shl Doc 1206 Filed 12/05/14 Entered 12/05/14 18:31:41 Main Document Pg 1 of 23

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1 Pg 1 of 23 OTTERBOURG P.C. 230 Park Avenue New York, New York (212) (Telephone) (212) (Facsimile) David M. Posner Kevin Zuzolo Counsel to the Liquidating Trustee AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, New York (212) (Telephone) (212) (Facsimile) Lindsay K. Zahradka Counsel to the Reorganized Debtors UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Hearing Date: January 6, 2015 at 10:00 a.m. (ET) Objection Deadline: December 30, 2014 at 5:00 p.m. (ET) ) In re: ) Chapter 11 ) TERRESTAR NETWORKS INC., et al., 1 ) Case No (SHL) ) Reorganized Debtors. ) Jointly Administered ) MOTION OF THE LIQUIDATING TRUSTEE AND REORGANIZED DEBTORS FOR ENTRY OF AN ORDER PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019 APPROVING THE SETTLEMENT AGREEMENT WITH HUGHES NETWORK SYSTEMS, LLC 1 The Reorganized Debtors (or Debtors, as applicable) in these chapter 11 cases, along with the last four digits of each Debtor s federal taxpayer identification number, are: TerreStar Networks Inc. (3931); TerreStar License Inc. (6537); TerreStar National Services Inc. (6319); TerreStar Networks Holdings (Canada) Inc. (1337); TerreStar Networks (Canada) Inc. (8766) and B.C. Ltd. (1345).

2 Pg 2 of 23 FTI Consulting, Inc., as the liquidating trustee (the Liquidating Trustee ) for the TerreStar Networks Inc. Liquidating Trust (the Liquidating Trust ), the trust established pursuant to the confirmed plan of reorganization for the above-captioned debtors and debtors in possession (collectively, the Debtors or the Reorganized Debtors, as applicable), and the Reorganized Debtors bring this motion (the Motion ), pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ), for entry of an order substantially in the form attached hereto as Exhibit A, resolving the objection filed by the Liquidating Trustee and the Reorganized Debtors (collectively, the TSN Parties ) to proof of claim No. 125 filed by Hughes Networks Systems, LLC ( Hughes and, together with the TSN Parties, the Parties ) and settling the disputes among the Parties as set forth in Settlement Agreement attached as Exhibit 1 of the proposed order. In support of this Motion, the TSN Parties 2 respectfully state as follows: PRELIMINARY STATEMENT 3 1. On August 14, 2014, the TSN Parties filed the Objection to the Hughes Rejection Claim and sought to reclassify a portion of the Rejection Claim from administrative expense priority to a general unsecured claim. In the Objection, the TSN Parties contended that Hughes failed to satisfy the requirements for entitlement to administrative claim priority that have been established by the case law in this Circuit. After Hughes filed its Response to the Objection and the Parties served discovery requests, the TSN Parties evaluated the risks, burdens, and expenses associated with the anticipated discovery and litigation between the TSN Parties and Hughes. 2 3 In order to avoid unnecessary duplication of efforts and to avoid incurring costs that would deprive creditors of a recovery from the Liquidating Trust, the Reorganized Debtors have deferred to the Liquidating Trustee in the prosecution of the objection and related settlement efforts. The Reorganized Debtors will also defer to the Liquidating Trustee at any hearing with regard this Motion. Capitalized terms used in the Preliminary Statement shall have the meanings ascribed below. 2

3 Pg 3 of 23 After extensive good faith and arms length negotiations with Hughes, the TSN Parties have determined that it is in the best interests of the Debtors estates and their creditors to enter into a Settlement Agreement with Hughes to resolve the pending Objection to the Rejection Claim. The settlement will fully and finally resolve a significant claim against the Debtors estates and will avoid the risks associated with litigating the Objection. Moreover, since Hughes holds the last remaining disputed claim asserted against the Debtors estate, the settlement achieves a significant step towards fully and finally administering the chapter 11 cases and completing distributions to creditors. 2. In short, rather than continuing to litigate the Objection to the Rejection Claim, the TSN Parties have agreed to grant Hughes an allowed administrative expense claim in the reduced amount of $351, (representing a reduction of 30% the asserted amount of the administrative claim which will be reclassified as a general unsecured claim). As described more fully below, the TSN Parties are receiving the benefit of a reduced claim amount and avoiding costly and time-consuming discovery and litigation. Accordingly, the TSN Parties respectfully submit that the settlement satisfies the requirements of Bankruptcy Rule 9019, will enable the TSN Parties to carry out their responsibilities under the Plan and the Trust Agreement, and therefore should be approved. 4 JURISDICTION 3. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2)(A), (B) and (O). 4 While the Plan confirmed by the Court confers upon the TSN Parties the authority to settle Disputed Claims without the need for Bankruptcy Court approval, the Liquidating Trustee may apply to the Court for such an order where, as here, the Liquidating Trustee believes that such an order is necessary or advisable. See Trust Agreement, Section

4 Pg 4 of Venue in this Court is proper pursuant to 28 U.S.C and The bases for the relief requested herein are Bankruptcy Rule 9019, Article VIII of the Plan and Section 7.3 of the Liquidating Trust Agreement. BACKGROUND A. The Chapter 11 Cases and the Liquidating Trust 6. On October 19, 2010 (the Petition Date ), each of the Debtors filed a petition with this Court pursuant to chapter 11 of Title 11 of the United States Code (the Bankruptcy Code ). Throughout their chapter 11 cases, the Debtors operated their business and managed their property as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No request for the appointment of a trustee or examiner was made in the chapter 11 cases of the Debtors. 7. On February 15, 2012, the Court entered an order (the Confirmation Order ) [Docket No. 922] confirming the Joint Chapter 11 Plan of TerreStar Networks Inc., et al. (the Plan ). 5 The effective date of the Plan occurred on March 29, 2012 (the Effective Date ). On the Effective Date, the Liquidating Trust was established pursuant to the Plan and the TerreStar Networks Inc. Liquidating Trust Agreement, dated as of March 29, 2012, among TerreStar Networks Inc., the Other Affiliated Debtors Party Thereto, and FTI Consulting, Inc., as Trustee (the Trust Agreement ). Also on the Effective Date, a liquidating trust board (the Liquidating Trust Board ) was established. The Liquidating Trust Board oversees the administration of the Liquidating Trust and, in certain instances set forth in the Trust Agreement, authorizes the Liquidating Trustee to take certain actions. 5 Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Plan. 4

5 Pg 5 of Pursuant to the Plan, holders of Allowed Administrative Claims are entitled to receive Cash in the full amount of such Allowed Administrative Claim from the Reorganized Debtors. Pursuant to the Plan and the Trust Agreement, the Liquidating Trust is responsible for making distributions to holders of Allowed Claims in Class 3 Unsecured Claims. Pursuant to the disclosure statement accompanying the Plan, the estimated recovery for Allowed Unsecured Claims against TSN is 6.14% and the Liquidating Trustee has distributed approximately % to date to holders of such claims. B. The Hughes Agreement and Rejection Claims 9. On or about March 31, 2009, TerreStar Networks Inc. ( TSN ), Hughes, and Skyterra LP entered into a contract for the design and development of GMR 1-3G software components to be used in connection with a mobile platform based on technology developed by Infineon Technologies AG (the SDR Agreement ). On March 9, 2011, the Debtors filed the Debtors Omnibus Motion for Entry of an Order Pursuant to Section 365 of the Bankruptcy Code Authorizing the Rejection of Executory Contracts and Unexpired Leases of Non- Residential Real Property Nunc Pro Tunc to February 9, 2011 [Docket No. 469] (the Omnibus Rejection Motion ) pursuant to which the Debtors sought authority to reject, among other agreements, the SDR Agreement nunc pro tunc to February 9, On March 23, 2011, the Court granted the Omnibus Rejection Motion and, on April 21, 2011, Hughes filed a proof of claim, denominated claim number 125, in the amount of $2,648, on account of rejection damages arising from the Debtors rejection of the SDR Agreement (the Rejection Claim ). 10. The Rejection Claim included a prepetition unsecured claim in the amount of $2,146,133 consisting of (a) $2,021,250 for unpaid milestone payments and testing invoices; and (b) $124,883 in prepetition costs and expenses allegedly incurred since the last milestone payment due date for the period October 1, 2010 through October 18, The Rejection 5

6 Pg 6 of 23 Claim also included a postpetition administrative expense claim of $502,118 for costs and expenses allegedly incurred in performing under the SDR Agreement from the Petition Date through February 9, 2011, the date of rejection. 11. The Liquidating Trustee raised informal objections with Hughes to the Rejection Claim and asserted that Hughes was not entitled to an administrative expense claim on account of damages arising from the rejection of the SDR Agreement. The Parties also exchanged information and supporting detail with respect to the Rejection Claim and attempted to settle the disputes without the need for litigation. Such initial efforts did not result in a consensual resolution. 12. On August 14, 2014, the TSN Parties filed the Joint Objection of the Liquidating Trustee and the Reorganized Debtors to Proof of Claim No. 125 Filed by Hughes Network Systems, LLC [Docket No. 1186] (the Objection ) and asserted, among other things, that Hughes was not entitled to an administrative expense claim arising from the rejection of the SDR Agreement. On September 2, 2014, the Liquidating Trust Board filed the Joinder of the Liquidating Trust Board to the Joint Objection of the Liquidating Trustee and the Reorganized Debtors to Proof of Claim No. 125 Filed by Hughes Network Systems, LLC [Docket No. 1190]. On September 19, 2014, Hughes filed the Response of Hughes Network Systems, LLC to the Joint Objection of the Liquidating Trustee and the Reorganized Debtors to Proof of Claim No. 125 [Docket No. 1195] (the Response ). C. The Settlement 13. After the Objection and Response were filed with the Court and discovery requests were exchanged, the TSN Parties and Hughes renewed efforts to explore a consensual resolution of the disputes surrounding the Rejection Claim. To avoid the need to litigate the issues raised in the Objection, the TSN Parties and Hughes have agreed to the terms of the 6

7 Pg 7 of 23 settlement as set forth in the Settlement Agreement attached as Exhibit 1 to the proposed order (the Settlement Agreement ). The salient terms of the Settlement Agreement are as follows: 6 Hughes will be entitled to an Allowed Administrative Claim in the amount of $351, (the Allowed Hughes Administrative Claim ) and the Reorganized Debtors will pay such amount to Hughes within ten (10) days after an order entered by the Court approving this Settlement Agreement (the Order ) has become final and nonappealable. Hughes will be entitled to an Allowed Unsecured Claim in the amount of $2,296, (the Allowed Hughes Unsecured Claim and together with the Allowed Hughes Administrative Claim, the Allowed Hughes Claims ). Within ten (10) days after the Order has become final and nonappealable, the Liquidating Trustee will instruct the Disbursing Agent to pay to Hughes on account of the Allowed Hughes Unsecured Claim a distribution equal to approximately % of the Allowed Hughes Unsecured Claim, which represents the amount that has been distributed by Liquidating Trustee to other holders of Allowed Unsecured Claims. Hughes will also be entitled to receive its pro rata share of any additional distributions that the Liquidating Trustee makes to holders of Allowed Unsecured Claims. The TSN Parties and Hughes will exchange comprehensive mutual releases. The TSN Parties and Hughes agree that entry into the Settlement Agreement will fully and finally resolve any and all issues, disputes or controversies related to the Rejection Claim, and any other claims against the Trust, the Debtors, or the Reorganized Debtors. 14. In sum, Hughes will receive an Allowed Administrative Claim equal to 70% of the asserted amount of the Administrative Claim and the remaining portion will be reclassified as an Allowed Unsecured Claim. The TSN Parties believe that the settlement is in the best interests of the Debtors estates because (a) the settlement is above the lowest point in the range of a reasonable resolution of the disputes with Hughes; (b) the settlement will avoid the significant costs to the estates, in both time and money, of litigating the Objection to the Rejection Claim; and (c) the settlement will resolve the last remaining Disputed Claim and allow the TSN Parties 6 The terms of the settlement described herein are qualified in their entirety by the terms of the Settlement Agreement. To the extent that the terms set forth below are inconsistent with the terms of the Settlement Agreement, the terms of the Settlement Agreement shall govern. 7

8 Pg 8 of 23 wind-down all remaining activities and prepare final distributions so that the chapter 11 cases may be concluded. RELIEF REQUESTED 15. By this Motion, the TSN Parties seek entry of an order approving the Settlement Agreement that fully and finally resolves any and all issues, disputes, or controversies in connection with the Rejection Claim and any other claims between the TSN Parties, on the one hand, and Hughes, on the other hand. BASIS FOR RELIEF A. The Standard for Approval of Settlements Under Bankruptcy Rule Bankruptcy Rule 9019(a) provides, in relevant part, that [o]n motion by the trustee and after notice and a hearing, the court may approve a compromise or settlement. Bankruptcy Rule 9019(a). Settlements and compromises are generally favored in bankruptcy cases. See, e.g., Collier on Bankruptcy (Alan N. Resnick & Henry J. Sommer eds., 16th ed.). Indeed, settlements are a normal part of the reorganization process. Group of Institutional Investors v. Chicago, M., S. P. & P. R. Co., 318 U.S. 523, 565 (1943). 17. The responsibility of a bankruptcy judge evaluating a settlement proposal under Rule 9019 is to determine whether the settlement falls below the lowest point in the range of reasonableness. Anaconda-Ericsson, Inc. v. Hessen (In re Teltronics Servs., Inc.), 762 F.2d 185, 189 (2nd Cir. 1985). To approve a compromise and settlement under Bankruptcy Rule 9019(a), a bankruptcy court must make an independent determination that the compromise and settlement is in the best interests of the debtor s estate. See In re Marvel Entnm t Group, Inc., 222 B.R. 243, 249 (D. Del. 1998); see also Vaughn v. The Drexel Burnham Lambert Group, Inc. (In re The Drexel Burnham Lambert Group, Inc.), 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991) 8

9 Pg 9 of 23 (decision to either accept or reject a compromise and settlement is within the sound discretion of the bankruptcy court). The bankruptcy court may exercise its discretion in light of the general public policy favoring settlements. In re Hibbard Brown & Co., 217 B.R. 41, 46 (Bankr. S.D.N.Y. 1998). 18. A bankruptcy court need not decide the numerous issues of law and fact raised by a settlement, but rather should canvass the issues to see whether the settlement falls below the lowest point in the range of reasonableness. Key3Media Group, Inc. v. Pulver.com, Inc. (In re Key3Media Group, Inc.), 336 B.R. 87, 93 (Bankr. D. Del. 2005) (citing In re Jasmine, Ltd., 258 B.R. 119, 123 (D.N.J. 2000)); In re Coram Healthcare Corp., 315 B.R. 321, 330 (Bankr. D. Del. 2004) ( [C]ourt must only conclude that the compromise or settlement falls within the reasonable range of litigation possibilities. ) (citing In re Penn Central Transp. Co., 596 F.2d 1102, 1114 (3d Cir. 1979)). 19. To evaluate whether a settlement is fair and equitable, courts in the Second Circuit consider factors including: (a) the balance between the litigation s possibility of success and the settlement s future benefits; (b) the likelihood of complex and protracted litigation, with its attendant expense, inconvenience, and delay; (c) the paramount interests of the creditors, including each affected class s relative benefits and the degree to which creditors either do not object to or affirmatively support the proposed settlement; (d) (e) (f) whether other parties in interest support the settlement; the competency and experience of counsel supporting the settlement; and the extent to which the settlement is the product of arm s length bargaining. See Motorola, Inc. v. Official Comm. of Unsecured Creditors (In re Iridium Operating LLC), 478 F.3d 452, 462 (2d Cir. 2007) (internal citations omitted); see also Air Line Pilots Ass n, Int l v. 9

10 Pg 10 of 23 Am. Nat l Bank & Trust Co. (In re Ionosphere Clubs, Inc.), 156 B.R. 414, 428 (S.D.N.Y. 1993), aff d, 17 F.3d 600 (2d. Cir. 1994). B. The Settlement Satisfies the Standard Under Applicable Law 20. The TSN Parties believe that the terms of the Settlement Agreement are in the best interests of the Debtors estates and creditors, and satisfy the standard for approval under the case law interpreting approval of settlements pursuant to Bankruptcy Rule 9019, and applicable provisions of the Plan and the Trust Agreement. Indeed, the TSN Parties respectfully submit that all of the applicable factors weigh in favor of approving the Settlement Agreement. 21. In respect of the first factor, the TSN Parties believe that the settlement is a fair balance between the likely success of the TSN Parties litigating Hughes entitlement to an administrative expense claim and the benefits of the settlement. Although the TSN Parties believe that the facts of this case and applicable authority support their position with respect to Hughes asserted entitlement to an administrative expense claim, the TSN Parties recognize that Hughes has also submitted a Response with authority from this Circuit supporting its position. Indeed, the Parties have cited to the same authority in some instances and the outcome of this litigation would largely be determined on an application of the facts including, among other things, (a) whether there was inducement or an affirmative action on behalf of the Debtors with respect to Hughes postpetition performance under the SDR Agreement; (b) whether the Debtors used Hughes property during the postpetition period; and (c) whether the Debtors estate received a benefit from Hughes postpetition performance. In this instance, the TSN Parties believe that the settlement is a fair compromise between litigants that have both put forward good faith arguments supporting their position. Moreover, continuing litigation would be timeconsuming and costly and the TSN Parties have determined that, on balance, achieving a 10

11 Pg 11 of 23 settlement is a better use of the Debtors estate resources than continuing litigation where the outcome is uncertain. 22. The future benefits of the settlement are also significant. The settlement resolves the last remaining Disputed Claim against the Debtors estates and will allow the Liquidating Trustee to work with the Reorganized Debtors to wind down all remaining activities and make final distributions to creditors. A protracted litigation would only delay final distributions and the closing of the chapter 11 cases. 23. The second factor the likelihood of complex and protracted litigation, with its expense, inconvenience, and delay also weighs in favor of the settlement. As noted above, the most significant disputes between the Parties are fact-specific and the Parties exchanged comprehensive document requests after the Objection and Response were filed. In this contested matter, the costs of discovery were estimated to be significant compared to the amount in dispute. The TSN Parties would incur additional significant costs in preparation for trial and trial itself. Accordingly, the TSN Parties determined that a settlement would be in the best interests of all stakeholders. The settlement will resolve this dispute in the near term and will save the TSN Parties from the time and expense associated with, discovery, additional pleadings, and trial. 24. The third factor the paramount interest of creditors also weighs in favor of the settlement. The settlement is favorable to all beneficiaries of the Liquidating Trust because the reduction in the administrative claim asserted against the Debtors will result in additional funds becoming available to be transferred to the Liquidating Trust that were previously reserved for by the Reorganized Debtors. More importantly to creditors, however, the settlement will resolve the last remaining disputed claim and facilitate final distributions to beneficiaries of the 11

12 Pg 12 of 23 Liquidating Trust. Beneficiaries of the Liquidating Trust will also benefit from the avoidance of fees and expenses that would be spent through protracted litigation with Hughes. 25. The fourth factor whether other parties in interest support the settlement weighs in favor of the settlement. The settlement has been approved by the Liquidating Trust Board and the Liquidating Trust Board played an active role in the negotiations between the TSN Parties and Hughes. In addition, all other parties will have an opportunity to be heard in connection with this Motion. 26. The fifth factor the quality and experience of counsel and the sixth factor whether the settlement was negotiated at arms length both weigh in favor of approval of the settlement. The TSN Parties have been represented in the negotiations by their respective undersigned counsel and Hughes has been represented by the same counsel that has represented Hughes throughout these chapter 11 cases. In addition, the Liquidating Trust Board has been represented by its own experienced counsel in connection with the Objection and the resolution through settlement. There can be no doubt the proposed settlement is the result of extensive, good faith, arms length negotiations among the Parties, each of whom was (and continues to be) represented by experienced and skilled counsel. 27. In sum, the TSN Parties submit that the proposed settlement is in the best interests of the Debtors estates as a whole and the beneficiaries of the Liquidating Trust. The settlement is above the lowest point of the range of reasonableness and avoids the time, costs, and risks of litigating the Objection with Hughes. The resolution of the disputes with Hughes will represent a significant step towards completing the remaining tasks of the Liquidating Trust and will facilitate the Liquidating Trustee s ability to make a final distribution to creditors. 12

13 Pg 13 of 23 MOTION PRACTICE 28. This Motion includes citations to the applicable rules and statutory authorities upon which the relief requested herein is predicated, and a discussion of their application to this Motion. Accordingly, TSN Parties submit that this Motion satisfies Rule (a) of the Local Rules of Bankruptcy Practice and Procedure for the Southern District of New York. NOTICE 29. The TSN Parties have provided notice of this Motion to: (a) Herrick Feinstein, as counsel to Hughes; (b) the Office of the United States Trustee for the Southern District of New York; (c) Akin Gump Strauss Hauer & Feld LLP, as counsel to the Debtors and Reorganized Debtors; (d) Patterson Belknap Webb & Tyler LLP as counsel to the Liquidating Trust Board; and (e) parties in interest who have filed a notice of appearance in these cases pursuant to Bankruptcy Rule In light of the nature of the relief requested, the TSN Parties respectfully submit that no further notice is necessary. [remainder of page intentionally left blank] 13

14 Pg 14 of 23 CONCLUSION WHEREFORE, for the reasons set forth herein, the TSN Parties respectfully request that the Court (a) enter an order, substantially in the form attached hereto as Exhibit A, approving the Settlement Agreement and authorizing the TSN Parties to enter into the Settlement Agreement; and (b) granting such other and further relief as is just and proper. New York, New York Dated: December 5, 2014 /s/ David M. Posner OTTERBOURG P.C. 230 Park Avenue New York, New York (212) (Telephone) (212) (Facsimile) David M. Posner Kevin Zuzolo Counsel to the Liquidating Trustee /s/ Lindsay K. Zahradka AKIN GUMP STRAUSS HAUER & FELD LLP One Bryant Park New York, New York (212) (Telephone) (212) (Facsimile) Lindsay K. Zahradka Counsel to the Reorganized Debtors 14

15 Pg 15 of 23 EXHIBIT A Proposed Order

16 Pg 16 of 23 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In re: ) Chapter 11 ) TERRESTAR NETWORKS INC., et al., 1 ) Case No (SHL) ) Reorganized Debtors. ) Jointly Administered ) ORDER APPROVING THE SETTLEMENT AGREEMENT AMONG THE LIQUIDATING TRUSTEE, REORGANIZED DEBTORS, AND HUGHES NETWORK SYSTEMS LLC Upon the Motion of the Liquidating Trustee and Reorganized Debtors for an Order Pursuant to Federal Rule of Bankruptcy Procedure 9019 Approving the Settlement Agreement with Hughes Network Systems, LLC (the Motion ) 2 filed by the liquidating trustee (the Liquidating Trustee ) for the TerreStar Networks Inc. Liquidating Trust (the Liquidating Trust ), the trust established pursuant to the confirmed plan of reorganization for the abovecaptioned debtors and debtors in possession (collectively, the Debtors or the Reorganized Debtors, as applicable) and the Reorganized Debtors (together with the Liquidating Trustee, the TSN Parties ), and consideration of the Motion and the relief requested therein being a core proceeding pursuant to 28 U.S.C. 157 and 1334; and venue being proper before this Court pursuant to 28 U.S.C and 1409; and due and proper notice of the Motion having been provided; and it appearing that no other or further notice need be provided; and that the Court having determined that there exists just cause for the relief granted herein and that such relief is in the best interest of the TSN Parties, the Debtors estates, creditors, stakeholders and all other 1 2 The Reorganized Debtors (or Debtors, as applicable) in these chapter 11 cases, along with the last four digits of each Debtor s federal taxpayer identification number, are: TerreStar Networks Inc. (3931); TerreStar License Inc. (6537); TerreStar National Services Inc. (6319); TerreStar Networks Holdings (Canada) Inc. (1337); TerreStar Networks (Canada) Inc. (8766) and B.C. Ltd. (1345). Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Motion.

17 Pg 17 of 23 parties in interest; and upon the evidence presented at the hearing before the Court, and any responses to the Motion having been withdrawn, resolved or overruled on the merits; and after due deliberation and sufficient cause appearing therefore, it is hereby ORDERED that: 1. The Motion is GRANTED to the extent set forth herein. 2. Pursuant to Bankruptcy Rule 9019, the Settlement Agreement is APPROVED. The TSN Parties are authorized to enter into the Settlement Agreement, substantially in the form annexed hereto as Exhibit 1, and to perform under the terms of the Settlement Agreement. 3. The TSN Parties are authorized to execute and deliver all instruments and documents, and take such other action as may be necessary or appropriate to implement and effectuate the Settlement Agreement authorized by this Order. 4. The Court-appointed claims agent is directed to modify the claims register so that Claim No. 125 is allowed as an administrative expense priority claim in the amount of $351, and a general unsecured claim in the amount of $2,296, The Court shall retain jurisdiction with respect to any matters, claims, rights or disputes arising from or related to the implementation of this Order. New York, New York Date:, 2014 Honorable Sean H. Lane United States Bankruptcy Judge

18 Pg 18 of 23 EXHIBIT 1 Settlement Agreement

19 Pg 19 of 23 SETTLEMENT AGREEMENT THIS SETTLEMENT AGREEMENT by and between TerreStar Networks Inc. Liquidating Trust ( Trust ), the Reorganized Debtors (defined below), and Hughes Networks Systems, LLC ( Hughes, and together with the Trust and Reorganized Debtors, the Parties ) is made and entered into as of December 5, RECITALS A. The Chapter 11 Cases and the Liquidating Trust WHEREAS, on October 19, 2010, TerreStar Networks Inc. ( TSN ) and certain of its subsidiaries and affiliates (collectively, the Debtors, and following the Effective Date of the Plan, the Reorganized Debtors ) filed voluntary petitions for relief under Chapter 11 of Title 11 of the United States Code (the Bankruptcy Code ) in the United States Bankruptcy Court for the Southern District of New York (the Court ), Case No (SHL) (Jointly Administered) (the Chapter 11 Cases ); WHEREAS, on March 29, 2012 (the Effective Date ), the Joint Chapter 11 Plan of TerreStar Networks Inc., et al. (the Plan ) became effective and FTI Consulting, Inc. was appointed the Liquidating Trustee (the Trustee ) of the Trust pursuant to the Plan and the TerreStar Networks Inc. Liquidating Trust Agreement, dated as of March 29, 2012, among the Debtors and the Trustee (the Trust Agreement ); WHEREAS, capitalized terms not otherwise defined herein shall have the meanings ascribed in the Plan; WHEREAS, pursuant to the Plan, holders of Allowed Administrative Claims are entitled to receive Cash in the full amount of such Allowed Administrative Claim from the Reorganized Debtors; WHEREAS, pursuant to the Plan and the Trust Agreement, the Trust was established for the benefit of holders of Allowed Unsecured Claims in Class 3 and the Trustee is responsible for, among other things, making distributions to holders of Allowed Unsecured Claims; WHEREAS, pursuant to the Plan and Trust Agreement, a liquidating trust board (the Liquidating Trust Board ) was established for the purpose of overseeing the administration of the Trust and, in some instances, approving certain actions contemplated by the Trust; B. The Hughes SDR Agreement and Rejection Claim WHEREAS, on or about March 31, 2009, TSN, Hughes, and Skyterra LP entered into a contract for the design and development of GMR 1-3G software components to be used in connection with a mobile platform based on technology developed by Infineon Technologies AG (the SDR Agreement );

20 Pg 20 of 23 WHEREAS, on March 9, 2011, the Debtors filed the Debtors Omnibus Motion for Entry of an Order Pursuant to Section 365 of the Bankruptcy Code Authorizing the Rejection of Executory Contracts and Unexpired Leases of Non-Residential Real Property Nunc Pro Tunc to February 9, 2011 [Docket No. 469] (the Omnibus Rejection Motion ) pursuant to which the Debtors sought authority to reject, among other agreements, the SDR Agreement; WHEREAS, on March 23, 2011, the Court entered an order granting the Omnibus Rejection Motion and approving the rejection of the SDR Agreement effective as of February 9, 2011 (the Rejection Date ); WHEREAS, on April 21, 2011, Hughes filed a proof of claim, denominated claim number 125, in the amount of $2,648, on account of rejection damages arising from the Debtors rejection of the SDR Agreement (the Rejection Claim ); WHEREAS, Hughes asserts in the Rejection Claim that it is entitled to a prepetition unsecured claim in the amount of $2,146,133 consisting of (a) $2,021,250 for unpaid milestone payments and testing invoices; and (b) $124,883 in prepetition costs and expenses allegedly incurred since the last milestone payment due date for the period October 1, 2010 through October 18, 2010; WHEREAS, Hughes asserts in the Rejection Claim that it is entitled to a postpetition administrative expense claim in the amount of $502,118 (the Administrative Claim ) for costs and expenses allegedly incurred in performing under the SDR Agreement from the Petition Date through the Rejection Date; WHEREAS, on August 14, 2014, the Trustee and the Reorganized Debtors filed the Joint Objection of the Liquidating Trustee and the Reorganized Debtors to Proof of Claim No. 125 Filed by Hughes Network Systems, LLC [Docket No. 1186] and asserted, among other things, that Hughes was not entitled to an administrative expense claim arising from the rejection of the SDR Agreement; WHEREAS, on September 2, 2014, the Liquidating Trust Board filed the Joinder of the Liquidating Trust Board to the Joint Objection of the Liquidating Trustee and the Reorganized Debtors to Proof of Claim No. 125 Filed by Hughes Network Systems, LLC [Docket No. 1190]; WHEREAS, on September 19, 2014, Hughes filed the Response of Hughes Network Systems, LLC to the Joint Objection of the Liquidating Trustee and the Reorganized Debtors to Proof of Claim No. 125 [Docket No. 1195]; and WHEREAS, following good faith negotiations, the Parties desire to settle and compromise any and all disputes between them with respect to the Rejection Claim on the terms set forth herein. AGREEMENT NOW THEREFORE, in consideration of the mutual promises and covenants contained herein, the Parties hereby stipulate and agree as follows: 2

21 Pg 21 of The Recitals set forth above are incorporated herein and made a part of this Settlement Agreement. 2. Hughes shall be entitled to an Allowed Administrative Claim in the amount of $351, (the Allowed Hughes Administrative Claim ) and the Reorganized Debtors shall pay such amount to Hughes within ten (10) days after an order entered by the Court approving this Settlement Agreement (the Order ) has become final and nonappealable. 3. Hughes shall be entitled to an Allowed Unsecured Claim in the amount of $2,296, (the Allowed Hughes Unsecured Claim and together with the Allowed Hughes Administrative Claim, the Allowed Hughes Claims ). Within ten (10) days after the Order has become final and nonappealable, the Trustee shall instruct the Disbursing Agent to pay to Hughes on account of the Allowed Hughes Unsecured Claim a distribution equal to the pro rata amount that has been distributed by Trustee to other holders of Allowed Unsecured Claims (which is approximately %). Hughes shall be entitled to receive its pro rata share of any additional distributions that the Trustee makes to holders of Allowed Unsecured Claims. 4. The Allowed Hughes Claims shall be paid in accordance with the terms of this Settlement Agreement and such payment shall be in full and final satisfaction of the Rejection Claim and any and all claims that Hughes may have against the Trust, the Debtors, or the Reorganized Debtors, whether arising under the SDR Agreement or otherwise. 5. It is understood that this settlement is a compromise of a Disputed Claim, that any payment made hereunder is not to be construed as an admission by either party of any liability on account of the Disputed Claim, and this Settlement Agreement and the implementing Order are intended to fully resolve and settle all claims which exist, whether known or unknown at this time, which could have been asserted (i) by Hughes against the Debtors or the Trust and each of their respective predecessors, successors, partners, principals, members, employees, officers, agents, heirs and assigns (collectively, the TSN Entities ) and (ii) by the Debtors or the Trust against Hughes and each of its predecessors, successors, partners, principals, members, employees, officers, agents, heirs and assigns (collectively, the Hughes Entities ). 6. The Parties enter into this Settlement Agreement for purposes of compromise. There is legal and valuable consideration for this Settlement Agreement. 7. This Settlement Agreement is subject to approval by the Court. If the Court does not approve this Settlement Agreement, or if the Order is reversed after appeal, this Settlement Agreement shall be treated as if it had never been entered into in the first instance. 8. Effective upon Court approval of the Settlement Agreement, Hughes hereby releases the TSN Entities from any and all claims, actions, causes of action, suits, debts, accounts, damages or demands whatsoever, whether existing now or in the future, and whether fixed, liquidated or contingent, except to enforce the terms of this Settlement Agreement. 3

22 Pg 22 of Effective upon Court approval of this Settlement Agreement, the TSN Entities hereby release the Hughes Entities from any and all claims, actions, causes of action, suits, debts, accounts, damages or demands whatsoever, whether existing now or in the future, and whether fixed, liquidated or contingent, except to enforce the terms of this Settlement Agreement. 10. The Trust represents that it has obtained the authorization of the Liquidating Trust Board to enter into this Settlement Agreement and that it does not require the authorization or approval of any other person. 11. Hughes represents that the execution and performance of this Settlement Agreement does not require the authorization or approval of any other person. 12. This Settlement Agreement shall be construed in accordance with the laws of the State of New York. 13. There are no other agreements or understandings of the Parties concerning the subject matter of this Settlement Agreement. 14. The Parties agree that this Settlement Agreement was the product of negotiations between the Parties and that any rule of construction that ambiguities are to be resolved against the drafting party shall not apply in the interpretation of this Settlement Agreement. 15. This Settlement Agreement may be amended only in a written document signed by the Parties. 16. Each Party agrees in good faith to take such further actions and execute such further documents as may be necessary or appropriate to fully carry out the intent and purposes of this Settlement Agreement. 17. This Settlement Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument. A fax signature or a signature transmitted electronically shall be the same as an original signature. 18. This Settlement Agreement may be signed by counsel for each party. If signed only by counsel, such counsel represents that it is counsel to that Party on whose behalf it has signed, and that Party has reviewed this Settlement Agreement and consented to its terms, and that counsel is authorized by its client to sign this Settlement Agreement. 19. The Court shall retain jurisdiction to enforce this Settlement Agreement. 20. Upon Court approval, this Settlement Agreement is binding on the Parties hereto, the Hughes Entities and the TSN Entities, their affiliates and all those acting in concert or participation with them or under their direction or control, and upon their successors and assigns. [remainder of page intentionally left blank] 4

23 Pg 23 of 23 IN WITNESS WHEREOF, the Parties have caused this Settlement Agreement to be executed by themselves or on their behalf by their respective attorneys as of the date first above mentioned. HERRICK, FEINSTEIN LLP OTTERBOURG P.C. By: /s/ Stephen B. Selbst Stephen B. Selbst 2 Park Avenue New York, New York (212) (Telephone) Counsel to Hughes Networks Systems LLC By: /s/ David M. Posner David M. Posner A Member of the Firm 230 Park Avenue New York, NY Tel: (212) Counsel to the Liquidating Trustee AKIN GUMP STRAUSS HAUER & FELD LLP By: /s/ Lindsay K. Zahradka Lindsay K. Zahradka One Bryant Park New York, New York (212) (Telephone) (212) (Facsimile) Counsel to the Reorganized Debtors 5

24 shl Doc Filed 12/05/14 Entered 12/05/14 18:31:41 Notice Pg 1 of 3 OTTERBOURG P.C. 230 Park Avenue New York, New York (212) (Telephone) (212) (Facsimile) David M. Posner Kevin Zuzolo Counsel to the Liquidating Trustee UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK Hearing Date: January 6, 2015 at 10:00 a.m. ET Objection Deadline: December 30, 2014 at 5:00 p.m. ET ) In re: ) Chapter 11 ) TERRESTAR NETWORKS INC., et al., 1 ) Case No (SHL) ) Reorganized Debtors. ) Jointly Administered ) NOTICE OF HEARING ON MOTION OF THE LIQUIDATING TRUSTEE AND REORGANIZED DEBTORS FOR ENTRY AN ORDER PURSUANT TO FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019 APPROVING THE SETTLEMENT AGREEMENT WITH HUGHES NETWORKS SYSTEMS, LLC PLEASE TAKE NOTICE that on December 5, 2014 the liquidating trustee (the Liquidating Trustee ) for the TerreStar Networks Inc. Liquidating Trust (the Liquidating Trust ), the trust established pursuant to the confirmed plan of reorganization for the abovecaptioned debtors and debtors in possession (collectively, the Debtors or the Reorganized Debtors, as applicable) and the Reorganized Debtors filed the Motion of the Liquidating Trustee and Reorganized Debtors for Entry of an Order Pursuant to Federal Rule of Bankruptcy Procedure 9019 Approving the Settlement Agreement with Hughes Networks Systems, LLC (the Motion ). 1 The Reorganized Debtors (or Debtors, as applicable) in these chapter 11 cases, along with the last four digits of each Debtor s federal taxpayer identification number, are: TerreStar Networks Inc. (3931); TerreStar License Inc. (6537); TerreStar National Services Inc. (6319); TerreStar Networks Holdings (Canada) Inc. (1337); TerreStar Networks (Canada) Inc. (8766) and B.C. Ltd. (1345)

25 shl Doc Filed 12/05/14 Entered 12/05/14 18:31:41 Notice Pg 2 of 3 PLEASE TAKE FURTHER NOTICE that a hearing (the Hearing ) to consider the Motion shall be held before the Honorable Sean H. Lane, United States Bankruptcy Judge, at the Courthouse, Alexander Hamilton Custom House, One Bowling Green, New York, New York on January 6, 2015 at 10:00 a.m. (prevailing Eastern time). PLEASE TAKE FURTHER NOTICE THAT any Objections to the Motion must be in writing, shall conform to the Federal Rules of Bankruptcy Procedure, the Local Rules of the Bankruptcy Court, and the Order Pursuant to Sections 105(a) and (d) of the Bankruptcy Code and Bankruptcy Rules 1015(c), 2002(m) and 9007 Implementing Certain Notice and Case Management Procedures [Docket No. 60] (the Case Management Order ), and shall be filed with the Bankruptcy Court either (i) electronically in accordance with General Order M-399 (which can be found at by registered users of the Bankruptcy Court s filing system, or (ii) on a 3.5 inch disk, preferably in Portable Document Format (PDF), WordPerfect, or any other Windows-based word processing format (with a hard copy delivered directly to Chambers), in accordance with General Order M-182 (which can be found at and (iii) shall be served in accordance with General Order M-399 on (a) Otterbourg P.C. as counsel to the Liquidating Trustee; (b) Herrick Feinstein LLP as counsel to Hughes; (c) the Office of the United States Trustee for the Southern District of New York; (d) Akin Gump Strauss Hauer & Feld LLP, as counsel to the Debtors and Reorganized Debtors; (e) Patterson Belknap Webb & Tyler LLP as counsel to the Liquidating Trust Board; and (f) parties in interest who have filed a notice of appearance in these cases pursuant to Bankruptcy Rule 2002, in each case so as to be received no later than December 30, 2014 at 5:00 p.m. (ET) (the Objection Deadline )

26 shl Doc Filed 12/05/14 Entered 12/05/14 18:31:41 Notice Pg 3 of 3 PLEASE TAKE FURTHER NOTICE that if no responses with respect to the Motion are timely filed and served in accordance with the Case Management Order, the Liquidating Trustee may, on or after the Objection Deadline, submit to the Bankruptcy Court an order substantially in the form of the proposed order annexed to the Motion, which order may be entered with no further notice or opportunity to be heard offered to any party. New York, New York Dated: December 5, 2014 /s/ David M. Posner OTTERBOURG P.C. 230 Park Avenue New York, New York (212) (Telephone) (212) (Facsimile) David M. Posner Kevin Zuzolo Counsel to the Liquidating Trustee