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NORTEL NETWORKS LIMITED
 DIRECTORS DEFERRED
 SHARE COMPENSATION PLAN
 AS AMENDED AND RESTATED
 Amended and Restated on October 3, 2007,
effective August 30, 2007




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NORTEL NETWORKS LIMITED
DIRECTORS DEFERRED
SHARE COMPENSATION PLAN
AS AMENDED AND RESTATED
 1. BACKGROUND; PURPOSE OF THE PLAN




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2      2. DEFINITIONS




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3




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4




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5 (i)
    
    the last trading day of such Quarter on which the Market Value of a Common
Share may be determined and on which the Bank of Canada published a noon rate of
exchange for U.S. dollars, or(ii)
    
    the Resignation Date of such Participant, if the Settlement Date with respect
to a Participant occurs during the Quarter prior to the last trading day of such
Quarter; provided that, if such Resignation Date is not a trading day on which the
Market Value of a Common Share or, if required, a day on which the Bank of Canada noon
rate of exchange for U.S. dollars may be determined, the Reference Date shall be the
immediately preceding trading day on which such Market Value and, if required, the Bank
of Canada noon rate of exchange for U.S. dollars may be determined.
  (a)
    
    the Participant has ceased to be a member of the Board for any reason whatsoever, including
the death of the Participant; and(b)
    
    the Participant is neither an employee nor a member of the board of directors of any Nortel
Networks Company,
  (a)
    
    the Participant has ceased to be a member of the Board for any reason whatsoever,
including the death of the Participant; and(b)
    
    the Participant has ceased to provide services as an independent contractor, or member
of the board of directors, of any Nortel Networks Company. The applicable definition of
separation from service under Section 409A of the Code shall be used to determine the
date of cessation of services as an independent contractor or member of the board of
directors of any Nortel Networks Company, including Nortel Limited, for purposes of the
foregoing proviso.




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6 3. ADMINISTRATION OF THE PLAN
    4. PARTICIPATION




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7     5. SHARES SUBJECT TO THE PLAN




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8  6. EXECUTION OF ELECTION FORM AND AGREEMENT
  7. DIVIDENDS AND RELATED AMOUNTS
  8. SETTLEMENT OF SHARE UNITS




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9     (a)
    
    the aggregate purchase price (Aggregate Purchase Price) of the Common Shares;(b)
    
    the purchase price per Common Share or, if the Common Shares were purchased at different
prices, the average purchase price (computed on a weighted average basis) per Common Share
(Price per Common Share);(c)
    
    the amount of any reasonable brokerage commission related to such purchase of Common Shares;
and(d)
    
    the Payment Date for such Common Shares.




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10   9. PARTICIPANTS ACCOUNT
  10. PURCHASES ON THE OPEN MARKET
  (a)
    
    the Brokers agreement with being so designated, to acting for the Participants account in
accordance with customary usage of the trade with a view to obtaining the best share price for
the Participant in respect of the Common Shares to be purchased for the Participant, and to
delivering to the Participant, or his or her representative, the share certificate for, or to
transferring electronically to an account designated by the Participant, the Common Shares
purchased upon receipt from Nortel Limited of payment of the Aggregate Purchase Price and
related reasonable brokerage commission; and(b)
    
    Nortel Limiteds agreement to notify the Broker of the number of Common Shares to be
purchased and to pay the Aggregate Purchase Price and the related reasonable brokerage
commission,




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11   11. RIGHTS OF PARTICIPANTS
   12. DEATH OF PARTICIPANT
  13. COMPLIANCE WITH APPLICABLE LAWS




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12 14. WITHHOLDING TAXES
  15. TRANSFERABILITY
  16. ALTERATION OF NUMBER OF SHARE UNITS SUBJECT TO THE PLAN
  (a)
    
    a dividend shall be declared upon the Common Shares or other securities of Nortel Corporation
payable in Common Shares or other securities of Nortel Corporation (other than a dividend
which may be paid in cash or in Common Shares at the option of the shareholder);(b)
    
    the outstanding Common Shares shall be changed into or exchanged for a different number or
kind of shares or other securities of Nortel Corporation or of another corporation, whether
through an arrangement, plan of arrangement, amalgamation or other similar statutory
procedure, or a share recapitalization, subdivision or consolidation or otherwise;(c)
    
    there shall be any change, other than those specified in paragraphs (a) and (b) of this
Section 16, in the number or kind of outstanding Common Shares or of any shares or other
securities into which such Common Shares shall have been changed or for which they shall have
been exchanged; or(d)
    
    there shall be a distribution of assets or shares to shareholders of Nortel Corporation out
of the ordinary course of business,




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13    17. UNSECURED PLAN
  18. EFFECTIVE DATE OF THE PLAN
  19. AMENDMENTS TO, SUSPENSION OR TERMINATION OF, THE PLAN




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14  20. GOVERNING LAW