Exhibit 10.11
Confidential Portions in Exhibit C omitted and filed separately with the
Securities and
Exchange Commission. Bullet points denote omissions.
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

                 
 
      x        
 
               
In re NORTEL NETWORKS CORP.
      :   Civil Action No. 05-MD-1659 (LAP)    
SECURITIES LITIGATION
      :        
 
      :  
CLASS ACTION
   
 
               
 
      :        
This Document Relates To:
      :        
 
      :        
ALL ACTIONS.
      :        
 
      x        
 
               

STIPULATION AND AGREEMENT OF SETTLEMENT (NORTEL II)
     This Stipulation and Agreement of Settlement (the “Stipulation”) is
submitted in the above-captioned In re Nortel Networks Corp. Securities
Litigation, Master File No. 05-MD-1659 (LAP) (the “Nortel II U.S. Action”),
pursuant to Rule 23 of the Federal Rules of Civil Procedure. Subject to the
approval of the United States District Court for the Southern District of New
York, this Stipulation is entered into among Lead Plaintiffs and
Class Representatives Ontario Teachers’ Pension Plan Board and the Department of
the Treasury of the State of New Jersey and its Division of Investment
(hereinafter “Lead Plaintiffs”) on behalf of themselves and the U.S. Global
Class (as defined herein), and defendant Nortel Networks Corporation (“Nortel”),
by and through their respective counsel.
     The following separate class actions in Ontario and Quebec, raising claims
on behalf of persons who purchased Nortel Securities (as defined herein), are
also being settled contemporaneously as part of a single settlement of those
actions and the Nortel II U.S. Action on the terms herein: Skarstedt v.
Corporation Nortel Networks, Superior Court of Quebec, District of Montreal, No:
500-06-000277-059 (the “Quebec Skarstedt Action”) and Gallardi v.

 

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Norte? Networks Corporation et al., Court File No. 05-CV-285606CP (Ont. Sup.Ct.
J.) (the “Ontario Gallardi Action”) (collectively, the “Nortel II Canadian
Actions”).
     A separate class action brought on behalf of persons who purchased Nortel
common stock or call options on Nortel common stock or wrote (sold) put options
on Nortel common stock from October 24, 2000 through February 15, 2001,
inclusive (the “Nortel I Class Period”), captioned In re Nortel Networks Corp.
Securities Litigation, Consolidated Civil Action No. 01 Civ. 1855 (RMB) (the
“Nortel I U.S. Action”) is also pending in the United States District Court for
the Southern District of New York, and is being settled contemporaneously
herewith.
     Also being settled contemporaneously herewith are the following separate
class actions brought in British Columbia, Ontario and Quebec, as part of a
single settlement including the Nortel I U.S. Action: Jeffery, et al., v. Nortel
Networks Corp., et al., Supreme Court of British Columbia, Vancouver Registry,
File No. S015159 (the “B.C. Jeffery Action”); Frohlinger v. Norte/ Networks
Corp., et al., Ontario Superior Court of Justice, Court File No. 02-CL-4605 (the
“Ontario Frohlinger Action”); and Association de Protection des Epargnants et
Investisseurs du Quebec v. Corporation Nortel Networks, Superior Court of
Quebec, District of Montreal, No: 500-06-000 126-017 (the “Quebec A.P.E.I.Q.
Action”) (collectively, the “Nortel I Canadian Actions”).
     It is a condition to the Settlement (as defined herein) that the Nortel II
U.S. Action and the Norte] II Canadian Actions (collectively, the “Nortel II
Actions”), as well as the Nortel I U.S. Action and the Nortel I Canadian Actions
(collectively, the “Nortel I Actions”) be settled contemporaneously and that the
Settlement and the settlement of the Norte? I Actions be approved by all of the
respective courts.

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     WHEREAS:
     A. Beginning on March 17, 2004, several putative class actions on behalf of
persons who purchased Nortel common stock or call options on Nortel common stock
or wrote (sold) put options on Nortel common stock during the period between
April 24, 2003 through April 27, 2004, inclusive, were filed against Nortel and
Frank Dunn, Douglas C. Beatty, Michael J. Gollogly, John Edward Cleghorn, Robert
Ellis Brown, Robert Alexander Ingram, Guylaine Saucier, and Sherwood Hubbard
Smith, Jr., (the “Individual Defendants”) alleging violations of Sections 10(b)
and 20(a) of the (United States) Securities Exchange Act of 1934, as amended
(the “Exchange Act”), and Rule 10b-5 promulgated thereunder, and subsequently
consolidated by order of the United States District Court for the Southern
District of New York, entered June 30, 2004, under the caption In re Nortel
Networks Corp. Securities Litigation, Master File No. 04 Civ. 2115 (LAP);
     B. On September 10, 2004, Lead Plaintiffs filed a Consolidated Class Action
Complaint (the “Complaint”), which alleged that Nortel, with the participation
of the Individual Defendants, perpetrated a fraud on the investing public by
improperly accounting for Nortel’s reserve accounts, reversing millions of
dollars into income to make the market believe that Nortel had returned to
profitability, when, in fact, it had not. On November 5, 2004, certain
Defendants moved to dismiss the Complaint. On December 3, 2004, Lead Plaintiffs
filed their memorandum of law opposing the motions to dismiss. On December 23,
2004, certain Defendants filed their reply papers in further support of the
motions to dismiss. On January 19, 2005, Lead Plaintiffs and Defendants entered
into a stipulation whereby Defendants would withdraw their motions to dismiss,
Lead Plaintiffs would withdraw their previously-filed motion to lift the
discovery stay implemented by the (United States) Private Securities Litigation
Reform

3

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Act, Lead Plaintiffs would drop the Audit Committee Defendants (herein defined)
from the Complaint, and the parties would commence discovery;
     C. Lead Plaintiffs filed their Second Amended Consolidated Class Action
Complaint (the “Second Amended Complaint”) on September 16, 2005. The Second
Amended Complaint alleged that the members of the Audit Committee of Nortel’s
Board of Directors (the “Audit Committee Defendants”) violated Section 10(b) of
the Exchange Act and Rule 10b-5 promulgated thereunder by issuing materially
false and misleading statements during the Class Period in a scheme to
artificially inflate the value of Nortel publicly-traded securities.
Specifically, Lead Plaintiffs alleged that the Audit Committee Defendants
disregarded the warning provided to them by Nortel’s auditors, Deloitte & Touche
LLP (“Deloitte”), that Nortel was reversing hundreds of millions of dollars of
reserves into income at the same time that Nortel’s projected losses turned into
profits, and that the Audit Committee Defendants ignored Deloitte’s
recommendation that Nortel institute a rigorous review of Nortel’s remaining
balance sheet provisions, choosing instead to approve numerous financial
disclosures reporting positive earnings results and a premature restatement that
deceived investors as to Nortel’s true financial condition;
     D. Pursuant to a stipulation entered into in January 2005 between Nortel
and Lead Plaintiffs, Nortel waived its right to move to dismiss the Second
Amended Complaint. As a result of the pending settlement negotiations, the
parties agreed to extend the dates for defendants Dunn and Gollogly to answer
the First Amended Complaint, the dates for Nortel, Dunn and Gollogly to answer
the Second Amended Complaint and the date by which the Audit Committee
Defendants had to move to dismiss or answer the Second Amended Complaint;

4

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     E. Lead Plaintiffs filed their motion for class certification on May 13,
2005. As a result of the pending settlement negotiations, the parties agreed to
extend the dates for Defendants to oppose the class certification motion. As
part of this Settlement, the Defendants to the Nortel II U.S. Action will
stipulate to a class, as follows: all persons and entities who purchased Nortel
common stock or call options on Nortel common stock or wrote (sold) put options
on Nortel common stock (collectively, “Nortel Securities”) during the period
between April 24, 2003 through April 27, 2004, inclusive (the “Class Period”),
and who suffered damages thereby, including, but not limited to, those persons
or entities who traded in Nortel Securities on the New York Stock Exchange
and/or the Toronto Stock Exchange. The parties to the Nortel II U.S. Action will
seek an Order under Rule 23 of the Federal Rules of Civil Procedure certifying
the class for settlement purposes;
     F. On March 9, 2005, the Ontario Gallardi Action was commenced in the
Ontario Superior Court of Justice against Nortel, the Individual Defendants and
Deloitte through the issuance of a Statement of Claim. The claim alleges that
the defendants were liable for misrepresenting Nortel’s true financial situation
by creating improper cash reserves and issuing false reports and financial
statements that artificially inflated Nortel’s earnings and the price of Nortel
securities during the Class Period. It also alleges that Nortel’s top executives
used these reserves to trigger bonus payments that were payable in the event of
Nortel’s return to profitability. The claim further alleges that Nortel and
certain of its officers breached corporate and securities legislation, including
the Canada Business Corporations Act, the Ontario Securities Act and the
Canadian Competition Act;
     G. The plaintiff in the Ontario Gallardi Action filed with the Ontario
Superior Court of Justice and delivered to the defendants in November 2005 their
motion for certification.

5

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Counsel in the Ontario Gallardi Action have attended a number of case
conferences before the Honourable Justice Winkler as the proceeding moved
towards a certification hearing;
     H. On February 18, 2005, the Quebec Skarstedt Action was commenced in the
Superior Court of Quebec against Nortel through the issuance of a Motion for
Authorization to Institute a Class Action. The claim alleges that Nortel
intentionally misrepresented its financial results for the fiscal year 2003. At
a preparatory conference held on May 19, 2005, the hearing of the Motion for
Authorization was scheduled for January 4 to 10, 2006. At that preparatory
conference, Nortel indicated its intention to file a Motion to Dismiss the
Petitioner’s Motion for Authorization to Institute a Class Action on the basis
that the factual allegations lacked a substantial connection to Quebec. A
further preparatory conference was held on October 6, 2005, at which time Nortel
agreed to serve its Motion to Dismiss by November 11, 2005. It was also decided
that the Motion to Dismiss should be heard before the Motion for Authorization
and thus, the hearing of the Motion for Authorization was postponed. The hearing
of the Motion to Dismiss was scheduled for April 10 and 11, 2006, but was
adjourned following the announcement of the settlement agreement in principle in
February 2006;
     I. Following the announcement of the settlement agreement in principle in
February 2006 to settle the Nortel II Actions and the Nortel I Actions as part
of a global settlement, Lead Plaintiffs Counsel and Nortel’s Counsel have worked
with plaintiffs’ counsel in the Nortel I Actions and the Nortel II Canadian
Actions to coordinate the settlement process to obtain approvals of the global
settlement by the United States District Court for the Southern District of New
York and by the applicable Canadian courts, and plaintiffs’ counsel in the
Nortel I Actions and Nortel II Canadian Actions have been consulted and
participated in the drafting of this Stipulation and other settlement documents;

6

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     J. Defendants in the Nortel II Actions deny any wrongdoing whatsoever, and
this Stipulation shall in no event be construed or deemed to be evidence of or
an admission or concession on the part of any defendant with respect to any
claim of any fault or liability or wrongdoing or damage whatsoever, or any
infirmity in the defenses that the defendants have asserted;
     K. The parties to this Stipulation recognize that the Nortel II U.S. Action
has been filed by the Lead Plaintiffs and defended by the Defendants in good
faith, that the Nortel II U.S. Action is being voluntarily settled after advice
of counsel, and that the terms of the Settlement are fair, reasonable and
adequate. This Stipulation shall not be construed or deemed to be a concession
by Lead Plaintiffs or any Class Member of any infirmity in the claims asserted
in the Nortel II U.S. Action or any other action;
     L. Lead Plaintiffs’ Counsel have conducted investigations relating to the
claims and the underlying events and transactions alleged in the Nortel II U.S.
Action. Lead Plaintiffs’ Counsel have analyzed the evidence adduced during
pretrial discovery and have researched the applicable law with respect to the
claims of the Lead Plaintiffs and the U.S. Global Class against the Defendants
and the potential defenses thereto;
     M. The parties recognize that the claims asserted in either of the Nortel
II Actions or the Nortel I Actions, if proved by the plaintiffs in those
actions, could have exposed Nortel to substantial damages awards. Accordingly,
the parties considered that a resolution of the Nortel II Actions and the Nortel
I Actions was advisable from the point of view of all parties;
     N. With the assistance of the Honorable Robert W. Sweet, United States
District Court Judge, acting as a special mediator, the Lead Plaintiffs in the
Nortel II U.S. Action and the Lead Plaintiff in the Nortel I U.S. Action,
directly and by their counsel, have conducted

7

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discussions and arm’s-length negotiations with Nortel’s Counsel with respect to
a global compromise and settlement of the Nortel I Actions and the Nortel II
Actions and with a view to settling the issues in dispute and achieving the best
relief possible consistent with the interests of the overall classes in the
Nortel II Actions and the Nortel I Actions;
     O. Nortel considers that, in order for it to achieve an end to litigation,
it is a necessary condition to the settlement of the Nortel II U.S. Actions that
as part of the Settlement the applicable Canadian Courts approve the Settlement
with respect to the Nortel II Canadian Actions and that the Settlement be
similarly conditional on the approval of the separate settlement reached with
respect to the Nortel I Actions;
     P. Based upon their investigation and pretrial discovery as set forth
above, Lead Plaintiffs and their counsel have concluded that the terms and
conditions of this Stipulation are fair, reasonable and adequate to Lead
Plaintiffs and the U.S. Global Class, and are in their best interests, and Lead
Plaintiffs have agreed to settle the claims raised in the Nortel II U.S. Action
pursuant to the terms and provisions of this Stipulation, after considering
(a) the substantial benefits that the members of the U.S. Global Class will
receive from settlement of the Nortel 11 U.S. Action, (b) the attendant risks of
litigation, and (c) the desirability of permitting the Settlement to be
consummated as provided by the terms of this Stipulation; and
     Q. Unless Nortel registers the Gross Settlement Shares (as defined herein),
Nortel will issue the Gross Settlement Shares in reliance on the exemption from
registration under the (United States) Securities Act of 1933, 15 U.S.C.
§77c(a)(1), as amended, pursuant to Section 3(a)(l 0) thereunder based on the
Courts’ approval of the fairness of the terms and conditions of the Settlement
following a fairness hearing open to everyone to whom any Gross Settlement
Shares would be issued in the proposed Settlement, with adequate notice thereof
having been

8

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given to all those persons. In Canada, Nortel intends to issue the Gross
Settlement Shares in reliance upon the Exemptive Relief (as defined herein)
granted by the applicable securities regulatory authorities. However, if Nortel
determines that such Exemptive Relief is unlikely to be granted, Nortel would
qualify the Gross Settlement Shares by a prospectus filed in each Canadian
province and territory.
     NOW THEREFORE, without any admission or concession on the part of Lead
Plaintiffs of any lack of merit of the Nortel II U.S. Action whatsoever, and
without any admission or concession of any liability or wrongdoing or lack of
merit in the defenses whatsoever by Defendants, it is hereby STIPULATED AND
AGREED, by and between the parties to this Stipulation, through their respective
counsel, subject to approval of the respective Courts pursuant to, as the case
may be, Rule 23(e) of the (United States) Federal Rules of Civil Procedure,
Article 1025 of the Quebec Code of Civil Procedure, Section 29 of the Ontario
Class Proceedings Act, 1992 and Section 35 of the British Columbia
Class Proceedings Act, in consideration of the benefits flowing to the parties
hereto from the Settlement herein set forth, that all Settled Claims (as defined
herein ), as against the Released Parties (as defined herein ), and all Settled
Defendants’ Claims (as defined herein) shall be compromised, settled, released
and dismissed with prejudice, upon and subject to the following terms and
conditions:
DEFINITIONS
     1. As used in this Stipulation, the following terms shall have the
following meanings:
          (a) “Authorized Claimant” means a Class Member who submits a timely
and valid Proof of Claim form to the Claims Administrator.
          (b) “B.C. Jeffery Action” means Jeffery et al. v. Nortel Networks
Corporation et al., Supreme Court of British Columbia, Vancouver Registry Court
File No. S015159.

9

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          (c) “Canadian Class Counsel” means Ontario National Class Counsel and
Quebec Class Counsel.
          (d) “Canadian Classes” means the Ontario National Class and the Quebec
Class.
          (e) “Canadian Courts” means the Superior Court of Quebec and the
Ontario Superior Court of Justice.
          (f) “Canadian Representative Plaintiffs” means Clifford W. Skarstedt
and Peter Gallardi.
          (g) “Cash Settlement Amounts” means the amounts specified in ¶ 4(a),
(b) (c) and (e) hereof.
          (h) “Claims Administrator” means The Garden City Group, Inc. (“GCG”),
which shall administer the Settlement.
          (i) “Class” means all members of the U.S. Global Class and the
Canadian Classes.
          (j) “Class Distribution Order” has the meaning defined in ¶ 9 hereof.
          (k) “Class Member” means a member of the Class.
          (l) “Class Period” means, for the purposes of this Settlement only,
the period of time between April 24, 2003 through April 27, 2004, inclusive.
          (m) “Court” means the United States District Court for the Southern
District of New York.
          (n) “Courts” means the United States District Court for the Southern
District of New York, the Ontario Superior Court of Justice, and the Superior
Court of Quebec.
          (o) “Defendants” means Nortel and the Individual Defendants.

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          (p) “Derivative Application” means the application brought in Indiana
Electrical Workers Pension Trust Fund IBEW and Laborers Local 100 and 397
Pension Fund v. Nortel Networks Corporation, Ontario Superior Court of Justice,
Court File No. 49059 for leave pursuant to the Canada Business Corporations Act
to commence a representative action in the name of and on behalf of Nortel
against certain of the Released Parties.
          (q) “Effective Date” means the date upon which the Settlement
contemplated by this Stipulation shall become effective, as set forth in ¶ 24
hereof.
          (r) “Escrow Agent” means Bernstein Litowitz Berger & Grossmann LLP and
any of its successors as approved by the Courts, if necessary, such successors
to be agreed upon by Plaintiffs’ Counsel and the parties to the existing escrow
agreements, acting as agent for the Class.
          (s) “Exemptive Relief” has the meaning defined in ¶ 24(1)(1) hereof.
          (t) “Final” or “Finality”, with respect to the Judgments (as defined
herein), means: (a) if no appeal is filed, the expiration date of the time
provided for under the corresponding rules of the applicable court or
legislation for filing or noticing of any appeal from the Courts’ Judgments
approving the Settlement; or (b) if there is an appeal from the Judgments, the
date of (i) final dismissal of any appeal from the Judgments, or the final
dismissal of any proceeding on certiorari or otherwise to review the Judgments;
or (ii) the date of final affirmance on an appeal of the Judgments, the
expiration of the time to file a petition for a writ of certiorari or other form
of review, or the denial of a writ of certiorari or other form of review of the
Judgments, and, if certiorari or other form of review is granted, the date of
final affirmance of the Judgments following review pursuant to that grant. Any
proceeding or order, or any appeal or petition for a writ of certiorari or other
form of review pertaining solely to (i) any application for

11

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attorneys’ fees, costs or expenses, and/or (ii) the plan of allocation, shall
not in any way delay or preclude the Judgments from becoming Final.
          (u) “GCG” means The Garden City Group, Inc.
          (v) “Gross Cash Settlement Fund” means the cash amounts paid or to be
paid to the Escrow Agent pursuant to ¶ 4(a), (b), (c) and (e) hereof, which
consists of (i) Two Hundred Ninety Million, One Hundred Sixty-Two Thousand, Four
Hundred and Twenty-Eight United States Dollars and Forty-Eight Cents
(US$290,162,428.48), being the sum of Two Hundred Eighty-Seven Million, Five
Hundred Thousand United States Dollars (US$287,500,000) plus Two Million, Six
Hundred Sixty-Two Thousand, Four Hundred and Twenty-Eight United States Dollars
and Forty-Eight Cents (US$2,662,428.48), paid to the Escrow Agents by Nortel on
June 1, 2006, plus (ii) Thirteen Million Five Hundred United States Dollars
(US$13,500,000) paid by Nortel’s insurers, plus (iii) Sixty Six Million, Four
Hundred Ninety-Five Thousand United States Dollars (US$66,495,000) and the
interest thereon transferred to the Escrow Agent by the Nortel I escrow agents
for the benefit of the Nortel II Class (pursuant to ¶ 4(c) hereof), plus
(iv) one-quarter of any actual recovery as a result of the action referenced in
T 4(e) hereof, plus (v) any interest on or other income or gains in respect of
the amounts in (i), (ii), (iii), (iv) and (v) earned while such amounts are held
by the Escrow Agent.
          (w) “Gross Settlement Fund” means the Gross Cash Settlement Fund plus
the Gross Settlement Shares.
          (x) “Gross Settlement Shares” means 314,333,875 shares of common stock
of Nortel to be issued by Nortel, pursuant to the Settlement, as may be adjusted
in accordance with ¶4(d) hereof.

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          (y) “Individual Defendants” means Frank Dunn, Douglas C. Beatty,
Michael J. Gollogly, John Edward Cleghorn, Robert Ellis Brown, Robert Alexander
Ingram, Guylaine Saucier, and Sherwood Hubbard Smith, Jr.
          (z) “Judgment” or “Judgments” means any, some or all of the proposed
judgments and orders to be entered by the respective Courts approving the
Settlement substantially in the forms attached hereto as Exhibits B, D and E.
          (aa) “Lead Plaintiffs” means Ontario Teachers’ Pension Plan Board and
the Department of the Treasury of the State of New Jersey and its Division of
Investment.
          (bb) “Lead Plaintiffs’ Counsel” means the law firm of Bernstein
Litowitz Berger & Grossmann LLP.
          (cc) “Net Cash Settlement Fund” has the meaning defined in ¶ 5 hereof.
          (dd) “Net Settlement Shares” has the meaning defined in ¶ 4(d) hereof.
          (ee) “Net Settlement Fund” means the Net Cash Settlement Fund and the
Net Settlement Shares.
          (ff) “Nortel” means Nortel Networks Corporation.
          (gg) “Nortel I Actions” means the Nortel I Canadian Actions and the
Nortel I U.S. Action.
          (hh) “Nortel I Canadian Actions” means the B.C. Jeffery Action, the
Ontario Frohlinger Action and the Quebec A.P.E.I.Q. Action.
          (ii) “Nortel I Class” means all persons and entities who purchased
Nortel common stock or call options on Nortel common stock or wrote (sold) put
options on Nortel common stock (collectively, the “Nortel Securities”) during
the period between October 24, 2000 through February 15, 2001, inclusive, and,
for purposes of the Nortel I U.S. Action, who suffered

13

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damages thereby, including, but not limited to, those persons or entities who
traded in Nortel Securities on the New York Stock Exchange and/or the Toronto
Stock Exchange. Excluded from the Nortel I Class are the defendants Nortel,
Clarence Chandran, Frank Dunn, John Roth, members of the immediate families of
any of the individual defendants, any entity in which any defendant has a
controlling interest or is a parent or subsidiary of or is controlled by Nortel,
and the officers, directors, affiliates, legal representatives, heirs,
predecessors, successors or assigns of any of the defendants. Excluded from the
class in the Nortel I U.S. Action are any putative class members who previously
requested exclusion in response to the Notice of Pendency (as listed in the
Affidavit of Jack R. DiGiovanni dated July 2, 2004 and filed with the court in
the Nortel I U.S. Action), save if they are also members of any of the Nortel I
Canadian classes and do not elect to exclude themselves from such Nortel I
Canadian classes (in which case they shall be eligible to share in the proceeds
of and will be bound by the terms of the settlement governing the Nortel I
Actions). Also excluded from the Nortel I Class are any putative members of the
Nortel I Class who exclude themselves by timely requesting exclusion in
accordance with the requirements set forth in the notice for the Nortel I
Actions.
          (jj) “Nortel I Notice” means Notice of Certification in Canada and
Proposed Settlements of Class Actions, Motions for Attorneys’ Fees and
Settlement Fairness Hearings, which is to be sent to members of the Nortel I
Class.
          (kk) “Nortel I U.S. Action” means In re Nortel Networks Corp.
Securities Litigation, Consolidated Civil Action No. 01-CV-1855 (RMB).
          (ll) “Nortel II Actions” means the Nortel II Canadian Actions and the
Nortel II U.S. Action.

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          (mm) “Nortel II Canadian Actions” mean the Quebec Skarstedt Proceeding
and the Ontario Gallardi Action.
          (nn) “Nortel II Defendants” means Nortel, the Individual Defendants
and Deloitte & Touche LLP.
          (oo) “Nortel II U.S. Action” means In re Nortel Networks Corp.
Securities Litigation, Master File No. 05-MD-1659 (LAP).
          (pp) “Nortel common stock” or “common stock of Nortel” means common
shares without nominal or par value in the authorized capital of Nortel.
          (qq) “Nortel Securities” means Nortel common stock or call options on
Nortel common stock or put options on Nortel common stock.
          (rr) “Nortel’s Counsel” means the law firms of Shearman & Sterling LLP
in the United States and Lenczner Slaght Royce Smith Griffin LLP and Ogilvy
Renault LLP in Canada.
          (ss) “Notice” means the Notice of Pendency and Certifications of
Class Actions and Proposed Settlements, Motions for Attorneys’ Fees and
Settlement Fairness Hearings, which is to be sent to members of the Class
substantially in the form attached hereto as Tab I to Exhibit A.
          (tt) “Ontario Gallardi Action” means Gallardi v. Nortel Networks
Corporation et al., Court File No. 05-CV-285606CP (Ont. Sup.Ct. J.).
          (uu) “Ontario Frohlinger Action” means Frohlinger v. Nortel Networks
Corporation et al., Court File No. 02-CL-4605 (Ont. Sup.Ct. J.).
          (vv) “Ontario National Class” means the class to be certified, for the
purposes of settlement only, by the Ontario Superior Court of Justice in the
Ontario Gallardi Action

15

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comprising all persons or entities, except members of the Quebec Class, who,
while residing in Canada at the time, purchased Nortel common stock or call
options or wrote (sold) put options on Nortel common stock during the period
between April 24, 2003 through April 27, 2004, inclusive. Excluded from the
Ontario National Class are (i) the Defendants; (ii) James Kinney (Finance Chief
for Nortel’s Wireless Networks Division, Richardson, Texas), Ken Taylor (Vice
President for Nortel’s Enterprise Networks Division, Raleigh, North Carolina),
Craig Johnson (Finance Director for Nortel’s Wireline Networks Division,
Richardson, Texas), Doug Hamilton (Finance Director for Nortel’s Optical
Networks Group, Montreal, Quebec), Michel Gasnier (Vice President of Finance for
Europe), Robert Ferguson (Vice President of Finance for China), and William
Bowrey (Controller for Asia); (iii) members of the immediate family of each of
the Individual Defendants and/or any of the individuals referenced above;
(iv) any entity in which any Defendant and/or any of the individuals referenced
above has a controlling interest; (v) any parent, subsidiary or affiliate of
Nortel; (vi) any person who was an officer or director of Nortel or any of its
subsidiaries or affiliates during the Class Period; and (vii) the legal
representatives, heirs, predecessors, successors or assigns of any of the
excluded persons or entities. Also excluded from the Ontario National Class are
any putative members of the Ontario National Class who exclude themselves by
timely filing a request for exclusion in accordance with the requirements set
forth in the Notice.
          (ww) “Ontario National Class Counsel” means Rochon Genova LLP and
Lemers LLP.
          (xx) “Opt-out Threshold” has the meaning set forth in ¶ 23 and in the
Supplemental Agreement.

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          (yy) “Order for Notice and Hearing” means the proposed order
preliminarily approving the Settlement and directing notice thereof to the Class
substantially in the form attached hereto as Exhibit A.
          (zz) “Plaintiffs’ Counsel” means Plaintiffs’ Lead Counsel, Canadian
Class Counsel, and any other counsel representing Class Members.
          (aaa) “Proof of Claim” means the form substantially in the form
attached as Tab 2 to Exhibit A hereto.
          (bbb) “Publication Notice” means the summary notice of proposed
Settlement and hearing for publication substantially in the form attached as Tab
3 to Exhibit A.
          (ccc) “Quebec A.P.E.I.Q. Action” means Association de Protection des
Epargnants et Investisseurs du Quebec v. Corporation Nortel Networks, Superior
Court of Quebec, District of Montreal, No: 500-06-000126-017.
          (ddd) “Quebec Class” means the class to be authorized by the Superior
Court of Quebec in the Quebec Skarstedt Action, comprised of all persons and
entities who, while residing in Quebec at the time, purchased Nortel common
stock or call options on Nortel common stock or wrote (sold) put options on
Nortel common stock during the period between April 24, 2003 through April 27,
2004, inclusive. For purposes of the definition of Quebec Class, an entity means
a legal person established for a private interest, a partnership or an
association if at all times during the 12-month period preceding February 18,
2005, not more than 50 persons bound to it by contract of employment were under
its direction or control and if it is dealing at arm’s length with the
representative of the Quebec Class. Excluded from the Quebec Class are
(i) defendants in the Nortel II Actions; (ii) James Kinney (Finance Chief for
Nortel’s Wireless Networks Division, Richardson, Texas), Ken Taylor (Vice
President for

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Nortel’s Enterprise Networks Division, Raleigh, North Carolina), Craig Johnson
(Finance Director for Nortel’s Wireline Networks Division, Richardson, Texas),
Doug Hamilton (Finance Director for Nortel’s Optical Networks Group, Montreal,
Quebec), Michel Gasnier (Vice President of Finance for Europe), Robert Ferguson
(Vice President of Finance for China), and William Bowrey (Controller for Asia);
(iii) members of the immediate family of each of the individual defendants in
the Nortel II Actions and/or any of the individuals referenced above; (iv) any
entity in which any defendant in the Nortel II Actions and/or any of the
individuals referenced above has a controlling interest; (v) any parent,
subsidiary or affiliate of Nortel; (vi) any person who was an officer or
director of Nortel or any of its subsidiaries or affiliates during the
Class Period; and (vii) the legal representatives, heirs, predecessors,
successors or assigns of any of the excluded persons or entities. Also excluded
from the Quebec Class are any putative members of the Quebec Class who exclude
themselves by timely filing a request for exclusion in accordance with the
requirements set forth in the Notice.
          (eee) “Quebec Class Counsel” means Trudel & Johnston.
          (fff) “Quebec Skarstedt Action” means Skarstedt v. Corporation Nortel
Networks, Superior Court of Quebec, No: 500-06-000277-059.
          (ggg) “Released Parties” means any and all of the Nortel II
Defendants, their past or present subsidiaries, parents, principals, affiliates,
general or limited partners or partnerships, successors and predecessors, heirs,
assigns, officers, directors, agents, employees, attorneys, advisors, investment
advisors, investment bankers, underwriters, insurers, co-insurers, re-insurers,
accountants, auditors, consultants, administrators, executors, trustees,
personal representatives, immediate family members and any person, firm, trust,
partnership, corporation, officer, director or other individual or entity in
which any Nortel II Defendant has a controlling

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interest or which is related to or affiliated with any of the Nortel II
Defendants, and the legal representatives, heirs, executors, administrators,
trustees, successors in interest or assigns of the Defendants.
          (hhh) “Settled Claims” means any and all claims, debts, demands,
rights or causes of action, suits, matters, and issues or liabilities whatsoever
(including, but not limited to, any claims for damages, interest, attorneys’
fees, expert or consulting fees, and any other costs, expenses or liability
whatsoever), whether based on United States or Canadian federal, state,
provincial, local, statutory or common law or any other law, rule or regulation,
whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated,
at law or in equity, matured or unmatured, whether class or individual in
nature, including both known claims and Unknown Claims (as defined herein),
(i) that have been asserted in any of the Nortel II Actions against any of the
Released Parties, or (ii) that could have been asserted in any forum by the
Class Members or any of them against any of the Released Parties which arise out
of or are based upon the allegations, transactions, facts, matters or
occurrences, representations or omissions involved, set forth, or referred to in
the Nortel II Actions and which relate to the purchase of Nortel common stock or
call options on Nortel common stock or the writing (sale) of put options on
Nortel common stock during the Class Period, or (iii) any oppression or other
claims under the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as
amended, that arise out of or are based upon the allegations, transactions,
facts, matters or occurrences, representations or omissions, set forth or
referred to in the Nortel II Actions. “Settled Claims” does not mean or include
claims, if any, against the Released Parties arising under the (United States)
Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001,
et seq. (“ERISA”) that are not common to all Class Members and which ERISA
claims are the subject of an action pending before the

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Judicial Panel on Multidistrict Litigation, denominated In re Nortel Networks
Securities and “ERISA” Litigation, MDL Docket No. 1537. “Settled Claims” further
does not include: (a) the action in Rohac et al. v. Nortel Networks Corp. et
al., Ontario Superior Court of Justice, Court File No. 04-CV-3268 and (b) the
Derivative Application.
          (iii) “Settled Defendants’ Claims” means any and all claims, rights or
causes of action or liabilities whatsoever, whether based on United States or
Canadian federal, state, provincial, local, statutory or common law or any other
law, rule or regulation, including both known claims and Unknown Claims, that
have been or could have been asserted in the Nortel II Actions or any forum by
the Defendants or any of them or the successors and assigns of any of them
against any of the Lead Plaintiffs, Canadian Representative Plaintiffs, any
Class Member or their attorneys, which arise out of or relate in any way to the
institution, prosecution, or settlement of the Nortel II Actions (except Settled
Defendants’ Claims does not include all claims, rights or causes of action or
liabilities whatsoever related to the enforcement of the Settlement, including,
without limitation, any of the terms of this Stipulation or orders or judgments
issued by the Courts in connection with the Settlement, confidentiality
obligations or in respect of the Derivative Application).
          (jjj) “Settlement” means the global settlement of the Nortel II
Actions contemplated by this Stipulation.
          (kkk) “Settlement Amount” means (i) Two Hundred Ninety Million, One
Hundred Sixty-Two Thousand, Four Hundred and Twenty-Eight United States Dollars
and Forty-Eight Cents (US$290,162,428.48) as set out in ¶ 4(a) hereof;
(ii) Thirteen Million Five Hundred Thousand United States Dollars
(US$13,500,000) as set out in ¶ 4(b) hereof; (iii) Sixty-Six Million, Four
Hundred and Ninety-Five Thousand United States Dollars (US$66,495,000) as

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set out in ¶ 4(c) hereof; (iv) the Gross Settlement Shares issued by Nortel as
set out in ¶ 4(d) hereof; and (v) one-quarter of any actual gross recovery by
Nortel referenced in ¶ 4(e) hereof as a result of the action referenced therein;
          (lll) “Stipulation” means this Stipulation and Agreement of
Settlement.
          (mmm) ”Taxes” means (i) any and all applicable taxes, duties and
similar charges imposed by a government authority (including any estimated
taxes, interest or penalties) arising in any jurisdiction, if any (A) with
respect to the income or gains earned by or in respect of the Gross Cash
Settlement Fund, including, without limitation, any taxes that may be imposed
upon Nortel or their counsel with respect to any income or gains earned by or in
respect of the Gross Cash Settlement Fund for any period while it is held by the
Escrow Agent during which the Gross Cash Settlement Fund does not qualify as a
Qualified Settlement Fund for federal or state income tax purposes; (B) with
respect to the Gross Settlement Shares, if issued to the Escrow Agents, prior to
their distribution to the Authorized Claimants or Lead Plaintiffs’ Counsel; or
(C) by way of withholding as required by applicable law on any distribution by
the Escrow Agent or the Claims Administrator of any portion of the Gross
Settlement Fund to Authorized Claimants and other persons entitled hereto
pursuant to this Stipulation; and (ii) any and all expenses, liabilities and
costs incurred in connection with the taxation of the Gross Settlement Fund
(including without limitation, expenses of tax attorneys and accountants). For
the purposes of paragraph (A) hereof, taxes imposed on Nortel shall include
amounts equivalent to taxes that would be payable by Nortel but for the
existence of relief from taxes by virtue of loss carryforwards or other tax
attributes, determined by Nortel, acting reasonably, and accepted by the Escrow
Agent, acting reasonably.

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          (nnn) “Unknown Claims” means any and all Settled Claims which any of
the Lead Plaintiffs, Canadian Representative Plaintiffs or Class Members does
not know or suspect to exist in his, her or its favor at the time of the release
of the Released Parties and any Settled Defendants’ Claims which any Nortel II
Defendant does not know or suspect to exist in his, her or its favor, as of the
Effective Date, which if known by him, her or it might have affected his, her or
its decision(s) with respect to the Settlement. With respect to any and all
Settled Claims and Settled Defendants’ Claims, the parties stipulate and agree
that upon the Effective Date, the Lead Plaintiffs, Canadian Representative
Plaintiffs and the Defendants shall expressly waive, and each Class Member shall
be deemed to have waived, and by operation of the Judgments shall have expressly
waived, any and all provisions, rights and benefits conferred by any law of any
state, province or territory of the United States or Canada, or principle of
common law or otherwise, which is similar, comparable, or equivalent to Cal.
Civ. Code § 1542, which provides:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
Lead Plaintiffs, Canadian Representative Plaintiffs and Nortel acknowledge, and
Class Members by operation of law shall be deemed to have acknowledged, that the
inclusion of “Unknown Claims” in the definition of Settled Claims and Settled
Defendants’ Claims was separately bargained for and was a key element of the
Settlement.
          (ooo) “U.S. Global Class” means, for the purposes of this settlement
only, all persons and entities who purchased Nortel common stock or call options
on Nortel common stock or wrote (sold) put options on Nortel common stock during
the period between April 24, 2003 through April 27, 2004, inclusive, and who
suffered damages thereby. Members of the Canadian Classes who suffered damages
are included within the definition of U.S. Global Class,

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unless otherwise excluded by this definition. Excluded from the U.S. Global
Class are (i) the Defendants; (ii) James Kinney (Finance Chief for Nortel’s
Wireless Networks Division, Richardson, Texas), Ken Taylor (Vice President for
Nortel’s Enterprise Networks Division, Raleigh, North Carolina), Craig Johnson
(Finance Director for Nortel’s Wireline Networks Division, Richardson, Texas),
Doug Hamilton (Finance Director for Nortel’s Optical Networks Group, Montreal,
Quebec), Michel Gasnier (Vice President of Finance for Europe), Robert Ferguson
(Vice President of Finance for China), and William Bowrey (Controller for Asia);
(iii) members of the immediate family of each of the Individual Defendants;
(iv) any entity in which any Defendant and/or any of the individuals referenced
above has a controlling interest; (v) any parent, subsidiary or affiliate of
Nortel; (vi) any person who was an officer or director of Nortel or any of its
subsidiaries or affiliates during the Class Period; and (vii) the legal
representatives, heirs, predecessors, successors or assigns of any of the
excluded persons or entities. Also excluded from the U.S. Global Class are any
putative members of the U.S. Global Class who exclude themselves by timely
requesting exclusion in accordance with the requirements set forth in the
Notice.

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SCOPE AND EFFECT OF SETTLEMENT
     2. The obligations incurred pursuant to this Stipulation shall be in full
and final disposition of the Nortel II U.S. Action as part of the Settlement and
any and all Settled Claims as against all Released Parties and any and all
Settled Defendants’ Claims.
     3. (a) Upon the Effective Date of the Settlement, Lead Plaintiffs, Canadian
Representative Plaintiffs (as confirmed in separate agreements) and all
Class Members on behalf of themselves, their personal representatives, heirs,
executors, administrators, trustees, successors and assigns, with respect to
each and every Settled Claim, release and forever discharge, and are forever
enjoined from prosecuting, any Settled Claims against any of the Released
Parties, and shall not institute, continue, maintain or assert, either directly
or indirectly, whether in the United States, Canada or elsewhere, on their own
behalf or on behalf of any class or any other person, any action, suit, cause of
action, claim or demand against any Released Party or any other person who may
claim any form of contribution or indemnity (save for a contractual indemnity)
from any Released Party in respect of any Settled Claim or any matter related
thereto, at any time on or after the Effective Date.
          (b) Upon the Effective Date of this Settlement, defendants Nortel,
John Edward Cleghorn, Robert Ellis Brown, Robert Alexander Ingram, Guylaine
Saucier, and Sherwood Hubbard Smith, Jr., on behalf of themselves, their
personal representatives, heirs, executors, administrators, trustees, successors
and assigns, release and forever discharge each and every one of the Settled
Defendants’ Claims, and are forever enjoined from prosecuting the Settled
Defendants’ Claims against Lead Plaintiff, all Class Members and their
respective counsel.
          (c) Notwithstanding the provisions of ¶ 3(a) hereof, in the event that
any of the Released Parties asserts against the Lead Plaintiff, any Class Member
or their respective

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counsel, any claim that is a Settled Defendants’ Claim, then Lead Plaintiff,
such Class Member or counsel shall be entitled to use and assert such factual
matters included within the Settled Claims only against such Released Party in
defense of such claim but not for the purposes of asserting any claim against
any Released Party.
SETTLEMENT CONSIDERATION
     4. In consideration for the release and discharge provided for in ¶ 3(a)
hereof, Nortel shall (i) pay or cause to be paid the Settlement Amount, as
prescribed in ¶ 4(a) – (e), hereof; and (ii) adopt the corporate governance
enhancements as prescribed in ¶ 4(f) hereof.
          (a) On June 1, 2006, Nortel paid to the Escrow Agent as agent for the
benefit of the Class: Two Hundred Ninety Million, One Hundred Sixty-Two
Thousand, Four Hundred and Twenty-Eight United States Dollars and Forty-Eight
Cents (U.S.$290,162,428.48) being an amount computed as the sum of (i) Two
Hundred Eighty-Seven Million, Five Hundred Thousand United States Dollars
(U.S.$287,500,000), and (ii) Two Million, Six Hundred Sixty-Two Thousand, Four
Hundred and Twenty-Eight United States Dollars and Forty-Eight Cents
(US$2,662,428.48), which is an amount equal to the interest that would have been
earned on the amount in (i) above from March 23, 2006 if invested at the
compounded rate for 90-day United States Treasury securities.
          (b) Nortel’s insurance carriers have paid to the Escrow Agent as agent
for the benefit of the Class Thirteen Million Five Hundred Thousand United
States Dollars (U.S.$13,500,000) (the “Insurers’ Nortel II Cash Settlement
Amount”).
          (c) Pursuant to an allocation agreement between the Lead Plaintiffs in
the Nortel II U.S. Action and the lead plaintiff in the Nortel I U.S. Action,
the escrow agents in the Nortel I Action transferred Sixty-Six Million, Four
Hundred Ninety-Five Thousand United States Dollars (US$66,495,000), plus
interest thereon from April 3, 2006 to the date of the transfer at

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the same interest rate earned on the gross cash settlement fund in the Nortel I
Actions, from the gross cash settlement fund in the Nortel I Actions to the
Escrow Agent.
          (d) In addition, in payment of that part of the Settlement Amount
described in part (iv) of the definition thereof, and at a time or times
subsequent to the Effective Date, Nortel will, following receipt of the written
instructions referred to below (which written instructions shall be deliverable
only after the Effective Date), as promptly as possible using every commercially
reasonable effort, issue and deliver the Gross Settlement Shares in whole or in
part and from time to time (any such shares referred to herein as “Settlement
Shares”) as instructed in writing by Lead Plaintiffs’ Counsel, on notice to and
in consultation with Canadian Class Counsel, which instructions, as relate to
Authorized Claimants, shall include proportionate distributions to all
Authorized Claimants based on the determinations made by the Claims
Administrator and approved by the Class Distribution Order. Upon receipt of such
instructions, Nortel will cause its transfer agent to issue certificates
evidencing such Settlement Shares registered in the respective names of the
Authorized Claimants (or, if acceptable to Nortel, through “book-entry”
registration of such Settlement Shares) and, to the extent applicable,
Plaintiffs’ Counsel (as awarded in accordance with ¶ 8 hereof) and in such
amounts as set forth in such instructions, and deliver such certificates and/or
notices to such Authorized Claimants and Plaintiffs’ Counsel, as applicable. The
reasonable costs and expenses of such physical delivery and extraordinary or
expedited services, if any, of the transfer agent shall be paid out of the Gross
Cash Settlement Fund. The Gross Settlement Shares issued and delivered by Nortel
pursuant to this Settlement shall be freely tradeable upon receipt by the
Authorized Claimants and Plaintiffs’ Counsel, subject to (i) under U.S.
securities laws, (A) the approvals required under U.S. state securities or “blue
sky” laws referred to in ¶ 24(i)(4) hereof and (B) such

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limitations on resale as may be applicable with respect to Authorized Claimants
who are “affiliates” of Nortel within the meaning of such securities laws, and
(ii) such limitations on resale as may be applicable under Canadian securities
laws or as contemplated by the Exemptive Relief. At the time of issuance and
delivery, the Gross Settlement Shares shall be listed for trading on the New
York Stock Exchange and the Toronto Stock Exchange, subject to official notice
of issuance. Nortel shall at no cost to the Class either register the Gross
Settlement Shares or confirm that it has received the written opinion of
counsel, substantially to the effect that the issuance and delivery to the
Authorized Claimants and Plaintiffs’ Counsel of the Gross Settlement Shares are
exempt from registration under the (United States) Securities Act of 1933, 15
U.S.C. § 77c(a)(1), as amended, pursuant to Section 3(a)(10) thereunder. Nortel
shall also, at no cost to the Class, either qualify the Gross Settlement Shares
pursuant to a prospectus filed under all applicable Canadian provincial and
territorial securities legislation or confirm that it has received the written
opinion of Canadian counsel substantially to the effect that the issuance and
delivery to the Authorized Claimants and Plaintiffs’ Counsel of the Gross
Settlement Shares in Canada are exempt from the dealer registration and
prospectus requirements of all applicable Canadian provincial and territorial
securities legislation and that the first trade in any such province or
territory of Gross Settlement Shares shall not be subject to the prospectus
requirements of the securities legislation of such province or territory
provided that the conditions on resale set forth in the Exemptive Relief are
satisfied. Nortel understands that such written opinions may be relied upon by
Nortel’s transfer agent. From the date hereof until the date or dates Nortel
issues the Gross Settlement Shares upon Lead Plaintiff’s Counsel’s written
instructions as aforesaid, the Gross Settlement Shares shall be appropriately
adjusted to account for any stock splits, stock consolidations, stock dividends,
return of capital, extraordinary

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distributions, recapitalization or sale of all or substantially all of Nortel’s
assets or, by Nortel using every commercially reasonable effort to cause a
counterparty to agree to the adjustment contemplated by this If 4(d), any
conversion or exchange of Nortel’s outstanding shares of common stock into other
shares, securities or property resulting from an amalgamation or merger. The
Gross Settlement Shares, less any Settlement Shares awarded to Plaintiffs’
Counsel pursuant to ¶ 8 hereof (the “Net Settlement Shares”), shall be
distributed to Authorized Claimants.
          (e) In addition to the payment of those parts of the Settlement
Amounts described in ¶ 4(a), (b), (c) and (d) above, Nortel will also contribute
to the Gross Cash Settlement Fund by payment to the Escrow Agent, one-quarter of
the amount of any actual gross recovery (including the value of any monetary
benefit that Nortel might receive from the defendants by way of forgiveness or
cancellation of any monetary debt owed by Nortel to such defendants), excluding
court-awarded attorneys’ fees and expenses, if any, in the existing action
commenced by Nortel against Frank Dunn, Douglas Beatty and Michael Gollogly in
the Ontario Superior Court of Justice bearing Court File No. 05-CV-283095PD1.
          (f) Within sixty (60) days after the Effective Date, Nortel shall
adopt the corporate governance enhancements described in Appendix A of the
Notice.
     5. (a) The Gross Cash Settlement Fund shall be used to pay (i) the Notice
and Publication Notice and administration costs referred to in ¶ 7 hereof,
(ii) the attorneys’ fee and expense award referred to in ¶ 8 hereof, and
(iii) the remaining administration expenses referred to in ¶ 9 hereof. The
balance of the Gross Cash Settlement Fund after the above payments and payment
of any Taxes (as defined herein) shall be the Net Cash Settlement Fund. The Net
Cash Settlement Fund shall be transferred following the Effective Date by the
Escrow Agent to the

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Claims Administrator for distribution to Authorized Claimants as provided in ¶¶
10-12 hereof. Any sums required to be held in escrow hereunder shall be held by
the Escrow Agent as agent for the Class. All funds held by the Escrow Agent
shall be deemed to be in the custody of the Courts until such time as the funds
shall be distributed to Authorized Claimants or paid to the persons paying the
same pursuant to this Stipulation and/or further order of the Courts. The Escrow
Agent shall invest any funds in excess of U.S.$100,000 in short term United
States Agency or Treasury Securities (or a mutual fund invested solely in such
instruments), and shall collect and reinvest all interest accrued thereon. Any
funds held in escrow in an amount of less than U.S.$100,000 may be held in a
bank account insured by the Federal Deposit Insurance Corporation (“FDIC”). The
parties hereto agree that the Gross Cash Settlement Fund is intended to be a
Qualified Settlement Fund within the meaning of Treasury Regulation § 1.468B-1,
and that the Escrow Agent as administrator of the Gross Cash Settlement Fund
within the meaning of Treasury Regulation § I.468B-2(k)(3), shall be responsible
for filing tax returns and any other tax reporting for or in respect of the
Gross Settlement Fund and paying from the Gross Cash Settlement Fund any Taxes
owed with respect to the Gross Settlement Fund. The parties hereto agree that
the Gross Cash Settlement Fund shall be treated as a Qualified Settlement Fund
from the earliest date possible, and agree to any relation-back election
required to treat the Gross Cash Settlement Fund as a Qualified Settlement Fund
from the earliest date possible. Nortel agrees to provide promptly to the Escrow
Agent the statement described in Treasury Regulation § I.468B-3(e).
          (b) All Taxes (as defined herein) shall be paid out of the Gross Cash
Settlement Fund, shall be considered to be a cost of administration of the
Settlement and shall be timely paid by the Escrow Agent without prior Order of
the Courts. The Gross Settlement Fund

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or the Escrow Agent shall, to the extent required by law, be obligated to
withhold from any distributions to Authorized Claimants and other persons
entitled thereto pursuant to this Stipulation any funds necessary to pay Taxes
including the establishment of adequate reserves for Taxes as well as any amount
that may be required to be withheld under Treasury Reg. 1.468B-(1)(2) or
otherwise under applicable law in respect of such distributions. Further, the
Gross Settlement Fund shall indemnify and hold harmless the Nortel II Defendants
and their counsel for Taxes (including, without limitation, taxes payable by
reason of any such indemnification payments).
          (c) Furthermore, to the extent (without prejudice or admission of any
kind) that the Funds d’aide aux recours collectifs (Class Action Assistance Fund
(the “Fund”)) of Quebec is entitled under Quebec law to any portion of the Gross
Cash Settlement Fund and/or the Gross Settlement Shares regarding claims by
Quebec residents with respect to either of these compensatory items, any
relevant payments (whether in cash or shares) will be set aside by the Claims
Administrator on behalf of and paid over to the Fund from the amounts otherwise
allocable to such Quebec residents, it being agreed and understood that none of
the Nortel II Defendants or the Released Parties shall bear any responsibility
for any such payment of cash or shares.
          (d) None of the Nortel II Defendants, the Released Parties or their
respective counsel shall have any responsibility for or liability whatsoever
with respect to (i) any act, omission or determination of Lead Plaintiffs’
Counsel, the Escrow Agent or the Claims Administrator, or any of their
respective designees or agents, in connection with the administration of the
Settlement or otherwise; (ii) the management, investment or distribution of the
Gross Cash Settlement Fund; (iii) the Plan of Allocation; (iv) the
determination,

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administration, calculation or payment of any claims asserted against the Gross
Settlement Fund; (v) any losses suffered by, or fluctuations in the value of,
the Gross Settlement Fund; or (vi) the payment or withholding of any Taxes,
expenses and/or costs incurred in connection with the taxation of the Gross
Settlement Fund or the filing of any returns.
          (e) Authorized Claimants shall provide any and all such information
that the Claims Administrator may reasonably require and is required by
applicable law in respect of Taxes and filings and reportings for and in respect
of Taxes, before any distributions are made to Authorized Claimants as
contemplated hereby and the Claims Administrator may, without liability to the
Authorized Claimants, delay such distributions unless and until such information
is provided in the form required by the Claims Administrator.
ADMINISTRATION
     6. The Claims Administrator shall administer the Settlement subject to the
concurrent jurisdictions of the Courts for all members of the Canadian Classes
and for all other Class Members subject solely to the jurisdiction of the Court.
To the extent reasonably necessary to effectuate the terms of the Settlement,
Nortel shall provide to the Claims Administrator, without charge, all
information from Nortel’s transfer records concerning the identity of
Class Members and their transactions.
     7. (a) The Escrow Agent, acting solely in its capacity as escrow agent,
shall be subject to the jurisdiction of the Courts.
          (b) The Escrow Agent may pay from the Gross Cash Settlement Fund,
without further approval from Nortel, all reasonable costs and expenses
associated with identifying and notifying the Class Members and effecting
mailing of the Notice and Proof of Claim and publication of the Publication
Notice to the Class, and the administration of the Settlement, including without
limitation, the actual costs of printing and mailing the Notice and

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Proof of Claim, publication of the Publication Notice, reimbursements to nominee
owners for forwarding the Notice and Proof of Claim to their beneficial owners,
and the administrative expenses incurred and fees charged by the Claims
Administrator in connection with providing notice and processing the submitted
claims. In the event that the Settlement is terminated, as provided for herein,
notice and administration costs paid or accrued in connection with this
paragraph shall not be returned to the persons who paid the Cash Settlement
Amounts.
     (c) The Escrow Agent may rely upon any notice, certificate, instrument,
request, paper or other document reasonably believed by it to be genuine and to
have been made, sent or signed by an authorized signatory in accordance with
this Stipulation, and shall not be liable for (and will be indemnified from the
Gross Cash Settlement Fund and held harmless from and against) any and all
claims, actions, damages, costs (including reasonable attorneys’ fees) and
expenses claimed against or incurred by the Escrow Agent for any action taken or
omitted by it, consistent with the terms hereof and the terms of separate escrow
agreements between Nortel and the insurers and the Escrow Agent, in connection
with the performance by it of its duties pursuant to the provisions of this
Stipulation or order of the Courts, except for its gross negligence or willful
misconduct. If the Escrow Agent is uncertain as to its duties hereunder, the
Escrow Agent may (i) request that Lead Plaintiffs and Canadian Representative
Plaintiffs (and, prior to the Effective Date, Nortel) sign a document which
states the action or non-action to be taken by the Escrow Agent or (ii) commence
an Interpleader action in a federal court in the Southern District of New York
and be reimbursed out of the monies held in the Gross Cash Settlement Fund for
its costs and expenses (including reasonable attorneys’ fees). In the event the
Settlement is terminated, as provided for herein, indemnified amounts and
expenses incurred by the Escrow Agent in connection with this paragraph shall
not be returned to the persons who paid the Settlement Amounts.

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ATTORNEYS’ FEES AND EXPENSES
     8. Lead Plaintiffs’ Counsel will apply to the United States District Court
for the Southern District of New York for an award of attorneys’ fees and
reimbursement of expenses payable from both the Gross Cash Settlement Fund and
Gross Settlement Shares. Canadian Class Counsel will apply to their
corresponding Canadian Courts for an award of their counsel fees and
reimbursement of expenses to be paid from the Gross Cash Settlement Fund and
Gross Settlement Shares. All Plaintiffs’ Counsel shall further provide to their
respective Courts, as part of the motion for approval of the Settlement, all
necessary information required by their respective courts concerning the total
award of attorneys’ fees and reimbursement of expenses to be payable from the
Gross Cash Settlement Fund and Gross Settlement Shares. The total amount of
shares awarded as attorneys’ fees and reimbursement of expenses may amount to no
more than one-third of the Gross Settlement Shares, and in fact shall be
substantially less. Such amounts as are awarded by the United States District
Court for the Southern District of New York to Lead Plaintiffs’ Counsel or from
the Canadian Courts to Canadian Class Counsel from the Gross Cash Settlement
Fund shall be payable by the Escrow Agent immediately upon award,
notwithstanding the existence of any timely filed objections thereto, or
potential for appeal therefrom, or collateral attack on the Settlement or any
part thereof, subject to Plaintiffs’ Counsel’s obligations to make appropriate
refunds or repayments to the Gross Cash Settlement Fund plus accrued interest at
the same rate as is earned by the Gross Cash Settlement Fund, if and when, as a
result of any appeal and/or further proceedings on remand, or successful
collateral attack, the fee or cost award is reduced or reversed. Such amounts as
are awarded to Plaintiffs’ Counsel by the Courts from the Gross Settlement
Shares shall be payable to Plaintiffs’ Counsel at the first date on which the
Effective Date has occurred and the award of attorneys’ fees is Final.

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CLASS DISTRIBUTION ORDER/ADMINISTRATION EXPENSES
     9. Lead Plaintiffs’ Counsel and Canadian Class Counsel will apply
respectively to the United States District Court for the Southern District of
New York, and with respect to the claims of Canadian Class Members to the
Canadian Courts, on notice to Nortel’s Counsel, for an order (the
“Class Distribution Order”) approving the Claims Administrator’s administrative
determinations concerning the acceptance and rejection of the claims submitted
herein, and approving any fees and expenses not previously applied for relating
to the administration of the Settlement, including the fees and expenses of the
Claims Administrator, the reasonable costs and expenses of the physical delivery
of the Gross Settlement Shares and any extraordinary or expedited services of
the transfer agent with respect to such physical delivery, and, only if the
Effective Date has occurred, directing payment of the Net Settlement Fund to
Authorized Claimants.

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DISTRIBUTION TO AUTHORIZED CLAIMANTS
     10. The Claims Administrator shall determine each Authorized Claimant’s pro
rata share of the Net Settlement Fund based upon each Authorized Claimant’s
Recognized Claim (as defined in the Plan of Allocation described in the Notice
annexed hereto as Tab 1 to Exhibit A).
     11. It is understood and agreed by the parties that the proposed Plan of
Allocation, including, but not limited to, any adjustments to any Authorized
Claimant’s claim set forth herein, is not part of the Stipulation and is to be
considered by the Courts separately from the Courts’ consideration of fairness,
reasonableness and adequacy of the Settlement, and any order or proceeding
relating to the Plan of Allocation shall not operate to terminate or cancel the
Stipulation or affect the Finality of the Courts’ Judgments approving the
Stipulation and the Settlement set forth herein, or any other orders entered
pursuant to the Stipulation.
     12. Each Authorized Claimant shall be allocated a pro rata share of the Net
Settlement Fund based on his, her or its recognized claim compared to the total
recognized claims of all Authorized Claimants. This is not a claims-made
settlement. Neither Nortel nor its insurers shall be entitled to receive any of
the Gross Settlement Fund following the Effective Date. The Defendants shall
have no involvement in reviewing or challenging claims.
ADMINISTRATION OF THE SETTLEMENT
     13. Any Class Member who does not submit a valid Proof of Claim will not be
entitled to receive any of the proceeds from the Net Settlement Fund but will
otherwise be bound by all of the terms of this Stipulation and the Settlement,
including the terms of the Judgments to be entered in the Actions and the
releases provided for herein, and will be barred from bringing any action
against the Released Parties concerning the Settled Claims.
     14. The Claims Administrator shall process the Proofs of Claim and, after
the Effective Date and entry of the Class Distribution Order, Lead Plaintiffs’
Counsel in conjunction

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with Canadian Class Counsel shall give to Nortel the written instructions to
issue and deliver the Gross Settlement Shares in accordance with ¶ 4(d) hereof
and the Claims Administrator shall distribute the Net Cash Settlement Fund to
Authorized Claimants, and Nortel shall cause the transfer agent to distribute
the Net Settlement Shares to Authorized Claimants. Except for Nortel’s
obligation to pay or cause to be paid the Cash Settlement Amounts to the Escrow
Agent in accordance with ¶ 4 (a), (b) and (e) hereof, and to cooperate in the
production of information with respect to the identification of Class Members
from Nortel’s shareholder transfer records, as provided herein, and to issue and
deliver the Gross Settlement Shares in accordance with If 4(d) hereof,
Defendants shall have no liability, obligation or responsibility for the
administration of the Settlement or disbursement of the Net Settlement Fund.
Lead Plaintiff’s Counsel or Canadian Class Counsel, as the case may be, shall
have the right, but not the obligation, to advise the Claims Administrator to
waive what Lead Plaintiff’s Counsel, or, with respect to claims of the Canadian
Class Members, Canadian Class Counsel, deem to be formal or technical defects in
any Proofs of Claim submitted in the interests of achieving substantial justice.
     15. For purposes of determining the extent, if any, to which a Class Member
shall be entitled to be treated as an Authorized Claimant, the following
conditions shall apply:
          (a) Each Class Member shall be required to submit a Proof of Claim
(see attached Tab 2 to Exhibit A), supported by such documents as are designated
therein, including proof of the transactions claimed and the losses incurred
thereon or such other documents or proof as the Claims Administrator, in its
discretion, may deem acceptable;
          (b) All Proofs of Claim must be submitted by the date specified in the
Notice unless such period is extended by Order of the United States District
Court for the Southern District of New York or, in the case of a member of
Canadian Class, the applicable Canadian

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Court that certified the Canadian Class. Any Class Member who fails to submit a
Proof of Claim by such date shall be forever barred from receiving any payment
pursuant to the Settlement (unless, by court Order, a later submitted Proof of
Claim by such Class Member is approved), but shall in all other respects be
bound by all of the terms of this Stipulation and the Settlement, including the
terms of the Judgments to be entered in the Norte] II Actions, and the releases
provided for herein, and will be barred from bringing any action against the
Released Parties concerning the Settled Claims. Provided that it is received
before the first motion for the Class Distribution Order is filed, a Proof of
Claim shall be deemed to have been submitted when posted, if received with a
postmark indicated on the envelope and if mailed by first-class mail and
addressed in accordance with the instructions thereon. In all other cases, the
Proof of Claim shall be deemed to have been submitted when actually received by
the Claims Administrator;
          (c) Each Proof of Claim shall be submitted to and reviewed by the
Claims Administrator, which shall determine in accordance with this Stipulation
and the approved Plan of Allocation the extent, if any, to which each claim
shall be allowed, subject to review by the Courts pursuant to subparagraph
(e) below;
          (d) Proofs of Claim that do not meet the submission requirements may
be rejected. Prior to rejection of a Proof of Claim, the Claims Administrator
shall communicate with the claimant in order to attempt to remedy the curable
deficiencies in the Proof of Claim submitted. The Claims Administrator shall
notify, in a timely fashion and in writing, each claimant whose Proof of Claim
they propose to reject in whole or in part, setting forth the reasons therefor,
and shall indicate in such notice that the claimant whose claim is to be
rejected has the right to a review by the United States District Court for the
Southern District of New York or, in the case of a member of a Canadian Class
the applicable Canadian Court that

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certified the Canadian Class if the claimant so desires and complies with the
requirements of subparagraph (e) below; and
          (e) If any claimant whose claim has been rejected in whole or in part
desires to contest such rejection, the claimant must, within twenty (20) days
after the date of mailing of the notice required in subparagraph (d) above,
serve upon the Claims Administrator a notice and statement of reasons indicating
the claimant’s grounds for contesting the rejection along with any supporting
documentation, and requesting a final review thereof by the United States
District Court for the Southern District of New York or, in the case of a member
of a Canadian Class the applicable Canadian Court that certified the Canadian
Class. If a dispute concerning a claim cannot be otherwise resolved, Lead
Plaintiffs’ Counsel or Canadian Class Counsel shall thereafter present the
request for review to the respective court or to such court’s designee.
     16. The administrative determinations of the Claims Administrator accepting
and rejecting claims shall be presented to the United States District Court for
the Southern District of New York, and with respect to the claims of Canadian
Class Members to the Canadian Courts, on notice to Nortel’s Counsel, for
approval in the Class Distribution Order.
     17. Each claimant shall be deemed to have submitted to the jurisdiction of
the United States District Court for the Southern District of New York and, in
the case of members of the Canadian Classes with respect to such claimant’s
claim the Canadian Court that certified the applicable Canadian Class, and the
claim will be subject to investigation and discovery under the (United States)
Federal Rules of Civil Procedure, or under applicable Canadian rules with
respect to members of the Canadian Classes, provided that such investigation and
discovery shall be limited to that claimant’s status as a Class Member and the
validity and amount of such

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claimant’s claim. No discovery shall be allowed on the merits of the Nortel II
Actions or the Settlement in connection with processing of the Proofs of Claim.
     18. Payment pursuant to the Settlement shall be deemed final and conclusive
against all Class Members. All Class Members whose claims are not approved
pursuant to the Class Distribution Order shall be barred from participating in
distributions from the Net Settlement Fund, but otherwise shall be bound by all
of the terms of this Stipulation and the Settlement, including the terms of the
Judgments to be entered in the Nortel II Actions, and the releases provided for
herein, and will be barred from bringing any action against the Released Parties
concerning the Settled Claims.
     19. All proceedings with respect to the administration, processing and
determination of claims described by ¶15 hereof, and the determination of all
controversies relating thereto, including disputed questions of law and fact
with respect to the validity of claims, shall be subject to the jurisdiction of
the United States District Court for the Southern District of New York or, in
the case of a Canadian Class Member, the jurisdiction of the applicable Canadian
Court that certified the Canadian Class.
     20. The Net Cash Settlement Fund shall be distributed to Authorized
Claimants by the Claims Administrator, and the Net Settlement Shares shall be
issued and distributed to Authorized Claimants in accordance with ¶ 4(d) hereof,
only after the Effective Date and after all Claims have been processed, and all
claimants whose Claims have been rejected or disallowed, in whole or in part,
have been notified and provided the opportunity to contest with the Claims
Administrator such rejection or disallowance.
TERMS OF ORDER FOR NOTICE AND HEARING
     21. (a) Promptly after this Stipulation has been fully executed, Lead
Plaintiffs Counsel and Nortel’s Counsel jointly shall apply to the United States
District Court for the

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Southern District of New York for entry of an Order for Notice and Hearing,
substantially in the form annexed hereto as Exhibit A.
          (b) Promptly after this Stipulation has been fully executed, the
Canadian Representative Plaintiffs shall apply to the respective Canadian Courts
for, and Nortel shall consent to, orders for certification of the Nortel II
Canadian Actions (for settlement purposes only and on terms acceptable to
Nortel) substantially in the form annexed hereto as Exhibits D — F and for
directions approving the Notice.
          (c) The mailing or publication of the Notice and Publication Notice
shall not occur until all such orders of the Courts have been obtained, and in
the event that any of the Courts require changes in the Notice or the
Publication Notice, after such changes are also approved by the other Courts.
TERMS OF ORDER AND FINAL JUDGMENT
     22. (a) If the Settlement contemplated by this Stipulation is approved by
the United States District Court for the Southern District of New York,
Plaintiffs’ Lead Counsel and Nortel’s Counsel shall request that a Judgment be
entered substantially in the form annexed hereto as Exhibit B.
          (b) If the Settlement contemplated by this Stipulation is approved by
the Canadian Courts, Nortel’s counsel and Canadian Class Counsel jointly shall
apply to the respective Canadian Courts for entry of Judgments substantially in
the forms annexed hereto as Exhibits F and G.
SUPPLEMENTAL AGREEMENT
     23. Simultaneously herewith, Lead Plaintiffs’ Counsel, Canadian
Class Counsel and Nortel’s Counsel are executing a “Supplemental Agreement”
setting forth certain conditions under which this Settlement may be terminated
by Nortel if potential Class Members who

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purchased in excess of a certain number of shares of Nortel Securities traded
during the Class Period exclude themselves from the Class (the “Opt-out
Threshold”). Unless otherwise directed by the Courts, the Supplemental Agreement
may be filed with the Opt-out Threshold redacted. Notwithstanding the foregoing,
the Opt-out Threshold may be disclosed to the Courts for purposes of the
approval of the Settlement, as may be required by the Courts, but such
disclosure shall be carried out to the fullest extent possible in accordance
with the practices of the respective Courts so as to maintain the Opt-out
Threshold as confidential. In the event of a termination of this Settlement
pursuant to the Supplemental Agreement, this Stipulation shall become null and
void and of no further force and effect, with the exception of the provisions of
1 28 which shall continue to apply. Notwithstanding the foregoing, the
Stipulation shall not become null and void as a result of the election by Nortel
to exercise its option to withdraw from the Stipulation pursuant to the
Supplemental Agreement until the conditions set forth in the Supplemental
Agreement have been satisfied. The Supplemental Agreement is attached hereto as
Exhibit C, with the Opt-out Threshold redacted.
EFFECTIVE DATE OF SETTLEMENT, WAIVER OR TERMINATION
     24. The “Effective Date” of Settlement shall be the date when all the
following conditions of settlement shall have occurred:
          (a) approval by the United States District Court for the Southern
District of New York of the Settlement, following notice to the Class and a
hearing, as prescribed by Rule 23 of the (United States) Federal Rules of Civil
Procedure;
          (b) entry by the United States District Court for the Southern
District of New York of a Judgment, substantially in the form set forth in
Exhibit B annexed hereto, and the expiration of any time for appeal or review of
such Judgment, or, if any appeal is filed, after such Judgment is upheld on
appeal in all material respects and is no longer subject to review upon

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appeal or review by writ of certiorari, or, in the event that the United States
District Court for the Southern District of New York enters an order and final
Judgment in a form other than that provided above (“Alternative U.S. Judgment”)
and none of the parties hereto elect to terminate this Settlement, the date that
such Alternative U.S. Judgment becomes Final;
          (c) approval of the Settlement by the Ontario Superior Court of
Justice in the Ontario Gallardi Action, following notice to the Ontario National
Class and a hearing pursuant to the Ontario Class Proceedings Act, 1992;
          (d) entry by the Ontario Superior Court of Justice in the Ontario
Gallardi Action of a Judgment, substantially in the form set forth in Exhibit F
annexed hereto, and the expiration of any time for appeal or review of any and
all of such Judgment, or, if any appeal is filed, after any such judgment is
upheld on appeal in all material respects and is no longer subject to review
upon appeal or otherwise, or, in the event that the Ontario Superior Court of
Justice enters an order and final judgment in a form other than that provided
above (“Alternative Ontario Judgment”) and none of the parties hereto elect to
terminate this Settlement pursuant to ¶ 25(d) hereof within 30 days of the
Ontario Superior Court of Justice entering the Alternative Ontario Judgment, the
date that such Alternative Ontario Judgment becomes Final;
          (e) approval of the Settlement by the Superior Court of Quebec in the
Quebec Skarstedt Action, following notice to the Quebec Class and a hearing
pursuant to the Quebec Code of Civil Procedure;
          (f) entry by the Superior Court of Quebec in the Skarstedt Action of a
Judgment, substantially in the form set forth in Exhibit G annexed hereto, and
the expiration of any time for appeal or review of any and all of such
Judgments, or, if any appeal is filed, after any such Judgment is upheld on
appeal in all material respects and is no longer subject to review

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upon appeal or otherwise, or, in the event that the Superior Court of Quebec
enters an order and final judgment in a form other than that provided above
(“Alternative Quebec Judgment”) and none of the parties hereto elect to
terminate this Settlement pursuant to ¶ 25(d) hereof within 30 days of the
Superior Court of Quebec entering an Alternative Quebec Judgment, the date that
such Alternative Quebec Judgment becomes Final;
          (g) Nortel shall have used every commercially reasonable effort to
cause (1), (2), (3) and (4) below to have been obtained and Nortel shall have
received, in form and substance satisfactory to it:

  (1)   either (A) an MRRS decision document issued pursuant to National Policy
12-201 – Mutual Reliance Review System for Exemptive Relief Applications, or any
successor, replacement or amending regulatory instrument (“NI 12-201”) exempting
the issuance, delivery and distribution of the Gross Settlement Shares in
accordance with the terms of the Settlement from the dealer registration and
prospectus requirements of all applicable Canadian provincial and territorial
securities legislation, and imposing only those limitations on resale of Gross
Settlement Shares in any Canadian province or territory that are substantially
equivalent to those set forth in subsection (3) of section 2.6 of National
Instrument 45-102 — Resale of Securities, together with all necessary comparable
exemptive relief issued by each of the non-principal regulators (as such term is
defined for the purposes of NI 12-201) that have opted out of the system for the
application for

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      the aforementioned MRRS decision document (the “Exemptive Relief’), which
Exemptive Relief shall be in form and substance satisfactory to Lead Plaintiff’s
Counsel acting reasonably; or (B) a final MRRS decision document issued pursuant
to National Policy 43-201 — Mutual Reliance Review System for Prospectuses and
Annual Information Forms, or any successor, replacement or amending regulatory
instrument, (“NI 43-201”) evidencing that a receipt has been obtained for a
final prospectus of Nortel relating to the Gross Settlement Shares in each
Canadian province and territory where any Settlement Shares may be distributed,
together with all necessary receipts for such final prospectus issued by each of
the non-principal regulators (as such term is defined for purposes of NI 43-201)
that have opted out of the Mutual Reliance Review System for such prospectus;

  (2)   (A) should it be necessary, a “no action” letter from the United States
Securities and Exchange Commission with respect to the issuance, delivery and
distribution of the Gross Settlement Shares in accordance with the terms of the
Settlement pursuant to the exemption from registration set forth in Section
3(a)(10) under the (United States) Securities Act of 1933, 15 U.S.C. §
77c(a)(1), as amended (the “Securities Act”) (if necessary, the “No Action
Letter”); or (B) if a No Action Letter should be necessary and not be obtained,
Nortel shall register the Gross Settlement Shares and

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      notice of effectiveness shall have been received confirming that the
registration statement registering the Gross Settlement Shares under the
Securities Act and filed with the United States Securities and Exchange
Commission had been declared effective by such Commission;

  (3)   all required approvals from the New York Stock Exchange and the Toronto
Stock Exchange with respect to the issuance, delivery and distribution of the
Gross Settlement Shares in accordance with the terms of the Settlement (the
“Stock Exchange Approvals”); and     (4)   all required approvals under U.S.
state securities or “blue sky” laws with respect to the issuance, delivery and
distribution of the Gross Settlement Shares in accordance with the terms of the
Settlement, including those with respect to the states of Arizona and New York
(“Blue Sky Approvals”);

          (h) all conditions, if any, of the Exemptive Relief, the No Action
Letter, the Stock Exchange Approvals and the Blue Sky Approvals, to the issuance
and distribution of the Gross Settlement Shares, have been satisfied; and
          (i) expiration of the time to exercise the termination rights provided
in ¶ 25 hereof.
     25. Lead Plaintiff, the Canadian Representative Plaintiffs and Nortel shall
each have the right to terminate the Settlement and thereby this Stipulation by
providing written notice of their or its election to do so (“Termination
Notice”) to one another hereto within thirty (30) days of any of the following:
(a) the United States District Court for the Southern District of New

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York declining to enter the Order for Notice and Hearing in any material
respect; (b) any one of the Canadian Courts declining to enter orders, in any
material respect, in the form set forth in Exhibits D and E; (c) any one of the
Courts refusing to approve this Settlement as set forth in this Stipulation for
one or more of the Nortel II Actions; (d) any one of the Courts declining to
enter the corresponding Judgment for that court in any material respect; (e) the
date upon which a Judgment is modified or reversed in any material respect by
any level of appellate court; (f) the date upon which an Alternative Judgment is
modified or reversed in any material respect by any level of appellate court;
and (g) the date upon which the settlement in the Nortel I Actions is
terminated; or (h) the conditions set forth in ¶ 24(i) and 24(j) hereof not
having been satisfied prior to forty-five (45) calendar days after the latter of
(i) entry of the last Final Judgment contemplated in ¶ 24 hereof or (ii) entry
of the last final judgment in the Nortel I Actions.
     26. Notwithstanding anything else in this Stipulation, Nortel may, in
accordance with the terms set for in the Supplemental Agreement, and in its sole
and unfettered discretion, elect in writing to terminate the Settlement and this
Stipulation if the Opt-out Threshold is exceeded or as otherwise provided in the
Supplemental Agreement.
     27. In the event that there is non-delivery by Nortel of any of the Net
Settlement Shares required to be delivered hereunder in accordance with ¶ 4(d)
hereof, then Lead Plaintiff and the Canadian Representative Plaintiffs shall
consult with one another and, in the event of consensus, may apply jointly to
the Courts for orders at their option either terminating this Settlement as it
applies to the Class, directing specific performance of Nortel’s obligation to
issue and/or deliver such shares, or obtain such other available relief. In the
event of non-consensus between Lead Plaintiff and the Canadian Representative
Plaintiffs, each shall apply forthwith to their respective courts, on notice to
one another, for an order either terminating this

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Settlement as it applies to their class, directing specific performance of
Nortel’s obligation to issue and/or deliver such shares, or obtain such other
available relief. It is agreed that in the event that an Order is obtained on
such an application from one court terminating the Settlement for one class, the
Settlement shall be terminated for the balance of the Class and orders to that
effect shall be sought on consent from the remaining Courts.
     28. Except as otherwise provided herein, in the event the Settlement is
terminated, the parties to this Stipulation shall be deemed to have reverted to
their respective status in the Nortel II Actions immediately prior to the
execution of this Stipulation and, except as otherwise expressly provided, the
parties shall proceed in all respects as if this Stipulation and any related
orders had not been entered. Furthermore, an amount equal to the Cash Settlement
Amounts previously paid by Nortel and/or Nortel’s Insurers, as the case may be,
shall be paid to Nortel and/or Nortel’s Insurers, as the case may be, including
the amount transferred by the escrow agents in the Nortel I Actions to the
Escrow Agent, together with any interest or other income earned thereon or in
respect thereof, less any Taxes paid or due with respect to such income, less
any amounts required to be paid to the Escrow Agent pursuant to the relevant
escrow agreement, and less any reasonable costs of administration and notice
actually incurred and paid or payable from the Cash Settlement Amount (as
described in ¶ 7 hereof), less any applicable withholding taxes.
NO ADMISSION OF WRONGDOING
     29. This Stipulation, whether or not consummated, and any proceedings taken
pursuant to it:
          (a) shall not be offered or received against any of the Nortel II
Defendants as evidence of or construed as or deemed to be evidence of any
presumption, concession, or admission by any of those defendants with respect to
the truth of any fact alleged by any of the

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plaintiffs or the validity of any claim that has been or could have been
asserted in the Nortel II Actions or in any litigation, or the deficiency of any
defense that has been or could have been asserted in the Nortel II Actions or in
any litigation, or of any liability, negligence, fault, or wrongdoing of the
Nortel II Defendants;
          (b) shall not be offered or received against the Nortel II Defendants
as evidence of a presumption, concession or admission of any fault,
misrepresentation or omission with respect to any statement or written document
approved or made by any of the Nortel II Defendants;
          (c) shall not be offered or received against the Nortel II Defendants
as evidence of a presumption, concession or admission with respect to any
liability, negligence, fault or wrongdoing, or in any way referred to for any
other reason as against any of the Nortel II Defendants, in any other civil,
criminal or administrative action or proceeding, other than such proceedings as
may be necessary to effectuate the provisions of this Stipulation; provided,
however, that if this Stipulation is approved by the Courts, Nortel II
Defendants may refer to it to effectuate the liability protection granted them
hereunder;
          (d) shall not be construed against any of the Nortel II Defendants as
an admission or concession that the consideration to be given hereunder
represents the amount which could be or would have been recovered after trial;
          (e) shall not be construed as or received in evidence as an admission,
concession or presumption against Lead Plaintiffs, Canadian Representative
Plaintiffs or any of the Class Members that any of their claims are without
merit, or that any defenses asserted by the Defendants have any merit, or that
damages recoverable under the Nortel II Actions would not have exceeded the
Gross Settlement Fund; and

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          (f) shall not be construed as or received in evidence as an act of
attornment to the jurisdiction of any court by Lead Plaintiffs or Canadian
Representative Plaintiffs by reason of their participation or the participation
of their respective counsel in proceedings taken pursuant to the Stipulation to
approve the Settlement.
MISCELLANEOUS PROVISIONS
     30. All of the exhibits attached hereto are hereby incorporated by
reference as though fully set forth herein.
     31. Nortel warrants as to itself that, as to the payments made by or on its
behalf, at the time of such payment that it made or caused to be made pursuant
to ¶ 4 hereof, it was not insolvent, nor did nor will the payment required to be
made by or on behalf of it render it insolvent, within the meaning of and/or for
the purposes of the (United States) Bankruptcy Code, including §§ 101 and 547
thereof. This warranty is made by Nortel and not by Nortel’s Counsel.
     32. If a case is commenced in respect of any portion of the Settlement
Amount (or any insurer contributing funds to the Insurers’ Nortel I Cash
Settlement Amount on behalf of any Nortel II Defendant) under Title 11 of the
United States Code (Bankruptcy), or a trustee, receiver or conservator is
appointed under any similar law, and in the event of the entry of a final order
of a court of competent jurisdiction determining the transfer of money to the
Gross Cash Settlement Fund or issuance of any Gross Settlement Shares or any
portion thereof by or on behalf of such defendant to be a preference, voidable
transfer, fraudulent transfer or similar transaction and any portion thereof is
required to be returned, and such amount is not promptly deposited to the Gross
Cash Settlement Fund or such shares are not issued by others, then, at the
election of Lead Plaintiffs in respect of the Nortel II U.S. Action, and with
respect to the Nortel II Canadian Actions at the election of Canadian
Representative Plaintiffs, the parties shall jointly apply to the respective
courts, as the case may be, to vacate and set aside the releases given and
Judgments

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entered in favor of the Nortel II Defendants pursuant to this Stipulation, and
which releases and Judgments shall be null and void, and the parties shall be
restored to their respective positions in the Nortel II Actions as of the date a
day prior to the date of this Stipulation and any cash amounts in the Gross Cash
Settlement Fund and any Gross Settlement Shares previously issued by Nortel
shall be returned as provided in ¶ 28 hereof.
     33. The parties to this Stipulation intend the Settlement to be a final and
complete resolution of all disputes asserted or which could be asserted by the
Class Members against the Released Parties with respect to the Settled Claims.
Accordingly, Lead Plaintiffs, Canadian Representative Plaintiffs and Nortel
agree not to assert in any forum that the Nortel II Actions were brought by the
plaintiffs or defended by defendants in those actions in bad faith or without a
reasonable basis. The parties hereto shall assert no claims of any violation of
Rule 11 of the Federal Rules of Civil Procedure relating to the prosecution,
defense, or settlement of the Nortel II Actions. The parties agree that the
amount paid and the other terms of the Settlement were negotiated at arm’s
length in good faith by the parties, and reflect a settlement that was reached
voluntarily after consultation with experienced legal counsel.
     34. This Stipulation may not be modified or amended, nor may any of its
provisions be waived, except by a writing signed by all parties hereto or their
successors-in-interest.
     35. The headings herein are used for the purpose of convenience only and
are not meant to have legal effect.
     36. The administration and consummation of the Settlement as embodied in
this Stipulation shall be under the authority of the United States District
Court for the Southern District of New York and that Court shall retain
jurisdiction for the purpose of entering orders providing for awards of
attorneys’ fees and expenses to Lead Plaintiff’s Counsel and enforcing

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the terms of this Stipulation. Notwithstanding the foregoing, the Canadian
Courts shall retain concurrent jurisdiction with respect to the administration,
consummation and enforcement of the Settlement as embodied in this Stipulation
and with respect to members of the corresponding Canadian Classes and shall
retain jurisdiction for the purposes of entering orders providing for counsel
fees and expenses to Canadian Class Counsel.
     37. The waiver by one party of any breach of this Stipulation by any other
party shall not be deemed a waiver of any other prior or subsequent breach of
this Stipulation.
     38. This Stipulation and its exhibits, the Supplemental Agreement, the
various escrow agreements governing the cash contributions by Nortel and its
insurers toward the Settlement, and the contemporaneous agreements with respect
to Canadian Representative Plaintiffs confirming the application of this
Stipulation to the Nortel II Canadian Actions constitute the entire agreement
concerning the Settlement of the Nortel II Actions, and no representations,
warranties, or inducements have been made by any party hereto concerning this
Stipulation, its exhibits and the Supplemental Agreement other than those
contained and memorialized in such documents.
     39. This Stipulation may be executed in one or more counterparts. All
executed counterparts and each of them shall be deemed to be one and the same
instrument.
     40. This Stipulation shall be binding upon, and inure to the benefit of,
the successors and assigns of the parties hereto.
     41. The construction and interpretation of this Stipulation and the
Supplemental Agreement shall be governed by the internal laws of the State of
New York without regard to conflicts of laws, except to the extent that federal
law of the United States requires that federal law governs.

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     42. This Stipulation shall not be construed more strictly against one party
than another merely by virtue of the fact that it, or any part of it, may have
been prepared by counsel for one of the parties, it being recognized that it is
the result of arm’s-length negotiations between the parties and all parties have
contributed substantially and materially to the preparation of this Stipulation.
     43. All counsel and any other person executing this Stipulation and any of
the exhibits hereto, or any related settlement documents, warrant and represent
that they have the full authority to do so and that they have the authority to
take appropriate action required or permitted to be taken pursuant to the
Stipulation to effectuate its terms.

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     44. Lead Plaintiffs, Canadian Representative Plaintiffs and Nortel agree to
cooperate fully with one another in seeking Court approval of the Order for
Notice and Hearing, the Stipulation and the Settlement, and to promptly agree
upon and execute all such other documentation as may be reasonably required to
obtain final approval by the Courts of the Settlement.
DATED: June 20, 2006

                  BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP    
 
           
 
  By:   /s/ Max W. Berger
 
Max W. Berger (MB-5010)    
 
      John P. Coffey (JC-3832)    
 
      Jeffrey N. Leibell (JL-1356)         1285 Avenue of the Americas        
New York, New York 10019         Telephone: (212) 554-1400         Facsimile:
(212) 554-1444    
 
                Lead Plaintiffs’ Counsel    
 
                SHEARMAN & STERLING LLP    
 
           
 
  By:   /s/ Stuart J. Baskin
 
Stuart J. Baskin (SB-9936)    
 
      Tai H. Park (TP-2607)    
 
      Marc D. Ashley (MA-8896)         599 Lexington Avenue         New York,
New York 10022-6069         Telephone: (212) 848-4000         Facsimile:
(212) 848-7179    
 
                Nortel’s Counsel    

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EXHIBIT A
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

             
 
           
 
  x                      
 
  :        
In re NORTEL NETWORKS CORP.
  :   Civil Action No. 05-MD-1659 (LAP)    
SECURITIES LITIGATION
  :        
 
  :   CLASS ACTION                  
 
  :                      
This Document Relates To:
  :        
 
  :        
 
  :        
               ALL ACTIONS.
  :        
 
  x                      

PRELIMINARY ORDER FOR NOTICE AND HEARING IN CONNECTION WITH
SETTLEMENT PROCEEDINGS
     WHEREAS, on June 20, 2006, the parties to the above-entitled action (the
“Action”) entered into a Stipulation and Agreement of Settlement (the
“Stipulation”) which is subject to review under Rule 23 of the (United States)
Federal Rules of Civil Procedure and which, together with the exhibits thereto,
sets forth the terms and conditions for the proposed settlement of the claims
alleged in the Complaint on the merits and with prejudice; and the Court having
read and considered the Stipulation and the accompanying documents; and the
parties to the Stipulation having consented to the entry of this Order; and all
capitalized terms used herein having the meanings defined in the Stipulation;,
and
     WHEREAS, the Stipulation provides for the settlement and dismissal of the
Canadian class proceedings identified in the Stipulation (the “Canadian
Class Actions”) and approval of the Settlement in the courts before which the
Canadian Class Actions are pending (the “Canadian Courts”) is also being sought;
and
     WHEREAS, it is a condition to the effectiveness of the proposed Settlement
herein that additional putative class actions identified in the Stipulation
brought against Nortel and certain of

 

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the defendants herein in this District and in Canadian Courts (the “Nortel I/II
Actions”) also be settled and dismissed.
     NOW, THEREFORE, IT IS HEREBY ORDERED, this                      day of
                                        , 2006 that:
     1. Pursuant to Rules 23(a) and (b)(3) of the (United States) Federal Rules
of Civil Procedure, and for the purposes of the Settlement only, this Action is
hereby certified as a class action on behalf of all persons and entities who
purchased Nortel common stock or call options on Nortel common stock or wrote
(sold) put option on Nortel common stock (collectively, “Nortel Securities”)
during the period between April 24, 2003 through April 27, 2004, inclusive (the
“Class Period”), and who suffered damages thereby, including, but not limited
to, those persons or entities who traded in Nortel Securities on the New York
Stock Exchange and/or the Toronto Stock Exchange (the “U.S. Global Class” or
“U.S. Global Class Members”). Excluded from the U.S. Global Class are (i) the
defendants; (ii) James Kinney (Finance Chief for Nortel’s Wireless Networks
Division, Richardson, Texas), Ken Taylor (Vice President for Nortel’s Enterprise
Networks Division, Raleigh, North Carolina), Craig Johnson (Finance Director for
Nortel’s Wireline Networks Division, Richardson, Texas), Doug Hamilton (Finance
Director for Nortel’s Optical Networks Group, Montreal, Quebec), Michel Gasnier
(Vice President of Finance for Europe), Robert Ferguson (Vice President of
Finance for China), and William Bowrey (Controller for Asia); (iii) members of
the immediate family of each of the defendants and/or any of the individuals
referenced above; (iv) any entity in which any defendant and/or any of the
individuals referenced above has a controlling interest; (v) any parent,
subsidiary or affiliate of Nortel; (vi) any person who was an officer or
director of Nortel or any of its subsidiaries or affiliates during the
Class Period; and (vii) the legal representatives, heirs, predecessors,
successors or assigns of any of the excluded persons or entities. Also excluded
from the U.S. Global Class are any putative U.S. Global Class Members who
exclude themselves by filing a request for exclusion in accordance with the
requirements set forth in the Notice.

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     2. The Court finds, for the purposes of the Settlement only, that the
prerequisites for a class action under Rules 23(a) and (b)(3) of the (United
States) Federal Rules of Civil Procedure have been satisfied in that: (a) the
number of U.S. Global Class Members is so numerous that joinder of all members
thereof is impracticable; (b) there are questions of law and fact common to the
U.S. Global Class; (c) the claims of the named representatives are typical of
the claims of the U.S. Global Class they seek to represent; (d) the Lead
Plaintiffs will fairly and adequately represent the interests of the U.S. Global
Class; (e) the questions of law and fact common to the members of the U.S.
Global Class predominate over any questions affecting only individual members of
the U.S. Global Class; and (f) a class action is superior to other available
methods for the fair and efficient adjudication of the controversy.
     3. Pursuant to Rule 23 of the (United States) Federal Rules of Civil
Procedure, and for the purposes of the Settlement only, Lead Plaintiffs Ontario
Teachers’ Pension Plan Board and the Department of the Treasury of the State of
New Jersey and its Division of Investment are certified as
Class Representatives.
     4. A hearing (the “Settlement Fairness Hearing”) pursuant to Rule 23(e) of
the (United States) Federal Rules of Civil Procedure is hereby scheduled to be
held before the Court on                     , 2006, at ___:___.m. for the
following purposes:
          (a) to finally determine whether this Action satisfies the applicable
prerequisites for class action treatment under Rules 23(a) and (b) of the
(United States) Federal Rules of Civil Procedure;
          (b) to determine whether the proposed Settlement is fair, reasonable,
and adequate, and should be approved by the Court;
          (c) to determine whether the Judgment as provided under the
Stipulation should be entered, dismissing the Complaint filed herein, on the
merits and with prejudice, and to determine whether the release by the U.S.
Global Class of the Settled Claims, as set forth in the Stipulation, should be
provided to the Released Parties (as those terms are defined in the
Stipulation);

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          (d) to determine whether the proposed Plan of Allocation for the
proceeds of the Settlement is fair and reasonable, and should be approved by the
Court;
          (e) to consider Lead Plaintiffs’ Counsel’s application for an award of
attorneys’ fees and for reimbursement of expenses to Plaintiffs’ Counsel; and
          (f) to rule upon such other matters as the Court may deem appropriate.
     5. The Court recognizes and acknowledges that one consequence of the
approval of the Settlement at the Settlement Fairness Hearing, which shall be
open to everyone to whom any Gross Settlement Shares would be issued in the
proposed Settlement, with adequate notice to be given to all those persons, is
that, pursuant to Section 3(a)(10) of the (United States) Securities Act of
1933, as amended, 15 U.S.C. § 77c(a)(1), the Gross Settlement Shares may be
distributed to Class Members (and to Plaintiffs’ Counsel as may be awarded by
the respective Courts) without registration and compliance with the prospectus
delivery requirements of the U.S. securities laws as the Gross Settlement Shares
will be exempt from registration under the (United States) Securities Act of
1933, 15 U.S.C. § 77c(a)(1), as amended, pursuant to Section 3(a)(10)
thereunder. The Court further acknowledges that Nortel will rely on such
3(a)(10) exemption (and Nortel will not register the Gross Settlement Shares
under the (United States) Securities Act of 1933) based on the Court’s approval
of the fairness of the Settlement.
     6. The Court reserves the right to approve the Settlement with or without
modification and with or without further notice of any kind. The Court further
reserves the right to enter its Judgment approving the Stipulation and
dismissing the Complaint on the merits and with prejudice regardless of whether
it has approved the Plan of Allocation or awarded attorneys’ fees and expenses.
     7. The Court approves the form, substance and requirements of the Notice of
Pendency and Certifications of Class Actions and Proposed Settlements, Motions
for Attorneys’ Fees and Settlement Fairness Hearings (the “Notice”) and the
Proof of Claim form, annexed hereto as Tabs 1 and 2, respectively.

4

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     8. The Court approves the appointment of The Garden City Group Inc. (“GCG”)
as the Claims Administrator. Upon approval of the Notice and the Proof of Claim
and the appointment of GCG as the Claims Administrator by each of the Canadian
Courts (“Canadian Courts’ Approval”), the Claims Administrator shall cause the
Notice and the Proof of Claim, substantially in the forms annexed hereto as Tabs
1 and 2, to be mailed, by first class mail, postage prepaid, on or before
                     days after entry of the last order, whether by this Court,
the Court in the Nortel I U.S. Action, or any of the Canadian Courts, approving
the issuance of the Notice, to all U.S. Global Class Members who can be
identified with reasonable effort. Notices that are addressed to persons or
entities in Quebec shall be accompanied by a French language version of the
Notice and Proof of Claim forms. Nortel shall cooperate in making Nortel’s
transfer records and shareholder information available to the Claims
Administrator no later than                      days following entry of this
Order for the purpose of identifying and giving notice to the U.S. Global Class.
The Claims Administrator shall use reasonable efforts to give notice to nominee
purchasers such as brokerage firms and other persons or entities who purchased
Nortel common stock during the Class Period as record owners but not as
beneficial owners. Such nominee purchasers are directed, within seven (7) days
of their receipt of the Notice, to either forward copies of the Notice and Proof
of Claim to their beneficial owners or to provide the Claims Administrator with
lists of the names and addresses of the beneficial owners, and the Claims
Administrator is ordered to send the Notice and Proof of Claim promptly to such
identified beneficial owners. Nominee purchasers who elect to send the Notice
and Proof of Claim to their beneficial owners shall send a statement to the
Claims Administrator confirming that the mailing was made as directed.
Additional copies of the Notice shall be made available to any record holder
requesting such for the purpose of distribution to beneficial owners, and such
record holders shall be reimbursed from the Gross Settlement Fund, upon receipt
by the Claims Administrator of proper documentation, for the reasonable expense
of sending the Notice and Proofs of Claim to beneficial owners. Lead Plaintiffs’
Counsel shall, at or before the Settlement Fairness Hearing, file with the Court
proof of mailing of the Notice and Proof of Claim.

5

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     9. The Claims Administrator or the Escrow Agent or their agents are
authorized and directed to prepare any tax returns required to be filed on
behalf of or in respect of the Gross Settlement Fund and to cause any Taxes due
and owing to be paid from the Gross Settlement Fund, and to otherwise perform
all obligations with respect to Taxes and any reporting or filings in respect
thereof as contemplated by the Stipulation, without further order of the Court.
     10. Lead Plaintiffs’ Counsel shall submit their papers in support of final
approval of the Settlement and application for attorneys’ fees and reimbursement
of expenses by no later than forty-five (45) calendar days after the date set
for mailing of the Notice.
     11. The Court approves the form of Publication Notice of the Pendency of
this class action and the proposed settlement in substantially the form and
content annexed hereto as Tab 3 and directs that Lead Plaintiffs’ Counsel shall
cause the Publication Notice to be published in Canada in accordance with the
Notice Plan attached hereto as Tab 4, and the Publication Notice shall also be
published in the U.S. on two different dates in the national editions of The
Wall Street Journal, USA Today, and The New York Times, once in Investor ‘s
Business Daily, and once over the PR Newswire, which publications shall begin
within seven (7) calendar days of the mailing of the Notice and in accordance
with the Notice Plan. Lead Plaintiffs’ Counsel shall, at or before the
Settlement Fairness Hearing, file with the Court proof of the publication of the
Publication Notice.
     12. The form and content of the Notice, and the method set forth herein of
notifying the Class of the Settlement and its terms and conditions, meet the
requirements of Rule 23 of the (United States) Federal Rules of Civil Procedure,
Section 21 D(a)(7) of the (United States) Securities Exchange Act of 1934, as
amended, 15 U.S.C. 78u-4(a)(7), including by the (United States) Private
Securities Litigation Reform Act of 1995 (the “PSLRA”), Rule 23.1 of the Local
Rules of the Southern and Eastern Districts of New York, and due process,
constitute the best notice practicable under the circumstances, and shall
constitute due and sufficient notice to all persons and entities entitled
thereto.

6

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     13. In order to be entitled to participate in the Net Settlement Fund, in
the event the Settlement is effected in accordance with the terms and conditions
set forth in the Stipulation, each Class Member shall take the following actions
and be subject to the following conditions:
          (a) A properly executed Proof of Claim (the “Proof of Claim”),
substantially in the form attached hereto as Tab 2, must be submitted to the
Claims Administrator, at the Post Office Box indicated in the Notice, postmarked
not later than one hundred twenty (120) days after the date set for mailing the
Notice. Such deadline may be further extended by court order. Each Proof of
Claim shall be deemed to have been submitted when postmarked (if properly
addressed and mailed by first class mail, postage prepaid) provided such Proof
of Claim is actually received prior to the motion for an order of the Court
approving distribution of the Net Settlement Fund. Any Proof of Claim submitted
in any other manner shall be deemed to have been submitted when it was actually
received at the address designated in the Notice.
          (b) The Proof of Claim submitted by each Class Member must satisfy the
following conditions: (i) it must be properly completed, signed and submitted in
a timely manner in accordance with the provisions of the preceding subparagraph;
(ii) it must be accompanied by adequate supporting documentation for the
transactions reported therein, in the form of broker confirmation slips, broker
account statements, an authorized statement from the broker containing the
transactional information found in a broker confirmation slip, or such other
documentation as is deemed adequate by the Claims Administrator; (iii) if the
person executing the Proof of Claim is acting in a representative capacity, a
certification of his current authority to act on behalf of the Class Member must
be included in the Proof of Claim; and (iv) the Proof of Claim must be complete
and contain no material deletions or modifications of any of the printed matter
contained therein and must be signed under penalty of perjury.
          (c) As part of the Proof of Claim, each Class Member shall submit to
the jurisdiction of the applicable Court as set out in the Stipulation with
respect to the claim submitted, and shall (subject to effectuation of the
Settlement) release all Settled Claims as provided in the Stipulation.

7

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     14. U.S. Global Class Members shall be bound by all determinations and
judgments in this Action, whether favorable or unfavorable, unless such persons
request exclusion from the Class in a timely and proper manner, as hereinafter
provided. A U.S. Global Class Member wishing to make such request shall mail the
request in written form by first class mail postmarked no later than sixty
(60) calendar days after the date set for the mailing of the Notice to the
address designated in the Notice. Such request for exclusion shall clearly
indicate the name, address and telephone number of the person seeking exclusion,
that the sender requests to be excluded from the U.S. Global Class, and must be
signed by such person. Such persons requesting exclusion are also directed to
state: the date(s), price(s), and number(s) of shares of all purchases and sales
of Nortel common stock, call options on Nortel common stock and put options on
Nortel common stock during the Class Period. The request for exclusion shall not
be effective unless it provides the required information and is made within the
time stated above, or the exclusion is otherwise accepted by the Court.
     15. Comments and/or objections to the Settlement, the Plan of Allocation,
or the application by Lead Plaintiffs’ Counsel for an award of attorneys’ fees
and reimbursement of expenses and any supporting papers should be mailed, on or
before sixty (60) days after the date set for mailing of the Notice, to GCG at
the address set forth in the Notice. Attendance at the hearing is not necessary;
however, persons wishing to be heard orally in opposition to the approval of the
Settlement, the Plan of Allocation, and/or the request by Lead Plaintiffs’
Counsel for attorneys’ fees are required to indicate in their written objection
their intention to appear at the hearing. Persons who intend to object to the
Settlement, the Plan of Allocation, and/or Lead Plaintiffs’ Counsel’s
application for an award of attorneys’ fees and expenses and desire to present
evidence at the Settlement Fairness Hearing must include in their written
objections the identity of any witnesses they may call to testify and exhibits
they intend to introduce into evidence at the Settlement Fairness Hearing. U.S.
Global Class Members do not need to appear at the hearing or take any other
action to indicate their approval.

8

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     16. Lead Plaintiffs’ Counsel shall submit their reply papers, if any, in
support of final approval of the Settlement and application for attorneys’ fees
and reimbursement of expenses by no later than seventy-five (75) calendar days
after the date set for mailing of the Notice.
     17. Any U.S. Global Class Member who does not object to the Settlement
and/or the Plan of Allocation, and any Class Member who does not object to Lead
Plaintiffs’ Counsel’s application for an award of attorneys’ fees and
reimbursement of litigation expenses in the manner prescribed in the Notice
shall be deemed to have waived such objection and shall forever be foreclosed
from making any objection to the fairness, adequacy or reasonableness of the
proposed Settlement, the Order and Final Judgment to be entered approving the
Settlement, the Plan of Allocation or the application by Lead Plaintiffs’
Counsel for an award of attorneys’ fees and reimbursement of expenses.
     18. Pending final determination of whether the Settlement should be
approved, the Lead Plaintiffs, all U.S. Global Class Members, and each of them,
and anyone who acts or purports to act on their behalf, shall not institute,
commence or prosecute any action which asserts Settled Claims against any
Released Party. The foregoing shall not be interpreted to apply to proceedings
in respect of the seeking of approval of the Settlement in the Canadian Courts.
     19. As provided in the Stipulation, Lead Plaintiffs’ Counsel may pay the
Claims Administrator the reasonable fees and costs associated with giving notice
to the Class and the review of claims and administration of the Settlement out
of the Gross Settlement Fund without further order of the Court.
     20. If (a) the Settlement is terminated by Nortel pursuant to ¶ 26 of the
Stipulation; (b) any specified condition to the Settlement set forth in the
Stipulation is not satisfied and Lead Plaintiffs’ Counsel, Canadian
Representative Plaintiffs’ Counsel or Nortel elect to terminate the Settlement
as provided in ¶ 25 of the Stipulation; or (c) if the Settlement is terminated
pursuant to ¶ 27 of the Stipulation, then, in any such event, the terms of ¶ 28
of the Stipulation including any amendment(s) thereof, shall apply, and this
Preliminary Order certifying the Class and the

9

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Class Representatives for purposes of the Settlement shall be null and void, of
no further force or effect, and without prejudice to any party, and may not be
introduced as evidence or referred to in any actions or proceedings by any
person or entity, and each party shall be restored to his, her or its respective
position as it existed immediately prior to the execution of the Stipulation.
     21. The Court retains jurisdiction over the Action to consider all further
matters arising out of or connected with the Settlement.
Dated: New York, New York
            July 28, 2006

         
 
       
 
       
 
  UNITED STATES DISTRICT JUDGE    

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EXHIBIT A-1
NOTICE OF PENDENCY AND CERTIFICATIONS OF CLASS ACTIONS AND PROPOSED SETTLEMENTS,
MOTIONS FOR ATTORNEYS’ FEES AND SETTLEMENT FAIRNESS HEARINGS (NORTEL II NOTICE)
This Notice relates to the following actions (the “Nortel II Actions”):

  •   In Re Nortel Networks Corp. Securities Litigation, Master File No. 04 Civ.
2115 (LAP) in the United States District Court for the Southern District of New
York;     •   Gallardi v. Nortel Networks Corporation, No. 05-CV-285606CP in the
Ontario Superior Court of Justice;     •   Skarstedt v. Corporation Nortel
Networks, No. 500-06-000277-059 in the Superior Court of Quebec District of
Montreal;

If you bought Nortel Networks Corporation (“Nortel”) common stock or call
options on Nortel common stock, or you wrote (sold) put options on Nortel common
stock, during the period April 24, 2003 through April 27, 2004, inclusive (the
“Class Period”), your rights may be affected by class action lawsuit(s) and you
may be entitled to a payment from a proposed class action settlement.
Courts in the United States and Canada have authorized this notice.
This is not a solicitation from a lawyer.

  •   The “Settlement” described herein will provide total proceeds worth
approximately $___, including $370,157,418 in cash, plus 314,333,875 shares of
common stock of Nortel (“Settlement Shares”), having an aggregate market value
as of [date] of approximately $___, for the benefit of the Class. described
herein (See response to question 1 below defining the “Class” and
“Class Members”). Unless otherwise stated, all dollar amounts referenced herein
are in U.S. dollars.     •   In addition, Nortel will adopt the corporate
governance provisions described in Appendix A of this Notice. Nortel will also
contribute to the Class one-quarter of the recovery, if any, it obtains in
existing litigation by Nortel against certain former senior corporate officers.
    •   The Settlement resolves lawsuits over whether Nortel misled investors
about its historic and future earnings during the Class Period. The Settlement
is contingent upon court-approval of the settlement of several related actions
against Nortel and other defendants in the United States and Canada (the “Nortel
II Actions”).     •   Your legal rights are affected whether you act or do not
act. Read this notice carefully.

 

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YOUR LEGAL RIGHTS AND OPTIONS IN THIS SETTLEMENT:

     
SUBMIT A CLAIM FORM BY [November 30, 2006]
  The only way to get a distribution from the Net Settlement Fund and Net
Settlement Shares.

Le présent avis est aussi disponible en français. Vous pouvez l’obtenir sans
frais en vous adressant à [Claim administrator + Web site] ou à Trudel &
Johnston.

     
EXCLUDE YOURSELF (Opt-out of the Class) BY [September 15, 2006]
  Get no payment. This is the only option that allows you to ever be part of any
other lawsuit against Nortel and the other Released Parties about the Settled
Claims (as those terms are defined in the response to question 12 below).
 
   
OBJECT BY [September 15, 2006]
  Write to the Court(s) about why you do not like the Settlement, Plan of
Allocation, or Attorneys’ Fee Applications. See responses to questions 18, 20
and 22 below.
 
   
GO TO HEARINGS
  Ask to speak in Court(s) about the Settlement, Plan of Allocation, or
Attorneys’ Fee Applications. See responses to questions 18, 20 and 22 below.
 
   
DO NOTHING
  Get no payment. Give up rights.

  •   These rights and options — and the deadlines to exercise them - are
explained in this notice.     •   The Courts in charge of the various U.S. and
Canadian actions subject to this Settlement still have to decide whether to
approve the Settlement. Payments will be made if all of the Courts approve the
Settlement and after appeals, if any, are resolved. Please be patient.

SUMMARY NOTICE
Statement of Plaintiff Recovery
Pursuant to the Settlement described herein, a Settlement Fund consisting of
$370,157,418 in cash has been established, and 314,333,875 shares of Nortel
common stock, will be provided for the benefit of the Class. Lead Plaintiffs
estimate that there were approximately 2.9 billion shares of Nortel common stock
traded during the Class Period which may have been damaged. Lead Plaintiffs
estimate that the average recovery per damaged share of Nortel common stock
purchased during the Class Period under the Settlement is 10.7¢ in cash and
0.127 Settlement Shares, per damaged share1 before deduction of Court-awarded
attorneys’ fees and expenses, and
 

1   An allegedly damaged share might have been traded more than once during the
Class Period, and the indicated average recovery would be the total for all
purchasers of that share.

2

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the costs of administration. Class Members who transacted in options on Nortel
common stock may also receive a payment from the Settlement Fund, but the
various terms of those options and available records concerning such option
transactions do not permit a useful estimate to be provided concerning the
number of affected options or the recovery on those option transactions. See
response to question 9 below concerning payments to Class Members. A
Class Member’s actual recovery will be determined in accordance with the Plan of
Allocation set forth on page ___below.
Statement of Potential Outcome of Case
The parties strongly disagree on both liability and damages and do not agree on
the average amount of damages per share that would be recoverable if plaintiffs
were to have prevailed on each claim alleged.
Plaintiffs estimated that the potential damages to the Classes in the Nortel II
Actions and in certain similar actions relating to a earlier class period (see
response to question 8 below describing these “Nortel I Actions”) could well
have been in excess of the Gross Settlement Fund (as defined in response to
question 1 below). The defendants deny that they are liable to the plaintiffs or
the Class and deny that plaintiffs or the Class have suffered any damages.
Statement of Attorneys’ Fees and Costs Sought
As more fully described in response to question 17 below, plaintiffs’ counsel
are moving before their respective Courts for awards of attorneys’ fees and for
reimbursement of expenses incurred in the prosecution of their Actions as
follows:

  •   Lead Plaintiffs’ Counsel in the U.S. Action are moving for an award to
counsel of attorneys’ fees in cash and shares in an amount not to exceed ten
percent (10%) of the Gross Settlement Fund, and for reimbursement of expenses
incurred in connection with the prosecution of the U.S. Action in an amount not
to exceed $4.3 million.     •   Ontario National Class Counsel will move before
the Ontario Court for approval of an award to them of counsel fees in cash and
shares in an amount not to exceed point seven percent (0.7%) of the Gross
Settlement Fund, and for reimbursement of expenses incurred in connection with
the prosecution of the Ontario National Action in an amount not to exceed
$225,000.     •   Quebec Class Counsel will move before the Quebec Court for
approval of an award to them of counsel fees in cash and shares in an amount not
to exceed point forty five percent (0.45%) of the Gross Settlement Fund, and for
reimbursement of expenses incurred in connection with the prosecution of the
Quebec Action in an amount not to exceed $150,000.

The total requested attorneys fees and litigation expenses would amount to an
average of 1.5¢ in cash and 0.012 Settlement Shares, per damaged share in total
for fees and expenses. Application will also be made for reimbursement to the
Lead Plaintiffs, Ontario Teachers’ Pension Plan

3

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Board and the Department of the Treasury of the State of New Jersey and its
Division of Investment each for an amount not to exceed $30,000, for
reimbursement of their reasonable costs and expenses (including lost wages)
directly relating to their representation of the “U.S. Global Class” (as defined
in response to question 1 below).
Further Information
Further information may be obtained by contacting the following counsel:

  •   For the U.S. Action: Lead Plaintiff’s Counsel: Jeffrey N. Leibell, Esq.,
Bernstein Litowitz Berger & Grossmann LLP, 1285 Avenue of the Americas, New
York, New York 10019.     •   For the Ontario National Action: Ontario National
Class Counsel: Joel P. Rochon, Rochon Genova LLP, 121 Richmond Street West,
Suite 900, Toronto, Ontario M5H 2K1.     •   For the Quebec Action: Quebec
Class Counsel: Philippe H. Trudel, Trudel & Johnston, 85 de la Commune East, 3rd
Floor, Montreal, Quebec H2Y 1J1.

Reasons for the Settlement
Plaintiffs’ principal reason for the Settlement is the benefit to be provided to
the Class now. This benefit must be compared to the risk that no recovery might
be achieved after a contested trial and likely appeals, possibly years into the
future, and the further significant risk that even if the plaintiffs and the
Class successfully obtained a substantial judgment (after years of additional
litigation and appeals) the defendants might not be able to pay an amount
significantly greater than the value of the Gross Settlement Fund.
Lead Plaintiffs and Lead Plaintiffs’ Counsel, in consultation with their
investment banking and economic damages experts, considered the Company’s
current and anticipated financial condition, and also considered the extent of
the Company’s applicable insurance and the likely depletion of that insurance as
a result of continued litigation, both of which, in their view, limited the
amount that might have been recovered for-the U.S. Global Class after trial.
[END OF COVER PAGE]
WHAT THIS NOTICE CONTAINS

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Table of Contents

              Page  
SUMMARY NOTICE
    2  
Statement of Plaintiff Recovery
    2  
Statement of Potential Outcome of Case
    3  
Statement of Attorneys’ Fees and Costs Sought
    3  
Further Information
    4  
Reasons for the Settlement
    4  
BASIC INFORMATION
    6  
1. Why did I get this notice package?
    6  
2. What are these lawsuits about?
    8  
3. Why are these class actions?
    9  
4. Why is there a Settlement?
    9  
WHO IS IN THE SETTLEMENT
    10  
5. How do I know if I am part of the Settlement?
    10  
6. Are there exceptions to being included?
    10  
7. What if I am still not sure I am included?
    11  
THE SETTLEMENT BENEFITS — WHAT YOU GET
    11  
8. What does the Settlement provide?
    11  
9. How much will my payment be?
    12  
HOW YOU GET A PAYMENT — SUBMITTING A PROOF OF CLAIM FORM
    12  
10. How can I get a payment?
    12  
11. When will I get my payment?
    13  
12. What am I giving up to get a payment or stay in the Class?
    13  
REQUESTING EXCLUSION (“OPTING OUT”) FROM THE SETTLEMENT
    15  
13. How do I get out of the proposed Settlement?
    15  
14. If I do not exclude myself, can I sue Nortel and the other Released Parties
for the same thing later?
    15  
15. If I exclude myself, can I get a payment from the proposed Settlement?
    16  

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              Page  
THE LAWYERS REPRESENTING YOU
    16  
16. Do I have a lawyer in this case?
    16  
17. How will the lawyers and the Class Representatives be paid?
    16  
OBJECTING TO THE SETTLEMENT, PLAN OF ALLOCATION AND APPLICATIONS FOR ATTORNEYS’
FEES AND REIMBURSEMENT OF LITIGATION EXPENSES
    17  
18. How do I tell the Courts that I do not like the Settlement, the proposed
Plan of Allocation, and/or the applications for attorneys’ fees and
reimbursement of litigation expenses?
    17  
19. What is the difference between objecting and excluding?
    19  
THE SETTLEMENT FAIRNESS HEARINGS
    19  
20. When and where will the Courts decide whether to approve the proposed
Settlement?
    19  
21. Do I have to come to any of the Settlement Fairness Hearings?
    20  
22. May I speak at the Settlement Fairness Hearings?
    20  
IF YOU DO NOTHING
    20  
23. What happens if I do nothing at all?
    20  
GETTING MORE INFORMATION
    21  
24. Are there more details about the proposed Settlement?
    21  
25. How do I get more information?
    21  
PLAN OF ALLOCATION OF SETTLEMENT PROCEEDS AMONG CLASS MEMBERS
    22  
SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES
    29  
NORTEL: CORPORATE GOVERNANCE PROVISIONS
    31  

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BASIC INFORMATION
1. Why did I get this notice package?
You or someone in your family may have purchased Nortel common stock or call
options on Nortel common stock, or wrote (sold) put options on Nortel common
stock during the period between April 24, 2003 through April 27, 2004,
inclusive. Such purchasers may be members of the Classes in the Nortel II
Actions (as defined below) and are generally referred to herein as
“Class Members” and are collectively referred to as the “Class.” Class Members
include members of the “U.S. Global Class,” the “Ontario National Class,” and/or
the “Quebec Class.”
The Courts have directed that this Notice be sent to Class Members because they
have a right to know about their options prior to the Courts deciding whether to
approve the settlement of these lawsuits, and to understand how a class action
lawsuit may generally affect their rights. If the Courts approve the Settlement,
and after any objections and appeals are resolved, an administrator appointed by
the Courts will make the payments that the Settlement allows.
This package explains the lawsuits, the Settlement, Class Members’ legal rights,
what benefits are available, who is eligible for them, and how to get them.
The Courts in charge of the Nortel II Actions are as follows:

      Court   Action
United States District Court for the Southern District of New York (“U.S.
Court”)
  In re Nortel Networks Corp. Securities Litigation, Master File No. 04 Civ.
2115 (LAP) (“U.S. Action”)
 
   
Ontario Superior Court of Justice (“Ontario Court”)
  Gallardi v. Nortel Networks Corp., No. 05-CV-285606CP (“Ontario National
Action”)
 
   
Superior Court of Quebec, District of Montreal (“Quebec Court”)
  Skarstedt v. Corporation Nortel Networks, No. 500-06-000277-059 (“Quebec
Action”)

The entities who sued are called the plaintiffs, and the company and the persons
they sued, Nortel and certain of its officers and directors, are called the
defendants.
The Settlement in the U.S. Action resolves the claims on behalf of persons or
entities, wherever located, who bought Nortel common stock or call options on
Nortel common stock or who wrote (sold) put options on Nortel common stock
during the period April 24, 2003 through April 27, 2004, inclusive, and suffered
damages thereby, including, but not limited to, those persons or entities who
traded in Nortel Securities on the New York Stock Exchange and/or the Toronto
Stock Exchange (the “U.S. Global Class”). In addition, the Settlement covers the
two Canadian actions referred to above (the “Canadian Actions”). The Settlement
in the Canadian Actions resolve the claims on behalf of the following persons
and entities:

  •   Ontario National Class: All persons or entities, except members of the
Quebec Class, who while residing in Canada at the time, purchased Nortel common
stock or call options on Nortel common stock, or wrote (sold) put options on
Nortel common stock, during the period between April 24, 2003 through April 27,
2004, inclusive.     •   Quebec Class: All persons or entities who, while
residing in Quebec at the time, purchased Nortel common stock or call options on
Nortel common stock, or wrote (sold) put options on Nortel common stock, during
the period between April 24, 2003 through

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      April 27, 2004, inclusive. For purposes of the definition of Quebec Class,
an entity means a legal person established for a private interest, a partnership
or an association if at all times during the 12-month period preceding
February 18, 2005, not more than 50 persons bound to it by contract of
employment were under its direction or control and if it is dealing at arm’s
length with the representative of the Quebec Class. Other entities may be
members of the Ontario National Class.

Members of the classes certified in the Canadian Actions who suffered damages as
a result of their Class Period transactions in Nortel securities are also
members of the U.S. Global Class.
Regardless of how many classes you are a member of, you will not be entitled to
recover more than once for your claim.
2. What are these lawsuits about?
Nortel is a Canadian corporation with its principal executive offices located in
Brampton, Ontario, Canada and has offices located throughout the United States
and Canada. Nortel filed annual, quarterly and other reports with the Ontario
Securities Commission and the (United States) Securities and Exchange Commission
(the “SEC”) and its common stock is listed and traded on both the Toronto Stock
Exchange and the New York Stock Exchange under the symbol NT. Nortel is engaged
in the business of providing networking and communication services to customers
located in over 150 countries.
On September 10, 2004, Lead Plaintiffs in the U.S. Acton filed a Consolidated
Class Action Complaint (the “Complaint”), which alleged that Nortel and certain
of its former officers perpetrated a fraud on the investing public by improperly
accounting for the Company’s reserve accounts, reversing millions of dollars
into income to make the market believe that Nortel had returned to
profitability, when, in fact, it had not.
Lead Plaintiffs filed their Second Amended Consolidated Class Action Complaint
(the “Second Amended Complaint”) on September 16, 2005 based on Lead Plaintiffs’
Counsel’s extensive discovery efforts, which included a targeted review of a
substantial amount of the approximately 21 million pages of documents produced
by Nortel alone. In addition to the above, the Second Amended Complaint alleged
that the members the Audit Committee of Nortel’s Board of Directors (the “Audit
Committee Defendants”) violated Section 10(b) of the Exchange Act and SEC
Rule 10b-5 promulgated thereunder by issuing materially false and misleading
statements during the Class Period in a scheme to artificially inflate the value
of Nortel publicly-traded securities. Specifically, Lead Plaintiffs alleged that
the Audit Committee Defendants disregarded the warning provided to them by
Nortel’s auditors, Deloitte & Touche LLP (“D&T’), that Nortel was reversing
hundreds of millions of dollars of reserves into income at the same time that
Nortel’s projected losses turned into profits, and that the Audit Committee
Defendants ignored D&T’s recommendation that Nortel institute a rigorous review
of its remaining balance sheet provisions, choosing instead to approve numerous
financial disclosures reporting positive earnings results and a premature
restatement that deceived investors as to Nortel’s true financial condition.

8

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Similar factual allegations and claims are made in the Canadian Actions under
Canadian law. The defendants deny that they violated any laws or did anything
wrong. Defendants believe that their actions were proper under the U.S. federal
securities laws and applicable Canadian law, assert that they are not liable to
the plaintiffs or the Class, and have asserted several affirmative defenses to
the allegations in the Complaints.
3. Why are these class actions?
In a class action, one or more people, called class representatives, sue on
behalf of people who have similar claims. All these people are a class or class
members. Bringing a case, such as this one, as a class action allows uniform
adjudication of many similar claims of persons and entities that might be
economically too small to bring in individual actions. One court resolves the
issues for all class members, except for those who exclude themselves from the
class.
In these Nortel II Actions the class representatives are:

      Nortel II Action   Class Representatives
U.S. Action
  Ontario Teachers’ Pension Plan Board and the Department of the Treasury of the
State of New Jersey and its Division of Investment
 
   
Ontario National Action
  Peter Gallardi
 
   
Quebec Action
  Clifford W. Skarstedt

4. Why is there a Settlement?
The parties recognized that the claims asserted in the Nortel I Actions, as well
as in the Nortel II Actions, if ultimately proved by the plaintiffs in those
actions, could have resulted in Judgments that exposed defendants to substantial
damage awards. Plaintiffs recognized that, even if they were successful in
obtaining judgments against Nortel and the other defendants, there was a
significant risk that such judgments would not be fully collectible. Nortel
recognized that the continued defense of the Nortel I Actions and the Nortel II
Actions would require significant attention of its management and would distract
Nortel from pursuing its business affairs, and that a plaintiffs’ judgment could
be a very significant impediment to Nortel’s future success. Accordingly, the
parties considered that a resolution of the Nortel I Actions and the Nortel II
Actions was advisable.
The Courts have not finally decided in favor of the plaintiffs or the
defendants. Instead, all parties agreed to a settlement. That way, they avoid
the risks and cost of trial, the people affected will get compensation, and
Nortel will be released of burdensome and distracting

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litigation that potentially could be a significant impediment to Nortel’s future
success. The Class Representatives and their counsel think the Settlement is
fair, reasonable and adequate, and in the best interests of, all Class Members.
WHO IS IN THE SETTLEMENT
To see if you will get cash and Nortel common stock from this Settlement, you
first have to decide if you are a Class Member.
5. How do I know if I am part of the Settlement?
The U.S. Court decided for the purposes of the proposed Settlement in the U.S.
Action that everyone who fits the following description is a Class Member: all
persons and entities who purchased Nortel common stock, who purchased call
options on Nortel common stock, or who wrote (sold) put options on Nortel common
stock (the “Nortel Securities”) during the period between April 24, 2003 through
April 27, 2004, inclusive (the “Class Period”) and who suffered damages thereby,
including, but not limited to, those persons or entities who traded in Nortel
Securities on the New York Stock Exchange and/or the Toronto Stock Exchange. The
U.S. Global Class is not limited to U.S. residents.
The two Canadian Courts generally decided for the purposes of the proposed
Settlement that everyone residing in Canada who fits the following description
will be Class Members: all persons and entities who purchased Nortel common
stock, who purchased call options on Nortel common stock, or who wrote
(sold) put options on Nortel common stock during the period between April 24,
2003 through April 27, 2004, inclusive. To determine which specific Canadian
Class you might be part of, please see the definitions of Ontario National Class
and Quebec Class above in the response to question 1. Unlike the requirements
for membership in the U.S. Global Class, there is no requirement for you to have
suffered damages to be a member of Ontario National Class, or Quebec Class.
6. Are there exceptions to being included?
Excluded from the Class are (i) Nortel, Frank Dunn, Douglas C. Beatty, Michael
J. Gollogly, John Edward Cleghorn, Robert Ellis Brown, Robert Alexander Ingram,
Guylaine Saucier, and Sherwood Hubbard Smith, Jr.; (ii) James Kinney (Finance
Chief for Nortel’s Wireless Networks Division, Richardson, Texas), Ken Taylor
(Vice President for Nortel’s Enterprise Networks Division, Raleigh, North
Carolina), Craig Johnson (Finance Director for Nortel’s Wireline Networks
Division, Richardson, Texas), Doug Hamilton (Finance Director for Nortel’s
Optical Networks Group, Montreal, Quebec), Michel Gasnier (Vice President of
Finance for Europe), Robert Ferguson (Vice President of Finance for China), and
William Bowrey (Controller for Asia); (iii) members of the immediate family of
each of the defendants and/or any of the individuals referenced above; (iv) any
entity in which any defendant and/or any of the individuals referenced above has
a controlling interest; (v) any parent, subsidiary or affiliate of

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Nortel; (vi) any person who was an officer or director or Nortel or any of its
subsidiaries or affiliates during the Class Period; and (vii) the legal
representatives, heirs, predecessors, successors or assigns of any of the
excluded persons or entities (the “Excluded Persons”).
If one of your mutual funds owned shares of Nortel common stock during the
Class Period, that alone does not make you a Class Member. You are a
Class Member only if you directly purchased shares of Nortel common stock,
purchased call options on Nortel common stock, or wrote (sold) put options on
Nortel common stock, during the Class Period. Contact your broker to see if you
purchased shares of Nortel common stock, purchased call options on Nortel common
stock, or wrote (sold) put options on Nortel common stock, during the
Class Period.
If you sold Nortel common stock, sold call options on Nortel common stock, or
purchased put options on Nortel common stock during the Class Period that alone
does not make you a Class Member. You are a Class Member only if you purchased
Nortel common stock, purchased call options on Nortel common stock, or wrote
(sold) put options on Nortel common stock during the Class Period.
7. What if I am still not sure I am included?
If you are still not sure whether you are included, you can ask for free help.
You can call 1-800-___-___or visit [www.                    .com] for more
information. Or you can fill out and return the Proof of Claim form described in
response to question 10 below, to see if you qualify. Note, however, that if you
return a Proof of Claim form you will be releasing all your “Settled Claims”
against the “Released Parties.” (See response to question 12 below.)
THE SETTLEMENT BENEFITS — WHAT YOU GET
8. What does the Settlement provide?
In exchange for the Settlement and/or dismissal of the Nortel H Actions, Nortel
and its insurers agreed to create cash settlement funds for the benefit of the
Class herein consisting of $370,157,418 in cash, which is earning interest, and
Nortel agreed to issue 314,333,875 Settlement Shares of its common stock, having
an aggregate market value as of [date] of [$                    ], to be
divided, after fees and expenses as awarded by the Courts, among all
Class Members who submit valid Proof of Claim forms. Nortel has also agreed to
share with the Class 25% of any actual gross recovery obtained in existing
litigation against certain former Nortel officers (the “Contingent Recovery”).
The cash, Settlement Shares, and Contingent Recovery, and any interest or
dividends earned thereon, are referred to as the “Gross Settlement Fund.”
In addition, Nortel will adopt the corporate governance provisions in Appendix A
to this Notice.
A separate lawsuit, In re Nortel Networks Corp. Securities Litigation,
Consolidated Civil Action No. 01 Civ. 1855 (RMB) (S.D.N.Y.) and related Canadian
actions in Ontario, Quebec and British Columbia (the “Nortel I Actions”), are
also being settled on behalf of investors who

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purchased Nortel common stock or call options on Nortel common stock, or wrote
(sold) put options on Nortel common stock, during the period October 24, 2000
through February 15, 2001, inclusive (the “Nortel I Class Period”), including,
but not limited to, those persons or entities who traded in such Nortel
securities on the New York Stock Exchange and/or the Toronto Stock Exchange. The
settlement in the Nortel I Actions will provide $438,667,428 in cash and
314,333,875 Settlement Shares to the members of the Classes in the Nortel I
Actions. It is a condition of both the Settlement in the Nortel II Actions and
the settlement in the Nortel I Actions that the Settlement be approved by each
of the Courts in all of the actions. The Settlement is also contingent upon
appropriate securities regulatory and stock exchange approvals.
9. How much will my payment be?
The amount of your payment and Settlement Shares will depend on the number of
valid Proof of Claim forms that Class Members send in, how many shares of Nortel
common stock you bought, the number of call options on Nortel common stock you
bought, and the number of put options on Nortel common stock you wrote (sold),
and when you bought and sold them.
The value of the Settlement Shares is expected to fluctuate over time and is not
guaranteed. No representation can be made as to what the value of the Settlement
Shares may be at the time the Settlement Shares are distributed to Class Members
who submitted acceptable Proofs of Claim. Class Members receiving Settlement
Shares who may be deemed to be “affiliates” of Nortel, within the meaning of
(United States) federal securities laws, would be subject to certain limitations
on the resale of Settlement Shares as provided in Rule 145 under the (United
States) Securities Act of 1933, as amended, 15 U.S.C. § 77c(a)(1). Any
Class Member who might be deemed to be an affiliate should consult with counsel
as to these limitations. In addition, the resale of the Settlement Shares in
Canada may be subject to certain limitations under Canadian securities laws,
which may affect some Class Members.
You can calculate your Recognized Claim in accordance with the formula shown
below in the Plan of Allocation. It is unlikely that you will get a payment for
all of your Recognized Claim. After all Class Members have sent in their Proof
of Claim forms, the payment you get in cash and Nortel common stock will be part
of the Net Cash Settlement Fund and a part of the Net Settlement Shares equal to
your Recognized Claim divided by the total of everyone’s Recognized Claims. See
the Plan of Allocation on page [___] for more information on how your Recognized
Claim will be determined. Payments to members of the Quebec Class may be subject
to deductions pursuant to Quebec law payable to the Fonds d’aide aux recours
collectifs of Quebec.

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HOW YOU GET A PAYMENT — SUBMITTING A PROOF OF CLAIM FORM
10. How can I get a payment?
To qualify for a payment, you must send in a Proof of Claim form. A Proof of
Claim form is being circulated with this Notice. You may also get a Proof of
Claim form on the Internet at [www.                    .com]. Read the
instructions carefully, fill out the Proof of Claim form, include all the
documents the form asks for, sign it, and mail it, by first class mail,
postmarked no later than                     , 2006.
11. When will I get my payment?
The U.S. Court will hold a hearing on                     , 2006, to decide
whether to approve the Settlement. Settlement approval hearings will be held in
the Canadian Actions on dates shown below in the response to question 20. The
Courts in the Nortel I Actions will also hold hearings in the same time frame as
these hearings. Approval of settlement of the Nortel I Actions is also a
condition to the Settlement of these actions. If all the Courts approve the
Settlement, there may be appeals. It is always uncertain whether these appeals
can be resolved, and resolving them can take time, perhaps more than a year. It
also takes time for all the Proofs of Claim to be processed. After conclusion of
the approval hearings, any appeals, and claims processing, the funds and
Settlement Shares will be distributed. Please be patient.
12. What am I giving up to get a payment or stay in the Class?
Unless you validly request exclusion (“opt out”), you are staying in the Class,
and that means that, upon the “Effective Date,” you will release all “Settled
Claims” (as defined below) against the “Released Parties” (as defined below).
“Settled Claims” means any and all claims, debts, demands, rights or causes of
action, suits, matters, and issues or liabilities whatsoever (including, but not
limited to, any claims for damages, interest, attorneys’ fees, expert or
consulting fees, and any other costs, expenses or liability whatsoever), whether
based on United States or Canadian federal, state, provincial, local, statutory
or common law or any other law, rule or regulation, whether fixed or contingent,
accrued or unaccrued, liquidated or unliquidated, at law or in equity, matured
or unmatured, whether class or individual in nature, including both known claims
and Unknown Claims (herein defined), (i) that have been asserted in any of the
Nortel II Actions against any of the Released Parties, or (ii) that could have
been asserted in any forum by the Class Members or any of them against any of
the Released Parties which arise out of or are based upon the allegations,
transactions, facts, matters or occurrences, representations or omissions
involved, set forth, or referred to in the Nortel II Actions and which relate to
the purchase of Nortel common stock or call options on Nortel common stock or
the writing (sale) of put options on Nortel common stock during the
Class Period, or (iii) any oppression or other claims under the Canada Business
Corporations Act, R.S.C. 1985, c. C-44, as amended, that arise out of or are
based upon the allegations, transactions, facts, matters or occurrences,
representations or omissions, set forth or referred to in the Nortel II Actions.
“Settled Claims” does not mean or include claims, if any, against the Released
Parties arising under the (United States) Employee Retirement Income Security
Act of 1974, as amended, 29 U.S.C. § 1001, et seq. (“ERISA”) that are not common
to

13

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all Class Members and which ERISA claims are the subject of an action pending
before the Judicial Panel on Multidistrict Litigation, denominated In re Nortel
Networks Securities and “ERISA” Litigation, MDL Docket No. 1537. “Settled
Claims” further does not include: (a) the action in Rohac et al. v. Nortel
Networks Corp. et al., Ontario Superior Court of Justice, Court File No.
04-CV-3268 and (b) the application brought in Indiana Electrical Workers Pension
Trust Fund IBEW and Laborers Local 100 and 397 Pension Fund v. Nortel Networks
Corporation, Ontario Superior Court of Justice, Court File No. 49059, for leave
pursuant to the Canada Business Corporations Act to commence a representative
action in the name of and on behalf of Nortel against certain of the Released
Parties.
“Released Parties” means any and all of the defendants in the Nortel II Actions
(namely: Nortel, Frank Dunn, Douglas C. Beatty, Michael J. Gollogly, John Edward
Cleghorn, Robert Ellis Brown, Robert Alexander Ingram, Guylaine Saucier, and
Sherwood Hubbard Smith, Jr., and Deloitte & Touche LLP), their past or present
subsidiaries, parents, principals, affiliates, general or limited partners or
partnerships, successors and predecessors, heirs, assigns, officers, directors,
agents, employees, attorneys, advisors, investment advisors, investment bankers,
underwriters, insurers, co-insurers, re-insurers, accountants, auditors,
consultants, administrators, executors, trustees, personal representatives,
immediate family members and any person, firm, trust, partnership, corporation,
officer, director or other individual or entity in which any defendants in the
Nortel II Actions has a controlling interest or which is related to or
affiliated with any of the defendants in the Nortel II Actions, and the legal
representatives, heirs, executors, administrators, trustees, successors in
interest or assigns of the defendants in the Nortel II Actions.
“Unknown Claims” means any and all Settled Claims which any of the Lead
Plaintiffs, Canadian Representative Plaintiffs, or Class Members do not know or
suspect to exist in his, her or its favor at the time of the release of the
Released Parties, which if known by him, her or it might have affected his, her
or its decision(s) with respect to the Settlement. With respect to any and all
Settled Claims, the parties stipulate and agree that, upon the Effective Date,
the Lead Plaintiff, Canadian Representative Plaintiffs shall expressly waive,
and each Class Member shall be deemed to have waived, and by operation of the
Judgments shall have expressly waived, any and all provisions, rights and
benefits conferred by any law of any state, province or territory of the United
States or Canada, or principle of common law, which is similar, comparable, or
equivalent to Cal. Civ. Code § 1542, which provides:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
Lead Plaintiff, Canadian Representative Plaintiffs and Nortel acknowledge, and
Class Members by operation of law shall be deemed to have acknowledged, that the
inclusion of “Unknown Claims” in the definition of Settled Claims was separately
bargained for and was a key element of the Settlement.
In addition, upon the Effective Date of the Settlement, all Class Members on
behalf of themselves, their personal representatives, heirs, executors,
administrators, trustees, successors

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and assigns, with respect to each and every Settled Claim, release and forever
discharge, and be forever enjoined from prosecuting, any Settled Claims against
any of the Released Parties, and shall not institute, continue, maintain or
assert, either directly or indirectly, whether in the United States, Canada or
elsewhere, on their own behalf or on behalf of any class or any other person,
any action, suit, cause of action, claim or demand against any Released Party or
any other person who may claim any form of contribution or indemnity (save for a
contractual indemnity) from any Released Party in respect of any Settled Claim
or any matter related thereto, at any time on or after the Effective Date.
The “Effective Date” will occur when Orders entered by all the Courts approving
the Settlement in the Nortel I Actions and the Nortel II Actions become final
and not subject to appeal and when all conditions of the Stipulation have been
met.
If you remain a member of the Class, the applicable Court’s orders will apply to
you and legally bind you.
REQUESTING EXCLUSION (“OPTING OUT”) FROM THE SETTLEMENT
If you do not want a payment from this Settlement, but you want to keep any
right you may have on your own to sue or continue to sue Nortel and the other
Released Parties about the Settled Claims, then you must take steps to get out
of the Class. This process is called excluding yourself from — or is sometimes
referred to as “opting out” of— the Class. Nortel may withdraw from and
terminate the Settlement if persons or entities who would otherwise be
Class Members, and who purchased in excess of a certain amount of Nortel common
stock, opt out of the Class.
13. How do I get out of the proposed Settlement?
To opt out of the Class, you must send a signed letter by mail stating that you
“request exclusion from the Class in the Nortel II Securities Litigation”. Your
letter should include the date(s), price(s), and number(s) of shares of all
purchases and sales of Nortel common stock and/or Nortel common stock options
during the Class Period. In addition, be sure to include your name, address,
telephone number, and your signature. You must mail your exclusion request by
first class mail postmarked no later than                     , 2006 to:
Nortel II Securities Litigation Exclusions
c/o The Garden City Group, Inc. Claims Administrator
P.O. Box 0000
City, ST 00000-0000
You cannot exclude yourself by telephone or by e-mail. If you ask to be
excluded, you will not get any settlement payment, and you cannot object to the
Settlement. You will not be legally bound by anything that happens in these
Nortel II Actions, and you may be able to sue (or continue to sue) Nortel and
the other Released Parties in the future.
14. If I do not exclude myself, can I sue Nortel and the other Released Parties
for the same thing later?

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No. Unless you exclude yourself, you give up any rights to sue Nortel and the
other Released Parties for any and all Settled Claims. If you have a pending
lawsuit, speak to your lawyer in that case immediately. You must exclude
yourself from the Class to continue your own lawsuit. Remember, the exclusion
deadline is 2006.
15. If I exclude myself, can I get a payment from the proposed Settlement?
No. If you exclude yourself, do not send in a Proof of Claim form to ask for any
money or shares. But, you may exercise any right you may have to sue, continue
to sue, or be part of a different lawsuit against Nortel and the other Released
Parties.
THE LAWYERS REPRESENTING YOU
16. Do I have a lawyer in this case?
The following firms represent Class Members:

  •   For the U.S. Action: Lead Plaintiffs’ Counsel Bernstein Litowitz Berger &
Grossmann LLP, 1285 Avenue of the Americas, New York, New York 10019, together
with Lowenstein Sandler P.C., 65 Livingston Avenue, Roseland, New Jersey 07068;
    •   For the Ontario National Action: Rochon Genova LLP, 121 Richmond Street
West, Suite 900, Toronto, Ontario M5H 2K1 and Lerners LLP, 130 Adelaide Street
West, Suite 2400, Toronto, Ontario M5H 3P5;     •   For the Quebec Action:
Trudel & Johnston s.e.n.c., 85 de la Commune East, 3rd Floor, Montreal, Quebec
H2Y 1J1;

These lawyers are called Class Counsel. You will not be separately charged for
these lawyers. The U.S. Court will determine the amount of lawyers’ fees and
expenses to be awarded to the law firms in the U.S. Action. The Ontario Court
will determine the amount of lawyers’ fees and expenses to be awarded to the law
firms in the Ontario National Action. The Quebec Court will determine the amount
of lawyers’ fees and expenses to be awarded to the law firms in the Quebec
Action. All lawyers’ fees and expenses awarded by the respective Courts will be
paid from the Gross Settlement Fund. Class Members may, but are not required to,
hire their own lawyers at their own expense.
17. How will the lawyers and the Class Representatives be paid?

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Plaintiffs’ counsel are moving before their respective Courts for awards of fees
and for reimbursement of expenses incurred in the prosecution of their Actions
as follows:
Lead Plaintiffs’ Counsel in the U.S. Action, are moving before the U.S. Court
for an award to counsel of attorneys’ fees in cash and shares in an amount not
to exceed ten percent (10%) of the Gross Settlement Fund after deducting
litigation expenses awarded by the U.S. Court, and for reimbursement of expenses
incurred in connection with the prosecution of the U.S. Action in an amount not
to exceed $4,300,000. Plaintiffs’ counsel have agreed that, notwithstanding the
terms of their retainer agreement with Lead Plaintiffs, two large public pension
funds, which sets a fee of approximately 12.5% of the Gross Settlement Fund,
they will seek a fee no greater than 10%. Lead Plaintiffs’ Counsel has not
advised the Lead Plaintiffs with respect to their review of a proposed fee
application or their determination as to whether the Lead Plaintiffs should
approve a proposed fee application, including the amount thereof, in whole or in
part.
Ontario National Class Counsel will move before the Ontario Court for approval
of an award to them of counsel fees in cash and shares in an amount not to
exceed point seven percent (0.7%) of the Gross Settlement Fund, and for
reimbursement of expenses incurred in connection with the prosecution of the
Ontario National Action in an amount not to exceed $225,000.
Quebec Class Counsel will move before the Quebec Court for approval of an award
to them of counsel fees in cash and shares in an amount not to exceed point
forty five percent (0.45%) of the Gross Settlement Fund and for reimbursement of
expenses incurred in connection with the prosecution of the Quebec Action in an
amount not to exceed $150,000
Plaintiffs’ counsel, without further notice to the Class, may subsequently apply
to the appropriate Court for fees and expenses incurred in connection with
administering and distributing the settlement proceeds to the members of the
Class and any proceedings subsequent to the hearings.
Application will also be made for reimbursement to the Lead Plaintiffs, Ontario
Teachers’ Pension Plan Board and the Department of the Treasury of the State of
New Jersey and its Division of Investment each for an amount not to exceed
$30,000, for reimbursement of their reasonable costs and expenses (including
lost wages) directly relating to their representation of the U.S. Global Class.
OBJECTING TO THE SETTLEMENT, PLAN OF ALLOCATION AND
APPLICATIONS FOR ATTORNEYS’ FEES AND REIMBURSEMENT
OF LITIGATION EXPENSES
If you are a Class Member, you can tell the Courts that you do not agree with
the Settlement, or some part of it, the proposed Plan of Allocation, and/or any
of the applications for attorneys’ fees and reimbursement of litigation
expenses.
18. How do I tell the Courts that I do not like the Settlement, the proposed
Plan of Allocation, and/or the applications for attorneys’ fees and
reimbursement of litigation expenses?

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Any Class Member, no matter where he, she or it resides, can object to the
Settlement, or any of its terms, to the proposed Plan of Allocation, and/or to
any of the applications by plaintiffs’ counsel for awards of fees and expenses.
You may write to the Claims Administrator setting out your objection. You may
give reasons why you think the Settlement terms or arrangements, the proposed
Plan of Allocation, and/or any of the applications for attorneys’ fees or
expenses, should not be approved by the Courts addressing those matters. The
Claims Administrator will provide copies of your objections to each of the
Courts and to counsel for all the parties. The Courts will consider your views
if you provide your objection to the Claims Administrator within the deadline
identified and you are a member of the class certified by the court. However, it
is in the discretion of each of the Courts whether to consider the objections
filed by members of the other classes not certified by that Court.
Although it is up to each Court whether to hear the oral objections of persons
who are members of other classes not certified by that Court, if you are a
member of one or more of the classes described herein, and you wish to present
your views in person or through a lawyer to a particular Court, you should
follow the procedures for submitting objections set forth in this response, and
in the response to question 22 below.
To object to the Settlement, the proposed Plan of Allocation, and/or any of the
applications for attorneys’ fees and expenses in these Nortel II Actions, you
should send a signed letter stating that you object to the Settlement, the
proposed Plan of Allocation, and/or the applications by one or more of
plaintiffs’ counsel for awards of attorneys’ fees and expenses in the In re
Nortel II Securities Litigation. Be sure to include your name, address,
telephone number, and your signature, identify the date(s), price(s), and
number(s) of shares of all purchases and sales of Nortel common stock and/or
Nortel common stock options you made during the period April 24, 2003 through
April 27, 2004, inclusive, and state the reasons why you object to the
Settlement, the proposed Plan of Allocation, and/or any or all of the
applications by plaintiffs’ counsel for awards of attorneys’ fees and expenses.
Your objection must be must be mailed to the Claims Administrator at the
following address, on or before                     , 2006:
Nortel II Securities Litigation Objections
c/o The Garden City Group, Inc., Claims Administrator
P.O. Box                     
                    , ___                     
You do not need to go to any of the Settlement Fairness Hearings to have your
written objection considered by the appropriate Court(s). At the Settlement
Fairness Hearings, any Class Member who has not previously submitted a request
for exclusion from the Class and who has complied with the procedures set out in
this response and the response to question 22 below for filing with the Court(s)
and providing to the counsel for plaintiffs and defendants a statement of an
intention to appear at the Settlement Fairness Hearing(s) may also appear and be
heard, to the extent allowed by the applicable Court(s), to state any objection
to the Settlement, the Plan of Allocation or plaintiffs’ counsel’s motions for
awards of legal fees and reimbursement of expenses. Any such objector so
appearing may appear in person or arrange, at that objector’s expense, for a
lawyer to represent the objector at the Hearing(s).

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Any Class Member who does not object to the Settlement, the Plan of Allocation,
and/or any application for an award of attorneys’ fees and reimbursement of
litigation expenses in the manner prescribed above shall be deemed to have
waived such objection and shall forever be foreclosed from making any objection
to the fairness, adequacy or reasonableness of the proposed Settlement, the
Order and Final Judgment to be entered approving the Settlement, the Plan of
Allocation or the applications for awards of attorneys’ fees and reimbursement
of expenses.
19. What is the difference between objecting and excluding?
Objecting is simply telling the Court that you do not like something about the
proposed Settlement. You can object only if you stay in the Class. Excluding
yourself is telling the Court that you do not want to be part of the Class. If
you exclude yourself, you have no basis to object because the case no longer
affects you.
THE SETTLEMENT FAIRNESS HEARINGS
The Courts will hold hearings to decide whether to approve the proposed
Settlement. You may attend and you may ask to speak, but you do not have to.
20. When and where will the Courts decide whether to approve the proposed
Settlement?
The Courts will hold Settlement Fairness/Approval Hearings as follows:

  •   in the U.S. Action: at                     :                     ___.m. on
                      day,                      , 2006, at the United States
District Court for the Southern District of New York, Daniel Patrick Moynihan
United States Courthouse, 500 Pearl Street, New York, NY.     •   in the Ontario
National Action: at                     :                     ___.m. on
                     day,                      , 2006, at the Ontario Superior
Court of Justice, 361 University Avenue, Toronto, Ontario.     •   in the Quebec
Action: at                      :                     ___.m. on
                     day,                      , 2006, at the Superior Court of
Quebec, District of Montreal, 1 Notre-Dame East, Montreal, Quebec.

At these hearings, each Court will consider whether the Settlement is fair and
reasonable and satisfies the legal requirements in each jurisdiction. At the
Settlement Fairness Hearings, each Court also will consider the proposed Plan of
Allocation for the proceeds of the Settlement. In addition, the U.S. Court will
consider the fee and expense application by plaintiffs’ counsel in the U.S.
Action, and the respective Canadian Courts will consider the fee and expense
applications by plaintiffs’ counsel in the Canadian Actions. The Courts will
take into consideration any written objections filed in accordance with the
instructions shown at question 18. The Courts also may listen to people who have
properly indicated, within the deadline identified above, an intention to speak
at the hearing(s); however, decisions regarding the conduct of the hearing(s)
will be made by the appropriate Court. See response to question 22 for

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more information about speaking at the hearing(s). After each hearing, each
Court will decide whether to approve the Settlement. If the Courts approve the
Settlement, each Court may also decide how much to pay to plaintiffs’ counsel
appearing in the Nortel I or Nortel II Action before it. Only the U.S. Court
will decide the amount of fees and expenses to be awarded to plaintiffs’ counsel
in the U.S. Action, and only the respective Canadian Courts will decide the
amount of fees and expenses to be awarded to plaintiffs’ counsel in the Canadian
Actions. It is not known how long these decisions will take.
You should be aware that any of the Courts may change the date(s) and time(s) of
the Settlement Fairness Hearings. Thus, if you want to come to any of the
hearings, you should check with plaintiffs’ counsel before coming, to be sure
that the date(s) and/or time(s) have not changed.
21. Do I have to come to any of the Settlement Fairness Hearings?
No. Plaintiffs’ counsel will answer questions any of the Courts may have.
However, you are welcome to come at your own expense. If you send an objection,
you do not have to come to Court to talk about it. As long as you filed your
written objection on time, the Court(s) will consider it. You may also pay your
own lawyer to attend, but it is not necessary. Class Members do not need to
appear at any hearing or take any other action to indicate their approval.
22. May I speak at the Settlement Fairness Hearings?
If you object to the Settlement, the Plan of Allocation and/or the
application(s) by any counsel for an award of attorneys’ fees and expenses, you
may ask the appropriate Court for permission to speak at the Settlement Fairness
Hearing(s). To do so, you must include with your objection (see question 18
above) a statement stating that it is your “Notice of Intention to Appear” in
the appropriate Nortel II Action. Persons who intend to object to the
Settlement, the Plan of Allocation, and/or plaintiffs’ counsel’s applications
for awards of legal fees and reimbursement of expenses and desire to present
evidence at the Settlement Fairness Hearing(s) must include in their written
objections the identity of any witnesses they may call to testify and exhibits
they intend to introduce into evidence at the Settlement Fairness Hearing(s).
You may not be entitled to speak at the Settlement Fairness Hearing(s) if you
excluded yourself from the Class, if you are not a member of the class in which
the Court is holding the Settlement Fairness Hearing, or if you have not
provided written notice of your intention to speak at the Settlement Fairness
Hearing(s) by the deadline identified and in accordance with the procedures
described in response to question 18 and this response.

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IF YOU DO NOTHING
23. What happens if I do nothing at all?
If you do nothing, you will get no money or shares from this Settlement, and you
will be precluded from starting a lawsuit, continuing with a lawsuit, or being
part of any other lawsuit against Nortel and the other Released Parties about
the Settled Claims, ever again. To share in the Net Settlement Fund you must
submit a Proof of Claim form (see question 10). To start, continue or be a part
of any other lawsuit against Nortel and the other Released Parties about the
Settled Claims you must have properly excluded yourself from the Class in
accordance with the procedures set forth in this Notice (see questions 13 — 15).
GETTING MORE INFORMATION
24. Are there more details about the proposed Settlement?
This Notice summarizes the proposed Settlement. More details are set forth in a
Stipulation and Agreement of Settlement dated                     , 2006 (the
“Stipulation”). You can get a copy of the Stipulation by writing to appropriate
Class Counsel, as set forth in “Further Information,” above, by visiting
[www.                    .com], or by contacting the Claims Administrator at:
Nortel II Securities Litigation Settlement
c/o The Garden City Group, Inc., Claims Administrator
P.O. Box 0000
City, ST 00000-0000
1-800-____-                     toll free
[www.                    .com]
where you will find answers to common questions about the Settlement, a Proof of
Claim form, plus other information to help you determine whether you are a
Class Member and whether you are eligible for a payment.
25. How do I get more information?
For even more detailed information concerning the matters involved in this
Nortel II Action, reference is made to the pleadings, to the Stipulation and
Settlement Agreements, to the Orders entered by the respective Courts and to the
other papers filed in the Nortel II Actions, which may be inspected, during
regular business hours, as follows:

  •   In the U.S. Action: at the Office of the Clerk, United States District
Court for the Southern District of New York, Daniel Patrick Moynihan United
States Courthouse, 500 Pearl Street, New York, NY.     •   In the Ontario
National Action: at the Civil Court Office, Ontario Superior Court of Justice,
393 University Avenue, 10th Floor, Toronto, Ontario.     •   In the Quebec
Action: at the Office of the Special Clerk, Superior Court of Quebec, 1
Notre-Dame East, Montreal, Quebec.

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PLAN OF ALLOCATION OF SETTLEMENT PROCEEDS
AMONG CLASS MEMBERS
The $370,157,418 Cash Settlement Amount plus any Contingent Recovery, and the
interest earned thereon, and the 314,333,875 Settlement Shares of Nortel common
stock shall be the Gross Settlement Fund. The Gross Settlement Fund, less all
taxes, approved costs, fees and expenses (the “Net Settlement Fund”) shall be
distributed to members of the Class who submit acceptable Proofs of Claim
(“Authorized Claimants”).
The Claims Administrator shall determine each Authorized Claimant’s pro rata
share of the cash and Settlement Shares in the Net Settlement Fund based upon
each Authorized Claimant’s “Recognized Claim.” The Recognized Claim formula is
not intended to be an estimate of the amount of what a Class Member might have
been able to recover after a trial; nor is it an estimate of the amount that
will be paid to Authorized Claimants pursuant to the Settlement. The Recognized
Claim formula is the basis upon which the Net Settlement Fund will be
proportionately allocated to the Authorized Claimants.
The proposed Plan of Allocation generally measures the amount of loss that a
Class Member can claim under the Settlement for the purpose of making pro-rata
allocations of the cash and Settlement Shares in the Net Settlement Fund to
Class Members who submit acceptable Proofs of Claim. The following proposed Plan
of Allocation reflects plaintiffs’ allegations that the price of Nortel common
stock was inflated artificially during the Class Period due to
misrepresentations regarding Nortel’s revenue and earnings. On March 10, 2004,
after the market close, Nortel issued a press release announcing that it was
delaying the filing of its 2003 Form 10-K and might restate its results for
2003. On March 15, 2004, before the market opened, Nortel announced that it had
placed its CFO and controller on paid leave, and replaced them with interim
appointments, effective immediately. On April 28, 2004, before the market
opened, Nortel announced that it would restate and revise 2003 and prior-year
financial results, and would delay the release of its first-quarter results. It
further stated that it expected reductions of about 50% of 2003 earnings and
that its CFO and controller, who had been appointed on a temporary basis, had
been made permanent, and the former CFO and controller “have been terminated for
cause.” The reaction to each of these announcements in the marketplace was
swift. Nortel’s stock price declined from its $6.88 closing price on March 10,
2004 on the New York Stock Exchange to a closing price of $6.37 per share on
March 11, 2004 – a decline of 7%. Nortel’s stock again declined from a closing
price of $6.43 on March 12, 2004 to a closing price of $5.24 on March 15, 2004 –
a decline of 19%. Another decline accompanied Nortel’s third disclosure, with
Nortel’s stock plunging 28% from a closing price of $5.64 on April 27, 2004 to a
closing price of $4.05 on April 28, 2004. Plaintiffs estimated that a total of
approximately $2.90 per share, or 42%, of the $6.88 closing price on March 10,
2004 represented the artificial inflation caused by the Defendants’ alleged
misrepresentations. (Note: Nortel’s common stock price did not bounce back above
a $4.05 average price in the 90-day period following the end of the
Class Period; accordingly, no reduction of the claimed damages is required under
the (United States) Private Securities Litigation Reform Act.)
An Authorized Claimant’s “Recognized Claim” will be calculated for purposes of
the Settlement as follows:

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To the extent a claimant had a gain from his, her or its overall transactions in
Nortel common stock and/or Nortel put and call options during the Class Period,
the value of the Recognized Claim will be zero. Such claimants will in any event
be bound by the Settlement. You may wish to consider this when deciding to opt
out.
Common Stock Purchases

1.   For shares of Nortel common stock purchased between April 24, 2003 and
March 10, 2004, inclusive, and:

  a.   sold at a loss prior to March 11, 2004, the Recognized Claim is the
lesser of (x) $0.29 per share, which is 10%2 of the inflation at the time of
purchase ($2.90 per share), or (y) 10% of the difference between the purchase
price and the sales price.     b.   sold at a loss between March 11, 2004 and
March 12, 2004, the Recognized Claim is the lesser of: (i) the purchase price
minus the sales price; or (ii) $0.44 per share.     c.   sold at a loss between
March 15, 2004 and April 27, 2004, the Recognized Claim is the lesser of:
(i) the purchase price minus the sales price; or (ii) $1.48 per share.     d.  
held as of the close of business on April 27, 2004, the Recognized Claim is the
lesser of: (i) the purchase price minus $4.05; or (ii) $2.90 per share.

2.   For shares of Nortel common stock purchased between March 11, 2004 and
March 12, 2004, inclusive, and:

  a.   sold at a loss prior to March 15, 2004, the Recognized Claim is the
lesser of (x) $0.25, which is 10%3 of the inflation at the time of purchase
($2.46 per share), and (y) 10% of the difference between the purchase price and
the sales price.     b.   sold at a loss between March 15, 2004 and April 27,
2004, the Recognized Claim is the lesser of: (i) the purchase price minus the
sales price; or (ii) $1.04 per share.     c.   held as of the close of business
on April 27, 2004, the Recognized Claim is the lesser of: (i) the purchase price
minus $4.05; or (ii) $2.46 per share.

3.   For shares of Nortel common stock purchased between March 15, 2004 and
April 27, 2004, inclusive, and:

 

2   Class members who sold Nortel common stock at a loss prior to the close of
trading on March 10, 2004 before the disclosures made on March 11, 2004 would
face a potential defense that their loss was not related to the alleged
misrepresentations because the same alleged misrepresentations affected both
their purchase and their sale. The discount to 10% reflects this greater
difficulty.   3   Class members who purchased Nortel common stock on March 11
and 12, 2004 and who sold those shares of Nortel common stock at a loss prior to
the close of trading on March 12, 2004 (before the disclosures made on March 15,
2004) would face a potential defense that their loss was not related to the
alleged misrepresentations because the same alleged misrepresentations affected
both their purchase and their sale. The discount to 10% reflects this greater
difficulty.

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  a.   sold at a loss between March 15, 2004 and April 27, 2004, the Recognized
Claim is the lesser of (x) $0.14, which is 10%3 of the inflation at the time of
purchase ($1.42 per share), or (y) 10% of the difference between the purchase
price and the sales price.     b.   held as of the close of business on
April 27, 2004, the Recognized Claim is the lesser of: (i) the purchase price
minus $4.05; or $1.42 per share.

Put and Call Options
The total recovery payable to Authorized Claimants from transactions in call or
put options shall not exceed five percent (5%) of the Net Settlement Fund.
Call Option Purchases

1.   For call options purchased between April 24, 2003 and March 10, 2004:

  a.   No claim will be recognized for any Nortel call options purchased between
April 24, 2003 and March 10, 2004 that were not owned as of the close of trading
on March 10, 2004.     b.   For call options purchased between April 24, 2003
and March 10, 2004 and owned as of the close of trading on March 10, 2004, an
Authorized Claimant’s Recognized Claim shall be the lesser of (a) 50% of the
difference, if a loss, between (x) the amount paid for the call options
(including brokerage commissions and transaction charges) and (y) the sum for
which said call options were subsequently sold at a loss (after brokerage
commissions and transaction charges (or $0.00 if the call option expired while
still owned by the Authorized Claimant), or (b) $1.45 per share covered by such
call options (i.e., 50% of the $2.90 maximum per common share claim for this
loss).     c.   No loss shall be recognized based on a sale or writing of any
call option that was subsequently repurchased.     d.   Shares of Nortel
acquired during the Class Period through the exercise of a call option shall be
treated as a purchase on the date of exercise for the exercise price plus the
cost of the call option, and any Recognized Claim arising from such transaction
shall be computed as provided for other purchases of common stock.

1.   For call options purchased between March 11, 2004 and March 12, 2004:

 

4   Class members who purchased Nortel common stock between March 15, 2004 and
April 27, 2004 and who sold those shares of Nortel common stock at a loss prior
to the close of trading on April 27, 2004 (before the disclosures made on
April 27, 2004) would face a potential defense that their loss was not related
to the alleged misrepresentations because the same alleged misrepresentations
affected both their purchase and their sale. The discount to 10% reflects this
greater difficulty.

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  a.   No claim will be recognized for any Nortel call options purchased between
March 11, 2004 and March 12, 2004 that were not owned as of the closed of
trading on March 12, 2004.     b.   For Nortel call options purchased between
March 11, 2004 and March 12, 2004 and owned as of the close of trading on
March 12, 2004, an Authorized Claimant’s Recognized Claim shall be the lesser of
(a) 50% of the difference, if a loss, between (x) the amount paid for the call
options (including brokerage commissions and transaction charges) and (y) the
sum for which said call options were subsequently sold at a loss (after
brokerage commissions and transaction charges (or $0.00 if the call option
expired while still owned by the Authorized Claimant), or (b) $1.23 per share
covered by such call options (i.e., 50% of the $2.46 maximum per common share
claim for this loss).     c.   No loss shall be recognized based on a sale or
writing of any call option that was subsequently repurchased.     d.   Shares of
Nortel acquired during the Class Period through the exercise of a call option
shall be treated as a purchase on the date of exercise for the exercise price
plus the cost of the call option, and any Recognized Claim arising from such
transaction shall be computed as provided for other purchases of common stock.

2.   For call options purchased between March 15, 2004 and April 27, 2004:

  a.   No claim will be recognized for any Nortel call options purchased between
March 15, 2004 and April 27, 2004 that were not owned as of the closed of
trading on April 27, 2004.     b.   For Nortel call options purchased between
March 15, 2004 and April 27, 2004 and owned as of the close of trading on
April 27, 2004, an Authorized Claimant’s Recognized Claim shall be the lesser of
(a) 50% of the difference, if a loss, between (x) the amount paid for the call
options (including brokerage commissions and transaction charges) and (y) the
sum for which said call options were subsequently sold at a loss (after
brokerage commissions and transaction charges (or $0.00 if the call option
expired while still owned by the Authorized Claimant), or (b) $0.71 per share
covered by such call options (i.e., 50% of the $1.42 maximum per common share
claim for this loss).     c.   No loss shall be recognized based on a sale or
writing of any call option that was subsequently repurchased.     d.   Shares of
Nortel acquired during the Class Period through the exercise of a call option
shall be treated as a purchase on the date of exercise for the exercise price
plus the cost of the call option, and any Recognized Claim arising from such
transaction shall be computed as provided for other purchases of common stock.

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Put Option Sales
For Nortel put options sold (written) during the Class Period that expired
unexercised, an Authorized Claimant’s Recognized Claim shall be $0.00.

1.   For put options sold (written) between April 24, 2003 and March 10, 2004:

  a.   No claim will be recognized for Nortel put options sold (written) between
April 24, 2003 and March 10, 2004 which were not the obligation of the
Authorized Claimant as of the close of trading on March 10, 2004.     b.   For
Nortel put options sold (written) between April 24, 2003 and March 10, 2004 that
were the obligation of the Authorized Claimant at the close of trading on March
10, 2004, an Authorized Claimant’s Recognized Claim shall be the lesser of
(a) the difference, if a loss, between (x) the amount received for writing the
put option (net of brokerage commissions and transaction charges) and (y) the
sum for which said put options were repurchased at a loss after the close of
trading on March 10, 2004 (including brokerage commissions and transaction
charges) or (b) $2.90 per share covered by such put options.     c.   For Nortel
put options written between April 24, 2003 and March 10, 2004 that were “put” to
the Authorized Claimant (i.e., exercised), the Authorized Claimant’s Recognized
Claim shall be calculated as a purchase of common stock as shown above, and as
if the sale of the put option were instead a purchase of Nortel common stock on
the date of the sale of the put option, and the “purchase price paid” shall be
the strike price less the proceeds received on the sale of the put option.    
d.   No loss shall be recognized based on a sale of any put option that was
previously purchased.

2.   For put options sold (written) between March 11, 2004 and March 12, 2004:

  a.   No claim will be recognized for any Nortel put options sold
(written) between March 11, 2004 and March 12, 2004 that were not the obligation
of the claimant as of the close of trading on March 12, 2004.     b.   For
Nortel put options sold (written) between March 11, 2004 and March 12, 2004 that
were the obligation of the Authorized Claimant at the close of trading on March
12, 2004, an Authorized Claimant’s Recognized Claim shall be the lesser of
(a) the difference, if a loss, between (x) the amount received for writing the
put option (net of brokerage commissions and transaction charges) and (y) the
sum for which said put option was repurchased at a loss after the close of
trading on March 12, 2004 (including brokerage commissions and transaction
charges) or (b) $2.46 per share covered by such put option.     c.   For Nortel
put options written between April 24, 2003 and March 10, 2004 that were “put” to
the Authorized Claimant (i.e., exercised), the Authorized Claimant’s Recognized
Claim shall be calculated as a purchase of common stock as shown

26

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      above, and as if the sale of the put option were instead a purchase of
Nortel common stock on the date of the sale of the put option, and the “purchase
price paid” shall be the strike price less the proceeds received on the sale of
the put option.     d.   No loss shall be recognized based on a sale of any put
option that was previously purchased.

3.   For put options sold (written) between March 15, 2004 and April 27, 2004:

  a.   No claim will be recognized for any Nortel put option sold
(written) between March 15, 2004 and April 27, 2004 that was not the obligation
of the claimant as of the close of trading on April 27, 2004.     b.   For
Nortel put options sold (written) between March 15, 2004 and April 27, 2004 that
were the obligation of the Authorized Claimant at the close of trading on April
27, 2004, an Authorized Claimant’s Recognized Claim shall be the lesser of
(a) the difference, if a loss, between (x) the amount received for writing the
put option (net of brokerage commissions and transaction charges) and (y) the
sum for which said put options were repurchased at a loss after the close of
trading on April 27, 2004 (including brokerage commissions and transaction
charges) or (b) $1.42 per share covered by such put options.     c.   For Nortel
put options written between March 15, 2004 and April 27, 2004 that were “put” to
the Authorized Claimant (i.e., exercised), the Authorized Claimant’s Recognized
Claim shall be calculated as a purchase of common stock as shown above, and as
if the sale of the put option were instead a purchase of Nortel common stock on
the date of the sale of the put option, and the “purchase price paid” shall be
the strike price less the proceeds received on the sale of the put option.    
d.   No loss shall be recognized based on a sale of any put option that was
previously purchased.

In the event a Class Member has more than one purchase or sale of Nortel common
stock and/or Nortel common stock options, all purchases and sales shall be
matched on a First In First Out (“FIFO”) basis, Class Period sales will be
matched first against any Nortel shares and/or options held at the beginning of
the Class Period, and then against purchases in chronological order, beginning
with the earliest purchase made during the Class Period. Purchases and sales of
Nortel common stock and options shall be deemed to have occurred on the
“contract” or “trade” date as opposed to the “settlement” or “payment” date. The
receipt or grant by gift, devise or operation of law of Nortel common stock
and/or options during the Class Period shall not be deemed a purchase or sale of
these Nortel securities for the calculation of an Authorized Claimant’s
Recognized Claim nor shall it be deemed an assignment of any claim relating to
the purchase of such Nortel securities unless specifically provided in the
instrument of gift or assignment. The receipt of Nortel common stock during the
Class Period in exchange for securities of any other corporation or entity shall
not be deemed a purchase or sale of Nortel common stock.
Each Authorized Claimant shall be allocated pro rata shares of the cash and
Settlement Shares in the Net Settlement Fund based on his, her or its Recognized
Claim as compared to the total

27

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Recognized Claims of all Authorized Claimants. Each Authorized Claimant shall be
paid an amount determined by multiplying the total cash or Settlement Shares,
respectively, in the Net Settlement Fund, by a fraction the numerator of which
shall be his, her or its “Recognized Claim” and the denominator of which shall
be the Total Recognized Claims of all Authorized Claimants. This computation
weighs each Class Member’s claim against every other Class Member’s claim. Each
Authorized Claimant will receive pro rata shares of the cash and Settlement
Shares in the Net Settlement Fund based on his, her or its Recognized Claim.
The amount of a Class Member’s Recognized Claim as computed above is not
intended to be an estimate of what a Class Member might have been able to
recover at trial, and it is not an estimate of the amount that will be paid
pursuant to this Settlement. Instead, this computation is only a method to
weight Class Members’ claims against one another. Each Authorized Claimant will
receive pro rata shares of the cash and Settlement Shares in the Net Settlement
Fund based on his, her or its Recognized Claim.
To the extent a Claimant had a gain from his, her or its overall transactions in
Nortel common stock and/or Nortel put and call options during the Class Period,
the value of the Recognized Claim will be zero. Such claimants will in any event
be bound by the Settlement. To the extent that a Claimant suffered an overall
loss on his, her or its overall transactions in Nortel common stock and/or
options during the Class Period, but that loss was less than the Recognized
Claim calculated above, then the Recognized Claim shall be limited to the amount
of the actual loss.
For purposes of determining whether a Claimant had a gain from his, her or its
overall transactions in Nortel common stock during the Class Period or suffered
a loss, the Claims Administrator shall: (i) total the amount the Claimant paid
for all Nortel common stock and Nortel options purchased during the
Class Period, and the cost or amount paid to repurchase or close after the
Class Period any Nortel put options written by the Claimant during the
Class Period that were open obligations of the Claimant at the end of the
Class Period (the “Total Purchase Amount”); (ii) match any sales of Nortel
common stock or options during the Class Period first against the Claimant’s
opening position in the stock (the proceeds of those sales will not be
considered for purposes of calculating gains or losses); (iii) total the amount
received for sales of the remaining shares of Nortel common stock and any
options sold during the Class Period (the “Sales Proceeds”); and (iv) ascribe a
$4.05 per share holding value for the number of shares of Nortel common stock
purchased during the Class Period and still held at the end of the Class Period
and add the value at the end of Class period of any call options still held by
the Claimant at the end of the Class Period (“Holding Value”). The difference
between (x) the Total Purchase Amount ((i) above) and (y) the sum of the Sales
Proceeds ((iii) above) and the Holding Value ((iv) above) will be deemed a
Claimant’s gain or loss on his, her or its overall transactions in Nortel common
stock during the Class Period.
Class Members who do not submit acceptable Proofs of Claim will not share in the
settlement proceeds. Class Members who do not either submit a request for
exclusion or submit an acceptable Proof of Claim will nevertheless be bound by
the Settlement and the Judgment of the Court dismissing the Nortel II Actions.
Distributions will be made to Authorized Claimants after all claims have been
processed and after the Courts have finally approved the Settlement. If any
funds remain in the Net Settlement

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Fund by reason of un-cashed distributions or otherwise, then, after the Claims
Administrator has made reasonable and diligent efforts to have Class Members who
are entitled to participate in the distribution of the Net Settlement Fund cash
their distributions, any balance remaining in the Net Settlement Fund one
(1) year after the initial distribution of such funds shall be re-distributed to
Class Members who have cashed their initial distributions and who would receive
at least $10.00 from such re-distribution, after payment of any unpaid costs or
fees incurred in administering the Net Settlement Fund for such re-distribution.
If after six months after such re-distribution any funds shall remain in the Net
Settlement Fund, then such balance shall be contributed proportionally to United
States and Canadian non-sectarian, not-for-profit organizations designated by
plaintiffs’ counsel (and in the case of any relevant settlement shares, by
transfer of such shares to such organization) after notice to the. Courts and
subject to direction, if any, by the Courts.
Plaintiffs, defendants, their respective counsel, and all other Released Parties
shall have no responsibility for or liability whatsoever for the investment or
distribution of the Settlement Fund, the Net Settlement Fund, the Plan of
Allocation or the determination, administration, calculation, or payment of any
Proof of Claim or non-performance of the Claims Administrator, the payment or
withholding of taxes owed by the Settlement Fund, or any losses incurred in
connection therewith.
Any payment required to be made to the Fonds d’aide aux recours collectifs of
Quebec shall be paid by the Claims Administrator from the funds allocable to
such members of the Quebec Class.
SPECIAL NOTICE TO SECURITIES BROKERS AND OTHER NOMINEES
If you purchased Nortel common stock or call options on Nortel common stock, or
wrote (sold) put options on Nortel common stock during the period between
April 24, 2003 through April 27, 2004, inclusive for the beneficial interest of
a person or organization other than yourself, the United States District Court
has directed that, WITHIN SEVEN (7) DAYS OF YOUR RECEIPT OF THIS NOTICE, you
either (a) provide to the Claims Administrator the name and last known address
of each person or organization for whom or which you purchased or sold such
stock and/or options during such time period or (b) request additional copies of
this Notice and the Proof of Claim form, which will be provided to you free of
charge, and within seven (7) days mail the Notice and Proof of Claim form
directly to the beneficial owners of such stock and/or options. If you choose to
follow alternative procedure (b), the Court has directed that, upon such
mailing, you send a statement to the Claims Administrator confirming that the
mailing was made as directed. You are entitled to reimbursement from the Gross
Settlement Fund of your reasonable expenses actually incurred in connection with
the foregoing, including reimbursement of postage expense and the cost of
ascertaining the names and addresses of beneficial owners. Those expenses will
be paid upon request and submission of appropriate supporting documentation. All
communications concerning the foregoing should be addressed to the Claims
Administrator:
Nortel II Securities Litigation Settlement
c/o The Garden City Group, Inc., Claims Administrator
P.O. Box                     
                    , __                     
(800) ____-                    
Dated:                     , 2006

         
 
  By Order of the Courts    
 
 
 
   

29

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30

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APPENDIX “A”
NORTEL: CORPORATE GOVERNANCE PROVISIONS
Corporate Governance Enhancements
A. The following are the corporate governance enhancements that Nortel Networks
Corporation (“Nortel”) has agreed to implement:
     1) Nortel will amend its Statement of Governance Guidelines (the
“Governance Statement”) to explicitly provide that the non-executive Chair (the
“Chair”) of Nortel’s Board of Directors (the “Board”) shall have adequate
support staff to carry out the Chair’s responsibilities.
     2) Nortel will amend its Governance Statement and the mandates of the Board
and the Board committees to explicitly provide for in camera or executive
sessions at every Board and Board committee meeting, whether such meetings are
conducted in-person or telephonically.
     3) The Board will adopt a formal policy in 2006 to provide guidance to
directors on the number of outside public boards on which a director may serve.
The Board may take into account various factors in making its determination,
including number of meetings and work plan of additional boards, committee
memberships, industry and geographic location.
     4) Nortel will amend the fourth page, first non-indented paragraph, first
sentence of the current mandate of Nortel’s Compensation and Human Resources
Committee (formerly the Joint Leadership Resources Committee, the “CHRC”) to
read:
Subject as hereinafter provided, the committee shall have sole authority over
the engagement of compensation consultants, including over the terms and
conditions of such engagements.
     5) Nortel will disclose in its annual proxy circular and proxy statement
the names of comparator companies used for purpose of pay setting and
performance comparisons.
     6) The CHRC will include the results of comparator companies in determining
its compensation practices and philosophy in consultation with the independent
compensation consultants to the CHRC.
     7) The CHRC intends to establish its. compensation structures and policies
in line with best practices. The CHRC will consult with its independent
compensation consultants regularly to review the current state of affairs on
best practices in the various areas of executive and other employee
compensation, including with respect to the relative balance between annual and
long-term compensation.

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     8) The CHRC will not utilize pro forma or adjusted financial metrics to
assess performance and pay incentives except in extraordinary circumstances, and
in consultation with the independent compensation consultants to the CHRC and
Nortel’s Audit Committee.
     9) The CHRC will disclose in Nortel’s annual proxy circular and proxy
statement pay for performance measures and the time period(s) used to assess
management’s performance, except that confidential or competitive information
will not be disclosed.
     10) The CHRC will require that all executives’ employment agreements
include a clawback provision that entitles the company to take back
compensation, or declare compensation not owed, in the case of fraud.
     11) Nortel will amend the mandate of the Board to formalize the Board’s
current practice of electing the Chair on an annual basis.
     12) Nortel will require that all committees of the Board must meet at least
once a year.
     13) Any material deviation from Nortel’s Governance Statement will be
disclosed in the Report on Governance in the annual proxy circular and proxy
statement.
B. The following are either current practices of Nortel or practices that Nortel
was in the process of adopting at the time that negotiations with Lead
Plaintiffs as to corporate governance enhancements began, and which Lead
Plaintiffs have demanded be memorialized as part of this Settlement, and which
Nortel has either implemented or has agreed to implement:
     1) Commencing with 2006, Nortel will prepare a forward agenda for the
Board, as well as each committee of the Board, at the beginning of each fiscal
year. Each forward agenda will identify the decisions and actions to be
presented to the Board or committee for the ensuing year as prescribed by the
mandate of the Board or of the applicable committee.
     2) Nortel currently conducts an annual assessment of the Board, its
committees, individual directors and the Chair and reports those results to the
Board. Nortel will describe this review process in its annual proxy circular and
proxy statement.
     3) Nortel’s Nominating and Governance Committee (formerly the Committee on
Directors, the “Committee”) will adopt, each year, general procedures which the
Committee will follow for the purpose of identifying Board candidates. These
procedures will be sufficiently flexible to permit the Committee to respond to
current circumstances as well as to the requirements of the Canada Business
Corporations Act, the stock exchanges and applicable securities laws regarding
the election and appointment of directors. These procedures will be adopted for
candidate identification and the appointment of new directors to the Board.

31

--------------------------------------------------------------------------------

 

     4) Nortel is in the process of amending the Committee’s mandate to
explicitly identify that the Committee is responsible for director succession
planning.
     5) Nortel is in the process of formalizing and expanding its director
orientation and education program.
     6) The CHRC generally will not grant enhanced pension arrangements except
in extraordinary circumstances and in consultation with its independent
compensation consultants.
     7) The CHRC agrees with the policy of not layering incentive plans on top
of other incentive plans by reason of an unlikely payout under another existing
plan.
C. Lead Plaintiffs are invited to address the chairman of Nortel’s Board and the
Committee no later than four months after the Effective Date with respect to
certain additional governance proposals, who will in turn discuss those
proposals with the Board. The Board will then consider those proposals in good
faith and act accordingly.

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EXHIBIT A-2
PROOF OF CLAIM AND RELEASE
This Proof of Claim and Release relates to the following actions (the “Nortel II
Actions”):

•   In Re Nortel Networks Corp. Securities Litigation, Master File No. 04 Civ.
21 15 (LAP) in the United States District Court for the Southern District of New
York;   •   Gallardi v. Nortel Networks Corporation, No. 05-CV-285606CP in the
Ontario Superior Court of Justice; and   •   Skarstedt v. Corporation Nortel
Networks, No. 500-06-000277-059 in the Superior Court of Quebec District of
Montreal.

DEADLINE FOR SUBMISSION: ___, 2006.
IF YOU PURCHASED NORTEL NETWORKS CORPORATION (“NORTEL”) COMMON STOCK OR CALL
OPTIONS ON NORTEL COMMON STOCK OR WROTE (SOLD) PUT OPTIONS ON NORTEL COMMON
STOCK (“NORTEL SECURITIES”) DURING THE PERIOD BETWEEN APRIL 24, 2003 THROUGH
APRIL 27, 2004, INCLUSIVE (“CLASS PERIOD”), YOU MAY BE A “CLASS MEMBER” ENTITLED
TO SHARE IN THE PROCEEDS OF A SETTLEMENT.
NOTE: If you also purchased Nortel common stock or call options on Nortel common
stock or wrote (sold) put options on Nortel common stock during the period
between October 24, 2000 through February 15, 2001, inclusive, then you should
have also received another Notice and you should also submit a separate Proof of
Claim for those securities on the [COLOR] Proof of Claim form relating to a
separate class action covering that time period (copies of that [COLOR] form are
available from [Claims Administrator]. This [ANOTHER COLOR] Proof of Claim
should be submitted with respect to only your purchases during the April 24,
2003 through April 27, 2004, inclusive, time period.
Excluded from the Class are (i) Nortel, Frank Dunn, Douglas C. Beatty, Michael
J. Gollogly, John E. Cleghorn, Robert E. Brown, Robert A. Ingram, Guylaine
Saucier and Sherwood H. Smith, Jr. (the “Defendants”); (ii) James Kinney
(finance chief for Nortel’s Wireless Networks Division, Richardson, Texas), Ken
Taylor (Vice President for Nortel’s Enterprise Networks Division, Raleigh, North
Carolina), Craig Johnson (Finance Director for Nortel’s Wireline Networks
Division, Richardson, Texas), Doug Hamilton (Finance Director for Nortel’s
Optical Networks Group, Montreal, Quebec), Michael Gasnier (Vice President of
Finance for Europe), Robert Ferguson (Vice President of Finance for China), and
William Bowrey (Controller for Asia); (iii) members of the immediate family of
each of the defendants and/or any of the individuals referenced above; (iv) any
entity in which any defendant and/or any of the individuals referenced above has
a controlling interest; (v) any parent, subsidiary or affiliate of Nortel;
(vi) any

 

--------------------------------------------------------------------------------

 

person who was an officer or director or Nortel or any of its subsidiaries or
affiliates during the Class Period; and (vii) the legal representatives, heirs,
predecessors, successors or assigns of any of the excluded persons or entities.
IF YOU ARE A CLASS MEMBER, YOU MUST COMPLETE AND SUBMIT THIS FORM IN ORDER TO BE
ELIGIBLE FOR ANY SETTLEMENT BENEFITS.
YOU MUST COMPLETE AND SIGN THIS PROOF OF CLAIM AND MAIL IT BY FIRST CLASS MAIL,
POSTMARKED NO LATER THAN ___, 2006 TO THE FOLLOWING ADDRESS:
In re Nortel II Securities Litigation
c/o [Claims Administrator]
Claims Administrator
Post Office Box ___
_________, ___  ___
YOUR FAILURE TO SUBMIT YOUR CLAIM BY ___, 2006 WILL SUBJECT YOUR CLAIM TO
REJECTION AND PRECLUDE YOUR RECEIVING ANY MONEY IN CONNECTION WITH THE
SETTLEMENT OF THIS LITIGATION. DO NOT MAIL OR DELIVER YOUR CLAIM TO THE COURTS
OR TO ANY OF THE PARTIES OR THEIR COUNSEL AS ANY SUCH CLAIM WILL BE DEEMED NOT
TO HAVE BEEN SUBMITTED. SUBMIT YOUR CLAIM ONLY TO THE CLAIMS ADMINISTRATOR.

2

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CLAIMANT’S STATEMENT
     1. I purchased Nortel Networks Corporation (“Nortel”) common stock and/or
call options on Nortel common stock and/or wrote (sold) put options on Nortel
common stock during the period between April 24, 2003 through April 27, 2004,
inclusive. (Do not submit this Proof of Claim if you did not purchase Nortel
common stock or call options or write (sell) put options on Nortel common stock
during this period.)
     2. By submitting this Proof of Claim, I state that I believe in good faith
that I am a Class Member as defined above and in the Notice of Pendency and
Certifications of Class Actions and Proposed Settlements, Motions for Attorneys’
Fees and Settlement Fairness Hearings (the “Notice”), or am acting for such
person; that I am not a defendant in any of the Actions or anyone excluded from
the Class; that I have read and understand the Notice; that I believe that I am
entitled to receive a share of the Net Settlement Fund as described in the
Notice; that I elect to participate in the proposed Settlement described in the
Notice; and that I have not filed a request for exclusion. (If you are acting in
a representative capacity on behalf of a Class Member (e.g., as an executor,
administrator, trustee, or other representative), you must submit evidence of
your current authority to act on behalf of that Class Member. Such evidence
would include, for example, letters testamentary, letters of administration, or
a copy of the trust documents.)
     3. I consent to the jurisdiction of the Courts with respect to all
questions concerning the validity of this Proof of Claim. I understand and agree
that my claim may be subject to investigation and discovery under the applicable
rules of civil procedure, provided that such investigation and discovery shall
be limited to my status as a Class Member and the validity and amount of my
claim. No discovery shall be allowed on the merits of the Actions or the
Settlement in connection with processing of the Proofs of Claim.

3

--------------------------------------------------------------------------------

 

     4. I have set forth where requested below all relevant information with
respect to each of my purchases and sales of Nortel common stock and/or call
options and/or put options during the periods indicated. I agree to furnish
additional information (including transactions in other Nortel securities) to
the Claims Administrator, as required by it, to support this claim and my
entitlement to a distribution if requested to do so. I understand that my
failure to comply with this provision may result in a delay of my distribution,
or the rejection of my claim.
     5. I have enclosed photocopies of the stockbroker’s confirmation slips,
stockbroker’s statements, or other documents evidencing each purchase, sale or
retention of Nortel common stock or Nortel common stock options listed below in
support of my claim. (IF ANY SUCH DOCUMENTS ARE NOT IN YOUR POSSESSION, PLEASE
OBTAIN A COPY OR EQUIVALENT DOCUMENTS FROM YOUR BROKER BECAUSE THESE DOCUMENTS
ARE NECESSARY TO PROVE AND PROCESS YOUR CLAIM.)
     6. I understand that the information contained in this Proof of Claim is
subject to such verification as the Claims Administrator may request or as the
Courts may direct, and 1 agree to cooperate in any such verification. (The
information requested herein is designed to provide the minimum amount of
information necessary to process most simple claims. The Claims Administrator
may request additional information as required to efficiently and reliably
calculate your Recognized Claim and any applicable withholding taxes. In some
cases the Claims Administrator may condition acceptance of the claim based upon
the production of additional information, including, where applicable,
information concerning transactions in any derivatives of the subject securities
such as options.)
     7. Upon the occurrence of the Effective Date (as described in the Notice),
my signature hereto will constitute a full and complete release, remise and
discharge by me and my

4

--------------------------------------------------------------------------------

 

heirs, executors, administrators, predecessors, successors, and assigns (or, if
I am submitting this Proof of Claim on behalf of a corporation, a partnership,
estate or one or more other persons, by it, him, her or them, and by its, his,
her or their heirs, executors, administrators, predecessors, successors, and
assigns) of each of the “Released Parties” of all “Settled Claims,” including
“Unknown Claims”, as these terms are defined in the Notice.
     8. NOTICE REGARDING ELECTRONIC FILES: Certain claimants with large numbers
of transactions may request, or may be requested, to submit information
regarding their transactions in electronic files. All Claimants MUST submit a
manually signed paper Proof of Claim form listing all their transactions whether
or not they also submit electronic copies. If you wish to file your claim
electronically, you must contact the Claims Administrator at 1-(800)___-___or
visit their website at www.___.com to obtain the required file layout. No
electronic files will be considered to have been properly submitted unless the
Claims Administrator issues to the Claimant a written acknowledgment of receipt
and acceptance of electronically submitted data.
     9. Statement of Claim
     Name(s) of Beneficial Owner(s):
                                        
Name
                                        
Joint Owner’s Name (if any)
     Residence Address of Beneficial Owner(s):
                                        
Street No.
                                                                       
City                   State / Province                  Zip Code / Postal Code

5

--------------------------------------------------------------------------------

 

     Mailing Address of Beneficial Owner(s) (if different):
                                                            
Street No.
                                                                       
City                   State / Province                  Zip Code / Postal Code
(    )                                              (    )           
                             
Telephone No. (Day)                   Telephone No. (Night)
Check one:
                     Individual                                   Corporation
                     Joint Owners                               IRA/RRSP
                     Estate                                          Other
                                          (specify)
     Citizenship:
                     USA                                      Canadian
                                 Other
Place of residence at the time you purchased Nortel common stock or call options
on Nortel common stock or wrote (sold) put options on Nortel common stock:
                                                             
State / Province                Country
If the Place of residence indicated above is Quebec, and if you are a legal
person established for a private interest, a partnership or an association,
indicate whether, at any time during the 12-month period preceding February 18,
2005, more than 50 employees were under your direction or control. /___/
FOR NORTEL COMMON STOCK:
     10. At the close of business on April 23, 2003, I owned ___shares of Nortel
common stock (If none, write “0” or “Zero”) (must be documented if other than
zero).
     11. I made the following purchases of Nortel common stock during the period
April 24, 2003 through April 27, 2004, inclusive. (Persons who received Nortel
common stock during this period other than by purchase are not eligible to
submit claims for those transactions.):

6

--------------------------------------------------------------------------------

 

                          Aggregate Cost Date(s) of Purchase   Number of Shares
of       (including (List Chronologically)   Common Stock   Purchase Price Per
Share   commissions, taxes, (Month/Day/Year)   Purchased   of Common Stock   and
fees)
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        

     12. I made the following sales of Nortel common stock during the period
April 24, 2003 through April 27, 2004, inclusive:

              Date(s) of Sale (List           Amount Received (net
Chronologically)   Number of Shares of   Sale Price Per Share   of commissions,
taxes, (Month/Day/Year)   Common Stock Sold   of Common Stock   and fees)
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        
___/___/___
                                            
$                                          
$                                        

     13. At the close of trading on April 27, 2004, I owned shares of Nortel
common stock (If none, write “0” or “Zero” ) (must be documented if other than
zero).
FOR CALL OPTIONS ON NORTEL COMMON STOCK:
     14. At the close of business on April 23, 2003,1 owned the following call
options on Nortel common stock (must be documented if other than zero.):

                  Date Purchased                 (List                
Chronologically)           Expiration Date     (Month/Day/Year)   Number of
Contracts   Strike Price   (Month/Day/Year)   Aggregate Cost
___/___/___
                                            
$                                           ___/___/___    
___/___/___
                                            
$                                           ___/___/___    
___/___/___
                                            
$                                           ___/___/___    
___/___/___
                                            
$                                           ___/___/___    

     15. I made the following purchases of call options on Nortel common stock
during the period between April 24, 2003 through April 27, 2004, inclusive:

7

--------------------------------------------------------------------------------

 

                                          Aggregate Cost Date of Purchase      
            (including (List Chronologically)   Number of       Expiration Date
  Price Paid   commissions, (Month/Day/Year)   Contracts   Strike Price  
(Month/Day/Year)   Per Share   taxes, and fees)
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    

     16. I made the following sales of call options on Nortel common stock
during the period April 24, 2003 through April 27, 2004, inclusive:

                                          Aggregate Date of Sale (List          
        Received (net of Chronologically)   Number of       Expiration Date  
Sale Price   commissions, (Month/Day/Year)   Contracts   Strike Price  
(Month/Day/Year)   Per Share   taxes, and fees)
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    

     17. I exercised the following call options on Nortel common stock during
the period between April 24, 2003 through April 27, 2004, inclusive:

              Date of Exercise       Expiration Date     (Month/Day/Year)  
Strike Price   (Month/Day/Year)   Number of Contracts
___/___/___
  $                                           ___/___/                      
                                        
___/___/___
  $                                           ___/___/                      
                                        
___/___/___
  $                                           ___/___/                      
                                        
___/___/___
  $                                           ___/___/                      
                                        

     18. At the close of business on April 27, 2004, I still owned the following
call options on Nortel common stock:

          Number of Contracts   Strike Price   Expiration Date (Month/Day/Year)
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___

FOR PUT OPTIONS ON NORTEL COMMON STOCK:
     19. At the close of business on April 23, 2003, I was obligated on the
following put options on Nortel common stock:

8

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          Number of Contracts   Strike Price   Expiration Date (Month/Day/Year)
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___

     20. I wrote (sold) put options on Nortel common stock during the period
between April 24, 2003 through April 27, 2004, inclusive, as follows:

                                          Aggregate Date of Writing (Sale)      
            Received (net of (List Chronologically)   Number of       Expiration
Date   Sale Price   commissions, (Month/Day/Year)   Contracts   Strike Price  
(Month/Day/Year)   Per Share   taxes, and fees)
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    

     21. I made the following re-purchases of put options on Nortel common stock
which I wrote (sold) during the period between April 24, 2003 through April 27,
2004, inclusive (include all re-purchases no matter what the date):

                                          Aggregate Cost Date of re-Purchase    
              (including (List Chronologically)   Number of       Expiration
Date   Sale Price   commissions, (Month/Day/Year)   Contracts   Strike Price  
(Month/Day/Year)   Per Share   taxes, and fees)
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    
___/___/___
                         $                       ___/___/___  
$                       $                    

     22. The following put options on Nortel common stock which I wrote
(sold) during the period between April 24, 2003 through April 27, 2004,
inclusive were exercised by the holders thereof and assigned to me(include all
re-purchases no matter what the date):

                      Expiration Date   Date of Exercise Number of Contracts  
Strike Price   (Month/Day/Year)   (Month/Day/Year)
                    
  $                                           ___/___/___   ___/___/___
                    
  $                                           ___/___/___   ___/___/___
                    
  $                                           ___/___/___   ___/___/___
                    
  $                                           ___/___/___   ___/___/___

     23. At the close of business on April 27, 2004, I was obligated on the
following put options on Nortel common stock:

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          Number of Contracts   Strike Price   Expiration Date (Month/Day/Year)
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___
                                        
  $                                           ___/___/___

IF YOU NEED ADDITIONAL SPACE TO LIST YOUR TRANSACTIONS PHOTOCOPY THIS PAGE
     24. Request for Taxpayer Identification Number:
     For tax purposes, enter the appropriate tax identification number below for
the Beneficial Owner(s). For most United States individuals, this is your Social
Security Number. For most United States entities other than individuals, this is
your Taxpayer Identification Number. For most Canadian individuals, this is your
Social Insurance Number. For most Canadian entities other than individuals, this
is your Business Number. If you fail to provide this information, your claim may
be rejected.

         
Individuals:
       
 
       
 
Social Security Number
  or  
 
Social Insurance Number
 
       
Estates, Trusts, Corporations, etc.:
       
 
       
 
       
Taxpayer Identification Number
      Business Number/Trust Number
 
       
Certification
       

     U.S. Persons and Entities: /___/ I (We) certify that I am (we are) NOT
subject to backup withholding under the provisions of Section 3406 (a)(1)(c) of
the Internal Revenue Code because: (a) I am (We are) exempt from backup
withholding, or (b) I (We) have not been notified by the I.R.S. that I am (we
are) subject to backup withholding as a result of a failure to report all
interest or dividends, or (c) the I.R.S. has notified me (us) that I am (we are)
no longer subject to backup withholding.

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NOTE: If you have been notified by the I.R.S. that you are subject to backup
withholding, please strike out the language that you are not subject to backup
withholding in the certification above.
     Canadian or Other Non-U.S. Persons and Entities: /___/ The beneficial owner
is not a U.S. person and the income to which this form relates, if any, is not
effectively connected with the conduct of a trade or business in the United
States.
     UNDER THE PENALTIES OF PERJURY, I (WE) CERTIFY THAT ALL OF THE INFORMATION
I (WE) PROVIDED ON THIS PROOF OF CLAIM FORM IS TRUE, CORRECT AND COMPLETE.

     
 
  Signature of Claimant (If this claim is being made on behalf of Joint
Claimants, then each must sign)
 
   
 
   
 
  (Signature)
 
   
 
   
 
  (Signature)
 
   
 
   
 
  (Title/Capacity of person(s) signing, e.g. beneficial purchaser(s), president,
executor, administrator, trustee, etc.)

Date:                     

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     THIS PROOF OF CLAIM MUST BE SUBMITTED NO LATER THAN 2006, AND MUST BE
MAILED TO:
In re Nortel II Securities Litigation
c/o [Claims Administrator]
Claims Administrator
Post Office Box ___
                    , __                     
     A Proof of Claim received by the Claims Administrator shall be deemed to
have been submitted when posted, if mailed by                     , 2006, and if
a postmark is indicated on the envelope and it is mailed first class, and
addressed in accordance with the above instructions. In all other cases, a Proof
of Claim shall be deemed to have been submitted when. actually received by the
Claims Administrator.
     You should be aware that it will take a significant amount of time to
process fully all of the Proofs of Claim and to administer the Settlement. This
work will be completed as promptly as time permits, given the need to
investigate and tabulate each Proof of Claim. Please notify the Claims
Administrator of any change of address.
REMINDER CHECKLIST
1. o Please be sure to sign this Proof of Claim on page [_]. If this Proof of
Claim is submitted on behalf of joint claimants, then both claimants must sign.
2. o Please remember to attach supporting documents. Do NOT send any stock
certificates. Keep copies of everything you submit.
3. o Do NOT use highlighter on the Proof of Claim or any supporting documents.
4. o If you move after submitting this Proof of Claim, please notify the Claims
Administrator of the change in your address.

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NOTE: RECEIPT ACKNOWLEDGMENT NEEDED
     The Claims Administrator will send a written confirmation of its receipt of
your Proof of Claim. Do not assume your claim is submitted until you receive
written confirmation of its receipt. Your claim is not deemed fully filed until
the Claims Administrator sends you written confirmation of its receipt of your
Proof of Claim. If you do not receive an acknowledgement postcard within thirty
(30) days of your mailing the Proof of Claim, then please call the Claims
Administrator toll free at                     .

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EXHIBIT A-3

NORTEL II SECURITIES LITIGATION
SUMMARY NOTICE OF PROPOSED SETTLEMENT CERTIFICATION OF
CANADIAN ACTIONS, MOTIONS FOR LEGAL FEES AND SETTLEMENT
FAIRNESS HEARING
THIS NOTICE MAY AFFECT YOUR RIGHTS, PLEASE READ CAREFULLY
ALL PERSONS OR ENTITIES WHO PURCHASED NORTEL NETWORKS CORPORATION
(“NORTEL”) COMMON STOCK OR CALL OPTIONS ON NORTEL COMMON STOCK OR WROTE
(SOLD) PUT OPTIONS ON NORTEL COMMON STOCK (COLLECTIVELY “NORTEL SECURITIES”)
DURING THE PERIOD APRIL 24, 2003 THROUGH APRIL 27, 2004 (THE “CLASS PERIOD”),
INCLUSIVE, INCLUDING, BUT NOT LIMITED TO, THOSE PERSONS WHO TRADED IN NORTEL
SECURITIES ON THE NEW YORK STOCK EXCHANGE AND/OR THE TORONTO STOCK EXCHANGE.
NOTICE OF PROPOSED SETTLEMENT
This Summary Notice Is directed to all members of the Classes described below,
and is given pursuant to Rule 23 of the United States Federal Rules of Civil
Procedure and various Canadian provincial class proceedings legislation. The
proposed Settlement is more fully described in the “Notice of Pendency and
Certifications of Class Actions and Proposed Settlements, Motions for Attorneys
Fees and Settlement Fairness Hearings (Norte, II Notice)” (the
“Long-Form Notice”) which is currently being mailed to known Class Members. If
you have not yet received a copy of the Long-Form Notice you should request one
from the Claims Administrator Identified in the section below entitled “For More
Information.
Briefly, this Summary Notice advises you, among other things, of a proposed
settlement in the following class actions in the United States and Canada:

•   In Re Node/ Networks Corp. Securities Litigation, Master File No. 04 Civ.
2115 (LAP) in the United States District Court for the Southern District of New
York (“New York Court”) (“U.S. Action”);   •   Galardi v. Norte/ Networks
Corporation, No. 05-CV-285606CP in the Ontario Superior Court of Justice
(“Ontario Court”) (“Ontario National Action”);   •   Skarstedt v. Corporation
Node/ Networks, No. 500-06-000277-059 in the Superior Court of Quebec, District
of Montreal (“Quebec Court”) (“Quebec Action”);

The Ontario National Action and the Quebec Action are collectively referred to
as the “Canadian Nortel II Actions”. The U.S. Action and the Canadian Nortel 11
Actions are collectively referred to as the “Nortel Ii Actions”.
TERMS OF PROPOSED SETTLEMENT
The Settlement will provide total proceeds consisting of approximately
$370,157,418 in cash, plus 314,333,875 shares of Nortel common stock for the
benefit of members of the Classes. In addition, Norte will adopt certain
corporate governance enhancements. The Settlement resolves lawsuits over whether
Nortel misled Investors about its historic and future earnings during the
Class Period, The Settlement is contingent on approval by the Courts in the
Nortel II Actions and in certain related actions against Nortel in the United
States and Canada (the “Norte) I Actions”) for which there is a separate notice.
The Settlement is further subject to certain regulatory approvals. The
Settlement constitutes a full and final resolution of claims and causes of
action raised by members of the Classes in the Nortel II Actions and encompassed
In the Settlement.
NOTICE OF CERTIFICATION OF CLASSES
The U.S. Action was certified for purposes of the Settlement to proceed as a
class action on behalf of persons and entities, wherever located, who bought
Nortel common stock or call options on Nortel common stock or who wrote
(sold) put options on Nortel common stock during the period April 24, 2003
through April 27, 2004, inclusive, and suffered damages thereby, including, but
not limited to, those persons or entities who traded in Nortel Securities on the
New York Stock Exchange and/or the Toronto Stock Exchange (the “U.S. Global
Class”).
The Canadian Nortel II Actions have also been certified for settlement purposes
on behalf of Canadian Class Members. The Ontario Court and the Quebec Court have
certified the following classes for settlement purposes:

•   Ontario National Class: All persons or entitles, except members of the
Quebec Class, who while residing In Canada at the time, purchased Nortel common
stock or call options on Nortel common stock, or wrote (sold) put options on
Nortel common stock, during the period between April 24, 2003 through April 27,
2004, inclusive.   •   Quebec Class: All persons or entities, the latter having
not more than 50 employees at the relevant time – please refer to the
Long-Form Notice –, who, while residing in Quebec at the time, purchased Nortel
common stock or call options on Nortel common stock, or wrote (sold) put options
on Norte, common stock, during the period between April 24, 2003 through
April 27, 2004, inclusive.

As described in detail in the Long-Form Notice, certain persons and entities are
excluded from the above Classes.

 

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OPTING-OUT OF THE CLASS
If you are a member of any of the Classes you will be bound by the terms of the
Settlement, if approved, and you will not be able to bring or maintain any other
claim or legal proceedings against the defendants in connection with the
allegations raised in the Nortel II Actions, unless you exclude yourself
(“opt-out”). If you are a member of any of the Classes and wish to exclude
yourself from the Settlement, you must make a request for exclusion in writing.
In order to be valid, each such request for exclusion must set forth the name
and address of the person or entity requesting exclusion, must expressly state
that such person or entity requests exclusion from the Classes, and must be
signed by such person or entity. Requests for exclusion must be mailed to:
Nortel II Securities Litigation Exclusions
c/o The Garden City Group, Inc. Claims Administrator
P.O. Box 0000
City, ST 00000-0000
Requests for exclusion, to be effective, must be post-marked no later than
(September 15, 2006). If you exclude yourself from the Classes, you will not be
bound by any judgment or other orders made in the Norte) II Actions, will not be
able to participate in the Settlement, and will retain any rights you may have
as against the defendants. Do not request exclusion if you wish to participate
in the Settlement.
NOTICE OF SETTLEMENT FAIRNESS/APPROVAL HEARINGS
As noted, in order for the Settlement to become effective, It must be approved
by the New York Court, the Ontario Court and the Quebec Court, each of which
must be satisfied that the Settlement is fair, reasonable, adequate and in the
best interests of Class Members. Dates for the Settlement Fairness/Approval
Hearings have been scheduled with the respective courts as follows:
• in the U.S. Action: at ___:___.m. on                     day, ___, 2006, at
the United States District Court for the Southern District of New York, Daniel
Patrick Moynihan United States Courthouse, 500 Pearl Street, New York, NY.
• in the Ontario National Action: at ___:___.m. on                     day, ___,
2006, at the Ontario Superior Court of Justice, 361 University Avenue, Toronto,
Ontario.
• in the Quebec Action: ___:___.m. on                     day, ___, 2006, at the
Superior Court of Quebec, District of Montreal, 1 Notre-Dame East, Montreal,
Quebec.
If you are a member of any of the Classes and you do not oppose the Settlement,
you need not appear at the Settlement Fairness/Approval Hearings to indicate
your approval. if you are a member of any of the Classes and you wish to comment
on or make an objection to the terms of the Settlement, you should send your
name, address and brief reasons for the objection to the Claims Administrator as
set forth in the Long-Form Notice prior to (September 15, 2006) You will be
entitled to appear at the Settlement Fairness/Approval Hearings and be heard if
you wish to do so.
At the Settlement Fairness Hearing, plaintiffs’ counsel will apply to the
respective Courts for awards of legal fees and for reimbursement of expenses
incurred in prosecuting the Nortel II Actions.
PROOF OF CLAIM REQUIRED TO SHARE IN SETTLEMENT PROCEEDS
In order to receive any of the money or shares of Nortel common stock being made
available through the Settlement you must submit a Proof of Claim form by
[November 30, 2006]. Proof of Claim forms may be obtained by contacting the
Clams Administrator at the addresses shown below.
FOR MORE INFORMATION
If you have not yet received the full printed Long-Form Notice and Proof of
Claim form, you may obtain copies of these documents by contacting the Claims
Administrator. As there will be no further notices sent directly to members of
the Classes, you should keep yourself apprised of all developments and updates
by regularly contacting the                  Claims Administrator or by
visiting:
Nortel II Securities Litigation Settlement
c/o The Garden City Group, Inc., Claims Administrator
P.O. Box 0000, City, ST 00000-0000
1-800-___-                     toll free
[www.                                        .coom]
If there is a discrepancy between this Summary Notice and the Long Form Notice,
the latter prevails.
PLAINTIFFS’ COUNSEL:
     For the U.S. Action: Lead Plaintiff’s Counsel Jeffrey N. Leibell, Esq.,
Bernstein Litowitz Berger & Grossmann LLP, 1285 Avenue of the Americas, New
York, New York 10019.
     For the Ontario National Action: Ontario National Class Counsel: Joel P.
Rochon, Rochon Genova LLP, 121 Richmond Street West, Suite 900, Toronto, Ontario
M5H 2K1.
     For the Quebec Action: Quebec Class Counsel: Philippe H. Trudel, Trudel &
Johnston, 85 de la Commune East, 3rd Floor, Montreal, Quebec H2Y 1J1.
This Summary Notice has been approved by the United States District Court for
the Southern District of New York, the Ontario Superior Court of Justice and the
Superior Court of Quebec.

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EXHIBIT A-4
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Nortel I and II Canadian Actions
Proposed Legal Notification Campaign

     
 
  Prepared by:
 
  Jeanne C. Finegan, APR
 
  June 19, 2006

 

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Table of Contents

              Page  
INTRODUCTION
    1  
1. Legal Notice Communication Methodology
    2  
2. Multi-National Legal Notice Experience
    4  
3. Media Rationale Overview
    5  
4. Direct Mail
    5  
5. Publication
    8  
6. Notice Program Strategy
    9  
7. Publication Analysis
    12  
8. Frequency Rationale
    14  
9. Prominent Ad Position, Formatting and “Plain Language”
    15  
10. Internet Banner Advertising
    15  
11. Media Relations
    16  
12. Toll Free Information Line
    16  
13. Web Site
    17  
14. Conclusion
    18  
15. Budget Overview
    18  
16. Publication Summary
    18  
17. Media Definitions
    21  
18. Syndicated Research Definitions
    22  
Exhibit 1
    24  
Exhibit 2
    44  

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INTRODUCTION
Since 1984, The Garden City Group, Inc. (GCG) has established a history of
providing successful class action settlement services. Originally a practice
unit of KPMG Peat Marwick, the company is now a wholly owned subsidiary of
Crawford & Company, the world’s largest risk adjusting firm (NYSE symbols
CRD.A/CRD/B).
For over 20 years, GCG has specialized in the design and implementation of
Class Action notification campaigns. GCG’s team has designed and implemented
large domestic and international campaigns as well as highly focused local
campaigns for class action proceedings. GCG has also handled the notice and
administration of some of the largest securities settlements of all time. Our
recent experience includes the $6.2 billion WorldCom case (where we have
processed nearly one million claims); the $1.1 billion Royal Ahold case (which
included mailing notice to class members in more than 100 countries); and the
$1 billion IPO settlement where we mailed more than 17 million notices.
Jeanne C. Finegan, Senior Vice President, GCG
Jeanne Finegan, APR, has more than 20 years of communications and advertising
experience. She is a nationally recognized expert in legal notice programs, both
in Federal and State courts. Finegan has lectured and published extensively on
various aspects of legal noticing. Her articles have been published in The
National Law Journal, The ABA’s Class Action Litigation Reporter, and The
International Risk Management Institute, among others. She has provided expert
testimony before Congress on issues of notice and served the Consumer Product
Safety Commission (CPSC) as an expert to determine ways in which the Commission
can increase the effectiveness of its product recall campaigns. She is
accredited

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(APR) in Public Relations by the Universal Accreditation Board, a program
administered by the Public Relations Society of America.
Finegan has designed and implemented many of the nation’s largest and high
profile legal notice communication programs. Her multi-national experience
includes some of the most high-profile restructuring communications programs
involving international Notice. She has designed legal notices for a wide range
of class actions and consumer matters that include product liability,
construction defect, antitrust, medical/pharmaceutical, human rights, civil
rights, telecommunication, media, environment, securities, banking, insurance,
and bankruptcies. Attached hereto as Exhibit 1 is Finegan’s comprehensive
curriculum vitae.
1. Legal Notice Communication Methodology1
Within the context of “Expert Opinion,” two U.S. Supreme Court decisions,
Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (1993), and Kumho Tire Co.
v. Carmichael, 526 U.S. 137 (1999), suggest that when we design a media plan for
submission to a court for approval, as experts, we must: 1) Apply a technique
that can be tested by peers; and 2) Use industry accepted methodology.
Therefore, the following legal notice proposal was developed using a scientific
method accepted within the advertising industry for modeling target class
members by their demography and media consumption habits.
Most importantly, in formulating a program for delivering “Appropriate Notice,”
we have been mindful of the natural justice and fair process concerns expressed
by the Canadian courts, as well as of the factors listed in the Ontario
Class Proceedings Act, S.O.
 

1   The Canadian plan was calculated based on data provided by the Print
Measurement Bureau (PMB) and The Newspaper Audience Databank (NADbank).

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1992, c. 6, s. 17, the applicable British Columbia statute (R.S.B.C. 1996, c.
50, s. 19), and the relevant provisions in the Quebec Code of Civil Procedure.
The purpose of this document is to fully describe our methodology for modeling a
target audience and then appropriately selecting the methods of communication
that will best reach them, including direct mail, published notice, third-party
outreach, and media relations. It is our intention to provide to the Courts of
Canada a well-formulated notice plan that defines the target audience by its
demography and media consumption habits, as well as the percentage reached by
this campaign and how frequently the target audience will have the opportunity
to see the message as calculated by accepted advertising industry practice.
Our analysis is designed to be rigorous and well calculated based on available
research and scientific analysis. However, as with all social sciences, it
should be noted that there is no one absolute formula for reaching these
conclusions. The calculation of human behavior and media consumption is not an
exact science, but instead it is a combination of science and judgment based
upon knowledge and experience with advertising industry methodologies that are
traditionally utilized in designing legal notice programs.
This proposal is submitted in connection with the Nortel I and Nortel II United
States and Canadian class actions.2 This proposal
 

2   The Nortel I Settlement includes three actions covered by Canadian Law: (i)
Law, et al., v. Nortel Networks Corp., et al., Ontario Superior Court of Justice
Commercial List, Court file No. 02-CL-4605 (the “Ontario Action”); (ii) Jeffrey,
et al., v. Nortel Networks Corp., et al., Supreme Court of British Columbia,
No. S015159 Vancouver Registry (the “British Columbia Action”); and (iii)
Association de Protection des Epargnants et Investissuers du Quebec v. Nortel
Networks Corp., Superior Court, District of Montreal No.: 500-06-000 126-017
(the “Quebec Proceeding”).       The Nortel II Settlement includes two actions
governed by Canadian law: (i) Gallardi v. Nortel Networks Corp., Ontario
Superior Court of Justice Commercial List, Court No. 05-CV-285606CP (the
“Ontario Action”); Skarstedt v. Nortel Networks Corp., Superior Court, District
of Montreal, No. 500-06-000277-059 (the “Quebec Proceeding”). These five
actions/proceedings are collectively referred to herein as the Canadian Actions.

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addresses only the Canadian outreach effort. Adhering to the highest
communication and outreach standards, this Notice Program is based on a
scientific methodology that is used throughout the advertising industry and one
which has been embraced by Courts in the United States and in Canada. Therefore,
GCG has designed a Notice Program to “reach”3 the greatest practicable number of
class members.
2. Multi-National Legal Notice Experience
GCG’s ground breaking multi-national efforts are commonly cited by Legal Notice
Experts. Our benchmark international cases (see In re: Vancouver Women’s Health
Collective Society v. A.H. Robins Co., 820 F.2d 1359 (4th Cir. 1987), and In re:
Lindsey v. Dow Corning Corp., Civil Action No. CV 94-P-11558-S), have been cited
as international legal notice standards. As demonstrated below, GCG is
particularly qualified to develop and implement a legal notice program that will
effectively and efficiently reach the targeted potential class members in a
manner that is similar in scope and form to other multi-national court-approved
notice programs.
In re Vancouver Women’s Health Collective Soc y v. A. H. Robins Co., 820 F.2d
1359, 1364 (4th Cir. 1987). In an appellate opinion, the Honorable Robert R.
Merhige, Jr., Senior District Judge found that [**15] “ the notification program
used by Robins was, under the circumstances, reasonable. The evidence indicates
that every news outlet in the world received the information. Similarly, there
is fairly strong evidence that the news was broadly disseminated worldwide. A
battery of world health and welfare organizations also disseminated the
information. It appears to this court that the extensive notification program
was a success.
Lindsey, et al., v. Dow Corning Corp., et al., Civil Action No. CV 94-P-11558-S.
In an order approving the Notice of Settlement,
 
These five actions/proceedings are collectively referred to herein as the
Canadian Actions.

      3   Reach is the number or percentage of different persons exposed to a
specific media schedule.

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United States District Judge Samuel J Pointer, Jr., stated, “Indeed, the efforts
to provide information to such persons must be viewed as among the most
extensive and complete ever undertaken.” The court finds and concludes that,
under these circumstances, the notice program, with all its components,
satisfies constitutional requirements and, in the words of Rule 23, constitutes
“the best notice practicable under the circumstances, including individual
notice to all members who can be identified through reasonable effort.”
Other samples of our international experience are included as Exhibit 2.
3. Media Rationale Overview
GCG has designed a Notice Program that is consistent with other United States
Court-ordered multi-national notice programs and with the various Canadian class
action statutes. In formulating a program for delivering “Appropriate Notice”
that meets the concepts of natural justice and fair process we are guided by
sound principles of communication. We are utilizing nationally syndicated
Canadian media research bureaus to provide both demographic and media
consumption habits of the Canadian population. These data are used by Canadian
advertising agencies as the basis to select media most appropriate to reach
specific target audiences.
We are confident that class members will be provided with multiple opportunities
to see this Notice through: 1) Mailed notice to all reasonably identifiable
class members who purchased Nortel stock during the class period; 2) Publication
in Canada in appropriate magazines and newspapers; 3) Internet banner ads; 4)
Media relations; 5) a Toll-free information line; and 6) a Web site.
4. Direct Mail
In securities class actions in the United States, the long-accepted practice for
disseminating notice to the class members is through

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direct mailings. However, there is never one defined mailing list of class
members. Rather, we need to cull together a complete list from various sources.
The first step is to mail notice to all record holders of the subject company’s
publicly traded securities during the Class Period. This list is provided to us
by the company’s transfer agent. These record holders, however, are usually just
the tip of the iceberg in terms of’ the potential class members that we reach.
The overwhelming majority of class members are found through the network of
brokerage firms, banks and other third-party nominees whose clients and/or
customers may have purchased a company’s stock during the appropriate Settlement
Class Period. These firms hold stock in street name on behalf of their customers
and, through the years, have developed specialized departments to respond to
requests for class member lists.
During its 20-year history of performing class action settlement administration,
GCG has built and maintained a proprietary database of the largest brokerage
firms, banks, institutions and other nominees (the “Broker Database”). This
Broker Database is continually monitored and updated as brokerage firms change
addresses, go out of business and/or come into existence. Currently, GCG has
more than 2,500 such firms in its U.S. database and thousands more in its
international database.
After notice is mailed, these brokerage firms respond in one of two ways. First,
many firms provide us with lists of clients believed to be class members (i.e.,
they purchased the requisite security during the applicable time period). These
lists come in the forms of electronic feeds of data as well as hard-copy labels
and other formats. GCG, in turn, updates its database records for the
appropriate case to reflect these names and addresses and then mails the notice
(and usually a claim form) to these individuals and

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entities. Other nominee firms, ostensibly due to privacy concerns, do not
provide names of their clients, but rather, request copies of the notice packet
in bulk so that they can forward notice directly to their clients.
In large cases such as this, GCG conducts follow-up telephone campaigns with
these nominee firms to make certain that they have received the notice and that
they have complied with the requirements described therein. To help ensure
compliance, we will also ask these nominee firms to submit to us a compliance
certificate, which basically confirms that they searched their records and
provided us with names and addresses of potential class members and/or that they
actually mailed the notice packets that they requested. We expect to employ this
methodology of direct mail notice in both the United States and Canada in
connection with the Nortel I and Norte! II Settlements. GCG’s database already
contains names and addresses of 185 of the largest Canadian nominees to be
targeted for all securities mailings. This list was updated through extensive
research only a few months ago in connection with another large international
settlement. GCG has experience receiving names and requests from these firms in
Canada and we are, therefore, confident that we can rely on their participation
in this case. We have also worked in the past with Dun & Bradstreet to purchase
additional lists of banks and brokerage firms in countries outside the United
States. We will work with them to determine whether they have names and
addresses that genuinely supplement our Canadian nominee mailings.
However, because we cannot reasonably expect the Canadian brokerage firms to be
as comfortable with this process as are the firms in the U.S. – because plainly
there is not yet the volume of securities class actions settlements in Canada
that exists in the U.S.

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– we are buttressing this direct mail program with a very comprehensive notice
publication program, which is described below. We expect that this media program
will be at least comparable, if not more fulsome than the program developed for
the U.S.
5. Publication
The Canadian Notice plan is calculated based on data provided by The Print
Measurement Bureau (PMB). PMB is Canada’s leading nationally syndicated media
research bureau, which provides data on publication readership, product usage
and demographic information. PMB is widely accepted by the top advertising
agencies. Additionally, the Canadian plan incorporates data provided by The
Newspaper Audience Databank (NADbank). NADbank studies newspapers on a
market-by-market basis.
Based on my over 20 years of experience in the field of advertising, public
relations and marketing communications, I believe that this syndicated research
provides a valid basis for determining the multimedia characteristics of
specific target audiences.
The closest definition that PMB provides on which to base our research for the
Nortel Legal Notice Program is “People who own common or preferred stock.” Based
on this definition, we have conducted an extensive analysis of the demographics
of the target audience in Canada for their tendencies to read various magazines
and newspapers.

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Based on this data, the media program alone is estimated to reach 84.22 percent
of “Canadians who own common or preferred stock,” with an average frequency of
3.82 times.4
Demographic Profile – Canada
Target: People who own common or preferred stock

         
Men
    62.38 %
Women
    37.62 %
 
       
Ages 35-64
    67.15 %
 
       
Own Home
    87.84 %
 
       
Employed
    66.00 %
Employed Full Time
    62.99 %
 
       
HHI $75K-$150K
    57.10 %
HHI $50K+
    79.72 %
 
       
English Canada
    76.64 %
French Canada
    23.36 %
 
       
Married
    77.44 %
 
       
Ontario
    40,29 %
Quebec
    25.90 %
British Columbia
    13.59 %
Alberta
    10.37 %
Manitoba/Saskachewan
    5.69 %

Source: PMB 2006 Two-Year Readership Database
6. Notice Program Strategy
Demographic profiles have been used for many years by advertising agencies as
the standard practice for defining media objectives and selecting media.
Demographics provide insight regarding a target
 

4   Detailed explanations of reach and frequency are found on the Definitions
page.

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audience’s age, ethnicity, preferred language, income, population size and
geographical distribution. Additionally, data provided by PMB goes beyond basic
demographics by analyzing lifestyle characteristics, including media usage
habits. These lifestyle characteristics and demographic descriptions are
segmented into distinct cluster types. Each cluster uniquely describes
demographics, attitudes, and consumer behavior. For the purposes of targeting a
legal notice program, these clusters describe media usage patterns, and are used
to define the extent of a medium’s usage within a given cluster.
Based on this research, we have developed an approach utilizing broad-reaching
publications and more vertically targeted business publications that we know the
target has a likelihood of reading. Moreover, our research indicates over
22 percent of the Canadian population speak French. The chart below identifies
the percentage of French and/or English spoken by province.

                                  Canadian Province   English   French   Total
Population*   % Speak French
Newfoundland and Labrador
    500,065       2,180       508,075       0.43 %
Prince Edward Island
    125,215       5,670       133,385       4.25 %
Nova Scotia
    834,315       34,155       897,570       3.81 %
New Brunswick
    465,720       238,775       719,710       32.90 %
Quebec
    572,085       5,788,655       7,126,580       81.24 %
Ontario
    8,079,500       493,630       11,285,550       4.37 %
Manitoba
    836,980       44,775       1,103,700       4.06 %
Saskatchewan
    825,865       18,035       963,150       1.87 %
Alberta
    2,405,935       59,735       2,941,150       2.03 %
British Colombia
    2,885,300       56,100       3,868,875       1.45 %
Yukon Territory
    24,840       890       28,525       3.12 %
Northwest Territories
    28,985       985       37,105       2.60 %
Nunavut
    7,370       400       26,665       1.50 %
Total
    17,572,175       5,741,965       29,839,040       22.75 %  
Total French Speakers
    6,741,965                            
% French Speakers of Total Pop.
    22.79 %                        

 
* Includes people who speak English & French and other languages
Source: Census 2001
Therefore, we have included a number of French general circulation magazines and
newspapers geared toward the French speaking population in Canada, most
particularly in Quebec.

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Additionally, we analyzed total circulation and Readers Per Copy “RPC” of a
publication in order to understand its total readership. While this number does
not factor out duplication, it is illustrative as to the extent of the program.
Also this number only includes these consumer publications, and does not include
the multiple other methods of communications we are using, i.e. direct mail, and
media relations efforts. These additional methods of communication will only
further increase readership.
PMB research indicates that the magazines detailed below are the most
appropriate to reach the largest percentage of this target. The magazines used
in this Legal Notice program are published in either French and/or English and
deliver the broadest appropriate reach of “people who own common or preferred
stock.”
Canadian Magazines Selected for this Legal Notice Program

                                             
Canadian Business
  Bi-Weekly   E     92,000       11.8       1,085,600     1/4 Page     1  
Maclean’s
  Weekly   E     822,000       7.1       5,836,200     Page     2  
L’actualite
  Monthly   F     191,000       6.0       1,146,000     Full Page     1  
Report on Business Magazine (Globe & Mail)
  Monthly   E     288,000       5.0       1,440,000     1/4 Page     1  
Financial Post Business Magazine
  Monthly   E     221,000       5.9       1,303.900     1/4 Page     1  
Time Canada
  Weekly   E     239,000       11.5       2.748,500     1/4 Page     1  
MoneySense
  7X/Year   E     115.000       8.2       943,000     1/4 Page     1  
Readers Digest (English Edition)
  Monthly   E     1,990,000       7.2       14,328,000     Full Page     2  
Readers Digest (French Edition)
  Monthly   F     250,000       5.2       1,300,000     Full Page     1  
Canadian Living
  Monthly   E     538,000       8.2       4,411,600     1/4 Page     1  
Coup de Pouce
  Monthly   F     230,000       6.2       1,426,000     Full Page     1  
Canadian Geographic
  Monthly   E     230,000       17.8       4,094,000     1/2 Page     1  
Chatelaine (English Edition)
  Monthly   E     697.000       6.4       4,460,800     1/4 Page     1  
Chatelaine (French Edition)
  Monthly   F     209,000       6.2       1,295,800     Full Page     1  
The National Post (Wed)
  Daily   E     248,000       3.4       843,200     1/4 Page     1  
The National Post (Sal)
  Daily   E     268.000       2.6       696,800     1/4 Page     1  
The Globe and Mail (Daily — Report on Business Section)
  Daily   E     322,000       4.1       1,320,200     1/4 Page     1  
The Globe and Mail
(Sal — Report on Business Section)
  Daily   E     402,000       3.2       1,286,400     1/4 Page     1  

 

*   Unit Size will depend on final size of Summary Notices.

The Notice program includes publication in the two largest national newspapers
in Canada, The National Post and The Globe and Mail. To increase the overall
reach and effectiveness of this plan, GCG has added newspapers in the top 10
Census markets. The Legal Notice will appear on both the highest day of
circulation as well as

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the day business editorial is the most highly concentrated.

                                             
Toronto Star
  Toronto (Ontario)   E     2     1/4 Page   Sat.     673,663     Wed.    
462,985  
Toronto Sun
  Toronto Ontario   E     2     1/2 Page Tab   Sun.     337,000     Mon.    
194,000  
Le Journal de Montreal
(Mon-Fri)
  Montreal (Quebec)   F     2     Full Page Tab   Sat.     321,000     Wed.    
268,000  
Montreal Gazette
  Montreal (Quebec)   E     2     1/4 Page   Sat.     153,016     Wed.    
136,818  
La Presse
  Montreal (Quebec)   F     1     1/2 Page   Sat.     277,935     N/A     N/A  
The Vancouver Sun
  Vancouver (British Columbia)   E     2     1/4 Page   Sat.     230,526    
Wed.     173,145  
Ottawa Citizen
  Ottawa-Hull (Ontario-Quebec)   E     2     1/4 Page   Sat.     156,657    
Wed.     127,792  
La Drolt
  Ottawa-Hull (Ontario-Quebec)   F     1     1/2 Page   Sat     39,889     N/A  
  N/A  
Calgary Herald
  Calgary (Alberta)   E     2     1/4 Page   Fri.     140,728     Wed.    
116,671  
Edmonton Journal
  Edmonton (Alberta)   E     2     1/4 Page   Fri.     143,312     Wed.    
125,827  
Le Journal de Quebec
  Quebec (Quebec)   F     2     Full Page Tab   Sat.     122,863     Wed.    
98,165  
Quebec City Le Soleil
  Quebec (Quebec)   F     1     1/2 Page   Sat.     112,660     N/A     N/A  
The Hamilton Spectator
  Hamilton (Ontario)   E     2     1/4 Page   Sat.     122,572     Wed.    
10%643  
Winnipeg Free Press
  Winnipeg (Manitoba)   E     2     1/4 Page   Sat.     164,106     Wed.    
119,392  
The London Free Press
  London (Ontario)   E     2     1/4 Page   Sat.     112,182     Mon.     92,476
 
Subtotal:
            27               3,108,109           2,020,914  

 

*   Unit size will depend on final size of Summary Notices.

Additionally, we are further enhancing the Notice Program by adding the largest
general circulation newspaper in each of the Canadian provinces.

                                 
Moncton Times &
Transcript
  New Brunwick   E     1     1/4 Page   Saturday     45,500  
L’Acadie Nouvelle
  Moncton (New Brunswick)   F     1     1/2 Page   Saturday     20,436  
The Guardian
  Prince Edward Island   E     1     1/4 Page   Saturday     20,746  
The Halifax
Chronicle Herald
  Nova Scotia   E     1     1/4 Page   Saturday     111,501  
The Star Phoenix
  Saskatchewan   E     1     1/4 Page   Friday     60,499  
Nunavut News/North
  Nunavet   E     1     1/2 Page Tab   Monday     6,213  
Yukon News
  Yukon   E     1     1/2 Page Tab   Friday     7,850  
NWT/News North
  Northwest Territories   E     1     1/2 Page Tab   Monday     9,672  
The Telegram
  Newfoundland   E     1     1/4 Page   Saturday     55,031  
Subtotal:
            9               337,448  

 

*   Unit Size will depend on final size of Summary Notices.

All unit sizes and pricing presented in this proposal are subject to change
depending on the final text of the Summary Notices.
7. Publication Analysis
We have previously identified one way to measure media, which is reach. Reach
refers to those people who actually are exposed to a message. Two other media
measures of a publication are coverage (i.e., potential exposure through a given
publication) and index against a target. Coverage is the percentage of the
target audience that reads a magazine. For example, as shown in the chart below,

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Canadian Business reaches an estimated 10.78 percent of “people who own common
or preferred stock.” Canadian Living reaches an estimated 19.01 percent of this
target. It should be noted that the overall average estimated reach is
calculated through a random duplication formula widely accepted in the
advertising industry.
Index is an indicator of the tendency of a consumer to read a certain
publication. An index of 100 is a mean. An index greater than 100 indicates a
percentage greater than the average tendency to read a publication. For example
an index of 110 would mean that the target is 10 percent more likely than the
average person to read a publication.
The chart below lists each publication by its reach of those who own common or
preferred stock. The magazines selected for this Class either reach a
significant percentage of the target audience or they index well. As the chart
below indicates, the selected Canadian publications are well read by those who
own common or preferred stock. For example, Canadian Business is 176 percent
more likely to be read by our target audience of “those who own common or
preferred stock” than the average Canadian.
     % Coverage and Composition Index Target: Own Common or Preferred Stock
Target: Own Common or Preferred Stock

                 
Canadian Business
    10.78 %     (276 )
Maclean’s
    14.19 %     (135 )
L’actualite
    6.69 %     (181 )
Report on Business Magazine (Globe & Mail)
    14.52 %     (279 )
Financial Post Business Magazine
    13.39 %     (285 )
Time Canada
    12.05 %     (121 )
MoneySense
    7.63 %     (224 )
Reader’s Digest (English Edition)
    26.10 %     (100 )
Reader’s Digest (French Edition)
    6.02 %     (129 )
Canadian Living
    19.01 %     (120 )
Coup de Pouce
    5.76 %     (112 )
Canadian Geographic
    14.79 %     (100 )
Chatelaine (English Edition)
    17.87 %     (111 )
Chatelaine (French Edition)
    5.62 %     (121 )
The National Post (Wed)
    9.37 %     (309 )
The National Post (Sat)
    8.23 %     (322 )
The Globe and Mall(Daily — Report on Business Section)
    12.25 %     (256 )
The Globe and Mall (Sat — Report on Business Section)
    11.65 %     (254 )

Source: PMB 2006 Two-Year Readership Database

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We have selected broad reaching magazines for this Legal Notice program.
Additionally, we are using ad sizes that will be noticed by potential class
members, while maintaining cost efficiency. In that regard, we are recommending
certain ad unit sizes. For example, we are recommending half-page ads or larger
in the magazines, depending on final length of Summary Notice(s). According to
Magazine Dimensions 2005, “Studies show that a typical reader of a monthly
publication looks at or reads the issue about three times over a 12-week
interval. So the vast majority of the audience can be assumed to have scanned
all ads (via page openings) regardless of ad size or color.”
8. Frequency Rationale
Why do we need to expose the target audience to the Legal Notice more than once?
Author Michael J. Naples, suggests an answer. He has found a relationship
between frequency and message communication success. Among his conclusions: “The
weight of evidence suggests strongly that an exposure frequency of at least two
(2x) within a purchase cycle is an effective level.” Effective Frequency: The
Relationship Between Frequency and Advertising Effectiveness — Association of
National Advertisers, New York, New York 1988.
The table below reviews correlation between various factors and recommended
frequency in a notice program.

                  High   Moderate   Low Factor   Frequency   Frequency  
Frequency
 
                         
 
                         
 
                         

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9. Prominent Ad Position, Formatting and “Plain Language”
The concept of “plain language” in Notice is one that has received much
attention. Plain language is simply a more conversational form of communication.
The same style is used when reporting the news. The concept, now integrated into
Legal Notice practice, is one that has received note from various authorities.
For additional information, please visit www.fjc.gov/public/home.nsf;
www.plainenglish.co.uk and www.plainlanguagenetwork.org.
The published Notice will be formatted in a manner consistent with these and
other guidelines, including Federal Judiciary’s guidelines on easy to read,
plain language notice.
As noted in a RAND Study, the Louisiana-Pacific Inner Seal Siding Notice (1995)
was actually one of the first published plain language notices. It was
co-written by Jeanne Finegan. The RAND study suggested that the plain language
text from the L-P notice was more likely than other notices to attract the
attention of class members.5
Consistent with the Federal Judiciary’s guidelines, the black and white Notice
will have a bold headline and will call attention, by way of bold type, to
important details, such as class definitions, how individuals can obtain more
information by way of mail, toll-free numbers or a web address, relevant dates
and deadlines, and other salient points. We will make a best effort to request
prominent positioning in the magazines, namely right hand page, as far forward
as possible.
 

5   Deborah R. Hensler et al., CLASS ACTION DILEMAS, PURSUING PUBLIC GOALS FOR
PRIVATE GAIN. RAND (2000).

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10. Internet Banner Advertising
Banner advertising is recognized as an effective method of increasing brand
recall and product interest. It is also highly cost-efficient as a means of
generating brand awareness. GCG will design a banner advertisement for placement
on specific heavily trafficked areas on each of the Internet portals. These
banners will be targeting finance executives within Investments & Securities.
We would place banner advertising on financial focused websites such as Canada,
Sympatico MSN Finance Channel in English & French, Sympatico MSN — Hotmail
targeted to financial executives in English & French, Yahoo, National Post
Online, Globe & Mail – Globelnvester.com, and AOL Money & Technology network
targeting Canada. The precise sites will be chosen at the time of the media buy.
11. Media Relations
GCG will design a media relations campaign that includes distribution of a press
release over PR Newswire including Canadian news wires. The press release will
be broadly distributed to the media, as well as focused directly to the
securities industry. The press release will alert the media of the details of
the case, giving them the opportunity to report on the case and provide
additional media exposure by way of news stories to their audiences.
12. Toll Free Information Line
Complementing the Notice Program will be GCG’s ancillary telephone support and
website established especially for this case. The summary notice will direct
class members to the toll-free telephone number and the website URL for
additional information about the settlement.

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GCG is able to offer automated information about different aspects of the
settlement through our Interactive Voice Response (IVR) platform. We will
provide (in both French and English) information about deadlines, class members’
rights, background of the case, how to submit a claim, and other pertinent
information. In addition to this automated platform we will use our call center
facility to set up dedicated operators for this settlement. Our call center’s
main operational site is in Sarasota, Florida. However, we have many other
available locations from which we run cases. Here, we anticipate using our
Montreal site, where we have the capacity to use more than 100 seats (far more
than needed). All of the Representatives in this facility are bilingual (English
and French Canadian) professional (most have earned a college degree), and have
extensive customer service experience.
Regarding connectivity to our IVR platform, all of our domestic toll free
numbers automatically include “Extended Call Coverage” (ECC) which provides
connectivity from Canada and all of the U.S. Territories without any additional
set up. In addition, the transfer of a call from the IVR to a representative in
Montreal will be seamless as the infrastructure is already in place. Our IVR has
limitless capacity and can be customized to accommodate any foreign language
requirement.
13. Web Site
We also intend to create a case-specific web site that provides answers to
frequently asked questions as well as postings of all relevant
settlement-related documents. Class members will be able to access and download
copies of the notices and the claim forms and will have access to relevant Court
orders. This web site may be accessed by anyone in Canada or the U.S. and will
be available in English and French.

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14. Conclusion
Based on our experience in planning and implementing class action Notice it is
our judgment that this broad reaching Notice program is reasonably calculated,
using appropriate tools and methodology accepted in the advertising industry, to
effectively reach targeted class members in Canada.
15. Budget Overview
Below is a cost summary of the proposed Canadian Notice Program:

         
National Publications*
  $ 277,817.17  
Local Newspapers — Highest Circ Day*
  $ 96,303.59  
Local Newspapers — Best Business Day*
  $ 78,096.92  
Local Newspapers – Additional*
  $ 12,817.74  
Internet Banner Advertising
  $ 95,855.33  
Media Outreach
  $ 1,985.00  
Affidavits
  $ 6,600.00  
Total
  $ 569,475.75 *

To the extent we are asked to place separate ads for Nortel I and Nortel II, the
cost will essentially double. Pricing above based on 2006 pricing and current
exchange rate. Subject to change based on exchange rate at time of buy.
16. Publication Summary
Canadian Business
Provides news, opinion and community for business leaders, entrepreneurs and
investors in Canada. Bi-Weekly.
 

*   Final pricing will ultimately depend on the size of the final approved
Summary Notice(s).

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(GCG LOGO) [o32374o3237301.gif]
Maclean’s
Publishes the latest in health, education, personal finance, entertainment,
personalities, politics and sports, plus thought-provoking columnists and
special reports. Weekly.
L’actualite
Covers news and culture in Canada. Monthly.
Report On Business Magazine (Globe & Mail)
Considered the most comprehensive compilation of economic news in Canada.
Standard Report on Business sections are typically fifteen to twenty pages and
include the listings of major Canadian, US, and international stocks, bonds, and
currencies. Monthly.
Financial Post Business Magazine
Consistently provides context, analysis and understanding to current trends,
companies and issues that are shaping the economy and Canadians’ lives. Topics
include corporate strategies, profiles of top political and business leaders
with articles aimed at the broader interests of its upscale audience. Monthly.
Time Canada
Provides analysis and viewpoints. Provides insight and big-picture perspective
on the most important news of the day, at home and around the world. It covers
the transformational issues affecting society — socially, politically,
economically and culturally. Weekly.
MoneySense
Covers personal finance in Canada. Each issue contains insightful and
informative columns and articles to help consumers make the most of their money.
7x a Year.

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(GCG LOGO) [o32374o3237301.gif]
Reader’s Digest
(English Edition)
Puts the world in perspective through a fusion of timely original editorial and
select excerpts of the best journalism in print. It informs, entertains and
inspires people to take action at a time when mass media prominently shapes the
culture. Monthly.
Reader’s Digest
(French Edition)
French edition of the publication. Monthly.
Canadian Living
Provides readers with smart solutions for everyday living. The place to turn to
first for I-can-do-it recipes for midweek family suppers and elegant
entertaining, up-to-the-minute health and wellness information, and practical
parenting and family advice-plus inspiring fashion, beauty and home decor ideas
that make real sense in busy lives. Daily.
Coup de Pouce
Committed to helping women and their families living in Quebec, it delivers a
wealth of information and practical advice. Editorial covers food, health,
beauty and fashion, parenting, travel and home. Monthly.
Canadian Geographic
Delivers unmatched coverage of issues related to Canada and its people, all
brought to vivid life through stunning photography and unforgettable writing.
Monthly.

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(GCG LOGO) [o32374o3237301.gif]
Chatelaine
(English Edition)
Covers a variety of women’s interests, from fashion and relationships to health
information, profiles of successful women and journalism on social and political
issues relevant to women. Monthly.
Chatelaine
(French Edition)
French edition of the publication. Monthly.
The National Post
A major Canadian English language national newspaper based in Toronto. Daily.
The Globe and Mail
Often considered the newspaper of record in Canada, it is a major Canadian
English language national newspaper based in Toronto. Daily.
17. Media Definitions
REACH – The number of different people (or homes) exposed to an advertisement
one or more times. Reach is expressed as an estimated percentage of the defined
target population that has an opportunity to see the ad.
FREQUENCY – The average number of exposures received by the people who were
reached by the media schedule.
GROSS IMPRESSIONS – The sum of audiences for all vehicles (such as newspapers
and/or magazines) on an advertising schedule.
READERS-PER-COPY (RPC) – The average number of readers-per—copy of a publication
is computed by dividing the total number

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(GCG LOGO) [o32374o3237301.gif]
of different people who read or looked into an average issue of a magazine by
the magazine’s total circulation, This number is based upon the assumption that
readers will “pass along” their copy of a magazine for others to read as well.
18. Syndicated Research Definitions
PMB Print Measurement Bureau is Canada’s leading syndicated study for
single-source data on print readership, non–print media exposure, product usage
and lifestyles. Its reputation is based on over 30 years of accurate, in-depth
measurement of Canadian consumer behavior.
PMB is a non-profit organization, representing the interests of Canadian
publishers advertising agencies, advertisers and other companies.
The first national PMB study was conducted in 1973. Since then, it has grown to
the point where it now uses an annual sample of 24,000 to measure the readership
of over 120 publications and consumer usage of over 2,500 products and brands.
The PMB 2006 study is based on 25,165 interviews conducted over 24 months
(October 2003 — September 2005).
*See www.pmb.ca/public/e/index.htm.
INTERACTIVE MARKET SYSTEMS (IMS) — IMS is the leading international provider of
information systems and solutions for the media industry. IMS provides media
planning and analysis software for both industry and proprietary research. One
function of IMS software is to run a reach and frequency report based on formula
models such as IMS Modal and Metheringham. These formulas create a reach and
frequency estimate.

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(GCG LOGO) [o32374o3237301.gif]
NADbank — The NADbank 2005 study is the most comprehensive data source for
market level data on newspaper readership, retail shopping and product category
data in Canada.

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Exhibit 1

 

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JEANNE C. FINEGAN, APR
BIOGRAPHY
     Jeanne Finegan, Senior Vice President of The Garden City Group, Inc., has
more than 20 years of communications and advertising experience. She is a
nationally recognized expert in class action, bankruptcy and mass tort
notification campaigns. Finegan, is accredited (APR) in Public Relations by the
Universal Accreditation Board, a program administered by the Public Relations
Society of America.
     She has provided expert testimony before Congress on issues of notice.
Additionally, she has provided expert testimony in both State and Federal Courts
regarding notification campaigns and conducted media audits of proposed notice
programs for their adequacy under Fed R. Civ. P. 23(c)(2) and similar state
class action statutes.
     She has lectured, published and has been cited extensively on various
aspects of legal noticing, product recall and crisis communications and has
served the Consumer Product Safety Commission (CPSC) as an expert to determine
ways in which the Commission can increase the effectiveness of its product
recall campaigns.
     Finegan has developed and implemented many of the nation’s largest and most
high profile legal notice communication and advertising programs. In the course
of her class action experience, Courts have recognized the merits of, and
admitted expert testimony based on, her scientific evaluation of the
effectiveness of notice plans. She has designed legal notices for a wide range
of class actions and consumer matters that include product liability,
construction defect, anti-trust, medical/pharmaceutical, human rights, civil
rights, telecommunication, media, environment, securities, banking, insurance,
mass tort, restructuring and product recall.
     Her work includes:
     In re: UAW v General Motors Corporation, Case No: 05-73991 Class Action,
United States District Court Eastern District of Michigan Southern Division
(2006).
     In re: Wicon, Inc. v. Cardservice International, Inc., BC 320215
Class Action Superior Court of the State of California for the County of Los
Angeles (2004).

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     In re: Varacallo, et aL v. Massachusetts Mutual Life Insurance Company, et
al., Civil Action No. 04-2702 (JLL), United States District Court for the
District of New Jersey (2004).
     (Preliminary Approval Order at 9). ... the Court found that ... “all of the
notices are written in simple terminology, are readily understandable by
Class Members, and comply with the Federal Judicial Center’s illustrative class
action notices.”
     ... By working with a nationally syndicated media research firm, [Finegan
‘s firm] was able to define a target audience for the MassMutual Class Members,
which provided a valid basis for determining the magazine and newspaper
preferences of the Class Members. (Id. at 0 5.2). ... The Court agrees with
Class Counsel that this was more than adequate.
     In re: John’s Manville (Statutory Direct Action Settlement, Common Law
Direct Action and Hawaii Settlement) Index No 82-11656 (BRL) United States
Bankruptcy Court Southern District of New York (2004). The nearly half-billion
dollar settlement constituted three separate notification programs, which
targeted all persons, who had asbestos claims whether asserted or unasserted,
against the Travelers Indemnity Company.
     In the Findings of Fact and Conclusions of a Clarifying Order Approving the
Settlements, the Honorable Chief Judge Burton R. Lifland said:
     “As demonstrated by Findings of Fact, the Statutory Direct Action
Settlement notice program was reasonably calculated under all circumstances to
apprise the affected individuals of the proceedings and actions taken involving
their interests, Mullane v. Cent. Hanover Bank & Trust Co; 339 U.S. 306, 314
(1950), such program did apprise the overwhelming majority of potentially
affected claimants and far exceeded the minimum notice required The Court
concludes that mailing direct notice via U.S. Mail to law firms and directly to
potentially affected claimants, as well as undertaking an extensive print media
and Internet campaign met and exceeded the requirements of due process. The
Court’s conclusion in this regard is buttressed by the results over 26,000 phone

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calls, 20,000 requests for information 8,000 website visits and 4,000 users
registered to download documents. The results simply speak for themselves.”
     In re: Wilson v. Massachusetts Mutual Life Insurance Company, Case
No. D-101-CV 98-02814 (First Judicial District Court County of Santa Fe State of
New Mexico 2002.) This was a nationwide notification program that included all
persons in the United States who owned, or had owned, a life or disability
insurance policy with Massachusetts Mutual Life Insurance Company and had paid
additional charges when paying their premium on an installment bases. The class
was estimated to exceed 1.6 million individuals.
(www.insuranceclassclaims.com/).
In granting preliminary approval to the settlement agreement, the Honorable Art
Encinias commented:
     “The Notice Plan was the best practicable and reasonably calculated, under
the circumstances of the action. ...land] that the notice meets or exceeds all
applicable requirements of law, including Rule 1-023(C)(2) and (3) and 1-023(E),
NMRA 2001, and the requirements of federal and/or state constitutional due
process and any other applicable law.”
In re: Deke, et al. v. Cardservice International, Case No. BC 271679 Superior
Court of the State of California for the County of Los Angeles. (2004)
     In the Final Order dated March I, 2004, The Honorable Charles W. McCoy
commented:
     “The Class Notice satisfied the requirements of California Rules of Court
1856 and 1859 and due process and constituted the best notice practicable under
the circumstances.”
In re: Sager v. Inamed Corp. and McGhan Medical Breast Implant Litigation, Case
No. 01043771, Superior Court of the State of California County of Santa Barbara.
(2004).
     In the Final Judgment and Order, dated March 30, 2004, the Honorable Thomas
P. Anderle stated:

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     “Notice provided was the best practicable under the circumstances.”
In re: Florida Microsoft Antitrust Litigation Settlement. Index number 99-27340
CA 11, 11`h Judicial District Court of Miami – Dade County, Florida. (2003)
     In the Final Order Approving the Fairness of the Settlement, The Honorable
Henry H. Harnage said:
     “The Class Notice ... was the best notice practicable under the
circumstances and fully satisfies the requirements of due process, the Florida
Rules of Civil Procedure, and any other applicable rules of the Court.”
In re: Montana Microsoft Antitrust Litigation Settlement. No. DCV 2000 219,
Montana First Judicial District Court – Lewis & Clark Co. (2003).
In re: South Dakota Microsoft Antitrust Litigation Settlement. Civ. No. 00-235,
State of South Dakota county of Hughes in the circuit Court Sixth Judicial
Circuit.
In re: Kansas Microsoft Antitrust Litigation Settlement. Case No. 99C17089
Division No. 15 Consolidated Cases, District Court of Johnson County, Kansas
Civil Court Department.
In the Final Order and Final Judgment, the Honorable Allen Slater stated:
“The Class Notice provided was the best notice practicable under the
circumstances and fully complied in all respects with the requirements of due
process and of the Kansas State. Annot. 00-22.1”
     In re: North Carolina Microsoft Antitrust Litigation Settlement.
No. 00-CvS-4073 (Wake) 00-CvS-1246 (Lincoln), State of North Carolina, Wake and
Lincoln Counties in the General Court of Justice Superior Court Division North
Carolina Business Court.
     In the multiple state cases, Plaintiffs generally allege that Microsoft
unlawfully used anticompetitive means to maintain a monopoly in markets for
certain software, and that as a result, it overcharged consumers who licensed
its MS-DOS, Windows, Word, Excel and Office software. The multiple legal notice

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programs targeted both individual users and business users of this software. The
scientifically designed notice programs took into consideration both media usage
habits and demographic characteristics of the targeted class members.
     In re: MCI Non-Subscriber RatePavers Litigation, MDL Docket No. 1275,
(District Court for Southern District of Illinois 2001). The advertising and
media notice program was designed with the understanding that the litigation
affects all persons or entities who were customers of record for telephone lines
presubscribed to MCl/World Corn, and were charged the higher non-subscriber
rates and surcharges for direct-dialed long distance calls placed on those
lines. (www.rateclaims.com).
     After a hearing to consider objections to the terms of the settlement, The
Honorable David R. Herndon stated:
     “As further authorized by the Court, [Ms. Finegan’s company] ... published
the Court-approved summary form of notice in eight general-interest magazines
distributed nationally; approximately 900 newspapers throughout the United
States and a Puerto Rico newspaper. In addition, [Ms. Finegan ‘s company] caused
the distribution of the Court-approved press release to over 2,500 news outlets
throughout the United States... The manner in which notice was distributed was
more than adequate...”
     In re: Sparks v. AT&T Corporation, Case No. 96-LM-983 (In the Third
Judicial Circuit, Madison County, Illinois.) The litigation concerned all
persons in the United States who leased certain AT&T telephones during the
1980’s. Finegan designed and implemented a nationwide media program designed to
target all persons who may have leased telephones during this time period, a
class that included a large percentage of the entire population of the United
States.
In granting final approval to the settlement, the Court commented:
     “The Court further finds that the notice of the proposed settlement was
sufficient and furnished Class Members with the information they needed to
evaluate whether to participate in or opt out of the proposed settlement. The
Court therefore concludes that the notice of the proposed

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settlement met all requirements required by law, including all Constitutional
requirements.”
     In re: Pigford v. Glickman and U.S. Department of Agriculture, Case No. CA
No. 97-19788 (PLF), (District Court for the District of Columbia 1999). This was
the largest civil rights case to settle in the United States in over 40 years.
The highly publicized, nation-wide paid media program was designed to alert all
present and past African-American farmers of the opportunity to recover monetary
damages against the U.S. Department of Agriculture for alleged loan
discrimination.
     In his Opinion, the Honorable Paul L. Friedman commented on the notice
program by saying:
     “The parties also exerted extraordinary efforts to reach class members
through a massive advertising campaign in general and African American targeted
publications and television stations.”
Judge Friedman continued:
     “The Court concludes that class members have received more than adequate
notice and have had sufficient opportunity to be heard on the fairness of the
proposed Consent Decree.”
     In re: SmithKline Beecham Clinical Billing Litigation, Case No. CV.
No. 97-L-1230 (Illinois Third Judicial District Madison County, 2001.) Finegan
designed and developed a national media and Internet site notification program
in connection with the settlement of a nationwide class action concerning
billings for clinical laboratory testing services.
     In re: MacGregor v. Schering-Plough Corp., Case No. EC248041 (Superior
Court of the State of California in and for the County of Los Angeles 2001).
This nationwide notification was designed to reach all persons who had purchased
or used an aerosol inhaler manufactured by Schering-Plough. Because no mailing
list was available, notice was accomplished entirely through the media program.
     In re: Swiss Banks Holocaust Victim Asset Litigation Case No. CV-96-4849,
(Eastern District of New York 1999). Finegan managed the design and
implementation of the Internet site on this historic case. The site was
developed in 21 native languages. It is a highly secure data gathering tool and
information

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hub, central to the global outreach program of Holocaust survivors.
(www.swissbankclaims.com/).
     In re: Louisiana-Pacific Inner-Seal Siding Litigation, Civil Action Nos.
879-JE, and 1453-JE U.S.D.C., (District of Oregon 1995 and 1999). Under the
terms of the Settlement, three separate Notice programs were to be implemented
at three-year intervals over a period of six years. In the first Notice
campaign, Finegan implemented the print advertising and Internet components of
the Notice program.
     In approving the legal notice communication plan, the Honorable Robert E.
Jones stated:
     “The notice given to the members of the Class fully and accurately informed
the Class members of all material elements of the settlement... [through] a
broad and extensive multi-media notice campaign.”
     In reference to the third-year Notice program for Louisiana-Pacific,
Special Master Hon. Judge Richard Unis, commented:
     “In approving the third year notification plan for the Louisiana-Pacific
Inner-SeaP’M Siding litigation, the court referred to the notice as `...well
formulated to conform to the definition set by the court as adequate and
reasonable notice. ‘
     Indeed, I believe the record should also reflect the Court’s appreciation
to Ms. Finegan for all the work she’s done, ensuring that noticing was done
correctly and professionally, while paying careful attention to overall costs.
“Her understanding of various notice requirements under Fed. R. Civ. P. 23,
helped to insure that the notice given in this case was consistent with the
highest standards of compliance with Rule 23(d)(2).
     In re: Thomas A. Foster and Linda E. Foster v. ABTco Siding Litigation.
Case No. 95-151-M, (Circuit Court of Choctaw County, Alabama 2000). This
litigation focused on past and present owners of structures sided with
Abitibi-Price siding. The notice program that Finegan designed and implemented
was national in scope.

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     In the Order and Judgment Finally approving settlement, Judge J. Lee
McPhearson said:
     “The Court finds that the Notice Program conducted by the Parties provided
individual notice to all known Class Members and all Class Members who could be
identified through reasonable efforts and constitutes the best notice
practicable under the circumstances of this Action. This finding is based on the
overwhelming evidence of the adequacy of the notice program ... The media
campaign involved broad national notice through television and print media,
regional and local newspapers, and the Internet (see id. ¶¶9-II) The result:
over 90 percent of Abitibi and ABTco owners are estimated to have been reached
by the direct media and direct mail campaign.”
     In re: Exxon Valdez Oil Spill Litigation, Case No. A89-095-CV (HRH)
(Consolidated) U.S. District Court for the District of Alaska (1997, 2002).
Finegan designed and implemented two media campaigns to notify native Alaskan
residents, trade workers, fisherman, and others impacted by the oil spill of the
litigation and their rights under the settlement terms.
     In re: Georgia-Pacific Toxic Explosion Litigation Case No. 98 CVCO5-3535,
(Court of Common Pleas Franklin County, Ohio 2001). Finegan designed and
implemented a regional notice program that included network affiliate
television, radio and newspaper. The notice was designed to alert adults living
near a Georgia-Pacific plant that they had been exposed to an air-born toxic
plume and their rights under the terms of the class action settlement.
     In the Order and Judgement finally approving the settlement the Honorable
Jennifer L. Bunner said:
     ”...Notice of the settlement to the Class was the best notice practicable
under the circumstances, including individual notice to all members who can be
identified through reasonable effort. The Court finds that such effort exceeded
even reasonable effort and that the Notice complies with the requirements of
Civ. R. 23(C).

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     In re: Johns Manville Phenolic Foam Litigation Case No. CV 96-10069,
(District Court for the District of Massachusetts 1999). The nationwide
multi-media legal notice program was designed to reach all Persons who own any
structure, including an industrial building, commercial building, school,
condominium, apartment house, home, garage or other type of structure located in
the United States or its territories, in which Johns Manville PFRI was
installed, in whole or in part, on top of a metal roof deck.
     In re: James Hardie Roofing Litigation Case No. CV. No. 00-2-17945-65SEA
(Superior Court of Washington in and for King County 2002). The nationwide legal
notice program included advertising on television, in print and on the Internet.
It was national in scope and designed to reach all persons who own any structure
with JHBP roofing products.
     In the Final Order and Judgement the Honorable Steven Scott stated:
     “The notice program required by the Preliminary Order has been fully
carried out.... [and was/ extensive. The notice provided fully and accurately
informed the Class Members of all material elements of the proposed Settlement
and their opportunity to participate in or be excluded from it; was the best
notice practicable under the circumstances; was valid, due and sufficient notice
to all Class Members; and complied fully with Civ. R. 23, the United States
Constitution, due process, and other applicable law. “
     In re: First Alert Smoke Alarm Litigation, Case No. CV-98-C-1546-W (UWC),
(District Court for the Northern District of Alabama Western Division 2000).
Finegan designed and implemented a nationwide legal notice and public
information program. The public information program is scheduled to run over a
two-year period to inform those with smoke alarms of the performance
characteristics between photoelectric and ionization detection. The media
program includes network and cable television, magazine and specialty trade
publications.
     In the Findings and Order Preliminarily Certifying the Class, The Honorable
C.W. Clemon wrote that the notice plan:
     “...Constitutes due, adequate and sufficient notice to all Class Members;
and meets or exceeds all applicable requirements of the Federal Rules of

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Civil Procedure, the United States Constitution (including the Due Process
Clause), the Alabama State Constitution, the Rules of the Court, and any other
applicable law.”
     In re: American Cyanamid, Civil Action CV-97-0581-BH-M United States
District court for the Southern District of Alabama 2001. The media program
targeted those Farmers who had purchased crop protection chemicals manufactured
by American Cyanamid.
     In the Final Order and Judgment, the Honorable Charles R. Butler Jr. wrote:
     “The Court finds that the form and method of notice used to notify the
Temporary Settlement Class of the Settlement satisfied the requirements of Fed.
R. Civ. P. 23 and due process, constituted the best notice practicable under the
circumstances, and constituted due and sufficient notice to all potential
members of the Temporary Class Settlement.”
     In re: Bristow v Fleetwood Enterprises Litigation Case No Civ 00-0082-S-EJL
(District Court for the District of Idaho 2001). Finegan designed and
implemented a legal notice campaign targeting present and former employees of
Fleetwood Enterprises, Inc., or its subsidiaries who worked as hourly production
workers at Fleetwood’s housing, travel trailer, or motor home manufacturing
plants. The comprehensive notice campaign included print, radio and television
advertising.
     In re: New Orleans Tank Car Leakage Fire Litigation, Case No 87-16374.
(Civil District Court for the Parish of Orleans, State of Louisiana 2000). This
case resulted in one of the largest settlements in US History. This campaign
consisted of a media relations and paid advertising program to notify
individuals of their rights under the terms of the settlement.
     In re: Garria Spencer v. Shell Oil Company, Case No. CV 94-074, District
Court, Harris County Texas (1995). The nation wide notification program was
designed to reach individuals who owned real property or structures in the
United States which contained polybutylene plumbing with acetyl insert or metal
insert fittings.

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     In re: Rene Rosales v. Fortune Insurance Company, Case No 99-04588 CA
(41) Circuit Court of the 11th Judicial Circuit in and for Miami-Dade County,
Florida (2000). Finegan provided expert testimony in this matter. She conducted
an audit on behalf of intervening attorneys for the proposed notification to
individuals insured with personal injury insurance. Based upon the audit, Ms.
Finegan testified that the proposed notice program was inadequate. The Court
agreed and signed an Order Granting Intervenors’ Objections to Class Action
settlement...The Honorable Jose M. Rodriques said:
     “The Court finds that Ms. Finegan is qualified as an expert on class notice
and effective media campaigns. The Court finds that her testimony is credible
and reliable.”
     Based in part on Finegan’s testimony, the Court ruled in favor of the
intervening parties and disapproved the parties’ original settlement agreement,
vacating the order of preliminary approval.
     In re: Hurd Millwork Heat Mirrorrm Litigation Case No. CV-772488, (Superior
Court of the State of California for the County of Santa Clara 2000). This
nationwide multi-media notice program was designed to reach class members with
failed heat mirror seals on windows and doors, and alert them as to the actions
that they needed to take to receive enhanced warranties or window and door
replacement.
     In re: Laborers District Counsel of Alabama Health and Welfare Fund v
Clinical Laboratory Services, Inc, Case No. CV —97-C-629-W (Northern District of
Alabama 2000.) Finegan designed and developed a national media and Internet site
notification program in connection with the settlement of a nationwide class
action concerning alleged billing discrepancies for clinical laboratory testing
services.
     In re: StarLink Corn Products Liability Litigation Case No. 01 C 1181,
(Northern District of Illinois, Eastern Division 2002). Finegan designed and
implemented a nationwide notification program designed to alert potential class
members of the terms of the settlement.
     In re: Albertson’s Back Pay Litigation, Case No. 97-0159-S—BLW, U.S.
District Court of Idaho (1997). Finegan designed and developed a secure Internet
site, where claimants could seek case information confidentially.

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     In re: Georgia Pacific Hardboard Siding Recovering Program, Case
No. CV-95-3330-RG, Circuit Court for the County of Mobile, State of Alabama
(1997). Finegan designed and implemented a multi-media legal notice program,
which was designed to reach class members with failed G-P siding and alert them
of the pending matter. Notice was provided through advertisements which aired on
national cable networks, magazines of nationwide distribution, local newspaper,
press releases and trade magazines.
     In re: Diet Drug Litigation, Finegan has worked on many state notification
programs and worked as a consultant to the National Diet Drug Settlement
Committee on notification issues.
     In re: ABS II Pipes Litigation, Case No. 3126, Contra Costa Superior Court,
State of California (1998 and 2001). The Court approved regional notification
program designed to alert those individuals who owned structures with the pipe,
that they were eligible to recover the cost of replacing the pipe.
(www.abspipes.com/).
     In re: Avenue A Inc. Internet Privacy Litigation District Court for the
Western District of Washington Case No: COO-1964C.
     In re: Lorazepam and Clorazepate Antitrust Litigation, MDL No. 1290
(TFH) United States District Court for the District of Columbia.
     In re: Providian Financial Corporation ERISA Litigation Case No C-01-5027
United States District Court for the Northern District of California.
     In re: H & R Block., et al Tax Refund Litigation State of Maryland Circuit
Court for Baltimore City Case No. 97195023/CC41 11
     In re: American Premier Underwriters, Inc, U.S. Railroad Vest Corp. Boone
Circuit Court – Boone County, Indiana. Cause No: 06C01-9912
     In re: Sprint Corporation Optical Fiber Litigation District Court of
Leavenworth Co, Kansas Case No: 9907 CV 284
     In re: Shelter Mutual Insurance Company Litigation District Court in and
for Canadian Co. State of Oklahoma Case No. CJ-2002-263

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     In re: Consecos Inc. Securities Litigation Southern District of Indiana
Indianapolis Division Case No: IP-00-0585-C Y/S CA
     In re: National Treasury Employees Union, et al United States Court of
Federal Claims Case No: 02-128C
     In re: City of Miami Parking Litigation Circuit Court of the 11 `h Judicial
Circuit in and for Miami Dade County, Florida Case Nos: 99-21456 CA-10, 99-23765
— CA-10.
     In re: Prime Co. Incorporated DB/A/Prime Co. Personal Communications,
United States Court Eastern District of Texas Beaumont Division — Civil Action
No. L 1:01CV658.
     In re: Alsea Veneer v. State of Oregon A.A., Case No. 88C-11289-88C-11300.
A Sample of Finegan’s Bankruptcy Experience —
     Finegan has designed and implemented literally hundreds of domestic and
international bankruptcy notice programs. A sample case list includes the
following:
     In re: United Airlines, Case No. 02-B-48191 (Bnkr. N.D Illinois Eastern
Division) Finegan worked with United and its restructuring attorneys to design
and implement global legal notice programs. The notice was published in 11
countries and translated into 6 languages. Finegan worked closely with legal
counsel and UAL’s advertising team to select the appropriate media and to
negotiate the most favorable advertising rates. (www.pd-ual.com/).
     In re: Enron. Case No. 01-16034 (Bankr. S.D.N.Y.) Finegan worked with Enron
and its restructuring attorneys to publish various legal notices.
     In re: Dow Corning, Case No. 95-20512 (Banks. E.D. Mich.) Finegan
originally designed the information website. This Internet site is a major
information hub that has various forms in 15 languages.
     In re: Harnischfeger Industries, Case No. 99-2171 (RJW) Jointly
Administered U.S. Bankr., District of Delaware. Finegan designed and implemented
6 domestic and international notice programs for this case. The notice was
translated into 14 different languages and published in 16 countries.

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     In re: Keene Corporation, Case No. 93B 46090 (SMB) U.S. Bankr. Eastern
District of Missouri, Eastern Division. Finegan designed and implemented
multiple domestic bankruptcy notice programs including notice on the plan of
reorganization directed to all creditors and all Class 4 asbestos-related
claimants and counsel.
     In re: Lamonts, Case No. 00-00045 U.S. Bankr. Western District of
Washington. Finegan designed an implemented multiple bankruptcy notice programs.
     In re: Monet Group Holdings, Case Nos. 00-1936 (MFW) U.S. Bankr. District
of Delaware. Finegan designed and implemented a bar date notice.
     In re: Laclede Steel Company, Case No 98-53121-399 US Bankr, CT, Eastern
District of MO, Eastern Division. Finegan designed and implemented multiple
bankruptcy notice programs.
     In re: Columbia Gas Transmission Corporation, Case No. 91-804 Bankr.,
Southern District of New York; Finegan developed multiple nation-wide legal
notice notification programs for this case.
     In re: U.S.H. Corporation of New York, et al., and (BRL) Bankr. Southern
District of New York; she designed and implemented a bar date advertising
notification campaign.
     In re: Best Products Co., Inc., Bankr. Case No. 96-35267-T, Eastern
District of Virginia; she implemented a national legal notice program that
included multiple advertising campaigns for notice of sale, bar date, disclosure
and plan confirmation.
     In re: Lodzian, Inc., et al – Southern District Court of New York Case
No. 16345 (BRL) Factory Card Outlet – 99-685 (JCA), 99-686 (JCA)
     In re: International Total Services, Inc., et al – Eastern District Court
of New York, Case No: 01-21812, 01-21818, 01-21820, 01-21882, 01-21824,
01-21826, 01-21827 (CD) Under Case No: 01-21812
     In re: Decora Industries, Inc and Decora, Incorporated. District of
Delaware Case No: 00-4459 and 00-4460 (JJF)
     In re: Genesis Health Ventures, Inc., et al — District of Delaware Case
No. 002692 (PJW)

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     In re: Telephone Warehouse, Inc., et al – District of Delaware Case
No. 00-2105 through 00-2110 (MFW)
     In re: United Companies Financial Corporation, et al., District of Delaware
Case No. 99-450 (MFW) through 99-461 (MFW)
     In re: Caldor, Inc. New York, The Caldor Corporation, Caldor, Inc, CT, et
al. Southern District of New York Case No: 95-B44080 (JLG)
     In re: Physicians Health Corporation, et al. District of Delaware Case No:
00-4482 (MFW)
     In re: GC Companies., et al. District of Delaware Case Nos:00-3897 through
00-3927 (MFW)
     In re: Heilij-Meyers Company, et al, Eastern District of Virginia (Richmond
Division) Case Nos: 00-34533 through 00-34538.
Product Recall and Crisis Communication
     Reser’s Fine Foods – Reser’s is a nationally distributed brand and
manufacturer of food products through giants such as Albertsons, Costco, Food
Lion, WinnDixie, Ingles, Safeway and Walmart. Finegan designed an enterprise
wide crisis communication plan that included communications objectives, crisis
team roles and responsibilities, crisis response procedures, regulatory
protocols, definitions of incidents that require various levels of notice,
target audiences, and threat assessment protocols. Finegan worked with the
company through two nationwide, high profile recalls, conducting extensive media
relations efforts.
Background
     Prior to joining The Garden City Group, Inc., Finegan co-founded Huntington
Advertising, a nationally recognized leader in legal notice communications.
After Fleet Bank purchased her firm in 1997; she grew the company into one of
the nation’s leading legal notice communication agencies.
     Prior to that, Finegan spearheaded Huntington Communications, (an Internet
development company) and The Huntington Group, Inc., (a public relations firm).
As a partner and consultant, she has worked on a wide variety of client
marketing, research, advertising, public relations and Internet programs. During
her tenure at the Huntington Group, client projects included advertising (media
planning and buying), shareholder

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meetings, direct mail, public relations (planning, financial communications) and
community outreach programs. Her past client list includes large public and
privately held companies: Code-A-Phone Corp., Thrifty-Payless Drug Stores,
Hyster-Yale, The Portland Winter Hawks Hockey Team, U.S. National Bank, U.S.
Trust Company, Morley Capital Management, and Durametal Corporation.
     Prior to Huntington Advertising, Finegan worked as a consultant and public
relations specialist for a West Coast-based Management and Public Relations
Consulting firm.
     Additionally, Finegan has experience in news and public affairs. Her
professional background includes being a reporter, anchor and public affairs
director for KWJJ/KJIB radio in Portland, Oregon, as well as reporter covering
state government for KBZY radio in Salem, Oregon. Finegan worked as an assistant
television program/promotion manager for KPDX directing $50 million in
programming. Additionally she was the program/promotion manager at and KECH-22
television.
     Finegan’s multi-level communication background gives her a thorough,
hands-on understanding of media, the communication process, and how it relates
to creating effective and efficient legal notice campaigns.
Articles
Co-Author, “Approaches to Notice in State Court Class Actions,” – For The
Defense, Vol. 45, No. 11 — November, 2003.
Citation – “Recall Effectiveness Research: A Review and Summary of the
Literature on Consumer Motivation and Behavior” U.S. Consumer Product Safety
Commission,
CPSC-F-02-1391, p.10, Heiden Associates – July 2003.
Author, “The Web Offers Near, Real-Time Cost Efficient Notice,” – American
Bankruptcy Institute — ABI Journal, Vol. XXII, No. 5. — 2003.
Author, “Determining Adequate Notice in Rule 23 Actions,” – For The Defense,
Vol. 44, No. 9 — September, 2002,
Author, Legal Notice. What You Need To Know and Why, — Monograph, July 2002.
Co-Author, “The Electronic Nature of Legal Noticing,” — The American Bankruptcy
Institute Journal -Vol. XXI, No. 3, April 2002.
Author, “Three Important Mantras for CEO’s and Risk Managers in 2002” —
International Risk Management Institute — irmi.com/ January 2002.

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Co-Author, “Used the Bat Signal Lately” — The National Law Journal, Special
Litigation Section — February 19, 2001.
Author, “How Much is Enough Notice” — Dispute Resolution Alert, Vol. 1, No. 6.
March 2001.
Author, “Monitoring the Internet Buzz” – The Risk Report, Vol. XXIII, No. 5,
Jan. 2001.
Author, “High-Profile Product Recalls Need More Than the Bat Signal” —
International Risk Management Institute — irmi.com/ July 2001.
Co-Author, “Do you know what 100 million people are buzzing about today? Risk
and Insurance Management – March 2001.
Quoted Article: “Keep Up with Class Action” Kentucky Courier Journal – March 13,
2000.
Author, “The Great Debate — How Much is Enough Legal Notice?” American Bar
Association – Class Actions and Derivatives Suits Newsletter, Winter edition
1999.
Speaker/Expert Panelist/Presenter

     
Practicing Law Institute
  Faculty Panelist — CLE Presentation -11 m Annual Consumer Financial Services
Litigation. Presentation: Class Action Settlement Structures — Evolving Notice
Standards in the Internet Age. New York/Boston (simulcast), NY March 2006;
Chicago, IL April 2006 and San Francisco, CA May 2006.
 
   
U.S. Consumer Product Safety Commission
  Ms. Finegan participated as an Expert to the Consumer Product Safety
Commission to discuss ways in which the CPSC could enhance and measure the
recall process. As an expert panelist, Ms Finegan discussed how the CPSC could
better motivate consumers to take action on recalls and how companies could
scientifically measure and defend their outreach efforts. Bethesda MD, September
2003.

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Weil, Gotshal & Manges
  CLE presentation “ A Scientific Approach to Legal Notice Communication” New
York, June 2003.
 
   
Sidley & Austin
  CLE presentation “A Scientific Approach to Legal Notice Communication” Los
Angeles, May 2003.
 
   
Kirkland & Ellis
  Speaker to restructuring group addressing “The Best Practicable Methods to
Give Notice in a Tort Bankruptcy.” Chicago, April 2002.
 
   
Georgetown University Law
Center Mass Tort Litigation
Institute
  CLE White Paper: What are the best practicable methods to give notice?
Dispelling the communications myth — A notice disseminated is a notice
communicated. Faculty — Mass Tort Litigation Institute — Washington D.C.,
November 1, 2001.
 
   
American Bar Association
  How to Bullet-Proof Notice Programs and what communication barriers present
due process concerns in legal notice. Presentation to the ABA Litigation
Section Committee on Class Actions & Derivative Suits — Chicago, IL, August 6,
2001.
 
   
McCutchin, Doyle, Brown & Enerson
  Speaker to litigation group in San Francisco and simulcast to four other
McCutchin locations, addressing the definition of effective notice and barriers
to communication that affect due process in legal notice. San Francisco, CA —
June 2001.
 
   
Marylhurst University
  Guest lecturer on public relations research methods. Portland, OR -
February 2001.
 
   
University of Oregon
  Guest speaker to MBA candidates on quantitative and qualitative research for
marketing and communications programs. Portland, OR — May 2001.

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Judicial Arbitration & Mediation
Services (JAMS)
  Speaker on the definition of effective notice. San Francisco and Los Angeles,
CA — June 2000.
 
   
International Risk Management Institute
  Expert Commentator on Crisis and Litigation Communications. www.irmi.com/
 
   
The American Bankruptcy Institute
Journal (ABI)
  Past Contributing Editor — Beyond the Quill. www.abi.org/.

Memberships and Professional Credentials
APR — Accredited Public Relations — The Universal Board of Accreditation Public
Relations Society of America.
Member Portland Advertising Federation Member of the Public Relations Society

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Exhibit 2

 

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GCG’s Sample Multi-National experience
In re Federal-Mogul Global Inc., No. 01-10578 (AMW) (Bankr. D. Del. 2003). The
worldwide notice program for the Federal-Mogul Bankruptcy case was published in
127 countries, 307 publications, and 69 languages. In addition, the notice was
published in 28 major publications in United Kingdom and in 14 major
publications in the United States. (http://www.fmoplan.com/).
Complexities: The Class consisted of multiple sets of demographics; both white
collar and blue collar workers. We analyzed the media and media habits of these
populations in the involved countries and published the notice as was necessary
to reach both groups effectively. A four-tiered rationale was tailored, so that
notice was distributed in an effective manor. Countries were assigned to a tier
according to their level of business with Federal Mogul.
In Re Western Union Monev Transfer Litig., Master File No. CV 01 0335 (CPS)
(E.D.N.Y 2002). The court approved a worldwide settlement and notice program.
The Legal Notice was published in more than 160 publications, in more than 80
countries and in more than 20 languages, it is one of the largest international
notice programs ever. (http://www.cruzlitigation.com/).
Complexities: The web site was developed in 20 native languages. This notice
program was developed after thorough analysis of the data relating to the amount
of and number of transactions conducted around the world. Publications in
countries were determined by the volume of money and transactions both inbound
from and outbound to the United States. For example, when it was shown that a
large amount of money was transferred from the United States to Guatemala,
ethnic publications catering specifically to the Guatemalan populations in the
United States were used. Also the reverse was true, when large amounts of money
were transferred to the United States from other countries, we analyzed the
widely circulated, well read publications in those countries. This complex
analysis and implementation effectively reached all the targeted populations.
In re: Swiss Banks Holocaust Victim Asset Litigation Case No. CV-96-4849,
(E.D.N.Y. 1999). Finegan managed the design and implementation of the Internet
site. The site was developed in 21 native languages. It is a highly secure data
gathering tool and information hub, central to the global outreach program of
Holocaust survivors. The website can be viewed at www.swissbankclaims.com/.
Complexities. The web site had to be developed in 21 native languages. The site
also had to be designed to work under the lowest common

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browser. The site was tested across more than 100 different platforms so that a
wide range of visitors could easily access this site. Because of the sensitive
nature of the information collected on this site, extraordinary security
measures had to be established and actively managed to protect it from intrusion
and to this day cannot be fully disclosed.
At several points during the notice campaign the site was used as a platform for
real-time press conference coverage at four sites simultaneously. Press
conferences were held in New York, Tel Aviv, Paris and Budapest.
In re: Mexico Money Transfer Litigation Settlement, 164 F. Supp. 2d 1002 (N.D.
I11.2000). (need to bring up the text)This case involved the alleged failure of
Western Union and Money Gram to pass along currency conversion discounts to
their customers and to post the currency conversion rates in stores. GCG was
extensively involved in helping the corporate defendants identify settlement
options and related costs.
(http://www.gardencitygroup.com/cases/pdf/WES/WESNotice.pdf)
Complexities: The challenges in this case were numerous in light of the sheer
volume of data from the money transfer companies (approximately 47 million
records). GCG designed and formatted bilingual notices and claim forms and
implemented an extremely complex notice program that included United States and
Mexico radio, TV, and newspapers, as well as an 800-number telephone support
system in Mexico and the United States. Extensive tracking and reporting of all
activities was required for each of three defendants. We recently implemented
the claims phase of this settlement with the completed mailing of over 5,000,000
claim forms. Once the processing of claims is complete later this spring, we
will begin mailing thousands of coupons to approved claimants. As a follow-up to
this settlement, we have just recently initiated the notice phase of a
settlement entitled Amorsolo v. Western Union Financial Services, Inc. This case
of over 3.2 million California-only class members mimics the process described
above. GCG is responsible for implementing all phases of the settlement.

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EXHIBIT B
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK

         
 
  x              
In re NORTEL NETWORKS CORP.
  :   Civil Action No. 05-MD-1659 (LAP)
SECURITIES LITIGATION
  :    
 
  :  
CLASS ACTION
         
 
  :    
This Document Relates To:
  :    
 
  :    
               ALL ACTIONS.
  :    
 
  :    
 
  x              

ORDER AND FINAL JUDGMENT
     On the                      day of                     , 2006, a hearing
having been held before this Court to determine: (1) whether the terms and
conditions of the Stipulation and Agreement of Settlement dated
                                        , 2006 (the “Stipulation”) are fair,
reasonable and adequate for the settlement of all claims asserted by the U.S.
Global Class against the Defendants in the Complaint now pending in this Court
under the above caption, including the release of the Defendants and the
Released Parties, and should be approved; (2) whether judgment should be entered
dismissing the Complaint on the merits and with prejudice in favor of the
Defendants and as against all persons or entities who are members of the U.S.
Global Class herein who have not requested exclusion therefrom; (3) whether to
approve the Plan of Allocation as a fair and reasonable method to allocate the
settlement proceeds among the members of the U.S. Global Class; and (4) whether
and in what amount to award lead Plaintiffs’ Counsel fees and reimbursement of
expenses. The Court having considered all matters submitted to it at the

 

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hearing and otherwise; and it appearing that a notice of the hearing
substantially in the form approved by the Court (including French language
versions sent to addresses in Quebec, Canada) was mailed to all persons or
entities reasonably identifiable, who purchased common stock of Nortel Networks
Corporation (“Nortel”), or call options on Nortel common stock, or wrote
(sold) put options on Nortel common stock during the period between April 24,
2003 through April 27, 2004, inclusive (the “Class Period”), except those
persons or entities excluded from the definition of the U.S. Global Class, as
shown by the records of Nortel’s transfer agent, at the respective addresses set
forth in such records, and that a summary notice of the hearing substantially in
the form approved by the Court was published pursuant to the Notice Plan as set
forth in the Affidavit of                                         , and the
Court having considered and determined the fairness and reasonableness of the
award of attorneys’ fees and expenses requested by Lead Plaintiffs’ Counsel; and
all capitalized terms used herein having the meanings as set forth and defined
in the Stipulation.
     NOW, THEREFORE, IT IS HEREBY ORDERED THAT:
     1. The Court has jurisdiction over the subject matter of the Action, the
Lead Plaintiffs, all U.S. Global Class Members, and the Defendants.
     2. The Court finds that the prerequisites for a class action under (United
States) Federal Rules of Civil Procedure 23(a) and (b) (3) have been satisfied
in that: (a) the number of U.S. Global Class Members is so numerous that joinder
of all members thereof is impracticable; (b) there are questions of law and fact
common to the U.S. Global Class; (c) the claims of the U.S. Global
Class Representatives are typical of the claims of the U.S. Global Class they
seek to represent; (d) the Class Representatives have and will fairly and
adequately represent the interests of the U.S. Global Class; (e) the questions
of law and fact common to the members of

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the U.S. Global Class predominate over any questions affecting only individual
member of the U.S. Global Class; and (f) a class action is superior to other
available methods for the fair and efficient adjudication of the controversy.
     3. Pursuant to Rule 23 of the (United States) Federal Rules of Civil
Procedure this Court hereby finally certifies this action as a class action on
behalf of all persons and entities who purchased Nortel common stock, or
purchased call options on Nortel common stock, or wrote (sold) put options on
Nortel common stock (collectively, “Nortel Securities”) during the period
between April 24, 2003 through April 27, 2004, inclusive, and who suffered
damages thereby, including, but not limited to, those persons or entities who
traded in Nortel Securities on the New York Stock Exchange and/or the Toronto
Stock Exchange. Excluded from the U.S. Global Class are (i) the Defendants;
(ii) James Kinney (Finance Chief for Nortel’s Wireless Networks Division,
Richardson, Texas), Ken Taylor (Vice President for Nortel’s Enterprise Networks
Division, Raleigh, North Carolina), Craig Johnson (Finance Director for Nortel’s
Wireline Networks Division, Richardson, Texas), Dough Hamilton (Finance Director
for Nortel’s Optical Networks Group, Montreal, Quebec), Michael Gasnier (Vice
President of Finance for Europe), Robert Ferguson (Vice President of Finance for
China), and William Bowrey (Controller for Asia); (iii) members of the immediate
family of each of the Defendants and/or any of the individuals referenced above;
(iv) any entity in which any Defendant and/or any of the individuals referenced
above has a controlling interest; (v) any parent, subsidiary or affiliate of
Nortel; (vi) any person who was an officer or director of Nortel or any of its
subsidiaries or affiliates during the Class Period; and (vii) the legal
representatives, heirs, predecessors, successors or assigns of any of the
excluded persons or entities. Also excluded from the U.S. Global Class for this
Action are the person and/or entities who have required

3

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exclusion from the U.S. Global Class by filing a request for exclusion as listed
on Exhibit 1 annexed hereto.
     4. Notice of the pendency of this Action as a class action and of the
proposed Settlement was given to all U.S. Global Class Members who could be
identified with reasonable effort. The form and method of notifying the U.S.
Global Class of the pendency of the action as a class action and of the terms
and conditions of the proposed Settlement met the requirements of Rule 23 of the
(United States) Federal Rules of Civil Procedure, Section 21D(a)(7) of the
(United States) Securities Exchange Act of 1934, 15 U.S.C. 78u-4(a)(7), as
amended, including by the (United States) Private Securities Litigation Reform
Act of 1995 (the “PSLRA”), Rule 23.1 of the Local Rules of the Southern and
Eastern Districts of New York, due process, and any other applicable law,
constituted the best notice practicable under the circumstances, and constituted
due and sufficient notice to all persons and entities entitled thereto.
     5. The Settlement is approved as fair, reasonable and adequate. Subject to
the terms and provisions of the Stipulation and the conditions therein being
satisfied, the parties are directed to consummate the Settlement.
     6. The Gross Settlement Shares are to be issued solely in exchange for bona
fide outstanding claims. All parties to whom it is proposed to issue such
securities have had the right to appear at the hearing on the fairness of the
Settlement and adequate notice has been given to all such parties. The Court
recognized and acknowledged that one consequence of its approval of the
Settlement at the Settlement Fairness Hearing is that, pursuant to
Section 3(a)(10) of the (United States) Securities Act of 1933, as amended, 15
U.S.C. § 77c(a)(1), the Gross Settlement Shares may be distributed to
Class Members (and to Plaintiffs’ Counsel as may be awarded by

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the respective Courts for attorneys’ fees) without registration and compliance
with the prospectus delivery requirements of the U.S. securities laws as the
Gross Settlement Shares will be exempt from registration under the (United
States) Securities Act of 1933, 15 U.S.C. § 77c(a)(1), as amended, pursuant to
Section 3(a)(10) thereunder. The Court also acknowledges that Nortel will rely
on such 3(a)(10) exemption (and Nortel will not register the Gross Settlement
Shares under the (United States) Securities Act of 1933) based on this Court’s
approval of the fairness of the Settlement.
     7. The Complaint, which the Court finds was filed on a good faith basis in
accordance with the Private Securities Litigation Reform Act and Rule 11 of the
(United States) Federal Rules of Civil Procedure based upon all publicly
available information, is hereby dismissed in its entirety with prejudice and
without costs, except as provided in the Stipulation, as against the Defendants.
     8. Lead Plaintiffs and each U.S. Global Class Member who has not validly
opted out, whether or not such U.S. Global Class Member executes and delivers a
Proof of Claim, on behalf of themselves, their heirs, executors, administrators,
successors and assigns, are hereby permanently barred and enjoined from
instituting, commencing or prosecuting any and all claims, debts, demands,
rights or causes of action or liabilities whatsoever (including, but not limited
to, any claims for damages, interest, attorneys’ fees, expert or consulting
fees, and any other costs, expenses or liability whatsoever), whether based on
federal, state, provincial, local, statutory or common law or any other law,
rule or regulation, whether fixed or contingent, accrued or un-accrued,
liquidated or un-liquidated, at law or in equity, matured or un-matured, whether
class or individual in nature, including both known claims and Unknown Claims,
(i) that have been asserted in this Action by the U.S. Global Class Members or
any of them against any

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of the Released Parties, or (ii) that could have been asserted in any forum by
the U.S. Global Class Members or any of them against any of the Released Parties
which arise out of or are based upon the allegations, transactions, facts,
matters or occurrences, representations or omissions involved, set forth, or
referred to in the Complaint and which relate to the purchase of Nortel common
stock or call options on Nortel common stock or the sale of put options on
Nortel common stock during the Class Period, or (iii) any oppression or other
claims under the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as
amended, that arise out of or are based upon the allegations, transactions,
facts, matters or occurrences, representations or omissions during the
Class Period, set forth or referred to in the Nortel II Actions, (the “Settled
Claims”), against any and all of the Defendants, their past or present
subsidiaries, parents, principal, affiliates, general or limited partners or
partnerships, successors and predecessors, heirs, assigns, officers, directors,
agents, employees, attorneys, advisors, investment advisors, investment bankers,
underwriters, insurers, co-insurers, re-insurers, attorneys, accountants,
auditors, consultants, administrators, executors, trustees, personal
representatives, immediate family members and any person, firm, trust,
partnership, corporation, officer, director or other individual or entity in
which any Defendant has a controlling interest or which is related to or
affiliated with any of the Defendants, and the legal representatives, heirs,
executors, administrators, trustees, successors in interest or assigns of the
Defendants (the “Released Parties”); provided, however, that “Settled Claims”
does not mean or include (a) claims, if any, against the Released Parties
arising under the (United States) Employee Retirement Income Security Act of
1974, as amended, 29 U.S.C. §1001, et seq. (“ERISA”) which are not common to all
U.S. Global Class Members and which are the subject of an action pending before
the Judicial Panel on Multidistrict Litigation, denominated In re Nortel
Networks Securities and “ERISA” Litigation, MDL Docket No. 1537;

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(b) the action in Rohac, et al. v. Nortel Networks Corporation, et al., Court
File No. 04-CV-3268 (Ont. Sup. Ct. J.); and (c) the application brought in
Indiana Electrical Workers Pension Trust Fund IBEW and Laborers Local 100 and
397 Pension Fund v. Nortel Networks Corporation, Ontario Superior Court of
Justice, Court File No. 49059, for leave pursuant to the Canada Business
Corporations Act to commence a representative action in the name of and on
behalf of Nortel against certain of the Released Parties (the “Derivative
Application”). Each U.S. Global Class Member who has not validly opted out has
fully, finally, and forever released, relinquished, and discharged all Settled
Claims against the Released Parties and each such U.S. Global Class Member is
bound by this judgment, including without limitations, the release of claims as
set forth in the Stipulation. The Settled Claims are hereby compromised,
settled, released, discharged and dismissed as against the Released Parties on
the merits and with prejudice by virtue of the proceedings herein and this Order
and Final Judgment.
     9. Defendants Nortel, John Edward Cleghorn, Robert Ellis Brown, Robert
Alexander Ingram, Guylaine Saucier, and Sherwood Hubbard Smith, Jr., and the
successors and assigns of any of them, are hereby permanently barred and
enjoined from instituting, commencing or prosecuting any and all claims, rights
or causes of action or liabilities whatsoever, whether based on federal, state,
provincial, local, statutory or common law or any other law, rule or regulation,
including both known claims and unknown claims, that have been or could have
been asserted in the Action or any forum by the Defendants or any of them or the
successors and assigns of any of them against any of the Lead Plaintiffs, U.S.
Global Class Members or their attorneys, which arise out of or relate in any way
to the institution, prosecution, or settlement of the Action (except for claims
to enforce the Settlement, confidentiality obligations or in respect of the
Derivative Application) (the “Settled Defendant’s Claims”). The Settled
Defendants’ Claims of

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all the Released Parties are hereby compromised, settled, released discharged
and dismissed on the merits and with prejudice by virtue of the proceedings
herein and this Order and Final judgment. In the event that any of the Released
Parties asserts against the Lead Plaintiff, any U.S. Global Class Member or
their respective counsel, any claim that is a Settled Defendants’ Claim, then
Lead Plaintiff, such U.S. Global Class Member or counsel shall be entitled to
use and assert such factual matters included within the Settled Claims only
against such Released Party in defense of such claim but not for the purposes of
asserting any claim against any Released Party.
     10. Pursuant to the PSLRA, the Released Parties are hereby discharged from
all claims for contribution by any person or entity other than by Released
Parties, whether arising under state, provincial, federal or common law, based
upon, arising out of, relating to, or in connection with the Settled Claims of
the U.S. Global Class or any U.S. Global Class Member. Accordingly, to the full
extent provided by the PSLRA, the Court hereby bars all claims for contribution:
(a) against the Released Parties by any persons or entity other than the
Released Parties; and (b) by the Released Parties against any person or entity
other than the Released Parties.
     11. Neither this Order and Final Judgment, the Stipulating, nor any of its
terms and provisions, nor any of the negotiations or proceedings connected with
it, nor any of the documents or statements referred to therein shall be:
          (a) offered or received against the Defendants as evidence of or
construed as or deemed to be evidence of any presumption, concession, or
admission by any of the Defendants with respect to the truth of any fact alleged
by any of the plaintiffs or the validity of any claim that has been or could
have been asserted in the Action or in any litigation, or the

8

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deficiency of any defense that has been or could have been asserted in the
Action or in any litigation, or of any liability, negligence, fault, or
wrongdoing of the Defendants;
          (b) offered or received against the Defendants as evidence of a
presumption, concession or admission of any fault, misrepresentation or omission
with respect to any statement or written document approved or made by any
Defendant;
          (c) offered or received against the Defendants as evidence of a
presumption, concession or admission with respect to any liability, negligence,
fault or wrongdoing, or in any way referred to for any other reason as against
any of the Defendants, in any other civil, criminal or administrative action or
proceeding, other than such proceedings as may be necessary to effectuate the
provisions of the Stipulation; provided, however, that Defendants may refer to
it to effectuate the liability protection grate them hereunder;
          (d) construed against the Defendants as an admission or concession
that the consideration to be given hereunder represents the amount which could
be or would have been recovered after trial; or
          (e) construed as or received in evidence as an admission, concession
or presumption against Lead Plaintiffs or any of the U.S. Global Class Members
that any of their claims are without merit, or that any defenses asserted by the
Defendants have any merit, or that damages recoverable under the Complaint would
not have exceeded the Gross Settlement Fund.
     12. The Plan of Allocation is approved as fair and reasonable, and
Plaintiffs’ Counsel and the Claims Administrator are directed to administer the
Stipulation in accordance with its terms and provisions.

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     13. The Court finds that all parties and their counsel have complied with
each requirement of Rule 11 of the (United States) Federal Rules of Civil
Procedure as to all proceedings herein.
     14. Lead Plaintiffs’ Counsel in this Action are hereby awarded attorneys’
fees in the amount of                                         % of the Gross
Cash Settlement Fund (net of litigation expenses awarded in the nest sentence),
and ___% of the Gross Settlement Shares, which amounts the Court finds to be
fair and reasonable. Lead Plaintiffs’ Counsel are hereby awarded
$                                         in reimbursement of expenses, which
expenses shall be paid to Plaintiffs’ Lead Counsel from the Gross Cash
Settlement Fund with interest from the date such Gross Cash Settlement Fund was
funded to the date of payment at the same net rate that the Gross Cash
Settlement Fund earns. The award of attorneys’ fees shall be allocated among
plaintiffs’ counsel in a fashion which, in the opinion of Plaintiffs’ Lead
Counsel, fairly compensates such counsel for their respective contributions in
the prosecution and settlement of the Action.
     15. The fees and expenses of plaintiffs’ counsel in the Canadian Actions,
as determined by the Canadian Courts shall be paid from the Gross Settlement
Fund.
     16. Lead Plaintiff Ontario Teachers’ Pension Plan Board is hereby awarded
$                                        , and the Department of the Treasury of
the State of New Jersey and its Division of Investment is hereby awarded
$                                        . Such awards are for reimbursement of
their reasonable costs and expenses (including lost wages) directly related to
its representation of the U.S. Global Class.
     17. In making this award of attorneys’ fees and reimbursement of expenses
to be paid from the Gross Settlement Fund, the Court has considered and found
that:

10

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          (a) the Settlement has created a cash fund of $370,157,428 that is
already on deposit earning interest, and will also provide from the benefit of
the Class 314,333,875 shares of Nortel common stock;
          (b) the Settlement will entitle the Class to receive one-quarter of
any actual gross recovery by Nortel in the existing litigation by Nortel against
Frank Dunn, Douglas Beatty and Michael Gollogly (including the value of any
monetary benefit that Nortel might receive from the defendants by way of
forgiveness or cancellation of any monetary debt owed by Nortel to such
defendants), excluding attorneys’ fees and expenses warded by the court, if any;
          (c) Nortel has agreed to adopt the corporate governance enhancements
described in Appendix A to Tab 1 to Exhibit A of the Stipulation;
          (d) Over                      copies of the Notice were disseminated
to putative Class Members indicating that Lead Plaintiffs’ Counsel were moving
for attorneys’ fees in the amount of up to 10% of the Gross Settlement Fund less
litigation expenses awarded by the Court, and for reimbursement of expenses in
an amount of approximately $4.3 million, and [                    ] objections
were filed against the terms of the proposed Settlement or the ceiling on the
fees and expenses requested by Lead Plaintiffs’ Counsel contained in the Notice;
          (e) Lead Plaintiffs’ Counsel have conducted the litigation and
achieved the Settlement with skill, perseverance and diligent advocacy;
          (f) The action involves complex factual and legal issues and was
actively prosecuted over 2 years and, in the absence of a settlement, would
involve further lengthy proceedings with uncertain resolution of the complex
factual and legal issues;

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          (g) Had Lead Plaintiffs’ Counsel not achieved the Settlement there
would remain a significant risk that Lead Plaintiffs and the Class may have
recovered less or nothing from the Defendants;
          (h) Lead Plaintiffs’ Counsel have devoted over                     
hours, with a lodestar value of $                    , to achieve the
Settlement; and
          (i) The amount of attorneys’ fees awarded and expenses reimbursed from
the Settlement Fund are fair and reasonable and consistent with awards in
similar cases.
     18. Any appeal or any challenge affecting the approval of (a) the Plan of
Allocation submitted by Lead Plaintiffs’ Counsel and/or (b) this Court’s
approval regarding any attorneys’ fees and expense application shall in no way
disturb or affect the finality of the other provisions of this Final Judgment.
     19. Jurisdiction is hereby retained over the parties and the U.S. Global
Class Members for all matters relating to this Acting, including the
administration, interpretation, effectuation or enforcement of the Stipulation
and this Order and Final Judgment, and including any application for fees and
expenses incurred in connection with administering and distributing the
settlement proceeds to the members of the U.S. Global Class.
     20. In the event that the Settlement does not become final in accordance
with the terms of the Stipulation, or is terminated pursuant to ¶ 27 of the
Stipulation, this judgment shall be rendered null and void to the extent
provided by and in accordance with the Stipulation and shall be vacated and in
such event all orders entered and released by and in accordance with the
Stipulation.

12

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     21. Without further order of the Court, the parties may agree to reasonable
extensions of time to carry out any of the provisions of the Stipulation.
     22. There is no just reason for delay in the entry of this Order and Final
Judgment and immediate entry by the Clerk of the Court is expressly directed
pursuant to Rule 54(b) of the (United States) Federal rules of Civil Procedure.

             
Dated:
  New York, New York        
 
                                          , 2006        
 
           
 
     
 
[Insert Judge Name: Honorable                                        ]    
 
      UNITED STATES DISTRICT JUDGE    

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Confidential Portions omitted and filed separately with the Securities and
Exchange Commission. Bullet points denote omissions.
EXHIBIT C
SUPPLEMENTAL AGREEMENT – NORTEL II
     Pursuant to ¶ 23 of the Nortel II Stipulation and Agreement of Settlement
dated June 20, 2006 (the “Stipulation”) between Lead Plaintiffs and Nortel in In
re Nortel Networks Corp. Securities Litigation, Master File No. 05-MD-1659
(LAP), as also adopted and ratified by Canadian Class Counsel in the Nortel Il
Canadian Actions, the terms under which Nortel may withdraw from and terminate
the Stipulation are as follows:
     1. All capitalized terms used, but not defined herein, shall have the
meanings ascribed to them in the Stipulation.
     2. Nortel shall have the option, but not the obligation, to terminate the
Settlement in the event that the aggregate number of shares of Nortel common
stock purchased during the Class Period by Class Members who would otherwise be
entitled to participate as members of the Class, but who timely and validly
request exclusion, equals or exceeds [•] (the “Opt-out Threshold”) of the total
number of shares of Nortel common stock purchased during the Class Period.
     3. Nortel shall further have the option, but not the obligation, to
terminate the Settlement in the event that the aggregate number of shares of
Nortel common stock purchased during the Nortel I Class Period by members of the
Nortel 1 Class who would otherwise be entitled to participate as members of the
Nortel I Class, but who timely and validly request exclusion, equals or exceeds
[•] of the total number of shares of Nortel common stock purchased during the
Nortel I Class Period.

- 1 -

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Confidential Portions omitted and filed separately with the Securities and
Exchange Commission. Bullet points denote omissions.
     4. It is expressly understood and agreed that, for the purposes of
calculating the Opt-out Threshold in ¶ 3, the only persons and entities who will
be included in the calculation are those persons and entities who are
Class Members, excluding those persons or entities who previously requested
exclusion in response to the Notice of Pendency, as listed on Tab I to Exhibit B
annexed to the Nortel I Stipulation, whether or not they are Class Members.
     5. Lead Plaintiffs and Nortel, with the cooperation of Canadian
Class Counsel, shall make every effort to ensure that the first settlement
fairness hearing in any of the Nortel II Actions shall be scheduled no earlier
than fifteen (15) calendar days after the last date for exclusion in any of the
Nortel II Actions.
     6. Subject to the dates for exclusion and the terms of ¶ 5, the Preliminary
Approval Order shall provide that requests for exclusion shall be received at
least fifteen (15) calendar days prior to the date of the Settlement Fairness
Hearing before the United States District Court for the Southern District of New
York (“U.S. Settlement Fairness Hearing”) specified in the Notice. Upon
receiving any request(s) for exclusion pursuant to the Notice, the Claims
Administrator shall promptly (or in no event fewer than ten (10) calendar days
prior to the U.S. Settlement Fairness Hearing date) notify Plaintiffs’ Counsel
and Nortel’s Counsel of such request(s) for exclusion. Upon receiving any
request(s) for exclusion pursuant to the Notice, Nortel’s Counsel shall promptly
notify Plaintiffs’ Counsel and the Claims Administrator of such request(s) for
exclusion.
     7. If Nortel elects to exercise either of the options set forth in ¶ 2 or ¶
3 hereof, written notice of such election must be provided to Plaintiffs’
Counsel at least five (5) calendar days prior to the U.S. Settlement Fairness
Hearing.

- 2 -

--------------------------------------------------------------------------------

 

Confidential Portions omitted and filed separately with the Securities and
Exchange Commission. Bullet points denote omissions.
     8. In the event that Nortel files a written notice of its intent to
terminate the Settlement pursuant to ¶ 7 hereof, Nortel may withdraw its
election by providing written notice of such withdrawal to Plaintiffs’ Counsel
no later than 5:00 P.M. Eastern Time on the day prior to the U.S. Settlement
Fairness Hearing, or by such later time as shall be agreed upon in writing as
between Lead Plaintiffs’ Counsel and Nortel’s Counsel, on notice to Canadian
Class Counsel.
     9. If Nortel elects to withdraw from the Stipulation pursuant to ¶ 2 or ¶ 3
hereof, Plaintiffs’ Counsel may, within five (5) calendar days of receipt of
such notice of intention to withdraw from the Settlement (or such longer period
as shall be agreed upon in writing between Lead Plaintiff’s Counsel and Nortel’s
Counsel), review the validity of any request for exclusion. and may attempt to
cause retraction or withdrawal of any such request for exclusion. If, within the
five (5) calendar day period (or longer period agreed upon in writing),
Plaintiffs’ Counsel succeed in causing the filing of retractions or withdrawals
(which retractions and withdrawals shall be in form and substance acceptable to
Nortel’s Counsel) of a sufficient number of requests for exclusion such that the
number of shares represented by the remaining requests for exclusion does not
constitute grounds for withdrawal as specified in ¶ 2 or ¶ 3 above, then any
withdrawal from the Stipulation by Nortel shall automatically be deemed to be a
nullity. To retract or withdraw a prior request for exclusion, a Class Member or
member of the Nortel II class must file a signed written notice with either the
United States District Court for the Southern District of New York or, in the
case of Canadian Class Members, the Canadian Court that certified the Canadian
Class to which the Class Member belongs, stating that the person or entity
retracts or withdraws his, her or its request for exclusion and that the person
or entity agrees to be bound by the Settlement and the Judgments in these Nortel
II or Nortel I Actions as the case may be;

- 3 -

--------------------------------------------------------------------------------

 

Confidential Portions omitted and filed separately with the Securities and
Exchange Commission. Bullet points denote omissions.
provided, however, that the filing of such written notice signed by the
Class Member or member of the Nortel II class may be effected by Plaintiffs’
Counsel on written direction by the Class Member or member of the Nortel II
Class. Upon receipt of such written notice from such a Class Member or member of
the Nortel II class, Plaintiffs’ Counsel shall provide a copy of such written
notice to Nortel’s Counsel.
     10. If Nortel elects to withdraw from the Stipulation in accordance with ¶
2 or ¶ 3 of this Supplemental Agreement and such withdrawal is not nullified in
accordance with ¶ 8 of this Supplemental Agreement, the Stipulation shall be
withdrawn and terminated and deemed null and void, and the provisions of ¶ 28 of
the Stipulation shall apply.
     11. The Parties intend that the Opt-out Threshold in this Supplemental
Agreement be maintained as confidential. Subject to orders of the Courts, the
Supplemental Agreement shall not be filed with the Courts in such a manner so as
to disclose publicly the Opt-out Threshold itself prior to the deadline for
submitting requests for exclusion unless a dispute arises as to its terms.
Notwithstanding the foregoing, the Opt-out Threshold may be disclosed to the
Courts, as may be required by the Courts, for purposes of approval of the
Settlement, but such disclosure shall be carried out to the fullest extent
possible in accordance with the practices of the respective Courts so as to
maintain the confidentiality of the Opt-out Threshold.

- 4 -

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Confidential Portions omitted and filed separately with the Securities and
Exchange Commission. Bullet points denote omissions.
DATED: June 20, 2006

              BERNSTEIN LITOWITZ BERGER & GROSSMANN LLP
 
       
 
  By:        /s/ Max W. Berger
 
       
 
                Max W. Berger (MB 5010)
 
                John P. Coffey (JC-3832)
 
                Jeffrey N. Leibell (JL-1356)     1285 Avenue of the Americas    
New York, New York 10019     Telephone: (212) 554-1400     Facsimile:
(212) 554-1444
 
            Lead Plaintiffs’ Counsel
 
            SHEARMAN & STERLING LLP
 
       
 
  By:        /s/ Stuart J. Baskin
 
       
 
                Stuart J. Baskin (SB-9936)
 
                Tai H. Park (TP-2607)
 
                Marc D. Ashley (MA-8896)     599 Lexington Avenue     New York,
New York 10022-6069     Telephone: (212) 848-4000     Facsimile: (212) 848-7179
 
            Nortel’s Counsel

- 5 -

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EXHIBIT D
Court File No. 05-CV-285606CP
ONTARIO
SUPERIOR COURT OF JUSTICE

             
THE HONOURABLE SENIOR REGIONAL
    )                         DAY, THE           DAY
 
           
JUSTICE WINKLER
    )     OF                               , 2006
 
           
BETWEEN:
    )      

PETER GALLARDI
Plaintiff
- and –
NORTEL NETWORKS CORPORATION, FRANK A. DUNN
DOUGLAS BEATTY, MICHAEL GOLLOGLY,
JOHN EDWARD CLEGHORN, ROBERT ELLIS BROWN,
ROBERT ALEXANDER INGRAM, GUYLAINE SAUCIER,
SHERWOOD HUBBARD SMITH, JR. AND DELOITTE & TOUCHE LLP
Defendants
Proceedings under the Class Proceeding Act, 1992
ORDER
     THIS MOTION made by the Plaintiff for an Order certifying this action •s a
class proceeding for the purpose of settlement, approving the notice to class
members ;rid other declaratory relief was heard this day at the Court House, 361
University Avenue, Toronto, Ontario.
     ON READING the materials filed, including the Settlement Agreement (defined
herein), and on hearing the submissions of counsel for the Plaintiff and counsel
for the Defendants:
1. THIS COURT ORDERS AND DECLARES that for the purposes of this order the
following definitions apply and are incorporated into this Order:

  (a)   “Claims Administrator” means the entity approved by this Court pursuant
to paragraph 10 herein to administer the Settlement;

 

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  (b)   “Class Members” means members of the Ontario National Class, he Quebec
Class and the U.S. Global Class;     (c)   “Class Period” means the period of
time between April 24, 2003 through April 27, 2004, inclusive;     (d)  
“Courts” means this Court, the Supreme Court of British Columbia and the United
States District Court for the Southern District of New York;     (e)  
“Defendants” means the persons and entities named as defendants in the Ontario
National Action;     (f)   “Escrow Agent” has the meaning set forth in the
Stipulation;     (g)   “Excluded Persons” means: (i) Nortel and the Individual
Defendants; (ii) the Other Individuals; (iii) members of any of the Individual
Defendants’ immediate families; (iv) any entity in which Nortel or any of the
Individuals Defendants or the Other Individuals has a controlling interest;
(v) any parent, subsidiary or affiliate of Nortel; (vi) any person who was an
officer or directors of Nortel or any of its subsidiaries or affiliates during
the Class Period; and (vii) legal representatives, heirs, predecessors,
successors or assigns of any of the Excluded Persons;     (h)   “Gross Cash
Settlement Fund” has the meaning set forth in the Stipulation;     (i)   “Gross
Settlement Fund” has the meaning set forth in the Stipulation;     (j)   “Gross
Settlement Shares” means 314,333,875 shares of common stock of Nortel to be
issued by Nortel, pursuant to the Settlement, as may b adjusted in accordance
with paragraph 4(d) of the Stipulation;     (k)   “Individual Defendants” means
Frank A. Dunn, Douglas Beatty, Michael Gollogly, John Edward Cleghorn, Robert
Ellis Brown, Robert Alexander Ingram, Guylaine Saucier and Sherwood Hubbard
Smith, Jr.;     (l)   “Nortel” means the Defendant, Nortel Networks Corporation;
    (m)   “Nortel II Actions” means the Ontario National Action, the Quebec
Action, and the U.S. Action;     (n)   “Nortel II Defendants” means Nortel, the
Individual Defendants and Deloitte & Touche LLP;     (o)   “Notice” means the
notice to the class in the Nortel II Actions, substantially in the form attached
as Schedule “B” to this Order;

2

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  (p)   “Notice Plan” means the plan for the publication and dissemination of
the Notice, Publication Notice and Proof of Claim by the Claims Administrator,
attached as Schedule “E” to this Order;     (q)   “Ontario National Action”
means this proceeding which raises claims in the nature of negligence, negligent
and/or reckless misrepresentation, and alleges breaches of the Canada Business
Corporations Act, Competition Act and Ontario Securities Act, for which relief
is sought through an award of damages;     (r)   “Ontario National Class” means
the class certified for the purpose of settlement in the Ontario National Action
pursuant to paragraph 3 of this Order;     (s)   “Ontario National
Class Counsel” means Rochon Genova LLP ad Lerners LLP;     (t)   “Ontario
National Class Counsel Fees” means the fees, disbursements, costs, GST, and
other applicable taxes or charges of Ontario National Class Counsel;     (u)  
“Ontario National Class Member” means a member of the Ontario National Class who
does not opt out of the Ontario National Class in the manner set forth in this
Order;     (v)   “Other Individuals” means James Kinney (Finance Chief for
Nortel’s Wireless Networks Division, Richardson, Texas), Ken Taylor (Vice
President for Nortel’s Enterprise Networks Division, Raleigh, North Carolina),
Craig Johnson (Finance Director for Nortel’s Wireline Networks Division,
Richardson, Texas), Doug Hamilton (Finance Director for Nortel’ 5 Optical
Networks Group, Montreal, Quebec), Michel Gasnier (Vice President of Finance for
Europe), Robert Ferguson (Vice President of Finance for China), and William
Bowrey (Controller for Asia);     (w)   “Proof of Claim” means the form
substantially in the form attached as Schedule “C” to this Order;     (x)  
“Publication Notice” means the summary notice of certification and proposed
settlement, and of the hearing of the Settlement Approval Motion, substantially
in the form attached as Schedule “D” to this Order;     (y)   “Representative
Plaintiffs” means, collectively, the representative : or lead plaintiffs in each
of the Nortel II Actions;     (z)   “Quebec Action” means the proceeding in the
Superior Court of Quebec (District of Montreal), Clifford W. Skarstedt v.
Corporation Nortel Networks, No. 500-06-000277-059;     (aa)   “Quebec Class”
means all persons and “entities”, except Excluded Persons who, while resident in
Quebec at the time, purchased Nortel common stock or call options on Nortel
common stock or wrote (sold) put options on Nortel common stock during the Class
Period. For purposes of the definition of Quebec Class, an

3

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      entity means a legal person established for a private interest, a
partnership or an association if at all times during the 12-month period
preceding February 18, 2005, not more than 50 persons bound to it by contract of
employment were under its direction or control and if it s dealing at arm’s
length with the representative of the Quebec Class;     (bb)   “Released
Parties” means any and all of the Nortel II Defendants, their past or present
subsidiaries, parents, principals, affiliates, general o- limited partners or
partnerships, successors and predecessors, heirs, assigns, officers, directors,
agents, employees, attorneys, advisors, investment ‘advisors, investment
bankers, underwriters, insurers, co-insurers, re-insurers, accountants,
auditors, consultants, administrators, executors, trustees, personal
representatives, immediate family members and any person, firm, trust,
partnership, corporation, officer, director or other individual or entity in
which any Nortel II Defendant has a controlling interest or which is related to
or affiliated with any of the Nortel II Defendants, and the legal
representatives, heirs, executors, administrators, trustees, successors in
interest or assigns of the Nortel II Defendants;     (cc)   “Settled Claims”
means any and all claims, debts, demands, rights Br causes of action, suits,
matters, and issues or liabilities whatsoever (including, but not limited to,
any claims for damages, interest, attorneys’ fees, expert or consulting fees,
and any other costs, expenses or liability whatsoever) whether based on United
States or Canadian federal, state, provincial, local, statutory or common law or
any other law, rule or regulation, whether fixed or contingent, accrued or
unaccrued, liquidated or unliquidated, at law or in equity, matured or
un-matured, whether class or individual in nature, including both known claims
and Unknown Claims, (i) that have been asserted in any of the Nortel II Actions
against any of the Released Parties, or (ii) that could have been asserted in
any forum by the Class Members in the Nortel II Actions, or any of them, against
any of the Released Parties, that arise out of or • e based upon the
allegations, transactions, facts, matters or occurrences, representations or
omissions involved, set forth, or referred to in the Nortel II Actions and that
relate to the purchase of Nortel common stock or ca I options or the sale of
Nortel put options during the Class Period or (iii) any oppression or other
claims under the Business Corporations Act, R.S.C. 1985, c. C44, as amended,
that arise out of or are based upon the allegations, transactions, facts,
matters or occurrences, representations or omissions, set forth or referred to
in the Nortel II Actions. “Settled Claims” does not mean or include claims, if
any, against the Released Parties: (a) arising under the United States Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq.
(“ERISA”) that are not common to all Class Members and which ERISA claims are
the subject of an action pending before the Judicial Panel on Multidistrict
Litigation, denominated In re Nortel Networks Securities and “ERISA’ Litigation,
MDL Docket No. 1537. “Settled Claims” further does not include: (a) the action
in Rohac et al v. Nortel Networks et al, Ontario Superior Court of Justice,
Court File No. 04-CV-3268; and (b) the application brought in Indiana Electrical
Workers Pension Trust Fund IBEW and Laborers Local 100 and 397 Pension Fund v.
Nortel Networks Corporation, Ontario

4

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      Superior Court of Justice, Court File No. 49059, for leave pursuant to the
Canada Business Corporations Act to commence a representative action in the name
of and on behalf of Nortel against certain of the Released Parties;     (dd)  
“Settlement Agreement” means the Settlement Agreement and Confirmation of
Stipulation and Agreement of Settlement, including the Stipulation attached as
Schedule “A” thereto, entered into between the Plaintiffs and Norel, dated
June 20, 2006, which is attached to this Order as Schedule “A”;     (ee)  
“Settlement” means the proposed settlement of the Nortel II Actions pursuant to
the terms set forth in the Settlement Agreement adopting and ratifying the
Stipulation;     (ff)   “Settlement Approval Motion” means the motion for final
approval of the Settlement by this Court to be heard at the date, time and
location described in paragraph 6 of this Order;     (gg)   “Stipulation” means
the Stipulation and Agreement of Settlement attached to the Settlement Agreement
as Schedule “A”;     (hh)   “Supplemental Agreement” means the agreement
referred to in paragraph 23 of the Stipulation setting forth certain conditions
under which the Settlement may be terminated by Nortel if potential
Class Members who purchase in excess of a certain number of Nortel common stock
or options on Nortel common stock during the Class Period exclude themselves
from the Class;     (ii)   “Unknown Claims” means any and all Settled Claims
which a y of the Representative Plaintiffs, or Class Members does not know or
suspect to exist in his, her or its favour at the time of the release of the
Released Parties which if known by him, her or it might have affected his, her
or its decision(s) with respect to the Settlement;     (jj)   “U.S. Action”
means the proceeding in the U.S. Federal District Court for the Southern
District of New York, Master File No. 05-MD-1659 (LAP);     (kk)   “U.S. Global
Class” means all persons, except Excluded Persons, who purchased Nortel common
stock or call options on Nortel common stock or wrote (sold) put options on
Nortel common stock (collectively, “Norte) Securities”) during the Class Period,
and who suffered damages thereby, including, but not limited to, those persons
or entities who traded in Nortel Securities on the New York Stock Exchange
and/or the Toronto Stock Exchange.

2. THIS COURT ORDERS that the Ontario National Action be certified as a class
proceeding for the purpose of settlement.
3. THIS COURT ORDERS that the Ontario National Class be defined as:

5

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All persons and entities, except Excluded Persons and members of the Quebec
Class, who, while resident in Canada at the time, purchased Nortel common stock
or call options on Norte) common stock or wrote (sold) put options on Nortel
common stock during the Class Period.
4. THIS COURT ORDERS that Peter Gallardi be and is hereby appointed as the
representative plaintiff for the Ontario National Class.
5. THIS COURT ORDERS that the Ontario National Action is certified of a class
proceeding for the purpose of settlement on the basis of the following common
issuer
Did Nortel make false or misleading statements or omissions concerning its
financial performance or its revenue and earnings during the Class Period?
6. THIS COURT ORDERS that the Settlement Approval Motion and the motion by
Ontario National Class Counsel for approval of Ontario National Class Counsel
Fees shall be heard by this Court on a date to be set by the Registrar,
approximately 90 days from the date set herein for the mailing of the notice at
the Court House at 361 University Avenue, Toronto, Ontario.
7. THIS COURT ORDERS that each potential member of the Ontario National Class
who elects to opt out of the Ontario National Class must do so by writing a
letter, signed by such person, clearly requesting exclusion and clearly
indicating the name, address and telephone number of the person seeking to opt
out and the date(s), price(s), and number(s) of shares of all purchases of
Nortel common stock or call options on Nortel common stock and of all put
options of Nortel common stock written (sold) during the Class Period, and
sending it by first class mail post marked no later than 60 days after the date
set herein for the mailing of the Notice, to the address indicated in the
Notice.
8. THIS COURT ORDERS that any potential member of the Ontario National Class who
does not opt out in accordance with paragraph 7 of this Order shall be bound by
any future

6

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Orders in the Ontario National Action, and shall be bound by the terms of the
Settlement if approved by each of the Courts in each of the Actions.
9. THIS COURT ORDERS that any potential member of the Ontario National Class who
opts out of the Ontario National Class in accordance with paragraph 7 of this
Order may no longer participate in the Settlement or any continuation of the
Nortel II Actions, shall not be entitled to file a Proof of Claim as provided in
paragraph 19 of this Order, shall not be entitled to receive any payment out of
the Settlement and shall not be entitled to object to the approval of the
Settlement as provided in paragraph 21 of this Order,
10. THIS COURT ORDERS that The Garden City Group, Inc. is hereby appointed and
approved as the Claims Administrator, and shall be subject to the jurisdiction
of this Court for all matters relating to the Ontario National Action, including
the administration, interpretation, effectuation or enforcement of the
Settlement Agreement and this Order.
11. THIS COURT ORDERS that the Escrow Agent, acting in its capacity as escrow
agent, shall be subject to the jurisdiction of this Court in respect of the
Gross Cash Settlement Fund.
12. THIS COURT ORDERS that the form and content of the Notice, substantial y in
the form attached hereto as Schedule “B”, is hereby approved.
13. THIS COURT ORDERS that the form and content of the Proof of Claim form,
substantially in the form attached hereto as Schedule “C”, is hereby approved.
14. THIS COURT ORDERS that the plan of dissemination of the Notice substantially
in the manner described in the Notice Plan attached to this Order as Schedule
“D” is hereby approved.
15. THIS COURT ORDERS that upon approval of the Notice and the Proof (1)f Claim
and the appointment of The Garden City Group, Inc. as the Claims Administrator
by the Courts, the

7

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Claims Administrator shall cause the Notice and the Proof of Claim,
substantially in the forms attached as Schedules “B” and “C” to this Order, to
be mailed, by first class mail, postage prepaid, on or before 14 days after
entry of the last order by any of the courts in the Nortel II Actions and the
Nortel I Actions (as defined in the Stipulation) approving the Notice applicable
to that proceeding who can be identified with reasonable effort, in accordance
with the Notice Plan.
16. THIS COURT ORDERS that additional copies of the Notice shall be made
available to any record holder requesting such for the purpose of distribution
to beneficial owners, and such record holders shall be reimbursed from the Gross
Settlement Fund (as defined in the Stipulation), upon receipt by the Claims
Administrator of proper documentation, for the reasonable expense of sending the
Notice and Proof of Claim to beneficial owners.
17. THIS COURT ORDERS that Ontario National Class Counsel shall, at or *fore the
hearing of the Settlement Approval Motion, file with the Court proof of mailing
of the Notice and Proof of Claim.
18. THIS COURT ORDERS that the form of Publication Notice in substantially the
form and content attached hereto as Schedule “E” is hereby approved, and directs
that Claims Administrator shall cause the Publication Notice to be published in
accordance with the Notice Plan, which publication shall begin within ten
(10) days of the mailing of tie Notice, and Ontario National Class Counsel
shall, at or before the hearing of the Settlement Approval Motion, file with
this Court proof of the publication of the Publication Notice.
19. THIS COURT ORDERS that in order to be entitled to participate i the Net
Settlement Fund (as defined in the Stipulation), each Ontario National
Class Member shall take the following actions and be subject to the following
conditions:

8

--------------------------------------------------------------------------------

 

  (a)   A properly executed Proof of Claim, substantially in the form attached
hereto as Schedule “C”, must be submitted to the Claims Administrator, at the
Post Office Box indicated in the Notice, postmarked not later than 120 days
after the date set herein for the mailing of the Notice. Such deadline may be
further extended by order of this Court.     (b)   Each Proof of Claim shall be
deemed to have been submitted when postmarked (if properly addressed and mailed
by first class mail, postage prepaid) provided such Proof of Claim is actually
received prior to the motion for an order of this Court approving distribution
of the Net Settlement Fund.     (c)   Any Proof of Claim submitted in any other
manner shall be deemed to have been submitted when it was actually received at
the address designated in the Notice.

20. THIS COURT ORDERS that the Proof of Claim submitted by each Ontario National
Class Member must satisfy the following conditions:

  (a)   it must be properly completed, signed and submitted in a timely manner
in accordance with the provisions of the preceding paragraph;     (b)   it must
be accompanied by adequate supporting documentation for the transactions
reported therein, in the form of broker confirmation slips, broker account
statements, an authorized statement from the broker containing the transactional
information found in a broker confirmation slip, or such other documentation as
is deemed adequate by the Claims Administrator;     (c)   if the person
executing the Proof of Claim is acting in a representative capacity, a
certification of his current authority to act on behalf of the Ontario National
Class Member must be included in the Proof of Claim; and     (d)   the Proof of
Claim must be complete and contain no material deletions or modifications of any
of the printed matter contained therein and must be signed under penalty of
perjury.

21. THIS COURT ORDERS that, as part of the Proof of Claim, each Ontario National
Class Member shall submit to the jurisdiction of this Court with respect to the
claim submitted, and shall (subject to the approval of the Settlement by the
Courts) release all Settled Claims against the Released Parties.
22. THIS COURT ORDERS that Ontario National Class Members who wish to (file with
the Court an objection or comment to the Settlement or to the approval of
Ontario National Class

9

--------------------------------------------------------------------------------

 

Counsel Fees shall deliver a written submission to the Claims Administrator at
the address indicated in the Notice, no later than 60 days after the date set
herein for the mailing of the Notice , and the Claims Administrator shall file
all such submissions with the Court prior to the hearing of the Settlement
Approval Motion.
23. THIS COURT ORDERS that if (a) the Settlement is terminated by Nortel
‘pursuant to the Supplemental Agreement and paragraph 26 in the Stipulation;
(b) any specified condition to the Settlement set forth in the Stipulation is
not satisfied and any of the Representative Plaintiffs or Nortel elect(s) to
terminate the Settlement as provided in paragraph 25 in the Stipulation; or
(c) the Settlement is terminated pursuant to paragraph 27 of the Stipulation,
then: (i) this Order, including the certification of the action as a class
proceeding for the purpose of settlement, shall be set aside and be of no
further force or effect, and without prejudice to any party; (ii) each party to
the Ontario National Action` shall be restored to his, her or its respective
position in the litigation as it existed immediately prior to the execution of
the Settlement Agreement; and (iii) this Action shall be decertified s a class
proceeding pursuant to Section 10 of the Class Proceedings Act, 1992, without
prejudice to the Plaintiff’s ability to reapply for certification.
24. THIS COURT ACKNOWLEDGES having been notified that a determination of
fairness of the Settlement at the Settlement Approval Hearing will be relied
upon b Nortel for an exemption, pursuant to Section 3(a)(10) of the United
States Securities Act of 1933, as amended, 15 U.S.C. § 77c(a)(1), to enable the
Gross Settlement Shares to be distributed to Class Members, and to counsel for
the Representative Plaintiffs as may be awarded by the respective Courts for
counsel fees, without registration and compliance with the prospectus delivery
requirements of U.S. securities laws.

10

--------------------------------------------------------------------------------

 

     25. THIS COURT DECLARES that Schedule “A” hereto satisfies the requirements
of subsections 8(1)(c) and (d) of the Class Proceedings Act, 1992.

     
 
   

11

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EXHIBIT E

     
CANADA
  (CLASS ACTION)
 
   
PROVINCE OF QUÉBEC
  SUPERIOR COURT
DISTRICT OF MONTREAL
   
 
   
 
   
NO: 500-06-000277-059
  CLIFFORD W. SKARSTEDT
 
   
 
  Petitioner
 
  -v.
 
   
 
  CORPORATION NORTEL NETWORKS
 
   
 
  Respondent
 
   
 
  and
 
   
 
  FONDS D’AIDE AUX RECOURS
 
  COLLECTIFS
 
   
 
  Mis en cause

ORDER
     THIS MOTION made by the Petitioner for a Judgment authorizing the bringing
of the class action for the purpose of settlement pursuant to the Stipulation
and Agreement of Settlement (the “Settlement Agreement”) entered into between
the Petitioner and the Respondent was heard this day.
     ON READING the materials filed, including the Settlement Agreement (and the
exhibits/schedules thereto) attached to this Order as Schedule “A”, and on
hearing the submissions of counsel for the Petitioner and counsel for the
Respondent:
     1. THIS COURT ORDERS AND DECLARES that for the purposes of this Order the
following definitions apply and are incorporated into this Order:

  (a)   "Claims Administrator” means the entity approved by this Court pursuant
to paragraph 10 to administer the Settlement;     (b)   "Class Members” means
members of the Ontario National Class, the Quebec Class and the U.S. Global
Class;

 

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  (c)   "Class Period” means the period of time between April 24, 2003 through
April 27, 2004, inclusive;     (d)   "Courts” means the Ontario Court, the
Quebec Court and the U.S. Court;     (e)   "Defendant” means the Respondent,
Corporation Nortel Networks;     (f)   "Escrow Agent” has the meaning set forth
in the Stipulation;     (g)   "Excluded Persons” means Nortel and the
Individuals, members of any of the Individuals’ immediate families, any entity
in which Nortel or any of the Individuals has a controlling interest or is a
parent or subsidiary of or is controlled by Nortel, and the officers, directors,
affiliates, legal representatives, heirs, predecessors, successors or assigns of
any of Nortel and the Individuals;     (h)   "Gross Cash Settlement Fund” has
the meaning set forth in the Stipulation;     (i)   "Gross Settlement Fund” has
the meaning set forth in the Stipulation;     (j)   "Gross Settlement Shares”
means 314,333,875 shares of common stock of Nortel to be issued by Nortel,
pursuant to the Settlement, as may be adjusted in accordance with paragraph 4(d)
of the Stipulation;     (k)   "Individuals” means Frank A. Dunn, Douglas Beatty,
Michael Gollogly, John Edward Cleghorn, Robert Ellis Brown, Robert Alexander
Ingram, Guylaine Saucier, Sherwood Hubbard Smith, Jr., James Kinney (Finance
Chief for Nortel’s Wireless Networks Division, Richardson, Texas), Ken Taylor
(Vice President for Nortel’s Enterprise Networks Division, Raleigh, North
Carolina), Craig Johnson (Finance Director for Nortel’s Wireline Networks
Division, Richardson, Texas), Doug Hamilton (Finance Director for Nortel’s
Optical Networks Group, Montreal, Quebec), Michel Gasnier (Vice President of
Finance for Europe), Robert Ferguson (Vice President of Finance for China), and
William Bowrey (Controller for Asia);     (l)   "Nortel” means the Respondent,
Corporation Nortel Networks;     (m)   "Nortel II Actions” means the Ontario
National Action, the Quebec Action and the U.S. Action;     (n)   "Nortel II
Defendants” means Nortel, Frank A. Dunn, Douglas Beatty, Michael Gollogly, John
Edward Cleghorn, Robert Ellis Brown, Robert Alexander Ingram, Guylaine Saucier,
Sherwood Hubbard Smith, Jr. and Deloitte & Touche LLP;

 

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  (o)   "Notice” means the global notice to the classes in the Nortel II Actions
substantially in the form attached as Schedule “B” to this Order, as approved in
paragraph 12 of this Order;     (p)   "Notice Plan” means the plan for the
publication and dissemination of the Notice, Publication Notice and Proof of
Claim by the Claims Administrator, attached as Schedule “D” to this Order;    
(q)   "Ontario Court” means the Ontario Superior Court of Justice;     (r)  
"Ontario National Action” means the proceeding in the Ontario Superior Court of
Justice, Gallardi v. Nortel Networks Corporation et al., Court File
No. 05-CV-285606CP;     (s)   "Ontario National Class” means all persons, except
Excluded Persons and except members of the Quebec Class, who, while resident in
Canada at the time, purchased Nortel common stock or call options on Nortel
common stock or wrote (sold) put options on Nortel common stock during the
Class Period;     (t)   "Proof of Claim” means the form substantially in the
form attached as Schedule “C” to this Order, as approved in paragraph 13 of this
Order;     (u)   "Publication Notice” means the summary notice of certification
and proposed settlement, and of the hearing of the Settlement Approval Motion,
substantially in the form attached as Schedule “E” to this Order, as approved in
paragraph 18 of this Order;     (v)   "Quebec Action” means this proceeding;    
(w)   "Quebec Class” means all persons and entities, except Excluded Persons
who, while resident in Quebec at the time, purchased Nortel common stock or call
options on Nortel common stock or wrote (sold) Nortel put options on Nortel
common stock during the Class Period. For purposes of the definition of Quebec
Class, an entity means a legal person established for a private interest, a
partnership or an association if at all times during the 12-month period
preceding February 18, 2005, not more than 50 persons bound to it by contract of
employment were under its direction or control and if it is dealing at arm’s
length with the representative of the Quebec Class;     (x)   "Quebec
Class Counsel” means Trudel & Johnston;     (y)   "Quebec Class Counsel Fees”
means the fees, disbursements, costs, GST, and other applicable taxes or charges
of Quebec Class Counsel;

 

--------------------------------------------------------------------------------

 

  (z)   "Quebec Class Member” means a member of the Quebec Class who does not
opt out of, or request exclusion from, the Quebec Class in the manner set forth
in this Order;     (aa)   "Quebec Court” means the Superior Court of Quebec;    
(bb)   "Released Parties” means any and all of the Nortel II Defendants, their
past or present subsidiaries, parents, principals, affiliates, general or
limited partners or partnerships, successors and predecessors, heirs, assigns,
officers, directors, agents, employees, attorneys, advisors, investment
advisors, investment bankers, underwriters, insurers, co-insurers, re-insurers,
attorneys, accountants, auditors, consultants, administrators, executors,
trustees, personal representatives, immediate family members and any person,
firm, trust, partnership, corporation, officer, director or other individual or
entity in which any Nortel II Defendant has a controlling interest or which is
related to or affiliated with any of the Nortel II Defendants, and the legal
representatives, heirs, executors, administrators, trustees, successors in
interest or assigns of the Nortel II Defendants;     (cc)   "Representative
Plaintiffs” means, collectively, the representative or lead plaintiffs in each
of the Nortel II Actions;     (dd)   "Settled Claims” means any and all claims,
debts, demands, rights or causes of action, suits, matters, and issues or
liabilities whatsoever (including, but not limited to, any claims for damages,
interest, attorneys’ fees, expert or consulting fees, and any other costs,
expenses or liability whatsoever), whether based on United States or Canadian
federal, state, provincial, local, statutory or common law or any other law,
rule or regulation, whether fixed or contingent, accrued or unaccrued,
liquidated or unliquidated, at law or in equity, matured or un-matured, whether
class or individual in nature, including both known claims and Unknown Claims,
(i) that have been asserted in any of the Nortel II Actions against any of the
Released Parties, or (ii) that could have been asserted in any forum by the
Class Members in the Nortel II Actions, or any of them, against any of the
Released Parties, that arise out of or are based upon the allegations,
transactions, facts, matters or occurrences, representations or omissions
involved, set forth, or referred to in the Nortel II Actions and that relate to
the purchase of Nortel common stock or call options or the sale of Nortel put
options during the Class Period or (iii) any oppression or other claims under
the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended, that
arise out of or are based upon the allegations, transactions, facts, matters or
occurrences, representations or omissions, set forth or referred to in the
Nortel II Actions. Settled Claims does not mean or include claims, if any,
against the Released Parties arising under the United States Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq. (“ERISA”)
that are not common to all Class Members and which ERISA claims are the subject
of an action pending before the Judicial Panel on Multidistrict Litigation,
denominated In re Nortel Networks

 

--------------------------------------------------------------------------------

 

      Securities and “ERISA’ Litigation, MDL Docket No. 1537. Settled Claims
further does not include: (a) the action in Rohac et al. v. Nortel Networks et
al, Ontario Superior Court of Justice, Court File No. 04-CV-3268; and (b) the
application brought in Indiana Electrical Workers Pension Trust Fund IBEW and
Laborers Local 100 and 397 Pension Fund v. Nortel Networks Corporation, Ontario
Superior Court of Justice, Court File No. 49059, for leave pursuant to the
Canada Business Corporations Act to commence a representative action in the name
of and on behalf of Nortel against certain of the Released Parties;     (ee)  
"Settlement Agreement” means the Settlement Agreement and Confirmation of
Stipulation and Agreement of Settlement, including the Stipulation attached
thereto, entered into between the Plaintiff herein and Nortel, through their
counsel dated June ___, 2006, which is attached to this Order as Schedule “A”;  
  (ff)   "Settlement” means the proposed settlement of the Nortel II Actions
pursuant to the terms set forth in the Settlement Agreement adopting and
ratifying the Stipulation;     (gg)   "Settlement Approval Motion” means the
motion for final approval of the Settlement by this Court to be heard at the
date, time and location described in paragraph 6 of this Order;     (hh)  
"Stipulation” means the Stipulation and Agreement of Settlement attached to the
Settlement Agreement as Schedule “A”;     (ii)   "Supplemental Agreement” means
the agreement referred to in paragraph 23 of the Stipulation setting forth
certain conditions under which the Settlement may be terminated by Nortel if
potential Class Members who purchase in excess of a certain number of Nortel
common stock or options on Nortel common stock during the Class Period exclude
themselves from the Class;     (jj)   "Unknown Claims” means any and all Settled
Claims which any of the Representative Plaintiffs, or Class Members does not
know or suspect to exist in his, her or its favour at the time of the release of
the Released Parties which if known by him, her or it might have affected his,
her or its decision(s) with respect to the Settlement;     (kk)   "U.S. Action”
means the proceeding in the United States Federal District Court for the
Southern District of New York, In re Nortel Networks Corp. Securities
Litigation, Master File No. 05-MD-1659 (LAP);     (ll)   "U.S. Court” means the
U.S. Federal District Court for the Southern District of New York; and

 

--------------------------------------------------------------------------------

 

  (mm)   "U.S. Global Class” means all persons, except Excluded Persons, who
purchased Nortel common stock or call options on Nortel common stock or wrote
(sold) put options on Nortel common stock (collectively, “Nortel Securities”)
during the Class Period, and who suffered damages thereby, including, but not
limited to, those persons or entities who traded in Nortel Securities on the New
York Stock Exchange and/or the Toronto Stock Exchange.

2. THIS COURT ORDERS that the bringing of the Quebec Action as a class action be
authorized for the purpose of settlement.
3. THIS COURT ORDERS that the Quebec Class be defined as:
All persons and entities, except Excluded Persons who, while resident in Quebec
at the time, purchased Nortel common stock or call options on Nortel common
stock or wrote (sold) Nortel put options on Nortel common stock during the
Class Period. For purposes of the definition of Quebec Class, an entity means a
legal person established for a private interest, a partnership or an association
if at all times during the 12-month period preceding February 18, 2005, not more
than 50 persons bound to it by contract of employment were under its direction
or control and if it is dealing at arm’s length with the representative of the
Quebec Class.
4. THIS COURT ORDERS that Clifford W. Skarstedt be and is hereby appointed as
the representative for the Quebec Class.
5. THIS COURT ORDERS that the bringing of the Quebec Action as a class action is
authorized for the purpose of settlement only, on the basis of the following
common issue:
Did Nortel make false or misleading statements or omissions concerning its
financial performance or its revenue and earnings during the Class Period?
6. THIS COURT ORDERS that the Settlement Approval Motion and the motion by
Quebec Class Counsel for approval of Quebec Class Counsel Fees shall be heard by
this Court on                     , 2006, at ___:___.m. at the Montreal Court
House, located at 1, Notre-Dame Street East, Montreal, Quebec.

 

--------------------------------------------------------------------------------

 

7. THIS COURT ORDERS that each potential member of the Quebec Class who elects
to opt out of the Quebec Class must do so by writing a letter, signed by such
person, clearly requesting exclusion and clearly indicating the name, address
and telephone number of the person seeking to opt out and the date(s), price(s),
and number(s) of shares of all purchases of Nortel common stock or call options
on Nortel common stock and of all put options of Nortel common stock written
(sold) during the Class Period, and sending it by first class mail post marked
no later than                     , 2006, to the address indicated in the
Notice.
8. THIS COURT ORDERS that any potential member of the Quebec Class who does not
opt out in accordance with paragraph 7 of this Order shall be bound by any
future Orders in the Quebec Action, and shall be bound by the terms of the
Settlement if approved by each of the Courts in each of the Nortel II Actions.
9. THIS COURT ORDERS that any potential member of the Quebec Class who opts out
of the Quebec Class in accordance with paragraph 7 of this Order may no longer
participate in the Settlement or any continuation of the Nortel II Actions,
shall not be entitled to file a Proof of Claim as provided in paragraph 20 of
this Order, shall not be entitled to receive any payment out of the Settlement
and shall not be entitled to object to the approval of the Settlement as
provided in paragraph 22 of this Order.
10. THIS COURT ORDERS that The Garden City Group, Inc. is hereby appointed and
approved as the Claims Administrator, and shall be subject to the jurisdiction
of this Court for all matters relating to the Quebec Action, including the
administration, interpretation, effectuation or enforcement of the Settlement
Agreement and this Order.

 

--------------------------------------------------------------------------------

 

11. THIS COURT ORDERS that the Escrow Agent acting in its capacity as escrow
agent, shall be subject to the jurisdiction of this Court in respect of the
Gross Cash Settlement Fund.
12. THIS COURT ORDERS that the form and content of the Notice, substantially in
the form attached hereto as Schedule “B”, is hereby approved.
13. THIS COURT ORDERS that the form and content of the Proof of Claim form,
substantially in the form attached hereto as Schedule “C”, is hereby approved.
14. THIS COURT ORDERS that the plan of dissemination of the Notice in the manner
described in the Notice Plan attached to this Order as Schedule “D”, is hereby
approved.
15. THIS COURT ORDERS that upon approval of the Notice and the Proof of Claim
and the appointment of The Garden City Group, Inc. as the Claims Administrator
by the Courts, the Claims Administrator shall cause the Notice and the Proof of
Claim, substantially in the forms attached as Schedules “B” and “C” to this
Order, to be mailed, by first class mail, postage prepaid, on or before
                    , 2006, to all of the Quebec Class Members who can be
identified with reasonable effort, in accordance with the Notice Plan.
16. THIS COURT ORDERS that additional copies of the Notice shall be made
available to any record holder requesting such for the purpose of distribution
to beneficial owners, and such record holders shall be reimbursed from the Gross
Settlement Fund (as defined in the Stipulation), upon receipt by the Claims
Administrator of proper documentation, for the reasonable expense of sending the
Notice and Proof of Claim to beneficial owners.
17. THIS COURT ORDERS that Quebec Class Counsel shall, at or before the hearing
of the Settlement Approval Motion, file with the Court proof of mailing of the
Notice and Proof of Claim.

 

--------------------------------------------------------------------------------

 

18. THIS COURT ORDERS that the form of Publication Notice in substantially the
form and content attached hereto as Schedule “E” is hereby approved, and directs
that Claims Administrator shall cause the Publication Notice to be published in
accordance with the Notice Plan, which publication shall begin within ten
(10) days of the mailing of the Notice, and Quebec Class Counsel shall, at or
before the hearing of the Settlement Approval Motion, file with this Court proof
of the publication of the Publication Notice.

19. THIS COURT ORDERS that in order to be entitled to participate in the Net
Settlement Fund (as defined in the Stipulation), each Quebec Class Member shall
take the following actions and be subject to the following conditions:

  (a)   A properly executed Proof of Claim, substantially in the form attached
hereto as Schedule “C”, must be submitted to the Claims Administrator, at the
Post Office Box indicated in the Notice, postmarked not later than
                    , 2006. Such deadline may be further extended by order of
this Court.     (b)   Each Proof of Claim shall be deemed to have been submitted
when postmarked (if properly addressed and mailed by first class mail, postage
prepaid) provided such Proof of Claim is actually received prior to the motion
for an order of this Court approving distribution of the Net Settlement Fund (as
defined in the Stipulation).     (c)   Any Proof of Claim submitted in any other
manner shall be deemed to have been submitted when it was actually received at
the address designated in the Notice.

20. THIS COURT ORDERS that the Proof of Claim submitted by each Quebec
Class Member must satisfy the following conditions:

  (a)   it must be properly completed, signed and submitted in a timely manner
in accordance with the provisions of the preceding paragraph;     (b)   it must
be accompanied by adequate supporting documentation for the transactions
reported therein, in the form of broker confirmation slips, broker account
statements, an authorized statement from the broker containing the transactional
information found in a broker confirmation slip, or such other documentation as
is deemed adequate by the Claims Administrator;

 

--------------------------------------------------------------------------------

 

  (c)   if the person executing the Proof of Claim is acting in a representative
capacity, a certification of his current authority to act on behalf of the
Quebec Class Member must be included in the Proof of Claim; and     (d)   the
Proof of Claim must be complete and contain no material deletions or
modifications of any of the printed matter contained therein and must be signed
under penalty of perjury.

21. THIS COURT ORDERS that, as part of the Proof of Claim, each Quebec
Class Member shall submit to the jurisdiction of this Court with respect to the
claim submitted, and shall (subject to the approval of the Settlement by the
Courts) release all Settled Claims against the Released Parties.
22. THIS COURT ORDERS that Quebec Class Members who wish to file with the Court
an objection or comment to the Settlement or to the approval of Quebec
Class Counsel Fees shall deliver a written submission to the Claims
Administrator at the address indicated in the Notice, no later than
                    , 2006, and Claims Administrator shall file all such
submissions with the Court prior to the hearing of the Settlement Approval
Motion.
23. THIS COURT ORDERS that if (a) the Settlement is terminated by Nortel
pursuant to the Supplemental Agreement and paragraph 26 in the Stipulation;
(b) any specified condition to the Settlement set forth in the Stipulation is
not satisfied and any of the Representative Plaintiffs or Nortel elect(s) to
terminate the Settlement as provided in paragraph 25 in the Stipulation; or
(c) the Settlement is termination pursuant to paragraph 27 of the Stipulation,
then: (i) this Order, including the authorization of the bringing of the Quebec
Action as a class action for the purpose of settlement, shall be set aside and
be of no further force or effect, and without prejudice to any party; (ii) each
party to the Quebec Action shall be restored to his, her or its respective
position in the litigation as it existed immediately prior to the execution of
the Settlement Agreement; and (iii) this Action

 

--------------------------------------------------------------------------------

 

authorizing the bringing of the class action shall be annulled pursuant to the
Code of Civil Procedure, without prejudice to the Petitioner’s ability to
reapply for certification.
24. THIS COURT ACKNOWLEDGES having been notified that a determination of
fairness of the Settlement at the Settlement Approval Hearing will be relied
upon by Nortel for an exemption, pursuant to Section 3(a)(10) of the United
States Securities Act of 1933, as amended, 15 U.S.C. § 77c(a)(1), to enable the
Gross Settlement Shares to ‘be distributed to Class Members, and to counsel for
the Representative Plaintiffs as may be awarded by the respective Courts for
counsel fees, without registration and compliance with the prospectus delivery
requirements of U.S. securities laws.

         
 
       
Date
  J.C.S.    

 

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EXHIBIT F
Court File No. 05-CV-285606CP
ONTARIO
SUPERIOR COURT OF JUSTICE

             
THE HONOURABLE SENIOR
    )                         DAY, THE           DAY
REGIONAL JUSTICE WINKLER
    )      
 
    )     OF                               , 2006

BETWEEN:
PETER GALLARDI
Plaintiff
- and –
NORTEL NETWORKS CORPORATION, FRANK A. DUNN
DOUGLAS BEATTY, MICHAEL GOLLOGLY,
JOHN EDWARD CLEGHORN, ROBERT ELLIS BROWN,
ROBERT ALEXANDER INGRAM, GUYLAINE SAUCIER,
SHERWOOD HUBBARD SMITH, JR. and DELOITTE & TOUCHE LLP
Defendants
Proceedings under the Class Proceeding Act, 1992
ORDER
     THIS MOTION made by the Plaintiff for an Order approving the Settlement
Agreement and Confirmation of Stipulation of Agreement of Settlement (the
“Settlement Agreement”) entered into between the Plaintiffs and the Defendant,
Nortel Networks Corporation, approving Ontario National Class Counsel Fees and
for declaratory relief, was heard this day at 361 University Avenue, Toronto,
Ontario.
     ON READING the materials filed, including the Settlement Agreement attached
to this Order as Schedule “A”, and on hearing the submissions of counsel for the
Plaintiff and counsel for the Defendants:
1. THIS COURT DECLARES that for the purposes of this Order the following
definitions apply and are incorporated into this Order:

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  (a)   “Certification Order” means the Order certifying this action as a class
proceeding dated June ___2006;     (b)   “Claims Administrator” means The Garden
City Group, Inc.;     (c)   “Class Members” means members of the Ontario
National Class, the Quebec Class and the U.S. Global Class;     (d)  
“Class Period” means the period of time between April 24, 2003 through April 27,
2004, inclusive;     (e)   “Courts” means this Court, the Superior Court of
Quebec and the United States Federal District Court for the Southern District of
New York;     (f)   “Defendants” means the persons and entities named as
defendants in the Ontario National Action;     (g)   “Derivative Application”
application brought in Indiana Electrical Workers Pension Trust Fund IBEW and
Laborers Local 100 and 397 Pension Fund v. Nortel Networks Corporation, Ontario
Superior Court of Justice, Court File No. 49059, for leave pursuant to the
Canada Business Corporations Act to commence a representative action in the name
of and on behalf of Nortel against certain of the Released Parties;     (h)  
“Effective Date” means the date upon which the Settlement contemplated by the
Settlement Agreement shall become effective, as provided in paragraph 24 of the
Stipulation;     (i)   “Escrow Agent” has the meaning set forth in the
Stipulation;     (j)   “Excluded Persons” means: (i) Nortel and the Individual
Defendants; (ii) the Other Individuals; (iii) members of any of the Individual
Defendants’ immediate families; (iv) any entity in which Nortel or any of the
Individuals Defendants or the Other Individuals has a controlling interest;
(v) any parent, subsidiary or affiliate of Nortel; (vi) any person who was an
officer or directors of Nortel or any of its subsidiaries or affiliates during
the Class Period; and (vii) legal representatives, heirs, predecessors,
successors or assigns of any of the Excluded Persons;     (k)   “Gross
Settlement Fund” has the meaning set forth in the Stipulation;     (l)   “Gross
Settlement Shares” means 314,333,875 shares of common stock of Nortel to be
issued by Nortel, pursuant to the Settlement, as may be adjusted in accordance
with paragraph 4(d) of the Stipulation;     (m)   “Individual Defendants” means
Frank A. Dunn, Douglas Beatty, Michael Gollogly, John Edward Cleghorn, Robert
Ellis Brown, Robert Alexander Ingram, Guylaine Saucier and Sherwood Hubbard
Smith, Jr.;

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  (n)   “Nortel” means the Defendant, Nortel Networks Corporation;     (o)  
“Nortel I Actions” means the following proceedings in Canada and the U.S.:

  (i)   Frohlinger v. Nortel Networks Corporation et al., Ontario Superior Court
of Justice, Court File No. 02-CL-4605;     (ii)   Association de Protection des
Epargnants et Investisseurs du Quebec v. Corporation Nortel Networks, Superior
Court of Quebec, District of Montreal, No.: 500-06-000126-017;     (iii)  
Jeffery et al. v. Nortel Networks Corporation et al., Supreme Court of British
Columbia, Vancouver Registry Court File No. S015159; and     (iv)   In re Nortel
Networks Corp. Securities Litigation, Consolidated Civil Action No. 01-CV-1855
(RMB);

  (p)   “Nortel II Actions” means the Ontario National Action, the Quebec Action
and the U.S. Action;     (q)   “Nortel II Defendants” means Nortel, the
Individual Defendants and Deloitte & Touche LLP;     (r)   “Ontario National
Action” means this proceeding;     (s)   “Ontario National Class Counsel” means
Rochon Genova LLP and Lerners LLP;     (t)   “Ontario National Class Counsel
Fees” means the fees, disbursements, costs, GST, and other applicable taxes or
charges of Ontario National Class Counsel, as approved by this Court in this
Order;     (u)   “Ontario National Class” means all persons, except Excluded
Persons and except members of the Quebec Class, who, while resident in Canada at
the time, purchased Nortel common stock or call options on Nortel common stock
or wrote (sold) put options on Nortel common stock during the Class Period;    
(v)   “Ontario National Class Member” means a member of the Ontario National
Class who has not opted out of the Ontario National Class in accordance with the
Certification Order;     (w)   “Other Actions” means actions or proceedings,
other than the Proceedings, relating to Settled Claims commenced by an Ontario
National Class Member against one or more Released Parties;     (x)   “Other
Individuals” means James Kinney (Finance Chief for Nortel’s Wireless Networks
Division, Richardson, Texas), Ken Taylor (Vice President for Nortel’s Enterprise
Networks Division, Raleigh, North Carolina), Craig Johnson (Finance

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      Director for Nortel’s Wireline Networks Division, Richardson, Texas), Doug
Hamilton (Finance Director for Nortel’s Optical Networks Group, Montreal,
Quebec), Michel Gasnier (Vice President of Finance for Europe), Robert Ferguson
(Vice President of Finance for China), and William Bowrey (Controller for Asia);
    (y)   “Plan of Allocation” means the plan of allocation set forth in the
Notice of Certification in Canada and Proposed Settlements of Class Actions,
Motion for Attorneys’ Fees and Settlement Fairness Hearings and attached as
Schedule “B” to this Order;     (z)   “Proceedings” means the Ontario National
Action, the Quebec Action, the U.S. Action and the Nortel I Actions;     (aa)  
“Quebec Action” means the proceeding in the Superior Court of Quebec (District
of Montreal), Clifford W. Skarstedt v. Corporation Nortel Networks, No:
500-06-000277-059;     (bb)   “Quebec Class” means all persons and entities,
except Excluded Persons who, while resident in Quebec at the time, purchased
Nortel common stock or call options on Nortel common stock or wrote
(sold) Nortel put options on Nortel common stock during the Class Period. For
purposes of this definition, an entity means a legal person established for a
private interest, a partnership or an association if at all times during the
12-month period preceding February 18, 2005, not more than 50 persons bound to
it by contract of employment were under its direction or control and if it is
dealing at arm’s length with the representative of the Quebec Class;     (cc)  
“Released Parties” means any and all of the Nortel II Defendants, their past or
present subsidiaries, parents, principals, affiliates, general or limited
partners or partnerships, successors and predecessors, heirs, assigns, officers,
directors, agents, employees, attorneys, advisors, investment advisors,
investment bankers, underwriters, insurers, co-insurers, re-insurers,
accountants, auditors, consultants, administrators, executors, trustees,
personal representatives, immediate family members and any person, firm, trust,
partnership, corporation, officer, director or other individual or entity in
which any Nortel II Defendant has a controlling interest or which is related to
or affiliated with any of the Nortel II Defendants, and the legal
representatives, heirs, executors, administrators, trustees, successors in
interest or assigns of the Nortel H Defendants;     (dd)   “Representative
Plaintiffs” means, collectively, the representative or lead plaintiffs in each
of the Canadian Actions and the U.S. Action;     (ee)   “Settled Claims” means
any and all claims, debts, demands, rights or causes of action, suits, matters,
and issues or liabilities whatsoever (including, but not limited to, any claims
for damages, interest, attorneys’ fees, expert or consulting fees, and any other
costs, expenses or liability whatsoever), whether based on

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      United States or Canadian federal, state, provincial, local, statutory or
common law or any other law, rule or regulation, whether fixed or contingent,
accrued or unaccrued, liquidated or unliquidated, at law or in equity, matured
or un-matured, whether class or individual in nature, including both known
claims and Unknown Claims, (i) that have been asserted in any of the Nortel II
Actions against any of the Released Parties, or (ii) that could have been
asserted in any forum by the Class Members in the Nortel II Actions, or any of
them, against any of the Released Parties, that arise out of or are based upon
the allegations, transactions, facts, matters or occurrences, representations or
omissions involved, set forth, or referred to in the Nortel II Actions and that
relate to the purchase of Nortel common stock or call options or the sale of
Nortel put options during the Class Period or (iii) any oppression or other
claims under the Business Corporations Act, R.S.C. 1985, c. C-44, as amended,
that arise out of or are based upon the allegations, transactions, facts,
matters or occurrences, representations or omissions, set forth or referred to
in the Nortel II Actions. “Settled Claims” does not mean or include claims, if
any, against the Released Parties arising under the United States Employee
Retirement Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq.
(“ERISA”) that are not common to all Class Members and which ERISA claims are
the subject of an action pending before the Judicial Panel on Multidistrict
Litigation, denominated In re Nortel Networks Securities and “ERISA” Litigation,
MDL Docket No. 1537. Settled Claims further does not include: (a) the action in
Rohac et al v. Nortel Networks et al, Ontario Superior Court of Justice, Court
File No. 04-CV-3268; and (b) the Derivative Application;     (ff)   “Settled
Defendants’ Claim” means any and all claims, rights or causes of action or
liabilities whatsoever, whether based on federal, provincial, local, statutory
or common law or any other law, rule or regulation, including both known claims
and Unknown Claims, that have been or could have been asserted in the Nortel II
Actions or any forum by the Nortel II Defendants or any of them or the
successors and assigns or any of them against the Representative Plaintiffs, any
Class Member, or their counsel, and that arise out of or relate in any way to
the institution, prosecution, or settlement of the Nortel II Actions (except
Settled Defendants’ Claims does not include all claims, rights or causes of
action or liabilities whatsoever related to the enforcement of the Settlement
including, without limitation, any of the terms of the Stipulation or orders or
judgments issued by the Courts in connection with the Settlement,
confidentiality obligations or in respect of the Derivative Application);    
(gg)   “Settlement Agreement” means the Settlement Agreement and Confirmation of
Stipulation and Agreement of Settlement, including the Stipulation attached
thereto, entered into between the Plaintiffs and Nortel, dated as of June 20,
2006, attached to this Order as Schedule “A”;     (hh)   “Settlement” means the
proposed settlement of the Nortel II Actions pursuant to the terms set forth in
the Settlement Agreement adopting and ratifying the Stipulation;

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  (ii)   “Stipulation” means the Stipulation and Agreement of Settlement
attached to the Settlement Agreement as Schedule “A”.     (jj)   “Supplemental
Agreement” means the agreement referred to in paragraph 23 of the Stipulation
setting forth certain conditions under which the Settlement may be terminated by
Nortel if potential Class Members who purchase in excess of a certain number of
Nortel common stock or options on Nortel common stock during the Class Period
exclude themselves from the Class;     (kk)   “Unknown Claims” means any and all
Settled Claims which any of the Representative Plaintiffs, or Class Members does
not know or suspect to exist in his, her or its favour at the time of the
release of the Released Parties and any Settled Defendants’ Claims which any
Nortel II Defendant does not know or suspect to exist in his, her or its favour,
which if known by him, her or it might have affected his, her or its decision(s)
with respect to the Settlement;     (ll)   “U.S. Action” means the proceeding in
the United States Federal District Court for the Southern District of New York,
In re Nortel Networks Corp. Securities Litigation, Master File No. 05-MD-1659
(LAP); and     (mm)   “U.S. Global Class” means all persons, except Excluded
Persons, who purchased Nortel common stock or call options on Nortel common
stock or wrote (sold) put options on Nortel common stock (collectively, “Nortel
Securities”) during the Class Period, and who suffered damages thereby,
including, but not limited to, those persons or entities who traded in Nortel
Securities on the New York Stock Exchange and/or the Toronto Stock Exchange.

2. THIS COURT DECLARES that the Settlement Agreement is fair, reasonable and in
the best interests of the Ontario National Class.
3. THIS COURT ORDERS that the Settlement Agreement attached to this Order as
Schedule “A” is hereby approved pursuant to s. 29 of the Class Proceedings Act,
1992.
4. THIS COURT DECLARES that the Settlement Agreement is binding upon the
representative Plaintiff, upon all Ontario National Class Members, and upon the
Defendants, including those persons who are minors or mentally incapable, and
that the requirements of Rules 7.04(1) and 7.08(4) of the Rules of Civil
Procedure are dispensed with in respect of the Ontario National Action.
5. THIS COURT ORDERS that, upon the Effective Date, the Plaintiff herein and
each of the Ontario National Class Members, on behalf of themselves, their
personal representatives, heirs, executors, administrators, trustees, successors
and assigns, are hereby permanently barred and enjoined from instituting,
commencing or prosecuting any Settled Claims against the Released Parties.
6. THIS COURT ORDERS AND DECLARES that, upon the Effective Date, the Plaintiff
herein and each of the Ontario National Class Members, on behalf of themselves,
their personal representatives, heirs, executors, administrators, trustees,
successors and assigns shall release and

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shall be conclusively deemed to have fully, finally and forever released the
Released Parties from the Settled Claims.
7. THIS COURT ORDERS that, upon the Effective Date, the Plaintiff herein and
each of the Ontario National Class Members and their respective personal
representatives, heirs, executors, administrators, trustees, successors and
assigns, shall not institute, continue, maintain or assert, either directly or
indirectly, whether in the United States, Canada or elsewhere, on their own
behalf or on behalf of any class or any other person, any action, suit, cause of
action, claim or demand against any Released Party or any other person who may
claim any form of contribution or indemnity (save for a contractual indemnity)
from any Released Party in respect of any Settled Claim or any matter related
thereto, at any time on or after the Effective Date, and are enjoined from doing
so.
8. THIS COURT ORDERS that, upon the Effective Date, the defendants Nortel, John
Edward Cleghorn, Robert Ellis Brown, Robert Alexander Ingram, Guylaine Saucier
and Sherwood Hubbard Smith, Jr. on behalf of themselves and their personal
representatives, heirs, executors, administrators, trustees, successors and
assigns, are hereby permanently barred and enjoined from prosecuting a Settled
Defendants’ Claim against the Plaintiff herein, the Ontario National
Class Members or Ontario National Class Counsel. In the event that any of the
Released Parties assert against the Plaintiffs, any Ontario National
Class Member or the Ontario National Class Counsel, any claim that is a Settled
Defendants’ Claim, then the Plaintiff, such Class Member or Ontario National
Class Counsel, as the case may be, shall be entitled to use and assert such
factual matters included within the Settled Claims only against such Released
Party in defence of such claim but not for the purposes of asserting any claim
against any Released Party.
9. THIS COURT ORDERS AND DECLARES that each Ontario National Class Member shall
consent and shall be deemed to have consented to the dismissal of any Other
Actions he, she or it has commenced against the Released Parties, without costs
and with prejudice.
10. THIS COURT ORDERS that neither this Order, the Settlement Agreement, the
Stipulation, nor any of their terms and provisions, nor any of the negotiations
or proceedings connected with it, nor any of the documents or statements
referred to therein shall be:

  (a)   offered or received against the Defendants as evidence of or construed
as or deemed to be evidence of any presumption, concession, or admission by any
of the Defendants with respect to the truth of any fact alleged in the Statement
of Claim as amended or the validity of any claim that has been or could have
been asserted in the Ontario National Action or in any litigation, or the
deficiency of any defence that has been or could have been asserted in the
Ontario National Action or in any litigation, or of any liability, negligence,
fault, or wrongdoing of the Defendants;     (b)   offered or received against
the Defendants as evidence of a presumption, concession or admission of any
fault, misrepresentation or omission with respect to any statement or written
document approved or made by any Defendant;

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  (c)   offered or received against the Defendants as evidence of a presumption,
concession or admission with respect to any liability, negligence, fault or
wrongdoing, or in any way referred to for any other reason as against any of the
Defendants, in any other civil, criminal or administrative action or proceeding,
other than such proceedings as may be necessary to enforce and give effect to
the provisions of the Settlement Agreement (provided, however, that Defendants
may refer to it to effectuate the release and liability protection granted them
hereunder);     (d)   construed against the Defendants as an admission or
concession that the consideration to be given hereunder represents the amount
which could be or would have been recovered after trial; or     (e)   construed
as or received in evidence as an admission, concession or presumption against
the Plaintiff or any of the Ontario National Class Members that any of their
claims are without merit, or that any defences asserted by the Defendants have
any merit, or that damages recoverable under the Statement of Claim as amended
would not have exceeded the amounts set forth under the Settlement Agreement.

11. THIS COURT ORDERS that the Plan of Allocation is approved as fair and
reasonable.
12. THIS COURT ORDERS that Ontario National Class Counsel Fees in the amount of
$                     in cash, and                                 shares, which
includes $                     for disbursements, and which amounts this Court
finds to be fair and reasonable, are hereby approved.
13. THIS COURT ORDERS that the Ontario National Class Counsel Fees shall be paid
out of the Gross Settlement Fund.
14. THIS COURT ORDERS that this Court shall retain jurisdiction over the parties
herein, the Ontario National Class Members, the Claims Administrator and the
Escrow Agent for all matters relating to the Ontario National Action, including
the administration, interpretation, effectuation or enforcement of the
Settlement Agreement and this Order, and including any application for fees and
expenses by the Ontario National Class Counsel and the Claims Administrator
incurred in overseeing and administering the Settlement, in distributing
settlement proceeds to the Ontario National Class Members, and in complying with
the terms of this Order and the Certification Order.
15. THIS COURT ORDERS that, on notice to the Court but without further order of
the Court, the parties to the Settlement Agreement may agree to reasonable
extensions of time to carry out any of the provisions of the Settlement
Agreement.
16. THIS COURT ORDERS AND DECLARES that the Released Parties have no
responsibility for and no liability whatsoever with respect to the
administration of the Settlement.
17. THIS COURT RECOGNIZES & ACKNOWLEDGES that: (i) one of the effects of its
determination that the Settlement Agreement is fair is that, pursuant to
Section 3(a)(10) of the United States Securities Act of 1933, as amended, 15
U.S.C. § 77c(a)(1), the Gross Settlement

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Shares may be distributed to Class Members, and to counsel for the plaintiffs in
the Nortel I Actions as may be awarded by the respective Courts for counsel
fees, without registration and compliance with the prospectus delivery
requirements of U.S. securities laws; and (ii) Nortel will rely on such
Section 3(a)(10) exemption (and Nortel will not register the Gross Settlement
Shares under the United States Securities Act of 1933) based on this Court’s
approval of the fairness of the Settlement.
18. THIS COURT DECLARES that all of the Ontario National Class Members to whom
it is proposed to issue Gross Settlement Shares have had the right to appear at
the hearing on the fairness of the Settlement Agreement, and that adequate
notice of this hearing has been provided to Ontario National Class Members in
accordance with the terms of the Certification Order.
19. THIS COURT ORDERS that if (a) the Settlement Agreement is terminated by
Nortel pursuant to the Supplemental Agreement and paragraph 26 of the
Stipulation; (b) any specified condition to the Settlement set forth in the
Stipulation is not satisfied and any of the Lead Plaintiffs or Nortel elect(s)
to terminate the Settlement Agreement as provided in paragraph 25 of the
Stipulation; or (c) the Settlement Agreement is otherwise terminated pursuant to
paragraph 27 of the Stipulation, then, in any such event:

  (a)   this Order (except for paragraphs 1, 10, 14, 16, 17, 18 and 19 herein)
shall be set aside, be of no further force or effect, and be without prejudice
to any party;     (b)   the Certification Order (except for paragraph 24), shall
be set aside and be of no further force or effect, and without prejudice to any
party;     (c)   the Ontario National Action shall be immediately decertified as
a class proceeding pursuant to Section 10 of the Class Proceedings Act, 1992,
without prejudice to the Plaintiff’s ability to reapply for certification; and  
  (d)   each party to the Ontario National Action shall be restored to his, her
or its respective position as it existed immediately prior to the execution of
the Settlement Agreement.

20. THIS COURT ORDERS AND ADJUDGES that any appeal or challenge affecting the
approval of the Plan of Allocation or this Court’s approval of Ontario National
Counsel Fees shall in no way disturb or affect the balance of this Order and
shall be deemed to be separate and apart from the balance of this Order.
21. THIS COURT ORDERS AND ADJUDGES that, upon the Effective Date, the Ontario
National Action be and is hereby dismissed against the Defendants with prejudice
and without costs.

     
 
   

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PETER GALLARDI
      NORTEL NETWORKS CORPORATION     Court File No: 05-CV-285606CP
Plaintiff
  and   et al.      
 
      Defendants              
 
             
 
            ONTARIO
 
            SUPERIOR COURT OF JUSTICE
 
             
 
            Proceeding commenced at Toronto
 
             
 
           
 
             
 
            ORDER
 
             
 
           
 
             
 
             
 
             
 
             
 
             
 
             
 
             
 
             

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EXHIBIT G

     
CANADA
  (CLASS ACTION)
 
   
PROVINCE OF QUÉBEC
  SUPERIOR COURT
DISTRICT OF MONTREAL
   
 
   
 
   
NO : 500-06-000277-059
  CLIFFORD W. SKARSTEDT  
 
  Representative  
 
  - v. -
 
   
 
  CORPORATION NORTEL NETWORKS  
 
  Defendant  
 
  and
 
   
 
  FONDS D’AIDE AUX RECOURS
 
   
 
  COLLECTIFS  
 
  Mis en cause

ORDER
     THIS MOTION made by the Representative for an Order approving the
Settlement Agreement and Confirmation of Stipulation of Agreement of Settlement
(the “Settlement Agreement”) entered into between the Plaintiffs and the
Defendant, Nortel Networks Corporation, approving Quebec Class Counsel Fees and
for declaratory relief, was heard this day.
     ON READING the materials filed, including the Settlement Agreement attached
to this Order as Schedule “A”, and on hearing the submissions of counsel for the
Representative and counsel for the Defendant:
1. THIS COURT DECLARES that for the purposes of this Order the following
definitions apply and are incorporated into this Order:

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  2

  (a)   “Authorization Order” means the Order authorizing the bringing of the
class action for the purpose of settlement dated June ___, 2006;     (b)  
“Canadian Actions” means the Ontario National Action, the British Columbia
Action and the Quebec Action;     (c)   “Claims Administrator” means The Garden
City Group, Inc.;     (d)   “Class Members” means members of the Ontario
National Class, the Quebec Class and the U.S. Global Class;     (e)  
“Class Period” means the period of time between April 24, 2003 through April 27,
2004, inclusive;     (f)   “Courts” means this Court, the Ontario Supreme Court
of Justice and the United States Federal District Court for the Southern
District of New York;     (g)   “Defendant” means Corporation Nortel Networks;  
  (h)   “Derivative Application” application brought in Indiana Electrical
Workers Pension Trust Fund IBEW and Laborers Local 100 and 397 Pension Fund v.
Nortel Networks Corporation, Ontario Superior Court of Justice, Court File
No. 49059, for leave pursuant to the Canada Business Corporations Act to
commence a representative action in the name of and on behalf of Nortel against
certain of the Released Parties;     (i)   “Effective Date” means the date upon
which the Settlement contemplated by the Settlement Agreement shall become
effective, as provided in paragraph 24 of the Stipulation;     (j)   “Escrow
Agent” has the meaning set forth in the Stipulation;     (k)   “Excluded
Persons” means Nortel and the Individuals, members of any of the Individuals’
immediate families, any entity in which Nortel or any of the Individuals has a
controlling interest or is a parent or subsidiary of or is controlled by Nortel,
and the officers, directors, affiliates, legal representatives, heirs,
predecessors, successors or assigns of any of Nortel and the Individuals;    
(l)   “Gross Settlement Fund” has the meaning set forth in the Stipulation;    
(m)   “Gross Settlement Shares” means 314,333,875 shares of common stock of
Nortel to be issued by Nortel, pursuant to the Settlement, as may be adjusted in
accordance with paragraph 4(d) of the Stipulation;     (n)   “Individuals” means
Frank A. Dunn, Douglas Beatty, Michael Gollogly, John Edward Cleghorn, Robert
Ellis Brown, Robert Alexander Ingram, Guylaine Saucier, Sherwood Hubbard Smith,
Jr., James Kinney (Finance Chief for Nortel’s Wireless Networks Division,
Richardson, Texas), Ken Taylor (Vice President for

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3

Nortel’s Enterprise Networks Division, Raleigh, North Carolina), Craig Johnson
(Finance Director for Nortel’s Wireline Networks Division, Richardson, Texas),
Doug Hamilton (Finance Director for Nortel’s Optical Networks Group, Montreal,
Quebec), Michel Gasnier (Vice President of Finance for Europe), Robert Ferguson
(Vice President of Finance for China), and William Bowrey (Controller for Asia);

  (o)   “Nortel” means the Defendant, Nortel Networks Corporation;     (p)  
“Nortel I Actions” means the following proceedings in Canada and the U.S.:

  (i)   Frohlinger v. Nortel Networks Corporation et al., Ontario Superior Court
of Justice, Court File No. 02-CL-4605;     (ii)   Association de Protection des
Épargnants et Investisseurs du Québec v. Corporation Nortel Networks, Superior
Court of Quebec, District of Montreal, No. 500-06-000126-017;     (iii)  
Jeffery et al. v. Nortel Networks Corporation et al., Supreme Court of British
Columbia, Vancouver Registry Court File No. S015159; and     (iv)   In re Nortel
Networks Corp. Securities Litigation, Consolidated Civil Action No. 2001-CV-1855
(RMB);

  (q)   “Nortel II Actions” means the Ontario National Action, the Quebec Action
and the U.S. Action;     (r)   “Nortel H Defendants” Nortel, Frank A. Dunn,
Douglas Beatty, Michael Gollogly, John Edward Cleghorn, Robert Ellis Brown,
Robert Alexander Ingram, Guylaine Saucier, Sherwood Hubbard Smith, Jr. and
Deloitte & Touche LLP;     (s)   “Ontario National Action” means the proceeding
in the Ontario Superior Court of Justice, Gallardi v. Nortel Networks
Corporation et al., Court File No. 05-CV-285606CP;     (t)   “Ontario National
Class” means all persons, except Excluded Persons and except members of the
Quebec Class, who, while resident in Canada at the time, purchased Nortel common
stock or call options on Nortel common stock or wrote (sold) put options on
Nortel common stock during the Class Period;     (u)   “Other Actions” means
actions or proceedings, other than the Proceedings, relating to Settled Claims
commenced by a Quebec Class Member against one or more Released Parties;     (v)
  “Plan of Allocation” means the plan of allocation set forth Notice of
Certification in Canada and Proposed Settlements of Class Actions, Motion for
Attorneys’ Fees and Settlement Fairness Hearings and attached as Schedule “B” to
this Order;

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4

  (w)   “Proceedings” means the Ontario National Action, the Quebec Action, the
U.S. Action and the Nortel I Actions;     (x)   “Quebec Action” means this
proceeding;     (y)   “Quebec Class” means all persons and entities, except
Excluded Persons who, while resident in Quebec at the time, purchased Nortel
common stock or call options on Nortel common stock or wrote (sold) Nortel put
options on Nortel common stock during the Class Period. For purposes of the
definition of Quebec Class, an entity means a legal person established for a
private interest, a partnership or an association if at all times during the
12-month period preceding February 18, 2005, not more than 50 persons bound to
it by contract of employment were under its direction or control and if it is
dealing at arm’s length with the representative of the Quebec Class;     (z)  
“Quebec Class Counsel” means Trudel & Johnston;     (aa)   “Quebec Class Counsel
Fees” means the fees, disbursements, costs, GST, and other applicable taxes or
charges of Quebec Class Counsel;     (bb)   “Quebec Class Member” means a member
of the Quebec Class who has not opted out of, or requested exclusion from, the
Quebec Class in accordance with the Authorization Order;     (cc)   “Released
Parties” means any and all of the Nortel II Defendants, their past or present
subsidiaries, parents, principals, affiliates, general or limited partners or
partnerships, successors and predecessors, heirs, assigns, officers, directors,
agents, employees, attorneys, advisors, investment advisors, investment bankers,
underwriters, insurers, co-insurers, re-insurers, accountants, auditors,
consultants, administrators, executors, trustees, personal representatives,
immediate family members and any person, firm, trust, partnership, corporation,
officer, director or other individual or entity in which any Nortel II Defendant
has a controlling interest or which is related to or affiliated with any of the
Nortel II Defendants, and the legal representatives, heirs, executors,
administrators, trustees, successors in interest or assigns of the Nortel II
Defendants;     (dd)   “Representative Plaintiffs” means, collectively, the
representative or lead plaintiffs in each of the Canadian Actions and the U.S.
Action;     (ee)   “Settled Claims” means any and all claims, debts, demands,
rights or causes of action, suits, matters, and issues or liabilities whatsoever
(including, but not limited to, any claims for damages, interest, attorneys’
fees, expert or consulting fees, and any other costs, expenses or liability
whatsoever), whether based on United States or Canadian federal, state,
provincial, local, statutory or common law or any other law, rule or regulation,
whether fixed or contingent, accrued or unaccrued, liquidated or unliquidated,
at law or in equity, matured or un-matured, whether class or individual in
nature, including both known claims and unknown

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5

claims, (i) that have been asserted in any of the Nortel II Actions against any
of the Released Parties, or (ii) that could have been asserted in any forum by
the Class Members in the Nortel II Actions, or any of them, against any of the
Released Parties, that arise out of or are based upon the allegations,
transactions, facts, matters or occurrences, representations or omissions
involved, set forth, or referred to in the Nortel II Actions and that relate to
the purchase of Nortel common stock or call options or the sale of Nortel put
options during the Class Period or (iii) any oppression or other claims under
the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as amended, that
arise out of or are based upon the allegations, transactions, facts, matters or
occurrences, representations or omissions, set forth or referred to in the
Nortel II Actions. Settled Claims does not mean or include claims, if any,
against the Released Parties arising under the United States Employee Retirement
Income Security Act of 1974, as amended, 29 U.S.C. § 1001, et seq. (“ERISA”)
that are not common to all Class Members and which ERISA claims are the subject
of an action pending before the Judicial Panel on Multidistrict Litigation,
denominated In re Nortel Networks Securities and “ERISA” Litigation, MDL Docket
No. 1537. Settled Claims also does not include: (a) the action in Rohac et al.
v. Nortel Networks et al, Ontario Superior Court of Justice, Court File
No. 04-CV- 3268; and (b) the Derivative Application;

  (ff)   “Settled Defendants’ Claim” means any and all claims, rights or causes
of action or liabilities whatsoever, whether based on federal, provincial,
local, statutory or common law or any other law, rule or regulation, including
both known claims and unknown claims, that have been or could have been asserted
in the Nortel II Actions or any forum by the Nortel II Defendants or any of them
or the successors and assigns or any of them against the Representative
Plaintiffs, any Class Member, or their counsel, and that arise out of or relate
in any way to the institution, prosecution, or settlement of the Nortel II
Actions (except for claims or proceedings to enforce the Settlement including,
without limitation, any of the terms of the Stipulation or orders or judgments
issued by the Courts in connection with the Settlement, confidentiality
obligations or in respect of the Derivative Application);     (gg)   “Settlement
Agreement” means the Settlement Agreement and Confirmation of Stipulation and
Agreement of Settlement, including the Stipulation attached as Schedule “A”
thereto, entered into between the Plaintiffs and Nortel, through their counsel,
dated as of June ___, 2006, attached to this Order as Schedule “A”;     (hh)  
“Settlement” means the proposed settlement of the Nortel II Actions pursuant to
the terms set forth in the Stipulation;     (ii)   “Stipulation” means the
Stipulation and Agreement of Settlement attached to the Settlement Agreement as
Schedule “A”;

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  (jj)   “Supplemental Agreement” means the agreement referred to in paragraph
23 of the Stipulation setting forth certain conditions under which the
Settlement may be terminated by Nortel if potential Class Members who purchase
in excess of a certain number of Nortel common stock or options on Nortel common
stock during the Class Period exclude themselves from the Class;     (kk)  
“Unknown Claims” means any and all Settled Claims which any of the
Representative Plaintiffs, or Class Members does not know or suspect to exist in
his, her or its favour at the time of the release of the Released Parties and
any Settled Defendants’ Claims which any Nortel II Defendant does not know or
suspect to exist in his, her or its favour, which if known by him, her or it
might have affected his, her or its decision(s) with respect to the Settlement;
    (ll)   “U.S. Action” means the proceeding in the United States Federal
District Court for the Southern District of New York, In re Nortel Networks
Corp. Securities Litigation, Master File No. 05-MD-1659 (LAP); and     (mm)  
“U.S. Global Class” means all persons, except Excluded Persons, who purchased
Nortel common stock or call options on Nortel common stock or wrote (sold) put
options on Nortel common stock (collectively, “Nortel Securities”) during the
Class Period, and who suffered damages thereby, including, but not limited to,
those persons or entities who traded in Nortel Securities on the New York Stock
Exchange and/or the Toronto Stock Exchange,

2. THIS COURT DECLARES that the Settlement Agreement is fair, reasonable and in
the best interests of the Quebec Class.
3. THIS COURT ORDERS that the Settlement Agreement attached to this Order as
Schedule “A” is hereby approved pursuant to Article 1025 of the Code of Civil
Procedure.
4. THIS COURT DECLARES that the Settlement Agreement is binding upon the
Representative, upon all Quebec Class Members, and upon the Defendant, including
those persons who are minors or mentally incapable.
5. THIS COURT ORDERS that, upon the Effective Date, the Representative herein
and each of the Quebec Class Members, on behalf of themselves, their personal
representatives, heirs, executors, administrators, trustees, successors and
assigns, are hereby permanently barred

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7

and enjoined from instituting, commencing or prosecuting any Settled Claims
against the Released Parties.
6. THIS COURT ORDERS AND DECLARES that, upon the Effective Date, the
Representative herein and each of the Quebec Class Members, on behalf of
themselves, their personal representatives, heirs, executors, administrators,
trustees, successors and assigns shall release and shall be conclusively deemed
to have fully, finally and forever released the Released Parties from the
Settled Claims.
7. THIS COURT ORDERS that, upon the Effective Date, the Plaintiff herein and
each of the Quebec Class Members and their respective personal representatives,
heirs, executors, administrators, trustees, successors and assigns, shall not
institute, continue, maintain or assert, either directly or indirectly, whether
in the United States, Canada or elsewhere, on their own behalf or on behalf of
any class or any other person, any action, suit, cause of action, claim or
demand against any Released Party or any other person who may claim any form of
contribution or indemnity (save for a contractual indemnity) from any Released
Party in respect of any Settled Claim or any matter related thereto, at any time
on or after the Effective Date, and are enjoined from doing so.
8. THIS COURT ORDERS that, upon the Effective Date, the Defendant Nortel, on
behalf of itself and its personal representatives, heirs, executors,
administrators, trustees, successors and assigns is hereby permanently barred
and enjoined from prosecuting a Settled Defendants’ Claim against the
Representative herein, the Quebec Class Members or Quebec Class Counsel. In the
event that any of the Released Parties assert against the Representative, any
Quebec Class Member or the Quebec Class Counsel, any claim that is a Settled
Defendants’ Claim, then the

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8

Representative, such Class Member or Quebec Class Counsel, as the case may be,
shall be entitled to use and assert such factual matters included within the
Settled Claims only against such Released Party in defence of such claim but not
for the purpose of asserting any claim against any Released Party.
9. THIS COURT ORDERS AND DECLARES that each Quebec Class Member shall consent
and shall be deemed to have consented to the dismissal of any Other Actions he,
she or it has commenced against the Released Parties, without costs and with
prejudice.
10. THIS COURT ORDERS that neither this Order, the Settlement Agreement, the
Stipulation, nor any of their terms and provisions, nor any of the negotiations
or proceedings connected with it, nor any of the documents or statements
referred to therein shall be:

  (a)   offered or received against the Defendant as evidence of or construed as
or deemed to be evidence of any presumption, concession, or admission by the
Defendant with respect to the truth of any fact alleged in the Quebec Action or
the validity of any claim that has been or could have been asserted in the
Quebec Action or in any litigation, or the deficiency of any defence that has
been or could have been asserted in the Quebec Action or in any litigation, or
of any liability, negligence, fault, or wrongdoing of the Defendant;     (b)  
offered or received against the Defendant as evidence of a presumption,
concession or admission of any fault, misrepresentation or omission with respect
to any statement or written document approved or made by the Defendant;     (c)
  offered or received against the Defendant as evidence of a presumption,
concession or admission with respect to any liability, negligence, fault or
wrongdoing, or in any way referred to for any other reason as against the
Defendant, in any other civil, criminal or administrative action or proceeding,
other than such proceedings as may be necessary to enforce and give effect to
the provisions of the Settlement Agreement (provided, however, that Defendant
may refer to it to effectuate the release and liability protection granted them
hereunder);     (d)   construed against the Defendant as an admission or
concession that the consideration to be given hereunder represents the amount
which could be or would have been recovered after trial; or

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9

  (e)   construed as or received in evidence as an admission, concession or
presumption against the Representative or any of the Quebec Class Members that
any of their claims are without merit, or that any defences asserted by the
Defendant have any merit, or that damages recoverable under the Quebec Action
would not have exceeded the amounts set forth under the Settlement Agreement.

11. THIS COURT ORDERS that the Plan of Allocation is approved as fair and
reasonable.
12. THIS COURT ORDERS that Quebec Class Counsel Fees in the amount of
$                     in cash, and                                 shares, which
includes $                     for disbursements, and which amounts this Court
finds to be fair and reasonable, are hereby approved.
13. THIS COURT ORDERS that the Quebec Class Counsel Fees shall be paid out of
the Gross Settlement Fund.
14. THIS COURT ORDERS that this Court shall retain jurisdiction over the parties
herein, the Quebec Class Members, the Claims Administrator and the Escrow Agent
for all matters relating to the Quebec Action, including the administration,
interpretation, effectuation or enforcement of the Settlement Agreement and this
Order, and including any application for fees and expenses by the Quebec Class
Counsel and the Claims Administrator incurred in overseeing and administering
the Settlement, in distributing settlement proceeds to the Quebec Class Members,
and in complying with the terms of this Order and the Authorization Order.
15. THIS COURT ORDERS that, on notice to the Court but without further order of
the Court, the parties to the Settlement Agreement may agree to reasonable
extensions of time to carry out any of the provisions of the Settlement
Agreement.
16. THIS COURT ORDERS AND DECLARES that the Released Parties have no
responsibility for and no liability whatsoever with respect to the
administration of the Settlement.

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10

17. THIS COURT RECOGNIZES & ACKNOWLEDGES that: (i) one of the effects of its
determination that the Settlement Agreement is fair is that, pursuant to
Section 3(a)(10) of the United States Securities Act of 1933, as amended, 15
U.S.C. § 77c(a)(1), the Gross Settlement Shares may be distributed to
Class Members, and to counsel for the plaintiffs in the Nortel I Actions as may
be awarded by the respective Courts for counsel fees, without registration and
compliance with the prospectus delivery requirements of U.S. securities laws;
and (ii) Nortel will rely on such Section 3(a)(10) exemption (and Nortel will
not register the Gross Settlement Shares under the United States Securities Act
of 1933) based on this Court’s approval of the fairness of the Settlement.
18. THIS COURT DECLARES that all Quebec Class Members to whom it is proposed the
Settlement Agreement, and that adequate notice of this hearing has been provided
to Quebec Class Members in accordance with the terms of the Authorization Order.
19. THIS COURT ORDERS that if (a) the Settlement is terminated by Nortel
pursuant to the Supplemental Agreement and paragraph 26 of the Stipulation;
(b) any specified condition to the Settlement set forth in the Stipulation is
not satisfied and any of the Representative Plaintiffs or Nortel elect(s) to
terminate the Settlement as provided in paragraph 25 of the Stipulation; or
(c) the Settlement Agreement is otherwise terminated pursuant to paragraph 27 of
the Stipulation, then, in any such event:

  (a)   this Order (except for paragraphs 1, 10, 14, 16, 17, 18 and 19 herein)
shall be set aside, be of no further force or effect, and be without prejudice
to any party;     (b)   the Authorization Order (except for paragraph 24), shall
be set aside, of no further force or effect, and without prejudice to any party;
    (c)   the judgment authorizing the bringing of the class action shall be
annulled pursuant to the Code of Civil Procedure; and

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11

  (d)   each party to the Quebec Action shall be restored to his, her or its
respective position as it existed immediately prior to the execution of the
Settlement Agreement.

20. THIS COURT ORDERS AND ADJUDGES that any appeal or challenge, to the extent
any such right exists, affecting the approval of the Plan of Allocation or this
Court’s approval of Quebec Counsel Fees shall in no way disturb or affect the
balance of this Order and shall be deemed to be separate and apart from the
balance of this Order.
21. THIS COURT ORDERS AND ADJUDGES that, upon the Effective Date, the Quebec
Action be and is hereby dismissed against the Defendant with prejudice and
without costs.

             
 
Date
     
 
J.C.S.