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materials pending the replacement of the representative plaintiffs. On February 19, 2004, the plaintiffs’ counsel advised the Court of a potential
new representative plaintiff. On February 26, 2004, the defendants requested the Court to direct the plaintiffs’ counsel to bring a motion to
permit the withdrawal of the current representative plaintiffs and to substitute the proposed representative plaintiff. On June 8, 2004, the Court
signed an order allowing a Second Fresh as Amended Statement of Claim that substituted one new representative plaintiff, but did not change
the substance of the prior claim.
A purported class action lawsuit was filed in the U.S. District Court for the Middle District of Tennessee on December 21, 2001, on behalf of
participants and beneficiaries of the Nortel Networks Long-Term Investment Plan (the “Plan”) at any time during the period of March 7, 2000
through the filing date and who made or maintained Plan investments in Nortel Networks Corporation common shares, under the Employee
Retirement Income Security Act (“ERISA”) for Plan-wide relief and alleging, among other things, material misrepresentations and omissions
to induce Plan participants to continue to invest in and maintain investments in Nortel Networks Corporation common shares in 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
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