Motorola 2006 Annual Report Download - page 35

27
An unfavorable outcome in one or more of the Iridium-related cases still pending could have a material
adverse effect on Motorola's consolidated financial position, liquidity or results of operations.
Telsim-Related Cases
In April 2001, Telsim Mobil Telekomunikasyon Hizmetleri A.S. (""Telsim''), a wireless telephone operator in
Turkey, defaulted on the payment of approximately $2 billion of loans owed to Motorola and its subsidiaries
(the ""Telsim Loans''). Motorola fully reserved the carrying value of the Telsim Loans in the second quarter of
2002. The Uzan family controlled Telsim until 2004 when an agency of the Turkish government took over control
of Telsim. Telsim was sold by the Turkish government to Vodafone in 2006. Motorola received payment from the
sale, pursuant to the settlement described below. Motorola is involved in several matters related to Telsim.
October 2005 Settlement
In 2005, Motorola signed an agreement resolving its disputes regarding the Telsim Loans with Telsim and the
Government of Turkey (the ""Telsim Dispute Agreement''). Under the Telsim Dispute Agreement, Motorola was
paid $410 million on May 24, 2006 (in addition to the $500 million Motorola received pursuant to the Telsim
Dispute Agreement in 2005) upon Vodafone's completion of its acquisition of Telsim as final payment. Motorola
also agreed that it will not pursue collection efforts against the three corporate defendants under TMSF control
(Unikom Iletisim Hizmetleri Pazarlama A.S., Standart Pazarlama A.S., and Standart Telekomunikasyon Bilgisayar
Hizmetleri A.S.) (the ""Corporate Defendants''), that are subject to its final judgment in the U.S. courts related to
the matter. The Telsim Dispute Agreement permits Motorola to continue its efforts (except in Turkey and three
other countries, which restriction is subject to certain conditions) to enforce the U.S. Judgment described below
against the Uzan family. In addition, pursuant to the Telsim Dispute Agreement, Telsim and its related companies
have dismissed all litigation, including arbitrations, pending against Motorola.
U.S. Judgment
The Company continues its efforts to collect on its judgment of $2.13 billion (the ""U.S. Judgment'') for
compensatory damages rendered by the United States District Court for the Southern District of New York
(the ""District Court'') against the Uzans on July 31, 2003 and affirmed by the U.S. Court of Appeals for the Second
Circuit (the ""Second Circuit'') in 2004 and in connection with foreign proceedings against the Uzan family. However,
the Company believes that the ongoing litigation, collection and/or settlement processes against the Uzan family will be
very lengthy in light of the Uzans' continued resistance to satisfy the judgment against them and their decision to violate
various courts' orders, including orders holding them in contempt of court. Following a remand from the Second Circuit
of the U.S. Judgment by the District Court, on February 8, 2006, the District Court awarded a judgment in favor of
Motorola for $1 billion in punitive damages against the Uzan family and their co-conspirator, Antonio Luna
Bettancourt. The defendants have appealed this judgment to the Second Circuit.
Class Action Securities Lawsuits
A purported class action lawsuit, Barry Family LP v. Carl F. Koenemann, was filed against the former chief
financial officer of Motorola on December 24, 2002 in the United States District Court for the Southern District of
New York, alleging breach of fiduciary duty and violations of Section 10(b) of the Securities Exchange Act of
1934 and SEC Rule 10b-5. In 2003, it was consolidated with a number of related cases as In re Motorola Securities
Litigation in the United States District Court for the Northern District of Illinois (the ""Illinois District Court'').
The plaintiffs allege that the price of Motorola's stock was artificially inflated by a failure to disclose vendor
financing to Telsim Mobil Telekomunikasyon Hizmetleri A.S. (""Telsim''), in connection with the sale of
telecommunications equipment by Motorola as well as other related aspects of Motorola's dealings with Telsim.
On August 25, 2004, the Illinois District Court issued its decision on Motorola's motion to dismiss, granting the
motion in part and denying it in part. The court dismissed without prejudice the fraud claims against the individual
defendants and denied the motion to dismiss as to Motorola. The plaintiffs chose not to file an amended
complaint; therefore, the fraud claims against the individual defendants are dismissed. The court, however, declined
to dismiss the plaintiffs' claims that the individual defendants were ""controlling persons of Motorola.'' During
2005, the court certified the case as a class action. The case is scheduled for trial beginning April 16, 2007.
A purported class action, Howell v. Motorola, Inc., et al., was filed against Motorola and various of its
directors, officers and employees in the United States District Court for the Northern District of Illinois on July 21,
2003, alleging breach of fiduciary duty and violations of the Employment Retirement Income Security Act