Document:

exv10w1

 

Exhibit 10.1

 

 

NORTEL NETWORKS LIMITED

 

RESTRICTED STOCK UNIT PLAN

 

 

 

 

Dated as of January 30, 1997, as amended effective

April 29, 1999, September 1, 1999, February 15, 2000,

May 1, 2000, November 15, 2000, and January 23, 2003

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NORTEL NETWORKS LIMITED

RESTRICTED STOCK UNIT PLAN

	1.	 	BACKGROUND; PURPOSE OF THE PLAN

The Nortel Networks Limited Restricted Stock Unit Plan has been amended
and restated to reflect the transactions contemplated by the plan of
arrangement (the “Plan of Arrangement”) described in the Amended and Restated
Arrangement Agreement, made as of January 26, 2000, as amended and restated
March 13, 2000, among BCE Inc., Nortel Networks Corporation, New Nortel Inc.
and the other parties thereto. In connection with the Plan of Arrangement, New
Nortel Inc. acquired from the holders of the common shares (other than BCE Inc.
and its affiliates) of Nortel Networks Corporation all of the Nortel Networks
Corporation common shares then held by such shareholders in exchange for an
equal number of common shares of New Nortel Inc. and each shareholder of BCE
Inc. received approximately 0.78 common shares of New Nortel Inc. for each
common share of BCE Inc. then held by such BCE shareholder. On the effective
date of the Plan of Arrangement, the common shares of New Nortel Inc. were
listed on the New York Stock Exchange and The Toronto Stock Exchange in
substitution for the common shares of Nortel Networks Corporation. As part of
the Plan of Arrangement, Nortel Networks Corporation changed its name to Nortel
Networks Limited (“Nortel Limited” or the “Corporation”) and New Nortel Inc.
changed its name to Nortel Networks Corporation (“Nortel Networks”).

In connection with and effective as of May 1, 2000, the effective date of
the Plan of Arrangement (the “Restatement Effective Date”), awards granted or
to be granted under the Plan and the shares subject to the Plan were adjusted
and relate to the common shares of Nortel Networks. In all other respects, the
terms and provisions of the Plan were reaffirmed, as stated at that time.

The purpose of the Plan is to promote the long term success of Nortel
Networks by providing for the payment of performance bonuses to Designated
Employees in the form of Shares or calculated by reference to the Share Price.
The Plan is designed to encourage Designated Employees to acquire a proprietary
interest in Nortel Networks through ownership of Shares or interests in Shares,
to provide them with additional incentive to further the growth and development
of Nortel Networks, to encourage them to remain in the employment of Nortel
Networks and to assist Nortel Networks in attracting individuals with
experience and ability.

	2.	 	DEFINITIONS

For purposes of the Plan, the terms contained in this Section shall have
the following meanings.

“Administrator” shall mean such administrator as may be appointed by the
Corporation from time to time to administer the Plan.

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“affiliated companies” shall have the meaning ascribed to the term
“affiliated bodies corporate” in Section 2(2) of the CBCA or such other
meaning, and shall include such other entities, as may be determined by the
Committee.

“Board of Directors” shall mean the Board of Directors of the Corporation.

“Business Day” shall mean a day, other than a Saturday or Sunday, on which
banking institutions in Canada and the United States are not authorized or
obligated by law to close.

“CBCA” shall mean the Canada Business Corporations Act, R.S.C. 1985,
c.C-44, as amended.

“Change in Control” shall have the meaning assigned to such term under the
Retention Plan.

“CIC Date” shall have the meaning assigned to such term under the
Retention Plan.

“Committee” shall mean the joint leadership resources committee of the
Board of Directors or such other committee of the Board of Directors comprised
of members of the Board of Directors as the Board of Directors shall from time
to time appoint to administer the Plan.

“Corporation” shall mean Nortel Networks Limited (known prior to the Plan
of Arrangement as Nortel Networks Corporation) or its successors.

“Designated Employee” shall mean any employee of Nortel Networks Companies
who is designated by the Committee for participation in the Plan, but shall not
include a member of the Board of Directors who is not also such a designated
employee.

“Effective Date” shall mean, unless otherwise determined by the Board of
Directors when confirming a Grant, the date determined by the Committee, in
accordance with Section 5 hereof, as being the date on which such Grant shall
take effect, provided that the Effective Date shall not be a date prior to the
date on which the Board of Directors confirms the Grant and, unless otherwise
determined, the Effective Date will be the date on which the Board of Directors
confirms the Grant.

“Fiscal Year” shall mean any fiscal year of the Corporation, commencing
with the fiscal year ending December 31, 1997.

“Grant” shall mean an award of RSUs allocated to a Designated Employee at
any time in accordance with Section 5 hereof.

“Nortel Networks” shall mean Nortel Networks Corporation (known prior to
the Plan of Arrangement as New Nortel Inc.) or its successors.

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“Nortel Networks Companies” shall mean, collectively, the Corporation,
Nortel Networks and their respective subsidiaries and affiliated companies or,
individually, any corporate entity included within such group, as the context
indicates.

“Participant” shall mean a Designated Employee to whom a Grant has been
made in accordance with Section 5 hereof.

“Performance Criteria” shall mean the criteria, if any, established by the
Committee in respect of a Grant (or any specified portion thereof) either on or
prior to the Effective Date of such Grant or prior to the commencement of the
applicable Performance Period or Performance Segment, if any, for such Grant,
which may include, without limitation, criteria based on the financial
performance of Nortel Networks Companies and/or any company or business unit
thereof.

“Performance Period” shall mean the period established by the Committee in
respect of a Grant which period shall commence and end on the dates designated
by the Committee; provided, however, that (i) each Performance Period shall,
unless otherwise determined by the Committee, commence no earlier than the
first day of the Fiscal Year in which the Grant was made and end no later than
the end of the second Fiscal Year following the Fiscal Year in which the Grant
was made and (ii) the Committee may establish one or more Performance Segments
within a Performance Period.

“Performance Segments” shall mean the period or periods, if any, within
the Performance Period established by the Committee in respect of a Grant (or
any specified portion thereof).

“Plan” shall mean the Nortel Networks Limited Restricted Stock Unit Plan,
as set forth herein and as the same may be further amended and in effect from
time to time.

“Plan of Arrangement” shall have the meaning assigned to such term in
Section 1 hereof.

“Release Date” shall mean in respect of each Grant or any specified
portion or portions of such Grant, unless otherwise determined by the Committee
with respect to such Grant or any specified portion or portions of such Grant,
(i) for the purpose of paragraphs (c) of Section 6, the day which is 45
Business Days following the end of the applicable Performance Period and/or
Performance Segment, if any, provided that the Release Date shall not be after
the end of the second Fiscal Year subsequent to the Fiscal Year in which such
Grant was made, and (ii) for all other purposes, the tenth Business Day
following notification to the Corporation and the Administrator of the
occurrence of the event giving rise to the issuance of the RSUs in accordance
with the provisions of the Plan.

“Restatement Effective Date” shall have the meaning assigned to such term
in Section 1 hereof.

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“Retention Plan” shall mean the Nortel Networks Corporation Executive
Retention and Termination Plan, as the same may be amended and in effect from
time to time prior to a CIC Date.

“Retirement” shall mean retirement in accordance with the provisions of
any pension or retirement plan of Nortel Networks Companies covering the
Participant, retirement pursuant to a special pension arrangement entered into
by Nortel Networks Companies and a Participant and applicable in lieu of, or in
addition to, any pension or retirement plan of Nortel Networks Companies or, if
the Participant is not covered by such a plan and/or special pension
arrangement, as determined by the Committee.

“RSU” shall mean a restricted stock unit allocated to a Designated
Employee in accordance with Section 5 hereof which shall, upon issuance in
accordance with and subject to the provisions of the Plan, entitle the holder
thereof to receive one RSU Share.

“RSU Shares” shall mean the Shares delivered to Participants in accordance
with the provisions of the Plan in settlement of RSUs issued under the Plan.

“Shares” shall mean the common shares of Nortel Networks and “Share” shall
mean a common share of Nortel Networks.

“Share Price” shall mean the arithmetic average of the closing prices for
the Shares for the 20 trading days immediately preceding the Release Date on
(i) the Toronto Stock Exchange for Canadian-resident Participants, or (ii) the
New York Stock Exchange for all other Participants.

“subsidiary” shall have the meaning ascribed to the term “subsidiary body
corporate” in Section 2(5) of the CBCA.

	3.	 	ADMINISTRATION

The Committee shall administer the Plan in accordance with its terms. The
Committee may, subject to the terms of the Plan, delegate to third parties,
including the Administrator if one is appointed, the whole or any part of the
administration of the Plan and shall determine the scope of such delegation.
Any decision made by the Committee or the Administrator in carrying out its
responsibilities with respect to the administration of the Plan shall be final
and binding on the Participants.

In addition to the other powers granted to the Committee under the Plan
and subject to the terms of the Plan, the Committee shall have full and
complete authority to interpret the Plan. The Committee and/or the
Administrator may from time to time prescribe such rules and regulations and
make all determinations necessary or desirable for the administration of the
Plan. In particular, the Committee shall select the Designated Employees to
whom it recommends Grants shall be made and shall determine the amounts and
terms of the Grants (including the related Performance Criteria, if any, and
the formula, if any, to be used to determine the number of RSUs to be issued
based on the level of achievement of such Performance Criteria), and the extent
to which the Performance Criteria to be achieved during

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the Performance Period and/or any Performance Segment, if any, have been
achieved. At or after the Effective Date for a Grant, the Committee may
determine whether a Grant (and/or any portion or portions thereof) will be
settled in RSU Shares or cash and any conditions applicable to a Participant’s
right to elect to receive settlement in cash of any RSUs issuable to such
Participant. Any such interpretation, rule, determination or other act of the
Committee and/or the Administrator shall be conclusively binding upon all
persons, including the Participants and their legal representatives and
beneficiaries.

No member of the Committee, the Board of Directors or the Board of
Directors of Nortel Networks 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 either such Boards of Directors and, as such, is or was required or entitled
to take action pursuant to the terms of the Plan.

Except as Participants may otherwise be advised by prior written notice of
at least thirty (30) days, all costs of the Plan, including any administration
fees, shall be paid by the Corporation. Notwithstanding the foregoing, in the
event that a Participant is employed by one or more Nortel Networks Companies
other than the Corporation, the Corporation may request reimbursement from each
such Nortel Networks Company of an amount equal to that portion of the costs of
the Plan which the Corporation determines may reasonably be attributed to such
Participant’s employment with any such Nortel Networks Company.

	4.	 	RSU SHARES SUBJECT TO THE PLAN

Neither Nortel Networks nor the Corporation shall be required to issue
and/or cause to be delivered Shares or issue and/or cause to be delivered
certificates evidencing Shares to be delivered pursuant to the Plan unless and
until such issuance and delivery is in compliance with all applicable laws,
regulations, rules, orders of governmental or regulatory authorities and the
requirements of any stock exchange upon which Shares of Nortel Networks are
listed. Neither Nortel Networks nor the Corporation shall in any event be
obligated to take any action to comply with any such laws, regulations, rules,
orders or requirements. Subject to the foregoing, the Board of Directors of
Nortel Networks may authorize from time to time the issuance by Nortel Networks
of Shares and the Board of Directors may authorize from time to time the
purchase of Shares for the benefit of Participants on the open market or by
private transaction as required in order to administer the Plan.

	5.	 	GRANTS

Subject to the provisions of the Plan, the Committee shall, in its sole
discretion and from time to time, determine the Designated Employees to whom it
recommends that Grants be made based on their current and potential
contribution to the success of Nortel Networks. At such time, the Committee
shall also:

	 	(a)	 	determine, in connection with each Grant, the
Effective Date thereof and the number of RSUs to be allocated;

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	 	(b)	 	determine, in connection with each Grant, the
Performance Period and the Performance Segments, if any,
applicable thereto;
	 
	 	(c)	 	determine, in connection with each Grant, the
Performance Criteria, if any, to be achieved during any
applicable Performance Period and/or Performance Segment, if
any; and
	 
	 	(d)	 	determine the other terms and conditions (which
need not be identical and which, without limitation, may
include conditions on the allocation, issuance and/or
settlement of RSUs, and non-competition provisions) of all
RSUs covered by any Grant.

Any Grant and any determination made by the Committee in connection with
any such Grant as provided shall be subject to confirmation by the Board of
Directors.

	6.	 	TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS

Certificates need not be issued with respect to RSUs covered by a Grant or
RSUs when issued. The Corporation or the Administrator shall maintain records
showing the number of RSUs allocated to each Participant under the Plan. Each
Participant shall be notified in writing of the number of RSUs covered by a
Grant and of the terms and conditions of such Grant, including those described
below:

	 	(a)	 	Number of RSUs

Each notification of Grant shall state the number of RSUs allocated to the
Participant and state that each such RSU shall, upon issuance subject to and in
accordance with the terms of the Plan, entitle the Participant to receive one
RSU Share.

	 	(b)	 	Performance Criteria

Each notification of Grant shall describe the Performance Criteria, if
any, for the Performance Period (and/or any Performance Segment, if any,
within the Performance Period,)established by the Committee that must be
achieved for all or any specified portion of the RSUs covered by such Grant to
be issued to the Participant.

	 	(c)	 	Issue and Settlement of RSUs

Unless otherwise determined by the Committee and except as otherwise
provided in paragraphs (d), (e) or (f) of this Section or in any other employee
benefit plan approved by the Board of Directors, subject to the level of
achievement of Performance Criteria, if any, determined by the Committee, the
Corporation shall issue to a Participant all or any portion of the RSUs covered
by a Grant (or any specified portion thereof) on the Release Date for such
Grant (or applicable portion thereof), in full satisfaction and cancellation of
such Grant (or such applicable portion thereof); provided that such Participant
is continuously employed with Nortel Networks Companies from the Effective Date
of such Grant to the Release Date. In such event, the Participant shall be
entitled to receive on the Release Date, in full settlement of the RSUs

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issued, a number of RSU Shares equal to the number of RSUs issued, or, in
the sole discretion of the Committee, a cash payment equal to the product of
the number of RSUs issued (or the number determined by the Committee to be paid
in cash) multiplied by the Share Price, in each case, subject to reduction for
any applicable withholding taxes, social charges and any other applicable wage
deduction amounts in accordance with Section 9. Any RSUs covered by a Grant
(or any specified portion thereof) that are not issued on the Release Date for
such Grant (or such specified portion thereof) in accordance with the Plan or
are not otherwise settled (i) in accordance with this paragraph (c) or
paragraphs (d), (e) or (f) of this Section, or (ii) prior to the Release Date
for such Grant (or specified portion thereof), in accordance with the terms of
any other employee benefit plan approved by the Board of Directors, shall be
forfeited on the Release Date and the related Grant (or specified portion
thereof) shall thereupon expire in its entirety. In addition, the Committee
may provide that RSUs covered by a Grant (or any specified portion thereof)
will be forfeited in the event the Participant does not satisfy the Share
ownership requirements (or any element thereof) applicable to such Participant
and, in such event, the related Grant (or applicable portion thereof) shall
thereupon expire in its entirety.

	 	(d)	 	Right to RSUs in the Event of Death, Retirement or
Termination of Employment
	 
	 	 	 	Unless otherwise determined by the Committee:

	 	(i)	 	In the event of the death of a Participant while
in the employment of Nortel Networks Companies, the deceased
Participant’s estate shall elect in writing to the
Corporation, within the earlier of (i) 120 days of the
Participant’s death; and (ii) the first Business Day of the
last calendar month of the second Fiscal Year subsequent to
the Fiscal Year in which such Grant was made, with respect to
each Grant then outstanding (or any portion thereof then
outstanding) to such Participant for which the Release Date
has not yet occurred and the RSUs covered by such Grant (or
applicable portion thereof) have not otherwise been issued
prior to the date of death, to receive, subject to and in
accordance with the provisions of the Plan, RSUs settled in
the form of RSU Shares to the deceased Participant’s estate:

	 	(x)	 	as if the Performance Period (or any
specified Performance Segments), if any, had ended and
the corresponding Performance Criteria, if any, had been
met (but not exceeded) for any such Grant (or applicable
portion thereof), on the day preceding the date of the
Participant’s death (in which case, receipt of the
election from the Participant’s estate shall constitute
the event giving rise to the issuance of the RSUs for
the purpose of determining the applicable Release Date);
or
	 
	 	(y)	 	on the Release Date or, if
applicable, the Release Dates on which all or a portion
of the RSUs covered by such Grant (or any specified
portion thereof) would otherwise have been issued, if at
all, in accordance with the Plan had the Participant not
died and

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	 	 	 	continued in the employment of Nortel Networks
Companies until such Release Date or Release Dates, as
applicable.

	 	 	 	In the event of death of a Participant in the last calendar
month of the second Fiscal Year subsequent to the Fiscal Year
in which the Grant was made or in the event a deceased
Participant’s estate fails to make an election as herein
provided, such Participant’s estate shall be deemed to have
elected to receive RSUs settled in the form of RSU Shares in
accordance with subparagraph (x) above.
	 
	 	 	 	In the event of the death of a Participant following the end
of the Performance Period (or any specified Performance
Segments, if any) and prior to the Release Date for such
Grant (or any specified portion thereof then outstanding),
the number of such RSUs that would otherwise be issued to
such Participant shall be issued in the form of RSU Shares
and delivered to the Participant’s estate in accordance with
and subject to paragraph (c) of this Section, as if such
Participant had continued in the employment of Nortel
Networks Companies until the Release Date or Release Dates,
as applicable.
	 
	 	(ii)	 	In the event of Retirement of a Participant, with
respect to each Grant then outstanding (or any portion thereof
then outstanding) to such Participant for which RSUs have not
been issued prior to the date of Retirement, the RSUs covered
by any such Grant (or applicable portion thereof) to the
Participant shall be issued in accordance with and subject to
paragraph (c) of this Section, as if the Participant continued
in the employment of Nortel Networks Companies until the
Release Date for such Grant (or applicable portion thereof).
	 
	 	(iii)	 	In the event a Participant’s employment
terminates for any cause other than death or Retirement (with
or without notice, and whether or not in breach of contract by
the employer or employee), the RSUs covered by each Grant then
outstanding (or any portion thereof then outstanding) to such
Participant for which RSUs have not been issued prior to such
termination shall be forfeited with effect from the date of
such termination of employment with Nortel Networks Companies,
all such Grants shall expire in their entirety on such
termination and any such termination of employment for
whatever reason (with or without notice, and whether or not in
breach of contract by the employer or employee) shall not
entitle a Participant to any compensation or damages for loss
of any benefit under the Plan and, by his or her participation
in the Plan, a Participant irrevocably and unconditionally
waives his or her entitlement to any such compensation or
damages.

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	 	(e)	 	Cash Settlement Election by Participant

Except in the event of the occurrence of a Change in Control, and unless
otherwise determined by the Committee, a Participant may elect, by notice to
the Corporation prior to the Release Date for a Grant (or any specified portion
thereof), to settle the RSUs to be issued under paragraph (c) or (d) in the
form of a cash payment, and not in the form of RSU Shares. In this case, the
Participant shall receive a cash payment from the Corporation equal to the
number of RSUs being settled multiplied by the Share Price. Absent such an
election and except in the event of the occurrence of a Change in Control, the
RSUs shall be settled in the form of RSU Shares or cash, as determined by the
Committee and contemplated in paragraph (c) or (d) of this Section. The
election provided for in this paragraph (e) shall be subject to Section 9 such
that any cash payment in settlement of RSUs shall be reduced by all applicable
withholding taxes, social charges and any other applicable wage deduction
amounts and, except to the extent provided otherwise by the Committee, shall
not be available for any Participant who does not, immediately prior to the
Release Date, satisfy the Share ownership requirements applicable for such
Participant as prescribed from time to time.

	 	(f)	 	Right to RSUs in the Event of a Change in Control

In the event of the occurrence of a Change in Control, and unless
otherwise determined by the Committee, with respect to each Grant (or portion
thereof) then outstanding on the CIC Date,

	 	(i)	 	notwithstanding any other provision of this Plan,
any and all requirements that any Performance Criteria, if any,
be achieved for any purpose applicable to such Grant (or any
specified portion thereof) shall be waived as of the CIC Date;
and
	 
	 	(ii)	 	except as may be otherwise provided under the terms
of any other employee benefit plan approved by the Board of
Directors, each Participant who has received any such Grant (or
any applicable portion thereof) shall, on the applicable
Release Date which would have applied had the Change in Control
not occurred, be entitled to receive from the Corporation, in
full settlement of the RSUs covered by such Grant (or
applicable portion thereof), one of the following, at the sole
discretion of the Committee:

	 	(x)	 	a cash payment equal to the Special
Value (as defined below) for each Covered RSU (as
defined below); or
	 
	 	(y)	 	one CIC Share (as defined below) for
each Covered RSU (as defined below);

	 	 	 	provided that such Participant is continuously employed by
Nortel Networks Companies from the Effective Date of such
Grant to the Release Date or Release Dates.

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The term “Special Value” shall mean an amount with respect to each Covered
RSU determined as follows:

	 	(i)	 	if any Shares are sold as part of the transaction
constituting the Change in Control, the Special Value shall
equal the weighted average of the prices paid for those Shares
by the acquiror, provided that if any portion of the
consideration paid for such Shares by the acquiror is paid in
property other than cash, the Board of Directors (as
constituted immediately prior to the CIC Date) shall determine
the fair market value of such property as of the CIC Date for
purposes of determining the Special Value under this paragraph
(f); and
	 
	 	(ii)	 	if no Shares are sold as part of the transaction
constituting the Change in Control, the Special Value shall
equal the arithmetic average of the closing prices for the
Shares on The Toronto Stock Exchange for the 20 trading days
immediately preceding the CIC Date.

The term “CIC Share” shall mean the following with respect to each Covered
RSU:

	 	(i)	 	the sum of: (A) the number of Consideration
Shares (as defined below), rounded to the nearest whole
number, that is equal to the product of (x) one Share
multiplied by (y) the number of Consideration Shares (as
defined below) received by the shareholders of Nortel Networks
in respect of one Share, if, in connection with the
transaction constituting the Change in Control, the
shareholders of Nortel Networks exchange their Shares for, or
otherwise convert their Shares into, shares of equity
securities of the acquiror (or its direct or indirect parent)
(such shares of equity securities, the “Consideration
Shares”); and (B) the amount, if any, that is equal to the
product of (x) one Share multiplied by (y) any cash or other
property, the fair market value of which shall be determined
by the Board of Directors (as constituted immediately prior to
the CIC Date), received by the shareholders of Nortel Networks
in respect of one Share, in connection with such transaction;
and
	 
	 	(ii)	 	in the case of all other transactions
constituting the Change in Control, one Share, as adjusted
pursuant to Section 7 hereof in connection with such
transaction, if applicable;

and, in each case, as further adjusted pursuant to Section 7, if applicable, in
respect of covered events occurring after such Change in Control.

The term “Covered RSU” shall mean, with respect to each Grant (or portion
thereof) that is outstanding on the CIC Date, the number of RSUs that would
have been issued to a Participant on the applicable Release Date and settled in
the form of RSU Shares had (x) the Participant continued in the employment of
Nortel Networks Companies until such Release Date and (y) all Performance
Criteria, if any, applicable to such Grant (or any applicable portion

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thereof) (in all cases, determined without regard to the occurrence of the
Change in Control) had been met (but not exceeded) during the applicable
Performance Period or Performance Segment, if any.

	 	(g)	 	Non-Transferability

The rights or interests of a Participant under the Plan shall not be
assignable or transferable, otherwise than by will or the laws governing the
devolution of property in the event of death and such rights or interests shall
not be encumbered.

	 	(h)	 	RSUs Not Shares

Under no circumstances shall a Grant or an RSU be considered a Share, nor
shall a Grant or an RSU entitle any Participant to the exercise of voting
rights, the receipt of dividends or the exercise of any other rights attaching
to ownership of a Share, until delivery of an RSU Share in settlement of such
RSU in accordance with the terms of the Plan. Notwithstanding the foregoing,
in the event that Shares are purchased and held for the benefit of a
Participant prior to delivery of RSU Shares in settlement of any RSUs, the
Committee may determine the extent to which a Participant may be entitled to
exercise any voting rights, receive dividends or exercise any other rights
attaching to ownership of such Shares.

	 	(i)	 	RSU Shares Fully Paid

RSU Shares, if issued by Nortel Networks to settle RSUs under the Plan,
shall be considered fully paid in consideration of past service that is no less
in value than the fair equivalent of the money Nortel Networks would have
received if the RSU Shares had been issued for money.

	7.	 	EFFECTS OF ALTERATION OF SHARE CAPITAL

In the event that:

	 	(a)	 	a dividend shall be declared upon the Shares
payable in Shares of Nortel Networks;
	 
	 	(b)	 	the outstanding Shares shall be changed into or
exchanged for a different number or kind of shares or other
securities of Nortel Networks or of another corporation,
whether through an arrangement, plan of arrangement,
amalgamation or other similar statutory procedure, or a share
recapitalization, subdivision or consolidation;
	 
	 	(c)	 	there shall be any change, other than those
specified in paragraphs (a) and (b) of this Section, in the
number or kind of outstanding Shares or of any shares or other
securities into which such Shares shall have been changed or
for which they shall have been exchanged; or
	 
	 	(d)	 	there shall be a distribution of assets or shares
to shareholders of Nortel Networks out of the ordinary course
of business,

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then, if the Board of Directors shall in its sole discretion determine that
such change equitably requires an adjustment in the number of RSUs with respect
to which Grants may be made pursuant to the Plan but not yet covered by Grants,
of the RSUs then covered by Grants, of the RSUs generally available for Grants
under the Plan and of the RSUs available for Grants under the Plan in any
calendar year, such adjustment shall be made by the Board of Directors and
shall be effective and binding for all purposes.

No adjustment provided for in this Section shall entitle a Participant to
be allocated a fractional RSU, or receive a fractional RSU Share or any payment
in lieu thereof, and the total adjustment with respect to each RSU shall be
limited accordingly.

	8.	 	AMENDMENT AND TERMINATION

The Board of Directors may from time to time amend, suspend or terminate
the Plan in whole or in part. The Committee may from time to time amend the
terms of Grants made under the Plan, subject to confirmation by the Board of
Directors and the obtaining of any required regulatory or other approvals and,
if any such amendment will materially adversely affect the rights of a
Participant with respect to a Grant, the obtaining of the written consent of
such Participant to such amendment. Notwithstanding the foregoing, (i) the
obtaining of the written consent of any Participant to an amendment which
materially adversely affects the rights of such Participant with respect to a
Grant shall not be required if such amendment is required to comply with
applicable laws, regulations, rules, orders of governmental or regulatory
authorities or the requirements of any stock exchange on which Shares of Nortel
Networks are listed and (ii) no amendment may be made to paragraph (f) of
Section 6 of the Plan or to the defined terms referred to in paragraph (f) of
Section 6 on or after the CIC Date.

	9.	 	MISCELLANEOUS PROVISIONS

Participation in the Plan by a Designated Employee is voluntary. No
employee shall have any claim or right to receive Grants under the Plan, and
the Grant and issuance of RSUs under the Plan shall not be construed as giving
a Participant any right to continue in the employment of Nortel Networks
Companies or to receive any additional Grants, or affect the right of Nortel
Networks Companies to terminate the employment of any Participant. Unless the
Committee determines otherwise, no notice of termination or payment in lieu
thereof shall extend the period of employment for purposes of this Plan.

The Committee and/or the Administrator may adopt and apply rules that in
its opinion will ensure that Nortel Networks Companies will be able to comply
with applicable provisions of any federal, provincial, state or local law
relating to the withholding of tax, including on the amount, if any, included
in income of a Participant. Nortel Networks Companies or the Administrator may
withhold from any amount payable to a Participant, either under this Plan, or
otherwise, such amount as may be necessary so as to ensure that Nortel Networks
Companies will be able to comply with applicable provisions of any federal,
provincial, state or local law relating to withholding of tax or other required
deductions, including on the amount, if any, includable in the income of a
Participant. Nortel Networks Companies or the Administrator shall, in this
connection, have the right in its discretion to satisfy any such withholding
tax liability by retaining or acquiring any Shares which would otherwise be

13

 

 issued or provided to a Participant hereunder, or withholding any portion
of any cash amount payable to a Participant hereunder. Nortel Networks
Companies or the Administrator shall also have the right to withhold the
delivery of any RSUs and RSU Shares and any cash payment payable to a
Participant hereunder unless and until such Participant pays to Nortel Networks
Companies a sum sufficient to indemnify Nortel Networks Companies for any
liability to withhold tax in respect of the amounts included in the income of
such Participant as a result of the settlement of RSUs under this Plan, to the
extent that such tax is not otherwise being withheld from payments to such
Participant by Nortel Networks Companies or the Administrator.

Participation in the Plan by any Participant shall be construed as
acceptance of the terms and conditions of the Plan by the Participant and as to
the Participant’s agreement to be bound thereby. The Plan shall be construed
in accordance with and governed by the laws of the Province of Ontario.

In this Plan, whenever the context so requires, the masculine gender
includes the feminine gender and a singular number includes the plural number.

	10.	 	EFFECTIVE DATE AND TERM OF THE PLAN

The Plan originally became effective upon its adoption by the Board of
Directors. Any amendments to the Plan shall become effective upon their
adoption by the Board of Directors. The Plan shall terminate on the date
determined by the Board of Directors pursuant to Section 8 hereof, and no
Grants may become effective under the Plan after the date of termination, but
such termination shall not affect any Grants that became effective pursuant to
the Plan prior to such termination.

The Plan was adopted with immediate effect on January 30, 1997 and was
subsequently amended on April 29, 1999 with immediate effect, on August 19,
1999 effective September 1, 1999, on February 15, 2000 with immediate effect,
on April 27, 2000, effective as of the Restatement Effective Date, on October
26, 2000 effective November 15, 2000, and on January 23, 2003 with immediate
effect.

14exv10w2

 

Exhibit 10.2

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) to receive 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 value by rewarding Eligible Employees for their contributions
to the Company’s overall success. An Eligible Employee’s contribution is
determined by two factors: (1) the impact of that employee’s role on business
results and (2) that employee’s achievement of individual performance
objectives during the employee’s active service with the Company. The actual
award received by an Eligible Employee will reflect (1) an employee’s job
scope, complexity, and responsibilities, and that employee’s contribution and
achievement, during the Plan Period2 and (2) the Company’s performance as
indicated by the Nortel Networks Performance Factor (the “Nortel Networks
Performance Factor”).

Section 2: SUCCESS Plan Eligibility

          Generally,
Company employees who are in professional/managerial job
families3 are eligible to participate in the SUCCESS Plan (“Eligible
Employees”), subject to the following:

	 	(1)	 	Employees who participate in other incentive plans are
ineligible for the SUCCESS Plan during the full calendar month(s)
when they participate in the other incentive plan(s). “Other
incentive plans” include sales incentive

1   For purposes of the SUCCESS Plan, the “Company” is defined as Nortel
Networks Limited and its subsidiaries and affiliates and other entities, which
it controls directly or indirectly and which have been approved for
participation in the SUCCESS Plan by the person holding the position of senior
vice president responsible for human resources or the equivalent at the Company
(the “Senior Vice-President, HR”).

2   Each calendar year consists of one Plan Period — from January 1 through
December 31. The Plan Period(s) for each calendar year may be changed by the
JLRC (as defined in Section 2) and Board of Directors (as defined in Section 2)
at any time.

3   This includes the Customer Service, Research, Design and Development,
Operations, Information Technology, Sales & Marketing, Corporate Services, and
Supply Management job families. It also includes all
managerial/professional/specialist job families in jobs at Job Complexity
Indicator (“JCI”) 1, 2, and 3 in the Europe, Middle East and Africa region,
unless non-legislated or contractual overtime has been agreed to by individual
or collective agreement. Employees in Administration, Technician, Installation
Field Technician and System House Operations job families (including jobs in
JCI 5 and 6) and employees eligible for legally required overtime premium
payments are ineligible for the SUCCESS Plan.

 

 

	 	 	 	compensation or any other incentive/bonus arrangements being offered
in lieu of the SUCCESS Plan. As set out below, employees who
participate in other incentive plans for a portion of the month and
the SUCCESS Plan for a portion of the month are eligible for the
SUCCESS Plan for that month;
	 
	 	(2)	 	Individuals determined by the Company to be students, co-op
students, interns, temporary, or non-payroll workers are ineligible
for the SUCCESS Plan;
	 
	 	(3)	 	Regular full-time and regular part-time employees who are
eligible for participation in Company health benefit plans based on
their regularly scheduled hours will be eligible for the SUCCESS
Plan;
	 
	 	(4)	 	The Joint Leadership Resources Committee of the Boards of
Directors of Nortel Networks Corporation and Nortel Networks Limited
(“JLRC”) and the Board of Directors of Nortel Networks Limited (the
“Board of Directors”) may determine that certain Company employees
(including employees who are not eligible for the SUCCESS Plan) may
be eligible to receive an award from a Discretionary Bonus Pool
created pursuant to Section 5 hereof;
	 
	 	(5)	 	Subject to applicable law, to be eligible for either a full
or pro-rated award for any given Plan Period: (a) an employee must
have been actively employed in an eligible role under the SUCCESS
Plan for at least six full calendar months in that Plan Period 4(an
employee is not eligible for a payout for any period(s) of inactive
service in a Plan Period unless required by applicable law) and (b)
the employee must have been an active employee in an eligible role
or in a role that is eligible for another incentive award, such as
sales incentive compensation, on or before July 15. Except where
otherwise required by contract or applicable law, an employee who is
on “notice” of the termination of his/her employment will be
considered on inactive service for the purposes of the SUCCESS Plan,
unless that employee continues at the Company’s express request to
perform work for the Company throughout the notice period;
	 
	 	(6)	 	Pro-rated awards, based on the number of months that an
employee is actively employed (as defined by sub section 2(5) above)
in a position that is eligible under the SUCCESS Plan, shall also be
made to employees who transfer into or out of positions covered by
other incentive programs (for example, sales incentive
compensation), or who are moved to a job that is ineligible for the
SUCCESS Plan. For any Plan Period when the employee is partially
eligible for the SUCCESS Plan, the employee’s award will be based on
the number of

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

5   The dates on which an employee must be actively employed may be changed by
the JLRC and Board of Directors at any time.

2

 

	 	 	 	months the employee was eligible for the SUCCESS Plan divided by the
Plan Period. For the purposes of determining pro-rata awards, an
employee’s participation in the SUCCESS Plan for part of a month will
be deemed to be the same as participation for a full month.
	 
	 	(7)	 	Employees who meet all of the SUCCESS Plan eligibility
requirements, but who leave employment with the Company between the
end of the Plan Period and the related payment date for the award,
other than for reasons determined by the Company to be related to
inappropriate actions, misconduct, dismissal for cause (where
applicable) or unsatisfactory performance, will be eligible for an
award for the applicable Plan Period;
	 
	 	(8)	 	An employee’s Management Team6 has the right, in consultation
with the relevant Human Resources Business prime, to make limited
exceptions to the ‘active employee’ service requirements outlined
above, where required by law or where circumstances clearly warrant
an exception. Exceptional circumstances might include approved
leaves where warranted by applicable law (e.g. maternity, paternity,
parental, military, family, or medical), disability, outsourcing,
divestiture, or death. In such situations, if the employee has
during his or her active service substantially achieved his/her
individual objectives, the employee’s Management Team may grant
partial awards. If awards are paid in these circumstances, the
awards will be pro-rated to reflect the number of months of active
employment in an eligible position, and will be commensurate with
the employee’s contribution and achievement. As required by
local/in-country law, eligible maternity and/or parental leave shall
be deemed to be active service for the purposes of the SUCCESS Plan.
Notwithstanding anything to the contrary, nothing in the SUCCESS
Plan shall preclude paying an employee an award under the SUCCESS
Plan for more than the number of months of active employment
pursuant to that individual employee’s termination agreement, which
the Senior Vice-President, HR has approved; and
	 
	 	(9)	 	Company affiliates and joint ventures may choose to offer the
SUCCESS Plan or a similar plan subject to the approval of the Senior
Vice-President, HR.

Section 3: Award Elements

          An Eligible Employee’s cash award for a Plan Period under the SUCCESS Plan
will be based on the following formula:

6   The “Management Team” consists of the managers with whom the employee has a
direct or indirect reporting relationship as set out in the Organization
Structure Manager (“OSM”) or its equivalent as maintained by the Company from
time to time.

3

 

100%7 of Annual Base Salary x Award % x Nortel Networks Performance Factor

Annual Base Salary means the yearly regular compensation paid to an Eligible
Employee, excluding any other compensation, such as, but not limited to,
bonuses, commissions, overtime, and relocation benefits. Regardless of any
raises or decreases an Eligible Employee may receive during the Plan Period,
the Annual Base Salary will be measured at a uniform time for all Eligible
Employees for the SUCCESS Plan on or about six weeks prior to the end of the
Plan Period.

Award % is the percentage of Annual Base Salary that is used to compute the
SUCCESS Plan award for each Eligible Employee. For JCI 1-6, the Award % ranges
from 0% to 40% of Annual Base Salary. For JCI 55, the Award % ranges from 0%
to 400% of Annual Base Salary. For each JCI, the Senior Vice-President, HR may
set a suggested narrower award range, intended to reflect a market trend to
give certain Eligible Employees with higher levels of responsibility a higher
incentive potential as a percentage of Annual Base Salary. Within the ranges
approved by the JLRC and the Board of Directors, an Eligible Employee’s
Management Team will determine the recommended Award % for that employee for
each Plan Period based on the employee’s job scope, complexity and
responsibilities and the employees’ contributions and achievements during the
Plan Period. An Eligible Employee’s recommended Award % is subject to review
and approval by the Senior Management Team.8

The total SUCCESS Plan award for all Eligible Employees for a Plan Period
(reflecting the Nortel Networks Performance Factor) is recommended by the
Senior Management Team for approval by the JLRC and the Board of Directors
after the end of the Plan Period.

Nortel Networks Performance Factor is calculated based on the achievement by
the Company of key corporate objectives for the Plan Period. The objectives
are approved by the JLRC and the Board of Directors near the start of each Plan
Period. The Nortel Networks Performance Factor may be based on one or more
performance metrics, each with specific targets. The performance metrics may
have equal or different weightings. Performance metrics are the general
corporate goals for the Plan Period, such as profitability, market momentum, or
customer loyalty. Targets shall be based on objective and/or subjective
criteria established to measure, directly or indirectly, the performance
metrics. Weightings shall be the relative weight or percentage accorded in the
Nortel Networks Performance Factor for achieving each specific target. After
approval by the JLRC and the Board of Directors, the Company’s objectives for
the Plan Period will be communicated to Eligible Employees early in each Plan
Period. The Nortel Networks Performance Factor is deemed to be 1.0
(achievement) throughout the Plan Period and is

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

8   For purposes of the SUCCESS Plan only, the “Senior Management Team” shall
consist of the President and Chief Executive Officer, the Chief Financial
Officer and the Senior Vice-President, HR of Nortel Networks Limited.

4

 

then adjusted by the JLRC and the Board of Directors based on their
determination of corporate performance.

Section 4: SUCCESS Plan Awards

Awards for each Plan Period are calculated based on 100%9 of an Eligible
Employee’s Annual Base Salary, the Eligible Employee’s Award % (which reflects
the employee’s job scope, complexity and responsibilities, and that employee’s
contribution and achievement, during the Plan Period), and the Nortel Networks
Performance Factor (that is, the Company’s business performance for the Plan
Period as determined by the JLRC and the Board of Directors). When warranted,
cash awards will be made in the first quarter following the close of the
applicable Plan Period.

Any award under the SUCCESS Plan to an Eligible Employee is subject to the
discretion of the Eligible Employee’s Management Team and Senior Management
Team and the JLRC and the Board of Directors. That is, an Eligible Employee’s
Management Team determines, in its discretion, the Award % for an Eligible
Employee subject to review and confirmation by the Senior Management Team.
Specifically, the Senior Management Team reserves the right, in its discretion,
to review and adjust an Award % assigned to an Eligible Employee by that
employee’s Management Team to reflect its assessment of the employee’s
contributions to the business, as well as to ensure that the final payouts, if
any, are within appropriate budgetary guidelines. The JLRC and the Board of
Directors determine, in their discretion, the achievement of the targets for
the performance metrics and the final calculation of the Nortel Networks
Performance Factor (which may include a determination of a Nortel Networks
Performance Factor of zero, even if certain of the performance metrics targets
are achieved, and/or an adjustment to the relative weighting of the performance
metrics.) During the Plan Period, the JLRC and the Board of Directors can
review performance measures, weightings, and targets to determine whether they
remain appropriate. The JLRC and the Board of Directors may, at their sole
discretion, adjust the business priorities, plan performance measures,
weightings, targets, and/or plan payouts, as they deem necessary during the
year, to reflect changes in business conditions or other circumstances.

Any SUCCESS Plan award will be made by an Eligible Employee’s statutory
employer and will be paid in the same currency as the Eligible Employee’s
regular pay at the end of the Plan Period. Eligible Employees who transfer to
another country during the Plan Period or between the end of the Plan Period
and the payment date for the award will be paid in the currency in which they
receive their pay at the end of the Plan Period.

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 the award as required by applicable
law.

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

5

 

Depending on local laws and policies, SUCCESS Plan awards may have an impact on
some benefits and may or may not be included in the “eligible earnings” for
purposes of capital accumulation and retirement plans offered in the various
regions by the Company. Where appropriate, deductions may be made from SUCCESS
Plan awards in accordance with the specific capital accumulation and retirement
plan selected by the employee.

Section 5: Discretionary Bonus Pool

During a Plan Period, the JLRC and the Board of Directors may consider the
creation of a separate Discretionary 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 who individually or in
groups made a relative contribution that significantly added to the overall
success of the Company, whether or not the employees are entitled to
participate in the SUCCESS Plan. The determination that a Company employee is
eligible for a Discretionary Bonus Pool award does not otherwise entitle that
employee to generally participate in the SUCCESS Plan. The JLRC and the Board
of Directors have complete discretion to determine: the establishment of the
Discretionary Bonus Pool; the eligibility for participation; any performance
metrics, weightings and targets; the achievement, if any, of the targets for
the performance metrics; and the amount of the awards, if any, paid from the
Discretionary Bonus Pool. Whether or not an Eligible Employee receives a
SUCCESS Plan award shall have no effect on that employee’s eligibility to
receive a Discretionary Bonus Pool award.

Discretionary Bonus Pool awards will be considered income and therefore subject
to national, state/provincial, and/or local taxes. All appropriate taxes and
other withholdings will be deducted from the award as required by applicable
law.

Depending on local laws and policies, Discretionary Bonus Pool awards may have
an impact on some benefits and may or may not be included in the “eligible
earnings” for purposes of capital accumulation and retirement plans offered in
the various regions by the Company. Where appropriate, deductions may be made
from the Discretionary Bonus Pool awards in accordance with the specific
capital accumulation and retirement plan selected by the employee.

Section 6: Interpretations and Amendments

This document, as amended from time to time, constitutes the “Nortel Networks
Limited SUCCESS Incentive Plan”. In the event of any conflicts or
inconsistencies between the provisions of the SUCCESS 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 JLRC and the Board of
Directors in certain cases, shall interpret the provisions of the SUCCESS Plan,
which shall be final and binding on the Company and all SUCCESS Plan
participants. This

6

 

document is subject to interpretation to comply with applicable laws. It is
not and shall not be construed as either an employment contract or as a
contract concerning the subject matter contained herein. There is no guarantee
that any award under the SUCCESS Plan will actually be paid. Any award to an
“Eligible Employee”, based on individual contribution and measures of corporate
performance, is determined at the discretion of an Eligible Employee’s
Management Team, the Senior Management Team and the JLRC and the Board of
Directors as the case may be. If such awards, however, are made, they shall be
made in accordance with the provisions herein.

The SUCCESS Plan can only be terminated or amended by Board of Directors, which
shall have the full authority, at any time, to terminate the SUCCESS Plan or to
delete, modify and/or add to any and 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 on

January 23, 2003 with effect from January 1, 2003.

7

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