Nortel Networks Corporation and Nortel Networks Limited - ss. 144(1)

Headnote

Section 144 -- application for revocation of management and insider cease trade order

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am. s. 127 and 144.

Applicable Ontario Policies

OSC Policy 57-603 Defaults by Reporting Issuers in Complying with Financial Statement Filing Requirements

June 6, 2006

IN THE MATTER OF

THE SECURITIES ACT

R.S.O. 1990, C. S.5, AS AMENDED

(THE "ACT")

AND

IN THE MATTER OF

CERTAIN DIRECTORS, OFFICERS AND INSIDERS OF

NORTEL NETWORKS CORPORATION AND

NORTEL NETWORKS LIMITED

(BEING THE PERSONS AND COMPANIES LISTED

IN SCHEDULE "A" HERETO)

ORDER

(SUBSECTION 144(1))

WHEREAS on April 10, 2006, the Ontario Securities Commission (the "Commission") made an order under paragraph 2 and paragraph 2.1 of subsection 127(1) of the Act that all trading in and acquisitions of securities of Nortel Networks Corporation ("NNC") and Nortel Networks Limited ("NNL", and collectively with NNC, the "Corporations", or either individually, the "Corporation"), whether direct or indirect, by any of the persons and companies listed in Schedule "A" annexed thereto (the "Respondents"), shall cease until two business days following the receipt by the Commission of all filings the Corporations are required to make pursuant to Ontario securities law (the "Nortel MCTO");

AND WHEREAS the Commission made the Nortel MCTO upon hearing evidence that:

(a) NNC had announced that the Corporations would restate their respective financial results for 2003 and 2004 and for the first nine months of 2005 and would have adjustments to periods prior to 2003 and that the Corporations had not restated the financial results for such prior periods as of the date of the Nortel MCTO;

(b) each of the Corporations had failed to file its:

(i) annual report on Form 10-K for the year ended December 31, 2005 (the "2005 Form 10-K") which includes: (A) audited annual consolidated financial statements for such period, prepared in accordance with United States generally accepted accounting principles ("GAAP"), together with the Canadian GAAP reconciliation and other information required by Part 4 of National Instrument 52 107; and (B) management's discussion and analysis ("MD&A") for such period prepared in accordance with Item 303 of Regulation S-K under the United States Securities Exchange Act of 1934, as amended (the "1934 Act"); and

(ii) supplemental Canadian GAAP annual MD&A for such period (together with the 2005 Form 10-K, the "2005 Disclosure Documents") by the required filing dates under Ontario securities law and had not filed such documents as of the date of the Nortel MCTO; and

(c) each of the Respondents had, or may have had, in the ordinary course access to material information with respect to the Corporations that had not been generally disclosed;

AND WHEREAS the Corporations have applied to the Commission for a revocation of the Nortel MCTO pursuant to section 144 of the Act;

AND UPON the Corporations having represented to the Commission that:

1. Each of NNC and NNL is incorporated under the Canada Business Corporations Act and is a reporting issuer in the Province of Ontario.

2. Each of the Corporations has restated the following financial information of the respective Corporations: (a) audited annual consolidated financial statements for the year ended December 31, 2004; (b) audited annual consolidated statements of operations, changes in equity and comprehensive income (loss) and cash flows, and related note disclosure for the year ended December 31, 2003; and (c) unaudited consolidated financial information for each of the first three quarters of 2005 and each of the quarters in 2004 (the "Restatement").

3. The Restatement resulted in the delay in filing each of the Corporation's: (a) 2005 Disclosure Documents; (b) unaudited interim consolidated financial statements for the quarter ended March 31, 2006 prepared in accordance with US GAAP (the "2006 First Quarter US GAAP Financial Statements"); and (c) MD&A for such period prepared in accordance with Item 303 of Regulation S-K under the 1934 Act (together with the 2006 First Quarter US GAAP Financial Statements, the "2006 First Quarter Disclosure Documents" and with the 2005 Disclosure Documents, the "Delayed Filings") by the required filing dates under Ontario securities law.

4. Each of the Corporations has now completed the filing of its Delayed Filings and is up-to-date with its current continuous disclosure filing obligations under Ontario securities law.

5. The Corporations believe that requiring them to amend their prior continuous disclosure filings to rectify content deficiencies therein due or related to the Restatement (the "Prior Unamended Filings"), including:

(a) any of their continuous disclosure filings for periods ended prior to January 1, 2001;

(b) their annual reports on Form 10-K or Form 10-K/A for the years ended December 31, 2001, 2002, 2003 and 2004 and related supplemental Canadian GAAP MD&A for such periods;

(c) any of their quarterly reports on Form 10-Q or Form 10-Q/A for each of the three quarterly periods in 2001, 2002, 2003, 2004 and 2005 and related supplemental Canadian GAAP MD&A for such periods; and

(d) any of their annual audited or interim unaudited consolidated financial statements prepared in accordance with Canadian GAAP for certain of the foregoing periods,

would likely negatively affect their ability to report future financial results on a timely basis and would likely detract from the Corporations' ability to address the material weaknesses in their internal control over financial reporting.

6. The Corporations believe that if the Prior Unamended Filings were amended, the information that would be contained therein would in large part repeat the information contained in the 2005 Disclosure Documents and that the 2005 Disclosure Documents include all financial and other information needed for current investor understanding of the Corporations.

7. Although the Corporations have not amended the Prior Unamended Filings, each of NNC's 2005 Form 10-K/A and NNL's 2005 Form 10-K includes the restated financial information described in paragraph 0 above. In addition, each of the Corporations' 2006 First Quarter Disclosure Documents includes restated unaudited consolidated financial statements for the period ended March 31, 2005.

8. Given that each of the Corporations has not amended its respective Prior Unamended Filings, the Respondents cannot rely on the Nortel MCTO to expire pursuant to its terms.

AND WHEREAS the Commission is of the opinion that it would not be prejudicial to the public interest to revoke the Nortel MCTO effective June 8, 2006;

IT IS ORDERED, pursuant to Subsection 144(1) of the Act, that the Nortel MCTO be and is hereby revoked, effective June 8, 2006.

Schedule "A"