Martina Navratilova and her longtime companion have reached a tentative financial agreement in an out-of-court settlement that would end the palimony suit against the tennis star, her publicist says.

But the talks broke down over non-financial matters in the settlement between Navratilova and Judy Nelson, publicist Linda Dozoretz said Tuesday night.Navratilova and Nelson began discussing a settlement on the second day of a hearing over whether Nelson's attorney should be disqualified from the case. Dozoretz, who said Nelson made the offer, added she was "optimistic" both sides would come to terms.

Nelson contends Navratilova reneged on a 1986 non-marital cohabitation agreement in which Nelson was to get half of the estimated $5 million to $9 million earned during their seven-year relationship.

An unidentified source close to the case told the Fort Worth Star-Telegram that following the couple's break-up in February, Navratilova offered to settle for approximately $1 million. The nine-time Wimbledon champion has said in a televised interview with ABC-TV's Barbara Walters that Nelson's side refused to begin talking for less than $2 million.

Dozoretz said Nelson had substantially reduced her economic expectations but the stumbling block was Nelson's refusal to acknowledge that the cohabitation agreement was invalid.

Nelson said both sides have compromised in trying to reach a settlement.

"Neither of us ever wanted this to happen. It has, and we're in it, and I think that we would both like to see the pain and the suffering stop so that we can both recover from it and get on with our lives," she said.

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Nelson said the lawsuit is about more than the money she could win in a judgment.

"It's about Martina honoring a contract, an agreement that she did honestly and that we both wanted," said Nelson, a former beauty queen. "I really don't want to look at the dollars and cents of it. I mean, it goes beyond that."

Earlier Tuesday, the two women returned to a state district courtroom for the second day of a preliminary hearing. State District Judge Harry Hopkins was to rule whether Nelson's attorney, Jerry Loftin of Fort Worth, should be disqualified from the case.

Navratilova's attorneys are trying to have Loftin removed, saying he has unfair knowledge of Navratilova's financial status due to previous work for her.

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