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                                                                     EXHIBIT 4.5


                      Dated the 11th day of December 2000






                        NORTEL NETWORKS (IRELAND) LIMITED
                                                       one part







                             MERCER TRUSTEES LIMITED
                                                       other part





                  TRUST DEED AND RULES






                  THE NORTEL NETWORKS IRELAND
                  SHARE PARTICIPATION SCHEME






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THIS TRUST DEED is made the 11th day of December 2000


BETWEEN

(1)      NORTEL NETWORKS (IRELAND) LIMITED whose registered office is situated
         at Mervue Business Park, Mervue, Galway (hereinafter called "the
         Company") of the one part; and

(2)      MERCER TRUSTEES LIMITED whose registered office is situated at St.
         James House, Adelaide Road, Dublin 2 (hereinafter called "the Trustees"
         which expression shall include the trustee or trustees for the time
         being hereof) of the other part.

WHEREAS:

(A)      This Trust Deed is supplemental to a resolution of the Board of
         Directors of the Company passed on the day of 2000 whereby the
         Directors determined to establish the Nortel Networks Ireland Share
         Participation Scheme (hereinafter called "the Scheme") as an employees'
         share scheme for approval by the Revenue Commissioners in accordance
         with Chapter 1 of Part 17 and Schedule 11 of the Taxes Consolidation
         Act 1997 ("the Act").

(B)      In this Trust Deed, unless the context otherwise requires, words and
         expressions defined in the Rules shall bear the same meanings and the
         provisions of the Rules set out in the Schedule hereto shall be deemed
         to be incorporated herein.

(C)      The Company is ultimately owned and controlled by the Parent Company
         (within the meaning of that expression contained in Section 432 of the
         Act).

(D)      The Trustees have agreed to act as the first trustees of the Scheme.


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NOW THIS TRUST DEED WITNESSES and it is hereby declared and agreed as follows:-

1.       PARTICIPATING COMPANY CONTRIBUTIONS

1.1      Each Participating Company shall pay to the Trustees the amount due
         from it pursuant to Rule 3 for the purpose of the acquisition of Shares
         by the Trustees in accordance with the Trust Deed and Rules together
         with any other amount required to cover any costs, charges and expenses
         incurred in such acquisition and any other expenses and charges
         incurred by the Trustees in the operation of the Scheme.

1.2      Each Participating Company shall provide the Trustees with all
         information which is necessary for the purposes of the Scheme and the
         Trustees shall be entitled to rely on such information in good faith
         without further enquiry.

1.3      Subject as hereinafter provided the Trustees hereby covenant with each
         Participating Company to apply such sums received for that purpose in
         the acquisition of Shares in accordance with the Rules and to hold the
         same once appropriated under trust for the respective Participants
         entitled thereto.

1.4      The Trustees shall hold:

         1.4.1    any unutilised cash balance arising under paragraph 1.3
                  hereof; and

         1.4.2    any income therefrom to be applied in accordance with Clause
                  14 hereof.



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2.       DECLARATION OF TRUST

The Trustees shall hold Scheme Shares upon trust for the benefit of the
Participants to whom Scheme Shares have been appropriated in accordance with the
Rules, provided always that the Trustees:

2.1      shall not dispose of any Scheme Shares whether by transfer to a
         Participant or otherwise before the end of the Period of Retention
         applicable thereto except in the circumstances mentioned in Section
         511(6)(a), (b) or (c) of the Act;

2.2      shall not dispose of any Scheme Shares after the end of the Period of
         Retention (but before the Release Date) applicable thereto except
         pursuant to Rule 5.1 nor in such a way that such a transaction would
         involve a breach of that Participant's obligations under Section
         511(4)(c) or (d) of the Act; and

2.3      shall deal with any right conferred in respect of Scheme Shares to be
         allotted other shares, securities or rights of any description only in
         accordance with Paragraph 17(b) of Schedule 11 to the Act and as
         directed by or on behalf of the Participant or any person in whom the
         beneficial interest in his shares is for the time being vested.

3.       DISTRIBUTION OF TRUST FUNDS

Subject to any such direction as is referred to in Section 513(3) of the Act,
the Trustees shall pay over to a Participant any money or money's worth received
by them in respect of or by reference to any of his Scheme Shares other than
money consisting of a sum referred to in Section 511(4)(c) of the Act or money's
worth consisting of New Shares within the meaning of Section 514 of the Act.

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4.       APPROPRIATION OF SCHEME SHARES

As soon as practicable after any Scheme Shares have been appropriated to a
Participant the Trustees shall give him notice in writing of the appropriation:

4.1      specifying the number and description of those Shares; and

4.2      stating their Initial Market Value and their Appropriation Date.


5.       MAINTENANCE OF RECORDS

The Trustees shall prepare and keep all such accounts and records as may be
required for the purpose of the Scheme and may, as agreed between the Trustees
and the Company, submit accounts to the Company and the Company may cause such
accounts to be made up and audited by qualified accountants. In particular the
Trustees shall:

5.1      maintain such records as may be necessary to enable them to carry out
         their obligations under Chapter 1 of Part 17 of the Act;

5.2      inform a Participant who becomes liable to income tax under Schedule E
         in relation to the operation of the Scheme of any facts of which they
         are aware relevant to the determination of that liability; and

5.3      be liable for any liability to tax properly incurred by the Trustees in
         the course of the operation of the Scheme.



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6.       PARTICIPATING COMPANIES

The Directors may at any time:

6.1      direct that any Subsidiary, not being a party to the Trust Deed, but
         otherwise eligible to be a Participating Company, shall, upon entering
         into a deed supplemental hereto in such form as the Directors and the
         Trustees shall require, become bound by the provisions hereof; or

6.2      by deed supplemental hereto, to which the Trustees shall be a party,
         declare that any Participating Company shall cease to be bound by the
         provisions hereof.

7        REPLACEMENT OF COMPANY/PARENT COMPANY

7.1      In any of the following events:-

         7.1.1    If the Company shall cease to carry on business and another
                  body corporate person or firm (whether in contemplation of or
                  after such cessation of business) enters into an agreement
                  with the Trustees to perform the obligations of the Company
                  under the Trust Deed and the Rules; or

         7.1.2    If the business or a part of the business of the Company is
                  acquired by or vested in any other body corporate person or
                  firm and such other body corporate person or firm enters into
                  an agreement with the Trustees or is bound by virtue of or
                  pursuant to any statutory provision or instrument made
                  thereunder or any order of a court or otherwise to perform the
                  said obligations; or

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         7.1.3    If the Company shall be dissolved by virtue of or pursuant to
                  any statutory provision or any order of the Court made
                  thereunder or otherwise and another body corporate person or
                  firm is bound by virtue of or pursuant to any statutory
                  provision or any order of the Court made thereunder or
                  otherwise to perform the said obligations; or

         7.1.4    If the Company shall amalgamate or enter into any arrangement
                  having the effect of amalgamation with any other body
                  corporate, person or firm or if the Company desires to be
                  discharged of its duties as the Company and any other body
                  corporate, person or firm enters into an agreement with the
                  Trustees to perform the said obligations;

         then in any such event by deed supplemental hereto in such form as the
         Company and the Trustees shall require the Company shall be thereby
         released from all the said obligations and such other body corporate
         person or firm as aforesaid shall be deemed to be substituted for the
         Company as the person liable to perform the said obligations and the
         Trust Deed and the Rules shall henceforth have effect as if such other
         body corporate person or firm had been a party to and had executed the
         Trust Deed in place of the Company and as if the reference to the
         Company in the Trust Deed and in the Rules were references to such
         other body corporate person or firm.

7.2      If the Parent Company divests itself of its shareholding in the Company
         and that shareholding is acquired by or vested in any other body
         corporate person or firm the Company and the Trustees may amend the
         definition of "Parent Company" in Rule 1 of the Rules in accordance
         with Clause 21 hereof.

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8.       TRUSTEE LIABILITY AND INDEMNITY

8.1      The Trustees shall not be liable to satisfy any monetary obligations
         under the Scheme (including but without prejudice to the generality of
         the foregoing any monetary obligations to Participants) beyond the sums
         of money (including income) from time to time in their hands or under
         their control as Trustees and properly applicable for that purpose.

8.2      No Trustee for the time being of the Scheme and no director or employee
         of any corporate trustee shall be responsible chargeable or liable in
         any manner whatsoever for or in respect of any loss of or any
         depreciation in or default upon any of the investments securities
         stocks or policies in or upon which any part of the Scheme may at any
         time be invested or for any delay which may occur from whatever cause
         in the investment of any moneys belonging thereto or for the safety of
         any securities or documents of title deposited by the Trustees for safe
         custody or for the exercise of any discretionary power vested in the
         Trustees by the Trust Deed (including any act or omission by any
         committee appointed by the Trustees) or by reason of any other matter
         or thing except fraud or deliberate culpable disregard of the interests
         of all or of any of the beneficiaries under the Scheme.

8.3      Each of the Trustees and each director of any corporate trustee shall
         be indemnified by the Participating Companies against all liabilities
         incurred by such Trustee in the execution of the trusts of and in the
         management and administration of the Scheme other than liabilities
         arising as a consequence of fraud or deliberate and culpable disregard
         of the interests of all or any of the beneficiaries under the Scheme or
         (in the case of any Trustee who is engaged in the business of providing
         a trustee service for a fee) negligence.


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9.       COSTS AND EXPENSES

9.1      The costs, charges, expenses and other liabilities of the establishment
         of the Scheme and of the preparation and execution of the Trust Deed
         and the Rules shall be borne by the Company or, if the Directors
         otherwise determine, by the Participating Companies.

9.2      All costs, charges, expenses and other liabilities of, and incidental
         to, the administration, operation and determination of the Scheme
         (including any remuneration of the Trustees and any tax or duty for
         which the Trustees may be accountable to the Revenue Commissioners
         arising from or in connection with the Scheme) shall be borne by the
         Participating Companies in proportion to the Scheme Shares for the time
         being appropriated to their respective Participants or otherwise as the
         Directors may determine if and to the extent that the same cannot
         properly be paid by the Trustees out of funds in their hands available
         for the purpose.

10.      TRUSTEES' POWERS AND DISCRETIONS

The Trustees shall have the following powers and discretions in addition to
those conferred upon them by general law:

10.1     full power and discretion to agree with the Company all matters
         relating to the operation and administration of the trusts of this
         Trust Deed and so that no person claiming any interest under such
         trusts shall be entitled to question the legality and correctness of
         any arrangement or agreement made between the Company and the Trustees
         in relation to such operation and administration;

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10.2     power to arrange for the Company to account to the Revenue
         Commissioners or other authority concerned for any amounts received by
         the Trustees pursuant to the Scheme and required to be paid to the
         Revenue Commissioners in respect of income tax or any other payment
         required by statute; and

10.3     power by resolution:

         10.3.1   to authorise the manner in which cheques and other documents
                  shall be signed on their behalf; and

         10.3.2   to delegate the signing of such cheques and documents to such
                  persons as they shall think fit.

11.      DIRECTIONS TO TRUSTEES

The Trustees shall comply with any reasonable directions given by the Directors
pursuant to the Trust Deed and the Rules and shall not be under any liability in
respect thereof to any Participating Company. In no event may the Directors
direct the Trustees to distribute any Share or Scheme Share to any Participating
Company. Each Participating Company agrees to indemnify the Trustees in respect
of any liability arising to any Participant as a result of the Trustees
complying with any directions given by the Directors pursuant to this Trust Deed
and the Rules.

12.      INDEPENDENCE OF THE TRUSTEES

The Trustees shall administer the Scheme impartially and in strict accordance
with the Trust Deed and the Rules. The Company hereby declares and confirms the
independence of the Trustees in the exercise of all their functions and
obligations under the Scheme and undertakes that it shall not seek to influence
them in any manner, save in such manner as specifically provided for in the
Rules or the Trust Deed.


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13.      RETIREMENT, REMOVAL AND APPOINTMENT OF TRUSTEES

13.1     Any Trustee may retire from the trusts hereby constituted at any time
         by giving to the Company and the remaining Trustees (if any) not less
         than three months' written notice and the retiring Trustee shall upon
         the expiry of such notice cease to be a Trustee and shall not be
         responsible for any costs occasioned by such retirement and cessation.
         In the event that any Trustee who wishes to retire is the sole Trustee
         of the Plan or in the event that upon such resignation taking effect
         there would be only one Trustee of the Plan and that Trustee is not a
         body corporate the Company shall appoint a new Trustee on or before the
         date when such retirement is to take effect.

13.2     Where a body corporate is acting as sole Trustee the Company may by
         resolution of the Directors, with the prior written approval of the
         Revenue Commissioners, remove that Trustee from office and upon the
         passing of such resolution the removal shall be immediately effective.
         Alternatively the Company may by deed remove a Trustee from office.

13.3     The Company may by deed appoint a new Trustee or Trustees in place of
         any Trustee or Trustees who retire or are removed from office under
         paragraph 13.1 or 13.2 hereof and may by deed appoint an additional
         Trustee or Trustees provided that the Company shall by deed appoint a
         Trustee or Trustees in place of a sole Trustee who retires or is
         removed from office under paragraph 13.1 or 13.2 hereof.

13.4     The minimum number of Trustees shall be three unless a body corporate
         is or is appointed a Trustee in which case that body corporate may be
         the sole Trustee or may act jointly with one or more individuals who
         are appointed as Trustees of the Scheme.


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13.5     If the Company shall not appoint a new Trustee or new Trustees with
         effect from the date of expiry of the notice referred to in paragraph
         13.1 hereof the Trustees may exercise such power by executing an
         instrument in writing signed by them as is necessary to appoint a new
         Trustee or new Trustees.

13.6     The Trustees (and if more than one, each of them) shall be resident in
         the Republic of Ireland for the purposes of the Act.


14       THE RESIDUAL FUND

The Trustees shall hold and apply the Residual Fund as follows:-

14.1     in paying their costs, charges and expenses incurred in the operation
         of the Scheme as they in their absolute discretion shall determine; and

14.2     subject thereto, if so instructed by the Directors, to acquire Shares
         in accordance with Rule 3 and to hold the same once appropriated in
         accordance with the provisions of the Scheme or in the case of Shares
         held as part of the Residual Fund, to appropriate them in accordance
         with Rule 3; and

14.3     subject as aforesaid any moneys at any time which are not immediately
         required to be applied by the Trustees in a particular manner may be
         placed on deposit (either with or without interest at the discretion of
         the Trustees) with any bank or other deposit taking institution in the
         Republic of Ireland either with or without security as the Trustees may
         determine; and

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14.4     upon the determination of the Scheme and to the extent that the
         Residual Fund has not been applied as aforesaid the Trustees shall sell
         any Shares comprised in the Residual Fund for the best consideration in
         money reasonably obtainable and shall pay or transfer the proceeds of
         such sale together with any other moneys then comprised in the Residual
         Fund to any Participating Companies in proportion to the total moneys
         provided by each of them to the Trustees.

15       TRUSTEE REMUNERATION FOR SERVICES

15.1     Any Trustee being an individual shall be entitled to receive and retain
         as remuneration for his services hereunder such sum or sums as may from
         time to time be agreed with the Company.

15.2     Any Trustee, being a solicitor, accountant, stockbroker or engaged in
         any other profession or business, shall be entitled to be paid all
         reasonable professional or proper charges for services rendered
         including acts which such Trustee, not being engaged as aforesaid,
         could have done personally.

15.3     Any Trustee, being a body corporate (whether or not a trust
         corporation), may charge and be paid such reasonable remuneration or
         charges as shall from time to time be agreed in writing between the
         Company and such body corporate and any such body corporate (being a
         bank) shall be entitled (without being liable to account for any profit
         or advantage so obtained) to act as banker and perform any services in
         relation to the Scheme on the same terms as would be made with a
         customer in the ordinary course of its business as a banker.

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16.      TRUSTEES WHO ARE PARTICIPANTS

Any Trustee, otherwise eligible to be a Participant, may be so and may retain
for his absolute benefit all the interest to which he is entitled as a
Participant in any Scheme Shares acquired or received for him and any other
money or money's worth accruing to him as such and exercise all rights to which
he is entitled as a Participant.

17.      TRUSTEES WHO ARE DIRECTORS

Any Trustee who shall be or become a Director or holder of any other office or
employment in the Company, may retain for his own absolute benefit any fees or
remuneration received by him in connection with such office or employment
notwithstanding that his appointment to or retention of such office or
employment may be directly or indirectly due to the exercise or non-exercise of
any votes in respect of any stock, shares or other securities in the Parent
Company held by the Trustees or other persons on their behalf under the trusts
of the Scheme.

18.       TRUSTEES WHO OWN SHARES

No Trustee, nor any holding company of a corporate Trustee, nor any subsidiary
of such holding company, nor any director or officer of a body corporate acting
as Trustee shall be precluded from underwriting, purchasing, holding, dealing in
and disposing of any stock, shares or other securities whatsoever of any
Participating Company or any subsidiary or holding company thereof or any
subsidiary of any such holding company or from otherwise at any time contracting
or entering into any insurance, financial or other transactions with any such
company or being interested in any such transaction or accepting and holding the
trusteeship of any debenture stock or other securities of any such company
neither shall such Trustee, holding company, subsidiary, director or officer be
liable to account for any profit made by him thereby or in connection therewith.


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19.       TRUSTEES MEETINGS

19.1     In the event of the appointment of Trustees other than a body corporate
         as sole Trustee:-

         19.1.1   the Trustees may at any time but shall at least once in every
                  year meet together for the despatch of business and may
                  adjourn and otherwise regulate their meetings as they think
                  fit and the Trustees may elect one of their number to be
                  chairman of their meeting provided that in the event of
                  equality of votes on the election of a chairman he shall be
                  chosen by lot;

         19.1.2   all business brought before a meeting of the Trustees shall be
                  decided by a majority of the votes of the Trustees present and
                  voting thereon and, in the case of equality of votes, the
                  chairman of the meeting shall have a second or casting vote;

         19.1.3   a resolution in writing signed by all of the Trustees shall be
                  as effectual as if it had been passed at a meeting of the
                  Trustees and may consist of one or more documents in similar
                  form each signed by one or more of the Trustees; and

         19.1.4   two Trustees (or such other number agreed by the Trustees)
                  present at a meeting of the Trustees of which notice has been
                  given to all Trustees shall form a quorum.

19.2     The Trustees shall cause proper minutes to be kept and entered in a
         book provided for the purpose of all their resolutions and proceedings
         and any such minutes shall be signed by the chairman of the next
         meeting.


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20.      DEALING WITH TRUST MONIES

20.1     The Trustees may, without prejudice to their obligations under Section
         516 of the Act, in any particular case or cases, decide not to commence
         or pursue proceedings for the recovery of any moneys due to them from
         any Participant and shall not be responsible for any loss incurred by
         their so doing.

20.2     Valid and effectual receipts and discharges for any moneys or other
         property payable, transferable, or deliverable to the Trustees or any
         of them may be given by a Trustee who is a body corporate or by any one
         Trustee to whom such duty may have been delegated pursuant to paragraph
         20.5 hereof or by any person from time to time nominated by the Company
         and authorised in writing for the purpose by all the Trustees.

20.3     The Trustees may from time to time appoint for the proper
         administration and management of the Scheme such secretarial or
         executive officers or staff or other persons as they consider desirable
         and as the Directors shall approve on such terms as they think fit and
         a Trustee hereof being a body corporate (whether or not a trust
         corporation) may act by its proper officers and may by its proper
         officers have and exercise all powers, trusts and discretions vested in
         it hereunder.

20.4     The Trustees may from time to time in writing delegate any business and
         the exercise of any of the duties imposed on them by the Scheme to any
         one or more of their number.

20.5     The Trustees may employ and pay for the services of such registrars,
         solicitors, accountants, bankers or other professional or business
         advisers as they consider desirable to advise on any business to be
         done in connection with the Scheme or for the proper administration and
         management of the Scheme or otherwise in connection therewith.


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20.6     The Trustees may at any time cause any part of the trust property to be
         deposited for safekeeping with any one or more of the Trustees or any
         other persons (including any company or corporation) on behalf of the
         Trustees and may pay any expenses in connection therewith.

20.7     No Trustee shall be liable or responsible for any loss to the trust
         property which may be occasioned as a result of the exercise of the
         foregoing powers except to the extent that such loss arises as a result
         of any fraud, wilful default or negligence on the part of such Trustee.

21.      AMENDMENT OF TRUST DEED AND RULES

21.1     The Company with the consent of the Trustees may at any time and from
         time to time by deed supplemental hereto modify, alter, amend or extend
         the Scheme in any respect (such modification, alteration, amendment or
         extension being referred to in this Clause as an "amendment") provided
         that

         21.1.1   no amendment shall alter to the disadvantage of a Participant
                  his rights in respect of any Scheme Shares appropriated before
                  the date of such amendment;

         21.1.2   no amendment shall be made which would or might infringe any
                  rule against perpetuities or which could result in the Scheme
                  ceasing to be an Approved Scheme;

         21.1.3   no amendment shall take effect unless prior written approval
                  of the Revenue Commissioners to the Scheme as amended thereby
                  shall have first been obtained in accordance with paragraph
                  5(2) of Schedule 11 to the Act.

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21.2     The Company may, by resolution, subject to sub-paragraph 21.1.2 of this
         Clause and without otherwise obtaining the prior approval thereto of
         any other person but after consulting the Trustees, modify or alter or
         amend the Scheme in any way which may be necessary in order to secure
         the initial approval of the Scheme by the Revenue Commissioners under
         Part 2 of Schedule 11 to the Act or to maintain such approval.

22.      TERMINATION OF TRUST

The Scheme and the trusts hereby created shall be determined on the earlier of
the following:-

22.1     the date on which the Directors resolve to terminate the Scheme which
         they shall be entitled to do only on a date on which there are no
         Scheme Shares or Shares held pursuant to this Trust Deed: or

22.2     the expiry of a period of twenty-one years after the death of the last
         survivor of the issue living on the date hereof of his late Britannic
         Majesty King George V.

23.      DISPUTES

All disputes and differences arising out of the Scheme or otherwise in
connection therewith may be referred by the Trustees to arbitration pursuant to
the provisions of the Arbitration Acts 1954 and 1980 and any Participant so
affected shall submit to such arbitration.

24.      GOVERNING LAW

This Trust Deed shall be governed by and construed in accordance with the law of
the Republic of Ireland.

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IN WITNESS WHEREOF this Trust Deed has been executed by the parties hereto the
day and year first herein written :

PRESENT when the Common Seal of
NORTEL NETWORKS IRELAND LIMITED
was affixed hereto :-

__________________________________ Director

__________________________________ Director/Secretary

PRESENT when the Common Seal of
MERCER TRUSTEES LIMITED
was affixed hereto :-

__________________________________ Director

__________________________________ Director/Secretary


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                                 FIRST SCHEDULE

                      RULES OF THE NORTEL NETWORKS IRELAND

                           SHARE PARTICIPATION SCHEME

1.       DEFINITIONS

         In these Rules and in the Trust Deed:

1.1      The following words and expressions shall have the following meanings:

         "Act" the Taxes Consolidation Act, 1997.

         "Announcement Date" the day or days following the Cut-Off Dates in each
         year in which the Company notifies each Eligible Employee of his
         entitlement under the Scheme.

         "Appropriate Percentage" the percentage of the Locked-in Value of a
         Participant's shares chargeable to income tax under Schedule E computed
         in accordance with section 511(3) of the Act.

         "Appropriation Date" in respect of any Scheme Share not being a New
         Share, the date on which it is appropriated to an Eligible Employee
         pursuant to Rule 3.2, and in respect of any New Share the date on which
         it is deemed to have been appropriated pursuant to Rule 6.5.

         "Approved Scheme" a Scheme approved by the Revenue Commissioners for
         the purposes of Chapter 1, Part 17 of the Act and Schedule 11 thereof.

         "Auditors" the Auditors for the time being of the Company.

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         "Basic Salary" the remuneration of an Eligible Employee for a Year of
         Assessment including shift differentials, paid holidays and sick leave
         but excluding overtime and any other fluctuating emoluments.

         "Board of Directors" the board of directors for the time being of the
         Company or a duly authorised committee or officer appointed by them for
         the purposes of administering the Scheme.

         "Capital Receipt" the meaning given to that expression by section 513
         of the Act.

         "Company" Nortel Networks (Ireland) Limited

         "Corresponding Shares" the meaning that is given to that expression by
         Section 514(1) of the Act.

         "Cut-off Date" 1st of July in each year or such other date or dates as
         the Company shall from time to time, with the approval of the Revenue
         decide.

         "Directors" the board of directors for the time being of the Company or
         a duly authorised committee or officer appointed by them for the
         purposes of administering the Scheme.

         "Eligible Employee" at any Cut-Off Date any person who:

         (i) (a)  is, or has been an employee of a Participating Company
                  including a full-time director, and

             (b)  is, or has been, chargeable to tax under Schedule E in respect
                  of that employment, or

         (ii)     is any other employee of a Participating Company, including a
                  full-time Director, who has a contract of employment with such
                  a Participating Company and has been nominated by the
                  Directors for participation in the Scheme


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<PAGE>   22

         provided that such person is not ineligible to become a Participant by
         virtue of the provisions of Part 4, Schedule 11 of the Act.

         "Entitlement" the amount of each Eligible Employee's entitlement shall
         be determined in accordance with the Third Schedule to the Trust Deed
         or on such other basis as may, from time to time, be agreed in writing
         with the Revenue Commissioners provided that

         (i)      an Eligible employee shall only have such entitlement if he is
                  employed by a Participating Company on the relevant
                  Appropriation Date; and

         (ii)     an Eligible Employee who, on the relevant Appropriation Date
                  is ineligible to participate by virtue of Part 4 of Schedule
                  11 to the Act shall have no such entitlement; and

         (iii)    all Eligible Employees shall be entitled to participate in
                  this scheme on similar terms subject to paragraph 4(2) of Part
                  2 of Schedule 11 to the Act.

         "Initial Market Value" the market value of a share (calculated in
         accordance with section 548 of the Act) on the date on which the shares
         are appropriated, or on such earlier date(s) as has been agreed in
         writing with the Revenue Commissioners pursuant to section 510(2)(b) of
         the Act.

         "Invitation Period" such period following the relevant Cut-Off Date as
         the Directors shall prescribe for the purposes of Rule 2 for the
         completion and return of contracts being not less than 14 days.

         "Locked-in Value" the meaning given to that expression by section
         512(1) of the Act.

         "New Shares" the meaning given to that expression by section 514(1) of
         the Act.


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         "Ordinary Shares" common stock of or such other security of the Parent
         Company which satisfies the provisions of Part 3 of Schedule 11 to the
         Act.

         "Parent Company" Nortel Networks Corporation whose registered office is
         situated at 8200 Dixie Road, Suite 100, Brampton, Ontario, L6T 5P6,
         Canada.

         "Participant" any person on whose behalf the Trustees hold a Scheme
         Share including where the context requires any person in whom an
         interest in Scheme Shares or an entitlement thereto becomes vested.

         "Participating Company" any company being the Company or a Subsidiary
         which is for the time being bound by the provisions of the Trust Deed
         other than in its capacity as Trustee hereof.

         "Period of Retention" the meaning given to that expression by section
         511(1)(a) of the Act.

         "Profit Sharing Period" any period not exceeding 12 months commencing
         on a Cut-Off Date and ending on the next following Cut-Off Date.

         "Release Date" the meaning given to that expression by section 511(2)
         of the Act.

         "Residual Fund" means all moneys or Shares directed to be held as part
         of the Residual Fund or for which no specific provision is made (other
         than under Clause 14) and the income (if any) arising therefrom all of
         which shall be held in accordance with Clause 14.

         "Rules" these rules with, and subject to, any modifications,
         alterations, amendments or extensions hereto for the time being in
         force.

                                                                              22
<PAGE>   24

         "Scheme" means The Nortel Networks Ireland Share Participation Scheme
         constituted by the Trust Deed.

         "Scheme Shares" any Share of common stock or other security in the
         Parent Company which has been appropriated or has been deemed to have
         been appropriated under the Scheme and is for the time being held by
         the Trustees on behalf of a Participant.

         "Shares" fully paid Ordinary Shares of the Parent Company which comply
         with the provisions of Part 3, Schedule 11 of the Act and where the
         context requires shall refer to a single share.

         "Subsidiary" any subsidiary of the Company which is controlled by the
         Company, control being construed in accordance with section 432 of the
         Act.

         "Trust Deed" the trust deed constituting the Scheme with any
         modifications and variations thereto for the time being in force.

         "Trustees" the trustee or trustees for the time being of the Scheme

         "Year of Assessment" the meaning given to that expression by section
         2(1) of the Act.

1.2      Words importing the singular shall include the plural and vice versa
         and words importing the masculine shall include the feminine.

1.3      Any reference to any statute (or a particular Part, Chapter or Section
         thereof) shall mean and include any statutory modification or
         re-enactment thereof for the time being in force and any regulations
         made thereunder.

2.       CONDITIONS OF PARTICIPATION


                                                                              23
<PAGE>   25

2.1      Each Eligible Employee shall, on each occasion on which the Directors
         intend to operate the Scheme, be offered participation by the Directors
         in the Scheme as soon as is practicable after the relevant Cut-Off
         Date.

2.2      Those Eligible Employees who wish to participate in the Scheme shall
         within a period of fourteen days after receipt of the notification
         referred to above, or such other period as the Company shall allow,
         return to the Company a form of acceptance and a contract of
         participation (included in the Schedule to the Rules) duly signed
         agreeing the terms and conditions set out therein.

2.3      The contract shall be addressed to the Company and the Trustees and
         shall be signed by the Eligible Employee and returned to the Company.
         An Eligible Employee shall not be entitled to an appropriation of
         Scheme Shares unless he has completed a contract which is binding in
         respect of the relevant Appropriation Date.

2.4      A signed contract shall bind the Eligible Employee in contract with the
         Company and the Trustees:

         (i)      to permit his Scheme Shares to remain in the hands of the
                  Trustees throughout the Period of Retention;

         (ii)     not to assign, charge or otherwise dispose of the beneficial
                  interest in his Scheme Shares during that period;

         (iii)    if he directs the Trustees to transfer the ownership of his
                  Scheme Shares to him at any time before the Release Date, to
                  pay to the Trustees before the transfer takes place a sum
                  equal to income tax at the standard rate on the appropriate
                  percentage of the Locked-in Value of the Scheme Shares at the
                  time of direction, and

         (iv)     not to direct the Trustees to dispose of his Shares at any
                  time before the Release Date in any other way except by sale
                  for

                                                                              24

<PAGE>   26

                  the best consideration in money that can reasonably be
                  obtained at the time of sale.

3.       ALLOCATION OF FUNDS, ACQUISITION AND APPROPRIATION OF SHARES

3.1      Each Participating Company shall on or before each Appropriation Date
         (or at such other time as shall be agreed by the Participating Company
         and the Trustees) pay to the Trustees the aggregate of the amounts due
         following the completion and return of contracts in accordance with
         Rule 2 by such Eligible Employees employed by it.

3.2      As soon as reasonably practicable after the receipt from the
         Participating Companies of the amounts referred to in Rule 3.1 above
         the Trustees will apply the aggregate of such amounts in the
         acquisition of Shares for appropriation to such Eligible Employees. The
         Shares so acquired for appropriation shall be appropriated to each such
         Eligible Employee on the basis that the aggregate Initial Market Value
         of the Shares appropriated to him is as nearly as possible equal to the
         amount of his Entitlement that has been paid to the Trustees. The
         aggregate Initial Market Value of shares that may be appropriated to
         any one Participant in any one Year of Assessment shall not exceed the
         amount, for the time being, specified in paragraph 3(4) of Part 2 of
         Schedule 11 of the Act.

3.3      Where the Trustees are unable to purchase sufficient Shares to satisfy
         in full appropriations pursuant to Rule 3.2 the Trustees shall reduce
         the appropriation pro-rata.

3.4      In the event that a portion of the Shares acquired by the Trustees
         carries any right not attaching to all such Shares the Trustees shall
         appropriate those Shares among Eligible Employees as nearly as possible
         in the same proportions as provided in Rule 3.2 above.

3.5      As soon as practicable after any Scheme Shares have been appropriated
         by the Trustees to a Participant in accordance with the

                                                                              25
<PAGE>   27

         Rules, the Trustees shall give the Participant notice in writing of the
         appropriation specifying the number and description of Scheme Shares
         appropriated, their Initial Market Value and the date on which such
         Scheme Shares were appropriated.

3.6      The Trustees shall sell any Shares which they do not appropriate on an
         Appropriation Date under this Rule within eighteen months of the date
         of acquisition for the best consideration in money reasonably
         obtainable at the time and retain the net proceeds of sale in
         accordance with Clause 14 of the Trust Deed.

3.7      If at any time following the date on which the Trustees are entered on
         the Parent Company's register of members Shares have not for the time
         being been appropriated to any Participant and the Trustees shall in
         respect of such Shares:-

         3.7.1    receive any dividends or other distributions; or

         3.7.2    become entitled to any other rights to be allotted securities
                  in the Parent Company (other than an issue to capitalisation
                  shares of the same class as Shares then held by the Trustees
                  pending an appropriation which capitalisation shares shall be
                  retained by the Trustees and shall form part of the Shares to
                  be appropriated)

         then the Trustees shall, in the case of Rule 3.7.2 above and of any
         distribution not consisting of cash use their best endeavours to sell
         the rights or distributions concerned for the best consideration in
         money reasonably obtainable at the time and in the case of Rule 3.7.1
         and Rule 3.7.2. shall retain the monies concerned in the Residual Fund.

3.8      No Shares shall be appropriated to any Eligible Employee after 18 years
         from the date of death of the last survivor of the issue living on the
         date of the Trust Deed of his late Britannic Majesty King

                                                                              26
<PAGE>   28

         George V.

3.9      The Directors may determine at any Cut-Off Date that there shall be no
         entitlements and may so decide at any subsequent Cut-Off Date.



4.       LIMITATIONS

         The maximum number of Shares that may be appropriated to any one
         Participant in any Year of Assessment shall be determined by
         legislation for the time being in force as stated in Schedule 11 of the
         Act.

5.       CONDITIONS OF RETENTION AND DISPOSAL

5.1      Scheme Shares shall subject as hereinafter provided in this Rule be
         held by the Trustees until the date on which the Participant concerned
         directs the Trustees:

         5.1.1    to sell his Scheme Shares, or

         5.1.2    to transfer the legal ownership of Scheme Shares to him.

5.2      A Participant shall not be entitled to give any direction under Rule
         5.1 above or to assign or charge or otherwise dispose of his beneficial
         interest in any Scheme Shares before the end of the Period of Retention
         applicable to such Scheme Shares except in the circumstances mentioned
         in section 511(6)(a), (b) or (c) of the Act.

5.3      Subject to Rule 5.2 above, the Trustees shall disregard any direction
         given in respect of the disposal or transfer of a Participant's Scheme
         Shares before the end of the Period of Retention and shall not be
         required or bound to act in accordance therewith if to their knowledge
         such Participant is or would following implementation

                                                                              27
<PAGE>   29

         of such direction be in breach of his obligations in respect of such
         Scheme Shares under Rule 5.2 above.

6.       ISSUE OR REORGANISATION

6.1      A Participant shall not be prevented by Rule 5 above from:

         6.1.1    directing the Trustees to accept an offer for any of his
                  Shares (hereinafter referred to as "the Original Shares") if
                  the acceptance or agreement will result in a new holding,
                  within the meaning of section 584 of the Act, being equated
                  with the Original Shares for the purposes of Capital Gains
                  Tax, or

         6.1.2    directing the Trustees to agree to a transaction affecting his
                  Shares or such of them as are of a particular class if the
                  transaction would be entered into pursuant to a compromise,
                  arrangement or scheme applicable to or affecting:

                  (i)      all the ordinary share capital of the Parent Company
                           or, as the case may be, all the Shares of the class
                           in question, or

                  (ii)     all the Shares, or Shares of the class in question,
                           held by a class of shareholders identified otherwise
                           than by reference to their employment or their
                           participation in this Scheme.

         6.1.3    directing the Trustees to accept an offer of cash, with or
                  without other assets, for his Shares if the offer forms part
                  of a general offer made to holders of shares of the same class
                  as his or of shares in the Parent Company and which is made in
                  the first instance on a condition such that if it is satisfied
                  the person making the offer will have control of the Parent
                  Company within the meaning of section 11 of the Act.

                                                                              28
<PAGE>   30

         6.1.4    agreeing after the Retention Period to sell the beneficial
                  interest in his Shares to the Trustees for the same
                  consideration as in accordance with Rule 2.4 (iv) above would
                  be required to be obtained for the Shares themselves.

6.2      In the event of an offer being made or a transaction being proposed in
         any of the circumstances described in Rule 6.1.1, 6.1.2 or 6.1.3 the
         Trustees shall forthwith notify each Participant thereof and shall act
         in accordance with the instructions of the Participant in dealing with
         his Scheme Shares and in the absence of any such instructions no action
         shall be taken.

6.3      In the event of the Parent Company proposing to make a rights issue in
         respect of any class of its share capital which includes Shares held on
         behalf of Participants, the Trustees shall immediately on receipt of
         the offer from the Parent Company, notify each Participant of the
         following options in respect of the Shares held by the Trustees on his
         behalf:

         6.3.1    to instruct the Trustees to exercise the rights in respect of
                  all or any of his Scheme Shares provided that such instruction
                  is accompanied by payment in cash of the amount necessary to
                  exercise such rights, or

         6.3.2    to instruct the Trustees to exercise the rights in respect of
                  some only of his Scheme Shares and to dispose of the rights
                  nil paid in respect of the remainder and either:

                  (i)      to pay to the Trustees any amount in excess of the
                           disposal proceeds necessary to exercise such rights,
                           or

                  (ii)     to instruct the Trustees to pay to him any amount of
                           the disposal proceeds in excess of the amount
                           necessary to exercise such rights, or

                                                                              29
<PAGE>   31

         6.3.3    to instruct the Trustees to dispose of the rights nil paid in
                  respect of all or any of his Scheme Shares and pay the
                  proceeds to him.

6.4      The Participant shall instruct the Trustees accordingly within any
         period of time specified by the Trustees and shall, if appropriate, pay
         to the Trustees in cash any amounts necessary to carry out such
         instructions. The Trustees shall, subject to receipt of the cash as
         aforesaid, carry out the instructions of the Participants within the
         time allowed by the Parent Company for the exercise of the rights. If a
         Participant shall fail to give any direction to and shall not otherwise
         have authorised the Trustees, no action shall be taken in respect of
         the rights associated with the Shares held on behalf of that particular
         Participant.

6.5      Any New Shares allocated to the Trustees pursuant to Rule 6.2 and Rule
         6.3 or on a capitalisation issue shall be deemed to have been
         appropriated to a Participant on the Appropriation Date of the Shares
         in respect of which they were allocated.

7.       PAYMENTS AND TRANSFERS TO PARTICIPANTS

7.1      If any amount falls to be paid to a Participant prior to the Release
         Date in respect of his Scheme Shares being:

         7.1.1    the proceeds of a sale of Scheme Shares pursuant to a
                  direction given by the Participant under Rule 5.1.1, or

         7.1.2    a Capital Receipt

         the Trustees shall pay such amount to the Participant.

7.2      If a Participant directs the Trustees to transfer the ownership of any
         Scheme Shares to himself pursuant to Rule 5.1.2 before their Release
         Date, he shall pay to the Trustees, before the transfer takes

                                                                              30

<PAGE>   32

         place, a sum equal to income tax at the standard rate on the
         appropriate percentage of the Locked-in Value of the Scheme Shares at
         the time of the direction.

7.3      If, following a company reconstruction as defined in section 514 of the
         Act, the Trustees are allotted any shares or other securities which are
         not New Shares, they shall forthwith transfer the same to the
         Participant.

7.4      Any stamp duty involved in any transfer of Scheme Shares or other
         shares or securities by the Trustees into the name of the Participant
         concerned shall be payable in the case of:

         7.4.1    a transfer as referred to in Rule 5.1.2;

         7.4.2    a transfer following the death of a Participant; or

         7.4.3    a transfer as referred to in Rule 7.3

         by the Trustees out of the Residual Fund or in the case of a deficiency
         out of funds made available for the purpose by the Company and, in any
         other case, shall be payable by the Participant concerned.

8.       REPURCHASE BY TRUSTEES

8.1      At the time a Participant directs the Trustees to dispose of any Scheme
         Shares, the Trustees may offer to purchase the beneficial interest in
         such Scheme Shares from the Participant at the best consideration in
         money that can reasonably be obtained at the time of the sale.

8.2      If, at the time of the proposed purchase of Scheme Shares under Rule
         8.1, the Trustees do not have sufficient funds to purchase such Scheme
         Shares, they may apply to the Company for such funds. If


                                                                              31
<PAGE>   33

         any funds are so provided by the Company they shall reduce the
         liability of the Company in respect of the payment to be made pursuant
         to Rule 3 in respect of the next Appropriation Date.

8.3      The Trustees shall hold any Shares purchased pursuant to Rule 8.1 above
         under trust for appropriation to Eligible Employees employed by the
         Company that provided the funds used in the purchase of such Shares
         subject to Rule 3.7.

9.       PAYMENT OF DIVIDENDS

Subject to the provisions of Clause 5.3 of the Trust Deed:

9.1      Any dividends paid by the Parent Company to the Trustees in respect of
         Scheme Shares shall be forwarded to the Participants on whose behalf
         the Trustees hold such Scheme Shares together with particulars of the
         related tax credit.

9.2      Any dividends received by the Trustees during the period from the date
         of their acquisition of Shares to the Appropriation Date shall be dealt
         with by the Trustees in accordance with Clause 3 of the Trust Deed.

10.      VOTING RIGHTS

Participants have no right to attend or vote at a general meeting of the Parent
Company. The voting rights in respect of the Scheme Shares shall, on a poll, be
exercised only in accordance with any directions in writing by the Participants
concerned to the Trustees. In the absence of any such direction, the Trustees
shall abstain from voting. The Trustees shall not be obliged to demand or join
in demanding a poll.


                                                                              32
<PAGE>   34

11.      RIGHTS OF EMPLOYEES

Participation in the Scheme by a Participant is a matter entirely separate from
any pension right or entitlement he may have and from his terms and conditions
of employment and participation in this Scheme shall in no respect whatever
affect in any way a Participant's pension rights and entitlements or terms or
conditions of employment and in particular (but without limiting the generality
of the foregoing words) any Participant who leaves the employment of a
Participating Company shall not be entitled to any compensation for any loss of
any right or benefit or prospective right or benefit under the Scheme which he
might otherwise have enjoyed whether such compensation is claimed by way of
damages for wrongful dismissal or other breach of contract or by way of
compensation for loss of office or otherwise howsoever.

12.      DUTY TO ACCOUNT FOR TAX

12.1     When the Trustees receive from a Participant who has directed them to
         transfer the ownership of his Scheme Shares to him at any time before
         the Release Date the sum calculated in accordance with Rule 7.2 above,
         that sum shall be accounted for to the Revenue Commissioners in
         accordance with section 516 of the Act.

12.2     The Trustees shall keep records of all sums received from Participants
         under Rule 12.1.

12.3     The Trustees shall inform each Participant in writing of any facts know
         to them which are relevant to determining the liability (if any) of
         that Participant to Irish income tax under Schedule E.

13.      ERRORS AND OMISSIONS


                                                                              33
<PAGE>   35



If as a result of an error or omission any Shares to which a Participant is
entitled pursuant to these Rules are not appropriated to him in accordance with
Rule 3.2, the Company, and the Trustees shall do all such acts and things as may
be agreed in writing with the Revenue Commissioners to enable the Trustees to
appropriate to the Participant the Shares necessary to put him in a position he
would have been in but for such want of appropriation and agree, where relevant,
the Initial Market Value attributable to such Shares notwithstanding that such
actions may fall outside the time limits contemplated by or otherwise conflict
with the other provisions of the Rules provided always that the Trustees shall
not be obliged to incur any liability (whether actual or contingent) without
being funded or indemnified to their satisfaction.

14.      NOTICES

14.1     All notices to be given to a Participant under the Scheme shall be in
         writing and shall either be delivered to the Participant at his place
         of work or be sent by post to the address shown on the records of the
         Trustees or displayed on a notice board at his place of work. Any
         notice or document sent by post as aforesaid shall be deemed to have
         been received on the expiry of 72 hours from the time at which it was
         posted.

14.2     Any notice or document delivered, displayed or sent in the manner
         described in Rule 14.1 shall be deemed for all purposes to have been
         sufficiently served on the Participant and all persons claiming through
         or under such Participant and accordingly service in the manner
         aforesaid shall operate to exonerate the Trustees from all or any
         liability for the non-receipt by a Participant or other person as
         aforesaid of any such notice or document.

14.3     To be valid any direction to the Trustees in respect of a Participant's
         Scheme Shares must be given in writing by or on behalf of such
         Participant and shall be effective only when it is received by the
         Trustees.



                                                                              34
<PAGE>   36



14.4     A direction once duly given and received as mentioned in Rule 14.3 and
         subject to Rule 5.3 shall be carried out by the Trustees as soon as
         practicable in accordance with its terms unless prior to their acting
         in respect thereof the Trustees receive written notice from the
         Participant revoking the direction. Unless received by the Trustees the
         Trustees shall incur no liability to a Participant if they act or fail
         to act upon a direction or revocation which purports to have been duly
         given as aforesaid.

15.      MISCELLANEOUS

If any matter arises on or in connection with this Scheme or its operation for
which specific provision is not made in the Rules such matter shall be resolved,
dealt with or provided for in such manner as the Directors and the Trustees
shall in their absolute discretion consider appropriate having taken into
account the respective interests of the Company and of the Participants and the
requirements of the Revenue Commissioners.



                                                                              35
<PAGE>   37



                                 SECOND SCHEDULE

                             FORM OF ACCEPTANCE AND
                            CONTRACT OF PARTICIPATION

TO :                  NORTEL NETWORKS (IRELAND) LIMITED ("THE COMPANY")
                      and
TO :                  MERCER TRUSTEES LIMITED        ("THE TRUSTEES")

FROM :

SURNAME                 _____________________________________________

FORENAME(S)             _____________________________________________

HOME ADDRESS            _____________________________________________

                        _____________________________________________

PPS NUMBER              _____________________________________________


1.   I have read a copy of the Employee Booklet describing the Scheme.

2.   I wish to participate in the Scheme and in consideration thereof and of any
     appropriation to me of Scheme Shares in accordance with the provisions of
     the Scheme I bind myself in contract with the Company and the Trustees and
     I agree to be bound by the Rules of the Scheme (including any amendments or
     additions made thereto) in accordance with the provisions of the Scheme and
     in particular :

     a)   to permit Scheme Shares appropriated to me to be held by the Trustees
          throughout the applicable Period of Retention (normally two years
          after the Appropriation Date on which shares are allocated to me by
          the Trustees);

     b)   not to assign, charge or otherwise dispose of my beneficial interest
          in the said Shares during the Period of Retention;






     c)   not to direct the Trustees to dispose of the said Shares before the
          applicable Release Date (at present three years after the
          Appropriation Date) in any other way except by sale for the best



                                                                              36
<PAGE>   38


          consideration in money that can reasonably be obtained at the time of
          the sale; and

     d)   if I direct the Trustees of the Scheme to transfer the ownership of
          any of the said Shares into my name before the applicable Release
          Date, I undertake to pay the Trustees, before the transfer takes
          place, a sum equal to the income tax at the standard rate on the
          appropriate percentage of the Locked-in Value (the initial value
          except in special circumstances which will be notified to you) of the
          said Shares at the time of the direction as notified to me by the
          Trustees.

3.   I accept that the dividend tax voucher which I will receive from the
     Trustees in respect of any of my Scheme Shares will be in full satisfaction
     of any rights I have to a tax deduction certificate from the Trustees.

4.   I undertake to notify the Trustees of any change in my address.

5.   I understand that this contract is binding in respect of all appropriations
     of Scheme Shares to me at any time unless I have previously varied its
     terms in writing to the Company and the Trustees and they have consented to
     such variation.

     Signed :   ________________________________________________

     Date :     ________________________________________________




                                                                              37
<PAGE>   39

                               THE THIRD SCHEDULE

                           THE NORTEL NETWORKS IRELAND
                           SHARE PARTICIPATION SCHEME

BASIS OF CALCULATION OF ENTITLEMENTS

1.       The entitlement of each Eligible Employee under the Scheme shall be
         calculated as such total amount of Nortel Pounds, if any, allocated by
         the Company under the Nortel Networks Flexible Benefits Plan and which
         may be applied by an employee to provide such benefits as are provided
         under that Plan including shares, and

2.       Each Eligible Employee shall have the option to forego between 0.5% and
         7.5% of basic gross salary towards Ordinary Shares subject to this
         election not exceeding the amount applied to shares under 1 above.

Provided that, in the case of any Eligible Employee the total of the
Entitlements in any Year of Assessment shall not exceed the amount for the time
being specified as being the limit on individual appropriations for the purposes
of paragraph 3(4) of Schedule 11 to the Act.



                                                                              38
<PAGE>   40
                      Dated the 11th day of December 2000








                  NORTEL NETWORKS (SHANNON) LIMITED
                                                        one part







                  MERCER TRUSTEES LIMITED
                                                        other part







                  DEED OF AMENDMENT





                  NORTEL NETWORKS SHANNON SHARE
                  PARTICIPATION SCHEME


<PAGE>   41



THIS DEED OF AMENDMENT is made the 11th day of December 2000 BETWEEN NORTEL
NETWORKS (SHANNON) LIMITED whose registered office is at 25-28 North Wall Quay,
Dublin 1 (hereinafter called "the Principal Company") of the one part AND MERCER
TRUSTEES LIMITED whose registered office is at St. James' House, Adelaide Road,
Dublin 2 (hereinafter called "the Trustees") of the other part

WHEREAS:

(a)    This Deed is supplemental to, inter alia:

       (i)      a Deed dated the 7th July 1999 between the parties hereto
                (hereinafter called "the Trust Deed") whereby the Principal
                Company established the scheme now known as the NORTEL NETWORKS
                SHANNON SHARE PARTICIPATION SCHEME (hereinafter called "the
                Scheme") which has been approved by the Revenue Commissioners in
                accordance with Chapter 1 of Part 17 of the Taxes Consolidation
                Act 1997 and Schedule 11 thereto (hereinafter called "the Act"),
                and

       (ii)     a Deed of Amendment dated                    .

(b)    Clause 20 of the Trust Deed provides that the Principal Company and the
       Trustees may by a supplemental deed amend the Trust Deed and the rules
       scheduled thereto (hereinafter called "the Rules").

(c)    The parties hereto are desirous of effecting such an amendment.





<PAGE>   42



NOW THIS DEED WITNESSETH as follows :

The parties hereto in pursuance of the aforesaid desire and in exercise of the
power for this purpose conferred upon them by the Trust Deed and of every and
any other power enabling them in this behalf HEREBY AMEND the Trust Deed and the
Rules as follows:

With effect from the date hereof :-

1    The Parent Company name shall be amended to the NORTEL NETWORKS CORPORATION
     and all references and definitions within the Trust Deed and Rules shall be
     amended accordingly.

2    Schedule 3 shall be deleted and replaced by the following Schedule 3:-


                               THE THIRD SCHEDULE

                           THE NORTEL NETWORKS SHANNON
                           SHARE PARTICIPATION SCHEME

     BASIS OF CALCULATION OF ENTITLEMENTS

     1.   The entitlement of each Eligible Employee under the Scheme shall be
          calculated as such total amount of Nortel Pounds, if any, allocated by
          the Company under the Nortel Networks Flex Plan and which may be
          applied by an employee to provide such benefits as are provided under
          that Plan including shares, and

     2.   Each Eligible Employee shall have the option to forego between 0.5%
          and 7.5% of basic gross salary towards Ordinary Shares subject to this
          election not exceeding the amount applied to shares under 1 above.

     Provided that, in the case of any Eligible Employee the total of the
     Entitlements in any Year of Assessment shall not exceed the amount for the
     time being specified as being the limit on individual appropriations for
     the purposes of paragraph 3(4) of Schedule 11 to the Act.


<PAGE>   43

IN WITNESS WHEREOF the parties hereto have executed these presents the day and
year first above written.





GIVEN under the Common Seal
of  NORTEL NETWORKS SHANNON LIMITED


___________________________________ Director

___________________________________ Director/Secretary





GIVEN under the Common Seal
of MERCER TRUSTEES LIMITED

___________________________________ Director

___________________________________ Director/Secretary