Nortel announced agreement in principle for a proposed settlement of certain shareholder class action lawsuits with the lead plaintiffs in two significant class action lawsuits.
As previously announced, the proposed settlement was conditioned, among other things, on the resolution of insurance related issues and Nortel and the lead plaintiffs reaching an agreement on corporate governance related matters. These matters have now been resolved with Nortel’s insurers agreeing to pay US$228.5 million towards the settlement and Nortel agreeing with the insurers to certain indemnification obligations. The Company believes that these indemnification obligations would be unlikely to materially increase its total cash payment obligations under the proposed settlement. These insurance payments would not reduce the amounts payable by the company as noted below.
Nortel has also agreed to certain corporate governance enhancements, including the codification of certain of its current governance practices (such as the annual election by its directors of a non-executive Board chair) in its Board of Directors written mandate and the inclusion in its annual proxy circular and proxy statement of a report on certain of its other governance practices (such as the process followed for the annual evaluation of the Board, committees of the Board and individual directors).
As previously announced, under the terms of the proposed global settlement contemplated by the agreement in principle, the Company would make a payment of US$575 million in cash, issue 628,667,750 of its common shares (representing 14.5% of its equity), and contribute one-half of any recovery in the existing litigation by Nortel against Messrs. Frank Dunn, Douglas Beatty and Michael Gollogly, the Company’s former senior officers who were terminated for cause in April 2004. http://www.nortel.com
