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                                                                    EXHIBIT 10.2


                           NORTEL NETWORKS CORPORATION
                               EXECUTIVE RETENTION
                              AND TERMINATION PLAN










                                                                   JULY 26, 2001
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                           NORTEL NETWORKS CORPORATION


                    EXECUTIVE RETENTION AND TERMINATION PLAN


       1. PURPOSE OF THE PLAN

       1.1 The Corporation relies upon the experience and expertise of the
Specified Executives to manage the business of Nortel Networks objectively and
for the benefit of the Corporation and its shareholders.

       1.2 The Corporation recognizes that, in view of the existing market
conditions for the shares of publicly-traded companies involved in the
telecommunications business as well as the existing distribution and ownership
of the outstanding shares of the Corporation, there is a possibility of a Change
in Control.

       1.3 To reinforce and encourage the continued attention and commitment of
the Specified Executives to their duties without distraction in the face of the
potentially disturbing circumstances arising from the possibility of a Change in
Control, this Plan has been established to provide certain arrangements for
Specified Executives whose employment with Nortel Networks is terminated as a
result of a Change in Control.

       2. DEFINITIONS

For the purpose of the Plan, the terms contained in this Article shall have the
following meanings:

"AFFILIATED COMPANIES" shall have the meaning ascribed to the term "affiliated
bodies corporate" in subsection 2(2) of the Canada Business Corporations Act.

"AFFILIATED ENTITIES" means (a) affiliated companies of the Corporation and (b)
such other companies, partnerships or other legal entities as the Nortel
Networks Board may determine for the purposes of any of the provisions of the
Plan.

"ANNUAL SALARY" means, with respect to a Specified Executive, the greater of (A)
the annual base salary rate paid to the Specified Executive by or on behalf of
Nortel Networks immediately prior to the CIC Date and (B) the annual base salary
rate paid to the Specified Executive immediately prior to his or her Termination
Date; provided, however, if the Specified Executive incurs a Termination Due to
Change in Control as a result of his or her resignation for Good Reason due to a
reduction in such Specified Executive's annual salary rate, the applicable
annual base salary rate of such Specified Executive for purposes of this
Paragraph (B) shall be the annual base salary rate in effect immediately prior
to any such reduction.

"AUDITOR" means the independent auditor of the Corporation as appointed by the
Corporation's shareholders or by the Nortel Networks Board from time to time.
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                                      -2-


"BAY NETWORKS STOCK OPTION PLAN" means the Bay Networks, Inc. 1994 Stock Option
Plan, as amended from time to time prior to the CIC Date.

"CANADIAN EXECUTIVE" means a Specified Executive who is a resident of Canada for
the purposes of the Income Tax Act (Canada), as amended.

"CANADIAN TRUST" means the trust established pursuant to the Canadian Trust
Agreement.

"CANADIAN TRUST AGREEMENT" has the meaning given to that term in Section 3.1.

"CANADIAN TRUSTEE" means the trustee under the Canadian Trust Agreement.

"CAUSE" means, for the purposes of this Plan only, a Specified Executive's:

       (i)    conviction (including any pleas of guilty or nolo contendere) of a
              criminal offence or felony that involves fraud in connection with
              the performance by the Specified Executive of the duties of the
              Specified Executive's employment with Nortel Networks or moral
              turpitude;

       (ii)   the willful and continual failure of the Specified Executive
              substantially to perform the duties of the Specified Executive's
              employment with Nortel Networks (other than any such failure due
              to the Specified Executive's physical or mental illness), after a
              written demand for substantial performance has been delivered to
              the Specified Executive by the Nortel Networks Board, and a
              reasonable opportunity to cure has been given to the Specified
              Executive by the Nortel Networks Board;

       (iii)  material violation of any written agreement between the Specified
              Executive and Nortel Networks not to disclose any confidential or
              proprietary information of Nortel Networks or confidential or
              proprietary information of a third person in respect of which
              Nortel Networks is under a written confidentiality obligation to
              such third party of which the Specified Executive has received
              prior written notice; or

       (iv)   fraud or willful and serious misconduct in connection with the
              performance of the Specified Executive's duties for Nortel
              Networks, which, in the case of any such misconduct, has caused
              direct material injury to Nortel Networks.

"CEO" means the individual serving as chief executive officer of the Corporation
at any time during the period which is thirty (30) days prior to the CIC Date.

"CHANGE IN CONTROL" or "CIC" means the occurrence of any of the events described
in Schedule A hereto.

"CIC DATE" means the date on which the Change in Control occurs.

"COMMITTEE" means the joint leadership resources committee of the Nortel
Networks Board and the board of directors of NNL or such other committee of the
Nortel Networks Board as the Nortel Networks Board may designate from time to
time as the "Committee" for the purposes of this Plan,
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                                      -3-


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
written terms and conditions as it may determine.

"CORPORATION" means Nortel Networks Corporation and any successor thereto,
including, without limitation, any successor to Nortel Networks Corporation
following a Change in Control.

"DESIGNATED BENEFICIARY" of any Specified Executive means, with respect to any
Entitlement available to such Specified Executive, the person designated by the
Specified Executive as his or her beneficiary for the purposes of any plan or
arrangement governing such Entitlement or, if the Specified Executive has not
made such designation with respect to such Entitlement (or no plan or
arrangement governs such Entitlement), then the "DESIGNATED BENEFICIARY" of such
Specified Executive means the estate of the Specified Executive for the purpose
of such Entitlement. For the purposes of this Plan, "ESTATE" shall include only
the executors or administrators of such estate or any person or persons who
shall have acquired the right to the applicable Entitlement directly from the
Specified Executive by bequest or inheritance.

"ENTITLEMENTS" means the payments, benefits, rights and other entitlements to be
paid or provided to a Specified Executive pursuant to Article 4 of this Plan.

"EXCLUDED REPLACEMENT OPTIONS" means the replacement options covered by a grant
to a Specified Executive under the key contributor program of the applicable
Stock Option Plan if, on the Termination Date: (i) all of the original options
granted to such Specified Executive 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 Specified Executive's failure to continue to own beneficially the required
number of common shares that were acquired on the exercise of the original
options, determined in accordance with the terms of the grant of the replacement
options.

"GOOD REASON" means the occurrence of any of the following condition(s) without
the prior written consent of the Specified Executive which condition(s) remain
in effect ten (10) days after written notification by the Specified Executive to
the SVP Human Resources:

       (i)    the requirement that the Specified Executive relocate his or her
              office or home base to a location that is outside a 100 kilometre
              radius of his or her office or home base immediately prior to the
              CIC Date; or

       (ii)   the assignment to the Specified Executive of a set of
              responsibilities and/or the employment or continued employment of
              the Specified Executive on terms and conditions that are not the
              Substantial Equivalent of such Specified Executive's set of
              responsibilities and/or the terms and conditions of employment in
              effect immediately prior to the CIC Date;

provided that a "Good Reason" shall not be deemed to have occurred until the end
of such ten (10) day period.

"INTERNATIONAL EXECUTIVES" means Specified Executives other than Canadian
Executives.
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                                      -4-


"NNL" means Nortel Networks Limited.

"NORTEL NETWORKS BOARD" means the board of directors of the Corporation.

"NORTEL NETWORKS" means the Corporation and the affiliated entities.

"OPTION" means an option and related stock appreciation right, if any, granted
pursuant to any stock option plan maintained or assumed by NNL or the
Corporation for the benefit of the employees of Nortel Networks but does not
include Excluded Replacement Options.

"PAYMENT DATE" means, with respect to a Specified Executive, the later of (i)
his or her Termination Date and (ii) the CIC Date.

"PERSON" includes any individual, legal or personal representative, corporation,
company, partnership, syndicate, unincorporated association, trust, trustee,
government body, regulatory authority or other entity, howsoever designated or
constituted.

"PLAN" means the Executive Retention and Termination Plan of Nortel Networks
Corporation as set forth herein and as may be amended 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.

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

"RSU PLAN" means the Nortel Networks Limited Restricted Stock Unit Plan, as
amended from time to time prior to the CIC Date.

"SPECIFIED EXECUTIVE" means each of (i) the CEO, (ii) each Tier I Executive
(iii) each Tier II Executive and (iv) any other individual whose employment with
Nortel Networks is terminated more than thirty (30) days prior to the CIC Date
at the direction of any Person who acquires control of the Corporation, within
the meaning of Paragraph (i) of the definition of the term "Termination Due to
Change in Control," if, immediately prior to such termination of such
individual's employment, such individual is identified in the records of the
Plan maintained by the Corporation as a Tier I Executive or a Tier II Executive
or is serving in the position of CEO.

"STOCK OPTION PLAN" means each of the Nortel Networks Corporation 1986 Stock
Option Plan As Amended And Restated, as the same may be further amended from
time to time prior to the CIC Date and the Nortel Networks Corporation 2000
Stock Option Plan, as the same may be amended from time to time prior to the CIC
Date.

"SUBSTANTIAL EQUIVALENT" means, with respect to a Specified Executive:

       (i)    a set of responsibilities that are (x) commensurate with such
              Specified Executive's professional training and experience and (y)
              in all material respects, equivalent to or better than the set of
              responsibilities of such Specified Executive immediately prior to
              the CIC Date; and
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                                      -5-


       (ii)   terms and conditions of employment that (x) include an annual base
              salary rate and annual cash incentive compensation opportunity
              that are each equal to or greater than such Specified Executive's
              annual base salary rate and annual cash incentive compensation
              opportunity in effect immediately prior to the CIC Date, (y)
              include overall additional compensation and benefits that are
              substantially equivalent to or better than the additional
              compensation and benefits of the Specified Executive immediately
              prior to the CIC Date, and (z) are otherwise substantially
              equivalent to or better than the terms and conditions of such
              Specified Executive in effect immediately prior to the CIC Date.

"SVP HUMAN RESOURCES" means the individual holding the most senior position
responsible for human resources at the Corporation at the applicable time.

"SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN" means the Nortel Networks Limited
Supplementary Executive Retirement Plan, as amended from time to time prior to
the CIC Date.

"TERMINATION DATE" means the actual date of a Specified Executive's termination
of employment with Nortel Networks.

"TERMINATION DUE TO CHANGE IN CONTROL" means:

       (i)    any termination of the employment of the Specified Executive by
              Nortel Networks during the period commencing thirty (30) days
              prior to the CIC Date and ending on the date which is twenty-four
              (24) months after the CIC Date, provided however that a
              termination of the employment of a Specified Executive by Nortel
              Networks prior to such 30 day period at the direction of the
              Person who acquires control of the Corporation in the Change in
              Control, shall be deemed to be a Termination Due to Change in
              Control; or

       (ii)   any resignation for Good Reason within twenty-four (24) months
              after the CIC Date by a Specified Executive provided that such
              Specified Executive resigns no later than thirty (30) days after a
              Good Reason has occurred with respect to such Specified Executive.

       Notwithstanding the foregoing, "Termination Due to Change in Control"
       shall not include any termination of the employment of the Specified
       Executive: (1) by Nortel Networks for Cause; or (2) pursuant to an
       agreement to resign or retire entered into by Nortel Networks and the
       Specified Executive prior to the CIC Date.

"TIER I EXECUTIVES" means the executives determined by the Committee from time
to time prior to the CIC Date to be Tier I Executives and identified as such in
the records of the Plan maintained by the Corporation at any time during the
period which is thirty (30) days prior to the CIC Date.

"TIER II EXECUTIVES" means the executives determined by the Committee from time
to time prior to the CIC Date to be Tier II Executives and identified as such in
the records of the Plan maintained by the Corporation at any time during the
period which is thirty (30) days prior to the CIC Date.
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                                      -6-


"U.S. TRUST" has the meaning given to that term in Section 3.2.

"U.S. TRUST AGREEMENT" has the meaning given to that term in Section 3.2.

"U.S. TRUSTEE" means the trustee under the U.S. Trust Agreement.

"VOTING SHARES" has the meaning given to that term in Schedule A.

       3. ESTABLISHMENT OF TRUST

       3.1    Source of Payments to Canadian Executives - The Corporation shall,
              or shall cause one or more of its affiliated entities to, enter
              into an agreement or agreements (collectively, the "Canadian Trust
              Agreement") pursuant to which the Canadian Trustee will have
              available to it, for the benefit of the Canadian Executives, the
              funds necessary to fund the Entitlements available to the Canadian
              Executives. Under the terms of the Canadian Trust Agreement, the
              Corporation shall be required, immediately prior to the CIC Date
              or, if it is not known in advance that the Change in Control will
              occur, immediately following the Corporation's becoming aware of
              the occurrence of a Change in Control, to contribute, or to cause
              one or more of its affiliated entities to contribute, to the trust
              or trusts an amount equal to 200% of the fee payable to acquire a
              letter of credit for an amount equal to the estimated maximum
              liability of Nortel Networks for any and all Entitlements that
              would arise if all Canadian Executives experienced a Termination
              Due to Change in Control on the earlier of the Specified
              Executive's Termination Date or the CIC Date, as calculated by the
              Auditor. If neither the Corporation nor any of its affiliated
              entities satisfies the obligations of the Corporation hereunder to
              pay or provide the Entitlements to a Canadian Executive within the
              time set out herein, such Canadian Executive shall be entitled to
              deliver a notice to the Canadian Trustee stating that such
              obligation or obligations have not been satisfied and the Canadian
              Trustee shall thereupon satisfy such obligation or obligations to
              such Canadian Executive from the assets of the Canadian Trust,
              subject to and in accordance with the Canadian Trust Agreement,
              unless the Canadian Trustee shall be directed by an arbitrator
              duly appointed pursuant to Article 6 hereof or a court of
              competent jurisdiction not to satisfy such obligation or
              obligations.

       3.2 Source of Payments to International Executives - The Corporation
shall, or shall cause one or more of its affiliated entities to, pay the
Entitlements to which International Executives are entitled under the terms of
this Plan to the International Executives out of the general corporate assets of
the Corporation and/or the applicable affiliated entities of the Corporation,
and no assets of the Corporation or any such affiliated entities shall be
designated to fund such Entitlements provided herein or deemed to be assets to
be used for that purpose, it being understood that this Plan is an unfunded plan
with respect to the International Executives. This Plan does not confer on any
International Executive or his or her Designated Beneficiary a beneficial
interest in any asset of Nortel Networks. Notwithstanding the foregoing, the
Corporation shall, or shall cause one or more of its affiliated entities to,
establish a trust or trusts (collectively, the "U.S. Trust") pursuant to a trust
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                                      -7-

agreement or agreements (collectively, the "U.S. Trust Agreement") and the
Corporation shall make contributions thereto or cause contributions to be made
thereto for the purpose of providing for the Entitlements to International
Executives hereunder. Immediately prior to the CIC Date or, if it is not known
in advance that the Change in Control will occur, immediately following the
Corporation's becoming aware of the occurrence of a Change in Control, the
Corporation shall, or shall cause one or more of its affiliated entities to,
contribute to the U.S. Trust an amount in cash equal to the excess of (i) the
estimated maximum liability of Nortel Networks for any and all Entitlements that
would arise if all International Executives experienced a Termination Due to
Change in Control on the earlier of the Specified Executive's Termination Date
or the CIC Date, as calculated by the Auditor, over (ii) the aggregate amount
then held in the U.S. Trust. The U.S. Trust Agreement shall contain procedures
to the following effect:

       (a) In the event of the insolvency of the Corporation or other affiliated
       entity of the Corporation that has established the applicable U.S. Trust
       Agreement (the party that has established such U.S. Trust Agreement, the
       "Grantor"), the trust fund will be available to pay the claims of any
       creditor of the Grantor to which a distribution may be made in accordance
       with the bankruptcy laws of the jurisdiction to which the Grantor is
       subject. The Grantor shall be deemed to be "insolvent" if the Grantor is
       subject to a pending proceeding as a debtor under the bankruptcy laws of
       such applicable jurisdiction. In the event the Grantor becomes insolvent,
       the Nortel Networks Board shall notify the U.S. Trustee of the event as
       soon as practicable. Upon receipt of such notice, or if the U.S. Trustee
       receives other written allegations of the Grantor`s insolvency, the U.S.
       Trustee shall cease making payments to International Executives from the
       trust fund, shall hold the trust fund for the benefit of the Grantor's
       creditors, and shall take such steps that are necessary to determine
       within thirty (30) days whether the Grantor is insolvent. In the case of
       the U.S. Trustee's actual knowledge of or other determination of the
       Grantor's insolvency, the U.S. Trustee will deliver assets of the trust
       fund to satisfy claims of the Grantor's creditors as directed by a court
       of competent jurisdiction; and

       (b) The U.S. Trustee shall resume payments to the International Executive
       or in the event of the death of the International Executive, his or her
       Designated Beneficiary, as applicable, under the U.S. Trust Agreement
       only after the U.S. Trustee has determined that the Grantor is not
       insolvent (or is no longer insolvent, if the U.S. Trustee had previously
       determined the Grantor to be insolvent) or upon receipt of an order of a
       court of competent jurisdiction requiring such payment. If the U.S.
       Trustee discontinues payment pursuant to Subsection 3.2(a) and
       subsequently resumes such payment, the first payment to be made to each
       International Executive or in the event of the death of the International
       Executive, his or her Designated Beneficiary, as applicable, following
       such discontinuance shall include an aggregate amount equal to the excess
       of (i) the payments which would have been made to such International
       Executive or Designated Beneficiary during any such period of
       discontinuance, plus interest on such amount at a rate equivalent to the
       net rate of return earned by the trust during the period of such
       discontinuance, over (ii) the sum of all payments actually made to such
       International Executive or Designated Beneficiary during such period of
       discontinuance plus interest on such
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                                      -8-

       payments at a rate equivalent to the net rate of return earned by the
       trust during the period of discontinuance.

       Upon the Termination Due to Change in Control of any International
Executive, the Corporation shall and such International Executive shall be
entitled to deliver a notice to the U.S. Trustee stating that such Termination
Due to Change in Control has occurred. Upon receipt of any such notice from the
Corporation and/or an International Executive, the U.S. Trustee shall commence
paying the Entitlements due to such International Executive in accordance with
Section 4.1, 4.2 and 4.3 hereof, subject to and in accordance with the U.S.
Trust Agreement, unless the U.S. Trustee shall be directed by an arbitrator duly
appointed pursuant to Article 6 hereof or a court of competent jurisdiction not
to make such payments.

       3.3 Alternative Source of Payments. Notwithstanding Sections 3.1 and 3.2
hereof, effective no later than 30 days prior to the CIC Date and to maximize
the tax benefits available to Nortel Networks in the various jurisdictions in
which Specified Executives reside or are employed, the Corporation may provide
for alternative arrangements pursuant to which the Entitlements hereunder shall
be paid to Specified Executives, provided that any such alternative arrangements
must protect the rights of the affected Specified Executives at least to the
same extent such rights would have been protected had the Entitlements been paid
in accordance with Section 3.1 or 3.2, whichever is applicable.

       4. OBLIGATIONS OF THE CORPORATION TO SPECIFIED EXECUTIVES

       4.1 Entitlements - In the event of a Specified Executive's Termination
Due to Change in Control, the Specified Executive shall be entitled to the
following:

       (a) within thirty (30) days after the Payment Date, payment to or to the
       order of the Specified Executive in cash or by certified cheque of a lump
       sum amount equal to the Specified Executive's accrued but unpaid salary
       for the period to and including the Termination Date, together with an
       amount equal to the cash value of any accrued but unused vacation
       entitlement to the Termination Date;

       (b) within thirty (30) days of submission by the Specified Executive of
       proper expense reports, reimbursement in cash or by certified cheque of
       the Specified Executive in accordance with Nortel Networks' expense
       reimbursement policy for all expenses incurred by the Specified Executive
       in connection with the business of Nortel Networks prior to the
       Termination Date;

       (c) within one hundred and twenty (120) days after the Payment Date,
       payment to or to the order of the Specified Executive in cash or by
       certified cheque of a lump sum equal to the sum of the following amounts:

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                                      -9-

              (i) an amount equal to three times the CEO's Annual Salary in the
              case of the CEO, two times the Specified Executive's Annual Salary
              in the case of a Tier I Executive and 1.5 times the Specified
              Executive's Annual Salary in the case of a Tier II Executive; and

              (ii) an amount equal to 100% of the annual bonus that the
              Specified Executive would have been entitled to receive pursuant
              to the applicable Nortel Networks' executive management incentive
              award plan(s) for the fiscal year of the Corporation or the
              affiliated entity, as the case may be, which includes the
              Specified Executive's Termination Date had the Specified Executive
              remained in the continuous employment of Nortel Networks until at
              least the last day of such fiscal year and as if the Corporation,
              any applicable affiliated entity, any applicable business unit and
              the Specified Executive had each achieved 100% of their respective
              performance objectives, if any, established by Nortel Networks for
              such fiscal year, otherwise fulfilled all other relevant
              eligibility criteria and with any other applicable factor set at
              mid-range, after deduction for any mid-year payments in respect of
              such plan(s) for such fiscal year paid by Nortel Networks to the
              Specified Executive prior to the Termination Date;

       (d) continuation of any loans from Nortel Networks to the Specified
       Executive, without modification or amendment;

       (e) out placement counseling services of a firm chosen from time to time
       by the Specified Executive, for a period not to exceed 18 months after
       the Payment Date;

       (f) maintenance of coverage for the maximum extended reporting period
       available under any directors' and officers' liability insurance that is
       in place on the Termination Date in the event that such policy is
       cancelled or not renewed;

       (g) during the period ending on the three-year anniversary in the case of
       the CEO, the two-year anniversary in the case of a Tier I Executive and
       the eighteen-month anniversary in the case of a Tier II Executive of the
       Specified Executive's Termination Date (such applicable period, the
       "Continuation Period"), provision of continued coverage under each of the
       Nortel Network's life insurance, medical, dental, health and disability
       plans or arrangements in which the Specified Executive was entitled to
       participate immediately prior to the earlier of the Termination Date or
       the CIC Date at a cost to the Specified Executive no greater than the
       actual amount that the Specified Executive paid or would have paid for
       such coverage immediately prior to the earlier of the Termination Date or
       the CIC Date and otherwise in accordance with the terms of such plans and
       arrangements as in effect immediately prior to the earlier of the
       Termination Date or the CIC Date; provided however that:

              (i) if the continued coverage of a Specified Executive under any
              such plan or arrangement is not permitted under the terms thereof
              or under applicable law, the Corporation shall arrange to provide
              the Specified Executive with benefits that are substantially
              equivalent to those which the Specified
<PAGE>
                                      -10-


              Executive was entitled to receive under such plan or arrangement
              immediately prior to the earlier of the Termination Date or the
              CIC Date or pay an amount to the Specified Executive in cash or by
              certified cheque sufficient to enable the Specified Executive to
              purchase substantially equivalent coverage for the applicable
              period on an individual basis, in either case at a cost to the
              Specified Executive no greater than the Specified Executive paid
              or would have paid for such coverage immediately prior to the
              earlier of the Termination Date or the CIC Date, determined on an
              after-tax basis to the Specified Executive;

              (ii) in the event that a Specified Executive obtains alternative
              employment during the applicable Continuation Period and, in
              connection therewith, the Specified Executive receives
              substantially equivalent coverage under the plans of his or her
              new employer, the obligation of the Corporation to provide such
              Specified Executive with continued coverage under the
              corresponding plan or arrangement of Nortel Networks (and the
              obligation to provide benefits and payments pursuant to Paragraph
              4.1(g)(i)) shall terminate as of the effective date of such
              substantially equivalent coverage; and

              (iii) in the case of a Specified Executive whose Termination Date
              occurs prior to the CIC Date, if the coverage of such Specified
              Executive and, where applicable, his or her eligible dependants,
              under any such plan or arrangement terminates prior to the
              expiration of the Continuation Period applicable to such Specified
              Executive, (A) the Corporation shall reimburse the Specified
              Executive or cause the Specified Executive to be reimbursed for
              the actual costs incurred by such Specified Executive for
              alternative and substantially equivalent life insurance, medical,
              dental, health and disability coverage obtained by him or her
              (other than alternative coverage described in the preceding
              Paragraph (ii)) for the portion of the applicable Continuation
              Period following the termination of the Specified Executive's
              coverage under the corresponding plan or arrangement of Nortel
              Networks (such portion, the "Stub Period") or (B) (x) in the case
              of medical, dental and/or other health coverage, if no such
              alternative coverage has been obtained, the Corporation shall
              reimburse the Specified Executive for the medical, dental and/or
              other health expenses, as applicable, actually paid by the
              Specified Executive for medical, dental and/or other health
              services provided to the Specified Executive and, where
              applicable, his or her eligible dependants or beneficiaries during
              the Stub Period to the extent such expenses would have been
              reimbursed under the corresponding plan or arrangement of Nortel
              Networks had the Specified Executive's coverage thereunder
              continued for the duration of the Continuation Period or any
              earlier date determined under the preceding Paragraph (ii) (the
              amount of such reimbursement to be determined after reduction for
              the costs the Specified Executive would have been required to pay
              under the applicable plan or arrangement of Nortel Networks had
              his or her coverage thereunder continued) and (y) in the case
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                                      -11-

              of life insurance or disability coverage, if no such alternative
              coverage has been obtained and, during the Stub Period, the
              Specified Executive or, where applicable, any of his or her
              eligible dependants dies or becomes disabled (within the meaning
              of the applicable disability plan of Nortel Networks), the
              Corporation shall pay to the Specified Executive (or in the event
              of the Specified Executive's death, the Specified Executive's
              Designated Beneficiary) an amount equal to the death or disability
              benefits, as applicable, that would have been payable had the
              Specified Executive's coverage under the life insurance and/or
              disability plan of Nortel Networks continued for the Continuation
              Period (such amount to be determined after reduction for the costs
              the Specified Executive would have been required to pay under such
              plan of Nortel Networks had the Specified Executive's coverage
              thereunder continued for the Continuation Period or Stub Period,
              as the case may be);

              (h) if the Specified Executive is 50 years of age or older on the
              Termination Date, then

                     (i) if the Specified Executive is eligible to participate
                     in the Supplementary Executive Retirement Plan prior to the
                     Termination Date, the Specified Executive shall receive
                     credit for an additional number of years of service for all
                     purposes under the Supplementary Executive Retirement Plan
                     equal to the lesser of: (i) the excess of (A) 60 over (B)
                     the Specified Executive's age as of his or her Termination
                     Date; and (ii) five years, and

                     (ii) commencing on the latest of (x) such time as the
                     health, medical and dental benefits available to a
                     Specified Executive pursuant to Subsection 4.1(g) hereof
                     expire, (y) the beginning of the calendar year during which
                     the Specified Executive will attain age 55 and (z) the
                     expiration of any coverage of the Specified Executive by
                     such Specified Executive's new employer as contemplated by
                     Paragraph 4.1(g)(ii) hereof, the Specified Executive shall
                     be eligible for coverage under the health, dental and
                     medical benefits available to retired executives of Nortel
                     Networks immediately prior to the earlier of the
                     Termination Date or the CIC Date provided however, if the
                     continued coverage of a Specified Executive under any such
                     plan or arrangement is not permitted under the terms
                     thereof or under applicable law, the Corporation shall
                     arrange to provide the Specified Executive benefits that
                     are substantially equivalent to those which retired
                     executives of Nortel Networks were entitled to receive
                     under such plan or arrangement immediately prior to the
                     earlier of the Termination Date or the CIC Date or pay an
                     amount to the Specified Executive in cash or by certified
                     cheque sufficient to enable the Specified Executive to
                     purchase substantially equivalent coverage for the
                     applicable period on an individual basis in any event at a
                     cost no greater than the Specified Executive paid or would
                     have paid for such coverage immediately prior to the
                     earlier of the Termination Date or the CIC Date, determined
                     on an after-tax basis to the Specified
<PAGE>
                                      -12-

                     Executive; and

              (i) within thirty (30) days after the Payment Date, payment to or
              to the order of the Specified Executive in full settlement of any
              RSUs (as defined in the RSU Plan) allocated to the Specified
              Executive under the RSU Plan of an amount in cash equal to the
              excess of (i) the product of (x) the number of Covered RSUs (as
              defined in the RSU Plan) in respect of all Grants (as defined in
              the RSU Plan) made to the Specified Executive under the RSU Plan
              prior to the CIC Date multiplied by (y) the Special Value (as
              defined in the RSU Plan) over (ii) the aggregate cash payments
              made to the Specified Executive prior to the Termination Date in
              accordance with the RSU Plan in respect of the Grants.

       4.2 Stock Options/Restricted Stock Units

              (a) Acceleration - In the event of a Specified Executive's
              Termination Due to Change in Control, the Corporation shall cause
              all Options held by the Specified Executive as of his or her
              Termination Date to become fully exercisable as of such
              Termination Date and which Options will thereafter be exercisable
              by the Specified Executive (or, in the event of his or her death
              or incapacity, by his or her Designated Beneficiary) in accordance
              with the applicable stock option plan.

              (b) Waiver of Certain Provisions - None of the Options held by a
              Specified Executive as of his or her Termination Date shall be
              subject to the right of Nortel Networks to require, in certain
              circumstances, repayment of the proceeds of an Option exercise and
              related sale of the underlying common shares. In addition, for
              greater certainty, Nortel Networks shall not exercise its right to
              require, in certain circumstances, the repayment of the Market
              Value (as defined in the RSU Grants made to Specified Executives)
              of the allocated RSUs settled in accordance with Subsection 4.1(i)
              hereof.

              (c) Period for Exercise - In the event of a Specified Executive's
              Termination Due to Change in Control,

                     (i) the Specified Executive will be deemed to continue to
                     be employed by Nortel Networks for all purposes under the
                     Stock Option Plan, the Bay Networks Stock Option Plan and
                     any other applicable stock option plan, except with respect
                     to future grants of stock options, for the applicable
                     Continuation Period; and

                     (ii) the Specified Executive will be deemed to continue to
                     be employed by Nortel Networks for all purposes under the
                     RSU Plan, except with respect to future grants of RSUs,
                     until such time as the RSUs allocated to such Specified
                     Executive are settled in accordance with the provisions
                     hereof and the RSU Plan.


<PAGE>


       4.3 Other Deferred Compensation and Pension Arrangements - If a Specified
Executive participates in any deferred compensation, pension or supplementary
retirement plans offered by Nortel Networks, then upon such Specified
Executive's Termination Due to Change in Control, and except as otherwise
specifically provided in this Plan, such Specified Executive shall be entitled
to payments under such plans in accordance with the terms of each such plan. The
full unfunded amount payable under any deferred compensation, pension or
supplementary retirement plans shall be funded in accordance with Article 3.

       4.4 Mechanism for Providing Entitlements to a Specified Executive -


              (a) Obligation of the Corporation - The Corporation shall provide
              or cause to be provided all Entitlements available to a Specified
              Executive pursuant to the Plan, including this Article 4 (or, in
              the event of his or her death, to the Specified Executive's
              Designated Beneficiary); it being understood that to the extent
              any amount is paid to the Specified Executive (or, if applicable,
              his or her Designated Beneficiary) under Article 3, such payment
              shall be deemed made on behalf of the Corporation and the
              applicable affiliated entity, if any, in satisfaction of the
              Corporation's and such affiliated entity's obligations therefor.
              All Entitlements shall be paid or provided at the applicable time
              set forth in the Plan. In the event that the Corporation makes
              contributions hereunder on behalf of an affiliated entity, such
              contributions shall be charged by the Corporation to such
              affiliated entity.

              (b) Where No Time Specified - If no time is set out in Section 4.1
              hereof with respect to any Entitlement, the Corporation shall be
              deemed to be required to provide such Entitlement as of or on the
              Payment Date.

       4.5 Reasonable Efforts - Subject to the provisions hereof, the
Corporation shall use commercially reasonable efforts to take or cause to be
taken all actions and to do or cause to be done all things reasonably necessary
in accordance with applicable law to implement and make effective the Plan,
including the Entitlements available to Specified Executives pursuant to the
Plan.

       4.6 No Mitigation Required - A Specified Executive shall not be required
to mitigate the amount of any Entitlement provided for in this Plan either by
seeking other employment or otherwise. The amount of any Entitlement provided
for herein shall not be reduced by any remuneration that the Specified Executive
may earn from employment with another employer or otherwise following his or her
Termination Date except as specified in Subsection 4.1(g) hereof.

       4.7 Tax Withholding - The Corporation shall withhold or shall cause to be
withheld from amounts payable hereunder any applicable employment or other
withholding taxes required to be withheld under applicable law.

       5. OBLIGATIONS OF SPECIFIED EXECUTIVE

       5.1 Exclusive Remedy - The Entitlements shall constitute each Specified
Executive's sole and exclusive remedy for any claim arising out of such
Specified Executive's Termination Due to Change in Control.
<PAGE>
                                      -14-


       5.2 Release - It shall be a condition precedent to the delivery to the
Specified Executive of any Entitlement that the Specified Executive execute, and
deliver to Nortel Networks, a full and final release in the form which the SVP
Human Resources has designated as being acceptable prior to the Change in
Control.

       5.3 Non-Solicitation - If the Specified Executive accepts the
Entitlements pursuant to Article 4 hereof, then for a period of one year after
the Payment Date, the Specified Executive will not, directly or indirectly,
solicit the services of or in any other manner persuade any employee of Nortel
Networks to discontinue his or her employment with Nortel Networks or to
materially alter that relationship in a manner which is adverse to Nortel
Networks.

       5.4 Options - If the Specified Executive accepts the Entitlements
pursuant to Article 4 hereof, then the Specified Executive acknowledges and
agrees he or she will not exercise and waives any entitlement to exercise any
Options which become fully exercisable as of the Termination Date until after
the later to occur of the CIC Date or the Termination Date.

       6. ARBITRATION PROVISION

       6.1 Arbitration Requirement - Any disputes arising hereunder between a
Specified Executive and the Corporation, including the interpretation, validity,
enforceability or applicability of the Plan, shall be subject to binding
arbitration under the Arbitration Act (Ontario) or the International Commercial
Arbitration Act (Ontario) depending upon the Specified Executive's office or
home base.

       6.2 Qualification of Arbitrator - Any arbitrator appointed pursuant
hereto shall be a disinterested Person or alternative dispute resolution service
of recognized competence.

       6.3 Appointment of Arbitrator - Each of the Corporation and the Specified
Executive involved in the dispute shall act reasonably to come to agreement as
to the identity of an appropriate arbitrator with respect to the particular
dispute hereunder. If the Corporation and the Specified Executive cannot agree
on the identity of the arbitrator, each of them shall 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 shall be governed by the laws of
Ontario. The arbitrator shall not have the right to confer any rights with
respect to the trade secrets, confidential and proprietary information or other
intellectual property rights of Nortel Networks upon the Specified Executive or
any third party and this arbitration provision shall not preclude Nortel
Networks 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 Nortel Networks' intellectual property.

       6.4 Determination of Arbitrator - The determination of any arbitrator
appointed in accordance with this Article 6 shall be final and binding on the
Specified Executive and the Corporation.


<PAGE>
                                      -15-


       6.5 Site of Arbitration - Any arbitration proceedings required to be
conducted pursuant to this Plan shall be conducted in the location agreed to by
the parties, but if the parties cannot agree, in the City of Toronto.

       6.6 Costs and Expenses - Each party shall bear its own costs and expenses
for arbitration or litigation arising out of this Plan, except that the
Corporation will pay or cause to be paid all of the fees and expenses of the
arbitrator. The Specified Executive 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 shall have
jurisdiction to determine whether payment of the Specified Executive's legal
fees and expenses are reasonable in the circumstances and the amounts to be
reimbursed by or on behalf of the Corporation.

       7. GENERAL

       7.1 No Obligation to Employ - This Plan does not obligate Nortel Networks
to continue to employ a Specified Executive 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 Nortel Networks and a Specified
Executive and applicable law, Nortel Networks may assign that Specified
Executive to other duties, and either Nortel Networks or the Specified Executive
may terminate the Specified Executive's employment at any time for any reason.

       7.2 Governing Law - This Plan shall be governed by and construed in
accordance with the laws of Ontario and the laws of Canada applicable therein
and shall be treated in all respects as an Ontario contract.

       7.3 Severability - If any provision of this Plan is determined by a court
of competent jurisdiction to be invalid, illegal or unenforceable in any
respect, such determination shall not impair or affect the validity, legality or
enforceability of the remaining provisions hereof, and each provision is hereby
declared to be separate, severable and distinct.

       7.4 Enurement

              (a) This Plan shall enure to the benefit of and be binding upon
              the Specified Executives and their respective heirs, executors,
              administrators and other legal personal representatives and upon
              the Corporation and its successors and assigns.

              (b) This Plan shall enure to the benefit of and shall be binding
              upon and enforceable against the Corporation and any successor
              thereto, including, without limitation, any corporation or
              corporations acquiring directly or indirectly all or substantially
              all of the business or assets of the Corporation, whether by
              merger, consolidation, sale or otherwise, but shall not otherwise
              be assignable by the Corporation.

              (c) Without limitation of Subsection 7.4(b) hereof, the
              Corporation shall 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 Corporation, by
              a written
<PAGE>
                                      -16-


              agreement expressly, absolutely and unconditionally to
              assume and agree to perform the covenants and obligations of the
              Corporation pursuant to the terms of this Plan in the same manner
              and to the same extent as the Corporation would have been required
              to perform if no such succession had taken place, provided
              however, that such agreement shall not be required if the
              successor assumes the obligations of the Corporation hereunder by
              operation of law. Failure of the Corporation to obtain the written
              agreement of a successor required by this Subsection 7.4(c) shall
              be deemed to be a circumstance permitting a Specified Executive to
              terminate his or her employment for Good Reason and, accordingly,
              to be entitled to the Entitlements.

       7.5 Notice - Notices and other communications given or made under the
Plan shall be delivered as follows:

              (a) if to the Corporation, at its principal executive offices, to
              the attention of the SVP Human Resources;

              (b) if to a Specified Executive, to the most recent residential
              address shown for such Specified Executive in the records of
              Nortel Networks;

              (c) if to the Canadian Trustee, at the address provided to the
              Corporation from time to time; and

              (d) if to the U.S. Trustee, at the address provided to the
              Corporation from time to time.

       8. AMENDMENT AND TERMINATION

              (a) Amendment Prior to Any Proposed CIC - Except as provided in
              Subsection 8(b) hereof, the Corporation may amend this Plan at any
              time, in whole or in part.

              (b) Amendment Prior to Proposed CIC - No amendment of any
              provision of this Plan, the Canadian Trust Agreement, the U.S.
              Trust Agreement and any other trust agreement established in
              accordance with Article 3 hereof made after thirty (30) days prior
              to the earliest of: (1) the date that the Corporation first
              publicly announces it is conducting negotiations leading to a
              transaction that results in a Change in Control; or (2) the date
              that the Corporation enters into a definitive agreement
              documenting a Change in Control (even though still subject to
              approval by the Corporation's shareholders and other conditions
              and contingencies); or (3) the date of the first public
              announcement of a transaction that results in a Change in Control
              which does not fall within the events described in the preceding
              (1) or (2); (4) the date that the Corporation first enters into
              negotiations leading to a transaction that results in a Change in
              Control; or (5) the CIC Date; shall be effective unless consented
              to in writing by the Corporation and by any Specified Executive
              affected by such amendment.

              (c) Termination - The Nortel Networks Board may from time to time
              suspend or terminate the Plan in whole or in part. Notwithstanding
              the foregoing, the Plan
<PAGE>
                                      -17-


              shall not be suspended or terminated at any time after thirty (30)
              days prior to the earliest of: (1) the date that the Corporation
              first publicly announces it is conducting negotiations leading to
              a transaction that results in a Change in Control; or (2) the date
              that the Corporation enters into a definitive agreement
              documenting a Change in Control (even though still subject to
              approval by the Corporation's shareholders and other conditions
              and contingencies); or (3) the date of the first public
              announcement of a transaction that results in a Change in Control
              which does not fall within the events described in the preceding
              (1) or (2); (4) the date that the Corporation first enters into
              negotiations leading to a transaction that results in a Change in
              Control; or (5) the CIC Date, unless such suspension or
              termination is consented to in writing by the Corporation and by
              any Specified Executed affected by such suspension or termination.

       9. EFFECTIVE DATE AND TERM OF THE PLAN

The Plan was adopted by resolution of the board of directors of Nortel Networks
Limited on August 19, 1999 with effect from September 1, 1999. The Plan was
assumed by the Corporation effective May 1, 2000 and amended and restated by the
Nortel Networks Board with effect from July 26, 2001. Any amendments to the Plan
shall become effective as specified by the Nortel Networks Board, and consented
to by the Corporation and the Specified Executives required hereby. Any
termination or suspension of the Plan shall become effective as specified by the
Nortel Networks Board, and consented to by the Corporation and the Specified
Executives as required hereby.


<PAGE>
                                   SCHEDULE A

                                CHANGE IN CONTROL


       1. Events Constituting Change in Control - For the purposes of this Plan,
the term "Change in Control" means the occurrence of any of the following:

              (a) any Person or group acquires beneficial ownership of
              securities of the Corporation representing more than 20% of the
              outstanding securities entitled to vote in the election of
              directors of the Corporation (collectively, the "Voting Shares")
              other than in connection with a Permitted Business Combination;

              (b) the consummation of a merger, amalgamation, business
              combination, reorganization or consolidation or sale or other
              disposition of all or substantially all of the assets of the
              Corporation or any liquidation or dissolution of the Corporation,
              including by way of plan of arrangement (a "Business Combination")
              unless, in any such case:

                     (i) such Business Combination involves solely the
                     Corporation, and one and more affiliated entities; or

                     (ii) following completion of all steps involved in the
                     transaction or transactions pursuant to which the Business
                     Combination is effected:

                            (A) Persons who were the beneficial owners,
                            respectively, of the outstanding common shares of
                            the Corporation immediately prior to such Business
                            Combination beneficially own, directly or
                            indirectly, by reason of such prior ownership of
                            common shares, more than 50% of the then-outstanding
                            voting shares of (x) the entity resulting from such
                            Business Combination (the "Resulting Entity") or (y)
                            the Person that ultimately controls the Resulting
                            Entity, whether directly or indirectly (the
                            "Ultimate Parent"); and

                            (B) at least a majority of the members of the board
                            of directors of the Person resulting from such
                            Business Combination (or the Ultimate Parent) were
                            members of the Nortel Networks Board at the earlier
                            of the time of the execution of the initial
                            agreement providing for, or the action of the Nortel
                            Networks Board approving, such Business Combination;

              (c) the persons who were directors of the Corporation on the date
              hereof (the "Incumbent Directors") cease (for any reason other
              than death or disability) to constitute at least a majority of the
              Nortel Networks Board; provided, that, any person who was not a
              director on the date hereof shall be deemed to be an Incumbent
              Director if such person was elected or appointed to the Nortel
<PAGE>
                                      -2-


              Networks Board by, or on the recommendation of or with the
              approval of, at least two-thirds of the directors who then qualify
              as Incumbent Directors either actually or by operation of this
              proviso, unless such election, appointment, recommendation or
              approval was the result of any actual or publicly threatened proxy
              contest for the election of directors; or

              (d) any other event which the Nortel Networks Board determines in
              good faith could reasonably be expected to give rise to a Change
              in Control resulting from situations such as:

                     (i) any Person acquiring a significant interest in the
                     Corporation; or

                     (ii) the election of any Person to the Nortel Networks
                     Board in circumstances in which management has not
                     solicited proxies in respect of such election.

       2. Definitions - In addition to the definitions set out in Article 2 of
the Plan, for the purposes of this Schedule A:

       (a) "beneficial ownership" means ownership at law or in equity and, for
the purposes of this Plan, includes "beneficial ownership" as interpreted in
accordance with Subsections 1(5) and (6) and Section 90 of the Securities Act
(Ontario) as in force as of July 26, 2001 (the "OSA");

       (b) "control" or "controls" means, with respect to any Person, the direct
or indirect ownership of voting securities of such Person that carry with them
in the aggregate more than 50% of the votes for the election of directors of
such Person;

       (c) "group" means a Person and one or more other Persons who are acting
jointly or in concert with such Person and, for the purposes of this Plan,
"acting jointly or in concert" shall be interpreted in accordance with
Subsection 91(1) of the OSA; and

       (d) "Permitted Business Combination" means a Business Combination
described in Paragraph 1(b)(i) or 1(b)(ii) above.