NORTEL NETWORKS CORPORATION CHANGE IN CONTROL PLAN

EXHIBIT 10.4

NORTEL NETWORKS CORPORATION
CHANGE IN CONTROL PLAN

June 1, 2007

NORTEL NETWORKS CORPORATION

CHANGE IN CONTROL 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 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, the Corporation has established this Plan to provide certain arrangements for Specified Executives whose employment with Nortel is terminated as a result of a Change in Control.

2.

DEFINITIONS

For the purpose of the Plan, the terms below 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 Board may determine for the purposes of any of the provisions of the Plan.

“ Awards ” means restricted stock units, performance stock units or other stock based incentive awards, other than Options, granted pursuant to a Stock Incentive 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 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 Board in relation to this Plan from time to time.

“Canadian Executive” means a Specified Executive who is a resident of Canada for the purposes of the Income Tax Act (Canada), as amended from time to time.

“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 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 (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 Board, and a reasonable opportunity to cure has been given to the Specified Executive by the Nortel Board;
	(iii)		material violation of any written agreement between the Specified Executive and Nortel not to disclose any confidential or proprietary information of Nortel or confidential or proprietary information of a third person in respect of which Nortel is under a written confidentiality obligation to such third party of which the Specified Executive has received prior written notice;
	(iv)		fraud or willful and serious misconduct in connection with the performance of the Specified Executive’s duties for Nortel, which, in the case of any such misconduct, has caused direct material injury to Nortel; or
	(v)		dismissal for just cause (including but not limited to a dismissal for performance related reasons or for misconduct) in accordance with applicable law.

“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.

“Code” means the United States Internal Revenue Code of 1986, as amended, the regulations thereunder and any interpretive guidance as may be issued from time to time.

“Committee” means the compensation and human resources committee of the Nortel Board and the board of directors of NNL or such other committee of the Nortel Board as the Nortel Board may designate from time to time as the “Committee” for the purposes of this Plan; provided, however, that the Committee may, in its discretion, delegate in writing such of its powers, rights and duties under the Plan, in whole or in part, to such committee, person or persons as it may determine, from time to time, on 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 Incentive 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.

“EVP Corporate Operations” means the individual holding the most senior position responsible for corporate operations at the Corporation at the applicable time.

“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 more than thirty (30) days after written notification by the Specified Executive to the EVP Corporate Operations (such notification to be made within a period not to exceed ninety (90) days from the initial existence of the Good Reason condition):

	(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, however that a “Good Reason” shall not be deemed to have occurred until the end of such thirty (30) day period.

“International Executives” means Specified Executives other than Canadian Executives.

“ Key Employee ” means such term as defined by section 416(i) of the Code.

“NNL” means Nortel Networks Limited and its successors.

“Nortel Board” means the board of directors of the Corporation.

“Nortel” means the Corporation and the affiliated entities.

“Option” means a stock option and related stock appreciation right, if any, and any stand-alone stock appreciation rights granted pursuant to a Stock Incentive Plan, 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 Nortel Networks Corporation Change in Control Plan 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 particular provision is specified.

“ Pro Rata Basis ” means, (i) for any performance stock units or other similar performance-based awards, 100% of the unvested target amount of the award awarded, multiplied by a fraction, the numerator of which equals the number of full months of continuous service provided since the commencement of the applicable performance period until the Termination Date and the denominator of which is 36 and (ii) for any restricted stock units or other time-based awards excluding Options, the product of one-third of the award awarded multiplied by a fraction, the numerator of which equals the number of days which have elapsed at the Termination Date since the later of (a) the date 33 percent of the awards became vested; and (b) the date 66 percent of the

awards became vested, and the denominator of which is 365; provided, however, that no portion of an award shall become vested earlier than the first anniversary of the date the award was granted.

“ Separation From Service ” means separation from service as defined by section 409A of the Code and refers to a separation from service from the affiliated group as determined using a 50% common ownership test with reference to section 414(b) and (c) of the Code.

“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 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 Incentive Plan” means each of the Nortel Networks Corporation 1986 Stock Option Plan, As Amended And Restated, the Nortel Networks Corporation 2000 Stock Option Plan and the Nortel 2005 Stock Incentive Plan, As Amended and Restated and as each may be further amended from time to time prior to the CIC Date, or any other similar plan adopted or assumed by the Corporation or NNL for the benefit of employees of Nortel.

“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
	(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.

“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: (i) the actual date of a Specified Executive’s termination of employment with Nortel, or (ii) if required to comply with section 409A of the Code, the actual date of a Specified Executive’s Separation From Service with Nortel.

“Termination Due to Change in Control” means:

	(i)		any termination of the employment of the Specified Executive by Nortel 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 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 for Cause; or (2) pursuant to an agreement to resign or retire entered into by Nortel 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.

“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 — At least 30 days prior to any CIC Date, or if the Corporation is not aware in advance that a CIC Date will occur, immediately following the Corporation becoming aware of the occurrence of a CIC Date, 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, unless there has been a recent down turn in the financial health of Nortel. 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 CIC Date will occur, immediately

following the Corporation’s becoming aware of the occurrence of a CIC Date, 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 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. Notwithstanding the foregoing, at least 30 days prior to any CIC Date, or if the Corporation is not aware in advance that a CIC Date will occur, immediately following the Corporation becoming aware of the occurrence of a CIC Date, 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 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, unless there has been a recent down turn in the financial health of Nortel. Immediately prior to the CIC Date or, if it is not known in advance that the CIC Date will occur, immediately following the Corporation’s becoming aware of the occurrence of a CIC Date, 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 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 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 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 deli