.6%   |  | $ | 44,926 |  | 13.6%
|Enterprise                                                                                                                                                                                                 |  |                                          | 270,716   |               |   | 291,610       |  |          | 284,587 |  |   | (20,894  | )      |  | (7.2)%  |  |   | 7,023  |  | 2.5% 
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Total North America Broadband                                                                                                                                                                              |  |                                          | 690,279   |               |   | 667,665       |  |          | 615,716 |  |   | 22,614   |        |  | 3.4%    |  |   | 51,949 |  | 8.4% 
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|International Broadband:                                                                                                                                                                                   |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Enterprise                                                                                                                                                                                                 |  |                                          | 203,886   |               |   | 237,188       |  |          | 214,833 |  |   | (33,302  | )      |  | (14.0)% |  |   | 22,355 |  | 10.4%
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Telecom Systems:                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Mobile Satellite Systems                                                                                                                                                                                   |  |                                          | 76,772    |               |   | 105,725       |  |          | 103,991 |  |   | (28,953  | )      |  | (27.4)% |  |   | 1,734  |  | 1.7% 
|Telematics                                                                                                                                                                                                 |  |                                          | 23,645    |               |   | 31,065        |  |          | 22,301  |  |   | (7,420   | )      |  | (23.9)% |  |   | 8,764  |  | 39.3%
|Terrestrial Microwave                                                                                                                                                                                      |  |                                          | 12,083    |               |   | 18,248        |  |          | 13,234  |  |   | (6,165   | )      |  | (33.8)% |  |   | 5,014  |  | 37.9%
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Total Telecom Systems                                                                                                                                                                                      |  |                                          | 112,500   |               |   | 155,038       |  |          | 139,526 |  |   | (42,538  | )      |  | (27.4)% |  |   | 15,512 |  | 11.1%
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|Total revenues                                                                                                                                                                                             |  | $                                        | 1,006,665 |               | $ | 1,059,891     |  | $        | 970,075 |  | $ | (53,226  | )      |  | (5.0)%  |  | $ | 89,816 |  | 9.3% 
|                                                                                                                                                                                                           |  |                                          |           |               |   |               |  |          |         |  |   |          |        |  |         |  |   |        |  |      
|                                                                                                                                                                                                          
|The following table presents our churn rate, average revenue per unit (ARPU), average monthly gross subscriber additions, and
subscribers as of or for the years ended December 31, 2009, 2008 and 2007:
|                                                                                                                                                                                                           |  |                                         
|                                                                                                                                                                                                           |  |                                          |           | Variance     
|                                                                                                                                                                                                           |  | As of or For the Year Ended December 31, |           | 2009 vs. 2008 |   | 2008 vs. 2007
|                                                                                                                                                                                                           |  | 2009                                     |           | 2008          |   | 2007          |  | Amount   |         |  | % |          | Amount |  | %      
|Churn rate                                                                                                                                                                                                 |  |                                          | 2.23%     |               |   | 2.36%         |  |          | 2.26%   |  |   | (0.13)%  |        |  | (5.5)%  |  |   | 0.10%  |  | 4.4% 
|ARPU                                                                                                                                                                                                       |  | $                                        | 70        |               | $ | 68            |  | $        | 65      |  | $ | 2        |        |  | 2.9%    |  | $ | 3      |  | 4.6% 
|Average monthly gross subscriber additions                                                                                                                                                                 |  |                                          | 16,500    |               |   | 14,000        |  |          | 12,000  |  |   | 2,500    |        |  | 17.9%   |  |   | 2,000  |  | 16.7%
|Subscribers                                                                                                                                                                                                |  |                                          | 504,300   |               |   | 432,800       |  |          | 379,900 |  |   | 71,500   |        |  | 16.5%   |  |   | 52,900 |  | 13.9%

North America
Broadband Segment

Revenue from our Consumer group for the year ended December 31, 2009 increased by 11.6% to
$419.6 million compared to the same period in 2008. The growth in our Consumer group has been driven primarily by two factors: (i) the substantial growth in the number of subscribers arising from increased consumer awareness of our products and
services in geographic areas that have historically been underserved by DSL and cable and (ii) value-added services, resulting in an increase in average monthly revenue per subscriber.

As of December 31, 2009 and 2008, we achieved a total subscription base of 504,300 and 432,800, respectively, which included 28,000 and
16,700 subscribers in our small/medium enterprise and wholesale businesses, respectively. For the year ended December 31, 2009, our ARPU was $70 compared to $68 for the same period in 2008. ARPU is used to measure average monthly consumer
subscription service revenues on a per subscriber basis. Our ARPU calculation may not be consistent with other companies calculation in the same or similar businesses as we are not aware of any uniform standards for calculating ARPU.

Revenue from our North American Enterprise group for the year ended December 31, 2009 decreased by 7.2% to $270.7
million compared to the same period in 2008, primarily due to lower hardware sales as a result of the unfavorable condition of the overall market and economy, as well as changes in the product mix where the emphasis on managed services



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has led to lower upfront hardware revenue and an increase in recurring service revenues. The decrease in hardware sales was partially offset by the increase in services revenues resulting from an
increase in our managed services business, new contracts awarded in 2008 that provided incremental service revenue in 2009 and the growth in our small/medium and wholesale subscriber base.

International Broadband Segment

Revenue from our International Enterprise group for the year ended December 31, 2009 decreased by 14.0% to $203.9 million compared to the same period in 2008, primarily due to the completion of
terminal shipments on a multi-year contract for a large lottery operator in the United Kingdom and the unfavorable impact of currency exchange rates of $16.0 million resulting from the appreciation of the U.S. dollar. Partially offsetting these
decreases were higher revenues from our Mexico operations and from our Brazil operations as the number of sites in service in Brazil approached 11,000 as of December 31, 2009.

Telecom Systems Segment

Revenue from our Telecom Systems segment for the year ended December 31, 2009 decreased by 27.4% to $112.5 million compared to the same period in 2008, primarily due to the reduction in revenue
from our Mobile Satellite group. Our Mobile Satellite group revenues are opportunity driven and are subject to the life cycle of customer contracts as they move from design and development to delivery and maintenance of completed networks. As a
result, revenues in the Mobile Satellite group fluctuate on a quarter to quarter basis. Additionally, the decrease was impacted by the unfavorable economy in the automobile industry causing HTI to terminate substantially all of the development
engineering and manufacturing services with us in August 2009 as a result of the bankruptcy filing of one of HTIs customers. We expect our future revenue from the Telematics group to be insignificant.

Revenue BacklogAt December 31, 2009, 2008 and 2007, our total revenue backlog, which we define as our expected future
revenue under customer contracts that are non-cancelable and excluding consumer customers, was $834.0 million, $840.9 million and $751.8 million, respectively. We expect to realize our revenue backlog as follows: $342.7 million in 2010, $245.9
million in 2011, $147.4 million in 2012, $34.5 million in 2013 and $63.5 million thereafter. See Item 1A. Risk Factors and Special Note Regarding Forward-Looking Statements for a discussion of the potential risks to our
revenue and backlog. Although we have signed contracts with our consumer customers for 24 months, we do not include these contractual commitments in our backlog.

Cost of ServicesOur cost of services primarily consist of transponder capacity leases, hub infrastructure, customer care, wire line and wireless capacity, depreciation expense related to
network infrastructure and capitalized hardware and software, and the salaries and related employment costs for those employees who manage our network operations and other project areas. These costs are dependent on the number of customers served
and have increased relative to our growth. We continue to execute a number of cost containment and efficiency initiatives that were implemented in previous years. In addition, the migration to a single upgraded platform for our North America
Broadband segment has enabled us to leverage our satellite bandwidth and network operation facilities to achieve further cost efficiencies. The costs associated with transponder capacity leases for the Consumer group are expected to decline as more
customers are added to the SPACEWAY network.

Cost of Hardware Products SoldWe outsource a significant portion of
the manufacturing of our hardware for our North America and International Broadband and Telecom Systems segments to third-party contract manufacturers. Our cost of hardware products sold relates primarily to direct materials and subsystems (e.g.,
antennas), salaries and related employment costs for those employees who are directly associated with the procurement and manufacture of our products and other items of indirect overhead incurred in the procurement and production process. Cost of
hardware products sold also includes certain engineering and hardware costs related to the design of a particular product for specific customer programs. In addition, certain software development costs are capitalized in accordance with ASC 985-20,
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, and amortized to cost of hardware products sold over their estimated useful lives, not to exceed five years. As we have developed new product offerings, we have
reduced product costs due to higher levels of component integration, design improvements and volume increases.

Subscriber
acquisition costs (SAC) are associated with our Consumer group and are comprised of three elements: (i) the subsidy for the cost of hardware and related installation; (ii) certain sales and marketing expense; and
(iii) dealer and



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customer service representative commissions on new installations/activations. The subsidy for cost of hardware and related cost of installation is deferred and amortized over the initial contract
period or the useful life of the hardware as a component of cost of hardware products sold for hardware related sales or cost of services for activities related to the consumer rental program. The portion of SAC related to sales and marketing is
expensed as incurred. Dealer and customer service representative commissions are deferred and amortized over the initial contract period as a component of sales and marketing expense.

Selling, General and Administrative (SG&A)Selling expenses primarily consist of the salaries, commissions,
related benefit costs of our direct sales force and marketing staff, advertising, channel compensations on new activations which are deferred and amortized over the initial consumer contract period, travel, allocation of facilities, and other
directly related overhead costs for our domestic and international businesses. General and administrative expenses include bad debt expense and salaries and related employee benefits for employees associated with common supporting functions, such as
accounting and finance, risk management, legal, information technology, administration, human resources, and senior management. Selling, general, and administrative costs also include facilities costs, third-party service providers costs (such
as outside tax and legal counsel, and insurance providers), bank fees related to credit card processing charges and depreciation of fixed assets.

Research and Development (R&D)R&D expenses primarily consist of the salaries of certain members of our engineering staff plus an applied overhead charge. R&D expenses
also include engineering support for existing platforms and development efforts to build new products and software applications, subcontractors, material purchases and other direct costs in support of product development.

Selected Segment Data

Our
operations are comprised of four segments: (i) the North America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; and (iv) the Corporate segment. The following tables set forth our
revenues and operating income for our reportable segments (dollars in thousands):



|                                       |  |                         |           |               |      |               |           |  |        |         |  |   |         |        |  |          |  |   |          |  |        
|-------------------------------------- |  | ----------------------- | --------- | ------------- | ---- | ------------- | --------- |  | ------ | ------- |  | - | ------- | ------ |  | -------- |  | - | -------- |  | -------
|                                       |  |                         |           | Variance     
|                                       |  | Year Ended December 31, |           | 2009 vs. 2008 |      | 2008 vs. 2007
|                                       |  | 2009                    |           |               | 2008 |               | 2007      |  | Amount |         |  | % |         | Amount |  | %       
|Revenues by end market:                |  |                         |           |               |      |               |           |  |        |         |  |   |         |        |  |          |  |   |          |  |        
|North America Broadband                |  | $                       | 690,279   |               |      | $             | 667,665   |  | $      | 615,716 |  | $ | 22,614  |        |  | 3.4%     |  | $ | 51,949   |  | 8.4%   
|International Broadband                |  |                         | 203,886   |               |      |               | 237,188   |  |        | 214,833 |  |   | (33,302 | )      |  | (14.0)%  |  |   | 22,355   |  | 10.4%  
|Telecom Systems                        |  |                         | 112,500   |               |      |               | 155,038   |  |        | 139,526 |  |   | (42,538 | )      |  | (27.4)%  |  |   | 15,512   |  | 11.1%  
|                                       |  |                         |           |               |      |               |           |  |        |         |  |   |         |        |  |          |  |   |          |  |        
|Total revenues                         |  | $                       | 1,006,665 |               |      | $             | 1,059,891 |  | $      | 970,075 |  | $ | (53,226 | )      |  | (5.0)%   |  | $ | 89,816   |  | 9.3%   
|                                       |  |                         |           |               |      |               |           |  |        |         |  |   |         |        |  |          |  |   |          |  |        
|Operating income (loss) by end market: |  |                         |           |               |      |               |           |  |        |         |  |   |         |        |  |          |  |   |          |  |        
|North America Broadband(1)             |  | $                       | (8,028    | )             |      | $             | 21,339    |  | $      | 44,259  |  | $ | (29,367 | )      |  | (137.6)% |  | $ | (22,920) |  | (51.8)%
|International Broadband                |  |                         | 15,120    |               |      |               | 21,679    |  |        | 19,637  |  |   | (6,559  | )      |  | (30.3)%  |  |   | 2,042    |  | 10.4%  
|Telecom Systems                        |  |                         | 14,227    |               |      |               | 25,116    |  |        | 25,911  |  |   | (10,889 | )      |  | (43.4)%  |  |   | (795)    |  | (3.1)% 
|                                       |  |                         |           |               |      |               |           |  |        |         |  |   |         |        |  |          |  |   |          |  |        
|Total operating income                 |  | $                       | 21,319    |               |      | $             | 68,134    |  | $      | 89,807  |  | $ | (46,815 | )      |  | (68.7)%  |  | $ | (21,673) |  | (24.1)%
|                                       |  |                         |           |               |      |               |           |  |        |         |  |   |         |        |  |          |  |   |          |  |        



|(1) | Operating loss for North America Broadband includes $44.4 million of impairment loss related to our prepaid deposit (see Note 9Other Assets for further
discussion) and $3.2 million development cost related to the construction costs associated with our Jupiter satellite.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Results of Operations

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008

Revenues



|                                |  |                         |           |          |   |           |  |   |          |   |  |        
|------------------------------- |  | ----------------------- | --------- | -------- | - | --------- |  | - | -------- | - |  | -------
|                                |  | Year Ended December 31, |           | Variance
|(Dollars in thousands)          |  | 2009                    |           | 2008     |   | Amount    |  |   | %       
|Services revenues               |  | $                       | 709,558   |          | $ | 610,785   |  | $ | 98,773   |   |  | 16.2%  
|Hardware sales                  |  |                         | 297,107   |          |   | 449,106   |  |   | (151,999 | ) |  | (33.8)%
|                                |  |                         |           |          |   |           |  |   |          |   |  |        
|Total revenues                  |  | $                       | 1,006,665 |          | $ | 1,059,891 |  | $ | (53,226  | ) |  | (5.0)% 
|                                |  |                         |           |          |   |           |  |   |          |   |  |        
|% of revenue to total revenues: |  |                         |           |          |   |           |  |   |          |   |  |        
|Services revenues               |  |                         | 70.5%     |          |   | 57.6%     |  |   |          |   |  |        
|Hardware sales                  |  |                         | 29.5%     |          |   | 42.4%     |  |   |          |   |  |        

Services Revenues

Services revenue for the year ended December 31, 2009 increased primarily due to higher revenue of $59.1 million from our Consumer
group to $382.0 million for the year ended December 31, 2009 compared to $322.9 million for the same period in 2008.

The
increase was primarily due to the growth of our consumer subscriber base and, in part, to the election by customers to utilize the consumer rental program introduced in September 2008, for which we recognized services revenue of $16.0 million and
$0.7 million for the years ended December 31, 2009 and 2008, respectively. Also contributing to the increase in services revenues was revenue growth of $30.3 million from our North American Enterprise group to $183.7 million for the year ended
December 31, 2009 compared to $153.4 million for the same period in 2008, mainly as a result of growth and a shift toward our managed services business, new contracts awarded in 2008 that provided incremental service revenue in 2009 and
the growth in our small/medium and wholesale subscriber base.

Also contributing to higher services revenue was an increase of
$19.6 million from our International Broadband segment to $122.1 million for the year ended December 31, 2009 from $102.5 million for the same period in 2008, primarily due to the continued growth in the number of enterprise sites in service
internationally.

Partially offsetting the increase was a decrease in revenue from our Telecom Systems segment of $10.2
million to $21.8 million for the year ended December 31, 2009 compared to $32.0 million for the same period in 2008, mainly impacted by significant reduction in revenues from the Telematics group.

Hardware Sales

The decrease in hardware sales for the year ended December 31, 2009 was mainly due to the decline in revenues from our North America Broadband segment, which decreased by $66.8 million to $124.6 million for the year ended
December 31, 2009 compared to $191.4 million for the same period in 2008. Hardware sales from our North American Enterprise group decreased by $51.2 million to $87.0 million for the year ended December 31, 2009 compared to $138.2
million for the same period in 2008 as a result of the emphasis on managed services which has led to a change in product mix and a shift towards lower upfront hardware revenue and an increase in recurring service revenues. Despite the growth in our
consumer subscriber base, hardware sales in the Consumer group decreased by $15.6 million to $37.6 million for the year ended December 31, 2009 compared to $53.2 million for the same period in 2008 as a result of changes in consumer plans
in response to competitive pressures and the election by customers to utilize the consumer rental program. Additionally, hardware revenues from our International Broadband segment decreased by $52.9 million to $81.8 million compared to $134.7
million for the same period in 2008. The decrease resulted from the completion of the rollout of terminal shipments on a multi-year contract for a large lottery operator in the United Kingdom.

Further contributing to the decrease in hardware sales was a decrease in revenues of $32.3 million from our Telecom Systems segment to $90.7
million for the year ended December 31, 2009 compared to $123.0 million for the same period in 2008. The decrease was mainly due to several development contracts in the Mobile Satellite group reaching their completion stage.



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Cost of Revenues



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                         |         |          |   |         |  |   |         |   |  |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------- | -------- | - | ------- |  | - | ------- | - |  | -------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Year Ended December 31, |         | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 2009                    |         | 2008     |   | Amount  |  |   | %      
|Cost of services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | $                       | 448,767 |          | $ | 406,673 |  | $ | 42,094  |   |  | 10.4%  
|Cost of hardware products sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                         | 289,516 |          |   | 378,264 |  |   | (88,748 | ) |  | (23.5)%
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                         |         |          |   |         |  |   |         |   |  |        
|Total cost of revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | $                       | 738,283 |          | $ | 784,937 |  | $ | (46,654 | ) |  | (5.9)% 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                         |         |          |   |         |  |   |         |   |  |        
|Gross margin on services revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                         | 36.8%   |          |   | 33.4%   |  |   |         |   |  |        
|Gross margin on hardware revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                         | 2.6%    |          |   | 15.8%   |  |   |         |   |  |        
|Cost of
Services  Cost of services increased partly due to
higher fixed expenses of $15.9 million from our North American Enterprise group related to the commencement of SPACEWAY services, which began in April 2008 and primarily consisted of SPACEWAY related depreciation, as well as related network
operations center and support, operation of Traffic Off-load Gateways, and in-orbit insurance. These costs are generally fixed in nature and are expected to be absorbed in the coming quarters as additional consumer customers are added to the
SPACEWAY network. In addition, other support costs including customer service, wire line and wireless costs, field services, network operation and depreciation expense increased by $37.6 million. The increase in cost of services was partially offset
by lower transponder capacity lease expense of $16.2 million, mainly resulting from reduction in transponder capacity lease expense for the Consumer group as new consumer customers were added to the SPACEWAY network. We expect transponder capacity
lease expense for the Consumer group to continue to decrease as more customers are placed on the SPACEWAY network.  Cost of services in our International Broadband segment increased by $12.0 million, primarily due to an increase in the number of
enterprise sites in service across Europe and Brazil. The increase in cost of services was partially offset by a decrease of $6.3 million in cost of services from the Telematics group.  Cost of Hardware Products Sold  Corresponding with the decrease in hardware sales, cost of hardware
products sold within the respective group decreased for the year ended December 31, 2009 compared to the same period in 2008. Cost of hardware products sold from our North America Broadband segment, International Broadband segment, and Telecom
Systems segment decreased by $35.8 million, $29.5 million, and $23.4 million, respectively, for the year ended December 31, 2009 compared to $198.0 million, $86.3 million, and $94.0 million, respectively, for the same period in
2008.  Selling, General and Administrative Expense
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | Year Ended December 31, |         | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 2009                    |         | 2008     |   | Amount  |  |   | %      
|Selling, general and administrative expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | $                       | 175,203 |          | $ | 173,568 |  | $ | 1,635   |   |  | 0.9%   
|% of revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |                         | 17.4%   |          |   | 16.4%   |  |   |         |   |  |        

The increase in SG&A expense was mainly a result of our expanded efforts in promoting our
consumer business which caused marketing costs to increase by $14.3 million. The increase was partially offset by lower compensation expense of $12.1 million related to the one time retention program established in April 2005 (the Retention
Program) and other incentive plans. For further discussion of the Retention Program, see Note 16Other Benefits to our audited consolidated financial statements included in Item 8 of this report.



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##### Table of Contents

Loss on Impairment



|                                                                                                                                                                                                                                                                                                                                                         |  |                         |        |          |   |        |  |   |         |   |  |        
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | -------- | - | ------ |  | - | ------- | - |  | -------
|                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                   |  | 2009                    |        | 2008     |   | Amount |  |   | %      
|Loss on impairment                                                                                                                                                                                                                                                                                                                                       |  | $                       | 44,400 |          | $ | -      |  | $ | 44,400  |   |  | *      
|% of revenue                                                                                                                                                                                                                                                                                                                                             |  |                         | 4.4%   |          |   | 0.0%   |  |   |         |   |  |        
|*  Percentage not meaningful.  In June 2009, we recognized $44.4 million of impairment loss related the impairment of the Deposit. For further discussion of the impairment loss, see Note 9Other Assets to our audited consolidated
financial statements included in Item 8 of this report.  Research
and Development                                 
|                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                   |  | 2009                    |        | 2008     |   | Amount |  |   | %      
|Research and development                                                                                                                                                                                                                                                                                                                                 |  | $                       | 22,296 |          | $ | 26,833 |  | $ | (4,537  | ) |  | (16.9)%
|% of revenue                                                                                                                                                                                                                                                                                                                                             |  |                         | 2.2%   |          |   | 2.5%   |  |   |         |   |  |        
|R&D decreased due to a
reduction in development activities in our North America Broadband segment. This reduction was partially offset by a $3.2 million increase in development activities related to the construction of our Jupiter satellite.  Amortization of Intangible Assets                                                                    
|                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                   |  | 2009                    |        | 2008     |   | Amount |  |   | %      
|Amortization of intangible assets                                                                                                                                                                                                                                                                                                                        |  | $                       | 5,164  |          | $ | 6,419  |  | $ | (1,255  | ) |  | (19.6)%
|% of revenue                                                                                                                                                                                                                                                                                                                                             |  |                         | 0.5%   |          |   | 0.6%   |  |   |         |   |  |        
|Amortization of intangible assets
decreased due to the impact of adjustments to our intangible assets in 2008 to reflect the reversal of valuation allowances against deferred tax assets associated with our United Kingdom and German subsidiaries pursuant to the application of ASC
805-740, Business CombinationsIncome Taxes.  Operating Income
|                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                   |  | 2009                    |        | 2008     |   | Amount |  |   | %      
|Operating income                                                                                                                                                                                                                                                                                                                                         |  | $                       | 21,319 |          | $ | 68,134 |  | $ | (46,815 | ) |  | (68.7)%
|% of revenue                                                                                                                                                                                                                                                                                                                                             |  |                         | 2.1%   |          |   | 6.4%   |  |   |         |   |  |        
|Our operating income decreased
significantly due to the $44.4 million impairment loss recognized in the second quarter of 2009 associated with the Deposit. For further discussion of the impairment loss, see Note 9Other Assets to our audited consolidated financial statements
included in Item 8 of this report.  Interest
Expense                
|                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                   |  | 2009                    |        | 2008     |   | Amount |  |   | %      
|Interest expense                                                                                                                                                                                                                                                                                                                                         |  | $                       | 64,094 |          | $ | 51,327 |  | $ | 12,767  |   |  | 24.9%  

Interest expense
primarily relates to interest on the 2006 Senior Notes, the 2009 Senior Notes and the Term Loan Facility less capitalized interest associated with the construction of our satellites. We recognized $9.9 million of interest expense, which included the
accretion of the original issue discount, on the 2009 Senior Notes offered in May 2009. In addition, interest expense increased by $3.0 million due to the discontinuation of capitalization of interest associated with the construction of SPACEWAY 3
after the satellite was placed into service in April 2008, which was partially offset by the capitalization of interest of $1.7 million related to the construction of the Jupiter satellite.



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##### Table of Contents

Interest and Other Income (Loss), Net



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                         |           |          |      |   |         |  |   |        |   |  |         
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | -------- | ---- | - | ------- |  | - | ------ | - |  | --------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |           | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 2009                    |           |          | 2008 |   | Amount  |  |   | %     
|Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | $                       | 1,988     |          |      | $ | 2,978   |  | $ | (990   | ) |  | (33.2)% 
|Other income (loss), net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |                         | (334      | )        |      |   | 178     |  |   | (512   | ) |  | (287.6)%
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                         |           |          |      |   |         |  |   |        |   |  |         
|Total interest and other income (loss), net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $                       | 1,654     |          |      | $ | 3,156   |  | $ | (1,502 | ) |  | (47.6)% 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                         |           |          |      |   |         |  |   |        |   |  |         
|The decrease in total interest
and other income (loss), net was primarily due to lower rates of return on our investments for the year ended December 31, 2009 compared to the same period in 2008 as we invested our cash in secure but lower yielding investments.  Income Tax Expense                                                                                                                                                                                                                                                                                                                                                                                                                
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |           | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 2009                    |           |          | 2008 |   | Amount  |  |   | %     
|Income tax expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | $                       | 2,436     |          |      | $ | 7,588   |  | $ | (5,152 | ) |  | 67.9%   
|Changes in income tax expense are
generally attributable to state income taxes and income earned from our foreign subsidiaries. For the year ended December 31, 2009, our income tax expense was partially offset by $2.8 million of income tax benefit generated by our Indian
subsidiary as a result of it being engaged in telecommunications infrastructure development. Indian tax law provides for a deduction of 100% of profits and gains derived from qualifying infrastructure businesses for ten consecutive assessment years.
This benefit is available to us through the tax assessment year of 2015/2016.  Year Ended December 31, 2008 Compared to Year Ended December 31, 2007  Revenues
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Year Ended December 31, |           | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  | 2008                    |           |          | 2007 |   | Amount  |  |   | %     
|Services revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | $                       | 610,785   |          |      | $ | 537,115 |  | $ | 73,670 |   |  | 13.7%   
|Hardware sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                         | 449,106   |          |      |   | 432,960 |  |   | 16,146 |   |  | 3.7 %   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                         |           |          |      |   |         |  |   |        |   |  |         
|Total revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | $                       | 1,059,891 |          |      | $ | 970,075 |  | $ | 89,816 |   |  | 9.3 %   
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |                         |           |          |      |   |         |  |   |        |   |  |         
|% of revenue to total revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                         |           |          |      |   |         |  |   |        |   |  |         
|Services revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                         | 57.6%     |          |      |   | 55.4%   |  |   |        |   |  |         
|Hardware sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |                         | 42.4%     |          |      |   | 44.6%   |  |   |        |   |  |         

Services Revenues

The largest contributor to the increase in services revenues was revenue growth from the Consumer group of $55.8 million, or 20.9%, to
$322.9 million for the year ended December 31, 2008 compared to $267.1 million for the same period in 2007. The increase was primarily due to an increase in the subscriber base of approximately 52,900 subscribers to approximately 432,800
subscribers at December 31, 2008 and an increase in ARPU of 4.6% to $68 for 2008. Also contributing to the increase in services revenues was revenue growth from our North American Enterprise group of $16.2 million to $153.4 million for the
year ended December 31, 2008 compared to $137.2 million for the same period in 2007, mainly due to an increase in our managed services business as well as new contracts awarded in 2007 and 2008 that provided incremental service revenue in 2008.

The increase in services revenue was also driven by an increase in revenue from our Telecom Systems segment of
$9.0 million to $32.0 million for the year ended December 31, 2008 compared to $23.0 million for the same period in 2007, which primarily resulted from an increase in design and development engineering and manufacturing services provided
by our Telematics group.



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##### Table of Contents

Services revenue from our International Broadband segment decreased by $7.3 million to
$102.5 million for the year ended December 31, 2008 from $109.8 million for the same period in 2007, mainly resulting from a reduction in revenue from our European operations as a result of the completion of legacy service contracts.

Hardware Sales

Hardware sales increased mainly due to revenue growth from our International Broadband segment of $29.7 million, or 28.3%, to $134.7 million for the year ended December 31, 2008 compared to $105.0
million for the same period in 2007. The increase was primarily due to the continued rollout of terminal shipments on a new, multi-year contract for a large lottery operator in the United Kingdom, partially offset by delays in U.S. sourced new
orders from enterprise customers.

Hardware sales from our Telecom Systems segment for the year ended December 31, 2008
increased $6.5 million to $123.0 million compared to $116.5 million for the same period in 2007. The increase resulted from higher hardware sales from the Terrestrial Microwave group, primarily due to orders from new and existing customers in Europe
and Africa.

Partially offsetting the increase in hardware sales was a reduction in revenue from our North America Broadband
segment of $20.0 million to $191.4 million for the year ended December 31, 2008 compared to $211.4 million for the same period in 2007. The decrease was primarily due to a revenue reduction of $9.2 million in our North American Enterprise group
as a result of a change in the product mix where the emphasis on managed services has led to lower upfront hardware revenue and an increase in recurring service revenues. In addition, despite the growth in the subscriber base, hardware sales in the
Consumer group decreased by $10.8 million to $53.2 million in 2008, resulting from increasing popularity of the equipment rental program, as well as changes in pricing plans in response to competitive pressures.

Cost of Revenues



|                                  |  |                         |         |          |   |         |  |   |        |  |      
|--------------------------------- |  | ----------------------- | ------- | -------- | - | ------- |  | - | ------ |  | -----
|                                  |  | Year Ended December 31, |         | Variance
|(Dollars in thousands)            |  | 2008                    |         | 2007     |   | Amount  |  | %
|Cost of services                  |  | $                       | 406,673 |          | $ | 356,232 |  | $ | 50,441 |  | 14.2%
|Cost of hardware products sold    |  |                         | 378,264 |          |   | 355,475 |  |   | 22,789 |  | 6.4% 
|                                  |  |                         |         |          |   |         |  |   |        |  |      
|Total cost of revenues            |  | $                       | 784,937 |          | $ | 711,707 |  | $ | 73,230 |  | 10.3%
|                                  |  |                         |         |          |   |         |  |   |        |  |      
|Gross margin on services revenues |  |                         | 33.4%   |          |   | 33.7%   |  |   |        |  |      
|Gross margin on hardware revenues |  |                         | 15.8%   |          |   | 17.9%   |  |   |        |  |      

Cost of Services

Cost of services increased mainly as a result of revenue growth from our North American Enterprise group. The increase was partly due to
$24.7 million of fixed expenses related to the commencement of SPACEWAY services, which primarily consisted of SPACEWAY related depreciation, as well as related network operations center and support, operation of Traffic Off-load Gateways, and
in-orbit insurance. These costs are generally fixed in nature and are expected to be absorbed in the coming quarters as additional consumer customers are added to the SPACEWAY network. The increase in cost of services was also due to higher
transponder capacity lease expense of $4.7 million in 2008 compared to 2007, mainly resulting from additional space capacity acquired to support the growth in the enterprise service business from the North American Enterprise. The increase in
additional space capacity for the enterprise services business was partially offset by a reduction in transponder capacity lease expense for the Consumer group as new consumer customers were added to the SPACEWAY network. We expect transponder
capacity lease expense for the Consumer group to continue to decrease as more customers are placed on the SPACEWAY network. In addition, other support costs including customer service, network operations, field services and backhaul costs and
depreciation expense increased by $12.6 million.

Cost of Hardware Products Sold

Cost of hardware products sold increased in conjunction with the growth in hardware sales. The increase was mainly attributable to higher
cost of hardware products sold from our International Broadband segment of $16.9 million to $86.3



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##### Table of Contents

million for the year ended December 31, 2008 compared to $69.4 million for the same period in 2007. The increase was primarily due to the continued rollout of terminal shipments on a new,
multi-year contract for a large lottery operator in the United Kingdom, partially offset by a decrease in U.S. sourced shipments to our international enterprise customers.

In addition, cost of hardware products sold from the Telecom System segment increased by $6.3 million to $94.0 million for the year ended
December 31, 2008 compared to $87.7 million for the same period in 2007. The increase was due to engineering and manufacturing costs related to the design and manufacturing of user terminals and chipset related development, as well as, product
costs associated with the sale of point-to-multipoint equipment from the Terrestrial Microwave group.

Cost of hardware
products sold from the North America Broadband segment remained flat for 2008 compared to 2007. As a result of the commencement of SPACEWAY services and changes in consumer pricing plans implemented in 2007, cost of hardware products sold from
the Consumer group increased slightly. However, the increase in cost of hardware product sold in the Consumer group was offset by the reduction in cost of hardware products sold in the North American Enterprise group due to lower hardware revenues.

Selling, General and Administrative Expense



|                                                                                                                                                                                                                                                                                                                                                                   |  |                         |         |          |   |         |  |   |        |  |      
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ----------------------- | ------- | -------- | - | ------- |  | - | ------ |  | -----
|                                                                                                                                                                                                                                                                                                                                                                   |  | Year Ended December 31, |         | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                             |  | 2008                    |         | 2007     |   | Amount  |  | %
|Selling, general and administrative expense                                                                                                                                                                                                                                                                                                                        |  | $                       | 173,568 |          | $ | 145,381 |  | $ | 28,187 |  | 19.4%
|% of revenue                                                                                                                                                                                                                                                                                                                                                       |  |                         | 16.4%   |          |   | 15.0%   |  |   |        |  |      
|SG&A expense increased
primarily due to higher costs of $13.2 million related to the Retention Program. Further contributing to the increase in SG&A expense was additional domestic selling, advertising and customer service costs of $8.0 million as well as additional
SG&A expense from Helius, which we acquired in February 2008.  Research and Development
|                                                                                                                                                                                                                                                                                                                                                                   |  | Year Ended December 31, |         | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                             |  | 2008                    |         | 2007     |   | Amount  |  | %
|Research and development                                                                                                                                                                                                                                                                                                                                           |  | $                       | 26,833  |          | $ | 17,036  |  | $ | 9,797  |  | 57.5%
|% of revenue                                                                                                                                                                                                                                                                                                                                                       |  |                         | 2.5%    |          |   | 1.8%    |  |   |        |  |      
|The increase in research and
development was primarily due to continued development in our North America Broadband segment in connection with our HughesNet and SPACEWAY platforms and from our Helius subsidiary that we acquired in February 2008.  Amortization of Intangible Assets                                                                           
|                                                                                                                                                                                                                                                                                                                                                                   |  | Year Ended December 31, |         | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                             |  | 2008                    |         | 2007     |   | Amount  |  | %
|Amortization of intangible assets                                                                                                                                                                                                                                                                                                                                  |  | $                       | 6,419   |          | $ | 6,144   |  | $ | 275    |  | 4.5% 
|% of revenue                                                                                                                                                                                                                                                                                                                                                       |  |                         | 0.6%    |          |   | 0.6%    |  |   |        |  |      

Amortization of intangible assets increased due to additional amortization related to the
acquisition of Helius. The increase was partially offset by adjustments to our intangible assets to reflect the reversal of valuation allowances against deferred tax assets associated with our United Kingdom and German subsidiaries pursuant to the
application of ASC 805-740. See Note 8Intangible Assets, Net to our audited consolidated financial statements included in Item 8 of this report.



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##### Table of Contents

Operating Income



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |        |          |   |        |  |   |          |   |  |        
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------ | -------- | - | ------ |  | - | -------- | - |  | -------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 2008                    |        | 2007     |   | Amount |  |   | %       
|Operating income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $                       | 68,134 |          | $ | 89,807 |  | $ | (21,673) |   |  | (24.1)%
|% of revenue                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                         | 6.4%   |          |   | 9.3%   |  |   |          |   |  |        
|The decrease in operating income
was attributable to the increase in operating costs associated with the increase in revenues. In 2008, there were two initiatives related to our operations that did not exist in 2007, which were the recognition of $19.6 million of depreciation
expense associated with the commencement of SPACEWAY services in April 2008 and $13.2 million of compensation expense related to the Retention Program. Further contributing to higher operating costs was the increase in SG&A and R&D as
described above.  Interest Expense                                                                                                                                                                             
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 2008                    |        | 2007     |   | Amount |  |   | %       
|Interest expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | $                       | 51,327 |          | $ | 43,772 |  | $ | 7,555    |   |  | 17.3%  
|Interest expense primarily
relates to interest on the 2006 Senior Notes and the Term Loan Facility less the capitalized interest associated with the construction and launch of SPACEWAY 3. The increase in interest expense was due to the interest capitalization associated with
SPACEWAY 3 which was discontinued after the satellite was placed into service in April 2008. In addition, interest expense on the Term Loan Facility for 2008 was incurred over a 12-month period compared to a 10-month period in 2007. Partially
offsetting the increase in interest expense is a decrease in lease interest due to the expiration of leases associated with our North American Enterprise group in 2008. 
Interest and Other Income, Net
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 2008                    |        | 2007     |   | Amount |  |   | %       
|Interest income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | $                       | 2,978  |          | $ | 8,972  |  | $ | (5,994   | ) |  | (66.8)%
|Other income, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |                         | 178    |          |   | 193    |  |   | (15      | ) |  | (7.8)% 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |        |          |   |        |  |   |          |   |  |        
|Total interest and other income, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  | $                       | 3,156  |          | $ | 9,165  |  | $ | (6,009   | ) |  | (65.6)%
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |        |          |   |        |  |   |          |   |  |        
|The decrease in total interest
and other income, net was primarily due to lower average cash balances and lower rates of return for 2008 compared to 2007.  Income Tax Expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | Year Ended December 31, |        | Variance
|(Dollars in thousands)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | 2008                    |        | 2007     |   | Amount |  |   | %       
|Income tax expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | $                       | 7,588  |          | $ | 5,316  |  | $ | 2,272    |   |  | 42.7%  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |                         |        |          |   |        |  |   |          |   |  |        

The increase in income tax expense was primarily attributable to increases in income earned from
our foreign subsidiaries and in state income taxes.



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##### Table of Contents

Liquidity and Capital Resources

Year Ended December 31, 2009 Compared to Year Ended December 31, 2008



|                                |  |                         |          |   |          |   |         |        |  |   |         |  |        
|------------------------------- |  | ----------------------- | -------- | - | -------- | - | ------- | ------ |  | - | ------- |  | -------
|                                |  | Year Ended December 31, |          |   | Variance
|(Dollars in thousands)          |  | 2009                    |          |   | 2008     |   |         | Amount |  | %
|Net cash provided by (used in): |  |                         |          |   |          |   |         |        |  |   |         |  |        
|Operating activities            |  | $                       | 162,871  |   |          | $ | 70,165  |        |  | $ | 92,706  |  | 132.1% 
|Investing activities            |  | $                       | (205,020 | ) |          | $ | (92,582 | )      |  | $ | 112,438 |  | 121.4% 
|Financing activities            |  | $                       | 129,792  |   |          | $ | (9,920  | )      |  | $ | 139,712 |  | 1408.4%

Net Cash Flows from Operating Activities

The increase in net cash provided by operating activities was primarily due to changes in our operating assets and liabilities of $69.4
million. In addition, prior to noncash depreciation and amortization expense of $102.1 million and impairment loss of $44.4 million, our net income increased by $21.7 million for the year ended December 31, 2009.

Net Cash Flows from Investing Activities

The increase in net cash used in investing activities was mainly due to: (i) an increase in capital expenditures of $67.2 million, as set forth in the table below; (ii) a net increase in
marketable securities of $42.2 million; and (iii) a long-term loan receivable of $10.0 million made to a customer. Partially offsetting the increase was the Helius acquisition of $10.5 million that occurred in February 2008.

Capital expenditures for the years ended December 31, 2009 and 2008 are shown as follows (in thousands):



|                              |  |                         |         |      |   |          |  |   |         |  
|----------------------------- |  | ----------------------- | ------- | ---- | - | -------- |  | - | ------- | -
|                              |  | Year Ended December 31, |         |      |  
|                              |  | 2009                    |         | 2008 |   | Variance | 
|Capital expenditures:         |  |                         |         |      |   |          |  |   |         |  
|Capital expendituresVSAT     |  | $                       | 96,138  |      | $ | 41,314   |  | $ | 54,824  |  
|Jupiter program               |  |                         | 44,024  |      |   | -        |  |   | 44,024  |  
|Capitalized software          |  |                         | 12,772  |      |   | 14,564   |  |   | (1,792  | )
|Capital expendituresother    |  |                         | 7,671   |      |   | 11,318   |  |   | (3,647  | )
|SPACEWAY program              |  |                         | 2,781   |      |   | 27,211   |  |   | (24,430 | )
|VSAT operating lease hardware |  |                         | 88      |      |   | 1,826    |  |   | (1,738  | )
|                              |  |                         |         |      |   |          |  |   |         |  
|Total capital expenditures    |  | $                       | 163,474 |      | $ | 96,233   |  | $ | 67,241  |  
|                              |  |                         |         |      |   |          |  |   |         |  

Net Cash Flows from Financing Activities

The increase in net cash provided by financing activities was primarily due to the net proceeds of $133.6 million received from the
Companys offering of the 2009 Senior Notes completed on May 27, 2009.

Year Ended December 31, 2008 Compared to Year
Ended December 31, 2007



|                                |  |                         |         |   |          |   |          |        |  |   |          |   |  |         
|------------------------------- |  | ----------------------- | ------- | - | -------- | - | -------- | ------ |  | - | -------- | - |  | --------
|                                |  | Year Ended December 31, |         |   | Variance
|(Dollars in thousands)          |  | 2008                    |         |   | 2007     |   |          | Amount |  |   | %       
|Net cash provided by (used in): |  |                         |         |   |          |   |          |        |  |   |          |   |  |         
|Operating activities            |  | $                       | 70,165  |   |          | $ | 95,204   |        |  | $ | (25,039  | ) |  | (26.3)% 
|Investing activities            |  | $                       | (92,582 | ) |          | $ | (155,276 | )      |  | $ | (62,694  | ) |  | (40.4)% 
|Financing activities            |  | $                       | (9,920  | ) |          | $ | 93,211   |        |  | $ | (103,131 | ) |  | (110.6)%



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Net Cash Flows from Operating Activities

The decrease in net cash provided by operating activities for the year ended December 31, 2008 was primarily due to the decrease in net
income of $37.7 million for the year ended December 31, 2008 compared to the same period in 2007. In addition, changes of $10.8 million in operating assets and liabilities further contributed to the decrease in net cash provided by operating
activities, primarily related to a one-time retention program. The decrease in net cash provided by operating activities was partially offset by a $23.6 million increase in noncash depreciation and amortization expense.

Net Cash Flows from Investing Activities

The decrease in net cash used in investing activities for the year ended December 31, 2008 was primarily due to a decrease of $151.9 million in capital expenditures, as set forth in the table below.
The decrease was partially offset by the reduction in sales of marketable securities in 2008.

Capital expenditures for the
years ended December 31, 2008 and 2007 are shown as follows (in thousands):



|                              |  |                         |        |      |   |          |  |   |          |  
|----------------------------- |  | ----------------------- | ------ | ---- | - | -------- |  | - | -------- | -
|                              |  | Year Ended December 31, |        |      |  
|                              |  | 2008                    |        | 2007 |   | Variance | 
|Capital expenditures:         |  |                         |        |      |   |          |  |   |          |  
|Capital expendituresVSAT     |  | $                       | 41,314 |      | $ | 30,330   |  | $ | 10,984   |  
|SPACEWAY program              |  |                         | 27,211 |      |   | 190,057  |  |   | (162,846 | )
|Capitalized software          |  |                         | 14,564 |      |   | 14,228   |  |   | 336      |  
|Capital expendituresother    |  |                         | 11,318 |      |   | 13,565   |  |   | (2,247   | )
|VSAT operating lease hardware |  |                         | 1,826  |      |   | -        |  |   | 1,826    |  
|                              |  |                         |        |      |   |          |  |   |          |  
|Total capital expenditures    |  | $                       | 96,233 |      | $ | 248,180  |  | $ | (151,947 | )
|                              |  |                         |        |      |   |          |  |   |          |  

Net Cash Flows from Financing Activities

For the year ended December 31, 2008, net cash used in financing activities was mainly related to debt repayments, which was partially
offset by additional borrowings in 2008. For the year ended December 31, 2007, net cash provided by financing activities was mainly related to the borrowing of the $115 million Term Loan Facility in 2007.

Future Liquidity Requirements

As of December 31, 2009, our Cash and cash equivalents and Marketable securities were $214.9 million and our total debt was $721.7 million. We are significantly leveraged as a result of our indebtedness.

On May 27, 2009, we, along with our subsidiary, HNS Finance Corp., as co-issuer, completed a private debt offering of $150.0 million of
9.50% senior notes maturing on April 15, 2014 (the 2009 Senior Notes). The terms and covenants with respect to the 2009 Senior Notes are substantially identical to those of the 2006 Senior Notes. The 2009 Senior Notes are guaranteed
on a senior unsecured basis by each of our current and future domestic subsidiaries that guarantee any of our indebtedness or indebtedness of our other subsidiary guarantors. Interest on the 2009 Senior Notes is accrued from April 15, 2009 and
is paid semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2009. After the original issue discount of $13.6 million and related offering expenses of approximately $4.5 million, we received net
proceeds of approximately $133.6 million, including $1.7 million of prepaid interest received from the note holders, from the offering. We have used and intend to continue to use these net proceeds for general corporate purposes, which could include
working capital needs, corporate development opportunities (which may include acquisitions), capital expenditures and opportunistic satellite fleet expansion. The 2009 Senior Notes were offered and sold in the United States only to qualified
institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended, (the Securities Act) and in offshore transactions to non-United States persons in reliance on Regulation S of the Securities Act. In connection with
the offering of the 2009 Senior Notes, we entered into a registration rights agreement requiring us to complete a registered exchange offer relating to the 2009 Senior Notes within 360 days after May 27, 2009. On August 17, 2009, we
completed the registered exchange offer pursuant to the registration rights agreement. Accordingly, the 2009 Senior Notes have been registered under the Securities Act. As of December 31, 2009, the 2009 Senior Notes were rated B1 and B by
Moodys and Standard & Poor (S&P), respectively. As of December 31, 2009, we had recorded $3.0 million of accrued interest payable related to the 2009 Senior Notes.



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Our $450 million of 9.50% senior notes maturing on April 15, 2014 (the 2006
Senior Notes) are guaranteed on a senior unsecured basis by us and each of our current and future domestic subsidiaries that guarantee any of our indebtedness or indebtedness of our other subsidiary guarantors. Interest on the 2006 Senior
Notes is paid semi-annually in arrears on April 15 and October 15. As of December 31, 2009, we had recorded $8.9 million of accrued interest payable related to the 2006 Senior Notes. As of December 31, 2009, the 2006 Senior Notes
were rated B1 and B by Moodys and S&P, respectively.

We have a senior secured $50 million revolving credit facility
(the Revolving Credit Facility), which matures on April 22, 2011. The interest rate with respect to the Revolving Credit Facility, if any, is based on, at our option, the ABR rate (as defined in the Revolving Credit Facility) plus
1.50% or Adjusted LIBOR plus 2.50%. The Revolving Credit Facility is guaranteed by, subject to certain exceptions, our direct and indirect wholly-owned domestic subsidiaries and is secured by substantially all of our domestic tangible and intangible
assets. For outstanding letters of credit issued under the Revolving Credit Facility, we pay a participation fee of 2.50% per annum and an issuance fee of 0.25% per annum. In addition, we are charged a commitment fee of 0.50% per
annum for any unused portion of the Revolving Credit Facility. As of December 31, 2009, the total outstanding letters of credit and the available borrowing capacity under the Revolving Credit Facility were $2.4 million and $47.6 million,
respectively. As of December 31, 2009, the Revolving Credit Facility was rated Baa3 and BB- by Moodys and S&P, respectively.

In February 2007, we borrowed $115 million from a syndicate of banks pursuant to a senior unsecured credit agreement (the Term Loan Facility), which matures on April 15, 2014. The Term
Loan Facility is guaranteed, on a senior unsecured basis, by all of our existing and future subsidiaries that guarantee our existing 2006 Senior Notes and the Revolving Credit Facility. The interest on the Term Loan Facility is paid quarterly at
Adjusted LIBOR (as defined in the Term Loan Facility and the existing Revolving Credit Facility) plus 2.50%. To mitigate the variable interest rate risk associated with the Term Loan Facility, we entered into an agreement to swap the Adjusted LIBOR
for a fixed rate of 5.12% per annum (the Swap Agreement). As a result, the Term Loan Facility has a fixed interest rate of 7.62% per annum. The Term Loan Facility is subject to certain mandatory and optional prepayment
provisions and contains negative covenants and events of default, in each case, substantially similar to those provisions contained in the indentures governing the Senior Notes. The net interest payments based on the Swap Agreement and the Term Loan
Facility are estimated to be approximately $8.8 million for each of the years ending December 31, 2010 through 2013 and $3.3 million for the year ending December 31, 2014. As of December 31, 2009, the Term Loan was rated B1 and B by
Moodys and S&P, respectively.

Although the terms and covenants with respect to the 2006 Senior Notes are
substantially identical to the 2009 Senior Notes, the 2009 Senior Notes were issued under a separate indenture and do not vote together with the 2006 Senior Notes. Each of the indentures governing the 2006 Senior Notes and 2009 Senior Notes
(collectively, the Senior Notes), the agreement governing the amended Revolving Credit Facility and the agreement governing the Term Loan Facility require us to comply with certain affirmative and negative covenants: (i) in the case
of the indentures, for so long as any Senior Notes are outstanding; (ii) in the case of the amended Revolving Credit Facility, for so long as the amended Revolving Credit Facility is in effect; and (iii) in the case of the Term Loan
Facility, for so long as the Term Loan Facility remains outstanding. Negative covenants contained in these agreements include limitations on our ability and/or certain of our subsidiaries ability to incur additional indebtedness; issue
redeemable stock and subsidiary preferred stock; incur liens; pay dividends or distributions or redeem or repurchase capital stock; prepay, redeem or repurchase debt; make loans and investments; enter into agreements that restrict distributions from
our subsidiaries; sell assets and capital stock of our subsidiaries; enter into certain transactions with affiliates; consolidate or merge with or into, or sell substantially all of our assets to, another person; and enter into new lines of
business. In addition to these negative covenants, the amended Revolving Credit Facility, the indentures governing the Senior Notes and/or the agreement governing the Term Loan Facility contain affirmative covenants that require us to:
(i) preserve our businesses and properties; (ii) maintain insurance over our assets; (iii) pay and discharge all material taxes when due; and (iv) furnish the lenders administrative agent our financial statements for each
fiscal quarter and fiscal year, certificates from a financial officer certifying that no Event of Default or Default has occurred during the fiscal period being reported, litigation and other notices, compliance with laws, maintenance of records and
other such customary covenants. Management believes that the Company was in compliance with all of its debt covenants as of December 31, 2009.



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Our subsidiaries primarily meet their working capital requirements through their respective
operations or the utilization of local credit facilities. Occasionally, the subsidiaries utilize temporary advances to/from us to meet temporary cash requirements. Our Indian and Brazilian subsidiaries maintain various revolving and term loans
funded by local banks in Indian Rupees and Brazilian Reais, respectively. As of December 31, 2009, the aggregate balance outstanding under these loans was $4.4 million. Our Indian subsidiary may be restricted from paying dividends to us under
the terms of these loans.

The Company and its subsidiaries are separate and distinct legal entities and, except for our
existing and future subsidiaries that are or will be guarantors of the Senior Notes, the Term Loan Facility and the Revolving Credit Facility, they will have no obligation, contingent or otherwise, to pay amounts due under the Senior Notes, Term
Loan Facility and the Revolving Credit Facility, or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment.

In February 2008, our Parent, HCI, completed the acquisition of Helius, Inc. in connection with the merger agreement that HCI entered into on December 21, 2007 (the Merger Agreement) with
Helius, Inc., Utah Acquisition Corp., a wholly-owned subsidiary of the Company, and The Canopy Group, Inc. and Canopy Ventures I, L.P., the primary shareholders of Helius, Inc. Pursuant to the Merger Agreement, HCI paid $10.5 million after certain
adjustments at the closing of the acquisition. Immediately after the acquisition, Helius, Inc. was converted to a limited liability company, Helius, LLC (Helius). As part of the Merger Agreement, we had a contractual obligation for
contingent consideration of up to $20.0 million (Contingent Payment) as additional purchase price, if any, to be payable in April 2010 by us or Helius, subject to Helius achieving certain post-closing performance goals. As of
December 31, 2009, Helius did not meet the performance goals as set forth in the Merger Agreement. As a result, we are not obligated to pay the Contingent Payment.

In August 2007, our Parent, HCI, filed a shelf registration statement on Form S-3, as amended on November 15, 2007, to register shares of its common stock, preferred stock, and warrants and debt
securities and non-convertible debt securities of the Company and HNS Finance Corp., as co issuers. In the event that we issue debt securities pursuant to the shelf registration statement, HCI will, and one or more of our other subsidiaries may, on
a joint and several basis, offer full and unconditional guarantees of our and HNS Finance Corp.s obligations under the debt securities. In May 2008, HCI made an equity offering to sell 2,000,000 shares of its common stock, par value
$0.001 per share for a purchase price of $50.00 per share, prior to deducting the underwriting discounts and commissions. As a result of the equity offering, HCI raised $93.0 million, net of the underwriting discounts, commissions and offering
expenses, which will be used for the acquisition of a satellite or general corporate purposes.

In July 2006, we entered into
an agreement with 95 West Co., Inc. (95 West Co.) and its parent, Miraxis License Holdings, LLC (MLH), pursuant to which 95 West Co. and MLH agreed to provide a series of coordination agreements allowing the Company to
operate SPACEWAY 3 at the 95° West Longitude orbital slot where 95 West Co. and MLH have higher priority rights. Our remaining obligations with 95 West Co. as of December 31, 2009 are subject to conditions in the agreement including
our ability to operate SPACEWAY 3, and are as follows: $0.75 million for the year ending December 31, 2010 and $1.0 million for each of the years ending December 31, 2011 through 2016.

In June 2009, we entered into an agreement with SS/L, under which SS/L will manufacture our Jupiter satellite. Jupiter will employ a
multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in North America. We are obligated to pay an aggregate of approximately $252.0 million for the construction of Jupiter and have agreed to
make payment to SS/L in installments upon the completion of each milestone as set forth in the agreement. We anticipate launching Jupiter in the first half of 2012. In connection with the construction of Jupiter, we have entered into a contract with
Barrett, whereby Barrett has agreed to lease or acquire user beams, gateways and terminals for the Jupiter satellite that are designed to operate in Canada.

Based on our current and anticipated levels of operations and conditions in our markets and industry, we believe that our cash on hand, cash flow from operations and availability under our Revolving
Credit Facility will enable us to meet our requirements for working capital, capital expenditures, debt service, research and development, remaining ground infrastructure expenditures for SPACEWAY 3, new acquisitions, initial milestone payments for
development of our Jupiter satellite and, to a lesser extent, other on-going capital and operating expenditures. However, our ability to fund these needs and to comply with the financial covenants under our debt agreements depends on our future
operating performance and cash flow, which is subject to prevailing economic conditions, the level of spending by our customers and other factors, many of which are beyond our control. Any future acquisitions, joint ventures, acquisition of a
satellite, or other similar transactions will likely require additional capital and there can be no assurance that any such capital will be available to us on acceptable terms, if at all.



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Contractual Obligations

The following table summarizes our contractual obligations at December 31, 2009 and the effect such obligations are expected to have on
our liquidity and cash flow in future periods (in thousands):



|                                       |  |        |         |      |   |         |  |      |         |      |   |            |  |       |         |  |   |        |  |   |          
|-------------------------------------- |  | ------ | ------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ---------- |  | ----- | ------- |  | - | ------ |  | - | ---------
|                                       |  | Due in |         |     
|                                       |  | 2010   |         | 2011 |   | 2012    |  | 2013 |         | 2014 |   | Thereafter |  | Total
|Senior notes                           |  | $      | -       |      | $ | -       |  | $    | -       |      | $ | -          |  | $     | 587,874 |  | $ | -      |  | $ | 587,874  
|Term loans                             |  |        | 1,598   |      |   | 1,288   |  |      | -       |      |   | -          |  |       | 115,000 |  |   | -      |  |   | 117,886  
|VSAT hardware financing obligations(1) |  |        | 3,158   |      |   | 2,954   |  |      | 2,186   |      |   | 546        |  |       | 175     |  |   | -      |  |   | 9,019    
|Orbital slot commitment(2)             |  |        | 429     |      |   | 705     |  |      | 747     |      |   | 792        |  |       | 840     |  |   | 1,833  |  |   | 5,346    
|Construction contract for Jupiter      |  |        | 121,310 |      |   | 40,620  |  |      | 27,445  |      |   | -          |  |       | -       |  |   | -      |  |   | 189,375  
|Revolving loans                        |  |        | 1,547   |      |   | -       |  |      | -       |      |   | -          |  |       | -       |  |   | -      |  |   | 1,547    
|Estimated interest payments(3)         |  |        | 67,203  |      |   | 66,668  |  |      | 66,352  |      |   | 66,140     |  |       | 44,154  |  |   | 167    |  |   | 310,684  
|Transponder lease obligations          |  |        | 123,392 |      |   | 59,613  |  |      | 27,050  |      |   | 23,623     |  |       | 8,230   |  |   | 16,250 |  |   | 258,158  
|Leases and other commitment            |  |        | 10,821  |      |   | 9,680   |  |      | 8,665   |      |   | 5,704      |  |       | 4,454   |  |   | 6,357  |  |   | 45,681   
|Due to affiliates                      |  |        | 4,253   |      |   | -       |  |      | -       |      |   | -          |  |       | -       |  |   | -      |  |   | 4,253    
|                                       |  |        |         |      |   |         |  |      |         |      |   |            |  |       |         |  |   |        |  |   |          
|Total                                  |  | $      | 333,711 |      | $ | 181,528 |  | $    | 132,445 |      | $ | 96,805     |  | $     | 760,727 |  | $ | 24,607 |  | $ | 1,529,823
|                                       |  |        |         |      |   |         |  |      |         |      |   |            |  |       |         |  |   |        |  |   |          



|(1) | Amount represents our VSAT hardware financing obligations that were funded by third-party financial institutions.
|--- | -----------------------------------------------------------------------------------------------------------------

|(2) | Amount represents a commitment to a related party for certain rights in connection with a satellite orbital slot for SPACEWAY 3.
|--- | --------------------------------------------------------------------------------------------------------------------------------

|(3) | Amount includes interests calculated on the Senior Notes, Term loans, VSAT hardware financing obligations, and Orbital slot commitment.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies

For a discussion of commitments and contingencies, see Note 20Commitments and Contingencies to our audited consolidated financial statements included in Item 8 of this report.

Off-Balance Sheet Arrangements

We are required to issue standby letters of credit and bonds primarily to support certain sales of our equipment to international government customers. These letters of credit are either bid bonds to support contract bids, or to support
advance payments made by customers upon contract execution and prior to equipment being shipped, or guarantees of performance issued in support of its warranty obligations. Bid bonds typically expire upon the issue of the award by the customer.
Advance payment bonds expire upon receipt by the customer of equipment, and performance bonds typically expire when the warranty expires, generally one year after the installation of the equipment.

As of December 31, 2009, we had $14.2 million of contractual obligations to customers and other statutory/governmental agencies, which
were secured by letters of credit issued through us and our subsidiaries credit facilities. Of this amount, $2.4 million was issued under the Revolving Credit Facility; $1.7 million was secured by restricted cash; $0.9 million related to
insurance bonds; and $9.2 million was secured by letters of credit issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued by our Indian subsidiaries are secured by their assets.

Seasonality

Like many communications infrastructure equipment vendors, a significant amount of our hardware sales occur in the second half of the year due to our customers annual procurement and budget cycles. Large enterprises and operators
usually allocate their capital expenditure budgets at the beginning of their fiscal year (which often coincides with the calendar year). The typical sales cycle for large complex system procurements is 6 to 12 months, which often results in the
customer expenditure occurring towards the end of the year. Customers often seek to expend the budgeted funds prior to the end of the year and the next budget cycle. As a result, interim results are not indicative of the results to be expected for
the full year.



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Inflation

Historically, inflation has not had a material effect on our results of operations.

Certain
Relationships and Related Transactions

For a discussion of related-party transactions, see Item 13. Certain
Relationships and Related Transactions and Director Independence and Note 18Transactions with Related Parties to our audited consolidated financial statements included in Item 8 of this report.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United
States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingencies at the date of the financial statements as well as the
reported amounts of revenues and expenses during the reporting period. We evaluate these estimates and assumptions on an ongoing basis. The results of these estimates form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results could differ from these estimates under different assumptions and conditions.

Revenue Recognition

Service revenues and hardware sales, excluding
lease revenues described below, are recognized when services are rendered or products are installed and as title passes to those customers, net of sales taxes. In situations where customer offerings represent a bundled arrangement for both services
and hardware, revenue elements are separated into their relevant components (services or hardware) for revenue recognition purposes. We offer a rebate to qualifying new consumer subscribers and record a reduction in revenue in the same period the
related sale occurs based on an estimate of the number of rebates that will be redeemed. This estimate is based on historical experience and actual sales during the promotion.

In addition to providing standard product and service offerings, we also enter into contracts to design, develop and deliver
telecommunication networks to customers. These contracts for telecommunication networks require significant effort to develop and construct the network, over an extended time period. Revenues are also earned from long-term contracts for the sale of
mobile satellite communications systems. Sales under these long-term contracts are recognized using the percentage-of-completion (cost-to-cost) method of accounting. Under this method, sales are recorded equivalent to costs incurred plus a portion
of the profit expected to be realized, determined based on the ratio of costs incurred to estimated total costs at completion. Profits expected to be realized on long-term contracts are based on estimates of total sales value and costs at
completion. These estimates are reviewed and revised periodically throughout the lives of the contracts, and adjustments to profits resulting from such revisions are recorded in the accounting period in which the revisions are made. Estimated losses
on contracts are recorded in the period in which they are identified.

Business Combinations and Intangible Assets

We have participated in several significant transactions that have impacted our financial statements. We account for business
combinations in accordance with the ASC 805, Business Combinations. The acquisition of businesses is an element of our business strategy. Under the purchase method, we are required to record the net assets acquired at the estimated fair
value at the date of acquisition. The determination of the fair value of the assets acquired and liabilities assumed requires the Company to make estimates and assumptions that affect the Companys financial statements. Intangible assets
acquired in connection with business combinations which have finite lives are amortized over their estimated useful lives. The estimated useful lives are based on estimates of the period during which the assets are expected to generate revenue.
Intangible assets with finite lives are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may no longer be recoverable.



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Income Taxes

We are a limited liability company and have elected to be treated as a partnership for income tax purposes. As such, U.S. federal and state income taxes (in the states which tax limited liability
companies as partnerships) are the direct responsibility of our members. Our Parent holds 100% of our Class A membership interests. Thus, our activity is reported on our Parents tax returns. Under the terms of the December 2004
Agreement, DIRECTV retained the tax benefits from our net operating losses occurring prior to April 23, 2005 and has responsibility for all of the pre-closing domestic and foreign income tax liabilities of DTV Networks. We have recorded a
liability in the balance sheet for the estimated amount we may be required to pay to DIRECTV resulting from prepaid taxes exceeding tax liabilities as of April 22, 2005. Our income tax expense represents taxes associated with our foreign
subsidiaries and state taxes in the states that recognize limited liability companies as taxable corporations.

Subscriber Acquisition
Costs (SAC)

Our Consumer group, included in the North America Broadband segment, offers internet and data
networking services to consumers and small-medium businesses in North America. The products and services are sold to customers using a variety of competitive service packages, through an extensive independent nationwide network of distributors,
dealers, sales agents and retail companies. SAC is an important component of our cost to acquire new consumer subscribers. SAC consists of dealer and customer service representative commissions on new installations, and, in certain cases, the cost
of hardware and installation provided to customers at the inception of service or cost of services for activities related to the consumer rental program. SAC is deferred when a customer commits to a service agreement, and the deferred SAC is
amortized over the commitment period as the related service revenue is earned. Prior to 2007, service agreements were 12 to 15 months in duration. In May 2007, we began to offer only 24-month service agreements. Customers who receive hardware and
installation under these service agreements have a higher monthly service rate than is charged to customers who purchase their equipment outright at the inception of service. We monitor the recoverability of subscriber acquisition costs and are
entitled to an early termination fee (secured by customer credit card information) if the subscriber cancels service prior to the end of the commitment period. The recoverability of deferred subscriber acquisition costs is reasonably assured through
the increased monthly service fee charged to customers, the ability to recover the equipment, and/or the ability to charge an early termination fee.

New Accounting Pronouncements

For a discussion of new accounting pronouncements, see Note 2Basis of
Presentation and Summary of Significant Accounting Policies to our audited consolidated financial statements included in Item 8 of this report.



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|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk
|-------- | ----------------------------------------------------------

The following discussion and the estimated amounts generated from the sensitivity analyses referred to below include forward-looking statements of market risk which assume for analytical purposes that
certain adverse market conditions may occur. Actual future market conditions may differ materially from such assumptions because the amounts noted below are the result of analyses used for the purpose of assessing possible risks and the mitigation
thereof. Accordingly, you should not consider the forward-looking statements as projections by us of future events or losses.

General

Our cash flows and earnings are subject to fluctuations resulting from changes in foreign currency exchange rates, interest
rates and changes in the market value of our equity investments. We manage our exposure to those market risks through internally established policies and procedures and, when deemed appropriate, through the use of derivative financial instruments.
We enter into derivative instruments only to the extent considered necessary to meet our risk management objectives and do not enter into derivative contracts for speculative purposes.

Foreign Currency Risk

We generally conduct our business in United States
dollars. However, as our international business is conducted in a variety of foreign currencies, it is exposed to fluctuations in foreign currency exchange rates. Our objective in managing our exposure to foreign currency changes is to reduce
earnings and cash flow volatility associated with foreign exchange rate fluctuations. Accordingly, we may enter into foreign exchange contracts to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and
anticipated foreign currency transactions. As of December 31, 2009, we had an estimated $17.7 million of foreign currency denominated receivables and payables outstanding, of which $2.4 million had hedge contracts in place to partially mitigate
foreign currency risk. The differences between the face amount of the foreign exchange contracts and their estimated fair values were not material as of December 31, 2009.

The impact of a hypothetical 10% adverse change in exchange rates on the fair value of foreign currency denominated net assets and
liabilities of our foreign subsidiaries would be an estimated loss of $7.4 million as of December 31, 2009.

Marketable Securities
Risk

We have a significant amount of cash that is invested in marketable securities which is subject to market risk due
to interest rate fluctuations. We have established an investment policy which governs our investment strategy and stipulates that we diversify investments among United States Treasury securities and other high credit quality debt instruments that we
believe to be low risk. We are averse to principal loss and seek to preserve our invested funds by limiting default risk and market risk.

Interest Rate Risk

Our Senior Notes and outstanding borrowings related to very small aperture terminal
hardware financing arrangements are not subject to interest rate fluctuations because the interest rate is fixed for the term of the instrument. We are subject to variable interest rates on certain other debt including the Revolving Credit Facility
and the Term Loan Facility. To the extent we draw against the credit facility, increases in interest rates would have an adverse impact on our results of operations.

To mitigate the variable interest rate risk associated with the Term Loan Facility, we entered into the Swap Agreement to swap the variable LIBOR based interest on the Term Loan Facility for a fixed
interest rate of 5.12% per annum. The net interest payments based on the Swap Agreement and the Term Loan Facility are paid quarterly and estimated to be approximately $8.8 million for each of the years ending December 31, 2010 through
2013 and $3.3 million for the year ending December 31, 2014. The security for our interest obligation under the Swap Agreement is the same as the security for the Revolving Credit Facility described in Note 11Debt to our audited
consolidated financial statements included in Item 8 in this report.



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Market Concentration and Credit Risk

We provide services and extend credit to a number of equipment customers, service providers, and a large number of consumers, both in the
United States and around the world. We monitor our exposure to credit losses and maintain, as necessary, allowances for anticipated losses. Financial instruments which potentially subject us to a concentration of credit risk consist of cash, cash
equivalents and marketable investments. Although we maintain cash balances at financial institutions that exceed federally insured limits, these balances are placed with high credit quality financial institutions.

Commodity Price Risk

All
of our products contain components whose base raw materials have undergone dramatic cost fluctuations in the last 24 months. Fluctuations in pricing of raw materials have the ability to affect our product costs. Although we have been successful in
offsetting or mitigating our exposure to these fluctuations, such changes could have an adverse impact on our product costs. We are unable to predict the possible impact of changes in commodity prices.



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|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Managers and
Members of

Hughes Network Systems, LLC

Germantown, Maryland

We have audited the accompanying consolidated balance sheets of Hughes Network Systems, LLC and
subsidiaries (the Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audits
also included Schedule II listed in the Index at Item 15. We also have audited the Companys internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control  Integrated
Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission. The Companys management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control
over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control Over Financial Reporting. Our responsibility is to express an
opinion on these financial statements and financial statement schedule and an opinion on the Companys internal control over financial reporting based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit
of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A companys internal control over financial reporting is a process designed by, or under the supervision of, the companys
principal executive and principal financial officers, or persons performing similar functions, and effected by the companys board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or
improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to
future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Hughes Network Systems, LLC and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting
principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal
Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.

As discussed in Note 2 to the consolidated financial statements, in 2009 the Company changed its method of accounting for noncontrolling interests to conform to ASC 810 Consolidation, and retrospectively adjusted the 2008 and 2007
financial statements for the change.



|                         
|-------------------------
|/s/ Deloitte & Touche LLP
|                         
|Baltimore, Maryland      
|March 3, 2010            

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HUGHES NETWORK SYSTEMS, LLC

CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                            |  |              |           |   |      |   |           |  
|------------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                            |  | December 31, |          
|                                            |  | 2009         |           |   | 2008 |  
|ASSETS                                      |  |              |           |   |      |   |           |  
|Current assets:                             |  |              |           |   |      |   |           |  
|Cash and cash equivalents                   |  | $            | 183,733   |   |      | $ | 100,262   |  
|Marketable securities                       |  |              | 31,126    |   |      |   | -         |  
|Receivables, net                            |  |              | 162,806   |   |      |   | 200,259   |  
|Inventories                                 |  |              | 60,244    |   |      |   | 65,485    |  
|Prepaid expenses and other                  |  |              | 20,976    |   |      |   | 20,425    |  
|                                            |  |              |           |   |      |   |           |  
|Total current assets                        |  |              | 458,885   |   |      |   | 386,431   |  
|Property, net                               |  |              | 601,964   |   |      |   | 507,270   |  
|Capitalized software costs, net             |  |              | 49,776    |   |      |   | 51,454    |  
|Intangible assets, net                      |  |              | 13,488    |   |      |   | 19,780    |  
|Goodwill                                    |  |              | 2,661     |   |      |   | 2,661     |  
|Other assets                                |  |              | 68,524    |   |      |   | 112,511   |  
|                                            |  |              |           |   |      |   |           |  
|Total assets                                |  | $            | 1,195,298 |   |      | $ | 1,080,107 |  
|                                            |  |              |           |   |      |   |           |  
|LIABILITIES AND EQUITY                      |  |              |           |   |      |   |           |  
|Current liabilities:                        |  |              |           |   |      |   |           |  
|Accounts payable                            |  | $            | 117,513   |   |      | $ | 80,667    |  
|Short-term debt                             |  |              | 6,750     |   |      |   | 8,252     |  
|Accrued liabilities and other               |  |              | 133,926   |   |      |   | 159,415   |  
|                                            |  |              |           |   |      |   |           |  
|Total current liabilities                   |  |              | 258,189   |   |      |   | 248,334   |  
|Long-term debt                              |  |              | 714,957   |   |      |   | 578,298   |  
|Other long-term liabilities                 |  |              | 16,191    |   |      |   | 18,005    |  
|                                            |  |              |           |   |      |   |           |  
|Total liabilities                           |  |              | 989,337   |   |      |   | 844,637   |  
|                                            |  |              |           |   |      |   |           |  
|Commitments and contingencies               |  |              |           |   |      |   |           |  
|                                            |  |             
|Equity:                                     |  |              |           |   |      |   |           |  
|Hughes Network Systems, LLC (HNS) equity: |  |              |           |   |      |   |           |  
|Class A membership interests                |  |              | 177,933   |   |      |   | 177,425   |  
|Class B membership interests                |  |              | -         |   |      |   | -         |  
|Retained earnings                           |  |              | 36,094    |   |      |   | 80,999    |  
|Accumulated other comprehensive loss        |  |              | (13,987   | ) |      |   | (27,586   | )
|                                            |  |              |           |   |      |   |           |  
|Total HNS equity                           |  |              | 200,040   |   |      |   | 230,838   |  
|                                            |  |              |           |   |      |   |           |  
|Noncontrolling interest                     |  |              | 5,921     |   |      |   | 4,632     |  
|                                            |  |              |           |   |      |   |           |  
|Total equity                                |  |              | 205,961   |   |      |   | 235,470   |  
|                                            |  |              |           |   |      |   |           |  
|Total liabilities and equity                |  | $            | 1,195,298 |   |      | $ | 1,080,107 |  
|                                            |  |              |           |   |      |   |           |  

See accompanying Notes to the Consolidated Financial Statements.



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HUGHES NETWORK SYSTEMS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS

(In
thousands)



|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|------------------------------------------------------ |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | ------- | -
|                                                       |  | Year Ended December 31, |          
|                                                       |  | 2009                    |           |   | 2008 |   |           | 2007 | 
|Revenues:                                              |  |                         |           |   |      |   |           |      |  |   |         |  
|Services revenues                                      |  | $                       | 709,558   |   |      | $ | 610,785   |      |  | $ | 537,115 |  
|Hardware sales                                         |  |                         | 297,107   |   |      |   | 449,106   |      |  |   | 432,960 |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|Total revenues                                         |  |                         | 1,006,665 |   |      |   | 1,059,891 |      |  |   | 970,075 |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|Operating costs and expenses:                          |  |                         |           |   |      |   |           |      |  |   |         |  
|Cost of services                                       |  |                         | 448,767   |   |      |   | 406,673   |      |  |   | 356,232 |  
|Cost of hardware products sold                         |  |                         | 289,516   |   |      |   | 378,264   |      |  |   | 355,475 |  
|Selling, general and administrative                    |  |                         | 175,203   |   |      |   | 173,568   |      |  |   | 145,381 |  
|Loss on impairment                                     |  |                         | 44,400    |   |      |   | -         |      |  |   | -       |  
|Research and development                               |  |                         | 22,296    |   |      |   | 26,833    |      |  |   | 17,036  |  
|Amortization of intangible assets                      |  |                         | 5,164     |   |      |   | 6,419     |      |  |   | 6,144   |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|Total operating costs and expenses                     |  |                         | 985,346   |   |      |   | 991,757   |      |  |   | 880,268 |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|Operating income                                       |  |                         | 21,319    |   |      |   | 68,134    |      |  |   | 89,807  |  
|Other income (expense):                                |  |                         |           |   |      |   |           |      |  |   |         |  
|Interest expense                                       |  |                         | (64,094   | ) |      |   | (51,327   | )    |  |   | (43,772 | )
|Interest income                                        |  |                         | 1,988     |   |      |   | 2,978     |      |  |   | 8,972   |  
|Other income (loss), net                               |  |                         | (334      | ) |      |   | 178       |      |  |   | 193     |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|Income (loss) before income tax expense                |  |                         | (41,121   | ) |      |   | 19,963    |      |  |   | 55,200  |  
|Income tax expense                                     |  |                         | (2,436    | ) |      |   | (7,588    | )    |  |   | (5,316  | )
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|Net income (loss)                                      |  |                         | (43,557   | ) |      |   | 12,375    |      |  |   | 49,884  |  
|Net income attributable to the noncontrolling interest |  |                         | (1,348    | ) |      |   | (279      | )    |  |   | (83     | )
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  
|Net income (loss) attributable to HNS                  |  | $                       | (44,905   | ) |      | $ | 12,096    |      |  | $ | 49,801  |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |         |  

See accompanying Notes to the Consolidated Financial Statements.



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HUGHES NETWORK SYSTEMS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In
thousands)



|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|---------------------------------------------------------- |  | -------------------------------- | ------- | - | ---------------- | - | ------- | --------------------------------- |  | - | ---------------------- | - |  | ----- | ----- | - | -------------------------- | - | ------- | - |  | - | ------- | -
|                                                           |  | HNS Equity                      |         |   |                  |   |         |                                   |  |   |                        |  
|                                                           |  | Class A and BMembershipInterests |         |   | RetainedEarnings |   |         | AccumulatedOtherComprehensiveLoss |  |   | NoncontrollingInterest |   |  | Total |       |   | ComprehensiveIncome (Loss) |  
|Balance at January 1, 2007                                 |  | $                                | 180,346 |   |                  | $ | 19,102  |                                   |  | $ | (110                   | ) |  | $     | 3,624 |   |                            | $ | 202,962 |   |  |   |         |  
|Share-based compensation                                   |  |                                  | 309     |   |                  |   |         |                                   |  |   | -                      |   |  |       | -     |   |                            |   | 309     |   |  |   |         |  
|Close-out of a subsidiary                                  |  |                                  | -       |   |                  |   |         |                                   |  |   | -                      |   |  |       | 608   |   |                            |   | 608     |   |  |   |         |  
|Comprehensive income (loss):                               |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Net income                                                 |  |                                  |         |   |                  |   | 49,801  |                                   |  |   |                        |   |  |       | 83    |   |                            |   | 49,884  |   |  | $ | 49,884  |  
|Foreign currency translation adjustments                   |  |                                  |         |   |                  |   |         |                                   |  |   | 3,491                  |   |  |       | 961   |   |                            |   | 4,452   |   |  |   | 4,452   |  
|Reclassification of realized gain on hedging instruments   |  |                                  |         |   |                  |   |         |                                   |  |   | (252                   | ) |  |       | -     |   |                            |   | (252    | ) |  |   | (252    | )
|Unrealized loss on hedging instruments                     |  |                                  |         |   |                  |   |         |                                   |  |   | (5,230                 | ) |  |       | -     |   |                            |   | (5,230  | ) |  |   | (5,230  | )
|Unrealized gain on available-for-sale securities           |  |                                  |         |   |                  |   |         |                                   |  |   | 87                     |   |  |       | -     |   |                            |   | 87      |   |  |   | 87      |  
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Balance at December 31, 2007                               |  | $                                | 180,655 |   |                  | $ | 68,903  |                                   |  | $ | (2,014                 | ) |  | $     | 5,276 |   |                            | $ | 252,820 |   |  | $ | 48,941  |  
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Share-based compensation                                   |  |                                  | 473     |   |                  |   |         |                                   |  |   | -                      |   |  |       | -     |   |                            |   | 473     |   |  |   |         |  
|Retirement of bonus units                                  |  |                                  | (4,150  | ) |                  |   |         |                                   |  |   | -                      |   |  |       | -     |   |                            |   | (4,150  | ) |  |   |         |  
|Issuance of employee stock option plan at subsidiary       |  |                                  | 447     |   |                  |   |         |                                   |  |   | -                      |   |  |       | -     |   |                            |   | 447     |   |  |   |         |  
|Comprehensive income (loss):                               |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Net income                                                 |  |                                  |         |   |                  |   | 12,096  |                                   |  |   |                        |   |  |       | 279   |   |                            |   | 12,375  |   |  | $ | 12,375  |  
|Foreign currency translation adjustments                   |  |                                  |         |   |                  |   |         |                                   |  |   | (13,594                | ) |  |       | (923  | ) |                            |   | (14,517 | ) |  |   | (14,517 | )
|Reclassification of realized loss on hedging instruments   |  |                                  |         |   |                  |   |         |                                   |  |   | 2,010                  |   |  |       | -     |   |                            |   | 2,010   |   |  |   | 2,010   |  
|Unrealized loss on hedging instruments                     |  |                                  |         |   |                  |   |         |                                   |  |   | (13,931                | ) |  |       | -     |   |                            |   | (13,931 | ) |  |   | (13,931 | )
|Unrealized loss on available-for-sale securities           |  |                                  |         |   |                  |   |         |                                   |  |   | (57                    | ) |  |       | -     |   |                            |   | (57     | ) |  |   | (57     | )
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Balance at December 31, 2008                               |  | $                                | 177,425 |   |                  | $ | 80,999  |                                   |  | $ | (27,586                | ) |  | $     | 4,632 |   |                            | $ | 235,470 |   |  | $ | (14,120 | )
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Share-based compensation                                   |  |                                  | 899     |   |                  |   |         |                                   |  |   | -                      |   |  |       | -     |   |                            |   | 899     |   |  |   |         |  
|Purchase of subsidiary shares from noncontrolling interest |  |                                  | (391    | ) |                  |   |         |                                   |  |   | (19                    | ) |  |       | (345  | ) |                            |   | (755    | ) |  |   |         |  
|Comprehensive income (loss):                               |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Net income (loss)                                          |  |                                  |         |   |                  |   | (44,905 | )                                 |  |   |                        |   |  |       | 1,348 |   |                            |   | (43,557 | ) |  | $ | (43,557 | )
|Foreign currency translation adjustments                   |  |                                  |         |   |                  |   |         |                                   |  |   | 6,760                  |   |  |       | 286   |   |                            |   | 7,046   |   |  |   | 7,046   |  
|Reclassification of realized loss on hedging instruments   |  |                                  |         |   |                  |   |         |                                   |  |   | 4,701                  |   |  |       | -     |   |                            |   | 4,701   |   |  |   | 4,701   |  
|Unrealized gain on hedging instruments                     |  |                                  |         |   |                  |   |         |                                   |  |   | 2,180                  |   |  |       | -     |   |                            |   | 2,180   |   |  |   | 2,180   |  
|Unrealized loss on available-for-sale securities           |  |                                  |         |   |                  |   |         |                                   |  |   | (23                    | ) |  |       | -     |   |                            |   | (23     | ) |  |   | (23     | )
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Balance at December 31, 2009                               |  | $                                | 177,933 |   |                  | $ | 36,094  |                                   |  | $ | (13,987                | ) |  | $     | 5,921 |   |                            | $ | 205,961 |   |  | $ | (29,653 | )
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  

See accompanying Notes to the Consolidated Financial Statements



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HUGHES NETWORK SYSTEMS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In
thousands)



|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|--------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ---- |  | - | -------- | -
|                                                                                        |  | Year Ended December 31, |         
|                                                                                        |  | 2009                    |          |   | 2008 |   |         | 2007 | 
|Cash flows from operating activities:                                                   |  |                         |          |   |      |   |         |      |  |   |          |  
|Net income (loss)                                                                       |  | $                       | (43,557  | ) |      | $ | 12,375  |      |  | $ | 49,884   |  
|Adjustments to reconcile net income (loss) to net cash flows from operating activities: |  |                         |          |   |      |   |         |      |  |   |          |  
|Depreciation and amortization                                                           |  |                         | 102,139  |   |      |   | 68,937  |      |  |   | 45,860   |  
|Amortization of debt issuance costs                                                     |  |                         | 2,025    |   |      |   | 1,424   |      |  |   | 906      |  
|Share-based compensation expense                                                        |  |                         | 899      |   |      |   | 473     |      |  |   | 309      |  
|Loss on impairment                                                                      |  |                         | 44,400   |   |      |   | -       |      |  |   | -        |  
|Other                                                                                   |  |                         | 546      |   |      |   | (112    | )    |  |   | 384      |  
|Change in other operating assets and liabilities, net of acquisition:                   |  |                         |          |   |      |   |         |      |  |   |          |  
|Receivables, net                                                                        |  |                         | 52,538   |   |      |   | (2,638  | )    |  |   | (23,319  | )
|Inventories                                                                             |  |                         | 6,438    |   |      |   | (2,710  | )    |  |   | (3,708   | )
|Prepaid expenses and other                                                              |  |                         | 4,721    |   |      |   | (10,811 | )    |  |   | (9,648   | )
|Accounts payable                                                                        |  |                         | 15,580   |   |      |   | 6,985   |      |  |   | 12,767   |  
|Accrued liabilities and other                                                           |  |                         | (22,858  | ) |      |   | (3,758  | )    |  |   | 21,769   |  
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Net cash provided by operating activities                                               |  |                         | 162,871  |   |      |   | 70,165  |      |  |   | 95,204   |  
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Cash flows from investing activities:                                                   |  |                         |          |   |      |   |         |      |  |   |          |  
|Change in restricted cash                                                               |  |                         | (108     | ) |      |   | 3,104   |      |  |   | 379      |  
|Purchases of marketable securities                                                      |  |                         | (41,080  | ) |      |   | -       |      |  |   | (22,096  | )
|Proceeds from sales of marketable securities                                            |  |                         | 10,000   |   |      |   | 11,090  |      |  |   | 114,105  |  
|Expenditures for property                                                               |  |                         | (150,702 | ) |      |   | (81,669 | )    |  |   | (233,952 | )
|Expenditures for capitalized software                                                   |  |                         | (12,772  | ) |      |   | (14,564 | )    |  |   | (14,228  | )
|Proceeds from sale of property                                                          |  |                         | 397      |   |      |   | -       |      |  |   | 516      |  
|Long-term loan receivable                                                               |  |                         | (10,000  | ) |      |   | -       |      |  |   | -        |  
|Acquisition of Helius, Inc., net of cash received                                       |  |                         | -        |   |      |   | (10,543 | )    |  |   | -        |  
|Other, net                                                                              |  |                         | (755     | ) |      |   | -       |      |  |   | -        |  
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Net cash used in investing activities                                                   |  |                         | (205,020 | ) |      |   | (92,582 | )    |  |   | (155,276 | )
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Cash flows from financing activities:                                                   |  |                         |          |   |      |   |         |      |  |   |          |  
|Net increase in notes and loans payable                                                 |  |                         | -        |   |      |   | 223     |      |  |   | 376      |  
|Short-term revolver borrowings                                                          |  |                         | 6,791    |   |      |   | -       |      |  |   | -        |  
|Repayments of revolver borrowings                                                       |  |                         | (7,861   | ) |      |   | -       |      |  |   | -        |  
|Long-term debt borrowings                                                               |  |                         | 147,849  |   |      |   | 3,606   |      |  |   | 119,731  |  
|Repayment of long-term debt                                                             |  |                         | (12,375  | ) |      |   | (13,749 | )    |  |   | (24,843  | )
|Debt issuance costs                                                                     |  |                         | (4,612   | ) |      |   | -       |      |  |   | (2,053   | )
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Net cash provided by (used in) financing activities                                     |  |                         | 129,792  |   |      |   | (9,920  | )    |  |   | 93,211   |  
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                            |  |                         | (4,172   | ) |      |   | 3,372   |      |  |   | (3,010   | )
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                    |  |                         | 83,471   |   |      |   | (28,965 | )    |  |   | 30,129   |  
|Cash and cash equivalents at beginning of the period                                    |  |                         | 100,262  |   |      |   | 129,227 |      |  |   | 99,098   |  
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Cash and cash equivalents at end of the period                                          |  | $                       | 183,733  |   |      | $ | 100,262 |      |  | $ | 129,227  |  
|                                                                                        |  |                         |          |   |      |   |         |      |  |   |          |  
|Supplemental cash flow information                                                      |  |                         |          |   |      |   |         |      |  |   |          |  
|Cash paid for interest                                                                  |  | $                       | 60,386   |   |      | $ | 54,138  |      |  | $ | 53,592   |  
|Cash paid for income taxes                                                              |  | $                       | 5,619    |   |      | $ | 3,598   |      |  | $ | 3,357    |  
|Supplemental non-cash disclosures related to                                            |  |                         |          |   |      |   |         |      |  |   |          |  
|Capitalized software and property acquired, not paid                                    |  | $                       | 26,946   |   |      |   |         |      |  |   |          |  
|95 West capital lease                                                                   |  |                         |          |   |      | $ | 5,751   |      |  |   |          |  

See accompanying Notes to the Consolidated Financial Statements.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Note
1:    Organization and Description of Business

Hughes Network Systems, LLC (HNS and,
together with its consolidated subsidiaries, the Company or we, us, and our) was formed as a Delaware limited liability company on November 12, 2004. The Limited Liability Company Agreement of
Hughes Network Systems, LLC, as amended (the LLC Agreement) provides for two classes of membership interests. The Class A membership interests, which have voting rights, are purchased by investors in the Company. The Class B
membership interests, which do not have voting rights, are available for grant to employees, officers, directors, and consultants of the Company in exchange for the performance of services. Hughes Communications, Inc. (HCI or
Parent) is the sole owner of our Class A membership interests and serves as our managing member, as defined in the LLC Agreement. As of December 31, 2009, there were 95,000 Class A membership interests outstanding and
3,330 Class B membership interests outstanding.

We are a telecommunications company that provides equipment and services to
the broadband communications marketplace. We have extensive technical expertise in satellite, wire line and wireless communications which we utilize in a number of product and service offerings. In particular, we offer a spectrum of broadband
equipment and services to the managed services market, which is comprised of enterprises with a requirement to connect a large number of geographically dispersed locations with reliable, scalable, and cost-effective applications, such as credit card
verification, inventory tracking and control, and broadcast video. We provide broadband network services and systems to the international and domestic enterprise markets and satellite Internet broadband access to North American consumers, which we
refer to as the Consumer market. In addition, we provide networking systems solutions to customers for mobile satellite, telematics and wireless backhaul systems. These services are generally provided on a contract or project basis and may involve
the use of proprietary products engineered by us.

We have four reportable segments, which we operate and manage as strategic
business units and organize by products and services. We measure and evaluate our reportable segments based on operating earnings of the respective segments. Our business segments include: (i) the North America Broadband segment; (ii) the
International Broadband segment; (iii) the Telecom Systems segment; and (iv) the Corporate segment. The North America Broadband segment consists of the Consumer group, which delivers broadband internet service to consumer customers, and
the Enterprise group, which provides satellite, wire line and wireless communication networks and services to enterprises. The International Broadband segment consists of our international service companies and services sold directly to
international enterprise customers. The International Enterprise group provides managed networks services and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite
Systems group, the Telematics group, and the Terrestrial Microwave group. The Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators. The Telematics group provides development engineering and
manufacturing services to Hughes Telematics, Inc. (HTI). The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for cellular backhaul solutions. The Corporate segment includes our
corporate offices and assets not specifically related to another business segment.

Note 2:    Basis of Presentation
and Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with: (i) generally accepted accounting principles
in the United States of America (GAAP); (ii) the instructions to Form 10-K; and (iii) the guidance of Rule 10-01 of Regulation S-X under the Securities and Exchange Act of 1934, as amended, for financial statements required to
be filed with the Securities and Exchange Commission (SEC). They include the assets, liabilities, results of operations and cash flows of the Company, including its domestic and foreign subsidiaries that are more than 50% owned or for
which the Company is deemed to be the primary beneficiary as defined by the Financial Accounting Standards Board (FASB) Accounting Standards Codification (the ASC or the Codification) 810,
Consolidation. Entities in which the Company holds at least 20% ownership or in which there are other indicators of significant influence are generally accounted for by the equity method, whereby the Company records its proportionate
share of the entities results of operations. Entities in which the Company holds less than 20% ownership and does not have the ability to exercise significant influence are generally carried at cost. Management believes the accompanying
consolidated financial statements reflect all normal and recurring adjustments necessary for a fair presentation of the Companys financial condition, results of operations, and cash flows as of and for the periods presented herein.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Effective January 1, 2009, we adopted the update to ASC 810 relating to
noncontrolling interests, which did not have a material impact on our financial condition, results of operations or cash flows. However, the update impacted the presentation and disclosure of noncontrolling interests on our consolidated financial
statements. As a result, certain prior period items in these consolidated financial statements have been reclassified to conform to the current period presentation.

All intercompany balances and transactions with subsidiaries and other consolidated entities have been eliminated.

Use of Estimates in the Preparation of the Consolidated Financial Statements

The preparation of our consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities,
and the reported amounts of revenues and expenses. Management bases its estimates and assumptions on historical experience and on various other factors that are believed to be reasonable under the circumstances. Due to the inherent uncertainty
involved in making estimates, actual results reported in future periods may be affected by changes in those estimates.

Market
Concentrations and Credit Risk

We provide services and extend credit to a number of communications equipment customers,
service providers, and a large number of consumers, both in the United States and around the world. We monitor our exposure to credit losses and maintain, as necessary, allowances for anticipated losses. No single customer accounted for more than
10% of total annual revenues in any of the periods presented in this report. Financial instruments which potentially subject us to a concentration of credit risk consist of cash, cash equivalents and marketable investments. Although we maintain cash
balances at financial institutions that exceed federally insured limits, these balances are placed with high credit quality financial institutions.

Revenue Recognition

Service revenues and hardware sales, excluding lease revenues described below, are
recognized when services are rendered or products are installed and as title passes to those customers, net of sales taxes. In situations where customer offerings represent a bundled arrangement for both services and hardware, revenue elements are
separated into their relevant components (services or hardware) for revenue recognition purposes. We offer a rebate to qualifying new consumer subscribers and record a reduction in revenue in the same period in which the related sale occurs based on
an estimate of the number of rebates that will be redeemed. This estimate is based on historical experience and actual sales during the promotion. In September 2008, we began to offer our consumer customers the option to rent the equipment with a
24-month service contract. Once the initial contract ends, it becomes a month-to-month contract. Revenue on the rental equipment is recognized on a monthly basis until the customers terminate their contracts with us.

Revenue is also earned from long-term contracts for the sale of mobile satellite communications systems. Sales under these long-term
contracts are recognized using the percentage-of-completion (cost-to-cost) method of accounting. Under this method, sales are recorded equivalent to costs incurred plus a portion of the profit expected to be realized, based on the ratio of costs
incurred to estimated total costs at completion. Profits expected to be realized on long-term contracts are based on estimates of total sale values and costs at completion. These estimates are reviewed and revised periodically throughout the lives
of the contracts, and adjustments to profits resulting from such revisions are recorded in the accounting period in which the revisions are made. Estimated losses on contracts are recorded in the period in which they are identified.

Income Taxes

We are a
limited liability company and have elected to be treated as a partnership for income tax purposes. As such, U.S. federal and state income taxes (in the states which tax limited liability companies as partnerships) are the direct responsibility of
its members. Our Parent holds 100% of our Class A membership interests. Thus, our activity is reported on our Parents tax returns. Under the terms of the December 2004 agreement entered into between the Company, SkyTerra
Communications, Inc. (SkyTerra), The DIRECTV Group, Inc. (DIRECTV) and DTV Network Systems, Inc. (DTV Networks), DIRECTV retained the tax benefits from net operating losses of the Company occurring prior to
April 23, 2005



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



and has responsibility for all of the pre-closing domestic and international income tax liabilities of DTV Networks. We have recorded a liability in the balance sheet for the estimated amount we
may be required to pay to DIRECTV resulting from prepaid taxes exceeding tax liabilities as of April 22, 2005. Our income tax expense represents taxes associated with our foreign subsidiaries and state taxes in the states which tax limited
liability companies as taxable corporations.

In July 2006, the FASB amended ASC 740, Income Taxes, to clarify the
accounting for uncertainty in income taxes recognized in the financial statements. The amendment provides that a tax benefit from an uncertain tax position may be recognized when it is more-likely-than-not that the position will be sustained upon
examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of
ASC 740 and in subsequent periods. This standard also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

Upon adoption of ASC 740 on January 1, 2007, the Company did not identify any significant unrecognized tax benefits and therefore, did
not book any related liability. The Company recognizes interest accrued related to unrecognized tax benefits in operating expenses and penalties in income tax expense within the consolidated statements of operations.

As a result of the revision in ASC 805, Business Combinations, effective January 1, 2009, adjustments recorded to the
valuation allowance related to deferred tax assets recognized in connection with earlier business combinations will impact tax expense in lieu of recording an adjustment to intangible assets.

Cash and Cash Equivalents

We consider all highly liquid investments with original maturities of ninety days or less at the date of investment to be cash equivalents.

Restricted Cash

Cash subject to restrictions expiring within one year is included in Prepaid expenses and
other in the accompanying Consolidated Balance Sheets. Cash subject to restrictions expiring beyond one year is included in Other assets in the accompanying Consolidated Balance Sheets. As of December 31, 2009 and 2008, we had $1.8 million and
$1.7 million of restricted cash, respectively, which secures certain of our letters of credit. Restrictions on the cash relating to letters of credit will be released as the letters of credit expire through December 2015.

Marketable Securities

We
classify all debt securities with original maturities exceeding ninety days as available-for-sale investments in accordance with ASC 320, InvestmentDebt and Equity Securities. Securities classified as available-for-sale securities
are carried at fair value with the related unrealized gains and losses reported as a component of accumulated other comprehensive income (loss). Fair value is based on quoted market prices as of the reporting date. The book value of these securities
is adjusted for amortization or accretion of premium and discounts over the contractual lives of the securities, which is included in Interest income in the accompanying Consolidated Statements of Operations.

Available-for-sale investments in debt securities that have an unrealized loss are evaluated for impairment in accordance with ASC 320. Our
management uses judgments to evaluate each security held at a loss based on market conditions and other factors to determine if the decline in the market value of the security indicates an other-than-temporary impairment. When our management
believes that the security is impaired, we recognize the impairment charge by writing down the amortized cost basis of the security to its estimated fair market value.

The Company had no investments classified as trading or held-to-maturity at December 31, 2009 and no investments at December 31, 2008.

Property and Depreciation

Property and equipment are carried at cost and depreciated or amortized on a straight-line basis over their estimated useful lives, generally three to thirty years. Land is carried at cost, and land improvements are depreciated over ten
years. Buildings are depreciated over thirty years. Leasehold improvements are amortized over the lesser of their estimated useful lives or lease term.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



A significant component of our property and equipment is the capitalized costs
associated with the satellite and related assets, which include costs associated with the construction of the satellite, launch services, insurance premiums for the satellite launch and the in-orbit testing period, capitalized interest incurred
during the construction of the satellite, and other costs directly related to the satellite. Capitalized satellite costs are depreciated on a straight-line basis over the estimated useful life of 15 years. The Company periodically reviews, at least
annually, the remaining estimated useful life of the satellite to determine if revisions to the estimated life are necessary.

Capitalized
Software Costs

Software development costs are capitalized in accordance with ASC 985-20, Costs of Computer Software
to Be Sold, Leased, or Otherwise Marketed. Capitalized software development costs are amortized using the straight-line method over their estimated useful lives, not in excess of five years. Software program reviews are conducted at least
annually, or as events and circumstances warrant such a review, to ensure that capitalized software development costs are not impaired and that costs associated with programs that are no longer generating revenue are expensed. Amortization of
software development costs was $14.2 million, $11.3 million and $8.3 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Intangible Assets

Intangible assets acquired in connection with business combinations which have finite lives
are amortized on a straight-line basis over their estimated useful lives. Intangible assets and their estimated useful lives are as follows:



|                       |  |             
|---------------------- |  | ------------
|                       |  | Life (Years)
|Backlog                |  | 4           
|Customer relationships |  | 8           
|Patented technology    |  | 8           
|Trademarks             |  | 2 -10       

Goodwill

Goodwill is the excess of purchase price over the fair value of identified net assets of businesses acquired. Goodwill is accounted for in
accordance with ASC 350, IntangiblesGoodwill and Other. Under the provisions of this statement, the Companys goodwill is tested at the reporting unit level for impairment on an annual basis during the fourth quarter, or
earlier if events and circumstances occur indicating that goodwill might be impaired. During 2009, 2008 and 2007, the Company did not recognize any goodwill impairment charges.

Debt Issuance Costs

Debt issuance costs are amortized based upon the
lives of the associated debt obligations using the effective interest method with such amortization included in Interest expense in the accompanying Consolidated Statements of Operations. For the years ended December 31, 2009, 2008 and 2007, we
amortized $2.0 million, $1.4 million and $0.9 million, respectively, of debt issuance costs related to the senior notes and term loans. At December 31, 2009 and 2008, the Company had $12.9 million and $10.3 million, respectively, of unamortized
debt issuance costs included in Other assets in the accompanying Consolidated Balance Sheets.

Subscriber Acquisition Costs
(SAC)

SAC is an important component of our costs to acquire new consumer subscribers. SAC consists of costs
paid to third-party dealers and customer service representative commissions on new installations and, in certain cases, the cost of hardware and installation provided to customers at the inception of service or cost of services for activities
related to the consumer rental program, which we began to offer to our consumer customers in September 2008. SAC is deferred when a customer commits to a service agreement, and the deferred SAC is amortized over the commitment period as the related
service



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



revenue is earned. Prior to 2007, service agreements were 12 to 15 months in duration. In May 2007, the Company began to offer only 24 month service agreements. Customers who receive hardware and
installation under these service agreements have a higher monthly service rate than is charged to customers who purchase their equipment outright at the inception of service. The Company monitors the recoverability of subscriber acquisition costs
and is entitled to an early termination fee (secured by customer credit card information) if the subscriber cancels service prior to the end of the commitment period. The recoverability of deferred subscriber acquisition costs is reasonably assured
through the increased monthly service fee charged to customers, the ability to recover the equipment, and/or the ability to charge an early termination fee. At December 31, 2009 and 2008, the Company had $29.9 million and $43.4 million of
deferred SAC, respectively, included in Other assets in the accompanying Consolidated Balance Sheets.

Valuation of Long-Lived Assets

The Company evaluates the carrying value of long-lived assets to be held and used annually or when events and circumstances
warrant such a review. The carrying value of a long-lived asset is considered impaired when the carrying value of the asset exceeds the aggregate amount of its separately identifiable undiscounted future cash flows. In that event, a loss is
recognized based on the amount by which the carrying value exceeds the fair value of the long-lived asset. Changes in estimates of future cash flows could result in a write-down of long-lived assets in a future period. During 2009, the Company
recognized $44.4 million of impairment charges on long-lived assets. See Note 9Other Assets for a more detailed explanation on the impairment charges. During 2008 and 2007, the Company did not recognize any impairment charges on long-lived
assets.

Foreign Currency

Certain foreign operations have determined the local currency to be their functional currency. Accordingly, these foreign entities translate assets and liabilities from their local currencies to U.S.
dollars using period-end exchange rates while income and expense accounts are translated at the average rates in effect during the period. The resulting translation adjustment is recorded in accumulated other comprehensive loss (AOCL), a
separate component of equity. Translation adjustments for foreign currency denominated equity investments are not material and are recorded as part of AOCL.

The Company also has foreign operations where the U.S. dollar has been determined as the functional currency. Gains and losses resulting from remeasurement of the foreign currency denominated assets,
liabilities and transactions into the U.S. dollar are recognized currently in the statements of operations and were not material in each of the periods presented herein.

Investments and Financial Instruments

The Company maintains its
investments in equity securities in Other assets in the accompanying Consolidated Balance Sheets. Non-marketable equity securities are carried at cost. Marketable equity securities are considered available-for-sale and carried at fair value based on
quoted market prices with unrealized gains or losses (excluding other-than-temporary losses), reported as part of AOCL. The Company continually reviews its investments to determine whether a decline in fair value below the cost basis is
other-than-temporary. The Company considers, among other factors: the magnitude and duration of the decline; the financial health and business outlook of the investee, including industry and sector performance, changes in technology, and
operational and financing cash flow factors; and the Companys intent and ability to hold the investment. If the decline in fair value is judged to be other-than-temporary, the carrying value of the security is written down to its estimated
fair value, and the impairment on the security is recognized in the statements of operations in i) Other income (loss), net and recorded as a reclassification adjustment from AOCL for marketable equity securities and ii) Loss on impairment for
non-marketable securities.

Investments in which the Company owns at least 20% of the voting securities or has significant
influence are accounted for under the equity method of accounting. Equity method investments are recorded at cost and adjusted for the appropriate share of the net earnings or losses of the investee. The carrying value of investments may include a
component of goodwill if the cost of our investment exceeds the fair value of the investment, and any such goodwill is subject to an evaluation for impairment pursuant to ASC 323InvestmentsEquity Method and Joint Ventures.
Investee losses are recorded up to the amount of the investment plus advances and loans made to the investee, and financial guarantees made on behalf of the investee. In certain instances, this can result in the Company recognizing investee earnings
or losses in excess of its ownership percentage. As of December 31, 2009 and 2008, we had cost method investments of $1.3 million and $1.2 million, respectively, and equity method investments of each $8.3 million.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The carrying value of cash and cash equivalents; receivables, net; other assets;
accounts payable; and amounts included in accrued liabilities and other liabilities meeting the definition of a financial instrument approximated their respective fair value at December 31, 2009 and 2008.

The Company carries all derivative financial instruments in the balance sheets at fair value based on quoted market prices. The Company uses
derivative contracts to minimize the financial impact of changes in the fair value of recognized assets, liabilities, and unrecognized firm commitments, or the variability of cash flows associated with forecasted transactions in accordance with
internal risk management policies. Changes in fair value of designated, qualified, and effective fair value hedges are recognized in earnings as offsets to the changes in fair value of the related hedged items. Changes in fair value of designated,
qualified, and effective cash flow hedges are deferred and recorded as a component of AOCL until the hedged transactions occur and are recognized in earnings. Changes related to amounts excluded from the effectiveness assessment of a hedging
derivatives change in fair value and the ineffective portion of a hedge is immediately recognized in the statements of operations. Both at the inception of the hedge and on an on-going basis, we assess whether the derivatives are highly
effective. Hedge accounting is prospectively discontinued when hedge instruments are no longer highly effective. During 2009 and 2008, the Company did not enter into any material hedge transactions.

The Company enters into interest rate swaps from time to time to manage its interest rate exposure. These derivatives may be designated as
cash flow hedges or fair value hedges depending on the nature of the risk being hedged. Derivatives used to hedge risk associated with changes in the cash flows of certain variable rate debt obligations are designated as cash flow hedges.
Derivatives used to hedge risk associated with changes in the fair value of certain fixed rate debt obligations are designated as fair value hedges. Consequently, changes in the fair value of the hedged debt obligations that are attributable to the
hedged risk are recognized in the current period earnings.

The Companys cash flows and earnings are subject to
fluctuations resulting from changes in foreign currency exchange rates, interest rates, and changes in the market value of its equity investments. We manage our exposure to these market risks through internally established policies and procedures
and, when deemed appropriate, through the use of derivative financial instruments. We enter into derivative instruments only to the extent considered necessary to meet our risk management objectives and do not enter into derivative contracts for
speculative purposes.

The Company generally conducts its business in U.S. dollars with some business conducted in a variety
of foreign currencies and, therefore, is exposed to fluctuations in foreign currency exchange rates. Our objective in managing our exposure to foreign currency changes is to reduce earnings and cash flow volatility associated with foreign exchange
rate fluctuations. Accordingly, we enter into foreign exchange contracts to mitigate risks associated with foreign currency denominated assets, liabilities, commitments and anticipated foreign currency transactions. The gains and losses on
derivative foreign exchange contracts offset changes in the value of the related exposures. As of December 31, 2009 and 2008, we had purchased foreign exchange contracts totaling $2.4 million and $9.0 million, respectively, to mitigate foreign
currency fluctuation risks associated with short-term U.S. dollar denominated obligations. The differences between the face amount of the foreign exchange contracts and their estimated fair values were not material at December 31, 2009 and
2008. All of the forward exchange contracts outstanding at December 31, 2009 expire in 2010.

The Company is exposed to
credit risk in the event of non-performance by the counterparties to its derivative financial instrument contracts. While the Company believes this risk is remote, credit risk is managed through the periodic monitoring and approval of financially
sound counterparties.

New Accounting Pronouncements

In July 2009, the Codification was released, changing the way accounting standards are organized from a standards-based model (with thousands of individual standards) to a topically based model (with
roughly 90 topics). The 90 topics are organized by ASC number and are updated with an Accounting Standards Update (ASU). The ASU will replace accounting changes that historically were issued as FASB Statements, FASB Interpretations, FASB
Staff Positions, or other types of FASB standards. The FASB considers the ASU an update to the Codification but not as authoritative in its own right. The Codification serves as the single source of nongovernmental authoritative U.S. GAAP for
interim and annual periods ending after September 15, 2009. Accordingly, all accounting references included in this report are provided in accordance with the Codification.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Recently Adopted Accounting Guidance

In September 2009, the FASB issued ASU 2009-6, effective for reporting periods ending after September 15, 2009, to provide
implementation guidance to ASC 740 on accounting for uncertainty in income taxes and related disclosures for nonpublic entities. The adoption of the guidance and disclosures in ASU 2009-6 did not have a material impact on our income tax disclosure
and financial statements.

In August 2009, the FASB issued ASU 2009-5, effective for reporting periods beginning after
October 1, 2009, to revise ASC 820, Fair Value Measurements and Disclosures, for the fair value measurement of liabilities when a quoted price in an active market for the identical liability is not available. The adoption of the
guidance in ASU 2009-5 did not have a material impact on our financial statements.

In May 2009, the FASB amended ASC 855,
Subsequent Events, effective for reporting periods ending after June 15, 2009, to establish general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are
issued or are available to be issued. The adoption of the amendment did not have a material impact on our financial statements.

In April 2009, the FASB amended ASC 820, effective for reporting periods ending after June 15, 2009, to provide guidance on (i) estimating the fair value of an asset or liability when the volume and level of activity for the asset
or liability have significantly decreased and (ii) identifying whether a transaction is distressed or forced. The adoption of the amendment did not have a material impact on our financial statements.

In April 2009, the FASB amended ASC 320, effective for reporting periods ending after June 15, 2009, to provide guidance on measuring
other-than-temporary impairments for debt securities and improving the presentation and disclosure of other-than-temporary impairments on debt and equity securities in financial statements. The adoption of the amendment did not have a material
impact on our financial statements.

In April 2009, the FASB amended ASC 825, Financial Instruments, effective for
reporting periods ending after June 15, 2009, requiring companies to provide qualitative and quantitative information about fair value estimates for all those financial instruments not measured on the balance sheet at fair value in interim and
annual financial statements. The adoption of the amendment did not have a material impact on our disclosures about the fair values of financial instruments.

In March 2008, the FASB amended ASC 815, Derivative and Hedging, effective for statements issued for fiscal years and interim periods beginning after November 15, 2008, to expand the
disclosure requirements for derivative instruments and hedging activities. The adoption of the amendment on January 1, 2009 did not have a material impact on our disclosures about derivative instruments and hedging activities.

In February 2008, the FASB amended ASC 820 to delay the effective date of fair value measurements for non-financial assets and liabilities
to fiscal years beginning after November 15, 2008. The adoption of fair value measurements for non-financial assets and liabilities on January 1, 2009 did not have a material impact on our financial statements.

In December 2007, the FASB amended ASC 810 relating to noncontrolling interests, effective for fiscal years and interim periods beginning on
or after December 15, 2008, to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements. The adoption of the amendment on January 1, 2009
did not have a material impact on our financial statements; however, it impacted the presentation and disclosure of noncontrolling interest on our audited consolidated financial statements.

Accounting Guidance Not Yet Effective

In January 2010, the FASB issued ASU 2010-06 to improve disclosures about fair value measurements. ASU 2010-6 clarifies certain existing disclosures and requires new disclosure regarding significant
transfers in and out of Level 1 and Level 2 of fair value measurements and the reasons for the transfer. The amendments in ASU 2010-06 will be effective for fiscal years beginning after December 15, 2010, and for interim periods within those
fiscal periods. We believe that ASU 2010-6 will not have a material impact on our fair value measurements.



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In October 2009, the FASB issued ASU 2009-14 to amend ASC 605, Revenue
Recognition. The amendments in this update change the accounting model for revenue arrangements that include both tangible products and software elements. The amendments in ASU 2009-14 will be effective for us beginning January 1, 2011,
with early adoption permitted. We are currently evaluating the impact these amendments will have on our financial statements when they become effective.

In October 2009, the FASB issued ASU 2009-13 amending ASC 605 related to revenue arrangements with multiple deliverables. Among other things, ASU 2009-13 provides guidance for entities in determining the
selling price of a deliverable and clarifies that the allocation of revenue is based on entity-specific assumptions rather than assumptions of a marketplace participant. We are currently evaluating the impact ASU 2009-13 will have on our financial
statements when it becomes effective on January 1, 2011. Early adoption is permitted.

In June 2009 and December 2009,
the FASB amended ASC 810 changing certain consolidation guidance and requiring improved financial reporting by enterprises involved with variable interest entities (VIE). The amendments provide guidance in determining when a reporting
entity should include the assets, liabilities, noncontrolling interest and results of activities of a VIE in its consolidated financial statements. The amendments to ASC 810 are effective for the first annual reporting period that begins after
November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. We are currently evaluating the impact these revisions will have on our financial statements for future
reporting.

Note 3:    Acquisition of Helius, Inc.

In February 2008, we completed the acquisition of Helius, Inc. pursuant to the merger agreement HCI entered into on December 21, 2007
(the Merger Agreement). Pursuant to the Merger Agreement, we paid $10.5 million, after certain adjustments, at the closing of the acquisition. Immediately after the acquisition, Helius, Inc. was converted to a limited liability company,
Helius, LLC (Helius). As part of the Merger Agreement, we had a contractual obligation for contingent consideration of up to $20.0 million (the Contingent Payment) as additional purchase price, if any, to be payable in April
2010 by us or Helius, subject to Helius achieving certain post-closing performance goals. As of December 31, 2009, Helius did not meet the performance goals as set forth in the Merger Agreement. As a result, we are not obligated to pay the
Contingent Payment.

The excess of the total acquisition costs of $10.8 million over the fair value of the net assets acquired
from Helius has been reflected as goodwill in accordance with ASC 805-30, Goodwill or Gain from Bargain Purchase, Including Consideration Transferred. We believe that the goodwill resulting from the Helius acquisition reflects the
expected synergies that will generate long-term revenue growth, expansion of customer service and improvement of customer retention rates as we combine Helius customer base and skills as a recognized leader in the internet protocol television
solutions business with our extensive broadband networking experience and customer base. Due to the nature of Helius business activities, its customer base and other similarities with our North American Enterprise business, Helius operates
within our North America Broadband segment. Helius results of operations have been included in our Consolidated Statements of Operations since February 2008.

The purchase price consisted of the following (in thousands):



|                         |  |        |       
|------------------------ |  | ------ | ------
|                         |  | Amount
|Cash consideration       |  | $      | 10,500
|Direct acquisition costs |  |        | 305   
|                         |  |        |       
|Total acquisition costs  |  | $      | 10,805
|                         |  |        |       



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The following table summarizes the fair values of the assets acquired and liabilities
assumed at the acquisition date (in thousands):



|                    |  |   |        |   |  |        |  | 
|------------------- |  | - | ------ | - |  | ------ |  | 
|                    |  |   |        |   |  | Amount | 
|Current assets      |  | $ | 1,054  |  
|Property            |  |   | 658    |  
|Intangible assets   |  |   | 7,600  |  
|Goodwill            |  |   | 2,661  |  
|                    |  |   |        |   |  |        |  | 
|Total assets        |  |   | 11,973 |  
|                    |  |   |        |   |  |        |  | 
|Current liabilities |  |   | (1,168 | )
|                    |  |   |        |   |  |        |  | 
|Total liabilities   |  |   | (1,168 | )
|                    |  |   |        |   |  |        |  | 
|Net assets acquired |  | $ | 10,805 |  
|                    |  |   |        |   |  |        |  | 

Based on the valuation of Helius intangible assets, using an income approach,
the fair values of the intangible assets at the acquisition date were as follows (in thousands):



|                                                                                                                                                                                                                          |  |           |        |                                     |   |                      |  |   |       
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------- | ------ | ----------------------------------- | - | -------------------- |  | - | ------
|                                                                                                                                                                                                                          |  |           |        | WeightedAverage UsefulLives (years) |   | Amount              
|Customer relationships                                                                                                                                                                                                    |  |           | 8      |                                     | $ | 4,260               
|Patented technology                                                                                                                                                                                                       |  |           | 8      |                                     |   | 2,870               
|Trademarks                                                                                                                                                                                                                |  |           | 2      |                                     |   | 470                 
|                                                                                                                                                                                                                          |  |           |        |                                     |   |                      |  |   |       
|Total amortizable intangible assets                                                                                                                                                                                       |  |           |        |                                     |   | 8                    |  | $ | 7,600 
|                                                                                                                                                                                                                          |  |           |        |                                     |   |                      |  |   |       
|The total amount of goodwill is
expected to be deductible for tax purposes. Pro forma financial statements are not presented as Helius results of operations were not material to our consolidated financial statements.
|                                                                                                                                                                                                                         
|Note 4:    Marketable Securities                                                                                                                                                                                         
|                                                                                                                                                                                                                         
|The amortized cost basis and estimated fair values of available-for-sale marketable securities are
summarized as follows (in thousands):                                                                                 
|                                                                                                                                                                                                                          |  | CostBasis |        | GrossUnrealizedGain                 |   | EstimatedFair Values
|December 31, 2009:                                                                                                                                                                                                        |  |           |        |                                     |   |                      |  |   |       
|U.S. government bonds and treasury bills                                                                                                                                                                                  |  | $         | 15,105 |                                     | $ | 4                    |  | $ | 15,109
|Certificates of deposit                                                                                                                                                                                                   |  |           | 16,012 |                                     |   | 5                    |  |   | 16,017
|                                                                                                                                                                                                                          |  |           |        |                                     |   |                      |  |   |       
|Total available-for-sale securities                                                                                                                                                                                       |  | $         | 31,117 |                                     | $ | 9                    |  | $ | 31,126
|                                                                                                                                                                                                                          |  |           |        |                                     |   |                      |  |   |       
|December 31, 2008:                                                                                                                                                                                                        |  |           |        |                                     |   |                      |  |   |       
|Total available-for-sale securities                                                                                                                                                                                       |  | $         | -      |                                     | $ | -                    |  | $ | -     
|                                                                                                                                                                                                                          |  |           |        |                                     |   |                      |  |   |       

The investments in U.S. government bonds and treasury
bills have AAA/Aaa ratings from S&P and Moodys. The investments in certificates of deposit have A-1+ and P-1/Aa3 ratings from S&P and Moodys, respectively. All investments mature within one year. We will also hold marketable
equity securities as a long-term investment (see Note 9Other Assets for further discussion).



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Note 5:    Receivables, Net

Receivables, net consisted of the following (in thousands):



|                                |  |              |         |   |      |   |         |  
|------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                |  | December 31, |        
|                                |  | 2009         |         |   | 2008 |  
|Trade receivables               |  | $            | 154,037 |   |      | $ | 177,684 |  
|Contracts in process            |  |              | 16,952  |   |      |   | 30,412  |  
|Other receivables               |  |              | 3,902   |   |      |   | 1,714   |  
|                                |  |              |         |   |      |   |         |  
|Total receivables               |  |              | 174,891 |   |      |   | 209,810 |  
|Allowance for doubtful accounts |  |              | (12,085 | ) |      |   | (9,551  | )
|                                |  |              |         |   |      |   |         |  
|Total receivables, net          |  | $            | 162,806 |   |      | $ | 200,259 |  
|                                |  |              |         |   |      |   |         |  

Trade receivables included $8.7 million and $6.8 million of amounts due from affiliates as of
December 31, 2009 and 2008, respectively. Advances and progress billings offset against contracts in process amounted to $0.3 million and $13.9 million as of December 31, 2009 and 2008, respectively.

Note 6:    Inventories

Inventories consisted of the following (in thousands):



|                                  |  |              |        |      |   |       
|--------------------------------- |  | ------------ | ------ | ---- | - | ------
|                                  |  | December 31,
|                                  |  | 2009         |        | 2008
|Production materials and supplies |  | $            | 7,896  |      | $ | 10,268
|Work in process                   |  |              | 15,615 |      |   | 12,445
|Finished goods                    |  |              | 36,733 |      |   | 42,772
|                                  |  |              |        |      |   |       
|Total inventories                 |  | $            | 60,244 |      | $ | 65,485
|                                  |  |              |        |      |   |       

Inventories are carried at the lower of cost or
market, principally using standard costs adjusted to reflect actual cost, based on variance analyses performed throughout the year. Inventories are adjusted to net realizable value using managements best estimates of future use. In making its
assessment of future use or recovery, management considers the aging and composition of inventory balances, the effects of technological and/or design changes, forecasted future product demand based on firm or near-firm customer orders and
alternative means of disposition of excess or obsolete items.

Note 7:    Property, Net

Property, net consisted of the following (dollars in thousands):



|                                     |  |           |  |                              |          |              |        |      |          |   |        | 
|------------------------------------ |  | --------- |  | ---------------------------- | -------- | ------------ | ------ | ---- | -------- | - | ------ | 
|                                     |  |           |  | EstimatedUseful Lives(years) |          | December 31, |       
|                                     |  |           |  |                              | 2009     |              |        | 2008 |         
|Land and improvements                |  | 10        |  | $                            | 5,885    |              |        | $    | 5,871    |  
|Buildings and leasehold improvements |  | 2 -30     |  |                              | 32,867   |              |        |      | 28,090   |  
|Satellite related assets             |  | 15        |  |                              | 380,394  |              |        |      | 380,394  |  
|Machinery and equipment              |  | 1 - 7     |  |                              | 250,345  |              |        |      | 134,544  |  
|VSAT operating lease hardware        |  | 2 - 5     |  |                              | 18,945   |              |        |      | 42,741   |  
|Furniture and fixtures               |  | 7         |  |                              | 1,557    |              |        |      | 1,092    |  
|Construction in progress             |  | - Jupiter |  |                              |          |              | 66,555 |      |          |   | -      | 
|                                     |  | - Other   |  |                              |          |              | 12,888 |      |          |   | 25,180 | 
|                                     |  |           |  |                              |          |              |        |      |          |   |        | 
|Total property                       |  |           |  |                              | 769,436  |              |        |      | 617,912  |  
|Accumulated depreciation             |  |           |  |                              | (167,472 | )            |        |      | (110,642 | )
|                                     |  |           |  |                              |          |              |        |      |          |   |        | 
|Total property, net                  |  |           |  | $                            | 601,964  |              |        | $    | 507,270  |  
|                                     |  |           |  |                              |          |              |        |      |          |   |        | 



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Satellite related assets primarily consist of SPACEWAYTM3 (SPACEWAY 3), a next-generation broadband satellite
system with a unique architecture for broadband data communications. In April 2008, we placed SPACEWAY 3 into service and began to depreciate its related costs on a straight-line basis over the estimated useful life of 15 years. Satellite related
assets include the costs associated with the construction and launch of the satellite, insurance premiums for the satellite launch and the in-orbit testing period, interest incurred during the construction of the satellite, and other costs directly
related to the satellite.

In June 2009, we entered into an agreement with Space Systems/Loral, Inc. (SS/L), under
which SS/L will manufacture a next-generation, high throughput geostationary satellite (Jupiter). Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide additional capacity for the HughesNet service in
North America. We are obligated to pay an aggregate of approximately $252.0 million for the construction of Jupiter and have agreed to make payment to SS/L in installments upon the completion of each milestone as set forth in the agreement. In July
2009, we began the construction of the satellite and capitalized costs associated with the construction of the satellite, including interest incurred and other direct costs related to the satellite. We anticipate launching Jupiter in the first half
of 2012.

During 2009, we capitalized $1.7 million of interest related to the construction of Jupiter. In 2008 and 2007, we
capitalized $4.8 million and $12.1 million of interest related to the construction of SPACEWAY 3. During 2009, 2008 and 2007, depreciation expense for property was $82.8 million, $51.2 million and $31.5 million, respectively.

Note 8:    Intangible Assets, Net

Intangible assets, net consisted of the following (dollars in thousands):



|                                   |  |                                |  |            |        |                         |   |         |           |  |   |       
|---------------------------------- |  | ------------------------------ |  | ---------- | ------ | ----------------------- | - | ------- | --------- |  | - | ------
|                                   |  | Estimated Useful Lives (years) |  | Cost Basis |        | AccumulatedAmortization |   |         | Net Basis
|December 31, 2009:                 |  |                                |  |            |        |                         |   |         |           |  |   |       
|Backlog and customer relationships |  | 4-8                            |  | $          | 21,612 |                         | $ | (16,015 | )         |  | $ | 5,597 
|Patented technology and trademarks |  | 2-10                           |  |            | 15,745 |                         |   | (7,854  | )         |  |   | 7,891 
|                                   |  |                                |  |            |        |                         |   |         |           |  |   |       
|Total intangible assets, net       |  |                                |  | $          | 37,357 |                         | $ | (23,869 | )         |  | $ | 13,488
|                                   |  |                                |  |            |        |                         |   |         |           |  |   |       
|December 31, 2008:                 |  |                                |  |            |        |                         |   |         |           |  |   |       
|Backlog and customer relationships |  | 4-8                            |  | $          | 22,092 |                         | $ | (12,694 | )         |  | $ | 9,398 
|Patented technology and trademarks |  | 2-10                           |  |            | 16,393 |                         |   | (6,011  | )         |  |   | 10,382
|                                   |  |                                |  |            |        |                         |   |         |           |  |   |       
|Total intangible assets, net       |  |                                |  | $          | 38,485 |                         | $ | (18,705 | )         |  | $ | 19,780
|                                   |  |                                |  |            |        |                         |   |         |           |  |   |       

We amortize the recorded values of our intangible
assets over their estimated useful lives. We recorded amortization expense of $5.2 million, $6.4 million and $6.1 million for the years ended December 31, 2009, 2008 and 2007, respectively. Estimated future amortization expense at
December 31, 2009 was as follows (in thousands):



|                                            |  |        |       
|------------------------------------------- |  | ------ | ------
|                                            |  | Amount
|Year ending December 31,                    |  |        |       
|2010                                        |  | $      | 2,750 
|2011                                        |  |        | 2,730 
|2012                                        |  |        | 2,730 
|2013                                        |  |        | 2,730 
|2014                                        |  |        | 1,237 
|Thereafter                                  |  |        | 1,311 
|                                            |  |        |       
|Total estimated future amortization expense |  | $      | 13,488
|                                            |  |        |       



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Note 9:    Other Assets

Other assets consisted of the following (in thousands):



|                             |  |              |        |      |   |        
|---------------------------- |  | ------------ | ------ | ---- | - | -------
|                             |  | December 31,
|                             |  | 2009         |        | 2008
|Subscriber acquisition costs |  | $            | 29,884 |      | $ | 43,361 
|Debt issuance costs          |  |              | 12,899 |      |   | 10,312 
|Long-term loan               |  |              | 10,000 |      |   | -      
|Other                        |  |              | 15,741 |      |   | 14,438 
|Sea Launch deposit           |  |              | -      |      |   | 44,400 
|                             |  |              |        |      |   |        
|Total other assets           |  | $            | 68,524 |      | $ | 112,511
|                             |  |              |        |      |   |        

In June 2007, we initiated an arbitration proceeding
against Sea Launch Limited Partnership and Sea Launch Company, LLC (collectively, Sea Launch) relating to our SPACEWAY 3 satellite. Because of the material failure of a Sea Launch rocket that occurred in January 2007, the launch of our
SPACEWAY 3 satellite was substantially delayed. In anticipation of receiving a full refund of $44.4 million in payments (the Deposit) made to Sea Launch, we recorded $44.4 million in Other assets in June 2007. In March 2009,
we received an arbitral award against Sea Launch entitling us to a refund of the Deposit, in addition to interest of 10% per annum on the Deposit from July 10, 2007 until payment in full of the Deposit.

On June 22, 2009, Sea Launch filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the District of Delaware. As a result of this filing, our efforts to pursue collection of the arbitral award from Sea Launch have been stayed under the bankruptcy laws. While we still intend to vigorously pursue collection
of our arbitral award, we will have to do so as part of Sea Launchs bankruptcy process and in accordance with its timetable. Sea Launch is a private company and our evaluation had historically been principally based on Sea
Launchs available credit information and its ability to continue its operations, including its launch backlog and history of successful launches. Based upon information made available in the bankruptcy proceedings, including but not limited
to, Sea Launchs credit information and its ability to continue its operations, we determined that the value of the Deposit was impaired in accordance with ASC 360-10-55, Impairment or Disposal of Long-Lived Assets. As a result, in
June 2009, we recognized an impairment loss of $44.4 million related to our North America Broadband segment in Loss on impairment included in the accompanying Consolidated Statements of Operations.

Note 10:    Accrued Liabilities and Other

Accrued liabilities and other consisted of the following (in thousands):



|                                    |  |              |         |      |   |        
|----------------------------------- |  | ------------ | ------- | ---- | - | -------
|                                    |  | December 31,
|                                    |  | 2009         |         | 2008
|Progress billings to customers      |  | $            | 47,911  |      | $ | 51,019 
|Accrued and other liabilities       |  |              | 43,763  |      |   | 55,130 
|Payroll and other compensation      |  |              | 25,104  |      |   | 40,843 
|Accrued interest expense            |  |              | 12,895  |      |   | 9,804  
|Due to affiliates                   |  |              | 4,253   |      |   | 2,619  
|                                    |  |              |         |      |   |        
|Total accrued liabilities and other |  | $            | 133,926 |      | $ | 159,415
|                                    |  |              |         |      |   |        



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Note 11:    Debt

Short-term and the current portion of long-term debt consisted of the following (dollars in thousands):



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                 |  |              |         |      |   |        
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- |  | ------------ | ------- | ---- | - | -------
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                 |  | December 31,
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Interest Rates  |  | 2009         |         | 2008
|VSAT hardware financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 8.00% -15.00%   |  | $            | 3,158   |      | $ | 4,864  
|Term loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 12.42% - 13.75% |  |              | 1,598   |      |   | 206    
|Revolving bank borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | 8.25% - 19.55%  |  |              | 1,547   |      |   | 2,432  
|Capital lease and other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 6.00% - 39.60%  |  |              | 447     |      |   | 750    
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                 |  |              |         |      |   |        
|Total short-term and the current portion of long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |                 |  | $            | 6,750   |      | $ | 8,252  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                 |  |              |         |      |   |        
|As of December 31, 2009, we
had outstanding revolving bank borrowings of $1.5 million, which had a weighted average variable interest rate of 14.2%. These borrowings were obtained by our subsidiaries in India and Brazil under revolving lines of credit with several local banks.
There is no requirement for compensating balances for these borrowings. The total amount available for borrowing by the Indian, Brazilian and European subsidiaries under the revolving lines of credit was $4.2 million at December 31, 2009.  Long-term debt consisted of the following (dollars
in thousands):
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                 |  | December 31,
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | Interest Rates  |  | 2009         |         | 2008
|Senior Notes(1)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | 9.50%           |  | $            | 587,874 |      | $ | 450,000
|Term loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | 7.62% - 12.42%  |  |              | 116,288 |      |   | 115,000
|VSAT hardware financing                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 8.00% - 15.00%  |  |              | 5,861   |      |   | 8,038  
|Capital lease and other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  | 6.00% - 39.60%  |  |              | 4,934   |      |   | 5,260  
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                 |  |              |         |      |   |        
|Total long-term debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                 |  | $            | 714,957 |      | $ | 578,298
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                 |  |              |         |      |   |        
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|(1)Includes 2006 Senior
Notes and 2009 Senior Notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |                 |  |              |         |      |   |        

On May 27, 2009, we, along with our subsidiary, HNS Finance Corp., as co-issuer, completed a
private debt offering of $150.0 million of 9.50% senior notes maturing on April 15, 2014 (the 2009 Senior Notes). The terms and covenants with respect to the 2009 Senior Notes are substantially identical to those of the 2006 Senior
Notes. Interest on the 2009 Senior Notes is accrued from April 15, 2009 and is paid semi-annually in arrears on April 15 and October 15 of each year, beginning on October 15, 2009. After the original issue discount of $13.6
million and related offering expenses of approximately $4.5 million, we received net proceeds of approximately $133.6 million, including $1.7 million of prepaid interest received from the note holders, from the offering. The 2009 Senior Notes were
offered and sold in the United States only to qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933, as amended, (the Securities Act) and in offshore transactions to non-United States persons in reliance on
Regulation S of the Securities Act. In connection with the offering of the 2009 Senior Notes, we entered into a registration rights agreement requiring us to complete a registered exchange offer relating to the 2009 Senior Notes within 360 days
after May 27, 2009. On August 17, 2009, we completed the registered exchange offer pursuant to the registration rights agreement. Accordingly, the 2009 Senior Notes have been registered under the Securities Act. As of December 31,
2009, we recorded $3.0 million of accrued interest payable related to the 2009 Senior Notes.

The $450 million of 9.50% senior
notes maturing on April 15, 2014 (the 2006 Senior Notes) have a fixed interest rate of 9.50% per annum and mature on April 15, 2014. Interest on the 2006 Senior Notes is paid semi-annually in arrears on April 15 and
October 15. As of December 31, 2009 and 2008, we recorded $8.9 million and $9.0 million, respectively, of accrued interest payable related to the 2006 Senior Notes.

We have a senior secured $50 million revolving credit facility (the Revolving Credit Facility), which matures on April 22,
2011. The interest rate associated with the Revolving Credit Facility is based on, at our option, the ABR rate plus 1.50% per annum or Adjusted LIBOR plus 2.50% per annum. During 2009 and 2008, there were no borrowings under the Revolving
Credit Facility. As of December 31, 2009, the Revolving Credit Facility had total outstanding letters of credit of $2.4 million and an available borrowing capacity of $47.6 million.



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



In February 2007, we borrowed $115 million from a syndicate of banks (the Term
Loan Facility), which matures on April 15, 2014. The interest on the Term Loan Facility is paid quarterly at Adjusted LIBOR (as defined in the Term Loan Facility and existing Revolving Credit Facility) plus 2.50% per annum. To
mitigate the variable interest rate risk associated with the Term Loan Facility, we entered into a swap agreement to swap the Adjusted LIBOR for a fixed interest rate of 5.12% per annum (the Swap Agreement). As a result, the Term
Loan Facility has a fixed interest rate of 7.62% per annum. As of each of December 31, 2009 and 2008, interest accrued based on the Swap Agreement and the Term Loan Facility was $0.8 million.

Although the terms and covenants with respect to the 2006 Senior Notes are substantially identical to the 2009 Senior Notes, the 2009 Senior
Notes were issued under a separate indenture and do not vote together with the 2006 Senior Notes. Each of the indentures governing the 2006 Senior Notes and the 2009 Senior Notes (collectively, the Senior Notes), the agreement governing
the amended Revolving Credit Facility and the agreement governing the Term Loan Facility require us to comply with certain affirmative and negative covenants: (i) in the case of the indentures, for so long as any Senior Notes are outstanding;
(ii) in the case of the amended Revolving Credit Facility, so long as the amended Revolving Credit Facility is in effect; and (iii) in the case of the Term Loan Facility, for so long as the Term Loan Facility remains outstanding. Negative
covenants contained in these agreements include limitations on our ability and/or certain of our subsidiaries ability to incur additional indebtedness; issue redeemable stock and subsidiary preferred stock; incur liens; pay dividends or
distributions or redeem or repurchase capital stock; prepay, redeem or repurchase debt; make loans and investments; enter into agreements that restrict distributions from our subsidiaries; sell assets and capital stock of our subsidiaries; enter
into certain transactions with affiliates; consolidate or merge with or into, or sell substantially all of our assets to, another person; and enter into new lines of business. In addition to these negative covenants, the amended Revolving Credit
Facility, the indentures governing the Senior Notes and/or the agreement governing the Term Loan Facility contain affirmative covenants that require us to: (i) preserve our businesses and properties; (ii) maintain insurance over our
assets; (iii) pay and discharge all material taxes when due; and (iv) furnish the lenders administrative agent our financial statements for each fiscal quarter and fiscal year, certificates from a financial officer certifying that no
Event of Default or Default has occurred during the fiscal period being reported, litigation and other notices, compliance with laws, maintenance of records and other such customary covenants. Management believes that we were in compliance with all
of our debt covenants as of December 31, 2009.

Prior to September 2005, we leased certain VSAT hardware under an
operating lease with customers which were funded by two financial institutions at the inception of the operating lease for the future operating lease revenues. As part of the agreement, the financial institution received title to the equipment and
obtained the residual rights to the equipment after the operating lease with the customer expires and assumed the credit risk associated with non-payment by the customers. However, we retained a continuing obligation to the financing institution to
indemnify it from losses it may incur (up to the original value of the hardware) from non-performance of our system (a Non-Performance Event). Accordingly, we recognized a liability to the financial institution for the funded amount. We
have not provided a reserve for a Non-Performance Event because we believe that the possibility of an occurrence of a Non-Performance Event due to a service outage is remote, given the ability to quickly re-establish customer service at relatively
nominal costs.

We entered into a capital lease with 95 West Co., Inc. (95 West Co.) and its parent, Miraxis
License Holdings, LLC (MLH), which are our related parties as discussed in Note 18 Transactions with Related Parties. Pursuant to the capital lease agreement, 95 West Co. and MLH agreed to provide a series of coordination
agreements allowing us to operate SPACEWAY 3 at the 95° west longitude orbital slot where 95 West Co. and MLH have higher priority rights. As of December 31, 2009, the remaining debt balance under the capital lease was $5.3 million, which
was included in Capital lease and other in the short-term and long-term debt tables above. The remaining payments under the capital lease are subject to conditions in the agreement including our ability to operate SPACEWAY 3, and are as
follows: $0.75 million for the year ending December 31, 2010 and $1.0 million for each of the years ending December 31, 2011 through 2016.



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Principal payments of our debt at December 31, 2009 are as follows (in thousands):



|                         |  |        |        
|------------------------ |  | ------ | -------
|                         |  | Amount
|Year ending December 31, |  |        |        
|2010                     |  | $      | 6,750  
|2011                     |  |        | 4,964  
|2012                     |  |        | 2,933  
|2013                     |  |        | 1,338  
|2014                     |  |        | 703,889
|Thereafter               |  |        | 1,833  
|                         |  |        |        
|Total debt               |  | $      | 721,707
|                         |  |        |        

Note 12:    Financial Instruments

Interest Rate Swap

The interest on the Term Loan Facility was at Adjusted LIBOR plus 2.50% per annum. To mitigate the variable interest rate risk associated with the Term Loan Facility, we entered into the Swap
Agreement to swap the Adjusted LIBOR for a fixed interest rate of 5.12% per annum. As a result, the Term Loan Facility has a fixed interest rate of 7.62% per annum. We account for the Swap Agreement as a cash flow hedge in accordance with
ASC 815-30 Derivatives and Hedging Cash Flow Hedges. Accordingly, we recorded a net unrealized gain of $6.9 million and net unrealized losses of $11.9 million and $5.5 million for the years ended December 31, 2009, 2008
and 2007, respectively, in AOCL associated with the fair market valuation of the interest rate swap. The net interest payments based on the Swap Agreement and the Term Loan Facility are paid quarterly and estimated to be approximately $8.8 million
for each of the years ending December 31, 2010 through 2013 and $3.3 million for the year ending December 31, 2014. We recorded interest expense of $9.0 million, $8.9 million and $7.6 million for the years ended December 31, 2009,
2008 and 2007, respectively, on the Term Loan Facility.

Note 13:    Fair Value

Under ASC 820, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price) in an
orderly transaction between market participants at the measurement date, and the principal market is defined as the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity
for the asset or liability. If there is no principal market, the most advantageous market is used. This is the market in which the reporting entity would sell the asset or transfer the liability with the price that maximizes the amount that would be
received for the asset or minimizes the amount that would be paid to transfer the liability. ASC 820 clarifies that fair value should be based on assumptions market participants would make in pricing the asset or liability. Where available, fair
value is based on observable quoted market prices or derived from observable market data. Where observable prices or inputs are not available, valuation models are used (i.e. Black-Scholes, a barrier option model or a binomial model). ASC 820
established the following three levels used to classify the inputs used in measuring fair value measurements:

Level 1-Inputs
are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level
2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs
derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting
entitys own assumptions on the assumptions market participants would use in pricing the asset or liability based on the best available information.

In determining fair value, we use various valuation approaches, including market, income and/or cost approaches. Other valuation techniques involve significant management judgment. As of December 31,
2009, the carrying values of cash and cash equivalents, receivables, net, accounts payable, and debt, except for the Senior Notes as described below, approximated their respective fair values.



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Our Senior Notes were categorized as Level 1 of the fair value hierarchy as we utilized
recent market transactions for identical notes.

Our Term Loan Facility originally had a variable interest rate based on
observable interest rates plus 2.50% per annum. To mitigate the variable interest rate risk, we entered into the Swap Agreement to swap the Adjusted LIBOR for a fixed interest rate of 5.12% per annum. As a result, the Term Loan Facility
has a fixed interest rate of 7.62% per annum. We adjust the value of the interest rate swap on a quarterly basis. The fair value of the interest rate swap was categorized as Level 2 of the fair value hierarchy.

Assets and liabilities measured at fair value on a recurring basis are summarized below (dollars in thousands):



|                                             |  |       |  |                             |  |                     |         |                 |   |        
|-------------------------------------------- |  | ----- |  | --------------------------- |  | ------------------- | ------- | --------------- | - | -------
|                                             |  |       |  |                             |  | December 31, 2009  
|                                             |  | Level |  | Included In                 |  | Carrying      Value |         | Fair      Value
|Marketable securities                        |  | 1     |  | Marketable securities       |  | $                   | 31,126  |                 | $ | 31,126 
|2006 Senior Notes                            |  | 1     |  | Long-term debt              |  | $                   | 450,000 |                 | $ | 463,500
|2009 Senior Notes                            |  | 1     |  | Long-term debt              |  | $                   | 150,000 |                 | $ | 153,750
|Interest rate swap on the Term Loan Facility |  | 2     |  | Other long-term liabilities |  | $                   | 10,522  |                 | $ | 10,522 

We measure certain
nonfinancial assets and liabilities at fair value on a nonrecurring basis in accordance with ASC 820. As described in Note 9Other Assets, we recognized an impairment loss of $44.4 million related to our North America Broadband segment in the
second quarter of 2009 as a result of using Level 3 inputs in determining the fair value of the Deposit. Since Sea Launch is a private company, the evaluation required significant management inputs and judgments. Our evaluation was based upon
information made available in the bankruptcy proceedings, including but not limited to, Sea Launchs credit information and its ability to continue its operations.

Note 14:    Income Taxes

The Company is a limited
liability company and has elected to be treated as a partnership for income tax purposes. As such, U.S. federal and state income taxes (in the states which tax limited liability companies as partnerships) are the direct responsibility of its
members. As a result of the transactions described in Note 1, our Parent holds 100% of our Class A membership interests. Thus, our activity is reported on our Parents income tax returns. Under the terms of the December 2004
Agreement, DIRECTV retained the domestic tax benefits of the Company occurring prior to April 23, 2005 and has responsibility for all of the pre-closing domestic and foreign income tax liabilities of DTV Networks.

Our income tax expense represents taxes associated with our foreign subsidiaries and with states that impose income taxes on limited
liability companies. Foreign income taxes for our consolidated foreign subsidiaries are reflected in the financial statements.

The Companys German and United Kingdom (U.K.) subsidiaries have approximately $35.8 million and $36.1 million of net operating loss (NOL) carryforwards, respectively. As the U.K. subsidiary is treated as a
disregarded entity for U.S. income tax purposes, its net income or loss is reported on our partnership income tax return and subsequently allocated to the Company. The NOL carryforwards are available to reduce future U.K. taxable income and do not
expire. The NOL carryforwards of the German subsidiary are available to reduce future German taxable income and do not expire. During 2009, the German subsidiary utilized $2.5 million NOL carryforwards to offset taxable income.

As the German and U.K. subsidiaries have not met the more-likelythan-not criteria of ASC 740, the Company maintained a full valuation
allowance on the German and U.K. NOL carryforwards as of December 31, 2009. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become
deductible. The Company considered the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning in making these assessments.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



The components of income (loss) before income tax expense and the corresponding income
tax expense (benefit) are as follows (in thousands):



|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------ |  | - | ------
|                                                                                                                                                                                                                                             |  | Year Ended December 31,
|                                                                                                                                                                                                                                             |  | 2009                    |         |   | 2008 |   | 2007  
|Components of income (loss) before income tax expense:                                                                                                                                                                                       |  |                         |         |   |      |   |        |  |   |       
|Domestic                                                                                                                                                                                                                                     |  | $                       | (52,815 | ) |      | $ | 11,536 |  | $ | 45,273
|Foreign                                                                                                                                                                                                                                      |  |                         | 11,694  |   |      |   | 8,427  |  |   | 9,927 
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Total                                                                                                                                                                                                                                        |  | $                       | (41,121 | ) |      | $ | 19,963 |  | $ | 55,200
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Components of income tax expense:                                                                                                                                                                                                            |  |                         |         |   |      |   |        |  |   |       
|Current income tax expense:                                                                                                                                                                                                                  |  |                         |         |   |      |   |        |  |   |       
|Foreign                                                                                                                                                                                                                                      |  | $                       | 2,739   |   |      | $ | 2,373  |  | $ | 2,850 
|State                                                                                                                                                                                                                                        |  |                         | 651     |   |      |   | 798    |  |   | -     
|Federal                                                                                                                                                                                                                                      |  |                         | -       |   |      |   | -      |  |   | -     
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Total current income tax expense                                                                                                                                                                                                             |  |                         | 3,390   |   |      |   | 3,171  |  |   | 2,850 
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Deferred income tax expense (benefit):                                                                                                                                                                                                       |  |                         |         |   |      |   |        |  |   |       
|Foreign                                                                                                                                                                                                                                      |  |                         | (954    | ) |      |   | 4,417  |  |   | 2,466 
|State                                                                                                                                                                                                                                        |  |                         | -       |   |      |   | -      |  |   | -     
|Federal                                                                                                                                                                                                                                      |  |                         | -       |   |      |   | -      |  |   | -     
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Total deferred income tax expense (benefit)                                                                                                                                                                                                  |  |                         | (954    | ) |      |   | 4,417  |  |   | 2,466 
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Total income tax expense                                                                                                                                                                                                                     |  | $                       | 2,436   |   |      | $ | 7,588  |  | $ | 5,316 
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|For the years ended
December 31, 2009, 2008 and 2007, income tax expense differs from the amounts computed by applying the statutory rates to the Companys income from continuing operations before income taxes as follows (in thousands):
|                                                                                                                                                                                                                                             |  | Year Ended December 31,
|                                                                                                                                                                                                                                             |  | 2009                    |         |   | 2008 |   | 2007  
|Income (loss) before income tax expense                                                                                                                                                                                                      |  | $                       | (41,121 | ) |      | $ | 19,963 |  | $ | 55,200
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Federal income tax @ 0%                                                                                                                                                                                                                      |  | $                       | -       |   |      | $ | -      |  | $ | -     
|State taxes, net of federal benefit                                                                                                                                                                                                          |  |                         | 651     |   |      |   | 798    |  |   | -     
|Foreign taxes above federal tax rate                                                                                                                                                                                                         |  |                         | 1,785   |   |      |   | 6,790  |  |   | 5,316 
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       
|Total income tax expense                                                                                                                                                                                                                     |  | $                       | 2,436   |   |      | $ | 7,588  |  | $ | 5,316 
|                                                                                                                                                                                                                                             |  |                         |         |   |      |   |        |  |   |       

As the Company is not a taxable entity at the Federal
level or in most state jurisdictions, the Companys effective tax rate is comprised primarily of foreign income taxes.

ASC 740 Income Taxes addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Company may recognize the tax benefit
from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial
statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information.
ASC 740 requires increased disclosures and also provides guidance on de-recognition, classification, interest and penalties on income taxes and accounting in interim periods.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



At the adoption of ASC 740 on January 1, 2007, the Company did not identify any
significant uncertain tax positions and, therefore, did not record any transition adjustments. In addition, the Company did not identify any significant uncertain tax positions during 2008. Furthermore, the Company did not accrue any interest or
penalties associated with uncertain tax positions. The Company recognizes interest accrued related to unrecognized tax benefits in operating expenses and penalties in income tax expense within the condensed statements of operations. The Company does
not believe that the unrecognized tax benefits will significantly increase or decrease within the next twelve months. Following is a description of the tax years that remain subject to examination by major tax jurisdictions:



|                               |  |                 
|------------------------------ |  | ----------------
|United States - Federal        |  | 2007 and forward
|United States - Various States |  | 2005 and forward
|United Kingdom                 |  | 2005 and forward
|Germany                        |  | 2004 and forward
|Italy                          |  | 2005 and forward
|India                          |  | 1995 and forward
|Mexico                         |  | 2000 and forward
|Brazil                         |  | 2003 and forward

Note
15:    Employee Share-Based Payments

HCIs 2006 Equity and Incentive Plan

In January 2006, HCIs Board of Directors approved the HCI 2006 Equity and Incentive Plan (the Plan). The Plan provides for
the grant of equity-based awards, including restricted common stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards, as well as cash bonuses and long-term cash awards to directors, officers, other
employees, advisors and consultants of HCI and its subsidiaries who are selected by HCIs Compensation Committee for participation in the Plan. Unless earlier terminated by HCIs Board of Directors, the Plan will expire on the tenth
anniversary of the date of its adoption. Termination of the Plan is not intended to adversely affect any award that is then outstanding without the award holders consent. HCIs Board of Directors may amend the Plan at any time. Plan
amendments are not intended to adversely affect any award that is then outstanding without the award holders consent, and HCI must obtain stockholder approval of a plan amendment if stockholder approval is required to comply with any
applicable law, regulation or stock exchange rule.

The Plan provides for the issuance of up to 2,700,000 shares of HCIs
common stock which may be issued in the form of restricted stock, stock options or stock appreciation rights; provided that the maximum number of shares that may be issued pursuant to the exercise of incentive stock options may not exceed 1,350,000
shares. In accordance with the terms of the Plan, in August 2006, HCIs Board delegated to the CEO the authority to award, at the CEOs discretion, up to 250,000 shares in the aggregate of restricted stock to HCIs and our employees
(other than Section 16 reporting persons) up to a maximum award of 4,000 shares per employee. The CEO has issued restricted stock awards and restricted stock units to employees, for which 50% of the shares vest on the second anniversary of the
issuance date, and an additional 25% of the shares vest on each of the third and fourth anniversaries of the issuance date. The fair value of the shares is calculated based on the market price on the grant date.

HCI also issues shares under the Plan to its directors, officers and key employees and contractors of the Company and its wholly-owned
subsidiaries. These awards are issued at their fair market value on the date of grant. In March 2006, HCI issued Restricted Stock Award of 14,000 shares each to four of its officers. These restricted shares vest within two years of the date of
issuance.

The Company and HCI account for shares issued in accordance with the provisions of ASC 718,
CompensationStock Compensation. The Company records compensation expense for restricted stock awards and restricted stock units on a straight-line basis over their vesting period. The costs of the Plan are allocated from the
Company to HCI based upon specific identification of employee costs. For the years ended December 31, 2009, 2008 and 2007, we recorded compensation expense related to the restricted stock awards, issued to HCIs executives and our
employees, and restricted stock units, issued only to our international employees, after adjustment for forfeitures, of $2.5 million, $2.7 million and $2.9 million, respectively. As of December 31, 2009, we had $2.8 million of unrecognized
compensation expense related to the restricted stock awards and restricted stock units, which will be recognized over a weighted average life of 1.32 years. We recognized a tax benefit of $0.7 million and $1.5 million related to restricted stock
awards and restricted stock units for the years ended December 31, 2009 and 2008, respectively. The Company did not recognize any tax benefit in 2007.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Summaries of non-vested restricted stock awards and restricted stock units are as
follows:

Restricted Stock Awards



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |         |   |  |                                      |      
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- | - |  | ------------------------------------ | -----
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Shares  |   |  | Weighted-AverageGrant-DateFair Value
|Non-vested at December 31, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 144,100 |   |  | $                                    | 47.41
|Forfeited                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | (6,350  | ) |  | $                                    | 46.05
|Vested                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | (65,390 | ) |  | $                                    | 47.35
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |         |   |  |                                      |      
|Non-vested at December 31, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 72,360  |   |  | $                                    | 47.58
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |         |   |  |                                      |      
|The weighted average grant-date
fair value of restricted stock awards granted for the year ended December 31, 2008 and 2007 were $47.95 and $49.86, respectively. No restricted stock awards were granted for the year ended December 31, 2009. The total fair value of shares
vested during the years ended December 31, 2009 and 2008 were $3.1 million and $5.0 million, respectively. None of the restricted stock awards issued to employees vested during 2007.
|Restricted Stock Units                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  | Shares  |   |  | Weighted-AverageGrant-DateFair Value
|Non-vested at December 31, 2008                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 8,350   |   |  | $                                    | 46.12
|Granted                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  | 4,000   |   |  | $                                    | 8.82 
|Forfeited                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | (500    | ) |  | $                                    | 44.20
|Vested                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | (3,175  | ) |  | $                                    | 46.94
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |         |   |  |                                      |      
|Non-vested at December 31, 2009                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | 8,675   |   |  | $                                    | 28.73
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |         |   |  |                                      |      

The weighted average grant-date fair value of restricted stock units granted for the year ended
December 31, 2009, 2008 and 2007 were $8.82, $43.27 and $50.00, respectively. The total fair value of units vested during the years ended December 31, 2009 and 2008 were $0.1 million and $0.2 million, respectively. None of the restricted
stock units were vested during 2007.

Stock Option Program

On April 24, 2008, HCIs Compensation Committee made stock options awards under the Plan (the Stock Option Program),
which consisted of the issuance of non-qualified stock options to employees of HCI and its subsidiaries. A total of 700,000 options (the Option Pool) have been authorized under the Stock Option Program for option awards during the period
of April 24, 2008 to December 31, 2011. The grant and exercise price of the stock options is the closing price of HCIs common stock on the date of the grant. Any options forfeited or cancelled before exercise will be deposited back
into the Option Pool and will become available for award under the Stock Option Program. In accordance with the terms of the Stock Option Program, the Compensation Committee of HCI delegated to our Chief Executive Officer (CEO) and
President the authority to award options, at his discretion, to the current and future employees of HCI and its subsidiaries. Each grant has a 10 year life and vests 50% on the second anniversary of the grant date and 25% on each of the third and
fourth anniversaries of the grant date. The fair value of each option award was estimated on the date of grant using a Black-Scholes option valuation model based on the assumptions noted in the table below.

Since HCI became a public registrant in February 2006 and does not have sufficient history to measure expected volatility using its own
stock price history and does not have the history to compute the expected term of the stock options, HCI utilized an average volatility based on a group of companies identified as its peers until such time that HCI has adequate stock history of its
own. HCI estimated the expected term of the stock options, which is closely aligned with the identified peer group, based upon the current anticipated corporate growth, the currently identified market value of the stock price at issuance and the
vesting schedule of the stock options. The risk-free interest rate is based on the published U.S. Treasury Yield Curve as of the grant date for the period of 5 years which most closely correlates to the expected term of the option award. Dividend
yield is zero as HCI has not, nor does it currently plan to, issue dividends to its shareholders.



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



On March 19, 2009, HCI offered eligible participants in the Stock Option Program
the opportunity to exchange (the Exchange Offer) all or a portion of their eligible outstanding stock options for new stock options, on a one-for-one basis, through an exchange offer, which expired on April 16, 2009. Each new option
(the New Option) has an exercise price of $14.47, which was the closing price of our common stock on April 15, 2009, and a new vesting schedule to reflect the new grant date of April 16, 2009.

As a result of the Exchange Offer, which was completed on April 16, 2009, 546,900 outstanding stock options (representing 100%
participation) were exchanged, and the estimated fair value of the New Options of $2.3 million was computed using a Black-Scholes option valuation model based on the new grant date. The compensation expense related to the New Options is recognized
on a straight-line basis over the four-year vesting period beginning on the date of grant.

The key assumptions for the option
awards are as follows:



|                                         |  |                                   
|---------------------------------------- |  | ----------------------------------
|                                         |  | Year Ended    December 31,    2009
|Volatility range                         |  | 45.97%  47.92%                   
|Weighted-average volatility              |  | 47.62%                            
|Expected term                            |  | 5 years                           
|Risk-free interest rate range            |  | 1.71%  2.20%                     
|Weighted-average risk-free interest rate |  | 1.79%                             



|                                                 |  |                  |   |  |                                |       |                                         |      |                          |   |      
|------------------------------------------------ |  | ---------------- | - |  | ------------------------------ | ----- | --------------------------------------- | ---- | ------------------------ | - | -----
|                                                 |  | Option    Shares |   |  | Weighted-AverageExercise Price |       | WeightedAverageRemainingContractualLife |      | AggregateIntrinsicValue*
|Outstanding at January 1, 2008                   |  | -                |   |  | $                              | -     |                                         |      |                          |   |      
|Granted                                          |  | 562,400          |   |  | $                              | 53.67 |                                         |      |                          |   |      
|Forfeited or expired                             |  | (10,000          | ) |  | $                              | 54.00 |                                         |      |                          |   |      
|                                                 |  |                  |   |  |                                |       |                                         |      |                          |   |      
|Outstanding at December 31, 2008                 |  | 552,400          |   |  | $                              | 53.67 |                                         | 9.32 |                          | $ | -    
|Retired                                          |  | (546,900         | ) |  | $                              | 54.00 |                                         |      |                          |   |      
|Granted                                          |  | 647,400          |   |  | $                              | 16.77 |                                         | 9.37 |                          | $ | -    
|Forfeited or expired                             |  | (4,850           | ) |  | $                              | 20.84 |                                         |      |                          |   |      
|                                                 |  |                  |   |  |                                |       |                                         |      |                          |   |      
|Outstanding at December 31, 2009                 |  | 648,050          |   |  | $                              | 16.77 |                                         | 9.37 |                          | $ | 6,326
|                                                 |  |                  |   |  |                                |       |                                         |      |                          |   |      
|Vested and expected to vest at December 31, 2009 |  | 583,245          |   |  | $                              | 16.77 |                                         | 9.37 |                          | $ | 5,693
|                                                 |  |                  |   |  |                                |       |                                         |      |                          |   |      
|Exercisable at December 31, 2009                 |  | -                |   |  | $                              | -     |                                         |      |                          |   |      
|                                                 |  |                  |   |  |                                |       |                                         |      |                          |   |      
|                                                 |  |                  |   |  |                                |       |                                         |      |                         
|*      In thousands.                            

The compensation expense related to stock option awards is recognized on a straight-line basis over the four-year vesting period beginning
on the date of grant. We recorded $3.5 million and $2.0 million compensation expense for the years ended December 31, 2009 and 2008, respectively. As of December 31, 2009, we had $10.1 million of unrecognized compensation expense for
non-vested stock options, which is expected to be recognized over a weighted average period of 3.34 years. No stock options vested in 2009.

Bonus Unit Plan

In July 2005, we adopted an incentive bonus unit plan (the Bonus Unit Plan)
pursuant to which 4.4 million bonus units representing approximately 4% of the increase in the value of the Company, as defined in the Bonus Unit Plan, were granted to certain of its employees. The bonus units provide for time vesting over five
years and are subject to a participants continued employment with the Company. Pursuant to the Bonus Unit Plan, if participants are employed by the Company on the predetermined exchange dates, they are entitled to exchange their vested bonus
units for shares of HCIs common stock.



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The first exchange occurred on July 15, 2008, when approximately 1.9 million
bonus units were exchanged for 192,399 shares of HCIs common stock. The number of shares of HCI common stock to be issued upon each exchange is calculated based upon the fair market value of the vested bonus unit divided by the closing trading
price of HCIs common stock for the 20 business days immediately preceding the date of the exchange. The fair value of the bonus units on the grant date was approximately $1.2 million, after adjustment for a 13% estimated forfeiture rate, based
on the estimated increase in the fair market value of the Companys net equity at the time of the grant.

On
September 19, 2008, we issued 310,000 bonus units to certain of our employees pursuant to the terms of the Bonus Unit Plan. The fair value of the new issuance of bonus units was determined using a forward pricing model. The total estimated
compensation expense for the new issuance of bonus units is $1.7 million, after adjustment for a 10% estimated forfeiture rate. Pursuant to ASC 718, we amortize the compensation expense of the Bonus Unit Plan over the vesting period beginning on the
date of grant. For the years ended December 31, 2009, 2008 and 2007, we recognized compensation expense of $0.8 million, $0.4 million and $0.2 million, respectively.

The following table summarizes changes in bonus units under the Bonus Unit Plan:



|                               |  |                         |   |  |            |  
|------------------------------ |  | ----------------------- | - |  | ---------- | -
|                               |  | Year Ended December 31, |  
|                               |  | 2009                    |   |  | 2008       |  
|Non-vested beginning balance   |  | 2,500,000               |   |  | 4,175,000  |  
|Issuance of bonus units        |  | -                       |   |  | 310,000    |  
|Converted to HCI common shares |  | -                       |   |  | (1,865,250 | )
|Forfeited                      |  | (46,750                 | ) |  | (119,750   | )
|                               |  |                         |   |  |            |  
|Non-vested ending balance      |  | 2,453,250               |   |  | 2,500,000  |  
|                               |  |                         |   |  |            |  

Class B Membership Interests

Our Class B membership interests were issued to certain members of our senior management, two of our former senior management and a member of our Board of Managers and HCIs Board of Directors. The
holders of the Class B membership interests are entitled to receive their pro-rata share of any distributions made by the Company after the holders of Class A equity interests have received distributions equaling their capital contributions.
However, holders of the Class B membership interests are not entitled to distributions resulting from appreciation of the Companys assets or income earned by the Company prior to the issuance of the Class B membership interests.

The Class B membership interests are subject to certain vesting requirements, with 50% of the Class B membership interests subject to time
vesting over five years and the other 50% vesting based upon certain performance milestones. One-half of the Class B membership interests subject to performance milestones will vest if, following the earlier of April 22, 2010 (January 24, 2011
with respect to 250 Class B membership interests) or a change of control of the Company, and HCI has received a cumulative total return of at least 3.0 times on its investment in the Company. All Class B membership interests subject to performance
milestones will vest if, following the earlier of April 22, 2010 (January 24, 2011 with respect to 250 Class B membership interests) or a change of control of the Company, and HCI has received a cumulative total return of at least 5.0 times on
its investment in the Company. In each such case, vesting of Class B membership interests subject to performance milestones requires continued employment of the Class B membership holder through the earlier of April 22, 2010 (January 24, 2011
with respect to 250 Class B membership interests) or a change in control of the Company.

At the holders election,
vested Class B membership interests may be exchanged for common stock of HCI. The number of shares of HCI common stock to be issued upon such exchange is based upon the fair market value of such vested Class B membership interest tendered for
exchange divided by the average closing trading price of HCI common stock for the 20 business days immediately preceding the date of such exchange. Pursuant to ASC 718, we determined that the Class B membership interests had nominal value at the
date of grant, and, accordingly, compensation expensed of $0.1 million was recorded for each of the years ended December 31, 2009, 2008 and 2007.

In May 2008, HCI completed an equity offering in which certain members of our senior management exchanged a portion of their vested Class B membership interests for HCIs common stock. A total
of 170,081 shares of HCIs common stock were issued in connection with the exchange, of which 169,600 shares were sold in connection with the offering.



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On September 25, 2009, HCI registered 75,000 shares of common stock with the SEC on
Form S-8 to be issued, from time to time, upon the exchange of Class B membership interests. As of December 31, 2009, our outstanding Class B membership interests represented approximately 3.4% of the combined outstanding Class A and Class
B membership interests. A summary of Class B membership interests activities is as follows:



|                               |  |                         |   |  |       |  
|------------------------------ |  | ----------------------- | - |  | ----- | -
|                               |  | Year Ended December 31, |  
|                               |  | 2009                    |   |  | 2008  |  
|Outstanding beginnning balance |  | 3,656                   |   |  | 4,650 |  
|Converted to HCI common shares |  | (326                    | ) |  | (994  | )
|                               |  |                         |   |  |       |  
|Outstanding ending balance     |  | 3,330                   |   |  | 3,656 |  
|                               |  |                         |   |  |       |  

Note 16:     Other Benefits

401(k) Plan

We have a 401(k) salary deferral program for eligible
employees in the United States who have met certain service requirements. Eligible employees may contribute up to 25% (16% for highly compensated employees) of their eligible compensation into the plan on a pre-tax basis each payroll period, subject
to a limit of $16,500 in 2009 per the IRS. Employee contributions are immediately vested. We will match 100% of employee contributions up to 3% of eligible compensation and 50% of employee contributions on up to an additional 6% of eligible
compensation. Matching contributions are 100% vested after eligible employees have completed three years of service. During 2009, 2008 and 2007, we made $6.6 million, $6.7 million and $6.4 million, respectively, of matching contributions.

In addition, set by the IRS, participants who are age 50 or older may make additional contributions (catch-up
contributions), up to $5,500 in 2009, into the plan. The Company does not match the catch-up contributions. The plan also permits participants to make contributions on an after-tax basis.

Long-Term Cash Incentive Retention Program

In connection with the April 22, 2005 transaction between The DIRECTV and SkyTerra, the Company established the Long-Term Cash Incentive Retention Program (the Retention Program), a
one-time employee retention program, which was designed to retain a select group of employees chosen by the Companys senior management. The Retention Program provides that participants will receive a cash payout equal to each
participants individual target bonus amount if (i) the individual remains employed by the Company on the vesting date of April 22, 2009 and (ii) the Company successfully attains its earnings goal for 2008.

In accordance with the Retention Program, the Company established the earnings goal in March 2008, which was equivalent to its planned 2008
Adjusted EBITDA, defined as earnings before interest, tax, depreciation and amortization further adjusted to exclude certain adjustments consistent with the definition used in calculating the Companys covenant compliance under its credit
agreements and the indentures governing the Senior Notes. The Company successfully attained 100% of its Adjusted EBITDA goal for 2008. As a result, the Company paid $14.7 million, of which $13.2 million was accrued as of December 31, 2008, to
participants under the Retention Program in 2009.



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Note 17:    Segment Data and Geographic Data

Set forth below is selected financial information for our operating segments (in thousands). There were no intersegment transactions in
2009, 2008 and 2007.



|                                              |  |                               |         |   |                        |   |                    |  |           |         |              |   |         |  |   |          
|--------------------------------------------- |  | ----------------------------- | ------- | - | ---------------------- | - | ------------------ |  | --------- | ------- | ------------ | - | ------- |  | - | ---------
|                                              |  | North    America    Broadband |         |   | InternationalBroadband |   | Telecom    Systems |  | Corporate |         | Consolidated
|As of or For the Year Ended December 31, 2009 |  |                               |         |   |                        |   |                    |  |           |         |              |   |         |  |   |          
|Revenues                                      |  | $                             | 690,279 |   |                        | $ | 203,886            |  | $         | 112,500 |              | $ | -       |  | $ | 1,006,665
|Operating income (loss)(1)                    |  | $                             | (8,028  | ) |                        | $ | 15,120             |  | $         | 14,227  |              | $ | -       |  | $ | 21,319   
|Depreciation and amortization                 |  | $                             | 84,706  |   |                        | $ | 13,355             |  | $         | 4,078   |              | $ | -       |  | $ | 102,139  
|Assets(2)                                     |  | $                             | 699,399 |   |                        | $ | 184,461            |  | $         | 45,500  |              | $ | 265,938 |  | $ | 1,195,298
|Capital expenditures(3)                       |  | $                             | 139,621 |   |                        | $ | 15,124             |  | $         | 1,213   |              | $ | 7,516   |  | $ | 163,474  
|As of or For the Year Ended December 31, 2008 |  |                               |         |   |                        |   |                    |  |           |         |              |   |         |  |   |          
|Revenues                                      |  | $                             | 667,665 |   |                        | $ | 237,188            |  | $         | 155,038 |              | $ | -       |  | $ | 1,059,891
|Operating income                              |  | $                             | 21,339  |   |                        | $ | 21,679             |  | $         | 25,116  |              | $ | -       |  | $ | 68,134   
|Depreciation and amortization                 |  | $                             | 55,868  |   |                        | $ | 9,233              |  | $         | 3,836   |              | $ | -       |  | $ | 68,937   
|Assets                                        |  | $                             | 648,603 |   |                        | $ | 197,087            |  | $         | 64,727  |              | $ | 169,690 |  | $ | 1,080,107
|Capital expenditures                          |  | $                             | 71,696  |   |                        | $ | 11,188             |  | $         | 2,223   |              | $ | 11,126  |  | $ | 96,233   
|As of or For the Year Ended December 31, 2007 |  |                               |         |   |                        |   |                    |  |           |         |              |   |         |  |   |          
|Revenues                                      |  | $                             | 615,716 |   |                        | $ | 214,833            |  | $         | 139,526 |              | $ | -       |  | $ | 970,075  
|Operating income                              |  | $                             | 44,259  |   |                        | $ | 19,637             |  | $         | 25,911  |              | $ | -       |  | $ | 89,807   
|Depreciation and amortization                 |  | $                             | 34,970  |   |                        | $ | 7,947              |  | $         | 2,943   |              | $ | -       |  | $ | 45,860   
|Assets                                        |  | $                             | 610,950 |   |                        | $ | 214,231            |  | $         | 66,215  |              | $ | 220,612 |  | $ | 1,112,008
|Capital expenditures                          |  | $                             | 216,943 |   |                        | $ | 14,357             |  | $         | 4,093   |              | $ | 12,787  |  | $ | 248,180  



|(1) | Operating loss for North America Broadband includes $44.4 million of impairment loss related to our prepaid deposit (see Note 9Other Assets for further
discussion) and $3.2 million development cost related to the construction of our Jupiter satellite.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | North America Broadband segment includes $66.6 million of construction-in-process related to the construction of our Jupiter satellite.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(3) | Capital expenditures for North America Broadband segment includes $44.1 million related to capitalized software and the construction of our Jupiter satellite.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

For the years ended December 31, 2009, 2008 and 2007, no single customer accounted for more than 10% of
total revenues. Revenues by geographic area are summarized by customers locations as follows (in thousands):



|                                 |  |                         |           |      |   |           |  |   |        
|-------------------------------- |  | ----------------------- | --------- | ---- | - | --------- |  | - | -------
|                                 |  | Year Ended December 31,
|                                 |  | 2009                    |           | 2008 |   | 2007     
|North America                    |  | $                       | 800,659   |      | $ | 803,034   |  | $ | 725,673
|Africa, Asia and the Middle East |  |                         | 88,412    |      |   | 106,627   |  |   | 125,043
|Europe                           |  |                         | 68,072    |      |   | 115,495   |  |   | 88,366 
|South America and the Caribbean  |  |                         | 49,522    |      |   | 34,735    |  |   | 30,993 
|                                 |  |                         |           |      |   |           |  |   |        
|Total revenues                   |  | $                       | 1,006,665 |      | $ | 1,059,891 |  | $ | 970,075
|                                 |  |                         |           |      |   |           |  |   |        



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Individual countries with significant revenues for the three years ended
December 31, 2009 are as follows (in thousands):



|                                                                                                        |  |                         |         |              |   |         |  |   |        
|------------------------------------------------------------------------------------------------------- |  | ----------------------- | ------- | ------------ | - | ------- |  | - | -------
|                                                                                                        |  | Year Ended December 31,
|                                                                                                        |  | 2009                    |         | 2008         |   | 2007   
|United States                                                                                           |  | $                       | 773,615 |              | $ | 784,887 |  | $ | 717,251
|India                                                                                                   |  | $                       | 38,956  |              | $ | 48,067  |  | $ | 49,681 
|United Kingdom                                                                                          |  | $                       | 29,166  |              | $ | 66,555  |  | $ | 30,568 
|Total property, net by geographic
area is summarized by customers locations as follows (in thousands):
|                                                                                                        |  |                         |         | December 31,
|                                                                                                        |  |                         |         | 2009         |   | 2008   
|North America:                                                                                          |  |                         |         |              |   |         |  |   |        
|United States                                                                                           |  |                         |         |              | $ | 573,748 |  | $ | 489,284
|Mexico                                                                                                  |  |                         |         |              |   | 55      |  |   | 2      
|                                                                                                        |  |                         |         |              |   |         |  |   |        
|Total North America                                                                                     |  |                         |         |              |   | 573,803 |  |   | 489,286
|South America and the Caribbean                                                                         |  |                         |         |              |   | 12,702  |  |   | 5,344  
|Africa, Asia and the Middle East                                                                        |  |                         |         |              |   | 10,336  |  |   | 8,300  
|Europe                                                                                                  |  |                         |         |              |   | 5,123   |  |   | 4,340  
|                                                                                                        |  |                         |         |              |   |         |  |   |        
|Total property, net                                                                                     |  |                         |         |              | $ | 601,964 |  | $ | 507,270
|                                                                                                        |  |                         |         |              |   |         |  |   |        

Note 18:    Transactions with Related Parties

In the ordinary course of our operations, we enter into transactions with related parties to purchase and/or sell
telecommunications services, equipment, and inventory. Related parties include all entities that are controlled by Apollo Management, L.P. and its affiliates (collectively Apollo), our Parents controlling stockholder.

Hughes Telematics, Inc.

In July 2006, we granted a limited license to HTI allowing HTI to use the HUGHES trademark. The license is limited in that HTI may use the HUGHES trademark only in connection with its business of automotive telematics and only in
combination with the TELEMATICS name. As partial consideration for the license, the agreement provides that we will be HTIs preferred engineering services provider. The license is royalty-free, except that HTI has agreed to pay a royalty to us
in the event HTI no longer has a commercial or affiliated relationship with us.

In October 2007, we entered into an agreement
with HTI and a customer of HTI, whereby we agreed to assume the rights and performance obligations of HTI in the event that HTI fails to perform its obligations due to a fundamental cause such as bankruptcy or the cessation of its telematics
business. In connection with that agreement, the Company and HTI have entered into a letter agreement pursuant to which HTI has agreed to take certain actions to enable us to assume HTIs obligations in the event that such action is required.
However, as a result of the Merger, as defined and described below, our obligations to HTI and its customer expired when HTI became a public company in March 2009 with an initial market capitalization value greater than $300.0 million.

In January 2008, we entered into an agreement with HTI for the development of an automotive telematics system for HTI, comprising the
telematics system hub and the Telematics Control Unit (TCU), which will serve as the user appliance in the telematics system. The agreement also provided that, subject to certain specified performance conditions, we will serve as the
exclusive manufacturer and supplier of TCUs for HTI.

In March 2009, HCI exchanged $13.0 million of HTI receivables for
HTI convertible preferred stock (HTI Preferred Stock) as part of a $50.0 million private placement of HTI Preferred Stock. In connection with the merger of HTI with Polaris Acquisition Corp. (the Merger), which occurred on
March 31, 2009, HTI became a publicly traded company and HCIs HTI Preferred Stock was converted into HTI common stock (HTI Shares). There are certain restrictions and/or earn-out provisions applicable to the HTI Shares
pursuant to the Merger agreement. If the full earn-out is achieved, HCIs investment could represent approximately 3.8% of HTIs outstanding common stock.



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In August 2009, HTI terminated substantially all of the development engineering and
manufacturing services with us as a result of the bankruptcy filing of one of HTIs customers. On December 18, 2009, the Company entered into a promissory note with HTI (Promissory Note) for the purposes of establishing a
revised payment schedule for $8.3 million of account receivables that HTI owed to the Company. The Promissory Note has a maturity date of December 31, 2010 and an interest rate of 12% per annum.

HTI is controlled by an affiliate of Apollo. Jeffrey A. Leddy, a member of our Board of Managers and HCIs Board of Directors, is the
CEO and a director of HTI and owns less than 1% of HTIs equity as of December 31, 2009. In addition, Andrew Africk and Aaron Stone, members of our Board of Managers and HCIs Board of Directors, are directors of HTI and partners of
Apollo.

Hughes Systique Corporation (Hughes Systique)

We have contracted with Hughes Systique for software development services. The founders of Hughes Systique include Pradman Kaul, our and
HCIs Chief Executive Officer (CEO) and President, and certain former employees of the Company, including Pradeep Kaul, who is the CEO and President of Hughes Systique, our former Executive Vice President and the brother of our CEO
and President. HCI acquired an equity investment in Hughes Systique Series A Preferred shares of $3.0 million and $1.5 million in October 2005 and January 2008, respectively. As of December 31, 2009, on an undiluted basis, HCI owned
approximately 45.23% of Hughes Systiques outstanding shares, and our CEO and President and his brother, in the aggregate, owned approximately 25.61% of Hughes Systiques outstanding shares. In addition, our CEO and President and Jeffrey
A. Leddy, a member of our Board of Managers and HCIs Board of Directors, serve on the board of directors of Hughes Systique.

Hughes
Communications, Inc.

We have a management and advisory services agreement with HCI, our Parent, pursuant to which HCI
agrees to provide us, through its officers and employees, general support, advisory, and consulting services in relation to our business. Pursuant to the agreement, we reimburse HCI for its out of pocket costs and expenses incurred in connection
with the services, including an amount equal to 98% of the compensation of certain HCI executives plus a 2% service fee. On March 12, 2009, we transferred $13.0 million of receivables that HTI owed to us to our Parent for $13.0 million in cash.

Agreement with 95 West Co., Inc.

In July 2006, we entered into an agreement with 95 West Co. and its parent, MLH, pursuant to which 95 West Co. and MLH agreed to provide a series of coordination agreements which allow us to operate
SPACEWAY 3 at an orbital position where such parties have higher-priority rights. Jeffrey A. Leddy, a member of our Board of Managers and HCIs Board of Directors, is the managing director of 95 West Co. and MLH and also owns a small interest
in each. Andrew Africk, another member of our Board of Managers and HCIs Board of Directors, is also a director of MLH. As part of the agreement, we agreed to pay $9.3 million, in annual installments of $0.3 million in 2006, $0.75 million in
each year between 2007 and 2010 and $1.0 million in each year between 2011 and 2016 for the use of the orbital position, subject to conditions in the agreement including our ability to operate SPACEWAY 3. As of December 31, 2009, the remaining
debt balance under the capital lease was $5.3 million, which was included in Capital lease and other in the short-term and long-term debt tables included in Note 11Debt. During 2009, we paid $0.75 million to 95 West Co. pursuant to
the agreement.

Smart & Final, Inc.

As of December 31, 2009, Apollo owned, directly or indirectly, 95% of Smart & Final, Inc. (Smart & Final). We provide broadband products and services to Smart &
Final.

Intelsat Holdings Limited

We lease satellite transponder capacity from Intelsat Holdings Limited (Intelsat). In addition, our Italian subsidiary, Hughes Network Systems, S.r.L., entered into a cooperation agreement
with Intelsat, Telespazio and Telecom Italia. Under this agreement, the parties are cooperating to provide broadband satellite services for Italian businesses operating in Eastern Europe and North Africa. Effective February 4, 2008, Apollo
divested its entire ownership interest in Intelsat, and as a result, Intelsat is no longer a related party.



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Other

Certain members of our Board of Managers and officers serve on the boards of directors of some of our affiliates. In some cases, such members have received stock-based compensation from such affiliates
for their service. In those cases, the amount of stock-based compensation received by the directors and officers is comparable to stock-based compensation awarded to other non-executive members of the affiliates boards of directors.

Related Party Transactions

Sales and purchase transactions with related parties are as follows (in thousands):



|                      |  |                         |        |      |   |        |  |   |        
|--------------------- |  | ----------------------- | ------ | ---- | - | ------ |  | - | -------
|                      |  | Year Ended December 31,
|                      |  | 2009                    |        | 2008 |   | 2007  
|Sales:                |  |                         |        |      |   |        |  |   |        
|HTI                   |  | $                       | 23,644 |      | $ | 31,065 |  | $ | 22,301 
|Apollo and affiliates |  |                         | 476    |      |   | 897    |  |   | 11,512 
|                      |  |                         |        |      |   |        |  |   |        
|Total sales           |  | $                       | 24,120 |      | $ | 31,962 |  | $ | 33,813 
|                      |  |                         |        |      |   |        |  |   |        
|Purchases:            |  |                         |        |      |   |        |  |   |        
|Hughes Systique       |  | $                       | 9,853  |      | $ | 9,419  |  | $ | 5,609  
|HCI                   |  |                         | 9,160  |      |   | 6,605  |  |   | 6,052  
|95 West Co.           |  |                         | -      |      |   | 750    |  |   | -      
|Intelsat(1)           |  |                         | -      |      |   | 10,074 |  |   | 119,961
|                      |  |                         |        |      |   |        |  |   |        
|Total purchases       |  | $                       | 19,013 |      | $ | 26,848 |  | $ | 131,622
|                      |  |                         |        |      |   |        |  |   |        



|(1) | Subsequent to February 4, 2008, Intelsat is no longer a related party.
|--- | ----------------------------------------------------------------------

Assets and liabilities resulting from transactions with related parties are as follows (in thousands):



|                               |  |              |       |      |   |      
|------------------------------ |  | ------------ | ----- | ---- | - | -----
|                               |  | December 31,
|                               |  | 2009         |       | 2008
|Due from related parties:      |  |              |       |      |   |      
|HTI                            |  | $            | 8,652 |      | $ | 6,734
|Smart & Final                  |  |              | 52    |      |   | 30   
|                               |  |              |       |      |   |      
|Total due from related parties |  | $            | 8,704 |      | $ | 6,764
|                               |  |              |       |      |   |      
|Due to related parties:        |  |              |       |      |   |      
|HCI                            |  | $            | 2,610 |      | $ | 1,112
|Hughes Systique                |  |              | 1,643 |      |   | 1,507
|                               |  |              |       |      |   |      
|Total due to related parties   |  | $            | 4,253 |      | $ | 2,619
|                               |  |              |       |      |   |      



|                                                                                                 |  |                         |         |   |      |   |        |  |   |        |  
|------------------------------------------------------------------------------------------------ |  | ----------------------- | ------- | - | ---- | - | ------ |  | - | ------ | -
|Note 19:    Net Income (loss) Attributable to HNS and Transfer from Noncontrolling
Interest      | 
|                                                                                                 |  | Year Ended December 31, |        
|                                                                                                 |  | 2009                    |         |   | 2008 |   | 2007   | 
|                                                                                                 |  | (In thousands)          |        
|Net income (loss) attributable to HNS                                                            |  | $                       | (44,905 | ) |      | $ | 12,096 |  | $ | 49,801 |  
|                                                                                                 |  |                         |         |   |      |   |        |  |   |        |  
|Transfers from the noncontrolling interest:                                                      |  |                         |         |   |      |   |        |  |   |        |  
|Decrease in HNS paid-in capital for purchase of subsidiary shares                                |  |                         | (391    | ) |      |   | -      |  |   | -      |  
|Close-out of a subsidiary                                                                        |  |                         | -       |   |      |   | -      |  |   | (608   | )
|                                                                                                 |  |                         |         |   |      |   |        |  |   |        |  
|Change from net income (loss) attributable to HNS and transfers from the noncontrolling interest |  | $                       | (45,296 | ) |      | $ | 12,096 |  | $ | 49,193 |  
|                                                                                                 |  |                         |         |   |      |   |        |  |   |        |  



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Note 20:     Commitments and Contingencies

Litigation

We are
periodically involved in litigation in the ordinary course of our business involving claims regarding intellectual property infringement, product liability, property damage, personal injury, contracts, employment and workers compensation. We
do not believe that there are any such pending or threatened legal proceedings, including ordinary litigation incidental to the conduct of our business and the ownership of our properties that, if adversely determined, would have a material adverse
effect on our business, financial condition, results of operations or liquidity.

In March 2009, we received an arbitral award
against Sea Launch entitling us to a full refund of the Sea Launch Deposit of $44.4 million, in addition to interest of 10% per annum on the Deposit from July 10, 2007 until payment is received in full. This award resulted from an
arbitration proceeding initiated by the Company on June 28, 2007 relating to our SPACEWAY 3 satellite. Because of the material failure of a Sea Launch rocket that occurred on January 30, 2007, the launch of our SPACEWAY 3 satellite,
scheduled for May 2007, was substantially delayed. We made alternative arrangements with another launch services provider to launch SPACEWAY 3 in August 2007 and in accordance with the Launch Service Agreement (LSA), we sent a notice of
termination to Sea Launch. Under the LSA, we were entitled to terminate due to the launch delay and receive a refund of the Deposit made to Sea Launch in anticipation of the SPACEWAY 3 launch. Sea Launch refused to refund our Deposit and alleged
that we had breached the LSA. The arbitration hearings were completed during the third quarter of 2008, and the March 2009 arbitral award was the result of the arbitration panel rendering its decision in our favor.

On June 22, 2009, Sea Launch filed a voluntary petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the District of Delaware. As a result of this filing, our efforts to pursue collection of the arbitral award from Sea Launch have been stayed under the bankruptcy laws. While we still intend to vigorously pursue the
collection of our arbitral award, we will have to do so as part of Sea Launchs bankruptcy process and in accordance with its timetable. Based upon information made available in the bankruptcy proceedings, including but not limited
to, Sea Launchs credit information and its ability to continue its operations, we concluded that the value of the previously-recorded Deposit was impaired and recorded an impairment loss of $44.4 million in Loss on impairment in
the accompanying Consolidated Statements of Operations.

On May 18, 2009, the Company and HCI received notice of a
complaint filed in the U.S. District Court for the Northern District of California by two California subscribers to the HughesNet service. The plaintiffs complain about the speed of the HughesNet service, the Fair Access Policy, early termination
fees and certain terms and conditions of the HughesNet subscriber agreement. The plaintiffs seek to pursue their claims as a class action on behalf of other California subscribers. On June 4, 2009, the Company and HCI received notice of a
similar complaint filed by another HughesNet subscriber in the Superior Court of San Diego County, California. The plaintiff in this case also seeks to pursue his claims as a class action on behalf of other California subscribers. Both cases have
been consolidated into a single case in the U.S. District Court for the Northern District of California. Based on our investigation, we believe that the allegations in both complaints are not meritorious and we intend to vigorously defend these
matters.

In October 2008, Hughes Telecommunicaçoes do Brasil Ltda. (HTB), a wholly-owned subsidiary of
ours, received a tax assessment of approximately $6.4 million from the State of São Paulo Treasury Department. The tax assessment alleges that HTB failed to pay certain import taxes to the State of São Paulo. We do not believe the
assessment is valid and plans to dispute the State of São Paulos claims and to defend itself vigorously against these allegations. Therefore, we have not recorded a liability. It is the opinion of management that such litigation is not
expected to have a material adverse effect on our financial position, results of operations or cash flows.

On
December 18, 2009, the Company and HCI received notice of a complaint filed in the Cook County, Illinois, Circuit Court by a former subscriber to the HughesNet service. The complaint seeks a declaration allowing the former subscriber to
file a class arbitration challenging early termination fees under the subscriber agreement. Based on our investigation, we believe that the allegations in this complaint are not meritorious and we intend to vigorously defend this matter.



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Product Warranties

We warrant our hardware products over 12 to 24 months, depending on the products sold, following the date of installation. A large portion of our enterprise customers enter into maintenance agreements
under which we recognize revenue for providing maintenance services that prolong the life and effectiveness of the installed hardware, thus minimizing the potential for warranty claims or repairs. Warranty reserves are determined based on historical
warranty repair experience and an assessment of the number of units remaining under warranty coverage. Long-term contracts for the sale of wireless communications systems may include contractual provisions relating to warranty coverage for fixed
terms generally not exceeding five years. Warranty provisions for these contracts are included in the determination of overall contract costs and earnings, based on managements estimates of the cost of the related coverage. Accrued contract
warranty costs are reviewed and adjusted, as appropriate, over the term of the contractual warranty period.

Changes in
accrued warranty costs were as follows (in thousands):



|                            |  |              |        |   |      |   |        |  
|--------------------------- |  | ------------ | ------ | - | ---- | - | ------ | -
|                            |  | December 31, |       
|                            |  | 2009         |        |   | 2008 |  
|Balance beginning of period |  | $            | 3,909  |   |      | $ | 3,579  |  
|Warranty costs accrual      |  |              | 2,350  |   |      |   | 3,267  |  
|Warranty costs incurred     |  |              | (4,338 | ) |      |   | (2,937 | )
|                            |  |              |        |   |      |   |        |  
|Balance at end of period    |  | $            | 1,921  |   |      | $ | 3,909  |  
|                            |  |              |        |   |      |   |        |  

Leases

We have non-cancelable operating leases having lease terms in excess of one year, primarily for real property. Future minimum payments under such leases at December 31, 2009 are as follows (in
thousands):



|                             |  |        |       
|---------------------------- |  | ------ | ------
|                             |  | Amount
|Year ending December 31,     |  |        |       
|2010                         |  | $      | 10,595
|2011                         |  |        | 9,680 
|2012                         |  |        | 8,665 
|2013                         |  |        | 5,704 
|2014                         |  |        | 4,454 
|Thereafter                   |  |        | 6,357 
|                             |  |        |       
|Total minimum lease payments |  | $      | 45,455
|                             |  |        |       

Rental expenses under operating leases, net of
sublease income, were $13.3 million, $12.8 million and $12.6 million for the years ended December 31, 2009, 2008 and 2007, respectively.

We have non-cancelable vendor obligations for acquisition of transponder capacity. Future minimum payments under such obligations at December 31, 2009 are as follows (in thousands):



|                             |  |        |        
|---------------------------- |  | ------ | -------
|                             |  | Amount
|Year ending December 31,     |  |        |        
|2010                         |  | $      | 123,392
|2011                         |  |        | 59,613 
|2012                         |  |        | 27,050 
|2013                         |  |        | 23,623 
|2014                         |  |        | 8,230  
|Thereafter                   |  |        | 16,250 
|                             |  |        |        
|Total minimum lease payments |  | $      | 258,158
|                             |  |        |        

Rental expenses under operating leases for transponder
capacity were $180.9 million, $193.3 million and $188.5 million for the years ended December 31, 2009, 2008 and 2007, respectively.



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Other

In June 2009, we entered into an agreement with SS/L, under which SS/L will manufacture our Jupiter satellite. Jupiter will employ a multi-spot beam, bent pipe Ka-band architecture and will provide
additional capacity for the HughesNet service in North America. We are obligated to pay an aggregate of approximately $252.0 million for the construction of Jupiter and have agreed to make payment to SS/L in installments upon the completion of each
milestone as set forth in the agreement. We anticipate launching Jupiter in the first half of 2012. In connection with the construction of Jupiter, we have entered into a contract with Barrett Xplore Inc. (Barrett), whereby Barrett has
agreed to lease or acquire user beams, gateways and terminals for the Jupiter satellite that are designed to operate in Canada.

We are contingently liable under standby letters of credit and bonds in the aggregate amount of $14.2 million that were undrawn as of December 31, 2009. Of this amount, $2.4 million was issued under the Revolving Credit Facility; $1.7
million was secured by restricted cash; $0.9 million related to insurance bonds; and $9.2 million was secured by letters of credit issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued
by our Indian subsidiaries are secured by their assets. As of December 31, 2009, these obligations were scheduled to expire as follows: $9.6 million in 2010; $1.9 million in 2011; $0.3 million in 2012; and $2.4 million in 2013 and thereafter.



|Note 21: | Supplemental Guarantor and Non-Guarantor Financial Information
|-------- | --------------------------------------------------------------

Certain of the Companys wholly-owned subsidiaries (HNS Real Estate LLC, Hughes Network Systems International Service Company, HNS
India VSAT, Inc., HNS Shanghai, Inc. and Helius (together, the Guarantor Subsidiaries)) have fully and unconditionally guaranteed, on a joint and several basis, payment of the Senior Notes. In lieu of providing separate audited financial
statements of the Co-Issuer and the Guarantor Subsidiaries, condensed financial statements prepared in accordance with Rule 3-10 of Regulation S-X are presented below. The column marked Parent represents our results of operations, with
the subsidiaries accounted for using the equity method. The column marked Guarantor Subsidiaries includes the results of the Guarantor Subsidiaries along with the results of the Co-Issuer, a finance subsidiary which is 100% owned by the
Company and which had no assets, operations, revenues or cash flows for the periods presented. The column marked Non-Guarantor Subsidiaries includes the results of non-guarantor subsidiaries of the Company. Eliminations necessary to
arrive at the information for the Company on a consolidated basis for the periods presented are included in the column so labeled. Separate financial statements and other disclosures concerning the Co-Issuer and the Guarantor Subsidiaries are not
presented because management has determined that they are not material to investors.

The following represents the
supplemental condensed financial statements of the Company, the Guarantor Subsidiaries and the Non-guarantor Subsidiaries. These condensed financial statements should be read in conjunction with our consolidated financial statements and notes
thereto.



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Condensed Consolidated Balance Sheet as of December 31, 2009

(In thousands)



|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|--------------------------------------------------------------------------- |  | ------ | --------- | --------------------- | - | ------------------------- |  | ------------ | ------- |  | ----- | -------- | - |  | - | ---------
|                                                                            |  | Parent |           | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |         |  | Total
|Assets                                                                      |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Cash and cash equivalents                                                   |  | $      | 173,991   |                       | $ | 1,091                     |  | $            | 8,651   |  | $     | -        |   |  | $ | 183,733  
|Marketable securities                                                       |  |        | 31,126    |                       |   | -                         |  |              | -       |  |       | -        |   |  |   | 31,126   
|Receivables, net                                                            |  |        | 115,948   |                       |   | 628                       |  |              | 60,862  |  |       | (14,632  | ) |  |   | 162,806  
|Inventories                                                                 |  |        | 47,437    |                       |   | 138                       |  |              | 12,669  |  |       | -        |   |  |   | 60,244   
|Prepaid expenses and other                                                  |  |        | 7,421     |                       |   | 234                       |  |              | 13,321  |  |       | -        |   |  |   | 20,976   
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total current assets                                                        |  |        | 375,923   |                       |   | 2,091                     |  |              | 95,503  |  |       | (14,632  | ) |  |   | 458,885  
|Property, net                                                               |  |        | 542,642   |                       |   | 32,792                    |  |              | 26,530  |  |       | -        |   |  |   | 601,964  
|Investment in subsidiaries                                                  |  |        | 115,136   |                       |   | -                         |  |              | -       |  |       | (115,136 | ) |  |   | -        
|Other assets                                                                |  |        | 102,045   |                       |   | 3,221                     |  |              | 29,183  |  |       | -        |   |  |   | 134,449  
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total assets                                                                |  | $      | 1,135,746 |                       | $ | 38,104                    |  | $            | 151,216 |  | $     | (129,768 | ) |  | $ | 1,195,298
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Liabilities and equity                                                      |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Accounts payable                                                            |  | $      | 97,114    |                       | $ | 2,272                     |  | $            | 32,759  |  | $     | (14,632  | ) |  | $ | 117,513  
|Short-term debt                                                             |  |        | 2,054     |                       |   | -                         |  |              | 4,696   |  |       | -        |   |  |   | 6,750    
|Accrued liabilities and other                                               |  |        | 110,088   |                       |   | 714                       |  |              | 23,124  |  |       | -        |   |  |   | 133,926  
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total current liabilities                                                   |  |        | 209,256   |                       |   | 2,986                     |  |              | 60,579  |  |       | (14,632  | ) |  |   | 258,189  
|Long-term debt                                                              |  |        | 710,259   |                       |   | -                         |  |              | 4,698   |  |       | -        |   |  |   | 714,957  
|Other long-term liabilities                                                 |  |        | 16,191    |                       |   | -                         |  |              | -       |  |       | -        |   |  |   | 16,191   
|Total HNS equity                                                           |  |        | 200,040   |                       |   | 29,197                    |  |              | 85,939  |  |       | (115,136 | ) |  |   | 200,040  
|Noncontrolling interest                                                     |  |        | -         |                       |   | 5,921                     |  |              | -       |  |       | -        |   |  |   | 5,921    
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total liabilities and equity                                                |  | $      | 1,135,746 |                       | $ | 38,104                    |  | $            | 151,216 |  | $     | (129,768 | ) |  | $ | 1,195,298
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|                                                                           
|Condensed Consolidated Balance Sheet as of December 31, 2008 (In thousands)
|                                                                            |  |        |           |                       |  
|                                                                            |  | Parent |           | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | Eliminations |         |  | Total
|Assets                                                                      |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Cash and cash equivalents                                                   |  | $      | 75,956    |                       | $ | 2,013                     |  | $            | 22,293  |  | $     | -        |   |  | $ | 100,262  
|Receivables, net                                                            |  |        | 147,424   |                       |   | 2,007                     |  |              | 66,109  |  |       | (15,281  | ) |  |   | 200,259  
|Inventories                                                                 |  |        | 57,453    |                       |   | 666                       |  |              | 7,366   |  |       | -        |   |  |   | 65,485   
|Prepaid expenses and other                                                  |  |        | 8,030     |                       |   | 284                       |  |              | 12,111  |  |       | -        |   |  |   | 20,425   
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total current assets                                                        |  |        | 288,863   |                       |   | 4,970                     |  |              | 107,879 |  |       | (15,281  | ) |  |   | 386,431  
|Property, net                                                               |  |        | 459,855   |                       |   | 29,600                    |  |              | 17,815  |  |       | -        |   |  |   | 507,270  
|Investment in subsidiaries                                                  |  |        | 92,057    |                       |   | -                         |  |              | -       |  |       | (92,057  | ) |  |   | -        
|Other assets                                                                |  |        | 173,531   |                       |   | 10,614                    |  |              | 2,261   |  |       | -        |   |  |   | 186,406  
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total assets                                                                |  | $      | 1,014,306 |                       | $ | 45,184                    |  | $            | 127,955 |  | $     | (107,338 | ) |  | $ | 1,080,107
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Liabilities and equity                                                      |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Accounts payable                                                            |  | $      | 57,488    |                       | $ | 3,133                     |  | $            | 35,327  |  | $     | (15,281  | ) |  | $ | 80,667   
|Short-term debt                                                             |  |        | 4,391     |                       |   | -                         |  |              | 3,861   |  |       | -        |   |  |   | 8,252    
|Accrued liabilities and other                                               |  |        | 128,813   |                       |   | 761                       |  |              | 29,841  |  |       | -        |   |  |   | 159,415  
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total current liabilities                                                   |  |        | 190,692   |                       |   | 3,894                     |  |              | 69,029  |  |       | (15,281  | ) |  |   | 248,334  
|Long-term debt                                                              |  |        | 574,771   |                       |   | -                         |  |              | 3,527   |  |       | -        |   |  |   | 578,298  
|Other long-term liabilities                                                 |  |        | 18,005    |                       |   | -                         |  |              | -       |  |       | -        |   |  |   | 18,005   
|Total HNS' equity                                                           |  |        | 230,838   |                       |   | 36,658                    |  |              | 55,399  |  |       | (92,057  | ) |  |   | 230,838  
|Noncontrolling interest                                                     |  |        | -         |                       |   | 4,632                     |  |              | -       |  |       | -        |   |  |   | 4,632    
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          
|Total liabilities and equity                                                |  | $      | 1,014,306 |                       | $ | 45,184                    |  | $            | 127,955 |  | $     | (107,338 | ) |  | $ | 1,080,107
|                                                                            |  |        |           |                       |   |                           |  |              |         |  |       |          |   |  |   |          



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Condensed Consolidated Statement of Operations for the Year Ended December 31,
2009

(In thousands)



|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|-------------------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | ------- | - |  | - | --------- | -
|                                                                                                   |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |        
|Revenues                                                                                           |  | $      | 873,794 |   |                       | $ | 9,680   |                           |  | $ | 148,382      |   |  | $     | (25,191 | ) |  | $ | 1,006,665 |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Operating costs and expenses:                                                                      |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Costs of revenues                                                                                  |  |        | 644,750 |   |                       |   | 5,281   |                           |  |   | 109,870      |   |  |       | (21,618 | ) |  |   | 738,283   |  
|Selling, general and administrative                                                                |  |        | 147,793 |   |                       |   | 5,173   |                           |  |   | 25,810       |   |  |       | (3,573  | ) |  |   | 175,203   |  
|Loss on impairment                                                                                 |  |        | 44,400  |   |                       |   | -       |                           |  |   | -            |   |  |       | -       |   |  |   | 44,400    |  
|Research and development                                                                           |  |        | 19,574  |   |                       |   | 2,722   |                           |  |   | -            |   |  |       | -       |   |  |   | 22,296    |  
|Amortization of intangible assets                                                                  |  |        | 4,038   |   |                       |   | 1,126   |                           |  |   | -            |   |  |       | -       |   |  |   | 5,164     |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Total operating costs and expenses                                                                 |  |        | 860,555 |   |                       |   | 14,302  |                           |  |   | 135,680      |   |  |       | (25,191 | ) |  |   | 985,346   |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Operating income (loss)                                                                            |  |        | 13,239  |   |                       |   | (4,622  | )                         |  |   | 12,702       |   |  |       | -       |   |  |   | 21,319    |  
|Other income (expense):                                                                            |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Interest expense                                                                                   |  |        | (62,972 | ) |                       |   | -       |                           |  |   | (1,251       | ) |  |       | 129     |   |  |   | (64,094   | )
|Interest and other income (loss), net                                                              |  |        | 1,541   |   |                       |   | -       |                           |  |   | 242          |   |  |       | (129    | ) |  |   | 1,654     |  
|Equity in earnings of subsidiaries                                                                 |  |        | 4,033   |   |                       |   | -       |                           |  |   | -            |   |  |       | (4,033  | ) |  |   | -         |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Income (loss) before income tax expense                                                            |  |        | (44,159 | ) |                       |   | (4,622  | )                         |  |   | 11,693       |   |  |       | (4,033  | ) |  |   | (41,121   | )
|Income tax expense                                                                                 |  |        | (746    | ) |                       |   | -       |                           |  |   | (1,690       | ) |  |       | -       |   |  |   | (2,436    | )
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Net income (loss)                                                                                  |  |        | (44,905 | ) |                       |   | (4,622  | )                         |  |   | 10,003       |   |  |       | (4,033  | ) |  |   | (43,557   | )
|Net (income) loss attributable to the noncontrolling interest                                      |  |        | -       |   |                       |   | (1,842  | )                         |  |   | 494          |   |  |       | -       |   |  |   | (1,348    | )
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Net income (loss) attributable to HNS                                                              |  | $      | (44,905 | ) |                       | $ | (6,464  | )                         |  | $ | 10,497       |   |  | $     | (4,033  | ) |  | $ | (44,905   | )
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|                                                                                                  
|Condensed Consolidated Statement of Operations for the Year Ended December 31, 2008
(In thousands) | 
|                                                                                                   |  |        |         |   |                      
|                                                                                                   |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |        
|Revenues                                                                                           |  | $      | 894,885 |   |                       | $ | 13,873  |                           |  | $ | 186,728      |   |  | $     | (35,595 | ) |  | $ | 1,059,891 |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Operating costs and expenses:                                                                      |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Costs of revenues                                                                                  |  |        | 676,339 |   |                       |   | 5,878   |                           |  |   | 134,476      |   |  |       | (31,756 | ) |  |   | 784,937   |  
|Selling, general and administrative                                                                |  |        | 140,747 |   |                       |   | 5,533   |                           |  |   | 31,127       |   |  |       | (3,839  | ) |  |   | 173,568   |  
|Research and development                                                                           |  |        | 23,931  |   |                       |   | 2,902   |                           |  |   | -            |   |  |       | -       |   |  |   | 26,833    |  
|Amortization of intangible assets                                                                  |  |        | 5,387   |   |                       |   | 1,032   |                           |  |   | -            |   |  |       | -       |   |  |   | 6,419     |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Total operating costs and expenses                                                                 |  |        | 846,404 |   |                       |   | 15,345  |                           |  |   | 165,603      |   |  |       | (35,595 | ) |  |   | 991,757   |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Operating income (loss)                                                                            |  |        | 48,481  |   |                       |   | (1,472  | )                         |  |   | 21,125       |   |  |       | -       |   |  |   | 68,134    |  
|Other income (expense):                                                                            |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Interest expense                                                                                   |  |        | (49,898 | ) |                       |   | -       |                           |  |   | (1,429       | ) |  |       | -       |   |  |   | (51,327   | )
|Interest and other income, net                                                                     |  |        | 2,448   |   |                       |   | -       |                           |  |   | 708          |   |  |       | -       |   |  |   | 3,156     |  
|Equity in earnings of subsidiaries                                                                 |  |        | 11,988  |   |                       |   | -       |                           |  |   | -            |   |  |       | (11,988 | ) |  |   | -         |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Income (loss) before income tax expense                                                            |  |        | 13,019  |   |                       |   | (1,472  | )                         |  |   | 20,404       |   |  |       | (11,988 | ) |  |   | 19,963    |  
|Income tax expense                                                                                 |  |        | (923    | ) |                       |   | -       |                           |  |   | (6,665       | ) |  |       | -       |   |  |   | (7,588    | )
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Net income (loss)                                                                                  |  |        | 12,096  |   |                       |   | (1,472  | )                         |  |   | 13,739       |   |  |       | (11,988 | ) |  |   | 12,375    |  
|Net (income) loss attributable to the noncontrolling interest                                      |  |        | -       |   |                       |   | (381    | )                         |  |   | 102          |   |  |       | -       |   |  |   | (279      | )
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  
|Net income (loss) attributable to HNS                                                              |  | $      | 12,096  |   |                       | $ | (1,853) |                           |  | $ | 13,841       |   |  | $     | (11,988 | ) |  | $ | 12,096    |  
|                                                                                                   |  |        |         |   |                       |   |         |                           |  |   |              |   |  |       |         |   |  |   |           |  



85



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Condensed Consolidated Statement of Operations for the Year Ended December 31,
2007

(In thousands)



|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|-------------------------------------------------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - |  | ----- | -------- | - |  | - | -------- | -
|                                                                                                   |  | Parent |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |         
|Revenues                                                                                           |  | $      | 845,501  |   |                       | $ | 1,140   |                           |  | $ | 148,128      |   |  | $     | (24,694) |   |  | $ | 970,075  |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Operating costs and expenses:                                                                      |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Costs of revenues                                                                                  |  |        | 627,684  |   |                       |   | -       |                           |  |   | 104,626      |   |  |       | (20,603  | ) |  |   | 711,707  |  
|Selling, general and administrative                                                                |  |        | 116,134  |   |                       |   | 3,295   |                           |  |   | 30,043       |   |  |       | (4,091   | ) |  |   | 145,381  |  
|Research and development                                                                           |  |        | 17,036   |   |                       |   | -       |                           |  |   | -            |   |  |       | -        |   |  |   | 17,036   |  
|Amortization of intangible assets                                                                  |  |        | 6,144    |   |                       |   | -       |                           |  |   | -            |   |  |       | -        |   |  |   | 6,144    |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Total operating costs and expenses                                                                 |  |        | 766,998  |   |                       |   | 3,295   |                           |  |   | 134,669      |   |  |       | (24,694  | ) |  |   | 880,268  |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Operating income (loss)                                                                            |  |        | 78,503   |   |                       |   | (2,155  | )                         |  |   | 13,459       |   |  |       | -        |   |  |   | 89,807   |  
|Other income (expense):                                                                            |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Interest expense                                                                                   |  |        | (41,962  | ) |                       |   | -       |                           |  |   | (1,810       | ) |  |       | -        |   |  |   | (43,772  | )
|Interest and other income, net                                                                     |  |        | 8,690    |   |                       |   | -       |                           |  |   | 475          |   |  |       | -        |   |  |   | 9,165    |  
|Equity in earnings of subsidiaries                                                                 |  |        | 4,670    |   |                       |   | -       |                           |  |   | -            |   |  |       | (4,670   | ) |  |   | -        |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Income (loss) before income tax expense                                                            |  |        | 49,901   |   |                       |   | (2,155  | )                         |  |   | 12,124       |   |  |       | (4,670   | ) |  |   | 55,200   |  
|Income tax expense                                                                                 |  |        | (100     | ) |                       |   | -       |                           |  |   | (5,216       | ) |  |       | -        |   |  |   | (5,316   | )
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Net income (loss)                                                                                  |  |        | 49,801   |   |                       |   | (2,155  | )                         |  |   | 6,908        |   |  |       | (4,670   | ) |  |   | 49,884   |  
|Net (income) loss attributable to the noncontrolling interest                                      |  |        | -        |   |                       |   | (286    | )                         |  |   | 203          |   |  |       | -        |   |  |   | (83      | )
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Net income (loss) attributable to HNS                                                              |  | $      | 49,801   |   |                       | $ | (2,441  | )                         |  | $ | 7,111        |   |  | $     | (4,670   | ) |  | $ | 49,801   |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Condensed Consolidated Statement of
Cash Flows for the Year Ended December 31, 2009 (In thousands) | 
|                                                                                                   |  | Parent |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |         
|Cash flows from operating activities:                                                              |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Net income (loss)                                                                                  |  | $      | (44,905  | ) |                       | $ | (4,622) |                           |  | $ | 10,003       |   |  | $     | (4,033)  |   |  | $ | (43,557  | )
|Adjustments to reconcile net income (loss) to net cash flows from operating activities             |  |        | 202,417  |   |                       |   | 8,534   |                           |  |   | (8,556       | ) |  |       | 4,033    |   |  |   | 206,428  |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Net cash provided by operating activities                                                          |  |        | 157,512  |   |                       |   | 3,912   |                           |  |   | 1,447        |   |  |       | -        |   |  |   | 162,871  |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Cash flows from investing activities:                                                              |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Change in restricted cash                                                                          |  |        | (1       | ) |                       |   | -       |                           |  |   | (107         | ) |  |       | -        |   |  |   | (108     | )
|Purchases of marketable securities                                                                 |  |        | (41,080  | ) |                       |   | -       |                           |  |   | -            |   |  |       | -        |   |  |   | (41,080  | )
|Proceeds from sales of marketable securities                                                       |  |        | 10,000   |   |                       |   | -       |                           |  |   | -            |   |  |       | -        |   |  |   | 10,000   |  
|Expenditures for property                                                                          |  |        | (133,746 | ) |                       |   | (4,837  | )                         |  |   | (12,119      | ) |  |       | -        |   |  |   | (150,702 | )
|Expenditures for capitalized software                                                              |  |        | (12,772  | ) |                       |   | -       |                           |  |   | -            |   |  |       | -        |   |  |   | (12,772  | )
|Proceeds from sale of property                                                                     |  |        | 14       |   |                       |   | 3       |                           |  |   | 380          |   |  |       | -        |   |  |   | 397      |  
|Long-term loan receivable                                                                          |  |        | (10,000  | ) |                       |   | -       |                           |  |   | -            |   |  |       | -        |   |  |   | (10,000  | )
|Other, net                                                                                         |  |        | (410     | ) |                       |   | -       |                           |  |   | (345         | ) |  |       | -        |   |  |   | (755     | )
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Net cash used in investing activities                                                              |  |        | (187,995 | ) |                       |   | (4,834  | )                         |  |   | (12,191      | ) |  |       | -        |   |  |   | (205,020 | )
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Cash flows from financing activities:                                                              |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Short-term revolver borrowings                                                                     |  |        | -        |   |                       |   | -       |                           |  |   | 6,791        |   |  |       | -        |   |  |   | 6,791    |  
|Repayments of revolver borrowings                                                                  |  |        | -        |   |                       |   | -       |                           |  |   | (7,861       | ) |  |       | -        |   |  |   | (7,861   | )
|Long-term debt borrowings                                                                          |  |        | 138,024  |   |                       |   | -       |                           |  |   | 9,825        |   |  |       | -        |   |  |   | 147,849  |  
|Repayment of long-term debt                                                                        |  |        | (4,894   | ) |                       |   | -       |                           |  |   | (7,481       | ) |  |       | -        |   |  |   | (12,375  | )
|Debt issuance costs                                                                                |  |        | (4,612   | ) |                       |   | -       |                           |  |   | -            |   |  |       | -        |   |  |   | (4,612   | )
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Net cash provided by financing activities                                                          |  |        | 128,518  |   |                       |   | -       |                           |  |   | 1,274        |   |  |       | -        |   |  |   | 129,792  |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                                       |  |        | -        |   |                       |   | -       |                           |  |   | (4,172       | ) |  |       | -        |   |  |   | (4,172   | )
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                               |  |        | 98,035   |   |                       |   | (922    | )                         |  |   | (13,642      | ) |  |       | -        |   |  |   | 83,471   |  
|Cash and cash equivalents at beginning of the period                                               |  |        | 75,956   |   |                       |   | 2,013   |                           |  |   | 22,293       |   |  |       | -        |   |  |   | 100,262  |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  
|Cash and cash equivalents at end of the period                                                     |  | $      | 173,991  |   |                       | $ | 1,091   |                           |  | $ | 8,651        |   |  | $     | -        |   |  | $ | 183,733  |  
|                                                                                                   |  |        |          |   |                       |   |         |                           |  |   |              |   |  |       |          |   |  |   |          |  



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Condensed Consolidated Statement of Cash Flows for the Year Ended December 31,
2008

(In thousands)



|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|-------------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------ | - | ----- | - | -------- |  | - | ------- | -
|                                                                                       |  | Parent |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | Eliminations |   | Total |  
|Cash flows from operating activities:                                                  |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Net income (loss)                                                                      |  | $      | 12,096  |   |                       | $ | (1,472) |                           |  | $ | 13,739       |   |       | $ | (11,988) |  | $ | 12,375  |  
|Adjustments to reconcile net income (loss) to net cash flows from operating activities |  |        | 40,452  |   |                       |   | 8,174   |                           |  |   | (2,824       | ) |       |   | 11,988   |  |   | 57,790  |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Net cash provided by operating activities                                              |  |        | 52,548  |   |                       |   | 6,702   |                           |  |   | 10,915       |   |       |   | -        |  |   | 70,165  |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Cash flows from investing activities:                                                  |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Change in restricted cash                                                              |  |        | 3,577   |   |                       |   | -       |                           |  |   | (473         | ) |       |   | -        |  |   | 3,104   |  
|Proceeds from sales of marketable securities                                           |  |        | 11,090  |   |                       |   | -       |                           |  |   | -            |   |       |   | -        |  |   | 11,090  |  
|Expenditures for property                                                              |  |        | (69,535 | ) |                       |   | (4,839  | )                         |  |   | (7,295       | ) |       |   | -        |  |   | (81,669 | )
|Expenditures for capitalized software                                                  |  |        | (14,564 | ) |                       |   | -       |                           |  |   | -            |   |       |   | -        |  |   | (14,564 | )
|Acquisition of Helius, net of cash received                                            |  |        | (10,543 | ) |                       |   | -       |                           |  |   | -            |   |       |   | -        |  |   | (10,543 | )
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Net cash used in investing activities                                                  |  |        | (79,975 | ) |                       |   | (4,839  | )                         |  |   | (7,768       | ) |       |   | -        |  |   | (92,582 | )
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Cash flows from financing activities:                                                  |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Net increase in notes and loans payable                                                |  |        | -       |   |                       |   | -       |                           |  |   | 223          |   |       |   | -        |  |   | 223     |  
|Long-term debt borrowings                                                              |  |        | 173     |   |                       |   | -       |                           |  |   | 3,433        |   |       |   | -        |  |   | 3,606   |  
|Repayment of long-term debt                                                            |  |        | (10,320 | ) |                       |   | -       |                           |  |   | (3,429       | ) |       |   | -        |  |   | (13,749 | )
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Net cash provided by (used in) financing activities                                    |  |        | (10,147 | ) |                       |   | -       |                           |  |   | 227          |   |       |   | -        |  |   | (9,920  | )
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                           |  |        | -       |   |                       |   | -       |                           |  |   | 3,372        |   |       |   | -        |  |   | 3,372   |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                   |  |        | (37,574 | ) |                       |   | 1,863   |                           |  |   | 6,746        |   |       |   | -        |  |   | (28,965 | )
|Cash and cash equivalents at beginning of the period                                   |  |        | 113,530 |   |                       |   | 150     |                           |  |   | 15,547       |   |       |   | -        |  |   | 129,227 |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  
|Cash and cash equivalents at end of the period                                         |  | $      | 75,956  |   |                       | $ | 2,013   |                           |  | $ | 22,293       |   |       | $ | -        |  | $ | 100,262 |  
|                                                                                       |  |        |         |   |                       |   |         |                           |  |   |              |   |       |   |          |  |   |         |  



87



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##### Table of Contents

HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)



Condensed Consolidated Statement of Cash Flows for the Year Ended December 31,
2007

(In thousands)



|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | ------ | -------- | - | ----------------------- | - | ------ | ------------------------- |  | - | ------------ | - |  | ----- | ------ | - |  | - | -------- | -
|                                                                                       |  | Parent |          |   | Guarantor  Subsidiaries |   |        | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |       
|Cash flows from operating activities:                                                  |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Net income (loss)                                                                      |  | $      | 49,801   |   |                         | $ | (2,155 | )                         |  | $ | 6,908        |   |  | $     | (4,670 | ) |  | $ | 49,884   |  
|Adjustments to reconcile net income (loss) to net cash flows from operating activities |  |        | 21,375   |   |                         |   | 3,420  |                           |  |   | 15,855       |   |  |       | 4,670  |   |  |   | 45,320   |  
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Net cash provided by operating activities                                              |  |        | 71,176   |   |                         |   | 1,265  |                           |  |   | 22,763       |   |  |       | -      |   |  |   | 95,204   |  
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Cash flows from investing activities:                                                  |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Change in restricted cash                                                              |  |        | 284      |   |                         |   | -      |                           |  |   | 95           |   |  |       | -      |   |  |   | 379      |  
|Purchases of marketable securities                                                     |  |        | (22,096  | ) |                         |   | -      |                           |  |   | -            |   |  |       | -      |   |  |   | (22,096  | )
|Proceeds from sales of marketable securities                                           |  |        | 114,105  |   |                         |   | -      |                           |  |   | -            |   |  |       | -      |   |  |   | 114,105  |  
|Expenditures for property                                                              |  |        | (220,451 | ) |                         |   | (1,195 | )                         |  |   | (12,306      | ) |  |       | -      |   |  |   | (233,952 | )
|Expenditures for capitalized software                                                  |  |        | (14,228  | ) |                         |   | -      |                           |  |   | -            |   |  |       | -      |   |  |   | (14,228  | )
|Proceeds from sale of property                                                         |  |        | 382      |   |                         |   | -      |                           |  |   | 134          |   |  |       | -      |   |  |   | 516      |  
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Net cash used in investing activities                                                  |  |        | (142,004 | ) |                         |   | (1,195 | )                         |  |   | (12,077      | ) |  |       | -      |   |  |   | (155,276 | )
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Cash flows from financing activities:                                                  |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Net increase in notes and loans payable                                                |  |        | -        |   |                         |   | -      |                           |  |   | 376          |   |  |       | -      |   |  |   | 376      |  
|Long-term debt borrowings                                                              |  |        | 115,000  |   |                         |   | -      |                           |  |   | 4,731        |   |  |       | -      |   |  |   | 119,731  |  
|Repayment of long-term debt                                                            |  |        | (21,577  | ) |                         |   | -      |                           |  |   | (3,266       | ) |  |       | -      |   |  |   | (24,843  | )
|Debt issuance cost                                                                     |  |        | (2,053   | ) |                         |   | -      |                           |  |   | -            |   |  |       | -      |   |  |   | (2,053   | )
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Net cash provided by financing activities                                              |  |        | 91,370   |   |                         |   | -      |                           |  |   | 1,841        |   |  |       | -      |   |  |   | 93,211   |  
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Effect of exchange rate changes on cash and cash equivalents                           |  |        | -        |   |                         |   | -      |                           |  |   | (3,010       | ) |  |       | -      |   |  |   | (3,010   | )
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Net increase in cash and cash equivalents                                              |  |        | 20,542   |   |                         |   | 70     |                           |  |   | 9,517        |   |  |       | -      |   |  |   | 30,129   |  
|Cash and cash equivalents at beginning of the period                                   |  |        | 92,988   |   |                         |   | 80     |                           |  |   | 6,030        |   |  |       | -      |   |  |   | 99,098   |  
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  
|Cash and cash equivalents at end of the period                                         |  | $      | 113,530  |   |                         | $ | 150    |                           |  | $ | 15,547       |   |  | $     | -      |   |  | $ | 129,227  |  
|                                                                                       |  |        |          |   |                         |   |        |                           |  |   |              |   |  |       |        |   |  |   |          |  



|Note 22: | Supplementary Unaudited Quarterly Financial Information
|-------- | -------------------------------------------------------

The following table sets forth selected unaudited quarterly financial data, which included all adjustments that are necessary, in the opinion of our management, for a fair presentation of its results of
operations for the interim periods (in thousands):



|                                      |  |            |         |   |            |   |         |            |  |   |            |   |  |   |        
|------------------------------------- |  | ---------- | ------- | - | ---------- | - | ------- | ---------- |  | - | ---------- | - |  | - | -------
|                                      |  | 1stQuarter |         |   | 2ndQuarter |   |         | 3rdQuarter |  |   | 4thQuarter
|2009:                                 |  |            |         |   |            |   |         |            |  |   |            |   |  |   |        
|Revenue                               |  | $          | 239,754 |   |            | $ | 255,106 |            |  | $ | 250,469    |   |  | $ | 261,336
|Gross margin                          |  | $          | 59,003  |   |            | $ | 66,731  |            |  | $ | 67,929     |   |  | $ | 74,719 
|Net income (loss) attributable to HNS |  | $          | (4,854  | ) |            | $ | (45,710 | )          |  | $ | (1,570     | ) |  | $ | 7,229  
|Net income (loss)                     |  | $          | (4,464  | ) |            | $ | (45,260 | )          |  | $ | (1,354     | ) |  | $ | 7,521  
|2008:                                 |  |            |         |   |            |   |         |            |  |   |            |   |  |   |        
|Revenue                               |  | $          | 237,020 |   |            | $ | 265,490 |            |  | $ | 271,719    |   |  | $ | 285,662
|Gross margin                          |  | $          | 66,019  |   |            | $ | 66,265  |            |  | $ | 68,850     |   |  | $ | 73,820 
|Net income attributable to HNS        |  | $          | 1,458   |   |            | $ | 2,634   |            |  | $ | 3,585      |   |  | $ | 4,419  
|Net income                            |  | $          | 1,494   |   |            | $ | 2,668   |            |  | $ | 3,620      |   |  | $ | 4,593  



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|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A(T). | Controls and Procedures
|----------- | -----------------------

Disclosure
Controls and Procedures

As required by Rules 13a-15 and 15d-15 of the Securities Exchange Act of 1934, the Company has
evaluated, with the participation of management, including the Chief Executive Officer and the Chief Financial Officer, the effectiveness of its disclosure controls and procedures (as defined in such rules) as of the end of the period covered by
this annual report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the
Company in reports prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the SEC) is recorded, processed, summarized and reported within the time periods specified by the SECs rules and
forms.

Our management, including the Companys Chief Executive Officer and Chief Financial Officer, does not expect that
the Companys disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty,
and that breakdowns can occur because of simple error or mistake.

Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures
may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control Over Financial Reporting

There have been no
changes in the Companys internal control over financial reporting that occurred during the fourth quarter of the year ended December 31, 2009 that have materially affected, or are reasonably likely to materially affect, the Companys
internal control over financial reporting. The Company continues to review its disclosure controls and procedures, including its internal controls over financial reporting, and may from time to time make changes aimed at enhancing their
effectiveness and to ensure that the Companys systems evolve with its business.

Management Report on Internal Control Over Financial
Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial
reporting. Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles in the United States (GAAP) and includes those policies and procedures that:



| |  |  | pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the
company;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the companys assets that
could have a material effect on its financial statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Because of its inherent limitations, a system of internal control over financial reporting
can provide only reasonable assurance and may not prevent or detect misstatements. Further, because of changes in conditions, effectiveness of internal controls over financial reporting may vary over time. Our system contains self-monitoring
mechanisms, and actions are taken to correct deficiencies as they are identified.

Our management conducted an evaluation of
the effectiveness of the system of internal control over financial reporting based on the framework in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, our management concluded that our system of internal control over financial reporting was effective as of December 31, 2009. The effectiveness of our internal controls over financial reporting has been audited by Deloitte &
Touche LLP, an independent registered public accounting firm, as stated in their report, which is included herein.



|Item 9B. | Other Information
|-------- | -----------------

None.



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PART III



|Item 10. | Directors, Executive Officers and Corporate Governance
|-------- | ------------------------------------------------------

Set forth below is certain information concerning our executive officers and members of our Board of Managers. Our Board of Managers is composed of four members. Each manager is elected for a one-year
term or until such persons successor is duly elected or qualified.



|                  |  |     |  |                                                                         
|----------------- |  | --- |  | ------------------------------------------------------------------------
|Name              |  | Age |  | Position                                                                
|Pradman P. Kaul   |  | 63  |  | Chief Executive Officer, President and Chairman of the Board of Managers
|Grant A. Barber   |  | 50  |  | Executive Vice President and Chief Financial Officer                    
|T. Paul Gaske     |  | 56  |  | Executive Vice President, North American Division                       
|Adrian Morris     |  | 55  |  | Executive Vice President, Engineering                                   
|Bahram Pourmand   |  | 63  |  | Executive Vice President, International Division                        
|Bob Buschman      |  | 60  |  | Senior Vice President, Telematics                                       
|George Choquette  |  | 52  |  | Senior Vice President, Engineering                                      
|Mike Cook         |  | 56  |  | Senior Vice President, North America Sales and Marketing                
|John Corrigan     |  | 56  |  | Senior Vice President, Engineering                                      
|Estil Hoversten   |  | 73  |  | Senior Vice President                                                   
|Tom Hsu           |  | 64  |  | Senior Vice President, Terrestrial Microwave                            
|Robert Kepley     |  | 52  |  | Senior Vice President, Engineering                                      
|Sandi Kerentoff   |  | 56  |  | Senior Vice President, Administration and Human Resources               
|Dean A. Manson    |  | 43  |  | Senior Vice President, General Counsel and Secretary                    
|Thomas J. McElroy |  | 54  |  | Senior Vice President and Controller                                    
|John McEwan       |  | 57  |  | Senior Vice President, Operations                                       
|Ashok Mehta       |  | 55  |  | Senior Vice President, Business InformationTechnology Services          
|Vinod Shukla      |  | 61  |  | Senior Vice President, International Division                           
|David Zatloukal   |  | 52  |  | Senior Vice President, North American Operations                        
|Deepak V. Dutt    |  | 65  |  | Vice President and Treasurer                                            
|Andrew D. Africk  |  | 43  |  | Member of the Board of Managers                                         
|Jeffrey A. Leddy  |  | 54  |  | Member of the Board of Managers                                         
|Aaron J. Stone    |  | 37  |  | Member of the Board of Managers                                         

Pradman P. KaulChief Executive Officer, President and Chairman of the Board of Managers. Mr. Kaul has been our Chief Executive Officer and President since 2000. Mr. Kaul has served on and been the
Chairman of our Board of Managers since April 22, 2005 and has been with us since 1973. Previously, Mr. Kaul served as our Chief Operating Officer, Executive Vice President and Director of Engineering. Mr. Kaul has also been the Chief
Executive Officer and President as well as a director of our Parent, Hughes Communications, Inc. (HCI), since February 3, 2006. With over 37 years of experience at the Company, Mr. Kaul has a deep knowledge and understanding of the
Company, its operations and its lines of business. Before joining us, Mr. Kaul worked at COMSAT Laboratories in Clarksburg, Maryland. Mr. Kaul received a Bachelor of Science degree in Electrical Engineering from The George Washington
University and a Master of Science degree in Electrical Engineering from the University of California at Berkeley. He holds numerous patents and has published articles and papers on a variety of technical topics concerning satellite communications.
Mr. Kaul has been inducted as a member of the National Academy of Engineering.

Grant A.
BarberExecutive Vice President and Chief Financial Officer. Mr. Barber has been our Executive Vice President and Chief Financial Officer (CFO) since January 2006. Mr. Barber has also served as the Executive
Vice President and CFO of HCI since February 2006. From 2003 to 2006, Mr. Barber served first as Controller and then as Executive Vice President and Chief Financial Officer for Acterna, Inc., a global manufacturer of test and measurement
equipment for the Telco and Cable markets located in Germantown, Maryland. From 1984 through 2002, Mr. Barber served in various senior financial positions with Nortel Networks in the United States, Canada, France and England. Mr. Barber
received his Bachelor degree in Business Administration from Wilfrid Laurier University and is a Canadian chartered accountant.

T. Paul GaskeExecutive Vice President, North American Division. Mr. Gaske has been our Executive Vice President, North American Division since 1999 and has also served as an Executive Vice President of HCI
since 2006. Mr. Gaske joined us in 1977. Mr. Gaske has held a variety of engineering, marketing, and business management positions



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throughout his career. Mr. Gaske holds a Bachelor of Science degree in Electrical Engineering from the University of Maryland and a Master of Science degree in Computer Science from Johns
Hopkins University in Baltimore, Maryland. He is a member of the Institute of Electrical and Electronics Engineering (IEEE), a published author on satellite networking technologies and markets and the holder of numerous patents in satellite
communications and broadband networking.

Adrian MorrisExecutive Vice President, Engineering.
Mr. Morris has been our Executive Vice President, Engineering since February 2006 and also has served as an Executive Vice President of HCI since 2006. Prior to that, Mr. Morris had been Senior Vice President of Engineering since 1996. His
career began with us in 1982 as a hardware design engineer and he has held a variety of technical and management positions throughout his career. Mr. Morris received a Bachelor of Science degree from Trinity College Dublin and a Master of
Science degree in Digital Techniques from Heriot Watt University, Edinburgh. Prior to joining us, he worked for Ferranti Electronics and Electro Optics Division. Mr. Morris is a co-inventor for a number of patents in digital communications and
has authored several published papers. He is also a member of the IEEE.

Bahram PourmandExecutive Vice
President, International Division. Mr. Pourmand has been our Executive Vice President, International Division since 1993 and has also served as an Executive Vice President of HCI since February 2006. Mr. Pourmand joined us in 1979 and
is currently responsible for all aspects of our international operations, including oversight of profit and loss, marketing, product development and strategic direction for our global activities. He is also a member of our Executive Committee, which
oversees the overall management of the Company. Prior to joining us, Mr. Pourmand was a director with Rockwell International in Dallas, Texas. Mr. Pourmand has a Bachelor of Science degree in Electrical Engineering from Texas Tech
University and a Master of Science degree in Electrical Engineering from Southern Methodist University.

Bob
BuschmanSenior Vice President, Telematics. Mr. Buschman has been our Senior Vice President, Telematics since August 2007. From 1998 to 2007, Mr. Buschman has been responsible for the development of the SPACEWAY System
including the procurement of the SPACEWAY satellite. Mr. Buschman joined us in 1975 as a hardware designer and has held a variety of engineering and program management positions involving digital transmission over satellite and cellular
systems. Mr. Buschman received a Bachelor of Science degree in Electrical Engineering from the University of Maryland and a Master of Science degree in Computer Science from George Washington University. He is also co-inventor on two patents in
digital communications.

George ChoquetteSenior Vice President, Engineering. Mr. Choquette has
been our Senior Vice President, Engineering since October 2005. Mr. Choquette has engineering development responsibility for SPACEWAY and oversight of certain mobile satellite, Ku VSAT and government projects. Mr. Choquette joined us in
1981 and has held various positions prior to his present position. Mr. Choquette has a Bachelor of Science degree in Computer Science from Virginia Tech, and a Masters degree in Business Administration from The George Washington University.

Mike CookSenior Vice President, North American Sales and Marketing. Mr. Cook has been Senior
Vice President, North American Sales and Marketing since March 2002. Mr. Cook is responsible for sales and marketing activities for all of our market sectors including our Enterprise and Consumer groups. He joined us in 1991 as Sales and
Marketing Director for one of our subsidiaries, HNS Ltd, and was responsible for starting up our broadband service businesses in Europe, becoming managing director of our European broadband service business from 1994 to 1999. In addition, he was
appointed Vice President of HNS Europe in 1998 and is currently a member of the board of directors of HNS Europe. Prior to joining us, Mr. Cook ran the U.K. data systems division of Alcatel Business Systems. Mr. Cook has a first class
Bachelor of Science degree in Mathematics from Exeter University in England.

John CorriganSenior Vice
President, Engineering. Mr. Corrigan has been our Senior Vice President, Engineering for Very Large Scale Integration (VLSI) and Wireless Networks since June 1996. He is responsible for the design and implementation of
technologies and custom VLSI for our products and for the development of mobile satellite infrastructure and chipsets. Mr. Corrigan was the engineering manager and one of the principal architects of the AIReach wireless infrastructure
product line, and the GMH-2000 wireless infrastructure for fixed and mobile networks. He began his career with us in 1978, when he developed concepts for local distribution of voice and data. Mr. Corrigan received a Bachelor of Science Degree
in Electrical Engineering from the University of Michigan and a Master of Science Degree in Electrical Engineering from Johns Hopkins University. He holds 14 U.S. patents in the field of wireless communications and is a member of IEEE.



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Estil HoverstenSenior Vice President.Dr. Hoversten has been
our Senior Vice President since May 1992. He has been an officer of the Company and its predecessor organizations since 1978 with responsibilities at various times for business management, product development, strategic planning and new business
development. Before joining us, Dr. Hoversten worked at COMSAT Corporation in Clarksburg, Maryland. Dr. Hoversten received his Bachelor of Science degree, Master of Science degree and his PhD in Electrical Engineering from Iowa State
University and is a noted author on satellite communications technology.

Tom HsuSenior Vice
President, Terrestrial Microwave Group. Mr. Hsu has been our Senior Vice President, Terrestrial Microwave group since 1999. Mr. Hsu oversees profit and loss, product strategy, product design and development, product marketing
and sales, business development, field deployment, and after-sales support. Prior to this, Mr. Hsu held a variety of engineering, marketing and business management positions throughout his career with us, including Vice President of Software
Engineering and Vice President of Business Development for our Wireless Network Division. Mr. Hsu has a Master of Science degree in Computer Science from the University of Massachusetts, a Master of Science degree in Mathematics from the
University of East Texas State and a Bachelor of Science degree in Mathematics from Chung Yuan University in Taiwan.

Robert KepleySenior Vice President, Engineering. Mr. Kepley has been our Senior Vice President, Engineering since July 2006. Mr. Kepley joined us in 1981 as a Member of the Technical Staff in our
Corporate Research Center. Since 1985, he has held a variety of technical and management positions within Engineering including: Engineering Manager of Settop Box development from 1994 to 2002, Manager of VSAT Hardware Engineering, and is currently
manager of Hardware Engineering. Mr. Kepley received his Bachelor of Science and Master of Science degrees in Electrical Engineering from North Carolina State University in Raleigh, North Carolina. He is co-inventor for a number of patents in
electronics and communications systems and has authored several published technical papers.

Sandi
KerentoffSenior Vice President, Administration and Human Resources. Ms. Kerentoff has been our Senior Vice President, Administration and Human Resources since April 2000 and also serves as our Ethics Officer.
Ms. Kerentoffs responsibilities include human resources, facilities, security, travel and corporate services. Ms. Kerentoff joined us in 1977 and, from 1977 to 2000, held various positions. She received her Bachelor of Science degree
in Finance from Michigan State University.

Dean A. MansonSenior Vice President, General Counsel and
Secretary. Mr. Manson has been our and HCI s Senior Vice President, General Counsel and Secretary since August 2007, prior to which he was our Vice President, General Counsel and Secretary since November 2004 and HCIs Vice
President, General Counsel and Secretary since February 2006. Mr. Manson also serves as a director or officer for several of our subsidiaries. Before joining us in June 2000 as an Assistant Vice President, Legal Mr. Manson was associated
with the law firm of Milbank, Tweed, Hadley & McCloy LLP. Mr. Manson earned a Bachelor of Science degree in Engineering from Princeton University and a Juris Doctorate degree from Columbia University School of Law.

Thomas J. McElroySenior Vice President and Controller. Mr. McElroy has been our Senior Vice President and
Controller since August 2007. He is responsible for all financial accounting and reporting matters for our global consolidated operations. From June 2006 to September 2007, Mr. McElroy served as our Vice President and Controller. Prior to
joining us in January 1988 as a Director of Finance, Mr. McElroy was a Senior Manager in the audit group for Price Waterhouse & Co. in Washington, D.C. from 1977 to 1988. He received his Bachelor of Science degree in Accounting from
St. Francis University.

John McEwanSenior Vice President, Operations. Mr. McEwan has been our
Senior Vice President of Manufacturing Operations since March 2001. Mr. McEwan joined us in 1995 as an Assistant Vice President with responsibility for the Materials Management function of the Company. In 1999, he was promoted to Vice
President. In 2000, Mr. McEwan assumed responsibility for the management of all operations and support functions for manufacturing. In 2001, he was promoted to Senior Vice President. Prior to joining us, Mr. McEwan held various management
positions at SCI Systems, Inc. and Burroughs. Mr. McEwan has over 30 years of experience in procurement, materials management and manufacturing operations in Europe and North America.

Ashok MehtaSenior Vice President, Business Information Technology Services(BITS). Mr. Mehta has
been our Senior Vice President of the BITS division since August 2007. Mr. Mehta joined HNS in 1982 and has held a variety of engineering and information technology positions throughout his career. Mr. Mehta holds a Master of Science
degree in



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Electrical Engineering from Northwestern University and a Master of Business Administration degree from Loyola University. He is a member of Institute of Electrical and Electronic Engineering
(IEEE) and inventor of several patents in wireless communications.

Vinod ShuklaSenior Vice
President, International Division. Mr. Shukla has served as Senior Vice President, International Division since 1999. Mr. Shukla is responsible for general management of the international business and, in particular, for the
profit and loss management of network and VSAT equipment sales internationally. From 1990 to 1998, Dr. Shukla was responsible for establishing joint venture companies worldwide to facilitate HNS revenue growth through service companies.
Before joining us in 1980, Dr. Shukla held engineering management positions in ground segment and satellite communication payload development at Rockwell International, Richardson, Texas, and RCA, Ltd, Montreal, Canada, respectively.
Dr. Shukla received his Bachelor of Science degree in Electrical Engineering in 1967 from the Indian Institute of Science in India, a Master of Science degree in Electrical Engineering from Nova Scotia Technical College in Canada in 1968 and
his Ph.D. in Electrical Engineering degree in 1971 from Southern Methodist University in Dallas, Texas. Dr. Shukla has authored several publications in the satellite communications area and is a member of the IEEE.

David ZatloukalSenior Vice President,North American Operations. Mr. Zatloukal has been
our Senior Vice President, North American Operations since 2005. Mr. Zatloukal is responsible for North American Service Delivery including: customer service, program and project management, billing, service management, network engineering and
integration, application certification, as well as the operation of HughesNets broadband and narrowband services in the consumer, small business, government and enterprise markets. Mr. Zatloukal joined us in December 1996 to support the
launch of the consumer internet service business and, from 1996 to 2005, held various positions. Prior to joining us, Mr. Zatloukal spent 14 years with AT&T in various assignments including directing a nationwide operations organization of
more than 700 employees supporting the long distance network. Mr. Zatloukal received a Bachelor of Science degree in Information Science from Western Illinois University. He also has participated in multiple executive management programs,
including the Northwesterns Kellogg School of Business.

Deepak V. DuttVice President and
Treasurer. Mr. Dutt has been our Vice President and Treasurer since January 2001and our Investor Relations Officer since February 2008. Mr. Dutt has served as Vice President, Treasurer and Investor Relations Officer for HCI since March
2007. Mr. Dutt joined us in July 1993 and has held various positions in finance since then, including corporate planning, international finance, treasury and an international assignment as Chief Financial Officer of a subsidiary of our company
where he played a lead role in its start-up and in taking it public. Prior to joining our Company, Mr. Dutt served in various positions in the U.S. and overseas at IBM Corporation in sales, marketing and finance. He received a Bachelor of
Science degree in Engineering from the University of Poona, India.

Andrew D. AfrickMember of the Board
of Managers. Mr. Africk has served on our Board of Managers since April 22, 2005. Mr. Africk is a senior partner of Apollo Advisors, L.P., which, together with its affiliates, acts as managing general partner of the Apollo Investment Funds, a
series of private securities investment funds, where he has worked since 1992. Mr. Africk has significant experience making and managing private equity investments on behalf of Apollo and has over 18 years experience financing, analyzing and
investing in public and private companies. Mr. Africk led the diligence team for the acquisition of the majority ownership of HCI by Apollo and has worked closely with the management of the Company since the acquisition. Mr. Africk also serves on
the boards of directors of Hughes Telematics, Inc., Petroleum Corporation, SOURCECORP, Incorporated and HCI. From 1999 to 2008, Mr. Africk served on the board of directors of SkyTerra Communications, Inc. (SkyTerra), including its
predecessor. From 2005 to 2008 Mr. Africk served as the chairman of the board of directors of Intelsat Holdings, Ltd. From 2003 to 2006, Mr. Africk served on the board of directors of Superior Essex Inc. From 2001 to 2008, Mr. Africk served on the
board of directors of Mobile Satellite Ventures. Mr. Africk serves as the chairman of the Nominating and Corporate Governance Committee and Compensation Committee of HCI.

Jeffrey A. LeddyMember of the Board of Managers. Mr. Leddy has served on our Board of Managers since April 22, 2005. Mr. Leddy is also a director of HCI. Mr. Leddy is currently
the Chief Executive Officer of Hughes Telematics and has more than 30 years of experience with communications companies. He previously served as SkyTerras Chief Executive Officer and President from April 2003 through December 2006, having
served as its President and Chief Operating Officer since October 2002 and its Senior Vice President of Operations since June 2002. From September 1980 to December 2001, Mr. Leddy worked for EMS Technologies, most recently as a Vice President. Mr.
Leddy also currently serves on the Board of Directors of Hughes Telematics, Arrowstream, Inc. and Hughes Systique Corporation.

Aaron J. StoneMember of the Board of Managers. Mr. Stone has served on our Board of Managers since April 22, 2005. Mr. Stone is a senior partner of Apollo Advisors,
L.P., which, together with its affiliates, acts as managing general partner of the Apollo Investment Funds, a series of private securities investment funds, where he has worked since 1997. Mr. Stone has significant experience making and managing
private equity investments on behalf of Apollo and has over 14 years experience financing, analyzing and investing in public and private companies. Mr. Stone worked with the diligence team for the acquisition of the majority ownership of HCI by
Apollo and has worked closely with the management of the Company since the acquisition. Mr. Stone also serves on the board of directors of AMC Entertainment Inc., Hughes Telematics, Inc., Parallel Petroleum, Connections Academy, LLC and HCI. Mr.
Stone also serves on the Nominating and Corporate Governance Committee and the Compensation Committee of HCI. From 2005 to 2008, Mr. Stone served on the boards of directors of SkyTerra, Intelsat Holdings, Ltd. and Mobile Satellite Ventures. From
2004 to 2007, Mr. Stone served on the board of directors of Educate, Inc.



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Composition of the Board of Managers and Committees

Our Board of Managers currently consists of four members. The individuals currently serving on the board are Pradman P. Kaul, Jeffrey A.
Leddy, Andrew D. Africk and Aaron J. Stone. The chairman of the Board of Managers is Pradman P. Kaul. Our Board of Managers is elected annually, and each member holds office for a one-year term.

Our Board of Managers has the authority to appoint committees to perform certain management and administration functions. Our Board of
Managers currently has an audit committee which consists of Jeffrey A. Leddy and Aaron J. Stone. Our audit committee selects, on behalf of our Board of Managers, an independent public accounting firm to be engaged to audit our financial statements,
discusses with the independent auditors their independence, reviews and discusses the audited financial statements with the independent auditors and management and recommends to our Board of Managers whether the audited financial statements should
be included in our Annual Reports on Form 10-K filed with the Securities and Exchange Commission (the SEC). Our Board of Managers has not designated an audit committee financial expert.

The Company does not have a standing nominating committee or a committee performing a similar function. Pursuant to our Second Amended and
Restated Limited Liability Company Agreement, members of our Board of Managers are elected by the holders of our Class A membership interests. Our parent, HCI, is currently the holder of all of our Class A membership interests and the
Board of Directors of HCI nominates and elects the members of our Board of Managers.

The Company does not have a compensation
committee. The Compensation Committee of the Board of Directors of HCI, our parent, is responsible for establishing, implementing and continually monitoring the compensation of our executive officers.

Code of Ethics

Hughes
Communications, Inc. (HCI) has adopted a written Code of Ethics (Code of Ethics), which is applicable to our principal executive officer, chief financial officer and principal accounting officer or controller and other
executive officers performing similar functions (each, a Selected Officer). The Code of Ethics is available on our website at www.hughes.com or you may request a free copy of the Code of Ethics can be requested from:

Hughes Network System, LLC

11717 Exploration Lane

Germantown, MD 20876

Attn: Sandi Kerentoff

To date, there have been no waivers under the Code of Ethics. We intend to disclose any changes in or waivers under the Code of Ethics applicable to any Selected Officer or by filing a Form 8-K.



|Item 11. | Executive Compensation
|-------- | ----------------------

Compensation
Discussion and Analysis

Overview of Compensation Program

The Company is a wholly-owned subsidiary of Hughes Communications, Inc. (HCI or Parent). The Compensation Committee
of the Board of Directors of HCI, which we refer to as the Compensation Committee, is responsible for establishing, implementing and continually monitoring the Companys executive compensation program, including the compensation of our Chief
Executive Officer (Pradman Kaul), Chief Financial Officer (Grant Barber), and our three other most highly compensated executive officers (Paul Gaske, Bahram Pourmand and Adrian Morris). We refer to these executives throughout this section as our
Named Executive Officers. Generally, the types of compensation and benefits provided to our Named Executive Officers are similar to those provided to other officers of the Company. All of our Named Executive Officers are officers and employees of
HCI and also provide services to the Company. All compensation earned by our Named Executive Officers is paid by HCI which in turn bills the Company 98% of the base salaries and all other compensation of our Named Executive Officers plus a 2%
service fee. The remaining 2% of the base salaries and other compensation paid to our Named Executive Officers is expensed by, and for services to, HCI.



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Compensation Objectives and Philosophy

The primary objective of our executive compensation program is to closely align the compensation paid to executive officers, including our
Named Executive Officers, with the short-term and long-term performance of the Company and to allow the Company to attract, retain and motivate key executives with talent critical to drive long-term success and create value to the Company. The
Compensation Committee seeks to achieve this objective by linking a substantial portion of each executives total compensation to the achievement of the Companys financial and operational goals. Our executive compensation program is
designed to provide for both guaranteed and incentive compensation based on the Companys performance, to motivate our executives to achieve the business goals set by the Company and to reward the executives for achieving these goals.
Guaranteed compensation consists primarily of base salary, which represents 50% or less of total direct compensation. Incentive compensation consists of annual performance bonuses and equity compensation.

The Compensation Committee evaluates individual and Company performance with a goal of setting total compensation at levels that the
Compensation Committee believes are competitive with the compensation paid to executives in companies of similar size and industry while also reviewing internal comparisons (including performance and levels of responsibility). The Compensation
Committee believes that base salaries should be competitive to attract and retain qualified executive officers, and that executive officers should be provided opportunities to own shares of the Companys stock to align their interests with the
Companys shareholders. In addition, the Compensation Committee believes that incentive compensation should be based primarily on the accomplishment of the Companys performance goals in the interest of building a cohesive management team.
We believe that our current executive compensation program provides an overall level of target compensation and compensation opportunity that is appropriate for a company of our size and industry.

Elements of Compensation

The Compensation Committee establishes the elements of our executive compensation program and determines the amount of total compensation to be paid to each of our Named Executive Officers. Members of management generally do not play a role
in establishing the elements of compensation or the amount of compensation awarded to executives, including named executive officers, other than to make recommendations to the Compensation Committee regarding Company Performance Targets used to
determine annual bonuses, as discussed below. The Compensation Committee has not engaged a compensation consultant to assist the Company in determining the compensation provided to our Named Executive Officers.

Our executive compensation program consists of the following key elements:



| |  |  | base salary
| | - |  | -----------



| |  |  | annual performance bonuses
| | - |  | --------------------------



| |  |  | equity compensation
| | - |  | -------------------



| |  |  | perquisites and other compensation
| | - |  | ----------------------------------

Our executive officers also participate in the Companys and HCIs other employee benefit plans on the same terms as other employees. Our benefit plans include medical and dental coverage, long
and short term disability coverage and basic life insurance equal to two times annual base salary. In addition, Pradman Kaul, our Chief Executive Officer, receives enhanced medical coverage for which he has no premium payment and no co-payments.
This benefit was in place prior to the assumption of his employment agreement by HCI and HCI has agreed to continue to provide this benefit.

Base SalaryBase salaries for our Named Executive Officers are established at the beginning of the term of each executives employment agreement based on the executives
responsibilities and a comparison to competitive market levels for the executives job function. The base salaries of our Named Executive Officers are reviewed on an annual basis by the Compensation Committee and at the time of a promotion or a
significant change in responsibility. Factors considered for salary increases, although informally applied, are: individual and corporate performance, individual level of responsibility, inflation, contributions to the Companys overall
success, and current competitive market levels. For 2009, after review of the competitive market levels, and the recent economic conditions, the Compensation Committee did not grant salary increases to our general employee population, including the
Named Executive Officers. As a result, the base salaries of our Named Executive Officers remained at the following 2008 levels, $620,090 for Mr. Kaul, $382,200 for Mr. Barber, $426,983 for Mr. Gaske, $426,733 for Mr. Pourmand and
$367,183 for Mr. Morris. The Compensation Committee has not yet determined if salary increases will be granted to our Named Executive Officers for 2010.



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Annual Performance BonusesThe Annual Incentive Plan (the AIP) is an
annual performance bonus program adopted by the Compensation Committee under the HCI 2006 Equity and Incentive Plan (the Plan). The AIP is designed to provide cash awards to our executive officers for achieving the Companys
financial and operational goals. The Compensation Committee believes that as an executives level of seniority and responsibility within the Company increases, a greater percentage of the executives compensation should be tied to the
Companys performance. Our Named Executive Officers and other officers of the Company and HCI participate in the AIP. Annual performance bonuses awarded under the AIP are reviewed and approved by the Compensation Committee and are paid in cash
in a lump sum in the first quarter following the completion of each fiscal year. Annual performance bonuses for 2009 were awarded to all of our Named Executive Officers. Pursuant to his employment agreement and the AIP, each executive officer is
eligible to receive an annual performance bonus up to an amount equal to a specified percentage of the executives annual base salary, which we refer to as the executives bonus target. For 2009, based on seniority and level of
responsibility, the Compensation Committee set the bonus targets for each of our Named Executive Officers at 100% for Pradman Kaul, 70% for Paul Gaske, and 60% for Messrs. Barber, Pourmand and Morris.

The Compensation Committee annually determines a bonus pool for the year based on each executives target bonus amount and competitive
market levels among the Companys peer group (as discussed under Targeted Compensation) and makes awards under the AIP based on the level of achievement of our performance targets. The Compensation Committee may increase the annual
performance bonus paid to the executive up to an additional 50% of the executives target bonus amount if the Companys performance targets are exceeded. The Company performance targets to be used are established by the Compensation
Committee at the beginning of each fiscal year based on financial and other metrics that the Compensation Committee has determined are indicative of the Companys annual performance and position in the market. For 2009, the performance target
components were revenue of $1,082.80 million, adjusted EBITDA of $175.0 million and cash balance of $273.5 million (referred to collectively as the Company Performance Targets) and a subjective factor to be determined by the Compensation Committee.
If the Company achieves the annual budgeted amount for each of the Company Performance Targets, the Compensation Committee will award 100% of the bonus pool to the executives that participate in the AIP, with our revenue, adjusted EBITDA, cash
balance and the subjective factor (based on overall Company performance) weighted at 30%, 40%, 15%, and 15%, respectively. Weight is allocated among the Company Performance Targets based on the significance of the target to the Companys
overall performance. Historically, the Compensation Committee has weighted the subjective factor at 15% of the total bonus amount and has determined not to adjust the weight for 2009. The measurement of actual performance is determined by
interpolating the results on a straight line basis against the Company Performance Targets. If any of the Company Performance Targets fall below 90% of the budgeted amount, no weight will be awarded for that target. For 2009, the Compensation
Committee awarded the following percentages of each Named Executive Officers 2009 base salary under the AIP: 90% to Mr. Kaul (compared to a target of 100%), 63% to Mr. Gaske (compared to a target of 70%), and 54% to Messrs. Barber,
Pourmand and Morris (compared to a target of 60%). The actual 2009 AIP amounts awarded to each of our Named Executive Officers are shown in the Summary Compensation Table. The following table sets forth the percentage of the bonus pool that the
Compensation Committee would award based on the targets established by the Compensation Committee for 2009 AIP awards:



|                   |  |                                      |  |     |  |      |  |      
|------------------ |  | ------------------------------------ |  | --- |  | ---- |  | -----
|                   |  | Percentage of Budget Amount Achieved
|                   |  | 90%                                  |  | 95% |  | 100% |  | 110% 
|Revenue            |  | 12%                                  |  | 21% |  | 30%  |  | 45%  
|Adjusted EBITDA(1) |  | 0%                                   |  | 30% |  | 40%  |  | 60%  
|Cash balance       |  | 9%                                   |  | 12% |  | 15%  |  | 22.5%
|Subjective         |  | 0%                                   |  | 8%  |  | 15%  |  | 22.5%
|                   |  |                                      |  |     |  |      |  |      
|Total              |  | 21%                                  |  | 71% |  | 100% |  | 150% 
|                   |  |                                      |  |     |  |      |  |      



|(1) | Adjusted EBITDA is defined as earnings (losses) before interest, income taxes, depreciation, amortization, equity incentive plan compensation and other adjustments
permitted by the debt instruments of HNS. For the fiscal year ended December 31, 2009, Adjusted EBITDA is calculated from our audited financial statements by beginning with GAAP net loss (i) adding back interest expense; income tax
expense; depreciation and amortization; equity plan compensation expense; and long-term cash retention compensation and loss on impairment; then (ii) subtracting interest income. Interest expense, income tax expense, and loss on impairment
appear as line items on the Consolidated Statement of Operations. Depreciation and amortization appear as a line item on the Consolidated Statement of Cash Flows. The long-term cash retention compensation ($1.5 million for the year ended December,
31, 2009) and equity plan compensation expense ($6.9 million for the year ended December 31, 2009) appear on the Consolidated Statement of Operations as part of general and administrative expense.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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The following table sets forth the actual performance by the Company for each of the Company
Performance Targets established by the Compensation Committee for 2009 AIP awards and the corresponding AIP payout associated with each target (dollars in millions):



|                |  |                   |       |                     |        |        |      
|--------------- |  | ----------------- | ----- | ------------------- | ------ | ------ | -----
|                |  | ActualPerformance |       | % of BudgetAchieved |        | Payout
|Revenue         |  | $                 | 983.0 |                     | 90.8%  |        | 13.4%
|Adjusted EBITDA |  | $                 | 174.5 |                     | 99.8%  |        | 39.4%
|Cash balance    |  | $                 | 305.8 |                     | 111.8% |        | 22.5%
|Subjective      |  |                   |       |                     | 15.0%  |        | 15.0%
|                |  |                   |       |                     |        |        |      
|Total           |  |                   |       |                     |        |        | 90.3%
|                |  |                   |       |                     |        |        |      

Equity CompensationOur equity
compensation is entirely incentive based compensation and is designed to serve as a retention tool and to provide a long-term incentive to employees directly related to the success of the Company. Our Named Executive Officers are eligible to
participate in the Plan, which provides for equity awards including restricted stock, stock options, stock appreciation rights and other equity based awards of HCI. Each Named Executive Officer is reviewed annually by the Compensation Committee to
determine if an equity award is appropriate and the level of any such award, however, the Compensation Committee does not anticipate making awards of equity compensation each year.

On April 24, 2008 each of our Named Executive Officers was awarded options to purchase HCIs common stock under the Plan.
Mr. Kaul was awarded 100,000 options and each of Messrs. Barber, Gaske, Pourmand and Morris were awarded 25,000 options. These options are subject to time vesting restrictions over four years and vest 50% on April 24, 2010, 25% on
April 24, 2011, and 25% on April 24, 2012. These options had an exercise price of $54.00, the closing price of HCIs common stock on April 24, 2008, the grant date of the options. In 2009, the Company determined that the options
were under water and no longer served as a retention tool or provided the intended incentive to the option holders, including our Named Executive Officers. On April 16, 2009, all of the options awarded to each of our Named Executive Officers on
April 24, 2008, along with those of all other eligible participants, were exchanged for new stock options as part of HCIs offer to exchange certain outstanding stock options for new stock options (the Options Exchange
Program). The new options are also subject to time vesting restrictions and vest 50% on April 16, 2011, 25% on April 16, 2012, and 25% on April 16, 2013. The new options have an exercise price of $14.47, the closing price of
HCIs common stock on April 15, 2009.

In addition to equity compensation that may be granted under the Plan,
pursuant to their employment agreements, each of our Named Executive Officers was granted awards of our Class B membership interests pursuant to their employment agreements. Each of Messrs. Kaul, Gaske, Pourmand, and Morris were granted Class B
membership interests upon the original execution of their employment agreements with the Company in 2005 and Mr. Barber was granted Class B membership interests upon the execution of his employment agreement with HCI in 2006.

Perquisites and Other CompensationHCI provides our Named Executive Officers with perquisites and other personal benefits that
the Company and the Compensation Committee believe are reasonable and consistent with the Companys overall executive compensation program to better enable the Company to attract and retain superior employees for key positions. The Compensation
Committee annually reviews the levels of perquisites and other personal benefits provided to our Named Executive Officers, which include, without limitation:



| |  |  | Car allowance in the amount of $15,120 per year for Mr. Kaul and $12,940 per year for each of Messrs. Barber, Gaske, Pourmand, and Morris.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Financial planning services are provided to Mr. Kaul and Mr. Gaske. These services were in place prior to the assumption of their employment
agreements by HCI and HCI has agreed to continue to provide these services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Enhanced medical coverage is provided to Mr. Kaul, for which he has no premium payment and no co-payments. This benefit was in place prior to the
assumption of Mr. Kauls employment agreement by HCI and HCI has agreed to continue to provide this benefit.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Targeted Compensation

Target total compensation for each Named Executive Officer is established by the Compensation Committee based on peer group data, internal
equity and performance of the Company and individual. Members of management do not play a role in establishing the target compensation for our Named Executive Officers; however, management recommends to the Compensation Committee the Company
Performance Targets that are used to determine the annual performance bonus payments under the AIP. The Compensation Committee may, in its discretion, use or modify the Company Performance Targets recommended by management. The Company uses Equilar,
an independent executive compensation research firm to create reports showing the percentile position of each Named Executive Officer compared to the selected peer group for base salary, total cash compensation and total direct compensation. Equilar
is an on-line tool used by consultants and companies to obtain competitive information from proxy data. The Company did not engage any compensation consultants for executive compensation studies. The peer group used for the Equilar benchmarking tool
includes: American Tower Corp, CenturyTel, Earthlink, Frontier Communications, Global Crossing, Loral Space & Communications, Mediacom Communications, RCN Corp, SAVVIS, TW Telecom, ViaSat, and XO Holdings. The Companys peer group
consists of companies with which management and the Compensation Committee believe we compete for executive talent and stockholder investment. The Equilar report for 2009 showed the following results when we were compared to the peer group
companies:



|                                   |  |                 |  |                   |  |                                                |  |                                  |  |                                       
|---------------------------------- |  | --------------- |  | ----------------- |  | ---------------------------------------------- |  | -------------------------------- |  | --------------------------------------
|                                   |  |                 |  |                   |  | HNS Compared to CompetitiveMarket  Proxy Data
|Position                           |  | Executive       |  | OfficerComparison |  | BaseSalaryPercentile                           |  | Total CashCompensationPercentile |  | Total DirectCompensationPercentile (1)
|Chairman & Chief Executive Officer |  | Pradman Kaul    |  | CEO               |  | 18th                                           |  | 18th                             |  | 7th                                   
|Executive Vice President           |  | T. Paul Gaske   |  | 2nd highest paid  |  | 50th                                           |  | 43rd                             |  | 21st                                  
|Executive Vice President           |  | Bahram Pourmand |  | 3rd highest paid  |  | 78th                                           |  | 69th                             |  | 39th                                  
|Chief Financial Officer            |  | Grant Barber    |  | CFO               |  | 65th                                           |  | 61st                             |  | 28th                                  
|Executive Vice President           |  | Adrian Morris   |  | 5th highest paid  |  | 83rd                                           |  | 84th                             |  | 46th                                  



|(1) | Includes intrinsic annualized value of each Named Executive Officers interest in the Company through their Class B membership interests and all compensation
received by the Named Executive Officers, including awards under the Plan, averaged over the vesting period.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Compensation Committee seeks to set total compensation at levels that the Compensation Committee believes will retain our Named Executive Officers and at amounts that are competitive with the compensation paid to executives in similar
companies. Upon review of the Equilar report for 2009, the Compensation Committee determined that no changes to the Companys current executive compensation program were necessary.

The Compensation Committee believes that as an executives level of seniority and responsibility within the Company increases, a
greater percentage of the executives compensation should be tied to the Companys performance. Accordingly, the Compensation Committee set total compensation targets for 2009 as the following:



|                                                   |  |                                        |  |                                         |  |                                            
|-------------------------------------------------- |  | -------------------------------------- |  | --------------------------------------- |  | -------------------------------------------
|                                                   |  | Base Salary asa % of TotalCompensation |  | Bonus Targetas a % of TotalCompensation |  | Equity Targetas a % of TotalCompensation(1)
|Chief Executive Officer                            |  | 33%                                    |  | 33%                                     |  | 34%                                        
|Chief Financial Officer  Executive Vice President |  | 47%                                    |  | 28%                                     |  | 25%                                        
|Executive Vice Presidents                          |  | 46%                                    |  | 29%                                     |  | 25%                                        



|(1) | Includes intrinsic annualized value of each Named Executive Officers interest in the Company through their Class B membership interests. Also includes all
compensation received by the executive, including awards under the Plan, averaged over the vesting period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Termination
and Change of Control Benefits

The Compensation Committee has determined the appropriate levels of payments to be
made to our Named Executive Officers upon the termination of their employment, including a termination of employment in connection with a change of control of the Company, to provide the executive officer with adequate income during the period that
the executive officer



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may not compete with the Company, pursuant to the provisions of his employment agreement, and while seeking other employment. All of our Named Executive Officers receive the same benefits upon
termination of employment in connection with a change of control of the Company. The Company does not make any payments to our Named Executive Officers, or accelerate the vesting of any equity compensation awards granted to such officers solely on
the basis of a change of control of the Company. Payments are triggered only if the executive officer is terminated within one year, without cause, following a change of control of the Company. See Potential Payments upon Termination and
Change of control.

Section 162(m)

Under Section 162(m) of the Internal Revenue Code of 1986, as amended (the Code), as interpreted by IRS Notice 2007-49, a public company generally may not deduct compensation in excess of
$1.0 million paid to its chief executive officer and its three most highly compensated executive officers (other than the chief executive officer and the chief financial officer). Qualifying performance-based compensation will not be subject to the
deduction limitation if certain requirements are met. While Section 162(m) of the Code is not applicable to the Company, it is applicable to HCI.

The Compensation Committee generally structures the Companys and HCIs compensation programs, where feasible, to minimize or eliminate the impact of the limitations of Section 162(m) of
the Code. However, the Compensation Committee reserves the right to use its judgment to authorize compensation payments that do not comply with the exemptions in Section 162(m) of the Code when it believes that such payments are appropriate and
in the best interests of its stockholders, after taking into consideration changing business conditions or the officers performance. With respect to awards intended to qualify as performance-based compensation under Section 162(m) of the
Code, no payment may be made under our compensation program prior to certification by the Compensation Committee that the applicable performance goals have been attained. The Company believes that the compensation paid under our compensation program
in 2009 is fully deductible for federal income tax purposes.

Common Stock Ownership Guidelines

We believe that share ownership by our employees, including our Named Executive Officers, is the most effective method to deliver superior
stockholder returns by increasing the alignment between the interests of our employees and our shareholders. We do not, however, have a formal requirement for share ownership by any group of employees.

Compensation Committee Report

The Compensation Committee of HCIs Board of Directors reviews and either approves, on behalf of our Board of Managers, or recommends to our Board of Managers for approval: (i) the annual salaries and other compensation of our
executive officers and (ii) individual stock and stock option grants to each of our executive officers. The Compensation Committee also provides assistance and recommendations with respect to our compensation policies and practices and assists
with the administration of our compensation plans. Mr. Africk is the chairman of the Compensation Committee and the other member of the committee is Mr. Stone. The Compensation Committee has reviewed and discussed the Compensation
Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to our Board of Managers that the Compensation Discussion and Analysis be included in this report.



COMPENSATION COMMITTEEAndrew D. Africk, ChairmanAaron J. Stone


Summary Compensation Table

The following table sets forth, for the years
ended December 31, 2009, 2008 and 2007 the compensation for services in all capacities earned by our Named Executive Officers. All of our Named Executive Officers are officers and employees of HCI and provide services to the Company. All
compensation reflected in this section was paid or awarded directly by HCI, which in turn bills HNS for 98% of the base salaries and all other compensation of our Named Executive Officers plus a 2% service fee. The remaining 2% of the base salaries
and all other compensation paid to our Named Executive Officers are expensed by, and for service to, HCI. The compensation reflected in the Summary Compensation Table below is for service to the Company and HCI.



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|                                            |      |      |   |           |           |          |         |             |   |                 |   |                                         |           |                                                                     |   |                       |           |       |   |   |   |         |         |   |           |          
|------------------------------------------- | ---- | ---- | - | --------- | --------- | -------- | ------- | ----------- | - | --------------- | - | --------------------------------------- | --------- | ------------------------------------------------------------------- | - | --------------------- | --------- | ----- | - | - | - | ------- | ------- | - | --------- | ---------
|Name and Principal Position                 |      | Year |   | Salary    |           | Bonus(1) |         | StockAwards |   | OptionAwards(2) |   | Non-EquityIncentive PlanCompensation(1) |           | Change inPension Valueand
Non-QualifiedDeferredCompensationEarnings |   | All OtherCompensation |           | Total
|Pradman Kaul(3)CEO and Chairman
ofthe Board |      | 2009 |   | $         | 632,630   |          | $       | 94,000      |   | $               | - |                                         | $         | 465,000                                                             |   | $                     | 465,000   |       | $ | - |   | $       | 147,197 |   | $         | 1,803,827
|                                            | 2008 |      | $ | 637,370   |           | $        | 94,000  |             | $ | -               |   | $                                       | 2,443,000 |                                                                     | $ | 602,000               |           | $     | - |   | $ | 127,183 |         | $ | 3,903,553
|                                            | 2007 |      | $ | 607,589   |           | $        | 67,000  |             | $ | -               |   | $                                       | -         |                                                                     | $ | 483,000               |           | $     | - |   | $ | 114,658 |         | $ | 1,272,247
|                                            |      |      |   |           |           |          |         |             |  
|Grant Barber(4)Chief
FinancialOfficer       |      | 2009 |   |           | 382,200   |          |         | 35,000      |   |                 | - |                                         |           | 116,250                                                             |   |                       | 172,000   |       |   | - |   |         | 50,572  |   |           | 756,022  
|                                            | 2008 |      |   | 382,351   |           |          | 35,000  |             |   | -               |   |                                         | 610,750   |                                                                     |   | 223,000               |           |       | - |   |   | 52,341  |         |   | 1,303,441
|                                            | 2007 |      |   | 360,850   |           |          | 30,000  |             |   | -               |   |                                         | -         |                                                                     |   | 218,000               |           |       | - |   |   | 47,465  |         |   | 656,315  
|                                            |      |      |   |           |           |          |         |             |  
|Paul Gaske(5)Executive
VicePresident        |      | 2009 |   |           | 439,565   |          |         | 45,000      |   |                 | - |                                         |           | 116,250                                                             |   |                       | 225,000   |       |   | - |   |         | 77,806  |   |           | 903,621  
|                                            | 2008 |      |   | 437,656   |           |          | 45,000  |             |   | -               |   |                                         | 610,750   |                                                                     |   | 290,000               |           |       | - |   |   | 71,391  |         |   | 1,454,797
|                                            | 2007 |      |   | 406,640   |           |          | 37,000  |             |   | -               |   |                                         | -         |                                                                     |   | 267,000               |           |       | - |   |   | 79,484  |         |   | 790,124  
|                                            |      |      |   |           |           |          |         |             |  
|Bahram Pourmand(6)Executive
VicePresident   |      | 2009 |   |           | 426,754   |          |         | 39,000      |   |                 | - |                                         |           | 116,250                                                             |   |                       | 193,000   |       |   | - |   |         | 60,230  |   |           | 835,234  
|                                            | 2008 |      |   | 426,754   |           |          | 39,000  |             |   | -               |   |                                         | 610,750   |                                                                     |   | 249,000               |           |       | - |   |   | 62,435  |         |   | 1,387,939
|                                            | 2007 |      |   | 407,115   |           |          | 32,000  |             |   | -               |   |                                         | -         |                                                                     |   | 229,000               |           |       | - |   |   | 54,833  |         |   | 722,948  
|                                            |      |      |   |           |           |          |         |             |  
|Adrian Morris(7)Executive
VicePresident     |      | 2009 |   |           | 370,061   |          |         | 34,000      |   |                 | - |                                         |           | 116,250                                                             |   |                       | 165,000   |       |   | - |   |         | 48,146  |   |           | 733,457  
|                                            | 2008 |      |   | 367,203   |           |          | 34,000  |             |   | -               |   |                                         | 610,750   |                                                                     |   | 214,000               |           |       | - |   |   | 49,287  |         |   | 1,275,240
|                                            | 2007 |      |   | 361,143   |           |          | 32,000  |             |   | -               |   |                                         | -         |                                                                     |   | 229,000               |           |       | - |   |   | 44,205  |         |   | 666,348  
|                                            |      |      |   |           |           |          |         |             |   |                 |   |                                         |           |                                                                     |   |                       |           |       |   |   |   |         |         |   |           |          
|TotalCompensation                           |      | 2009 |   | $         | 2,251,210 |          | $       | 247,000     |   | $               | - |                                         | $         | 930,000                                                             |   | $                     | 1,220,000 |       | $ | - |   | $       | 383,951 |   | $         | 5,032,161
|                                            | 2008 |      | $ | 2,251,334 |           | $        | 247,000 |             | $ | -               |   | $                                       | 4,886,000 |                                                                     | $ | 1,578,000             |           | $     | - |   | $ | 362,637 |         | $ | 9,324,970
|                                            | 2007 |      | $ | 2,143,337 |           | $        | 198,000 |             | $ | -               |   | $                                       | -         |                                                                     | $ | 1,426,000             |           | $     | - |   | $ | 340,645 |         | $ | 4,107,982
|                                            |      |      |   |           |           |          |         |             |   |                 |   |                                         |           |                                                                     |   |                       |           |       |   |   |   |         |         |   |           |          



|(1) | Each year, we award a bonus to each Named Executive Officer under the AIP that consists of amounts awarded in connection with the achievement of the Company Performance
Targets and the subjective factor collectively. The amounts reflected in the Bonus column include the portion of the AIP award paid to each Named Executive Officer based on the subjective factor. Amounts paid in connection with the achievement of
the Company Performance Targets are reflected in the Non-Equity Incentive Plan Compensation column. All bonuses are paid in the year following the year it is earned.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On April 24, 2008. Mr. Kaul was awarded 100,000 stock options and Messrs. Barber, Gaske, Pourmand and Morris were each awarded 25,000 stock options. Each of
these stock options was exchanged on April 16, 2009 for substantially similar stock options. There were no stock options awarded during 2007. The amounts listed reflect the full, grant date, market value of the options as computed using the
Black-Scholes Model, $24.43 as of April 24, 2008, and $4.65 as of April 16, 2009. See Note 15Employee Share-Based Payments to the Companys audited consolidated financial statements included in Item 8 of this report for a
discussion of the assumptions made in the valuation of the option awards.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | For 2009, Mr. Kauls salary includes his salary earned of $620,111 plus $12,519 accrued, but unused paid time off (PTO). For 2008, Mr. Kauls salary
includes his salary earned of $620,110 plus $17,260 accrued, but unused PTO. For 2007, Mr. Kauls salary includes his salary earned of $590,554 plus $17,035 accrued, but unused, PTO. Mr. Kauls all other compensation includes the
Companys matching contributions to our qualified 401(k) plan of $14,700 for 2009, $13,800 for 2008, and $13,500 for 2007 and our non-qualified excess benefit plan of $31,482 for 2009, $57,769 for 2008, and $48,748 for 2007; a special after tax
bonus of $32,784 in lieu of a company contribution to the non-qualified excess benefit plan; a car allowance of $15,120 for 2009, $15,702 for 2008, $15,120 for 2007; executive medical coverage of $20,205 for 2009, $16,757 for 2008 and $15,008 for
2007; financial planning services in the amount of $11,876 for 2009, $11,089 for 2008, of which $169 of expense was incurred in 2007 but paid in 2008, and $10,500 for 2007; and a 50% PTO cashout payment in the amount of $11,926 for 2009 and,
$5,962.80 for 2008 for PTO accrued in prior years. Other items (below $10,000/year) include group term life insurance coverage over $50,000, excess medical coverage, and personal liability insurance reimbursement.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | For 2009, Mr. Barbers salary includes his salary earned of $382,200. Mr. Barber used all of his PTO earned in 2009. For 2008, Mr. Barbers
salary includes his salary earned of $382,200 plus $151 accrued, but unused PTO. For 2007, Mr. Barbers salary includes his salary earned of $359,800 plus $1,050 accrued, but unused, PTO. Mr. Barbers all other compensation
includes the Companys matching contributions to its qualified 401(k) plan of $11,925 for 2009, $12,650 for 2008 and $12,375 for 2007 and the non-qualified excess benefit plan of $19,404 for 2009, $24,852 for 2008 and $18,384 for 2007; a car
allowance of $12,940 for 2009, $13,438 for 2008, and $12,940 for 2007. Other items (below $10,000/year) include reimbursement for a management physical for 2007, group term life insurance coverage over $50,000, a special after tax bonus in lieu of a
Company contribution to the non-qualified excess benefit plan for 2009; and a credit for long term disability insurance.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | For 2009, Mr. Gaskes salary includes his salary earned of $427,003 plus $12,562 accrued, but unused PTO. For 2008, Mr. Gaskes salary includes his
salary earned of $427,003 plus $10,652 accrued, but unused PTO. For 2007, Mr. Gaskes salary includes his salary earned of $406,640. Mr. Gaske used all of his PTO earned in 2007. Mr. Gaskes all other compensation includes
the Companys matching contributions to its qualified 401(k) plan of $14,700 for 2009, $13,800 for 2008, and $13,500 for 2007 and the non-qualified excess benefit plan of $21,679 for 2009, $30,999 for 2008, and $38,511 for 2007; a car allowance
of $12,940 for 2009, $13,438 for 2008 and $12,940 for 2007; and financial planning services in the amount of $11,876 for 2009, $11,089 for 2008, of which $169 of expense was incurred in 2007 but paid in 2008, and $10,651 for 2007. Other items (below
$10,000/year) include reimbursement for a management physical for 2008 and 2007, a special after tax bonus in lieu of a company contribution to the non-qualified excess benefit plan for 2009 and group term life insurance coverage over $50,000.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | For 2009, Mr. Pourmands salary includes his salary earned of $426,754. Mr. Pourmand used all of his PTO earned in 2009. For 2008,
Mr. Pourmands salary includes his salary earned of $426,754. For 2007, Mr. Pourmands salary includes his salary earned of $406,411 plus $10,746 accrued but unused PTO ($5,090 of which was used in 2008). Mr. Pourmands
all other compensation includes the Companys matching contributions to its qualified 401(k) plan of $14,700 for 2009, $13,800 for 2008, and $13,500 for 2007 and the non-qualified excess benefit plan of $21,666 for 2009, $28,403 for 2008, and
$24,238 for 2007 and a car allowance of $12,940 for 2009, $13,438 for 2008 and $12,940 for 2007. Other items (below $10,000/year) include group term life insurance coverage over $50,000, reimbursement for a medical physical exam(in 2008, incurred in
2007, a special after tax bonus in lieu of a Company contribution to the non-qualified excess benefit plan for 2009 and a credit for long term disability insurance.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | For 2009, Mr. Morris salary includes his salary earned of $367,203 plus $2,858 accrued, but unused PTO. For 2008, Mr. Morris salary includes his
salary earned of $367,203. For 2007, Mr. Morris salary includes his salary earned of $349,710 plus $11,433 accrued but unused PTO ($6,039 of which was used in 2008). Mr. Morris all other compensation includes the Companys
matching contributions to its non-qualified excess benefit plan of $18,643 for 2009, $24,699 for 2008, and $20,171 for 2007 and a car allowance of $12,940 for 2009, $13,438 for 2008 and $12,940 for 2007. Other items (below $10,000/year) include the
Companys matching contributions to its qualified 401(k) plan, a special after tax bonus in lieu of a Company contribution to the non-qualified excess benefit plan (2009 only), group term life insurance coverage over $50,000 and a credit for
long term disability insurance.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Employment Agreements

Pradman P. Kaul

The employment agreement between Mr. Kaul and the
Company originally was entered into as of April 23, 2005. Mr. Kaul serves as our Chief Executive Officer and Chairman of our Board of Managers and the Chief Executive Officer and President of HCI. HCI assumed Mr. Kauls
employment agreement effective as of February 3, 2006. Mr. Kauls employment agreement provides for a two-year term and is subject to automatic one-year renewals if not terminated by Mr. Kaul or HCI at least 90 days (but not more
than 120 days) prior to the expiration of the original or a renewal term. Any termination of Mr. Kauls employment with HCI would also constitute a termination of his employment with the Company. The agreement provides for an annual base
salary ($620,090 for 2009) and a cash bonus target in the amount of a percentage of his annual base salary (100% for 2009), subject to an increase of up to 50% of the target bonus amount if the objective performance criteria established by the
Compensation Committee are exceeded.

Pursuant to Mr. Kauls employment agreement and his restricted unit purchase
agreement, effective as of April 23, 2005, Mr. Kaul purchased 1,500 Class B membership interests of the Company at $0.01 per unit. Of the 1,500 Class B membership interests, 750 are subject to time vesting, with 75 of the Class B
membership interests vesting on November 1, 2005 and the remaining 675 membership interests vesting in 54 equal monthly installments commencing on December 1, 2005, subject to Mr. Kauls continued employment with us. If
Mr. Kaul is employed by us on the date that HCI (or its successors or assigns) holds less than 20% of the aggregate equity interests (measured by vote and value) in the Company (excluding certain specified transactions), then all of his time
vesting Class B membership interests will vest on the first anniversary of the date on which HCIs (or its successors or assigns) aggregate equity interests in the Company fall below 20%. The remaining 750 Class B membership
interests owned by Mr. Kaul are subject to performance vesting with 375 Class B membership interests vesting if, following the earlier of April 23, 2010 or a change of control (as defined below ), liquidation, dissolution or winding up of
the Company, HCI has received a cumulative total return of at least 3.0 times on its investment in the Company, and all 750 Class B membership interests vesting if, following the earlier of April 23, 2010 or a change of control, liquidation,
dissolution or winding up of the Company, HCI has received a cumulative total return of at least 5.0 times on its investment in the Company.

The employment agreements of each of our Named Executive Officers, including Mr. Kaul, define change of control as (i) the acquisition of the Company by any individual or group not
affiliated with the Company, HCI or its owners immediately prior to such acquisition of beneficial ownership of more than 50%, directly or indirectly, of the vote of the Company or HCI; or (ii) the consummation of an amalgamation, a merger or
consolidation of the Company or HCI or any direct or indirect subsidiary of the Company or HCI with any other entity or a sale or other disposition of all or substantially all of the assets of the Company or HCI following which the voting securities
of the Company or HCI that are outstanding immediately prior to such transaction cease to represent at least 50% of the combined voting power of the securities of the Company or HCI or, if the Company or HCI is not the surviving entity, such
surviving entity or any parent or other affiliate of such surviving entity, outstanding immediately after such transaction.

Mr. Kauls employment agreement restricts him from competing with us by providing services to, serving in any capacity for or owning certain interests in our competitors while he is employed by us and for a period of one year
following the termination of his employment. The agreement also provides that Mr. Kaul must not solicit any of our employees or customers during his employment and for one year thereafter, and he must not divulge at any time any of our
confidential information.

Grant Barber

The employment agreement between Mr. Barber and HCI was entered into as of February 23, 2006. Mr. Barber serves as our Chief Financial Officer and as Executive Vice President and Chief
Financial Officer of HCI. The employment agreement provides for a two-year term and is subject to automatic one-year renewals if not terminated by Mr. Barber or HCI at least 90 days (but not more than 120 days) prior to the expiration of the
original or a renewal term. Any termination of Mr. Barbers employment with HCI would also constitute a termination of his employment with the Company. The



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agreement with Mr. Barber provides for an annual base salary ($382,200 for 2009) and a cash bonus target in the amount of a percentage of his annual base salary (60% for 2009), subject to an
increase of up to 50% of the target bonus amount if the objective performance criteria established by the Compensation Committee are exceeded.

Pursuant to Mr. Barbers employment agreement and his restricted unit purchase agreement, effective as of February 2, 2006, he purchased 500 Class B membership interests of the Company at
$0.01 per unit. Of the 500 Class B membership interests, 250 are subject to time vesting, with 25 of the Class B membership interests vesting on August 1, 2006 and the remaining 225 membership interests vesting in 54 equal monthly installments
commencing on September 1, 2006, subject to Mr. Barbers continued employment with us. If Mr. Barber is employed by us on the date that HCI (or its successors or assigns) holds less than 20% of the aggregate equity interests
(measured by vote and value) in the Company (excluding certain specified transactions), then all of his time vesting Class B membership interests will vest on the first anniversary of the date on which HCIs (or its successors or
assigns) aggregate equity interest in the Company falls below 20%. The remaining 250 Class B membership interests are subject to performance vesting with 125 Class B membership interests vesting on the earlier of January 24, 2011 or a
change of control (as defined above), liquidation, dissolution or winding up of the Company if, following the earlier of April 23, 2010 or a change of control, liquidation, dissolution or winding up of the Company, HCI has received a cumulative
total return of at least 3.0 times on its investment in the Company, and all 250 Class B membership interests vesting on the earlier of January 24, 2011 or a change of control, liquidation, dissolution or winding up of the Company if, following
the earlier of April 23, 2010 or a change of control, liquidation, dissolution or winding up of the Company, HCI has received a cumulative total return of at least 5.0 times on its investment in the Company.

Mr. Barbers employment agreement restricts him from competing with us by providing services to, serving in any capacity for or
owning certain interests in our competitors while he is employed by us and for a period of one year following the termination of his employment. The agreement also provides that Mr. Barber must not solicit any of our employees or customers
during his employment and for one year thereafter, and he must not divulge at any time any of our confidential information.

T. Paul Gaske

The employment agreement between Mr. Gaske and the Company originally was entered into as of April 23, 2005.
Mr. Gaske serves as our Executive Vice President, North America and as an Executive Vice President of HCI. HCI assumed Mr. Gaskes employment agreement effective as of February 3, 2006. The employment agreement provides for a
two-year term and is subject to automatic one-year renewals if not terminated by Mr. Gaske or HCI at least 90 days (but not more than 120 days) prior to the expiration of the original or a renewal term. Any termination of Mr. Gaskes
employment with HCI would also constitute a termination of his employment with the Company. The agreement with Mr. Gaske provides for an annual base salary ($426,983 for 2009) and a cash bonus target in the amount of a percentage of his annual
base salary (70% for 2009), subject to an increase of up to 50% of the target bonus amount if the objective performance criteria established by the Compensation Committee are exceeded.

Pursuant to Mr. Gaskes employment agreement and his restricted unit purchase agreement, effective as of April 23, 2005, he
purchased 650 Class B membership interests of the Company at $0.01 per unit. Of the 650 Class B membership interests, 325 are subject to time vesting, with 32.5 of the Class B membership interests vesting on November 1, 2005 and the remaining
292.5 membership interests vesting in 54 equal monthly installments commencing on December 1, 2005, subject to Mr. Gaskes continued employment with us. If Mr. Gaske is employed by us on the date that HCI (or its successors or
assigns) holds less than 20% of the aggregate equity interests (measured by vote and value) in the Company (excluding certain specified transactions), then all of his time vesting Class B membership interests will vest on the first anniversary of
the date on which HCIs (or its successors or assigns) aggregate equity interests in the Company fall below 20%. The remaining 325 Class B membership interests are subject to performance vesting with 162.5 Class B membership
interests vesting if, following the earlier of April 23, 2010 or a change of control (as defined above), liquidation, dissolution or winding up of the Company, HCI has received a cumulative total return of at least 3.0 times on its investment
in the Company, and all 325 Class B membership interests vesting if, following the earlier of April 23, 2010 or a change of control, liquidation, dissolution or winding up of the Company, HCI has received a cumulative total return of at least
5.0 times on its investment in the Company.

Mr. Gaskes employment agreement restricts him from competing with us
by providing services to, serving in any capacity for or owning certain interests in our competitors while he is employed by us and for a period of one year following



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the termination of his employment. The agreement also provides that Mr. Gaske must not solicit any of our employees or customers during his employment and for one year thereafter, and he
must not divulge at any time any of our confidential information.

Bahram Pourmand

The employment agreement between Mr. Pourmand and the Company originally was entered into as of April 23, 2005. Mr. Pourmand
serves as our Executive Vice President, International and as an Executive Vice President of HCI. HCI assumed Mr. Pourmands employment agreement effective as of February 3, 2006. The employment agreement provides for a two-year term
and is subject to automatic one-year renewals if not terminated by Mr. Pourmand or HCI at least 90 days (but not more than 120 days) prior to the expiration of the original or a renewal term. Any termination of Mr. Pourmands
employment with HCI would also constitute a termination of his employment with the Company. The agreement with Mr. Pourmand provides for an annual base salary $426,733 for 2009) and a cash bonus target in the amount of a percentage of his
annual base salary (60% for 2009), subject to an increase of up to 50% of the target bonus amount if the objective performance criteria established by the Compensation Committee are exceeded.

Pursuant to Mr. Pourmands employment agreement and his restricted unit purchase agreement, effective as of April 23, 2005,
he purchased 500 Class B membership interests of the Company at $0.01 per unit. Of the 500 Class B membership interests, 250 are subject to time vesting, with 25 of the Class B membership interests vesting on November 1, 2005 and the remaining
225 membership interests vesting in 54 equal monthly installments commencing on December 1, 2005, subject to Mr. Pourmands continued employment with us. If Mr. Pourmand is employed by us on the date that HCI (or its successors
or assigns) holds less than 20% of the aggregate equity interests (measured by vote and value) in the Company (excluding certain specified transactions), then all of his time vesting Class B membership interests will vest on the first anniversary of
the date on which HCIs (or its successors or assigns) aggregate equity interests in the Company fall below 20%. The remaining 250 Class B membership interests are subject to performance vesting with 125 Class B membership interests
vesting if, following the earlier of April 23, 2010 or a change of control (as defined above), liquidation, dissolution or winding up of the Company , HCI has received a cumulative total return of at least 3.0 times on its investment in the
Company, and all 250 Class B membership interests vesting if, following the earlier of April 23, 2010 or a change of control, liquidation, dissolution or winding up of the Company, HCI has received a cumulative total return of at least 5.0
times on its investment in the Company.

Mr. Pourmands employment agreement restricts him from competing with us by
providing services to, serving in any capacity for or owning certain interests in our competitors while he is employed by us and for a period of one year following the termination of his employment. The agreement also provides that Mr. Pourmand
must not solicit any of our employees or customers during his employment and for one year thereafter, and he must not divulge at any time any of our confidential information.

Adrian Morris

The employment agreement between Mr. Morris and the
Company originally was entered into as of April 23, 2005. Mr. Morris serves as our Executive Vice President, Engineering and as an Executive Vice President of HCI. HCI assumed Mr. Morris employment agreement effective as of
February 3, 2006. The employment agreement provides for a two-year term and is subject to automatic one-year renewals if not terminated by Mr. Morris or HCI at least 90 days (but not more than 120 days) prior to the expiration of the
original or a renewal term. Any termination of Mr. Morris employment with HCI would also constitute a termination of his employment with the Company. The agreement with Mr. Morris provides for an annual base salary ($367,183 for
2009) and a cash bonus target in the amount of a percentage of his annual base salary (60% for 2009), subject to an increase of up to 50% of the target bonus amount if the objective performance criteria established by the Compensation Committee are
exceeded.

Pursuant to Mr. Morris employment agreement and his restricted unit purchase agreement, effective as of
April 23, 2005, he purchased 500 Class B membership interests of the Company at $0.01 per unit. Of the 500 Class B membership interests, 250 are subject to time vesting, with 25 of the Class B membership interests vesting on November 1,
2005 and the remaining 225 membership interests vesting in 54 equal monthly installments commencing on December 1, 2005, subject to Mr. Morris continued employment with us. If Mr. Morris is employed by us on the date that HCI
(or its successors or assigns) holds less than 20% of the aggregate equity interests (measured by vote and value) in the Company (excluding certain specified transactions), then all of his time vesting Class B membership interests will vest on the
first anniversary of



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the date on which HCIs (or its successors or assigns) aggregate equity interests in the Company fall below 20%. The remaining 250 Class B membership interests are subject to
performance vesting with 125 Class B membership interests vesting if, following the earlier of April 23, 2010 or a change of control (as defined above), liquidation, dissolution or winding up of the Company, HCI has received a cumulative total
return of at least 3.0 times on its investment in the Company, and all 250 Class B membership interests vesting if, following the earlier of April 23, 2010 or a change of control, liquidation, dissolution or winding up of the Company, HCI has
received a cumulative total return of at least 5.0 times on its investment in the Company.

Mr. Morris employment
agreement restricts him from competing with us by providing services to, serving in any capacity for or owning certain interests in our competitors while he is employed by us and for a period of one year following the termination of his employment.
The agreement also provides that Mr. Morris must not solicit any of our employees or customers during his employment and for one year thereafter, and he must not divulge at any time any of our confidential information.

Grants of Plan Based Awards In Fiscal Year 2009

The Compensation Committee approved awards under the Plan to each of our Named Executive Officers in 2008, and approved an Options Exchange Program in 2009. On April 16, 2009, all of the outstanding
options of each of our Named Executive Officers, along with all other eligible participants, were exchanged as part of the Options Exchange Program. The new options are subject to time vesting restrictions and vest 50% on April 16, 2011, 25% on
April 16, 2012, and 25% on April 16, 2013. The new options have an exercise price of $14.47, the closing price of HCIs common stock on April 15, 2009. Set forth below is information regarding stock options granted during 2009
under the Plan through the Options Exchange Program and information regarding threshold, target and maximum bonus awards our Named Executive Officers could earn in 2009 under the AIP.



|                |  |           |  |                                                                 |  |                                                          |  |                                       |  |                                                         |  |                                           |  |                                                   |  |   |  |         |  |       |  |        
|--------------- |  | --------- |  | --------------------------------------------------------------- |  | -------------------------------------------------------- |  | ------------------------------------- |  | ------------------------------------------------------- |  | ----------------------------------------- |  | ------------------------------------------------- |  | - |  | ------- |  | ----- |  | -------
|                |  |           |  | Estimated FuturePayoutsUnder
Non-EquityIncentive Plan Awards(1) |  | Estimated FuturePayoutsUnder
EquityIncentive Plan Awards |  | All OtherStockAwards:SharesorUnits(#) |  | All OtherOptionAwards:SecuritiesUnderlyingOptions(2)(#) |  | Exerciseor BasePrice ofOptionAwards($/Sh) |  | GrantDate FairValue ofStock andOptionAwards(3)($)
|Name            |  | GrantDate |  | Threshold($)                                                    |  | Target($)                                                |  | Max($)                                |  | Threshold(#)                                            |  | Target(#)                                 |  | Max(#)                                            |  |   |  |        
|Pradman Kaul    |  | 4/16/2009 |  | 131,000                                                         |  | 527,000                                                  |  | 791,000                               |  | -                                                       |  | -                                         |  | -                                                 |  | - |  | 100,000 |  | 14.47 |  | 465,000
|Grant Barber    |  | 4/16/2009 |  | 49,000                                                          |  | 195,000                                                  |  | 293,000                               |  | -                                                       |  | -                                         |  | -                                                 |  | - |  | 25,000  |  | 14.47 |  | 116,250
|Paul Gaske      |  | 4/16/2009 |  | 63,000                                                          |  | 254,000                                                  |  | 381,000                               |  | -                                                       |  | -                                         |  | -                                                 |  | - |  | 25,000  |  | 14.47 |  | 116,250
|Bahram Pourmand |  | 4/16/2009 |  | 54,000                                                          |  | 218,000                                                  |  | 327,000                               |  | -                                                       |  | -                                         |  | -                                                 |  | - |  | 25,000  |  | 14.47 |  | 116,250
|Adrian Morris   |  | 4/16/2009 |  | 47,000                                                          |  | 187,000                                                  |  | 281,000                               |  | -                                                       |  | -                                         |  | -                                                 |  | - |  | 25,000  |  | 14.47 |  | 116,250



|(1) | Estimated Future Payout Under Non-Equity Incentive Plans describes the threshold, target and maximum amounts payable under the AIP with respect to the achievement of
the Company Performance Targets (i.e. it does not include payments in connection with the subjective factor under the AIP).
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Options to purchase HCI common stock were awarded on April 16, 2009 to each of our Named Executive Officers as part of the Options Exchange Program. Mr. Kaul
received 100,000 options and each of Messrs. Barber, Gaske, Pourmand and Morris received 25,000 options.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The amount listed in this column reflects the value of the options ($4.65) by the Black-Scholes option valuation model in accordance with Financial Accounting Standards
Board Accounting Codification (ASC) 718 Compensation-Stock Compensation.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

HCI 2006 Equity and
Incentive Plan

Our Named Executive Officers are eligible to participate in the Plan, which provides for the grant of
equity-based awards, including restricted common stock, restricted stock units, stock options, stock appreciation rights and other equity-based awards of HCI, as well as cash bonuses and long-term cash awards to our officers and other employees,
advisors and consultants who are selected by our Compensation Committee for participation in the Plan. Unless earlier terminated by HCIs Board of Directors, the Plan will expire on January 30, 2016. HCIs Board of Directors may amend
the Plan at any time. Termination of the Plan and amendments to the Plan are not intended to adversely affect any award that is then outstanding without the award holders consent, and HCI must obtain stockholder approval of a Plan amendment if
stockholder approval is required to comply with any applicable law, regulation or NASDAQ rules.



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Administration of the Plan

The Plan is administered by the Compensation Committee, which has the authority, among other things, to exercise all the powers and
authorities either specifically granted to it under the Plan or necessary or advisable in the administration of the Plan, including, without limitation, the authority to determine who will be granted awards and the types of awards that may be
granted. The Compensation Committee may, in its sole discretion, without amendment to the Plan: (i) accelerate the date on which any option granted under the Plan becomes exercisable, waive or amend the operation of Plan provisions respecting
exercise after termination of employment or otherwise adjust any of the terms of the option and (ii) accelerate the vesting date, or waive any condition imposed under the Plan, with respect to any restricted stock or other award, or otherwise
adjust any of the terms applicable to any such award.

Equity Incentive Program

A maximum of 2,700,000 shares (subject to adjustment) of HCIs common stock have been reserved for grants pursuant to the equity
incentive program under the Plan, and a maximum of 1,350,000 shares (subject to adjustment) may be issued pursuant to the exercise of incentive stock options granted under the Plan. Under the Plan, no more than 600,000 shares (subject to adjustment)
of HCIs common stock may be made subject to awards granted to a single individual in a single Plan year. In the event that the Compensation Committee determines that any corporate event, such as a stock split, reorganization, merger,
consolidation, repurchase or share exchange, affects the HCI common stock such that an adjustment is appropriate in order to prevent dilution or enlargement of the rights of Plan participants, the Compensation Committee will make those adjustments
as it deems necessary or appropriate to any or all of:



| |  |  | the number and kind of shares of common stock or other securities that may thereafter be issued in connection with future awards;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | the number and kind of shares of common stock, securities or other property issued or issuable in respect of outstanding awards;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | the exercise price, grant price or purchase price relating to any award; and/or
| | - |  | -------------------------------------------------------------------------------



| |  |  | the maximum number of shares subject to awards which may be awarded to any employee during any tax year of the Company;
| | - |  | -----------------------------------------------------------------------------------------------------------------------

provided, that, with respect to incentive stock options, any such adjustment will be made in accordance with Section 424 of the Code.

In the event the outstanding shares of HCIs common stock will be changed into or exchanged for any other class or series of capital
stock or cash, securities or other property pursuant to a re-capitalization, reclassification, merger, consolidation, combination or similar transaction, then, unless otherwise determined by the Compensation Committee: (i) each stock option
will thereafter generally become exercisable for the number and/or kind of capital stock, and/or the amount of cash, securities or other property so distributed, into which the shares of common stock subject to the stock option would have been
changed or exchanged had the option been exercised in full prior to such transaction and (ii) each award that is not a stock option and that is not automatically changed in connection with the transaction will represent the number and/or kind
of shares of capital stock, and/or the amount of cash, securities or other property so distributed, into which the number of shares of common stock covered by the award would have been changed or exchanged had they been held by a stockholder.

The Plan provides that, unless otherwise determined by the Compensation Committee, if on or within one year following a
change of control (as defined in the Plan), a participants employment is terminated by HCI or the Company other than for cause (as defined in the Plan) or by the participant for good reason (as defined in the Plan): (i) any award that is
subject to time vesting that was not previously vested will become fully vested and (ii) the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to any other award will lapse and the award will become
fully vested, except that any award subject to performance vesting will not become fully vested as a result of the termination following a change of control, but any vesting or other determinations required under the awards to determine whether
performance goals have been fully achieved will occur at the time of such termination.

Equity-based AwardsThe
Compensation Committee will determine all of the terms and conditions of equity-based awards granted under the Plan, including whether the vesting or payment of an award will be subject to the attainment of performance goals. The performance goals
that may be applied to awards under the equity incentive program under the Plan are the same as those discussed below under Cash Incentive Programs.



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Stock Options and Stock Appreciation AwardsThe terms and conditions of stock
options and stock appreciation rights granted under the Plan are determined by the Compensation Committee and set forth in an agreement between HCI and the Plan participant. Stock options granted under the Plan may be incentive stock
options within the meaning of Section 422 of the Code or non-qualified stock options. Pursuant to the Plan, a stock appreciation right confers on the participant the right to receive an amount, in cash or shares of HCIs common stock
(in the discretion of the Compensation Committee), equal to the excess of the fair market value of a share of HCIs common stock on the date of exercise over the exercise price of the stock appreciation right, and may be granted alone or in
tandem with another award. No stock appreciation rights have been granted under the Plan. The exercise price of an option granted under the Plan will not be less than the fair market value of HCIs common stock on the date of grant, unless
otherwise provided by the Compensation Committee. The vesting of a stock option or stock appreciation right will be subject to conditions as determined by the Compensation Committee, which may include the attainment of performance goals.

Restricted Stock AwardsThe terms and conditions of awards of restricted stock granted under the Plan are determined by the
Compensation Committee and set forth in an agreement between HCI and the Plan participant. These awards are subject to restrictions on transferability which may lapse under circumstances as determined by the Compensation Committee, which may include
the attainment of performance goals. Unless otherwise provided in the agreement, the holder of restricted stock will have the right to receive dividends on the restricted stock, which dividends will be subject to the same restrictions as the
underlying award of restricted stock.

The Plan also provides for other equity-based awards, the form and terms of which will
be as determined by the Compensation Committee, consistent with the purposes of the Plan. The vesting or payment of these awards may be made subject to the attainment of performance goals.

Cash Incentive Programs

The Plan provides for the grant of annual and long-term cash awards to Plan participants, including our Named Executive Officers, selected by the Compensation Committee. The AIP, under which our executive officers are awarded annual
performance bonuses, was developed by the Compensation Committee under the Plan. In general, with respect to cash awards intended to qualify as performance-based compensation under Section 162(m) of the Code, the maximum value of the total cash
payment that any Plan participant may receive under the Plans annual cash incentive program for any year is $2.5 million, and the maximum value of the total cash payment that any Plan participant may receive under the Plans long-term
cash incentive program for any one year of a long-term performance period is $2.5 million.

Payment of awards granted under
the cash incentive programs may be made subject to the attainment of performance goals to be determined by the Compensation Committee in its discretion. With respect to awards intended to qualify as performance-based compensation under
Section 162(m) of the Code, the Compensation Committee may base performance goals on one or more of the following business criteria, determined in accordance with generally accepted accounting principles, where applicable: return on equity,
earnings per share, net income (before or after taxes), earnings before all or any of interest, taxes, depreciation and/or amortization; operating income; cash flow; return on assets; market share; cost reduction goals or levels of expenses, costs
or liabilities; earnings from continuing operations; or any combination of one or more of the foregoing over a specified period. Such qualified performance-based goals may be expressed in terms of attaining a specified level of the particular
criterion, an increase or decrease in the particular criterion, or a comparison of HCIs performance, one of HCIs or our subsidiaries, a business unit, a product line or any combination thereof relative to a market index or peer group, or
any combination thereof. The Compensation Committee has the authority to make appropriate adjustments to such qualified performance goals to reflect the impact of extraordinary items (as defined in the Plan) not reflected in such goals.



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Outstanding Equity Awards As Of December 31, 2009

The following table summarizes the outstanding equity award holdings of our Named Executive Officers as of December 31, 2009.



|                |  |                                                               |  |                                                                    |  |                                                                   |  |                         |       |                      |           |                                                          |    |                                                               |         |                                                                                         |     |                                                                                                          |          
|--------------- |  | ------------------------------------------------------------- |  | ------------------------------------------------------------------ |  | ----------------------------------------------------------------- |  | ----------------------- | ----- | -------------------- | --------- | -------------------------------------------------------- | -- | ------------------------------------------------------------- | ------- | --------------------------------------------------------------------------------------- | --- | -------------------------------------------------------------------------------------------------------- | ---------
|                |  | Option Awards                                                 |  | Stock Awards                                                      
|Name            |  | Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable(#) |  | Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable(1)(#) |  | EquityIncentive PlanAwards:SecuritiesUnderlyingUnearnedOptions(#) |  | OptionExercise
Price($) |       | OptionExpirationDate |           | Number ofShares orUnits ofStock ThatHave NotVested(2)(#) |    | MarketValueofShares orUnits of StockThat Have NotVested(4)($) |         | EquityIncentive PlanAwards:UnearnedShares, Unitsor OtherRights ThatHaveNot
Vested(3)(#) |     | EquityIncentive PlanAwards:Marketor PayoutValue ofUnearnedShares,Units orOtherRightsThatHaveVested(4)($)
|Pradman Kaul    |  | -                                                             |  | 100,000                                                            |  | -                                                                 |  | $                       | 14.47 |                      | 4/16/2019 |                                                          | 63 |                                                               | 283,291 |                                                                                         | 750 |                                                                                                          | 3,372,510
|Grant Barber    |  | -                                                             |  | 25,000                                                             |  | -                                                                 |  | $                       | 14.47 |                      | 4/16/2019 |                                                          | 58 |                                                               | 260,807 |                                                                                         | 250 |                                                                                                          | 1,124,170
|T. Paul Gaske   |  | -                                                             |  | 25,000                                                             |  | -                                                                 |  | $                       | 14.47 |                      | 4/16/2019 |                                                          | 27 |                                                               | 121,410 |                                                                                         | 325 |                                                                                                          | 1,461,421
|Bahram Pourmand |  | -                                                             |  | 25,000                                                             |  | -                                                                 |  | $                       | 14.47 |                      | 4/16/2019 |                                                          | 21 |                                                               | 94,430  |                                                                                         | 250 |                                                                                                          | 1,124,170
|Adrian Morris   |  | -                                                             |  | 25,000                                                             |  | -                                                                 |  | $                       | 14.47 |                      | 4/16/2019 |                                                          | 21 |                                                               | 94,430  |                                                                                         | 250 |                                                                                                          | 1,124,170



|(1) | On April 16, 2009, the HCI stock options awarded to each of Messrs. Kaul, Barber, Gaske, Pourmand, and Morris on April 24, 2008 under the Plan were exchanged
for new HCI stock options pursuant to the Options Exchange Program. These options are subject to time vesting restrictions and vest 50% on April 16, 2011, 25% on April 16, 2012, and 25% on April 16, 2013. The options have an exercise
price of $14.47, the closing price of HCIs common stock on April 15, 2009.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The Class B membership interests are subject to certain vesting requirements, with 50% of the Class B membership interests subject to time vesting over five years and
the other 50% subject to vesting based upon the achievement of certain performance milestones. The amounts reflected in the Number of Shares or Units of Stock that Have Not Vested column includes the unvested portion of each Named Executive
Officers membership interests that are subject to time vesting.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The Class B membership interests are subject to certain vesting requirements, with 50% of the Class B membership interests subject to time vesting over five years and
the other 50% subject to vesting based upon the achievement of certain performance milestones. The amounts reflected in the Equity Incentive Plan Awards: Unearned Shares, Units or Other Rights That Have Not Vested column includes the unvested
portion of each Named Executive Officers membership interests that are subject to the achievement of performance milestones.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Messrs. Kaul, Gaske, Pourmand, and Morris purchased 1500, 650, 500, and 500, respectively, of Class B membership interests in HNS on April 23, 2005 for $0.01 per
unit. On February 2, 2006, Mr. Barber purchased 500 Class B membership interests in HNS for $0.01 per unit. As of December 31, 2009, the fair market value of the unvested Class B membership interests was determined by the appreciation
of HNS from the point the majority owners invested in the Company.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Class B Membership Interests

Our second amended and restated limited liability agreement allows for the issuance of the Companys Class B membership interests which
are entitled to receive a pro rata share of any distributions once the capital contributions of the Class A membership interest holders have been paid in full. As of December 31, 2009, a total of 4,650 Class B membership interests have
been issued since April 23, 2005 at par value to certain of our current and former directors and executive officers of the Company and HCI, including our Named Executive Officers, entitling the holders to approximately 4% of any capital
distributions resulting from a qualifying transaction. The value of the Class B membership interests is reflected in the Outstanding Equity Awards at Fiscal Year-end Table. The Class B membership interests are subject to certain vesting
requirements, with 50% of the Class B membership interests subject to time vesting over five years and the other 50% subject to vesting based upon the achievement of certain performance milestones. At the holders election, vested Class B
membership interests can be exchanged for HCIs common stock. The number of shares of HCIs common stock to be issued upon the exchange would be based upon the fair market value of the vested Class B membership interest divided by the
average closing trading price of HCIs common stock for the 20 business days immediately preceding the date of the exchange. The issuance of the shares of HCIs common stock is subject to the authorization of HCIs Board of Directors
and compliance with applicable securities laws. On May 28, 2008, 994 vested Class B membership interests held by our Named Executive Officers were exchanged for an aggregate of 170,083 shares of HCI common stock. During 2009, 326 Class B
membership interests held by individuals other than our Named Executive Officers were exchanged for an aggregate of 58,074 shares of HCI common stock.



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Option Exercises and Stock Vested In Fiscal Year 2009

In addition, there were no exercises of stock options by our Named Executive Officers during the year ended December 31, 2009. The
following table summarizes the vesting of HNS Class B Membership Interests held by each of our Named Executive Officers during the year ended December 31, 2009.



|                |  |                              |  |                               |  |                              |  |                                 |  |                                
|--------------- |  | ---------------------------- |  | ----------------------------- |  | ---------------------------- |  | ------------------------------- |  | -------------------------------
|                |  |                              |  | Option Awards                 |  | Stock Awards                
|Name            |  | Share Type                   |  | Shares Acquiredon Exercise(#) |  | Value Realizedon Exercise($) |  | Shares Acquiredon Vesting(1)(#) |  | Value Realizedon Vesting (2)($)
|Pradman Kaul    |  | Class B membership interests |  |                               |  |                              |  | 150                             |  | 674,502                        
|Grant Barber    |  | Class B membership interests |  |                               |  |                              |  | 50                              |  | 224,834                        
|T. Paul Gaske   |  | Class B membership interests |  |                               |  |                              |  | 65                              |  | 292,284                        
|Bahram Pourmand |  | Class B membership interests |  |                               |  |                              |  | 50                              |  | 224,834                        
|Adrian Morris   |  | Class B membership interests |  |                               |  |                              |  | 50                              |  | 224,834                        



|(1) | Messrs. Kaul, Gaske, Pourmand, and Morris purchased Class B membership interests in HNS on April 23, 2005 for $0.01 per unit. On February 2, 2005,
Mr. Barber purchased 500 Class B membership interests in HNS for $0.01 per unit. Amount represents the portion of membership interests that vested in 2009.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The fair market value at December 31, 2009 was determined by the appreciation of HNS from the point the majority owners invested in the Company. Pursuant to the
terms of the Class B membership interests, the realization of value of the membership interests does not occur until the membership interests are converted into HCI common stock. As such, Messrs Kaul, Barber, Gaske, Pourmand and Morris do not
realize the value shown on the membership interests they hold until such conversion.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Pension Benefits

None of our Named Executive Officers participates in or has an account balance in qualified or non-qualified defined benefit pension plans
sponsored by the Company or HCI.

Nonqualified Deferred Compensation As Of December 31, 2009

The following table summarizes non-qualified deferred compensation earned, or contributed by, or on behalf of, each of our Named Executive
Officers under our Excess Benefit Plan for the year ended December 31, 2009.



|                |  |                                     |  |                                      |  |                                |  |                                       |  |                                        
|--------------- |  | ----------------------------------- |  | ------------------------------------ |  | ------------------------------ |  | ------------------------------------- |  | ---------------------------------------
|Name            |  | ExecutiveContributions in2009(1)($) |  | RegistrantContributions in2009(2)($) |  | AggregateEarnings in2009(3)($) |  | AggregateWithdrawals/Distributions($) |  | AggregateBalance atDecember 31, 2009($)
|Pradman Kaul    |  | 83,953                              |  | 31,482                               |  | 116,457                        |  | -                                     |  | 510,548                                
|Grant Barber    |  | 29,106                              |  | 19,404                               |  | 22,277                         |  | -                                     |  | 158,850                                
|T. Paul Gaske   |  | 32,158                              |  | 21,679                               |  | 59,201                         |  | -                                     |  | 286,601                                
|Bahram Pourmand |  | 57,776                              |  | 21,666                               |  | 84,550                         |  | -                                     |  | 426,619                                
|Adrian Morris   |  | 49,714                              |  | 18,643                               |  | 39,549                         |  | -                                     |  | 341,156                                



|(1) | The amounts listed were contributed by the Named Executive Officer during 2009. These amounts are reported in the Salary column of the Summary
Compensation Table for each named executive officer.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The amounts listed were contributed by the Company during 2009 based on the same company match formula that is done for all other employees. Since all of the Named
Executive Officers have greater than 3 years of service, all contributions from the Company are 100% vested. These amounts are reported in the All Other Compensation column of the Summary Compensation Table for each named
executive officer.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Aggregate earnings are dependent on the investment decisions made by the Named Executive Officer. All earnings are market earnings, and none are preferential or set by
the Company or HCI.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Excess Benefit Plan

The Company maintains a non-qualified Excess Benefit Plan for the benefit of a select group of officers and highly compensated employees of the Company and HCI whose benefits under our 401(k) plan are
limited by the Code. Employees who are assistant vice presidents and above, including our Named Executive Officers, are eligible to participate in the Excess



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Benefit Plan and may elect to contribute up to 16% of their annual compensation into the plan on a pre-tax basis each payroll period. We make matching contributions into the plan in an amount
equal to (i) 100% of the participants contributions up to 3% of the participants compensation and (ii) 50% of the participants contributions up to an additional 6% of the participants compensation. Participants are
always 100% vested in the contributions they make into the plan and become 100% vested in the matching contributions that we make into the plan after completing three years of service. If a participants employment is terminated before he or
she completes three years of service, the participant will not be vested in the matching contributions that were made to his or her account and, therefore, will forfeit these amounts. Upon the occurrence of a change of control (as defined in the
plan), participants will become fully vested in the full amount of their account balances, including the matching contributions, even if they have not completed three years of service. In general, a participants vested account balance is
payable following a participants termination of employment, however, if a participant is a specified employee (within the meaning of Section 409A of the Code), the participants vested account balance will be payable as
soon as practicable on or after the first day of the seventh calendar month following termination of employment.

401(k) Plan

The Company maintains a 401(k) plan intended to permit HCIs and our employees to save on a tax-favorable basis for
their retirement. Eligible employees may elect to contribute up to 25% (16% for highly compensated employees) of their eligible compensation into the plan on a pre-tax basis each payroll period, subject to certain Internal Revenue Service limits
(16,500 in 2009). Participants who are age 50 or older may elect to make additional contributions, called catch-up contributions, into the plan. Up to $5,500 of catch-up contributions may be made in 2009. We make matching contributions into the plan
in an amount equal to (i) 100% of participant contributions up to 3% of eligible compensation and (ii) 50% of participant contributions up to an additional 6% of eligible compensation. We do not match catch-up contributions. Participants
become 100% vested in their matching contributions after completing three years of service. Participants are always 100% vested in the contributions they make into the plan. The plan also permits participants to elect to make contributions on an
after-tax basis. Our executive officers, including our Named Executive Officers, are eligible to participate in the 401(k) plan on the same terms as all other employees.

Potential Payments upon Termination and Change of Control

The
Compensation Committee has determined the appropriate levels of payments to be made to our Named Executive Officers upon the termination of their employment, including a termination of employment in connection with a change of control of the
Company, to provide the executive officer with adequate income during the period that the executive may not compete with the Company, pursuant to the provisions of his employment agreement, and while seeking other employment. The Company does not
make any payments to our Named Executive Officers, or accelerate the vesting of any equity compensation awards granted to such officers solely on the basis of a change of control of the Company. Payments are triggered only if the executive is
terminated without cause, as defined below, within one year following a change of control of the Company.

The following
paragraphs set forth the potential payments payable to our Named Executive Officers in certain circumstances under their current employment agreements and our other compensation programs. The Compensation Committee may, in its discretion, add to
these benefits or payments if it deems advisable. All cash payments, including accrued but unused paid time off but not including annual performance bonuses, to be made upon the termination of the employment of any executive officer are paid in a
lump sum at the time of termination. Annual performance bonuses, if earned and unpaid at the time of termination, are paid in a lump sum in the first quarter following the fiscal year in which the executive officer is terminated. All payments made
to our Named Executive Officers upon termination or change of control are paid by HCI, which is in turn is reimbursed by the Company for these amounts under the terms of the Management Agreement with HCI.

For purposes of the following discussion, the employment agreement of each of our Named Executive Officers provides the following
definitions:



| |  |  | Cause.Includes any of the following: (i) the executives failure to perform materially his duties under his employment agreement
(other than by reason of illness or disability); (ii) the executives commission of any felony, or his commission of any other crime involving moral turpitude or his commission of a material dishonest act or fraud against the Company or
any of its affiliates; (iii) the executives use or sale of illegal drugs; (iv) any act or omission by the executive that (a) is the result of his misconduct or gross negligence that is, or may reasonably be expected to be,
materially injurious to the financial condition, business or reputation of the Company or any of its affiliates or (b) is the result of his willful, reckless or grossly negligent act or omission during the executives employment that
results in a violation of any international trade law; or (v) the executives breach of any material provision of his employment agreement or other agreements the executive has with the Company.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | Good Reason. Includes any of the following conditions or events without the executives prior consent: (i) a material diminution of
the executives position or responsibilities that is inconsistent with the executives title, provided that (a) any change in the executives position or responsibilities that occurs as a result of the sale of HCI or its
significant assets or (b) any change in the executives position or responsibilities pursuant to an internal reorganization, in each case, following which, the executives level of position at the Company is not materially diminished
shall not give rise to good reason under (i) or (ii); (ii) a material and willful breach by HCI of the executives employment agreement; (iii) a reduction in the executives base salary or the percentage of his base salary
eligible as a target bonus; or (iv) a relocation of the executives principal place of business more than 50 miles away from the original location.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Change of Control. See Summary Compensation TableEmployment AgreementsPradman Kaul for the definition of change of
control.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------

Pradman P. Kaul

Pursuant to his employment agreement, if Mr. Kauls employment is terminated by us for Cause, Mr. Kaul will receive his: (i) earned but unpaid base salary; (ii) earned but unpaid
bonus; (iii) accrued but unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of termination. In the event that Mr. Kauls employment is terminated by us without Cause or by
him for Good Reason subject to his execution of a waiver and release of claims in favor of HCI and its affiliates, Mr. Kaul would receive: (i) any earned but unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and
unreimbursed business expenses (subject to company policies); (ii) one year of base salary plus the bonus that would have been payable for the calendar year in which such termination occurs as if he were employed by the Company at the end of
such year; (iii) six (6) months of vesting for his time vesting Class B membership interests (provided that if his employment is terminated by us without Cause within one year following a change of control, all of his Class B membership
interests subject to time vesting will become fully vested on the date of termination); (iv) vesting of the performance based Class B membership interests to the extent that within 180 days of such termination, the cumulative total return goals
are met; (v) continuation of health and medical plans for twelve (12) months following the termination; and (vi) reasonable outplacement benefits. Mr. Kaul is also entitled to receive these payments and benefits in the event that
we provide him with notice of non-renewal of his employment agreement. If Mr. Kaul provides us with notice of non-renewal of his employment agreement or terminates his employment without Good Reason, he will only be entitled to his earned but
unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed business expenses (subject to company policies). In general, following a termination of Mr. Kauls employment, we have a right to repurchase his
vested Class B membership interests at fair market value.

Mr. Kauls employment agreement also provides that if
Mr. Kaul should become permanently disabled and terminated by us, or die during the term of his employment agreement, Mr. Kaul or his estate would receive, his: (i) earned but unpaid base salary; (ii) earned but unpaid bonus;
(iii) accrued but unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of such event. Any of Mr. Kauls time vesting Class B membership interests that have not vested as of
the date of such an event would vest and his performance vesting Class B membership interests would remain outstanding and subject to vesting for 180 days to determine if the cumulative total return goals were met.



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Assuming that Mr. Kauls employment was terminated under each of the above
circumstances on December 31, 2009, such payments and benefits have an estimated value of:



|                                                                 |  |                  |  |          |  |                        |  |                                                                                      |  |                        
|---------------------------------------------------------------- |  | ---------------- |  | -------- |  | ---------------------- |  | ------------------------------------------------------------------------------------ |  | -----------------------
|Circumstances                                                    |  | CashSeverance($) |  | Bonus($) |  | MedicalContinuation($) |  | Value ofAcceleratedEquity
andPerformanceAwards andExcess BenefitPlan Accounts (1)($) |  | OutplacementBenefits($)
|For cause                                                        |  | -                |  | 621,000  |  | -                      |  | -                                                                                    |  | -                      
|Without cause, for good reason or non-renewal of agreement by us |  | 620,090          |  | 621,000  |  | 20,205                 |  | 283,291                                                                              |  | 10,000                 
|Without good reason non-renewal of agreement by executive        |  | -                |  | 621,000  |  | -                      |  | -                                                                                    |  | -                      
|Disability or death                                              |  | -                |  | 621,000  |  | -                      |  | 283,291                                                                              |  | -                      
|Termination within one year of Change of Control                 |  | 620,090          |  | 621,000  |  | 20,205                 |  | 283,291                                                                              |  | 10,000                 



|(1) | Value of Accelerated Equity was based on the fair market value as of December 31, 2009 for the Class B membership interests.
|--- | ----------------------------------------------------------------------------------------------------------------------------

Grant Barber

Pursuant to his employment agreement, if Mr. Barbers employment is terminated by us for Cause , Mr. Barber will receive his: (i) earned but unpaid base salary; (ii) earned but unpaid bonus; (iii) accrued but
unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of termination. In the event that Mr. Barbers employment is terminated by us without Cause or by him for Good Reason subject
to his execution of a waiver and release of claims in favor of HCI and its affiliates, Mr. Barber would receive: (i) any earned but unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed business
expenses (subject to company policies); (ii) one year of base salary plus the bonus that would have been payable for the calendar year in which such termination occurs as if he were employed by the Company at the end of such year;
(iii) six (6) months of vesting for his time vesting Class B membership interests (provided that if his employment is terminated by us without Cause within one year following a change of control, all of his Class B membership interests
subject to time vesting will become fully vested on the date of termination); (iv) vesting of the performance based Class B membership interests to the extent that within 180 days of such termination, the cumulative total return goals are met;
(v) continuation of health and medical plans for twelve (12) months following the termination; and (vi) reasonable outplacement benefits. Mr. Barber is also entitled to receive these payments and benefits in the event that we
provide him with notice of non-renewal of his employment agreement. If Mr. Barber provides us with notice of non-renewal of his employment agreement or terminates his employment without Good Reason, he will only be entitled to his earned but
unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed business expenses (subject to company policies). In general, following a termination of Mr. Barbers employment, we have a right to repurchase
his vested Class B membership interests at fair market value.

Mr. Barbers employment agreement also provides that
if Mr. Barber should become permanently disabled and terminated by us, or die during the term of his employment agreement, Mr. Barber or his estate would receive his: (i) earned but unpaid base salary; (ii) earned but unpaid
bonus; (iii) accrued but unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of such event. Any of Mr. Barbers time vesting Class B membership interests that have not
vested as of the date of such an event would vest and his performance vesting Class B membership interests would remain outstanding and subject to vesting for 180 days to determine if the cumulative total return goals were met.



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Assuming that Mr. Barbers employment was terminated under each of the above
circumstances on December 31, 2009, such payments and benefits have an estimated value of:



|                                                                 |  |                  |  |          |  |                        |  |                                                                                     |  |                        
|---------------------------------------------------------------- |  | ---------------- |  | -------- |  | ---------------------- |  | ----------------------------------------------------------------------------------- |  | -----------------------
|Circumstances                                                    |  | CashSeverance($) |  | Bonus($) |  | MedicalContinuation($) |  | Value ofAcceleratedEquity andPerformanceAwards andExcess BenefitPlan Accounts(1)($) |  | OutplacementBenefits($)
|For cause                                                        |  | -                |  | 230,000  |  | -                      |  | -                                                                                   |  | -                      
|Without cause, for good reason or non-renewal of agreement by us |  | 382,200          |  | 230,000  |  | 13,974                 |  | 112,417                                                                             |  | 10,000                 
|Without good reason non-renewal of agreement by executive        |  | -                |  | 230,000  |  | -                      |  | -                                                                                   |  | -                      
|Disability or death                                              |  | -                |  | 230,000  |  | -                      |  | 260,807                                                                             |  | -                      
|Termination within one year of Change of Control                 |  | 382,200          |  | 230,000  |  | 13,974                 |  | 112,417                                                                             |  | 10,000                 



|(1) | Value of Accelerated Equity was based on the fair market value as of December 31, 2009 for the Class B membership interests.
|--- | ----------------------------------------------------------------------------------------------------------------------------

T. Paul Gaske

Pursuant to his employment agreement, if Mr. Gaskes employment is terminated by us for Cause, Mr. Gaske will receive his: (i) earned but unpaid base salary; (ii) earned but unpaid bonus; (iii) accrued but
unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of termination. In the event that Mr. Gaskes employment is terminated by us without Cause or by him for Good Reason subject
to his execution of a waiver and release of claims in favor of HCI and its affiliates, Mr. Gaske would receive: (i) any earned but unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed business
expenses (subject to company policies); (ii) one year of base salary plus the bonus that would have been payable for the calendar year in which such termination occurs as if he were employed by the Company at the end of such year;
(iii) six (6) months of vesting for his time vesting Class B membership interests (provided that if his employment is terminated by us without Cause within one year following a change of control, all of his Class B membership interests
subject to time vesting will become fully vested on the date of termination); (iv) vesting of the performance based Class B membership interests to the extent that within 180 days of such termination, the cumulative total return goals are met;
(v) continuation of health and medical plans for twelve (12) months following the termination; and (vi) reasonable outplacement benefits. Mr. Gaske is also entitled to receive these payments and benefits in the event that we
provide him with notice of non-renewal of his employment agreement. If Mr. Gaske provides us with notice of non-renewal of his employment agreement or terminates his employment without Good Reason, he will only be entitled to his earned but
unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed business expenses (subject to company policies). In general, following a termination of Mr. Gaskes employment, we have a right to repurchase
his vested Class B membership interests at fair market value.

Mr. Gaskes employment agreement also provides that
if Mr. Gaske should become permanently disabled and terminated by us, or die during the term of his employment agreement, Mr. Gaske or his estate would receive his: (i) earned but unpaid base salary; (ii) earned but unpaid bonus;
(iii) accrued but unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of such event. Any of Mr. Gaskes time vesting Class B membership interests that have not vested as of
the date of such an event would vest and his performance vesting Class B membership interests would remain outstanding and subject to vesting for 180 days to determine if the cumulative total return goals were met.



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Assuming that Mr. Gaskes employment was terminated under each of the above
circumstances on December 31, 2009, such payments and benefits have an estimated value of:



|                                                                 |  |                  |  |          |  |                        |  |                                                                                     |  |                        
|---------------------------------------------------------------- |  | ---------------- |  | -------- |  | ---------------------- |  | ----------------------------------------------------------------------------------- |  | -----------------------
|Circumstances                                                    |  | CashSeverance($) |  | Bonus($) |  | MedicalContinuation($) |  | Value ofAcceleratedEquity andPerformanceAwards andExcess BenefitPlan Accounts(1)($) |  | OutplacementBenefits($)
|For cause                                                        |  | -                |  | 299,000  |  | -                      |  | -                                                                                   |  | -                      
|Without cause, for good reason or non-renewal of agreement by us |  | 426,983          |  | 299,000  |  | 13,974                 |  | 121,410                                                                             |  | 10,000                 
|Without good reason non-renewal of agreement by executive        |  | -                |  | 299,000  |  | -                      |  | -                                                                                   |  | -                      
|Disability or death                                              |  | -                |  | 299,000  |  | -                      |  | 121,410                                                                             |  | -                      
|Termination within one year of Change of Control                 |  | 426,983          |  | 299,000  |  | 13,974                 |  | 121,410                                                                             |  | 10,000                 



|(1) | Value of Accelerated Equity was based on the fair market value as of December 31, 2009 for the Class B membership interests.
|--- | ----------------------------------------------------------------------------------------------------------------------------

Bahram Pourmand

Pursuant to his employment agreement, if Mr. Pourmands employment is terminated by us for Cause, Mr. Pourmand will receive his: (i) earned but unpaid base salary; (ii) earned but unpaid bonus; (iii) accrued
but unused paid time off and (iv) unreimbursed business expenses (subject to company policies) through the date of termination. In the event that Mr. Pourmands employment is terminated by us without Cause or by him for Good Reason
subject to his execution of a waiver and release of claims in favor of HCI and its affiliates, Mr. Pourmand would receive (i) any earned but unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed
business expenses (subject to company policies); (ii) one year of base salary plus the bonus that would have been payable for the calendar year in which such termination occurs as if he were employed by the Company at the end of such year;
(iii) six (6) months of vesting for his time vesting Class B membership interests (provided that if his employment is terminated by us without Cause within one year following a change of control, all of his Class B membership interests
subject to time vesting will become fully vested on the date of termination); (iv) vesting of the performance based Class B membership interests to the extent that within 180 days of such termination, the cumulative total return goals are met;
(v) continuation of health and medical plans for twelve (12) months following the termination; and (vi) reasonable outplacement benefits. Mr. Pourmand is also entitled to receive these payments and benefits in the event that we
provide him with notice of non-renewal of his employment agreement. If Mr. Pourmand provides us with notice of non-renewal of his employment agreement or terminates his employment without Good Reason, he will only be entitled to his earned but
unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed business expenses (subject to company policies). In general, following a termination of Mr. Pourmands employment, we have a right to repurchase
his vested Class B membership interests at fair market value.

Mr. Pourmands employment agreement also provides
that if he should become permanently disabled and terminated by us, or die during the term of his employment agreement, Mr. Pourmand or his estate would receive his (i) earned but unpaid base salary; (ii) earned but unpaid bonus;
(iii) accrued but unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of such event. Any of Mr. Pourmands time vesting Class B membership interests that have not vested as
of the date of such an event would vest and his performance vesting Class B membership interests would remain outstanding and subject to vesting for 180 days to determine if the cumulative total return goals were met.



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Assuming that Mr. Pourmands employment was terminated under each of the above
circumstances on December 31, 2009, such payments and benefits have an estimated value of:



|                                                                 |  |                  |  |          |  |                        |  |                                                                                      |  |                         
|---------------------------------------------------------------- |  | ---------------- |  | -------- |  | ---------------------- |  | ------------------------------------------------------------------------------------ |  | ------------------------
|Circumstances                                                    |  | CashSeverance($) |  | Bonus($) |  | MedicalContinuation($) |  | Value ofAcceleratedEquity andPerformanceAwards
andExcess BenefitPlan Accounts (1)($) |  | OutplacementBenefits ($)
|For cause                                                        |  | -                |  | 257,000  |  | -                      |  | -                                                                                    |  | -                       
|Without cause, for good reason or non-renewal of agreement by us |  | 426,733          |  | 257,000  |  | 10,197                 |  | 94,430                                                                               |  | 10,000                  
|Without good reason non-renewal of agreement by executive        |  | -                |  | 257,000  |  | -                      |  | -                                                                                    |  | -                       
|Disability or death                                              |  | -                |  | 257,000  |  | -                      |  | 94,430                                                                               |  | -                       
|Termination within one year of Change of Control                 |  | 426,733          |  | 257,000  |  | 10,197                 |  | 94,430                                                                               |  | 10,000                  



|(1) | Value of Accelerated Equity was based on the fair market value as of December 31, 2009 for the Class B membership interests.
|--- | ----------------------------------------------------------------------------------------------------------------------------

Adrian Morris

Pursuant to his employment agreement, if Mr. Morris employment is terminated by us for Cause, Mr. Morris will receive his (i) earned but unpaid base salary; (ii) earned but
unpaid bonus; (iii) accrued but unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of termination. In the event that Mr. Morris employment is terminated by us without
Cause or by him for Good Reason subject to his execution of a waiver and release of claims in favor of HCI and its affiliates, Mr. Morris would receive: (i) any earned but unpaid base salary, earned but unpaid bonus, accrued but unused
paid time off and unreimbursed business expenses (subject to company policies); (ii) one year of base salary plus the bonus that would have been payable for the calendar year in which such termination occurs as if he were employed by the
Company at the end of such year; (iii) six (6) months of vesting for his time vesting Class B membership interests (provided that if his employment is terminated by us without Cause within one year following a change of control, all of his
Class B membership interests subject to time vesting will become fully vested on the date of termination); (iv) vesting of the performance based Class B membership interests to the extent that within 180 days of such termination, the cumulative
total return goals are met; (v) continuation of health and medical plans for twelve (12) months following the termination; and (vi) reasonable outplacement benefits. Mr. Morris is also entitled to receive these payments and
benefits in the event that we provide him with notice of non-renewal of his employment agreement. If Mr. Morris provides us with notice of non-renewal of his employment agreement or terminates his employment without Good Reason, he will only be
entitled to his earned but unpaid base salary, earned but unpaid bonus, accrued but unused paid time off and unreimbursed business expenses (subject to company policies). In general, following a termination of Mr. Morris employment, we
have a right to repurchase his vested Class B membership interests at fair market value.

Mr. Morris employment
agreement also provides that if Mr. Morris should become permanently disabled and be terminated by us, or die during the term of his employment agreement, Mr. Morris or his estate would receive, his: (i) earned but unpaid base salary;
(ii) earned but unpaid bonus; (iii) accrued but unused paid time off; and (iv) unreimbursed business expenses (subject to company policies) through the date of such event. Any of Mr. Morris time vesting Class B membership
interests that have not vested as of the date of such an event would vest and his performance vesting Class B membership interests would remain outstanding and subject to vesting for 180 days to determine if the cumulative total return goals were
met.



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Assuming that Mr. Morris employment was terminated under each of the above
circumstances on December 31, 2009, such payments and benefits have an estimated value of:



|                                                                 |  |                  |  |          |  |                        |  |                                                                                      |  |                        
|---------------------------------------------------------------- |  | ---------------- |  | -------- |  | ---------------------- |  | ------------------------------------------------------------------------------------ |  | -----------------------
|Circumstances                                                    |  | CashSeverance($) |  | Bonus($) |  | MedicalContinuation($) |  | Value ofAcceleratedEquity andPerformanceAwards
andExcess BenefitPlan Accounts (1)($) |  | OutplacementBenefits($)
|For cause                                                        |  | -                |  | 221,000  |  | -                      |  | -                                                                                    |  | -                      
|Without cause, for good reason or non-renewal of agreement by us |  | 367,183          |  | 221,000  |  | 6,871                  |  | 94,430                                                                               |  | 10,000                 
|Without good reason non-renewal of agreement by executive        |  | -                |  | 221,000  |  | -                      |  | -                                                                                    |  | -                      
|Disability or death                                              |  | -                |  | 221,000  |  | -                      |  | 94,430                                                                               |  | -                      
|Termination within one year of Change of Control                 |  | 367,183          |  | 221,000  |  | 6,871                  |  | 94,430                                                                               |  | 10,000                 



|(1) | Value of Accelerated Equity was based on the fair market value as of December 31, 2009 for the Class B membership interests.
|--- | ----------------------------------------------------------------------------------------------------------------------------

Board of Managers Compensation

The members of our Board of Managers receive no compensation for their services to us in their capacity as managers. Three members of our Board of Managers, Andrew Africk, Jeffrey Leddy and Aaron Stone, serve on HCIs Board of
Directors and receive compensation as members of the Board of Directors of HCI. Mr. Kaul is Chairman and Chief Executive Officer of HNS and Chief Executive Officer and President of HCI and receives his compensation as an employee of HCI.

Compensation Committee Interlocks and Insider Participation

The Board of Managers of the Company does not have a compensation committee. The Compensation Committee of the Board of Directors of HCI,
our parent, is responsible for establishing, implementing and continually monitoring the compensation of our executive officers.



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##### Table of Contents

|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|-------- | ----------------------------------------------------------------------------------------------

Our Limited Liability Company Agreement, as amended provides for two classes of membership interests. The Class A membership interests,
which have voting rights, are purchased by investors in the Company. The Class B membership interests, which do not have voting rights, are available for grant to employees, officers, directors, and consultants of the Company in exchange for the
performance of services. All of our Class A membership interests are owned by Hughes Communications, Inc. (HCI or Parent). The following table sets forth information regarding the beneficial ownership as of
February 26, 2010 of Hughes Network Systems, LLC (HNS) Class B membership interests of: (i) each of our executive officers; (ii) each member of our Board of Managers; and (iii) all of our executive officers and
members of our Board of Managers as a group. As of February 26, 2010, there were 3,330 Class B membership interests issued and outstanding.



|                                 |  |                                                                                |  |                |  |                   
|-------------------------------- |  | ------------------------------------------------------------------------------ |  | -------------- |  | ------------------
|Title of Class                   |  | Name of Beneficial Owner                                                       |  | Number ofUnits |  | Percentageof Class
|HNS Class B membership interests |  | Pradman P. Kaul(1)                                                             |  | 1,073          |  | 32.2%             
|HNS Class B membership interests |  | Grant Barber(2)                                                                |  | 400            |  | 12.0%             
|HNS Class B membership interests |  | T. Paul Gaske(3)                                                               |  | 465            |  | 14.0%             
|HNS Class B membership interests |  | Adrian Morris(4)                                                               |  | 359            |  | 10.8%             
|HNS Class B membership interests |  | Bahram Pourmand(5)                                                             |  | 359            |  | 10.8%             
|HNS Class B membership interests |  | Jeffrey A. Leddy(6)                                                            |  | 600            |  | 18.0%             
|                                 |  |                                                                                |  |                |  |                   
|HNS Class B membership interests |  | Members of the board of managers and executive officers as a group (6 persons) |  | 3,256          |  | 97.8%             
|                                 |  |                                                                                |  |                |  |                   



|(1) | Consists of 1,073 of our Class B membership interests which are subject to time or performance vesting requirements as set forth in Mr. Kauls employment
agreement. Mr. Kaul also owns 8,969, net of shares withheld for the payment of taxes, shares of HCI common stock granted as restricted stock that vested on March 24, 2008 under the HCI 2006 Equity and Incentive Plan (the Plan)
and 63 shares of HCI common stock received upon the exchange of Class B membership interests on May 28, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Consists of 400 of our Class B membership interests which are subject to time or performance vesting requirements as set forth in Mr. Barbers employment
agreement. Mr. Barber also owns 15,000 shares of HCI common stock granted as options he exercised under the Plan and 111 shares of HCI common stock received upon the exchange of Class B membership interests on May 28, 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Consists of 465 of our Class B membership interests which are subject to time or performance vesting requirements as set forth in Mr. Gaskes employment
agreement. Mr. Gaske also owns 9,351 shares, net of shares withheld for the payment of taxes, of HCI common stock granted as restricted stock that vested on March 24, 2008 under the Plan and 55 shares of HCI common stock received upon the
exchange of Class B membership interests on May 28, 2008.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Consists of 359 of our Class B membership interests which are subject to time or performance vesting requirements as set forth in Mr. Morris employment
agreement. Mr. Morris also owns 9,351 shares, net of shares withheld for the payment of taxes, of HCI common stock granted as restricted stock that vested on March 24, 2008 under the Plan and 126 shares of HCI common stock received upon
the exchange of Class B membership interests on May 28, 2008.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Consists of 359 of our Class B membership interests which are subject to time or performance vesting requirements as set forth in Mr. Pourmands employment
agreement. Mr. Pourmand also owns 9,351 shares, net of shares withheld for the payment of taxes, of HCI common stock granted as restricted stock that vested on March 24, 2008 under the Plan and 126 shares of HCI common stock received upon
the exchange of Class B membership interests on May 28, 2008.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Consists of 600 of our Class B membership interests which are subject to time or performance vesting requirements as set forth in a restricted unit purchase agreement
between Mr. Leddy and us. Mr. Leddy also owns 100,000 shares of HCI common stock including vested options to purchase 20,000 shares of HCI common stock and 15,000 shares of HCI common stock granted as restricted stock under the Plan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Our executive officers and members of our Board of Managers also own shares of the common
stock of our Parent. The following table sets forth information regarding the beneficial ownership as of February 26, 2010 of HCIs common stock of (i) each of our executive officers, (ii) each member of our Board of Managers and
(iii) all of our executive officers and members of our Board of Managers as a group. As of February 26, 2010, there were 21,632,324 shares of HCIs common stock issued and outstanding.



|                 |  |                                           |  |                 |  |                   
|---------------- |  | ----------------------------------------- |  | --------------- |  | ------------------
|Title of Class   |  | Name of Beneficial Owner                  |  | Number ofShares |  | Percentage ofClass
|HCI Common Stock |  | Pradman P. Kaul(1)                        |  | 9,032           |  | *                 
|HCI Common Stock |  | Grant Barber(2)                           |  | 15,111          |  | *                 
|HCI Common Stock |  | T. Paul Gaske(3)                          |  | 9,406           |  | *                 
|HCI Common Stock |  | Adrian Morris(4)                          |  | 9,477           |  | *                 
|HCI Common Stock |  | Bahram Pourmand(5)                        |  | 9,477           |  | *                 
|HCI Common Stock |  | Andrew Africk(6)                          |  | 50,000          |  | *                 
|HCI Common Stock |  | Aaron Stone(7)                            |  | 37,500          |  | *                 
|HCI Common Stock |  | Jeffrey A. Leddy(8)                       |  | 100,000         |  | *                 
|                 |  |                                           |  |                 |  |                   
|HCI Common Stock |  | Members of the board of managers and      |  |                 |  |                   
|                 |  | executive officers as a group (8 persons) |  | 240,003         |  | 1.1%              
|                 |  |                                           |  |                 |  |                   



|* | Indicates beneficial ownership of less than 1%.
|- | -----------------------------------------------

|(1) | Consists of 8,969 shares, net of shares withheld for taxes payment, of HCI common stock granted as restricted stock under the Plan and 63 shares of HCI common stock
received upon the exchange of Class B membership interests on May 28, 2008. Mr. Kaul also owns 1,073 HNS Class B membership interests, which are subject to time or performance vesting requirements as set forth in his employment agreement
with us.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Consists of 15,000 shares of HCI common stock granted as options he exercised under the HCI Plan and 111 shares of HCI common stock received upon the exchange of
Class B membership interests on May 28, 2008. Mr. Barber also owns 400 HNS Class B membership interests, which are subject to time vesting requirements as set forth in his employment agreement with us.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Consists of 9,351 shares, net of shares withheld for the payment of taxes, of HCI common stock granted as restricted stock that vested on March 24, 2008 under the
Plan and 55 shares of HCI common stock received upon the exchange of Class B membership interests on May 28, 2008. Mr. Gaske also owns 465 HNS Class B membership interests, which are subject to time or performance vesting requirements as
set forth in his employment agreement with us.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Consists of 9,351 shares, net of shares withheld for the payment of taxes, of HCI common stock granted as restricted stock that vested on March 24, 2008 under the
Plan and 126 shares of HCI common stock received upon the exchange of Class B membership interests on May 28, 2008. Mr. Morris also owns 359 HNS Class B membership interests, which are subject to time or performance vesting requirements as
set forth in his employment agreement with us.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Consists of 9,351 shares, net of shares withheld for the payment of taxes, of HCI common stock granted as restricted stock that vested on March 24, 2008 under the
Plan and 126 shares of HCI common stock received upon the exchange of Class B membership interests on May 28, 2008. Mr. Pourmand also owns 359 HNS Class B membership interests, which are subject to time or performance vesting requirements
as set forth in his employment agreement with us.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes options to purchase 3,750 shares of HCIs common stock, which are currently exercisable, and 25,000 shares of restricted stock granted under the HCI Plan.
Andrew Africk is a principal of Apollo Advisors IV, L.P., which together with an affiliated investment manager, serves as the manager of Apollo, the controlling stockholder of HCI. Mr. Africk disclaims beneficial ownership of the 12,408,611
shares of HCI common stock that are beneficially owned by Apollo.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Includes options to purchase 12,500 shares of our common stock which are currently exercisable and 25,000 shares of restricted stock granted under the Plan. Aaron Stone
is a principal of Apollo Advisors IV, L.P., which together with an affiliated investment manager, serves as the manager of Apollo, the controlling stockholder of HCI. Mr. Africk disclaims beneficial ownership of the 12,408,611 shares of HCI
common stock that are beneficially owned by Apollo.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Includes options to purchase 20,000 shares of HCIs common stock that are currently exercisable and 15,000 shares of HCI common stock granted as restricted stock
under the Plan. Mr. Leddy also owns 600 HNS Class B membership interests, which are subject to time or performance vesting requirements.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The amounts and percentages of voting membership interests beneficially owned are reported on the basis of regulations of the Securities and Exchange Commission (the SEC) governing the
determination of beneficial ownership of securities. Under the rules of the SEC, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or to
direct the voting of such security, or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a
right to acquire beneficial ownership within 60 days. Under these rules, more than one person may be deemed a beneficial owner of the same securities and a person may be deemed a beneficial owner of securities as to which he has no economic
interest.



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##### Table of Contents

Securities Authorized for Issuance under Incentive Compensation Plans



|                                                            |  |                                                                                 |  |                                                                           |  |                                                                                                                             
|----------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------
|Plan Category                                               |  | Securities to beIssued uponExercise
ofOutstandingOptions,Warrants andRights (a) |  | WeightedAverage ExercisePrice ofOutstandingOptions,Warrants andRights (b) |  | SecuritiesRemainingAvailable
forFuture Issuanceunder EquityCompensationPlans (ExcludingSecuritiesReflected inColumn (a)) (c)
|Equity compensation plans approve by security holders:      |  |                                                                                 |  |                                                                           |  |                                                                                                                             
|Hughes Network Systems, LLC Bonus Unit Plan(1)              |  |                                                                                 |  |                                                                           |  |                                                                                                                             
|Equity compensation plans not approved by security holders: |  |                                                                                 |  |                                                                           |  |                                                                                                                             
|None                                                        |  |                                                                                 |  |                                                                           |  |                                                                                                                             
|                                                            |  |                                                                                 |  |                                                                           |  |                                                                                                                             
|Total                                                       |  | -                                                                               |  | -                                                                         |  | -                                                                                                                           
|                                                            |  |                                                                                 |  |                                                                           |  |                                                                                                                             



|(1) | In July 2005, the Company adopted an incentive plan (the "Bonus Unit Plan") pursuant to which 4.4 million bonus units were granted to certain employees. The bonus
units provide for time vesting and are subject to a participant's continued employment with us at the time of predetermined exchange dates. The number of HCI's common stock shares to be issued upon each exchange would be based upon the fair market
value of the vested bonus units divided by the closing trading price of HCI's common stock for the 20 business days immediately preceding the date of the exchange.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions, and Director Independence
|-------- | -------------------------------------------------------------------------

The following is a description of certain relationships and related transactions.

Hughes Communications, Inc.

On March 27, 2006, we entered into a management and advisory services agreement with our parent company, Hughes Communications, Inc. (HCI or Parent). Under this agreement, HCI provides us, through its officers
and employees, with general support, advisory and consulting services in relation to our business. Under the agreement, we paid a quarterly fee of $250,000 for these services. In addition, we reimbursed HCI for its out of pocket costs and expenses
incurred in connection with the services, including an amount equal to 98% of the compensation of certain executives plus a 2% service fee. We amended the management and advisory services agreement, effective from January 1, 2007, to eliminate
the quarterly fee of $250,000 that we paid to HCI for the services. All other terms and conditions of the management and advisory services agreement remained unchanged. On March 12, 2009, the Company sold $13 million of receivables that were
owed to the Company from Hughes Telematics, Inc. (HTI) to HCI for $13 million in cash.

Sponsor Investment

As of December 31, 2009, Apollo owned, directly or indirectly 95% of Smart & Final. We provide broadband products and services
to Smart & Final. For the year ended December 31, 2009, Smart & Final paid $0.6 million to us for these services.

Agreements with Hughes Systique Corporation

The founders of Hughes Systique include our Chief Executive
Officer (CEO) and President and certain former employees of the HCI, including Pradeep Kaul, who is the CEO and President of Hughes Systique, our former Executive Vice President and the brother of our CEO and President. In addition, our
CEO and President and a member of our Board of Managers and HCIs Board of Directors, Jeffrey A. Leddy, serve on the board of directors of Hughes Systique.



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##### Table of Contents

On October 12, 2005, we granted a limited license to Hughes Systique Corporation
(Hughes Systique). The license is limited in that Hughes Systique may use the HUGHES trademark only in connection with its business of software development and associated consulting, licensing, sales, support, maintenance and hardware,
and only in combination with the SYSTIQUE name. The license is non-exclusive, non-transferable, non-sublicensable, worldwide and royalty-free. In addition to other standard termination provisions (i.e., in the event of default or bankruptcy), we may
terminate the license agreement in our reasonable business discretion, or in the event that HCI (or any affiliate thereof to which HCI transfers its ownership interest in Hughes Systique) ceases to maintain an ownership interest in Hughes Systique.

On December 22, 2005, we entered into a master software development agreement with Hughes Systique, allowing us to issue
mutually agreed statements of work to Hughes Systique for software development services. For the year ended December 31, 2009, we paid $9.6 million to Hughes Systique for their services.

In October 2005 and January 2008, HCI invested $3.0 million and $1.5 million, respectively, in the Series A Preferred Stock of Hughes
Systique (Hughes Systique Preferred Stock). On March 11, 2009, pursuant to a termination and settlement agreement between Hughes Systique and one of its significant shareholders, the holdings of such shareholder was converted to a
reduced level of ownership, representing 5% of Hughes Systiques common stock. As a result, at December 31, 2009, on an undiluted basis, HCI owned approximately 45.23% of the outstanding shares of Hughes Systique and our CEO and President
and Pradeep Kaul owned an aggregate of approximately 25.61% of the outstanding shares of Hughes Systique.

On February 8,
2008, HCI and another significant shareholder of Hughes Systique agreed to make available to Hughes Systique a term loan facility of up to $3.0 million. Under that facility Hughes Systique may make borrowing requests of at least $1.0 million to be
funded equally by HCI and the other shareholder. The loan bears interest at 6%, payable annually, and is convertible into common shares of Hughes Systique upon non-payment or an event of default. On February 11, 2008, Hughes Systique made an
initial draw of $1.0 million, and HCI funded its share of the initial draw in the amount of $0.5 million. Effective March 11, 2009, HCI and Hughes Systique amended the term loan facility to remove the other shareholder as a lender, and on
March 26, 2009, HCI funded the remaining $1.0 million of its $1.5 million commitment under the loan. As a result, HCI is not obligated to provide any further funding to Hughes Systique under the Loan.

Agreement with 95 West Co. Inc.

In July 2006, we entered into an agreement with 95 West Co. Inc. (95 West Co.) and its parent, Miraxis License Holdings, LLC., (MLH), pursuant to which 95 West Co. and MLH agreed to provide a series of coordination
agreements which allow us to operate our SPACEWAY 3 satellite at the 95° West Longitude orbital slot where 95 West Co. and MLH have higher priority rights. MLH owns a controlling interest in 95 West Co. MLH is controlled by an affiliate of
Apollo, HCIs controlling stockholder. Jeffrey Leddy, a member of our Board of Managers and a member of the HCI board of directors, is a director and the general manager of MLH, the CEO and President of 95 West Co., and also owns a small
interest in each of 95 West Co. and MLH. Andrew Africk, a member of our Board of Managers and a member of the HCIs Board of Directors, is also a director of MLH. As part of the agreement, we agreed to pay 95 West Co. $9.3 million in annual
installments of $0.3 million in 2006, $0.75 million in each of 2007 through 2010 and $1.0 million in each of 2011 through 2016 for the use of the orbital positions, subject to conditions in the agreement, which include our ability to operate
SPACEWAY 3. During 2009, we paid 95 West Co. $0.75 million.

Agreement with Hughes Telematics, Inc.

In July 2006, we granted a limited license to HTI, allowing HTI to use the HUGHES trademark. The license is limited in that HTI may use the
HUGHES mark only in connection with its business of automotive telematics and only in combination with the TELEMATICS name. As partial consideration for the license, the agreement provides that we will be HTIs preferred engineering services
provider. The license is royalty-free, except that HTI has agreed to commence paying a royalty to us in the event HTI no longer has a commercial or affiliated relationship with us.

In October 2007, we entered into an agreement with HTI and a customer of HTI, whereby we agreed to assume the rights and performance
obligations of HTI under that agreement in the event that HTI fails to perform its obligations due to a fundamental cause such as bankruptcy or the cessation of its telematics business. In connection with that agreement, the



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Company and HTI have entered into a letter agreement pursuant to which HTI has agreed to
take certain actions to enable us to assume HTIs obligations in the event that such action is required. However, as a result of the merger of HTI into Polaris Acquisition Corp. (the Merger), our obligations to HTI and its customer
expired when HTI became a public company in March 2009 with an initial market capitalization value greater than $300.0 million.

In January 2008, we entered into an agreement (the Telematics Agreement) with HTI, pursuant to which we are developing an overall automotive telematics system for HTI, comprising the telematics system hub and the Telematics
Control Unit (TCU), which will serve as the user appliance in the telematics system. The agreement also provides that, subject to certain specified performance conditions, we shall serve as the exclusive manufacturer and supplier of TCUs
for HTI. In August 2009, HTI terminated substantially all of the development engineering and manufacturing services with us under the Telematics Agreement as a result of the bankruptcy filing of one of its customers. We are working closely with HTI
to conclude the program and to settle all remaining obligations. During the year ended December 31, 2009, we received $25.1 million from HTI for development engineering and manufacturing services under the Telematics Agreement.

On March 12, 2009, HCI exchanged $13.0 million of HTI receivables for HTI convertible preferred stock of HTI (HTI Preferred
Stock) as part of a $50.0 million private placement of HTI Preferred Stock. In connection with the Merger, which occurred on March 31, 2009, HCIs outstanding HTI Preferred Stock converted into HTI common stock, subject to a
six-month lock-up. As a result of the Merger, HCIs investment represents approximately 5.4% of HTIs outstanding common stock, before giving effect to the earn-out discussed below. In connection with the Merger, HCI also
received certain additional common shares of HTI that are subject to achievement of certain earn-out targets by HTI over five years. If the full earn-out is achieved, HCIs investment could represent approximately 3.8% of HTIs
outstanding, unrestricted common stock. In addition to the risk and valuation fluctuations associated with the earn-out target, the carrying value of the investment in HTI may be subject to fair value adjustments in future reporting
periods.

On December 18, 2009, the Company entered into a promissory note with HTI (Promissory Note) for the
purposes of establishing a revised payment schedule for $8.3 million of account receivables that HTI owed to the Company. The Promissory Note has a maturity date of December 31, 2010 and an interest rate of 12% per annum.

HTI is controlled by an Apollo affiliate. Apollo owns a controlling interest in our parent. Jeffrey A. Leddy, a member of our Board of
Managers and HCIs Board of Directors, is the CEO and a director of HTI and owned less than 1.0% of the equity of HTI as of December 31, 2009. In addition, Andrew Africk, a member of our Board of Managers and HCIs Board of Directors,
is a director of HTI and a senior partner of Apollo.

Policies and Procedures for Reviewing Related Party Transactions

Our Audit Committee reviews and approves proposed transactions or courses of dealings with respect to which Apollo, our Parents
controlling stockholder, and/or our executive officers or managers or members of their immediate families have an interest. The HCI Code of Ethics for Chief Executive and Senior Financial Officers, which applies to our principal executive officer,
chief financial officer and principal accounting officer or controller and other executive officers performing similar functions (each a Selected Officer), requires our Selected Officers executive and financial executives to avoid actual or apparent
conflicts of interest between personal and professional relationships of such officers and the Company. Before making any investment, accepting any position or benefits, participating in any transaction or business arrangement or otherwise acting in
a manner that creates or appears to create a conflict of interest, such officers must make full disclosure of all facts and circumstances to the Audit Committee and obtain the prior written approval of the Audit Committee and the Board of Managers.
Where a conflict of interest may exist within our Audit Committee or Board of Managers, prior written approval is obtained from HCIs Audit Committee. HCIs written Code of Conduct which applies to our employees and officers, requires all
employees, including executive officers, to avoid actual or apparent conflicts of interest between personal and professional relationships of the employees and the Company, including, but not limited to any investment, interest, or association that
interferes or potentially could interfere with independent exercise of judgment in the best interest of the Company. In addition, our corporate Secretary distributes and collects questionnaires that solicit information about any direct or indirect
transactions with the Company from each of our directors and officers and reviews the responses to these questionnaires.

Pursuant to the Companys Amended and Restated Limited Liability Company Agreement, the Company is expressly permitted in the normal course of its business to enter into transactions with any or all members of the Company or with any
affiliate of any or all members of the Company provided that the price and other terms of such transactions are fair to the Company and that the price and other terms of such transactions are not less favorable to the Company than those generally
prevailing with respect to comparable transactions between unrelated parties.



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Board of Managers Member Independence

The Company is not a listed issuer under applicable Securities and Exchange Commission rules and therefore is not subject to any
independence rules of a national securities exchange or inter-dealer quotation system. All of our Class A membership interests are owned by our Parent. Our Board of Managers has determined that none of the members of our Board of Managers are
independent as defined in the NASDAQ rules and regulations to which our Parent is subject. Pursuant to our second amended and restated limited liability agreement, only the holders of our Class A membership interests are entitled to vote as
holders of interests in the Company. We rely on the controlled company exception contained in NASDAQ Marketplace Rule 4350 for exception from the independence requirements related to the majority of our Board of Managers. Pursuant to NASDAQ
Marketplace Rule 4350, a company of which more than 50% of the voting power is held by an individual, a group or another company is exempt from the requirements that its board of directors consist of a majority of independent directors. Because 100%
of our voting power is held by our Parent, we are exempt from the independence requirements under NASDAQ.



|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------

For the years ended December 31, 2009 and 2008, professional services were performed by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates
(collectively, Deloitte & Touche). Audit and all other fees paid or accrued by the Company and its consolidated subsidiaries aggregated $1,727,000 and $1,540,000 for the years ended December 31, 2009 and 2008, respectively
and were composed of the following:



| |  |  | Audit FeesThe aggregate fees billed for the audit of the Companys annual financial statements for the years ended December 31,
2009 and 2008, and for the reviews of the financial statements included in the Companys Quarterly Reports on Form 10-Q were $1,658,000 in 2009 and $1,462,000 in 2008.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Audit-Related FeesThe aggregate fees billed for audit-related services for the year ended December 31, 2009 was $16,000. These fees
relate to comfort letters, due diligence and consultation provided in connection with debt offerings and registration statements. There were no audit-related fees in 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tax FeesThe aggregate fees billed for tax services for the years ended December 31, 2009 and 2008, were $12,000 and $19,000,
respectively. These fees relate to tax consultations and services related to domestic and foreign office compliance in both 2009 and 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All Other FeesThe aggregate fees for services not included above were $41,000 and $59,000 respectively, for the years ended
December 31, 2009 and 2008. These fees relate to consultation on accounting, financial and regulatory reporting matters in Europe for 2008.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Audit Committee Approval Policy

The Audit Committee is directly
responsible for the appointment, retention and termination, compensation and oversight of the work of any registered public accountant providing any audit or attest services to the Company, including Deloitte & Touche. The approval of the
Audit Committee is required, prior to commencement of work, of all audit, audit-related, internal control-related, tax and permissible non-audit services to be provided to the Company by our independent accountants. As part of the approval process,
the Audit Committee review includes the proposed scope of work and the proposed fee for any engagements, including the annual audit of each fiscal year. All fees paid to Deloitte & Touche for the years ended December 31, 2009 and 2008
were pre-approved by the Audit Committee in accordance with these policies.

Audit Committee Report

The Audit Committee of the Hughes Network Systems, LLC Board of Managers, or the Committee, is currently composed of two directors and
operates under a written charter adopted by the Board of Managers. These committee members are not considered to be independent. The members of the Committee are Aaron J. Stone and Jeffrey A. Leddy.

Among its other duties, the Committee recommends to the Board of Managers the selection of the Companys independent auditors.
Management is responsible for internal controls over financial reporting, disclosure controls and procedures and the financial reporting process. The Companys independent registered public accounting firm is responsible for performing an
independent audit of the Companys financial statements in accordance with standards of the Public Company Accounting Oversight Board (United States) and issuing reports thereon. The Committees responsibility is to monitor and oversee
these processes.



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In this context, the Committee has met and held discussions with management and our
independent registered public accounting firm. Management represented to the Committee that the Companys financial statements were prepared in accordance with accounting principles generally accepted in the United States of America, and the
Committee has reviewed and discussed the audited financial statements with management and our independent registered public accounting firm. The Committee discussed with our independent registered public accounting firm matters required to be
discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as amended or supplemented.

The Companys independent registered public accounting firm also provided to the Committee the written disclosures required by Independence Standards Board Standard No.1, Independence Discussions with Audit Committees as
modified or supplemented and the Committee discussed with the independent registered public accounting firm that firms independence.

Based upon the Committees discussions with management and the independent registered public accounting firm and the Committees review of the representations of management and the reports of
the independent registered public accounting firm to the Committee, the Committee recommended that the Board of Managers include the audited financial statements in the Companys Annual Report on Form 10-K for the year ended December 31,
2009 filed with the Securities and Exchange Commission.



AUDIT COMMITTEE  Aaron J. Stone Jeffrey A.
Leddy




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PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



|    |  |    |  |                                                                                                                        |  |           
|--- |  | -- |  | ---------------------------------------------------------------------------------------------------------------------- |  | ----------
|    |  |    |  |                                                                                                                        |  | PageNumber
|(a) |  | 1. |  | All Consolidated Financial Statements                                                                                  |  | Item 8    
|    |  | 2. |  | Financial Statement Schedule IIValuation and Qualifying Accounts for the Years Ended December 31, 2009, 2008 and 2007 |  | 127       
|    |  | 3. |  | Exhibits                                                                                                               |  | See below 



|                  |  |                                                                                                                                                                                                                                                                                                                                                                                
|----------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    Number |  | Description                                                                                                                                                                                                                                                                                                                                                                    
|3.1               |  | Certificate of Formation of Hughes Network Systems, LLC filed in the State of Delaware on November 12, 2004 (incorporated by reference to Exhibit 3.1 to the Registration
Statement on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).                                                                                                 
|                  | 
|3.2               |  | Second Amended and Restated Limited Liability Company Agreement of Hughes Network Systems, LLC, dated February 28, 2006 (incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).                                                                                     
|                  | 
|3.3               |  | Certificate of Incorporation of HNS Finance Corp. filed in the State of Delaware on March 27, 2006 (incorporated by reference to Exhibit 3.3 to the Registration Statement on
Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).                                                                                                          
|                  | 
|3.4               |  | By-laws of HNS Finance Corp. (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File
No. 333-138009)).                                                                                                                                                                                
|                  | 
|3.5               |  | Certificate of Incorporation of Hughes Network Systems International Service Company filed in the State of Delaware on April 27, 1990, including all amendments thereto and as
last amended on June 12, 1990 (incorporated by reference to Exhibit 3.5 to the Registration Statement on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).
|                  | 
|3.6               |  | By-laws of Hughes Network Systems International Service Company (incorporated by reference to Exhibit 3.6 to the Registration Statement on Form S-4 of Hughes Network Systems, Inc.
filed October 16, 2006 (File No. 333-138009)).                                                                                                                                             
|                  | 
|3.7               |  | Certificate of Formation of HNS Real Estate, LLC filed in the State of Delaware on April 19, 2005 (incorporated by reference to Exhibit 3.7 to the Registration Statement on
Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).                                                                                                           
|                  | 
|3.8               |  | Amended and Restated Limited Liability Company Agreement of HNS Real Estate, LLC, dated April 22, 2005 (incorporated by reference to Exhibit 3.8 to the Registration Statement
on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).                                                                                                      
|                  | 
|3.9               |  | Certificate of Incorporation of HNS-India VSAT, Inc. filed in the State of Delaware on November 15, 1991 (incorporated by reference to Exhibit 3.9 to the Registration Statement
on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).                                                                                                    
|                  | 
|3.10              |  | By-laws of HNS-India VSAT, Inc. (incorporated by reference to Exhibit 3.10 to the Registration Statement on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006
(File No. 333-138009)).                                                                                                                                                                            
|                  | 
|3.11              |  | Certificate of Incorporation of HNS-Shanghai, Inc. filed in the State of Delaware on October 9, 1990, including all amendments thereto and as last amended on May 23, 1994
(incorporated by reference to Exhibit 3.11 to the Registration Statement on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File No. 333-138009)).                                 
|                  | 
|3.12              |  | By-laws of HNS-Shanghai, Inc. (incorporated by reference to Exhibit 3.12 to the Registration Statement on Form S-4 of Hughes Network Systems, Inc. filed October 16, 2006 (File
No. 333-138009)).                                                                                                                                                                              



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|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|----------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|4.1               |  | Indenture, dated as of April 13, 2006, among Hughes Network Systems, LLC, HNS Finance Corp., each of the guarantors party thereto, and Wells Fargo Bank, National Association,
as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Hughes Communications, Inc. filed April 17, 2006 (File No. 000-51784)).                                                                                                                                                                                                                                                                                         
|                  | 
|4.2               |  | Supplemental Indenture No. 1, dated as of May 6, 2008, among Helius, LLC, Helius Acquisition, LLC and Advanced Satellite Research, LLC, Hughes Network Systems, LLC, HNS Finance
Corp., the other Guarantors (as defined in the Indenture) and Wells Fargo Bank, National Association (incorporated by reference to Exhibit 4 to the Quarterly Report on Form 10-Q of Hughes Network Systems, LLC filed August 7, 2008 (File No.
333-138009)).                                                                                                                                                                                           
|                  | 
|4.3               |  | Registration Rights Agreement, dated as of April 13, 2006, among Hughes Network Systems, LLC, HNS Finance Corp., the guarantors listed on Schedule I thereto, Bear, Stearns
& Co., Inc, Morgan Stanley & Co. Incorporated and Banc of America Securities LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Hughes Communications, Inc. filed April 17, 2006 (File No. 000-51784)).                                                                                                                                                                                                                     
|                  | 
|4.4               |  | Form of 91/2% Senior Note due 2014 (included in the Indenture filed as Exhibit 4.1 to the Current Report on Form 8-K of Hughes Communications, Inc. filed April 17, 2006 (File No. 000-51784)).                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                  | 
|4.5               |  | Indenture, dated as of May 27, 2009 among Hughes Network Systems, LLC, HNS Finance Corp., each of the guarantors party thereto and Wells Fargo Bank, National Association, as
trustee (incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-4 of Hughes Network Systems, LLC filed May 29, 2009 (File No. 333-160307)).                                                                                                                                                                                                                                                                                      
|                  | 
|4.6               |  | Registration Rights Agreement, dated as of May 27, 2009, among Hughes Network Systems, LLC, HNS finance Corp., the guarantors listed on Schedule I thereto and J.P. Morgan
Securities Inc. (incorporated by reference to Exhibit 4.6 to the Registration Statement on Form S-4 of Hughes Network Systems, LLC filed May 29, 2009 (File No. 333-160307)).                                                                                                                                                                                                                                                                                 
|                  | 
|10.1              |  | Employment Agreement, dated as of April 23, 2005, by and between Hughes Network Systems, LLC and Pradman Kaul (incorporated by reference to Exhibit 10.3 to the Registration
Statement on Form S-1 of Hughes Communications, Inc. filed December 5, 2005 (File No. 333-130136)).                                                                                                                                                                                                                                                                                                                                                         
|                  | 
|10.2              |  | Restricted Unit Purchase Agreement, dated as of June 20, 2005, between Hughes Network Systems, LLC and Jeffrey A. Leddy (incorporated by reference to Exhibit 10.4 to the
Registration Statement on Form S-1 of Hughes Communications, Inc. filed December 5, 2005 (File No. 333-130136)).                                                                                                                                                                                                                                                                                                                                               
|                  | 
|10.3              |  | 2006 Equity and Incentive Plan (incorporated by reference to Exhibit 10.6 to Amendment No. 3 to the Registration Statement on Form S-1 of Hughes Communications, Inc. filed
February 6, 2006 (File No. 333-130136)).                                                                                                                                                                                                                                                                                                                                                                                                                     
|                  | 
|10.4              |  | Investor Rights Agreement, dated as of April 22, 2005, by and among Hughes Network Systems, LLC, Hughes Network Systems, Inc. and SkyTerra Communications, Inc. (incorporated by
reference to Exhibit 99.5 to the Current Report on Form 8-K of SkyTerra Communications, Inc. filed April 26, 2005 (File No. 000-13865)).                                                                                                                                                                                                                                                                                                                
|                  | 
|10.5              |  | Credit Agreement dated as of April 22, 2005, as amended and restated as of June 27, 2005 and as further amended and restated as of April 13, 2006, among Hughes
Network Systems, LLC, the lenders party thereto from time to time, Bear Stearns Corporate Lending Inc., as administrative agent, Morgan Stanley Senior Funding, Inc., as syndication agent, and Bear, Stearns & Co. Inc. and Morgan Stanley Senior
Funding, Inc., as joint lead arrangers and joint book managers (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Hughes Communications, Inc. filed April 17, 2006 (File No. 000-51784)).
|                  | 
|10.6              |  | Contribution and Membership Interest Purchase Agreement, dated December 3, 2004, by and among The DIRECTV Group, Inc., Hughes Network Systems, Inc., SkyTerra Communications,
Inc. and Hughes Network Systems, LLC (incorporated by reference to the Current Report on Form 8-K of SkyTerra Communications, Inc. filed December 9, 2004 (File No. 000-13865)).                                                                                                                                                                                                                                                                           



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|                  |  |                                                                                                                                                                                                                                                                                                                                                                                        
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    Number |  | Description                                                                                                                                                                                                                                                                                                                                                                            
|10.7              |  | Membership Interest Purchase Agreement, dated as of November 10, 2005, by and among SkyTerra Communications, Inc., SkyTerra Holdings, Inc., DIRECTV Group, Inc., DTV Network
Systems, Inc. and Hughes Network Systems, LLC (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of SkyTerra Communications, Inc. filed November 14, 2005 (File No. 000-13865)).
|                  | 
|10.8              |  | Hughes Network Systems, LLC Bonus Unit Plan (incorporated by reference to Exhibit 10.1 to the quarterly report on Form 10-Q of SkyTerra Communications, Inc. filed August 15,
2005 (File No. 000-13865)).                                                                                                                                                                              
|                  | 
|10.9              |  | Employment Agreement, dated as of April 23, 2005, by and between Hughes Network Systems, LLC and Paul Gaske (incorporated by reference to Exhibit 10.19 to Amendment No. 2 to
the Registration Statement on Form S-1 of Hughes Communications, Inc. filed January 26, 2006 (File No. 333-130136)).                                                                                     
|                  | 
|10.10             |  | Employment Agreement, dated as of April 23, 2005, by and between Hughes Network Systems, LLC and Bahram Pourmand (incorporated by reference to Exhibit 10.20 to Amendment No. 2
to the Registration Statement on Form S-1 of Hughes Communications, Inc. filed January 26, 2006 (File No. 333-130136)).                                                                                
|                  | 
|10.11             |  | Employment Agreement, dated as of April 23, 2005, by and between Hughes Network Systems, LLC and Adrian Morris (incorporated by reference to Exhibit 10.21 to Amendment No. 2 to
the Registration Statement on Form S-1 of Hughes Communications, Inc. filed January 26, 2006 (File No. 333-130136)).                                                                                  
|                  | 
|10.12             |  | Employment Agreement, dated February 23, 2006, between Hughes Communications, Inc., Hughes Network Systems, LLC and Grant A. Barber (incorporated by reference to Exhibit 10.1
to the Current Report on Form 8-K of Hughes Communications, Inc. filed February 27, 2006 (File No. 000-51784)).                                                                                         
|                  | 
|10.13             |  | Form of Restricted Stock Agreement for grants to non-management directors pursuant to the Hughes Communications, Inc. 2006 Equity and Incentive Plan (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q of Hughes Communications, Inc. filed May 15, 2006 (File No. 000-51784)).                                                                          
|                  | 
|10.14             |  | Form of Restricted Stock Agreement for grants to executive officers pursuant to the Hughes Communications, Inc. 2006 Equity and Incentive Plan (incorporated by reference to Exhibit
10.2 to the Quarterly Report on Form 10-Q of Hughes Communications, Inc. filed May 15, 2006 (File No. 000-51784)).                                                                                
|                  | 
|10.15             |  | Form of Terms of Stock Option for grants to executive officers pursuant to the Hughes Communications, Inc. 2006 Equity and Incentive Plan (incorporated by reference to Exhibit 10.3
to the Quarterly Report on Form 10-Q of Hughes Communications, Inc. filed May 15, 2006 (File No. 000-51784)).                                                                                     
|                  | 
|10.16             |  | Management and Advisory Services Agreement dated March 27, 2006 between Hughes Communications, Inc. and Hughes Network Systems, LLC (incorporated by reference to Exhibit 10.1
to the Current Report on Form 8-K of Hughes Communications, Inc. filed March 29, 2006 (File No. 000-51784)).                                                                                            
|                  | 
|10.17             |  | Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Hughes Communications, Inc. filed June 22, 2006 (File No.
000-51784)).                                                                                                                                                                                               
|                  | 
|10.18             |  | Amendment No. 1 to Restricted Unit Purchase Agreement dated December 15, 2006 between Hughes Network Systems, LLC and Jeffrey A. Leddy (incorporated by reference to Exhibit
10.1 to the Current Report on Form 8-K of Hughes Network Systems, LLC filed December 19, 2006).                                                                                                           
|                  | 
|10.19             |  | Credit Agreement dated as of February 23, 2007, among Hughes Network Systems, LLC and HNS Finance Corp., as co borrowers, the lenders party thereto, Bear Stearns Corporate
Lending Inc. and Bear Stearns & Co., Inc. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Hughes Network Systems, LLC filed February 27, 2007 (File No. 333-138009)).      



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|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|----------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|10.20             |  | First Amendment to Amended and Restated Credit Agreement and First Lien Guarantee and Collateral Agreement, dated as of April 06, 2007, by and among Hughes Network System, LLC,
as the Borrower, and Bear Stearns Corporate Lending Inc., as administrative agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Hughes Network System, LLC filed April 12, 2007 (File No.
333-138009)).                                                                                                                                        
|                  | 
|10.21             |  | Hughes Network System, LLC Long Term Cash Incentive Retention Program (incorporated by reference to Exhibit 10.1 to the Form 10-Q of Hughes Network Systems, LLC filed May 7,
2008 (File No. 333-138009)).                                                                                                                                                                                                                                                                                                                                                        
|                  | 
|10.22             |  | Contract between Hughes Network Systems, LLC and Space Systems/Loral, Inc. for the Hughes Jupiter Satellite Program dated June 8, 2009 (Confidential treatment has been
requested for certain portion of this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended, which portions have been omitted and filed separately with the Securities and Exchange Commission) (incorporated by reference
to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Hughes Network Systems, LLC filed August 7, 2009 (File No. 333-138009)).
|                  | 
|12*               |  | Statement of computation of ratio of earnings to fixed charges.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                  | 
|21.1*             |  | List of subsidiaries of Hughes Network Systems, LLC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                  | 
|31.1*             |  | Certification of Chief Executive Officer of Hughes Network Systems, LLC. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                               
|                  | 
|31.2*             |  | Certification of Chief Financial Officer of Hughes Network Systems, LLC. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                                                                                                                                                               
|                  | 
|32*               |  | Certification of Chief Executive Officer and Chief Financial Officer of Hughes Network Systems, LLC. pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.                                                                                                                                                                                                                                                                                                                                                                                                   



|* | Filed herewith.
|- | ---------------

Financial Statements
Schedule

Schedule IIValuation and Qualifying Accounts for the Years Ended December 31, 2009, 2008 and 2007



|                                                      |  |                  |        |                   |   |               |  |            |   |  |               |         |   |  |   |       
|----------------------------------------------------- |  | ---------------- | ------ | ----------------- | - | ------------- |  | ---------- | - |  | ------------- | ------- | - |  | - | ------
|                                                      |  |                  |        | Additional to     |   |               |  |            |  
|Deductions - Descriptions                             |  | BeginningBalance |        | Costs andExpenses |   | OtherAccounts |  | Deductions |   |  | EndingBalance
|                                                      |  | (In thousands)  
|Reserves and allowances deducted from asset accounts: |  |                  |        |                   |   |               |  |            |   |  |               |         |   |  |   |       
|Allowances for uncollectible accounts receivable:     |  |                  |        |                   |   |               |  |            |   |  |               |         |   |  |   |       
|Year ended December 31, 2009                          |  | $                | 9,551  |                   | $ | 21,391        |  | $          | - |  | $             | (18,857 | ) |  | $ | 12,085
|Year ended December 31, 2008                          |  | $                | 9,060  |                   | $ | 15,198        |  | $          | - |  | $             | (14,707 | ) |  | $ | 9,551 
|Year ended December 31, 2007                          |  | $                | 10,158 |                   | $ | 11,405        |  | $          | - |  | $             | (12,503 | ) |  | $ | 9,060 



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SIGNATURES

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



|                    |  |                             |  |                                                     
|------------------- |  | --------------------------- |  | ----------------------------------------------------
|Date: March 3, 2010 |  | HUGHES NETWORK SYSTEMS, LLC
|                    |  | (Registrant)               
|                    |  |                            
|                    |  |                             |  | /S/ GRANT A. BARBER                                 
|                    |  |                            
|                    |  | Name:                       |  | Grant A. Barber                                     
|                    |  | Title:                      |  | Executive Vice President and Chief Financial Officer
|                    |  |                             |  | (Principal Financial Officer)                       

Pursuant to
the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities indicated.



|                      |  |                                                                     |  |              
|--------------------- |  | ------------------------------------------------------------------- |  | -------------
|Signature             |  | Title                                                               |  | Date         
|                      |  |                                                                    
|/S/ PRADMAN P. KAUL   |  | Chief Executive Officer, President                                  |  | March 3, 2010
|Pradman P. Kaul       |  | and Chairman of the Board of Managers (Principal Executive Officer) |  |              
|                      |  |                                                                    
|/S/ GRANT A. BARBER   |  | Executive Vice President and Chief Financial Officer                |  | March 3, 2010
|Grant A. Barber       |  | (Principal Financial Officer)                                       |  |              
|                      |  |                                                                    
|/S/ THOMAS J. MCELROY |  | Senior Vice President, Controller and Chief                         |  | March 3, 2010
|Thomas J. McElroy     |  | Accounting Officer                                                  |  |              
|                      |  |                                                                    
|/S/ JEFFREY A. LEDDY  |  | Member of the Board of Managers                                     |  | March 3, 2010
|Jeffrey A. Leddy      |  |                                                                     |  |              
|                      |  |                                                                    
|/S/ ANDREW D. AFRICK  |  | Member of the Board of Managers                                     |  | March 3, 2010
|Andrew D. Africk      |  |                                                                     |  |              
|                      |  |                                                                    
|/S/ AARON J. STONE    |  | Member of the Board of Managers                                     |  | March 3, 2010
|Aaron J. Stone        |  |                                                                     |  |              



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