NORTEL NETWORKS CORP
EXHIBIT 10.1
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<TYPE>EX-10.1
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<DESCRIPTION>EXHIBIT 10.1
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<P align="right"><FONT size="2"><B>Exhibit&nbsp;10.1</B>
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<P align="center"><IMG src="t09721nortel.gif" alt="(NORTEL NETWORKS LOGO)">

<P>&nbsp;
<P>&nbsp;

<P align="center"><FONT size="6"><B>NORTEL NETWORKS LIMITED</B>
</FONT>

<P>&nbsp;

<P align="center"><FONT size="6"><B>RESTRICTED STOCK UNIT PLAN</B>
</FONT>

<P>&nbsp;
<P>&nbsp;

<P>&nbsp;
<P>&nbsp;


<P align="right"><FONT size="2">Dated as of January&nbsp;30, 1997, as amended effective<BR>
April&nbsp;29, 1999, September&nbsp;1, 1999, February&nbsp;15, 2000,<BR>
May&nbsp;1, 2000, November&nbsp;15, 2000, and January&nbsp;23, 2003
</FONT>


<P align="center"><FONT size="2">1</FONT>
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<P align="center"><FONT size="2"><B>NORTEL NETWORKS LIMITED</B>
</FONT>

<P align="center"><FONT size="2"><B>RESTRICTED STOCK UNIT PLAN</B>
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>1.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>BACKGROUND; PURPOSE OF THE PLAN</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The Nortel Networks Limited Restricted Stock Unit Plan has been amended
and restated to reflect the transactions contemplated by the plan of
arrangement (the &#147;Plan of Arrangement&#148;) described in the Amended and Restated
Arrangement Agreement, made as of January&nbsp;26, 2000, as amended and restated
March&nbsp;13, 2000, among BCE Inc., Nortel Networks Corporation, New Nortel Inc.
and the other parties thereto. In connection with the Plan of Arrangement, New
Nortel Inc. acquired from the holders of the common shares (other than BCE Inc.
and its affiliates) of Nortel Networks Corporation all of the Nortel Networks
Corporation common shares then held by such shareholders in exchange for an
equal number of common shares of New Nortel Inc. and each shareholder of BCE
Inc. received approximately 0.78 common shares of New Nortel Inc. for each
common share of BCE Inc. then held by such BCE shareholder. On the effective
date of the Plan of Arrangement, the common shares of New Nortel Inc. were
listed on the New York Stock Exchange and The Toronto Stock Exchange in
substitution for the common shares of Nortel Networks Corporation. As part of
the Plan of Arrangement, Nortel Networks Corporation changed its name to Nortel
Networks Limited (&#147;Nortel Limited&#148; or the &#147;Corporation&#148;) and New Nortel Inc.
changed its name to Nortel Networks Corporation (&#147;Nortel Networks&#148;).</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">In connection with and effective as of May&nbsp;1, 2000, the effective date of
the Plan of Arrangement (the &#147;Restatement Effective Date&#148;), awards granted or
to be granted under the Plan and the shares subject to the Plan were adjusted
and relate to the common shares of Nortel Networks. In all other respects, the
terms and provisions of the Plan were reaffirmed, as stated at that time.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The purpose of the Plan is to promote the long term success of Nortel
Networks by providing for the payment of performance bonuses to Designated
Employees in the form of Shares or calculated by reference to the Share Price.
The Plan is designed to encourage Designated Employees to acquire a proprietary
interest in Nortel Networks through ownership of Shares or interests in Shares,
to provide them with additional incentive to further the growth and development
of Nortel Networks, to encourage them to remain in the employment of Nortel
Networks and to assist Nortel Networks in attracting individuals with
experience and ability.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>2.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>DEFINITIONS</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">For purposes of the Plan, the terms contained in this Section shall have
the following meanings.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Administrator&#148; shall mean such administrator as may be appointed by the
Corporation from time to time to administer the Plan.</DIV>
</FONT>
<P align="center"><FONT size="2">2</FONT>
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<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;affiliated companies&#148; shall have the meaning ascribed to the term
&#147;affiliated bodies corporate&#148; in Section&nbsp;2(2) of the CBCA or such other
meaning, and shall include such other entities, as may be determined by the
Committee.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Board of Directors&#148; shall mean the Board of Directors of the Corporation.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Business Day&#148; shall mean a day, other than a Saturday or Sunday, on which
banking institutions in Canada and the United States are not authorized or
obligated by law to close.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;CBCA&#148; shall mean the Canada Business Corporations Act, R.S.C. 1985,
c.C-44, as amended.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Change in Control&#148; shall have the meaning assigned to such term under the
Retention Plan.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;CIC Date&#148; shall have the meaning assigned to such term under the
Retention Plan.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Committee&#148; shall mean the joint leadership resources committee of the
Board of Directors or such other committee of the Board of Directors comprised
of members of the Board of Directors as the Board of Directors shall from time
to time appoint to administer the Plan.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Corporation&#148; shall mean Nortel Networks Limited (known prior to the Plan
of Arrangement as Nortel Networks Corporation) or its successors.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Designated Employee&#148; shall mean any employee of Nortel Networks Companies
who is designated by the Committee for participation in the Plan, but shall not
include a member of the Board of Directors who is not also such a designated
employee.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Effective Date&#148; shall mean, unless otherwise determined by the Board of
Directors when confirming a Grant, the date determined by the Committee, in
accordance with Section&nbsp;5 hereof, as being the date on which such Grant shall
take effect, provided that the Effective Date shall not be a date prior to the
date on which the Board of Directors confirms the Grant and, unless otherwise
determined, the Effective Date will be the date on which the Board of Directors
confirms the Grant.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Fiscal Year&#148; shall mean any fiscal year of the Corporation, commencing
with the fiscal year ending December&nbsp;31, 1997.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Grant&#148; shall mean an award of RSUs allocated to a Designated Employee at
any time in accordance with Section&nbsp;5 hereof.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Nortel Networks&#148; shall mean Nortel Networks Corporation (known prior to
the Plan of Arrangement as New Nortel Inc.) or its successors.</DIV>
</FONT>
<P align="center"><FONT size="2">3</FONT>
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<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Nortel Networks Companies&#148; shall mean, collectively, the Corporation,
Nortel Networks and their respective subsidiaries and affiliated companies or,
individually, any corporate entity included within such group, as the context
indicates.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Participant&#148; shall mean a Designated Employee to whom a Grant has been
made in accordance with Section&nbsp;5 hereof.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Performance Criteria&#148; shall mean the criteria, if any, established by the
Committee in respect of a Grant (or any specified portion thereof) either on or
prior to the Effective Date of such Grant or prior to the commencement of the
applicable Performance Period or Performance Segment, if any, for such Grant,
which may include, without limitation, criteria based on the financial
performance of Nortel Networks Companies and/or any company or business unit
thereof.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Performance Period&#148; shall mean the period established by the Committee in
respect of a Grant which period shall commence and end on the dates designated
by the Committee; provided, however, that (i)&nbsp;each Performance Period shall,
unless otherwise determined by the Committee, commence no earlier than the
first day of the Fiscal Year in which the Grant was made and end no later than
the end of the second Fiscal Year following the Fiscal Year in which the Grant
was made and (ii)&nbsp;the Committee may establish one or more Performance Segments
within a Performance Period.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Performance Segments&#148; shall mean the period or periods, if any, within
the Performance Period established by the Committee in respect of a Grant (or
any specified portion thereof).</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Plan&#148; shall mean the Nortel Networks Limited Restricted Stock Unit Plan,
as set forth herein and as the same may be further amended and in effect from
time to time.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Plan of Arrangement&#148; shall have the meaning assigned to such term in
Section&nbsp;1 hereof.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Release Date&#148; shall mean in respect of each Grant or any specified
portion or portions of such Grant, unless otherwise determined by the Committee
with respect to such Grant or any specified portion or portions of such Grant,
(i)&nbsp;for the purpose of paragraphs (c)&nbsp;of Section&nbsp;6, the day which is 45
Business Days following the end of the applicable Performance Period and/or
Performance Segment, if any, provided that the Release Date shall not be after
the end of the second Fiscal Year subsequent to the Fiscal Year in which such
Grant was made, and (ii)&nbsp;for all other purposes, the tenth Business Day
following notification to the Corporation and the Administrator of the
occurrence of the event giving rise to the issuance of the RSUs in accordance
with the provisions of the Plan.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Restatement Effective Date&#148; shall have the meaning assigned to such term
in Section&nbsp;1 hereof.</DIV>
</FONT>
<P align="center"><FONT size="2">4</FONT>
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<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Retention Plan&#148; shall mean the Nortel Networks Corporation Executive
Retention and Termination Plan, as the same may be amended and in effect from
time to time prior to a CIC Date.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Retirement&#148; shall mean retirement in accordance with the provisions of
any pension or retirement plan of Nortel Networks Companies covering the
Participant, retirement pursuant to a special pension arrangement entered into
by Nortel Networks Companies and a Participant and applicable in lieu of, or in
addition to, any pension or retirement plan of Nortel Networks Companies or, if
the Participant is not covered by such a plan and/or special pension
arrangement, as determined by the Committee.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;RSU&#148; shall mean a restricted stock unit allocated to a Designated
Employee in accordance with Section&nbsp;5 hereof which shall, upon issuance in
accordance with and subject to the provisions of the Plan, entitle the holder
thereof to receive one RSU Share.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;RSU Shares&#148; shall mean the Shares delivered to Participants in accordance
with the provisions of the Plan in settlement of RSUs issued under the Plan.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Shares&#148; shall mean the common shares of Nortel Networks and &#147;Share&#148; shall
mean a common share of Nortel Networks.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;Share Price&#148; shall mean the arithmetic average of the closing prices for
the Shares for the 20 trading days immediately preceding the Release Date on
(i)&nbsp;the Toronto Stock Exchange for Canadian-resident Participants, or (ii)&nbsp;the
New York Stock Exchange for all other Participants.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">&#147;subsidiary&#148; shall have the meaning ascribed to the term &#147;subsidiary body
corporate&#148; in Section&nbsp;2(5) of the CBCA.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>3.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>ADMINISTRATION</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The Committee shall administer the Plan in accordance with its terms. The
Committee may, subject to the terms of the Plan, delegate to third parties,
including the Administrator if one is appointed, the whole or any part of the
administration of the Plan and shall determine the scope of such delegation.
Any decision made by the Committee or the Administrator in carrying out its
responsibilities with respect to the administration of the Plan shall be final
and binding on the Participants.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">In addition to the other powers granted to the Committee under the Plan
and subject to the terms of the Plan, the Committee shall have full and
complete authority to interpret the Plan. The Committee and/or the
Administrator may from time to time prescribe such rules and regulations and
make all determinations necessary or desirable for the administration of the
Plan. In particular, the Committee shall select the Designated Employees to
whom it recommends Grants shall be made and shall determine the amounts and
terms of the Grants (including the related Performance Criteria, if any, and
the formula, if any, to be used to determine the number of RSUs to be issued
based on the level of achievement of such Performance Criteria), and the extent
to which the Performance Criteria to be achieved during</DIV>
</FONT>
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<P align="left"><FONT size="2">the Performance Period and/or any Performance Segment, if any, have been
achieved. At or after the Effective Date for a Grant, the Committee may
determine whether a Grant (and/or any portion or portions thereof) will be
settled in RSU Shares or cash and any conditions applicable to a Participant&#146;s
right to elect to receive settlement in cash of any RSUs issuable to such
Participant. Any such interpretation, rule, determination or other act of the
Committee and/or the Administrator shall be conclusively binding upon all
persons, including the Participants and their legal representatives and
beneficiaries.
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">No member of the Committee, the Board of Directors or the Board of
Directors of Nortel Networks shall be liable for any action or determination
made in good faith pursuant to the Plan. To the full extent permitted by law,
the Corporation shall indemnify and save harmless each person made, or
threatened to be made, a party to any action or proceeding by reason of the
fact that such person is or was a member of the Committee or is or was a member
of either such Boards of Directors and, as such, is or was required or entitled
to take action pursuant to the terms of the Plan.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Except as Participants may otherwise be advised by prior written notice of
at least thirty (30)&nbsp;days, all costs of the Plan, including any administration
fees, shall be paid by the Corporation. Notwithstanding the foregoing, in the
event that a Participant is employed by one or more Nortel Networks Companies
other than the Corporation, the Corporation may request reimbursement from each
such Nortel Networks Company of an amount equal to that portion of the costs of
the Plan which the Corporation determines may reasonably be attributed to such
Participant&#146;s employment with any such Nortel Networks Company.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>4.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>RSU SHARES SUBJECT TO THE PLAN</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Neither Nortel Networks nor the Corporation shall be required to issue
and/or cause to be delivered Shares or issue and/or cause to be delivered
certificates evidencing Shares to be delivered pursuant to the Plan unless and
until such issuance and delivery is in compliance with all applicable laws,
regulations, rules, orders of governmental or regulatory authorities and the
requirements of any stock exchange upon which Shares of Nortel Networks are
listed. Neither Nortel Networks nor the Corporation shall in any event be
obligated to take any action to comply with any such laws, regulations, rules,
orders or requirements. Subject to the foregoing, the Board of Directors of
Nortel Networks may authorize from time to time the issuance by Nortel Networks
of Shares and the Board of Directors may authorize from time to time the
purchase of Shares for the benefit of Participants on the open market or by
private transaction as required in order to administer the Plan.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>5.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>GRANTS</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Subject to the provisions of the Plan, the Committee shall, in its sole
discretion and from time to time, determine the Designated Employees to whom it
recommends that Grants be made based on their current and potential
contribution to the success of Nortel Networks. At such time, the Committee
shall also:</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">determine, in connection with each Grant, the
Effective Date thereof and the number of RSUs to be allocated;</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">6</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">determine, in connection with each Grant, the
Performance Period and the Performance Segments, if any,
applicable thereto;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">determine, in connection with each Grant, the
Performance Criteria, if any, to be achieved during any
applicable Performance Period and/or Performance Segment, if
any; and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">determine the other terms and conditions (which
need not be identical and which, without limitation, may
include conditions on the allocation, issuance and/or
settlement of RSUs, and non-competition provisions) of all
RSUs covered by any Grant.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Any Grant and any determination made by the Committee in connection with
any such Grant as provided shall be subject to confirmation by the Board of
Directors.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>6.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Certificates need not be issued with respect to RSUs covered by a Grant or
RSUs when issued. The Corporation or the Administrator shall maintain records
showing the number of RSUs allocated to each Participant under the Plan. Each
Participant shall be notified in writing of the number of RSUs covered by a
Grant and of the terms and conditions of such Grant, including those described
below:</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>Number of RSUs</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Each notification of Grant shall state the number of RSUs allocated to the
Participant and state that each such RSU shall, upon issuance subject to and in
accordance with the terms of the Plan, entitle the Participant to receive one
RSU Share.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>Performance Criteria</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Each notification of Grant shall describe the Performance Criteria, if
any, for the Performance Period (and/or any Performance Segment, if any,
within the Performance Period,)established by the Committee that must be
achieved for all or any specified portion of the RSUs covered by such Grant to
be issued to the Participant.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>Issue and Settlement of RSUs</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Unless otherwise determined by the Committee and except as otherwise
provided in paragraphs (d), (e)&nbsp;or (f)&nbsp;of this Section or in any other employee
benefit plan approved by the Board of Directors, subject to the level of
achievement of Performance Criteria, if any, determined by the Committee, the
Corporation shall issue to a Participant all or any portion of the RSUs covered
by a Grant (or any specified portion thereof) on the Release Date for such
Grant (or applicable portion thereof), in full satisfaction and cancellation of
such Grant (or such applicable portion thereof); provided that such Participant
is continuously employed with Nortel Networks Companies from the Effective Date
of such Grant to the Release Date. In such event, the Participant shall be
entitled to receive on the Release Date, in full settlement of the RSUs</DIV>
</FONT>
<P align="center"><FONT size="2">7</FONT>
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<P align="left"><FONT size="2">issued, a number of RSU Shares equal to the number of RSUs issued, or, in
the sole discretion of the Committee, a cash payment equal to the product of
the number of RSUs issued (or the number determined by the Committee to be paid
in cash) multiplied by the Share Price, in each case, subject to reduction for
any applicable withholding taxes, social charges and any other applicable wage
deduction amounts in accordance with Section&nbsp;9. Any RSUs covered by a Grant
(or any specified portion thereof) that are not issued on the Release Date for
such Grant (or such specified portion thereof) in accordance with the Plan or
are not otherwise settled (i)&nbsp;in accordance with this paragraph (c)&nbsp;or
paragraphs (d), (e)&nbsp;or (f)&nbsp;of this Section, or (ii)&nbsp;prior to the Release Date
for such Grant (or specified portion thereof), in accordance with the terms of
any other employee benefit plan approved by the Board of Directors, shall be
forfeited on the Release Date and the related Grant (or specified portion
thereof) shall thereupon expire in its entirety. In addition, the Committee
may provide that RSUs covered by a Grant (or any specified portion thereof)
will be forfeited in the event the Participant does not satisfy the Share
ownership requirements (or any element thereof) applicable to such Participant
and, in such event, the related Grant (or applicable portion thereof) shall
thereupon expire in its entirety.
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>Right to RSUs in the Event of Death, Retirement or
Termination of Employment</B></FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2">Unless otherwise determined by the Committee:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">In the event of the death of a Participant while
in the employment of Nortel Networks Companies, the deceased
Participant&#146;s estate shall elect in writing to the
Corporation, within the earlier of (i)&nbsp;120&nbsp;days of the
Participant&#146;s death; and (ii)&nbsp;the first Business Day of the
last calendar month of the second Fiscal Year subsequent to
the Fiscal Year in which such Grant was made, with respect to
each Grant then outstanding (or any portion thereof then
outstanding) to such Participant for which the Release Date
has not yet occurred and the RSUs covered by such Grant (or
applicable portion thereof) have not otherwise been issued
prior to the date of death, to receive, subject to and in
accordance with the provisions of the Plan, RSUs settled in
the form of RSU Shares to the deceased Participant&#146;s estate:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(x)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">as if the Performance Period (or any
specified Performance Segments), if any, had ended and
the corresponding Performance Criteria, if any, had been
met (but not exceeded) for any such Grant (or applicable
portion thereof), on the day preceding the date of the
Participant&#146;s death (in which case, receipt of the
election from the Participant&#146;s estate shall constitute
the event giving rise to the issuance of the RSUs for
the purpose of determining the applicable Release Date);
or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(y)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">on the Release Date or, if
applicable, the Release Dates on which all or a portion
of the RSUs covered by such Grant (or any specified
portion thereof) would otherwise have been issued, if at
all, in accordance with the Plan had the Participant not
died and</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">8</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">continued in the employment of Nortel Networks
Companies until such Release Date or Release Dates, as
applicable.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">In the event of death of a Participant in the last calendar
month of the second Fiscal Year subsequent to the Fiscal Year
in which the Grant was made or in the event a deceased
Participant&#146;s estate fails to make an election as herein
provided, such Participant&#146;s estate shall be deemed to have
elected to receive RSUs settled in the form of RSU Shares in
accordance with subparagraph (x)&nbsp;above.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">In the event of the death of a Participant following the end
of the Performance Period (or any specified Performance
Segments, if any) and prior to the Release Date for such
Grant (or any specified portion thereof then outstanding),
the number of such RSUs that would otherwise be issued to
such Participant shall be issued in the form of RSU Shares
and delivered to the Participant&#146;s estate in accordance with
and subject to paragraph (c)&nbsp;of this Section, as if such
Participant had continued in the employment of Nortel
Networks Companies until the Release Date or Release Dates,
as applicable.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">In the event of Retirement of a Participant, with
respect to each Grant then outstanding (or any portion thereof
then outstanding) to such Participant for which RSUs have not
been issued prior to the date of Retirement, the RSUs covered
by any such Grant (or applicable portion thereof) to the
Participant shall be issued in accordance with and subject to
paragraph (c)&nbsp;of this Section, as if the Participant continued
in the employment of Nortel Networks Companies until the
Release Date for such Grant (or applicable portion thereof).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(iii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">In the event a Participant&#146;s employment
terminates for any cause other than death or Retirement (with
or without notice, and whether or not in breach of contract by
the employer or employee), the RSUs covered by each Grant then
outstanding (or any portion thereof then outstanding) to such
Participant for which RSUs have not been issued prior to such
termination shall be forfeited with effect from the date of
such termination of employment with Nortel Networks Companies,
all such Grants shall expire in their entirety on such
termination and any such termination of employment for
whatever reason (with or without notice, and whether or not in
breach of contract by the employer or employee) shall not
entitle a Participant to any compensation or damages for loss
of any benefit under the Plan and, by his or her participation
in the Plan, a Participant irrevocably and unconditionally
waives his or her entitlement to any such compensation or
damages.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">9</FONT>
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<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(e)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>Cash Settlement Election by Participant</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Except in the event of the occurrence of a Change in Control, and unless
otherwise determined by the Committee, a Participant may elect, by notice to
the Corporation prior to the Release Date for a Grant (or any specified portion
thereof), to settle the RSUs to be issued under paragraph (c)&nbsp;or (d)&nbsp;in the
form of a cash payment, and not in the form of RSU Shares. In this case, the
Participant shall receive a cash payment from the Corporation equal to the
number of RSUs being settled multiplied by the Share Price. Absent such an
election and except in the event of the occurrence of a Change in Control, the
RSUs shall be settled in the form of RSU Shares or cash, as determined by the
Committee and contemplated in paragraph (c)&nbsp;or (d)&nbsp;of this Section. The
election provided for in this paragraph (e)&nbsp;shall be subject to Section&nbsp;9 such
that any cash payment in settlement of RSUs shall be reduced by all applicable
withholding taxes, social charges and any other applicable wage deduction
amounts and, except to the extent provided otherwise by the Committee, shall
not be available for any Participant who does not, immediately prior to the
Release Date, satisfy the Share ownership requirements applicable for such
Participant as prescribed from time to time.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(f)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>Right to RSUs in the Event of a Change in Control</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">In the event of the occurrence of a Change in Control, and unless
otherwise determined by the Committee, with respect to each Grant (or portion
thereof) then outstanding on the CIC Date,</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">notwithstanding any other provision of this Plan,
any and all requirements that any Performance Criteria, if any,
be achieved for any purpose applicable to such Grant (or any
specified portion thereof) shall be waived as of the CIC Date;
and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">except as may be otherwise provided under the terms
of any other employee benefit plan approved by the Board of
Directors, each Participant who has received any such Grant (or
any applicable portion thereof) shall, on the applicable
Release Date which would have applied had the Change in Control
not occurred, be entitled to receive from the Corporation, in
full settlement of the RSUs covered by such Grant (or
applicable portion thereof), one of the following, at the sole
discretion of the Committee:</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(x)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">a cash payment equal to the Special
Value (as defined below) for each Covered RSU (as
defined below); or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="18%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(y)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="76%"><FONT size="2">one CIC Share (as defined below) for
each Covered RSU (as defined below);</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">provided that such Participant is continuously employed by
Nortel Networks Companies from the Effective Date of such
Grant to the Release Date or Release Dates.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">10</FONT>
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<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The term &#147;Special Value&#148; shall mean an amount with respect to each Covered
RSU determined as follows:</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">if any Shares are sold as part of the transaction
constituting the Change in Control, the Special Value shall
equal the weighted average of the prices paid for those Shares
by the acquiror, provided that if any portion of the
consideration paid for such Shares by the acquiror is paid in
property other than cash, the Board of Directors (as
constituted immediately prior to the CIC Date) shall determine
the fair market value of such property as of the CIC Date for
purposes of determining the Special Value under this paragraph
(f); and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">if no Shares are sold as part of the transaction
constituting the Change in Control, the Special Value shall
equal the arithmetic average of the closing prices for the
Shares on The Toronto Stock Exchange for the 20 trading days
immediately preceding the CIC Date.</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The term &#147;CIC Share&#148; shall mean the following with respect to each Covered
RSU:</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">the sum of: (A)&nbsp;the number of Consideration
Shares (as defined below), rounded to the nearest whole
number, that is equal to the product of (x)&nbsp;one Share
multiplied by (y)&nbsp;the number of Consideration Shares (as
defined below) received by the shareholders of Nortel Networks
in respect of one Share, if, in connection with the
transaction constituting the Change in Control, the
shareholders of Nortel Networks exchange their Shares for, or
otherwise convert their Shares into, shares of equity
securities of the acquiror (or its direct or indirect parent)
(such shares of equity securities, the &#147;Consideration
Shares&#148;); and (B)&nbsp;the amount, if any, that is equal to the
product of (x)&nbsp;one Share multiplied by (y)&nbsp;any cash or other
property, the fair market value of which shall be determined
by the Board of Directors (as constituted immediately prior to
the CIC Date), received by the shareholders of Nortel Networks
in respect of one Share, in connection with such transaction;
and</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(ii)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">in the case of all other transactions
constituting the Change in Control, one Share, as adjusted
pursuant to Section&nbsp;7 hereof in connection with such
transaction, if applicable;</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">and, in each case, as further adjusted pursuant to Section&nbsp;7, if applicable, in
respect of covered events occurring after such Change in Control.
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The term &#147;Covered RSU&#148; shall mean, with respect to each Grant (or portion
thereof) that is outstanding on the CIC Date, the number of RSUs that would
have been issued to a Participant on the applicable Release Date and settled in
the form of RSU Shares had (x)&nbsp;the Participant continued in the employment of
Nortel Networks Companies until such Release Date and (y)&nbsp;all Performance
Criteria, if any, applicable to such Grant (or any applicable portion</DIV>
</FONT>
<P align="center"><FONT size="2">11</FONT>
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<P align="left"><FONT size="2">thereof) (in all cases, determined without regard to the occurrence of the
Change in Control) had been met (but not exceeded) during the applicable
Performance Period or Performance Segment, if any.</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(g)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>Non-Transferability</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The rights or interests of a Participant under the Plan shall not be
assignable or transferable, otherwise than by will or the laws governing the
devolution of property in the event of death and such rights or interests shall
not be encumbered.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(h)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>RSUs Not Shares</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Under no circumstances shall a Grant or an RSU be considered a Share, nor
shall a Grant or an RSU entitle any Participant to the exercise of voting
rights, the receipt of dividends or the exercise of any other rights attaching
to ownership of a Share, until delivery of an RSU Share in settlement of such
RSU in accordance with the terms of the Plan. Notwithstanding the foregoing,
in the event that Shares are purchased and held for the benefit of a
Participant prior to delivery of RSU Shares in settlement of any RSUs, the
Committee may determine the extent to which a Participant may be entitled to
exercise any voting rights, receive dividends or exercise any other rights
attaching to ownership of such Shares.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="6%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(i)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="88%"><FONT size="2"><B>RSU Shares Fully Paid</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">RSU Shares, if issued by Nortel Networks to settle RSUs under the Plan,
shall be considered fully paid in consideration of past service that is no less
in value than the fair equivalent of the money Nortel Networks would have
received if the RSU Shares had been issued for money.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>7.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>EFFECTS OF ALTERATION OF SHARE CAPITAL</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">In the event that:</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(a)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">a dividend shall be declared upon the Shares
payable in Shares of Nortel Networks;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(b)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">the outstanding Shares shall be changed into or
exchanged for a different number or kind of shares or other
securities of Nortel Networks or of another corporation,
whether through an arrangement, plan of arrangement,
amalgamation or other similar statutory procedure, or a share
recapitalization, subdivision or consolidation;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(c)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">there shall be any change, other than those
specified in paragraphs (a)&nbsp;and (b)&nbsp;of this Section, in the
number or kind of outstanding Shares or of any shares or other
securities into which such Shares shall have been changed or
for which they shall have been exchanged; or</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="12%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%" align="left" nowrap><FONT size="2">(d)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="82%"><FONT size="2">there shall be a distribution of assets or shares
to shareholders of Nortel Networks out of the ordinary course
of business,</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">12</FONT>
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<P align="left"><FONT size="2">then, if the Board of Directors shall in its sole discretion determine that
such change equitably requires an adjustment in the number of RSUs with respect
to which Grants may be made pursuant to the Plan but not yet covered by Grants,
of the RSUs then covered by Grants, of the RSUs generally available for Grants
under the Plan and of the RSUs available for Grants under the Plan in any
calendar year, such adjustment shall be made by the Board of Directors and
shall be effective and binding for all purposes.
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">No adjustment provided for in this Section shall entitle a Participant to
be allocated a fractional RSU, or receive a fractional RSU Share or any payment
in lieu thereof, and the total adjustment with respect to each RSU shall be
limited accordingly.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>8.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>AMENDMENT AND TERMINATION</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The Board of Directors may from time to time amend, suspend or terminate
the Plan in whole or in part. The Committee may from time to time amend the
terms of Grants made under the Plan, subject to confirmation by the Board of
Directors and the obtaining of any required regulatory or other approvals and,
if any such amendment will materially adversely affect the rights of a
Participant with respect to a Grant, the obtaining of the written consent of
such Participant to such amendment. Notwithstanding the foregoing, (i)&nbsp;the
obtaining of the written consent of any Participant to an amendment which
materially adversely affects the rights of such Participant with respect to a
Grant shall not be required if such amendment is required to comply with
applicable laws, regulations, rules, orders of governmental or regulatory
authorities or the requirements of any stock exchange on which Shares of Nortel
Networks are listed and (ii)&nbsp;no amendment may be made to paragraph (f)&nbsp;of
Section&nbsp;6 of the Plan or to the defined terms referred to in paragraph (f)&nbsp;of
Section&nbsp;6 on or after the CIC Date.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>9.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>MISCELLANEOUS PROVISIONS</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Participation in the Plan by a Designated Employee is voluntary. No
employee shall have any claim or right to receive Grants under the Plan, and
the Grant and issuance of RSUs under the Plan shall not be construed as giving
a Participant any right to continue in the employment of Nortel Networks
Companies or to receive any additional Grants, or affect the right of Nortel
Networks Companies to terminate the employment of any Participant. Unless the
Committee determines otherwise, no notice of termination or payment in lieu
thereof shall extend the period of employment for purposes of this Plan.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The Committee and/or the Administrator may adopt and apply rules that in
its opinion will ensure that Nortel Networks Companies will be able to comply
with applicable provisions of any federal, provincial, state or local law
relating to the withholding of tax, including on the amount, if any, included
in income of a Participant. Nortel Networks Companies or the Administrator may
withhold from any amount payable to a Participant, either under this Plan, or
otherwise, such amount as may be necessary so as to ensure that Nortel Networks
Companies will be able to comply with applicable provisions of any federal,
provincial, state or local law relating to withholding of tax or other required
deductions, including on the amount, if any, includable in the income of a
Participant. Nortel Networks Companies or the Administrator shall, in this
connection, have the right in its discretion to satisfy any such withholding
tax liability by retaining or acquiring any Shares which would otherwise be</DIV>
</FONT>
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<P align="left"><FONT size="2"> issued or provided to a Participant hereunder, or withholding any portion
of any cash amount payable to a Participant hereunder. Nortel Networks
Companies or the Administrator shall also have the right to withhold the
delivery of any RSUs and RSU Shares and any cash payment payable to a
Participant hereunder unless and until such Participant pays to Nortel Networks
Companies a sum sufficient to indemnify Nortel Networks Companies for any
liability to withhold tax in respect of the amounts included in the income of
such Participant as a result of the settlement of RSUs under this Plan, to the
extent that such tax is not otherwise being withheld from payments to such
Participant by Nortel Networks Companies or the Administrator.
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">Participation in the Plan by any Participant shall be construed as
acceptance of the terms and conditions of the Plan by the Participant and as to
the Participant&#146;s agreement to be bound thereby. The Plan shall be construed
in accordance with and governed by the laws of the Province of Ontario.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">In this Plan, whenever the context so requires, the masculine gender
includes the feminine gender and a singular number includes the plural number.</DIV>
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%" align="left" nowrap><FONT size="2"><B>10.</B></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="94%"><FONT size="2"><B>EFFECTIVE DATE AND TERM OF THE PLAN</B></FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The Plan originally became effective upon its adoption by the Board of
Directors. Any amendments to the Plan shall become effective upon their
adoption by the Board of Directors. The Plan shall terminate on the date
determined by the Board of Directors pursuant to Section&nbsp;8 hereof, and no
Grants may become effective under the Plan after the date of termination, but
such termination shall not affect any Grants that became effective pursuant to
the Plan prior to such termination.</DIV>
</FONT>
<P align="left"><FONT size="2"><DIV style="margin-left:0%; text-indent:12%">The Plan was adopted with immediate effect on January&nbsp;30, 1997 and was
subsequently amended on April&nbsp;29, 1999 with immediate effect, on August&nbsp;19,
1999 effective September&nbsp;1, 1999, on February&nbsp;15, 2000 with immediate effect,
on April&nbsp;27, 2000, effective as of the Restatement Effective Date, on October
26, 2000 effective November&nbsp;15, 2000, and on January&nbsp;23, 2003 with immediate
effect.</DIV>
</FONT>

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