UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
January 3, 2006 (December 30, 2005)
SkyTerra Communications, Inc.
(Exact name of registrant as specified in its charter)
Delaware 000-13865 23-2368845
(State or Other (Commission File Number) (IRS Employer
Jurisdiction of Identification Number)
Incorporation
19 West 44th Street, Suite 507, New York, New York
10036 (Address of principal executive offices, including zip code)
(212) 730-7540
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Section 1 - Registrant's Business and Operations
Item 1.01. Entry into a Material Definitive Agreement.
On December 30, 2005, SkyTerra Communications, Inc. (the "Company")
entered into a separation agreement with its wholly-owned subsidiary Hughes
Communications, Inc. ("Hughes") to facilitate the previously announced proposed
special dividend distribution of Hughes to the Company's stockholders. The
separation agreement effected the transfer, by way of contribution on December
31, 2005, from the Company to Hughes of substantially all of the assets and
liabilities of the Company other than its interest in Mobile Satellite Ventures
LP ("MSV"), Terrestar Networks, Inc. ("TerreStar") and certain designated cash.
The separation agreement also contains agreements relating to indemnification
and access to information, facilities, information technology and
communications equipment. A copy of the separation agreement is filed as
Exhibit 10.1 to this Current Report on Form 8-K and is incorporated herein by
reference.
On December 30, 2005, the Company also entered into a tax sharing
agreement with Hughes under which Hughes has generally agreed to be responsible
for, and to indemnify the Company and its subsidiaries against, all tax
liabilities imposed on or attributable to (i) Hughes and any of its
subsidiaries relating to all taxable periods and (ii) the Company and any of
its subsidiaries for all taxable periods or portions thereof ending on or prior
to a change of control of SkyTerra, in each case, after taking into account any
tax attributes of the Company or any of its subsidiaries that are available to
offset such tax liabilities. Notwithstanding the foregoing, Hughes is not
responsible for any taxes relating to MSV, TerreStar or such a change of
control. Additionally, under the tax sharing agreement, the Company is
responsible for, and indemnifies Hughes and its subsidiaries against, all tax
liabilities imposed on or attributable to such a change of control of the
Company, MSV and TerreStar relating to all taxable periods, and the Company and
any of its subsidiaries relating to all taxable periods or portions thereof
beginning and ending after such a change of control. The tax sharing agreement
also generally provides for the preparing and filing of tax returns and the
handling, settling and contesting of tax liabilities for all taxable periods. A
copy of the tax sharing agreement is filed as Exhibit 10.2 to this Current
Report on Form 8-K and is incorporated herein by reference.
On December 30, 2005, Hughes and Apollo Investment Fund IV, L.P. and
Apollo Overseas Partners IV, L.P. ("Apollo"), stockholders of the Company,
entered into a note purchase agreement and issued notes on January 1, 2006
pursuant to which Hughes borrowed $100 million in order to finance Hughes'
purchase of the remaining 50 percent of the class A membership interests of HNS
from The DIRECTV Group, Inc. ("DTV") (See Item 2.01 below.) The loan bears
interest at a rate of 8% per annum and has a final maturity date of January 1,
2007. Pursuant to the note purchase agreement, following the special dividend
distribution, Hughes is required to use best efforts to consummate its
previously announced proposed rights offering so as to generate sufficient
proceeds to repay the loan. Apollo has agreed to exercise its rights (including
its over-subscription privileges) so that it purchases all of the shares of
Hughes not subscribed for by other stockholders in the rights offering, up to
the total unpaid principal and interest on the loan. Upon consummation of the
proposed rights offering, the loan will automatically convert into common stock
of Hughes based on the rights offering subscription price. The principal and
interest under the loan that is not converted in the rights offering will be
repaid in cash from proceeds from the rights offering. The loan is secured by a
security interest in the cash proceeds of the rights offering that Hughes
receives from stockholders other than Apollo. A copy of the note purchase
agreement is filed as Exhibit 10.3 to this Current Report on Form 8-K and is
incorporated herein by reference.
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On January 1, 2006, in connection with the transactions contemplated
by the note purchase agreement, Hughes and Apollo entered into a security
agreement pursuant to which Hughes granted Apollo a security interest in the
proceeds of the proposed rights offering, other than with respect to
subscriptions by Apollo as a result of the automatic conversion of the loan
under the terms of the note purchase agreement. A copy of the security
agreement is filed as Exhibit 10.4 to this Current Report on Form 8-K and is
incorporated herein by reference.
On January 1, 2006, in connection with the transactions contemplated
by the note purchase agreement, Hughes, Apollo and certain affiliates of Apollo
also entered into a registration rights agreement providing for, among other
things, various demand and piggyback registration rights to Apollo relating to
the resale of the shares of common stock that are issued to Apollo and its
affiliates in connection with the proposed rights offering and special dividend
distribution. A copy of the registration rights agreement is filed as Exhibit
10.5 to this Current Report on Form 8-K and is incorporated herein by
reference.
Section 2 - Financial Information
Item 2.01. Completion of Acquisition or Disposition of Assets.
Effective January 1, 2006, Hughes completed the purchase of the
remaining 50 percent of the class A membership interests of HNS from DTV for
$100 million in cash. To finance the transaction, effective January 1, 2006,
Hughes borrowed $100 million from Apollo, stockholders of the Company.
Concurrently, with the funding of the purchase from DTV, HNS paid DIRECTV $10
million to resolve certain post-closing adjustments related to the initial
purchase by the Company of its 50 percent interest in HNS.
On January 3, 2006, the Company issued a press release announcing the
consummation of the purchase of the remaining 50 percent of the class A
membership interests of HNS from DTV for $100 million in cash. A copy of the
press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and
is incorporated herein by reference.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On December 30, 2005, Hughes and Apollo entered into a note purchase
agreement pursuant to which Hughes borrowed $100 million, effective January 1,
2006, in order to finance Hughes' purchase of the remaining 50 percent of the
class A membership interests of HNS from DTV, the material terms and conditions
of which are described in Item 1.01 above and are incorporated herein by
reference.
Section 9 - Financial Statements and Exhibits
Item 9.01 Financial Statements and Exhibits
(c) Exhibits.
The exhibits to this Current Report on Form 8-K are listed on the
Exhibit Index on page 5 hereof, which is incorporated by reference in this Item
9.01(c).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Date: January 3, 2006 By: /s/ ROBERT C. LEWIS
-------------------------------------
Name: Robert C. Lewis
Title: Senior Vice President, General
Counsel and Secretary
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EXHIBIT INDEX
Number Description
------ -----------
4.1 Form of 8% Senior Secured Note due 2007.
10.1 Separation Agreement, dated as of December 30, 2005, by and
between Hughes Communications, Inc. and SkyTerra Communications,
Inc.
10.2 Tax Sharing Agreement, dated as of December 30, 2005, by and
between Hughes Communications, Inc. and SkyTerra Communications,
Inc.
10.3 Note Purchase Agreement, dated as of December 30, 2005, by and
among Hughes Communications, Inc., Apollo Investment Fund IV,
L.P. and Apollo Overseas Partners IV, L.P.
10.4 Security Agreement, dated as of January 1, 2006, by and between
Hughes Communications, Inc. and Apollo Investment Fund IV, L.P.,
as Collateral Agent and Secured Party.
10.5 Registration Rights Agreement, dated as of January 1, 2006, by
and among Hughes Communications, Inc., Apollo Investment Fund
IV, L.P., Apollo Overseas Partners IV, L.P., AIF IV/RRRR LLC,
AP/RM Acquisition LLC and ST/RRRR LLC.
99.1 Press Release of SkyTerra Communications, Inc., dated January 3,
2006.
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