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                                                                    EXHIBIT 10.3


                           NORTEL NETWORKS CORPORATION
                             SPECIAL RETENTION PLAN

1. PURPOSE OF THE PLAN.

       The Company considers it essential to the best interests of the Company
and its shareholders to secure and encourage the continued employment of
Participants with the Company Group for the Covered Period and thereafter. The
Company further recognizes that the recent announcement of the pending
retirement of its President and Chief Executive Officer may create some
uncertainty among Participants concerning their continuing role in the
management and direction of the Company Group.

       Accordingly, to reinforce and encourage the continued attention and
dedication of Participants to the duties and responsibilities of their
employment without distraction, the Board has adopted this Nortel Networks
Corporation Special Retention Plan which provides for, among other things,
certain special compensation arrangements in the event of a Qualifying
Termination of a Participant's employment during the Covered Period.

2. DEFINITIONS.

       (a) "Annual Salary" means a Participant's annual salary rate in effect
       immediately prior to his or her Termination Date.

       (b) "Board" means the Board of Directors of the Company.

       (c) "Committee" means the joint leadership and resources committee of the
       Board and of the Board of Directors of Nortel Networks Limited (the "NNL
       Board") or such other committee of the Board as the Board may designate
       from time to time as the "Committee" for purposes of the Plan, provided,
       however, that the Committee may, in its discretion, delegate in writing
       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, from time
       to time, on such written terms and conditions as it may determine.

       (d) "Company Group" means, collectively, the Company and each Person that
       is an "affiliated body corporate" of the Company, within the meaning of
       Subsection 2(2) of the Canada Business Corporations Act.

       (e) "Continuation Period" means the period commencing on a Participant's
       Termination Date and ending, in the case of a Tier I Participant, on the
       two-year anniversary of such Participant's Termination Date or, in the
       case of a Tier II Participant, on the eighteen-month anniversary of such
       Participant's Termination Date.

       (f) "Covered Period" means the period commencing on November 1, 2001 and
       ending on June 30, 2003.

       (g) "Designated Beneficiary" of a Participant means, with respect to any
       compensation or benefit to be paid or provided to such Participant
       pursuant to Section 5 hereof, the person designated by such Participant
       as his or her beneficiary for the



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       purposes of the plan or arrangement of the Company Group (in addition to
       this Plan) pursuant to the terms of which such compensation or benefit
       will be paid or provided; provided, that, if (i) such Participant has not
       made a designation for purposes of such plan or arrangement or (ii) there
       is no other plan or arrangement pursuant to which such compensation or
       benefit will be paid or provided, then the "Designated Beneficiary" of
       such Participant for purposes of such compensation or benefit means his
       or her estate. For purposes of the Plan, "estate" includes only the
       executors or administrators of such estate or any person or persons who
       have acquired the right to the applicable compensation or benefit
       directly from the Participant by bequest or inheritance.

       (h) "Disability" means the absence of a Participant from the duties of
       his or her employment with the Company Group on a full-time basis for a
       total of six months during any twelve (12) month period as a result of
       incapacity due to mental or physical illness as determined by a physician
       selected by and acceptable to such Participant and the Board. A
       Disability shall not be incurred hereunder until, at the earliest, the
       last day of the sixth month of such absence.

       (i) "Excluded Replacement Options" means the replacement options covered
       by a grant to a Participant under the key contributor program of a Stock
       Option Plan if, on the Termination Date, (i) all of the original options
       granted to such Participant in connection with the grant of such
       replacement options have not been exercised or (ii) such original options
       have been exercised but the replacement options could never become
       exercisable due to such Participant's failure to continue to own
       beneficially the required number of common shares of the Company that
       were acquired on the exercise of the original options, determined in
       accordance with the terms of the grant of the replacement options.

       (j) "ERTP" means the Nortel Networks Corporation Executive Retention and
       Termination Plan, as the same may be amended and in effect from time to
       time.

       (K) "Good Reason" means, when used in connection with the termination by
       a Participant of his or her employment with the member of the Company
       Group that then employs such Participant, a termination of such
       Participant's employment by such Participant following (i) a material and
       substantial diminution of such Participant's duties, responsibilities and
       status in effect on the first day of the Covered Period or (ii) a
       relocation of such Participant's office or home base to an office or home
       base on a different continent , in any such case, without the prior
       written consent of such Participant, which condition remains in effect
       ten (10) days after written notification by such Participant to the SVP
       Human Resources of the occurrence thereof; provided that a "Good Reason"
       will not be deemed to have occurred until the end of such ten (10) day
       period.

       (l) "Option" means any option and related stock appreciation right, if
       any, granted to a Participant pursuant to any Stock Option Plan, other
       than the Excluded Replacement Options.

       (m) "Participant" means, collectively or individually, a Tier I
       Participant and/or a Tier II Participant, as the context requires.


                                       2
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       (n) "Person" means any individual, legal or personal representative,
       corporation, company, partnership, limited liability company, syndicate,
       unincorporated association, trust, trustee, government body, regulatory
       authority or other entity, howsoever designated or constituted.

       (o) "Plan" means this Nortel Networks Corporation Special Retention Plan,
       including, without limitation, any Exhibit attached hereto, as set forth
       herein or therein and as the same may be amended or restated and in
       effect from time to time and "hereto", "herein", "hereof", "herewith" and
       similar terms refer to this Plan in its entirety, unless a specific
       provision is specified.

       (p) "Qualifying Termination" means a termination of a Participant's
       employment with the Company Group (i) by the member thereof that then
       employs the Participant Without Cause or (ii) by such Participant for
       Good Reason.

       (q) "Release and Undertaking" means the General Release of Claims and
       Undertaking of Certain Covenants substantially in the form thereof
       attached hereto as Exhibit A or in such other form as the SVP Human
       Resources prescribes (i) from time to time or (ii) for participants
       located in jurisdictions outside of Canada and the United States of
       America.

       (r) "RSU" means a restricted stock unit granted pursuant to the RSU Plan.

       (s) "RSU Plan" means the Nortel Networks Limited Restricted Stock Unit
       Plan, as amended and in effect from time to time.

       (t) "Stock Option Plan" means, as the case may be, the Nortel Networks
       Corporation 1986 Stock Option Plan As Amended And Restated, as the same
       may be further amended and in effect from time to time, the Nortel
       Networks Corporation 2000 Stock Option Plan, as the same may be amended
       and in effect from time to time, and/or any other stock option or equity
       incentive plan maintained or assumed by any member of the Company Group
       for the benefit of employees of the Company Group, as any such plan may
       be amended and in effect from time to time.

       (u) "SVP Human Resources" means the individual holding the position of
       senior vice-president responsible for human resources or equivalent at
       the Company at the applicable time.

       (v) "Termination Date" means, when used in connection with the
       termination of a Participant's employment with the Company Group, the
       last date of such Participant's active employment with the member of the
       Company Group that then employs such Participant.

       (w) "Tier I Participant" means each senior executive of the Company Group
       who, as of such executive's Termination Date, is identified as a `Tier I
       Participant' in the records of the Plan maintained by the Committee from
       time to time during the Covered Period.


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<PAGE>

       (x) "Tier II Participant" means each senior executive of the Company
       Group who, as of such executive's Termination Date, is identified as a
       `Tier II Participant' in the records of the Plan maintained by the
       Committee from time to time during the Covered Period.

       (y) "Without Cause," means when used in connection with the termination
       of a Participant's employment by any member of the Company Group that
       then employs such Participant, the termination of such Participant's
       employment by such member other than due to such Participant's (i)
       Disability or death or (ii) (w) conviction of, or plea of guilty or nolo
       contendere to, a criminal offence or felony that involves fraud in
       connection with the performance by such Participant of the duties of his
       or her employment with the Company Group or moral turpitude; (x) willful
       and continued failure substantially to perform the duties of his or her
       employment with the Company Group (other than any such failure due to
       such Participant 's physical or mental illness), after a written demand
       for substantial performance has been delivered to such Participant by the
       Board, and a reasonable opportunity to cure has been given to such
       Participant by the Board; (y) material violation of any written agreement
       between such Participant and any member of the Company Group not to
       disclose any confidential or proprietary information of the Company Group
       or confidential or proprietary information of a third person in respect
       of which the Company Group is under a written confidentiality obligation
       to such third party of which such Participant has received prior written
       notice; or (z) fraud or willful and serious misconduct in connection with
       the performance by such Participant of his or her duties for the Company
       Group, which, in the case of any such misconduct, has caused direct
       material injury to the Company Group.

3. ADMINISTRATION.

       The Committee will have full power and complete discretionary authority
to operate and administer the Plan in accordance with its terms. In addition to
the other powers expressly granted to the Committee under the Plan and subject
to the terms of the Plan, the Committee will have full and complete
discretionary authority to interpret the Plan and to prescribe such rules and
regulations and make all determinations necessary or desirable for the
administration and operation of the Plan. All actions taken by the Committee in
connection with the Plan and all interpretations, rules, regulations and
determinations of the Committee under the Plan will be made by the Committee in
its sole and absolute discretion and will be conclusively binding upon all
persons.

       No member of the Committee or the Board will be liable for any action or
determination made in good faith pursuant to the Plan. To the full extent
permitted by law, the Company will indemnify and save harmless each person made,
or threatened to be made, a party to any action or proceeding in respect of the
Plan by reason of the fact that such person is or was a member of the Committee
or the Board.

4. TERMINATION OF A PARTICIPANT'S EMPLOYMENT DURING THE COVERED PERIOD.

       In the event of a Qualifying Termination of a Participant's employment as
of a Termination Date occurring during the Contract Period, such Participant
(or, the event of his or her death, such Participant's Designated Beneficiary)
will be entitled to the compensation and


                                       4
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benefits provided in Section 5 hereof, subject to the terms and conditions of
such Section 5. In the event of any other termination of a Participant's
employment with the Company Group, whether or not during the Covered Period,
such Participant will not be entitled to any compensation or benefits pursuant
to the Plan.

5. COMPENSATION AND BENEFITS PAYABLE IN CERTAIN CIRCUMSTANCES.

       In the event of a Qualifying Termination of a Participant's employment as
of a Termination Date occurring during the Contract Period, provided such
Participant executes and delivers to the Company the Release and Undertaking and
such Participant refrains from revoking such Release and Undertaking to the
extent permitted therein and complies with the covenants therein, such
Participant (or, the event of his or her death, such Participant's Designated
Beneficiary) will be entitled to the following compensation and benefits, at the
time or times specified in this Section 5:

       (a) Within thirty (30) days following such Participant's Termination
       Date, a lump sum cash payment equal to such Participant's accrued but
       unpaid salary for the period to and including such Participant's
       Termination Date, together with an amount equal to the cash value of any
       accrued but unused vacation entitlement to such Participant's Termination
       Date.

       (b) Within thirty (30) days of submission by such Participant of proper
       expense reports, reimbursement in accordance with the Company's expense
       reimbursement policy for its senior executives for all expenses incurred
       by such Participant in connection with the business of the Company Group
       on or prior to such Participant's Termination Date.

       (c) Within one hundred and twenty (120) days following such Participant's
       Termination Date, a lump sum cash payment equal to the sum of the amounts
       under the clauses (i) and (ii):

              (i)    The product of (A) 2, in the case of a Tier I Participant,
                     or 1.5, in the case of a Tier II Participant, multiplied by
                     (B) such Participant's Annual Salary; and

              (ii)   An amount equal to the excess of (A) 100% of the annual
                     bonus that such Participant would have been entitled to
                     receive pursuant to the executive management incentive
                     award plan(s) of the Company group in which such
                     Participant was entitled to participate for the fiscal year
                     of the Company which includes such Participant's
                     Termination Date had (x) such Participant remained in the
                     continuous employment of the Company Group until at least
                     the last day of such fiscal year and (y) all members of the
                     Company Group and such Participant each achieved 100% of
                     their respective performance objectives, if any,
                     established for such fiscal year and otherwise fulfilled
                     all other relevant eligibility criteria, with any
                     applicable factors set at mid-range, over (B) the sum of
                     any mid-year payments received prior to the Termination
                     Date by such Participant pursuant to such plan(s) for such
                     fiscal year.


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       (d) Outplacement counseling services of a firm chosen from time to time
       by such Participant, for a period not to exceed 18 months following such
       Participant's Termination Date.

       (e) Continued coverage of such Participant and his or her eligible
       dependents during the Continuation Period under the Company Group life
       insurance, medical, dental, health and disability plans or arrangements
       in which such Participant a participant immediately prior to such
       Participant's Termination Date at a cost to such Participant that is no
       greater than the actual amount that such Participant paid for such
       coverage immediately prior to such Participant's Termination Date and
       otherwise in accordance with the terms of such plans and arrangements as
       in effect immediately prior to such Participant's Termination Date;
       provided however that if continued coverage under any such plan or
       arrangement is not permitted under the terms thereof or under applicable
       law, the Company will pay an amount to such Participant in cash
       sufficient to enable such Participant to purchase substantially
       equivalent coverage for the Continuation Period on an individual basis,
       at a cost to such Participant (determined on an after-tax basis to such
       Participant) that is no greater than that paid by such Participant for
       such coverage immediately prior to such Participant's Termination Date.

       (f) If such Participant is 50 years of age or older on his or her
       Termination Date and such Participant is a participant in the
       Supplementary Executive Retirement Plan of the Company prior to his or
       her Termination Date, such Participant will receive credit for an
       additional number of years of service (including partial years) for all
       purposes under such Supplementary Executive Retirement Plan equal to the
       lesser of (i) the amount by which (A) 60 exceeds (B) such Participant's
       age as of his or her Termination Date and (ii) five.

       (g) With respect to any RSUs allocated to such Participant under the RSU
       Plan that have not been settled in full prior to such Participant's
       Termination Date, such Participant will be entitled to settlement and
       payment of such RSUs (i) in accordance with Section 6(d) of the RSU Plan,
       with the amount of such payment to be calculated as described in
       subparagraph (x) of Section 6(d)(i) of the RSU Plan as if the Performance
       Period (as defined in the RSU Plan) had ended and the Performance
       Criteria (as defined in the RSU Plan) had been achieved (but not
       exceeded) on the day preceding such Participant's Termination Date, and
       (ii) in cash pursuant to Section 6(e) of the RSU Plan.

       (h) With respect to any Options granted to such Participant that are
       outstanding as of such Participant's Termination Date, the Company will
       cause (A) all such Options to become fully exercisable as of such
       Termination Date and thereafter to remain exercisable by such Participant
       (or, in the event of his or her death, by his or her Designated
       Beneficiary) in accordance with the applicable Stock Option Plan and (B)
       the Continuation Period to be treated for all purposes under such Stock
       Option Plans (other than eligibility for new grants) as a period of
       continued employment of such Participant with the Company Group.

       (i) Such Participant will be entitled to all compensation and benefits
       payable, earned or accrued under any plan, policy, program or practice of
       any member of the Company Group in which such Participant was a
       participant during his employment with the


                                       6
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       Company Group in accordance with the generally applicable provisions
       thereof; provided that (i) except for the ERTP, such Participant shall
       not be entitled to receive any payments or benefits under any such plan,
       policy, program or practice providing for any severance compensation or
       benefits, including, without limitation, the Nortel Networks Severance
       Plan, and (ii) with respect to the ERTP, any compensation or benefits
       payable to such Participant pursuant to the ERTP in connection with any
       termination of such Participant's employment will be reduced by any
       compensation and/or benefits paid or provided to such Participant
       pursuant to the Plan.

6. NO MITIGATION; OFFSET.

       Participants will not be required to mitigate the amount of any
compensation or benefits payable pursuant to the Plan by seeking other
employment or otherwise. The amount of any such compensation or benefits shall
not be reduced by any compensation or other amounts paid to or earned by a
Participant as the result of employment with another employer or otherwise after
such Participant's Termination Date, except that continued benefits provided to
a Participant pursuant to Section 5(f) will be reduced or canceled to the extent
of any comparable benefit coverage offered to such Participant during his or her
Continuation Period by a subsequent employer or other Person for which such
Participant performs services, including but not limited to consulting services,
after such Participant's Termination Date.

7. PAYMENT OBLIGATIONS ABSOLUTE.

       The obligations of the Company Group to pay or provide a Participant who
satisfies the conditions therefor the compensation and benefits specified in
Section 5 are absolute and unconditional and will not be affected by any
circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which any member of the Company Group may
have against such Participant or anyone else or any claim or right which any
member of the Company Group may have pursuant to any provision hereof. All
amounts payable by the Company hereunder shall be paid without notice or demand.
All compensation and benefits paid or provided pursuant to the Plan will be
final and no member of the Company Group will seek to recover all or any part of
such compensation or benefits from any Participant or from whosoever may be
entitled thereto, for any reason whatsoever. Notwithstanding the foregoing, in
the event a Participant breaches his or her covenants or obligations under the
Release and Undertaking, the Company Group may, in addition to any other
remedies available to it, seek to recover compensation or benefits paid or
provided to such Participant pursuant to the Plan.

8. ARBITRATION OF DISPUTES

       (a) Any disputes arising under the Plan will be resolved by binding
       arbitration under the Arbitration Act, 1991 (Ontario) or the
       International Commercial Arbitration Act (Ontario), depending upon the
       office or home base of the Participant involved in such dispute,
       including the interpretation, validity, enforceability or applicability
       of the Plan under any circumstances, the entitlement of any individual to
       any compensation or benefits under the Plan or the calculation or
       determination of any amounts due under the Plan. Notwithstanding the
       foregoing, disputes relating to or in respect of any of the covenants or
       obligations of a Participant or the rights or remedies of any member of
       the


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       Company Group under any applicable provision of the Release and
       Undertaking will be resolved as provided in the Release and Undertaking.

       (b) Any arbitrator appointed to resolve any dispute under the Plan will
       be a disinterested Person or alternative dispute resolution service of
       recognized competence.

       (c) Each of the Company and the Participant involved in the dispute will
       act reasonably to come to agreement as to the identity of an appropriate
       arbitrator with respect to the particular dispute at issue. If the
       Company and such Participant cannot agree on the identity of the
       arbitrator, each will submit to binding arbitration before a single
       arbitrator selected from the roster of available arbitrators selected by
       CPR Institute for Dispute Resolution, JAMs/Indispute or the Canadian
       Foundation for Dispute Resolution (CFDR) depending upon the site for such
       arbitration. Arbitrations hereunder will be governed by the laws of
       Ontario. The arbitrator will not have the right to confer any rights with
       respect to the trade secrets, confidential or proprietary information or
       other intellectual property rights of any member of the Company Group
       upon any Participant or any third party and this arbitration provision
       will not preclude the Company Group from seeking legal and equitable
       relief from any court having jurisdiction with respect to disputes or
       claims relating to or arising out of the misuse or misappropriation of
       any intellectual property of any member of the Company Group.

       (d) The determination of any arbitrator appointed in accordance with this
       Section 8 will be final and binding on the affected Participant and the
       Company Group.

       (e) Any arbitration proceedings required to be conducted pursuant to the
       Plan will be conducted in the location agreed to by the parties, but if
       the parties cannot agree, in the Municipality of Metropolitan Toronto.

       (f) Each party will bear its own costs and expenses for arbitration or
       litigation arising in connection with the Plan, except that the Company
       will pay all of the fees and expenses of the arbitrator. The Participant
       who institutes the arbitral proceedings provided hereunder may apply at
       the conclusion of such proceedings to the arbitrator for the
       reimbursement for the legal fees and expenses expended in connection with
       the arbitral proceedings and the arbitrator will have jurisdiction to
       determine whether payment of such Participant 's legal fees and expenses
       is reasonable in the circumstances and the amounts to be reimbursed by
       the Company, if any.

9. SUCCESSORS AND ASSIGNS; BINDING OBLIGATIONS.

       (a) The Plan will inure to the benefit of and be binding upon
       Participants and their respective heirs, executors, administrators and
       other legal personal representatives and upon the Company and its
       successors and assigns, including, in the case of the Company, any
       corporation or corporations acquiring directly or indirectly all or
       substantially all of the business or assets of the Company, whether by
       merger, consolidation, sale or otherwise, but shall not otherwise be
       assignable by the Company.



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       (b) Without limitation of Section 9(a), the Company will require any
       successor (whether direct or indirect, by merger, consolidation, sale or
       otherwise) to all or substantially all of the business or assets of the
       Company, by a written agreement, expressly, absolutely and
       unconditionally to assume and agree to perform the covenants and
       obligations of the Company under the Plan in the same manner and to the
       same extent as the Company would have been required to perform if no such
       succession had taken place.

10. NOTICES.

       All notices, requests, demands and other communications required or
permitted to be given by the Company or by any Participant (including, without
limitation, any notice of termination of employment) will be in writing and will
be deemed to have been duly given when delivered personally or received by
certified or registered mail, return receipt requested, postage prepaid, at the
following addresses:

       (a) If to the Company, at its principal executive offices, to the
       attention of the SVP Human Resources.

       (b) If to a Participant, to the most recent address provided to the
       Company and set forth in the Company's records.

11. SEVERABILITY.

       If any term or provision of the Plan or the application thereof to any
person or circumstance is to any extent held invalid or unenforceable, the
remainder of the Plan or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or unenforceable
will not be affected thereby, and each term and provision of the Plan will be
valid and enforceable to the fullest extent permitted by law.

12. GOVERNING LAW.

       The Plan will in all respects be governed by, and construed and enforced
in accordance with, the laws of Ontario, without reference to its principles of
conflicts of law.

13. CERTAIN WITHHOLDINGS.

       The Company may withhold from any amounts payable to a Participant
hereunder all federal, state, city, provincial and other taxes and social
charges required to be withheld pursuant to any applicable law or regulation.

14. NO OBLIGATION TO EMPLOY.

       The Plan does not obligate the Company Group to continue to employ any
Participant for any specific period of time, or in any specific role or
geographic location. Subject to the terms of any applicable written employment
agreement between any member of the Company Group and a Participant and
applicable law, the Company Group may assign that


                                       9
<PAGE>

Participant to other duties, and either the Company Group or the Participant may
terminate the Participant's employment at any time for any reason.

15. EFFECTIVE DATE OF PLAN; AMENDMENT AND TERMINATION.

       (a) The Plan will become effective on August 1, 2001.

       (b) The Company, by action of the Board, may amend the Plan at any time
       and from time to time, in whole or in part, provided that no such
       amendment will be effective with respect to any Participant whose rights
       under the Plan would be adversely affected thereby unless consented to in
       writing by the Company and such Participant.

       (c) The Plan will automatically terminate upon the expiration of the
       Covered Period unless extended by the Board, on such terms and conditions
       as the Board determines in its sole and absolute discretion. Prior to the
       expiration of the Covered Period, the Plan may not be suspended or
       terminated unless such suspension or termination is consented to in
       writing by the Board and by each Participant affected by such suspension
       or termination.


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<PAGE>

                                                                       EXHIBIT A



                          GENERAL RELEASE OF CLAIMS AND
                        UNDERTAKING OF CERTAIN COVENANTS

       WHEREAS, Executive served as a senior executive officer of the Company
Group and is a Participant in the Nortel Networks Corporation Special Retention
Plan (the "Plan");

       WHEREAS, Executive's employment with the Company Group is terminating in
a Qualifying Termination, effective as of the date hereof (the "Date of
Termination"), and, in connection therewith, Executive is entitled to certain
compensation and benefits, subject to and in accordance with the terms of the
Plan (such payments and benefits referred to herein as the "Termination
Benefits"); and

       WHEREAS, it is a condition to the obligation of the Company to pay or
provide the Termination Benefits to Executive that Executive execute and deliver
this General Release of Claims and Undertaking of Certain Covenants (this
"Release and Undertaking") and that Executive refrain from exercising his right
under Section 6 hereof to revoke this Release and Undertaking and Executive
comply with his covenants and obligations hereunder.

       NOW, THEREFORE, in consideration of the payment or provision to Executive
of the Termination Benefits, each of Executive and the Company hereby agree as
follows:

1.     Certain Defined Terms. Capitalized terms used herein without definition
       shall have meanings assigned thereto in the Plan.


2.     Executive's Termination and Resignation. The Company and Executive hereby
       acknowledge and agree that Executive's employment with the Company Group
       terminated effective as of the Date of Termination. Executive hereby
       resigns from each of his employment positions with each member of the
       Company Group, effective as of the Date of Termination. Executive will
       execute and deliver such additional documents evidencing or effectuating
       such resignations as the Company may reasonably request.

3.     Executive's General Release of Claims and Waiver.


              (a) EXECUTIVE, ON HIS OWN BEHALF AND ON BEHALF OF HIS AGENTS,
       REPRESENTATIVES, ASSIGNS, HEIRS, EXECUTORS AND ADMINISTRATORS
       (COLLECTIVELY, THE "EXECUTIVE RELEASORS") HEREBY FULLY AND
       UNCONDITIONALLY RELEASES, REMISES, ACQUITS AND FOREVER DISCHARGES EACH
       MEMBER OF THE COMPANY GROUP AND EACH OF THEIR AND THEIR RESPECTIVE
       OFFICERS, DIRECTORS, SHAREHOLDERS, MEMBERS, AGENTS, EMPLOYEES,
       CONSULTANTS, INDEPENDENT CONTRACTORS, ATTORNEYS, ADVISERS, SUCCESSORS AND
       ASSIGNS (COLLECTIVELY, THE "COMPANY RELEASEES"), JOINTLY AND SEVERALLY,
       FROM ANY AND ALL CLAIMS, CAUSES OF ACTION, CHARGES, COMPLAINTS, DEMANDS,
       COSTS, RIGHTS, LOSSES, DAMAGES AND OTHER LIABILITY WHATSOEVER, KNOWN OR
       UNKNOWN (COLLECTIVELY, THE "CLAIMS"), WHICH EXECUTIVE HAS OR MAY HAVE
       AGAINST ANY COMPANY RELEASEE ARISING ON OR PRIOR TO THE DATE OF THIS
       RELEASE, INCLUDING BUT NOT LIMITED TO, CLAIMS IN RESPECT OF EXECUTIVE'S
       EMPLOYMENT WITH, OR



<PAGE>

       TERMINATION OF EMPLOYMENT FROM, ANY AND ALL MEMBERS OF THE COMPANY GROUP
       OR EXECUTIVE'S RELATIONSHIP WITH ANY MEMBER OF THE COMPANY GROUP,
       DISMISSAL, REDUNDANCY, WRONGFUL TERMINATION, BREACH OF CONTRACT, FRAUD,
       DECEIT, NEGLIGENCE, MISREPRESENTATION, DEFAMATION, DISABILITY,
       DISCRIMINATION OF ANY TYPE, UNLAWFUL DEDUCTION FROM WAGES, BREACH OF
       RIGHTS OR ENTITLEMENTS UNDER THE UNITED STATES AGE DISCRIMINATION IN
       EMPLOYMENT ACT, THE UNITED STATES AMERICANS WITH DISABILITIES ACT OF
       1990, THE UNITED STATES FAMILY AND MEDICAL LEAVE ACT OF 1993, TITLE VII
       OF THE UNITED STATES CIVIL RIGHTS ACT OF 1964, 42 U.S.C. SS. 1981, THE
       LAWS OF THE [EITHER STATE OF [INSERT STATE OF RESIDENCE OF EXECUTIVE, IF
       APPLICABLE] OR PROVINCE OF [INSERT PROVINCE OF RESIDENCE OF EXECUTIVE, IF
       APPLICABLE] OR [INSERT COUNTRY OF RESIDENCE OF EXECUTIVE, IF
       APPLICABLE]], THE LAWS OF CANADA AND ANY WORKERS' COMPENSATION OR
       DISABILITY CLAIMS OR ANY OTHER FEDERAL, STATE, LOCAL, PROVINCIAL, COMMON
       OR OTHER LAW, OTHER THAN THE EXCLUDED CLAIMS (AS DEFINED BELOW).
       EXECUTIVE FURTHER AGREES THAT HE WILL NOT FILE OR PERMIT TO BE FILED ON
       HIS BEHALF ANY SUCH CLAIM. NOTWITHSTANDING THE PRECEDING SENTENCE OR ANY
       OTHER PROVISION OF THIS RELEASE AND UNDERTAKING, THIS RELEASE AND
       UNDERTAKING IS NOT INTENDED TO INTERFERE WITH EXECUTIVE'S RIGHT TO FILE A
       CHARGE WITH THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION (THE "EEOC") IN
       CONNECTION WITH ANY CLAIM HE BELIEVES HE MAY HAVE AGAINST ANY MEMBER OF
       THE COMPANY GROUP. HOWEVER, BY EXECUTING THIS RELEASE, EXECUTIVE HEREBY
       WAIVES THE RIGHT TO RECOVER IN ANY PROCEEDING EXECUTIVE MAY BRING BEFORE
       THE EEOC OR ANY STATE HUMAN RIGHTS COMMISSION OR IN ANY PROCEEDING
       BROUGHT BY THE EEOC OR ANY STATE HUMAN RIGHTS COMMISSION ON EXECUTIVE'S
       BEHALF. NOTWITHSTANDING THE PRECEDING SENTENCE OR ANY OTHER PROVISION
       HEREOF, THIS RELEASE IS FOR ANY RELIEF, NO MATTER HOW DENOMINATED,
       INCLUDING, BUT NOT LIMITED TO, INJUNCTIVE RELIEF, WAGES, BACK PAY, FRONT
       PAY, COMPENSATORY DAMAGES, AND PUNITIVE DAMAGES.

              (b) Executive acknowledges that the Termination Benefits that
       Executive is receiving in connection with this Release and Undertaking
       are in addition to anything of value to which Executive is already
       entitled from the Company Group or any other Company Releasee.

              (c) For purposes of this Release and Undertaking, the term
       "Excluded Claims" means claims to enforce any of Executive's rights under
       or pursuant to this Release and Undertaking, claims for any Termination
       Benefits payable pursuant to and on the conditions set forth in the Plan
       or, with respect to Executive's employment with the Company Group prior
       to the Date of Termination, the Company's indemnification arrangements
       for directors and officers as in effect from time to time.

4.     Restrictive Covenants. Executive hereby covenants and agrees, for the
       benefit of the Company Group, as follows.


              (a) Unauthorized Disclosure. During the period following any
       termination of Executive's employment with the Company Group, without the
       prior written consent of the Board or its authorized representative,
       except to the extent required by an order of a court having jurisdiction
       or under subpoena from an appropriate government agency, in which event,
       Executive will use his best efforts to consult with the Board prior to
       responding to any such order or subpoena, Executive will not disclose (i)
       the existence or content of this


                                       ii
<PAGE>

       Release and Undertaking or the Plan, except to financial or legal
       advisors, or (ii) any confidential or proprietary trade secrets, customer
       lists, drawings, designs, programs, software, protocols, information
       regarding product development, marketing plans, sales plans,
       manufacturing plans, management organization information (including but
       not limited to data and other information relating to members of the
       Board or of the Board of Directors of any other member of the Company
       Group or to management of any member of the Company Group), operating
       policies or manuals, business plans, financial records, packaging design
       or other financial, commercial, business or technical information (i)
       relating to any member of the Company Group or (ii) that any member of
       the Company Group may receive belonging to suppliers, customers or others
       who do business with any member of the Company Group (collectively,
       "Confidential Information") to any third person unless such Confidential
       Information has been previously disclosed to the public or is in the
       public domain (other than by reason of Executive's breach of this Section
       4(a)).

              (b) Non-Solicitation of Employees. During the period ending on the
       first anniversary of the Termination Date (the "Restriction Period"),
       Executive will not, directly or indirectly, for his own account or for
       the account of any other Person, anywhere in the world, solicit for
       employment, employ or otherwise interfere with the relationship of any
       member of the Company Group with any natural person throughout the world
       who is or was employed by or otherwise engaged to perform services for
       any member of the Company Group at any time during the six-month period
       preceding such solicitation, employment or interference.

              (c) Non-Solicitation of Customers. During the Restriction Period,
       Executive will not, directly or indirectly, for his own account or for
       the account of any other Person, anywhere in the world, solicit or
       otherwise attempt to establish any business relationship of a nature that
       is competitive with the business or relationship of any member of the
       Company Group with any Person which is or was a customer, client or
       distributor of any member of the Company Group at any time during the
       twelve-month period preceding the Termination Date.

              (d) Non-Disparagement. Executive will not, publicly or privately,
       disparage or otherwise make any derogatory statement (whether written or
       oral) in respect of the Company Releasee or the conduct of any of their
       respective business or professional activities.

              (e) Injunctive Relief. Executive acknowledges and agrees that the
       covenants, obligations and agreements of Executive contained in this
       Section 4 relate to special, unique and extraordinary matters and that a
       violation of any of the terms of such covenants, obligations or
       agreements will cause the Company Group irreparable injury for which
       adequate remedies are not available at law. Therefore, Executive agrees
       that the Company will be entitled to an injunction, restraining order or
       such other equitable relief (without the requirement to post bond) as a
       court of competent jurisdiction may deem necessary or appropriate to
       restrain Executive from committing any violation of such covenants,
       obligations or agreements. These injunctive remedies are cumulative and
       in addition to any other rights and remedies the Company may have. The
       Company, Employer and Executive hereby irrevocably submit to the
       exclusive jurisdiction of the courts of Ontario located in


                                      iii
<PAGE>

       Ontario, Canada in respect of the injunctive remedies set forth in this
       Section 4(d) and the interpretation and enforcement of this Section 4
       insofar as such interpretation and enforcement relate to any request or
       application for injunctive relief in accordance with the provisions of
       this Section 4(d).

5.     Knowing and Voluntary Waiver by Executive. Executive acknowledges that he
       is entering into this Release and Undertaking voluntarily and, by his act
       of signing below, Executive agrees to all of the terms of this Release
       and Undertaking and intends to be legally bound thereby.

6.     Acknowledgement by Executive of his Right to Consider and Revoke This
       Release; Effective Date of this Release.


              (a) Executive understands, agrees and acknowledges that:

              1.     he has been advised and encouraged by the Company to have
                     this Release and Undertaking reviewed by legal counsel of
                     Executive's own choosing and that he has been given ample
                     time to do so prior to his signing this Release and
                     Undertaking;
              2.     he has been provided at least twenty-one (21) days to
                     consider this Release and Undertaking and to decide whether
                     to agree to the terms contained herein;
              3.     he will have the right to revoke this Release and
                     Undertaking during the seven (7) day period following the
                     date Executive signs this Release and Undertaking by giving
                     written notice of his revocation to [___________] of the
                     Company at [Address] on or prior to the seventh day after
                     the date Executive signs this Release and if Executive
                     exercises his right to revoke this Release and Undertaking,
                     he will forfeit his right to receive any of the Termination
                     Benefits;
              4.     the Termination Benefits provided herein will not be paid
                     to Executive until at least eight (8) days after Executive
                     signs this Release and Undertaking and will be paid only if
                     Executive does not revoke this Release and Undertaking
                     pursuant to (iii) above; and
              5.     by signing this Release and Undertaking, Executive
                     represents that he fully understands the terms and
                     conditions of this Release and Undertaking and intends to
                     be legally bound by them.

              (b) This Release and Undertaking will become effective,
       enforceable and irrevocable seven (7) days after the date on which it is
       executed by Executive and provided it is not revoked by Executive during
       such seven day period (the "Effective Date").

7.     Governing Law. This Agreement will be governed by and construed in
       accordance with the laws of the Ontario, without reference to its
       principles of conflicts of laws.

8.     Severability. The parties hereto intend that the validity and
       enforceability of any provision of this Release and Undertaking will not
       affect or render invalid any other provision of this Release and
       Undertaking. If any term or provision of this Release and Undertaking or
       the application thereof to any person or circumstance is to any extent
       held invalid or unenforceable, the remainder of this Release and
       Undertaking or the


                                       iv
<PAGE>

       application of such term or provision to persons or circumstances other
       than those as to which it is held invalid or unenforceable will not be
       affected thereby, and each term and provision of this Release and
       Undertaking will be valid and enforceable to the fullest extent permitted
       by law.

9.     Binding Agreement. This Release and Undertaking will be binding on and
       will inure to the benefit of the parties hereto and their respective
       heirs, administrators, representatives, executors, successors and
       assigns.


                                       v
<PAGE>


       IN WITNESS WHEREOF, the Company, by its duly authorized representative,
has caused this Release and Undertaking to be executed and Executive has signed
this Release and Undertaking, in each such case, as of the ___ day of ______,
200_.

                           NORTEL NETWORKS CORPORATION


                           --------------------------------------------
                           By:
                           Title:



                           --------------------------------------------
                           EXECUTIVE




                                       vi
<PAGE>


ACKNOWLEDGMENT


         [STATE OF ___________________)
                                           ss:
         COUNTY OF____________________)]

On the ____ day of __________, 200_, before me personally came ________. ______
who, being by me duly sworn, did depose and say that he resides at [      ]; and
did acknowledge and represent that he has had an opportunity to consult with
attorneys and other advisers of his choosing regarding the General Release of
Claims and Undertaking of Certain Covenants to which this Acknowledgment is
attached, that he has reviewed all of the terms of the General Release of Claims
and Undertaking of Certain Covenants and that he fully understands all of its
provisions, including, without limitation, the knowing and voluntary waiver set
forth therein.

Notary Public


Date:
     -------------------------------



                                      vii