exv10w2



 



EXHIBIT 10.2



FINAL – October 23, 2002





NORTEL NETWORKS



SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN










 


CONTENTS




	 	 	 	 	 	 	 	 	 
	SECTION	 	 	 	 	 	PAGE
	
	 	 	 	 	 	

	   1
	 	PURPOSE OF THE
PLAN	 	 	1	 
	 
	   2
	 	DEFINITIONS	 	 	1	 
	 
	   3
	 	ELIGIBILITY TO PARTICIPATE IN THE PLAN	 	 	7	 
	 
	   4
	 	TOTAL RETIREMENT BENEFIT	 	 	7	 
	 
	   5
	 	SERP BENEFIT	 	 	9	 
	 
	   6
	 	TRANSFERS	 	 	10	 
	 
	 	6.1 Transfers Prior to May 1, 2000	 	 	 	 
	 
	 	6.2 Transfers After April 30, 2000	 	 	 	 
	 
	   7
	 	SURVIVOR BENEFIT	 	 	11	 
	 
	   8
	 	PAYMENT OF BENEFITS	 	 	11	 
	 
	 	8.1 Mode of Payment	 	 	 	 
	 
	 	8.2 Company Effecting Payment	 	 	 	 
	 
	 	8.3 Currency	 	 	 	 
	 
	   9
	 	ADMINISTRATION	 	 	13	 
	 
	 	9.1 Committee	 	 	 	 
	 
	 	9.2 Limitation of Liability	 	 	 	 
	 
	 	9.3 Evidence of Entitlement to Benefits	 	 	 	 
	 
	  10
	 	EFFECTIVE DATE OF PLAN	 	 	14	 
	 
	  11
	 	AMENDMENT, TERMINATION	 	 	14	 
	 
	  12
	 	GENERAL PROVISIONS	 	 	14	 
	 
	 	12.1 Assignment	 	 	 	 
	 
	 	12.2 No Right to Continuation of Employment	 	 	 	 
	 
	 	12.3 No Additional Rights to Benefits under Pension Plan	 	 	 	 
	 
	 	12.4 Funding	 	 	 	 
	 
	 	12.5 Tax Treatment	 	 	 	 










 



NORTEL NETWORKS

SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN




1.  PURPOSE OF PLAN



     The Nortel Networks Supplementary Executive Retirement Plan, together with
other employer sponsored retirement plans, is designed to provide eligible
Executives of Nortel Networks with retirement benefits.




2.  DEFINITIONS



     In the Plan,


     “Accumulated Percentage” means, in respect of the determination of the
SERP III Benefit pursuant to section 4(c) hereof, the sum of Percentage Credits
attributed to the Executive’s Actual Years of Service.


     “Actual Years of Service” means years and months of service with Nortel
Networks, including periods of extended salary continuance paid as a severance
benefit, measured from the date that the Executive becomes a member of the
Canadian Pension Plan (including any additional service credits that may be
granted due to service bridging) or, if the Executive is first hired by a U.S.
subsidiary or affiliate of Nortel Networks and is a member of the U.S. Pension
Plan or the Canadian Pension Plan, the Executive’s employment date in the U.S.
Any part of a month of service will be considered a full month for purposes of
this definition.


     “Actuarial Equivalent” means a benefit that has the equivalent value of
another Total Retirement Benefit payable under the Plan, determined by using
the actuarial tables and other methods and assumptions that are used by the
Corporation in actuarial equivalency determinations under the Pension Plan
under which an Executive is or was a Participant, provided that the interest
assumption on which the calculation of equivalent value is based shall be six
percent (6%) compounded annually.


     For greater certainty, in determining the Actuarial Equivalent lump sum of
a Total Retirement Benefit under the Plan as at any particular time, the fact
that the Plan does not benefit from the same favorable tax treatment as is
afforded to the Pension Plan shall not be taken into account.


     The Actuarial Equivalent of any Total Retirement Benefit or part thereof,
the payment of which is within the discretion of the Corporation, shall be
deemed to be nil.


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     “Age + Service Points” means the sum of the Executive’s age and Service
Points as of the determination date. “Age” for this purpose is the age on the
Executive’s birthday during the calendar year that contains the determination
date.


     “Board of Directors” means the Board of Directors of Nortel Networks
Limited;


     “Capital Accumulation and Retirement Program” means the employee benefit
program established as of May 1, 2000 by Nortel Networks for certain of its
employees in the United States and Canada. Such program includes options
concerning pension benefit plans for such employees. The options available for
selection under that program are referred to as the “traditional”, “balanced”
and “investor” options (“Traditional Option”, “Balanced Option”, and “Investor
Option”).


     “Committee” means the Joint Leadership Resources Committee of the Board
of Directors or its predecessors and successors;


     “Corporation” means Nortel Networks Limited or its successors;


     “Earnings” of an Executive for a particular month means the base pay of
the Executive for that month, plus the incentive award or bonus, if any,
granted to the Executive for such month under the SUCCESS Plan or one of its
predecessors (including the Senior Management Incentive Award Plan or the
Executive Management Incentive Plan) and commissions. Bonuses and/or
commissions are taken into account in the year in which they are paid or would
have been paid if the Executive had not elected a deferral of such payment.


     The inclusion of bonuses and commissions in the definition of Earnings is
subject to the following limitations:


     With respect to calculation of a SERP I Benefit under section 4(a) hereof
for an Executive:



	     (a)	 	only fifty percent (50%) of the bonus or commission granted
to an Executive shall be included in Earnings in the case of an
Executive who was classified as a Band 11 under the Nortel Networks
employment classification system as of December 31, 1998.
	 
	     (b)	 	if an Executive retires on or after reaching age fifty eight
(58) but before reaching age fifty nine (59), only thirty three and
one third percent (33-1/3%) of the bonus or commission which would
otherwise be included for a particular month as provided above shall
be included in Earnings; and
	 
	     (c)	 	if an Executive retires on or after reaching age fifty nine
(59) but before reaching age sixty (60), only sixty six and two
thirds percent



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	 	 	     (66-2/3%) of the bonus or commission which would
otherwise be included in Earnings for a particular month as provided
above      shall be included in Earnings;



     With respect to calculation of a SERP II or III Benefit under section 4
hereof for an Executive who was classified as a Band 12 or higher under the
Nortel Networks employment classification system as of December 31, 1998 or
whose base salary is at least equal to either one of the following table
amounts as of the corresponding stated date, then one hundred percent (100%) of
the bonus or commission shall be included in Earnings. (Amounts in the table
are stated in the currency of the Executive’s country of employment at the date
indicated). Otherwise, then fifty percent (50%) of the bonus or commission
shall be included in Earnings:



	 	 	 	 	 
	Date	 	Amount*1
	
	 	

	December 31, 1998	 	$	200,000	 
	December 31, 1999	 	$	215,000	 



     However, the bonus or commission will not be included for a given year to
the extent that it exceeds sixty percent (60%) of the final base pay of the
Executive effective as of the last day of that calendar year.


     “Excess Plan Benefit” means the annual benefit payable upon Retirement to
the Executive under the pension benefit plan that pays the difference between
the amount determined under the applicable formula under the Pension Plan that
applies to the Executive and the actual amount paid to the Executive under such
Pension Plan after taking into consideration regulatory restrictions on maximum
amounts that may be paid from such Pension Plan. For U.S. Executives, such
pension benefit plan is the Nortel Networks Restoration Plan. For Canadian
Executives, such pension benefit plan is the Nortel Networks Excess Plan.


     “Executive” means an employee of Nortel Networks who is a participant in
the Plan pursuant to section 3;


     “Final Average Earnings” means (a) with respect to the calculation of a
SERP I and SERP II Benefit, the average of the three (3) highest consecutive
years of Earnings of the Executive; or (b) with respect to the calculation of a
SERP III benefit, the average of the three (3) highest consecutive years of the
Earnings of the Executive during the last ten (10) years of the Executive’s
employment with Nortel Networks.


     “Nortel Networks” means Nortel Networks Limited and its subsidiaries and
affiliates in the United States and Canada that have adopted the Nortel
Networks





1
Canadian or US dollars, as applicable.

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Retirement Income Plan or the Nortel Networks Managerial and
Non-Negotiated Pension Plan for the benefit of their employees;


     “Pension Plan” in respect of an Executive means the Pension Service Plan
portion of the Nortel Networks Retirement Income Plan (the “U.S. Pension Plan”)
or the Nortel Networks Managerial and Non-Negotiated Pension Plan, Parts I and
II (the “Canadian Pension Plan”) from which the Executive becomes entitled to
receive a benefit upon Retirement;


     “Pension Plan Benefit” in respect of an Executive means the amount of the
annual pension payable upon Retirement to the Executive under the Pension Plan;


     “Percentage Credit” means the credit attributed to a year granted to the
Executive based on the Executive’s Age + Service Points for that year. For
each year of Pension Plan membership, including the extended salary continuance
period, an Executive shall be credited with a Percentage Credit determined from
the following chart. The Percentage Credit awarded shall be based on the
Executive’s Age + Service Points in that calendar year:



	 	 	 	 	 
	Sum of Age Plus Service Points	 	Percentage Credit
	
	 	

	Up to 45
	 	 	2	%
	46 – 55
	 	 	5	%
	56 – 65
	 	 	20	%
	66 – 75
	 	 	22	%
	over 75
	 	 	24	%



     An Executive’s Percentage Credit for a particular calendar year shall be
prorated if the Executive has less than a full year of Actual Years of Service
in that calendar year.


     “Plan” means the Supplementary Executive Retirement Plan (SERP) as set
forth herein and as may be modified from time to time;


     “Retirement” and “Retired” in respect of an Executive means the
termination of employment of the Executive in circumstances where the Executive
is not re-employed by Nortel Networks, provided the Executive satisfies one of
the following conditions. However, satisfaction of the conditions described in
subsections (d) and (e) below shall not qualify an Executive for a SERP I
Benefit:



	    (a)	 	the Executive has attained sixty five (65) years of age;
	 
	    (b)	 	the Executive has attained age sixty (60) and has at least
twenty (20) Years of Eligible Retirement Service;



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	    (c)	 	the Executive has attained age fifty eight (58) and the sum
of the Executive’s age and Years of Eligible Retirement Service
equals or exceeds eighty five (85);
	 
	    (d)	 	the Executive has attained age sixty (60) and has at least
five (5) years of continuous service, provided such Executive was
hired directly into what was then known as the Executive Leadership
Team on or after January 1, 1999 and prior to January 1, 2000; or
	 
	    (e)	 	the termination of employment is initiated by Nortel Networks
and the Executive has attained fifty five (55) years of age
(provided that no severance benefit is paid in connection with such
Retirement, unless severance benefits payable in connection with
such Retirement are approved by the Committee or its delegate).



     “SERP Benefit” in respect of an Executive shall have the meaning set forth
in section 5;


     “Service Points” means the number of years of the Executive’s continuous
service with Nortel Networks that the Executive would have completed on his
employment anniversary date that occurred in that calendar year, regardless of
whether the Executive remains employed to such anniversary date in that
calendar year that contains the determination date.


     Service Points will be granted for service with Nortel Networks in a
country other than Canada and the U.S. if the Executive qualifies for a benefit
under the U.S. Pension Plan or the Canadian Pension Plan.


     “Special Pension Credits” means, for Executives hired after attaining age
thirty five (35) and prior to January 1, 1999 and for purposes of this Plan
only, additional years of service calculated as thirty five (35) subtracted
from the Executive’s attained age on his date of hire by Nortel Networks.
Such Special Pension Credits are only taken into account for purposes of this
Plan if the Executive retires or his employment is otherwise terminated on or
after attaining age sixty (60).


     “Special Pension Credit Plan Benefit” means the benefit that is payable to
the Executive upon his retirement under the terms of the Nortel Networks
Special Pension Credit Plan.


     “Spouse” of an Executive means an individual who at the time of Retirement
and death of the Executive is the person who otherwise qualifies as a spouse
under the Pension Plan;


     “Survivor Benefit” means the benefit payable under the Plan to an
Executive’s Spouse as described in section 7;


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     “Total Retirement Benefit” shall have the meaning set forth in section 4;


     “Years of Credited Service” in respect of an Executive means Actual Years
of Service plus fifty percent (50%) of Special Pension Credits. For an
Executive hired at age fifty one (51) or greater, Years of Credited Service may
not exceed two (2) times the Executive’s Actual Years of Service, with a
minimum of five (5) years of actual service required. Special Pension Credits
are only taken into account for purposes of this Plan if the Executive retires
or his employment is otherwise terminated on or after attaining age sixty
(60).


     “Years of Eligible Retirement Service” in respect of an Executive means
the Executive’s actual years of service recognized under the Pension Plan for
purposes of eligibility for benefits, plus Special Pension Credits, if
applicable.


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3.  ELIGIBILITY TO PARTICIPATE IN THE PLAN



     The following employees are Executives who may be entitled to benefits
from the Plan:



	    (a)	 	Employees who had an annual base salary of two hundred
thousand dollars ($200,000) or more at any time during the period
January 1, 1999 to December 31, 1999.
	 
	    (b)	 	Employees who were designated as Band 11 or higher under the
Nortel Networks employment classification system on or before April
30, 1998. Membership in the Plan was closed during the period from
May 1, 1998 to December 31, 1998. No individual who became a Band
11 or higher employee under the Nortel Networks employment
classification system during the period from May 1, 1998 to December
31, 1998 qualifies as an Executive under this Plan.



     To qualify as an Executive, such an employee must also be a participant in
the Traditional Option. An employee becomes an Executive with respect to the
Plan upon his or her attainment of such criteria and does not cease to be an
Executive prior to his or her Retirement or death (even if the employee ceases
to meet the definition of an Executive). However, no employee shall become an
“Executive” after December 31, 1999.


     Executives and their Spouses shall be entitled to receive benefits under
the Plan only in the event the conditions for entitlement to such benefit (as
described in the Plan) have been satisfied.



4.  TOTAL RETIREMENT BENEFIT



     “Total Retirement Benefit” in respect of an Executive



	    (i)	 	with respect to service while working in the US or service
while working in Canada and enrolled in Part II of the Canadian
Pension Plan, means the Actuarial Equivalent of the form of payment
applicable to the Executive under this Plan of the greatest of (1)
the Actuarial Equivalent lump sum value of the amount calculated
under subsection (a); (2) the Actuarial Equivalent lump sum value of
the amount calculated under subsection (b); or (3) the amount
calculated under subsection (c); but only to extent that each such
subsection is applicable to the Executive, as described therein:
	 
	    (ii)	 	with respect to service while working in Canada and enrolled
in Part I of the Canadian Pension Plan, means the form of payment



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	 	 	applicable to the Executive under this Plan of the greatest of (1)
the amount calculated under subsection (a); or (2) the amount
    calculated under subsection (b) but only to extent that each such
subsection is applicable to the Executive, as described therein:
	 
	    (iii)	 	with respect to each country should be calculated
separately.



     SERP Benefits shall be calculated as follows:



	     (a)	 	SERP I Benefit—an annual amount equal to the lesser of:




	 	          (i)	 	one and three tenths percent (1.3%) multiplied
by the Executive’s Final Average Earnings and Years of
Credited Service; and
	 
	 	          (ii)	 	seventy percent (70%) of the Executive’s final
base salary (exclusive of any bonus, incentive award, or
commission) immediately prior to Retirement.
	 
	 	 	 	If an executive has Actual Years of Service in both Canada
and the US, the cap outlined in subsection (ii) above shall
be prorated by Actual Years of Service in each country.




	 	An Executive will qualify for a SERP I Benefit if the Executive (1) was
classified as a Band 11 or higher under Nortel Networks employment
classification system on or before April 30, 1998, (2) became an
Executive on or before May 1, 1998, and (3) elected the Traditional
Option effective as of May 1, 2000.



	 
	     (b)	 	SERP II Benefit—an annual amount equal to the lesser of the
following amounts and subject to a seven percent (7%) reduction
(prorated for partial years) for each year by which the Executive’s
Retirement precedes his attainment of age sixty (60):




	 	          (i)	 	one and three tenths percent (1.3%) multiplied
by the Executive’s Final Average Earnings and Years of
Credited Service; and
	 
	 	          (ii)	 	sixty percent (60%) of the Executive’s Final
Average Earnings.
	 
	 	 	 	If an executive has Actual Years of Service in both Canada and the
US, the cap outlined in subsection (ii) above shall be prorated by
Actual Years of Service in each country.




	 	An Executive will qualify for a SERP II Benefit if the Executive (1)
receives a Pension Plan Benefit from the Canadian Pension Plan, Part I,
or (2) receives a Pension Plan Benefit from the U.S. Pension Plan and was
a member of the version of that plan that was in effect as of December
31,



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	 	 	1998; had attained age fifty (50) and completed at least four (4)
years of vesting service under the terms of that plan as of that date;
and has met the requirements described in the last paragraph of Section
4(a) to qualify for a SERP I Benefit.
	 
	     (c)	 	SERP III Benefit—the lump sum value determined by multiplying
the Executive’s total Percentage Credits by his Final Average
Earnings. The lump sum value shall be limited to an amount equal to
five hundred fifty percent (550%) of the Executive’s Final Average
Earnings (including the bonus included after any adjustment for
maximum limits).
	 
	 	 	The SERP III Benefit for the Actual Years of Service in each country
shall be calculated based on the sum of the actual Percentage Credits
for each calendar year of Actual Years of Service in each country.
Percentage Credits will be prorated for the year of transfer.
	 
	 	 	If the retirement cap applies, the accumulated credits in each
country are determined as the maximum (i.e. 550% of Final Average
Earnings) multiplied by the ratio of the Accumulated Percentage
(before the cap) in each country to the total Accumulated Percentage
(before the cap).
	 
	 	 	An Executive will qualify for a SERP III Benefit if the Executive (1)
receives a Pension Plan Benefit from the Canadian Pension Plan, Part
II, or (2) receives a Pension Plan Benefit from the U.S. Pension Plan.




5.  SERP BENEFIT



     Upon Retirement, an Executive shall receive a benefit under this Plan
(herein referred to as the “SERP Benefit”) which is the excess, if any, of the
amount determined as the Executive’s Total Retirement Benefit under Section 4
hereof with respect to the Actual Years of Service in each country, over the
Executive’s Pension Plan Benefit, Excess Plan Benefit, and Special Pension
Credit Plan Benefit, if any, in each country, in accordance with the
administrative practice established by Nortel Networks for such offset
calculations. The determination of the amount of such SERP Benefit shall be
subject to the terms of Section 6 hereof, however, with respect to an Executive
who receives both a U.S. Pension Plan benefit and a Canadian Pension Plan
benefit.


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6.    TRANSFERS




6.1  Transfers Prior to May 1, 2000



       In determining the SERP Benefit for an Executive who transferred between
employment with a U.S. Nortel Networks subsidiary or affiliate and a Canadian
Nortel Networks subsidiary or affiliate prior to May 1, 2000, the following
provisions shall apply rather than the provisions that would otherwise apply to
the determination of the SERP Benefit for the Executive if there had been no
such transfer:



		
	 	     (a) The Executive’s total combined service in both countries shall equal no
more than the Executive’s total service (years and partial months, with any
part of a month considered a full month). The Canadian service will always
be rounded up to the next month. The US service will only be rounded up if
required to equal total combined service.




		
	 	     (b) Earnings as defined in the Plan shall be converted based on the
administrative practice In effect at the time of the conversion, as
determined at the discretion of the Committee.
	 
	 	     (c) For benefit purposes, Special Pension Credits shall be recognized with
respect to the service completed by the Executive in the country in which
the Executive Retires.




		
	 	     (d) “Service Points” — Under SERP III Benefit calculation, Executives who
transfer between the US and Canada (or other countries under the reciprocal
agreement) will remain whole under the Service Points calculation. A
Canadian transfer to the US would start accruing Service Points in the U.S.
where he or she was at the time of the transfer (and vice versa).




		
	 	     (e) Service in the year of a transfer is prorated so that total service in
both countries equals no more than one year of Benefit Service.
Correspondingly, in the year of transfer, the Executive’s Percentage Credit
is prorated between the service earned in each country.




6.2  Transfers after April 30, 2000



       In determining the SERP Benefit for an Executive who transferred between
employment with a U.S. Nortel Networks subsidiary or affiliate and a Canadian
Nortel Networks subsidiary or affiliate after April 30, 2000, the following
provisions shall apply rather than the provisions that would otherwise apply to
the determination of the SERP Benefit for the Executive if there had been no
such transfer:



		
	 	     (a) Executives who transfer either to/from Canada/US will be given the
options available in the Capital Accumulation and Retirement Program in the
new country that are open to such Executive. If the Executive elects the



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	 	Balanced Option or the Investor Option upon his or her transfer to the new
country, his or her participation in the SERP will be suspended during his
or her employment in the new country.




		
	 	     (b) If the Executive returns to the country of origin and if the Executive
recommences participation in the Traditional option in accordance with
policy established in the country of origin, the Executive will accrue SERP
benefits with respect to the service after the return to the country of
origin. If the Executive elects the Balanced or the Investor option upon
return to the country of origin in accordance with the policy established in
the country of origin, the Executive would forfeit all SERP Benefits, even
for service earned during the period preceding the initial transfer.




		
	 	     (c) SERP benefits will not be forfeited under this transfer arrangement
(except as noted above).




		
	 	     (d) The SERP benefit determined in respect of the country of transfer,
would be determined as if the Executive was participating in the Traditional
program in the receiving country.




7.  SURVIVOR BENEFIT



     In the event of the death of an Executive after payment of the SERP
Benefit payable at Retirement to such Executive has commenced, the Executive’s
Spouse, if any, shall be paid an annual amount under this Plan during his or
her lifetime equal to sixty percent (60%) of the SERP Benefit that was payable
to the Executive. However, if the Executive was receiving a Pension Plan
benefit under the U.S. Pension Plan or under the Canadian Pension Plan, Part
II, and elects the lump sum option (and a fifteen (15) year payment is
applicable, as referenced in section 8.1) then payment of the SERP Benefit
shall continue to the Spouse until the completion of the fifteen (15) year term
that began on the Executive’s Retirement Date or, if there is no Spouse, the
actuarial value of the remaining payments under the annuity shall be paid to
the Executive’s estate.



8.    PAYMENT OF BENEFITS




8.1  Mode of Payment



       (a) 
Canadian Pension Plan, Part I Benefit


       A SERP Benefit that is payable to an Executive who receives a Canadian
Pension Plan, Part I benefit for the same period of service shall be paid
monthly for the remaining life of the Executive after Retirement and the first
payment thereof shall become due at the end of the month during which
Retirement occurs. Subsequent payments shall be due the last day of each
calendar month during the period the benefit is payable. Payment for the first
month in respect of which the benefit is payable, if less than a full month,
shall


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be prorated. Payment of the benefit in respect of the month the
Executive dies shall be made as if the Executive survived until the end of the
month.


     (b)  Canadian Pension Plan, Part II Benefit

     A SERP Benefit that is payable to an Executive who receives a Canadian
Pension Plan, Part II benefit for the same period of service may be paid
monthly for life as described in the preceding paragraph. However, if the
Executive elects a lump sum payment of his Canadian Pension Plan, Part II
benefit and if the total value of the Executive’s Excess Plan Benefit, SERP
Benefit, and Special Pension Credit Plan Benefit, if applicable, is equal to or
greater than fifty percent (50%) of the “final average earnings” determined for
the Executive under the Canadian Pension Plan, Part II, the SERP Benefit will
be paid in the form of a fifteen (15) year term certain annuity commencing on
the last day of the month during which Retirement occurs. If the Executive
elects payment of the Canadian Pension Plan, Part II benefit in a lump sum and
the total value of his Excess Plan Benefit, SERP Benefit, and Special Pension
Credit Plan Benefit, if applicable, is less than fifty percent (50%) of the
“final average earnings” determined for the Executive under the Canadian Pension Plan,
Part II, the SERP Benefit will be paid in a lump sum.


     (c)  U.S. Pension Plan Benefit

     A SERP Benefit that is payable to an Executive who receives a U.S. Pension
Plan benefit will be paid in a form of payment that is based on how the
Executive’s U.S. Pension Plan benefit is paid to the Executive. If the
Executive is unmarried and his U.S. Pension Plan benefit is paid in the form of
a life annuity, the SERP Benefit will normally be paid in the form of a life
annuity. If the Executive has a Spouse and the U.S. Pension Plan benefit is
paid in the form of a joint and survivor annuity, the SERP Benefit will
normally be paid in the form of a sixty percent (60%) joint and survivor
annuity, with the Spouse receiving the survivor benefit. If, however, the
Executive elects payment of the U.S. Pension Plan benefit in the form of a lump
sum and the total value of his Excess Plan Benefit, SERP Benefit, and Special
Pension Credit Plan Benefit, if applicable, is less than fifty percent (50%) of
the “final average earnings”, the SERP Benefit will be paid in a lump sum.
(“Final average earnings” for purposes of this sentence and the following
sentence means the definition of such term under the U.S. Pension Plan but
without regard to the dollar limitation imposed upon “final average earnings”
for purposes of determining the amount of a benefit that is payable under the
U.S. Pension Plan.) However, if the Executive elects payment of the U.S.
Pension Plan benefit in the form of a lump sum and the total value of his
Excess Plan Benefit, SERP Benefit, and Special Pension Credit Plan Benefit, if
applicable, is equal to or greater than fifty percent (50%) of the “final
average earnings” determined under the U.S. Pension Plan (as described above),
the SERP Benefit will be paid in the form of a fifteen (15) year term certain
annuity with the Spouse as the beneficiary. If there is no Spouse, the
Executive may elect another individual to be the beneficiary with respect to
the fifteen (15) year certain annuity.



8.2 Company Effecting Payment



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       The SERP Benefit payable under the Plan shall be paid by the Corporation
and/or any subsidiary or affiliate of the Corporation, as may be determined by
the Corporation in its sole discretion.



8.3  Currency



       All benefits payable under the Plan in respect of an Executive shall be
payable in the same currency as benefits are payable under the Pension Plan
from which the Executive Retired, provided that where the Executive is entitled
to receive a pension from more than one pension plan established by Nortel
Networks, benefits shall generally be payable in the currency of the country
where the Executive earned the service attributable to the benefit, or portion
of the benefit, in question. Currency conversion shall occur in accordance
with established administrative guidelines under the Plan. However, the
Committee shall have the sole discretion to alter the provisions of this section as it
deems appropriate.



9.    ADMINISTRATION




9.1  Committee



       The Plan shall be administered by the Committee, which shall have full and
exclusive power to interpret the Plan, to adopt such rules, regulations and
guidelines as it may deem necessary or proper and to make all determinations
necessary or desirable for the administration of the Plan. Any such
interpretation, rule, determination or other act of the Committee shall be
conclusively binding upon all persons.


       The Committee shall have the authority to modify any provision of the Plan
in respect of any Executive including the granting of additional service for
purposes of calculating Years of Credited Service or Years of Eligible
Retirement Service, waiving early retirement reductions, and waiving the bonus
recognition limitations of the Plan.


       The Committee may delegate to any person or persons any power or authority
it deems appropriate.



9.2  Limitation of Liability



       Neither the Corporation, its subsidiaries or affiliates nor any member of
the Committee or the Board of Directors shall be liable for any action or
determination made in good faith pursuant to the Plan. To the full extent
permitted by law, the Corporation shall indemnify and save harmless each person
made, or threatened to be made, a party to any action or proceeding by reason
of the fact that such person is or was a member of the Committee or is or was a
member of the Board of Directors and, as such, is or was required to take
action pursuant to the terms of the Plan.


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9.3  Evidence of Entitlement to Benefits



       Every person eligible for a benefit under the Plan shall, on request,
provide the Committee evidence, including evidence by way of affidavit,
declaration or certificate, and including but not limited to proof of age,
satisfactory to the Committee, as it may require to determine the entitlement
to or the amount of such benefit.



10.  EFFECTIVE DATE OF PLAN



       The Plan was adopted by the Board of Directors on April 29, 1983 effective
January 1, 1983 and was subsequently amended by the Board of Directors on July
23, 1998, and on September 24, 1998 effective January 1, 1999. The Plan was
subsequently amended by the Committee on December 16, 1999 effective January 1,
2000, on April 25, 2001 with immediate effect and a restated version of the
Plan was adopted by the Committee on October 25, 2001 with immediate effect.
The Plan was subsequently amended by the Committee on October 23, 2002 with
immediate effect.


       Any subsequent amendments to the Plan shall become effective upon their
adoption by the Committee.



11.  AMENDMENT, TERMINATION



       The Committee reserves the right to amend, suspend or terminate the Plan
at any time without the consent of any Executive or Spouse, provided that no
such action affects amounts in payment under the Plan nor affects the right of
an Executive or Spouse to receive any benefit which such person is eligible to
receive at the time of such amendment, suspension, or termination.



12.   GENERAL PROVISIONS




12.1 Assignment



        No right of a person and no benefit payable under the Plan shall be
capable of or may be assigned, alienated, charged, pledged or given as security
and no such benefit shall confer upon any Executive, Spouse, personal


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representative or dependent, or other person, any right or interest therein
that is capable of being assigned, alienated, charged, pledged or given as
security, except as required by law.



12.2  No Right to Continuation of Employment



         This Plan shall not be construed as giving an Executive any right to
continue in the employment of Nortel Networks or affect the right of Nortel
Networks to terminate the employment of an Executive without regard to the
effect such action might have upon the Executive’s rights under the Plan.



12.3  No Additional Rights to benefits under Pension Plan



         Nothing herein shall entitle an Executive or any other person to any
benefit under a Pension Plan or a Restoration Plan to which such Executive or
other person is not otherwise entitled pursuant to the provisions of the
Pension Plan.



12.4  Funding



         All benefits payable hereunder shall be payable from the general funds of
Nortel Networks and Nortel Networks shall have no liability whatsoever to
segregate any assets or establish any special funding arrangements to provide
for payment of amounts payable under the Plan.



12.5  Tax Treatment



         No representations are made regarding the tax treatment under any
jurisdiction of amounts paid as a benefit under this Plan. No additional
payments will be made to compensate an Executive or an Executive’s Spouse for
any tax effect or for the lack of availability of any preferred tax-favored
treatment of such benefit.



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