Exhibit 10.2

Nortel Networks Limited Annual Incentive Plan for Nortel Business Services and

Corporate Group

Section 1: Introduction

The Nortel Networks Limited Annual Incentive Plan for Nortel Business Services
and Corporate Group (“NBS/CG 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 relevant
“Business Unit”1 of the Company2, conditioned on the relevant Business Unit
meeting its objectives.

The NBS/CG Plan is intended to drive business performance by rewarding Eligible
Employees for their contributions to the relevant Business Unit’s overall
success and the completion of their role. An Eligible Employee’s contribution is
determined by the following factors: (1) the impact of the employee’s role on
business results and (2) the employee’s performance during the employee’s active
employment with the Company. The actual award received by an Eligible Employee
will reflect (1) the scope, complexity, and responsibilities of the employee’s
role and the employee’s performance during the applicable Plan Period3 and
(2) the relevant Business Unit’s performance during the applicable Plan Period
as indicated by the Business Unit Performance Factor, as described below.

 

 

1

For purposes of the NBS/CG Plan, the “Business Unit” is defined as Nortel
Business Services (“NBS”) or Nortel Finance and Corporate Services (“Corporate
Group”) or other organization as defined and approved by the Board of Directors
(as defined in Section 2).

 

2

For purposes of the NBS/CG 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 NBS/CG Plan by the “Senior Vice-President, HR”, who is defined for
purposes of the NBS/CG Plan as the person holding the most senior position
responsible for human resources or the equivalent at the Company, as identified
by the Board of Directors.

 

3

The Plan Period applicable to Eligible Employees who are in JCI 55 roles as of
January 1st or, if later, their first day of NBS/CG Plan participation in the
relevant calendar year (“Annual Basis Eligible Employees”) is the relevant
calendar year. The Plan Periods applicable to Eligible Employees whose roles are
other than JCI 55 as of January 1st or, if later, their first day of NBS/CG Plan
participation in the relevant calendar year (“Semi-Annual Basis Eligible
Employees”) is January 1st through June 30th of the relevant calendar year
(“First Half”) and July 1st through December 31 st of the relevant calendar year
(“Second Half”). For avoidance of doubt, subsequent changes in the JCI of an
Eligible Employee’s role during the relevant calendar year will not affect the
Plan Period applicable to such Eligible Employee. The Plan Period(s) may be
changed by the Board of Directors at any time.

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Section 2: NBS/CG Plan Eligibility

Generally, regular full-time and regular part-time4 Company employees assigned
to a Business Unit are eligible to participate in the NBS/CG Plan (“Eligible
Employees”), subject to the following:

 

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

 

  (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 NBS/CG Plan.

 

  (3)

Individuals determined by the Company to be students, co-op students, interns,
temporary5, or non-payroll workers (i.e., individuals who are not paid from a
Company employee payroll) are ineligible to participate in the NBS/CG Plan.

 

  (4) The Boards of Directors of Nortel Networks Corporation and Nortel Networks
Limited (the “Board of Directors”) may determine that certain Company employees
(including employees who are not otherwise eligible for the NBS/CG 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 an award for any relevant Plan
Period an employee must be actively employed in a role that is eligible under
the NBS/CG Plan or other incentive plan (“Incentive Eligible Role”) for at least
one calendar month in that Plan Period6 and (a) be employed by the Company
(i) on the last day of the relevant Plan Period if an Eligible Employee employed
in EMEA (“EMEA Employee”) or (ii) on the applicable Payment Date, as defined in
Section 4 hereof, if an Eligible Employee

 

 

4

For purposes of the NBS/CG 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.

 

5

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 NBS/CG Plan.

 

6

The required period of active employment status may be changed by the Board of
Directors at any time.

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employed in a region other than EMEA (“Non-EMEA Employee”) 7 or (b) if no longer
employed as of the applicable date set out in sub-section 5(a) above, then
(i) with respect to EMEA Employees, be terminated from employment prior to the
last day of the relevant Plan Period due to death, Transfer (as defined below)
or involuntarily by the Company for a reason determined by the Company to be
other than for Cause (as defined below) and (ii) with respect to Non-EMEA
Employees, be terminated from employment prior to the applicable Payment Date
due to death, Transfer or involuntarily by the Company for a reason determined
by the Company to be other than for Cause. For purposes of the NBS/CG Plan, an
employee will be considered to be “actively employed” on those days when the
employee is classified as “active” on the applicable Company payroll and one day
of active employment in a calendar month is deemed to be active employment for
that full calendar month. “Transfer” under the NBS/CG Plan means an Eligible
Employee’s transfer to or hire by a new employer not affiliated with the Company
that purchased one or more of the Company’s business units or to which Company
services have been outsourced with the advance written consent, including with
respect to the Eligible Employee’s transfer or hire date, of the Company and the
new employer. “Cause” under the NBS/CG Plan means the employee’s inappropriate
actions or inactions, misconduct, breach of an agreement with the Company or
unsatisfactory performance or cause (as legally defined, if at all, in the
relevant jurisdiction)(collectively, “Cause”).

 

  (6) Pro-rated awards will be made as described below to employees who
(a) transfer into or out of positions covered by other incentive plans, (b) move
from or to a job within the Company that is ineligible for the NBS/CG Plan,
(c) are on a Company approved leave of absence or on “notice” of termination of
employment and not actively employed for part of the Plan Period or (d) are
terminated from employment due to death, Transfer or by the Company
involuntarily for a reason determined by the Company to be other than for Cause
prior to the end of the relevant Plan Period, provided that the employee meets
the other NBS/CG Plan requirements set out above. However, subject to applicable
law, an employee is not eligible for an NBS/CG Plan payout for any calendar
month in which the employee is not actively employed in a position eligible
under the NBS/CG Plan for at least one day. Except as provided in the following
sentence, if an employee meets the above NBS/CG Plan requirements, but is
actively employed in a position that is eligible under the NBS/CG Plan for less
than the full relevant Plan Period, the employee’s NBS/CG Plan award for the
relevant Plan Period will be based on the number of months during the relevant
Plan Period that the employee is actively employed in a NBS/CG Plan eligible
position for at least one calendar day divided by the number of months in the
relevant Plan Period. For purposes of determining the amount of a pro-rata
NBS/CG Plan award, an employee will

 

 

7

The Senior Vice President, HR, will determine if an Eligible Employee is
employed in EMEA or a region other than EMEA for purposes of the NBS/CG Plan.

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not be considered to be actively employed in an NBS/CG Plan eligible position in
a calendar month in which (x) the employee participates in another incentive
plan for that full calendar month or (y) the employee participates in another
incentive plan for the greater portion of the month, each as determined by the
Company.

 

  (7) With respect to former employees who continue to be eligible for an NBS/CG
Plan award under Section 2(5) (b) of the NBS/CG Plan, the Company may deny
payment of that NBS/CG Plan award to those former employees if they engage in
conduct after their employment termination date and prior to the applicable
Payment Date that constitutes Cause, as determined by the Company.

Notwithstanding the foregoing, any payment made after termination of employment
to a “specified employee” that would be considered a “deferral of compensation”
within the meaning of, and subject to, Section 409A of the U.S. Internal Revenue
Code and regulations thereunder (“Section 409A”) will be paid on the later of
the date which is six months and one day after (a) the termination date and
(b) the date on which the award is otherwise payable under Section 4 of the
NBS/CG Plan. A “specified employee” means any U.S. taxpayer who is a key
employee (as defined in Section 416(i) of the U.S. Internal Revenue Code without
regard to paragraph 5 thereof) of the Company. (This is generally limited to
employees who are (i) in the top 50 officers having an annual compensation
greater than US$145,000, (ii) a 5-percent owner, or (iii) a 1-percent owner
having an annual compensation of more than US$150,000.). For this purpose,
termination of employment means “a separation from service” as defined in
Section 409A.

 

  (8)

An employee’s Management Team8 may, in consultation with the relevant Human
Resources Business prime, make limited exceptions to the ‘actively employed’
requirement set out in Section 2(5) above where required by applicable law
(e.g., as required under applicable maternity, paternity, parental, military,
family, or medical leave laws). Notwithstanding anything in the foregoing to the
contrary, nothing in the NBS/CG Plan shall preclude the Company paying an
employee an award under the NBS/CG Plan for more than the number of months the
employee was actively employed in an NBS/CG Plan eligible role during the
relevant Plan Period pursuant to that individual employee’s employment
termination agreement, which the Senior Vice-President, HR has approved.

 

  (9) Company affiliates and joint ventures may choose to offer the NBS/CG Plan
or a similar plan subject to the approval of the Senior Vice-President, HR.

 

 

8

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 the relevant Plan Period under the NBS/CG
Plan will be based on the following formula9:

Formula Applicable to Semi-Annual Basis Eligible Employees:

50%10 of Annual Base Salary x Award % x Business Unit Performance Factor for
First Half or Second Half, as applicable

Formula Applicable to Annual Basis Eligible Employees:

100%11 of Annual Base Salary x Award % x Business Unit Performance Factor for
Calendar Year

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 during the last
calendar month of the relevant Plan Period on a uniform date to be determined in
the sole discretion of the Senior Vice-President, HR.

Award % is the percentage determined for each Eligible Employee for purposes of
the applicable formula above based on the scope, complexity, and
responsibilities of the employee’s role and that employee’s performance during
the applicable Plan Period. An Eligible Employee’s Award % is subject to review,
modification and approval by the Senior Management Team and the Board of
Directors as provided in Section 4.12

For Eligible Employees in Job Complexity Indicator (“JCI”) 1-6 and 55, target
Award %s (“Target Award %”) ranging from 3.5% to 100% are established that
reflect JCI level and assume that the Eligible Employee’s performance is at a
minimum satisfactory. The JCI level for these purposes will be measured
concurrently with Annual Base Salary as described above. There is no guarantee
that an Eligible Employee’s Award % used in the formula above will equal the
applicable Target Award %.

The total NBS/CG Plan award for all Eligible Employees for a Business Unit is
recommended by the Senior Management Team for approval by the Board of Directors

 

 

9

The NBS/CG Plan award will be pro-rated as applicable under Section 2(6) and
(8).

 

10

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

 

11

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

 

12

For purposes of the Plan only, the "Senior Management Team" shall consist of the
President, Nortel Business Services (NBS), the Senior Vice President of
Corporate Services and Chief Financial Officer and the Senior Vice-President, HR
or any other position(s) as identified and approved by the Board of Directors
(as defined in Section 2).

.

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after the end of the relevant Plan Period. The Board of Directors will
determine, in its sole discretion, whether all or any part of the recommended
total NBS/CG Plan award for a Business Unit for the relevant Plan Period will be
paid and the amount of any total NBS/CG Plan award for a Business Unit in
respect of that Plan Period.

Business Unit Performance Factor applicable to each Business Unit shall be
determined by the Board of Directors in its sole discretion based on its
assessment of that Business Unit’s achievements against performance metrics
targets established for that Business Unit by the Board of Directors in its sole
discretion for the First Half and the Second Half. The Business Unit 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 Business Unit objectives for the First Half
or Second Half, as applicable. Targets will be based on objective and/or
subjective criteria established to measure, directly or indirectly, the
performance metrics. Weightings will be the relative weight or percentage
accorded in the relevant Business Unit Performance Factor for achieving each
specific target. After approval by the Board of Directors, the relevant Business
Unit’s objectives for the First Half and the Second Half will be communicated to
Eligible Employees within that Business Unit. The Business Unit Performance
Factor for each Business Unit is deemed to be 1.0 (achievement) throughout the
relevant Plan Period and is then adjusted by the Board of Directors based on its
determination of each Business Unit’s performance for (i) the First Half and
Second Half, as applicable, with respect to the award calculation of Semi-Annual
Basis Eligible Employees for the relevant Plan Period and (ii) the calendar year
with respect to the award calculation of Annual Basis Eligible Employees for the
relevant Plan Period; provided, however, that, the Business Unit Factor for the
calendar year, which is used in the award calculation for Annual Basis Eligible
Employees, will be equal to the average of the applicable Business Unit Factor
for the First Half and the Second Half. The Senior Management Team may, in its
sole discretion, recommend to the Board of Directors that the applicable
Business Unit Performance Factor be adjusted with respect to certain sub-units
within a Business Unit, JCI levels or any other groups of employees and the
Board can approve such adjustment to the relevant Business Unit Performance
Factor, in its sole discretion, based on additional factors that the Senior
Management Team and Board of Directors determine in their sole discretion are
relevant to the award including, without limitation, collective relative
contribution to achievement of the key Business Unit objectives during the
relevant Plan Period.

The Business Unit Performance Factor used in an Eligible Employee’s Award
calculation will be based on the Business Unit to which the Eligible Employee is
aligned in the Company’s Organization Structure Manager (OSM) as of a uniform
date in the last calendar month in the relevant Plan Period to be determined in
the sole discretion of the Senior Vice-President, HR; provided, however, that
the Business Unit Performance Factor used in the Award calculation of EMEA
Employees shall be the average of the Business Unit Factors for all Business
Units for the relevant Plan Period.

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Section 4: NBS/CG Plan Awards

Awards for each relevant Plan Period are calculated as described in Section 3.
Notwithstanding any provision in the NBS/CG Plan to the contrary, the maximum
NBS/CG Plan award payable to an Eligible Employee in the relevant Plan Period is
a cash amount equal to (a) 100% of such Eligible Employee’s Annual Base Salary
multiplied by a percentage equal to one and one-half (1.5) times the Eligible
Employee’s Target Award % if such employee is an Annual Basis Eligible Employee
or (b) 50% of such Eligible Employee’s Annual Base Salary multiplied by a
percentage equal to one and one-half (1.5) times the Eligible Employee’s Target
Award % if such employee is a Semi-Annual Basis Eligible Employee.

Any award under the NBS/CG Plan to an Eligible Employee is subject to the
discretion of the Eligible Employee’s Management Team and Senior Management Team
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, as reflected in their performance, to the Business
Unit or the achievement of the Business Unit’s key objectives, as well as to
ensure that the final payouts, if any, are within appropriate budgetary
guidelines. Finally, the Board of Directors reserves the right, in its
discretion, to make a final determination of the Award % of any Eligible
Employee. The Board of Directors determines, in its sole discretion, the
achievement of the targets for the performance metrics, the final calculation of
the Business Unit Performance Factor (which may include a determination of a
Business Unit 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) and whether NBS/CG Plan awards will be paid in respect
of a Plan Period. During the relevant Plan Period, the Board of Directors can
review Business Unit objectives, performance measures, weightings, and targets
to determine whether they remain appropriate. The Board of Directors may, at its
sole discretion, adjust the Business Unit’s objectives, performance measures,
weightings, targets, and/or plan payouts for the relevant Plan Period, as it
deems necessary, to reflect changes in business conditions or other
circumstances.

Subject to applicable law, the Senior Vice-President, HR, may approve the
reduction of NBS/CG Plan awards payable to Eligible Employees for a Plan Period
by the full or partial amount of other bonuses or similar payments, including,
without limitation, Company performance related payments required by applicable
law, that are payable to such employees in respect of any part of such Plan
Period. The Senior Vice-President, HR, will have sole discretion to determine
those bonuses or payments that are subject to the preceding sentence and the
amount of any such reduction to the NBS/CG Plan award.

If the Board of Directors approves the payment of a total NBS/CG Plan award for
a Business Unit for the relevant Plan Period in accordance with the provisions
of the

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NBS/CG Plan, any NBS/CG Plan award approved for an Eligible Employee under the
NBS/CG Plan in that Business Unit will be payable as follows:

Semi-Annual Basis Eligible Employees employed outside of EMEA:

1. 50% of the award, if any, with respect to the First Half Plan Period
following completion of the First Half;

2. 50% of the award, if any, with respect to the First Half Plan Period
following completion of the Second Half; and

3. 100% of the award, if any, with respect to the Second Half Plan Period
following completion of the Second Half.

Notwithstanding the foregoing, if the employment of a Semi-Annual Basis Eligible
Employee employed outside of EMEA is terminated involuntarily by the Company for
a reason determined by the Company to be other than for Cause or due to the
Employee’s death or Transfer and the employment termination occurs (a) on or
before June 30th of the relevant calendar year, then 100% of the award with
respect to the First Half Plan Period will be payable following completion of
the First Half and no award will be payable with respect to the Second Half Plan
Period or (b) on or after July 1st of the relevant calendar year, then (i) with
respect to any First Half award that is payable, 50% will be paid following
completion of the First Half and the remaining 50% will be paid within 90 days
of such employment termination, but in no event earlier than such initial 50%
payment, and (ii) with respect to any Second Half award that is payable, 100%
will be paid following completion of the Second Half.

Semi-Annual Basis Eligible Employees employed in EMEA:

1. 100% of the award, if any, with respect to the First Half Plan Period
following completion of the First Half;

2. 100% of the award, if any, with respect to the Second Half Plan Period
following completion of the Second Half.

Annual Basis Eligible Employees:

100% of the award, if any, with respect to the calendar year Plan Period
following the completion of the Second Half.

The payment of any award or portion of an award payable upon completion of the
First Half, as provided above, will be made as soon as practicable following
September 1st of that calendar year, but in no event later than October 31st of
that calendar year. The payment of any award or portion of an award payable upon
completion of the Second Half, as provided above, will be made as soon as
practicable following March 1st of the following calendar year but in no event
later than April 30th of the following calendar year.

The applicable date on which an award is paid as described above is the “Payment
Date”. NBS/CG 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. Each NBS/CG Plan award for each separate Plan Period will be
treated as a separate payment for purposes of Section 409A.

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Depending on local laws and policies, NBS/CG 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 NBS/CG
Plan awards in accordance with the specific capital accumulation and retirement
plan in which the Eligible Employee participates.

Notwithstanding anything in the NBS/CG Plan to the contrary, if the Board of
Directors, in its sole discretion, upon consideration of facts and circumstances
determined by the Board of Directors to be relevant, concludes that an Eligible
Employee has committed intentional misconduct, as defined in the Policy
Regarding Recoupment of Incentive Compensation (the “Recoupment Policy”)
relating to the forfeiture and/or recoupment of incentive compensation,
including NBS/CG Plan award payments, the Eligible Employee will forfeit any
planned but unpaid NBS/CG Plan award and/or reimburse the Company the amount of
the NBS/CG Plan award received, as determined by the Board of Directors.

Section 5: Discretionary Bonus Pool

During a Plan Period, the Board of Directors may consider the creation of a
separate Discretionary Bonus Pool under the NBS/CG 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 NBS/CG 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
NBS/CG Plan. 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 NBS/CG 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 Annual Incentive Plan for Nortel Business Services and Corporate Group”.
In the event of any conflicts or inconsistencies between the provisions of the
NBS/CG Plan and any other document or communication, written or oral, concerning
the NBS/CG Plan, the provisions of this document, as amended from time to time,
will govern.

The Senior Vice-President, HR, subject to approval of the Board of Directors in
certain cases, as it may specify, will interpret the provisions of the NBS/CG
Plan and that interpretation will be final and binding on the Company, the
Business Units and all NBS/CG 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
NBS/CG 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 Board
of Directors, as the case may be. If any awards, however, are paid, they will be
determined and paid in accordance with the provisions herein.

The NBS/CG Plan can only be terminated or amended by the Board of Directors,
which has the full authority, at any time, to terminate the NBS/CG Plan or to
delete, modify and/or add to any and all terms, conditions, and provisions of
the NBS/CG 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, as amended on March 15, 2007 with effect from
January 1, 2007, as amended on February 22, 2008 with effect from January 1,
2008, as amended on February 20, 2009 with effect from January 1, 2009, as
amended on November 13, 2009 with effect from October 1, 2009 and as amended on
March 10, 2010 with effect from January 1, 2010.