Nortel Aims for $2.5 Billion Settlement

Nortel (NT Quote) agreed to pay $2.5 billion in cash and stock in a bid to settle class action lawsuits brought in the wake of the networker's financial scandals of recent years.

The Toronto-based company said it will pay $575 million in cash and issue 629 million shares, representing a 14.5% stake in the company, to settle the suits. The agreement was reached with the lead plaintiffs in two significant class action lawsuits pending in the Southern District of New York and based on the recommendation of a senior federal judge, following a mediation process.

The proposed settlement would be part of, and is conditioned on, the company reaching a global settlement encompassing all pending shareholder class actions and proposed shareholder class actions commenced against the company and certain other defendants following the company's announcement of revised financial guidance during 2001, and the company's revision of its 2003 financial results and restatement of other prior periods. The proposed settlement is also conditioned on Nortel and the lead plaintiffs reaching agreement on corporate governance-related matters and the resolution of insurance-related issues.

The agreement in principle is also conditioned on the contribution of available insurance, which has yet to be resolved. The total settlement amount will include all plaintiffs' court-approved attorneys' fees. Nortel has agreed to respond to the corporate governance proposals of the lead plaintiffs and enter into a dialogue to review the company's corporate governance. ...