Exhibit 10.1
Nortel Networks Limited SUCCESS Incentive Plan
Section 1:  Introduction
     The Nortel Networks Limited SUCCESS Incentive Plan (the “SUCCESS Plan”) is
a short-term, incentive bonus plan that provides the potential for “Eligible
Employees” (as defined below) to receive cash awards based on their
contributions to the success of the “Company”1, conditioned on the Company
meeting its objectives.
     The SUCCESS Plan is intended to drive business performance and customer and
shareholder value by rewarding Eligible Employees for their contributions to the
Company’s overall success. An Eligible Employee’s contribution is determined by
two factors: (1) the impact of that employee’s role on business results and
(2) that employee’s achievement of individual performance objectives during the
employee’s active service with the Company. The actual award received by an
Eligible Employee will reflect (1) an employee’s job scope, complexity, and
responsibilities, and that employee’s contribution and achievement, during the
Plan Period2 and (2) the Company’s performance as indicated by the Nortel
Performance Factor (the “Nortel Performance Factor”).
Section 2:  SUCCESS Plan Eligibility
     Generally, regular full-time and regular part-time3 Company employees are
eligible to participate in the SUCCESS Plan (“Eligible Employees”), subject to
the following:

  (1)   Eligible employees who participate in other incentive plans for a full
calendar month or the greater portion of a month, as determined by the Company,
are not eligible to participate in the SUCCESS Plan during that calendar month.
For purposes of this document, “other incentive plans” mean sales incentive
compensation or any other incentive/bonus arrangements which the Company
determines have been offered in lieu of the SUCCESS Plan;

 

1   For purposes of the SUCCESS Plan, the “Company” is defined as Nortel
Networks Limited and its subsidiaries and affiliates and other entities, which
it controls directly or indirectly and which have been approved for
participation in the SUCCESS Plan by the person holding the most senior position
responsible for human resources or the equivalent at the Company as identified
by the CHRC (the “Senior Vice-President, HR”).   2   Each calendar year consists
of one Plan Period— from January 1 through December 31. The Plan Period(s) for
each calendar year may be changed by the CHRC (as defined in Section 2) and
Board of Directors (as defined in Section 2) at any time.   3   For purposes of
the SUCCESS Plan, regular full-time and regular part-time Company employees are
those employees who are eligible for participation in the Company health benefit
plans based on their regularly scheduled hours.

 

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  (2)   Subject to applicable law, employees who are covered under a collective
labor agreement are not eligible unless that collective labor agreement provides
for their participation in the SUCCESS Plan;     (3)   Individuals determined by
the Company to be students, co-op students, interns, temporary4, or non-payroll
workers are ineligible for the SUCCESS Plan;     (4)   The Compensation and
Human Resources Committee of the Boards of Directors of Nortel Networks
Corporation and Nortel Networks Limited (“CHRC”) and the Board of Directors of
Nortel Networks Limited (the “Board of Directors”) may determine that certain
Company employees (including employees who are not otherwise eligible for the
SUCCESS Plan) may be eligible to receive an award from a Discretionary Bonus
Pool created pursuant to Section 5 hereof;     (5)   Subject to applicable law,
to be eligible for either a full or pro-rated award for any given Plan Period:
(a) an employee must have been actively employed in a role that is eligible
under the SUCCESS Plan or other incentive plan (“Incentive Eligible Role”) for
at least three full calendar months in that Plan Period5 and (b) the employee
must have been an employee in an Incentive Eligible Role on or before October 1
of that Plan Period6. For purposes of this document, an employee will be
considered to be “actively employed” for any calendar month in which the
employee actually works for at least one day or as otherwise required under
applicable contract or law. Notwithstanding the foregoing and subject to
applicable law, employees whose employment terminates before December 31 of a
Plan Period are not eligible to receive a SUCCESS Plan award for that Plan
Period.     (6)   Pro-rated awards may be made to employees who transfer into or
out of positions covered by other incentive plans, move from or to a job that is
ineligible for the SUCCESS Plan or who are on a Company approved leave of
absence or on “notice” of termination of employment for part of the Plan Period,
provided that the employee meets the other SUCCESS Plan requirements set out
above. However, subject to applicable law, an employee is not eligible for a
SUCCESS Plan payout for any calendar month in which the employee is not actively
employed in a position eligible under the SUCCESS Plan. If an employee meets the
above

 

4   Where legally required, temporary full time employees on fixed term
contracts with the Company may be included as Eligible Employees subject to the
other conditions in Section 2 of the Plan.   5   The required period of active
employment may be changed by the CHRC and Board of Directors at any time.   6  
The dates on which an employee must be employed in an Incentive Eligible Role
may be changed by the CHRC and Board of Directors at any time.

 

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      SUCCESS Plan requirements, but is actively employed in a position that is
eligible under the SUCCESS Plan for less than the full Plan Period, the
employee’s SUCCESS award will be based on the number of months the employee is
actively employed in a SUCCESS Plan eligible position divided by the number of
months in the Plan Period, with the following exception. For purposes of
determining the amount of a pro-rata SUCCESS award, an employee will not be
considered to be actively employed in SUCCESS Plan eligible position in a
calendar month in which (a) the employee participates in another incentive plan
for that full calendar month or (b) the employee participates in another
incentive plan for the greater portion of the month, each as determined by the
Company.     (7)   Employees who meet all of the SUCCESS Plan eligibility
requirements, but who leave employment with the Company between the end of the
Plan Period and the related payment date for the award, other than for reasons
determined by the Company to be related to inappropriate actions, misconduct,
dismissal for cause (where applicable) or unsatisfactory performance, will be
eligible for an award for the applicable Plan Period;     (8)   An employee’s
Management Team7 has the right, in consultation with the relevant Human
Resources Business prime, to make limited exceptions to the ‘actively employed’
requirements set out in Section 2(5) and (6) above where required by law or
where the Management Team determines that circumstances clearly warrant an
exception. Exceptional circumstances might include approved leaves where
warranted by applicable law (e.g. maternity, paternity, parental, military,
family, or medical), disability, outsourcing, divestiture, or death. In such
situations, if the employee has, while actively employed in a SUCCESS Plan
eligible position, substantially achieved his/her individual objectives, the
employee’s Management Team may grant partial awards. If awards are paid in these
circumstances, the awards will be pro-rated to reflect the number of months the
employee was actively employed in a SUCCESS Plan eligible position, as defined
in Section 2(5) above, and will be commensurate with the employee’s contribution
and achievement. Notwithstanding anything in the foregoing to the contrary,
nothing in the SUCCESS Plan shall preclude the Company paying an employee an
award under the SUCCESS Plan for more than the number of months the employee was
actively employed in a SUCCESS Plan eligible position pursuant to that
individual employee’s employment termination agreement, which the Senior
Vice-President, HR has approved; and     (9)   Company affiliates and joint
ventures may choose to offer the SUCCESS Plan or a similar plan subject to the
approval of the Senior Vice-President, HR.

 

7   The “Management Team” consists of the managers with whom the employee has a
direct or indirect reporting relationship as set out in the Organization
Structure Manager (“OSM”) or its equivalent as maintained by the Company from
time to time.

 

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Section 3:  Award Elements
     An Eligible Employee’s cash award for a Plan Period under the SUCCESS Plan
will be based on the following formula:
100%8 of Annual Base Salary x (# Months actively employed in SUCCESS eligible
position / # Months in Plan Period) [“Pro-Ration Factor”] x Award % x Nortel
Performance Factor.
Annual Base Salary means the annualized regular compensation paid to an Eligible
Employee, excluding any other compensation, such as, but not limited to,
bonuses, commissions, overtime, and relocation benefits. The Annual Base Salary
for these purposes will be measured for all Eligible Employees at a uniform time
on or after October 1st of the applicable Plan Period to be determined in the
sole discretion of the Senior Vice-President, HR.
Award % is the percentage of Annual Base Salary that is used to compute the
SUCCESS Plan award for each Eligible Employee. For Job Complexity Indicator
(“JCI”) 1-6, the Award % ranges from 0% to 40% of Annual Base Salary. For JCI
55, the Award % ranges from 0% to 400% of Annual Base Salary. The JCI level for
these purposes will be measured concurrently with Annual Base Salary as
described above. For each JCI, the Senior Vice-President, HR may set a suggested
narrower award range, intended to reflect a market trend to give certain
Eligible Employees with higher levels of responsibility a higher incentive
potential as a percentage of Annual Base Salary. Within the ranges approved by
the CHRC and the Board of Directors, an Eligible Employee’s Management Team will
determine the recommended Award % for that employee for each Plan Period based
on the employee’s job scope, complexity and responsibilities and the employees’
contributions and achievements during the Plan Period. An Eligible Employee’s
recommended Award % is subject to review, modification and approval by the
Senior Management Team as provided in Section 4.9
The total SUCCESS Plan award for all Eligible Employees for a Plan Period
(reflecting the Nortel Performance Factor) is recommended by the Senior
Management Team for approval by the CHRC and the Board of Directors after the
end of the Plan Period.
Nortel Performance Factor is calculated based on the achievement by the Company
of key corporate objectives for the Plan Period. The objectives are approved by
the CHRC and the Board of Directors for each Plan Period. The Nortel Performance
Factor may be based on one or more performance metrics, each with specific
targets. The performance metrics may have equal or different weightings.
Performance metrics are the general
 

8   The percentage of Annual Base Salary that is applied to the formula may be
changed by the CHRC and Board of Directors at any time.   9   For purposes of
the SUCCESS Plan only, the “Senior Management Team” shall consist of the
President and Chief Executive Officer, the Chief Financial Officer and the
Senior Vice-President, HR of Nortel Networks Limited.

 

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corporate goals for the Plan Period, such as profitability, market momentum, or
customer loyalty. Targets shall be based on objective and/or subjective criteria
established to measure, directly or indirectly, the performance metrics.
Weightings shall be the relative weight or percentage accorded in the Nortel
Performance Factor for achieving each specific target. After approval by the
CHRC and the Board of Directors, the Company’s objectives for the Plan Period
will be communicated to Eligible Employees. The Nortel Performance Factor is
deemed to be 1.0 (achievement) throughout the Plan Period and is then adjusted
by the CHRC and the Board of Directors based on their determination of corporate
performance. The President and Chief Executive Officer may, in his sole
discretion, recommend to the CHRC and the Board of Directors that the Nortel
Performance Factor be adjusted with respect to certain business units, JCI
levels or any other groups of employees and the CHRC and the Board can approve
such adjustment to the Nortel Performance Factor, in their sole discretion,
based on additional factors that the President/CEO and the CHRC and Board
determine in their sole discretion are relevant to the award including without
limitation, collective relative contribution to achievement of the key Company
objectives during the Plan Period.
Section 4:  SUCCESS Plan Awards
Awards for each Plan Period are calculated based on 100%10 of an Eligible
Employee’s Annual Base Salary, the Pro-Ration Factor, the Eligible Employee’s
Award % (which reflects the employee’s job scope, complexity and
responsibilities, and that employee’s contribution and achievement, during the
Plan Period), and the Nortel Performance Factor (that is, the Company’s business
performance for the Plan Period as determined by the CHRC and the Board of
Directors). When warranted, cash awards will be made as soon as practicable
following the close of the applicable Plan Period and the calculation of any
award.
Any award under the SUCCESS Plan to an Eligible Employee is subject to the
discretion of the Eligible Employee’s Management Team and Senior Management Team
and the CHRC and the Board of Directors. That is, an Eligible Employee’s
Management Team determines, in its discretion, the Award % for an Eligible
Employee subject to review, modification and approval by the Senior Management
Team. Specifically, the Senior Management Team reserves the right, in its
discretion, to review and adjust Eligible Employees’ Award percentages, which
are assigned to those Eligible Employees by their Management Team to reflect its
assessment of the employees’ contributions to the business or the achievement of
the Company’s key objectives, as well as to ensure that the final payouts, if
any, are within appropriate budgetary guidelines. The CHRC and the Board of
Directors determine, in their discretion, the achievement of the targets for the
performance metrics and the final calculation of the Nortel Performance Factor
(which may include a determination of a Nortel Performance Factor of zero, even
if certain of the performance metrics targets are achieved, and/or an adjustment
to the relative weighting of the performance metrics.) During the Plan Period,
the CHRC and the Board of Directors can review Company objectives, performance
measures, weightings, and
 

10   The percentage of Annual Base Salary that is applied to the formula may be
changed by the CHRC and Board of Directors at any time.

 

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targets to determine whether they remain appropriate. The CHRC and the Board of
Directors may, at their sole discretion, adjust the Company objectives,
performance measures, weightings, targets, and/or plan payouts for the Plan
Period, as they deem necessary, to reflect changes in business conditions or
other circumstances.
SUCCESS Plan awards are considered income and are therefore subject to national,
state/provincial, and/or local taxes. All appropriate taxes and other
withholdings will be deducted from any such awards and payments as required by
applicable law.
Depending on local laws and policies, SUCCESS Plan awards may have an impact on
some benefits and may or may not be included in the “eligible earnings” for
purposes of capital accumulation and retirement plans offered in the various
regions by the Company. Where appropriate, deductions may be made from SUCCESS
Plan awards in accordance with the specific capital accumulation and retirement
plan in which the Eligible Employee participates.
Section 5:  Discretionary Bonus Pool
During a Plan Period, the CHRC and the Board of Directors may consider the
creation of a separate Discretionary Bonus Pool under the SUCCESS Plan to
provide discretionary, incremental bonus awards. These awards may be made to all
employees of the Company or employees of the Company who individually or in
groups made a relative contribution that significantly added to the overall
success of the Company, whether or not the employees are eligible to participate
in the SUCCESS Plan under the criteria set out in Section 2 of this document.
The determination that a Company employee is eligible for a Discretionary Bonus
Pool award does not otherwise entitle that employee to generally participate in
the SUCCESS Plan. The CHRC and the Board of Directors have complete discretion
to determine: the establishment of the Discretionary Bonus Pool; the eligibility
criteria for participation; any performance metrics, weightings and targets; the
achievement, if any, of the targets for the performance metrics; and the amount
of the awards, if any, paid from the Discretionary Bonus Pool. Whether or not an
Eligible Employee receives a SUCCESS Plan award shall have no effect on that
employee’s eligibility to receive a Discretionary Bonus Pool award.
Discretionary Bonus Pool awards will be considered income and therefore subject
to national, state/provincial, and/or local taxes. All appropriate taxes and
other withholdings will be deducted from the award as required by applicable
law.
Depending on local laws and policies, Discretionary Bonus Pool awards may have
an impact on some benefits and may or may not be included in the “eligible
earnings” for purposes of capital accumulation and retirement plans offered in
the various regions by the Company. Where appropriate, deductions may be made
from the Discretionary Bonus Pool awards in accordance with the specific capital
accumulation and retirement plan in which the employee participates.

 

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Section 6:  Interpretations and Amendments
This document, as amended from time to time, constitutes the “Nortel Networks
Limited SUCCESS Incentive Plan”. In the event of any conflicts or
inconsistencies between the provisions of the SUCCESS Plan and any other
document or communication, written or oral, concerning the SUCCESS Plan, the
provisions of this document, as amended from time to time, shall govern.
The Senior Vice-President, HR, subject to approval of the CHRC and the Board of
Directors in certain cases shall interpret the provisions of the SUCCESS Plan,
which shall be final and binding on the Company and all SUCCESS Plan
participants. This document is also subject to interpretation to comply with
applicable laws. It is not and shall not be construed as either an employment
contract or as a contract concerning the subject matter contained herein. There
is no guarantee that any award under the SUCCESS Plan will actually be paid. Any
award is determined at the discretion of an Eligible Employee’s Management Team,
the Senior Management Team and the CHRC and the Board of Directors, as the case
may be. If such awards, however, are paid, they shall be determined and paid in
accordance with the provisions herein.
The SUCCESS Plan can only be terminated or amended by the Board of Directors,
which shall have the full authority, at any time, to terminate the SUCCESS Plan
or to delete, modify and/or add to any and all terms, conditions, and provisions
of the SUCCESS Plan.
As adopted by the Board of Directors of Nortel Networks Limited on July 25,
2002, as amended on January 23, 2003 with effect from January 1, 2003, as
amended on July 28, 2003 with effect from January 1, 2003, as amended on
February 26, 2004 with effect from January 1, 2004, as amended on March 9, 2006
with effect from January 1, 2006.