Nortel Networks, incoming CEO settle U.S. lawsuit filed by Motorola Inc.
10/31/2005 5:19:00 PM
TORONTO (CP) - Former Motorola Inc. president Mike Zafirovski will pay the U.S. cellphone maker $11.5 million US to help settle a lawsuit that had threatened to block the American executive from becoming CEO of Nortel Networks Corp., the big Canadian telecom technology company.
Nortel and Motorola announced late Monday that the companies had resolved their dispute with the cash payment to Motorola and restrictions on Nortel and Zafirovski from certain recruiting activities.
The Motorola suit, filed last month in Circuit Court of Cook County, Ill., had sought to block Zafirovski, who had been Motorola's second-highest ranking executive until January, from working for Nortel, which is a competitor for some parts of its business.
In a statement after markets closed Monday, Nortel and Zafirovski said they had reached a settlement of the Oct. 18 lawsuit that will allow Zafirovski to join Nortel as president, chief executive and director Nov. 15 as originally planned and announced.
"We worked in good faith to resolve this issue with Motorola and we are very pleased with the successful outcome," Harry Pearce, chairman of Nortel's board of directors, said in the statement.
"The board selected Mike as we believe he is the best candidate to assume the role of president and CEO and we have every confidence in him."
Zafirovski said he was pleased he can apply his "full focus" to Nortel.
"I am looking forward to working with Nortel's leadership team and its employees to create a new chapter of prosperity and prominence for the company and its stakeholders," Zafirovski said.
Under terms of the settlement, which is subject to confidentiality restrictions, there are no admissions by Zafirovski, Nortel or Motorola of any violations of law, breaches of any agreements, or any other improper conduct.
The settlement requires Zafirovski to repay $11.5 million US in cash to Motorola, which was part of his separation payment from the U.S. company. It also restricts unspecified recruitment efforts by Nortel and Zafirovski against former Motorola employees.
Nortel said it has agreed to fully reimburse Zafirovski for his repayment to the world's second-biggest cellphone company.
Motorola, Inc. (NYSE:MOT) confirmed in a separate statement that it reached an agreement to settle the lawsuit against Zafirovski, the company's former president and chief operating officer.
In the lawsuit, Motorola alleged that Zafirovski's move to Nortel threatened an unlawful misappropriation of Motorola trade secrets and a breach of multiple non-compete, confidentiality and no solicitation agreements that Zafirovski had signed with Motorola.
Motorola said the lawsuit will be dismissed, but the court will keep jurisdiction of the matter to enforce terms of the settlement.
The Chicago-area company, which ranks behind Nokia as the world's biggest supplier of cellphones, said the settlement reaffirms Zafirovski's obligations to protect Motorola's trade secrets and confidential information.
The agreement also restricts Zafirovski from internal and customer activities that could lead to his use of and sharing of such information to Nortel's unfair advantage, Motorola said.
Zafirovski, 51, was chosen last month to replace William Owens, 65, who said the company needed a younger leader as it entered a new phase in its recovery from a major financial crisis.
At the time, Zafirovski said his top priority was to continue and possibly accelerate the "financial transformation" that Nortel undertook when accounting irregularities were discovered.
He will also focus on coming up with a "clear strategic focus" and on improving Nortel's profitability.
On the Toronto Stock Exchange, Nortel shares (TSX:NT) closed unchanged at $3.81 per share before the announcement.
The company will report its third quarter results Wednesday.
© The Canadian Press, 2005
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