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Exhibit 10.6 (NORTEL LOGO) CONFIDENTIAL-SPECIAL HANDLING March 2, 2005 Mr. Gary Daichendt
2620 Riviera Drive
Laguna Beach, CA 92651 Dear Gary: I am pleased to offer you the position of President and Chief Operating Officer of Nortel
Networks Corporation (NNC) and Nortel Networks Limited (NNL) (collectively Nortel Networks),
reporting to William A. (Bill) Owens, with a suggested start date of March 14, 2005. This
employment offer is subject to your appointment by the Boards of Directors of NNC and NNL and the
terms and conditions of this offer letter. The key responsibilities and focus of this position have been discussed and communicated to you.
We look forward to you playing a key role in this area. We have also discussed the senior
executives that will be reporting to you in this role. Should you have any further questions, I
would be pleased to assist you. The terms of this offer are as follows: Salary
Your base salary will be US$800,000 per annum paid to you bi-weekly. Normally, salaries are
reviewed on an annual basis, typically in the first quarter, in accordance with the various
evaluation processes and market-driven guidelines. Incentive Award
You will be eligible to participate in the annual Nortel Networks Limited SUCCESS Incentive Plan
(SUCCESS Plan) with a target of 125% of your base salary. For 2005, you will be eligible to
participate in the 2005 SUCCESS Plan and we will guarantee that you will receive a SUCCESS Plan
payment of at least 125%. In all other respects, your SUCCESS payment will be determined in
accordance with the terms of the SUCCESS Plan. A copy of the Plan is enclosed.




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Long Term Incentive
As a consequence of a delay of certain public filings by Nortel Networks, the grant of stock
options under the Nortel Networks stock option plans has been suspended. Once the suspension has
been lifted, we intend to recommend to the Joint Leadership Resources Committee of the Boards of
Directors of NNC and NNL (the Committee) for approval during the next available approval cycle a
new hire grant of 500,000 stock options for you. Such stock options, including the grant thereof,
will be subject to the terms and conditions of the applicable Nortel Networks stock option plan at
the time of grant, as well as applicable Nortel Networks corporate policies and procedures, in
effect at the time the recommendation for approval is submitted, including , (i) to be eligible
for the recommendation of this option grant, you must be an active employee of Nortel Networks on
the date of the grant of the options; and (ii) the exercise price of the options will be equal to
100% of the market value of one common share of NNC on the date of the grant of such options
determined in accordance with the terms of the applicable Nortel Networks stock option plan. In addition, as part of your 2005 long term incentive award, our intention is to award you a long
term incentive package valued at the time of award by an industry recognized valuation tool
approved by the Committee equivalent to US$3.75 million and conditional upon shareholder and all
other required approvals having been obtained prior to the award. Benefits
As an employee of Nortel Networks Inc. (NNI), NNCs principal operating subsidiary, you will be
eligible to participate in U.S. employee benefit plans of NNI in accordance with the terms of those
plans upon your commencement of employment. This currently includes medical, dental, vision, short
term disability, long term disability, business travel insurance, accidental death and
dismemberment, and life insurance coverages. A Benefits Summary is included with this offer. You will also be eligible for 5 weeks of vacation per annum upon your commencement of employment.
Vacation is accrued monthly at the rate of 2.08 days per month of employment. We periodically review benefit plans, as well as compensation programs, and make modifications,
including enhancements and reductions, as we deem appropriate. Capital Accumulation and Retirement Programs (CARP)
You will be offered the choice between two Capital Accumulation and Retirement Programs (CARP):
the Balanced Program or the Investor Program. Details of these programs have been included. All of
our retirement programs are periodically reviewed and changes may result to the programs as
currently described. Change in Control
Subject to the approval of the Committee, you will be eligible to participate in our Nortel
Networks Corporation Executive Retention and Termination Plan (ERTP). The ERTP provides certain
payments in the event that your employment is terminated for a qualifying reason under the ERTP
within 24 months following a change in control (as defined in the ERTP). You would be eligible for
the benefits described for Tier I Executive under the terms and conditions of the ERTP. A copy of
the ERTP is enclosed. Ongoing participation in the ERTP will continue as a function of your role and responsibilities. The number of executives 2




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who
participate in the ERTP is very limited, and is subject to approval by the Committee. Payment to
you of ERTP benefits would make you ineligible for the payments/benefits described below in the
paragraph entitled Involuntary Separation. Tax Review for Board Appointed Officers
As a board appointed officer, you are required to participate in Nortels Executive Tax Review
Program. Under the terms of this program, your personal income tax return will be prepared and/or
reviewed by our designated tax provider. Executive Travel Services
You will be eligible for executive travel reservation services:
Dedicated travel telephone # ESN 830-4698, (613) 274-4698 Reporting Insider
You will be designated a Reporting Insider under applicable Canadian and U.S. securities
legislation with respect to trades of securities of Nortel Networks. Further details will be sent
to you directly by our Securities Law group following your acceptance of this offer. Share Ownership Guidelines
As a senior executive you will be expected under the Share Ownership Guidelines to own common
shares of NNC equivalent to 300% of your base salary within 5 years from the date you commence
employment. We strongly believe that it is important for senior executives to have this
commitment. As a result, we review progress against these guidelines on a regular basis. Employment Relationship
Your employment relationship is that of employment at will and therefore such relationship is
terminable at the will of either party and is not an employment agreement for a year or any other
specified term. Involuntary Separation
Notwithstanding, the employment relationship described in the paragraph above entitled Employment
Relationship, if the Corporation initiates your separation of employment as President and Chief
Operating Officer, or there is a change of your reporting relationship in that role to someone
other than William A. (Bill) Owens or if your responsibilities or authority are involuntarily
changed and are not substantially equivalent to your current role, you will be provided in lieu of
any other payment or benefit with the following: the equivalent of two years base salary paid
bi-weekly, the equivalent of one year SUCCESS Plan payment at target to be paid in a lump sum, the
opportunity to continue health, life insurance and AD&D benefits coverage in which you are then
enrolled for two years following your employment termination (Salary Continuance Period) at
active employee rates, and the continued vesting of outstanding stock options during the Salary
Continuance Period. However, the foregoing payments and benefits will not be provided to you if
your separation of employment arises out of conduct and/or inaction by you that is not in the best
interests of the Corporation. Additionally, the provision of any such payments and benefits will
be conditioned upon your execution of a separation agreement, which will be prepared by the
Corporation and will contain, among other things, a full and final release of claims and a covenant
not to compete against the Corporation or solicit its employees during the Salary 3




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Continuance
Period. Payment to you of the benefits described in this paragraph would make you ineligible for the payments/benefits described above in
the paragraph entitled Change in Control. If you are in accord with this offer, please sign and return one copy of this letter to me and
retain the other for your files. At the commencement of your employment, there will be a number of documents for you to complete,
including our standard Employee Agreement as well as an Agreement Related to Intellectual Property
and Confidentiality and Conflict of Interests. Also, the employment offer is contingent upon you
providing certain legally required documentation such as those required under the Immigration
Reform and Control Act of 1986, as well as the completion of background and reference checks to the
Corporations satisfaction. I look forward to you joining Nortel Networks and believe you will find your new position to be a
challenging and rewarding experience. Sincerely, /s/ William Donovan William J. Donovan
Senior Vice-President,
Human Resources
Nortel Networks Corporation Accepted this 3rd day of March, 2005
 Signature:
    /s/ Gary Daichendt
 Confirmed Start date:
    3/14/05
 Social Security #:
 Date of Birth:
 Enclosure 4