exv10w16



 







EXHIBIT 10.16




	 	 	 
	CANADA

	 	(CLASS ACTION)
	 
	 	 
	PROVINCE OF QUEBEC

	 	SUPERIOR COURT
	DISTRICT OF MONTREAL
	 	 
	 

	 	PRESIDING: THE HONOURABLE

MADAM JUSTICE MICHELE MONAST, JSC
	 
	 	 
	 

	 	 
	 
	 	 
	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;
	 
	 	(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;




2









 






	 	(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 (or a French version thereof in the case of
the French magazines and newspapers contemplated by the Notice Plan), 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;




3









 






	 	(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




4









 






	 	 	 	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
20, 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.



5









 




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 a date to be set by this
Court, approximately 90 days from the date set herein for the mailing of the Notice, 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




6









 







marked no later than 60 days from 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 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.



7









 




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 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, no later than 14 days
after entry of the last order by any order of the Courts in the Nortel I Actions and the Nortel II
Actions (as defined in the Stipulation) approving the Notice applicable to that proceeding, 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


8









 






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 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 (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.




9









 










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 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 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




10









 







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.




	 	 	 	 	 	 	 
	27 Juin 2006

	 	 	 	/s/ Michèle Monast	 	 
	 	 	 
	Date

	 	 	 	J.S.C.	 	 







11