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CONFIDENTIAL — SPECIAL HANDLING
Exhibit 10.1

      July 27, 2007   VIA ELECTRONIC TRANSMISSION

Mr. Dion Joannou
2839 NE 24th Place
Fort Lauderdale, FL 33305
U.S.A.
Dear Dion:
This letter (“Agreement”) records the arrangements between you and Nortel
Networks Inc. concerning the cessation of your employment. The arrangements are
as follows:
Cessation of Employment

1.   As used in this Agreement, the term “Corporation” shall mean Nortel
Networks Inc., its parent, subsidiaries, affiliates (including, but not limited
to, Nortel Networks Corporation and Nortel Networks Limited), predecessors,
successors and assigns and all past and present officers, directors, employees
and agents (in their individual and representative capacities only) of Nortel
Networks Inc., its parent, subsidiaries, affiliates, predecessors, successors
and assigns, in every case individually and collectively.   2.   Your employment
relationship with the Corporation shall cease on August 31, 2007 (“Employment
Termination Date”). All previous external responsibilities which you had will be
assumed by a person designated by the Corporation, including any participation
in industry or other associations representing the Corporation. You cease to act
as an officer and/or director of the Corporation and any of the Corporation’s
subsidiaries and affiliates on August 31, 2007, and the Corporation will take
all necessary steps to remove you from all such positions.

Revocation Clause

3.   You acknowledge that you received this document on or about July 27, 2007,
and have been provided at least twenty-one (21) days on or about July 27, 2007,
at your discretion, to consider the terms in this Agreement. In addition, you
shall have seven (7) calendar days following your execution of this document to
revoke this Agreement by written notice. To be valid, the letter of revocation
must be received by Gordon A. Davies at Nortel Networks, 195 The West Mall,
Toronto, Ontario M9C 5K1, consistent with the terms of paragraph 10 of this
Agreement, not later than the close of business seven (7)

 

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Mr. Dion Joannou   Confidential — Special Handling Page 2 of 18          

    calendar days after you sign this Agreement. The terms and conditions of
this Agreement shall become operative seven (7) days after you execute and
deliver this Agreement to Mr. Davies, provided that you are in compliance with
all terms and conditions of this Agreement as of such date, you have not revoked
this Agreement pursuant to the provisions set forth above in this paragraph and
the conditions in clauses (i) and (viii) of the first paragraph of paragraph 4
have been satisfied.

Post Termination Payments/Benefits (“PTPB”) To Be Provided by the Corporation

4.   The Corporation will provide you the payments and benefits set out in this
paragraph 4(a) through (e) below, in addition to the payments and benefits set
forth in paragraph 5 of this Agreement, conditional upon (i) completion of the
Corporation’s governance process, including approval by the Compensation and
Human Resources Committee of the Boards of Directors of Nortel Networks
Corporation and Nortel Networks Limited, (ii) your signing and returning to
Mr. Davies a copy of this Agreement within the time period provided in paragraph
10 of this Agreement; (iii) your compliance with the terms and conditions of
this Agreement and the Employee Agreement and other documents such as the
Agreement Relating to Intellectual Property (collectively, the “Employment
Documents”); (iv) you not revoking this Agreement pursuant to paragraph 3 above;
(v) you not soliciting, either directly or indirectly, for employment during the
Severance Period any employee(s) currently employed by the Corporation; (vi) you
not electing to accept employment with, or serve as a consultant, contractor or
representative for, any of the companies identified on the Corporation’s
comparator list which was reviewed with you on July 27, 2007 (the “Comparator
List”), without the written consent of Nortel’s Chief Legal Officer; (vii) your
execution on or promptly following the Employment Termination Date, and
returning to Mr. Davies, a Release in the Form of Exhibit A, which is attached
and made a part of this Agreement and (viii) the Corporation’s execution of this
Agreement. Notwithstanding the foregoing, if the events in clauses (i) and
(viii) hereof do not occur on or prior to August 21, 2007, this Agreement,
including your release of claims in paragraph 9 hereof and your agreement to
terminate your employment, shall be null and void. So long as you comply with
the foregoing provisions, the Corporation will:       (Severance allowance)

  (a)   pay you severance allowances (“Severance Pay”) pursuant to the Nortel
Networks Enhanced Severance Allowance Plan (“Severance Plan”) from September 1,
2007 through February 28, 2009 (“Severance Period”), paid in a bi-weekly amount
of twenty thousand ($20,000.00) dollars; provided that the payments which would
ordinarily have been paid to you during the first six months shall be paid to
you in a lump sum on or about March 1, 2008; all such payments will be made via
direct deposit to your account in a U. S. bank, in accordance with your
instructions;

 

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    (Insurance benefits)

  (b)   allow you to elect to: (i) continue during the Severance Period, all
group life insurance (basic and optional employee and optional spouse and
dependent), health coverages (medical, dental, vision, hearing, Employee
Assistance Program and Health Care Reimbursement Account (“HCRA”)) and AD&D
coverage in which you and your covered eligible dependents, if any, are enrolled
on the Employment Termination Date pursuant to the terms and conditions of such
coverages, or (ii) revoke all such coverages. If you elect (i), your coverages
will continue at the applicable active employee contribution rate, provided,
however that you shall be responsible for the payment of such employee
contributions by making monthly payments during the first six months of the
Severance Period and thereafter, applicable payments will be deducted from
Severance Pay. The Corporation shall have the right to change coverages to the
extent that it is generally changing its coverages for employees. Upon
termination of coverage, only continued health coverage will be offered, as
required by the Consolidated Omnibus Budget Reconciliation Act of 1985
(“COBRA”), for a period generally extending for eighteen (18) months from your
Employment Termination Date, minus the period of coverage at active contribution
rates during the Severance Period. If you elect (ii), your life and AD&D
coverages will terminate effective 12:01 a.m. on September 1, 2007, and your
health coverages, with the exception of UCRA, will terminate at the end of the
month in which your employment relationship ceases (August 2007), with an
opportunity for continued health coverage under COBRA. If you decline the
opportunity to continue HCRA coverage under COBRA, only eligible expenses
incurred on or prior to the Employment Termination Date will be considered for
reimbursement. Irrespective if you select (i) or (ii) above, at the time your
group life insurance coverages terminate, you may convert appropriate coverages
to applicable individual policies. AD&D cannot be converted to an individual
policy. Please make your election in the space provided at the end of this
Agreement concerning your decision to elect or decline the benefits set forth in
this paragraph 4(b);

    (Stock Options, Restricted Stock Unit Awards (“RSUs”) and Performance Stock
Unit Awards (“PSUs”))

  (c)   consider you ineligible for consideration for any future grant(s) of
stock options, RSUs and PSUs. Moreover, all PSUs previously granted to you, as
well as those stock options and RSUs granted to you in 2007, are forfeited as of
the Employment Termination Date. Further, the Corporation, in accordance with
the applicable Nortel stock option plans and applicable Instruments of Grant
and/or Instruments of Award, will determine your rights with respect to those
stock options and RSUs granted to you prior to 2007 as set forth in Exhibit B
attached hereto. Subject to any applicable trading restrictions (including
Nortel policies or applicable securities laws) that may restrict your ability to
trade Nortel securities, you will have the right to exercise any vested Nortel
stock options or settle any

 

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      vested RSUs in accordance with the terms of the applicable instruments of
grant/award, stock option plan(s) and any other relevant documents governing the
options and RSUs as set forth in Exhibit B. In addition, should you accept
employment with, or serve as a consultant, contractor or representative for, any
of the companies listed on the Comparator List, without the written consent of
Nortel’s Chief Legal Officer, you agree that you will, if required by Nortel in
its sole discretion, pay to Nortel an amount in cash equal to; (i) the amount by
which the market value of the shares on the date of exercise of the options
exceeds the exercise price (in the case of options); and (ii) the amount
(subject to certain adjustments) equal to the number of RSUs that vested during
the applicable period multiplied by the market value of the shares on the
applicable settlement date (in the case of RSUs), all in accordance with the
terms of the applicable instruments of award/grant and any other documents that
govern. Finally, please see paragraph 6(f) of this Agreement for Stock Insider
Obligations;

    (Outplacement assistance)

  (d)   make available to you, should you elect, senior executive outplacement
services in South Florida to assist you in securing new employment and pay the
professional fees for such services as are reasonably incurred;

    (Tax Preparation Services)

  (e)   provide you with income tax preparation service through a tax preparer
as designated by the Corporation, for the tax years 2007 and 2008;

    (2007 Annual Incentive Plan (“AIP”))

  (f)   you will not be eligible to receive an AIP payment for 2007;

    (Withholdings)

  (g)   with respect to any monies or monetary equivalents to be paid hereunder,
in its reasonable discretion, withhold appropriate amounts concerning any and
all applicable federal, state or local tax withholding.

Benefits and Payments Available to You Without Signing this Agreement

5.   The following payments and benefits shall be provided to you by the
Corporation, as applicable, without the requirement that you sign this
Agreement:

 

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    (Pension benefits)

  (a)   you shall be eligible for benefits, if applicable, pursuant to the terms
and conditions of the Nortel Networks Retirement Income Plan (“Retirement Income
Plan”);

    (Nortel Networks Retirement Income Plan Restoration Plan (“Restoration
Plan”), as applicable)

  (b)   you shall be eligible for benefits, if applicable, pursuant to the terms
and conditions of the Restoration Plan, however it is agreed and understood that
in no event will you receive benefits under the Restoration Plan earlier than
six months from your Employment Termination Date due to your status as a “key
employee” under Internal Revenue Code Section 409A;

    (Insurance benefits)

  (c)   you will be allowed to elect to: (i) continue applicable health
coverages, as required by the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”), for a period generally extending for eighteen (18) months
following the Employment Termination Date from the Corporation; (ii) convert
your group life insurance to an individual policy without a medical examination
within thirty-one (31) days of the termination of that coverage; or (iii) if
eligible, to commence coverage under the Nortel Networks Retiree Medical Plan
and the Nortel Networks Retiree Life Plan pursuant to the terms and conditions
of those plans;

    (Stock options, Restricted Stock Unit Awards (“RSUs”) and Performance Stock
Unit Awards (“PSUs”))

  (d)   you are ineligible for consideration for any future grant(s) of stock
options and RSUs and PSUs. Moreover, all PSUs previously granted to you as well
as those stock options and RSUs granted to you in 2007 are forfeited as of
Employment Termination Date. It is understood that if you do not sign this
Agreement there will be no Severance Period during which stock options or RSUs
granted to you prior to 2007 may be exercised or settled, as described in
paragraph 4(c). Further, the Company, in accordance with the applicable Nortel
stock option plans and applicable Instrument(s) of Grant and/or Instrument(s) of
Award, will determine your rights with respect to those stock options and RSUs
granted to you prior to 2007. Subject to any applicable trading restrictions
(including Nortel policies or applicable securities laws) that may restrict your
ability to trade Nortel securities, you will have the right to exercise any
vested Nortel stock options or settle any vested RSUs in accordance with the
terms of the applicable instruments of grant/award, stock option plan(s) and any
other relevant documents governing the options and RSUs. In addition, should you
accept employment with, or serve as a consultant, contractor or representative
for, any of the companies listed on the

 

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      Comparator List without the written consent of Nortel’s Chief Legal
Officer, you agree that you will, if required by Nortel in its sole discretion,
pay to Nortel an amount in cash equal to: (i) the amount by which the market
value of the shares on the date of exercise of the options exceeds the exercise
price (in the case of options); and (ii) the amount (subject to certain
adjustments) equal to the number of RSUs that vested during the applicable
period multiplied by the market value of the shares on the applicable settlement
date (in the case of RSUs), all in accordance with the terms of the applicable
instruments of award/grant and any other documents that govern. Finally, please
see paragraph 6(f) of this Agreement for Stock Insider Obligations. The
provisions of this paragraph 5(d) shall only apply if you do not execute this
Agreement in accordance with paragraph 10 hereof;

    (Nortel Networks Long Term Investment Plan (“LTIP”), as applicable)

  (e)   contributions made by you and any amounts that have vested in your LTIP
account will be maintained or distributed, pursuant to your direction(s) as
permitted by the terms and conditions of the LTIP;

    (Deferred Compensation, as applicable)

  (f)   any amounts in your account in the Nortel Networks U.S. Deferred
Compensation Plan (“NNDP”) will be distributed pursuant to your direction(s) as
permitted by the terms and conditions of the NNDP; however, it is agreed and
understood that in no event will you receive benefits under the Deferred
Compensation Plan earlier than six (6) months from your Employment Termination
Date due to your status as a “key employee” under Internal Revenue Code
Section 409A;

    (Vacation benefit)

  (g)   you shall be paid, on or before the first pay period following the
Employment Termination Date, a lump sum amount equivalent to your current
accrued but unused vacation benefit (35 days) with no further vacation accrual
subsequent to the Employment Termination Date; and

    (Nortel Stock Purchase Plan (“NSPP”), as applicable)

  (h)   any shares in your account in the NSPP will be distributed to you. If
your account has not been closed within ninety (90) days of the Employment
Termination Date, it will automatically be closed by the Plan’s service provider
and all shares will be sold at the current market value.

 

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Obligations of DION JOANNOU

6.   Your signature at the end of this Agreement is required to receive the PTPB
set forth in paragraph 4. Additionally, your signature will confirm the
obligations set forth in this paragraph 6. Notwithstanding your signature, you,
nonetheless, will be expected to comply with these obligations:      
(Business/Expense Accounts)

  (a)   you shall reconcile and settle your employee expense account, and any
advances made to you by the Corporation, as soon as possible, but not later than
the Employment Termination Date, and the Corporation shall in the normal course
reimburse you for any business expenses incurred by you through the Employment
Termination Date;

    (Inventions/Confidentiality)

  (b)   you acknowledge that you continue to be bound by the invention and
confidentiality obligations of the Employment Documents. You confirm that your
entire right, title, and interest to all Inventions as generally described in
such agreement with the Corporation are assigned to the Corporation regardless
of the exact terms in, or the existence of, such an agreement between you and
the Corporation.         With respect to Inventions as described in the above
paragraph, you have disclosed or will promptly disclose them in writing to the
Corporation, and you will, on the Corporation’s request, promptly execute a
specific assignment of title to the Corporation or its designee, and do anything
else reasonably necessary, at the Corporation’s sole expense, to enable the
Corporation to secure a patent or other form of protection for such Inventions
in the United States and in other countries. Any information pertaining to such
an Invention is considered the confidential information of the Corporation
unless and until such Invention is patented or published by the Corporation.    
    Further, you agree that this Agreement is a confidential document as are all
the terms and conditions expressed herein, subject to the Corporation’s right to
disclose this Agreement in accordance with applicable securities laws.
Accordingly, unless and until the Corporation publicly discloses this Agreement,
you agree that you will not, except as required by law or judicial process,
directly or indirectly, disclose, publicize or discuss the terms and/or
conditions of this Agreement, with any employee and/or former employee of the
Corporation, other than Mr. Davies, myself, the Corporation’s attorneys, or any
other person, except as applicable, your spouse, your attorney, accountant,
financial advisor, outplacement advisor and/or any prospective employer (but
with respect to a prospective employer only with respect to the restrictions, or
lack thereof, on your

 

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      activities following termination of employment) beyond what is stated in
any press coverage release or disclosure by the Corporation. In the event that
you discuss this Agreement with any of the aforementioned individuals, it shall
be your duty, responsibility and obligation to advise said individual(s) of the
confidential nature of this Agreement and direct them not to discuss the terms
and/or conditions of this Agreement with any person.         Also, you shall
continue to maintain the confidentiality of all trade secrets and confidential,
proprietary, commercial, technical or other information of the Corporation
obtained by you during your employment and, specifically, you agree that you
shall not at any time during or following your employment with the Corporation,
disclose, other than to the Corporation’s authorized personnel, or otherwise use
for non-Corporation purposes, any confidential or proprietary information
(whether or not a trade secret) relating to an activity of the Corporation or to
any invention, which is owned or licensed by the Corporation. Further, during
the Severance Period, you agree, except as required by law or Judicial process,
not to publicly reveal, disclose, or cause to be publicly revealed or disclosed
anything with respect to the Corporation that could be reasonably expected to be
injurious or harmful to any of its interests. In addition, during the Severance
Period, you shall issue no public statement on the business affairs, policies or
the like of the Corporation without the prior written consent of the Corporation
and without limiting the foregoing, during the Severance Period neither party
shall make any public statement that could be reasonably expected to disparage
the other. Nothing in this Agreement or otherwise shall prevent you from
(x) responding to incorrect, disparaging or derogatory statements to the extent
reasonably necessary to correct or refute such statement or (y) making any
truthful statement to the extent necessary in connection with circumstances
covered by clauses (i), (ii) or (iii) of the next paragraph.        
Notwithstanding any of the foregoing, the provisions of this paragraph 6(b)
shall not apply (i) when disclosure is required by law or by any court, or
administrative or legislative body (including any committee thereof) with actual
or apparent jurisdiction to order you to disclose or make accessible any such
information, (ii) with respect to any litigation involving this Agreement or any
other agreement between you and the Corporation, (iii) in connection with any
assistance provided by you pursuant to paragraph 6(d) hereof or (iv) as to
information that becomes generally known to the public or within the relevant
trade or industry other than due to your violation of this paragraph 6(b).

    (Notice)

  (c)   upon the occurrence of any contingency which affects your rights in or
to any subsequent payment or benefit as expressly set forth in clause (vi) of
the first paragraph of paragraph 4 hereof, or upon your commencement of coverage
under a new employer’s benefit plan(s), you shall, within ten (10) days of such

 

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Mr. Dion Joannou   Confidential — Special Handling Page 9 of 18          

      occurrence, give written notice to the Corporation of that event. Such
notice shall be sent in writing to Mr. Davies;

    (Advice and Assistance)

  (d)   you shall make available to the Corporation advice, assistance and
information that shall include, but not be limited to, offering and explaining
evidence, providing sworn statements, participation in discovery, critical
preparation testimony as may be deemed necessary by the Corporation concerning
the Corporation’s position in any legal proceedings involving issues brought
against or initiated by the Corporation of which you have knowledge. In the
event it is necessary for you to provide the aforementioned services, then the
Corporation shall reimburse you for authorized, reasonable and documented travel
expenses, including, but not limited to, transportation, lodging and meals, but
not including attorneys’ or other professional fees incurred without the prior
approval of Nortel’s Chief Legal Officer (provided that in all events you shall
have the benefits of paragraph 8 hereof);

    (Company Property and Information Preservation)

  (e)   prior to your Employment Termination Date and before receiving any
monies pursuant to this Agreement, you shall return to the Corporation any and
all property of the Corporation currently in your possession and/or subject to
your control, whether such material shall be written instruments or tapes in
electronic and/or recorded format. Nothing herein shall prevent you from
retaining your personal papers, materials relating to your compensation and/or
business expenses, materials you reasonably believe are necessary for your
personal taxes or your work product (provided you treat any confidential
information contained in such work product in accordance with paragraph 6(b) of
this Agreement).         The Corporation’s Corporate Procedure 206.01 provides
that all data, including personal documents and messages stored on or
transmitted through the network resources of Nortel Networks in any form are and
remain at all times the property of Nortel Networks. In addition, all work
product that you have produced during your employment with the Corporation is
the property of the Corporation. Therefore, all information (however recorded or
stored) (“Information”) in your possession and/or that you have created in the
course of your employment with the Corporation (whether or not currently in your
possession or control) is the property of the Corporation.         You are aware
that Nortel Networks has received a formal order of investigation from the
United States Securities and Exchange Commission (“SEC”) that requires the
preservation and collection and disclosure of certain Information to the SEC.
The Corporation is also a party to various civil lawsuits and other
investigations and may need access to certain Information for those matters as

 

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      well. Therefore, you agree to use your best efforts to preserve all
Information in your possession, custody and control (including information
controlled by your assistant, if any), will leave all such information in the
possession and custody of the Corporation, and will not knowingly retain any
Information in your possession or custody.         In addition, the Corporation
will take possession of your computer and preserve all electronic Information on
your computer, as well as any related servers on which you have Information
stored, at the time your computer is turned into the Corporation. Except to the
extent you are permitted to retain certain Information pursuant to the last
sentence of the first paragraph of this paragraph 6(e), you will use your best
efforts to ensure that Information located in your home, including on a home
personal computer, is returned to the Corporation and deleted from your home
computer.         The Information will be used by the Corporation for general
business purposes and may also be provided by the Corporation to regulatory
authorities in response to their requests or disclosed in any relevant private
litigation to which the Corporation is a party. Also, the Information may be
used by and provided to other entities within the Nortel Networks group and/or
the Corporation’s external advisors. In some instances, the recipients of this
Information will be located outside your geographic area. To the extent that the
Information contains any personal information, you consent to the collection,
transfer and disclosure of that information by the Corporation to Nortel
Networks entities, third parties and regulatory authorities within and outside
of your geographic area for the purposes set out above. The Corporation will use
its best efforts to provide you with notice in advance of disclosing such
personal information;

    (Stock Insider)

  (f)   you understand and agree that if you have the designation of either
“Reporting” or “Non-Reporting” Insider pursuant to Corporate Policy 320.28 of
Nortel Networks Corporation (and under applicable Canadian/US securities
legislation for Reporting Insiders), you will cease to have this designation
effective on the Employment Termination Date. Notwithstanding the fact that you
will no longer have this designation, if you are in possession of material
non-public information relating to Nortel Networks, you are prohibited from
trading in Nortel Networks securities (or informing another person of the
material non-public information) in accordance with applicable laws. If you are
a “Reporting” Insider, you understand that you are required to amend your
insider profile within ten (10) days of your termination date on the Canadian
System for Electronic Disclosure by Insiders (SEDI) to indicate that you are no
longer a “Reporting” Insider of Nortel Networks. You should contact the Insider
Reporting Department at (905) 863-1220 and fax (905) 863-8524 for assistance in
amending the SEDI profile, which will be provided by the Corporation’s law
department. In addition, the

 

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      Corporation will: (i) assist you with the preparation and filing with the
SEC of a Form 4 or Form 5 (and any equivalent filing that may be required in
Canada), as applicable, reporting the termination of your insider status, and
(ii) provide you with a copy of the SEC Form 8-K prepared in connection with
this Agreement before it is filed;

    (Completion of Forms/Paperwork)

  (g)   you agree to complete such documentation/forms and paperwork that may be
necessary to commence benefits to be provided under this Agreement; and

    (Repayment)

  (h)   you understand and agree that the Corporation may deduct from any
payment provided to you under this Agreement any amounts (including, but not
limited to, any advance loans, overpayment, tax equalization payments of other
monies) that the Corporation determines that you owe the Corporation. In the
event that the Corporation intends to exercise its rights under this paragraph
6(h), the Corporation shall provide you with written notice, including an
explanation for the deduction, and you shall have ten (10) business days from
the date of such notice to respond. During the ten (10) day notice period, the
Corporation will not make any proposed deductions and the Corporation agrees to
consider in good faith any response you may provide during the notice period.

Cessation of Benefits

7.   All company benefits not expressly extended to you pursuant to this
Agreement shall be terminated effective 12:01 a.m. on the day after the
Employment Termination Date. In addition, prior to the Corporation taking action
that would cause a forfeiture to you of any payment, or benefit in accordance
hereunder, it shall give you written notice of the events giving rise to such
action and no less than thirty (30) days to cure such events.

Indemnification

8.   The Corporation shall defend, indemnify and otherwise hold you harmless in
accordance with section 124 of the Canada Business Corporation’s Act and the
Corporation’s By-Laws. Subject to and without limiting the foregoing, the
Corporation’s legal counsel (at the Corporation’s expense) will represent you in
respect of any civil, criminal, administrative, investigative (including any
internal investigation or independent review being conducted by the
Corporation’s Board of Directors or a Committee thereof) or other proceeding in
Canada, the United States or other applicable jurisdiction in which you are
involved (including as a witness) because of your association with the
Corporation (hereafter, a “Matter”). However, in the event that the
Corporation’s counsel cannot represent you in a Matter because of a conflict,
the Corporation agrees to pay your reasonable and actual legal expenses in that
Matter provided you agree that you will not

 

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    settle the Matter, retain defense counsel or expert witnesses or
consultants, or incur any defense costs without obtaining the Corporation’s
prior written consent, which consent will not be unreasonably withheld.

RELEASE

9.   IN CONSIDERATION OF THE FOREGOING PAYMENTS AND BENEFITS DESCRIBED IN THIS
AGREEMENT, YOU HEREBY FULLY AND UNCONDITIONALLY RELEASE AND FOREVER DISCHARGE
CORPORATION (EXCEPT FOR THE PROMISES AND COMMITMENTS CONTAINED HEREIN,
INCLUDING, BUT NOT LIMITED TO, YOUR RIGHTS TO BE INDEMNIFIED AND/OR EXPENSES
PAID UNDER APPLICABLE LAW OR THE CORPORATION’S BY-LAWS OR TO BE COVERED UNDER
ANY APPLICABLE INSURANCE POLICIES AND YOUR RIGHTS TO VESTED OR ACCRUED BENEFITS
AS OF THE EMPLOYMENT TERMINATION DATE) TO THE EXTENT PERMITTED BY LAW, FROM ANY
AND ALL CLAIMS, INCLUDING WITHOUT LIMITATION, PROVISIONS FOR SALARY, INCENTIVE
COMPENSATION, VACATION PAY, SEVERANCE PAY UNDER THE NORTEL NETWORKS EXECUTIVE
MANAGEMENT TEAM SEVERANCE ALLOWANCE PLAN, NORTEL NETWORKS ENHANCED SEVERANCE
ALLOWANCE PLAN, NORTEL NETWORKS CORPORATION SPECIAL RETENTION PLAN, COMMISSIONS,
PENSION OR OTHER BENEFITS OR OTHER COMPENSATION AND PERQUISITES AND ANY AND ALL
REAL OR PRETENDED CLAIMS, CAUSES OF ACTION, OR DEMANDS, INCLUDING, WITHOUT
LIMITATION, THOSE FROM RIGHTS UNDER ANY FEDERAL, STATE, AND LOCAL LAW,
INCLUDING, WITHOUT LIMITATION, THE WORKER ADJUSTMENT AND RETRAINING NOTIFICATION
ACT (“WARN”) AND THOSE PROHIBITING DISCRIMINATION ON ANY BASIS, INCLUDING SEX,
AGE, RELIGION, SEXUAL ORIENTATION, DISABILITY, RACE, NATIONAL ORIGIN, AS MAY BE
PROHIBITED UNDER SUCH LAWS AS THE AGE DISCRIMINATION ACT OF 1967, THE OLDER
WORKERS BENEFIT PROTECTION ACT (OWBPA), THE CIVIL RIGHTS ACT OF 1964, THE
AMERICANS WITH DISABILITIES ACT, THE EQUAL PAY ACT AND THE FAMILY AND MEDICAL
LEAVE ACT, INCLUDING ANY AMENDMENTS TO THOSE LAWS (INCLUDING, BUT NOT LIMITED
TO, YOUR RIGHT TO MAKE A CLAIM IN YOUR OWN RIGHT OR THROUGH A SUIT BROUGHT BY
ANY THIRD PARTY ON YOUR BEHALF) OR ANY COMMON LAW CLAIMS OF ANY KIND, INCLUDING,
BUT NOT LIMITED TO, CONTRACT, TORT, AND PROPERTY RIGHTS INCLUDING, BUT NOT
LIMITED TO, BREACH OF CONTRACT, FRAUD, DECEIT, NEGLIGENCE, NEGLIGENT
MISREPRESENTATION, DEFAMATION, NEGLIGENT SUPERVISION, BREACH OF PRIVACY,
MISREPRESENTATION, WRONGFUL TERMINATION, INVASION OF PRIVACY, INTENTIONAL OR
NEGLIGENT INFLICTION OF EMOTIONAL DISTRESS, BREACH OF FIDUCIARY DUTY, VIOLATION
OF PUBLIC POLICY AND ANY OTHER COMMON LAW CLAIM OF ANY KIND WHATSOEVER AS OF THE
DATE OF THIS AGREEMENT WHICH YOU EVER HAD OR NOW HAVE,

 

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Mr. Dion Joannou   Confidential — Special Handling Page 13 of 18          

    DIRECTLY OR INDIRECTLY, BASED UPON ANY FACT, MATTER, EVENT OR CAUSE, WHETHER
KNOWN OR UNKNOWN, ARISING OUT OF OR RELATING TO YOUR EMPLOYMENT BY CORPORATION
AND YOUR SEPARATION THEREFROM, OR YOUR RELATIONSHIP WITH CORPORATION OR THE
TERMS OF ANY WRITTEN OR ORAL EMPLOYMENT ARRANGEMENTS OR THE LIKE THAT YOU MAY
HAVE ENTERED INTO WITH THE CORPORATION. THIS AGREEMENT MAY NOT BE USED TO
INTERFERE WITH YOUR RIGHT TO FILE A CHARGE OR PARTICIPATE IN AN INVESTIGATION OR
PROCEEDING CONDUCTED BY THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION OR ANY OTHER
APPROPRIATE AGENCY. HOWEVER, YOU UNDERSTAND AND AGREE THAT THE CORPORATION WILL
USE THIS AGREEMENT AS A DEFENSE TO ANY SUCH CHARGE YOU FILE, INVESTIGATION OR
PROCEEDING IN WHICH YOU PARTICIPATE, OR REMEDY WHICH YOU SEEK. YOU AGREE THAT
THIS RELEASE SHALL BE BINDING UPON YOU AND YOUR HEIRS, ADMINISTRATORS,
REPRESENTATIVES, EXECUTORS, SUCCESSORS AND ASSIGNS, AND ITS ENFORCEABILITY SHALL
NOT BE CHALLENGED. YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT AND THAT
YOU UNDERSTAND ALL OF ITS TERMS AND EXECUTE IT VOLUNTARILY WITH FULL KNOWLEDGE
OF ITS SIGNIFICANCE AND THE CONSEQUENCES THEREOF. FURTHER, YOU ACKNOWLEDGE THAT
YOU HAVE HAD AN ADEQUATE OPPORTUNITY TO REVIEW AND CONSIDER THE TERMS OF THIS
AGREEMENT, INCLUDING AT YOUR DISCRETION, THE RIGHT TO DISCUSS THIS AGREEMENT
WITH LEGAL COUNSEL OF YOUR CHOICE. YOU HEREBY ACKNOWLEDGE THAT YOU INTEND TO
GRANT TO THE CORPORATION A FULL AND FINAL RELEASE AS SET FORTH HEREIN.

Review Period

10.   The terms and conditions of this Agreement will be open for your review
and consideration through the close of business on August 21, 2007. If you have
not returned an executed copy of this Agreement to Mr. Davies, at the address
referenced in paragraph 3 of this Agreement by the close of business on
August 21, 2007, then the terms and conditions set forth in this Agreement shall
be withdrawn as of that time and date.   11.   This Agreement constitutes the
entire understanding of the parties with respect to your prior employment,
including termination thereof, and there are no promises, understandings or
representations other than those set forth herein. This Agreement may be
modified only with a written instrument duly executed by you and Corporation.
This Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors, assigns, heirs (in your case) and assigns.   12.  
This Agreement shall be governed by the laws of North Carolina without regard to
any provisions concerning conflict of laws. This Agreement may be delivered by
facsimile and executed in counterparts, all of which, taken together, shall
constitute one and the same original instrument.

 

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Mr. Dion Joannou   Confidential — Special Handling Page 14 of 18          

13.   The parties agree that should any provision of this Agreement be declared
or be determined by any court to be illegal or invalid, the validity of the
remaining parts, terms or provisions shall not be affected thereby and said
illegal or invalid part, term, or provision shall be deemed not to be a part of
this Agreement.

14.   You shall be under no obligation to seek other employment, including
self-employment, and, except as otherwise provided in paragraph 6(c) hereof,
there shall be no offset against amounts or entitlements due you on account of
any remuneration or benefits provided by subsequent employment you may obtain.

15.   In the event of your death while any payment, benefit or entitlement is
due to you under this Agreement, such payment, benefit or entitlement shall be
paid or provided to your beneficiary, devisee, legatee or other designee, or if
there is no such designee, to your estate.

Please acknowledge that the foregoing correctly and completely sets forth your
understanding of the arrangements and commitments, and your acceptance thereby,
by signing, dating and returning this Agreement to Mr. Davies.
Yours truly,
 
/s/ Mike S. Zafirovski                    
Mike S. Zafirovski
Chief Executive Officer

 

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Mr. Dion Joannou   Confidential — Special Handling Page 15 of 18          

IN WITNESS WHEREOF, intending to be legally bound, the parties have executed
this Agreement as set forth below.

                  PLEASE INDICATE BELOW YOUR     ELECTIONS REGARDING     •
Insurance Benefits
 
                I elect the provisions of: (CIRCLE ONE)
 
           
 
  paragraph   4(b)(i)   OR 4(b)(ii)
 
                     D.J.     
INITIALS

     
 
   
NORTEL NETWORKS INC.
  DION JOANNOU
 
   
By: /s/ William J. LaSalle          
            /s/ D. Joannou          
 
   
Title: General Counsel — Operations
  Date:      August 1, 2007     
 
   
Date: August 1, 2007     
   

 

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Mr. Dion Joannou   Confidential — Special Handling Page 16 of 18          

Exhibit A
RELEASE
In consideration of your continued employment through the Employment Termination
Date and the payments and benefits as set forth in the letter Agreement between
Nortel Networks Inc. and you dated July 27, 2007, none of which are released or
waived hereby, you hereby fully and unconditionally release and forever
discharge Corporation, as defined in the Agreement (except for the promises and
commitments contained in the letter dated July 27, 2007, including, but not
limited to, your rights to be indemnified and/or expenses paid under applicable
law or the Corporation’s By-laws or to be covered under any applicable
directors’ and officers’ insurance policies and your rights to vested or accrued
benefits as of the date you execute this Release), to the extent permitted by
law, from any and all claims, including without limitation, provisions for
salary, incentive compensation, vacation pay, severance pay under the Nortel
Networks Executive Management Team Severance Allowance Plan, Nortel Networks
Enhanced Severance Allowance Plan, Nortel Networks Corporation Special Retention
Plan, commissions, pension or other benefits or other compensation and
perquisites and any and all real or pretended claims, causes of action, or
demands, including, without limitation, those from rights under any federal,
state, and local law, including without limitation, the Worker Adjustment and
Retraining Notification Act (“WARN”) and those prohibiting discrimination on any
basis including sex, age, religion, sexual orientation, disability, race,
national origin, as may be prohibited under such laws as The Age Discrimination
Act of 1967, The Older Workers Benefit Protection Act (OWBPA), the Civil Rights
Act of 1964, the Americans With Disabilities Act, The Equal Pay Act and the
Family and Medical Leave Act, including any amendments to those laws (including
but not limited to, your right to make a claim in your own right or through a
suit brought by any third party on your behalf) or any common law claims of any
kind, including, but not limited to, contract, tort, and property rights
including, but not limited to, breach of contract, fraud, deceit, negligence,
negligent misrepresentation, defamation, negligent supervision, breach of
privacy, misrepresentation, wrongful termination, invasion of privacy,
intentional or negligent infliction of emotional distress, breach of fiduciary
duty, violation of public policy and any other common law claim of any kind
whatsoever as of the date of this Release which you ever had or now have,
directly or indirectly, based upon any fact, matter, event or cause, whether
known or unknown, arising out of or relating to your employment by Corporation
and your separation therefrom, or your relationship with Corporation or the
terms of any written or oral employment arrangements or the like that you may
have entered into with the Corporation. This Release may not be used to
interfere with your right to file a charge or participate in an investigation or
proceeding conducted by the Equal Employment Opportunity Commission or any other
appropriate agency. However, you understand and agree that the Corporation will
use this Release as a defense to any such charge you file, investigation or
proceeding in which you participate, or remedy which you seek. You agree that
this Release shall be binding upon you and your heirs, administrators,
representatives, executors, successors and assigns, and its enforceability shall
not be challenged. You acknowledge that you have read this Release and that you
understand all of its terms and execute it voluntarily with full knowledge of
its significance and the consequences thereof. Further, you acknowledge that you
have had an adequate opportunity to review and consider the terms of this
Release, including at your discretion, the right to discuss this Release with
legal

 

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Mr. Dion Joannou   Confidential — Special Handling Page 17 of 18          

counsel of your choice. You hereby acknowledge that you intend to grant to the
Corporation a full and final release as set forth herein.
(Signature)                /s/ D. Joannou               
                         DION JOANNOU
(Date)                August 1, 2007               

 

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(NORTEL LOGO) [o38098o3809802.gif]
Exhibit B
Dion Joannou — Severance Arrangements
 
Long Term Incentives — Severance Treatment

                                                                               
                                                                           
Vesting       Termination Treatment                                 Number      
Strike                                                       Award     Grant
Date       Plan       of Units       Price ($USD)       Date       Amount      
Date       Vested       Forfeit       Expiry      
PSUs
    21-Mar-07     2005 SIP       25,000         n/a       1-Jan-10       25,000
      31-Aug-07                 25,000       n/a    
 
    14-Jun-06     2005 SIP       17,500         n/a       1-Jan-09       17,500
      31-Aug-07                 17,500       n/a    
RSUs
    21-Mar-07     2005 SIP       25,000         n/a       21-Mar-08       8,333
      31-Aug-07                 8,333       n/a    
 
                                            21-Mar-09       8,333      
31-Aug-07                 8,333       n/a    
 
                                            21-Mar-10       8,334      
31-Aug-07                 8,334       n/a    
 
    14-Jun-06     2005 SIP       17,500         n/a       14-Jun-07       5,833
      14-Jun-07       5,833                      
 
                                    n/a       14-Jun-08       5,833      
14-Jun-08       5,833                 n/a    
 
                                    n/a       14-Jun-09       5,834      
28-Feb-09       5,834                 n/a    
 
    22-Nov-05     2005 SIP       20,000         n/a       22-Nov-07       10,000
      22-Nov-07       10,000                 n/a    
 
                                    n/a       22-Nov-08       10,000      
22-Nov-08       10,000                 n/a    
Options
    21-Mar-07     2005 SIP       50,000         25.82       21-Mar-08      
12,500       31-Aug-07                 12,500            
 
                                            21-Mar-09       12,500      
31-Aug-07                 12,500            
 
                                            21-Mar-10       12,500      
31-Aug-07                 12,500            
 
                                            21-Mar-11       12,500      
31-Aug-07                 12,500            
 
    14-Jun-06     2005 SIP       25,000         21.20       vested       6,250  
    vested       6,250                 29-May-09    
 
                                            14-Jun-08       6,250      
14-Jun-08       6,250                 29-May-09    
 
                                            14-Jun-09       6,250      
28-Feb-09                 6,250                
 
                                            14-Jun-10       6,250      
28-Feb-09                 6,250                
 
    22-Nov-05       1986         75,000         30.70       vested       18,750
      vested       18,750                 29-May-09    
 
                                            22-Nov-07       18,750      
22-Nov-07       18,750                 29-May-09    
 
                                            22-Nov-08       18,750      
22-Nov-08       18,750                 29-May-09    
 
                                            22-Nov-09       18,750      
28-Feb-09                 18,750                
 
    28-Feb-02       1986         9,000         51.50       vested       9,000  
    vested       9,000                 29-May-09    
 
    29-Jan-02       2000         800         71.60       vested       800      
vested       800                 29-May-09    
 
    29-Jan-02       2000         333         71.60       vested       333      
vested       333                 29-May-09    
 
    29-Jan-02       1986         1,333         71.60       vested       1,333  
    vested       1,333                 29-May-09    
 
    28-Jan-99       1986         1,333         155.33       vested       1,333  
    vested       1,333                 27-Jan-09    
 
    29-Oct-98       1986         1,066         101.48       vested       1,066  
    vested       1,066                 28-Oct-08    
 
    29-Jan-98       1986         133         112.90       vested       133      
vested       133                 28-Jan-08