Nortel Networks Corporation – 165

June 29, 2009

Joint Hearing between Canadian CCAA Court and U.S. Bankruptcy Court

Interim Funding and Settlement Agreement (IFSA): On June 29, the judges in both courts (Justice Morawetz in Toronto and Justice Gross in Delaware) approved an agreement that will ensure $157M in new funding flows from Nortel’s US subsidiary Nortel Networks Inc., to Nortel’s Canadian parent company, Nortel Networks Limited. The funding will permit Canadian operations to continue through to the end of September, 2009. This arrangement replaces, for now and for CCAA purposes, the “transfer pricing system” (TPS) within Nortel. The TPS was designed to rebalance the internal disparity at Nortel between the Canadian company’s expenditures, especially on R&D, which the whole company benefited from, and the US subsidiary’s revenues. Those payments under the TPS were stopped when Nortel filed for court protection on January 14, 2009.

Bid Process and Asset Sale Agreement with Nokia Siemens Network: The Courts in both Canada and Delaware also approved the bid and sale process agreed to between Nortel and Nokia Siemens, with some adjustments which resulted from creditors’ objections. Nokia Siemens and Nortel had agreed to a “stalking horse” process whereby Nokia Siemens’ agreement to purchase the majority of the CDMA and LTE business from Nortel for $650 million will be tested in an auction process. Other entities will be permitted to submit bids for the same business and Nortel will choose the winning bid, subject to certain parameters and court approval. New bids are due by July 21st, and the auction will be held in the US on July 24, 2009. A request from a bondholder group – Matlin Patterson, who contends that they will put together a bid which will resemble a restructuring plan – to delay the process for two weeks was rejected.

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