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

| Source: Bittium Oyj
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, 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

Oulu, July 11, 2014

Elektrobit Corporation
Jukka Harju

Further information:

Jukka Harju
Tel. +358 40 344 5466

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


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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.