Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -Issuer and parent issuer subject of creditor protection proceedings in Canada, United States and elsewhere -- issuers in process of selling principal operating businesses and remaining businesses -- issuers are reporting issuers in Canada and "venture issuers" for purposes of National Instrument 51-102 -- Continuous Disclosure (NI 51-102) -- issuer was formerly an "SEC issuer" as defined in NI 51-102 and National Instrument 52-107 - Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) but has completed deregistration process -- parent issuer continues to be an SEC issuer -- no securities of either issuer trade on any exchange -- issuers have publicly announced holders of equity securities unlikely to receive any value from creditor protection proceedings -- creditors of issuers unlikely to receive full recovery -- issuers seeking to reduce costs to maximize value of their estates for the benefit of creditors -- parent issuer and issuer formerly complied with Canadian reporting requirements by filing corresponding U.S. filings in accordance with NI 51-102 and 52-107 -- parent issuer will continue to be an SEC issuer under NI 51-102 and NI 52-107 and will continue to file all required disclosure on SEDAR -- as a result of deregistration, issuer no longer an SEC issuer for purposes of NI 51-102 or NI 52-107 and required to file financial statements prepared in accordance with Canadian GAAP and to file executive compensation disclosure prepared in accordance with Form 6 of NI 51-102 (NI 51-102F6) -- Relief granted, subject to conditions, to permit issuer to file specified disclosure in accordance with specified U.S. requirements for years ended December 31, 2009 and December 31, 2010

Applicable Legislative Provisions

National Instrument 52-107 -- Acceptable Accounting Principles, Auditing Standards and Reporting Currency, ss. 3.1 and 3.2.

National Instrument 51-102 -- Continuous Disclosure Obligations, s. 11.6(2).

April 15, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION

OF ONTARIO

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

NORTEL NETWORKS LIMITED

DECISION

Background

The principal regulator has received an application from Nortel Networks Limited (the Filer) under the securities legislation of Ontario (the Legislation) for a decision pursuant to Section 9.1 of National Instrument 52-107 - Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) and Section 13.1 of National Instrument 51-102 - Continuous Disclosure (NI 51-102) that the Filer is exempt from (i) the requirements of Sections 3.1 and 3.2 of NI 52-107 for its financial year ended December 31, 2009, for each of the interim periods in its financial year ending December 31, 2010 and for its financial year ending December 31, 2010 (collectively, the Exempted Periods), and (ii) the requirements of Section 11.6(2) of NI 51-102 for its financial year ended December 31, 2009 (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that Section 4.7(1) of Multilateral Instrument 11-102 - Passport System is intended to be relied upon in each of the provinces and territories of Canada other than Ontario (together with Ontario, the Jurisdictions).

Interpretation

Terms defined in National Instrument 14-101 - Definitions have the same meaning in this decision, unless they are otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. Nortel Networks Corporation (NNC and, together with the Filer, the Reporting Issuers) is incorporated under the Canada Business Corporations Act (the CBCA) and is a reporting issuer in each Jurisdiction where such concept exists.

2. The Filer is incorporated under the CBCA and is a reporting issuer in each Jurisdiction where such concept exists.

3. For the purposes of Parts 4, 5, 6 and 9 of NI 51-102, and for the purposes of Form 51-102F1 and Form 51-102F6 under NI 51-102, as at the end of the Reporting Issuers' most recently completed financial year, being December 31, 2009, each of the Reporting Issuers was a venture issuer, as such term is defined in NI 51-102.

4. The Reporting Issuers are not in default of any of their respective obligations as reporting issuers under the securities legislation of any of the Jurisdictions.

5. NNC's issued share capital and outstanding debt securities consist of common shares, together with associated rights under a shareholder rights protection plan (the NNC Common Shares) and two series of convertible senior notes (collectively, the NNC Notes), which notes are fully and unconditionally guaranteed by the Filer and a subsidiary of the Reporting Issuers.

6. The Filer's issued share capital and outstanding debt securities consists of common shares, all of which are held by NNC (the NNL Common Shares), two series of Class A Preferred Shares (collectively, the NNL Preferred Shares), three series of senior notes which notes are fully and unconditionally guaranteed by NNC and a subsidiary of the Reporting Issuers (collectively, the High Yield Notes) and one other series of notes (collectively with the High Yield Notes, the NNL Notes). The Filer has also fully and unconditionally guaranteed the payment of a series of notes issued by a subsidiary of the Reporting Issuers.

7. The Filer is NNC's principal direct operating subsidiary and the Filer's financial results are consolidated with the financial results of NNC.

8. Since January 14, 2009, the Reporting Issuers and certain of their subsidiaries have been the subject of creditor protection proceedings in Canada, the United States and various other countries (the Creditor Protection Proceedings).

9. Pursuant to the Creditor Protection Proceedings, the Reporting Issuers have sold, or entered into agreements to sell, all of their principal operating businesses and are pursuing the sale of their remaining businesses.

10. Since the commencement of the Creditor Protection Proceedings, NNC has disclosed in several news releases that it expects that the holders of the NNC Common Shares and the NNL Preferred Shares will not receive any value from the Creditor Protection Proceedings and that such proceedings will ultimately result in the cancellation of such equity interests.

11. The NNC Common Shares were delisted from the NYSE on February 2, 2009. The NNC Common Shares and the NNL Preferred Shares were delisted from the Toronto Stock Exchange on June 26, 2009. NNC Common Shares and NNL Preferred shares are not listed on any other stock exchange.

12. None of the NNC Notes or the NNL Notes are listed on any stock exchange.

13. Each of the Reporting Issuers is required to meet the continuous disclosure requirements prescribed by Canadian securities laws for venture issuers (Canadian Reporting Requirements).

14. NNC is, and until March 18, 2010 the Filer was, an SEC issuer, as such term is defined in NI 51-102 and NI 52-107. In accordance with NI 51-102 and NI 52-107, NNC complies with, and until March 18, 2010 the Filer complied with, certain of its Canadian Reporting Requirements by filing corresponding disclosure documents prepared in accordance with, and filed within the time periods prescribed by, the periodic reporting requirements of the 1934 Act (U.S. Reporting Requirements and, collectively with the Canadian Reporting Requirements, the Reporting Obligations).

15. NNC qualifies as a smaller reporting company under Regulation S-K under the 1934 Act. The disclosure requirements for smaller reporting companies under the 1934 Act are, in certain respects, less onerous than those applicable to issuers that do not qualify as smaller reporting companies.

16. The Filer does not qualify as a smaller reporting company under Regulation S-K under the 1934 Act.

17. Because it is all but certain that creditors of the Reporting Issuers will not receive a full recovery of the debts owed to them, such creditors have an interest in preserving the assets of the Reporting Issuers. The Reporting Issuers, in turn, have a responsibility to reduce unnecessary costs and take other steps to maximize the value of their estates for their respective creditors.

18. As part of their ongoing cost reduction activities, the Reporting Issuers and certain of their subsidiaries, on March 11, 2010, made the necessary filings with the SEC to reflect the automatic suspension of reporting requirements under the 1934 Act with respect to their debt securities and related guarantees. Also, on March 18, 2010, the Filer made the necessary filings with the SEC under the 1934 Act to terminate the registration of the NNL Common Shares under the 1934 Act and suspend the Filer's obligations to file periodic reports with the SEC, including Forms 10-K, 10-Q and 8-K. As a result of the foregoing processes, known as "deregistration" (Deregistration), as of March 18, 2010 the Filer has no further obligations under the 1934 Act to file periodic reports with the SEC.

19. As a consequence of Deregistration, the Reporting Issuers believe they will achieve significant costs savings, including the costs associated with compliance with certain U.S. Reporting Requirements which would have applied had Deregistration not occurred.

20. Following Deregistration:

(a) the NNC Common Shares remain registered under section 12(g) of the 1934 Act;

(b) NNC continues to be subject to U.S. Reporting Requirements as a smaller reporting company and is, therefore, required to prepare annual and interim financial statements in accordance with U.S. GAAP (which term, for the purposes of this decision, means U.S. GAAP as supplemented by Regulation S-X under the 1934 Act as defined in NI 52-107) and file disclosure documents in accordance with U.S. Reporting Requirements;

(c) NNC continues to be eligible to rely on the exemptions applicable to SEC issuers provided for in NI 51-102 and NI 52-107 in respect of Canadian Reporting Requirements; and

(d) all periodic reports, including interim and annual financial statements and related management's discussion and analysis of financial condition and results of operations (MD&A) and officer's certificates contained therein, that are filed by NNC with the SEC will continue to be filed in Canada on SEDAR in accordance with NI 51-102 and NI 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109).

21. As a result of Deregistration, the Filer is no longer required to comply with U.S. Reporting Requirements and is, therefore, no longer an SEC issuer for the purposes of NI 51-102 or NI 52-107. Absent this decision, the Filer would be required to file interim and annual financial statements prepared in accordance with Canadian GAAP and to prepare and file executive compensation disclosure prepared in accordance with the form requirements of Form 6 of NI 51-102 (NI 51-102F6) for the periods to which this decision relates.

22. NNC and the Filer have the same NEOs, as such term is defined in NI 51-102F6, and the executive compensation disclosure that was filed by NNC in satisfaction of its Reporting Obligations for its financial year ended December 31, 2009 is the same as the executive compensation disclosure that the Filer would be required to file to satisfy its Reporting Obligations for such financial year had the Filer continued to be an SEC issuer.

23. The Filer has reported its financial results in accordance with U.S. GAAP for fiscal periods commencing on and after January 1, 2000.

24. As of result of Deregistration, the Filer is no longer required to provide officer's certificates in accordance with the SOX 302 Rules or the SOX 404 Rules, as those terms are defined in NI 52-109. The Filer will file officer's certificates in respect of its annual and interim financial statements and related MD&A disclosure in the form that it is permitted to file as a venture issuer pursuant to NI 52-109.

Decision

The principal regulator is satisfied that this decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that the following conditions are satisfied:

(a) NNC remains the holder of all of the NNL Common Shares;

(b) the Filer's financial results continue to be consolidated with the financial results of NNC in NNC's annual and interim financial statements filed in satisfaction of its Reporting Obligations;

(c) for the Exempted Periods: (i) the Filer prepares its financial statements in accordance with U.S. GAAP as supplemented by the requirements of Regulation S-X under the 1934 Act that are applicable to NNC and, in the case of its financial statements for the year ended December 31, 2009 and the year ending December 31, 2010, such financial statements are audited in accordance with U.S. GAAS and accompanied by an auditor's report prepared in accordance with U.S. GAAS that complies with the requirements of paragraphs (a) though (d) of Section 4.2 of NI 52-107, as if such Section were applicable; and

(d) the Filer satisfies the executive compensation disclosure required pursuant to Section 11.6(1) of NI 51-102 for its financial year ended December 31, 2009 by providing the information required by Item 402 "Executive Compensation" of Regulation S-K;

and provided further that the Filer shall give the principal regulator prompt notice, including reasonable details, of any changes in the representations contained in paragraphs 4, 11, 12, 13, 14, 17 (with respect to the Reporting Issuers' expectation that their creditors will not receive a full recovery of the debts owed to them in the Creditor Protection Proceedings), and 20 hereof that occur prior to the earlier of (i) April 30, 2011, and (ii) the date of filing the Filer's annual financial statements for its financial year ending December 31, 2010.

"Michael Brown"
Assistant Manager, Corporate Finance
Ontario Securities Commission