exv10w1



 





			
	
	 	






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)




 









 











			
	Mr. Dion Joannou
	 	Confidential — Special Handling
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	 	 	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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	 	Confidential — Special Handling
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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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	 	Confidential — Special Handling
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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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	 	Confidential — Special Handling
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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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	 	 	 	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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	 	 	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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	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




 









 





			
	Mr. Dion Joannou
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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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	 	Confidential — Special Handling
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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



 









 





			
	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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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