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Nortel Networks Corp. has agreed to pay $2.473-billion (U.S.) in cash and stock - more than some analysts expected - in a proposed settlement of class-action lawsuits filed in New York after a revised financial forecast in 2001 and an accounting scandal that emerged in 2003.

The settlements with two lead plaintiffs in the cases - both Canadian pension funds - depend on several conditions, Nortel said Wednesday. The company must settle all pending shareholder class actions, including those in Canada, and there must also be agreement on corporate governance-related matters and insurance-related issues. The proposed settlement would contain no admission of wrongdoing by the company or any other defendants.

Nortel's new chief executive officer Mike Zafirovski is trying to resolve outstanding issues stemming from a major bookkeeping crisis that was first revealed in 2003. The company is still dealing with the fallout from its accounting issues, which hurt its stock price, customer confidence and employee morale. Nortel said it still faces ongoing investigations by U.S. and Canadian securities regulators.

"Resolving these important issues will enhance the company's ability to focus on our transformation and renewal priorities and our customers," Mr. Zafirovski said in a statement.

One lawsuit covers the period of Oct. 24, 2000 and Feb. 15, 2001, while the other covers the period of April 24, 2003 and April 27, 2004.

The settlement cost was more than some analysts estimated. In a note Wednesday, UBS analysts wrote that they expected a $750-million settlement.

Nortel shares fell 3 cents to $3.44. Its stock is about 93 per cent lower than five years ago.

The settlement would be composed of a $575-million cash payment and the issuance of 628,667,750 common shares, or 14.5 per cent of Nortel's current equity. Nortel will also contribute half of any money it may receive from its own lawsuit against former executives Frank Dunn, Douglas Beatty and Michael Gollogly, who were fired in April, 2004 after the accounting woes were revealed.

As a result of the agreement in principle, Nortel will set up a litigation reserve and record a charge to its full-year 2005 financial results, applicable to the fourth quarter of last year. On an after-tax basis, and based on Tuesday's share valuation, the company expects to record a total charge of $2.47-billion, or 57 cents a share.

"Our intent is to achieve a fair resolution of these lawsuits and avoid a prolonged, uncertain and costly litigation process," Nortel chairman Harry Pearce said in a statement. "A final settlement would remove a significant impediment to Nortel's future success and allow Mike Zafirovski and the Nortel team to move forward."

Wednesday's agreement, which stems from a mediation process, relates to two large class action lawsuits pending in the Southern District of New York, and are based on the recommendation of a senior federal judge. The OPSEU Pension Trust was the lead plaintiff in the lawsuit filed in 2001 and consolidated with other class-action lawsuits.

"OPTrust has worked hard for many years to bring this case to its successful conclusion, and, with this conditional settlement, has secured an historically significant financial recovery for class members," Heather Gavin, chief administrative officer of the OPSEU Pension Trust, said in a statement.

The Ontario Teachers' Pension Plan Board and the Department of the Treasury of the State of New Jersey and its Division of Investment were the lead plaintiffs in the other lawsuit, which was filed in 2004 and consolidated with other class-action lawsuits.

"We pursued this class action on our 250,000 members' behalf and are pleased with the tentative settlement," Teachers chief executive Claude Lamoureux said in a statement. "We have a fiduciary duty to the active and retired Ontario teachers for whom we invest to press the companies we invest in to deliver shareholder value. As this suit illustrates, we are prepared to act when necessary."

The settlement is also conditional on court, securities and stock exchange approvals.

"At this time, there can be no assurance that such an agreement can be reached," Nortel cautioned.

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