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the Plan. A second purported class action lawsuit, on behalf of the Plan and Plan participants for whose individual accounts the Plan
purchased Nortel Networks Corporation common shares during the period from October 27, 2000 to February 15, 2001 and making
similar allegations was filed in the same court on March 12, 2002. A third purported class action lawsuit, on behalf of persons who are or
were Plan participants or beneficiaries at any time since March 1, 1999 to the filing date and making similar allegations, was filed in the
same court on March 21, 2002. The first and second purported class action lawsuits were consolidated by a new purported class action
complaint, filed on May 15, 2002 in the same court and making similar allegations, on behalf of Plan participants and beneficiaries who
directed the Plan to purchase or hold shares of certain funds, which held primarily Nortel Networks Corporation common shares, during
the period from March 7, 2000 through December 21, 2001. On September 24, 2002, plaintiffs in the consolidated action filed a motion
to consolidate all the actions and to transfer them to the U.S. District Court for the Southern District of New York. The plaintiffs then
filed a motion to withdraw the pending motion to consolidate and transfer. The withdrawal was granted by the District Court on
December 30, 2002. A fourth purported class action lawsuit, on behalf of the Plan and Plan participants for whose individual accounts the
Plan held Nortel Networks Corporation common shares during the period from March 7, 2000 through March 31, 2001 and making
similar allegations, was filed in the U.S. District Court for the Southern District of New York on March 12, 2003. On March 18, 2003,
plaintiffs in the fourth purported class action filed a motion with the Judicial Panel on Multidistrict Litigation to transfer all the actions to
the Southern District of New York for coordinated or consolidated proceedings pursuant to 28 U.S.C. section 1407. On June 24, 2003,
the Judicial Panel on Multidistrict Litigation issued a transfer order transferring the Southern District of New York action to the Middle
District of Tennessee (the “Consolidated ERISA Action”). On September 12, 2003, the plaintiffs in all the actions filed a consolidated
class action complaint. On October 28, 2003, the defendants filed a motion to dismiss the complaint and a motion to stay discovery
pending disposition of the motion to dismiss. On March 30, 2004, the plaintiffs filed a motion for certification of a class consisting of
participants in, or beneficiaries of, the Plan who held shares of the Nortel Networks Stock Fund during the period from March 7, 2000
through March 31, 2001. On April 27, 2004, the Court granted the defendants’ motion to stay discovery pending resolution of
defendants’ motion to dismiss. On June 15, 2004, the plaintiffs filed a First Amended Consolidated Class Action Complaint that added
additional current and former officers and employees as defendants and expanded the purported class period to extend from March 7,
2000 through to June 15, 2004.
On March 4, 1997, Bay Networks, Inc. (“Bay Networks”), a company acquired on August 31, 1998, announced that shareholders had
filed two separate lawsuits in the U.S. District Court for the Northern District of California (the “Federal Court”) and the California
Superior Court, County of Santa Clara (the “California Court”), against Bay Networks and ten of Bay Networks’ then current and former
officers and directors purportedly on behalf of a class of shareholders who purchased Bay Networks’ common shares during the period of
May 1, 1995 through October 14, 1996. On August 17, 2000, the Federal Court granted the defendants’ motion to dismiss the federal
complaint. On August 1, 2001, the U.S. Court of Appeals for the Ninth Circuit denied the plaintiffs’ appeal of that decision. On April 18,
1997, a second lawsuit was filed in the California Court, purportedly on behalf of a class of shareholders who acquired Bay Networks’
common shares pursuant to the registration statement and prospectus that became effective on November 15, 1995. The two actions in the
California Court were consolidated in April 1998; however, the California Court denied the plaintiffs’ motion for class certification. In
January 2000, the California Court of Appeal rejected the plaintiffs’ appeal of the decision. A petition for review was filed with the
California Supreme Court by the plaintiffs and was denied. In February 2000, new plaintiffs who allege to have been shareholders of Bay
Networks during the relevant periods, filed a motion for intervention in the California Court seeking to become the representatives of a
class of shareholders. The motion was granted on June 8, 2001 and the new plaintiffs filed their complaint-in-intervention on an
individual and purported class representative basis alleging misrepresentations made in connection with the purchase and sale of
securities of Bay Networks in violation of California statutory and common law. On March 11, 2002, the California Court granted the
defendants’ motion to strike the class allegations. The plaintiffs were permitted to proceed on their individual claims. The intervenor-
plaintiffs appealed the dismissal of their class allegations. On July 25, 2003, the California Court of Appeal reversed the trial court’s
dismissal of the intervenor-plaintiffs’ class allegations. On September 3, 2003, the defendants filed a petition for review with the
California Supreme Court seeking permission to appeal the Court of Appeal decision. On October 22, 2003, the California Supreme
Court denied, without opinion, the defendants’ petition for review. On December 22, 2003, the plaintiffs served their motion for
certification of a class of purchasers of Bay Networks’ common shares from July 25, 1995 through to October 14, 1996. Hearing of the
plaintiffs’ motion for class certification was held on May 4, 2004. On July 27, 2004, the Court entered an Amended Order Denying
Motion of Intervenor Plaintiffs for Class Certification and Setting Further Hearing. On August 9, 2004, the intervenor-plaintiffs obtained
Court approval to dismiss their claims and this action and, on September 30, 2004, the Court entered dismissal with prejudice of the
entire action of all parties and all causes of action.
Subsequent to the March 10, 2004 announcement in which Nortel Networks indicated it was likely that it would need to revise its
previously announced unaudited results for the year ended December 31, 2003, and the results reported in