MURRAY HILL, N.J.-Lucent Technologies Inc. has agreed to pay $315 million in common stock and cash to settle 54 separate shareholder lawsuits, without admitting any wrongdoing in connection with charges it violated federal and state securities laws.
After the settlement proceeds are distributed, Lucent also will issue 200 million warrants, which expire three years after issuance, to purchase an equal number of common stock shares at a strike price of $2.75. The current fair market value of these warrants is about $100 million, Lucent said.
Lucent said it is in negotiations over how much its Avaya spin-off, “which is contractually responsible for a portion of the settlement,” must contribute.
The telecommunications equipment vendor said it also would seek partial recovery of some of its settlement obligation from its fiduciary insurance policies, which are worth up to $70 million. It already has received commitments that other of its insurance carriers will collectively pay $148 million cash into the settlement fund.
The agreement, which is subject to court approval, would settle “all pending shareowner and related litigation against the company, its current and former officers and directors and certain other defendants,” Lucent said.
These include the consolidated shareowner class-action lawsuit in the U.S. District Court in Newark, N.J., and all related Employee Retirement Income Security Act, bondholder, derivative and state securities cases, the company said.
In connection with the settlement, Lucent expects to record a second-quarter charge this year of about $420 million, or 11 cents per share. However, this sum may be adjusted downward depending on how much Lucent’s fiduciary insurance carrier contributes and also to reflect any changes in the fair value of the warrants to purchase common stock.
“By resolving these legacy issues, we can put all of our energy into running the business and continuing to rebuild shareowner confidence in the performance of this company,” said Patricia Russo, chairman and chief executive officer.
