Nortel Provides Update on Agreement in Principle for Proposed Global Settlement of Shareholder Class Action Litigation

Toronto, Canada (ots/PRNewswire) -

- Agreement Reached With Lead Plaintiffs on Insurance and
Corporate Governance Matters

www.nortel.com

TORONTO, Canada, March 17 /PRNewswire/ --

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 reached an agreement on the related insurance and
corporate governance matters.

As previously announced, the proposed settlement was conditioned,
among other things, on the resolution of insurance related issues
and Nortel and the lead plaintiffs reaching an agreement on
corporate governance related matters. These matters have now been
resolved with Nortel's insurers agreeing to pay US$228.5 million
towards the settlement and Nortel agreeing with the insurers to
certain indemnification obligations. The Company believes that these
indemnification obligations would be unlikely to materially increase
its total cash payment obligations under the proposed settlement.
These insurance payments would not reduce the amounts payable by the
Company as noted below.

Nortel has also agreed to certain corporate governance
enhancements, including the codification of certain of its current
governance practices (such as the annual election by its directors
of a non-executive Board chair) in its Board of Directors written
mandate and the inclusion in its annual proxy circular and proxy
statement of a report on certain of its other governance practices
(such as the process followed for the annual evaluation of the
Board, committees of the Board and individual directors).

As previously announced, under the terms of the proposed global
settlement contemplated by the agreement in principle, the Company
would make a payment of US$575 million in cash, issue 628,667,750 of
its common shares (representing 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 is to bear interest commencing March 23,
2006 at a prescribed rate and is to be held in escrow on June 1,
2006 pending satisfactory completion of all conditions to the
proposed settlement. The proposed settlement would contain no
admission of wrongdoing by the Company or any of the other
defendants.

The proposed global settlement remains conditioned on the
settlement encompassing all 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. Discussions are ongoing regarding a process to
resolve the Canadian actions as part of the terms of this proposed
global settlement. The proposed global settlement would also be
conditioned on the receipt of all required court, securities
regulatory and stock exchange approvals.

The Company and the lead plaintiffs are continuing discussions
towards a definitive settlement agreement. At this time, there can
be no assurance that such an agreement can be reached, that each of
the actions noted above can be brought into, or otherwise bound by,
the proposed settlement, if finalized, or that the proposed
settlement would receive the required court and other approvals.
These settlement discussions are being mediated by United States
District Court Judge, the Honourable Robert W. Sweet.

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 proposed settlement does not relate to these
ongoing investigations. The proposed settlement also does not
encompass the previously disclosed related ERISA action and the
previously disclosed pending application in Canada for leave to
commence a derivative action against certain current and former
officers and directors of Nortel.

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. These statements are subject
to important assumptions, risks and uncertainties, which are
difficult to predict and the actual outcome may be materially
different. Although Nortel believes expectations reflected in such
forward- looking statements are reasonable based upon the assumptions
in this press release, they may prove to be inaccurate and
consequently Nortel's actual results could differ materially from
its expectations set out in this press release. 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 recently announced restatement and two
previous restatements of its financial statements and related events
and that the previously filed financial statements of Nortel and NNL
and related audit reports should not be relied upon; the negative
impact on Nortel and NNL of their announced restatement and delay in
filing their financial statements and related periodic reports
causing them to breach their public debt indentures and obligations
under their credit facilities with the possibility that the holders
of their public debt or NNL's lenders would seek to accelerate the
maturity of that debt; and causing a breach of NNL's support
facility with EDC with the possibility that EDC would refuse to
issue additional support under the facility, terminate its
commitments under the facility or require NNL to cash collateralize
all existing support; 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 restatement 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;
any default in Nortel's filing obligations extending beyond May 9,
2006, causing any Canadian securities regulatory authority to impose
an order to cease all trading in Nortel's securities within the
applicable jurisdiction or to impose such an order sooner if Nortel
fails to comply with the alternate information guidelines of such
regulatory authorities; (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 its 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; restrictions on how Nortel and its
president and chief executive officer conduct its business arising
from a settlement with Motorola Inc.; 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
affect 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
recently announced restatement and two previous restatements of its
financial statements; any acceleration under their public debt
indentures and credit facilities, which may result in Nortel and NNL
being unable to meet their respective payment obligations; 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 affect 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 Nortel's market price of its
publicly traded securities, or any future share consolidation
resulting in a lower total market capitalization or adverse affect on
the liquidity of Nortel's common shares. For additional information
with respect to certain of these and other factors, see Nortel's
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.

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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