##### 



The securities offered under this stock purchase plan have not been registered under the
Securities Act of 1933 and may not be offered or sold in the United States unless
registered or an exemption from registration is available.
 NORTEL STOCK PURCHASE PLAN
 FOR MEMBERS OF THE
 SAVINGS AND RETIREMENT PROGRAM, AS AMENDED




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##### 



TABLE OF CONTENTS
 PageSECTION 1 DEFINITIONS
    
    
    1SECTION 2 ESTABLISHMENT OF THE PLAN
    
    
    32.1
    
    Purpose
    
    
    3SECTION 3 PARTICIPATION AND ENROLLMENT
    
    
    33.1
    
    Participation in the Plan
    
    
    33.2
    
    Entry Date
    
    
    3SECTION 4 CONTRIBUTIONS TO THE PLAN
    
    
    44.1
    
    Employee Contributions
    
    
    44.2
    
    Variation of Contribution Levels
    
    
    44.3
    
    Cessation of Contributions
    
    
    44.4
    
    Leaves of Absence
    
    
    44.5
    
    Remittance of Employee Contributions and Employer Payments
    
    
    5SECTION 5 SHARE PURCHASE
    
    
    55.1
    
    Purchase of Plan Shares
    
    
    55.2
    
    Interest Income
    
    
    55.3
    
    US$25,000 Limit
    
    
    5SECTION 6 DIVIDENDS
    
    
    66.1
    
    Application of Dividends
    
    
    6SECTION 7 SHARE ALLOCATION
    
    
    67.1
    
    Allocation of Plan Shares
    
    
    67.2
    
    Dividends
    
    
    67.3
    
    Maintenance of Records
    
    
    6SECTION 8 VESTING OF PLAN SHARES
    
    
    78.1
    
    Employee Contributions and Employer Payments
    
    
    7SECTION 9 WITHDRAWAL OF PLAN SHARES
    
    
    79.1
    
    Voluntary Withdrawals
    
    
    79.2
    
    Change in Member Status
    
    
    79.3
    
    Payment Options
    
    
    89.4
    
    Sale of Plan Shares
    
    
    89.5
    
    Cash Payments
    
    
    99.6
    
    Compliance With Applicable Laws and Company Policy
    
    
    99.7
    
    Rights As A Shareholder and Employee
    
    
    99.8
    
    Legends
    
    
    109.9
    
    Holding Periods
    
    
    10SECTION 10 ADMINISTRATION
    
    
    10




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-2- Page10.1
    
    Administration and Delegation
    
    
    1010.2
    
    Appointment of Plan Custodian
    
    
    1010.3
    
    Rules and Procedures
    
    
    1110.4
    
    Limitation of Liability
    
    
    1110.5
    
    Expenses
    
    
    1110.6
    
    Member Statements
    
    
    1110.7
    
    Shareholder Communications and Notices
    
    
    1110.8
    
    Voting Rights
    
    
    1210.9
    
    Withholdings
    
    
    1210.10
    
    Transferability
    
    
    1210.11
    
    Alteration or Substitution of Plan Shares
    
    
    1210.12
    
    Effect Of Change In Control or Alteration or Substitutionof Shares On Purchase Rights
    
    
    13SECTION 11 AMENDMENT AND TERMINATION OF THE PLAN
    
    
    1311.1
    
    Amendment
    
    
    1311.2
    
    Termination
    
    
    1411.3
    
    Withdrawal of Employer
    
    
    14SECTION 12 GENERAL PROVISIONS
    
    
    1412.1
    
    No Additional Rights to Employment
    
    
    1412.2
    
    Liability
    
    
    1512.3
    
    Members Agreement to be Bound by Plan Terms
    
    
    1512.4
    
    Effect of Mistake
    
    
    1512.5
    
    Indemnification
    
    
    1512.6
    
    Assignment, Exemption from Seizure and Bankruptcy
    
    
    1612.7
    
    Physical, Mental or Legal Incapacity of the Member
    
    
    1612.8
    
    Governing Law and Captions
    
    
    1612.9
    
    Stock Exchange Rules
    
    
    16SECTION 13 EFFECTIVE DATE AND TERM
    
    
    1713.1
    
    Effective Date
    
    
    1713.2
    
    Term
    
    
    17SCHEDULE A  CHANGE IN CONTROL




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-1- SECTION 1
 DEFINITIONS
  Average Sale Price
 Change in Control
 Committee
 Company
 Continuous Service
 Custodian Agreement
 Effective Date
 Eligible Earnings
 Eligible Employee
 Employee Contributions




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-2- Employer
 Employer Payments
 Entry Date
 Fair Market Value
 Ineligible Individual
 Member
 Members Account
 Nortel
 Offering Period
 Pension Plan Eligible Employee
 Plan
 Plan Custodian
 Plan Shares




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-3-  Purchase Amount
 Shares
 Stock Exchange
 SECTION 2
 ESTABLISHMENT OF THE PLAN
 2.1
    
    PurposeThe Plan has been adopted to facilitate the acquisition and retention of Plan Shares by
Eligible Employees of the Company and other Employers.
 SECTION 3
 PARTICIPATION AND ENROLLMENT
 3.1
    
    Participation in the PlanAn Eligible Employee may elect to participate in the Plan by properly completing and filing
an enrollment form and such other forms of authorization and designation as may be specified
by the Company from time to time. Subject to Section 9.2, in respect of a given Offering
Period, the Employee Contributions of an Eligible Employee for such period shall be used for
the purchase of Plan Shares only if the Eligible Employee continues his or her employment
with an Employer during the three-month period preceding the date on which the Plan Shares
are purchased.3.2
    
    Entry DateEach Employer shall permit its Eligible Employees to participate in the Plan as of the Entry
Date next following the date on which an Eligible Employee timely completes and files their
enrollment form as specified in Section 3.1 (which shall be no later than ten calendar days
before the applicable Entry Date). An Eligible Employees election to participate in the
Plan shall remain effective with respect to subsequent Offering Periods unless otherwise
modified or revoked in accordance with Sections 4.2 or 4.3.




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##### 



-4- SECTION 4
 CONTRIBUTIONS TO THE PLAN
 4.1
    
    Employee ContributionsSubject to Section 5.3, a Member may make Employee Contributions to the Plan through payroll
deduction (for each pay period) (or in such other manner as may be specified by the Company)
in amounts equal to any whole percentage of Eligible Earnings, subject to a minimum of one
percent (1%) and a maximum of ten percent (10%) of Eligible Earnings. Members shall not be
permitted to make contributions to the Plan otherwise than as set forth above, except as
determined by the Company in its sole discretion.4.2
    
    Variation of Contribution LevelsEmployee Contributions may be varied by a Member as of the beginning of any Offering Period
(or such other times as may be specified by the Company), provided the Member notifies the
Members Employer and/or the Plan Custodian (as may be determined and required by the
Employer) in such form and with such advance notice as may be specified by the Company
(which shall not be later than ten calendar days before the beginning of such Offering
Period).4.3
    
    Cessation of ContributionsA Member may cease to make Employee Contributions at any time during an Offering Period,
provided the Member notifies the Members Employer and/or the Plan Custodian (as may be
determined and required by the Employer) in such form and with such advance notice as may be
specified by the Employer. In such event, payroll deductions will cease as soon as
administratively practicable. Such Member may elect to resume contributions to the Plan at
the beginning of any subsequent Offering Period, provided the Member provides proper
notification in such form and with such advance notice as may be specified by the Company
(which shall not be later than ten calendar days before the beginning of such Offering
Period). Except in the event that contributions cease due to circumstances set forth in
Section 9.2, any Employee Contributions made by such Member prior to the cessation of
contributions shall not be returned to the Member, but shall be used to purchase Shares at
the end of the Offering Period in accordance with the terms of the Plan.4.4
    
    Leaves of AbsenceSubject to Sections 4.2 and 4.3, a Member shall continue to make Employee Contributions
during any leave of absence for which the Member receives Eligible Earnings (including,
without limitation, a short-term disability leave). Any Member on a leave of absence who is
not receiving Eligible Earnings may not continue participation in the Plan. Any such Member
shall not be eligible to resume participation in the Plan until the Offering Period next
following such Members return from leave of absence. Any Employee Contributions made prior
to the date such Members participation ceases shall




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##### 



-5- 
 not be returned to the Member, but shall be used to purchase Shares at the end of the
Offering Period in accordance with the terms of the Plan.4.5
    
    Remittance of Employee Contributions and Employer PaymentsEach Employer shall arrange for the remittance of all Employee Contributions of Eligible
Employees of such Employer and related Employer Payments for an Offering Period to the Plan
Custodian at the end of such Offering Period and otherwise within the time specified by the
Plan Custodian. Employee Contributions and Employer Payments shall be remitted in such mode
as is determined by the Company and the Plan Custodian.
 SECTION 5
 SHARE PURCHASE
 5.1
    
    Purchase of Plan SharesPurchases of Plan Shares shall be made at Fair Market Value on the last trading day on the
Stock Exchange of each Offering Period, or as soon thereafter as administratively
practicable. The Plan Share purchases shall be made by the Plan Custodian. The Plan Shares
shall be purchased by the Plan Custodian on the Stock Exchange in whole Shares. The
purchase of the Plan Shares may be subject to price and delivery terms to which the Plan
Custodian agrees, and neither the Company nor the Committee have the authority or power to
direct the Plan Custodian with respect to the price or delivery terms upon which Plan Shares
are purchased. The purchased Plan Shares will be held in the name of the Plan Custodian.
All Plan Shares purchased or received by the Plan Custodian and any fractional amounts shall
be allocated to Members Accounts in accordance with Section 7.5.2
    
    Interest IncomeAny interest or other income earned on Employee Contributions or Employer Payments prior to
the payment for Plan Shares purchased in accordance with this Section 5 shall be applied to
meet Plan expenses in accordance with Section 10.5 and shall not be allocated or otherwise
payable to any Members Account or Member.5.3
    
    US$25,000 LimitThe maximum number of Plan Shares a Member may purchase for each calendar year shall be such
number of Plan Shares as has a Fair Market Value (determined at the time of purchase) equal
to US$25,000.




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-6- SECTION 6
 DIVIDENDS
 6.1
    
    Application of DividendsIn the event Nortel pays a dividend to holders of Shares, the net amount of such dividend
attributable to Plan Shares allocated to Members Accounts shall be applied to purchase
additional Plan Shares on the Stock Exchange as soon as practicable after the receipt of
such dividend by the Plan Custodian. The net amount of the dividend that is available for
the purchase of Plan Shares shall be determined after deducting from the gross amount of the
dividend such amount of applicable taxes as are required to be withheld in accordance with
applicable laws.
 SECTION 7
 SHARE ALLOCATION
 7.1
    
    Allocation of Plan SharesPlan Shares acquired with Employee Contributions and Employer Payments made during the
Offering Period will be allocated to and held for the benefit of Members in their respective
Members Accounts. The number of whole and fractional Plan Shares allocated to a Members
Account for an Offering Period shall equal in respect of each purchase (as necessary) the
Purchase Amount divided by the Fair Market Value. Notwithstanding that a record shall be
kept of fractional Plan Shares, no fractional Plan Shares shall be purchased or held by the
Custodian or otherwise transferred, disposed of or dealt with other than for such record
keeping purposes.7.2
    
    DividendsAll Plan Shares acquired with the net amount of any cash dividends shall be allocated to
each Members Account pro rata, based upon the ratio (as of the record date for the
applicable dividend) of the number of Plan Shares allocated to each such Members Account to
the total number of Plan Shares allocated to all Members Accounts. Share dividends shall
be allocated in the same manner based upon the Plan Shares allocated to a Members Account
as of the record date of such dividend.7.3
    
    Maintenance of RecordsThe Plan Custodian will maintain records of the Members Accounts held in the name of each
Member and all transactions with respect to such Members Accounts.




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-7- SECTION 8
 VESTING OF PLAN SHARES
 8.1
    
    Employee Contributions and Employer PaymentsPlan Shares purchased under the Plan shall vest in the Member immediately upon the
allocation of such Plan Shares by the Plan Custodian to such Members Account.
 SECTION 9
 WITHDRAWAL OF PLAN SHARES
 9.1
    
    Voluntary WithdrawalsSubject to the requirements of Sections 9.6 and 9.9, a Member may, on giving notice and
instructions to the Plan Custodian in accordance with applicable Plan rules, withdraw all or
a portion of the Plan Shares held in the Members Account at any time. The Plan Custodian
shall complete the withdrawal as soon as is practicable following receipt of such notice and
instructions by the Plan Custodian from a Member (or the beneficiary or legal representative
of a deceased Member).9.2
    
    Change in Member StatusA Members Plan Shares recorded in the Members Account shall be distributed to the Member
(or, in the case of the death of the Member, to the beneficiary of the deceased Member
designated in the manner specified by the Company or, in the absence of such designation, to
such Members legal representative), in accordance with the provisions of Section 9.3,
following the occurrence of any of the following:
 (a)
    
    the retirement or death of the Member; or(b)
    
    the cessation of active employment of the Member with an Employer in
circumstances where the Member is not immediately re-employed by the Employer or
another Employer;
 and each Members active participation in the Plan shall terminate immediately following
such occurrence.Notice of the retirement, death or cessation of active employment of any Member shall be
provided to the Plan Custodian by the Employer as soon as practicable following the event.
Upon receiving such notice, all Employee Contributions which have not been used to purchase
Plan Shares shall be returned to the Member or paid to the Members designated beneficiary,
without interest; provided, however, that the Plan Custodian may purchase Plan Shares for
such Members benefit to the extent the return of Employee Contributions is determined by
the Company, in its sole discretion, to be administratively




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##### 



-8- impractical. A Member whose participation in the Plan has terminated in accordance with
this Section 9.2 may again become eligible to participate in the Plan if, at the time, such
Member re-qualifies as an Eligible Employee and re-enrolls in the Plan and otherwise
complies with the provisions of this Plan.
 In the event a Member dies having designated no beneficiary, distributions hereunder shall
be made to such Members legal representative, and any such payment shall serve to relieve
the Company, Employer, Plan and Committee from any further liability hereunder.9.3
    
    Payment OptionsIf a Member elects or is required to make a withdrawal from the Members Account(s) under
Section 9.1 or Section 9.2, respectively, the Member (or such Members beneficiary or legal
representative) shall elect:
 (a)
    
    to receive a number of whole Plan Shares represented by share certificates (up
to the maximum whole number of Plan Shares recorded in such Members Account) plus, if
the Member elects or is required to withdraw all of the Plan Shares in such Members
Account, a cash payment equal to the value of any fraction of a Plan Share, if any,
recorded in such Members Account, after deduction of selling costs; or(b)
    
    to transfer record ownership of all whole Plan Shares recorded in such Members
Account to a broker of the Members choice plus, if the Member elects or is required to
withdraw all of the Plan Shares in such Members Account, a cash payment equal to the
value of any fraction of a Plan Share, if any, recorded in such Members Account, after
deduction of selling costs; or(c)
    
    to have a number of whole Plan Shares (up to the maximum whole number of Plan
Shares recorded in such Members Account) sold by the Plan Custodian and to receive the
net proceeds thereof, together with, if all Plan Shares in such Members Account are
being withdrawn, a cash payment equal to the value of any fraction of a Plan Share, if
any, in such Members Account after deduction for selling costs and such amount of
applicable taxes as are required to be withheld.
 If the Member (or the beneficiary or legal representative of the Member) fails to instruct
the Plan Custodian as to the desired method of payment within ninety (90) days following any
of the events described in Section 9.2, the Plan Custodian may, in its sole discretion, at
any time after such ninety (90) day period, effect such withdrawal by causing the relevant
Plan Shares to be sold and remitting the net proceeds to the Member or the beneficiary or
legal representative of the Member, as the case may be, to the last known address as shown
on the records of the Employer.9.4
    
    Sale of Plan SharesThe Plan Custodian shall sell that number of whole Plan Shares on the Stock Exchange as soon
as is practicable following receipt of instructions by the Plan Custodian from a Member (or
the beneficiary or legal representative of a deceased Member). The amount




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-9- payable to a Member for such sales shall equal the Average Sale Price for the Plan Shares
sold on such Members behalf, calculated based upon the total Plan Shares sold on the Stock
Exchange on behalf of all Plan Members on the relevant trading day. All costs of any sale
or transfer of Plan Shares shall be borne by the Member, by either withholding a number of
Plan Shares sufficient to cover such costs and expenses, or by deducting such amounts from
the proceeds of a sale of Plan Shares under the Plan.
 9.5
    
    Cash PaymentsTo the extent permitted under the applicable law, all cash payments will be made by cheque
or wire transfer (at the Eligible Employees election) in Canadian Dollars and shall be
mailed directly to the Member or such Members beneficiary or legal representative at their
last known address or sent by wire transfer to a financial institution designated by such
Member or such Members beneficiary or legal representative.9.6
    
    Compliance With Applicable Laws and Company PolicyAll aspects of the Plan shall be managed in accordance with, and be subject to compliance
with and determinations made under, all applicable federal, state, provincial and local law,
and corporate policy (to the extent not inconsistent with applicable laws). Plan Shares
shall not be offered, purchased, allocated, transferred, delivered or sold under the Plan to
the extent such action would constitute a violation of any applicable federal, state,
provincial or local securities laws or other law or regulations. Plan Shares may not be
offered or sold under the Plan or transferred by any Member unless (i) a registration
statement under the Securities Act of 1933, as amended, with respect to the Plan Shares is
in effect at the relevant time or, in the opinion of legal counsel to the Company, an
exemption from the registration requirements of said Act is available with respect to such
offer, sale or transfer of Plan Shares and (ii) such offer, sale or transfer of Plan Shares
complies with all applicable state securities laws. The inability of Nortel or the Company
to obtain any approval, exemption or other clearance from any regulatory body having the
jurisdiction or the authority, if any, deemed by Nortel or the Company to be necessary to
the lawful offer, purchase, allocation, transfer, delivery or sale of any Plan Shares under
the Plan shall relieve Nortel and the Company of any liability in respect of the failure to
offer, purchase, allocate, transfer, deliver or sell Plan Shares under the Plan and neither
Nortel nor the Company shall be obligated to seek any such approval, exemption or other
clearance. As a condition to a Members participation in the Plan or of allocation of Plan
Shares to a Members Account, the Company may require the Member to provide such
documentation or other evidence and to make such representations or warranties as it may
deem necessary or appropriate to satisfy any qualifications that may be necessary or
appropriate, or to comply with, any applicable law or regulation.9.7
    
    Rights As A Shareholder and EmployeeA Member shall have no rights as a shareholder by virtue of the Members participation in
the Plan until the date of the allocation of Plan Shares to such Members Account. No
adjustment shall be made for dividends, distributions or other rights for which the record
date is prior to the date of such allocation.




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-10- 
 9.8
    
    LegendsNortel may at any time place legends or other identifying symbols referencing any applicable
federal, state, provincial or foreign securities law restrictions or any provision
convenient in the administration of the Plan on some or all of the certificates representing
Plan Shares allocated under the Plan. The Member shall, at the request of the Company,
promptly present to the Company any and all Share certificates representing Plan Shares
acquired pursuant to the Plan in the possession of the Member in order to carry out the
provisions of this Section 9.8.9.9
    
    Holding PeriodsThe Committee shall have the sole and absolute discretion to impose hold period(s) on Plan
Shares restricting, for a specified period of time, a Members right to transfer or
otherwise dispose of Plan Shares. Any such hold period on Plan Shares may only be imposed
by the Company if Eligible Employees have been given notice of the hold period prior to the
commencement of the Offering Period for the Plan Shares that will be subject to such hold
period.
 SECTION 10
 ADMINISTRATION
 10.1
    
    Administration and DelegationThe Plan shall be administered by the Committee on behalf of the Company, with all
references to any Company actions or authority of any kind being effected and administered
on the Companys behalf by the Committee. The Committee may, in its discretion, delegate
such of its powers, rights and duties under the Plan, in whole or in part, to such
committee, person or persons as it may determine.The Committee shall have the full and complete authority to interpret the Plan, to prescribe
such rules and regulations and to make such other determinations as it deems necessary or
desirable for the administration of the Plan. The Committee may from time to time, subject
to the terms of the Plan, delegate to officers or employees of the Company or to third
parties, the whole or any part of the administration of the Plan and shall determine the
scope and terms and conditions of such delegation, including the authority to prescribe
rules and regulations. Any interpretation, rule, regulation or determination made or other
act of the Committee shall be final and binding on the Members and their beneficiaries and
legal representatives, the Company and its shareholders.10.2
    
    Appointment of Plan CustodianThe Company shall appoint (and by their participation in the Plan, Members authorize the
Company to appoint) one or more Plan Custodians to perform such functions as may be
specified in the Custodian Agreement(s). Any reference in the Plan to the purchase or




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##### 



-11- sale of Plan Shares by the Plan Custodian shall be read to include the purchase or sale of
Plan Shares effected through such broker(s) or agent(s) as may be appointed by the Plan
Custodian.
 10.3
    
    Rules and ProceduresThe Company, and any Employer with the consent of the Company, may from time to time adopt
rules and procedures in respect of the administration of the Plan, provided that all such
rules and procedures shall be consistent with the provisions of the Plan. Such rules and
procedures may vary for different Eligible Employees and Members. The rules and procedures
shall be binding on all Eligible Employees and Members in respect of whom such rules and
procedures are applicable. Any such rules and procedures shall be promulgated and
administered consistent with the applicable rules and other requirements of the Stock
Exchange on which the Plan Shares are purchased pursuant to the Plan.10.4
    
    Limitation of LiabilityNo member of the board of directors of Nortel or the Company or the Committee shall be
liable for any action (or failure to act) or determination done (or not done) made in good
faith in respect of or pursuant to the Plan. To the full extent permitted by law, the
Company shall indemnify and save harmless each member of the board of directors of Nortel or
the Company or the Committee (acting in that capacity) with respect to any actual or
threatened action or proceeding arising with respect to the adoption or operation of the
Plan.10.5
    
    ExpensesAll costs directly related to the sale, transfer or delivery of Plan Shares shall be borne
by the Members. All other administration costs related to the Plan, including the cost of
acquiring Plan Shares under the Plan, compensation or fees of the Plan Custodian,
consultants, actuaries, accountants, local counsel, and other service providers will be paid
by the Employers, save to the extent such costs are met out of any interest income earned by
the Plan as contemplated in Section 5.2.10.6
    
    Member StatementsEach Member will receive a statement (electronically or by mail as determined by the
Company) as of the end of each calendar quarter (or such other times as may be determined by
the Company), which statement shall contain such information in respect of Members Account
as the Company may determine from time to time.10.7
    
    Shareholder Communications and NoticesThe Plan Custodian shall furnish or cause to be furnished such information to each Member as
may be directed by the Company for the purpose of providing reports and other documents to
be sent by Nortel to shareholders.




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##### 



-12- 
 Where a notice is to be given by the Company, Nortel or the Plan Custodian to Members or
Eligible Employees, it shall be given in writing and delivered personally, electronically or
by mail.Notices or other instructions given by an Eligible Employee or a Member to an Employer or
the Plan Custodian shall be in such form as is prescribed by the Company and the Plan
Custodian from time to time.10.8
    
    Voting RightsThe Plan Custodian shall furnish or cause to be furnished to each Member who has Plan Shares
allocated to such Members Account a copy of all notices sent to shareholders in respect of
shareholder meetings at which the Plan Shares are entitled to be voted and shall request
from each such Member instructions as to the voting at such meeting of the aggregate number
of the Members whole Plan Shares on the record date of such meeting. If the Member
furnishes such instructions to the Plan Custodian on a timely basis, the Plan Custodian
shall vote such number of whole Plan Shares in accordance with the instructions of the
Member. If the Member fails to furnish timely instructions to the Plan Custodian, the Plan
Custodian shall not vote the Members Plan Shares. The Plan Custodian shall not vote any
fractional Plan Shares allocated to Members Accounts.10.9
    
    WithholdingsThe Company or a relevant Employer shall be permitted to withhold from any payment to or for
the benefit of a Member, including withholding against the amount, if any, included in
income of a Member, all amounts required to be withheld under applicable provisions of any
federal, provincial, state or local law relating to the withholding of tax or any other
source deductions.10.10
    
    TransferabilityExcept as otherwise indicated herein, and except with respect to Plan Shares previously
allocated to such Members Account, the rights or interests of a Member under the Plan shall
not be assignable or transferable. Plan Shares may be purchased only on behalf of a Member
and only during the Members lifetime.10.11
    
    Alteration or Substitution of Plan SharesIn the event that:
 (a)
    
    a dividend shall be declared upon the Plan Shares payable in Shares (other than
a dividend that may be paid in cash or in Shares at the option of the shareholder);(b)
    
    the outstanding Plan Shares shall be changed into or exchanged for a different
number or kind of shares or other securities of Nortel or of another corporation,
whether through an arrangement, plan of arrangement, amalgamation or other similar
statutory procedure, or a share recapitalization, subdivision or consolidation;




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##### 



-13- 
 (c)
    
    there shall be any change, other than those specified in paragraphs (a) and (b)
of this Section 10.11, 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(d)
    
    there shall be a distribution of assets or shares to shareholders of Nortel out
of the ordinary course of business;
 then adjustments shall be made with respect to the Plan Shares credited to Members Accounts
pursuant to the Plan to the extent of any adjustment that is otherwise applicable to
shareholders of Nortel generally. If any event described under subsection (b) or (c) above
occurs, the board of directors of the Company may substitute for each Plan Share credited to
a Members Account pursuant to the Plan the number and kind of shares or other securities
into which outstanding Plan Shares are so changed or for which outstanding Plan Shares are
so exchanged. Following any adjustment under this Section 10.11, all references to Shares
under the Plan will be deemed to refer to the Shares as so adjusted or such other securities
into which the Shares have been changed or for which the Shares have been exchanged, as
applicable.10.12
    
    Effect Of Change In Control or Alteration or Substitution of Shares On Purchase
RightsIn the event of a Change in Control, the surviving continuing successor, purchasing
corporation, or parent corporation thereof, as the case may be (the Acquiring
Corporation), may assume the Companys rights and obligations under the Plan. If the
Acquiring Corporation elects not to assume the Companys rights and obligations under the
Plan, then the board of directors of the Company may (i) accelerate the end of the
then-current Offering Period to a date before the date of the Change in Control specified by
the board of directors of the Company, or (ii) return all previously deducted Employee
Contributions that have not been applied to the purchase of Shares, without interest.
 SECTION 11
 AMENDMENT AND TERMINATION OF THE PLAN
 11.1
    
    AmendmentThe board of directors of the Company may, in its absolute discretion, at any time and from
time to time, amend the Plan or any provision thereof without prior notice to or consent of
Members or any other person. The Committee may also amend the Plan at any time or from time
to time, provided that any such amendment will not materially increase the liability of the
Company or any Employer under the Plan. Any amendment of the Plan made pursuant to this
Section may be made for such reasons as the board of directors of the Company, or the
Committee, deems appropriate.




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-14- 
 11.2
    
    TerminationThe board of directors of the Company may, in its absolute discretion, terminate the Plan at
any time. Upon termination of the Plan, all Plan Shares held by the Plan Custodian and any
cash balances remaining in Members Accounts shall be distributed to the relevant Members.
No further Employee Contributions or Employer Payments to the Plan shall thereafter be made.11.3
    
    Withdrawal of EmployerAny Employer may withdraw from the Plan at any time upon written notice to the Company. If
an Employer withdraws from the Plan, all Plan Shares held by the Plan Custodian and any cash
balances remaining in the Members Accounts held for the benefit of Members who are
employees of the Employer shall be distributed in accordance with the terms of Section 9.
Any Employee Contributions not yet used to purchase shares under the Plan shall be returned
to such Employees, without interest.
 SECTION 12
 GENERAL PROVISIONS
 12.1
    
    No Additional Rights to Employment
 (a)
    
    The opportunity to participate in this Plan at any time does not form a part of
any persons contract of employment, nor does the existence of a contract of employment
between any person and any Employer give such person any right or entitlement to
participate in the Plan or any expectation that an opportunity to participate in the
Plan will be offered to the Member subject to any conditions or at all.(b)
    
    The rights and obligations of a Member under the terms of his or her contract
of employment with any Employer shall not be affected by participation in the Plan.(c)
    
    The opportunity to acquire Plan Shares pursuant to the Plan shall not afford a
Member or any Eligible Employee any rights or additional rights to compensation or
damages in consequence of the loss or termination of the Members office or employment
with any Employer for any reason whatsoever.(d)
    
    A Member shall not be entitled to any compensation for damages for any loss or
potential loss that he or she may suffer by reason of being or becoming unable to
acquire Plan Shares under the Plan as a consequence of the loss or termination of his
or her employment with any Employer for any reason (including, without limitation, any
breach of contract by the Members Employer) or in any other circumstances whatsoever.




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-15- 
 12.2
    
    LiabilityNeither Nortel nor any Employer shall be liable for:
 (a)
    
    the performance of Shares on the Stock Exchange at or during any period of
time;(b)
    
    income taxes or social security contributions payable in respect of Employer
Payments or Employee Contributions, except in the case of an Employer to the extent
that (i) the Employer is required by law to withhold any such amounts either from a
Members Eligible Earnings or from payments under the Plan, or (ii) the Employer (but
not the Employee) is liable for such payment under applicable law;(c)
    
    the release of any information regarding any Member by Nortel, the Company, any
other direct or indirect subsidiary or affiliate of Nortel, or the Plan Custodian, in
the course of administering the Plan; or(d)
    
    any consequential or other similar damages arising out of or related to a
purchase of Plan Shares under the terms of the Plan.
 12.3
    
    Members Agreement to be Bound by Plan TermsParticipation in the Plan by any Member shall be construed as acceptance by the Member of
the terms and conditions of the Plan and all rules and procedures adopted hereunder, and as
the Members agreement to be bound thereby.12.4
    
    Effect of MistakeIn the event of a mistake regarding eligibility or participation of an employee of any
Employer in the Plan, errors in payroll deductions, or the amount of Plan Shares allocated
to a Member, to the extent possible, an appropriate adjustment shall be made to rectify the
mistake.12.5
    
    IndemnificationBy electing to participate in the Plan, a Member agrees to indemnify:
 (a)
    
    the Members Employer; and(b)
    
    the Plan Custodian and any other person who is or becomes liable to account for
tax, social security contributions, or any other regulatory or statutory contributions
on behalf of that Member;
 against any amount of, or representing, tax, social security contributions or any other
regulatory or statutory contributions for which the Employer (or such other person) is
liable to account in respect or in consequence of the payment of Employer Payments, or the
purchase or sale of any Plan Shares, for the benefit of such Member and which (as between
the Member and the Employer or such other person) is the liability of the Member but which
the Employer or such other person cannot otherwise lawfully recover from the Member (whether
by way of deduction from payroll or otherwise).




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-16- 
 The Plan Custodian shall have the right to withhold Plan Shares held in a Members Account
until the Member has agreed to such arrangements for giving effect to such indemnity (which,
if appropriate may include an authority by the Member to his or her Employer to deduct and
withhold such amount from any future wages, salary or other payment to the Member).12.6
    
    Assignment, Exemption from Seizure and BankruptcyExcept as may otherwise be specifically provided by any applicable law, no right of a Member
under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge and any attempt by anyone to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge the same shall be void, and any Plan
Shares or money to which any person is entitled under the Plan are exempt from execution,
seizure and attachment.If, notwithstanding the foregoing, a Member is deprived by applicable law of interests in
Plan Shares or ceases to retain beneficial interest in the Plan Shares, then all rights
under the Plan will cease forthwith, no further Plan Shares will be allocated under the Plan
to that Member, and any Employee Contributions which have not been used to purchase Plan
Shares under the Plan shall be returned to such Member, without interest.12.7
    
    Physical, Mental or Legal Incapacity of the MemberIf any payment is to be made under the Plan to a minor or other person who is physically,
mentally or legally incompetent, the Plan Custodian shall pay the same to the parent or
guardian or such other person having legal custody of, or being the legally appointed
representative of, such person, to be applied by such parent, guardian, person having legal
custody or legally appointed representative for the benefit of such person, without the Plan
Custodian being further liable to see to the application thereof and so that any such
payment shall be a complete discharge of any liability under the Plan and of any Employer
therefor.12.8
    
    Governing Law and CaptionsThe Plan shall be governed by and construed in accordance with the laws of the Province of
Ontario and the federal laws of Canada applicable therein. Captions or titles set forth in
this Plan are for convenience only and shall not serve as the basis for interpretation or
construction of the Plan.12.9
    
    Stock Exchange RulesNotwithstanding any terms of the Plan to the contrary, the Plan shall be subject to and
limited by the rules, policies and other requirements of the Stock Exchange, in addition to
the limitations referenced in Section 9.6 hereof.




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-17- SECTION 13
 EFFECTIVE DATE AND TERM
 13.1
    
    Effective DateThe Plan shall become effective on the first day of the next calendar quarter following both
(i) approval by the shareholders of Nortel at a meeting of shareholders of Nortel or any
adjournment thereof, which meeting or any adjournment thereof shall occur within 12 months
before or after the date the Plan is adopted by the board of directors of the Company; and
(ii) approval by the board of directors of the Company at board meetings or by written
consents (in accordance with applicable provisions of the corporate articles, by-laws, and
applicable laws prescribing the method and degree of director approval). Any amendments to
the Plan shall become effective upon their adoption by the board of directors of the
Company, subject to approval by the shareholders of Nortel at the next meeting of
shareholders of Nortel or any adjournment thereof, if required, in accordance with
applicable provisions of the corporate articles, bylaws, applicable laws or the rules of the
Stock Exchange and otherwise. If the shareholders of Nortel do not approve the Plan, or any
amendments to the Plan requiring shareholder approval, the Plan or such amendments, as the
case may be, shall not be effective.The Plan was originally adopted by the board of directors on April 27, 2005 and approved by
the shareholders on June 25, 2005. The Plan was amended by the board of directors of Nortel
on July 29, 2005. The Plan was amended by the independent members of the board of directors
of Nortel on February 22, 2008, subject to shareholder approval.13.2
    
    TermThe Plan shall terminate on the date determined by the board of directors of the Company
pursuant to Section 11.2 hereof and no purchase of Plan Shares pursuant to Section 5 hereof
may be made under the Plan after the date of termination, but such termination shall not
affect any purchases pursuant to the Plan prior to such termination. In no event may Plan
Shares be purchased under the Plan after September 30, 2015.




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-1- SCHEDULE A
 CHANGE IN CONTROL
 Events Constituting Change in Control
 (a)
    
    any Person or group acquires beneficial ownership of securities of Nortel
representing more than 20% of the outstanding securities entitled to vote in the
election of directors of Nortel (collectively, the Voting Shares) other than in
connection with a Permitted Business Combination;(b)
    
    the consummation of a merger, amalgamation, business combination,
reorganization or consolidation or sale or other disposition of all or substantially
all of the assets of Nortel or any liquidation or dissolution of Nortel, including by
way of plan of arrangement (a Business Combination) unless, in any such case:
 (i)
    
    such Business Combination involves solely Nortel, and one and
more affiliated entities; or(ii)
    
    following completion of all steps involved in the transaction
or transactions pursuant to which the Business Combination is effected:
 (A)
    
    Persons who were the beneficial owners,
respectively, of the outstanding common shares of Nortel immediately
prior to such Business Combination beneficially own, directly or
indirectly, by reason of such prior ownership of common shares, more
than 50% of the then-outstanding voting shares of (x) the entity
resulting from such Business Combination (the Resulting Entity) or
(y) the Person that ultimately controls the Resulting Entity, whether
directly or indirectly (the Ultimate Parent); and(B)
    
    at least a majority of the members of the board
of directors of the Person resulting from such Business Combination (or
the Ultimate Parent) were members of the board of directors of Nortel
(the Nortel Board) at the earlier of the time of the execution of the
initial agreement providing for, or the action of the Nortel Board
approving, such Business Combination;
 (c)
    
    the persons who were directors of Nortel on the date hereof (the Incumbent
Directors) cease (for any reason other than death or disability) to constitute at




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-2- least a majority of the Nortel Board; provided, that, any person who was not a
director on the date hereof shall be deemed to be an Incumbent Director if such
person was elected or appointed to the Nortel Board by, or on the recommendation of
or with the approval of, at least two-thirds of the directors who then qualify as
Incumbent Directors either actually or by operation of this proviso, unless such
election, appointment, recommendation or approval was the result of any actual or
publicly threatened proxy contest for the election of directors; or
 (d)
    
    any other event which the Nortel Board determines in good faith could
reasonably be expected to give rise to a Change in Control resulting from situations
such as:
 (i)
    
    any Person acquiring a significant interest in Nortel; or(ii)
    
    the election of any Person to the Nortel Board in circumstances
in which management has not solicited proxies in respect of such election.
 Definitions
 (a)
    
    beneficial ownership means ownership at law or in equity and, for the
purposes of this Plan, includes beneficial ownership as interpreted in accordance
with Subsections 1(5) and (6) and Section 90 of the Securities Act(Ontario) as in
force as of July 26, 2001 (the OSA);(b)
    
    control or controls means, with respect to any Person, the direct or
indirect ownership of voting securities of such Person that carry with them in the
aggregate more than 50% of the votes for the election of directors of such Person;(c)
    
    group means a Person and one or more other Persons who are acting jointly or
in concert with such Person and, for the purposes of this Plan, acting jointly or in
concert shall be interpreted in accordance with Subsection 91(1) of the OSA;(d)
    
    Permitted Business Combination means a Business Combination described in
Paragraph 1(b)(i) or 1(b)(ii) above; and(e)
    
    Person includes any individual, legal or personal representative,
corporation, company, partnership, syndicate, unincorporated association, trust,
trustee, government body, regulatory authority or other entity, howsoever designated or
constituted.