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Nortel Provides Update on Global Settlement of Shareholder Class Action Litigation

Toronto, Canada (ots/PRNewswire)

- Definitive Settlement Agreement Signed with Lead Plaintiffs;
Agreement  Reached With Canadian Plaintiffs
Nortel(x) (NYSE: NT, TSX: NT) today announced that, as a result of
the  continuing discussions in the mediation process with respect to
the  previously announced agreement in principle for a proposed
settlement of  certain shareholder class action lawsuits with the
lead plaintiffs in two  significant class action lawsuits pending in
the Southern District of New  York, the Company and the lead
plaintiffs have entered into stipulations  and agreements of
settlement in the two actions.
As previously announced, the proposed settlement was conditioned,
among  other things, on the resolution of related Canadian
shareholder class  actions. Nortel has now also reached agreement
with the plaintiffs in those  Canadian actions with respect to the
global settlement as set forth in the  stipulations and agreements of
settlement.
These various settlement agreements encompass most pending and
proposed  shareholder class actions commenced against the Company and
certain other  defendants following the Company's announcement of
revised financial  guidance during 2001, and the Company's revisions
of its 2003 financial  results and restatement of other prior periods
effected during the first  half of 2005.
As previously announced, under the terms of the global settlement,
subject to certain approvals, the Company would make a payment of
US$575  million in cash, issue 628,667,750 of its common shares
(representing  approximately 14.5% of its equity), and contribute
one-half of any recovery  in the existing litigation by Nortel
against Messrs. Frank Dunn, Douglas  Beatty and Michael Gollogly, the
Company's former senior officers who were  terminated for cause in
April 2004. The cash amount bears interest as of  March 23, 2006 at a
prescribed rate and was paid into escrow as of June 1,  2006 pending
satisfactory completion of all conditions to the settlement.
Further, previously announced settlement terms with respect to
insurance  and corporate governance related matters remain unchanged.
The settlement  contains no admission of wrongdoing by the Company or
any of the other  defendants.
The settlement remains conditioned, among other things, on receipt
of  all required court, securities regulatory and stock exchange
approvals.  Although settlement agreements have been entered into, at
this time, there  can be no assurance that all conditions to such
agreements will be satisfied.
The Company will continue to cooperate fully with the U.S. and
Canadian  securities regulators and law enforcement authorities in
their ongoing  investigations relating to the Company's accounting
restatements, and the  settlement does not relate to these ongoing
investigations. The settlement  also does not encompass the
previously disclosed related ERISA action, the  previously disclosed
pending application in Canada for leave to commence a  derivative
action against certain current and former officers and directors  of
Nortel, and the previously reported proposed Ontario shareholder
class  action against Nortel and certain current and former directors
and certain  former officers in respect of the payment of cash
bonuses to executives,  officers and employees in 2003 and 2004 under
the Nortel Networks Return to  Profitability bonus program.
About Nortel
Nortel is a recognized leader in delivering communications
capabilities  that enhance the human experience, ignite and power
global commerce, and  secure and protect the world's most critical
information. Our next- generation technologies, for both service
providers and enterprises, span  access and core networks, support
multimedia and business-critical  applications, and help eliminate
today's barriers to efficiency, speed and  performance by simplifying
networks and connecting people with information.  Nortel does
business in more than 150 countries. For more information,  visit
Nortel on the Web at www.nortel.com. For the latest Nortel news,
visit www.nortel.com/news.
Certain statements in this press release may contain words such as
" could", "expects", "may", "anticipates", "believes", "intends",
"estimates ", "plans", "envisions", "seeks" and other similar
language and are  considered forward-looking statements or
information under applicable  securities legislation. These
statements are based on Nortel's current  expectations, estimates,
forecasts and projections about the operating  environment, economies
and markets in which Nortel operates. Further,  actual results or
events could differ materially from those contemplated in
forward-looking statements as a result of the following (i) risks and
uncertainties relating to Nortel's restatements and related matters
including: Nortel's most recent restatement and two previous
restatements  of its financial statements and related events; the
negative impact on  Nortel and NNL of their most recent restatement
and delay in filing their  financial statements and related periodic
reports; legal judgments, fines,  penalties or settlements, or any
substantial regulatory fines or other  penalties or sanctions,
related to the ongoing regulatory and criminal  investigations of
Nortel in the U.S. and Canada; any significant pending  civil
litigation actions not encompassed by Nortel's proposed class action
settlement; any substantial cash payment and/or significant dilution
of  Nortel's existing equity positions resulting from the
finalization and  approval of its proposed class action settlement,
or if such proposed class  action settlement is not finalized, any
larger settlements or awards of  damages in respect of such class
actions; any unsuccessful remediation of  Nortel's material
weaknesses in internal control over financial reporting  resulting in
an inability to report Nortel's results of operations and  financial
condition accurately and in a timely manner; the time required to
implement Nortel's remedial measures; Nortel's inability to access,
in its  current form, its shelf registration filed with the United
States  Securities and Exchange Commission (SEC), and Nortel's below
investment  grade credit rating and any further adverse effect on its
credit rating due  to Nortel's restatements of its financial
statements; any adverse affect on  Nortel's business and market price
of its publicly traded securities  arising from continuing negative
publicity related to Nortel's restatements ; Nortel's potential
inability to attract or retain the personnel necessary  to achieve
its business objectives; any breach by Nortel of the continued
listing requirements of the NYSE or TSX causing the NYSE and/or the
TSX to  commence suspension or delisting procedures; (ii) risks and
uncertainties  relating to Nortel's business including: yearly and
quarterly fluctuations  of Nortel's operating results; reduced demand
and pricing pressures for its  products due to global economic
conditions, significant competition,  competitive pricing practice,
cautious capital spending by customers,  increased industry
consolidation, rapidly changing technologies, evolving  industry
standards, frequent new product introductions and short product  life
cycles, and other trends and industry characteristics affecting the
telecommunications industry; any material and adverse affects on
Nortel's  performance if its expectations regarding market demand for
particular  products prove to be wrong or because of certain barriers
in its efforts to  expand internationally; any reduction in Nortel's
operating results and any  related volatility in the market price of
its publicly traded securities  arising from any decline in its gross
margin, or fluctuations in foreign  currency exchange rates; any
negative developments associated with Nortel's  supply contract and
contract manufacturing agreements including as a result  of using a
sole supplier for key optical networking solutions components,  and
any defects or errors in Nortel's current or planned products; any
negative impact to Nortel of its failure to achieve its business
transformation objectives; additional valuation allowances for all or
a  portion of its deferred tax assets; Nortel's failure to protect
its  intellectual property rights, or any adverse judgments or
settlements  arising out of disputes regarding intellectual property;
changes in  regulation of the Internet and/or other aspects of the
industry; Nortel's  failure to successfully operate or integrate its
strategic acquisitions, or  failure to consummate or succeed with its
strategic alliances; any negative  effect of Nortel's failure to
evolve adequately its financial and  managerial control and reporting
systems and processes, manage and grow its  business, or create an
effective risk management strategy; and (iii) risks  and
uncertainties relating to Nortel's liquidity, financing arrangements
and capital including: the impact of Nortel's most recent restatement
and  two previous restatements of its financial statements; any
inability of  Nortel to manage cash flow fluctuations to fund working
capital  requirements or achieve its business objectives in a timely
manner or  obtain additional sources of funding; high levels of debt,
limitations on  Nortel capitalizing on business opportunities because
of credit facility  covenants, or on obtaining additional secured
debt pursuant to the  provisions of  indentures governing certain of
Nortel's public debt issues  and the provisions of its credit
facilities; any increase of restricted  cash requirements for Nortel
if it is unable to secure alternative support  for obligations
arising from certain normal course business activities, or  any
inability of Nortel's subsidiaries to provide it with sufficient
funding; any negative effect to Nortel of the need to make larger
defined  benefit plans contributions in the future or exposure to
customer credit  risks or inability of customers to fulfill payment
obligations under  customer financing arrangements; any negative
impact on Nortel's ability to  make future acquisitions, raise
capital, issue debt and retain employees  arising from stock price
volatility and further declines in the market  price of Nortel's
publicly traded securities, or any future share  consolidation
resulting in a lower total market capitalization or adverse  effect
on the liquidity of Nortel's common shares. For additional
information with respect to certain of these and other factors, see
Nortel's Annual Report on Form 10- K/A, Quarterly Report on Form 10-Q
and  other securities filings with the SEC. Unless otherwise required
by  applicable securities laws, Nortel disclaims any intention or
obligation to  update or revise any forward-looking statements,
whether as a result of new  information, future events or otherwise.
(x)Nortel, the Nortel logo and the Globemark are trademarks of
Nortel  Networks.

Contact:

For further information: Media - Patricia Vernon, +1-(905)-863-1035,
patricve@nortel.com; Investors - +1-(888)-901-7286,
+1-(905)-863-6049,
investor@nortel.com

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