Nortel Announces Pension Settlement

TORONTO -– Nortel* Networks Corporation [OTC: NRTLQ] today announced that it, Nortel Networks Limited and their Canadian subsidiaries that have filed for creditor protection under CCAA (collectively, Nortel), have reached an agreement on certain employment related matters regarding former Canadian Nortel employees, including Nortel's Canadian registered pension plans and benefits for Canadian pensioners and Nortel employees on long term disability (LTD).

Nortel entered into a Settlement Agreement with court-appointed representatives of its Canadian former employees, pensioners and LTD beneficiaries, the court-appointed representative counsel to such parties, Koskie Minsky LLP, the CAW Canada and Nortel's court-appointed Monitor. The Settlement Agreement is subject to, among other things, the approval of the Ontario Superior Court of Justice.

The Settlement Agreement provides that Nortel will continue to administer the Nortel Networks Negotiated Pension Plan and the Nortel Networks Limited Managerial and Non-Negotiated Pension Plan until September 30, 2010, at which point these pension plans will be transitioned, in accordance with the Ontario Pension Benefits Act, to a new administrator appointed by the Superintendent of Financial Services. Nortel and the Monitor will take all reasonable steps to complete the transfer of the administration of the pension plans to the new administrator. Nortel will continue to fund these pension plans consistent with the current service and special payments it has been making during the course of the CCAA proceedings through March 31, 2010, and thereafter will make current service payments until September 30, 2010.

For the remainder of 2010, Nortel will continue to pay medical and dental benefits to Nortel pensioners and survivors and Nortel LTD beneficiaries in accordance with the current benefit plan terms and conditions. Life insurance benefits will continue unchanged until December 31, 2010 and will continue to be funded consistent with 2009 funding. Further, Nortel will pay income benefits to the LTD beneficiaries and to those receiving survivor income benefits and survivor transition benefits through December 31, 2010, which payments will be made directly by Nortel. The employment of the LTD beneficiaries will terminate on December 31, 2010. The parties have agreed to work toward a court-approved distribution, in 2010, of the assets of Nortel's Health and Welfare Trust, the vehicle through which Nortel generally has historically funded these benefits, with the exception noted above.

The Settlement Agreement also provides that Nortel will establish a fund of CDN$4.2 million for termination payments of up to CDN$3,000 per employee to be made to eligible terminated employees as an advance against their claims under CCAA.

"We are pleased to have come to a resolution on these important matters," said David Richardson, Chairman, Nortel. "We understand the need to provide clarity to former employees as well as several months of certainty that will allow beneficiaries to make alternate plans. The Board of Directors and Nortel's management team have been working diligently with its advisors and stakeholders to reach an agreement that is as fair as possible in the circumstances, and that will result in almost two years of medical, dental and LTD coverage, an unusually lengthy period of time for companies under CCAA. It is expected that in aggregate, for the period from filing for creditor protection until the respective end dates announced today, Nortel will pay approximately CDN$100 million to the pension plans and towards benefits".

Under the Settlement Agreement, any claim made by any party in relation to the matters settled under the agreement will rank as ordinary unsecured claims under the CCAA proceedings. A charge in the maximum amount of CDN$57 million on Nortel's assets will be established to secure the payments to be made by Nortel under the Settlement Agreement, which amount shall be reduced by the amount of payments made.

Nortel Networks Ltd.