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Subsidiary of Elektrobit Corporation, Elektrobit Inc. and the TerreStar Networks Inc. liquidating trustee enter into conditional settlement agreement in the liquidation case

Fri 11th July, 2014 6:00pm

http://pdf.reuters.com/htmlnews/8knews.asp?i=43059c3bf0e37541&u=urn:newsml:reuters.com:20140711:nHUGQJy00a


Stock exchange release


Free for publication on July 11, 2014 at 8 p.m. (CEST+1)


Subsidiary of Elektrobit Corporation, Elektrobit Inc. and the TerreStar Networks Inc. liquidating
trustee enter into conditional settlement agreement in the liquidation case

Elektrobit Inc. (EB), a subsidiary of Elektrobit Corporation, has entered into a conditional
agreement of settlement (the "Settlement") with the liquidating trustee of The Liquidating Trust
(the "Trust") of TerreStar Networks Inc. ("TSN"), the Trust formed in connection with TSN's
Court-approved Chapter 11 liquidation plan (the "Plan"). On July 10, 2014, the trustee filed a
motion with the United States Bankruptcy Court seeking approval of the Settlement. According to
the Settlement, if the conditions to its effectiveness are fulfilled (as described below), the
Trust shall be obligated to pay to EB, an immediate cash payment of USD 1,075,000 (EUR 0.8 million
as per exchange rate of July 10, 2014) (the "Settlement Payment") in full and final satisfaction
of its claims against TSN and in resolution of all disputes between EB and the bankruptcy estate
of TSN and certain of its subsidiaries and affiliates.

If the Settlement is approved by the Bankruptcy Court and becomes effective by its terms, the
Settlement Payment would be paid within ten days after the Settlement becomes effective, i.e.
during the third year quarter of 2014. The Settlement Payment would result a non-recurring
positive effect of approximately EUR 0.8 million as on Elektrobit Corporation's operating result
and a positive effect on Elektrobit Corporation's cash flow of approximately EUR 0.8 million on
the third quarter 2014.

The Settlement will not become effective without Court approval by an order that has become final
and unappealable. The Court hearing is now scheduled to be held on August 11, 2014 and before the
hearing other stakeholders in the TSN Chapter 11 cases may file objections, if any, to the
Settlement. At this time there is no assurance that these contingencies will be fulfilled.

EB asserted claims for its accounts receivable in the amount of approximately USD 25.8 million
(EUR 19.0 million as per exchange rate of July 10, 2014) in the Chapter 11 cases of its customers
TSN and its parent company, TerreStar Corporation ("TSC"), filed in 2010 and 2011. In addition to
the booked receivables, EB asserted claims for additional costs in the amount of approximately USD
2.1 million (EUR 1.6 million as per exchange rate of July 10, 2014) resulting mainly from the ramp
down of the business operations between the parties. Thus, EB asserted claims against each of the
TerreStar entities in amounts totaling USD 27.9 million (EUR 20.5 million as per exchange rate of
July 10, 2014). Due to uncertainties related to the receivables, Elektrobit Corporation booked an
impairment of the accounts receivable in the amount of EUR 8.3 million during the second half of
2010.

The Settlement follows a settlement previously entered into between EB and TSC and certain of its
preferred shareholders in TSC's Chapter 11 reorganization case. Pursuant to that settlement, on
August 28, 2012 TSC made a cash payment to Elektrobit Inc. of USD 13.5 million in full and final
satisfaction of EB's claim against that entity and the parties exchanged mutual releases. That
settlement did not include TSN and did not include any distribution from the TSN Chapter 11 cases.
On October 24, 2012, the Bankruptcy Court entered an order approving a plan of reorganization for
TSC and a subsidiary of TSC (but not including TSN) that preserved EB's rights with respect to
EB's claim against TSN.

According to the terms of the Settlement, EB's remaining claims against TSN are fixed and allowed
as a general unsecured non-priority claim in the amount of USD 19,551,147.65 (EUR 14.4 million as
per exchange rate of July 10, 2014) (the "Allowed Non-priority Claim") and the Trust will pay to
EB in full and final satisfaction of the Allowed Non-priority Claim a distribution equal to
5.4984% of the Allowed Non-priority Claim, which the parties agree equals the amount of the USD
1,075,000 Settlement Payment.  This amount supplements a USD 650,890 distribution received by EB
under the Plan in March, 2012, on that portion of its claim entitled to payment priority under
U.S. bankruptcy law. The Settlement also provides for an exchange of comprehensive mutual
releases. The releases resolve, e.g., an informal objection by the trustee to certain amounts
claimed by EB and an informal demand by the trustee for return by EB of certain payments received
by EB within 90 days prior to TSN's bankruptcy filing.

The full implications of the TSN and TSC Chapter 11 cases on EB's profit, financial position and
outlook can be finally determined only when EB has accounted for all costs related to collecting
the receivables and the tax treatment of its receivables is confirmed. As more fully discussed in
EB's interim reports and financial statement at www.elektrobit.com http://www.elektrobit.com/ , EB
has appealed a ruling by the U.S. Internal Revenue Service ("IRS") disallowing a deduction taken
on Elektrobit Corporation's subsidiary's, Elektrobit Inc.'s 2010 U.S. federal income tax return
for the impairment of the receivables from the TerreStar companies. The appeal is presently
pending before the IRS Office of Appeals.

Oulu, July 11, 2014

Elektrobit Corporation
Jukka Harju
CEO

Further information:

Jukka Harju
CEO
Tel. +358 40 344 5466

Päivi Timonen
Chief Legal Officer
Tel. +358 40 344 2794

Distribution:

NASDAQ OMX Helsinki
Principal media

Elektrobit Corporation (EB)
EB creates advanced technology and turns it into enriching end-user experiences. EB is specialized
in demanding embedded software and hardware solutions for wireless and automotive industries. The
net sales in 2013 totaled EUR 199.3 million and operating profit was EUR 8.1 million. Elektrobit
Corporation is listed on NASDAQ OMX Helsinki. www.elektrobit.com http://www.elektrobit.com 



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This announcement is distributed by NASDAQ OMX Corporate Solutions on behalf of NASDAQ OMX
Corporate Solutions clients.
The issuer of this announcement warrants that they are solely responsible for the content,
accuracy and originality of the information contained therein.
Source: Elektrobit Oyj via Globenewswire


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