Nortel Networks Shareholders Rights Plan
The fundamental objectives of the Nortel Networks Rights Plan are to provide adequate time for the Nortel Networks board of directors and Nortel Networks shareholders to assess an unsolicited take-over bid for Nortel Networks, to provide the Nortel Networks board of directors with sufficient time to explore and develop alternatives for maximizing shareholder value if such bid is made and to provide Nortel Networks shareholders with an equal opportunity to participate in such a bid. The Rights Plan encourages a potential acquirer to proceed either by way of a "Permitted Bid" which satisfies certain minimum standards designed to promote fairness, or with the concurrence of the Nortel Networks board of directors. If a take-over bid fails to satisfy such minimum standards and the Rights Plan is not waived by the Nortel Networks board of directors, the Plan provides that Nortel Networks common shareholders, other than the acquirer, will be able to purchase additional Nortel Networks common shares at a 50% discount to market price, thus exposing the acquirer to substantial dilution of its holdings.
The protection to Nortel Networks shareholders provided by the Rights Plan is important since the wide distribution of Nortel Networks common shares pursuant to the Arrangement may create increased opportunities for coercive or opportunistic take-over bids.
Last Updated: June 28, 2005
