Exhibit 10.3
ESCROW AGREEMENT
THIS ESCROW AGREEMENT dated as of March 1, 2005 among:
Each of the individuals named on the attached Schedule I (individually, an
“Officer” and collectively, the “Officers”),
— and —
Nortel Networks Corporation, a corporation incorporated pursuant to the laws of
Canada (“NNC”),
— and —
COMPUTERSHARE TRUST COMPANY OF CANADA, as escrow agent (the “Escrow Agent”).
     WHEREAS each Officer wishes to pay to his or her respective NNC Employer
(as defined below) an amount equal to the entire Return to Profitability bonus
paid to the Officer by such NNC Employer in 2003, net of tax deductions at
source, being the amount set forth opposite the name of the Officer on the
attached Schedule I (the “RtP Amount”), as set forth in a letter of undertaking
from the Officers to NNC dated January 10, 2005, as modified by a letter dated
as of March 1, 2005 (the “Undertaking”);
     AND WHEREAS, as contemplated by the Undertaking, each Officer wishes to
place into escrow NNC Shares (as defined below) to be used to facilitate the
payment by the Officer of his or her RtP Amount as provided below;
     NOW THEREFORE, in consideration of the premises and mutual covenants and
agreements contained herein, the parties agree as follows:
1. Definitions and Interpretation

(a)   As used herein, unless the context requires otherwise, the following terms
have the definitions ascribed thereto below.       “Affected Parties” means
those parties to this Agreement directly affected by a particular waiver or
exercise of rights by one or more other parties, and excludes those not so
directly affected.       “Agreement” means this Escrow Agreement together with
all Schedules and Exhibits hereto and all amendments made thereto in writing by
the parties hereto.       “Blackout Trading Restrictions” means the trading
restrictions prescribed by (i) an Order of the Ontario Securities Commission
under paragraph 2 of subsection 127(1) of the Securities Act (Ontario) dated
May 31, 2004 In the matter of certain Directors, Officers and Insiders of Nortel
Networks Corporation and Nortel Networks Limited ((2004) 27 OSCB 5503), (ii)
Decision No. 2004-MC-1783 of the Autorité des Marchés Financiers, and
(iii) Section 306(a) of the

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    United States Sarbanes-Oxley Act of 2002 (15 U.S.C. Section 7244(a) and 17
U.S. Code of Federal Regulations Part 245 (Regulation BTR — Blackout Trading
Restrictions).

“Business Day” means a day that is not a Saturday or a Sunday or a statutory
holiday in Toronto, Ontario, Canada or New York City, New York, U.S.A. or a day
on which the offices of the Escrow Agent in Toronto are not open for business.
“Confirmation” has the meaning set out in section 5(f).
“Corporate Secretary” means the Corporate Secretary from time to time of NNC.
“Deemed Surrender Notice” has the meaning set out in section 5(b).
“Escrowed Shares” has the meaning set out in section 2(a).
“First Payment Day” means the day that is five Business Days after the Trading
Ban Termination Notice is delivered to each Officer and the Escrow Agent
pursuant to section 5(a)(ii).
“Market Value” means:

  (i)   in respect of NNC Shares delivered to the Escrow Agent pursuant to
section 2(a), U.S. $3.13, being the U.S. dollar closing price per NNC Share as
reported by the NYSE on February 7, 2005;     (ii)   in respect of Escrowed
Shares delivered by the Escrow Agent to the Corporate Secretary for cancellation
pursuant to a Deemed Surrender Notice pursuant to section 5(b) where such
delivery has not been delayed pursuant to section 5(e), the U.S. dollar closing
price per NNC Share as reported by the NYSE on the trading day immediately
preceding the Payment Day in respect of which the Deemed Surrender Notice is
delivered by NNC to the Escrow Agent, or if there is no such closing price
reported by the NYSE on such day, the closing price per NNC Share reported by
the NYSE on the next preceding trading day for which a closing price has been
reported;     (iii)   in respect of Escrowed Shares delivered by the Escrow
Agent to the Corporate Secretary for cancellation pursuant to a Surrender Notice
pursuant to section 5(c) where such delivery has not been delayed pursuant to
section 5(e), the U.S. dollar closing price per NNC Share as reported by the
NYSE on the trading day immediately preceding the day on which such Surrender
Notice is delivered by an Officer to NNC and the Escrow Agent, or if there is no
such closing price reported by the NYSE on such day, the closing price per NNC
Share reported by the NYSE on the next preceding trading day for which a closing
price has been reported; or     (iv)   in respect of Escrowed Shares delivered
by the Escrow Agent to the Corporate Secretary for cancellation pursuant to
section 5(e), the U.S. dollar closing price per NNC Share as reported by the
NYSE on the trading day immediately preceding the day on which the Escrowed
Shares are delivered by the Escrow Agent to the Corporate Secretary, or if there
is no such closing price reported by the NYSE on such day, the closing price per

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      NNC Share reported by the NYSE on the next preceding trading day for which
a closing price has been reported.

If an Officer’s RtP Amount is in a currency other than U.S. dollars, the U.S.
dollar closing price determined as aforesaid will be converted to the applicable
currency (rounded to two decimal points) based on the noon buying rate for such
currency for cable transfers quoted in New York City as certified for customs
purposes by the Federal Reserve Bank of New York, in the case of clause
(i) above, on February 7, 2005 (being Cdn.$1.26 per U.S.$1.00 and U.S.$1.00 per
£1.86 on such date), and in the case of clause (ii), (iii) or (iv) above, on the
trading day on which the U.S. dollar closing price is to be determined as
aforesaid. All references to closing prices as reported by the NYSE refer to the
closing price on the relevant trading day for regular (not extended hours)
trading.
“NYSE” means the New York Stock Exchange.
“NNC Employer” means the direct or indirect subsidiary of NNC that is the
employer of the Officer.
“NNC Shares” means common shares in the capital of NNC or such other securities
of NNC or successor entity resulting from any exchange, reclassification or
conversion of such common shares as a result of any capital reorganization of
NNC or amalgamation, merger, consolidation or reorganization of NNC with or into
any other entity or acquisition of NNC by any other entity.
“Payment Day” means a day on which a Scheduled Payment is to be made.
“Pre-Payment” means a payment by the Officer of a portion of the RtP Amount
prior to the time the Undertaking contemplates payment of such portion by a
Scheduled Payment.
“Procedure 320-28” means Nortel Networks Corporate Procedure No. 320-28 — Use of
Undisclosed Information, as may be amended or replaced and in effect from time
to time.
“Remaining Balance” means, in respect of any Officer at any time, the difference
between such Officer’s RtP Amount and the cumulative total of the Officer’s
payments made on account of such RtP Amount to that time.
“RtP Amount” has the meaning set out in the recitals hereto.
“Scheduled Payment” means, in respect of any Officer, the payment scheduled to
be made by such Officer on the First Payment Day and on February 15 and
August 15 of each year commencing on August 15, 2005 and ending on August 15,
2007 as contemplated by the Undertaking.
“Stock Transfer Power” has the meaning set out in section 2(a).
“Surrender Notice” has the meaning set out section 5(c).
“Termination Notice” has the meaning set out in section 5(g)(ii).
“Trading Ban Termination Notice” has the meaning set out in section 5(a).

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“Undertaking” has the meaning set out in the recitals hereto.
“Unpaid Amount” has the meaning set out in section 5(b).
“Window Period” means a Window Period under Procedure No. 320-28.

(b)   The headings of sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation.

(c)   Unless otherwise indicated, references herein to sections, Schedules and
Exhibits are to sections, Schedules and Exhibits of this Agreement.   (d)   The
following are the Schedules and Exhibits to this Agreement:

Schedule I — Officers, RtP Amount and Escrowed Shares
Exhibit A — Stock Transfer Power
Exhibit B — Trading Ban Termination Notice
Exhibit C — Deemed Surrender Notice
Exhibit D — Surrender Notice
Exhibit E — Confirmation
Exhibit F — Termination Notice
2. Establishment of Escrow

(a)   Each Officer delivers herewith to the Escrow Agent a certificate or
certificates representing the number of NNC Shares set forth opposite the name
of the Officer on the attached Schedule I (the “Escrowed Shares”), which shares,
except as noted on Schedule I, have an aggregate Market Value of not less than
the RtP Amount, together with a stock transfer power therefor substantially in
the form attached as Exhibit A (a “Stock Transfer Power”) duly executed in
blank.

(b)   The Escrow Agent agrees to act as Escrow Agent and hereby acknowledges
receipt of the Escrowed Shares and executed stock transfer power.

(c)   The Escrow Agent agrees to hold, safeguard and disburse the Escrowed
Shares pursuant to the terms and conditions hereof.

(d)   Each Officer will from time to time deliver to the Escrow Agent upon its
request sufficient Stock Transfer Powers duly executed in blank so that at all
times the Escrow Agent will have an executed Stock Transfer Power for all
Escrowed Shares then held by the Escrow Agent on behalf of such Officer under
this Agreement.

3. Representations and Warranties

(a)   Each Officer represents and warrants to NNC and the Escrow Agent that,
except as otherwise disclosed by the Officer in writing to NNC and the Escrow
Agent and accepted by NNC for the purposes hereof at the time such Officer’s
Escrowed Shares are delivered to the Escrow Agent under section 2(a):

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  (i)   the Officer is the beneficial owner of all of his or her Escrowed
Shares, with good and marketable title thereto, free and clear of all liens,
charges and other encumbrances of whatever nature; and

  (ii)   except as contemplated herein, no consent of any person is required for
the delivery by the Officer of his or her Escrowed Shares or for the execution,
delivery or performance of this Agreement by the Officer.

(b)   NNC and each Officer represents to the Escrow Agent that any account to be
opened by, or interest to be held by, the Escrow Agent in connection with this
Agreement, for or to the credit or such party, is not intended to be used by or
on behalf of any third party.

4. Ownership; Voting Rights and Dividends
     While an Officer’s Escrowed Shares are held in escrow pursuant to this
Agreement, the Officer will continue to be the beneficial owner of such Escrowed
Shares (subject to any disclosure made pursuant to section 3) and entitled,
inter alia, to:

(a)   exercise any and all voting and other consensual rights pertaining to such
Escrowed Shares for any purpose not inconsistent with the terms of this
Agreement;

(b)   receive and retain any and all dividends or other distributions payable in
respect of such Escrowed Shares; and

(c)   tender some or all of such Escrowed Shares in acceptance of a tender offer
or take-over-bid made for NNC Shares provided all Blackout Trading Restrictions
to which the Officer is subject have been previously terminated or ceased to
apply to such Officer.

5. Surrender of Escrowed Shares

(a)   NNC will:

  (i)   notify each Officer and the Escrow Agent of each Window Period during
the term of this Agreement not less than one Business Day prior to the
commencement of such Window Period; and

  (ii)   deliver to each Officer and the Escrow Agent a notice substantially in
the form attached as Exhibit B (the “Trading Ban Termination Notice”) promptly
upon the termination or cessation of all Blackout Trading Restrictions to which
the Officer is subject.

(b)   An Officer who makes a Scheduled Payment or Pre-payment pursuant to the
Undertaking will notify the Corporate Secretary thereof at the time of such
Payment or Pre-payment. If an Officer does not pay to such Officer’s NNC
Employer all or any portion of a Scheduled Payment by 5:00 p.m. (local time in
the place where such Officer’s NNC Employer’s head office is located) on a
Payment Day, NNC will on the first Business Day following such Payment Day
deliver to the Officer and the Escrow Agent a notice substantially in the form
attached as Exhibit C (a “Deemed Surrender Notice”) of non-payment by such
Officer setting out therein the amount of the Scheduled Payment that was not
paid by the Officer (the “Unpaid Amount”) and the Payment Day on which such
Scheduled Payment was to have been made. The Officer is

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    thereupon deemed to have on such Payment Day irrevocably instructed the
Escrow Agent to, and the Escrow Agent will, subject to sections 5(e) and 5(h),
within two Business Days of receipt of the Deemed Surrender Notice, surrender to
NNC for cancellation (to be credited against the RtP Amount to be paid by the
Officer to the NNC Employer as contemplated by the Undertaking) the lesser of
(i) that number of such Officer’s Escrowed Shares having an aggregate Market
Value determined by NNC equal to the Unpaid Amount (rounded up to the nearest
number of whole NNC Shares), and (ii) the number of such Officer’s Escrowed
Shares remaining in escrow hereunder.

(c)   If an Officer delivers written instructions substantially in the form
attached as Exhibit D (a “Surrender Notice”) to NNC and the Escrow Agent to
deliver Escrowed Shares to NNC on account of all or any portion of a Scheduled
Payment or a Pre-Payment, the Escrow Agent will, subject to sections 5(e) and
5(h), within two Business Days of receipt of such Surrender Notice surrender to
NNC for cancellation (to be credited against the RtP Amount to be paid by the
Officer to the NNC Employer as contemplated by the Undertaking) the number of
such Officer’s Escrowed Shares having a Market Value determined by NNC equal to
the amount instructed by the Officer to be paid by the surrender of Escrowed
Shares (rounded up to the nearest number of whole NNC Shares) pursuant to the
Surrender Notice.

(d)   In any case where the aggregate Market Value of an Officer’s Escrowed
Shares surrendered pursuant to section 5(b) or 5(c) is in excess of the amount
of any Scheduled Payment or Unpaid Amount on account of which such surrender is
made, as the case may be, such excess will be applied by NNC against the next
succeeding Scheduled Payment to be made by such Officer.

(e)   If:

  (i)   the day on which the Escrow Agent is to surrender Escrowed Shares for
cancellation pursuant to a Surrender Notice or a Deemed Surrender Notice is a
day that is not during a Window Period, the surrender of such Escrowed Shares
will be delayed until the first Business Day of the next Window Period; or

  (ii)   prior to the day on which Escrowed Shares are to be surrendered
pursuant to a Surrender Notice or a Deemed Surrender Notice, an Officer notifies
NNC and the Escrow Agent, or NNC notifies an Officer and the Escrow Agent, that
such Officer is precluded from trading in NNC Shares pursuant to (A) Procedure
No. 320.28, (B) applicable law, or (C) any applicable order of regulatory
authorities having jurisdiction, the surrender of such Escrowed Shares pursuant
to such Surrender Notice or Deemed Surrender Notice will be delayed until the
first Business Day of the first Window Period following the day on which the
Officer notifies NNC and the Escrow Agent or NNC notifies such Officer and the
Escrow Agent, as the case may be, that the Officer is no longer precluded from
trading in NNC Shares.

(f)   Within three Business Days following any surrender of Escrowed Shares, NNC
will deliver to the Escrow Agent and the Officer on account of whom such shares
have been surrendered a written confirmation substantially in the form attached
as Exhibit E (a “Confirmation”) confirming the calculation of the number of
Escrowed Shares surrendered and such Officer’s Remaining Balance. Upon
demonstration by the Officer of a calculation error, NNC will, at the Officer’s
election, credit any over payment against the Officer’s Remaining Balance (and
deliver a corrected Confirmation therefor) or refund the over payment to the
Officer in cash.

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(g)   If there are any Escrowed Shares of an Officer remaining in escrow after
the Escrow Agent receives:

  (i)   a Confirmation from NNC indicating that an Officer’s Remaining Balance
is zero; or

  (ii)   notice substantially in the form of Exhibit F attached (a “Termination
Notice”) from NNC that this Agreement has terminated in respect of such Officer,

the Escrow Agent will within three Business Days of receipt of such notice
return to the Officer, by pre-paid insured courier for next-day delivery, the
certificate or certificates for such remaining Escrowed Shares of the Officer
together with all remaining executed Stock Transfer Powers for such shares.

(h)   Notwithstanding the Undertaking or any other provision of this Agreement,
NNC will not accept the surrender of an Officer’s Escrowed Shares for
cancellation, and NNC will have no right to deliver a Deemed Surrender Notice
with respect to an Officer under section 5(b), and such Officer will not
instruct or be deemed to have instructed the Escrow Agent to surrender such
Officer’s Escrowed Shares or any other right, title or interest in such
Officer’s Escrowed Shares to NNC for cancellation, to the extent that such
surrender, or instruction or deemed instruction, would result in such Officer’s
violation of the Blackout Trading Restrictions or any of them.

6. Duties of Escrow Agent

(a)   This Agreement expressly sets forth all the duties of the Escrow Agent
with respect to any and all matters pertinent hereto. No implied duties or
obligations will be read into this Agreement against the Escrow Agent. The
Escrow Agent is not bound by the provisions of any agreement among the other
parties hereto except this Agreement. The parties hereto agree that the Escrow
Agent is not acting as a trustee or in any fiduciary capacity, that no trust is
intended to be, or will be, created, and that the duties of the Escrow Agent
hereunder are purely administrative in nature. The Escrow Agent will not be
under any duty to give the Escrowed Shares held by it hereunder any greater
degree of care than it gives its own similar property. The Escrow Agent does not
have any interest in the Escrowed Shares deposited hereunder but is serving as
escrow holder only and having only possession thereof.

(b)   The Escrow Agent will not be liable for any error of judgement, or for any
act done or step taken or omitted by it in good faith, or for any mistake of
fact or law, or for anything which it may do or refrain from doing in connection
herewith, except for its own fraud, negligence or wilful misconduct. In the
absence of fraud, negligence or wilful misconduct by the Escrow Agent, the
Escrow Agent will not be liable to the Officers or NNC for any loss or injury to
them.

(c)   Subject to section 6(b), upon the Escrow Agent’s delivery of any Escrowed
Shares in accordance with this Agreement, the Escrow Agent will be automatically
and immediately released from all obligations under this Agreement in respect of
such Escrowed Shares.

(d)   Subject to section 6(b), the Escrow Agent:

  (i)   may, if in its sole discretion it deems it necessary or desirable,
retain such independent counsel or other advisors as it reasonably may require
for the purpose of discharging or determining its duties, obligations or rights
hereunder;

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  (ii)   may act pursuant to the advice of its legal counsel or the reasonable
advice of external legal counsel to NNC with respect to any matter relating to
this Agreement;

  (iii)   will not be required to institute legal proceedings of any kind and
will not be required to defend any legal proceedings which may be instituted
against it in respect of the subject matter of this Agreement;

  (iv)   will be entitled to rely upon any order, judgment, certification,
demand, notice, instrument or other writing delivered to it hereunder without
being required to determine the authenticity or the correctness of any fact
stated therein or the propriety or validity of the service thereof;     (v)  
may act in reliance upon any instrument or signature believed by it to be
genuine and may assume that the person purporting to give receipt or advice or
make any statement or execute any document in connection with the provisions
hereof has been duly authorized to do so;     (vi)   may conclusively presume
that the undersigned representative of any party hereto which is an entity other
than a natural person has full power and authority to instruct the Escrow Agent
on behalf of that party unless written notice to the contrary is delivered to
the Escrow Agent; and     (vii)   is not required to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, or do anything not
expressly provided for herein; and     (viii)   retains the right not to act and
will not be liable for refusing to act if, due to a lack of information or for
any other reason whatsoever, the Escrow Agent, in its sole judgment, determines
that such act might cause it to be in non-compliance with any applicable
anti-money laundering or anti-terrorist legislation, regulation or guideline.

(e)   In the event of any disagreement between the other parties hereto
resulting in adverse claims or demands being made in connection with any
Escrowed Shares or in the event that the Escrow Agent is in doubt as to what
action it should take hereunder, the Escrow Agent will be entitled to retain
such Escrowed Shares until the Escrow Agent has received (i) a final
non-appealable order of a court of competent jurisdiction directing delivery of
such Escrowed Shares or (ii) a written agreement executed by the other Affected
Parties hereto directing delivery of such Escrowed Shares, in which event the
Escrow Agent will disburse such Escrowed Shares in accordance with such order or
agreement. Any court order must be accompanied by a legal opinion by counsel for
the presenting party reasonably satisfactory to the Escrow Agent to the effect
that the order is final and non-appealable. The Escrow Agent will act on such
court order and legal opinion without further question.

7. Successor Escrow Agent

(a)   Any company into which the Escrow Agent or its corporate trust department
may be merged or, with or to which it may be consolidated, amalgamated or sold,
or any company resulting from any merger, consolidation, sale or amalgamation to
which the Escrow Agent is a party, will be the new escrow agent under this
Agreement without the execution of any instrument or any

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    further act, provided that such company is resident in Canada and is
authorized to carry on the business of a trust company in the Province of
Ontario.

(b)   The Escrow Agent may:

  (i)   be removed at any time by the mutual consent of NNC and each Officer in
respect of which this Agreement remains in force by delivering notice thereof to
the Escrow Agent; and

  (ii)   at any time resign as such by delivering notice thereof to NNC and each
Officer in respect of which this Agreement remains in force;

whereupon the removal or resignation of the Escrow Agent, as the case may be,
will take effect on the earlier of (i) the appointment of a successor (including
a court of competent jurisdiction) or (ii) the day which is 30 days after the
date of delivery of the notice of removal or resignation, as the case may be, to
the other applicable party or parties hereto. The Escrow Agent will deliver the
Escrowed Shares to any successor Escrow Agent jointly designated by the other
parties hereto, or to any court of competent jurisdiction, whereupon, subject to
section 6(b), the Escrow Agent will be discharged of and from any and all
further obligations arising in connection with this Agreement. If the Escrow
Agent has not received a designation of a successor Escrow Agent within 30 days
of delivery of the notice of removal or resignation, as the case may be, the
Escrow Agent’s sole responsibility after that time will be to retain and
safeguard the Escrowed Shares until receipt of a designation of the successor
Escrow Agent or a joint written disposition instruction by the other parties
hereto or a final non-appealable order of a court of competent jurisdiction.
Upon receipt of the Escrowed Shares from the predecessor Escrow Agent, such
successor Escrow Agent will, without further act, become vested with all of the
rights, powers and duties of the predecessor Escrow Agent as if originally named
herein.
8. Indemnity
     In consideration of the Escrow Agent agreeing to act hereunder, NNC
covenants and agrees to save, defend and keep harmless and fully indemnify the
Escrow Agent, its officers, directors, employees and agents, and their
respective heirs, executors, administrators, successors and assigns, from and
against all losses, costs, liabilities, charges, suits, demands, claims, damages
and expenses of any nature which the Escrow Agent, its successors or assigns,
may at any time hereafter bear, sustain, suffer or be part to for or by reason
of or on account of its acting as escrow agent or anything in any manner
relating thereto or by reason of the Escrow Agent’s compliance with the terms
hereof, except such as result primarily from its own fraud, negligence or wilful
misconduct.
9. Not Obliged to Defend
     Without restricting the foregoing indemnity, if proceedings are taken by
arbitration or in any court respecting the Escrowed Shares, the Escrow Agent
will not be obliged to defend or otherwise participate in any such proceedings
until it has such security as the Escrow Agent determines, in its sole
discretion, to be adequate for its costs in such proceedings in addition to the
indemnity set out above.

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10. Expenses and Fees
     NNC shall reimburse the Escrow Agent for all reasonable expenses reasonably
incurred in connection with acting hereunder, including without limitation legal
fees paid by the Escrow Agent in respect of this Agreement. The fees of the
Escrow Agent relating to this Agreement and its responsibilities hereunder will
be borne by NNC.
11. Notices
     All notices, consents, waivers and other communications under this
Agreement must be in writing and will be deemed to have been duly given:

(a)   to any party hereto, when delivered by hand (with written confirmation of
receipt) or sent by telecopier (with written confirmation of receipt); or   (b)
  to NNC or any Officer, when e-mailed (with electronic confirmation of
receipt);

to the appropriate addresses, telecopier numbers or e-mail addresses set forth
below (or such other addresses, telecopier numbers or e-mail addresses as a
party may designate by notice to the other parties), as applicable. Any such
notice will be deemed to have been given as of the date received, in the case of
personal delivery, or on the date shown on the receipt or confirmation therefor,
in the case of telecopier delivery or e-mail.
12. Actions on Business Days
     If any day on which any action required to be taken hereunder is not a
Business Day, then, unless otherwise expressly provided for herein, such action
will be required to be taken on or before the requisite time on the next
succeeding day that is a Business Day.
13. Waiver
     The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege. To
the maximum extent permitted by applicable law, (a) no claim or right arising
out of this Agreement or the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other Affected Parties; (b) no
waiver that may be given by an Affected Party will be applicable except in the
specific instance of which it is given; and (c) no notice to or demand on one
party will be deemed to be a waiver of any obligation of such party or of the
right of the party giving such notice or demand to take further action without
notice or demand as provided in this Agreement or the documents referred to in
this Agreement.
14. Amendment
     This Agreement may not be amended except, as to any Officer, by a written
agreement executed by such Officer and NNC. The Escrow Agent shall not be bound
by any notice of a claim or demand, or any waiver, modification, amendment,
termination or rescission of this Agreement, unless received by it

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in writing and signed by NNC and the affected Officer or Officers and, if its
duties herein are affected, unless it has given its prior written consent
thereto.
15. Governing Law
     This Agreement will be governed by the laws of the Province of Ontario,
Canada, without regard to conflicts of law principles.
16. Further Assurances
     Each of the parties hereto will execute such further instruments and take
such other actions as any other party may reasonably request in order to
effectuate the purposes of this Agreement.
17. Binding Effect, Termination and Survival of Certain Provisions
     This Agreement will be binding upon and inure to the benefit of NNC and the
Escrow Agent, and each of their respective successors, assigns, heirs, executors
and administrators, and each Officer. This Agreement will terminate and be of no
further force or effect in respect of an Officer upon the earliest of (i) the
last of such Officer’s Escrowed Shares being surrendered to the Corporate
Secretary, (ii) the payment in full of such Officer’s RtP Amount, and (iii) the
death or permanent disability of such Officer. Upon termination of this
Agreement in respect of an Officer, NNC will within two Business Days thereof
deliver a Termination Notice to the Escrow Agent in respect of such Officer. For
greater certainty, upon the last of an Officer’s Escrowed Shares being
surrendered to the Corporate Secretary, such Officer will not be obligated to
deliver into escrow hereunder any further NNC Shares notwithstanding that such
Officer’s RtP Amount may not have been paid in full. Notwithstanding the
foregoing, the provisions of sections 8, 9 and 10 will survive the resignation
or removal of the Escrow Agent and the termination of this Agreement.
18. Counterparts; Facsimilied Agreements
     This Agreement may be executed in two or more counterparts, each of which
will be deemed to be an original and all of which, when taken together, will be
deemed to constitute one and the same. Any party hereto is entitled to rely on
delivery by facsimile of an executed copy of this Agreement, and acceptance of
such facsimile copy will be legally effective to create a valid and binding
agreement between the parties hereto in accordance with the terms hereof.
19. Administration of Escrow
     For the avoidance of doubt, to the extent the provisions of this Agreement
are inconsistent or conflict with Schedule B to the Undertaking, this Agreement
will govern the administration of the escrow contemplated by the Undertaking.
20. Severability
     If any provision of this Agreement becomes illegal or unenforceable in
whole or in part for any reason whatsoever, the remaining provisions will
nevertheless be deemed valid, binding and subsisting.

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- 12 -
     IN WITNESS WHEREOF the parties have executed and delivered this Agreement
as of the date first written above.

                  NORTEL NETWORKS CORPORATION   COMPUTERSHARE TRUST COMPANY
 
      OF CANADA        
 
               
By:
  /s/   Gordon Davies   By:   /s/   Mircho Mirchev    
Name:
  Gordon A. Davies   Name:   Mircho Mirchev    
Title:
  Corporate Secretary   Title:   Professional, Corporate Trust    
 
  August 11, 2005            
 
               
Address:
  8200 Dixie Road            
 
  Brampton, ON L6T 5P6   By:   /s/   C. Davidson    
Fax:
      Name:   Cheryl Davidson    
 
               
Attention:
      Title:   Administrator, Corporate Trust    
 
                 
 
  /s/   Anna Ventresca   Address:   100 University Avenue    
 
  Anna Ventresca       9th Floor,    
 
  Assistant Secretary       North Tower Toronto,    
 
        ON M5J 2Y1    
 
               
 
      Fax:        
 
               
 
      Attention:   Manager, Corporate Trust    
 
               

                /s/   Chahram Bolouri   /s/   Malcom Collins       Chahram
Bolouri   Malcom Collins    
 
           
Address:
  130 Beaconsfield Blvd   Address:   1801 Oatlands Court
 
  Beaconsfield, Quebec       Wake Forest
 
  Canada H9W 3Z7       North Carolina 27587
Fax:
  514-426-2715   Fax:   919-997-6130
 
            /s/   P Debon   /s/   Nicholas J. DeRoma Pascal Debon   Nicholas
DeRoma
 
           
Address:
  15190 Prestonwood Blvd   Address:   1 Chedington Place, Suite 8-D
 
  Apt 433       Toronto, Ontario
 
  Dallas, Texas 75248       Canada M4M 3R4
Fax:
  (972) 684-3632 or ESN 444-3632 Fax:   416-489-0095

 

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- 13 -

                /s/   Bill Donovan   /s/   John Giamatteo Bill Donovan   John
Giamatteo
 
           
Address:
  600 Hogans Valley Way   Address:   Gate City Ohsaki, East Tower 9F
 
  Cary, NC 27513       1-11-2 Ohsaki, Shinagawa-ku
 
          Tokyo 141-8411, Japan
Fax:
  Home Fax 919-468-0924   Fax:   81-3-5740-1849
 
            /s/   D Joannou   /s/   Robert Mao Dion Joannou   Robert Mao
 
           
Address:
  2839 NE 24th Place   Address:   1126 River Garden
 
  Ft. Lauderdale, FL, 33305       Shunyi County, Beijing
 
  USA       China, 101300
Fax:
  954-851-8126   Fax:   86-10-8046-5745
 
            /s/   B. McFadden   /s/   Greg Mumford Brian McFadden   Greg Mumford
 
           
Address:
  6 Magnolia St.   Address:   1201 Spinnaker Place
 
  Baie-D’Urfé       Kingston, Ontario
 
  Quebec, H9X 3P4       Canada K7L 5H6
Fax:
  514-457-0739   Fax:   613-544-7444   /s/   Steve Pusey   /s/   Susan Spradley
Steve Pusey   Susan L. Spradley
 
           
Address:
  8 St. Davids Drive   Address:   2 Dorset Pl
 
  Englefield Green       Dallas, Texas 75229
 
  Surrey        
Fax:
  (44) 1628 437760   Fax:   972-684-3950

 

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Schedule I
OFFICERS, RtP AMOUNT AND ESCROWED SHARES

                                      RtP Amount   Escrowed Name   RtP Amounts  
Converted to $US(1)   Shares(2)
BOLOURI, Chahram
    C$891,697     US $707,696.03     226,101  
COLLINS, Malcolm
  GBP£395,409   US $735,460.74     234,972  
DEBON, Pascal
  US $1,078,963             344,717  
DeROMA, Nicholas
    C$953,747     US $756,942.06     241,835  
DONOVAN, Bill
  US $640,271             204,559  
GIAMATTEO, John
  US $259,875             83,027  
JOANNOU, Dion
  US $328,412             104,924  
MAO, Robert
  US $627,500             200,479  
McFADDEN, Brian
    C$899,630     US $713,992.06     228,112  
MUMFORD, Greg
    C$921,500     US $731,349.21     233,658  
PUSEY, Steve
  GBP£473,173   US $880,101.78     281,183  
SPRADLEY, Susan
  US $967,694             309,167 (1)

 

(1)   C$ amounts are converted to US$ at the rate of C$1.26 per US$1.00 and GBP£
are converted to US$ at the rate of US$1.00 per £1.86.   (2)   The closing price
of NNC Shares on the NYSE on February 7, 2005 was US$3.13.   (3)    Represents
all NNC Shares beneficially owned by such Officer (excluding NNC Shares held in
long term investment plans).

--------------------------------------------------------------------------------

 

Exhibit A
STOCK TRANSFER POWER
     THE UNDERSIGNED hereby surrenders for cancellation, without return of
capital, to Nortel Networks Corporation,
                                                                                common
shares in Nortel Networks Corporation standing in the name of the undersigned on
the books of the said corporation represented by certificate number
                                                                                ,
together with all renewals thereof, substitutions therefore, accretions thereto
and proceeds thereof (all of which are hereinafter collectively referred to as
the “Shares”) and hereby irrevocably constitutes and appoints any one officer of
Computershare Trust Company of Canada as the attorney of the undersigned to
transfer the said Shares on the books of the said corporation with full power of
substitution in the premises.
     THE UNDERSIGNED shall from time to time at the request of Computershare
Trust Company of Canada, do such further acts and execute all such further deeds
and instruments as shall be necessary to fully perform and carry out the terms
and intent of this Stock Transfer Power.
     DATED:                                                             

                       
 
  Signature        
 
           
 
  Name:        
 
           
 
           
 
  Address:        
 
             
 
           
 
           

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Exhibit B
TRADING BAN TERMINATION NOTICE

     
To:
  Computershare Trust Company of Canada, as Escrow Agent (“Escrow Agent”)
 
   
To:
 
                                                                                                                        (the
“Officer”)
 
  Name of Officer
 
   
Copy to:
 
                                                                                                                        
 
  Name of Nortel Employer
 
   
From:
  Nortel Networks Corporation (“NNC”)

     Pursuant to section 5(a)(ii) of the Escrow Agreement dated March 1, 2005
among the Escrow Agent, NNC and the Officer, et al, (the “Escrow Agreement”),
you are hereby notified that all Blackout Trading Restrictions (as defined in
the Escrow Agreement) to which the Officer is subject have terminated or ceased
as of                                                              (insert
date). The First Payment Day (as defined under the Escrow Agreement) will
therefore be                                                             .

         
 
      Nortel Networks Corporation
 
       
 
  By:    
 
       
 
       
 
  Name:    
 
       
 
       
 
  Title:    
 
       
 
       
 
  Date:    
 
       

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Exhibit C
DEEMED SURRENDER NOTICE

       
To:
  Computershare Trust Company of Canada, as Escrow Agent  
 
     
To:
     
 
     
 
  Name of Officer  
 
     
Copy to:
     
 
     
 
  Name of Nortel Employer  
 
     
From:
  Nortel Networks Corporation (“NNC”)  
 
     
Re:
  Escrow Agreement dated as of March 1, 2005 among the Escrow Agent, NNC and the
Officer, et al  
 
     

     
Date of Scheduled Payment to which this
   
Deemed Surrender Notice relates:
 
 
 
   
Unpaid Amount to be paid by surrender of Escrowed Shares:
 
 
 
   
Date on which Market Value of NNC
   
Shares determined:
 
 
 
   
Closing Price of NNC Common Shares on NYSE on Market Value determination date:
 
 
 
   
Exchange rate rounded to two decimal points (if applicable)
 
 
 
   
Number of Escrowed Shares to be surrendered (Unpaid Amount divided by Market
Value of one NNC Share, rounded up to the nearest whole number):
 
 

         
 
      Nortel Networks Corporation
 
       
 
  By:    
 
       
 
       
 
  Name:    
 
       
 
       
 
  Title:    
 
       
 
       
 
  Date:    
 
       

 

--------------------------------------------------------------------------------

 

Exhibit D
SURRENDER NOTICE

       
To:
  Computershare Trust Company of Canada, as Escrow Agent  
 
     
Copy to:
     
 
       
 
  Name of Nortel Employer  
 
     
Copy to:
  Nortel Networks Corporation (“NNC”)  
 
     
From:
     
 
       
 
  Name of Officer  
 
     
Re:
  Escrow Agreement dated as of March 1, 2005 among the Escrow Agent, NNC and the
Officer, et al
 
     

Amount to be paid on account of
RtP Amount by the surrender
of Escrowed Shares:
                                                                                                                        

         
Check One:
o Scheduled Payment:  
                                                                                                                        
 
      (insert date)
 
       
 
o Pre-payment    
 
       
 
     
                                                                                                                        
 
      Signature of Officer
 
       
 
  Date:  
                                                                                                                        

 

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Exhibit E
CONFIRMATION

       
To:
     
 
       
 
  Name of Officer  
 
     
To:
  Computershare Trust Company of Canada, as Escrow Agent  
 
     
Copy to:
     
 
       
 
  Name of Nortel Employer  
 
     
From:
  Nortel Networks Corporation (“NNC”)  
 
     
Re:
  Escrow Agreement dated as of March 1, 2005 among the Escrow Agent, NNC and the
Officer, et al  

     
Date of Surrender Notice or Deemed Surrender Notice to which this Confirmation
relates:
 
 
 
   
Amount of payment made pursuant to notice referred to above:
 
 
 
   
Date on which Market Value of NNC Shares determined:
 
 
 
   
Closing Price of NNC Shares on NYSE on Market Value determination date:
 
 
 
   
Exchange rate rounded to two decimal points (if applicable)
 
 
 
   
Number of Escrowed Shares surrendered (Unpaid Amount divided by Market Value of
one NNC Share, rounded up to the nearest whole number):
 
 
 
   
Officer’s Remaining Balance:
 
 

         
 
      Nortel Networks Corporation
 
       
 
  By:    
 
       
 
       
 
  Name:    
 
       
 
       
 
  Title:    
 
       
 
       
 
  Date:    
 
       

 

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Exhibit F
TERMINATION NOTICE

     
To:
  Computershare Trust Company of Canada, as Escrow Agent (the “Escrow Agent”)
 
   
To:
   
 
     
 
  Name of Nortel Employer
 
   
From:
  Nortel Networks Corporation (“NNC”)
 
   
Re:
                                                                           
                                                     (the “Officer”)
 
  Name of Officer in respect of whom this Notice is delivered

You are hereby notified that the Escrow Agreement dated March 1, 2005 among the
Escrow Agent, NNC and the Officer, et al, is terminated in respect of such
Officer.

         
 
      Nortel Networks Corporation
 
       
 
  By:    
 
       
 
       
 
  Name:    
 
       
 
       
 
  Title:    
 
       
 
       
 
  Date: