X0202 4 2005-08-15 0 0000072911 NORTEL NETWORKS CORP NT 0001232226 DONOVAN WILLIAM JOHN C/O NORTEL NETWORKS CORPORATION 8200 DIXIE ROAD SUITE 100 BRAMPTON, A6 L6T 5P6 ONTARIO, CANADA 0 1 0 0 Senior VP, Human Resources Common Shares 2005-08-15 4 J 0 96137 3.33 D 121265 D Investment Fund Units Common Shares 19426.95 65413.67 D 01/30/97 Grant of Options 8.8513 2007-01-29 Common Shares 60000 60000 D 01/30/97 Grant of Options 2007-01-29 Common Shares 60000 60000 D 01/29/98 Grant of Options 11.29 2008-01-28 Common Shares 16000 16000 D 10/29/98 Grant of Options 10.1475 2008-10-28 Common Shares 40000 40000 D 01/27/00 Grant of Options 49.61 2010-01-26 Common Shares 80000 80000 D 06/09/00 Grant of Options 59.41 2010-06-08 Common Shares 50000 50000 D 09/28/00 Grant of Options 60.93 2010-09-27 Common Shares 120000 120000 D 01/25/01 Grant of Options 38.26 2011-01-24 Common Shares 50000 50000 D 10/25/01 Grant of Options 5.89 2007-10-25 Common Shares 350000 350000 D 02/28/02 Grant of Options 5.15 2012-02-27 Common Shares 175000 175000 D Common shares of Nortel Networks Corporation (NNC) surrendered by the officer for cancellation in accordance with the escrow agreement dated as of March 1, 2005 among NNC, Computershare Trust Company of Canada et al, in connection with the voluntary undertaking by the officer to pay over a three year period an amount equal to the return to profitability bonus paid to the officer in 2003, net of tax deductions at source, as set forth in a letter of undertaking dated January 10, 2005 as modified by a letter dated as of March 1, 2005. 65,413.67 company stock fund units are held in the participant's account as a result of the participant's contributions, vested company contributions and/or investment earnings thereon invested in the company stock fund (the "Stock Fund") pursuant to the Nortel Networks Long-Term Investment Plan (the "U.S. Investment Plan") as of August 15, 2005. The Stock Fund invests primarily in NNC common shares. As of August 15, 2005 the participant's company stock fund units represent approximately 19,426.95 common shares of NNC. The U.S. Investment Plan is administered as a unitized fund by Hewitt Associates Inc. and the number of shares represented by each unit fluctuates on a daily basis. The reported options were granted pursuant to the Nortel Networks Corporation 1986 Stock Option Plan As Amended and Restated (the "1986 Stock Option Plan"). These replacement options were granted pursuant to the Key Contributor Program under the 1986 Stock Option Plan. Under the terms of Key Contributor Program, a Participant is granted concurrently an equal number of initial options and replacement options. The replacement options expire ten years from the date of grant and have an exercise price equal to the market value (as defined in the 1986 Stock Option Plan) of common shares on the date the initial options are fully exercised, provided that in no event will the exercise price be less than the market value (as defined in the 1986 Stock Option Plan) on the date of grant. Subject to certain holding requirements with respect to shares received from the exercise of the initial options, the replacement options are generally exercisable commencing 36 months from the date all of the initial options are fully exercised. The reported options were granted pursuant to the Nortel Networks Corporation 2000 Stock Option Plan. The reported options are currently vested. T.S.J. Connelly McGilley, Attorney for William John Donovan 2005-08-17