**Exhibit 10.1****Nortel Networks Limited SUCCESS Incentive Plan****Section 1:**  **Introduction**     The Nortel Networks Limited SUCCESS Incentive Plan (the “SUCCESS Plan”) is a short-term,incentive bonus plan that provides the potential for “Eligible Employees” (as defined below) toreceive cash awards based on their contributions to the success of the “Company”1,conditioned on the Company meeting its objectives.     The SUCCESS Plan is intended to drive business performance and customer and shareholder valueby rewarding Eligible Employees for their contributions to the Company’s overall success. AnEligible Employee’s contribution is determined by two factors: (1) the impact of that employee’srole on business results and (2) that employee’s achievement of individual performance objectivesduring the employee’s active service with the Company. The actual award received by an EligibleEmployee will reflect (1) an employee’s job scope, complexity, and responsibilities, and thatemployee’s contribution and achievement, during the Plan Period2 and (2) the Company’sperformance as indicated by the Nortel Performance Factor (the “Nortel Performance Factor”).**Section 2:**  **SUCCESS Plan Eligibility**     Generally, regular full-time and regular part-time3 Company employees are eligibleto participate in the SUCCESS Plan (“Eligible Employees”), subject to the following: (1) Eligible employees who participate in other incentive plans for a fullcalendar month or the greater portion of a month, as determined by the Company, arenot eligible to participate in the SUCCESS Plan during that calendar month. Forpurposes of this document, “other incentive plans” mean sales incentive compensationor any other incentive/bonus arrangements which the Company determines have beenoffered in lieu of the SUCCESS Plan; 1 For purposes of the SUCCESS Plan, the“Company” is defined as Nortel Networks Limited and itssubsidiaries and affiliates and other entities, which it controls directly orindirectly and which have been approved for participation in the SUCCESS Planby the person holding the most senior position responsible for human resourcesor the equivalent at the Company as identified by the CHRC (the “SeniorVice-President, HR”). 2 Each calendar year consists of one PlanPeriod— from January 1 through December 31. The Plan Period(s) for eachcalendar year may be changed by the CHRC (as defined in Section 2) and Board ofDirectors (as defined in Section 2) at any time. 3 For purposes of the SUCCESS Plan, regularfull-time and regular part-time Company employees are those employees who areeligible for participation in the Company health benefit plans based on theirregularly scheduled hours.
 

 

- 2 - (2) Subject to applicable law, employees who are covered under a collective laboragreement are not eligible unless that collective labor agreement provides for theirparticipation in the SUCCESS Plan;  (3) Individuals determined by the Company to be students, co-op students,interns, temporary4, or non-payroll workers are ineligible for the SUCCESSPlan;  (4) The Compensation and Human Resources Committee of the Boards of Directors ofNortel Networks Corporation and Nortel Networks Limited (“CHRC”) and the Board ofDirectors of Nortel Networks Limited (the “Board of Directors”) may determine thatcertain Company employees (including employees who are not otherwise eligible for theSUCCESS Plan) may be eligible to receive an award from a Discretionary Bonus Poolcreated pursuant to Section 5 hereof;  (5) Subject to applicable law, to be eligible for either a full or pro-ratedaward for any given Plan Period: (a) an employee must have been actively employed in arole that is eligible under the SUCCESS Plan or other incentive plan (“IncentiveEligible Role”) for at least three full calendar months in thatPlan Period5 and (b) the employee must have been an employee in an Incentive EligibleRole on or before October 1 of that Plan Period6. For purposes of thisdocument, an employee will be considered to be “actively employed” for any calendarmonth in which the employee actually works for at least one day or as otherwiserequired under applicable contract or law. Notwithstanding the foregoing and subjectto applicable law, employees whose employment terminates before December 31 of a PlanPeriod are not eligible to receive a SUCCESS Plan award for that Plan Period.  (6) Pro-rated awards may be made to employees who transfer into or out ofpositions covered by other incentive plans, move from or to a job that is ineligiblefor the SUCCESS Plan or who are on a Company approved leave of absence or on “notice”of termination of employment for part of the Plan Period, provided that the employeemeets the other SUCCESS Plan requirements set out above. However, subject toapplicable law, an employee is not eligible for a SUCCESS Plan payout for any calendarmonth in which the employee is not actively employed in a position eligible under theSUCCESS Plan. If an employee meets the above 4 Where legally required, temporary full timeemployees on fixed term contracts with the Company may be included as EligibleEmployees subject to the other conditions in Section 2 of the Plan. 5 The required period of active employment maybe changed by the CHRC and Board of Directors at any time. 6 The dates on which an employee must beemployed in an Incentive Eligible Role may be changed by the CHRC and Board ofDirectors at any time.
 

 

- 3 -   SUCCESS Plan requirements, but is actively employed in a position that is eligible under the SUCCESSPlan for less than the full Plan Period, the employee’s SUCCESS award will be based onthe number of months the employee is actively employed in a SUCCESS Plan eligibleposition divided by the number of months in the Plan Period, with the followingexception. For purposes of determining the amount of a pro-rata SUCCESS award, anemployee will not be considered to be actively employed in SUCCESS Plan eligibleposition in a calendar month in which (a) the employee participates in anotherincentive plan for that full calendar month or (b) the employee participates in anotherincentive plan for the greater portion of the month, each as determined by the Company.  (7) Employees who meet all of the SUCCESS Plan eligibility requirements, but wholeave employment with the Company between the end of the Plan Period and the relatedpayment date for the award, other than for reasons determined by the Company to berelated to inappropriate actions, misconduct, dismissal for cause (where applicable)or unsatisfactory performance, will be eligible for an award for the applicable PlanPeriod;  (8) An employee’s Management Team7 has the right, in consultation withthe relevant Human Resources Business prime, to make limited exceptions to the‘actively employed’ requirements set out in Section 2(5) and (6) above where requiredby law or where the Management Team determines that circumstances clearly warrant anexception. Exceptional circumstances might include approved leaves where warranted byapplicable law (e.g. maternity, paternity, parental, military, family, or medical),disability, outsourcing, divestiture, or death. In such situations, if the employeehas, while actively employed in a SUCCESS Plan eligible position, substantiallyachieved his/her individual objectives, the employee’s Management Team may grantpartial awards. If awards are paid in these circumstances, the awards will bepro-rated to reflect the number of months the employee was actively employed in aSUCCESS Plan eligible position, as defined in Section 2(5) above, and will becommensurate with the employee’s contribution and achievement. Notwithstandinganything in the foregoing to the contrary, nothing in the SUCCESS Plan shall precludethe Company paying an employee an award under the SUCCESS Plan for more than thenumber of months the employee was actively employed in a SUCCESS Plan eligibleposition pursuant to that individual employee’s employment termination agreement,which the Senior Vice-President, HR has approved; and  (9) Company affiliates and joint ventures may choose to offer the SUCCESS Plan ora similar plan subject to the approval of the Senior Vice-President, HR. 7 The “Management Team” consists of themanagers with whom the employee has a direct or indirect reporting relationshipas set out in the Organization Structure Manager (“OSM”) or its equivalent asmaintained by the Company from time to time.
 

 

- 4 -**Section 3:**  **Award Elements**     An Eligible Employee’s cash award for a Plan Period under the SUCCESS Plan will be based onthe following formula:100%8 of Annual Base Salary x (# Months actively employed in SUCCESSeligible position / # Months in Plan Period) [“Pro-Ration Factor”] x Award % xNortel Performance Factor. Annual Base Salary means the annualized regular compensation paid to an Eligible Employee,excluding any other compensation, such as, but not limited to, bonuses, commissions, overtime, andrelocation benefits. The Annual Base Salary for these purposes will be measured for all EligibleEmployees at a uniform time on or after October 1st of the applicable Plan Period to bedetermined in the sole discretion of the Senior Vice-President, HR.Award % is the percentage of Annual Base Salary that is used to compute the SUCCESS Planaward for each Eligible Employee. For Job Complexity Indicator (“JCI”) 1-6, the Award % rangesfrom 0% to 40% of Annual Base Salary. For JCI 55, the Award % ranges from 0% to 400% of AnnualBase Salary. The JCI level for these purposes will be measured concurrently with Annual BaseSalary as described above. For each JCI, the Senior Vice-President, HR may set a suggestednarrower award range, intended to reflect a market trend to give certain Eligible Employees withhigher levels of responsibility a higher incentive potential as a percentage of Annual Base Salary.Within the ranges approved by the CHRC and the Board of Directors, an Eligible Employee’sManagement Team will determine the recommended Award % for that employee for each Plan Period basedon the employee’s job scope, complexity and responsibilities and the employees’ contributions andachievements during the Plan Period. An Eligible Employee’s recommended Award % is subject toreview, modification and approval by the Senior Management Team as provided in Section4.9The total SUCCESS Plan award for all Eligible Employees for a Plan Period (reflecting the NortelPerformance Factor) is recommended by the Senior Management Team for approval by the CHRC and theBoard of Directors after the end of the Plan Period.Nortel Performance Factor is calculated based on the achievement by the Company of keycorporate objectives for the Plan Period. The objectives are approved by the CHRC and the Board ofDirectors for each Plan Period. The Nortel Performance Factor may be based on one or moreperformance metrics, each with specific targets. The performance metrics may have equal or different weightings. Performance metrics are the general 8 The percentage of Annual Base Salary that isapplied to the formula may be changed by the CHRC and Board of Directors at anytime. 9 For purposes of the SUCCESS Plan only, the“Senior Management Team” shall consist of the President and Chief ExecutiveOfficer, the Chief Financial Officer and the Senior Vice-President, HR ofNortel Networks Limited.
 

 

- 5 -corporate goals for the Plan Period, such as profitability, market momentum, or customer loyalty. Targets shall bebased on objective and/or subjective criteria established to measure, directly or indirectly, theperformance metrics. Weightings shall be the relative weight or percentage accorded in the NortelPerformance Factor for achieving each specific target. After approval by the CHRC and the Board ofDirectors, the Company’s objectives for the Plan Period will be communicated to Eligible Employees.The Nortel Performance Factor is deemed to be 1.0 (achievement) throughout the Plan Period and isthen adjusted by the CHRC and the Board of Directors based on their determination of corporateperformance. The President and Chief Executive Officer may, in his sole discretion, recommend tothe CHRC and the Board of Directors that the Nortel Performance Factor be adjusted with respect tocertain business units, JCI levels or any other groups of employees and the CHRC and the Board canapprove such adjustment to the Nortel Performance Factor, in their sole discretion, based onadditional factors that the President/CEO and the CHRC and Board determine in their sole discretionare relevant to the award including without limitation, collective relative contribution toachievement of the key Company objectives during the Plan Period.**Section 4:**  **SUCCESS Plan Awards**Awards for each Plan Period are calculated based on 100%10 of an Eligible Employee’sAnnual Base Salary, the Pro-Ration Factor, the Eligible Employee’s Award % (which reflects theemployee’s job scope, complexity and responsibilities, and that employee’s contribution andachievement, during the Plan Period), and the Nortel Performance Factor (that is, the Company’sbusiness performance for the Plan Period as determined by the CHRC and the Board of Directors).When warranted, cash awards will be made as soon as practicable following the close of theapplicable Plan Period and the calculation of any award.Any award under the SUCCESS Plan to an Eligible Employee is subject to the discretion of theEligible Employee’s Management Team and Senior Management Team and the CHRC and the Board ofDirectors. That is, an Eligible Employee’s Management Team determines, in its discretion, theAward % for an Eligible Employee subject to review, modification and approval by the SeniorManagement 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 EligibleEmployees by their Management Team to reflect its assessment of the employees’ contributions to thebusiness or the achievement of the Company’s key objectives, as well as to ensure that the finalpayouts, if any, are within appropriate budgetary guidelines. The CHRC and the Board of Directorsdetermine, in their discretion, the achievement of the targets for the performance metrics and thefinal calculation of the Nortel Performance Factor (which may include a determination of a NortelPerformance Factor of zero, even if certain of the performance metrics targets are achieved, and/oran adjustment to the relative weighting of the performance metrics.) During the Plan Period, theCHRC and the Board of Directors can review Company objectives, performance measures, weightings, and 10 The percentage of Annual Base Salary that isapplied to the formula may be changed by the CHRC and Board of Directors at anytime.
 

 

- 6 -targets to determinewhether they remain appropriate. The CHRC and the Board of Directors may, at their solediscretion, adjust the Company objectives, performance measures, weightings, targets, and/or planpayouts for the Plan Period, as they deem necessary, to reflect changes in business conditions orother circumstances.SUCCESS Plan awards are considered income and are therefore subject to national, state/provincial,and/or local taxes. All appropriate taxes and other withholdings will be deducted from any suchawards and payments as required by applicable law.Depending on local laws and policies, SUCCESS Plan awards may have an impact on some benefits andmay or may not be included in the “eligible earnings” for purposes of capital accumulation andretirement plans offered in the various regions by the Company. Where appropriate, deductions maybe made from SUCCESS Plan awards in accordance with the specific capital accumulation andretirement plan in which the Eligible Employee participates.**Section 5**:  **Discretionary Bonus Pool**During a Plan Period, the CHRC and the Board of Directors may consider the creation of a separateDiscretionary Bonus Pool under the SUCCESS Plan to provide discretionary, incremental bonus awards.These awards may be made to all employees of the Company or employees of the Company whoindividually or in groups made a relative contribution that significantly added to the overallsuccess of the Company, whether or not the employees are eligible to participate in the SUCCESSPlan under the criteria set out in Section 2 of this document. The determination that a Companyemployee is eligible for a Discretionary Bonus Pool award does not otherwise entitle that employeeto generally participate in the SUCCESS Plan. The CHRC and the Board of Directors have completediscretion to determine: the establishment of the Discretionary Bonus Pool; the eligibilitycriteria for participation; any performance metrics, weightings and targets; the achievement, ifany, of the targets for the performance metrics; and the amount of the awards, if any, paid fromthe Discretionary Bonus Pool. Whether or not an Eligible Employee receives a SUCCESS Plan awardshall 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 bededucted from the award as required by applicable law.Depending on local laws and policies, Discretionary Bonus Pool awards may have an impact on somebenefits and may or may not be included in the “eligible earnings” for purposes of capitalaccumulation and retirement plans offered in the various regions by the Company. Whereappropriate, deductions may be made from the Discretionary Bonus Pool awards in accordance with thespecific capital accumulation and retirement plan in which the employee participates.
 

 

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