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employees may have up to 10 percent of their eligible compensation deducted from their pay during each offering period to contribute
towards the purchase of Nortel Networks Corporation common shares. The Nortel Networks Corporation common shares are purchased
by an independent broker through the facilities of the TSX and/or NYSE, and held by a custodian on behalf of the plan participants.
For non-North American eligible employees, common shares are purchased at a purchase price equal to the greater of:
(i) 85 percent of the average of the high and low prices of common shares on the first trading day of the offering period; and
(ii) 71.5 percent of the market price of the common shares on the last trading day of the offering period; or
(iii) if the market price on the last trading day is equal to or less than the average of the high and low on the first trading day, the
purchase price shall be 85 percent of the market price on the last trading day of the offering period.
Nortel Networks Com
p
an
y
Savin
g
sPlan
Eligible employees of Nortel Networks S.A. and other direct or indirect subsidiaries of Nortel Networks in France, including joint
ventures in which Nortel Networks holds an interest of greater than 50% as of October 30, 2002, may elect to participate in the Nortel
Networks Company Savings Plan (the “PEE”) instead of the ESPP in France. Under the PEE, which is a collective savings scheme
governed by French labor law, participants hold units of a Nortel Networks collective investment fund of which approximately 60% is
invested mainly in common shares of Nortel Networks Corporation, and the remainder in liquid assets. Participants may make voluntary
contributions up to 10% of their eligible gross earnings, and the employer contributes an amount equal to 25% of each participant’s
contributions, up to certain maximum amounts per participant per year. The employer contributions are subject to welfare surtaxes but
exempt from social security charges and income tax in France. The common shares are purchased on a monthly basis by the plan
custodian, through the facilities of the New York Stock Exchange.
16. Subse
q
uent events
Nortel Networks Audit Committee Inde
p
endent Review
;
restatements
;
related matters
As previously announced by NNC in October 2003, in late October 2003 the Audit Committee initiated the Independent Review of the
facts and circumstances leading to the First Restatement and engaged WCPHD to advise it in connection with the Independent Review.
On March 10, 2004, NNC announced that as a result of the work done to date in connection with the Independent Review, it was re-
examining the establishment, timing of, support for and release to income of certain accruals and provisions in prior periods. Further, it
was likely that NNC and Nortel Networks would need to revise its previously announced unaudited results for the year ended
December 31, 2003, and the results reported in certain of its quarterly reports for 2003, and to restate its previously filed financial results
for one or more earlier periods. NNC announced on March 15, 2004 that the filing of NNC and Nortel Networks annual reports on Form
10-K for the year ended December 31, 2003 (the “2003 Annual Reports”) would be delayed beyond March 30, 2004.
On April 5, 2004, NNC announced that the SEC had issued a formal order of investigation in connection with NNC’s previous
restatement of its financial results for certain periods, as announced in October 2003, and NNC’s announcements in March 2004
regarding the likely need to revise certain previously announced results and restate previously filed financial results for one or more
earlier periods. The matter had been the subject of an informal SEC inquiry. On April 13, 2004, NNC announced that it had received a
letter from the staff of the Ontario Securities Commission (“OSC”) advising that there is an OSC Enforcement Staff investigation into the
same matters that are the subject of the SEC investigation.
On April 28, 2004, NNC announced that the Independent Review was extended to include the second half of 2003 and it was determined
that the previously announced unaudited results for the year ended December 31, 2003 needed to be revised and that the financial results
reported in each of NNC’s and Nortel Networks quarterly periods of 2003 and for earlier periods including 2002 and 2001 needed to be
restated. NNC announced that it and Nortel Networks were not expected to timely file their first quarter 2004 financial statements and, in
accordance with Canadian securities regulations, their 2003 Canadian GAAP audited financial statements and Annual Information Form.
In April 2004, NNC terminated for cause its former president and chief executive officer, former chief financial officer and former
controller and, in August 2004, seven additional senior finance employees with significant responsibilities for NNC financial reporting as
a whole or for their respective business units and geographic regions in August 2004.
On May 14, 2004, NNC announced that it had received a Federal Grand Jury Subpoena for the production of certain documents,
including financial statements and corporate, personnel and accounting records, prepared during the period from January 1, 2000 to the
date of the subpoena. The materials sought are pertinent to an ongoing criminal investigation being conducted by the U.S. Attorney’s
Office for the Northern District of Texas, Dallas Division.