##### 



December 1, 2006
 Nortel 2005 Stock Incentive Plan,
As Amended and Restated
 Section 1. Purpose of the Plan
 Section 2. Definitions
 (a) Award
 (b) Base Price
 (c) Board of Directors
 (d) Canadian Award
 (e) Cause




---



##### 



(f) CBCA
 (g) Code
 (h) Committee
 (i) Company
 (j) Control
 (k) Effective Date
 (l) Exchange Act
 (m) Extension Period
 (i)
    
    in the case of a Participant who receives severance or other termination
compensation pursuant to the terms of an individual agreement entered into by such
Participant and the Company that employs the Participant or pursuant to the terms of
any plan, policy or practice of such Company, the last day of the period under (x) or
(y), as determined by the Committee: (x) the period used to calculate the portion of
the severance or other termination amount payable to the Participant under such
agreement, plan, policy or practice on the basis of his or her base salary rate or (y)
a period of calendar weeks equal to (A) the severance or
 2




---



##### 



(ii)
    
    in the case of a Participant who is party to a written contract of employment
with the Company that employs the Participant that requires the Company to provide the
Participant prior notice of such Qualifying Termination Without Cause or pay in lieu
thereof (including payment of continued compensation during any period of garden
leave), other than an individual agreement described in clause (i) above, the last day
of any such notice period, in the case of a notice period that ends after the
Participants Date of Termination, or the last day of the period for which the
Participant receives pay in lieu of notice.
 (n) Incentive Stock Option
 (o) Market Value
 (p) Nortel
 (q) NYSE
 (r) Option
 (s) Participants
 3




---



##### 



(t) Performance Criteria
 (u) Performance Stock Unit
 (v) Person
 (w) Plan
 (x) Prior Plan
 (y) Prior Plan Available Shares
 (z) Prior Plan Option
 (aa) Qualifying Performance Criteria
 4




---



##### 



(bb) Qualifying Termination Without Cause
 (cc) Restricted Stock Unit
 (dd) Retirement
 5




---



##### 



.
 (ee) Shares
 (ff) Stand-Alone SAR
 (gg) Stock Appreciation Right SAR
 (hh) Stock Exchanges
 (ii) Subsidiary
 (jj) Subscription Price
 (kk) Successor
 (ll) Tandem SAR
 (mm) Termination Date of Termination
 6




---



##### 



(nn) Termination Without Cause
 (oo) Third Party Trust
 (pp) TSX
 (qq) Unissued Prior Plan Option Shares
 (rr) Vested
 (ss) U.S. Award
 Section 3. Administration
 (a) Composition of Committee
 7




---



##### 



(b) Powers of the Committee
 (i)
 (ii)
 (iii)
 (iv)
 (v)
 (vi)
 (vii)
 8




---



##### 



(c) Establishment of Third Party Trusts
 (d) Effects of Committees Decision
 (e) Liability Limitation
 (f) Delegation and Administration
 Section 4. Shares Subject to the Plan
 (a) Aggregate Plan Limits
 9




---



##### 



(b) Tax Code Limits
 (c) Certain Additional Limits
 (d) Computation of Available Shares
 (e) Source of Shares
 Section 5. Terms of Awards In General
 (a) Instrument of Grant .
 (b) Vesting Conditions
 10




---



##### 



(c) Discretion of the Committee ,
 (d) No Repricing
 (e) Deferral of Payment or Other Settlement of Vested Awards
 11




---



##### 



Section 6. Stock Options
 (a) General
 (b) Vesting Terms
 (c) Subscription Price
 (d) Exercise of Vested Options
 (i)
 (ii)
 (iii)
 (iv)
 12




---



##### 



(e) Option Period
 (f) Incentive Stock Options
 Section 7. Stock Appreciation Rights
 (a) General
 (b) Tandem SARs (i)
 13




---



##### 



(ii)
 (iii)
 (c) Stand-Alone SARs
 (ii)
 (iii)
 (d) Exercise and Settlement
  (A)
    
    the excess of the Market Value of a Share on
the date of exercise over the Subscription Price or Base Price for a
Share under the applicable Stock Appreciation Right,
  (B)
    
    the number of Stock Appreciation Rights
exercised.
  14




---



##### 



Section 8. Restricted Stock Units and Performance Stock Units
 (a) General
 (b) Vesting Terms
 (c) Settlement
  (A)
    
    the Market Value of a Share on the applicable
settlement date specified by the Committee,
  (B)
    
    the number of Restricted Stock Units or
Performance Stock Units then being settled.
  (d) Dividend Equivalents .
 15




---



##### 



Section 9. Consequences of Termination
 (a) Options/Stock Appreciation Rights
 (i)
 (ii)
 16




---



##### 



(iii)
 (iv)
  (b) Restricted Stock Units and Performance Stock Units
 17




---



##### 



(c) Termination for Cause
 Section 10. Transferability
 (a) Transfer Restrictions
 (b) Permitted Transfers .
 Section 11. Alteration of Share Capital
 (a) No Corporate Action Restriction
 18




---



##### 



(b) Recapitalization Adjustment
 (i)
 (ii)
 (iii)
 Section 12. Amendment and Termination
 19




---



##### 



(i)
 (ii)
 (iii)
 (iv)
 (v)
 (vi)
 (vii)
 Section 13. Regulatory Approval
 Section 14. No Additional Rights
 Section 15. Miscellaneous Provisions
 (a) Shareholder Rights
 20




---



##### 



(b) Withholding
 (c) Governing Law
 (d) Compliance with Laws of Other Jurisdictions
 21




---



##### 



Section 16. Effective Date and Term of Plan
 (a) Effective Date
 (b) Termination
 
  22