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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, 2010

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
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 the definitions 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 3, 2011 was as follows:

Class A Membership
Interests:    95,000                Class B Membership Interests:    3,280

The aggregate market value of shares held by non-affiliates as of June 30, 2010 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                                                                                                 |  | 17  
|Item 1B.   |  | Unresolved Staff Comments                                                                                    |  | 28  
|Item 2.    |  | Properties                                                                                                   |  | 29  
|Item 3.    |  | Legal Proceedings                                                                                            |  | 30  
|Item 4.    |  | (Removed and Reserved)                                                                                       |  | 30  
|PART II    |  | 31                                                                                                          
|Item 5.    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 31  
|Item 6.    |  | Selected Financial Data                                                                                      |  | 31  
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 32  
|Item 7A.   |  | Quantitative and Qualitative Disclosures about Market Risk                                                   |  | 54  
|Item 8.    |  | Financial Statements and Supplementary Data                                                                  |  | 56  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 97  
|Item 9A.   |  | Controls and Procedures                                                                                      |  | 97  
|Item 9B.   |  | Other Information                                                                                            |  | 98  
|PART III   |  | 99                                                                                                          
|Item 10.   |  | Directors, Executive Officers and Corporate Governance                                                       |  | 99  
|Item 11.   |  | Executive Compensation                                                                                       |  | 104 
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 125 
|Item 13.   |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 127 
|Item 14.   |  | Principal Accountant Fees and Services                                                                       |  | 130 
|PART IV    |  | 132                                                                                                         
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                   |  | 132 
|SIGNATURES |  | 136                                                                                                         



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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 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.

As part of our commitment supporting the growth of our North American enterprise and consumer business, we launched our SPACEWAYTM3 satellite (SPACEWAY 3) in August 2007 and started providing service in North America on the SPACEWAY
network in April 2008. In addition, in June 2009, we entered into an agreement with Space Systems/Loral, Inc. (SS/L) for the design and manufacturing of our 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 our HughesNet service to the Consumer market in North America. We anticipate launching Jupiter in the first half of 2012.

Recent Developments - Merger Agreement with EchoStar Corporation

On February 13, 2011, HCI entered into an Agreement and Plan of Merger (the Merger Agreement) with EchoStar Corporation, a Nevada corporation (EchoStar), EchoStar Satellite
Services L.L.C., a Colorado limited liability company (Satellite Services), and Broadband Acquisition Corporation, a Delaware corporation (Merger Sub), pursuant to which, subject to the terms and conditions set forth therein,
Merger Sub will merge with and into HCI (the Merger), with HCI continuing as the surviving entity and becoming a wholly owned subsidiary of EchoStar.

Pursuant to the Merger Agreement, upon the closing of the Merger, each of HCIs issued and outstanding share of common stock (other than any HCIs common stock with respect to which appraisal
rights have been duly exercised under Delaware law) will automatically be converted into the right to receive $60.70 in cash (without interest) and cancelled. The Merger Agreement also contemplates the repayment of all of the Companys
outstanding debt (including the 9 1/2% Senior Notes due 2014), except that the $115 million loan facility guaranteed by COFACE, the French Export Credit Agency, will continue to remain outstanding following the Merger if the requisite lender
consents thereunder are obtained.

Each of the boards of directors of HCI and Merger Sub approved the Merger Agreement and
deemed it advisable and fair to, and in the best interests of, their respective companies and stockholders, to enter into the Merger Agreement and to consummate the Merger and the transactions and agreements contemplated thereby. The board of
directors of EchoStar approved the Merger Agreement and deemed it advisable and fair to, and in the best interests of, its stockholders to enter into the Merger Agreement and to consummate the transactions and agreements contemplated thereby.

The Merger is expected to close later this year, subject to certain closing conditions, including among others,
(i) receiving the required approvals of HCIs stockholders, which approval was effected on February 13, 2011, by written



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consent of a majority of HCIs stockholders (the Majority Stockholders Written Consents), (ii) 20 business days having elapsed since the mailing to HCIs
stockholders of the definitive information statement, with respect to such adoption of the Merger Agreement, in accordance with the Securities Exchange Act of 1934, as amended (the Exchange Act), and the rules and regulations promulgated
thereunder, (iii) receiving certain government regulatory approvals, including approval by the Federal Communications Commission (FCC), the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the receipt of the consents required under certain export control laws, (iv) the absence of any order or injunction by a court of competent jurisdiction preventing the consummation of the Merger, and
the absence of any action taken, or any law enacted, entered, enforced or made applicable to the Merger, by any governmental entity that makes the consummation of the Merger illegal or otherwise restrains, enjoins or prohibits the Merger,
(v) the absence of any proceeding in which the Office of Communications of the United Kingdom seeks to prohibit or enjoin the Merger, (vi) the accuracy of the representations and warranties made by HCI, EchoStar and Merger Sub,
(vii) the performance, in all material respects, by each of HCI, EchoStar and Merger Sub of all its respective obligations, agreements and covenants under the Merger Agreement, (viii) subject to certain customary exceptions, the absence of
(a) a change or event that has a material adverse effect on the business, financial condition or results of operations of HCI and its subsidiaries, taken as a whole or (b) any event, change, occurrence or effect that would prevent,
materially delay or materially impede the performance by HCI of its obligations under this Agreement or the consummation of the transactions contemplated hereby, if not cured, in either case since February 13, 2011 and (ix) holders of
HCIs common stock representing in excess of 25% of HCIs outstanding common stock shall not have exercised (or if exercised, shall not have withdrawn prior to the commencement of the marketing period for the financing of the pending
transaction) rights of dissent in connection with the Merger. The Merger Agreement clarifies that no party may rely on a failure of conditions to be satisfied if such partys breach was the proximate cause of the failure.

The Merger Agreement contains customary representations, warranties and covenants of HCI, EchoStar and Merger Sub. In particular, HCI
makes certain representations and warranties related to the business in which it and the Company operates, including with respect to our communications licenses; the health of our satellite currently in orbit and other related information; that
there are no claims under coordination and concession agreements; the status of our earth stations; and compliance with regulatory and export control laws. EchoStar and Merger Sub also make a representation that EchoStar and Satellite Services have
sufficient financing in order to complete the Merger.

HCI has agreed to various covenants in the Merger Agreement, including,
among others, covenants (i) to use commercially reasonable efforts to conduct its business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and completion of the
Merger, (ii) not to engage in certain kinds of transactions during this interim period and (iii) to cooperate and use commercially reasonable efforts to take all actions necessary to obtain all governmental and antitrust, FCC and
regulatory approvals, subject to certain customary limitations. As noted above, EchoStar and Satellite Services represent and warrant in the Merger Agreement that at the closing of the Merger they will have access to sufficient funds to consummate
the Merger and the other transactions contemplated by the Merger Agreement, and there is no closing condition related to them having procured such financing.

The Merger Agreement also contains a covenant pursuant to which HCI has agreed, subject to certain customary exceptions described below, that it will not, and will cause its representatives not to,
solicit, facilitate (including by providing information) or participate in any negotiations or discussions with any person relating to, any takeover proposal, as further described in the Merger Agreement. The Merger Agreement contains a
fiduciary-out provision, which provides that, prior to the time HCIs stockholders have adopted and approved the Merger Agreement (which adoption and approval was obtained on February 13, 2011 pursuant to the Majority
Stockholders Written Consents), HCIs board of directors may engage with alternative purchasers, change its recommendation to its stockholders or enter into a definitive agreement with respect to an unsolicited acquisition proposal, only
if HCIs board of directors has determined in good faith (a) that failure to take such action is likely to be inconsistent with the boards fiduciary duties, and (b) that the acquisition proposal constitutes a Superior
Proposal. However, as HCIs stockholders have approved and adopted the Merger Agreement, the fiduciary-out provision no longer provides an exception to the non-solicitation obligations described in this paragraph.

The Merger Agreement also contains a covenant pursuant to which EchoStar or the surviving entity must indemnify officers, directors and
employees of HCI and its subsidiaries for a period of six years following the closing of the Merger for all liabilities or claims related to their service or employment with HCI or its subsidiaries occurring prior to the closing of the Merger. This
covenant further requires EchoStar to keep in place HCIs directors and officers liability and fiduciary liability insurance policies in effect at the closing, or purchase a tail policy offering similar coverage unless HCI purchases
such a policy prior to closing.



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The Merger Agreement contains certain termination rights for both HCI and EchoStar. In
addition to certain termination rights related to breaches of the agreement or actions taken by HCI with respect to alternative transactions, so long as the failure of the terminating party to comply with its obligations is not the cause for delay
in closing, each of EchoStar and HCI has the right to terminate the Merger Agreement unilaterally if the Merger has not closed by a date nine months from the execution of the Merger Agreement. In addition, the Merger Agreement provides that, upon
termination of the Merger Agreement under specified circumstances, HCI may be required to pay EchoStar a termination fee of $45 million.

The Merger Agreement also contains termination and other rights related to the occurrence of certain reductions in performance or total loss of HCIs satellite currently in orbit, and certain waivers
increasing risks associated with construction, launch or operation of HCIs satellite currently under construction (a Material Satellite Event). Upon a Material Satellite Event, EchoStar is entitled to terminate the Merger Agreement
until 60 days after HCI provides a written plan describing its intended response (the Mitigation Plan). If EchoStar has not provided written consent to the Mitigation Plan 30 days after delivery, HCI can then terminate the Merger
Agreement. In addition, from the date of any Material Satellite Event until EchoStars approval of the Mitigation Plan, HCI will also be required to provide EchoStar with daily reports of customer complaints and subscriber cancellations.

The representations, warranties and covenants contained in the Merger Agreement were made by the parties thereto only for
purposes of that agreement and as of specific dates; were solely for the benefit of the parties to the Merger Agreement; may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made
for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts (such disclosures include information that has been included in Hughes public disclosures, as well as
additional non-public information); and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third party beneficiaries under the Merger Agreement (except
for the right of Hughes stockholders to receive the transaction consideration from and after the consummation of the Merger) and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations
of the actual state of facts or condition of Hughes or EchoStar or any of their respective subsidiaries or affiliates. Additionally, the representations, warranties, covenants, conditions and other terms of the Merger Agreement may be subject to
subsequent waiver or modification. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected
in Hughes public disclosures.

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
satellites. 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 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



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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 five business segments(i) the North America Broadband segment; (ii) the International Broadband segment; (iii) the Telecom Systems segment; (iv) the HTS Satellite segment; and (v) 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 network products and services to enterprises in North America. The International Broadband segment consists of our international service companies and 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 Terrestrial Microwave group, and the Telematics group. The Mobile Satellite Systems group provides turnkey satellite ground
segment systems to mobile system operators. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for cellular backhaul and broadband wireless access. The Telematics group provides development,
engineering and manufacturing services to Hughes Telematics, Inc. (HTI). However, as a result of the unfavorable impact of the economy on the automobile industry in 2009, 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. The HTS Satellite segment, which is a new segment starting in 2010, consists of activities related to the
development, construction and launch of high throughput satellites and currently represents construction activities of Jupiter and the development of related network equipment. As a result of the newly established HTS Satellite segment in 2010,
construction activities of Jupiter in 2009, which previously had been included in the North America Broadband segment, have been reclassified to the HTS Satellite segment to conform to the current period presentation. The Corporate segment includes
certain minority interest investments held by us, 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 16Segment Data and Geographic Data to the Companys audited consolidated financial statements included in Item 8. Financial Statements and Supplementary Data 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 HTS Satellite segment and Corporate segment, each of which is discussed in further detail below:



|                                |  |                                  |  |                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                   |  |                                                                                                                                                                                                              |  |                                                                                                                                                                                          |  |                               
|------------------------------- |  | -------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------
|                                |  | North America
Broadband Segment  |  | InternationalBroadband Segment                                                                                                                                                                                                                                              |  | Telecom Systems
Segment                                                                                                                                                                                                                                                                                          
|                                |  | Consumer                         |  | Enterprise                                                                                                                                                                                                                                                                  |  | Enterprise                                                                                                                                                                                                                                                                                                        |  | Mobile SatelliteSystems                                                                                                                                                                                      |  | TerrestrialMicrowave                                                                                                                                                                     |  | Telematics                    
|Customer Base                   |  |   Consumersubscription services |  |   Enterprises, governmentand local governmentagencies in NorthAmerica                                                                                                                                                                                                      |  |   Enterprises, Telecomcarriers andgovernmentagencies locatedoutside of North
America                                                                                                                                                                                                                             |  |   Mobile satellite-based voice anddata serviceoperators                                                                                                                                                     |  |   Cellular mobileoperators and localexchange carriers                                                                                                                                   |  |   Telematics serviceproviders
|                                |  |                                  |  |                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                  
|2010 Revenues
(in millions)     |  |   $477                          |  |   $257                                                                                                                                                                                                                                                                     |  |   $206                                                                                                                                                                                                                                                                                                           |  |   $80                                                                                                                                                                                                       |  |   $15                                                                                                                                                                                   |  |   $0.5                       
|                                |  |                                  |  |                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                  
|Products/Service Application(s) |  |   Internet accessand equipment  |  |   VSAT equipment                                                                                                                                                                                                                                                           |  |   VSAT equipment                                                                                                                                                                                                                                                                                                 |  |   Turnkey mobilenetwork solutionsincludinggateways/terminals                                                                                                                                                |  |   Microwave- based networking equipment                                                                                                                                                 |  |   Telematicsdevelopment      
|                                |  |                                  |  |                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                                                                                                                  
|                                |  |   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        |  |   Internet subscribers          |  |   ExxonMobil Corporation, Blockbuster, Inc., GTECH Corporation, Lowes, Wendys International, BP,
Wyndham Worldwide Corporation, Chevron Corporation, Shell, Walgreens Co., Rite Aid, YUM Brands, Social Security Administration, 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., LightSquared, Inc., Boeing Company, TerreStar
Networks, Inc., Thuraya Satellite Telecommunications Company, Iridium Communications, 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 |  |   Hughes Telematics, Inc.    



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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 a 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.

To further expand our business in North America, in June 2009, we entered into a contract with SS/L to build our Jupiter satellite, which is anticipated to be launched in the first half of 2012. 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 we 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 centers in Germantown, Maryland, and Las Vegas, Nevada, manage the delivery of our service and maintain our quality and performance. Our network operations centers also provide 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 packages provide our customers the option to purchase the equipment up front or to rent the equipment with a 24-month service contract and 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 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 energy, hospitality, retail and services industries.



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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.

In August 2010, we were awarded $58.7 million from the U.S. Government as the only national
provider of high-speed satellite broadband service under the broadband stimulus programs, established pursuant to the American Recovery and Reinvestment Act of 2009. This award is part of the U.S. Governments investments in broadband projects
to expand access to broadband service and create jobs and economic opportunity in rural, underserved communities nationwide. We began to offer services to customers under this program in October 2010.

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 centers 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.



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International Broadband Segment

Business Overview

Enterprise Group

We provide satellite communication network products 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 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, China, 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, China, 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; Jakarta, Indonesia; and Beijing, China. 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, 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, China, 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, Brazilian and Chinese 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 Europe, India 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.



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Telecom Systems Segment

Business Overview

The Telecom Systems segment consists of the Mobile
Satellite Systems group, the Terrestrial Microwave group, and the Telematics group. We believe our Mobile Satellite Systems 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.

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, LightSquared, Inc. (LightSquared, formerly SkyTerra Communications, Inc.), Mexicos Secretary of Communication
and Transport via a subcontract to Boeing Company (MEXSAT program), 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 have completed development and deployment of GBBF equipment for two different satellite systems. We have also completed the development of satellite base
stations for LightSquared, TerreStar and ICO. In addition, 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 a
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. We develop and manufacture satellite terminals for the land portable and land mobile market segments,
including machine to machine SCADA applications for the Inmarsat BGAN system. We also manufacture BGAN terminals on an OEM basis for the maritime and military sectors.

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.

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.

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 in 2009, one of HTIs customers filed bankruptcy.



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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.

HTS Satellite Segment

The HTS Satellite segment, which consists of activities related to the development, construction and launch of high throughput satellites, was established in 2010. Currently, the HTS Satellite
segment includes construction activities of our Jupiter satellite and the development of related network equipment.

Corporate Segment

The Corporate segment consists of certain minority interest investments held by us and 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 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 2.5 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 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 (Walgreens Co., Rite Aid Corporation and Lowes Companies, Inc.). 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Our
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. In
April 2008, we began to provide service on the SPACEWAY network.

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 revenues. In 2010, we derived approximately 75.7% of our
global revenues from providing services and 24.3% from hardware revenues and enterprise equipment 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.



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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 31 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 communications sector.

Our Business Strategy

Our business strategy, before giving effect to the
Merger, 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
| | - |  | --------------------------------------------------------------------------------------------------------



| |  |  | 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 is owned 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 the second half of 2011 when ViaSat expects 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 positions. 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.



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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
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
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 the Universal Service Fund to 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 Fund contribution through to our customers.



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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.

As a provider of interconnected VOIP services, we are
required to abide by a number of rules related to telephony service. Some of the key regulations that pertain to us are rules dealing with the protection of customer information and the processing of emergency calls.

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.

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).



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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.

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. During this period, the Company and its predecessors have been granted over 500 patents, many of which have been adopted in numerous communication
standards in both satellite and terrestrial systems. Of these patents, we currently own over 230 patents. The remaining patents are subject to either a royalty-free perpetual license or a covenant not to assert from The DIRECTV Group, Inc., our
former parent.

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



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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.

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, 2010, we had 1,897 employees, including 298 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, General Counsel 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. 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.

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.

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



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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 filings 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.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 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. In April 2010, we entered into an agreement with Arianespace for the launch of our Jupiter satellite
in the first half of 2012.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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.

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 could be adversely affected, to
the extent SPACEWAY 3 and Jupiter are unable to satisfy the associated demand.

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



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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.

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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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.



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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 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
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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 debt
instruments.

At December 31, 2010, Apollo Management, L.P., together with its affiliates (Apollo)
owned in the aggregate 12,408,611 shares, or approximately 56.8%, 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, if the
Merger is not consummated, the level of Apollos ownership of HCIs common stock could have the effect of discouraging or impeding an unsolicited acquisition proposal in the future. 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), our $115.0 million term loan facility (the Term Loan Facility),
our $115 million loan agreement with BNP Paribas and Societe Generale (COFACE Guaranteed Facility), which is guaranteed by COFACE, the French Export Credit Agency, and the Merger Agreement 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.



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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 the Universal Service Fund to 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 Fund 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 Fund contribution and distribution rules. 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 Fund contribution rules could adversely affect our costs of providing service to our customers. In addition, changes to the Universal Service Fund distribution rules could intensify the
competition we face by offering subsidies to competing firms and/or technologies.

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



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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, 2010, 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, the United Kingdom and China, 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 revenues 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.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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, 2010 (in thousands):



|                           |  |                  |         | 
|-------------------------- |  | ---------------- | ------- | 
|                           |  | December 31,2010 |        
|Senior Notes(1)            |  | $                | 590,173 | 
|Term Loan Facility         |  |                  | 115,000 | 
|COFACE Guaranteed Facility |  |                  | 27,403  | 
|VSAT hardware financing    |  |                  | 6,323   | 
|Revolving bank borrowings  |  |                  | 967     | 
|Capital lease and other    |  |                  | 6,817   | 
|                           |  |                  |         | 
|Total debt                 |  | $                | 746,683 | 
|                           |  |                  |         | 



|(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.

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, COFACE Guaranteed 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
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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, subject to conditions in the Merger Agreement, we may still be able to incur
substantially more debt. This could further exacerbate the risks described above.

The terms of each of the Merger
Agreement, our Revolving Credit Facility, Term Loan Facility, COFACE Guaranteed 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 and the Merger Agreement restrict our business in many ways.

Each of our Revolving Credit Facility, our Term Loan Facility, our COFACE Guaranteed 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;
| | - |  | ---------------------------------

In addition, the COFACE Guaranteed Facility also requires that the Company comply with certain maintenance covenants. Under the Merger Agreement, HCI has agreed to various covenants that affect our
business, including, among others, covenants (i) to use commercially reasonable efforts to conduct its business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and
completion of the Merger and (ii) not to engage in certain kinds of transactions during this interim period, including the incurrence of indebtedness.

A breach of any of the covenants under the Revolving Credit Facility, the Term Loan Facility, the indentures governing the Senior Notes, or the COFACE Guaranteed Facility could result in a default under
our Revolving Credit Facility, the Term Loan Facility, the Senior Notes, and the COFACE Guaranteed Facility. 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.



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Risks Related to the Merger

The Merger is subject to satisfaction or waiver of certain customary conditions.

The completion of the Merger is subject to the satisfaction or waiver of certain customary conditions, including (i) the receipt of certain government regulatory approvals, including approval by the
FCC, the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of the consents required under certain export control laws, (ii) the absence of any order or
injunction by a court of competent jurisdiction preventing the consummation of the Merger, and the absence of any action taken, or any law enacted, entered, enforced or made applicable to the Merger, by any governmental entity that makes the
consummation of the Merger illegal or otherwise restrains, enjoins or prohibits the Merger, (iii) the accuracy of the representations and warranties of the parties and compliance by the parties with their respective obligations under the Merger
Agreement and (iv) holders of HCIs common stock representing in excess of 25% of HCIs the outstanding common stock shall not have exercised (or if exercised, shall not have withdrawn prior to the commencement of the marketing period
for the financing of the pending transaction) rights of dissent in connection with the Merger. We cannot assure you that the Merger contemplated by the Merger Agreement will be consummated or that it will close in a timely manner or, if not
consummated, that we will enter into a comparable or superior transaction with another party.

The Merger may not be completed if
sufficient financing is not funded.

EchoStar and Satellite Services have obtained an aggregate financing commitment
of $1.0 billion in senior secured bridge financing and $800 million in senior unsecured bridge financing in connection with financing the transactions contemplated by the Merger Agreement, including the payment of the cash merger consideration and
the repayment of our indebtedness under the Revolving Credit Facility, the Term Loan Facility, the Senior Notes and, if lender consents are not obtained, the COFACE Guaranteed Facility. The funding under such commitment is subject to conditions,
including conditions that do not relate directly to the Merger Agreement. We cannot assure you that the committed amount will be sufficient to complete the Merger. Those amounts might be insufficient if, among other things, we, EchoStar or Satellite
Services have substantially less cash on hand or EchoStar and Satellite Services have substantially less net proceeds from the debt financings than we currently expect. Although obtaining the debt financing is not a condition to the completion of
the Merger, the failure of EchoStar and Satellite Services to obtain sufficient financing is likely to result in the failure of the Merger to be completed in a timely manner, if at all.

Our future business and financial position may be adversely affected if the Merger is not completed.

If the Merger Agreement is terminated and the Merger is not consummated, we will have incurred substantial expenses without realizing the expected benefits of the Merger. In addition, we may also be
subject to additional risks including, without limitation:



| |  |  | substantial costs related to the Merger, such as legal, accounting and financial advisory fees, that must be paid regardless of whether the Merger is
completed;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potential disruption to the current business plan and our operating activities and distraction of our workforce and management team; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | potential loss of key customers and suppliers as a result of any negative reaction to the Merger, including as result of the uncertainty concerning our
operations while the Merger is pending and after the Merger is closed.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Merger creates unique risks in the time
leading up to closing, and there are also risks of completing the conditions to closing.

The Merger Agreement
generally requires us to operate our business in the ordinary course pending consummation of the proposed combination, but restricts us, without EchoStars consent, from taking certain specified actions until the Merger is complete or the
Merger Agreement is terminated. Further, the pending Merger increases our risk of loss of key employees due to, among other things, uncertainty concerning the post-Merger operation of the Company.

Until all conditions to the Merger are satisfied and the related debt financing is ready to be funded, we cannot be certain that the
Merger will close. We will incur significant transaction costs relating to the proposed Merger, whether or not



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the proposed Merger is completed. Additionally, matters relating to the Merger (including integration planning) may require substantial commitments of time and resources, which could otherwise
have been devoted to other beneficial opportunities and there may be potential difficulties in employee retention as a result of the Merger.

Any loss of business opportunities or key personnel could have an adverse impact on future business, and, as a result, result in lower future sales and earnings.

Since announcing the proposed Merger, class action lawsuits have been filed against HCI and its directors. The outcome or settlement of these
claims may have an adverse effect upon HCIs results of operation.

Since the announcement of the proposed
Merger, putative class action lawsuits seeking to enjoin the Merger, among other things, have been filed on behalf of HCIs stockholders, two in the Delaware Court of Chancery and two in the Circuit Court for Montgomery County, Maryland.
Descriptions of these lawsuits, are set forth in Item 3. Legal Proceedings of this Report and are incorporated herein by reference. The cost of defending such law suits and paying any judgment or settlement in connection therewith could have an
adverse impact on HCI financial results.



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

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



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|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,
2010.



|                              |  |              |  |               |         |  |          |                                                                                               
|----------------------------- |  | ------------ |  | ------------- | ------- |  | -------- | ----------------------------------------------------------------------------------------------
|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)(2)          |  | Leased       |  |               | 43,600  |  |          | Corporate headquarters (Hughes Communication India Limited), shared hub, operations, warehouse
|Las Vegas, Nevada(1)          |  | Leased       |  |               | 49,300  |  |          | Shared hub, antennae yards, backup network operation and control center for SPACEWAY, gateways
|Griesheim, Germany(1)         |  | Leased       |  |               | 51,200  |  |          | Office space, shared hub, operations, warehouse                                               
|San Diego, California         |  | Leased       |  |               | 20,900  |  |          | Engineering, sales                                                                            
|Barueri, Brazil(1)            |  | Leased       |  |               | 11,000  |  |          | Warehouse, shared hub                                                                         
|Southfield, Michigan(1)       |  | Leased       |  |               | 15,000  |  |          | Shared hub                                                                                    
|Milton Keynes, United Kingdom |  | Leased       |  |               | 14,900  |  |          | Corporate headquarters (Europe) and operations                                                
|Bangalore, India(2)           |  | Leased       |  |               | 15,300  |  |          | Office, guest house                                                                           
|Kolkata, India(2)             |  | Leased       |  |               | 9,300   |  |          | Warehouse, office space, studio                                                               
|Lindon, Utah                  |  | Leased       |  |               | 7,900   |  |          | Office space                                                                                  
|Sao Paulo, Brazil             |  | Leased       |  |               | 6,700   |  |          | Corporate headquarters (Brazil)                                                               
|New Delhi, India              |  | Leased       |  |               | 6,000   |  |          | Corporate headquarters (India)                                                                
|Mumbai, India(2)              |  | Leased       |  |               | 5,600   |  |          | Warehouse, office space                                                                       
|Alexandria, Virginia          |  | Leased       |  |               | 4,700   |  |          | Warehouse                                                                                     
|Beijing, China(2)             |  | Leased       |  |               | 4,600   |  |          | Sales, marketing, operations                                                                  
|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                                                                  
|Fort Lauderdale, Florida      |  | 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) | Including properties of subsidiaries that are less than wholly-owned by the Company.
|--- | ------------------------------------------------------------------------------------



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|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, an arbitration panel
ruled in our favor in our arbitration 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 connection with launch services for SPACEWAY 3, 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. 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 were stayed under
the bankruptcy laws. On May 27, 2010, we entered into a settlement agreement with Sea Launch to resolve the claim that we filed in the Sea Launch bankruptcy (the Settlement Agreement). The Settlement Agreement provides that Sea
Launch will irrevocably issue to us two credits, each in the amount of $22.2 million (the Credits), in satisfaction and discharge of our bankruptcy claim. The Credits may be used by us to defray the cost of up to two launches contracted
by December 31, 2015, and scheduled to occur by December 31, 2017. In addition, subject to the terms and conditions of the Settlement Agreement, one or both Credits may be transferred to third parties. The bankruptcy court has
approved the Settlement Agreement, and its terms have been incorporated into the court's order approving Sea Launch's plan of reorganization. The Settlement Agreement became effective on October 27, 2010.

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. In January 2011, the Company agreed to settle this consolidated case on a nationwide basis, subject to court approval. As a result, the Company has accrued $1.9 million for estimated settlement costs,
plaintiffs attorney fees and other related expenses. In the event that the settlement is not effectuated, the Company would revert to its previous position of vigorously defending these matters as it believes that the allegations in these
complaints are not meritorious.

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.
While the Company remains a defendant, HCI was dismissed from this case in September 2010. The Companys motion to dismiss, filed in September 2010, is pending, and the Company will continue to vigorously defend the case.

Some or all of HCI, its Directors, EchoStar Corporation, EchoStar Satellite Services, L.L.C. (EchoStar LLC), Broadband
Acquisition Corporation ("Merger Sub"), and Apollo Global Management, LLC (AGM) have been named as defendants in four shareholder class action lawsuits in connection with the proposed transaction in which EchoStar will acquire all of the
outstanding equity of HCI and its subsidiaries. On February 18, 2011, the Gottlieb Family Foundation filed its class action complaint in the Circuit Court for Montgomery County, Maryland. On February 23, 2011, Plymouth County
Retirement System filed its shareholder class action complaint in the Court of Chancery of the State of Delaware. On February 24, 2011, Edward Ostensoe filed a shareholder class action complaint in the Circuit Court for Montgomery County,
Maryland. On February 28, 2011, Nina J. Shah Rohrbasser Irr. Trust filed a shareholder class action complaint in the Court of Chancery of the State of Delaware. Each complaint alleges that the directors of HCI breached their fiduciary
duties in agreeing to the transaction. The complaints also allege that some or all of HCI, EchoStar, EchoStar LLC, Merger Sub and AGM aided and abetted such breaches by the directors of HCI. In each case, the Plaintiffs seek to enjoin the
proposed transaction and/or damages, costs, and attorney fees. HCI believes that the allegations in all of these complaints are not meritorious and it intends to vigorously defend these matters.

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



|Item 4. | (Removed and Reserved)
|------- | ----------------------



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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
|------- | -----------------------

Set forth below is our selected consolidated financial data. For the years ended or as of December 31, 2010, 2009, 2008, 2007 and
2006, our consolidated balance sheets and statements of operations data are derived from our audited consolidated financial statements. The selected consolidated 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.



|                                           |  |                                          |           |  |      |   |           |      |  |   |           |  |  |      |           |  |  |   |         | 
|------------------------------------------ |  | ---------------------------------------- | --------- |  | ---- | - | --------- | ---- |  | - | --------- |  |  | ---- | --------- |  |  | - | ------- | 
|                                           |  | As of or For the Year Ended December 31, |          
|                                           |  | 2010                                     |           |  | 2009 |   |           | 2008 |  |   | 2007      |  |  | 2006 |          
|                                           |  | (Dollars in thousands)                   |          
|Consolidated statement of operations data: |  |                                          |           |  |      |   |           |      |  |   |           |  |  |      |           |  |  |   |         | 
|Revenues                                   |  | $                                        | 1,037,743 |  |      | $ | 1,006,665 |      |  | $ | 1,059,891 |  |  | $    | 970,075   |  |  | $ | 858,225 | 
|Income tax expense                         |  | $                                        | 5,691     |  |      | $ | 2,436     |      |  | $ | 7,588     |  |  | $    | 5,316     |  |  | $ | 3,276   | 
|Net income (loss) attributable to HNS      |  | $                                        | 25,393    |  |      | $ | (44,905   | )    |  | $ | 12,096    |  |  | $    | 49,801    |  |  | $ | 19,102  | 
|Net income (loss)                          |  | $                                        | 26,043    |  |      | $ | (43,557   | )    |  | $ | 12,375    |  |  | $    | 49,884    |  |  | $ | 19,265  | 
|Consolidated balance sheet data:           |  |                                          |           |  |      |   |           |      |  |   |           |  |  |      |           |  |  |   |         | 
|Total assets                               |  | $                                        | 1,255,365 |  |      | $ | 1,195,298 |      |  | $ | 1,080,107 |  |  | $    | 1,112,008 |  |  | $ | 912,390 | 
|Long-term obligations                      |  | $                                        | 767,795   |  |      | $ | 731,148   |      |  | $ | 596,303   |  |  | $    | 584,287   |  |  | $ | 487,269 | 
|Total equity                               |  | $                                        | 230,228   |  |      | $ | 205,961   |      |  | $ | 235,470   |  |  | $    | 252,820   |  |  | $ | 202,962 | 
|Ratio of earnings to fixed charges         |  |                                          | 1.2x      |  |      |   | *         |      |  |   | 1.3x      |  |  |      | 1.7x      |  |  |   | 1.4x    | 
|Deficiency of earnings to fixed changes    |  |                                          |           |  |      | $ | (42,837   | )    |  |   |           |  |  |      |           |  |  |   |         | 



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



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|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 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, wireless backhaul systems and telematics. 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 years ended December 31, 2010, 2009 and 2008, our net income (loss) attributable to HNS was
$25.4 million, $(44.9) million and $12.1 million, respectively. The changes in our net income (loss) for both 2010 and 2009 were significantly impacted by the $44.4 million impairment loss recognized in 2009 associated with our prepaid deposit
(the Deposit) paid to Sea Launch Company, LLC (Sea Launch). See Item 3Legal Proceedings of this report for further detail. Our gross margin for 2010 increased by $43.1 million, or 16.1%, compared to 2009, primarily
attributable to the growth in our consumer subscriber base. The increase in our 2010 net income was partially offset by additional selling, general and administrative (SG&A) expenses incurred in 2010 as part of our effort in
expanding our consumer and enterprise businesses in the North America Broadband segment. In addition to the impairment mentioned above, our 2009 net loss also reflected $9.9 million of interest expense associated with the issuance of the $150.0
million of 9.50% senior notes maturing on April 15, 2014 (2009 Senior Notes) in 2009.

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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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 development, construction and ownership structure of satellite assets and related ground infrastructure, capacity features and other factors that would promote long-term growth on a global basis, while meeting the needs
of our customers.

On February 13, 2011, our Parent, HCI, entered into an Agreement and Plan of Merger (the Merger
Agreement) with EchoStar Corporation, a Nevada corporation (EchoStar), EchoStar Satellite Services L.L.C., a Colorado limited liability company, and Broadband Acquisition Corporation, a Delaware corporation (Merger
Sub), pursuant to which, subject to the terms and conditions set forth therein, Merger Sub will merge with and into HCI (the Merger), with HCI continuing as the surviving entity and becoming a wholly owned subsidiary of EchoStar.
The Merger is expected to close later this year, subject to certain closing conditions, including among others, certain government regulatory approvals, such as approval by the Federal Communications Commission and the Federal Trade Commission.

Sales and DistributionIn June 2009, we entered into an agreement with Space Systems/Loral, Inc.
(SS/L), under which SS/L will manufacture our next-generation, geostationary high throughput satellite (HTS) named 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. The Company anticipates launching Jupiter in the first half of 2012. We entered into a contract with Barrett Xplore Inc. (Barrett), whereby Barrett agreed to lease user beams and
purchase gateways and Ka-band terminals for the Jupiter satellite that are designed to operate in Canada (the Barrett Agreement). As of December 31, 2010, our revenue backlog from Barrett totaled to $254.3 million. Of this, $245
million is associated with Barrett leasing the user beams and expected to be realized ratably over 15 years once Jupiter is launched and placed into service, and $9.3 million is related to the development and delivery of the gateways and terminals,
which is expected to be completed in 2011.

In August 2010, we were awarded $58.7 million from the U.S. Government as the only
national provider of high-speed satellite broadband service under the broadband stimulus programs, established pursuant to the American Recovery and Reinvestment Act of 2009. This award is part of the U.S. Governments investments in broadband
projects to expand access to broadband service and create jobs and economic opportunity in rural, underserved communities nationwide. We began to offer services to customers under this program in October 2010.

Key Business Metrics

Business SegmentsWe divide our operations into five distinct segments(i) the North America Broadband segment;
(ii) the International Broadband segment; (iii) the Telecom Systems segment; (iv) the HTS Satellite segment; and (v) 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, wireline and wireless communication network products and services to enterprises. The International Broadband segment consists of
our international service companies and provides managed network services and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite Systems group, the Terrestrial
Microwave group, and the Telematics group. The Mobile Satellite Systems group provides turnkey satellite ground segment systems to mobile system operators. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems
that are used for both cellular backhaul and broadband wireless access. The Telematics group provides development, engineering and manufacturing services to Hughes Telematics, Inc. (HTI). However, as a result of the unfavorable impact of
the economy on the automobile industry in 2009, 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. The HTS
Satellite segment, which is a new segment starting in 2010, consists of activities related to the development, construction and launch of high throughput satellites and currently represents construction activities of Jupiter and the
development of related network equipment. As a result of the newly established HTS Satellite segment in 2010, construction activities of Jupiter in 2009, which was included in the North America Broadband segment, have been reclassified to the HTS
Satellite segment to conform to the current period presentation. The Corporate segment includes certain minority interest investments held by us and 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



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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 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.

Average revenue per unit (ARPU)ARPU is calculated by dividing the total service revenues from the Consumer group
for the reporting period by the sum of the total number of subscribers in our Consumer group at the end of each month in the reporting period. 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.

Churn rateChurn rate represents
the average of the monthly churn rates for the months included in the reporting period. Monthly churn rate is calculated by dividing the number of churns for the month for the subscribers by the number of subscribers at the end of the month in our
Consumer group and our small/medium enterprise and wholesale business customers. Our churn rate calculations 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 churn rate.

ServicesOur services revenue is varied in nature and includes equipment
rental from our consumer rental program, 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. 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



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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 also have the option to purchase the equipment up front with a 24-month service contract. Hardware revenues of the North American Enterprise group and International Broadband segment
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
services. 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.

Revenue BacklogWe benefit from strong visibility of our future revenues. At December 31, 2010, 2009 and 2008, our total
revenue backlog, which we define as our expected future revenue under customer contracts that are non-cancelable and excluding agreements with our consumer customers, was approximately $1,062.2 million, $834.0 million and $840.9 million,
respectively. We expect to realize future revenue from our backlog as follows: $317.1 million in 2011, $230.8 million in 2012, $140.1 million in 2013, $95.1 million in 2014 and $279.1 million thereafter. Included in our revenue backlog are future
revenues of $254.3 million associated with our Jupiter satellite. Of the $254.3 million, $245.0 million is associated with the Barrett Agreement for satellite capacity, which revenue is expected to be realized ratably over 15 years once the
satellite is launched and placed into service and $9.3 million is related to gateway developments for Barrett. Of the $245.0 million in backlog, the Company has collected $5.0 million related to a non-refundable reservation fee.

The amounts included in backlog represent the full contract value for the duration of the contract and does not include termination fees.
We do not assume that a contract will be renewed beyond its stated expiration date. In certain cases of breach for non-payment or customer bankruptcy, we may not be able to recover the full value of certain contracts or termination fees.

Generally, following the successful launch of a satellite, if the satellite is operating nominally, our customers may only terminate
their service agreements for satellite capacity by paying us all, or substantially all, of the payments that would have otherwise become due over the term of the service agreement. In the case of our satellite under construction, Jupiter, we would
not be obligated to return the customer prepayments made under service agreements for the satellite if the launch was to fail. Also, if the launch of Jupiter was significantly delayed, our customers could exercise their right of termination under
their service agreement. 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, wireline 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 ongoing consumer customers from 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.



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Cost of Hardware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 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 also includes certain
engineering and hardware costs related to the design of a particular product for specific customer programs. 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 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 shorter of the initial contract period or the useful life of the hardware as a component of cost of hardware 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.

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)The Companys R&D programs are important to support future growth by
reducing costs and providing new technology and innovations to its customers. 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.



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Market Trends Impacting Our Revenues

The following table presents our revenues by end market for the years ended December 31, 2010, 2009 and 2008 (dollars in thousands):



|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|------------------------------------- |  | ----------------------- | --------- |  | ------------- | - | --------- | ------------- |  | - | --------- |  |  | - | ------- | - | ------ |  | ------- | - |  | - | -------- | - |  |  | ------- | 
|                                      |  |                         |           |  |               |   |           |               |  |   | Variance  | 
|                                      |  | Year Ended December 31, |           |  | 2010 vs. 2009 |   |           | 2009 vs. 2008 | 
|                                      |  | 2010                    |           |  | 2009          |   |           | 2008          |  |   | Amount    |  |  | % |         |   | Amount |  |         | % | 
|Revenues:                             |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Services revenues                     |  | $                       | 785,740   |  |               | $ | 709,558   |               |  | $ | 610,785   |  |  | $ | 76,182  |   |        |  | 10.7%   |   |  | $ | 98,773   |   |  |  | 16.2%   | 
|Hardware revenues                     |  |                         | 252,003   |  |               |   | 297,107   |               |  |   | 449,106   |  |  |   | (45,104 | ) |        |  | (15.2)% |   |  |   | (151,999 | ) |  |  | (33.8)% | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Total revenues                        |  | $                       | 1,037,743 |  |               | $ | 1,006,665 |               |  | $ | 1,059,891 |  |  | $ | 31,078  |   |        |  | 3.1%    |   |  | $ | (53,226  | ) |  |  | (5.0)%  | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Revenues by end market:               |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|North America Broadband segment:      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Consumer                              |  | $                       | 477,056   |  |               | $ | 419,563   |               |  | $ | 376,055   |  |  | $ | 57,493  |   |        |  | 13.7%   |   |  | $ | 43,508   |   |  |  | 11.6%   | 
|Enterprise                            |  |                         | 256,694   |  |               |   | 270,716   |               |  |   | 291,610   |  |  |   | (14,022 | ) |        |  | (5.2)%  |   |  |   | (20,894  | ) |  |  | (7.2)%  | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Total North America Broadband segment |  |                         | 733,750   |  |               |   | 690,279   |               |  |   | 667,665   |  |  |   | 43,471  |   |        |  | 6.3%    |   |  |   | 22,614   |   |  |  | 3.4%    | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|International Broadband segment       |  |                         | 205,607   |  |               |   | 203,886   |               |  |   | 237,188   |  |  |   | 1,721   |   |        |  | 0.8%    |   |  |   | (33,302  | ) |  |  | (14.0)% | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Telecom Systems segment:              |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Mobile Satellite Systems              |  |                         | 79,824    |  |               |   | 76,772    |               |  |   | 105,725   |  |  |   | 3,052   |   |        |  | 4.0%    |   |  |   | (28,953  | ) |  |  | (27.4)% | 
|Terrestrial Microwave                 |  |                         | 14,744    |  |               |   | 12,083    |               |  |   | 18,248    |  |  |   | 2,661   |   |        |  | 22.0%   |   |  |   | (6,165   | ) |  |  | (33.8)% | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Telematics                            |  |                         | 501       |  |               |   | 23,645    |               |  |   | 31,065    |  |  |   | (23,144 | ) |        |  | (97.9)% |   |  |   | (7,420   | ) |  |  | (23.9)% | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Total Telecom Systems segment         |  |                         | 95,069    |  |               |   | 112,500   |               |  |   | 155,038   |  |  |   | (17,431 | ) |        |  | (15.5)% |   |  |   | (42,538  | ) |  |  | (27.4)% | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|HTS Satellite segment                 |  |                         | 3,317     |  |               |   | -         |               |  |   | -         |  |  |   | 3,317   |   |        |  | *       |   |  |   | -        |   |  |  | *       | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 
|Total revenues                        |  | $                       | 1,037,743 |  |               | $ | 1,006,665 |               |  | $ | 1,059,891 |  |  | $ | 31,078  |   |        |  | 3.1%    |   |  | $ | (53,226  | ) |  |  | (5.0)%  | 
|                                      |  |                         |           |  |               |   |           |               |  |   |           |  |  |   |         |   |        |  |         |   |  |   |          |   |  |  |         | 



|* | Percentage not meaningful.
|- | --------------------------

The
following table presents our churn rate, ARPU, average monthly gross subscriber additions, and subscribers as of or for the years ended December 31, 2010, 2009 and 2008:



|                                              |  |                                           |         |  |               |   |         |      |  |   |         |  |  |   |        |  |        |  |       |   |  |   |        |  |  |  |       | 
|--------------------------------------------- |  | ----------------------------------------- | ------- |  | ------------- | - | ------- | ---- |  | - | ------- |  |  | - | ------ |  | ------ |  | ----- | - |  | - | ------ |  |  |  | ----- | 
|                                              |  | As of or For the Year Ended December 
31, |         |  | Variance      |  
|                                              |  | 2010 vs. 2009                             |         |  | 2009 vs. 2008 |  
|                                              |  | 2010                                      |         |  | 2009          |   |         | 2008 |  |   | Amount  |  |  | % |        |  | Amount |  |       | % | 
|Churn rate(1)                                 |  |                                           | 2.12%   |  |               |   | 2.23%   |      |  |   | 2.36%   |  |  |   | 0.11%  |  |        |  | 4.9%  |   |  |   | 0.13%  |  |  |  | 5.5%  | 
|ARPU(2)                                       |  | $                                         | 74      |  |               | $ | 70      |      |  | $ | 68      |  |  | $ | 4      |  |        |  | 5.7%  |   |  | $ | 2      |  |  |  | 2.9%  | 
|Average monthly gross subscriber additions(1) |  |                                           | 17,700  |  |               |   | 16,500  |      |  |   | 14,000  |  |  |   | 1,200  |  |        |  | 7.3%  |   |  |   | 2,500  |  |  |  | 17.9% | 
|Subscribers(1)                                |  |                                           | 578,200 |  |               |   | 504,300 |      |  |   | 432,800 |  |  |   | 73,900 |  |        |  | 14.7% |   |  |   | 71,500 |  |  |  | 16.5% | 



|(1) | Relates to our Consumer group and our small/medium enterprise and wholesale business customers who receive subscription services. The small/medium enterprise and
wholesale business customers are part of our Enterprise group. The Consumer and Enterprise groups are part of our North America Broadband segment. The trend of this metric has been substantially similar for the Consumer group and the small/medium
enterprise and wholesale business customers.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Relates only to our Consumer group, which is part of our North America Broadband segment.
|--- | -----------------------------------------------------------------------------------------



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North America Broadband Segment

Revenue from our Consumer group for the year ended December 31, 2010 increased by 13.7% to $477.1 million compared to the same period
in 2009. The growth in our Consumer group has been driven primarily by three factors: (i) the substantial growth in the number of subscribers arising from increased consumer awareness of our products and services as a result of the expansion of
our use of direct mail campaigns and television commercials targeting geographic areas that have historically been underserved by DSL and cable services; (ii) value-added services, such as express repair and web premium content services, and
the election by our customers to utilize the consumer rental program and to subscribe to higher level service plans resulting in an increase in ARPU; and (iii) improvements in customer retention as shown by the reduction in the churn rate.

As of December 31, 2010 and 2009, we achieved a total subscription base of 578,200 and 504,300, respectively, which
included 36,100 and 28,000, respectively, subscribers in our small/medium enterprise and wholesale businesses. Our ARPU, which is used to measure average monthly consumer subscription service revenues on a per subscriber basis, was $74 and $70 for
the years ended December 31, 2010 and 2009, respectively.

Revenue from our North American Enterprise group for the year
ended December 31, 2010 decreased by 5.2% to $256.7 million compared to the same period in 2009. The decrease was related to the reduction in hardware revenues due to delays in customer buying decisions, which impacted new hardware orders.
Partially offsetting the reduction in hardware revenues was the increase in service revenues as a result of growth in the managed service business. Enterprise service revenue is generally characterized by long-term service contracts.

International Broadband Segment

Revenue from our International Enterprise group for the year ended December 31, 2010 increased by 0.8% to $205.6 million compared to the same period in 2009, primarily due to the favorable
impact of currency exchange of $7.1 million as a result of the depreciation of the U.S. dollar and the continued growth of our expanding array of solutions and global services to enterprises and government organizations in Brazil and the
Africa/Middle East region. The increase was partially offset by delays in customer buying decisions which impacted new hardware orders.

Telecom Systems Segment

Revenue from our Telecom Systems segment for the year ended December 31, 2010 decreased by 15.5% to $95.1 million compared to the same period in 2009. The decrease was due to a reduction in
revenue from our Telematics group of $23.1 million to $0.5 million compared to the same period in 2009. The decrease in revenue was partially offset by the increase in revenue from our Mobile Satellite Systems and Terrestrial Microwave groups.



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HTS Satellite Segment

Pursuant to the Barrett Agreement, we develop and deliver gateways for Barretts service business in Canada which will utilize
Jupiter capacity. In 2010, we have recognized $3.3 million of hardware revenues for the HTS Satellite segment.

Selected Segment Data

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



|                                       |  |                         |           |   |               |   |           |      |  |   |           |  |  |   |         |   |        |  |         |   |  |   |         |   |  |  |         | 
|-------------------------------------- |  | ----------------------- | --------- | - | ------------- | - | --------- | ---- |  | - | --------- |  |  | - | ------- | - | ------ |  | ------- | - |  | - | ------- | - |  |  | ------- | 
|                                       |  | Year Ended December 31, |           |   | Variance      |  
|                                       |  | 2010 vs. 2009           |           |   | 2009 vs. 2008 |  
|                                       |  | 2010                    |           |   | 2009          |   |           | 2008 |  |   | Amount    |  |  | % |         |   | Amount |  |         | % | 
|Revenues by end market:                |  |                         |           |   |               |   |           |      |  |   |           |  |  |   |         |   |        |  |         |   |  |   |         |   |  |  |         | 
|North America Broadband segment        |  | $                       | 733,750   |   |               | $ | 690,279   |      |  | $ | 667,665   |  |  | $ | 43,471  |   |        |  | 6.3%    |   |  | $ | 22,614  |   |  |  | 3.4%    | 
|International Broadband segment        |  |                         | 205,607   |   |               |   | 203,886   |      |  |   | 237,188   |  |  |   | 1,721   |   |        |  | 0.8%    |   |  |   | (33,302 | ) |  |  | (14.0)% | 
|Telecom Systems segment                |  |                         | 95,069    |   |               |   | 112,500   |      |  |   | 155,038   |  |  |   | (17,431 | ) |        |  | (15.5)% |   |  |   | (42,538 | ) |  |  | (27.4)% | 
|HTS Satellite segment                  |  |                         | 3,317     |   |               |   | -         |      |  |   | -         |  |  |   | 3,317   |   |        |  | *       |   |  |   | -       |   |  |  | *       | 
|                                       |  |                         |           |   |               |   |           |      |  |   |           |  |  |   |         |   |        |  |         |   |  |   |         |   |  |  |         | 
|Total revenues                         |  | $                       | 1,037,743 |   |               | $ | 1,006,665 |      |  | $ | 1,059,891 |  |  | $ | 31,078  |   |        |  | 3.1%    |   |  | $ | (53,226 | ) |  |  | (5.0)%  | 
|                                       |  |                         |           |   |               |   |           |      |  |   |           |  |  |   |         |   |        |  |         |   |  |   |         |   |  |  |         | 
|Operating income (loss) by end market: |  |                         |           |   |               |   |           |      |  |   |           |  |  |   |         |   |        |  |         |   |  |   |         |   |  |  |         | 
|North America Broadband segment(1)     |  | $                       | 67,884    |   |               | $ | (7,991    | )    |  | $ | 21,339    |  |  | $ | 75,875  |   |        |  | *       |   |  | $ | (29,330 | ) |  |  | *       | 
|International Broadband segment        |  |                         | 10,571    |   |               |   | 15,120    |      |  |   | 21,679    |  |  |   | (4,549  | ) |        |  | (30.1)% |   |  |   | (6,559  | ) |  |  | (30.3)% | 
|Telecom Systems segment                |  |                         | 14,183    |   |               |   | 14,227    |      |  |   | 25,116    |  |  |   | (44     | ) |        |  | (0.3)%  |   |  |   | (10,889 | ) |  |  | (43.4)% | 
|HTS Satellite segment                  |  |                         | (3,350    | ) |               |   | (37       | )    |  |   | -         |  |  |   | (3,313  | ) |        |  | *       |   |  |   | (37     | ) |  |  | *       | 
|                                       |  |                         |           |   |               |   |           |      |  |   |           |  |  |   |         |   |        |  |         |   |  |   |         |   |  |  |         | 
|Total operating income                 |  | $                       | 89,288    |   |               | $ | 21,319    |      |  | $ | 68,134    |  |  | $ | 67,969  |   |        |  | 318.8%  |   |  | $ | (46,815 | ) |  |  | (68.7)% | 
|                                       |  |                         |           |   |               |   |           |      |  |   |           |  |  |   |         |   |        |  |         |   |  |   |         |   |  |  |         | 



|* | Percentage not meaningful.
|- | --------------------------

|(1) | For the year ended December 31, 2009, operating loss for North America Broadband segment includes $44.4 million of impairment loss related to our prepaid deposit
(see Item 3Legal Proceedings for further discussion).
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Results of Operations

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Revenues



|                                |  |                         |           |  |          |   |           |        |  |   |         |   |  |  |         | 
|------------------------------- |  | ----------------------- | --------- |  | -------- | - | --------- | ------ |  | - | ------- | - |  |  | ------- | 
|                                |  | Year Ended December 31, |           |  | Variance |  
|(Dollars in thousands)          |  | 2010                    |           |  | 2009     |   |           | Amount |  |   | %       |  
|Services revenues               |  | $                       | 785,740   |  |          | $ | 709,558   |        |  | $ | 76,182  |   |  |  | 10.7%   | 
|Hardware revenues               |  |                         | 252,003   |  |          |   | 297,107   |        |  |   | (45,104 | ) |  |  | (15.2)% | 
|                                |  |                         |           |  |          |   |           |        |  |   |         |   |  |  |         | 
|Total revenues                  |  | $                       | 1,037,743 |  |          | $ | 1,006,665 |        |  | $ | 31,078  |   |  |  | 3.1%    | 
|                                |  |                         |           |  |          |   |           |        |  |   |         |   |  |  |         | 
|% of revenue to total revenues: |  |                         |           |  |          |   |           |        |  |   |         |   |  |  |         | 
|Services revenues               |  |                         | 75.7%     |  |          |   | 70.5%     |        |  |   |         |   |  |  |         | 
|Hardware revenues               |  |                         | 24.3%     |  |          |   | 29.5%     |        |  |   |         |   |  |  |         | 

Services Revenues

The increase in services revenues was attributable to our North America Broadband segment. Revenues from our Consumer group increased by
$72.4 million to $454.4 million in 2010 compared to $382.0 million in 2009. The increase was primarily due to the growth in our subscriber base and ARPU as a result of increased marketing and sales efforts, as well as a larger percentage of our
customers utilizing the consumer rental program throughout 2010 compared to 2009 and the increased adoption of premium service offerings among our consumer subscriber base.

In addition, revenue from our North America Enterprise group increased by $7.8 million to $191.5 million in 2010



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compared to $183.7 million in 2009. The increase reflected the growth in our managed services business, new contracts awarded in prior periods that provided incremental service revenue in
2010 and the growth in our small/medium and wholesale subscriber base.

Furthermore, services revenue from our International
Broadband segment increased by $12.3 million to $134.4 million in 2010 from $122.1 million in 2009, primarily due to the continued growth of our expanding array of solutions and global services to enterprises and government organizations in Brazil
and the Africa/Middle East region. Also, contributing to the increase in international service revenue was $6.3 million as a result of the favorable impact of currency exchange due to the depreciation of the U.S. dollar.

Partially offsetting the increase in services revenue was a decrease in revenue from our Telecom Systems segment of $16.4 million to $5.4
million in 2010 compared to $21.8 million in 2009, mainly as a result of a significant reduction in revenues from the Telematics group.

Hardware Revenues

Hardware revenues from our North America
Broadband segment decreased by $36.8 million to $87.8 million in 2010 compared to $124.6 million in 2009.

Despite the growth
in the subscriber base, hardware revenues in the Consumer group decreased by $15.0 million to $22.6 million in 2010 compared to $37.6 million in 2009. The decrease was due to an increase in customers utilizing (i) the consumer rental
program, which accounts for rental revenues as services revenues, instead of the previously offered financed purchase plan, which revenues were accounted for as hardware revenues and (ii) the consumer rebate programs which reduced hardware
revenues.

Hardware revenue from our North America Enterprise group also decreased by $21.8 million to $65.2 million in 2010
compared to $87.0 million in 2009. The decrease was due to a lower volume of shipments as enterprise customers delayed their buying decisions as well as the changes in the product mix where the emphasis on managed services, which typically includes
a combination of satellite and terrestrial hardware, has led to lower upfront hardware revenue.

In addition, hardware
revenues from our International Broadband segment decreased by $10.6 million to $71.2 million in 2010 compared to $81.8 million in 2009. The decrease was primarily due to the completion of the rollout of terminal shipments in 2009 on a multi-year
contract for a large lottery operator in the United Kingdom and a decrease in shipment volume to our international enterprise customers as delays in customer buying decisions impacted new hardware orders. These decreases were slightly offset by a
$0.8 million favorable impact of currency exchange due to the depreciation of the U.S. dollar.

Hardware revenues from our
Telecom Systems segment decreased by $1.0 million to $89.7 million in 2010 compared to $90.7 million in 2009, mainly due to the decrease in hardware revenue from the Telematics group.

The decrease in hardware revenues in 2010 was partially offset by revenues of $3.3 million from the HTS segment associated with the
construction of gateway equipment for Barrett pursuant to the Barrett Agreement.



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Cost of Revenues



|                       |  |                         |         |  |          |   |         |        |  |   |         |   |  |  |         | 
|---------------------- |  | ----------------------- | ------- |  | -------- | - | ------- | ------ |  | - | ------- | - |  |  | ------- | 
|                       |  | Year Ended December 31, |         |  | Variance |  
|(Dollars in thousands) |  | 2010                    |         |  | 2009     |   |         | Amount |  |   | %       |  
|Cost of services       |  | $                       | 491,465 |  |          | $ | 448,767 |        |  | $ | 42,698  |   |  |  | 9.5%    | 
|Cost of hardware       |  |                         | 234,805 |  |          |   | 289,516 |        |  |   | (54,711 | ) |  |  | (18.9)% | 
|                       |  |                         |         |  |          |   |         |        |  |   |         |   |  |  |         | 
|Total cost of revenues |  | $                       | 726,270 |  |          | $ | 738,283 |        |  | $ | (12,013 | ) |  |  | (1.6)%  | 
|                       |  |                         |         |  |          |   |         |        |  |   |         |   |  |  |         | 
|Gross margin:          |  |                         |         |  |          |   |         |        |  |   |         |   |  |  |         | 
|Services revenues      |  |                         | 37.5%   |  |          |   | 36.8%   |        |  |   |         |   |  |  |         | 
|Hardware revenues      |  |                         | 6.8%    |  |          |   | 2.6%    |        |  |   |         |   |  |  |         | 

Cost of Services

Cost of services increased in conjunction with the increase in services revenues, mainly due to the growth in our consumer subscriber
base and our managed services businesses in the North America Broadband segment. The primary drivers for the increased costs associated with this growth in services included customer service and support, wireline and wireless costs, field services,
network operations and depreciation expense, which increased by $41.9 million for the year ended December 31, 2010 compared to the same period in 2009. The increases were partially offset by lower transponder capacity lease expense. 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, cost of services from our International Broadband segment increased by $12.7 million, primarily due to an increase in the number of enterprise and global service sites in service across
Brazil and the Africa/Middle East region. The increase was partially offset by a decrease of $12.6 million in cost of services from the Telecom Systems segment to $4.1 million in 2010 compared to $16.7 million in 2009, mainly related to the decline
in Telematics group revenue.

Cost of Hardware

Cost of hardware decreased in conjunction with the reduction in hardware revenues. Cost of hardware from our North America Broadband
segment decreased by $40.6 million to $121.6 million in 2010 compared to $162.2 million in 2009. Of the $40.6 million reduction, $26.9 million was attributable to the Consumer group despite the growth in the consumer subscriber base. Cost of
hardware from the Consumer group decreased because of: (i) more customers utilizing the consumer rental program, for which hardware cost is accounted for as a component of services cost, instead of the previously offered deferred purchase plan,
which cost was accounted for as hardware cost and (ii) lower hardware unit cost as a result of improved manufacturing efficiency.

Cost of hardware from our International Broadband segment decreased by $11.9 million to $44.9 million in 2010 compared to $56.8 million in 2009, primarily due to the reduction in hardware revenues. Cost
of hardware from our Telecom Systems segment decreased by $4.9 million, primarily related to the reduction in hardware cost from the Telematics group.

Cost of hardware in 2010 also included the costs associated with the construction of gateway equipment for Barrett pursuant to the Barrett Agreement, which did not exist in 2009.

Selling, General and Administrative Expense



|                                            |  |                         |         |  |          |   |         |        |  |   |        |  |  |  |       | 
|------------------------------------------- |  | ----------------------- | ------- |  | -------- | - | ------- | ------ |  | - | ------ |  |  |  | ----- | 
|                                            |  | Year Ended December 31, |         |  | Variance |  
|(Dollars in thousands)                      |  | 2010                    |         |  | 2009     |   |         | Amount |  |   | %      | 
|Selling, general and administrative expense |  | $                       | 199,156 |  |          | $ | 175,203 |        |  | $ | 23,953 |  |  |  | 13.7% | 
|% of revenue                                |  |                         | 19.2%   |  |          |   | 17.4%   |        |  |   |        |  |  |  |       | 

The increase in SG&A expense was mainly driven by our expanded efforts in promoting our
consumer and enterprise business in our North America Broadband segment, which caused an increase of $15.0 million in expenses. In addition, SG&A expense from our international subsidiaries increased by $4.9 million, primarily due to increased
bad debt expenses in India and increased costs in Brazil, as a result of favorable foreign currency impacts in 2009. In December 2010, we also



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recorded an estimated reserve of $1.9 million for settlement costs associated with a consumer class-action lawsuit filed against us in 2009. See Item 3Legal Proceedings of this report
for further detail.

Loss on Impairment

There was no impairment loss recognized in 2010. In 2009, we recognized $44.4 million of impairment loss, related to the Deposit paid to Sea Launch. See Item 3Legal Proceedings of this report
for further detail.

Research and Development



|                         |  |                         |        |  |          |   |        |        |  |   |        |   |  |  |        | 
|------------------------ |  | ----------------------- | ------ |  | -------- | - | ------ | ------ |  | - | ------ | - |  |  | ------ | 
|                         |  | Year Ended December 31, |        |  | Variance |  
|(Dollars in thousands)   |  | 2010                    |        |  | 2009     |   |        | Amount |  |   | %      |  
|Research and development |  | $                       | 20,279 |  |          | $ | 22,296 |        |  | $ | (2,017 | ) |  |  | (9.0)% | 
|% of revenue             |  |                         | 2.0%   |  |          |   | 2.2%   |        |  |   |        |   |  |  |        | 

R&D expense decreased due to a reduction in development activities of $7.4 million from our
North America Broadband segment. This decrease was partially offset by the increase in R&D activities of $3.9 million and $1.2 million related to the construction of Jupiter and our Mobile Satellite Systems group, respectively.

Amortization of Intangible Assets



|                                  |  |                         |       |  |          |   |       |        |  |   |        |   |  |  |         | 
|--------------------------------- |  | ----------------------- | ----- |  | -------- | - | ----- | ------ |  | - | ------ | - |  |  | ------- | 
|                                  |  | Year Ended December 31, |       |  | Variance |  
|(Dollars in thousands)            |  | 2010                    |       |  | 2009     |   |       | Amount |  |   | %      |  
|Amortization of intangible assets |  | $                       | 2,750 |  |          | $ | 5,164 |        |  | $ | (2,414 | ) |  |  | (46.7)% | 
|% of revenue                      |  |                         | 0.3%  |  |          |   | 0.5%  |        |  |   |        |   |  |  |         | 

Amortization of intangible assets decreased primarily due to the impact of intangible assets
reaching the end of their estimated life.

Operating Income



|                       |  |                         |        |  |          |   |        |        |  |   |        |  |  |  |        | 
|---------------------- |  | ----------------------- | ------ |  | -------- | - | ------ | ------ |  | - | ------ |  |  |  | ------ | 
|                       |  | Year Ended December 31, |        |  | Variance |  
|(Dollars in thousands) |  | 2010                    |        |  | 2009     |   |        | Amount |  |   | %      | 
|Operating income       |  | $                       | 89,288 |  |          | $ | 21,319 |        |  | $ | 67,969 |  |  |  | 318.8% | 
|% of revenue           |  |                         | 8.6%   |  |          |   | 2.1%   |        |  |   |        |  |  |  |        | 

Our operating income increased significantly due to the improvement in gross margin of $43.1
million in 2010 compared to 2009, as a result of growth in our services businesses, primarily in our North American businesses, and the reduction of costs associated with leased satellite capacity. In addition, in 2009, we recognized impairment cost
of $44.4 million associated with our Deposit paid to Sea Launch. There was no impairment cost in 2010. The increase in our operating income was partially offset by higher SG&A expenses of $24.0 million.

Interest Expense



|                       |  |                         |        |  |          |   |        |        |  |   |        |   |  |  |        | 
|---------------------- |  | ----------------------- | ------ |  | -------- | - | ------ | ------ |  | - | ------ | - |  |  | ------ | 
|                       |  | Year Ended December 31, |        |  | Variance |  
|(Dollars in thousands) |  | 2010                    |        |  | 2009     |   |        | Amount |  |   | %      |  
|Interest expense       |  | $                       | 59,324 |  |          | $ | 64,094 |        |  | $ | (4,770 | ) |  |  | (7.4)% | 

Interest expense
primarily relates to interest on the $450 million of 9.50% senior notes maturing on April 15, 2014 (the 2006 Senior Notes), $150 million of 9.50% senior notes maturing on April 15, 2014 (the 2009 Senior Notes) and
the $115 million term loan maturing on April 15, 2014 (the Term Loan Facility) less capitalized interest associated with the construction of our Jupiter satellite. The decrease in interest expense was primarily due to $12.2 million
of increased



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capitalized interest associated with the construction of Jupiter in 2010. The decrease was partially offset by higher interest expense of $6.6 million recognized on the 2009 Senior Notes for the
twelve months in 2010 compared to eight months in 2009 as the 2009 Senior Notes were issued in May 2009.

Interest and Other Loss, Net



|                                   |  |                         |       |  |          |   |       |        |  |   |      |   |  |  |         | 
|---------------------------------- |  | ----------------------- | ----- |  | -------- | - | ----- | ------ |  | - | ---- | - |  |  | ------- | 
|                                   |  | Year Ended December 31, |       |  | Variance |  
|(Dollars in thousands)             |  | 2010                    |       |  | 2009     |   |       | Amount |  |   | %    |  
|Interest income                    |  | $                       | 1,770 |  |          | $ | 1,988 |        |  | $ | (218 | ) |  |  | (11.0)% | 
|Other loss, net                    |  |                         | -     |  |          |   | (334  | )      |  |   | 334  |   |  |  | 100.0%  | 
|                                   |  |                         |       |  |          |   |       |        |  |   |      |   |  |  |         | 
|Total interest and other loss, net |  | $                       | 1,770 |  |          | $ | 1,654 |        |  | $ | 116  |   |  |  | 7.0%    | 
|                                   |  |                         |       |  |          |   |       |        |  |   |      |   |  |  |         | 

Other loss, net in 2009 mainly represented the extinguishment of certain lease financing
arrangements. There was no activity recorded in Other loss, net in 2010. The decrease in interest income in 2010 was primarily due to a reduction of interest income earned on third party receivables compared to 2009.

Income Tax Expense



|                       |  |                         |       |  |          |   |       |        |  |   |       |  |  |  |        | 
|---------------------- |  | ----------------------- | ----- |  | -------- | - | ----- | ------ |  | - | ----- |  |  |  | ------ | 
|                       |  | Year Ended December 31, |       |  | Variance |  
|(Dollars in thousands) |  | 2010                    |       |  | 2009     |   |       | Amount |  |   | %     | 
|Income tax expense     |  | $                       | 5,691 |  |          | $ | 2,436 |        |  | $ | 3,255 |  |  |  | 133.6% | 

Changes in income tax
expense are generally attributable to state income taxes and income earned from certain of our foreign subsidiaries. For the years ended December 31, 2010 and 2009, our income tax expense was partially offset by $0.4 million and $2.8 million,
respectively, of income tax benefit generated by our Indian subsidiary as a result of its engagement 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, 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 revenues               |  |                         | 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 revenues               |  |                         | 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 in 2009 compared to $322.9 million 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 in 2009 and 2008, respectively. Also
contributing to the increase in services revenues was revenue



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growth of $30.3 million from our North American Enterprise group to $183.7 million in 2009 compared to $153.4 million 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 in 2009 from $102.5 million in 2008, primarily due to the continued
growth in the number of enterprise sites in service internationally, mainly in India and Brazil.

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

Hardware Revenues

The decrease in hardware revenues in 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 in 2009 compared to
$191.4 million in 2008. Hardware revenues from our North American Enterprise group decreased by $51.2 million to $87.0 million in 2009 compared to $138.2 million 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 revenues in the Consumer group decreased by $15.6 million to
$37.6 million in 2009 compared to $53.2 million 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 in 2009 compared to $134.7 million 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 revenues was a decrease in revenues of $32.3
million from our Telecom Systems segment to $90.7 million in 2009 compared to $123.0 million in 2008. The decrease was mainly due to several development contracts in the Mobile Satellite group reaching their completion stage.

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       |  |                         | 289,516 |  |          |   | 378,264 |        |  |   | (88,748 | ) |  |  | (23.5)% | 
|                       |  |                         |         |  |          |   |         |        |  |   |         |   |  |  |         | 
|Total cost of revenues |  | $                       | 738,283 |  |          | $ | 784,937 |        |  | $ | (46,654 | ) |  |  | (5.9)%  | 
|                       |  |                         |         |  |          |   |         |        |  |   |         |   |  |  |         | 
|Gross margin:          |  |                         |         |  |          |   |         |        |  |   |         |   |  |  |         | 
|Services revenues      |  |                         | 36.8%   |  |          |   | 33.4%   |        |  |   |         |   |  |  |         | 
|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.



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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 from lower
revenues.

Cost of Hardware

Corresponding with the decrease in hardware revenues, cost of hardware within the respective groups decreased for the year ended December 31, 2009 compared to the same period in 2008. Cost of
hardware 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 15Other Benefits to our audited consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this
report.

Loss on Impairment

In June 2009, we recognized $44.4 million of impairment loss related the impairment of the Deposit. There was no impairment loss recognized in 2008.

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.



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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.

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.

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.



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Liquidity and Capital Resources

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009



|                                |  |                         |          |   |          |   |          |        |  |   |          |   |  |  |         | 
|------------------------------- |  | ----------------------- | -------- | - | -------- | - | -------- | ------ |  | - | -------- | - |  |  | ------- | 
|                                |  | Year Ended December 31, |          |   | Variance |  
|(Dollars in thousands)          |  | 2010                    |          |   | 2009     |   |          | Amount |  |   | %        |  
|Net cash provided by (used in): |  |                         |          |   |          |   |          |        |  |   |          |   |  |  |         | 
|Operating activities            |  | $                       | 147,157  |   |          | $ | 162,871  |        |  | $ | (15,714  | ) |  |  | (9.6)%  | 
|Investing activities            |  | $                       | (268,416 | ) |          | $ | (205,020 | )      |  | $ | (63,396  | ) |  |  | (30.9)% | 
|Financing activities            |  | $                       | 17,578   |   |          | $ | 129,792  |        |  | $ | (112,214 | ) |  |  | (86.5)% | 

Net Cash Flows from Operating
Activities

Net cash provided by operating activities was approximately $147.2 million in 2010. This was due to
approximately $160.6 million of cash generated by earnings after adjustments of non-cash expenses offset by a net increase in working capital of approximately $13.4 million. Net cash provided by operations was approximately $162.9 million in 2009.
This was due to approximately $106.5 million of cash generated by earnings after adjustment for non-cash expenses plus a net decrease in working capital of $56.4 million.

Net Cash Flows from Investing Activities

The increase in net cash used in
investing activities was mainly due to an increase in capital expenditures on a cash basis of $132.2 million, primarily related to the construction of our Jupiter satellite. The increase was partially offset by a net decrease in marketable
securities of $55.5 million.

Capital expenditures on a cash basis for the years ended December 31, 2010 and 2009 are
shown as follows (in thousands):



|                              |  |                         |         |  |      |   |         |          |  |   |         |  
|----------------------------- |  | ----------------------- | ------- |  | ---- | - | ------- | -------- |  | - | ------- | -
|                              |  | Year Ended December 31, |         |  |      |  
|                              |  | 2010                    |         |  | 2009 |   |         | Variance | 
|Capital expenditures:         |  |                         |         |  |      |   |         |          |  |   |         |  
|Jupiter program               |  | $                       | 172,975 |  |      | $ | 44,024  |          |  | $ | 128,951 |  
|Capital expendituresVSAT     |  |                         | 98,261  |  |      |   | 96,138  |          |  |   | 2,123   |  
|Capitalized software          |  |                         | 13,073  |  |      |   | 12,772  |          |  |   | 301     |  
|Capital expendituresother    |  |                         | 8,884   |  |      |   | 7,759   |          |  |   | 1,125   |  
|SPACEWAY program              |  |                         | 2,469   |  |      |   | 2,781   |          |  |   | (312    | )
|                              |  |                         |         |  |      |   |         |          |  |   |         |  
|Total capital expenditures(1) |  | $                       | 295,662 |  |      | $ | 163,474 |          |  | $ | 132,188 |  
|                              |  |                         |         |  |      |   |         |          |  |   |         |  



|(1) | Capital expenditures on an accrual basis were $295.7 million and $190.4 million for the years ended December 31, 2010 and 2009, respectively.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------

Net Cash Flows from Financing Activities

For the year ended December 31, 2010, the net cash provided by our financing activities of $17.6 million was mainly driven by the financing activity in connection with the launch related costs of our
Jupiter satellite. The increase in cash provided by our financing activities was partially offset by the repayment of our long-term debt and debt issuance costs associated with our financing facility. For the year ended December 31, 2009, our
net cash provided by financing activities was mainly related to the issuance of the 2009 Senior Notes.



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##### Table of Contents

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

Net cash provided by operating activities was approximately $162.9 million in 2009. This was due to
approximately $106.5 million of cash generated by earnings after adjustments of non-cash expenses plus a net decrease in working capital of approximately $56.4 million. Net cash provided by operations was approximately $70.2 million in 2008. This
was due to approximately $83.1 million of cash generated by earnings after adjustment for non-cash expenses offset by a net increase in working capital of $12.9 million.

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 on a cash basis 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 advanced to a customer. Partially offsetting the increase was the cash used in the Helius acquisition of $10.5 million that occurred in February 2008.

Capital expenditures on a cash basis 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    |  |                         | 7,759   |  |      |   | 13,144 |          |  |   | (5,385  | )
|SPACEWAY program              |  |                         | 2,781   |  |      |   | 27,211 |          |  |   | (24,430 | )
|                              |  |                         |         |  |      |   |        |          |  |   |         |  
|Total capital expenditures(1) |  | $                       | 163,474 |  |      | $ | 96,233 |          |  | $ | 67,241  |  
|                              |  |                         |         |  |      |   |        |          |  |   |         |  



|(1) | Capital expenditures on an accrual basis were $190.4 million and $96.2 million for the years ended December 31, 2009 and 2008, respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------

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.

Future Liquidity Requirements

As of December 31, 2010, our Cash and cash equivalents and Marketable securities were $87.5 million and our
total debt was $746.7 million. We are significantly leveraged as a result of our indebtedness. The Merger Agreement contemplates the repayment of all of the Companys outstanding debt (including the 91/2% Senior Notes due 2014), except that the $115 million loan facility
guaranteed by COFACE, the French Export Credit Agency, will continue to remain outstanding following the Merger if the requisite lender consents thereunder are obtained.



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Revolving Credit Facility and Term Loan

On March 16, 2010, we entered into a credit agreement with JP Morgan Chase Bank, N.A. and Barclays Capital to amend and restate our
senior secured $50 million revolving credit facility (the Revolving Credit Facility). Pursuant to the terms of the agreement, among other changes, the maturity date of the Revolving Credit Facility was extended to March 16,
2014, subject to an early maturity date of 91 days prior to March 16, 2014 in the event our 2009 and 2006 Senior Notes and our Term Loan Facility (as defined below) are not (i) repaid in full or (ii) refinanced with new debt (or
amended) with maturities of no earlier than 91 days after March 16, 2014. The terms of the Revolving Credit Facility were amended to be: (i) in respect of the interest rate, at our option, the Alternative Borrowing Rate (as defined in
the Revolving Credit Facility) plus 2.00% or the Adjusted London Interbank Offered Rate (LIBOR) (as defined in the Revolving Credit Facility) plus 3.00% and (ii) in respect of the participation fee for outstanding letters of credit,
3.00% per annum, in each case subject to downward adjustment based on our leverage ratio. As of December 31, 2010, the total outstanding letters of credit and the available borrowing capacity under the Revolving Credit Facility was $4.4
million and $45.6 million, respectively. As of December 31, 2010, the Revolving Credit Facility was rated Baa3 and BB- by Moodys and Standard & Poors (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) 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 and 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 remaining net interest payments on the Term Loan Facility are
estimated to be approximately $8.8 million for each of the years ending December 31, 2011 through 2013 and $3.3 million for the year ending December 31, 2014. As of December 31, 2010, the Term Loan was rated B1 and B by Moodys
and S&P, respectively.

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. Certain of our foreign subsidiaries maintain various revolving lines of credit and
term loans funded by their respective local banks in local currency. As of December 31, 2010, the aggregate balance outstanding under these loans was $2.8 million. Our subsidiaries 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 its existing and
future subsidiaries that are or will be guarantors of the Senior Notes, the Term Loan Facility, COFACE Guaranteed 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, COFACE Guaranteed Facility and the Revolving Credit Facility, or to make any funds available to pay those amounts, whether by dividend, distribution, loan or other payment.

Senior Notes

In
May 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 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. We received net proceeds of approximately $133.6 million 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. As
of December 31, 2010, the 2009 Senior Notes were rated B1 and B by Moodys and S&P, respectively. As of December 31, 2010, we had recorded $3.0 million of accrued interest payable related to the 2009 Senior Notes.



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In April 2006, we issued $450 million of 9.50% senior notes maturing on April 15, 2014
(the 2006 Senior Notes), which 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, 2010, we had recorded $8.9 million of accrued interest payable related to the 2006 Senior Notes. As of December 31, 2010,
the 2006 Senior Notes were rated B1 and B by Moodys and S&P, respectively.

COFACE Guaranteed Facility

On October 29, 2010, we entered into a $115 million loan agreement with BNP Paribas and Societe Generale (COFACE Guaranteed
Facility), which is guaranteed by COFACE, the French Export Credit Agency, to finance the launch related costs for Jupiter. Pursuant to the COFACE Guaranteed Facility agreement, loan draw-downs, which began in the fourth quarter of 2010, will
occur over the construction period for the launch vehicle up to the time of the launch, which is estimated to be in the first half of 2012. The COFACE Guaranteed Facility has a fixed interest rate of 5.13%, payable semi-annually in arrears starting
six months after each borrowing, and requires that principal repayments are to be paid in 17 consecutive equal semi-annual installments starting the earlier of (i) six months after the in-orbit delivery, or (ii) December 1, 2012. The
agreement also contains covenants and conditions which are customary for financings of this type. As of December 31, 2010, we had $27.4 million of borrowings under the loan and an available borrowing capacity of $87.6 million.

Although the terms and covenants with respect to the 2009 Senior Notes are substantially identical to the 2006 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, the agreement governing the COFACE Guaranteed 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; (iii) in the case of the COFACE Guaranteed
Facility, for so long as the COFACE Guaranteed Facility remains outstanding; and (iv) 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, the
COFACE Guaranteed Facility 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, 2010.

Other

In June 2009, we entered into an agreement with Space Systems/Loral, Inc. (SS/L) for the construction of Jupiter and agreed to make installment payments to SS/L upon the completion of each
milestone as set forth in the agreement. In connection with the construction of Jupiter, we entered into a contract with Barrett, whereby Barrett agreed to lease user beams and purchase gateways and Ka-band terminals for the Jupiter satellite that
are designed to operate in Canada. In April 2010, we entered into an agreement with Arianespace for the launch of Jupiter in the first half of 2012. Pursuant to the agreement, the Ariane 5 will launch Jupiter into geosynchronous transfer orbit from
Guiana Space Centre in Kourou, French Guiana. As of December 31, 2010, our remaining obligation for the construction and launch of Jupiter was approximately $210.8 million.

Based on our current and anticipated levels of operations and conditions in our markets and industry, we expect to meet our short-term
cash requirements through the use of cash on hand and cash from operations that we expect to generate. We expect to meet our long-term cash requirements through a combination of (i) cash on hand and cash from operations that we



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expect to generate and (ii) a possible refinancing of our senior notes and/or term loan that mature in 2014. If the Merger is not consummated, we believe that our current resources are
sufficient to meet our short-term cash requirements. 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. We do not currently anticipate making borrowings under the $50 million Revolving Credit Facility for the next twelve
months. 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.

Contractual Obligations

The following table summarizes our contractual obligations at December 31, 2010 and the effect such obligations are expected to have on our liquidity and cash flow in future periods (in thousands):



|                                       |  |        |         |  |      |   |         |      |  |   |         |  |  |      |         |  |            |   |        |       |  |   |        |  |  |   |           | 
|-------------------------------------- |  | ------ | ------- |  | ---- | - | ------- | ---- |  | - | ------- |  |  | ---- | ------- |  | ---------- | - | ------ | ----- |  | - | ------ |  |  | - | --------- | 
|                                       |  | Due in |         |  |      |  
|                                       |  | 2011   |         |  | 2012 |   |         | 2013 |  |   | 2014    |  |  | 2015 |         |  | Thereafter |   |        | Total | 
|Senior Notes(1)                        |  | $      | -       |  |      | $ | -       |      |  | $ | -       |  |  | $    | 600,000 |  |            | $ | -      |       |  | $ | -      |  |  | $ | 600,000   | 
|Term loans                             |  |        | 1,399   |  |      |   | 131     |      |  |   | 131     |  |  |      | 115,131 |  |            |   | 89     |       |  |   | -      |  |  |   | 116,881   | 
|VSAT hardware financing obligations(2) |  |        | 3,109   |  |      |   | 2,266   |      |  |   | 631     |  |  |      | 260     |  |            |   | 57     |       |  |   | -      |  |  |   | 6,323     | 
|COFACE Guaranteed Facility             |  |        | -       |  |      |   | 1,612   |      |  |   | 3,224   |  |  |      | 3,224   |  |            |   | 3,224  |       |  |   | 16,119 |  |  |   | 27,403    | 
|Orbital slot commitment(3)             |  |        | 705     |  |      |   | 747     |      |  |   | 792     |  |  |      | 840     |  |            |   | 890    |       |  |   | 943    |  |  |   | 4,917     | 
|Revolving loans                        |  |        | 967     |  |      |   | -       |      |  |   | -       |  |  |      | -       |  |            |   | -      |       |  |   | -      |  |  |   | 967       | 
|Estimated interest payments(4)         |  |        | 68,158  |  |      |   | 67,670  |      |  |   | 67,369  |  |  |      | 33,173  |  |            |   | 1,074  |       |  |   | 2,337  |  |  |   | 239,781   | 
|Jupiter commitments                    |  |        | 165,632 |  |      |   | 15,280  |      |  |   | 4,249   |  |  |      | 2,864   |  |            |   | 3,880  |       |  |   | 18,851 |  |  |   | 210,756   | 
|Transponder lease obligations          |  |        | 119,466 |  |      |   | 67,483  |      |  |   | 49,846  |  |  |      | 35,685  |  |            |   | 28,337 |       |  |   | 11,947 |  |  |   | 312,764   | 
|Leases and other commitments           |  |        | 12,900  |  |      |   | 10,907  |      |  |   | 7,824   |  |  |      | 6,371   |  |            |   | 3,181  |       |  |   | 4,752  |  |  |   | 45,935    | 
|Due to affiliates                      |  |        | 6,146   |  |      |   | -       |      |  |   | -       |  |  |      | -       |  |            |   | -      |       |  |   | -      |  |  |   | 6,146     | 
|                                       |  |        |         |  |      |   |         |      |  |   |         |  |  |      |         |  |            |   |        |       |  |   |        |  |  |   |           | 
|Total                                  |  | $      | 378,482 |  |      | $ | 166,096 |      |  | $ | 134,066 |  |  | $    | 797,548 |  |            | $ | 40,732 |       |  | $ | 54,949 |  |  | $ | 1,571,873 | 
|                                       |  |        |         |  |      |   |         |      |  |   |         |  |  |      |         |  |            |   |        |       |  |   |        |  |  |   |           | 



|(1) | Represents the face value of 2006 Senior Notes and 2009 Senior Notes.
|--- | ---------------------------------------------------------------------

|(2) | Represents our VSAT hardware financing obligations that were funded by third-party financial institutions.
|--- | ----------------------------------------------------------------------------------------------------------

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

|(4) | Includes interests calculated on the Senior Notes, Term loans, VSAT hardware financing obligations, COFACE Guaranteed Facility, and Orbital slot commitment.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

Commitments and Contingencies

For a discussion of commitments and contingencies, see Note 19Commitments and Contingencies to our audited consolidated financial statements included in Item 8. Financial Statements and
Supplementary Data 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, 2010, we had $16.1 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



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facilities. Of this amount, $4.4 million was issued under the Revolving Credit Facility; $0.6 million was secured by restricted cash; $1.1 million related to insurance bonds; and $10.0 million
was issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued by our foreign subsidiaries are secured by certain assets.

Seasonality

Like many communications infrastructure equipment vendors, a
higher amount of our hardware revenues occur in the second half of the year due to our customers annual procurement and budget cycles. Large enterprises and operators often 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.

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 17Transactions with Related Parties to our audited consolidated financial statements included in Item 8. Financial Statements and Supplementary Data of this report.

Critical Accounting Policies and Estimates

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 revenues are
generally recognized when services are rendered or products are installed and as title passes to those customers, net of sales taxes. Billings for revenues that have not been earned are deferred and recognized in the period when earned. 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.

Our consumer rental program allows consumer customers 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 as service revenue until the customer terminates the contract with us.

In August 2010, we were awarded $58.7 million from the U.S. Government as the only national provider of high-speed satellite broadband
service under the broadband stimulus programs, established pursuant to the American Recovery and Reinvestment Act of 2009. Under the consumer broadband stimulus program, eligible consumer customers have month-to-month service contracts and do not
have to pay for the rental of the equipment.

All upfront fees collected in connection with the service arrangements are
deferred and recognized as service revenue over the term of the customer arrangement.



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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 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.

Income Taxes

We
are a limited liability company and are 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, our predessor. 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 states that impose income tax on limited
liability companies.

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. Our consumer rental program allows consumer customers 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 as service revenue until the customer terminates the contracts with
us. We monitor the recoverability of subscriber acquisition costs and are entitled to an early termination fee 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 monthly rental fee charged to customers, the ability to recover the equipment, and/or the ability to charge an early termination fee.



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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. Financial Statements and Supplementary Data of this report.



|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 shown 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. Our international business is conducted in a variety of currencies, including
U.S. dollars, and it is therefore 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, 2010, we
had an estimated $10.7 million of foreign currency denominated receivables and payables outstanding, and $0.7 million of 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, 2010.

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 $5.7 million as of December 31, 2010.

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, the COFACE Guaranteed Facility and outstanding borrowings related to VSAT 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 Revolving 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 Adjusted LIBOR based interest on the Term Loan Facility for a fixed
interest rate of 5.12% per annum. The remaining 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, 2011
through 2013 and $3.3 million for the year



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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 10Debt to
our audited consolidated financial statements included in Item 8 in this report.

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, 2010 and 2009, 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, 2010. 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, 2010, 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, 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, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010,
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, 2010, based on the
criteria established in Internal Control  Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission.



|                         
|-------------------------
|/s/ Deloitte & Touche LLP
|                         
|Baltimore, Maryland      
|March 7, 2011            



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HUGHES NETWORK SYSTEMS, LLC

CONSOLIDATED BALANCE SHEETS

(In thousands)



|                                            |  |              |           |   |      |   |           |  
|------------------------------------------- |  | ------------ | --------- | - | ---- | - | --------- | -
|                                            |  | December 31, |          
|                                            |  | 2010         |           |   | 2009 |  
|ASSETS                                      |  |              |           |   |      |   |           |  
|Current assets:                             |  |              |           |   |      |   |           |  
|Cash and cash equivalents                   |  | $            | 80,800    |   |      | $ | 183,733   |  
|Marketable securities                       |  |              | 6,675     |   |      |   | 31,126    |  
|Receivables, net                            |  |              | 184,869   |   |      |   | 162,806   |  
|Inventories                                 |  |              | 57,819    |   |      |   | 60,244    |  
|Prepaid expenses and other                  |  |              | 24,600    |   |      |   | 20,976    |  
|                                            |  |              |           |   |      |   |           |  
|Total current assets                        |  |              | 354,763   |   |      |   | 458,885   |  
|Property, net                               |  |              | 773,652   |   |      |   | 601,964   |  
|Capitalized software costs, net             |  |              | 46,092    |   |      |   | 49,776    |  
|Intangible assets, net                      |  |              | 10,738    |   |      |   | 13,488    |  
|Goodwill                                    |  |              | 2,661     |   |      |   | 2,661     |  
|Other assets                                |  |              | 67,459    |   |      |   | 68,524    |  
|                                            |  |              |           |   |      |   |           |  
|Total assets                                |  | $            | 1,255,365 |   |      | $ | 1,195,298 |  
|                                            |  |              |           |   |      |   |           |  
|LIABILITIES AND EQUITY                      |  |              |           |   |      |   |           |  
|Current liabilities:                        |  |              |           |   |      |   |           |  
|Accounts payable                            |  | $            | 117,763   |   |      | $ | 117,513   |  
|Short-term debt                             |  |              | 6,196     |   |      |   | 6,750     |  
|Accrued liabilities and other               |  |              | 133,383   |   |      |   | 133,926   |  
|                                            |  |              |           |   |      |   |           |  
|Total current liabilities                   |  |              | 257,342   |   |      |   | 258,189   |  
|Long-term debt                              |  |              | 740,487   |   |      |   | 714,957   |  
|Other long-term liabilities                 |  |              | 27,308    |   |      |   | 16,191    |  
|                                            |  |              |           |   |      |   |           |  
|Total liabilities                           |  |              | 1,025,137 |   |      |   | 989,337   |  
|                                            |  |              |           |   |      |   |           |  
|Commitments and contingencies               |  |              |           |   |      |   |           |  
|                                            |  |             
|Equity:                                     |  |              |           |   |      |   |           |  
|Hughes Network Systems, LLC (HNS) equity: |  |              |           |   |      |   |           |  
|Class A membership interests                |  |              | 176,099   |   |      |   | 177,933   |  
|Class B membership interests                |  |              | -         |   |      |   | -         |  
|Retained earnings                           |  |              | 61,487    |   |      |   | 36,094    |  
|Accumulated other comprehensive loss        |  |              | (15,682   | ) |      |   | (13,987   | )
|                                            |  |              |           |   |      |   |           |  
|Total HNS equity                           |  |              | 221,904   |   |      |   | 200,040   |  
|                                            |  |              |           |   |      |   |           |  
|Noncontrolling interest                     |  |              | 8,324     |   |      |   | 5,921     |  
|                                            |  |              |           |   |      |   |           |  
|Total equity                                |  |              | 230,228   |   |      |   | 205,961   |  
|                                            |  |              |           |   |      |   |           |  
|Total liabilities and equity                |  | $            | 1,255,365 |   |      | $ | 1,195,298 |  
|                                            |  |              |           |   |      |   |           |  

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, |          
|                                                       |  | 2010                    |           |   | 2009 |   |           | 2008 | 
|Revenues:                                              |  |                         |           |   |      |   |           |      |  |   |           |  
|Services revenues                                      |  | $                       | 785,740   |   |      | $ | 709,558   |      |  | $ | 610,785   |  
|Hardware revenues                                      |  |                         | 252,003   |   |      |   | 297,107   |      |  |   | 449,106   |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Total revenues                                         |  |                         | 1,037,743 |   |      |   | 1,006,665 |      |  |   | 1,059,891 |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Operating costs and expenses:                          |  |                         |           |   |      |   |           |      |  |   |           |  
|Cost of services                                       |  |                         | 491,465   |   |      |   | 448,767   |      |  |   | 406,673   |  
|Cost of hardware                                       |  |                         | 234,805   |   |      |   | 289,516   |      |  |   | 378,264   |  
|Selling, general and administrative                    |  |                         | 199,156   |   |      |   | 175,203   |      |  |   | 173,568   |  
|Loss on impairment                                     |  |                         | -         |   |      |   | 44,400    |      |  |   | -         |  
|Research and development                               |  |                         | 20,279    |   |      |   | 22,296    |      |  |   | 26,833    |  
|Amortization of intangible assets                      |  |                         | 2,750     |   |      |   | 5,164     |      |  |   | 6,419     |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Total operating costs and expenses                     |  |                         | 948,455   |   |      |   | 985,346   |      |  |   | 991,757   |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Operating income                                       |  |                         | 89,288    |   |      |   | 21,319    |      |  |   | 68,134    |  
|Other income (expense):                                |  |                         |           |   |      |   |           |      |  |   |           |  
|Interest expense                                       |  |                         | (59,324   | ) |      |   | (64,094   | )    |  |   | (51,327   | )
|Interest income                                        |  |                         | 1,770     |   |      |   | 1,988     |      |  |   | 2,978     |  
|Other income (loss), net                               |  |                         | -         |   |      |   | (334      | )    |  |   | 178       |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Income (loss) before income tax expense                |  |                         | 31,734    |   |      |   | (41,121   | )    |  |   | 19,963    |  
|Income tax expense                                     |  |                         | (5,691    | ) |      |   | (2,436    | )    |  |   | (7,588    | )
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Net income (loss)                                      |  |                         | 26,043    |   |      |   | (43,557   | )    |  |   | 12,375    |  
|Net income attributable to the noncontrolling interest |  |                         | (650      | ) |      |   | (1,348    | )    |  |   | (279      | )
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  
|Net income (loss) attributable to HNS                  |  | $                       | 25,393    |   |      | $ | (44,905   | )    |  | $ | 12,096    |  
|                                                       |  |                         |           |   |      |   |           |      |  |   |           |  

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, 2008                                 |  | $                                | 180,655 |   |                  | $ | 68,903  |                                   |  | $ | (2,014                 | ) |  | $     | 5,276 |   |                            | $ | 252,820 |   |  |   |         |  
|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 | )
|Unrealized loss on hedging instruments                     |  |                                  |         |   |                  |   |         |                                   |  |   | (13,931                | ) |  |       | -     |   |                            |   | (13,931 | ) |  |   | (13,931 | )
|Reclassification of realized loss on hedging instruments   |  |                                  |         |   |                  |   |         |                                   |  |   | 2,010                  |   |  |       | -     |   |                            |   | 2,010   |   |  |   | 2,010   |  
|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   |  
|Unrealized gain on hedging instruments                     |  |                                  |         |   |                  |   |         |                                   |  |   | 2,180                  |   |  |       | -     |   |                            |   | 2,180   |   |  |   | 2,180   |  
|Reclassification of realized loss on hedging instruments   |  |                                  |         |   |                  |   |         |                                   |  |   | 4,701                  |   |  |       | -     |   |                            |   | 4,701   |   |  |   | 4,701   |  
|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 | )
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Share-based compensation                                   |  |                                  | 839     |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   | 839     |   |  |   |         |  
|Purchase of subsidiary shares from noncontrolling interest |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       | 1,462 |   |                            |   | 1,462   |   |  |   |         |  
|Retirement of bonus units                                  |  |                                  | (2,673  | ) |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   | (2,673  | ) |  |   |         |  
|Comprehensive income (loss):                               |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Net income                                                 |  |                                  |         |   |                  |   | 25,393  |                                   |  |   |                        |   |  |       | 650   |   |                            |   | 26,043  |   |  | $ | 26,043  |  
|Foreign currency translation adjustments                   |  |                                  |         |   |                  |   |         |                                   |  |   | 680                    |   |  |       | 291   |   |                            |   | 971     |   |  |   | 971     |  
|Unrealized loss on hedging instruments                     |  |                                  |         |   |                  |   |         |                                   |  |   | (7,938                 | ) |  |       | -     |   |                            |   | (7,938  | ) |  |   | (7,938  | )
|Reclassification of realized loss on hedging instruments   |  |                                  |         |   |                  |   |         |                                   |  |   | 5,559                  |   |  |       | -     |   |                            |   | 5,559   |   |  |   | 5,559   |  
|Unrealized loss on available-for-sale securities           |  |                                  |         |   |                  |   |         |                                   |  |   | 4                      |   |  |       | -     |   |                            |   | 4       |   |  |   | 4       |  
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  
|Balance at December 31, 2010                               |  | $                                | 176,099 |   |                  | $ | 61,487  |                                   |  | $ | (15,682                | ) |  | $     | 8,324 |   |                            | $ | 230,228 |   |  | $ | 24,639  |  
|                                                           |  |                                  |         |   |                  |   |         |                                   |  |   |                        |   |  |       |       |   |                            |   |         |   |  |   |         |  

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, |         
|                                                                                        |  | 2010                    |          |   | 2009 |   |          | 2008 | 
|Cash flows from operating activities:                                                   |  |                         |          |   |      |   |          |      |  |   |         |  
|Net income (loss)                                                                       |  | $                       | 26,043   |   |      | $ | (43,557  | )    |  | $ | 12,375  |  
|Adjustments to reconcile net income (loss) to net cash flows from operating activities: |  |                         |          |   |      |   |          |      |  |   |         |  
|Depreciation and amortization                                                           |  |                         | 130,954  |   |      |   | 102,139  |      |  |   | 68,937  |  
|Amortization of debt issuance costs                                                     |  |                         | 2,818    |   |      |   | 2,025    |      |  |   | 1,424   |  
|Share-based compensation expense                                                        |  |                         | 839      |   |      |   | 899      |      |  |   | 473     |  
|Loss on impairment                                                                      |  |                         | -        |   |      |   | 44,400   |      |  |   | -       |  
|Other                                                                                   |  |                         | (67      | ) |      |   | 546      |      |  |   | (112    | )
|Change in other operating assets and liabilities, net of acquisition:                   |  |                         |          |   |      |   |          |      |  |   |         |  
|Receivables, net                                                                        |  |                         | (21,558  | ) |      |   | 52,538   |      |  |   | (2,638  | )
|Inventories                                                                             |  |                         | 1,697    |   |      |   | 6,438    |      |  |   | (2,710  | )
|Prepaid expenses and other                                                              |  |                         | 1,065    |   |      |   | 4,721    |      |  |   | (10,811 | )
|Accounts payable                                                                        |  |                         | 19,607   |   |      |   | 15,580   |      |  |   | 6,985   |  
|Accrued liabilities and other                                                           |  |                         | (14,241  | ) |      |   | (22,858  | )    |  |   | (3,758  | )
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Net cash provided by operating activities                                               |  |                         | 147,157  |   |      |   | 162,871  |      |  |   | 70,165  |  
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Cash flows from investing activities:                                                   |  |                         |          |   |      |   |          |      |  |   |         |  
|Change in restricted cash                                                               |  |                         | 1,165    |   |      |   | (108     | )    |  |   | 3,104   |  
|Purchases of marketable securities                                                      |  |                         | (29,280  | ) |      |   | (41,080  | )    |  |   | -       |  
|Proceeds from sales of marketable securities                                            |  |                         | 53,693   |   |      |   | 10,000   |      |  |   | 11,090  |  
|Expenditures for property                                                               |  |                         | (282,589 | ) |      |   | (150,702 | )    |  |   | (81,669 | )
|Expenditures for capitalized software                                                   |  |                         | (13,073  | ) |      |   | (12,772  | )    |  |   | (14,564 | )
|Proceeds from sale of property                                                          |  |                         | 206      |   |      |   | 397      |      |  |   | -       |  
|Long-term loan receivable                                                               |  |                         | -        |   |      |   | (10,000  | )    |  |   | -       |  
|Acquisition of Helius, Inc., net of cash received                                       |  |                         | -        |   |      |   | -        |      |  |   | (10,543 | )
|Other, net                                                                              |  |                         | 1,462    |   |      |   | (755     | )    |  |   | -       |  
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Net cash used in investing activities                                                   |  |                         | (268,416 | ) |      |   | (205,020 | )    |  |   | (92,582 | )
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Cash flows from financing activities:                                                   |  |                         |          |   |      |   |          |      |  |   |         |  
|Short-term revolver borrowings                                                          |  |                         | 4,761    |   |      |   | 6,791    |      |  |   | -       |  
|Repayments of revolver borrowings                                                       |  |                         | (5,347   | ) |      |   | (7,861   | )    |  |   | -       |  
|Net increase in notes and loans payable                                                 |  |                         | -        |   |      |   | -        |      |  |   | 223     |  
|Long-term debt borrowings                                                               |  |                         | 31,548   |   |      |   | 147,849  |      |  |   | 3,606   |  
|Repayments of long-term debt                                                            |  |                         | (6,244   | ) |      |   | (12,375  | )    |  |   | (13,749 | )
|Debt issuance costs                                                                     |  |                         | (7,140   | ) |      |   | (4,612   | )    |  |   | -       |  
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Net cash provided by (used in) financing activities                                     |  |                         | 17,578   |   |      |   | 129,792  |      |  |   | (9,920  | )
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                            |  |                         | 748      |   |      |   | (4,172   | )    |  |   | 3,372   |  
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Net increase (decrease) in cash and cash equivalents                                    |  |                         | (102,933 | ) |      |   | 83,471   |      |  |   | (28,965 | )
|Cash and cash equivalents at beginning of the period                                    |  |                         | 183,733  |   |      |   | 100,262  |      |  |   | 129,227 |  
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Cash and cash equivalents at end of the period                                          |  | $                       | 80,800   |   |      | $ | 183,733  |      |  | $ | 100,262 |  
|                                                                                        |  |                         |          |   |      |   |          |      |  |   |         |  
|Supplemental cash flow information:                                                     |  |                         |          |   |      |   |          |      |  |   |         |  
|Cash paid for interest, net of amounts capitalized                                      |  | $                       | 53,184   |   |      | $ | 60,386   |      |  | $ | 54,138  |  
|Cash paid for income taxes                                                              |  | $                       | 7,517    |   |      | $ | 5,619    |      |  | $ | 3,598   |  
|Supplemental non-cash disclosures related to:                                           |  |                         |          |   |      |   |          |      |  |   |         |  
|Capitalized software and property acquired, not paid                                    |  | $                       | 26,954   |   |      | $ | 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, 2010, there were 95,000 Class A membership interests outstanding and 3,280 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, wireline 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 broadband Internet 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, wireless backhaul systems and telematics. These services are generally provided on a contract or project basis and may involve the use of proprietary products engineered by us.

We have five 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 the 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; (iv) the HTS Satellite segment; and (v) 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, wireline and wireless communication network products and services to enterprises. The International Broadband segment consists of our international service companies and provides managed network
services and equipment to enterprise customers and broadband service providers worldwide. The Telecom Systems segment consists of the Mobile Satellite Systems group, the Terrestrial Microwave group, and the Telematics group. The Mobile Satellite
Systems group provides turnkey satellite ground segment systems to mobile system operators. The Terrestrial Microwave group provides point-to-multipoint microwave radio network systems that are used for both cellular backhaul and broadband wireless
access. The Telematics group provides development, engineering and manufacturing services to Hughes Telematics, Inc. (HTI). However, as a result of the unfavorable impact of the economy on the automobile industry in 2009, 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. The HTS Satellite segment, which is a new segment starting in 2010,
consists of activities related to the development, construction and launch of high throughput satellites (HTS) and currently represents construction activities of our new satellite named Jupiter and the development of related
network equipment. As a result of the newly established HTS Satellite segment in 2010, construction activities of Jupiter in 2009, which was included in the North America Broadband segment, have been reclassified to the HTS Satellite segment to
conform to the current period presentation. The Corporate segment includes certain minority interest investments held by us and 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



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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. As a result of our new segment in 2010, the HTS Satellite segment, certain prior period items in these consolidated financial statements have
been reclassified to conform to the current period presentation.

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 revenues are generally recognized when services are rendered or products are installed and as title passes to those customers, net of sales taxes. Billings for revenues that
have not been earned are deferred and recognized in the period when earned. 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.

Our consumer
rental program allows consumer customers 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 as service
revenue until the customer terminates the contracts with us.

In August 2010, we were awarded $58.7 million from the U.S.
Government as the only national provider of high-speed satellite broadband service under the broadband stimulus programs, established pursuant to the American Recovery and Reinvestment Act of 2009. Under the consumer broadband stimulus program,
eligible consumer customers have month-to-month service contracts and do not have to pay for the rental of the equipment.

All
upfront fees collected in connection with the service arrangements are deferred and recognized as service revenue over the term of the customer arrangement.



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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, 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 are 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, LightSquared, Inc. (formerly SkyTerra Communications, Inc.), 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 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 states that impose income tax on limited liability companies.

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. ASC 740 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. It also provides guidance on measurement, derecognition, classification,
interest and penalties, accounting in interim periods, disclosure and transition. The Company recognizes interest accrued related to unrecognized tax benefits in operating expenses and penalties in income tax expense in 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, 2010
and 2009, we had $0.6 million and $1.8 million of restricted cash, respectively, which secures certain of our letters of credit. As of December 31, 2010, restrictions on the cash relating to letters of credit will be released as the letters of
credit expire through December 2013.

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 loss (AOCL). Fair value is based on quoted market
prices as of the reporting date. The book value of these



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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, 2010 and 2009.

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.

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.

Our Consumer rental equipment is related to our
consumer rental program which allows consumer customers to rent the equipment with a 24-month service contract. Once the initial contract ends, it becomes a month-to-month contract. Consumer rental equipment includes the cost of installation and
customer premise equipment, which is depreciated on a straight-line basis over the estimated useful life of 2-4 years.

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 $10.1 million, $14.2 million and $11.3 million for the years ended December 31, 2010, 2009 and 2008, 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 are retired when they are fully amortized. Intangible assets and their estimated useful lives as of December 31,
2010 are as follows:



|                       |  |             
|---------------------- |  | ------------
|                       |  | Life (Years)
|Customer relationships |  | 8           
|Patented technology    |  | 8           
|Trademarks             |  | 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



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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 2010, 2009 and 2008, 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, 2010, 2009 and 2008, we amortized $2.8 million, $2.0 million and $1.4 million, respectively,
of debt issuance costs related to our debts. As of December 31, 2010 and 2009, the Company had $17.2 million and $12.9 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 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, 2010 and 2009, the Company had $25.7 million and $29.9 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 2010 and 2008, the Company did not recognize any impairment charges on long-lived assets. In 2009, the
Company recognized $44.4 million of impairment charges on long-lived assets associated with our prepaid deposit (the Deposit) paid to Sea Launch Company, LLC (Sea Launch). See Note 19Commitments and Contingencies for
further detail.

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 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 re-measurement 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.



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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. We had cost method investments of $1.5 million and $1.3 million as of December 31, 2010 and 2009, respectively, and equity method investments of each $8.3 million as of each December 31, 2010 and 2009.

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, 2010 and 2009 because of their short-term maturity.

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 2010 and 2009, 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



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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, 2010 and 2009, we had purchased foreign exchange contracts totaling $0.7 million and $2.4 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, 2010 and 2009. All of the forward exchange contracts outstanding at December 31, 2010
expire in 2011.

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

Recently Adopted Accounting Guidance

In January 2010, the FASB issued Accounting Standard Update (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. In addition, ASU
2010-06 clarifies existing fair value disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The amendments in ASU 2010-06 were effective for fiscal years beginning after December 15,
2009, and for interim periods within those fiscal periods. The adoption of ASU 2010-06 did not have a material impact on our disclosure about fair value measurements.

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 were effective for the first annual reporting period beginning after November 15, 2009, for interim periods within that first annual reporting period, and for interim and annual reporting periods thereafter. The adoption of amendments
to consolidation rules did not have any impact on our disclosures relating to our VIE activity and our financial statements.

Accounting
Guidance Not Yet Effective

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.
We believe that ASU 2009-13 will not have a material impact on our financial statements.

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 accounting for multiple deliverable arrangements and establishes a hierarchy for
determining the amount of revenue to allocate to the various deliverables. The amendments in ASU 2009-13 will be effective for us beginning January 1, 2011. We believe that ASU 2009-13 will not have a material impact on our on our financial
statements



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Note 3:    Marketable Securities

The amortized cost basis and estimated fair values of available-for-sale marketable securities are summarized as follows (in thousands):



|                                         |  |       |        |  |                  |   |    |           |  |   |            |  |  |   |        | 
|---------------------------------------- |  | ----- | ------ |  | ---------------- | - | -- | --------- |  | - | ---------- |  |  | - | ------ | 
|                                         |  | Cost  |        |  | Gross Unrealized |   |    | Estimated | 
|                                         |  | Basis |        |  | Loss             |   |    | Gain      |  |   | Fair Value | 
|December 31, 2010:                       |  |       |        |  |                  |   |    |           |  |   |            |  |  |   |        | 
|Municipal commercial paper               |  | $     | 3,000  |  |                  | $ | -  |           |  | $ | -          |  |  | $ | 3,000  | 
|Other debt securities                    |  |       | 3,677  |  |                  |   | (2 | )         |  |   | -          |  |  |   | 3,675  | 
|                                         |  |       |        |  |                  |   |    |           |  |   |            |  |  |   |        | 
|Total available-for-sale securities      |  | $     | 6,677  |  |                  | $ | (2 | )         |  | $ | -          |  |  | $ | 6,675  | 
|                                         |  |       |        |  |                  |   |    |           |  |   |            |  |  |   |        | 
|December 31, 2009:                       |  |       |        |  |                  |   |    |           |  |   |            |  |  |   |        | 
|U.S. government bonds and treasury bills |  | $     | 15,105 |  |                  | $ | -  |           |  | $ | 4          |  |  | $ | 15,109 | 
|Other debt securities                    |  |       | 16,012 |  |                  |   | -  |           |  |   | 5          |  |  |   | 16,017 | 
|                                         |  |       |        |  |                  |   |    |           |  |   |            |  |  |   |        | 
|Total available-for-sale securities      |  | $     | 31,117 |  |                  | $ | -  |           |  | $ | 9          |  |  | $ | 31,126 | 
|                                         |  |       |        |  |                  |   |    |           |  |   |            |  |  |   |        | 

Our investments in municipal commercial papers have A-1+ and P-1 ratings from Standard &
Poors (S&P) and Moodys, respectively. The investments in Other debt securities have A-1/A-1+ and P-1 ratings from S&P and Moodys, respectively. We also hold marketable equity securities as a long-term
investment.

Note 4:    Receivables, Net

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



|                                |  |              |         |   |      |   |         |  
|------------------------------- |  | ------------ | ------- | - | ---- | - | ------- | -
|                                |  | December 31, |        
|                                |  | 2010         |         |   | 2009 |  
|Trade receivables               |  | $            | 170,851 |   |      | $ | 154,037 |  
|Contracts in process            |  |              | 25,208  |   |      |   | 16,952  |  
|Other receivables               |  |              | 3,963   |   |      |   | 3,902   |  
|                                |  |              |         |   |      |   |         |  
|Total receivables               |  |              | 200,022 |   |      |   | 174,891 |  
|Allowance for doubtful accounts |  |              | (15,153 | ) |      |   | (12,085 | )
|                                |  |              |         |   |      |   |         |  
|Total receivables, net          |  | $            | 184,869 |   |      | $ | 162,806 |  
|                                |  |              |         |   |      |   |         |  

Trade receivables included $5.8 million and $8.7 million of amounts due from affiliates as of
December 31, 2010 and 2009, respectively. Advances and progress billings offset against contracts in process amounted to $2.8 million and $0.3 million as of December 31, 2010 and 2009, respectively.

Note 5:    Inventories

Inventories consisted of the following (in thousands):



|                                  |  |              |        |  |      |   |        | 
|--------------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                                  |  | December 31, |       
|                                  |  | 2010         |        |  | 2009 |  
|Production materials and supplies |  | $            | 7,270  |  |      | $ | 7,896  | 
|Work in process                   |  |              | 12,828 |  |      |   | 15,615 | 
|Finished goods                    |  |              | 37,721 |  |      |   | 36,733 | 
|                                  |  |              |        |  |      |   |        | 
|Total inventories                 |  | $            | 57,819 |  |      | $ | 60,244 | 
|                                  |  |              |        |  |      |   |        | 



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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 6:    Property, Net

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



|                                     |  |                        |       |  |              |   |           |      |         |   |          |   |        | 
|------------------------------------ |  | ---------------------- | ----- |  | ------------ | - | --------- | ---- | ------- | - | -------- | - | ------ | 
|                                     |  | Estimated Useful Lives |       |  | December 31, |  
|                                     |  | (years)                |       |  | 2010         |   |           | 2009 |        
|Land and improvements                |  |                        | 10    |  |              | $ | 5,888     |      |         | $ | 5,885    |  
|Buildings and leasehold improvements |  |                        | 2 -30 |  |              |   | 35,509    |      |         |   | 32,867   |  
|Satellite related assets             |  |                        | 15    |  |              |   | 380,394   |      |         |   | 380,394  |  
|Machinery and equipment              |  |                        | 1 - 7 |  |              |   | 211,820   |      |         |   | 178,620  |  
|Consumer rental equipment            |  |                        | 2 - 4 |  |              |   | 140,616   |      |         |   | 71,725   |  
|VSAT operating lease hardware        |  |                        | 2 - 5 |  |              |   | 13,137    |      |         |   | 18,945   |  
|Furniture and fixtures               |  |                        | 7     |  |              |   | 1,714     |      |         |   | 1,557    |  
|Construction in progress             |  | - Jupiter              |       |  |              |   |           |      | 238,358 |   |          |   | 66,555 | 
|                                     |  | - Other                |       |  |              |   |           |      | 15,924  |   |          |   | 12,888 | 
|                                     |  |                        |       |  |              |   |           |      |         |   |          |   |        | 
|Total property                       |  |                        |       |  |              |   | 1,043,360 |      |         |   | 769,436  |  
|Accumulated depreciation             |  |                        |       |  |              |   | (269,708  | )    |         |   | (167,472 | )
|                                     |  |                        |       |  |              |   |           |      |         |   |          |   |        | 
|Total property, net                  |  |                        |       |  |              | $ | 773,652   |      |         | $ | 601,964  |  
|                                     |  |                        |       |  |              |   |           |      |         |   |          |   |        | 

Satellite related assets primarily consist of SPACEWAYTM3 (SPACEWAY 3), a 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 Jupiter, our next-generation and geostationary high throughput 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. The
construction of Jupiter began in July 2009 and we began to capitalize all direct costs associated with the construction and the launch of the satellite, including interest incurred during the construction of the satellite. Jupiter is scheduled to be
launched in the first half of 2012.

We capitalized $14.0 million and $1.7 million of interest for 2010 and 2009,
respectively, related to the construction of Jupiter. In 2008, we capitalized $4.8 million of interest related to the construction of SPACEWAY 3. During 2010, 2009 and 2008, depreciation expense for property was $111.3 million, $82.8 million and
$51.2 million, respectively.



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Note 7:    Intangible Assets, Net

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



|                                   |  |                                |  |            |        |  |                         |   |         |           |  |   |        | 
|---------------------------------- |  | ------------------------------ |  | ---------- | ------ |  | ----------------------- | - | ------- | --------- |  | - | ------ | 
|                                   |  | EstimatedUseful Lives 
(years) |  | Cost Basis |        |  | AccumulatedAmortization |   |         | Net Basis | 
|December 31, 2010:                 |  |                                |  |            |        |  |                         |   |         |           |  |   |        | 
|Customer relationships             |  | 8                              |  | $          | 9,785  |  |                         | $ | (5,310  | )         |  | $ | 4,475  | 
|Patented technology and trademarks |  | 8 -10                          |  |            | 15,275 |  |                         |   | (9,012  | )         |  |   | 6,263  | 
|                                   |  |                                |  |            |        |  |                         |   |         |           |  |   |        | 
|Total intangible assets, net       |  |                                |  | $          | 25,060 |  |                         | $ | (14,322 | )         |  | $ | 10,738 | 
|                                   |  |                                |  |            |        |  |                         |   |         |           |  |   |        | 
|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 | 
|                                   |  |                                |  |            |        |  |                         |   |         |           |  |   |        | 

We amortize the recorded values of our intangible assets over their estimated useful lives. As of
December 31, 2010, $12.3 million of fully amortized intangible assets were retired and as a result, it is not included in the balance included in the table above. For the years ended December 31, 2010, 2009 and 2008, we recorded $2.8
million, $5.2 million and $6.4 million, respectively, of amortization expense. In 2010, we did not incur costs to renew or extend the term of our intangible assets. Estimated future amortization expense as of December 31, 2010 is as follows (in
thousands):



|                                            |  |        |        | 
|------------------------------------------- |  | ------ | ------ | 
|                                            |  | Amount |       
|Year ending December 31,                    |  |        |        | 
|2011                                        |  | $      | 2,730  | 
|2012                                        |  |        | 2,730  | 
|2013                                        |  |        | 2,730  | 
|2014                                        |  |        | 1,237  | 
|2015                                        |  |        | 1,237  | 
|Thereafter                                  |  |        | 74     | 
|                                            |  |        |        | 
|Total estimated future amortization expense |  | $      | 10,738 | 
|                                            |  |        |        | 

Note 8:    Other Assets

Other assets consisted of the following (in thousands):



|                             |  |              |        |  |      |   |        | 
|---------------------------- |  | ------------ | ------ |  | ---- | - | ------ | 
|                             |  | December 31, |       
|                             |  | 2010         |        |  | 2009 |  
|Subscriber acquisition costs |  | $            | 25,695 |  |      | $ | 29,884 | 
|Debt issuance costs          |  |              | 17,150 |  |      |   | 12,899 | 
|Other                        |  |              | 24,614 |  |      |   | 25,741 | 
|                             |  |              |        |  |      |   |        | 
|Total other assets           |  | $            | 67,459 |  |      | $ | 68,524 | 
|                             |  |              |        |  |      |   |        | 



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|Note 9: | Accrued Liabilities and Other
|------- | -----------------------------

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



|                                    |  |              |         |  |      |   |         | 
|----------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                    |  | December 31, |        
|                                    |  | 2010         |         |  | 2009 |  
|Accrued and other liabilities       |  | $            | 46,392  |  |      | $ | 43,763  | 
|Progress billings to customers      |  |              | 40,912  |  |      |   | 47,911  | 
|Payroll and other compensation      |  |              | 26,860  |  |      |   | 25,104  | 
|Accrued interest expense            |  |              | 13,073  |  |      |   | 12,895  | 
|Due to affiliates                   |  |              | 6,146   |  |      |   | 4,253   | 
|                                    |  |              |         |  |      |   |         | 
|Total accrued liabilities and other |  | $            | 133,383 |  |      | $ | 133,926 | 
|                                    |  |              |         |  |      |   |         | 



|Note 10: | Debt
|-------- | ----

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



|                                                           |  |                                     |      |              |       |      |  |   |       | 
|---------------------------------------------------------- |  | ----------------------------------- | ---- | ------------ | ----- | ---- |  | - | ----- | 
|                                                           |  | Interest Rates 
atDecember 31, 2010 |      | December 31, |      
|                                                           |  |                                     | 2010 |              |       | 2009 | 
|VSAT hardware financing                                    |  | 7.27% -15.00%                       |      | $            | 3,109 |      |  | $ | 3,158 | 
|Revolving bank borrowings                                  |  | 8.75%                               |      |              | 967   |      |  |   | 1,547 | 
|Capital lease and other                                    |  | 5.50% -39.60%                       |      |              | 2,120 |      |  |   | 2,045 | 
|                                                           |  |                                     |      |              |       |      |  |   |       | 
|Total short-term and the current portion of long-term debt |  |                                     |      | $            | 6,196 |      |  | $ | 6,750 | 
|                                                           |  |                                     |      |              |       |      |  |   |       | 

As of December 31, 2010, we had outstanding revolving bank borrowings of $1.0 million, which had a
variable interest rate of 8.75%. The borrowing was obtained by our Indian subsidiary under its revolving line of credit with a local bank. There is no requirement for compensating balances for these borrowings. The total amount available for
borrowing by our foreign subsidiaries under various revolving lines of credit was $4.1 million as of December 31, 2010.

Long-term debt consisted of the following (dollars in thousands):



|                           |  |                                     |               |  |              |      |         |  |  |   |         | 
|-------------------------- |  | ----------------------------------- | ------------- |  | ------------ | ---- | ------- |  |  | - | ------- | 
|                           |  | Interest Rates 
atDecember 31, 2010 |               |  | December 31, |     
|                           |  |                                     | 2010          |  |              | 2009 |        
|Senior Notes(1)            |  |                                     | 9.50%         |  |              | $    | 590,173 |  |  | $ | 587,874 | 
|Term Loan Facility         |  |                                     | 7.62%         |  |              |      | 115,000 |  |  |   | 115,000 | 
|COFACE Guaranteed Facility |  |                                     | 5.13%         |  |              |      | 27,403  |  |  |   | -       | 
|VSAT hardware financing    |  |                                     | 7.27% -15.00% |  |              |      | 3,214   |  |  |   | 5,861   | 
|Capital lease and other    |  |                                     | 5.50% -39.60% |  |              |      | 4,697   |  |  |   | 6,222   | 
|                           |  |                                     |               |  |              |      |         |  |  |   |         | 
|Total long-term debt       |  |                                     |               |  |              | $    | 740,487 |  |  | $ | 714,957 | 
|                           |  |                                     |               |  |              |      |         |  |  |   |         | 



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

On October 29, 2010, we entered into a $115 million loan agreement with BNP Paribas and Societe Generale (COFACE Guaranteed Facility), which is guaranteed by COFACE, the French Export
Credit Agency, to finance the launch related costs for Jupiter satellite. Pursuant to the COFACE Guaranteed Facility agreement, loan draw-downs, which began in the fourth quarter of 2010, will occur over the construction period for the launch
vehicle up to the time of the launch, which is estimated to be in the first half of 2012. COFACE Guaranteed Facility has a fixed interest rate of 5.13%, payable semi-annually in arrears starting six months after each borrowing, and requires that
principal repayments are to be paid in 17 consecutive equal semi-annual installments starting the earlier of (i) six months after the in-orbit delivery, or (ii) December 1, 2012. The agreement also contains covenants and conditions
which are customary for financings of this type. As of December 31, 2010, we had $27.4 million of borrowings outstanding under the loan and an available borrowing capacity of $87.6 million.



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On March 16, 2010, we entered into a credit agreement with JP Morgan Chase Bank,
N.A. and Barclays Capital to amend and restate our senior secured $50 million revolving credit facility (the Revolving Credit Facility). Pursuant to the terms of the agreement, among other changes, the maturity date of the Revolving
Credit Facility was extended to March 16, 2014, subject to an early maturity date of 91 days prior to March 16, 2014 in the event our 2009 and 2006 Senior Notes and our Term Loan Facility (as defined below) are not (i) repaid in
full or (ii) refinanced with new debt (or amended) with maturities of no earlier than 91 days after March 16, 2014. The terms of the Revolving Credit Facility were amended to be: (i) in respect of the interest rate, at our
option, the Alternative Borrowing Rate (as defined in the Revolving Credit Facility) plus 2.00% or the Adjusted London Interbank Offered Rate (LIBOR) (as defined in the Revolving Credit Facility) plus 3.00% and (ii) in respect of
the participation fee for outstanding letters of credit, 3.00% per annum, in each case subject to downward adjustment based on our leverage ratio. For the years ended December 31, 2010 and 2009, there was no borrowing under the
Revolving Credit Facility. As of December 31, 2010, the Revolving Credit Facility had total outstanding letters of credit of $4.4 million and an available borrowing capacity of $45.6 million.

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, 2010 and 2009, we recorded $3.0 million of
accrued interest payable related to the 2009 Senior Notes.

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) 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 December 31, 2010 and 2009, interest accrued based on the Swap Agreement and the Term Loan Facility was $0.7 million and $0.8 million, respectively.

In April 2006, we issued $450 million of 9.50% senior notes maturing on April 15, 2014 (the 2006 Senior Notes). Interest
on the 2006 Senior Notes is paid semi-annually in arrears on April 15 and October 15. As of December 31, 2010 and 2009, we recorded $8.9 million of accrued interest payable related to the 2006 Senior Notes.

Although the terms and covenants with respect to the 2009 Senior Notes are substantially identical to the 2006 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, the agreement governing the COFACE Guaranteed 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; (iii) in the case of the COFACE Guaranteed Facility,
for so long as the COFACE Guaranteed Facility remains outstanding; and (iv) 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, the COFACE
Guaranteed Facility 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,



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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, 2010.

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.

In July 2006, 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 17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, 2010, the remaining debt balance under the capital lease was $4.9 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 $1.0 million for
each of the years ending December 31, 2011 through 2016.

Principal payments of our debt at December 31, 2010 are as
follows (in thousands):



|                         |  |        |         | 
|------------------------ |  | ------ | ------- | 
|                         |  | Amount |        
|Year ending December 31, |  |        |         | 
|2011                     |  | $      | 6,196   | 
|2012                     |  |        | 4,759   | 
|2013                     |  |        | 4,778   | 
|2014                     |  |        | 709,628 | 
|2015                     |  |        | 4,260   | 
|Thereafter               |  |        | 17,062  | 
|                         |  |        |         | 
|Total debt               |  | $      | 746,683 | 
|                         |  |        |         | 



|Note 11: | 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, in connection with the fair market valuation of the interest rate
swap, we recorded a net unrealized loss of $2.4 million, a net unrealized gain of $6.9 million and a net unrealized loss of $11.9 million for the years ended December 31, 2010, 2009 and 2008, respectively, in AOCL. The remaining 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, 2011 through 2013 and $3.3 million for the year ending
December 31, 2014. We recorded interest expense of $8.9 million, $9.0 million and $8.9 million for the years ended December 31, 2010, 2009 and 2008, respectively, on the Term Loan Facility.



|Note 12: | Fair Value
|-------- | ----------

Under ASC
820 Fair Value Measurements and Disclosures, 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



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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, 2010, the carrying values of cash and cash equivalents, receivables, net,
accounts payable, and short-term debt approximated their respective fair values because of their short-term maturities.

Our
Senior Notes were categorized as Level 1 of the fair value hierarchy as we utilized pricing for 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, 2010 |        
|                                             |  | Level |  | Included
In                 |  | CarryingValue     |         |     |  |  |  | FairValue | 
|Marketable securities                        |  | 2     |  | Marketable securities       |  | $                 | 6,675   |     |  |  |  |           |  | $ | 6,675   | 
|2006 Senior Notes                            |  | 1     |  | Long-term debt              |  | $                 | 450,000 |     |  |  |  |           |  | $ | 464,625 | 
|2009 Senior Notes                            |  | 1     |  | Long-term debt              |  | $                 | 140,173 | (1) |  |  |  |           |  | $ | 153,750 | 
|Term Loan Facility                           |  | 2     |  | Long-term debt              |  | $                 | 115,000 |     |  |  |  |           |  | $ | 110,688 | 
|COFACE Guaranteed Facility                   |  | 2     |  | Long-term debt              |  | $                 | 27,403  |     |  |  |  |           |  | $ | 29,018  | 
|Orbital slot commitment                      |  | 2     |  | Short-term/Long-term debt   |  | $                 | 4,917   |     |  |  |  |           |  | $ | 5,487   | 
|VSAT hardware financing                      |  | 2     |  | Short-term/Long-term debt   |  | $                 | 6,323   |     |  |  |  |           |  | $ | 6,436   | 
|Interest rate swap on the Term Loan Facility |  | 2     |  | Other long-term liabilities |  | $                 | 12,901  |     |  |  |  |           |  | $ | 12,901  | 



|(1) | Amount represents the face value of $150.0 million, net the remaining original issue discount of $9.8 million.
|--- | --------------------------------------------------------------------------------------------------------------



|Note 13: | Income Taxes
|-------- | ------------

The
Company is a limited liability company and is 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



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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 $35.2 million and $50.8 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 members. 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.

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. deferred tax assets as of December 31, 2010. 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.

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, |       
|                                                       |  | 2010                    |        |   | 2009 |   |         | 2008 | 
|Components of income (loss) before income tax expense: |  |                         |        |   |      |   |         |      |  |   |        | 
|Domestic                                               |  | $                       | 22,249 |   |      | $ | (52,815 | )    |  | $ | 11,536 | 
|Foreign                                                |  |                         | 9,485  |   |      |   | 11,694  |      |  |   | 8,427  | 
|                                                       |  |                         |        |   |      |   |         |      |  |   |        | 
|Total                                                  |  | $                       | 31,734 |   |      | $ | (41,121 | )    |  | $ | 19,963 | 
|                                                       |  |                         |        |   |      |   |         |      |  |   |        | 
|Components of income tax expense:                      |  |                         |        |   |      |   |         |      |  |   |        | 
|Current income tax expense:                            |  |                         |        |   |      |   |         |      |  |   |        | 
|Foreign                                                |  | $                       | 5,950  |   |      | $ | 2,739   |      |  | $ | 2,373  | 
|State                                                  |  |                         | 731    |   |      |   | 651     |      |  |   | 798    | 
|Federal                                                |  |                         | -      |   |      |   | -       |      |  |   | -      | 
|                                                       |  |                         |        |   |      |   |         |      |  |   |        | 
|Total current income tax expense                       |  |                         | 6,681  |   |      |   | 3,390   |      |  |   | 3,171  | 
|                                                       |  |                         |        |   |      |   |         |      |  |   |        | 
|Deferred income tax expense (benefit):                 |  |                         |        |   |      |   |         |      |  |   |        | 
|Foreign                                                |  |                         | (990   | ) |      |   | (954    | )    |  |   | 4,417  | 
|State                                                  |  |                         | -      |   |      |   | -       |      |  |   | -      | 
|Federal                                                |  |                         | -      |   |      |   | -       |      |  |   | -      | 
|                                                       |  |                         |        |   |      |   |         |      |  |   |        | 
|Total deferred income tax expense (benefit)            |  |                         | (990   | ) |      |   | (954    | )    |  |   | 4,417  | 
|                                                       |  |                         |        |   |      |   |         |      |  |   |        | 
|Total income tax expense                               |  | $                       | 5,691  |   |      | $ | 2,436   |      |  | $ | 7,588  | 
|                                                       |  |                         |        |   |      |   |         |      |  |   |        | 



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For the years ended December 31, 2010, 2009 and 2008, 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, |       
|                                        |  | 2010                    |        |  | 2009 |   |         | 2008 | 
|Income (loss) before income tax expense |  | $                       | 31,734 |  |      | $ | (41,121 | )    |  | $ | 19,963 | 
|                                        |  |                         |        |  |      |   |         |      |  |   |        | 
|Federal income tax @ 0%                 |  | $                       | -      |  |      | $ | -       |      |  | $ | -      | 
|State taxes, net of federal benefit     |  |                         | 731    |  |      |   | 651     |      |  |   | 798    | 
|Foreign taxes above federal tax rate    |  |                         | 4,960  |  |      |   | 1,785   |      |  |   | 6,790  | 
|                                        |  |                         |        |  |      |   |         |      |  |   |        | 
|Total income tax expense                |  | $                       | 5,691  |  |      | $ | 2,436   |      |  | $ | 7,588  | 
|                                        |  |                         |        |  |      |   |         |      |  |   |        | 

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 and states that impose income tax on limited liability companies.

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.

The Company did not identify any significant uncertain tax positions during 2010 nor from any previous years. 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 |  | 2006 and forward
|United Kingdom                 |  | 2005 and forward
|Germany                        |  | 2004 and forward
|Italy                          |  | 2006 and forward
|India                          |  | 1995 and forward
|Mexico                         |  | 2000 and forward
|Brazil                         |  | 2004 and forward



|Note 14: | 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



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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 of Director 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 February 2009, HCI issued an aggregate of 90,000 shares of restricted stock, which vest over a three year period, to members of our Board of Directors.

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, 2010, 2009
and 2008, we recorded compensation expense related to the issuance of restricted stock awards and restricted stock units after adjustment for forfeitures, of $2.1 million, $2.5 million and $2.7 million, respectively. As of December 31, 2010, we
had $1.2 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 2.09 years. We recognized a tax benefit of $3.7 million, $0.7 million
and $1.5 million related to restricted stock awards, restricted stock units and stock options for the years ended December 31, 2010, 2009 and 2008, respectively.

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

Restricted Stock Awards



|                                |  |        | Weighted-Average |   |                                       |   | Weighted-Average | 
|------------------------------- |  | ------ | ---------------- | - | ------------------------------------- | - | ---------------- | 
|                                |  | Shares |                  |   | Weighted-AverageGrant-DateFair
 Value |  
|Non-vested at December 31, 2009 |  |        | 72,360           |   |                                       | $ | 47.58            | 
|Forfeited                       |  |        | (2,950           | ) |                                       | $ | 46.89            | 
|Vested                          |  |        | (51,084          | ) |                                       | $ | 46.80            | 
|                                |  |        |                  |   |                                       |   |                  | 
|Non-vested at December 31, 2010 |  |        | 18,326           |   |                                       | $ | 49.85            | 
|                                |  |        |                  |   |                                       |   |                  | 

The weighted-average grant date fair value of restricted stock awards granted for the year ended
December 31, 2008 was $47.95. No restricted stock awards were granted for the years ended December 31, 2010 and 2009. The total fair value of shares vested during the years ended December 31, 2010, 2009 and 2008 were $2.4 million,
$3.1 million and $5.0 million, respectively.



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Restricted Stock Units



|                                |  |        | Weighted-Average |   |                                      |   | Weighted-Average | 
|------------------------------- |  | ------ | ---------------- | - | ------------------------------------ | - | ---------------- | 
|                                |  | Shares |                  |   | Weighted-AverageGrant-DateFair Value |  
|Non-vested at December 31, 2009 |  |        | 8,675            |   |                                      | $ | 28.73            | 
|Granted                         |  |        | 18,000           |   |                                      | $ | 28.99            | 
|Vested                          |  |        | (3,175           | ) |                                      | $ | 45.35            | 
|                                |  |        |                  |   |                                      |   |                  | 
|Non-vested at December 31, 2010 |  |        | 23,500           |   |                                      | $ | 26.68            | 
|                                |  |        |                  |   |                                      |   |                  | 

The weighted-average grant date fair value of restricted stock units granted for the years ended
December 31, 2010, 2009 and 2008 were $28.99, $8.82 and $43.27, respectively. The total fair value of units vested during the years ended December 31, 2010, 2009 and 2008 were $0.1 million, $0.1 million and $0.2 million, respectively.

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 1,250,000 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 it did not have sufficient history to measure expected volatility using its own stock price history nor have the history to compute the expected
term of the stock options at the time of issuing the stock options to its employees. As a result, 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.

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.



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The key assumptions for the option awards for the years ended December 31, 2010,
2009 and 2008 are as follows:



|                                         |  |                        |  |                 |  |               
|---------------------------------------- |  | ---------------------- |  | --------------- |  | --------------
|                                         |  | Year EndedDecember 31,
|                                         |  | 2010                   |  | 2009            |  | 2008          
|Volatility range                         |  | 45.33%  45.90%        |  | 45.97%  47.92% |  | 47.60%  55.0%
|Weighted-average volatility              |  | 45.40%                 |  | 47.62%          |  | 47.67%        
|Expected term                            |  | 5 years                |  | 5 years         |  | 5 years       
|Risk-free interest rate range            |  | 1.18%  2.59%          |  | 1.71%  2.20%   |  | 3.15%  1.50% 
|Weighted-average risk-free interest rate |  | 1.20%                  |  | 1.79%           |  | 3.14%         

A summary of option
activity under the Stock Option Program is presented below:



|                                                 |  |              |           |   |                                |   |       |                                         |  |  |                            |  |  |   |        | 
|------------------------------------------------ |  | ------------ | --------- | - | ------------------------------ | - | ----- | --------------------------------------- |  |  | -------------------------- |  |  | - | ------ | 
|                                                 |  | OptionShares |           |   | Weighted-AverageExercise
Price |   |       | WeightedAverageRemainingContractualLife |  |  | AggregateIntrinsicValue(1) | 
|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 |                                         |  |  |                            |  |  |   |        | 
|Forfeited or expired                             |  |              | (4,850    | ) |                                | $ | 20.84 |                                         |  |  |                            |  |  |   |        | 
|                                                 |  |              |           |   |                                |   |       |                                         |  |  |                            |  |  |   |        | 
|Outstanding at December 31, 2009                 |  |              | 648,050   |   |                                | $ | 16.77 |                                         |  |  | 9.37                       |  |  | $ | 6,326  | 
|Granted                                          |  |              | 572,500   |   |                                | $ | 28.99 |                                         |  |  |                            |  |  |   |        | 
|Forfeited or expired                             |  |              | (22,350   | ) |                                | $ | 19.56 |                                         |  |  |                            |  |  |   |        | 
|Exercised                                        |  |              | (1,250    | ) |                                | $ | 17.03 |                                         |  |  |                            |  |  |   |        | 
|                                                 |  |              |           |   |                                |   |       |                                         |  |  |                            |  |  |   |        | 
|Outstanding at December 31, 2010                 |  |              | 1,196,950 |   |                                | $ | 22.56 |                                         |  |  | 9.04                       |  |  | $ | 21,412 | 
|                                                 |  |              |           |   |                                |   |       |                                         |  |  |                            |  |  |   |        | 
|Vested and expected to vest at December 31, 2010 |  |              | 1,077,255 |   |                                | $ | 22.56 |                                         |  |  | 9.04                       |  |  | $ | 19,271 | 
|                                                 |  |              |           |   |                                |   |       |                                         |  |  |                            |  |  |   |        | 
|Exercisable at December 31, 2010                 |  |              | 1,250     |   |                                | $ | 17.03 |                                         |  |  | 7.96                       |  |  | $ | 29     | 
|                                                 |  |              |           |   |                                |   |       |                                         |  |  |                            |  |  |   |        | 



|(1) | In thousands.
|--- | -------------

The
weighted-average grant date fair value of options granted during the years 2010, 2009 and 2008 were $28.99, $16.77 and $53.67, respectively. The total intrinsic value of options exercised for the year ended December 31, 2010 was minimal. 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 $4.3 million, $3.5 million and $2.0 million compensation expense for the years
ended December 31, 2010, 2009 and 2008, respectively. As of December 31, 2010, we had $12.6 million of unrecognized compensation expense for non-vested stock options, which is expected to be recognized over a weighted average period of
3.08 years. As of December 31, 2010, there were 1,250 stock options outstanding and exercisable, which have an exercise price of $17.03.

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.

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s 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.



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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, 2010, 2009 and 2008, we
recognized compensation expense of $0.8 million, $0.8 million and $0.4 million, respectively. On July 15, 2010, the 2.1 million vested bonus units vested were exchanged for approximately 207,000 shares (net of income tax withholding) of
HCIs common stock pursuant to the Bonus Unit Plan. The remaining 300,000 bonus units will vest on July 15, 2011.

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



|                               |  |                         |            |   |      |  |           |  
|------------------------------ |  | ----------------------- | ---------- | - | ---- |  | --------- | -
|                               |  | Year Ended December 31, |           
|                               |  | 2010                    |            |   | 2009 | 
|Non-vested beginning balance   |  |                         | 2,453,250  |   |      |  | 2,500,000 |  
|Converted to HCI common shares |  |                         | (2,139,500 | ) |      |  | -         |  
|Forfeited                      |  |                         | (13,750    | ) |      |  | (46,750   | )
|                               |  |                         |            |   |      |  |           |  
|Non-vested ending balance      |  |                         | 300,000    |   |      |  | 2,453,250 |  
|                               |  |                         |            |   |      |  |           |  

Class B Membership Interests

Class B membership interests in the Company 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 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 criteria. At the
holders election, vested Class B membership interests may be exchanged for HCIs common stock. The number of shares of HCIs 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s common stock for the 20 business days immediately preceding the date of such exchange. As of December 31, 2010, 3,272 of the 3,280 outstanding
Class B membership interests were vested. If the total outstanding Class B membership interests were to convert into HCIs common stock as of December 31, 2010, they could be exchanged for approximately 646,000 shares of HCIs common
stock. On September 25, 2009, HCI registered 75,000 shares of its common stock with the SEC on Form S-8 to be issued, from time to time, upon the exchange of the Class B membership interests.

Pursuant to ASC 718 CompensationStock Compensation, the Company determined that the Class B membership interests had
nominal value at the date of grant, and, accordingly, $0.1 million compensation expense was recorded for each of the years ended December 31, 2010, 2009 and 2008. A summary of changes in Class B membership interests is as follows:



|                               |  |                         |       |   |      |  |       |  
|------------------------------ |  | ----------------------- | ----- | - | ---- |  | ----- | -
|                               |  | Year Ended December 31, |      
|                               |  | 2010                    |       |   | 2009 | 
|Outstanding beginning balance  |  |                         | 3,330 |   |      |  | 3,656 |  
|Converted to HCI common shares |  |                         | (50   | ) |      |  | (326  | )
|                               |  |                         |       |   |      |  |       |  
|Outstanding ending balance     |  |                         | 3,280 |   |      |  | 3,330 |  
|                               |  |                         |       |   |      |  |       |  



|Note 15: | 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 2010 per the IRS. Employee
contributions are immediately vested. We will match 100% of employee contributions up to 3% of eligible



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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 2010, 2009 and 2008, we made $6.6 million, $6.6 million and $6.7 million, respectively, of matching contributions.

In addition, as allowed by the IRS, participants who are age 50 or older may make additional contributions (catch-up contributions), up to $5,500 in 2010, 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 2005, the Company established a one-time employee retention program (Retention Program),
which was designed to retain certain employees chosen by its senior management. As a result of the Company successfully attaining 100% of its earnings goal for 2008, as defined in the Retention Program, the Company paid an aggregate of $14.7 million
to eligible participants under the Retention Program in 2009, of which $13.2 million was accrued as of December 31, 2008. The Company has no further obligation associated with the Retention Program.



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|Note 16: | Segment Data and Geographic Data
|-------- | --------------------------------

Set forth below is selected financial information for our operating segments (in thousands). There were no intersegment transactions in 2010, 2009 and 2008.



|                                              |  |                         | Corporate |   |                        |   | Corporate |                |  |   | Corporate    |  |  |           | Corporate |   |              |   | Corporate |  |  |   | Corporate | 
|--------------------------------------------- |  | ----------------------- | --------- | - | ---------------------- | - | --------- | -------------- |  | - | ------------ |  |  | --------- | --------- | - | ------------ | - | --------- |  |  | - | --------- | 
|                                              |  | NorthAmerica  Broadband |           |   | InternationalBroadband |   |           | TelecomSystems |  |   | HTSSatellite |  |  | Corporate |           |   | Consolidated |  
|As of or For the Year Ended December 31, 2010 |  |                         |           |   |                        |   |           |                |  |   |              |  |  |           |           |   |              |   |           |  |  |   |           | 
|Revenues                                      |  | $                       | 733,750   |   |                        | $ | 205,607   |                |  | $ | 95,069       |  |  | $         | 3,317     |   |              | $ | -         |  |  | $ | 1,037,743 | 
|Operating income (loss)                       |  | $                       | 67,884    |   |                        | $ | 10,571    |                |  | $ | 14,183       |  |  | $         | (3,350    | ) |              | $ | -         |  |  | $ | 89,288    | 
|Depreciation and amortization                 |  | $                       | 111,743   |   |                        | $ | 15,029    |                |  | $ | 4,182        |  |  | $         | -         |   |              | $ | -         |  |  | $ | 130,954   | 
|Assets                                        |  | $                       | 633,775   |   |                        | $ | 185,316   |                |  | $ | 44,252       |  |  | $         | 249,952   |   |              | $ | 142,070   |  |  | $ | 1,255,365 | 
|Capital expenditures(1)                       |  | $                       | 95,628    |   |                        | $ | 10,295    |                |  | $ | 343          |  |  | $         | 180,741   |   |              | $ | 8,655     |  |  | $ | 295,662   | 
|As of or For the Year Ended December 31, 2009 |  |                         |           |   |                        |   |           |                |  |   |              |  |  |           |           |   |              |   |           |  |  |   |           | 
|Revenues                                      |  | $                       | 690,279   |   |                        | $ | 203,886   |                |  | $ | 112,500      |  |  | $         | -         |   |              | $ | -         |  |  | $ | 1,006,665 | 
|Operating income (loss)(2)                    |  | $                       | (7,991    | ) |                        | $ | 15,120    |                |  | $ | 14,227       |  |  | $         | (37       | ) |              | $ | -         |  |  | $ | 21,319    | 
|Depreciation and amortization                 |  | $                       | 84,706    |   |                        | $ | 13,355    |                |  | $ | 4,078        |  |  | $         | -         |   |              | $ | -         |  |  | $ | 102,139   | 
|Assets                                        |  | $                       | 632,803   |   |                        | $ | 184,461   |                |  | $ | 45,500       |  |  | $         | 66,596    |   |              | $ | 265,938   |  |  | $ | 1,195,298 | 
|Capital expenditures(1)                       |  | $                       | 95,556    |   |                        | $ | 15,124    |                |  | $ | 1,213        |  |  | $         | 44,065    |   |              | $ | 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(1)                       |  | $                       | 71,696    |   |                        | $ | 11,188    |                |  | $ | 2,223        |  |  | $         | -         |   |              | $ | 11,126    |  |  | $ | 96,233    | 



|(1) | Capital expenditures on an accrual basis were: $295.7 million, $190.4 million and $96.2 million for the years ended December 31, 2010, 2009 and 2008, respectively.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Operating loss for North America Broadband includes $44.4 million of impairment loss related to our prepaid deposit to Sea Launch, which was impaired in 2009.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------

For the years ended December 31, 2010, 2009 and 2008, 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, |          
|                                 |  | 2010                    |           |  | 2009 |   |           | 2008 | 
|North America                    |  | $                       | 826,924   |  |      | $ | 800,659   |      |  | $ | 803,034   | 
|Africa, Asia and the Middle East |  |                         | 87,946    |  |      |   | 88,412    |      |  |   | 106,627   | 
|Europe                           |  |                         | 61,780    |  |      |   | 68,072    |      |  |   | 115,495   | 
|South America and the Caribbean  |  |                         | 61,093    |  |      |   | 49,522    |      |  |   | 34,735    | 
|                                 |  |                         |           |  |      |   |           |      |  |   |           | 
|Total revenues                   |  | $                       | 1,037,743 |  |      | $ | 1,006,665 |      |  | $ | 1,059,891 | 
|                                 |  |                         |           |  |      |   |           |      |  |   |           | 



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Individual countries with significant revenues for the three years ended
December 31, 2010 are as follows (in thousands):



|               |  |                         |         |  |      |   |         |      |  |   |         | 
|-------------- |  | ----------------------- | ------- |  | ---- | - | ------- | ---- |  | - | ------- | 
|               |  | Year Ended December 31, |        
|               |  | 2010                    |         |  | 2009 |   |         | 2008 | 
|United States  |  | $                       | 797,304 |  |      | $ | 773,615 |      |  | $ | 784,887 | 
|Brazil         |  | $                       | 56,791  |  |      | $ | 42,167  |      |  | $ | 30,038  | 
|India          |  | $                       | 45,872  |  |      | $ | 38,956  |      |  | $ | 48,067  | 
|United Kingdom |  | $                       | 21,193  |  |      | $ | 29,166  |      |  | $ | 66,555  | 

Total property, net
by geographic area is summarized as follows (in thousands):



|                                 |  |              |         |  |      |   |         | 
|-------------------------------- |  | ------------ | ------- |  | ---- | - | ------- | 
|                                 |  | December 31, |        
|                                 |  | 2010         |         |  | 2009 |  
|North America:                   |  |              |         |  |      |   |         | 
|United States                    |  | $            | 744,746 |  |      | $ | 573,748 | 
|Mexico                           |  |              | 5       |  |      |   | 55      | 
|                                 |  |              |         |  |      |   |         | 
|Total North America              |  |              | 744,751 |  |      |   | 573,803 | 
|South America and the Caribbean  |  |              | 13,377  |  |      |   | 12,702  | 
|Africa, Asia and the Middle East |  |              | 10,896  |  |      |   | 10,336  | 
|Europe                           |  |              | 4,628   |  |      |   | 5,123   | 
|                                 |  |              |         |  |      |   |         | 
|Total property, net              |  | $            | 773,652 |  |      | $ | 601,964 | 
|                                 |  |              |         |  |      |   |         | 



|Note 17: | 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 related to 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.

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 HTI Merger), which occurred on March 31, 2009, HTI became a publicly traded company and
HCIs outstanding HTI Preferred Stock was converted into approximately 3.3 million shares of HTI common stock (HTI Shares), of which 1.3 million shares and 2.0 million shares are referred to as Non-escrowed shares and
Escrowed



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shares, respectively. The Escrowed shares are subject to certain restrictions and/or earn-out targets by HTI over five years pursuant to the HTI Merger agreement. As of December 31, 2010,
HCIs investment represents approximately 3.9% of HTIs outstanding common stock, before giving effect to the earn-out of the Escrowed shares. If the full earn-out targets are achieved, HCIs investment could represent
approximately 3.6% of HTIs outstanding 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.

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 $8.3 million of account receivables that HTI owed
to the Company. The Promissory Note had a maturity date of December 31, 2010 and an interest rate of 12% per annum. On November 5, 2010, the Company revised the term of the Promissory Note to extend the maturity date to
December 31, 2011. As of December 31, 2010, the remaining Promissory Note, including accrued interest, had a balance of $5.6 million. We expect to fully recover $5.6 million.

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 1.5% of HTIs equity as of December 31, 2010. 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, an entity consolidated with our Parent, 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, 2010, 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.

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, 2010, the remaining debt balance under the capital lease was $4.9 million, which was included in
Capital lease and other in the short-term and long-term debt tables included in Note 10Debt. During 2010, we paid $0.75 million to 95 West Co. pursuant to the agreement.

Smart & Final, Inc.

As of December 31, 2010, Apollo owned,
directly or indirectly, 96% of Smart & Final, Inc. (Smart & Final). We provide broadband products and services to Smart & Final.



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CKE Restaurants, Inc.

On July 12, 2010, an affiliate of Apollo acquired CKE Restaurants, Inc. (CKE). As a result, CKE indirectly became our related party as of that date. We provide broadband products and
services to CKE.

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.

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 and officers 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, |       
|                |  | 2010                    |        |  | 2009 |   |        | 2008 | 
|Sales:          |  |                         |        |  |      |   |        |      |  |   |        | 
|HTI             |  | $                       | 501    |  |      | $ | 23,644 |      |  | $ | 31,065 | 
|Others          |  |                         | 1,046  |  |      |   | 476    |      |  |   | 897    | 
|                |  |                         |        |  |      |   |        |      |  |   |        | 
|Total sales     |  | $                       | 1,547  |  |      | $ | 24,120 |      |  | $ | 31,962 | 
|                |  |                         |        |  |      |   |        |      |  |   |        | 
|Purchases:      |  |                         |        |  |      |   |        |      |  |   |        | 
|Hughes Systique |  | $                       | 9,968  |  |      | $ | 9,853  |      |  | $ | 9,419  | 
|HCI             |  |                         | 9,876  |  |      |   | 9,160  |      |  |   | 6,605  | 
|95 West Co.     |  |                         | -      |  |      |   | -      |      |  |   | 750    | 
|Intelsat(1)     |  |                         | -      |  |      |   | -      |      |  |   | 10,074 | 
|                |  |                         |        |  |      |   |        |      |  |   |        | 
|Total purchases |  | $                       | 19,844 |  |      | $ | 19,013 |      |  | $ | 26,848 | 
|                |  |                         |        |  |      |   |        |      |  |   |        | 



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



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



|                               |  |              |       |  |      |   |       | 
|------------------------------ |  | ------------ | ----- |  | ---- | - | ----- | 
|                               |  | December 31, |      
|                               |  | 2010         |       |  | 2009 |  
|Due from related parties:      |  |              |       |  |      |   |       | 
|HTI                            |  | $            | 5,632 |  |      | $ | 8,652 | 
|Others                         |  |              | 159   |  |      |   | 52    | 
|                               |  |              |       |  |      |   |       | 
|Total due from related parties |  | $            | 5,791 |  |      | $ | 8,704 | 
|                               |  |              |       |  |      |   |       | 
|Due to related parties:        |  |              |       |  |      |   |       | 
|HCI                            |  | $            | 4,141 |  |      | $ | 2,610 | 
|Hughes Systique                |  |              | 2,005 |  |      |   | 1,643 | 
|                               |  |              |       |  |      |   |       | 
|Total due to related parties   |  | $            | 6,146 |  |      | $ | 4,253 | 
|                               |  |              |       |  |      |   |       | 



|Note 18: | Net Income (loss) Attributable to HNS and Transfer from Noncontrolling Interest
|-------- | -------------------------------------------------------------------------------



|                                                                                                 |  |                         |        |  |      |   |          |      |  |   |        | 
|------------------------------------------------------------------------------------------------ |  | ----------------------- | ------ |  | ---- | - | -------- | ---- |  | - | ------ | 
|                                                                                                 |  | Year Ended December 31, |       
|                                                                                                 |  | 2010                    |        |  | 2009 |   |          | 2008 | 
|                                                                                                 |  | (In thousands)          |       
|Net income (loss) attributable to HNS                                                            |  | $                       | 25,393 |  |      | $ | (44,905  | )    |  | $ | 12,096 | 
|                                                                                                 |  |                         |        |  |      |   |          |      |  |   |        | 
|Transfers from the noncontrolling interest:                                                      |  |                         |        |  |      |   |          |      |  |   |        | 
|Decrease in HNS paid-in capital for purchase of subsidiary shares                                |  |                         | -      |  |      |   | (391     | )    |  |   | -      | 
|                                                                                                 |  |                         |        |  |      |   |          |      |  |   |        | 
|Change from net income (loss) attributable to HNS and transfers from the noncontrolling interest |  | $                       | 25,393 |  |      | $ | (45,296) |      |  | $ | 12,096 | 
|                                                                                                 |  |                         |        |  |      |   |          |      |  |   |        | 



|Note 19: | 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 October 2008, Hughes
Telecommunicaçoes do Brasil Ltda. (HTB), a wholly-owned subsidiary of ours, received a tax assessment of approximately $7.6 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. Recent decrees and legislative actions by the State of São Paulo will alleviate approximately $4.8 million of the tax assessment over time with no impact to the Company. We do not
believe the assessment is valid and plan to dispute the State of São Paulos claims and to defend 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.

In March 2009,
an arbitration panel ruled in our favor in our arbitration 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 connection with launch services for SPACEWAY 3, 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. 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
were stayed under the bankruptcy laws. On May 27, 2010, we entered into a settlement agreement with Sea Launch to



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resolve the claim that we filed in the Sea Launch bankruptcy (the Settlement Agreement). The Settlement Agreement provides that Sea Launch will irrevocably issue to us two credits,
each in the amount of $22.2 million (the Credits), in satisfaction and discharge of our bankruptcy claim. The Credits may be used by us to defray the cost of up to two launches contracted by December 31, 2015, and scheduled to occur
by December 31, 2017. In addition, subject to the terms and conditions of the Settlement Agreement, one or both Credits may be transferred to third parties. The bankruptcy court has approved the Settlement Agreement, and its terms have
been incorporated into the courts order approving Sea Launchs plan of reorganization. The Settlement Agreement became effective on October 27, 2010.

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. In January 2011, the Company agreed to
settle this consolidated case on a nationwide basis, subject to court approval. As a result, the Company has accrued $1.9 million for estimated settlement costs, plaintiffs attorney fees and other related expenses. In the event that the
settlement is not effectuated, the Company would revert to its previous position of vigorously defending these matters as it believes that the allegations in these complaints are not meritorious.

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. While the Company remains a defendant, HCI
was dismissed from this case in September 2010. The Companys motion to dismiss, filed in September 2010, is pending, and the Company will continue to vigorously defend the case.

Some or all of HCI, its Directors, EchoStar Corporation, EchoStar Satellite Services, L.L.C. (EchoStar LLC), Broadband
Acquisition Corporation (Merger Sub), and Apollo Global Management, LLC (AGM) have been named as defendants in four shareholder class action lawsuits in connection with the proposed transaction in which EchoStar will acquire
all of the outstanding equity of HCI and its subsidiaries. See Note 22Subsequent Events for further discussion. On February 18, 2011, the Gottlieb Family Foundation filed its class action complaint in the Circuit Court for Montgomery
County, Maryland. On February 23, 2011, Plymouth County Retirement System filed its shareholder class action complaint in the Court of Chancery of the State of Delaware. On February 24, 2011, Edward Ostensoe filed a shareholder class
action complaint in the Circuit Court for Montgomery County, Maryland. On February 28, 2011, Nina J. Shah Rohrbasser Irr. Trust filed a shareholder class action complaint in the Court of Chancery of the State of Delaware. Each complaint alleges
that the directors of HCI breached their fiduciary duties in agreeing to the transaction. The complaints also allege that some or all of HCI, EchoStar, EchoStar LLC, Merger Sub and AGM aided and abetted such breaches by the directors of HCI. In
each case, the Plaintiffs seek to enjoin the proposed transaction and/or damages, costs, and attorney fees. HCI believes that the allegations in all of these complaints are not meritorious and it intends to vigorously defend these matters.

Product Warranties

We warrant our hardware products over 12 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.



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



|                            |  |              |       |   |      |   |        |  
|--------------------------- |  | ------------ | ----- | - | ---- | - | ------ | -
|                            |  | December 31, |      
|                            |  | 2010         |       |   | 2009 |  
|Balance beginning of period |  | $            | 1,921 |   |      | $ | 3,909  |  
|Warranty costs accrual      |  |              | 309   |   |      |   | 2,350  |  
|Warranty costs incurred     |  |              | (567  | ) |      |   | (4,338 | )
|                            |  |              |       |   |      |   |        |  
|Balance at end of period    |  | $            | 1,663 |   |      | $ | 1,921  |  
|                            |  |              |       |   |      |   |        |  

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, 2010 are as follows (in
thousands):



|                             |  |        |        | 
|---------------------------- |  | ------ | ------ | 
|                             |  | Amount |       
|Year ending December 31,     |  |        |        | 
|2011                         |  | $      | 12,060 | 
|2012                         |  |        | 10,263 | 
|2013                         |  |        | 7,191  | 
|2014                         |  |        | 5,705  | 
|2015                         |  |        | 3,017  | 
|Thereafter                   |  |        | 4,097  | 
|                             |  |        |        | 
|Total minimum lease payments |  | $      | 42,333 | 
|                             |  |        |        | 

Rental expenses under operating leases, net of sublease income, were $14.0 million, $13.3 million and $12.8
million for the years ended December 31, 2010, 2009 and 2008, respectively. The total of minimum rentals to be received in the future under non-cancelable subleases as of December 31, 2010 was $0.1 million.

We have non-cancelable vendor obligations for acquisition of transponder capacity. Future minimum payments under such obligations at
December 31, 2010 are as follows (in thousands):



|                             |  |        |         | 
|---------------------------- |  | ------ | ------- | 
|                             |  | Amount |        
|Year ending December 31,     |  |        |         | 
|2011                         |  | $      | 119,466 | 
|2012                         |  |        | 67,483  | 
|2013                         |  |        | 49,846  | 
|2014                         |  |        | 35,685  | 
|2015                         |  |        | 28,337  | 
|Thereafter                   |  |        | 11,947  | 
|                             |  |        |         | 
|Total minimum lease payments |  | $      | 312,764 | 
|                             |  |        |         | 

Rental expenses under operating leases for transponder capacity were $172.6 million, $180.9 million and
$193.3 million for the years ended December 31, 2010, 2009 and 2008, respectively.

Commitments

In June 2009, we entered into an agreement with SS/L for the construction of Jupiter and have agreed to make installment payments to SS/L
upon the completion of each milestone as set forth in the agreement. We entered into a contract with Barrett Xplore Inc. (Barrett), whereby Barrett agreed to lease user beams and purchase gateways and Ka-band



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terminals for the Jupiter satellite that are designed to operate in Canada. In April 2010, we entered into an agreement with Arianespace for the launch of Jupiter in the first half of 2012.
Pursuant to the agreement, the Ariane 5 will launch Jupiter into geosynchronous transfer orbit from Guiana Space Centre in Kourou, French Guiana. As of December 31, 2010, our remaining obligation for the construction and launch of Jupiter was
approximately $210.8 million.

We are contingently liable under standby letters of credit and bonds in the aggregate amount of
$16.1 million that were undrawn as of December 31, 2010. Of this amount, $4.4 million was issued under the Revolving Credit Facility; $0.6 million was secured by restricted cash; $1.1 million related to insurance bonds; and $10.0 million was
issued under credit arrangements available to our Indian and Brazilian subsidiaries. Certain letters of credit issued by our foreign subsidiaries are secured by certain assets. As of December 31, 2010, these obligations were scheduled to expire
as follows: $13.4 million in 2011; $1.0 million in 2012; $0.4 million in 2013 and $1.3 million in 2014 and thereafter.



|Note 20: | 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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Condensed Consolidated Balance Sheet as of December 31, 2010

(In thousands)



|                                                                            |  |        | Non-Guarantor |  |                       |   | Non-Guarantor |                           |  |   | Non-Guarantor |  |  |       | Non-Guarantor |   |  |   | Non-Guarantor | 
|--------------------------------------------------------------------------- |  | ------ | ------------- |  | --------------------- | - | ------------- | ------------------------- |  | - | ------------- |  |  | ----- | ------------- | - |  | - | ------------- | 
|                                                                            |  | Parent |               |  | GuarantorSubsidiaries |   |               | Non-GuarantorSubsidiaries |  |   | Eliminations  |  |  | Total |              
|Assets                                                                      |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|Cash and cash equivalents                                                   |  | $      | 67,707        |  |                       | $ | 256           |                           |  | $ | 12,837        |  |  | $     | -             |   |  | $ | 80,800        | 
|Marketable securities                                                       |  |        | 6,675         |  |                       |   | -             |                           |  |   | -             |  |  |       | -             |   |  |   | 6,675         | 
|Receivables, net                                                            |  |        | 141,422       |  |                       |   | 38            |                           |  |   | 57,367        |  |  |       | (13,958       | ) |  |   | 184,869       | 
|Inventories                                                                 |  |        | 45,388        |  |                       |   | -             |                           |  |   | 12,431        |  |  |       | -             |   |  |   | 57,819        | 
|Prepaid expenses and other                                                  |  |        | 9,172         |  |                       |   | 70            |                           |  |   | 15,358        |  |  |       | -             |   |  |   | 24,600        | 
|                                                                            |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|Total current assets                                                        |  |        | 270,364       |  |                       |   | 364           |                           |  |   | 97,993        |  |  |       | (13,958       | ) |  |   | 354,763       | 
|Property, net                                                               |  |        | 713,007       |  |                       |   | 32,948        |                           |  |   | 27,697        |  |  |       | -             |   |  |   | 773,652       | 
|Investment in subsidiaries                                                  |  |        | 118,080       |  |                       |   | -             |                           |  |   | -             |  |  |       | (118,080      | ) |  |   | -             | 
|Other assets                                                                |  |        | 98,967        |  |                       |   | 1,405         |                           |  |   | 26,578        |  |  |       | -             |   |  |   | 126,950       | 
|                                                                            |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|Total assets                                                                |  | $      | 1,200,418     |  |                       | $ | 34,717        |                           |  | $ | 152,268       |  |  | $     | (132,038      | ) |  | $ | 1,255,365     | 
|                                                                            |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|Liabilities and equity                                                      |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|Accounts payable                                                            |  | $      | 101,684       |  |                       | $ | 199           |                           |  | $ | 29,838        |  |  | $     | (13,958       | ) |  | $ | 117,763       | 
|Short-term debt                                                             |  |        | 2,284         |  |                       |   | -             |                           |  |   | 3,912         |  |  |       | -             |   |  |   | 6,196         | 
|Accrued liabilities and other                                               |  |        | 109,561       |  |                       |   | -             |                           |  |   | 23,822        |  |  |       | -             |   |  |   | 133,383       | 
|                                                                            |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|Total current liabilities                                                   |  |        | 213,529       |  |                       |   | 199           |                           |  |   | 57,572        |  |  |       | (13,958       | ) |  |   | 257,342       | 
|Long-term debt                                                              |  |        | 737,677       |  |                       |   | -             |                           |  |   | 2,810         |  |  |       | -             |   |  |   | 740,487       | 
|Other long-term liabilities                                                 |  |        | 27,308        |  |                       |   | -             |                           |  |   | -             |  |  |       | -             |   |  |   | 27,308        | 
|Total HNS equity                                                           |  |        | 221,904       |  |                       |   | 26,194        |                           |  |   | 91,886        |  |  |       | (118,080      | ) |  |   | 221,904       | 
|Noncontrolling interest                                                     |  |        | -             |  |                       |   | 8,324         |                           |  |   | -             |  |  |       | -             |   |  |   | 8,324         | 
|                                                                            |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|Total liabilities and equity                                                |  | $      | 1,200,418     |  |                       | $ | 34,717        |                           |  | $ | 152,268       |  |  | $     | (132,038      | ) |  | $ | 1,255,365     | 
|                                                                            |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 
|                                                                           
|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     | 
|                                                                            |  |        |               |  |                       |   |               |                           |  |   |               |  |  |       |               |   |  |   |               | 



90



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##### Table of Contents

HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



Condensed Consolidated Statement of Operations for the Year Ended December 31,
2010

(In thousands)



|                                                                                                   |  |        | Non-Guarantor |   |                       |   | Non-Guarantor |                           |  |   | Non-Guarantor |   |  |       | Non-Guarantor |   |  |   | Non-Guarantor |  
|-------------------------------------------------------------------------------------------------- |  | ------ | ------------- | - | --------------------- | - | ------------- | ------------------------- |  | - | ------------- | - |  | ----- | ------------- | - |  | - | ------------- | -
|                                                                                                   |  | Parent |               |   | GuarantorSubsidiaries |   |               | Non-GuarantorSubsidiaries |  |   | Eliminations  |   |  | Total |              
|Revenues                                                                                           |  | $      | 907,682       |   |                       | $ | 1,911         |                           |  | $ | 149,679       |   |  | $     | (21,529       | ) |  | $ | 1,037,743     |  
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Operating costs and expenses:                                                                      |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Costs of revenues                                                                                  |  |        | 635,057       |   |                       |   | 306           |                           |  |   | 109,487       |   |  |       | (18,580       | ) |  |   | 726,270       |  
|Selling, general and administrative                                                                |  |        | 168,742       |   |                       |   | 3,641         |                           |  |   | 29,722        |   |  |       | (2,949        | ) |  |   | 199,156       |  
|Research and development                                                                           |  |        | 19,824        |   |                       |   | 455           |                           |  |   | -             |   |  |       | -             |   |  |   | 20,279        |  
|Amortization of intangible assets                                                                  |  |        | 2,582         |   |                       |   | 168           |                           |  |   | -             |   |  |       | -             |   |  |   | 2,750         |  
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Total operating costs and expenses                                                                 |  |        | 826,205       |   |                       |   | 4,570         |                           |  |   | 139,209       |   |  |       | (21,529       | ) |  |   | 948,455       |  
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Operating income (loss)                                                                            |  |        | 81,477        |   |                       |   | (2,659        | )                         |  |   | 10,470        |   |  |       | -             |   |  |   | 89,288        |  
|Other income (expense):                                                                            |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Interest expense                                                                                   |  |        | (58,098       | ) |                       |   | -             |                           |  |   | (1,378        | ) |  |       | 152           |   |  |   | (59,324       | )
|Interest and other income, net                                                                     |  |        | 625           |   |                       |   | 870           |                           |  |   | 427           |   |  |       | (152          | ) |  |   | 1,770         |  
|Equity in earnings of subsidiaries                                                                 |  |        | 2,252         |   |                       |   | -             |                           |  |   | -             |   |  |       | (2,252        | ) |  |   | -             |  
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Income (loss) before income tax expense                                                            |  |        | 26,256        |   |                       |   | (1,789        | )                         |  |   | 9,519         |   |  |       | (2,252        | ) |  |   | 31,734        |  
|Income tax expense                                                                                 |  |        | (863          | ) |                       |   | -             |                           |  |   | (4,828        | ) |  |       | -             |   |  |   | (5,691        | )
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Net income (loss)                                                                                  |  |        | 25,393        |   |                       |   | (1,789        | )                         |  |   | 4,691         |   |  |       | (2,252        | ) |  |   | 26,043        |  
|Net (income) loss attributable to the noncontrolling interest                                      |  |        | -             |   |                       |   | (1,214        | )                         |  |   | 564           |   |  |       | -             |   |  |   | (650          | )
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|Net income (loss) attributable to HNS                                                              |  | $      | 25,393        |   |                       | $ | (3,003        | )                         |  | $ | 5,255         |   |  | $     | (2,252        | ) |  | $ | 25,393        |  
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  
|                                                                                                  
|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, 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       | )
|                                                                                                   |  |        |               |   |                       |   |               |                           |  |   |               |   |  |       |               |   |  |   |               |  



91



---

##### Table of Contents

HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



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

(In thousands)



|                                                                                                   |  |        | Eliminations |   |                       |   | Eliminations |                           |  |   | Eliminations |   |  |       | Eliminations |   |  |   | Eliminations |  
|-------------------------------------------------------------------------------------------------- |  | ------ | ------------ | - | --------------------- | - | ------------ | ------------------------- |  | - | ------------ | - |  | ----- | ------------ | - |  | - | ------------ | -
|                                                                                                   |  | 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       |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|                                                                                                  
|Condensed Consolidated Statement of Cash Flows for the Year Ended December 31, 2010
(In thousands) | 
|                                                                                                   |  | Parent |              |   | GuarantorSubsidiaries |   |              | Non-GuarantorSubsidiaries |  |   | Eliminations |   |  | Total |             
|Cash flows from operating activities:                                                              |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Net income (loss)                                                                                  |  | $      | 25,393       |   |                       | $ | (1,789       | )                         |  | $ | 4,691        |   |  | $     | (2,252       | ) |  | $ | 26,043       |  
|Adjustments to reconcile net income (loss) to net cash flows from operating activities             |  |        | 107,216      |   |                       |   | 3,036        |                           |  |   | 8,610        |   |  |       | 2,252        |   |  |   | 121,114      |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Net cash provided by operating activities                                                          |  |        | 132,609      |   |                       |   | 1,247        |                           |  |   | 13,301       |   |  |       | -            |   |  |   | 147,157      |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Cash flows from investing activities:                                                              |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Change in restricted cash                                                                          |  |        | 1,103        |   |                       |   | -            |                           |  |   | 62           |   |  |       | -            |   |  |   | 1,165        |  
|Purchases of marketable securities                                                                 |  |        | (29,280      | ) |                       |   | -            |                           |  |   | -            |   |  |       | -            |   |  |   | (29,280      | )
|Proceeds from sales of marketable securities                                                       |  |        | 53,693       |   |                       |   | -            |                           |  |   | -            |   |  |       | -            |   |  |   | 53,693       |  
|Expenditures for property                                                                          |  |        | (271,863     | ) |                       |   | (2,082       | )                         |  |   | (8,644       | ) |  |       | -            |   |  |   | (282,589     | )
|Expenditures for capitalized software                                                              |  |        | (13,073      | ) |                       |   | -            |                           |  |   | -            |   |  |       | -            |   |  |   | (13,073      | )
|Proceeds from sale of property                                                                     |  |        | 19           |   |                       |   | -            |                           |  |   | 187          |   |  |       | -            |   |  |   | 206          |  
|Other, net                                                                                         |  |        | -            |   |                       |   | -            |                           |  |   | 1,462        |   |  |       | -            |   |  |   | 1,462        |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Net cash used in investing activities                                                              |  |        | (259,401     | ) |                       |   | (2,082       | )                         |  |   | (6,933       | ) |  |       | -            |   |  |   | (268,416     | )
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Cash flows from financing activities:                                                              |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Short-term revolver borrowings                                                                     |  |        | -            |   |                       |   | -            |                           |  |   | 4,761        |   |  |       | -            |   |  |   | 4,761        |  
|Repayments of revolver borrowings                                                                  |  |        | -            |   |                       |   | -            |                           |  |   | (5,347       | ) |  |       | -            |   |  |   | (5,347       | )
|Long-term debt borrowings                                                                          |  |        | 29,702       |   |                       |   | -            |                           |  |   | 1,846        |   |  |       | -            |   |  |   | 31,548       |  
|Repayments of long-term debt                                                                       |  |        | (2,054       | ) |                       |   | -            |                           |  |   | (4,190       | ) |  |       | -            |   |  |   | (6,244       | )
|Debt issuance costs                                                                                |  |        | (7,140       | ) |                       |   | -            |                           |  |   | -            |   |  |       | -            |   |  |   | (7,140       | )
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Net cash provided by (used in) financing activities                                                |  |        | 20,508       |   |                       |   | -            |                           |  |   | (2,930       | ) |  |       | -            |   |  |   | 17,578       |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Effect of exchange rate changes on cash and cash equivalents                                       |  |        | -            |   |                       |   | -            |                           |  |   | 748          |   |  |       | -            |   |  |   | 748          |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Net decrease in cash and cash equivalents                                                          |  |        | (106,284     | ) |                       |   | (835         | )                         |  |   | 4,186        |   |  |       | -            |   |  |   | (102,933     | )
|Cash and cash equivalents at beginning of the period                                               |  |        | 173,991      |   |                       |   | 1,091        |                           |  |   | 8,651        |   |  |       | -            |   |  |   | 183,733      |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  
|Cash and cash equivalents at end of the period                                                     |  | $      | 67,707       |   |                       | $ | 256          |                           |  | $ | 12,837       |   |  | $     | -            |   |  | $ | 80,800       |  
|                                                                                                   |  |        |              |   |                       |   |              |                           |  |   |              |   |  |       |              |   |  |   |              |  



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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,
2009

(In thousands)



|                                                                                       |  |        | Eliminations |   |                       |   | Eliminations |                           |  |   | Eliminations |   |  |       | Eliminations |   |  |   | Eliminations |  
|-------------------------------------------------------------------------------------- |  | ------ | ------------ | - | --------------------- | - | ------------ | ------------------------- |  | - | ------------ | - |  | ----- | ------------ | - |  | - | ------------ | -
|                                                                                       |  | 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      |  
|Repayments 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 |         |   | Guarantor  Subsidiaries |   |        | 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   |  
|Repayments 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 |  
|                                                                                       |  |        |         |   |                         |   |        |                           |  |   |              |   |  |       |         |   |  |   |         |  



|Note 21: | 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):



|                                      |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |         | 
|------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | ---------------- |  | - | ---------------- | - |  | - | ------- | 
|                                      |  | 1st      Quarter |         |   | 2nd      Quarter |   |         | 3rd      Quarter |  |   | 4th      Quarter |  
|2010:                                 |  |                  |         |   |                  |   |         |                  |  |   |                  |   |  |   |         | 
|Revenue                               |  | $                | 242,143 |   |                  | $ | 251,333 |                  |  | $ | 264,715          |   |  | $ | 279,552 | 
|Gross margin                          |  | $                | 65,607  |   |                  | $ | 72,545  |                  |  | $ | 80,553           |   |  | $ | 92,768  | 
|Net income (loss) attributable to HNS |  | $                | (5,562  | ) |                  | $ | 2,794   |                  |  | $ | 10,800           |   |  | $ | 17,361  | 
|Net income (loss)                     |  | $                | (5,459  | ) |                  | $ | 2,601   |                  |  | $ | 10,745           |   |  | $ | 18,156  | 
|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   | 





|Note 22: | Subsequent Event
|-------- | ----------------

Agreement and Plan
of Merger

On February 13, 2011, the Company entered into an Agreement and Plan of Merger (the Merger
Agreement) with EchoStar Corporation, a Nevada corporation (EchoStar), EchoStar Satellite Services L.L.C., a Colorado limited liability



94



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



company (Satellite Services), and Broadband Acquisition Corporation, a Delaware corporation (Merger Sub), pursuant to which, subject to the terms and conditions set forth
therein, Merger Sub will merge with and into HCI (the Merger), with HCI continuing as the surviving entity and becoming a wholly owned subsidiary of EchoStar.

Pursuant to the Merger Agreement, upon the closing of the Merger, each of HCIs issued and outstanding share of common stock (other than any HCIs common stock with respect to which appraisal
rights have been duly exercised under Delaware law) will automatically be converted into the right to receive $60.70 in cash (without interest) and cancelled. Vested restricted stock award and restricted stock units will become HCIs common
stock upon the closing of the Merger and are therefore entitled to the right to receive $60.70 in cash (without interest) and cancelled. Unvested restricted stock awards and restricted stock units at the closing of the Merger have the right to
receive $60.70 in cash (without interest) and cancel, payable at the time such restricted stocks vest.

Vested stock options
to acquire HCIs common stock will continue to be outstanding until the closing of the Merger. Upon the closing of the Merger, vested options will be cancelled, and within 10 days after the closing of the Merger, each vested stock option will
receive $60.70 in cash (without interest) minus the exercise price of the stock option per share. Unvested stock option at closing of the Merger will be converted into the right to receive $60.70 in cash (without interest) minus the exercise price
of the stock option per share and cancel, payable at the time such options vest.

The Merger Agreement also contemplates to
refinance certain of the Companys existing debts, including the 2009 and 2006 Senior Notes. The COFACE Guaranteed Facility will continue to remain outstanding following the Merger if the requisite lender consents thereunder are obtained.

Each of the boards of directors of HCI and Merger Sub approved the Merger Agreement and deemed it advisable and fair to, and
in the best interests of, their respective companies and stockholders, to enter into the Merger Agreement and to consummate the Merger and the transactions and agreements contemplated thereby. The board of directors of EchoStar approved the Merger
Agreement and deemed it advisable and fair to, and in the best interests of, its stockholders to enter into the Merger Agreement and to consummate the transactions and agreements contemplated thereby.

The Merger is expected to close later this year, subject to certain closing conditions, including among others, (i) receiving the
required approvals of HCIs stockholders, which approval was effected on February 13, 2011, by written consent of a majority of HCIs stockholders (the Majority Stockholders Written Consents), (ii) 20 business
days having elapsed since the mailing to HCIs stockholders of the definitive information statement, with respect to such adoption of the Merger Agreement, in accordance with the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder, (iii) receiving certain government regulatory approvals, including approval by the Federal Communications Commission (FCC), the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the receipt of the consents required under certain export control laws, (iv) the absence of any order or injunction by a court of competent jurisdiction preventing the
consummation of the Merger, and the absence of any action taken, or any law enacted, entered, enforced or made applicable to the Merger, by any governmental entity that makes the consummation of the Merger illegal or otherwise restrains, enjoins or
prohibits the Merger, (v) the absence of any proceeding in which the Office of Communications of the United Kingdom seeks to prohibit or enjoin the Merger, (vi) the accuracy of the representations and warranties made by HCI, EchoStar and
Merger Sub, (vii) the performance, in all material respects, by each of HCI, EchoStar and Merger Sub of all its respective obligations, agreements and covenants under the Merger Agreement, (viii) subject to certain customary exceptions,
the absence of (a) a change or event that has a material adverse effect on the business, financial condition or results of operations of Hughes and its subsidiaries, taken as a whole or (b) any event, change, occurrence or effect that
would prevent, materially delay or materially impede the performance by HCI of its obligations under this Agreement or the consummation of the transactions contemplated hereby, if not cured, in either case since February 13, 2011 and
(ix) holders of HCIs common stock representing in excess of 25% of HCIs outstanding common stock shall not have exercised (or if exercised, shall not have withdrawn prior to the commencement of the marketing period for the financing
of the pending transaction) rights of dissent in connection with the Merger. The Merger Agreement clarifies that no party may rely on a failure of conditions to be satisfied if such partys breach was the proximate cause of the failure.

The Merger Agreement contains customary representations, warranties and covenants of HCI, EchoStar and Merger Sub. In
particular, HCI makes certain representations and warranties related to the business in which it operates, including with respect to its communications licenses; the health of its satellite currently in orbit and other related information; that
there are no claims under coordination and concession agreements; the status of our earth stations; and compliance with



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HUGHES NETWORK SYSTEMS, LLC

NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (CONTINUED)



regulatory and export control laws. EchoStar and Merger Sub also make a representation that EchoStar and Satellite Services have sufficient financing in order to complete the Merger.

HCI has agreed to various covenants in the Merger Agreement, including, among others, covenants (i) to use commercially reasonable
efforts to conduct its business in the ordinary course consistent with past practice during the interim period between the execution of the Merger Agreement and completion of the Merger, (ii) not to engage in certain kinds of transactions
during this interim period and (iii) to cooperate and use commercially reasonable efforts to take all actions necessary to obtain all governmental and antitrust, FCC and regulatory approvals, subject to certain customary limitations. As noted
above, EchoStar and Satellite Services represent and warrant in the Merger Agreement that at the closing of the Merger they will have access to sufficient funds to consummate the Merger and the other transactions contemplated by the Merger
Agreement, and there is no closing condition related to them having procured such financing.

The Merger Agreement also
contains a covenant pursuant to which HCI has agreed, subject to certain customary exceptions described below, that it will not, and will cause its representatives not to, solicit, facilitate (including by providing information) or participate in
any negotiations or discussions with any person relating to, any takeover proposal, as further described in the Merger Agreement. The Merger Agreement contains a fiduciary-out provision, which provides that, prior to the time HCIs
stockholders have adopted and approved the Merger Agreement (which adoption and approval was obtained on February 13, 2011 pursuant to the Majority Stockholders Written Consents), HCIs board of directors may engage with alternative
purchasers, change its recommendation to its stockholders or enter into a definitive agreement with respect to an unsolicited acquisition proposal, only if HCIs board of directors have determined in good faith (a) that failure to take
such action is likely to be inconsistent with the boards fiduciary duties, and (b) that the acquisition proposal constitutes a Superior Proposal. However, as HCIs stockholders have approved and adopted the Merger
Agreement, the fiduciary-out provision no longer provides an exception to the non-solicitation obligations described in this paragraph.

The Merger Agreement also contains a covenant pursuant to which EchoStar or the surviving entity must indemnify officers, directors and employees of Hughes and its subsidiaries for a period of six years
following the closing of the Merger for all liabilities or claims related to their service or employment with HCIs or its subsidiaries occurring prior to the closing of the Merger. This covenant further requires EchoStar to keep in place
HCIs directors and officers liability and fiduciary liability insurance policies in effect at the closing, or purchase a tail policy offering similar coverage unless HCI purchases such a policy prior to closing.

The Merger Agreement contains certain termination rights for both HCI and EchoStar. In addition to certain termination rights related to
breaches of the agreement or actions taken by HCI with respect to alternative transactions, so long as the failure of the terminating party to comply with its obligations is not the cause for delay in closing, each of EchoStar and HCI has the right
to terminate the Merger Agreement unilaterally if the Merger has not closed by a date nine months from the execution of the Merger Agreement. In addition, the Merger Agreement provides that, upon termination of the Merger Agreement under specified
circumstances, HCI may be required to pay EchoStar a termination fee of $45 million.

The Merger Agreement also contains
termination and other rights related to the occurrence of certain reductions in performance or total loss of HCIs satellite currently in orbit, and certain waivers increasing risks associated with construction, launch or operation of
HCIs satellite currently under construction (a Material Satellite Event). Upon a Material Satellite Event, EchoStar is entitled to terminate the Merger Agreement until 60 days after HCI provides a written plan describing its
intended response (the Mitigation Plan). If EchoStar has not provided written consent to the Mitigation Plan 30 days after delivery, HCI can then terminate the Merger Agreement. In addition, from the date of any Material Satellite Event
until EchoStars approval of the Mitigation Plan, HCI will also be required to provide EchoStar with daily reports of customer complaints and subscriber cancellations.

The foregoing description of the Merger Agreement and the transactions and agreements contemplated thereby does not purport to be complete and is subject to and qualified in its entirety by reference to
the Merger Agreement.



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

None.



|Item 9A. | 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, 2010 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, 2010. 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 members of our Board of Managers, our executive officers and certain other officers. 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   |  | 64  |  | Chief Executive Officer, President and Chairman of the Board of Managers
|Grant A. Barber   |  | 51  |  | Executive Vice President and Chief Financial Officer                    
|T. Paul Gaske     |  | 57  |  | Executive Vice President, North American Division                       
|Adrian Morris     |  | 56  |  | Executive Vice President, Engineering                                   
|Bahram Pourmand   |  | 64  |  | Executive Vice President, International Division                        
|Bob Buschman      |  | 61  |  | Senior Vice President, Jupiter                                          
|George Choquette  |  | 53  |  | Senior Vice President, Engineering                                      
|Mike Cook         |  | 57  |  | Senior Vice President, North America Sales and Marketing                
|John Corrigan     |  | 57  |  | Senior Vice President, Engineering                                      
|Estil Hoversten   |  | 74  |  | Senior Vice President                                                   
|Tom Hsu           |  | 65  |  | Senior Vice President, Terrestrial Microwave                            
|Robert Kepley     |  | 53  |  | Senior Vice President, Engineering                                      
|Sandi Kerentoff   |  | 57  |  | Senior Vice President, Administration and Human Resources               
|Dean A. Manson    |  | 44  |  | Senior Vice President, General Counsel and Secretary                    
|Thomas J. McElroy |  | 55  |  | Senior Vice President and Controller                                    
|John McEwan       |  | 58  |  | Senior Vice President, Operations                                       
|Ashok Mehta       |  | 56  |  | Senior Vice President, Business InformationTechnology Services          
|Vinod Shukla      |  | 62  |  | Senior Vice President, International Division                           
|David Zatloukal   |  | 53  |  | Senior Vice President, North American Operations                        
|Deepak V. Dutt    |  | 66  |  | Vice President and Treasurer                                            
|Andrew D. Africk  |  | 44  |  | Member of the Board of Managers                                         
|Jeffrey A. Leddy  |  | 55  |  | Member of the Board of Managers                                         
|Aaron J. Stone    |  | 38  |  | 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



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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
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, Jupiter. 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



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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.

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. 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



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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 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 board of directors
of HCI, Hughes Telematics and SOURCECORP, Incorporated. From 1999 to 2008, Mr. Africk served on the board of directors of LightSquared, Inc. (LightSquared, formerly SkyTerra Communications, Inc.), including its predecessor. From
2005 to 2008, Mr. Africk served as the vice 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. For 2003 to 2008, Mr. Africk served on the board of directors of Terrestar Networks, Inc. From 2007 to 2008, Mr. Africk served on the board of directors of Terrestar Global, Inc. From October 2009
to December 2009, Mr. Africk served on the boards of directors of Parrallel Petroleum. 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
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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 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. From 2005 to 2008, Mr. Stone served on the boards of directors of LightSquared, Intelsat Holdings, Ltd. and Mobile Satellite Ventures. From 2004 to 2007,
Mr. Stone served on the board of directors of Educate, Inc. Mr. Stone also serves on the Nominating and Corporate Governance Committee and the Compensation Committee of HCI.

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.



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|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.

Compensation Objectives and Philosophy

The primary objective of
our executive compensation program is to closely align the compensation paid to our 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 provides for both guaranteed compensation and incentive compensation based on the Companys performance, which is designed 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 taking into account
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. In 2010, the Compensation Committee engaged Semler Brossy Consulting Group, LLC, a compensation
consultant, to assist the Compensation Committee and the Company in analyzing 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
| | - |  | -------------------



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

Our Named 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 (maximum $500,000). In addition, Pradman Kaul, our Chief Executive Officer, receives enhanced medical coverage for which he has no premium payment
and no co-payments.

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, the Compensation Committee did not grant salary increases. For 2010, after review of the competitive
market levels, individual performance, level of responsibility and Company performance, the Compensation Committee granted salary increases to our general employee population including the Named Executive Officers. As a result, the 2010 base
salaries of our Named Executive Officers were as follows effective April 1, 2010: from $620,090 to $700,000 for Mr. Kaul, from $382,200 to $400,000 for Mr. Barber, from $426,983 to $462,000 for Mr. Gaske, $427,733 to $445,000 for
Mr. Pourmand and from $382,200 to $400,000 for Mr. Morris. On February 7, 2011, the Compensation Committee approved 3.5% increases to each Named Executive Officer for 2011, effective April 1, 2011. These increases were based on
competitive market levels, individual performance, and company performance.

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, or 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 2010 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
2010, based on seniority and level of responsibility, the Compensation Committee set the bonus targets for each of our Named Executive Officers at 100% for Mr. Kaul, 70% for Mr. 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 2010, the
performance target components were revenue of $1,100 million, adjusted EBITDA of $220.0 million and cash balance of $175 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 determined not to adjust the weight for 2010. 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 2010, the Compensation
Committee awarded the following percentages of each Named Executive Officers 2010 base salary under the AIP: 100% to Mr. Kaul, 70% to Mr. Gaske, and 60% to Messrs. Barber, Pourmand and Morris, thus each of our Named Executive
Officers received his target award. The actual 2010 AIP amounts awarded to each of our



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Named Executive Officers are shown in the Non-Equity Incentive Compensation column of 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 2010 AIP awards:



|                   |  |                             |     |  |     |  |     |      |  |  |      |  |  |  |       | 
|------------------ |  | --------------------------- | --- |  | --- |  | --- | ---- |  |  | ---- |  |  |  | ----- | 
|                   |  | % 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, 2010, Adjusted EBITDA is calculated from our audited financial statements by beginning with GAAP net income (i) adding back interest expense; income tax
expense; depreciation and amortization; equity plan compensation expense; and class action settlement; then (ii) subtracting interest income. Interest expense, interest income, and income tax expense 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 equity plan compensation expense of $7.2 million and reserve for class action settlement for the year ended
December 31, 2010 are included in the Consolidated Statement of Operations as part of general and administrative expense.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table sets forth the actual performance by the Company for each of the Company Performance Targets established by the Compensation Committee for 2010 AIP awards and the corresponding AIP
payout associated with each target (dollars in millions):



|                |  |                   |         |  |                      |  |        |            |  |  |        | 
|--------------- |  | ----------------- | ------- |  | -------------------- |  | ------ | ---------- |  |  | ------ | 
|                |  | ActualPerformance |         |  | % of 
BudgetAchieved |  |        | %Payout(1) | 
|Revenue         |  | $                 | 1,037.7 |  |                      |  | 94.3%  |            |  |  | 19.8%  | 
|Adjusted EBITDA |  | $                 | 228.6   |  |                      |  | 103.9% |            |  |  | 47.9%  | 
|Cash balance    |  | $                 | 182.7   |  |                      |  | 104.4% |            |  |  | 18.3%  | 
|Subjective      |  |                   |         |  |                      |  | 15.0%  |            |  |  | 15.0%  | 
|                |  |                   |         |  |                      |  |        |            |  |  |        | 
|Total           |  |                   |         |  |                      |  |        |            |  |  | 101.0% | 
|                |  |                   |         |  |                      |  |        |            |  |  |        | 



|(1) | The Company performance was 101.0%; however, AIP awards were paid at 100.0% based on the approval of the Compensation Committee.
|--- | --------------------------------------------------------------------------------------------------------------------------------

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. The performance of 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 October 14,
2010 each of our Named Executive Officers was awarded options to purchase HCIs common stock under the Plan. Mr. Kaul was awarded 35,000 options and each of Messrs. Barber, Gaske, Pourmand and Morris were awarded 15,000 options.
Mr. Kaul received more options due to his level of responsibility and market comparisons. These options are subject to time vesting restrictions over four years and vest 50% on October 14, 2012, 25% on October 14, 2013 and 25% on
October 14, 2014. These options have an exercise price of $28.85, the closing price of HCIs common stock on October 14, 2010, the grant date of the options.

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:



| |  |  | A car allowance in the amount of $15,120 per year is provided to Mr. Kaul and a car allowance in the amount of $12,940 per year is provided to
each of Messrs. Barber, Gaske, Pourmand, and Morris.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------

Targeted Compensation

Target total compensation for each Named Executive Officer is established by the Compensation Committee based on peer group data, internal equity considerations 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. In 2010, the Compensation Committee engaged Semler Brossy Consulting
Group which provides executive compensation reports. The peer group used by Semler Brossy included: Cincinnati Bell, Inc, Frontier Communications, General Communications Inc, Global Crossing, Leap Wireless International Inc, Loral Space &
Communications, Mediacom Communications, NTELOS Holdings Corp, PAETEC Holdings Corp, RCN Corp, SAVVIS, TW Telecom, ViaSat, Vonage 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 Semler Brossy report for 2010 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
|Chief Executive Officer  |  | Pradman Kaul    |  | CEO               |  | 43rd                                           |  | 32nd                             |  | 10th                              
|Chief Financial Officer  |  | Grant Barber    |  | CFO               |  | 71st                                           |  | 43rd                             |  | 6th                               
|Executive Vice President |  | T. Paul Gaske   |  | 2nd highest paid  |  | 62nd                                           |  | 60th                             |  | 6th                               
|Executive Vice President |  | Bahram Pourmand |  | 3rd highest paid  |  | 88th                                           |  | 69th                             |  | 24th                              
|Executive Vice President |  | Adrian Morris   |  | 5th highest paid  |  | 93rd                                           |  | 88th                             |  | 31st                              

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 Semler Brossy report for 2010, the
Compensation Committee determined that, other than an additional award of stock options, 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 2010 as the following:



|                          |  |                                        |  |                                         |  |                                        
|------------------------- |  | -------------------------------------- |  | --------------------------------------- |  | ---------------------------------------
|                          |  | Base Salary asa % of
TotalCompensation |  | Bonus Targetasa % of 
TotalCompensation |  | Equity Targetasa % of TotalCompensation
|Chief Executive Officer   |  | 31%                                    |  | 31%                                     |  | 38%                                    
|Chief Financial Officer   |  | 43%                                    |  | 26%                                     |  | 32%                                    
|Executive Vice Presidents |  | 43%                                    |  | 26%                                     |  | 32%                                    

Change of Control
BenefitsOn February 13, 2011, in connection with the pending acquisition of HCI, by EchoStar Corporation, HCI adopted Change of Control Bonus Programs for the benefit of its Named Executive Officers (each, a Bonus
Program). Pursuant to each Bonus Program, upon a change of control of the Company (a Change of Control), including an acquisition by an individual or group of more than 50% of the voting power of the Company or certain mergers or
consolidations of the Company, up to two cash payments (each, a Bonus) will be made to each of the Companys Named Executive in order to compensate them for their efforts to consummate the sale of the Company. The amount of each
Bonus paid to each Executive is calculated based on the price per share of the Companys common stock, par value $0.001 per share, realized in the Change of Control.



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Provided that the Executive remains employed by the Company or has been terminated without
cause, for good reason or by reason of death or disability, a Bonus will be paid within 10 days following the consummation of the Change of Control as follows: $5.35 million to Mr. Kaul, $2.4 million to Mr. Gaske, $1.9 million to Messrs.
Barber, Morris, and Pourmand.

In addition, within 6 months following the consummation of the Change of Control (provided that
on the date of such payment the Executive remains employed by the Company or has been terminated without cause, for good reason or by reason of death or disability), a second Bonus, equal in amount to the first Bonus, will be paid.

The obligations of the Company to make payments under each Bonus Program are contractual only, and all such payments will be made from
the general assets of the Company. Each Bonus Program will terminate on December 31, 2011 if a Change of Control has not been consummated by such date.

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 2010 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




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Risk Analysis

Each year, the Compensation Committee reviews the Companys compensation policies and practices, to ensure they do not cause any risks to the Company that are reasonably likely to have a
material adverse effect on the Company. Specifically, the Compensation Committee discussed at a meeting of the committee held on February 8, 2011, how the Companys compensation policies and practices for employees affect the
Companys risk. The committee feels that its compensation policies and practices for its Named Executive Officers and employees are not reasonably likely to have a material adverse effect on the Company or its business. The Companys
compensation structure contains various features that mitigate risk. For example:



| |  |  | The Company offers diverse compensation programs.
| | - |  | -------------------------------------------------



| |  |  | The Company periodically benchmarks its compensation programs and overall compensation structure to be consistent with industry practices.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company sets reasonable bonus targets for executives and employees and requires that certain performance metrics are achieved before bonuses
will be paid.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Neither of the Companys two principal business units carry a significant portion of the Companys overall risk profile on a stand-alone
basis.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Generally, the Companys compensation policies and practices are uniform across each of its business units and geographic regions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | The mix of compensation among base salary and incentive bonus, with substantially all of the employees receiving a significant portion of their overall
compensation in the form of base salary, does not encourage excessive risk taking.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All of the equity awards granted to employees under the Companys equity-based plans are subject to multi-year time vesting, which requires an
employee to commit to a longer period of employment for such awards to be valuable.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The structure of the Companys annual incentive bonus plan, applicable to its executive officers, provides for multiple pay-out levels based on
pre-established targets as compared to a single pay-out level, which could encourage excessive risks among employees to achieve such target or otherwise be ineligible for any bonus.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Summary Compensation Table

The following table sets forth, for the years ended December 31, 2010, 2009 and 2008 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-EquityCompensation(1)($) |  |                         | Change inNon-QualifiedDeferredEarnings($) |  |  | Compensation($)       |  |  | Total($) |     
|Pradman Kaul(3)CEO and Chairman ofthe
Board |  |      | 201020092008 |  |           |  | 707,231632,630637,370 |             |  |  | 105,00094,00094,000 |  |  |                    | ---  |  |                              |  | 410,327465,0002,443,000 |                                           |  |  | 595,000465,000602,000 |  |  |          | --
- |  |  |  | 164,667147,197127,183 |  |  |  | 1,982,2251,803,8273,903,553 | 
|                                            |  |      |              |  |           |  |                       |             | 
|Grant Barber(4)Chief
FinancialOfficer       |  |      | 201020092008 |  |           |  | 395,211382,200382,351 |             |  |  | 36,00035,00035,000  |  |  |                    | --
- |  |                              |  | 175,855116,250610,750   |                                           |  |  | 204,000172,000223,000 |  |  |          | --
- |  |  |  | 58,76650,57252,341    |  |  |  | 869,832756,0221,303,441     | 
|                                            |  |      |              |  |           |  |                       |             | 
|Paul Gaske(5)Executive
VicePresident        |  |      | 201020092008 |  |           |  | 452,585439,565437,656 |             |  |  | 48,60045,00045,000  |  |  |                    | --
- |  |                              |  | 175,855116,250610,750   |                                           |  |  | 275,400225,000290,000 |  |  |          | --
- |  |  |  | 94,65477,80671,391    |  |  |  | 1,047,094903,6211,454,797   | 
|                                            |  |      |              |  |           |  |                       |             | 
|Bahram Pourmand(6)Executive
VicePresident   |  |      | 201020092008 |  |           |  | 448,515426,754426,754 |             |  |  | 40,00039,00039,000  |  |  |                    | --
- |  |                              |  | 175,855116,250610,750   |                                           |  |  | 227,000193,000249,000 |  |  |          | --
- |  |  |  | 69,45160,23062,435    |  |  |  | 960,821835,2341,387,939     | 
|                                            |  |      |              |  |           |  |                       |             | 
|Adrian Morris(7)Executive
VicePresident     |  |      | 201020092008 |  |           |  | 391,174370,061367,203 |             |  |  | 36,00034,00034,000  |  |  |                    | --
- |  |                              |  | 175,855116,250610,750   |                                           |  |  | 204,000165,000214,000 |  |  |          | --
- |  |  |  | 61,52848,14649,287    |  |  |  | 868,557733,4571,275,240     | 



|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On October 14, 2010, Mr. Kaul was awarded 35,000 stock options and Messrs. Barber, Gaske, Pourmand and Morris were each awarded 15,000 stock options. 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. The amounts listed reflect the full, grant date, market value of the options as determined in accordance with ASC Topic 718, Compensation-Stock Compensation, $24.43 as of April 24, 2008, $4.65 as of April 16,
2009 and $11.72 as of October 14, 2010. 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 2010, Mr. Kauls salary includes his salary earned of $678,494, plus $28,738 accrued, but unused paid time off (PTO). 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. Mr. Kauls all other
compensation includes the Companys matching contributions to our qualified 401(k) plan of $14,700 for 2010, $14,700 for 2009, and $13,800 for 2008, and our non-qualified excess benefit plan of $91,050 for 2010, $31,482 for 2009, and $57,769
for 2008, a special after tax bonus of $32,784 in lieu of a company contribution to the non-qualified excess benefit plan in 2009; a car allowance of $15,120 for 2010 and 2009, and $15,702 for 2008, executive medical coverage of $24,546 for 2010,
$20,205 for 2009, and $16,757 for 2008; financial planning services in the amount of $12,804 for 2010, $11,876 for 2009, and $11,089 for 2008, of which $169 of expense was incurred in 2007 but paid in 2008; 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, personal liability insurance reimbursement and a credit for long term
disability insurance.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | For 2010, Mr. Barbers salary includes his salary earned of $395,211. For 2009, Mr. Barbers salary includes his salary earned of $382,200.
Mr. Barber used all of his PTO earned in 2010 and 2009. For 2008, Mr. Barbers salary includes his salary earned of $382,200 plus $151 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 2010, $11,925 for 2009, and $12,650 for 2008 and the non-qualified excess benefit plan of $32,233 for 2010, $19,404 for 2009, and $24,852 for 2008; a car allowance of $12,940 for
2010 and 2009, and $13,438 for 2008. Other items (below $10,000/year), 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 2010, Mr. Gaskes salary includes his salary earned of $452,585. Mr. Gaske used, or cashed in at 50%, all his PTO in 2010. 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. Mr. Gaskes all
other compensation includes the Companys matching contributions to its qualified 401(k) plan of $14,700 for 2010 and 2009, and $13,800 for 2008, and the non-qualified excess benefit plan of $43,208 for 2010, $21,679 for 2009, and $30,999 for
2008; a car allowance of $12,940 for 2010 and 2009, and $13,438 for 2008; and financial planning services in the amount of $12,665 for 2010, $11,876 for 2009, and $11,089 for 2008, of which $169 of expense was incurred in 2007 but paid in 2008.
Other items (below $10,000/year) include reimbursement for a management physical for 2008, a special after tax bonus in lieu of a Company contribution to the non-qualified excess benefit plan for 2009, group term life insurance coverage over
$50,000, a 50% cashout for 80 hours of PTO and a credit for long term disability insurance.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | For 2010, Mr. Pourmands salary includes his salary earned of $440,099 plus $8,416 accrued, but unused paid time off (PTO). 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. Mr. Pourmands all other compensation includes the
Companys matching contributions to its qualified 401(k) plan of $14,700 for 2010 and 2009, and $13,800 for 2008 and the non-qualified excess benefit plan of $37,641 for 2010, $21,666 for 2009, and $28,403 for 2008, and a car allowance of
$12,940 for 2010 and 2009, and $13,438 for 2008. 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 2010, Mr. Morris salary includes his salary earned of $391,174. Mr. Morris used, or cashed in at 50%, all his PTO in 2010. 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. Mr. Morris all other compensation includes the
Companys matching contributions to its qualified 401(k) plan of $10,388 for 2010, and the non-qualified excess benefit plan of $31,510 for 2010, $18,643 for 2009, and $24,699 for 2008, and a car allowance of $12,940 for 2010 and 2009, and
$13,438 for 2008. Other items (below $10,000/year) include the Companys matching contributions to its qualified 401(k) plan (2009 and 2008), 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, a 50% cashout for 40 hours of PTO (2010) 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 and amended on December 23, 2010. 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 ($700,000 effective April 1, 2010) and a cash bonus target in the amount of a percentage of his annual base salary (100% for 2010), 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 were
subject to time vesting, and 750 were subject to performance vesting. As of April 24, 2010 all 1,500 membership interests have vested. 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.

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 and amended on December 23, 2010. 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 agreement with Mr. Barber provides for an annual base salary ($400,000 effective
April 1, 2010) and a cash bonus target in the amount of a percentage of his annual base salary (60% for 2010), 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, Mr. Barber purchased 500 Class B membership interests of the Company at $0.01 per unit. Of the 500 Class B membership interests, 250 were subject to time vesting, and 250 were subject to performance
vesting. As of April 24, 2010 all 250 performance interests have vested, and the final Class B membership interests, subject to time vesting, vested on February 2, 2011. 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.

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.



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T. Paul Gaske

The employment agreement between Mr. Gaske and the Company originally was entered into as of April 23, 2005 and amended on December 23, 2010. 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 ($462,000 effective April 1, 2010) and a cash bonus target in the amount of a percentage of his annual base salary (70% for
2010), 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, Mr. Gaske purchased 650 Class B membership interests of the
Company at $0.01 per unit. Of the 650 Class B membership interests, 325 were subject to time vesting, and 325 were subject to performance vesting. As of April 24, 2010 all 750 membership interests have vested. 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.

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 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 and amended on
December 23, 2010. 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 ($445,000 effective April 1, 2010)
and a cash bonus target in the amount of a percentage of his annual base salary (60% for 2010), 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, Mr. Pourmand purchased 500 Class B membership interests of the Company at $0.01 per unit. Of the 500 Class B membership interests, 250 were subject to time vesting, and 250 were subject to performance vesting. As of
April 24, 2010 all 500 membership interests have vested. 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.

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 and amended on December 23, 2010. 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



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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 ($400,000
effective April 1, 2010) and a cash bonus target in the amount of a percentage of his annual base salary (60% for 2010), 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s employment agreement and his restricted unit purchase
agreement, effective as of April 23, 2005, Mr. Morris purchased 500 Class B membership interests of the Company at $0.01 per unit. Of the 500 Class B membership interests, 250 were subject to time vesting, and 250 were subject to
performance vesting. As of April 24, 2010 all 500 membership interests have vested. 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.

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 2010

The Compensation
Committee approved awards under the Plan to each of our Named Executive Officers in 2010. Set forth below is information regarding stock options granted during 2010 under the Plan and information regarding threshold, target and maximum bonus awards
our Named Executive Officers could earn in 2010 under the AIP.



|                |  |           |  |  |                                          |  |         |                                        |  |  |                                                        |  |  |                                             |         |  |                                                  |  |   |        |  |  |   |  |  |  |   |  |  |  |   |  |  |  |        |  |  |  |       |  |  |  |         | 
|--------------- |  | --------- |  |  | ---------------------------------------- |  | ------- | -------------------------------------- |  |  | ------------------------------------------------------ |  |  | ------------------------------------------- | ------- |  | ------------------------------------------------ |  | - | ------ |  |  | - |  |  |  | - |  |  |  | - |  |  |  | ------ |  |  |  | ----- |  |  |  | ------- | 
|                |  |           |  |  | Estimated Future Payouts                 |  |         | All 
OtherStockAwardsSharesorUnits
(#) |  |  | All
OtherOptionAwards:SecuritiesUnderlyingOption(2)(#) |  |  | Exerciseor 
BasePrice ofOptionsAwards($/Sh) |         |  | GrantDate 
FairValue
ofstock 
andOptionAwards($) | 
|                |  |           |  |  | Under Non-EquityIncentive Plan Awards(1) |  |         | Under Equity IncentivePlan
Awards      |  |  |                                                        |  | 
|Name            |  | GrantDate |  |  | Threshold($)                             |  |         | Target($)                              |  |  | Max($)                                                 |  |  | Threshold(#)                                |         |  | Target(#)                                        |  |   | Max(#) |  |  |   |  | 
|Pradman Kaul    |  |           |  |  |                                          |  | 147,000 |                                        |  |  | 595,000                                                |  |  |                                             | 893,000 |  |                                                  |  | - |        |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 35,000 |  |  |  | 28.85 |  |  |  | 410,327 | 
|Grant Barber    |  |           |  |  |                                          |  | 51,000  |                                        |  |  | 204,000                                                |  |  |                                             | 306,000 |  |                                                  |  | - |        |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 15,000 |  |  |  | 28.85 |  |  |  | 175,855 | 
|Paul Gaske      |  |           |  |  |                                          |  | 69,000  |                                        |  |  | 275,000                                                |  |  |                                             | 413,000 |  |                                                  |  | - |        |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 15,000 |  |  |  | 28.85 |  |  |  | 175,855 | 
|Bahram Pourmand |  |           |  |  |                                          |  | 57,000  |                                        |  |  | 227,000                                                |  |  |                                             | 341,000 |  |                                                  |  | - |        |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 15,000 |  |  |  | 28.85 |  |  |  | 175,855 | 
|Adrian Morris   |  |           |  |  |                                          |  | 51,000  |                                        |  |  | 204,000                                                |  |  |                                             | 306,000 |  |                                                  |  | - |        |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 15,000 |  |  |  | 28.85 |  |  |  | 175,855 | 



|(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 October 14, 2010 to each of our Named Executive Officers. Mr. Kaul received 35,000 options and each of
Messrs. Barber, Gaske, Pourmand and Morris received 15,000 options.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The amount listed in this column reflects the value of the options ($11.72) by the Black-Scholes option valuation model in accordance with ASC Topic 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.

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



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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, a participants employment is terminated by HCI or the Company other than for cause or by the participant for good reason (each of change of control, cause and good reason as defined below in
Potential Payments Upon Termination or Change of Control): (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.

Stock Options and Stock Appreciation
Rights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



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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, 2010

The following table summarizes the outstanding equity award holdings of our Named Executive Officers as of December 31, 2010.



|                |  |                                                               |   |  |                                                                      |  |         |                                                                    |  |  |                          |  |  |                      |       |  |                                                            |  |            |                                                               |  |  |                                                                                       |  |  |                                                                                                         |        |  |  |  |   |  |  |  |   | 
|--------------- |  | ------------------------------------------------------------- | - |  | -------------------------------------------------------------------- |  | ------- | ------------------------------------------------------------------ |  |  | ------------------------ |  |  | -------------------- | ----- |  | ---------------------------------------------------------- |  | ---------- | ------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------- |  |  | ------------------------------------------------------------------------------------------------------- | ------ |  |  |  | - |  |  |  | - | 
|                |  | Option Awards                                                 |   |  | Stock Awards                                                         | 
|Name            |  | Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable(#) |   |  | Number 
ofSecuritiesUnderlyingUnexercised
OptionsUnexercisable(1)(#) |  |         | EquityIncentive 
PlanAwards:SecuritiesUnderlyingUnearnedOptions(#) |  |  | OptionExercise 
Price($) |  |  | OptionExpirationDate |       |  | Number ofShares 
orUnits ofStock ThatHave 
NotVested(2)(#) |  |            | MarketValueofShares orUnits of StockThat Have NotVested(3)(#) |  |  | EquityIncentive 
PlanAwards:UnearnedShares,
UnitsOr OtherRights
ThatHaveNot Vested(#) |  |  | EquityIncentive 
PlanAwards:Marketor PayoutValue ofUnearnedShares,Units, orOtherRightsThatHaveVested(#) |       
|Pradman Kaul    |  |                                                               | - |  |                                                                      |  | 35,000  |                                                                    |  |  | -                        |  |  |                      | 28.85 |  |                                                            |  | 10/14/2020 |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|                |  |                                                               | - |  |                                                                      |  | 100,000 |                                                                    |  |  | -                        |  |  |                      | 14.47 |  |                                                            |  | 4/16/2019  |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|Grant Barber    |  |                                                               | - |  |                                                                      |  | 15,000  |                                                                    |  |  | -                        |  |  |                      | 28.85 |  |                                                            |  | 10/14/2020 |                                                               |  |  | 8                                                                                     |  |  |                                                                                                         | 63,704 |  |  |  | - |  |  |  | - | 
|                |  |                                                               | - |  |                                                                      |  | 25,000  |                                                                    |  |  | -                        |  |  |                      | 14.47 |  |                                                            |  | 4/16/2019  |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|Paul Gaske      |  |                                                               | - |  |                                                                      |  | 15,000  |                                                                    |  |  | -                        |  |  |                      | 28.85 |  |                                                            |  | 10/14/2020 |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|                |  |                                                               | - |  |                                                                      |  | 25,000  |                                                                    |  |  | -                        |  |  |                      | 14.47 |  |                                                            |  | 4/16/2019  |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|Bahram Pourmand |  |                                                               | - |  |                                                                      |  | 15,000  |                                                                    |  |  | -                        |  |  |                      | 28.85 |  |                                                            |  | 10/14/2020 |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|                |  |                                                               | - |  |                                                                      |  | 25,000  |                                                                    |  |  | -                        |  |  |                      | 14.47 |  |                                                            |  | 4/16/2019  |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|Adrian Morris   |  |                                                               | - |  |                                                                      |  | 15,000  |                                                                    |  |  | -                        |  |  |                      | 28.85 |  |                                                            |  | 10/14/2020 |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 
|                |  |                                                               | - |  |                                                                      |  | 25,000  |                                                                    |  |  | -                        |  |  |                      | 14.47 |  |                                                            |  | 4/16/2019  |                                                               |  |  | -                                                                                     |  |  |                                                                                                         | -      |  |  |  | - |  |  |  | - | 



|(1) | Options to purchase HCI common stock were awarded on October 14, 2010 to each of our Named Executive Officers. These options have an exercise price of $28.85, and
vest 50% on October 14, 2012, 25% on October 14, 2013, and 25% on October 14, 2014 and expire on October 14, 2020. 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 and expire on April 16, 2019. 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 Mr. Barbers
remaining membership interests that are subject to time vesting. All other remaining membership interests have vested as of April, 2010.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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. All performance based membership interests are 100% vested as of April 24, 2010.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2010, 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 methodology used to determine the number of shares of HCIs common stock issued upon the exchange of Class B membership interests is subject to the approval of the Compensation Committee 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

Option Exercises and Stock Vested In Fiscal Year 2010

There were no exercises of stock options by our Named Executive Officers during the year ended December 31, 2010. 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, 2010.



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|                |  |            |  |                               |  |                              |  |                                 |     |  |                                |  |           | 
|--------------- |  | ---------- |  | ----------------------------- |  | ---------------------------- |  | ------------------------------- | --- |  | ------------------------------ |  | --------- | 
|                |  |            |  | 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    |  |                               |  |                              |  |                                 | 813 |  |                                |  | 6,473,908 | 
|Grant Barber    |  | Class B    |  |                               |  |                              |  |                                 | 300 |  |                                |  | 2,388,896 | 
|T. Paul Gaske   |  | Class B    |  |                               |  |                              |  |                                 | 352 |  |                                |  | 2,802,971 | 
|Bahram Pourmand |  | Class B    |  |                               |  |                              |  |                                 | 271 |  |                                |  | 2,157,969 | 
|Adrian Morris   |  | Class B    |  |                               |  |                              |  |                                 | 271 |  |                                |  | 2,157,969 | 



|(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 2010. Mr. Kaul vested in 63 membership interests subject to time vesting and 750
membership interests subject to performance vesting, becoming 100% vested, during 2010. Mr. Barber vested in 50 membership interests subject to time vesting and 250 membership interests subject to performance vesting during 2010, leaving 8 time
membership interests to vest in 2011. Mr. Gaske vested in 27 membership interests subject to time vesting and 325 membership interests subject to performance vesting, becoming 100% vested, during 2010. Messrs. Pourmand and Morris vested in 21
membership interests subject to time vesting and 250 membership interests subject to performance vesting, becoming 100% vested, during 2010.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The fair market value at December 31, 2010 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, 2010

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, 2010.



|                |  |                                  |         |  |                                   |  |        |                                |  |  |                                       |  |  |                                |   |  |  |  |         | 
|--------------- |  | -------------------------------- | ------- |  | --------------------------------- |  | ------ | ------------------------------ |  |  | ------------------------------------- |  |  | ------------------------------ | - |  |  |  | ------- | 
|Name            |  | ExecutiveContributions in2010($) |         |  | RegistrantContributions in2010($) |  |        | AggregateEarnings in2010(1)($) |  |  | AggregateWithdrawals/Distributions($) |  |  | AggregateBalance at12/31/10($) |  
|Pradman Kaul    |  |                                  | 242,799 |  |                                   |  | 91,050 |                                |  |  | 118,616                               |  |  |                                | - |  |  |  | 963,013 | 
|Grant Barber    |  |                                  | 53,721  |  |                                   |  | 32,233 |                                |  |  | 23,620                                |  |  |                                | - |  |  |  | 268,423 | 
|T. Paul Gaske   |  |                                  | 64,812  |  |                                   |  | 43,208 |                                |  |  | 55,340                                |  |  |                                | - |  |  |  | 449,961 | 
|Bahram Pourmand |  |                                  | 100,376 |  |                                   |  | 37,641 |                                |  |  | 75,000                                |  |  |                                | - |  |  |  | 639,636 | 
|Adrian Morris   |  |                                  | 84,028  |  |                                   |  | 31,510 |                                |  |  | 47,177                                |  |  |                                | - |  |  |  | 503,871 | 



|(1) | The amounts listed were contributed by the Named Executive Officer during 2010. These amounts were contributed from the eligible earnings on the Summary
Compensation Table for each Named Executive Officers and are not in addition to.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | The amounts listed were contributed by the Company during 2010 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 Officers.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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 Benefit Plan and may elect to contribute up to 16% of their eligible 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



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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. 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 2010). 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 2010. 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. Except for the Change
of Control Bonus Program, 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. For a description of the Change of Control Bonus Program, see
Compensation Discussion and AnalysisTargeted Compensation.

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:



| |  |  | Change of Control, (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.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | 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.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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) a lump sum amount equal to three (3) times the sum of (x) and (y), where (x) is the Executives annual base salary (as in effect as of the date of termination) and (y) is 100% of Base Salary, which percentage of
Base Salary represents the Executives target bonus amount; (iii) the payment on the last day of the month following each month for which the Executive is eligible to elect COBRA continuing coverage, has elected COBRA continuation coverage
and has fully paid the COBRA premium for such month, a cash amount equal to 1.5 times the COBRA premium for such month paid by the Executive; 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.



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Assuming that Mr. Kauls employment was terminated under each of the above
circumstances on December 31, 2010, the payments and benefits have an estimated value of:



|                                                                 |  |                     |           |  |             |  |         |                           |  |  |                                                                                  |  |  |                         |   |  |  |  |        | 
|---------------------------------------------------------------- |  | ------------------- | --------- |  | ----------- |  | ------- | ------------------------- |  |  | -------------------------------------------------------------------------------- |  |  | ----------------------- | - |  |  |  | ------ | 
|Circumstances                                                    |  | CashSeverance(1)($) |           |  | Bonus(2)($) |  |         | MedicalContinuation(3)($) |  |  | Value ofAcceleratedEquity andPerformanceAwards andExcess BenefitPlan Accounts($) |  |  | OutplacementBenefits($) |  
|For cause                                                        |  |                     | -         |  |             |  | 700,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Without cause, for good reason or non-renewal of agreement by us |  |                     | 4,200,000 |  |             |  | 700,000 |                           |  |  | 55,229                                                                           |  |  |                         | - |  |  |  | 20,000 | 
|Without good reason non-renewal of agreement by executive        |  |                     | -         |  |             |  | 700,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Disability or death                                              |  |                     | -         |  |             |  | 700,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Change in control                                                |  |                     | 4,200,000 |  |             |  | 700,000 |                           |  |  | 55,229                                                                           |  |  |                         | - |  |  |  | 20,000 | 



|(1) | This amount represents three times the sum of Mr. Kauls base salary plus target bonus.
|--- | ---------------------------------------------------------------------------------------

|(2) | This amount represents Mr. Kauls AIP bonus earned in 2010.
|--- | -----------------------------------------------------------

|(3) | This amount represents the amount of Mr. Kauls medical payments for 18 months of COBRA coverage times 150%.
|--- | ------------------------------------------------------------------------------------------------------------

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) a lump sum amount equal to one and one-half (1.5) times the sum of (x) and (y), where
(x) is the Executives annual base salary (as in effect as of the date of termination) and (y) is 60% of Base Salary, which percentage of Base Salary represents the Executives target bonus amount; (iii) the payment on the
last day of the month following each month for which the Executive is eligible to elect COBRA continuing coverage, has elected COBRA continuation coverage and has fully paid the COBRA premium for such month, a cash amount equal to 1.5 times the
COBRA premium for such month paid by the Executive; 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.



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Assuming that Mr. Barbers employment was terminated under each of the above
circumstances on December 31, 2010, the payments and benefits have an estimated value of:



|                                                                 |  |                     |         |  |             |  |         |                           |  |  |                                                                                      |  |  |                         |        |  |  |  |        | 
|---------------------------------------------------------------- |  | ------------------- | ------- |  | ----------- |  | ------- | ------------------------- |  |  | ------------------------------------------------------------------------------------ |  |  | ----------------------- | ------ |  |  |  | ------ | 
|Circumstances                                                    |  | CashSeverance(1)($) |         |  | Bonus(2)($) |  |         | MedicalContinuation(3)($) |  |  | Value ofAcceleratedEquity andPerformanceAwards
andExcess BenefitPlan 
Accounts(4)($) |  |  | OutplacementBenefits($) |       
|For cause                                                        |  |                     | -       |  |             |  | 240,000 |                           |  |  | -                                                                                    |  |  |                         | -      |  |  |  | -      | 
|Without cause, for good reason or non-renewal of agreement by us |  |                     | 960,000 |  |             |  | 240,000 |                           |  |  | 32,767                                                                               |  |  |                         | 63,704 |  |  |  | 15,000 | 
|Without good reason non-renewal of agreement by executive        |  |                     | -       |  |             |  | 240,000 |                           |  |  | -                                                                                    |  |  |                         | -      |  |  |  | -      | 
|Disability or death                                              |  |                     | -       |  |             |  | 240,000 |                           |  |  | -                                                                                    |  |  |                         | 63,704 |  |  |  | -      | 
|Change in control                                                |  |                     | 960,000 |  |             |  | 240,000 |                           |  |  | 32,767                                                                               |  |  |                         | 63,704 |  |  |  | 15,000 | 



|(1) | This amount represents one and one-half times the sum of Mr. Barbers base salary plus target bonus.
|--- | ----------------------------------------------------------------------------------------------------

|(2) | This amount represents Mr. Barbers AIP bonus earned in 2010.
|--- | -------------------------------------------------------------

|(3) | This amount represents 1.5 times Mr. Barbers COBRA premium, for 18 months.
|--- | ---------------------------------------------------------------------------

|(4) | Value of Accelerated Equity is based on the fair market value as of December 31, 2010 of the unvested 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) a lump sum amount equal to two (2) times the sum of (x) and (y), where (x) is the
Executives annual base salary (as in effect as of the date of termination) and (y) is 70% of Base Salary, which percentage of Base Salary represents the Executives target bonus amount; (iii) the payment on the last day of the
month following each month for which the Executive is eligible to elect COBRA continuing coverage, has elected COBRA continuation coverage and has fully paid the COBRA premium for such month, a cash amount equal to 1.5 times the COBRA premium for
such month paid by the Executive; 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.

Assuming that Mr. Gaskes
employment was terminated under each of the above circumstances on December 31, 2010, the payments and benefits have an estimated value of:



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|                                                                 |  |                     |           |  |             |  |         |                           |  |  |                                                                                  |  |  |                         |   |  |  |  |        | 
|---------------------------------------------------------------- |  | ------------------- | --------- |  | ----------- |  | ------- | ------------------------- |  |  | -------------------------------------------------------------------------------- |  |  | ----------------------- | - |  |  |  | ------ | 
|Circumstances                                                    |  | CashSeverance(1)($) |           |  | Bonus(2)($) |  |         | MedicalContinuation(3)($) |  |  | Value ofAcceleratedEquity andPerformanceAwards andExcess BenefitPlan
Accounts($) |  |  | OutplacementBenefits($) |  
|For cause                                                        |  |                     | -         |  |             |  | 324,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Without cause, for good reason or non-renewal of agreement by us |  |                     | 1,572,000 |  |             |  | 324,000 |                           |  |  | 32,767                                                                           |  |  |                         | - |  |  |  | 15,000 | 
|Without good reason non-renewal of agreement by executive        |  |                     | -         |  |             |  | 324,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Disability or death                                              |  |                     | -         |  |             |  | 324,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Change in control                                                |  |                     | 1,572,000 |  |             |  | 324,000 |                           |  |  | 32,767                                                                           |  |  |                         | - |  |  |  | 15,000 | 



|(1) | This amount represents two times the sum of Mr. Gaskes base salary plus target bonus.
|--- | --------------------------------------------------------------------------------------

|(2) | This amount represents Mr. Gaskes AIP bonus earned in 2010.
|--- | ------------------------------------------------------------

|(3) | This amount represents 1.5 times Mr. Gaskes COBRA premium, for 18 months.
|--- | --------------------------------------------------------------------------

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) a lump sum amount equal to one and one-half (1.5) times the sum of (x) and (y), where (x) is the Executives annual base salary (as in effect as of the date of termination) and (y) is 60% of Base Salary, which
percentage of Base Salary represents the Executives target bonus amount; (iii) the payment on the last day of the month following each month for which the Executive is eligible to elect COBRA continuing coverage, has elected COBRA
continuation coverage and has fully paid the COBRA premium for such month, a cash amount equal to 1.5 times the COBRA premium for such month paid by the Executive; 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.



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Assuming that Mr. Pourmands employment was terminated under each of the above
circumstances on December 31, 2010, the payments and benefits have an estimated value of:



|                                                                 |  |                     |           |  |             |  |         |                           |  |  |                                                                                  |  |  |                         |   |  |  |  |        | 
|---------------------------------------------------------------- |  | ------------------- | --------- |  | ----------- |  | ------- | ------------------------- |  |  | -------------------------------------------------------------------------------- |  |  | ----------------------- | - |  |  |  | ------ | 
|Circumstances                                                    |  | CashSeverance(1)($) |           |  | Bonus(2)($) |  |         | MedicalContinuation(3)($) |  |  | Value ofAcceleratedEquity andPerformanceAwards andExcess BenefitPlan
Accounts($) |  |  | OutplacementBenefits($) |  
|For cause                                                        |  |                     | -         |  |             |  | 267,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Without cause, for good reason or non-renewal of agreement by us |  |                     | 1,068,000 |  |             |  | 267,000 |                           |  |  | 32,767                                                                           |  |  |                         | - |  |  |  | 15,000 | 
|Without good reason non-renewal of agreement by executive        |  |                     | -         |  |             |  | 267,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Disability or death                                              |  |                     | -         |  |             |  | 267,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Change in control                                                |  |                     | 1,068,000 |  |             |  | 267,000 |                           |  |  | 32,767                                                                           |  |  |                         | - |  |  |  | 15,000 | 



|(1) | This amount represents one and one-half times the sum of Mr. Pourmands base salary plus target bonus.
|--- | ------------------------------------------------------------------------------------------------------

|(2) | This amount represents Mr. Pourmands AIP bonus earned in 2010.
|--- | ---------------------------------------------------------------

|(3) | This amount represents 1.5 times Mr. Pourmands COBRA premium, for 18 months.
|--- | -----------------------------------------------------------------------------

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) a lump sum amount equal to one and one-half (1.5) times the sum of (x) and (y), where (x) is the Executives annual base salary (as in effect as of the date of termination) and (y) is 60% of Base Salary, which
percentage of Base Salary represents the Executives target bonus amount; (iii) the payment on the last day of the month following each month for which the Executive is eligible to elect COBRA continuing coverage, has elected COBRA
continuation coverage and has fully paid the COBRA premium for such month, a cash amount equal to 1.5 times the COBRA premium for such month paid by the Executive; 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.



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Assuming that Mr. Morris employment was terminated under each of the above
circumstances on December 31, 2010, the payments and benefits have an estimated value of:



|                                                                 |  |                     |         |  |             |  |         |                           |  |  |                                                                                  |  |  |                         |   |  |  |  |        | 
|---------------------------------------------------------------- |  | ------------------- | ------- |  | ----------- |  | ------- | ------------------------- |  |  | -------------------------------------------------------------------------------- |  |  | ----------------------- | - |  |  |  | ------ | 
|Circumstances                                                    |  | CashSeverance(1)($) |         |  | Bonus(2)($) |  |         | MedicalContinuation(3)($) |  |  | Value ofAcceleratedEquity andPerformanceAwards andExcess BenefitPlan
Accounts($) |  |  | OutplacementBenefits($) |  
|For cause                                                        |  |                     | -       |  |             |  | 240,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Without cause, for good reason or non-renewal of agreement by us |  |                     | 960,000 |  |             |  | 240,000 |                           |  |  | 16,135                                                                           |  |  |                         | - |  |  |  | 15,000 | 
|Without good reason non-renewal of agreement by executive        |  |                     | -       |  |             |  | 240,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Disability or death                                              |  |                     | -       |  |             |  | 240,000 |                           |  |  | -                                                                                |  |  |                         | - |  |  |  | -      | 
|Change in control                                                |  |                     | 960,000 |  |             |  | 240,000 |                           |  |  | 16,135                                                                           |  |  |                         | - |  |  |  | 15,000 | 



|(1) | This amount represents one and one-half times the sum of Mr. Morris base salary plus target bonus.
|--- | ---------------------------------------------------------------------------------------------------

|(2) | This amount represents Mr. Morris AIP bonus earned in 2010.
|--- | ------------------------------------------------------------

|(3) | This amount represents 1.5 times Mr. Morris COBRA premium, for 18 months.
|--- | --------------------------------------------------------------------------

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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|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 March 3, 2011, there were 3,280 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 |  |                    |  | 32.7% | 
|HNS Class B membership interests |  | Grant Barber(2)                                                                |  |                | 400   |  |                    |  | 12.2% | 
|HNS Class B membership interests |  | T. Paul Gaske(3)                                                               |  |                | 465   |  |                    |  | 14.2% | 
|HNS Class B membership interests |  | Adrian Morris(4)                                                               |  |                | 359   |  |                    |  | 10.9% | 
|HNS Class B membership interests |  | Bahram Pourmand(5)                                                             |  |                | 359   |  |                    |  | 10.9% | 
|HNS Class B membership interests |  | Jeffrey A. Leddy(6)                                                            |  |                | 600   |  |                    |  | 18.3% | 
|                                 |  |                                                                                |  |                |       |  |                    |  |       | 
|HNS Class B membership interests |  | Members of the board of managers and executive officers as a group (6 persons) |  |                | 3,256 |  |                    |  | 99.3% | 
|                                 |  |                                                                                |  |                |       |  |                    |  |       | 



|(1) | Consists of 1,073 of our Class B membership interests. 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. 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. 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. 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. 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. Mr. Leddy also owns 100,000 shares of HCI common stock including vested options to purchase 20,000 shares of
HCI common stock and 10,000 shares of HCI restricted stock granted under the Plan.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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 March 3, 2011 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 March 3, 2011, there were 21,834,354 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(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.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(6) | Includes options to purchase 3,750 shares of HCIs common stock, which are currently exercisable, and 25,000 shares of restricted stock (5,000 unvested) 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 (5,000 unvested) 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 (5,000 unvested) of HCI common stock granted as
restricted stock under the Plan.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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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.

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, 2010, Apollo owned, directly or indirectly 96% of Smart & Final, Inc. (Smart & Final). We provide broadband products and services to Smart &
Final. For the year ended December 31, 2010, Smart & Final paid $0.6 million to us for these services. In 2010, we received $0.6 million from Smart & Final for services and products provided.

On July 12, 2010, an affiliate of Apollo acquired CKE Restaurants, Inc. (CKE). As a result, CKE indirectly became our
related party as of that date. We provide broadband products and services to CKE. For the year ended December 31, 2010, CKE paid $0.2 million to us for these services. In 2010, we received $0.2 from CKE for services and products provided
beginning on or after July 12, 2010.



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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.

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, 2010, we paid $9.5 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, 2010, 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 2010, 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 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



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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.

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. During the year ended December 31, 2010, we received $0.7 million from HTI for development, engineering and manufacturing services under the Telematics Agreement.

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 outstanding HTI Preferred Stock was converted into approximately 3.3 million shares of HTI common stock (HTI Shares), of which 1.3 million shares and 2.0 million shares are referred to as
Non-escrowed shares and Escrowed shares, respectively. The Escrowed shares are subject to certain restrictions and/or earn-out targets by HTI over five years pursuant to the Merger agreement. As of December 31, 2010, HCIs investment
represents approximately 3.9% of HTIs outstanding common stock, before giving effect to the earn-out of the Escrowed shares. If the full earn-out targets are achieved, HCIs investment could represent approximately 3.6% of
HTIs outstanding 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 had a maturity date of December 31, 2010 and an interest rate of 12% per annum. On
November 5, 2010, the Company revised the terms of the Promissory Note to extend the maturity date to December 31, 2011.

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 1.5% of the equity of HTI as of December 31, 2010. 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



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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.

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, 2010 and 2009, 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 $1,666,000 and $1,727,000 for the years ended December 31, 2010 and 2009, 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,
2010 and 2009, and for the reviews of the financial statements included in the Companys Quarterly Reports on Form 10-Q were $1,548,000 in 2010 and $1,658,000 in 2009.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Audit-Related FeesThe aggregate fees billed for audit-related services for the years ended December 31, 2010 and 2009 were $0 and
$16,000, respectively. These fees relate to comfort letters, due diligence and consultation provided in connection with debt offerings and registration statements.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tax FeesThe aggregate fees billed for tax services for the years ended December 31, 2010 and 2009 were $13,000 and $12,000,
respectively. These fees relate to tax consultations and services related to domestic and foreign office compliance in both 2010 and 2009.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All Other FeesThe aggregate fees for services not included above were $105,000 and $41,000 respectively, for the years ended
December 31, 2010 and 2009. These fees relate to out of pocket expenses and certification fees/IFRS implementation in India.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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, 2010 and 2009
were pre-approved by the Audit Committee in accordance with these policies.



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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.

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, 2010 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, 2010, 2009 and 2008 |  | 135       
|    |  | 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, as further amended and restated as of April 13, 2006, as further amended and
restated as of March 16, 2010, among Hughes Network Systems, LLC, JP Morgan Chase Bank, N.A., as administrative agent, Barclays Capital, as syndication agent, J.P. Morgan Securities Inc., as sole lead book runner, and J.P. Morgan Securities
Inc. and Barclays Capital, as joint lead arrangers (incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Hughes Network Systems, LLC filed May 5, 2010 (File No. 333-138009)).
|                  | 
|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)).                                        
|                  | 
|10.20             |  | First Amendment to Amended and Restated Credit Agreement and First Lien Guarantee and Collateral Agreement, dated as of April 6, 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)).



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|                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|----------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit    Number |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|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 granted
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)).                                                                                                                                                                                                                                                                                    
|                  | 
|10.23             |  | Amendment Agreement dated March 16, 2010 among Hughes Network Systems, LLC, the lenders party thereto, JP Morgan Chase Bank, as administrative agent, Barclays Capital, as
syndication agent, to the 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 from time to
time party thereto, Bear, Sterns Corporate Lending Inc., as the 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 10.1 to the Quarterly Report on Form 10-Q of Hughes Network Systems, LLC filed May 5, 2010 (File No. 333-138009)).
|                  | 
|10.24             |  | Launch Services Agreement by and between Hughes Network Systems, LLC and Arianespace dated April 30, 2010 (portions of the agreement have been omitted pursuant to a
confidential treatment request) (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Hughes Network Systems, LLC filed August 4, 2010 (File No. 333-138009)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                  | 
|10.25*            |  | Coface Covered Export Credit Agreement between Hughes Network Systems, LLC, as Borrower, the companies listed in Schedule I as Original Guarantors, BNP Paribas and Societe Generale,
as Original Lenders, BNP Paribas and Societe Generale, as Mandated Lead Arrangers, BNP Paribas, as Facility Agent, Documentation Agent and Security Agent, and Societe Generale as Structuring Bank , dated October 29, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                  | 
|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, 2010, 2009 and 2008



|                                                      |  |                  |        |  |                   |   |        |               |  |   |            |  |  |                   |         |   |  |   |        | 
|----------------------------------------------------- |  | ---------------- | ------ |  | ----------------- | - | ------ | ------------- |  | - | ---------- |  |  | ----------------- | ------- | - |  | - | ------ | 
|                                                      |  |                  |        |  | Additional to     |   |        |               |  |   |            | 
|Deductions - Descriptions                             |  | BeginningBalance |        |  | Costs andExpenses |   |        | OtherAccounts |  |   | Deductions |  |  | Ending    Balance |        
|                                                      |  | (In thousands)   |       
|Reserves and allowances deducted from asset accounts: |  |                  |        |  |                   |   |        |               |  |   |            |  |  |                   |         |   |  |   |        | 
|Allowances for doubtful accounts:                     |  |                  |        |  |                   |   |        |               |  |   |            |  |  |                   |         |   |  |   |        | 
|Year ended December 31, 2010                          |  | $                | 12,085 |  |                   | $ | 32,642 |               |  | $ | -          |  |  | $                 | (29,574 | ) |  | $ | 15,153 | 
|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  | 



135



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##### Table of Contents

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 7, 2011 |  | 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
Pradman P. Kaul     |  | Chief Executive Officer, President and Chairman of the Board of Managers (Principal Executive Officer) |  | March 7, 2011
|                                        |  |                                                                                                       
|/S/ GRANT A. BARBER
Grant A. Barber     |  | Executive Vice President and Chief Financial Officer (Principal Financial Officer)                     |  | March 7, 2011
|                                        |  |                                                                                                       
|/S/ THOMAS J.
MCELROY Thomas J. McElroy |  | Senior Vice President, Controller and Chief Accounting Officer                                         |  | March 7, 2011
|                                        |  |                                                                                                       
|/S/ JEFFREY A. LEDDY
Jeffrey A. Leddy   |  | Member of the Board of Managers                                                                        |  | March 7, 2011
|                                        |  |                                                                                                       
|/S/ ANDREW D. AFRICK
Andrew D. Africk   |  | Member of the Board of Managers                                                                        |  | March 7, 2011
|                                        |  |                                                                                                       
|/S/ AARON J. STONE
Aaron J. Stone       |  | Member of the Board of Managers                                                                        |  | March 7, 2011



136