exv10w3



 








Exhibit 10.3




ESCROW AGREEMENT




THIS ESCROW AGREEMENT dated as of March 1, 2005 among:




Each of the individuals named on the attached Schedule I
(individually, an “Officer” and collectively, the “Officers”),



— and —




Nortel Networks Corporation, a corporation incorporated pursuant
to the laws of Canada (“NNC”),



— and —




COMPUTERSHARE TRUST COMPANY OF CANADA, as escrow agent (the
“Escrow Agent”).



     WHEREAS each Officer wishes to pay to his or her respective NNC Employer (as defined below) an
amount equal to the entire Return to Profitability bonus paid to the Officer by such NNC Employer
in 2003, net of tax deductions at source, being the amount set forth opposite the name of the
Officer on the attached Schedule I (the “RtP Amount”), as set forth in a letter of undertaking from
the Officers to NNC dated January 10, 2005, as modified by a letter dated as of March 1, 2005 (the
“Undertaking”);



     AND WHEREAS, as contemplated by the Undertaking, each Officer wishes to place into escrow NNC
Shares (as defined below) to be used to facilitate the payment by the Officer of his or her RtP
Amount as provided below;



     NOW THEREFORE, in consideration of the premises and mutual covenants and agreements contained
herein, the parties agree as follows:



1. Definitions and Interpretation





	(a)	 	As used herein, unless the context requires otherwise, the following terms have the
definitions ascribed thereto below.
	 
	 	 	“Affected Parties” means those parties to this Agreement directly affected by a particular
waiver or exercise of rights by one or more other parties, and excludes those not so
directly affected.
	 
	 	 	“Agreement” means this Escrow Agreement together with all Schedules and Exhibits hereto and
all amendments made thereto in writing by the parties hereto.
	 
	 	 	“Blackout Trading Restrictions” means the trading restrictions prescribed by (i) an Order of
the Ontario Securities Commission under paragraph 2 of subsection 127(1) of the Securities
Act (Ontario) dated May 31, 2004 In the matter of certain Directors, Officers and Insiders
of Nortel Networks Corporation and Nortel Networks Limited ((2004) 27 OSCB 5503), (ii)
Decision No. 2004-MC-1783 of the Autorité des Marchés Financiers, and (iii) Section 306(a)
of the










 



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	 	 	United States Sarbanes-Oxley Act of 2002 (15 U.S.C. Section 7244(a) and 17 U.S. Code of
Federal Regulations Part 245 (Regulation BTR — Blackout Trading Restrictions).





“Business Day” means a day that is not a Saturday or a Sunday or a statutory holiday in
Toronto, Ontario, Canada or New York City, New York, U.S.A. or a day on which the offices of
the Escrow Agent in Toronto are not open for business.



“Confirmation” has the meaning set out in section 5(f).



“Corporate Secretary” means the Corporate Secretary from time to time of NNC.



“Deemed Surrender Notice” has the meaning set out in section 5(b).



“Escrowed Shares” has the meaning set out in section 2(a).



“First Payment Day” means the day that is five Business Days after the Trading Ban
Termination Notice is delivered to each Officer and the Escrow Agent pursuant to section
5(a)(ii).



“Market Value” means:




	 	(i)	 	in respect of NNC Shares delivered to the Escrow Agent pursuant to section
2(a), U.S. $3.13, being the U.S. dollar closing price per NNC Share as reported by the
NYSE on February 7, 2005;
	 
	 	(ii)	 	in respect of Escrowed Shares delivered by the Escrow Agent to the Corporate
Secretary for cancellation pursuant to a Deemed Surrender Notice pursuant to section
5(b) where such delivery has not been delayed pursuant to section 5(e), the U.S. dollar
closing price per NNC Share as reported by the NYSE on the trading day immediately
preceding the Payment Day in respect of which the Deemed Surrender Notice is delivered
by NNC to the Escrow Agent, or if there is no such closing price reported by the NYSE
on such day, the closing price per NNC Share reported by the NYSE on the next preceding
trading day for which a closing price has been reported;
	 
	 	(iii)	 	in respect of Escrowed Shares delivered by the Escrow Agent to the Corporate
Secretary for cancellation pursuant to a Surrender Notice pursuant to section 5(c)
where such delivery has not been delayed pursuant to section 5(e), the U.S. dollar
closing price per NNC Share as reported by the NYSE on the trading day immediately
preceding the day on which such Surrender Notice is delivered by an Officer to NNC and
the Escrow Agent, or if there is no such closing price reported by the NYSE on such
day, the closing price per NNC Share reported by the NYSE on the next preceding trading
day for which a closing price has been reported; or
	 
	 	(iv)	 	in respect of Escrowed Shares delivered by the Escrow Agent to the Corporate
Secretary for cancellation pursuant to section 5(e), the U.S. dollar closing price per
NNC Share as reported by the NYSE on the trading day immediately preceding the day on
which the Escrowed Shares are delivered by the Escrow Agent to the Corporate Secretary,
or if there is no such closing price reported by the NYSE on such day, the closing
price per










 



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	 	 	 	NNC Share reported by the NYSE on the next preceding trading day for which a closing
price has been reported.






If an Officer’s RtP Amount is in a currency other than U.S. dollars, the U.S. dollar closing
price determined as aforesaid will be converted to the applicable currency (rounded to two
decimal points) based on the noon buying rate for such currency for cable transfers quoted
in New York City as certified for customs purposes by the Federal Reserve Bank of New York,
in the case of clause (i) above, on February 7, 2005 (being Cdn.$1.26 per U.S.$1.00 and
U.S.$1.00 per £1.86 on such date), and in the case of clause (ii), (iii) or (iv) above, on
the trading day on which the U.S. dollar closing price is to be determined as aforesaid.
All references to closing prices as reported by the NYSE refer to the closing price on the
relevant trading day for regular (not extended hours) trading.




“NYSE” means the New York Stock Exchange.




“NNC Employer” means the direct or indirect subsidiary of NNC that is the employer of the
Officer.




“NNC Shares” means common shares in the capital of NNC or such other securities of NNC or
successor entity resulting from any exchange, reclassification or conversion of such common
shares as a result of any capital reorganization of NNC or amalgamation, merger,
consolidation or reorganization of NNC with or into any other entity or acquisition of NNC
by any other entity.




“Payment Day” means a day on which a Scheduled Payment is to be made.




“Pre-Payment” means a payment by the Officer of a portion of the RtP Amount prior to the
time the Undertaking contemplates payment of such portion by a Scheduled Payment.




“Procedure 320-28” means Nortel Networks Corporate Procedure No. 320-28 — Use of Undisclosed
Information, as may be amended or replaced and in effect from time to time.




“Remaining Balance” means, in respect of any Officer at any time, the difference between
such Officer’s RtP Amount and the cumulative total of the Officer’s payments made on account
of such RtP Amount to that time.




“RtP Amount” has the meaning set out in the recitals hereto.




“Scheduled Payment” means, in respect of any Officer, the payment scheduled to be made by
such Officer on the First Payment Day and on February 15 and August 15 of each year
commencing on August 15, 2005 and ending on August 15, 2007 as contemplated by the
Undertaking.




“Stock Transfer Power” has the meaning set out in section 2(a).




“Surrender Notice” has the meaning set out section 5(c).




“Termination Notice” has the meaning set out in section 5(g)(ii).




“Trading Ban Termination Notice” has the meaning set out in section 5(a).









 



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“Undertaking” has the meaning set out in the recitals hereto.




“Unpaid Amount” has the meaning set out in section 5(b).




“Window Period” means a Window Period under Procedure No. 320-28.




	(b)	 	The headings of sections in this Agreement are provided for convenience only and will not
affect its construction or interpretation.






	(c)	 	Unless otherwise indicated, references herein to sections, Schedules and Exhibits are to
sections, Schedules and Exhibits of this Agreement.
	 
	(d)	 	The following are the Schedules and Exhibits to this Agreement:




Schedule I
— Officers, RtP Amount and Escrowed Shares



Exhibit A
— Stock Transfer Power

Exhibit B — Trading Ban Termination Notice

Exhibit C — Deemed Surrender Notice

Exhibit D — Surrender Notice

Exhibit E — Confirmation

Exhibit F — Termination Notice




2. Establishment of Escrow





	(a)	 	Each Officer delivers herewith to the Escrow Agent a certificate or certificates representing
the number of NNC Shares set forth opposite the name of the Officer on the attached Schedule I
(the “Escrowed Shares”), which shares, except as noted on Schedule I, have an aggregate Market
Value of not less than the RtP Amount, together with a stock transfer power therefor
substantially in the form attached as Exhibit A (a “Stock Transfer Power”) duly executed in
blank.






	(b)	 	The Escrow Agent agrees to act as Escrow Agent and hereby acknowledges receipt of the
Escrowed Shares and executed stock transfer power.






	(c)	 	The Escrow Agent agrees to hold, safeguard and disburse the Escrowed Shares pursuant to the
terms and conditions hereof.






	(d)	 	Each Officer will from time to time deliver to the Escrow Agent upon its request sufficient
Stock Transfer Powers duly executed in blank so that at all times the Escrow Agent will have
an executed Stock Transfer Power for all Escrowed Shares then held by the Escrow Agent on
behalf of such Officer under this Agreement.





3. Representations and Warranties





	(a)	 	Each Officer represents and warrants to NNC and the Escrow Agent that, except as otherwise
disclosed by the Officer in writing to NNC and the Escrow Agent and accepted by NNC for the
purposes hereof at the time such Officer’s Escrowed Shares are delivered to the Escrow Agent
under section 2(a):










 



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	 	(i)	 	the Officer is the beneficial owner of all of his or her Escrowed Shares, with
good and marketable title thereto, free and clear of all liens, charges and other
encumbrances of whatever nature; and






	 	(ii)	 	except as contemplated herein, no consent of any person is required for the
delivery by the Officer of his or her Escrowed Shares or for the execution, delivery or
performance of this Agreement by the Officer.






	(b)	 	NNC and each Officer represents to the Escrow Agent that any account to be opened by, or
interest to be held by, the Escrow Agent in connection with this Agreement, for or to the
credit or such party, is not intended to be used by or on behalf of any third party.





4. Ownership; Voting Rights and Dividends




     While an Officer’s Escrowed Shares are held in escrow pursuant to this Agreement, the Officer
will continue to be the beneficial owner of such Escrowed Shares (subject to any disclosure made
pursuant to section 3) and entitled, inter alia, to:




	(a)	 	exercise any and all voting and other consensual rights pertaining to such Escrowed Shares
for any purpose not inconsistent with the terms of this Agreement;






	(b)	 	receive and retain any and all dividends or other distributions payable in respect of such
Escrowed Shares; and






	(c)	 	tender some or all of such Escrowed Shares in acceptance of a tender offer or take-over-bid
made for NNC Shares provided all Blackout Trading Restrictions to which the Officer is subject
have been previously terminated or ceased to apply to such Officer.





5. Surrender of Escrowed Shares





	(a)	 	NNC will:






	 	(i)	 	notify each Officer and the Escrow Agent of each Window Period during the term
of this Agreement not less than one Business Day prior to the commencement of such
Window Period; and






	 	(ii)	 	deliver to each Officer and the Escrow Agent a notice substantially in the form
attached as Exhibit B (the “Trading Ban Termination Notice”) promptly upon the
termination or cessation of all Blackout Trading Restrictions to which the Officer is
subject.






	(b)	 	An Officer who makes a Scheduled Payment or Pre-payment pursuant to the Undertaking will
notify the Corporate Secretary thereof at the time of such Payment or Pre-payment. If an
Officer does not pay to such Officer’s NNC Employer all or any portion of a Scheduled Payment
by 5:00 p.m. (local time in the place where such Officer’s NNC Employer’s head office is
located) on a Payment Day, NNC will on the first Business Day following such Payment Day
deliver to the Officer and the Escrow Agent a notice substantially in the form attached as
Exhibit C (a “Deemed Surrender Notice”) of non-payment by such Officer setting out therein the
amount of the Scheduled Payment that was not paid by the Officer (the “Unpaid Amount”) and the
Payment Day on which such Scheduled Payment was to have been made. The Officer is










 



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	 	 	thereupon deemed to have on such Payment Day irrevocably instructed the Escrow Agent to, and
the Escrow Agent will, subject to sections 5(e) and 5(h), within two Business Days of
receipt of the Deemed Surrender Notice, surrender to NNC for cancellation (to be credited
against the RtP Amount to be paid by the Officer to the NNC Employer as contemplated by the
Undertaking) the lesser of (i) that number of such Officer’s Escrowed Shares having an
aggregate Market Value determined by NNC equal to the Unpaid Amount (rounded up to the
nearest number of whole NNC Shares), and (ii) the number of such Officer’s Escrowed Shares
remaining in escrow hereunder.






	(c)	 	If an Officer delivers written instructions substantially in the form attached as Exhibit D
(a “Surrender Notice”) to NNC and the Escrow Agent to deliver Escrowed Shares to NNC on
account of all or any portion of a Scheduled Payment or a Pre-Payment, the Escrow Agent will,
subject to sections 5(e) and 5(h), within two Business Days of receipt of such Surrender
Notice surrender to NNC for cancellation (to be credited against the RtP Amount to be paid by
the Officer to the NNC Employer as contemplated by the Undertaking) the number of such
Officer’s Escrowed Shares having a Market Value determined by NNC equal to the amount
instructed by the Officer to be paid by the surrender of Escrowed Shares (rounded up to the
nearest number of whole NNC Shares) pursuant to the Surrender Notice.






	(d)	 	In any case where the aggregate Market Value of an Officer’s Escrowed Shares surrendered
pursuant to section 5(b) or 5(c) is in excess of the amount of any Scheduled Payment or Unpaid
Amount on account of which such surrender is made, as the case may be, such excess will be
applied by NNC against the next succeeding Scheduled Payment to be made by such Officer.






	(e)	 	If:






	 	(i)	 	the day on which the Escrow Agent is to surrender Escrowed Shares for
cancellation pursuant to a Surrender Notice or a Deemed Surrender Notice is a day that
is not during a Window Period, the surrender of such Escrowed Shares will be delayed
until the first Business Day of the next Window Period; or






	 	(ii)	 	prior to the day on which Escrowed Shares are to be surrendered pursuant to a
Surrender Notice or a Deemed Surrender Notice, an Officer notifies NNC and the Escrow
Agent, or NNC notifies an Officer and the Escrow Agent, that such Officer is precluded
from trading in NNC Shares pursuant to (A) Procedure No. 320.28, (B) applicable law, or
(C) any applicable order of regulatory authorities having jurisdiction, the surrender
of such Escrowed Shares pursuant to such Surrender Notice or Deemed Surrender Notice
will be delayed until the first Business Day of the first Window Period following the
day on which the Officer notifies NNC and the Escrow Agent or NNC notifies such Officer
and the Escrow Agent, as the case may be, that the Officer is no longer precluded from
trading in NNC Shares.






	(f)	 	Within three Business Days following any surrender of Escrowed Shares, NNC will deliver to
the Escrow Agent and the Officer on account of whom such shares have been surrendered a
written confirmation substantially in the form attached as Exhibit E (a “Confirmation”)
confirming the calculation of the number of Escrowed Shares surrendered and such Officer’s
Remaining Balance. Upon demonstration by the Officer of a calculation error, NNC will, at the
Officer’s election, credit any over payment against the Officer’s Remaining Balance (and
deliver a corrected Confirmation therefor) or refund the over payment to the Officer in cash.










 



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	(g)	 	If there are any Escrowed Shares of an Officer remaining in escrow after the Escrow Agent
receives:






	 	(i)	 	a Confirmation from NNC indicating that an Officer’s Remaining Balance is zero;
or






	 	(ii)	 	notice substantially in the form of Exhibit F attached (a “Termination Notice”)
from NNC that this Agreement has terminated in respect of such Officer,






the Escrow Agent will within three Business Days of receipt of such notice return to the
Officer, by pre-paid insured courier for next-day delivery, the certificate or certificates
for such remaining Escrowed Shares of the Officer together with all remaining executed Stock
Transfer Powers for such shares.




	(h)	 	Notwithstanding the Undertaking or any other provision of this Agreement, NNC will not accept
the surrender of an Officer’s Escrowed Shares for cancellation, and NNC will have no right to
deliver a Deemed Surrender Notice with respect to an Officer under section 5(b), and such
Officer will not instruct or be deemed to have instructed the Escrow Agent to surrender such
Officer’s Escrowed Shares or any other right, title or interest in such Officer’s Escrowed
Shares to NNC for cancellation, to the extent that such surrender, or instruction or deemed
instruction, would result in such Officer’s violation of the Blackout Trading Restrictions or
any of them.





6. Duties of Escrow Agent





	(a)	 	This Agreement expressly sets forth all the duties of the Escrow Agent with respect to any
and all matters pertinent hereto. No implied duties or obligations will be read into this
Agreement against the Escrow Agent. The Escrow Agent is not bound by the provisions of any
agreement among the other parties hereto except this Agreement. The parties hereto agree that
the Escrow Agent is not acting as a trustee or in any fiduciary capacity, that no trust is
intended to be, or will be, created, and that the duties of the Escrow Agent hereunder are
purely administrative in nature. The Escrow Agent will not be under any duty to give the
Escrowed Shares held by it hereunder any greater degree of care than it gives its own similar
property. The Escrow Agent does not have any interest in the Escrowed Shares deposited
hereunder but is serving as escrow holder only and having only possession thereof.






	(b)	 	The Escrow Agent will not be liable for any error of judgement, or for any act done or step
taken or omitted by it in good faith, or for any mistake of fact or law, or for anything which
it may do or refrain from doing in connection herewith, except for its own fraud, negligence
or wilful misconduct. In the absence of fraud, negligence or wilful misconduct by the Escrow
Agent, the Escrow Agent will not be liable to the Officers or NNC for any loss or injury to
them.






	(c)	 	Subject to section 6(b), upon the Escrow Agent’s delivery of any Escrowed Shares in
accordance with this Agreement, the Escrow Agent will be automatically and immediately
released from all obligations under this Agreement in respect of such Escrowed Shares.






	(d)	 	Subject to section 6(b), the Escrow Agent:






	 	(i)	 	may, if in its sole discretion it deems it necessary or desirable, retain such
independent counsel or other advisors as it reasonably may require for the purpose of
discharging or determining its duties, obligations or rights hereunder;










 



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	 	(ii)	 	may act pursuant to the advice of its legal counsel or the reasonable advice of
external legal counsel to NNC with respect to any matter relating to this Agreement;






	 	(iii)	 	will not be required to institute legal proceedings of any kind and will not
be required to defend any legal proceedings which may be instituted against it in
respect of the subject matter of this Agreement;






	 	(iv)	 	will be entitled to rely upon any order, judgment, certification, demand,
notice, instrument or other writing delivered to it hereunder without being required to
determine the authenticity or the correctness of any fact stated therein or the
propriety or validity of the service thereof;
	 
	 	(v)	 	may act in reliance upon any instrument or signature believed by it to be
genuine and may assume that the person purporting to give receipt or advice or make any
statement or execute any document in connection with the provisions hereof has been
duly authorized to do so;
	 
	 	(vi)	 	may conclusively presume that the undersigned representative of any party
hereto which is an entity other than a natural person has full power and authority to
instruct the Escrow Agent on behalf of that party unless written notice to the contrary
is delivered to the Escrow Agent; and
	 
	 	(vii)	 	is not required to expend or risk its own funds or otherwise incur financial
liability in the performance of any of its duties or in the exercise of any of its
rights or powers, or do anything not expressly provided for herein; and
	 
	 	(viii)	 	retains the right not to act and will not be liable for refusing to act if, due to a
lack of information or for any other reason whatsoever, the Escrow Agent, in its sole
judgment, determines that such act might cause it to be in non-compliance with any
applicable anti-money laundering or anti-terrorist legislation, regulation or
guideline.






	(e)	 	In the event of any disagreement between the other parties hereto resulting in adverse claims
or demands being made in connection with any Escrowed Shares or in the event that the Escrow
Agent is in doubt as to what action it should take hereunder, the Escrow Agent will be
entitled to retain such Escrowed Shares until the Escrow Agent has received (i) a final
non-appealable order of a court of competent jurisdiction directing delivery of such Escrowed
Shares or (ii) a written agreement executed by the other Affected Parties hereto directing
delivery of such Escrowed Shares, in which event the Escrow Agent will disburse such Escrowed
Shares in accordance with such order or agreement. Any court order must be accompanied by a
legal opinion by counsel for the presenting party reasonably satisfactory to the Escrow Agent
to the effect that the order is final and non-appealable. The Escrow Agent will act on such
court order and legal opinion without further question.





7. Successor Escrow Agent





	(a)	 	Any company into which the Escrow Agent or its corporate trust department may be merged or,
with or to which it may be consolidated, amalgamated or sold, or any company resulting from
any merger, consolidation, sale or amalgamation to which the Escrow Agent is a party, will be
the new escrow agent under this Agreement without the execution of any instrument or any










 



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	 	 	further act, provided that such company is resident in Canada and is authorized to carry on
the business of a trust company in the Province of Ontario.






	(b)	 	The Escrow Agent may:






	 	(i)	 	be removed at any time by the mutual consent of NNC and each Officer in respect
of which this Agreement remains in force by delivering notice thereof to the Escrow
Agent; and






	 	(ii)	 	at any time resign as such by delivering notice thereof to NNC and each Officer
in respect of which this Agreement remains in force;






whereupon the removal or resignation of the Escrow Agent, as the case may be, will take
effect on the earlier of (i) the appointment of a successor (including a court of competent
jurisdiction) or (ii) the day which is 30 days after the date of delivery of the notice of
removal or resignation, as the case may be, to the other applicable party or parties hereto.
The Escrow Agent will deliver the Escrowed Shares to any successor Escrow Agent jointly
designated by the other parties hereto, or to any court of competent jurisdiction,
whereupon, subject to section 6(b), the Escrow Agent will be discharged of and from any and
all further obligations arising in connection with this Agreement. If the Escrow Agent has
not received a designation of a successor Escrow Agent within 30 days of delivery of the
notice of removal or resignation, as the case may be, the Escrow Agent’s sole responsibility
after that time will be to retain and safeguard the Escrowed Shares until receipt of a
designation of the successor Escrow Agent or a joint written disposition instruction by the
other parties hereto or a final non-appealable order of a court of competent jurisdiction.
Upon receipt of the Escrowed Shares from the predecessor Escrow Agent, such successor Escrow
Agent will, without further act, become vested with all of the rights, powers and duties of
the predecessor Escrow Agent as if originally named herein.



8. Indemnity




     In consideration of the Escrow Agent agreeing to act hereunder, NNC covenants and agrees to
save, defend and keep harmless and fully indemnify the Escrow Agent, its officers, directors,
employees and agents, and their respective heirs, executors, administrators, successors and
assigns, from and against all losses, costs, liabilities, charges, suits, demands, claims, damages
and expenses of any nature which the Escrow Agent, its successors or assigns, may at any time
hereafter bear, sustain, suffer or be part to for or by reason of or on account of its acting as
escrow agent or anything in any manner relating thereto or by reason of the Escrow Agent’s
compliance with the terms hereof, except such as result primarily from its own fraud, negligence or
wilful misconduct.



9. Not Obliged to Defend




     Without restricting the foregoing indemnity, if proceedings are taken by arbitration or in any
court respecting the Escrowed Shares, the Escrow Agent will not be obliged to defend or otherwise
participate in any such proceedings until it has such security as the Escrow Agent determines, in
its sole discretion, to be adequate for its costs in such proceedings in addition to the indemnity
set out above.









 



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10. Expenses and Fees




     NNC shall reimburse the Escrow Agent for all reasonable expenses reasonably incurred in
connection with acting hereunder, including without limitation legal fees paid by the Escrow Agent
in respect of this Agreement. The fees of the Escrow Agent relating to this Agreement and its
responsibilities hereunder will be borne by NNC.



11. Notices




     All notices, consents, waivers and other communications under this Agreement must be in
writing and will be deemed to have been duly given:




	(a)	 	to any party hereto, when delivered by hand (with written confirmation of receipt) or sent by
telecopier (with written confirmation of receipt); or
	 
	(b)	 	to NNC or any Officer, when e-mailed (with electronic confirmation of receipt);




to the appropriate addresses, telecopier numbers or e-mail addresses set forth below (or such other
addresses, telecopier numbers or e-mail addresses as a party may designate by notice to the other
parties), as applicable. Any such notice will be deemed to have been given as of the date
received, in the case of personal delivery, or on the date shown on the receipt or confirmation
therefor, in the case of telecopier delivery or e-mail.




12. Actions on Business Days




     If any day on which any action required to be taken hereunder is not a Business Day, then,
unless otherwise expressly provided for herein, such action will be required to be taken on or
before the requisite time on the next succeeding day that is a Business Day.



13. Waiver




     The rights and remedies of the parties to this Agreement are cumulative and not alternative.
Neither the failure nor any delay by any party in exercising any right, power, or privilege under
this Agreement or the documents referred to in this Agreement will operate as a waiver of such
right, power, or privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or
the documents referred to in this Agreement can be discharged by one party, in whole or in part, by
a waiver or renunciation of the claim or right unless in writing signed by the other Affected
Parties; (b) no waiver that may be given by an Affected Party will be applicable except in the
specific instance of which it is given; and (c) no notice to or demand on one party will be deemed
to be a waiver of any obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.



14. Amendment




     This Agreement may not be amended except, as to any Officer, by a written agreement executed
by such Officer and NNC. The Escrow Agent shall not be bound by any notice of a claim or demand,
or any waiver, modification, amendment, termination or rescission of this Agreement, unless
received by it









 



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in writing and signed by NNC and the affected Officer or Officers and, if its duties herein
are affected, unless it has given its prior written consent thereto.



15. Governing Law




     This Agreement will be governed by the laws of the Province of Ontario, Canada, without regard
to conflicts of law principles.



16. Further Assurances




     Each of the parties hereto will execute such further instruments and take such other actions
as any other party may reasonably request in order to effectuate the purposes of this Agreement.



17. Binding Effect, Termination and Survival of Certain Provisions




     This Agreement will be binding upon and inure to the benefit of NNC and the Escrow Agent, and
each of their respective successors, assigns, heirs, executors and administrators, and each
Officer. This Agreement will terminate and be of no further force or effect in respect of an
Officer upon the earliest of (i) the last of such Officer’s Escrowed Shares being surrendered to
the Corporate Secretary, (ii) the payment in full of such Officer’s RtP Amount, and (iii) the death
or permanent disability of such Officer. Upon termination of this Agreement in respect of an
Officer, NNC will within two Business Days thereof deliver a Termination Notice to the Escrow Agent
in respect of such Officer. For greater certainty, upon the last of an Officer’s Escrowed Shares
being surrendered to the Corporate Secretary, such Officer will not be obligated to deliver into
escrow hereunder any further NNC Shares notwithstanding that such Officer’s RtP Amount may not have
been paid in full. Notwithstanding the foregoing, the provisions of sections 8, 9 and 10 will
survive the resignation or removal of the Escrow Agent and the termination of this Agreement.



18. Counterparts; Facsimilied Agreements




     This Agreement may be executed in two or more counterparts, each of which will be deemed to be
an original and all of which, when taken together, will be deemed to constitute one and the same.
Any party hereto is entitled to rely on delivery by facsimile of an executed copy of this
Agreement, and acceptance of such facsimile copy will be legally effective to create a valid and
binding agreement between the parties hereto in accordance with the terms hereof.



19. Administration of Escrow




     For the avoidance of doubt, to the extent the provisions of this Agreement are inconsistent or
conflict with Schedule B to the Undertaking, this Agreement will govern the administration of the
escrow contemplated by the Undertaking.



20. Severability




     If any provision of this Agreement becomes illegal or unenforceable in whole or in part for
any reason whatsoever, the remaining provisions will nevertheless be deemed valid, binding and
subsisting.














 






- 12 -




     IN WITNESS WHEREOF the parties have executed and delivered this Agreement as of the date
first written above.



	 	 	 	 	 	 	 	 	 
	NORTEL NETWORKS CORPORATION	 	COMPUTERSHARE TRUST COMPANY
	 

	 	 	 	OF CANADA	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/   Gordon Davies
	 	By:	 	/s/   Mircho
Mirchev
	 	 
	Name:

	 	Gordon A. Davies	 	Name:	 	Mircho Mirchev	 	 
	Title:

	 	Corporate Secretary	 	Title:	 	Professional, Corporate Trust	 	 
	 

	 	August 11, 2005	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Address:

	 	8200 Dixie Road	 	 	 	 	 	 
	 

	 	Brampton, ON L6T 5P6
	 	By:	 	/s/   C. Davidson
	 	 
	Fax:

	 	 	 	Name:	 	Cheryl Davidson	 	 
	 

	 	 
	 	 	 	 	 	 
	Attention:

	 	 	 	Title:	 	Administrator, Corporate Trust	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 

	 	/s/   Anna Ventresca	 	Address:
	 	100 University Avenue	 	 
	 

	 	Anna Ventresca
	 	 	 	9th Floor,	 	 
	 

	 	Assistant Secretary
	 	 	 	North Tower Toronto,	 	 
	 

	 	
	 	 	 	ON M5J 2Y1	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Fax:	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	 	 	Attention:
	 	Manager, Corporate Trust	 	 
	 
	 	 	 	 	 	 	 	 







	 	 	 	 	 	 	 	 
	/s/   Chahram Bolouri	 	/s/   Malcom Collins
	 	 	 
	Chahram Bolouri	 	Malcom Collins	 	 
	 
	 	 	 	 	 	 
	Address:

	 	130 Beaconsfield Blvd
	 	Address:
	 	1801 Oatlands Court
	 

	 	Beaconsfield, Quebec
	 	 	 	Wake Forest
	 

	 	Canada H9W 3Z7
	 	 	 	North Carolina 27587
	Fax:

	 	514-426-2715
	 	Fax:
	 	919-997-6130
	 
	 	 	 	 	 	 
	/s/   P Debon	 	/s/   Nicholas J. DeRoma
	Pascal Debon	 	Nicholas DeRoma
	 
	 	 	 	 	 	 
	Address:

	 	15190 Prestonwood Blvd
	 	Address:
	 	1 Chedington Place, Suite 8-D
	 

	 	Apt 433
	 	 	 	Toronto, Ontario
	 

	 	Dallas, Texas 75248
	 	 	 	Canada M4M 3R4
	Fax:

	 	(972) 684-3632 or ESN
444-3632	Fax:
	 	416-489-0095






 









 






- 13 -




	 	 	 	 	 	 	 	 
	/s/   Bill Donovan	 	/s/   John Giamatteo
	Bill Donovan	 	John Giamatteo
	 
	 	 	 	 	 	 
	Address:

	 	600 Hogans Valley Way
	 	Address:
	 	Gate City Ohsaki, East Tower 9F
	 

	 	Cary, NC 27513
	 	 	 	1-11-2 Ohsaki, Shinagawa-ku
	 

	 	 	 	 	 	Tokyo 141-8411, Japan
	Fax:

	 	Home Fax 919-468-0924
	 	Fax:
	 	81-3-5740-1849
	 
	 	 	 	 	 	 
	/s/   D Joannou	 	/s/   Robert Mao
	Dion Joannou	 	Robert Mao
	 
	 	 	 	 	 	 
	Address:

	 	2839 NE 24th
Place
	 	Address:
	 	1126 River Garden
	 

	 	Ft. Lauderdale, FL, 33305
	 	 	 	Shunyi County, Beijing
	 

	 	USA
	 	 	 	China, 101300
	Fax:

	 	954-851-8126
	 	Fax:
	 	 86-10-8046-5745
	 
	 	 	 	 	 	 
	/s/   B. McFadden	 	/s/   Greg Mumford
	Brian McFadden	 	Greg Mumford
	 
	 	 	 	 	 	 
	Address:

	 	6 Magnolia St.
	 	Address:
	 	1201 Spinnaker Place
	 

	 	Baie-D’Urfé
	 	 	 	Kingston, Ontario
	 

	 	Quebec, H9X 3P4
	 	 	 	Canada K7L 5H6
	Fax:

	 	514-457-0739
	 	Fax:
	 	613-544-7444
	 
	/s/   Steve Pusey	 	/s/   Susan Spradley
	Steve Pusey	 	Susan L. Spradley
	 
	 	 	 	 	 	 
	Address:

	 	8 St. Davids Drive
	 	Address:
	 	2 Dorset Pl
	 

	 	Englefield Green
	 	 	 	Dallas, Texas 75229
	 

	 	Surrey	 	 	 	 
	Fax:

	 	(44) 1628 437760
	 	Fax:
	 	972-684-3950







 










 






Schedule I




OFFICERS, RtP AMOUNT AND ESCROWED SHARES




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	RtP Amount	 	Escrowed
	Name	 	RtP Amounts	 	Converted to $US(1)	 	Shares(2)
	BOLOURI, Chahram
	 	 	C$891,697	 	 	US $707,696.03	 	 	226,101	 
	COLLINS, Malcolm
	 	GBP£395,409	 	US $735,460.74	 	 	234,972	 
	DEBON, Pascal
	 	US $1,078,963	 	 	 	 	 	 	344,717	 
	DeROMA, Nicholas
	 	 	C$953,747	 	 	US $756,942.06	 	 	241,835	 
	DONOVAN, Bill
	 	US $640,271	 	 	 	 	 	 	204,559	 
	GIAMATTEO, John
	 	US $259,875	 	 	 	 	 	 	83,027	 
	JOANNOU, Dion
	 	US $328,412	 	 	 	 	 	 	104,924	 
	MAO, Robert
	 	US $627,500	 	 	 	 	 	 	200,479	 
	McFADDEN, Brian
	 	 	C$899,630	 	 	US $713,992.06	 	 	228,112	 
	MUMFORD, Greg
	 	 	C$921,500	 	 	US $731,349.21	 	 	233,658	 
	PUSEY, Steve
	 	GBP£473,173	 	US $880,101.78	 	 	281,183	 
	SPRADLEY, Susan
	 	US $967,694	 	 	 	 	 	 	309,167	(1)








 




			
	(1)	 	C$ amounts are converted to US$ at the rate of C$1.26 per US$1.00 and GBP£ are
converted to US$ at the rate of US$1.00 per £1.86.
	 
	(2)	 	The closing price of NNC Shares on the NYSE on February 7, 2005 was US$3.13.
	 
	(3) 	 	Represents all NNC Shares beneficially owned by such Officer (excluding NNC Shares
held in long term investment plans).












 










Exhibit A




STOCK TRANSFER POWER




     THE UNDERSIGNED hereby surrenders for cancellation, without return of capital, to Nortel
Networks Corporation,                                                                                 common shares in Nortel
Networks Corporation standing in the name of the undersigned on the books of the said corporation
represented by certificate number                                                                                 , together
with all renewals thereof, substitutions therefore, accretions thereto and proceeds thereof (all of
which are hereinafter collectively referred to as the “Shares”) and hereby irrevocably constitutes
and appoints any one officer of Computershare Trust Company of Canada as the attorney of the
undersigned to transfer the said Shares on the books of the said corporation with full power of
substitution in the premises.



     THE UNDERSIGNED shall from time to time at the request of Computershare Trust Company of
Canada, do such further acts and execute all such further deeds and instruments as shall be
necessary to fully perform and carry out the terms and intent of this Stock Transfer Power.



     DATED:                                                             



	 	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Signature	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	 













 







Exhibit B




TRADING BAN TERMINATION NOTICE




	 	 	 
	To:

	 	Computershare Trust Company of Canada, as Escrow Agent (“Escrow Agent”)
	 
	 	 
	To:

	 	                                                                                                                        (the “Officer”)
	 

	 	Name of Officer
	 
	 	 
	Copy to:

	 	                                                                                                                        
	 

	 	Name of Nortel Employer
	 
	 	 
	From:

	 	Nortel Networks Corporation (“NNC”)






     Pursuant to section 5(a)(ii) of the Escrow Agreement dated March 1, 2005 among the Escrow Agent,
NNC and the Officer, et al, (the “Escrow Agreement”), you are hereby notified that all Blackout
Trading Restrictions (as defined in the Escrow Agreement) to which the Officer is subject have
terminated or ceased as of
                                                             (insert date). The First Payment Day (as defined under the Escrow
Agreement) will therefore be                                                             .



	 	 	 	 	 
	 

	 	 	 	Nortel Networks Corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 













 






Exhibit C




DEEMED SURRENDER NOTICE




	 	 	 	 
	To:

	 	Computershare Trust Company of Canada, as Escrow Agent	 
	 
	 	 	 
	To:
	 	 	 
	 

	 	 	 
	 

	 	Name of Officer	 
	 
	 	 	 
	Copy to:
	 	 	 
	 

	 	 	 
	 

	 	Name of Nortel Employer	 
	 
	 	 	 
	From:

	 	Nortel Networks Corporation (“NNC”)	 
	 
	 	 	 
	Re:

	 	Escrow Agreement dated as of March 1, 2005 among the Escrow Agent, NNC and the Officer, et al	 
	 

	 	 	 






	 	 	 
	Date of Scheduled Payment to which this
	 	 
	Deemed Surrender Notice relates:

	 	 

	 
	 	 
	Unpaid Amount to be paid by surrender of Escrowed Shares:

	 	 

	 
	 	 
	Date on which Market Value of NNC
	 	 
	Shares determined:

	 	 


	 
	 	 
	Closing Price of NNC Common Shares on NYSE on Market Value determination date:

	 	 

	 
	 	 
	Exchange rate rounded to two decimal points (if applicable)

	 	 

	 
	 	 
	Number of Escrowed Shares to be surrendered (Unpaid Amount divided by
Market Value of one NNC Share, rounded up to the nearest whole number):
	 	 







	 	 	 	 	 
	 

	 	 	 	Nortel Networks Corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 






 









 








Exhibit D




SURRENDER NOTICE




	 	 	 	 
	To:

	 	Computershare Trust Company of Canada, as Escrow Agent	 
	 
	 	 	 
	Copy to:
	 	 	 
	 

	 	 	 	 
	 

	 	Name of Nortel Employer	 
	 
	 	 	 
	Copy to:

	 	Nortel Networks Corporation (“NNC”)	 
	 
	 	 	 
	From:
	 	 	 
	 

	 	 	 	 
	 

	 	Name of Officer	 
	 
	 	 	 
	Re:

	 	Escrow Agreement dated as of
March 1, 2005 among the Escrow Agent, NNC and the Officer, et al
	 

	 	 	 





Amount to be paid on account of 

RtP Amount by the surrender

of Escrowed Shares:                                                                                                                         




	 	 	 	 	 
	Check One:

	o	Scheduled Payment:
	 	                                                                                                                        
	 

	 	 	 	(insert date)
	 
	 	 	 	 
	 

	o	Pre-payment	 	 
	 
	 	 	 	 
	 

	 	 	 	                                                                                                                        
	 

	 	 	 	Signature of Officer
	 
	 	 	 	 
	 

	 	Date:
	 	                                                                                                                        







 









 







Exhibit E




CONFIRMATION




	 	 	 	 
	To:
	 	 	 
	 

	 	 	 	 
	 

	 	Name of Officer	 
	 
	 	 	 
	To:

	 	Computershare Trust Company of Canada, as Escrow Agent	 
	 
	 	 	 
	Copy to:
	 	 	 
	 

	 	 	 	 
	 

	 	Name of Nortel Employer	 
	 
	 	 	 
	From:

	 	Nortel Networks Corporation (“NNC”)	 
	 
	 	 	 
	Re:

	 	Escrow Agreement dated as of March 1, 2005 among the Escrow
Agent, NNC and the Officer, et al	 






	 	 	 
	Date of Surrender Notice or Deemed Surrender Notice to which this Confirmation
relates:

	 	 

	 
	 	 
	Amount of payment made pursuant to notice referred to above:

	 	 

	 
	 	 
	Date on which Market Value of NNC Shares determined:

	 	 

	 
	 	 
	Closing Price of NNC Shares on NYSE on Market Value determination date:

	 	 

	 
	 	 
	Exchange rate rounded to two decimal points (if applicable)

	 	 

	 
	 	 
	Number of Escrowed Shares surrendered (Unpaid Amount divided by Market Value of
one NNC Share, rounded up to the nearest whole number):

	 	 


	 
	 	 
	Officer’s Remaining Balance:

	 	 










	 	 	 	 	 
	 

	 	 	 	Nortel Networks Corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 






 









 








Exhibit F




TERMINATION NOTICE




	 	 	 
	To:

	 	Computershare Trust Company of Canada, as Escrow Agent (the “Escrow Agent”)
	 
	 	 
	To:
	 	 
	 

	 	 	 
	 

	 	Name of Nortel Employer
	 
	 	 
	From:

	 	Nortel Networks Corporation (“NNC”)
	 
	 	 
	Re:

	 	             
                   
                   
                   
                   
                   
            
(the “Officer”)
	 

	 	Name of Officer in respect of whom this Notice is delivered





You are hereby notified that the Escrow Agreement dated March 1, 2005 among the Escrow Agent, NNC
and the Officer, et al, is terminated in respect of such Officer.




	 	 	 	 	 
	 

	 	 	 	Nortel Networks Corporation
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Date: