Yesterday, Enterasys Networks Inc. (NYSE: ETS) announced an agreement to settle the securities class actions filed against it in the U.S. District Court for the District of New Hampshire. Enterasys agreed to pay approximately $17.4 million in cash and to distribute shares of common stock with a value of $33.0 million.

The settlement also continues a recent trend, previously discussed here, of including corporate governance reforms in settlements. A separate press release by the law firm Berman DeValerio Pease Tabacco Burt & Pucillo indicates that the settlement includes the following key corporate governance provisions:

-- Shareholders will be able to vote on a proposal, submitted by LACERA and supported by Enterasys, to declassify the board of directors. If approved, board members would be elected to one-year terms at each annual meeting, instead of the three-year, staggered terms they now serve.

-- Shareholders owning at least 5 percent of Enterasys stock for a minimum of two years may submit to Enterasys' nominating committee up to two candidates each year for election to the board of directors. If the nominating committee rejects the nominations, it must explain its reasoning in the annual proxy report.

-- The proxy statement must include a description of factors that determine the CEO's compensation and place the executive's salary in the context of comparable companies.

-- At least two-thirds of the board must be independent.

-- All executive vice presidents and the chief financial officer must report at least once a year to the independent members of the board, who may question them about the company without the presence of the CEO.

-- No board member shall serve as a director of more than three other public companies.