In announcing the change, the board said that buying out the old contract would "extinguish significant existing liabilities."

That decision creates the possibility of significant liability for directors, particularly those on compensation committees.

But the defendant still faces significant monetary liability.

The new inquiry, which began in May, threatens to undermine that claim and could place significant new financial liabilities on the company.

"This resolution makes it clear that when it comes to public art, you have to respect the artist's rights, or incur significant liability."

Named in numerous lawsuits, Mr. Lay could face significant personal liability.

"To continue to serve on this board could potentially expose me to significant legal liabilities which I am not willing to accept."

The company does not face financially significant liability from asbestos cases, he said, and has $2 billion in asbestos insurance.

"It's fairly widely felt in both agencies that we're taking on a significant liability," said an official involved in the negotiations.

The agency's biggest problem is that it faces significant potential liabilities.