Document:

exv10w8

 

Exhibit 10.8   

NORTEL NETWORKS LIMITED

DIRECTORS’ DEFERRED

SHARE COMPENSATION PLAN

AS AMENDED AND RESTATED

Amended on June 29, 2005 and Restated effective June 29, 2005

 

 

NORTEL NETWORKS LIMITED

DIRECTORS’ DEFERRED

SHARE COMPENSATION PLAN

AS AMENDED AND RESTATED

1. BACKGROUND; PURPOSE OF THE PLAN

The Nortel Networks Limited Directors’ Deferred Share Compensation Plan was 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. On May 1, 2000, the effective date of 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. In addition, 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. Also, as part of the Plan of
Arrangement, Nortel Networks Corporation changed its name to Nortel Networks Limited (“Nortel
Limited”) and New Nortel Inc. changed its name to Nortel Networks Corporation (“Nortel
Corporation”).

In connection with, and effective as of May 1, 2000, Share Units granted or to be granted under the
Plan and the shares subject to the Plan were adjusted and common shares of Nortel Corporation were
substituted for common shares of Nortel Limited. In all other respects, the terms and provisions
of the Plan were reaffirmed, as therein provided.

On May 25, 2000, the Board suspended the operation of the Plan, effective April 27, 2000, with the
effect that, notwithstanding any other provision of the Plan, (i) no further Share Units would be
credited to Participants in respect of Annual Retainer Fees (as defined in the Plan as at that
date) or any other fees payable on or after April 27, 2000 in respect of services rendered by
Participants to Nortel Limited or Nortel Corporation, (ii) Share Units, as so adjusted, credited to
Participants’ accounts prior to April 27, 2000 would remain outstanding, (iii) Share Units, as so
adjusted, would continue to be credited under Section 7 of the Plan for the period prior to the
Settlement Date, and (iv) Share Units, as so adjusted, would be settled subject to and in
accordance with the Plan and the terms and conditions of the Share Units.

 

 

On June 9, 2000, the Board approved the amendment and restatement of the Plan, (i) effective as of
May 1, 2000, to provide that Share Units would be credited to Participants in respect of services
rendered by Participants to Nortel Limited only and that the Plan would be administered by the
Board or by a Committee of the Board, and (ii) to reflect the suspension of the operation of the
Plan, effective April 27, 2000, until otherwise specifically determined by the Board, with respect
to the payment of Annual Retainer Fees (as defined in the Plan as at that date) or other fees
payable to Participants after April 27, 2000.

On January 24, 2002, the Board approved a further amendment and restatement of the Plan, effective
as of January 1, 2002, (i) to provide for the crediting of Share Units to Participants in respect
of all services rendered by such Participants as members of the Board; (ii) to provide that each
member of the Board who qualifies as an Eligible Director shall receive all fees payable to such
member for services as a member of the Board in the form of Share Units credited in respect of such
member under the Plan; and (iii) to reflect the re-commencement of the operation of the Plan as
amended and restated herein.

On May 29, 2003, the Board approved an amendment to the Plan, effective immediately, to permit
Eligible Directors to elect to receive between 0 — 100% of all fees payable to such member for
services as a member of the Board in the form of Share Units, with the remainder of such fees to be
settled in cash.

On December 18, 2003, the Board approved an amendment to the Plan, effective immediately, with
respect to the manner in which Eligible Directors may elect to receive cash in lieu of Share Units
under the Plan. On June 29, 2005, the Board approved amendments to the Plan, effectively
immediately, with respect to the election by Eligible Directors to receive Fees in the form of
Share Units, with the remainder of such Fees payable in cash.

The purpose of the Plan is to assist Nortel Limited in attracting and retaining individuals with
experience and ability to serve as members of the Board and to promote a greater alignment of
interests between Eligible Directors and the shareholders of Nortel Corporation.

2. DEFINITIONS

For the 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 Nortel Limited from time to
time to assist in the administration of the Plan in accordance with Section 3 hereof.

“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.

“Election Form and Agreement” shall mean the election form and agreement, as it may be amended from
time to time, entered into between Nortel Limited and an Eligible Director in accordance with
Section 6 hereof.

2

 

“Aggregate Purchase Price” shall have the meaning assigned thereto in Section 8 hereof.

“Board” shall mean the Board of Directors of Nortel Limited.

“Broker” shall have the meaning assigned thereto in Section 10 hereof.

“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 from time
to time.

“Committee” shall mean such committee of the Board comprised of members of the Board as the Board
shall from time to time appoint to administer the Plan; provided, however, that if the Board does
not appoint a Committee to administer the Plan, all references to the Committee shall be deemed to
be references to the Board, mutatis mutandis.

“Common Share” shall mean a common share of Nortel Corporation, subject to Section 16.

“Eligible Director” shall mean each member of the Board who, at the relevant time, is not an
employee of a Nortel Networks Company and such member shall continue to be an Eligible Director for
so long as such member continues to be a member of the Board and is not an employee of a Nortel
Networks Company; provided, however, that the Committee, in its sole discretion, may determine from
time to time that one or more members of the Board who is or are employees of a Nortel Networks
Company shall be an Eligible Director or Eligible Directors or that one or more members of the
Board, who would otherwise be an Eligible Director or Eligible Directors, shall not be.

“Fees” shall mean the amount, expressed in U.S. dollars, of all fees payable by Nortel Limited to
an Eligible Director (i) for all services rendered as a member of the Board, and/or any committees
thereof, and (ii) for all services rendered as an executive or non-executive chairperson of the
Board, and/or any committees thereof; except that, Fees shall not include any other fee that may be
payable by Nortel Limited to the Eligible Director in connection with services rendered by such
Eligible Director to Nortel Limited in any capacity other than as a member or chairperson of the
Board, and/or any committees thereof.

“Market Value” of a Common Share shall mean the fair market value thereof, which shall be the price
per common share which is equal to the average of the high and low prices for a board lot of the
Common Shares traded in Canadian dollars on The Toronto Stock Exchange (“TSE”) on the relevant day
or, if the volume of Common Shares traded on the composite tape in the United States exceeds the
volume of Common Shares traded in Canadian dollars on the TSE on such relevant day, the average of
the high and low prices for a board lot of Common Shares on the New York Stock Exchange (“NYSE”).
The Market Value so determined may be in Canadian dollars or in U.S. dollars. As a result, the
Market Value of a Common Share covered by a Share Unit shall be either (a) such Market Value as
determined above, if in Canadian dollars, or (b) such Market Value as determined above converted
into Canadian dollars at the noon rate of exchange of the Bank of Canada on the relevant day, if in
U.S. dollars. If on the relevant day, there is not a board lot trade in the Common Shares on the
TSE or NYSE, any of such exchanges

3

 

are not open for trading, or there is not a noon rate of exchange of the Bank of Canada, if
required, then the Market Value of a Common Share shall be determined as provided above on the
first day immediately preceding the relevant day for which there were such board lot trades in the
Common Shares and a noon rate of exchange. If at any time the Common Shares are no longer listed
or traded on the TSE or the NYSE, the Market Value shall be calculated in such manner as may be
determined by the Committee from time to time, but shall always be established in relation to the
fair market value of a Common Share. The Market Value of a Common Share shall be rounded up to the
nearest whole cent.

“Nortel Corporation” shall mean Nortel Networks Corporation (known prior to May 1, 2000 as New
Nortel Inc.) or its successors.

“Nortel Limited” shall mean Nortel Networks Limited (known prior to May 1, 2000 as Nortel Networks
Corporation) or its successors.

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

“Participant” shall mean an Eligible Director who participates in the Plan.

“Plan” shall mean the Nortel Networks Limited Directors’ Deferred Share Compensation Plan (as
amended and restated) set forth herein and as may be further amended or restated from time to time.

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

“Price per Common Share” shall have the meaning assigned thereto in Section 8 hereof.

“Quarter” means any of the four quarters of any financial year of Nortel Limited as may be adopted
from time to time and, until the financial year of Nortel Limited is changed, shall mean the
quarters ending March 31, June 30, September 30 and December 31.

“Quarterly Fee” shall mean the Fees earned for services rendered by an Eligible Director in the
applicable Quarter.

“Reference Date” shall mean, with respect to any Quarter, the date used to determine the Market
Value of a Common Share for purposes of determining the number of Share Units to be credited in
respect of such Quarter to a Participant’s account and the Canadian dollar equivalent of the
Quarterly Fee in respect to such Quarter pursuant to Section 4 hereof; which date shall be, unless
otherwise determined by the Committee and approved by the Board,

	 	(i)	 	the last trading day of such Quarter on which the Market Value of a Common
Share may be determined and on which the Bank of Canada published a noon rate of
exchange for U.S. dollars, or

4

 

	 	(ii)	 	the Resignation Date of such Participant, if the Settlement Date with respect
to a Participant occurs during the Quarter prior to the last trading day of such
Quarter; provided that, if such Resignation Date is not a trading day on which the
Market Value of a Common Share or, if required, a day on which the Bank of Canada noon
rate of exchange for U.S. dollars may be determined, the Reference Date shall be the
immediately preceding trading day on which such Market Value and, if required, the Bank
of Canada noon rate of exchange for U.S. dollars may be determined.

“Resignation Date” shall mean, in respect of a Participant, the earliest date on which both of the
following conditions are met:

	(a)	 	the Participant has ceased to be a member of the Board for any reason whatsoever, including
the death of the Participant; and
	 
	(b)	 	the Participant is neither an employee nor a member of the board of directors of any Nortel
Networks Company.

“Settlement Date” shall mean, unless otherwise determined by the Committee for the purpose of
Section 8, the date on which Common Shares shall be delivered in settlement of Share Units in
accordance with Section 8 hereof.

“Share Unit” shall mean a unit credited to a Participant’s account in accordance with the terms and
conditions of the Plan.

“Subsidiary” shall mean a body corporate that is a subsidiary of Nortel Limited or Nortel
Corporation within the meaning of Section 2(5) of the CBCA.

3. ADMINISTRATION OF THE PLAN

Except as herein otherwise specifically provided, the Plan shall be administered by the Committee
in accordance with its terms, the whole subject to applicable law. The Committee shall have full
and complete authority to interpret the Plan, to prescribe such rules and regulations and to make
such other determinations as it deems necessary or desirable for the administration of the Plan.
The Committee may from time to time, subject to the terms of the Plan, delegate to officers or
employees of a Nortel Networks Company or to third parties, including an Administrator if one is
appointed, the whole or any part of the administration of the Plan and shall determine the scope
and terms and conditions of such delegation, including the authority to prescribe rules and
regulations. Any interpretation, rule, regulation or determination made or other act of the
Committee shall be final and binding on the Participants and their beneficiaries and legal
representatives and Nortel Limited and its shareholders.

No member of the Committee or the Board shall be liable for any action or determination made in
good faith pursuant to the Plan. To the full extent permitted by law, Nortel Limited 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 and, as such, is or was required or entitled to take action pursuant to the
terms of the Plan.

5

 

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 and reasonable brokerage fees
related to the purchase of Common Shares pursuant to Section 8, shall be paid by Nortel Limited.
For greater certainty, Nortel Limited shall not pay or be responsible for brokerage or other fees
incurred by Participants in respect of the disposition of any Common Shares.

4. PARTICIPATION

All Eligible Directors shall participate in the Plan. Each Eligible Director shall be paid one
hundred percent (100%) of his or her Fees in the form of cash, unless the Eligible Director elects
prior to the beginning of a calendar year to receive between 0-100% of his or her Fees for the next
calendar year (and each calendar year thereafter unless and until such Eligible Director changes
such election with respect to Fees payable for the calendar year commencing after such change in
election is made) in the form of Share Units, with the remainder of such Fees to be paid in cash.
Fees payable to an Eligible Director in the calendar quarter in which such Eligible Director is
first appointed or elected to the Board shall be paid one hundred percent (100%) in the form of
cash, unless such Eligible Director elects prior to becoming an Eligible Director to receive,
effective on the date he or she becomes an Eligible Director, between 0-100% of his or her Fees for
the remainder of such calendar year (and future calendar years) in the form of Share Units, with
the remainder of such Fees to be paid in cash. The Board may, in its sole discretion, permit an
Eligible Director who is not subject to income tax under the US Internal Revenue Code of 1986, as
amended, to elect at a time other than the times specified in this paragraph to receive between
0-100% of his of her Fees in the form of Share Units, with the remainder of such Fees to be paid in
cash.

The number of Share Units (including fractional Share Units rounded to four decimal places) to be
credited on a quarterly basis with effect on the last day of each Quarter to an Eligible Director’s
account under Section 9 hereof with respect to each Quarter shall be equal to the quotient
determined by dividing: (i) the entire amount, expressed in U.S. dollars, of the Eligible
Director’s Quarterly Fee for such Quarter which is to be paid in Share Units, converted into
Canadian dollars at the noon rate of exchange of the Bank of Canada on the Reference Date for such
Quarter; by (ii) the Market Value of a Common Share on the Reference Date for such Quarter,
expressed in Canadian dollars.

A Participant who becomes an employee of a Nortel Networks Company or who, as a result of a
determination by the Committee, shall no longer be eligible to continue to participate in the Plan,
shall not be entitled to receive Share Units under this Section 4 in respect of any of his or her
future Fees. Share Units already credited to any such Participant’s account shall remain governed
by the Plan and the Election Form and Agreement, and such Participant shall be entitled to continue
to receive Share Units under Section 7 until such Participant’s Settlement Date.

5. SHARES SUBJECT TO THE PLAN

Neither Nortel Limited nor Nortel Corporation shall be required to cause to be delivered Common
Shares or certificates evidencing Common Shares pursuant to the Plan unless and until such delivery
is in compliance with all applicable laws, regulations, rules, orders of

6

 

governmental or regulatory authorities and the requirements of any stock exchange upon which shares
of Nortel Corporation are listed or traded. Neither Nortel Corporation nor Nortel Limited shall in
any event be obligated to the Participants to take any action to comply with any such laws,
regulations, rules, orders or requirements. Subject to the foregoing, Nortel Limited may from time
to time provide a Broker with funds on the Settlement Date as herein provided to purchase Common
Shares on behalf of Participants on the open market or by private transaction as required in order
to administer the Plan in accordance with its terms.

In the event Nortel Limited or Nortel Corporation determines that Common Shares or certificates
evidencing Common Shares shall not be delivered to a Participant or Participants in accordance with
the foregoing, the Participant shall be entitled to receive from Nortel Limited, in cash, an amount
equal to the Market Value of the Common Shares that would otherwise be delivered in settlement of
Share Units on the Settlement Date, less any amounts withheld by Nortel Limited in accordance with
Section 14 in respect of taxes payable or other source deductions in respect of such cash payment.

6. EXECUTION OF ELECTION FORM AND AGREEMENT

Each Eligible Director shall, in accordance with Section 4 and the Plan or at such other times as
Nortel Limited deems appropriate, enter into an Election Form and Agreement in writing with Nortel
Limited and, if applicable, the Administrator with respect to his or her participation in the Plan.
Such Election Form and Agreement shall set out certain rights and obligations of the parties
thereto pursuant to and in accordance with the Plan, and shall remain in full force and effect
until all such Share Units credited to the account of such Participant shall have been settled
and/or cancelled.

7. DIVIDENDS AND RELATED AMOUNTS

A Participant shall, from time to time during such Participant’s period of participation under the
Plan, including the period following the Resignation Date and until the Settlement Date referred to
in Section 8 hereof, be credited on each dividend payment date in respect of Common Shares with
additional Share Units, the number of which shall be equal to the quotient determined by dividing:
(i) the product determined by multiplying (a) one hundred percent (100%) of each dividend declared
and paid by Nortel Corporation on its Common Shares on a per share basis (excluding stock dividends
payable in Common Shares, but including dividends which may be paid in cash or in shares at the
option of the shareholder), which, if declared in U.S. dollars, shall be converted into Canadian
dollars at the noon rate of exchange of the Bank of Canada on the dividend payment date for such
dividend, or if on such dividend payment date a noon rate of exchange of the Bank of Canada is not
available, converted into Canadian dollars at the noon rate of exchange of the Bank of Canada on
the immediately preceding day on which such exchange rate may be determined, by (b) the number of
Share Units recorded in the Participant’s account on the record date for the payment of any such
dividend, by (ii) the Market Value of a Common Share on the dividend payment date for such
dividend, in each case, with fractions computed to four decimal places.

7

 

8. SETTLEMENT OF SHARE UNITS

Except as may be otherwise determined by the Committee or except as set forth below in this Section
8, the settlement date (“Settlement Date”) for a Participant with respect to whom a Resignation
Date shall have occurred shall be the fourth trading day following the release of Nortel
Corporation’s quarterly or annual financial results immediately following the Resignation Date with
respect to such Participant, provided that, if such Resignation Date occurs on the same date as the
release of Nortel Corporation’s financial results, the Settlement Date shall, in such a case, be
the fifth trading day immediately following such release of Nortel Corporation’s financial results.
A Participant shall receive, in full satisfaction of the number of Share Units recorded in the
Participant’s account on the Settlement Date, a whole number of Common Shares equal to the whole
number of Share Units then recorded in the account of the Participant (or as may be adjusted
pursuant to Section 16 hereof), reduced to reflect the amount of any applicable withholding taxes
and other source deductions withheld by Nortel Limited in connection with the satisfaction of the
Participant’s Share Units in accordance with Section 14. Any entitlement to fractional Common
Shares shall be paid in cash by Nortel Limited based on the Price per Common Share (as defined
below) on the Settlement Date.

If the Settlement Date would otherwise fall between the record date for a dividend on the Common
Shares and the related dividend payment date, the Settlement Date shall be the day immediately
following the date of payment of such dividend for purposes of recording in the account of the
Participant the additional Share Units referred to in Section 7 hereof and making the calculation
of Share Units recorded in the Participant’s account pursuant to this Section 8. Notwithstanding
any other provision of the Plan, the Settlement Date shall not be later than the last day of the
first calendar year that begins after the Resignation Date.

In the event that Nortel Limited is unable, by a Participant’s Settlement Date, to compute the
final number of Share Units credited to such Participant’s account by reason of the fact that any
of the data required in order to compute the Market Value of a Common Share is not available to
Nortel Limited, then the Settlement Date shall be the next following trading day on which such data
is available to Nortel Limited.

On the Settlement Date, Nortel Limited shall notify the Broker as to the number of Common Shares to
be purchased by the Broker on behalf of the Participant on the TSE, the NYSE, or any other stock
exchange approved by the Committee. As soon as practicable thereafter, the Broker shall purchase
the number of Common Shares which Nortel Limited has requested the Broker to purchase on behalf of
the Participant and shall notify the Participant and Nortel Limited of:

	(a)	 	the aggregate purchase price (“Aggregate Purchase Price”) of the Common Shares;
	 
	(b)	 	the purchase price per Common Share or, if the Common Shares were purchased at different
prices, the average purchase price (computed on a weighted average basis) per Common Share
(“Price per Common Share”);
	 
	(c)	 	the amount of any reasonable brokerage commission related to such purchase of Common Shares;
and
	 
	(d)	 	the Settlement Date for such purchase of Common Shares.

8

 

On such Settlement Date, upon payment of the Aggregate Purchase Price and related reasonable
brokerage commission by Nortel Limited, the Broker shall deliver to the Participant, or to his
designated representative, the certificate representing the Common Shares purchased on behalf of
such Participant or shall cause such Common Shares to be transferred electronically to an account
designated by such Participant.

If a Participant is a citizen or resident of a country other than Canada, Nortel Limited shall have
the right, in its sole discretion, to pay entirely in cash on the Settlement Date an amount equal
to the Market Value of the Common Shares as of the Settlement Date that would otherwise be
delivered in settlement of Share Units (less any applicable tax withholdings or required source
deductions), should it deem it desirable to do so in light of the regulatory or other requirements
of the applicable foreign jurisdiction associated with the purchase of, or payment in, Common
Shares.

9. PARTICIPANT’S ACCOUNT

Nortel Limited shall maintain or cause to be maintained in its records an account for each
Participant recording at all times the number of Share Units credited to the Participant. Upon
payment in satisfaction of Share Units pursuant to Section 8 herein, such Share Units shall be
cancelled. A written notification of the balance in the account maintained for each Participant
shall be mailed by Nortel Limited or by an Administrator on behalf of Nortel Limited to each
Participant at least annually. A Participant shall not be entitled to any certificate or other
document evidencing the Share Units.

10. PURCHASES ON THE OPEN MARKET

Purchases of Common Shares pursuant to the Plan shall be made on the open market by a broker
independent from Nortel Corporation and Nortel Limited designated by the Participant and who is a
member of the TSE, the NYSE, or any such other stock exchange as may be determined by the Committee
from time to time (the “Broker”). Any such designation of a Broker may be changed from time to
time. Upon designation of a Broker or at any time thereafter, Nortel Limited may elect to provide
the designated Broker with a letter agreement to be executed by the Broker, the Participant and
Nortel Limited, setting forth, inter alia:

	(a)	 	the Broker’s agreement with being so designated, to acting for the Participant’s account in
accordance with customary usage of the trade with a view to obtaining the best share price for
the Participant in respect of the Common Shares to be purchased for the Participant, and to
delivering to the Participant, or his or her representative, the share certificate for, or to
transferring electronically to an account designated by the Participant, the Common Shares
purchased upon receipt from Nortel Limited of payment of the Aggregate Purchase Price and
related reasonable brokerage commission; and
	 
	(b)	 	Nortel Limited’s agreement to notify the Broker of the number of Common Shares to be
purchased and to pay the Aggregate Purchase Price and the related reasonable brokerage
commission,

provided, however, that none of the terms of such letter agreement shall have the effect of making
the Broker or deeming the Broker to be an affiliate of, or not independent from, Nortel

9

 

Corporation or Nortel Limited for purposes of any applicable corporate, securities or stock
exchange requirement.

The Share Units, and any related Common Shares that may be delivered under the Plan, have not been
registered under the U.S. Securities Act of 1933, as amended, as of the effective date of the Plan
and neither Nortel Corporation nor Nortel Limited has any obligation to register such Share Units
or Common Shares. Accordingly, the Common Shares delivered under the Plan may not be offered or
sold in the United States unless they become registered or an exemption from registration is
otherwise available.

11. RIGHTS OF PARTICIPANTS

Except as specifically herein provided or provided in the Election Form and Agreement, no Eligible
Director, Participant or other person shall have any claim or right to any Common Shares to be
delivered in settlement of Share Units credited pursuant to the Plan. Nothing herein shall provide
any Participant with an entitlement or right to be elected or appointed a director of Nortel
Limited.

Under no circumstances shall Share Units be considered Common Shares nor shall they entitle any
Participant to exercise voting rights or any other rights attaching to the ownership or control of
Common Shares, nor shall any Participant be considered the owner of any Common Shares to be
delivered under the Plan until after the date of purchase of such Common Shares for the account of
such Participant as specifically provided herein.

12. DEATH OF PARTICIPANT

In the event of a Participant’s death, any and all Share Units then credited to the Participant’s
account shall become payable to a dependant or relation of the Participant designated in writing by
the Participant and provided to Nortel Limited, failing which to the Participant’s legal
representative.

13. COMPLIANCE WITH APPLICABLE LAWS

Any obligation of Nortel Limited with respect to Common Shares pursuant to the terms of the Plan is
subject to 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
Corporation are listed or traded. Should Nortel Limited, in its sole discretion, determine that it
is not desirable or feasible to provide for the settlement of Share Units in Common Shares pursuant
to Section 8 hereof, including by reason of any such laws, regulations, rules, orders or
requirements, such obligation shall be satisfied by means of a cash payment by Nortel Limited equal
to the Market Value of the Common Shares that would otherwise be delivered to a Participant in
settlement of Share Units on the Settlement Date (less any applicable tax withholdings or required
source deductions). Each Participant shall comply with all such laws, regulations, rules, orders
and requirements, and shall furnish Nortel Limited with any and all information and undertakings as
may be required to ensure compliance therewith.

10

 

14. WITHHOLDING TAXES

Nortel Limited may withhold from any payment to or for the benefit of a Participant any amount
required to comply with the applicable provisions of any federal, provincial, state or local law
relating to the withholding of tax or the making of any other source deductions, including on the
amount, if any, included in income of a Participant and may adopt and apply such rules and
regulations that in its opinion will ensure that Nortel Limited will be able to so comply.

15. TRANSFERABILITY

The rights or interests of a Participant under the Plan, including the Share Units, shall not be
assignable or transferable, otherwise than in case of death as set out in the Plan, and such rights
or interests shall not be encumbered.

16. ALTERATION OF NUMBER OF SHARE UNITS SUBJECT TO THE PLAN

In the event that:

	(a)	 	a dividend shall be declared upon the Common Shares or other securities of Nortel Corporation
payable in Common Shares or other securities of Nortel Corporation (other than a dividend
which may be paid in cash or in Common Shares at the option of the shareholder);
	 
	(b)	 	the outstanding Common Shares shall be changed into or exchanged for a different number or
kind of shares or other securities of Nortel Corporation or of another corporation, whether
through an arrangement, plan of arrangement, amalgamation or other similar statutory
procedure, or a share recapitalization, subdivision or consolidation or otherwise;
	 
	(c)	 	there shall be any change, other than those specified in paragraphs (a) and (b) of this
Section 16, in the number or kind of outstanding Common Shares or of any shares or other
securities into which such Common 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 Corporation out
of the ordinary course of business,

then, if the Board shall in its sole discretion determine that such change equitably requires an
adjustment in the number of Share Units credited to Participants pursuant to the Plan but not yet
settled and cancelled, and/or a substitution, for each Common Share, of the kind of securities into
which each outstanding Common Share has been so changed or exchanged and/or any other adjustment,
then such adjustment and/or substitution shall be made by the Board and shall be effective and
binding for all purposes.

In the case of any such substitution, change or adjustment as provided for in this Section 16, the
variation shall generally require that the dollar value of the Share Units then recorded in the
Participant’s account prior to such substitution, change or adjustment will be proportionately and

11

 

appropriately varied so that it shall be approximately equal to such dollar value after the
variation.

No adjustment provided for in this Section shall entitle a Participant to receive a fractional
Common Share or other security and the total adjustment with respect to each Share Unit shall be
limited accordingly.

In the event that, at the time contemplated for the purchase of Common Shares under the Plan, there
is no public market for the Common Shares or for securities substituted therefor as provided by
this Section 16, the obligations of Nortel Limited under the Plan shall be met by a payment in cash
on the Settlement Date in such amount as is reasonably determined by the Committee to be fair and
equitable in the circumstances, but shall always be established in relation to the fair market
value of a Common Share within the period that begins one year before the Resignation Date and ends
on the Settlement Date.

17. UNSECURED PLAN

Unless otherwise determined by the Committee, the obligations of Nortel Limited under the Plan
shall be general unsecured obligations of Nortel Limited.

18. EFFECTIVE DATE OF THE PLAN

The Plan was originally effective with respect to certain fees payable to Eligible Directors on or
after June 30, 1998. The Plan was amended and restated on April 27, 2000, effective as of May 1,
2000; was suspended on May 25, 2000, effective April 27, 2000; was amended and restated on June 9,
2000, effective May 1, 2000; was amended and restated and the suspension lifted on January 24,
2002, effective January 1, 2002; and was amended and restated on May 29, 2003. The Plan was
amended and restated on December 18, 2003, effective immediately. The Plan was amended on June 29,
2005 and restated effective June 29, 2005.

19. AMENDMENTS TO, SUSPENSION OR TERMINATION OF, THE PLAN

The Board may from time to time amend, suspend or terminate, in whole or in part, the Plan or amend
the terms of Share Units credited in accordance with the Plan. If any such amendment will
materially adversely affect the rights of a Participant with respect to Share Units credited to
such Participant or under any Election Form and Agreement, the written consent of such Participant
to such amendment shall be obtained. Notwithstanding the foregoing, the obtaining of the written
consent of any Participant to an amendment which materially adversely affects the rights of such
Participant with respect to any credited Share Unit or under any Election Form and Agreement 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 Corporation are listed or traded.

If the Board terminates the Plan, Share Units previously credited to Participants shall, at the
discretion of the Board, either (a) become immediately payable in accordance with the terms of

12

 

the Plan in effect at such time, or (b) remain outstanding and in effect and settled subject to and
in accordance with their applicable terms and conditions.

20. GOVERNING LAW

Consent to membership on the Board and the resulting 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.

13exv10w9

 

Exhibit 10.9

 

Forms of Instruments of Grant

generally provided to optionees granted options under the

Nortel Networks Corporation 1986 Stock Option Plan, as Amended and Restated

or the Nortel Networks Corporation 2000 Stock Option Plan.

 

 

Form of Instrument of Grant generally provided to optionees in Canada

permitting electronic acceptance

NORTEL NETWORKS CORPORATION — STOCK OPTIONS

INSTRUMENT OF GRANT

«COUNTRY»

	 	 	 
	NAME OF OPTIONEE:

	 	«NAME» («GID»)
	 
	 	 
	EFFECTIVE DATE:

	 	«GRANT_DATE»
	 
	 	 
	NUMBER OF OPTIONS:

	 	«GRANTED»
	 
	 	 
	SUBSCRIPTION PRICE:

	 	«PRICE» (CDN)
	 
	 	 
	EXPIRATION DATE:

	 	«EXPIRY_DATE»
	 
	 	 
	VESTING SCHEDULE:

	 	«VESTING» — «Vest_Desc»
	 
	 	 
	VESTING START DATE:
	 	 
	 
	 	 
	PLAN:

	 	Nortel «PLAN» Plan

This instrument (hereinafter the “Instrument of Grant”) evidences a Grant to you of the number
of Options indicated above, on the Effective Date indicated above, pursuant to either the
Nortel Networks Corporation 1986 Stock Option Plan As Amended and Restated, if indicated above
as “1986 Plan”, or the Nortel Networks Corporation 2000 Stock Option Plan, if indicated above
as “2000 Plan”, in each case as may be amended from time to time (hereinafter the “Plan”, as
the case may be). Each Option covered by this Instrument of Grant generally entitles you to
purchase one common share (a “Share”) of Nortel Networks Corporation (the “Corporation”), at
the Subscription Price per Share indicated above, no later than the Expiration Date indicated
above, or such earlier date as may be applicable pursuant to the provisions of section 6 of the
Plan. Capitalized terms not otherwise defined in this Instrument of Grant have the meanings
set forth in the Plan.

1.     All Options covered by this Instrument of Grant are subject to the terms and conditions
stated in the Plan, except as specifically or additionally provided in this Instrument of Grant
and/or in any rules, regulations, determinations or interpretations prescribed and/or made by
the Committee (or its delegates) under the power and authority granted under the Plan (the
“Rules and Regulations”), and all of the provisions of the Plan and the Rules and Regulations
are incorporated by reference as if expressly restated herein. Different Rules and Regulations
may apply to you and/or the Options covered by this Instrument of Grant depending on your
country work location, residency or payroll, whether on the Effective Date of the Grant of
Options, on the date of exercise of the Options, or otherwise. Accordingly, you should review
the Plan and the Rules and Regulations from time to time, which are available as indicated
below, in conjunction with this Instrument of Grant.

2.      The Options covered by this Instrument of Grant are Canadian Options, so the Subscription
Price and all other amounts to be calculated in accordance with the provisions of the Plan for
purposes of this Grant of Options shall be calculated and stated in Canadian dollars.

3.     You will have the right to exercise the Options after they have vested in such amounts and
on such dates in accordance with the vesting schedule indicated above, provided that you have
been in the continuous employment of the Corporation or any of its subsidiaries or affiliated
entities from the Effective Date. The exact amounts and dates for vesting are specified in
your Grant information available through the Nortel Intranet — WebStock site
(https://webstock.us.nortel.com:49701/webstock/docs/default.html), “Personal Summary of
Stock Options” web page, or such other web site or through such other means as may be specified
by the Corporation from time to time.

 

 

4.     Options may be exercised: (i) by irrevocable notice of exercise in writing, executed and
delivered by the Optionee to the Nortel Stock Option Administration Department (at 8200 Dixie
Road, Suite 100, Brampton, Ontario, Canada L6T 5P6, or such other address as may be in effect
from time to time); and/or (ii) through such Internet-based or on-line system or such
telephonic or voice recognition system (whether provided by the Corporation or any third party
on behalf of the Corporation); in each case, in such form or manner as may be specified from
time to time by the Corporation on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Exercise Process, or otherwise in accordance with the Plan.
The date of exercise of the Options shall be the date on which the notice of exercise,
accompanied by payment of the Subscription Price and any other required documentation as
provided in the Plan or the Rules and Regulations, is received by the Corporation, in such form
or manner as may be specified from time to time by the Corporation.

5.     The terms and conditions in this paragraph apply to you only if one or both of the following
apply: (i) you are a “Reporting Insider” for the purpose of Corporate Procedure No. 320.28 -
Use of Undisclosed Material Information on the Effective Date indicated above; or (ii) the
number of Options evidenced by this Instrument of Grant is equal to or in excess of 15,000
Options. In consideration of the Grant of Options, in the event that you exercise all or any
part of the Options at any time subsequent to the date which is twelve (12) months prior to the
date of termination of your employment (whether wrongful or for any other reason) (the
“Applicable Period”), and:

	(i)	 	while employed or during the period of twelve (12) months following the termination
of your employment (whether wrongful or for any other reason), you accept employment with
an employer, or accept an engagement to supply services, directly or indirectly, to a
third party, that is in competition with any Nortel Company;
	 
	(ii)	 	you fail to comply with or otherwise breach the terms or conditions of any
confidentiality agreement or non-disclosure agreement with any Nortel Company;
	 
	(iii)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, directly or indirectly recruit, induce or solicit, or attempt to
recruit, induce or solicit, any current employee or other individual who is/or was
supplying services to any Nortel Company, to terminate their employment or contractual
arrangements with any Nortel Company; or
	 
	(iv)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, solicit, divert or take away, or attempt to divert or take away the
business of any of the customers or accounts, or prospective customers or accounts, of any
Nortel Company or any of its distributors, representatives or vendors, which you have had
contact or communication with while employed at any Nortel Company;

you agree that you will, if required by the Corporation in its sole discretion, pay to the
Corporation within ten (10) days of written demand for payment from the Corporation an amount
equal to the amount of the excess of the Market Value, on the date of exercise of the Options,
of the Shares purchased as a result of the exercise of the Options over the Subscription Price
for the Shares covered by the Options (the “Applicable Amount”).

     Provided you are not entitled to any Corresponding Tax Benefit, the Applicable Amount
shall be reduced by the amount of Tax paid by you or on your behalf (or required to be paid by
you or on your behalf as of a future Tax due date) in respect of the issuance of Shares upon
the exercise of options during the Applicable Period (and, where applicable, in
respect of the Grant of such Options ) .

     If you are entitled to a Corresponding Tax Benefit which is equal to or less than the
amount of Tax paid by you or on your behalf (or required to be paid by you or on your behalf as
of a future Tax due date) in respect of the issuance of Shares upon the exercise of options
during the Applicable Period (such difference between the Corresponding Tax Benefit and Tax, if
any, is referred to herein as the “Tax Benefit Deficiency”), the Applicable Amount shall be
reduced by an amount equal to the Tax Benefit Deficiency.

     For the purposes of this paragraph 5:

	 	 	“Corresponding Tax Benefit” means the amount of any deduction from or reduction or
credit to the amount of Taxes paid or payable by you or on your behalf in accordance
with the laws of the tax jurisdiction applicable to you as a result of or in connection
with the payment to the Corporation of all or any portion of the Applicable Amount by
the Designated Employee;
	 
	 	 	“Nortel Company” means Nortel Networks Corporation and its affiliated entities (as such
term is defined by the 1986 Plan and 2000 Plan); and

 

 

	 	 	“Tax” means any income tax, capital gains tax, statutory pension plan contributions
and/or other social security tax or applicable social security charge levied in
accordance with the laws of the jurisdiction to which you are subject at the time the
Shares are issued upon the exercise of Options (and, where applicable, at the time of
the Effective Date of the Grant of such Options).

6.     The Corporation may require, as a condition of exercise of the Options, that you: (i) pay
any applicable taxes, charges, duties, contributions or otherwise (hereinafter “taxes”) which
are required to be paid by you to any federal, provincial, state, local, foreign or other
taxation authority; (ii) reimburse any taxes which are required to be withheld and remitted by
the Corporation or any of its subsidiaries; (iii) complete any forms or provide any additional
documents in connection with taxes; and (iv) otherwise comply with all applicable tax laws; in
each case in connection with the Grant of the Options, the vesting of the Options, the exercise
of the Options, and/or the expiration of the Options, and as may be specified in the Rules and
Regulations or otherwise in accordance with the Plan. The Corporation may also require, as a
condition of exercise of the Options, that all or a portion of the Shares issued to you upon
the exercise of the Options: (i) be withheld, until such time as payment for any tax
withholdings made by the Corporation or any of its subsidiaries on account of applicable taxes
(hereinafter “tax withholdings”) has been received; and/or (ii) be sold by you or on your
behalf to generate proceeds sufficient to cover tax withholdings, in each case if you do not
pay such tax withholdings within the designated time periods as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan. You further acknowledge and agree
that conditions or restrictions on the transferability of the Shares issued to you upon the
exercise of the Options may be imposed on such Shares on account of taxes or tax withholdings
in connection with the Grant of the Options, the vesting of the Options, the exercise of the
Options, and/or the expiration of the Options, in each case as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan.

7.     The Options are not transferable or assignable and shall only be exercisable by you or your
legal guardian while you are alive. In the event of your death, the right to exercise shall be
governed by section 6(g) of the Plan, subject to any applicable Rules and Regulations.

8.     This Instrument of Grant: (i) shall be binding upon and inure to the benefit of any
successor of the Corporation; (ii) shall be governed by the laws of the Province of Ontario,
and any applicable laws of Canada; and (iii) may not be amended except in writing or as
otherwise provided in the Plan. In the event of a conflict between the provisions of this
Instrument of Grant and those of the Plan or the Rules and Regulations, the provisions of the
Plan or the Rules and Regulations, as the case may be, shall govern, except to the extent that
the terms and conditions of the Grant of Options evidenced by this Instrument of Grant are
specifically recorded as a variation from the terms and conditions of the Plan or the Rules and
Regulations, as the case may be.

9.     A copy of the Plan, the Prospectus for the Plan pursuant to Section 10(a) of the U.S.
Securities Act of 1933, any amendments to such Prospectus, and the Rules and Regulations can be
found on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Stock Option Plan Documents. The Services@Work site also
contains other general information about the Options. You should check the Services@Work site
frequently since it may be updated from time to time.

10.     You acknowledge that: (i) the Plan is discretionary and may be suspended or terminated by
the Corporation at any time; (ii) the Grant of Options does not create any right to receive
future Grants of Options, or benefits in lieu of Options and the terms and conditions of any
future Grants of Options, if any, will be communicated if and when new Grants of Options are to
be made; (iii) the value of the Options is outside the scope of your employment contract, if
any, and the Grant of Options is not for labour performed; (iv) participation in the Plan is
voluntary; (v) the future value of the Shares is unknown and cannot be predicted with
certainty; (vi) the Options are not part of remuneration for purposes of any compensation on
termination of employment, severance payments, indemnities or end of service payments or
benefits of any nature; (vii) the vesting of the Options ceases upon termination of employment,
whether lawful or otherwise, except as provided in the Plan, and neither the Corporation nor
any of its subsidiaries is required to compensate you for any financial loss (including taxes,
social security premiums and lost capital gain) as a result of the expiration of Options or the
early exercise thereof on any such termination of employment; and (viii) the Grant of the
Option does not give rise to additional obligations for any subsidiary which employs you. If,
notwithstanding the foregoing, any contractual or statutory (employment or otherwise) claim is
found to have arisen, then you, by accepting this Instrument of Grant or the Options, shall, to
the extent permitted by applicable law, be deemed irrevocably to have waived your entitlement
to pursue such claim.

11.     The various provisions and sub-provisions of this Instrument of Grant are severable and if
any provision or identifiable part thereof is held to be unenforceable by any court of
competent jurisdiction then such unenforceability shall not affect the enforceability of the
remaining provisions or identifiable parts thereof in this Instrument of Grant, the Plan, the
Rules and Regulations, or any documents related to the Plan.

 

 

12.     Nortel and its third party service providers may need to collect and use information about
employees for the purpose of the grant and/or exercise of Options, administering the Plan, and
to comply with tax, reporting and disclosure obligations under applicable laws and regulations.
Such information may be communicated to any person deemed necessary for the administration of
the Plan, even if it requires such information to be transferred or communicated to persons
based outside your country of employment. Such information is from time to time transferred
between companies within the group and to such third party service providers, to achieve these
objectives. Nortel and its third party service providers will hold your “Plan participation
file” at any location deemed necessary, on the understanding that you will be given access
without constraint at reasonable intervals and without excessive delay or expense to examine
and correct such information. By accepting the Instrument of Grant or the Options, you are
affirming your consent to the collection, processing, storage, disclosure and transfer of your
personal information for these purposes.

13.     By accepting this Instrument of Grant or the Options, you expressly consent that the Plan,
the Rules and Regulations, the Prospectus for the Plan and any other document relating thereto,
including this Instrument of Grant and the information about the Grant available through the
Nortel Intranet — WebStock site, be drawn up and/or available in English only. Par votre
acceptation de la présente entente ou des options, vous consentez expressément à ce que le
régime d’achat d’actions, les règlements et le prospectus relatifs au régime d’achat d’actions
et tout autre document connexe, y compris la présente entente et l’information concernant vos
options disponible à la page « Webstock » de l’intranet de Nortel soient rédigés et/ou
disponibles en anglais seulement.

14.     By accepting this Instrument of Grant or the Options, you (i) acknowledge and confirm
that you have read and understood the Plan, the Rules and Regulations, this Instrument of
Grant and all information about the Grant available on Webstock Option Summary, and that
you have had an opportunity to seek separate fiscal, legal and taxation advice in relation
thereto; and (ii) agree to be bound by the terms and conditions stated in this Instrument
of Grant, including without limitation the terms and conditions of the Plan and the Rules
and Regulations incorporated by reference herein.

 

 

Form of Instrument of Grant generally provided to optionees in the United States

permitting electronic acceptance

NORTEL NETWORKS CORPORATION — STOCK OPTIONS

INSTRUMENT OF GRANT

«COUNTRY»

	 	 	 
	NAME OF OPTIONEE:

	 	«NAME» («GID»)
	 
	 	 
	EFFECTIVE DATE:

	 	«GRANT_DATE»
	 
	 	 
	NUMBER OF OPTIONS:

	 	«GRANTED»
	 
	 	 
	SUBSCRIPTION PRICE:

	 	«PRICE» (USD)
	 
	 	 
	EXPIRATION DATE:

	 	«EXPIRY_DATE»
	 
	 	 
	VESTING SCHEDULE:

	 	«VESTING» — «Vest_Desc»
	 
	 	 
	VESTING START DATE:
	 	 
	 
	 	 
	PLAN:

	 	Nortel «PLAN» Plan

This instrument (hereinafter the “Instrument of Grant”) evidences a Grant to you of the number
of Options indicated above, on the Effective Date indicated above, pursuant to either the
Nortel Networks Corporation 1986 Stock Option Plan As Amended and Restated, if indicated above
as “1986 Plan”, or the Nortel Networks Corporation 2000 Stock Option Plan, if indicated above
as “2000 Plan”, in each case as may be amended from time to time (hereinafter the “Plan”, as
the case may be). Each Option covered by this Instrument of Grant generally entitles you to
purchase one common share (a “Share”) of Nortel Networks Corporation (the “Corporation”), at
the Subscription Price per Share indicated above, no later than the Expiration Date indicated
above, or such earlier date as may be applicable pursuant to the provisions of section 6 of the
Plan. Capitalized terms not otherwise defined in this Instrument of Grant have the meanings
set forth in the Plan.

1.     All Options covered by this Instrument of Grant are subject to the terms and conditions
stated in the Plan, except as specifically or additionally provided in this Instrument of Grant
and/or in any rules, regulations, determinations or interpretations prescribed and/or made by
the Committee (or its delegates) under the power and authority granted under the Plan (the
“Rules and Regulations”), and all of the provisions of the Plan and the Rules and Regulations
are incorporated by reference as if expressly restated herein. Different Rules and Regulations
may apply to you and/or the Options covered by this Instrument of Grant depending on your
country work location, residency or payroll, whether on the Effective Date of the Grant of
Options, on the date of exercise of the Options, or otherwise. Accordingly, you should review
the Plan and the Rules and Regulations from time to time, which are available as indicated
below, in conjunction with this Instrument of Grant.

2.     The Options covered by this Instrument of Grant are U.S. Options, so the Subscription Price
and all other amounts to be calculated in accordance with the provisions of the Plan for
purposes of this Grant of Options shall be calculated and stated in U.S. dollars. The Options
are Non-Qualified Stock Options for the purposes of the Plan. Such designation is only
relevant in determining the U.S. federal income tax consequences, if any, applicable to the
Options, and has no bearing on the tax treatment applicable to Options in countries outside of
the United States. Optionees are urged to seek their own tax advice to assess the tax status
of such Options.

3.     You will have the right to exercise the Options after they have vested in such amounts and
on such dates in accordance with the vesting schedule indicated above, provided that you have
been in the continuous employment of the Corporation or any of its subsidiaries or affiliated
entities from the Effective Date. The exact amounts and dates for vesting are specified in
your Grant information available through the Nortel Intranet — WebStock site

 

 

(https://webstock.us.nortel.com:49701/webstock/docs/default.html), “Personal Summary of
Stock Options” web page, or such other web site or through such other means as may be specified
by the Corporation from time to time.

4.     Options may be exercised: (i) by irrevocable notice of exercise in writing, executed and
delivered by the Optionee to the Nortel Stock Option Administration Department (at 8200 Dixie
Road, Suite 100, Brampton, Ontario, Canada L6T 5P6, or such other address as may be in effect
from time to time); and/or (ii) through such Internet-based or on-line system or such
telephonic or voice recognition system (whether provided by the Corporation or any third party
on behalf of the Corporation); in each case, in such form or manner as may be specified from
time to time by the Corporation on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Exercise Process, or otherwise in accordance with the Plan.
The date of exercise of the Options shall be the date on which the notice of exercise,
accompanied by payment of the Subscription Price and any other required documentation as
provided in the Plan or the Rules and Regulations, is received by the Corporation, in such form
or manner as may be specified from time to time by the Corporation.

5.     The terms and conditions in this paragraph apply to you only if one or both of the following
apply: (i) you are a “Reporting Insider” for the purpose of Corporate Procedure No. 320.28 -
Use of Undisclosed Material Information on the Effective Date indicated above; or (ii) the
number of Options evidenced by this Instrument of Grant is equal to or in excess of 15,000
Options. In consideration of the Grant of Options, in the event that you exercise all or any
part of the Options at any time subsequent to the date which is twelve (12) months prior to the
date of termination of your employment (whether wrongful or for any other reason) (the
“Applicable Period”), and:

	(i)	 	while employed or during the period of twelve (12) months following the termination
of your employment (whether wrongful or for any other reason), you accept employment with
an employer, or accept an engagement to supply services, directly or indirectly, to a
third party, that is in competition with any Nortel Company;
	 
	(ii)	 	you fail to comply with or otherwise breach the terms or conditions of any
confidentiality agreement or non-disclosure agreement with any Nortel Company;
	 
	(iii)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, directly or indirectly recruit, induce or solicit, or attempt to
recruit, induce or solicit, any current employee or other individual who is/or was
supplying services to any Nortel Company, to terminate their employment or contractual
arrangements with any Nortel Company; or
	 
	(iv)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, solicit, divert or take away, or attempt to divert or take away the
business of any of the customers or accounts, or prospective customers or accounts, of any
Nortel Company or any of its distributors, representatives or vendors, which you have had
contact or communication with while employed at any Nortel Company;

you agree that you will, if required by the Corporation in its sole discretion, pay to the
Corporation within ten (10) days of written demand for payment from the Corporation an amount
equal to the amount of the excess of the Market Value, on the date of exercise of the Options,
of the Shares purchased as a result of the exercise of the Options over the Subscription Price
for the Shares covered by the Options (the “Applicable Amount”).

     Provided you are not entitled to any Corresponding Tax Benefit, the Applicable Amount
shall be reduced by the amount of Tax paid by you or on your behalf (or required to be paid by
you or on your behalf as of a future Tax due date) in respect of the issuance of Shares upon
the exercise of options during the Applicable Period (and, where applicable, in
respect of the Grant of such Options ) .

     If you are entitled to a Corresponding Tax Benefit which is equal to or less than the
amount of Tax paid by you or on your behalf (or required to be paid by you or on your behalf as
of a future Tax due date) in respect of the issuance of Shares upon the exercise of options
during the Applicable Period (such difference between the Corresponding Tax Benefit and Tax, if
any, is referred to herein as the “Tax Benefit Deficiency”), the Applicable Amount shall be
reduced by an amount equal to the Tax Benefit Deficiency.

     For the purposes of this paragraph 5:

	 	 	“Corresponding Tax Benefit” means the amount of any deduction from or reduction or
credit to the amount of Taxes paid or payable by you or on your behalf in accordance
with the laws of the tax jurisdiction applicable to you as a result of or in connection
with the payment to the Corporation of all or any portion of the Applicable Amount by
the Designated Employee;
	 
	 	 	“Nortel Company” means Nortel Networks Corporation and its affiliated entities (as such
term is defined by the 1986 Plan and 2000 Plan); and

 

 

	 	 	“Tax” means any income tax, capital gains tax, statutory pension plan contributions
and/or other social security tax or applicable social security charge levied in
accordance with the laws of the jurisdiction to which you are subject at the time the
Shares are issued upon the exercise of Options (and, where applicable, at the time of
the Effective Date of the Grant of such Options).

6.     The Corporation may require, as a condition of exercise of the Options, that you: (i) pay
any applicable taxes, charges, duties, contributions or otherwise (hereinafter “taxes”) which
are required to be paid by you to any federal, provincial, state, local, foreign or other
taxation authority; (ii) reimburse any taxes which are required to be withheld and remitted by
the Corporation or any of its subsidiaries; (iii) complete any forms or provide any additional
documents in connection with taxes; and (iv) otherwise comply with all applicable tax laws; in
each case in connection with the Grant of the Options, the vesting of the Options, the exercise
of the Options, and/or the expiration of the Options, and as may be specified in the Rules and
Regulations or otherwise in accordance with the Plan. The Corporation may also require, as a
condition of exercise of the Options, that all or a portion of the Shares issued to you upon
the exercise of the Options: (i) be withheld, until such time as payment for any tax
withholdings made by the Corporation or any of its subsidiaries on account of applicable taxes
(hereinafter “tax withholdings”) has been received; and/or (ii) be sold by you or on your
behalf to generate proceeds sufficient to cover tax withholdings, in each case if you do not
pay such tax withholdings within the designated time periods as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan. You further acknowledge and agree
that conditions or restrictions on the transferability of the Shares issued to you upon the
exercise of the Options may be imposed on such Shares on account of taxes or tax withholdings
in connection with the Grant of the Options, the vesting of the Options, the exercise of the
Options, and/or the expiration of the Options, in each case as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan.

7.     The Options are not transferable or assignable and shall only be exercisable by you or your
legal guardian while you are alive. In the event of your death, the right to exercise shall be
governed by section 6(g) of the Plan, subject to any applicable Rules and Regulations.

8.     This Instrument of Grant: (i) shall be binding upon and inure to the benefit of any
successor of the Corporation; (ii) shall be governed by the laws of the Province of Ontario,
and any applicable laws of Canada; and (iii) may not be amended except in writing or as
otherwise provided in the Plan. In the event of a conflict between the provisions of this
Instrument of Grant and those of the Plan or the Rules and Regulations, the provisions of the
Plan or the Rules and Regulations, as the case may be, shall govern, except to the extent that
the terms and conditions of the Grant of Options evidenced by this Instrument of Grant are
specifically recorded as a variation from the terms and conditions of the Plan or the Rules and
Regulations, as the case may be.

9.     A copy of the Plan, the Prospectus for the Plan pursuant to Section 10(a) of the U.S.
Securities Act of 1933, any amendments to such Prospectus, and the Rules and Regulations can be
found on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Stock Option Plan Documents. The Services@Work site also
contains other general information about the Options. You should check the Services@Work site
frequently since it may be updated from time to time.

10.     You acknowledge that: (i) the Plan is discretionary and may be suspended or terminated by
the Corporation at any time; (ii) the Grant of Options does not create any right to receive
future Grants of Options, or benefits in lieu of Options and the terms and conditions of any
future Grants of Options, if any, will be communicated if and when new Grants of Options are to
be made; (iii) the value of the Options is outside the scope of your employment contract, if
any, and the Grant of Options is not for labour performed; (iv) participation in the Plan is
voluntary; (v) the future value of the Shares is unknown and cannot be predicted with
certainty; (vi) the Options are not part of remuneration for purposes of any compensation on
termination of employment, severance payments, indemnities or end of service payments or
benefits of any nature; (vii) the vesting of the Options ceases upon termination of employment,
whether lawful or otherwise, except as provided in the Plan, and neither the Corporation nor
any of its subsidiaries is required to compensate you for any financial loss (including taxes,
social security premiums and lost capital gain) as a result of the expiration of Options or the
early exercise thereof on any such termination of employment; and (viii) the Grant of the
Option does not give rise to additional obligations for any subsidiary which employs you. If,
notwithstanding the foregoing, any contractual or statutory (employment or otherwise) claim is
found to have arisen, then you, by accepting this Instrument of Grant or the Options, shall, to
the extent permitted by applicable law, be deemed irrevocably to have waived your entitlement
to pursue such claim.

11.     The various provisions and sub-provisions of this Instrument of Grant are severable and if
any provision or identifiable part thereof is held to be unenforceable by any court of
competent jurisdiction then such unenforceability shall not affect the enforceability of the
remaining provisions or identifiable parts thereof in this Instrument of Grant, the Plan, the
Rules and Regulations, or any documents related to the Plan.

 

 

12.     Nortel and its third party service providers may need to collect and use information about
employees for the purpose of the grant and/or exercise of Options, administering the Plan, and
to comply with tax, reporting and disclosure obligations under applicable laws and regulations.
Such information may be communicated to any person deemed necessary for the administration of
the Plan, even if it requires such information to be transferred or communicated to persons
based outside your country of employment. Such information is from time to time transferred
between companies within the group and to such third party service providers, to achieve these
objectives. Nortel and its third party service providers will hold your “Plan participation
file” at any location deemed necessary, on the understanding that you will be given access
without constraint at reasonable intervals and without excessive delay or expense to examine
and correct such information. By accepting the Instrument of Grant or the Options, you are
affirming your consent to the collection, processing, storage, disclosure and transfer of your
personal information for these purposes.

13.     By accepting this Instrument of Grant or the Options, you expressly consent that the Plan,
the Rules and Regulations, the Prospectus for the Plan and any other document relating thereto,
including this Instrument of Grant and the information about the Grant available through the
Nortel Intranet — WebStock site, be drawn up and/or available in English only. Par votre
acceptation de la présente entente ou des options, vous consentez expressément à ce que le
régime d’achat d’actions, les règlements et le prospectus relatifs au régime d’achat d’actions
et tout autre document connexe, y compris la présente entente et l’information concernant vos
options disponible à la page « Webstock » de l’intranet de Nortel soient rédigés et/ou
disponibles en anglais seulement.

14.     By accepting this Instrument of Grant or the Options, you (i) acknowledge and confirm
that you have read and understood the Plan, the Rules and Regulations, this Instrument of
Grant and all information about the Grant available on Webstock Option Summary, and that
you have had an opportunity to seek separate fiscal, legal and taxation advice in relation
thereto; and (ii) agree to be bound by the terms and conditions stated in this Instrument
of Grant, including without limitation the terms and conditions of the Plan and the Rules
and Regulations incorporated by reference herein.

 

 

Form of Instrument of Grant generally provided to optionees in the United States

permitting written acceptance

NORTEL NETWORKS CORPORATION — STOCK OPTIONS

INSTRUMENT OF GRANT

«COUNTRY»

	 	 	 
	NAME OF OPTIONEE:

	 	«NAME» («GID»)
	 
	 	 
	EFFECTIVE DATE:

	 	«GRANT_DATE»
	 
	 	 
	NUMBER OF OPTIONS:

	 	«GRANTED»
	 
	 	 
	SUBSCRIPTION PRICE:

	 	«PRICE» (USD)
	 
	 	 
	EXPIRATION DATE:

	 	«EXPIRY_DATE»
	 
	 	 
	VESTING SCHEDULE:

	 	«VESTING» — «Vest_Desc»
	 
	 	 
	VESTING START DATE:
	 	 
	 
	 	 
	PLAN:

	 	Nortel «PLAN» Plan

This instrument (hereinafter the “Instrument of Grant”) evidences a Grant to you of the number
of Options indicated above, on the Effective Date indicated above, pursuant to either the
Nortel Networks Corporation 1986 Stock Option Plan As Amended and Restated, if indicated above
as “1986 Plan”, or the Nortel Networks Corporation 2000 Stock Option Plan, if indicated above
as “2000 Plan”, in each case as may be amended from time to time (hereinafter the “Plan”, as
the case may be). Each Option covered by this Instrument of Grant generally entitles you to
purchase one common share (a “Share”) of Nortel Networks Corporation (the “Corporation”), at
the Subscription Price per Share indicated above, no later than the Expiration Date indicated
above, or such earlier date as may be applicable pursuant to the provisions of section 6 of the
Plan. Capitalized terms not otherwise defined in this Instrument of Grant have the meanings
set forth in the Plan.

1.     All Options covered by this Instrument of Grant are subject to the terms and conditions
stated in the Plan, except as specifically or additionally provided in this Instrument of Grant
and/or in any rules, regulations, determinations or interpretations prescribed and/or made by
the Committee (or its delegates) under the power and authority granted under the Plan (the
“Rules and Regulations”), and all of the provisions of the Plan and the Rules and Regulations
are incorporated by reference as if expressly restated herein. Different Rules and Regulations
may apply to you and/or the Options covered by this Instrument of Grant depending on your
country work location, residency or payroll, whether on the Effective Date of the Grant of
Options, on the date of exercise of the Options, or otherwise. Accordingly, you should review
the Plan and the Rules and Regulations from time to time, which are available as indicated
below, in conjunction with this Instrument of Grant.

2.     The Options covered by this Instrument of Grant are U.S. Options, so the Subscription Price
and all other amounts to be calculated in accordance with the provisions of the Plan for
purposes of this Grant of Options shall be calculated and stated in U.S. dollars. The Options
are Non-Qualified Stock Options for the purposes of the Plan. Such designation is only
relevant in determining the U.S. federal income tax consequences, if any, applicable to the
Options, and has no bearing on the tax treatment applicable to Options in countries outside of
the United States. Optionees are urged to seek their own tax advice to assess the tax status
of such Options.

3.     You will have the right to exercise the Options after they have vested in such amounts and
on such dates in accordance with the vesting schedule indicated above, provided that you have
been in the continuous employment of the Corporation or any of its subsidiaries or affiliated
entities from the Effective Date. The exact amounts and dates for vesting are specified in
your Grant information available through the Nortel Intranet — WebStock site

 

 

(https://webstock.us.nortel.com:49701/webstock/docs/default.html), “Personal Summary of
Stock Options” web page, or such other web site or through such other means as may be specified
by the Corporation from time to time.

4.     Options may be exercised: (i) by irrevocable notice of exercise in writing, executed and
delivered by the Optionee to the Nortel Stock Option Administration Department (at 8200 Dixie
Road, Suite 100, Brampton, Ontario, Canada L6T 5P6, or such other address as may be in effect
from time to time); and/or (ii) through such Internet-based or on-line system or such
telephonic or voice recognition system (whether provided by the Corporation or any third party
on behalf of the Corporation); in each case, in such form or manner as may be specified from
time to time by the Corporation on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Exercise Process, or otherwise in accordance with the Plan.
The date of exercise of the Options shall be the date on which the notice of exercise,
accompanied by payment of the Subscription Price and any other required documentation as
provided in the Plan or the Rules and Regulations, is received by the Corporation, in such form
or manner as may be specified from time to time by the Corporation.

5.     The terms and conditions in this paragraph apply to you only if one or both of the following
apply: (i) you are a “Reporting Insider” for the purpose of Corporate Procedure No. 320.28 -
Use of Undisclosed Material Information on the Effective Date indicated above; or (ii) the
number of Options evidenced by this Instrument of Grant is equal to or in excess of 15,000
Options. In consideration of the Grant of Options, in the event that you exercise all or any
part of the Options at any time subsequent to the date which is twelve (12) months prior to the
date of termination of your employment (whether wrongful or for any other reason) (the
“Applicable Period”), and:

	(i)	 	while employed or during the period of twelve (12) months following the termination
of your employment (whether wrongful or for any other reason), you accept employment with
an employer, or accept an engagement to supply services, directly or indirectly, to a
third party, that is in competition with any Nortel Company;
	 
	(ii)	 	you fail to comply with or otherwise breach the terms or conditions of any
confidentiality agreement or non-disclosure agreement with any Nortel Company;
	 
	(iii)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, directly or indirectly recruit, induce or solicit, or attempt to
recruit, induce or solicit, any current employee or other individual who is/or was
supplying services to any Nortel Company, to terminate their employment or contractual
arrangements with any Nortel Company; or
	 
	(iv)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, solicit, divert or take away, or attempt to divert or take away the
business of any of the customers or accounts, or prospective customers or accounts, of any
Nortel Company or any of its distributors, representatives or vendors, which you have had
contact or communication with while employed at any Nortel Company;

you agree that you will, if required by the Corporation in its sole discretion, pay to the
Corporation within ten (10) days of written demand for payment from the Corporation an amount
equal to the amount of the excess of the Market Value, on the date of exercise of the Options,
of the Shares purchased as a result of the exercise of the Options over the Subscription Price
for the Shares covered by the Options (the “Applicable Amount”).

     Provided you are not entitled to any Corresponding Tax Benefit, the Applicable Amount
shall be reduced by the amount of Tax paid by you or on your behalf (or required to be paid by
you or on your behalf as of a future Tax due date) in respect of the issuance of Shares upon
the exercise of options during the Applicable Period (and, where applicable, in
respect of the Grant of such Options ) .

     If you are entitled to a Corresponding Tax Benefit which is equal to or less than the
amount of Tax paid by you or on your behalf (or required to be paid by you or on your behalf as
of a future Tax due date) in respect of the issuance of Shares upon the exercise of options
during the Applicable Period (such difference between the Corresponding Tax Benefit and Tax, if
any, is referred to herein as the “Tax Benefit Deficiency”), the Applicable Amount shall be
reduced by an amount equal to the Tax Benefit Deficiency.

     For the purposes of this paragraph 5:

	 	 	“Corresponding Tax Benefit” means the amount of any deduction from or reduction or
credit to the amount of Taxes paid or payable by you or on your behalf in accordance
with the laws of the tax jurisdiction applicable to you as a result of or in connection
with the payment to the Corporation of all or any portion of the Applicable Amount by
the Designated Employee;
	 
	 	 	“Nortel Company” means Nortel Networks Corporation and its affiliated entities (as such
term is defined by the 1986 Plan and 2000 Plan); and

 

 

	 	 	“Tax” means any income tax, capital gains tax, statutory pension plan contributions
and/or other social security tax or applicable social security charge levied in
accordance with the laws of the jurisdiction to which you are subject at the time the
Shares are issued upon the exercise of Options (and, where applicable, at the time of
the Effective Date of the Grant of such Options).

6.     The Corporation may require, as a condition of exercise of the Options, that you: (i) pay
any applicable taxes, charges, duties, contributions or otherwise (hereinafter “taxes”) which
are required to be paid by you to any federal, provincial, state, local, foreign or other
taxation authority; (ii) reimburse any taxes which are required to be withheld and remitted by
the Corporation or any of its subsidiaries; (iii) complete any forms or provide any additional
documents in connection with taxes; and (iv) otherwise comply with all applicable tax laws; in
each case in connection with the Grant of the Options, the vesting of the Options, the exercise
of the Options, and/or the expiration of the Options, and as may be specified in the Rules and
Regulations or otherwise in accordance with the Plan. The Corporation may also require, as a
condition of exercise of the Options, that all or a portion of the Shares issued to you upon
the exercise of the Options: (i) be withheld, until such time as payment for any tax
withholdings made by the Corporation or any of its subsidiaries on account of applicable taxes
(hereinafter “tax withholdings”) has been received; and/or (ii) be sold by you or on your
behalf to generate proceeds sufficient to cover tax withholdings, in each case if you do not
pay such tax withholdings within the designated time periods as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan. You further acknowledge and agree
that conditions or restrictions on the transferability of the Shares issued to you upon the
exercise of the Options may be imposed on such Shares on account of taxes or tax withholdings
in connection with the Grant of the Options, the vesting of the Options, the exercise of the
Options, and/or the expiration of the Options, in each case as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan.

7.     The Options are not transferable or assignable and shall only be exercisable by you or your
legal guardian while you are alive. In the event of your death, the right to exercise shall be
governed by section 6(g) of the Plan, subject to any applicable Rules and Regulations.

8.     This Instrument of Grant: (i) shall be binding upon and inure to the benefit of any
successor of the Corporation; (ii) shall be governed by the laws of the Province of Ontario,
and any applicable laws of Canada; and (iii) may not be amended except in writing or as
otherwise provided in the Plan. In the event of a conflict between the provisions of this
Instrument of Grant and those of the Plan or the Rules and Regulations, the provisions of the
Plan or the Rules and Regulations, as the case may be, shall govern, except to the extent that
the terms and conditions of the Grant of Options evidenced by this Instrument of Grant are
specifically recorded as a variation from the terms and conditions of the Plan or the Rules and
Regulations, as the case may be.

9.     A copy of the Plan, the Prospectus for the Plan pursuant to Section 10(a) of the U.S.
Securities Act of 1933, any amendments to such Prospectus, and the Rules and Regulations can be
found on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Stock Option Plan Documents. The Services@Work site also
contains other general information about the Options. You should check the Services@Work site
frequently since it may be updated from time to time.

10.     You acknowledge that: (i) the Plan is discretionary and may be suspended or terminated by
the Corporation at any time; (ii) the Grant of Options does not create any right to receive
future Grants of Options, or benefits in lieu of Options and the terms and conditions of any
future Grants of Options, if any, will be communicated if and when new Grants of Options are to
be made; (iii) the value of the Options is outside the scope of your employment contract, if
any, and the Grant of Options is not for labour performed; (iv) participation in the Plan is
voluntary; (v) the future value of the Shares is unknown and cannot be predicted with
certainty; (vi) the Options are not part of remuneration for purposes of any compensation on
termination of employment, severance payments, indemnities or end of service payments or
benefits of any nature; (vii) the vesting of the Options ceases upon termination of employment,
whether lawful or otherwise, except as provided in the Plan, and neither the Corporation nor
any of its subsidiaries is required to compensate you for any financial loss (including taxes,
social security premiums and lost capital gain) as a result of the expiration of Options or the
early exercise thereof on any such termination of employment; and (viii) the Grant of the
Option does not give rise to additional obligations for any subsidiary which employs you. If,
notwithstanding the foregoing, any contractual or statutory (employment or otherwise) claim is
found to have arisen, then you, by accepting this Instrument of Grant or the Options, shall, to
the extent permitted by applicable law, be deemed irrevocably to have waived your entitlement
to pursue such claim.

11.     The various provisions and sub-provisions of this Instrument of Grant are severable and if
any provision or identifiable part thereof is held to be unenforceable by any court of
competent jurisdiction then such unenforceability shall not affect the enforceability of the
remaining provisions or identifiable parts thereof in this Instrument of Grant, the Plan, the
Rules and Regulations, or any documents related to the Plan.

 

 

12.     Nortel and its third party service providers may need to collect and use information about
employees for the purpose of the grant and/or exercise of Options, administering the Plan, and
to comply with tax, reporting and disclosure obligations under applicable laws and regulations.
Such information may be communicated to any person deemed necessary for the administration of
the Plan, even if it requires such information to be transferred or communicated to persons
based outside your country of employment. Such information is from time to time transferred
between companies within the group and to such third party service providers, to achieve these
objectives. Nortel and its third party service providers will hold your “Plan participation
file” at any location deemed necessary, on the understanding that you will be given access
without constraint at reasonable intervals and without excessive delay or expense to examine
and correct such information. By accepting the Instrument of Grant or the Options, you are
affirming your consent to the collection, processing, storage, disclosure and transfer of your
personal information for these purposes.

13.     By accepting this Instrument of Grant or the Options, you expressly consent that the Plan,
the Rules and Regulations, the Prospectus for the Plan and any other document relating thereto,
including this Instrument of Grant and the information about the Grant available through the
Nortel Intranet — WebStock site, be drawn up and/or available in English only. Par votre
acceptation de la présente entente ou des options, vous consentez expressément à ce que le
régime d’achat d’actions, les règlements et le prospectus relatifs au régime d’achat d’actions
et tout autre document connexe, y compris la présente entente et l’information concernant vos
options disponible à la page « Webstock » de l’intranet de Nortel soient rédigés et/ou
disponibles en anglais seulement.

14.      By accepting this Instrument of Grant or the Options, you (i) acknowledge and confirm
that you have read and understood the Plan, the Rules and Regulations, this Instrument of
Grant and all information about the Grant available on Webstock Option Summary, and that
you have had an opportunity to seek separate fiscal, legal and taxation advice in relation
thereto; and (ii) agree to be bound by the terms and conditions stated in this Instrument
of Grant, including without limitation the terms and conditions of the Plan and the Rules
and Regulations incorporated by reference herein.

If you accept the terms and conditions of this Grant of Options as described in this Instrument
of Grant, please confirm your acceptance by signing where indicated below and returning it to
Nortel Stock Option Administration at the address indicated above.

Signature of Optionee:                                                             

 

 

Form of Instrument of Grant generally provided to optionees in Belgium

NORTEL NETWORKS CORPORATION — STOCK OPTIONS

INSTRUMENT OF GRANT — BELGIUM

«COUNTRY»

	 	 	 
	NAME OF OPTIONEE:

	 	«NAME» («GID»)
	 
	 	 
	EFFECTIVE DATE:

	 	«GRANT_DATE»
	 
	 	 
	NUMBER OF OPTIONS:

	 	«GRANTED»
	 
	 	 
	SUBSCRIPTION PRICE:

	 	«PRICE» (USD)
	 
	 	 
	EXPIRATION DATE:

	 	«EXPIRY_DATE»
	 
	 	 
	VESTING SCHEDULE:

	 	«VESTING» — «Vest_Desc»
	 
	 	 
	VESTING START DATE:
	 	 
	 
	 	 
	PLAN:

	 	Nortel «PLAN» Plan

This instrument (hereinafter the “Instrument of Grant”) evidences a Grant to you of the number
of Options indicated above, on the Effective Date indicated above, pursuant to either the
Nortel Networks Corporation 1986 Stock Option Plan As Amended and Restated, if indicated above
as “1986 Plan”, or the Nortel Networks Corporation 2000 Stock Option Plan, if indicated above
as “2000 Plan”, in each case as may be amended from time to time (hereinafter the “Plan”, as
the case may be). Each Option covered by this Instrument of Grant generally entitles you to
purchase one common share (a “Share”) of Nortel Networks Corporation (the “Corporation”), at
the Subscription Price per Share indicated above, no later than the Expiration Date indicated
above, or such earlier date as may be applicable pursuant to the provisions of section 6 of the
Plan. Capitalized terms not otherwise defined in this Instrument of Grant have the meanings
set forth in the Plan.

1.     All Options covered by this Instrument of Grant are subject to the terms and conditions
stated in the Plan, except as specifically or additionally provided in this Instrument of Grant
and/or in any rules, regulations, determinations or interpretations prescribed and/or made by
the Committee (or its delegates) under the power and authority granted under the Plan (the
“Rules and Regulations”), and all of the provisions of the Plan and the Rules and Regulations
are incorporated by reference as if expressly restated herein. Different Rules and Regulations
may apply to you and/or the Options covered by this Instrument of Grant depending on your
country work location, residency or payroll, whether on the Effective Date of the Grant of
Options, on the date of exercise of the Options, or otherwise. Accordingly, you should review
the Plan and the Rules and Regulations from time to time, which are available as indicated
below, in conjunction with this Instrument of Grant.

2.     The Options covered by this Instrument of Grant are U.S. Options, so the Subscription Price
and all other amounts to be calculated in accordance with the provisions of the Plan for
purposes of this Grant of Options shall be calculated and stated in U.S. dollars. The Options
are Non-Qualified Stock Options for the purposes of the Plan. Such designation is only
relevant in determining the U.S. federal income tax consequences, if any, applicable to the
Options, and has no bearing on the tax treatment applicable to Options in countries outside of
the United States. Optionees are urged to seek their own tax advice to assess the tax status
of such Options.

3.     You will have the right to exercise the Options after they have vested in such amounts and
on such dates in accordance with the vesting schedule indicated above, provided that you have
been in the continuous employment of the Corporation or any of its subsidiaries or affiliated
entities from the Effective Date. The exact amounts and dates for vesting are specified in
your Grant information available through the Nortel Intranet — WebStock site
(https://webstock.us.nortel.com:49701/webstock/docs/default.html), “Personal Summary of
Stock Options” web page, or such other web site or through such other means as may be specified
by the Corporation from time to time.

 

 

4.     Options may be exercised: (i) by irrevocable notice of exercise in writing, executed and
delivered by the Optionee to the Nortel Stock Option Administration Department (at 8200 Dixie
Road, Suite 100, Brampton, Ontario, Canada L6T 5P6, or such other address as may be in effect
from time to time); and/or (ii) through such Internet-based or on-line system or such
telephonic or voice recognition system (whether provided by the Corporation or any third party
on behalf of the Corporation); in each case, in such form or manner as may be specified from
time to time by the Corporation on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Exercise Process, or otherwise in accordance with the Plan.
The date of exercise of the Options shall be the date on which the notice of exercise,
accompanied by payment of the Subscription Price and any other required documentation as
provided in the Plan or the Rules and Regulations, is received by the Corporation, in such form
or manner as may be specified from time to time by the Corporation.

5.     The terms and conditions in this paragraph apply to you only if one or both of the following
apply: (i) you are a “Reporting Insider” for the purpose of Corporate Procedure No. 320.28 -
Use of Undisclosed Material Information on the Effective Date indicated above; or (ii) the
number of Options evidenced by this Instrument of Grant is equal to or in excess of 15,000
Options. In consideration of the Grant of Options, in the event that you exercise all or any
part of the Options at any time subsequent to the date which is twelve (12) months prior to the
date of termination of your employment (whether wrongful or for any other reason) (the
“Applicable Period”), and:

	(i)	 	while employed or during the period of twelve (12) months following the termination
of your employment (whether wrongful or for any other reason), you accept employment with
an employer, or accept an engagement to supply services, directly or indirectly, to a
third party, that is in competition with any Nortel Company;
	 
	(ii)	 	you fail to comply with or otherwise breach the terms or conditions of any
confidentiality agreement or non-disclosure agreement with any Nortel Company;
	 
	(iii)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, directly or indirectly recruit, induce or solicit, or attempt to
recruit, induce or solicit, any current employee or other individual who is/or was
supplying services to any Nortel Company, to terminate their employment or contractual
arrangements with any Nortel Company; or
	 
	(iv)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, solicit, divert or take away, or attempt to divert or take away the
business of any of the customers or accounts, or prospective customers or accounts, of any
Nortel Company or any of its distributors, representatives or vendors, which you have had
contact or communication with while employed at any Nortel Company;

you agree that you will, if required by the Corporation in its sole discretion, pay to the
Corporation within ten (10) days of written demand for payment from the Corporation an amount
equal to the amount of the excess of the Market Value, on the date of exercise of the Options,
of the Shares purchased as a result of the exercise of the Options over the Subscription Price
for the Shares covered by the Options (the “Applicable Amount”).

     Provided you are not entitled to any Corresponding Tax Benefit, the Applicable Amount
shall be reduced by the amount of Tax paid by you or on your behalf (or required to be paid by
you or on your behalf as of a future Tax due date) in respect of the issuance of Shares upon
the exercise of options during the Applicable Period (and, where applicable, in
respect of the Grant of such Options).

     If you are entitled to a Corresponding Tax Benefit which is equal to or less than the
amount of Tax paid by you or on your behalf (or required to be paid by you or on your behalf as
of a future Tax due date) in respect of the issuance of Shares upon the exercise of options
during the Applicable Period (such difference between the Corresponding Tax Benefit and Tax, if
any, is referred to herein as the “Tax Benefit Deficiency”), the Applicable Amount shall be
reduced by an amount equal to the Tax Benefit Deficiency.

     For the purposes of this paragraph 5:

	 	 	“Corresponding Tax Benefit” means the amount of any deduction from or reduction or
credit to the amount of Taxes paid or payable by you or on your behalf in accordance
with the laws of the tax jurisdiction applicable to you as a result of or in connection
with the payment to the Corporation of all or any portion of the Applicable Amount by
the Designated Employee;
	 
	 	 	“Nortel Company” means Nortel Networks Corporation and its affiliated entities (as such
term is defined by the 1986 Plan and 2000 Plan); and
	 
	 	 	“Tax” means any income tax, capital gains tax, statutory pension plan contributions
and/or other social security tax or applicable social security charge levied in
accordance with the laws of the jurisdiction to

 

 

	 	 	which you are subject at the time the Shares are issued upon the exercise of Options
(and, where applicable, at the time of the Effective Date of the Grant of such
Options).

6.     The Corporation may require, as a condition of exercise of the Options, that you: (i) pay
any applicable taxes, charges, duties, contributions or otherwise (hereinafter “taxes”) which
are required to be paid by you to any federal, provincial, state, local, foreign or other
taxation authority; (ii) reimburse any taxes which are required to be withheld and remitted by
the Corporation or any of its subsidiaries; (iii) complete any forms or provide any additional
documents in connection with taxes; and (iv) otherwise comply with all applicable tax laws; in
each case in connection with the Grant of the Options, the vesting of the Options, the exercise
of the Options, and/or the expiration of the Options, and as may be specified in the Rules and
Regulations or otherwise in accordance with the Plan. The Corporation may also require, as a
condition of exercise of the Options, that all or a portion of the Shares issued to you upon
the exercise of the Options: (i) be withheld, until such time as payment for any tax
withholdings made by the Corporation or any of its subsidiaries on account of applicable taxes
(hereinafter “tax withholdings”) has been received; and/or (ii) be sold by you or on your
behalf to generate proceeds sufficient to cover tax withholdings, in each case if you do not
pay such tax withholdings within the designated time periods as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan. You further acknowledge and agree
that conditions or restrictions on the transferability of the Shares issued to you upon the
exercise of the Options may be imposed on such Shares on account of taxes or tax withholdings
in connection with the Grant of the Options, the vesting of the Options, the exercise of the
Options, and/or the expiration of the Options, in each case as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan.

7.     The Options are not transferable or assignable and shall only be exercisable by you or your
legal guardian while you are alive. In the event of your death, the right to exercise shall be
governed by section 6(g) of the Plan, subject to any applicable Rules and Regulations.

8.     This Instrument of Grant: (i) shall be binding upon and inure to the benefit of any
successor of the Corporation; (ii) shall be governed by the laws of the Province of Ontario,
and any applicable laws of Canada; and (iii) may not be amended except in writing or as
otherwise provided in the Plan. In the event of a conflict between the provisions of this
Instrument of Grant and those of the Plan or the Rules and Regulations, the provisions of the
Plan or the Rules and Regulations, as the case may be, shall govern, except to the extent that
the terms and conditions of the Grant of Options evidenced by this Instrument of Grant are
specifically recorded as a variation from the terms and conditions of the Plan or the Rules and
Regulations, as the case may be.

9.     A copy of the Plan, the Prospectus for the Plan pursuant to Section 10(a) of the U.S.
Securities Act of 1933, any amendments to such Prospectus, and the Rules and Regulations can be
found on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Stock Option Plan Documents. The Services@Work site also
contains other general information about the Options. You should check the Services@Work site
frequently since it may be updated from time to time.

10.     You acknowledge that: (i) the Plan is discretionary and may be suspended or terminated by
the Corporation at any time; (ii) the Grant of Options does not create any right to receive
future Grants of Options, or benefits in lieu of Options and the terms and conditions of any
future Grants of Options, if any, will be communicated if and when new Grants of Options are to
be made; (iii) the value of the Options is outside the scope of your employment contract, if
any, and the Grant of Options is not for labour performed; (iv) participation in the Plan is
voluntary; (v) the future value of the Shares is unknown and cannot be predicted with
certainty; (vi) the Options are not part of remuneration for purposes of any compensation on
termination of employment, severance payments, indemnities or end of service payments or
benefits of any nature; (vii) the vesting of the Options ceases upon termination of employment,
whether lawful or otherwise, except as provided in the Plan, and neither the Corporation nor
any of its subsidiaries is required to compensate you for any financial loss (including taxes,
social security premiums and lost capital gain) as a result of the expiration of Options or the
early exercise thereof on any such termination of employment; and (viii) the Grant of the
Option does not give rise to additional obligations for any subsidiary which employs you. If,
notwithstanding the foregoing, any contractual or statutory (employment or otherwise) claim is
found to have arisen, then you, by accepting this Instrument of Grant or the Options, shall, to
the extent permitted by applicable law, be deemed irrevocably to have waived your entitlement
to pursue such claim.

 

 

11.     The various provisions and sub-provisions of this Instrument of Grant are severable and if
any provision or identifiable part thereof is held to be unenforceable by any court of
competent jurisdiction then such unenforceability shall not affect the enforceability of the
remaining provisions or identifiable parts thereof in this Instrument of Grant, the Plan, the
Rules and Regulations, or any documents related to the Plan.

12.     Nortel and its third party service providers may need to collect and use information about
employees for the purpose of the grant and/or exercise of Options, administering the Plan, and
to comply with tax, reporting and disclosure obligations under applicable laws and regulations.
Such information may be communicated to any person deemed necessary for the administration of
the Plan, even if it requires such information to be transferred or communicated to persons
based outside your country of employment. Such information is from time to time transferred
between companies within the group and to such third party service providers, to achieve these
objectives. Nortel and its third party service providers will hold your “Plan participation
file” at any location deemed necessary, on the understanding that you will be given access
without constraint at reasonable intervals and without excessive delay or expense to examine
and correct such information. By accepting the Instrument of Grant or the Options, you are
affirming your consent to the collection, processing, storage, disclosure and transfer of your
personal information for these purposes.

13.     By accepting this Instrument of Grant or the Options, you expressly consent that the Plan,
the Rules and Regulations, the Prospectus for the Plan and any other document relating thereto,
including this Instrument of Grant and the information about the Grant available through the
Nortel Intranet — WebStock site, be drawn up and/or available in English only. Par votre
acceptation de la présente entente ou des options, vous consentez expressément à ce que le
régime d’achat d’actions, les règlements et le prospectus relatifs au régime d’achat d’actions
et tout autre document connexe, y compris la présente entente et l’information concernant vos
options disponible à la page « Webstock » de l’intranet de Nortel soient rédigés et/ou
disponibles en anglais seulement.

14.     By accepting this Instrument of Grant or the Options, you (i) acknowledge and confirm
that you have read and understood the Plan, the Rules and Regulations, this Instrument of
Grant and all information about the Grant available on Webstock Option Summary, and that
you have had an opportunity to seek separate fiscal, legal and taxation advice in relation
thereto; and (ii) agree to be bound by the terms and conditions stated in this Instrument
of Grant, including without limitation the terms and conditions of the Plan and the Rules
and Regulations incorporated by reference herein.

	15.	 	The timing of taxation on your stock options is dependent upon when you accept this
Instrument of Grant;

	 	i)	 	if this Instrument of Grant is accepted greater than 60 days after the date of
offer/Formal Grant Notification Date (as defined below), your stock options will be taxable
at the date of exercise
	 
	 	ii)	 	if this Instrument of Grant is accepted within 60 days of the date of offer/Formal Grant
Notification Date (as defined below) by checking one of the boxes below, your stock
options will be taxable at time of grant:
	 
	 	Any references in this Instrument of Grant to potential tax consequences are made solely
for general information purposes. Nortel is and shall not in any manner be responsible or
in any way liable for the accuracy of such information, or changes in Belgian tax law or
interpretations made by Belgian authorities which could potentially conflict with such
information.

	o 	 	I accept the terms and conditions of this Grant and commit not to exercise
the options prior to the end of the third calendar year after the year in which Moment of
Grant occurs (Moment of Grant is deemed to occur 60 days after the Formal Grant
Notification Date), which will result in a taxable fringe benefit equal to 10% of the value
of the underlying shares. I understand that if I exercise the options prior to this time I
will be deemed to have received an additional taxable fringe benefit equal to 10% of the
value of the underlying shares. Further, I acknowledge and agree that Nortel has not
attested to or otherwise certified or guaranteed the accuracy of information on potential
tax consequences and Nortel is and shall not in any manner be responsible or in any way
liable for the accuracy of such information, or changes in Belgian tax law or
interpretations made by Belgian authorities which could potentially conflict with such
information.

 

 

	o 	 	I accept the terms and conditions of this Grant and do not commit not to
exercise the options prior to the end of the third calendar year after the year in
which Moment of Grant occurs (Moment of Grant is deemed to occur 60 days after the Formal
Grant Notification Date). I understand that because I have not committed to refrain from
exercising the options prior to this time I will be deemed to have received a taxable
fringe benefit equal to 20% of the value of the underlying shares. Further, I acknowledge
and agree that Nortel has not attested to or otherwise certified or guaranteed the accuracy
of information on potential tax consequences and Nortel is and shall not in any manner be
responsible or in any way liable for the accuracy of such information, or changes in
Belgian tax law or interpretations made by Belgian authorities which could potentially
conflict with such information.
	 
	 	 	If you accept this Grant and want to be taxed at grant please check the appropriate box
above, execute where indicated below and return within 60 days all pages of this Instrument
to Stock Option Plan Administrator, Nortel Networks Corporation, Dept CO1G, MS-036/EN/101,
8200 Dixie Road, Suite 100, Brampton, Ontario, Canada, L6T 5P6 within 60 days of the Formal
Grant Notification Date. The “Formal Grant Notification Date” of this Grant is the day on
which Nortel Networks Corporation sent you an e-mail notifying you of this Grant
(regardless of when you read that e-mail).
	 
	 	 	By default, taxation of your stock options will occur on the day of exercise.
	 
	 	 	 
	 
	 	 	Signature of Optionee:                                                                      
           
	 
	 	 	Date:                                                                         
        

 

 

Form of Instrument of Grant generally provided to optionees in Chile

permitting electronic acceptance

NORTEL NETWORKS CORPORATION — STOCK OPTIONS

INSTRUMENT OF GRANT

NEITHER THE ISSUER NOR THE SECURITIES ARE REGISTERED IN THE SECURITIES REGISTER
OF THE REPUBLIC OF CHILE OR SUBJECT TO THE SURVEILLANCE OF THE SUPERINTENDENCY OF
SECURITIES AND INSURANCE OF CHILE — EL EMISOR Y SUS ACCIONES NO SE ENCUENTRAN
INSCRITOS EN EL REGISTRO DE VALORES DE LA REPUBLICA DE CHILE NI ESTAN SUJETOS A LA
FISCALIZACION DE LA SUPERINTENDENCIA DE VALORES Y SEGUROS DE CHILE.

«COUNTRY»

	 	 	 
	NAME OF OPTIONEE:

	 	«NAME» («GID»)
	 
	 	 
	EFFECTIVE DATE:

	 	«GRANT_DATE»
	 
	 	 
	NUMBER OF OPTIONS:

	 	«GRANTED»
	 
	 	 
	SUBSCRIPTION PRICE:

	 	«PRICE» (USD)
	 
	 	 
	EXPIRATION DATE:

	 	«EXPIRY_DATE»
	 
	 	 
	VESTING SCHEDULE:

	 	«VESTING» — «Vest_Desc»
	 
	 	 
	VESTING START DATE:
	 	 
	 
	 	 
	PLAN:

	 	Nortel «PLAN» Plan

This instrument (hereinafter the “Instrument of Grant”) evidences a Grant to you of the number
of Options indicated above, on the Effective Date indicated above, pursuant to either the
Nortel Networks Corporation 1986 Stock Option Plan As Amended and Restated, if indicated above
as “1986 Plan”, or the Nortel Networks Corporation 2000 Stock Option Plan, if indicated above
as “2000 Plan”, in each case as may be amended from time to time (hereinafter the “Plan”, as
the case may be). Each Option covered by this Instrument of Grant generally entitles you to
purchase one common share (a “Share”) of Nortel Networks Corporation (the “Corporation”), at
the Subscription Price per Share indicated above, no later than the Expiration Date indicated
above, or such earlier date as may be applicable pursuant to the provisions of section 6 of the
Plan. Capitalized terms not otherwise defined in this Instrument of Grant have the meanings
set forth in the Plan.

1.     All Options covered by this Instrument of Grant are subject to the terms and conditions
stated in the Plan, except as specifically or additionally provided in this Instrument of Grant
and/or in any rules, regulations, determinations or interpretations prescribed and/or made by
the Committee (or its delegates) under the power and authority granted under the Plan (the
“Rules and Regulations”), and all of the provisions of the Plan and the Rules and Regulations
are incorporated by reference as if expressly restated herein. Different Rules and Regulations
may apply to you and/or the Options covered by this Instrument of Grant depending on your
country work location, residency or payroll, whether on the Effective Date of the Grant of
Options, on the date of exercise of the

 

 

 Options, or otherwise. Accordingly, you should review the Plan and the Rules and Regulations
from time to time, which are available as indicated below, in conjunction with this Instrument
of Grant.

2.     The Options covered by this Instrument of Grant are U.S. Options, so the Subscription Price
and all other amounts to be calculated in accordance with the provisions of the Plan for
purposes of this Grant of Options shall be calculated and stated in U.S. dollars. The Options
are Non-Qualified Stock Options for the purposes of the Plan. Such designation is only
relevant in determining the U.S. federal income tax consequences, if any, applicable to the
Options, and has no bearing on the tax treatment applicable to Options in countries outside of
the United States. Optionees are urged to seek their own tax advice to assess the tax status
of such Options.

3.     You will have the right to exercise the Options after they have vested in such amounts and
on such dates in accordance with the vesting schedule indicated above, provided that you have
been in the continuous employment of the Corporation or any of its subsidiaries or affiliated
entities from the Effective Date. The exact amounts and dates for vesting are specified in
your Grant information available through the Nortel Intranet — WebStock site
(https://webstock.us.nortel.com:49701/webstock/docs/default.html), “Personal Summary of
Stock Options” web page, or such other web site or through such other means as may be specified
by the Corporation from time to time.

4.     Options may be exercised: (i) by irrevocable notice of exercise in writing, executed and
delivered by the Optionee to the Nortel Stock Option Administration Department (at 8200 Dixie
Road, Suite 100, Brampton, Ontario, Canada L6T 5P6, or such other address as may be in effect
from time to time); and/or (ii) through such Internet-based or on-line system or such
telephonic or voice recognition system (whether provided by the Corporation or any third party
on behalf of the Corporation); in each case, in such form or manner as may be specified from
time to time by the Corporation on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Exercise Process, or otherwise in accordance with the Plan.
The date of exercise of the Options shall be the date on which the notice of exercise,
accompanied by payment of the Subscription Price and any other required documentation as
provided in the Plan or the Rules and Regulations, is received by the Corporation, in such form
or manner as may be specified from time to time by the Corporation.

5.     The terms and conditions in this paragraph apply to you only if one or both of the following
apply: (i) you are a “Reporting Insider” for the
purpose of Corporate Procedure No. 320.28 — Use of Undisclosed Material Information on the Effective Date indicated above; or (ii) the
number of Options evidenced by this Instrument of Grant is equal to or in excess of 15,000
Options. In consideration of the Grant of Options, in the event that you exercise all or any
part of the Options at any time subsequent to the date which is twelve (12) months prior to the
date of termination of your employment (whether wrongful or for any other reason) (the
“Applicable Period”), and:

	(i)	 	while employed or during the period of twelve (12) months following the termination
of your employment (whether wrongful or for any other reason), you accept employment with
an employer, or accept an engagement to supply services, directly or indirectly, to a
third party, that is in competition with any Nortel Company;
	 
	(ii)	 	you fail to comply with or otherwise breach the terms or conditions of any
confidentiality agreement or non-disclosure agreement with any Nortel Company;
	 
	(iii)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, directly or indirectly recruit, induce or solicit, or attempt to
recruit, induce or solicit, any current employee or other individual who is/or was
supplying services to any Nortel Company, to terminate their employment or contractual
arrangements with any Nortel Company; or
	 
	(iv)	 	while employed or during the period of twelve (12) months following termination of
your employment (whether wrongful or for any other reason), you, on your own behalf or on
any other’s behalf, solicit, divert or take away, or attempt to divert or take away the
business of any of the customers or accounts, or prospective customers or accounts, of any
Nortel Company or any of its distributors, representatives or vendors, which you have had
contact or communication with while employed at any Nortel Company;

you agree that you will, if required by the Corporation in its sole discretion, pay to the
Corporation within ten (10) days of written demand for payment from the Corporation an amount
equal to the amount of the excess of the Market Value, on the date of exercise of the Options,
of the Shares purchased as a result of the exercise of the Options over the Subscription Price
for the Shares covered by the Options (the “Applicable Amount”).

     Provided you are not entitled to any Corresponding Tax Benefit, the Applicable Amount
shall be reduced by the amount of Tax paid by you or on your behalf (or required to be paid by
you or on your behalf as of a future Tax due date) in respect of the issuance of Shares upon
the exercise of options during the Applicable Period (and, where applicable, in
respect of the Grant of such Options).

     If you are entitled to a Corresponding Tax Benefit which is equal to or less than the
amount of Tax paid by you or on your behalf (or required to be paid by you or on your behalf as
of a future Tax due date) in respect of the

 

 

issuance of Shares upon the exercise of options during the Applicable Period (such
difference between the Corresponding Tax Benefit and Tax, if any, is referred to herein as the
“Tax Benefit Deficiency”), the Applicable Amount shall be reduced by an amount equal to the Tax
Benefit Deficiency.

     For the purposes of this paragraph 5:

	 	 	“Corresponding Tax Benefit” means the amount of any deduction from or reduction or
credit to the amount of Taxes paid or payable by you or on your behalf in accordance
with the laws of the tax jurisdiction applicable to you as a result of or in connection
with the payment to the Corporation of all or any portion of the Applicable Amount by
the Designated Employee;
	 
	 	 	“Nortel Company” means Nortel Networks Corporation and its affiliated entities (as such
term is defined by the 1986 Plan and 2000 Plan); and
	 
	 	 	“Tax” means any income tax, capital gains tax, statutory pension plan contributions
and/or other social security tax or applicable social security charge levied in
accordance with the laws of the jurisdiction to which you are subject at the time the
Shares are issued upon the exercise of Options (and, where applicable, at the time of
the Effective Date of the Grant of such Options).

6.     The Corporation may require, as a condition of exercise of the Options, that you: (i) pay
any applicable taxes, charges, duties, contributions or otherwise (hereinafter “taxes”) which
are required to be paid by you to any federal, provincial, state, local, foreign or other
taxation authority; (ii) reimburse any taxes which are required to be withheld and remitted by
the Corporation or any of its subsidiaries; (iii) complete any forms or provide any additional
documents in connection with taxes; and (iv) otherwise comply with all applicable tax laws; in
each case in connection with the Grant of the Options, the vesting of the Options, the exercise
of the Options, and/or the expiration of the Options, and as may be specified in the Rules and
Regulations or otherwise in accordance with the Plan. The Corporation may also require, as a
condition of exercise of the Options, that all or a portion of the Shares issued to you upon
the exercise of the Options: (i) be withheld, until such time as payment for any tax
withholdings made by the Corporation or any of its subsidiaries on account of applicable taxes
(hereinafter “tax withholdings”) has been received; and/or (ii) be sold by you or on your
behalf to generate proceeds sufficient to cover tax withholdings, in each case if you do not
pay such tax withholdings within the designated time periods as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan. You further acknowledge and agree
that conditions or restrictions on the transferability of the Shares issued to you upon the
exercise of the Options may be imposed on such Shares on account of taxes or tax withholdings
in connection with the Grant of the Options, the vesting of the Options, the exercise of the
Options, and/or the expiration of the Options, in each case as may be specified in the Rules
and Regulations or otherwise in accordance with the Plan.

7.     The Options are not transferable or assignable and shall only be exercisable by you or your
legal guardian while you are alive. In the event of your death, the right to exercise shall be
governed by section 6(g) of the Plan, subject to any applicable Rules and Regulations.

8.     This Instrument of Grant: (i) shall be binding upon and inure to the benefit of any
successor of the Corporation; (ii) shall be governed by the laws of the Province of Ontario,
and any applicable laws of Canada; and (iii) may not be amended except in writing or as
otherwise provided in the Plan. In the event of a conflict between the provisions of this
Instrument of Grant and those of the Plan or the Rules and Regulations, the provisions of the
Plan or the Rules and Regulations, as the case may be, shall govern, except to the extent that
the terms and conditions of the Grant of Options evidenced by this Instrument of Grant are
specifically recorded as a variation from the terms and conditions of the Plan or the Rules and
Regulations, as the case may be.

9.     A copy of the Plan, the Prospectus for the Plan pursuant to Section 10(a) of the U.S.
Securities Act of 1933, any amendments to such Prospectus, and the Rules and Regulations can be
found on the Nortel Intranet — Services@Work site
(http://services-canada.ca.nortel.com/livelinksupport/saw), under
People/Compensation/Stock Options/Stock Option Plan Documents. The Services@Work site also
contains other general information about the Options. You should check the Services@Work site
frequently since it may be updated from time to time.

10.     You acknowledge that: (i) the Plan is discretionary and may be suspended or terminated by
the Corporation at any time; (ii) the Grant of Options does not create any right to receive
future Grants of Options, or benefits in lieu of Options and the terms and conditions of any
future Grants of Options, if any, will be communicated if and when new Grants of Options are to
be made; (iii) the value of the Options is outside the scope of your employment contract, if
any, and the Grant of Options is not for labour performed; (iv) participation in the Plan is
voluntary; (v) the future value of the Shares is unknown and cannot be predicted with
certainty; (vi) the Options are not part of remuneration for purposes of any compensation on
termination of employment, severance payments, indemnities

 

 

 or end of service payments or benefits of any nature; (vii) the vesting of the Options ceases
upon termination of employment, whether lawful or otherwise, except as provided in the Plan,
and neither the Corporation nor any of its subsidiaries is required to compensate you for any
financial loss (including taxes, social security premiums and lost capital gain) as a result of
the expiration of Options or the early exercise thereof on any such termination of employment;
and (viii) the Grant of the Option does not give rise to additional obligations for any
subsidiary which employs you. If, notwithstanding the foregoing, any contractual or statutory
(employment or otherwise) claim is found to have arisen, then you, by accepting this Instrument
of Grant or the Options, shall, to the extent permitted by applicable law, be deemed
irrevocably to have waived your entitlement to pursue such claim.

11.     The various provisions and sub-provisions of this Instrument of Grant are severable and if
any provision or identifiable part thereof is held to be unenforceable by any court of
competent jurisdiction then such unenforceability shall not affect the enforceability of the
remaining provisions or identifiable parts thereof in this Instrument of Grant, the Plan, the
Rules and Regulations, or any documents related to the Plan.

12.     Nortel and its third party service providers may need to collect and use information about
employees for the purpose of the grant and/or exercise of Options, administering the Plan, and
to comply with tax, reporting and disclosure obligations under applicable laws and regulations.
Such information may be communicated to any person deemed necessary for the administration of
the Plan, even if it requires such information to be transferred or communicated to persons
based outside your country of employment. Such information is from time to time transferred
between companies within the group and to such third party service providers, to achieve these
objectives. Nortel and its third party service providers will hold your “Plan participation
file” at any location deemed necessary, on the understanding that you will be given access
without constraint at reasonable intervals and without excessive delay or expense to examine
and correct such information. By accepting the Instrument of Grant or the Options, you are
affirming your consent to the collection, processing, storage, disclosure and transfer of your
personal information for these purposes.

13.     By accepting this Instrument of Grant or the Options, you expressly consent that the Plan,
the Rules and Regulations, the Prospectus for the Plan and any other document relating thereto,
including this Instrument of Grant and the information about the Grant available through the
Nortel Intranet — WebStock site, be drawn up and/or available in English only. Par votre
acceptation de la présente entente ou des options, vous consentez expressément à ce que le
régime d’achat d’actions, les règlements et le prospectus relatifs au régime d’achat d’actions
et tout autre document connexe, y compris la présente entente et l’information concernant vos
options disponible à la page « Webstock » de l’intranet de Nortel soient rédigés et/ou
disponibles en anglais seulement.

14.      By accepting this Instrument of Grant or the Options, you (i) acknowledge and confirm
that you have read and understood the Plan, the Rules and Regulations, this Instrument of
Grant and all information about the Grant available on Webstock Option Summary, and that
you have had an opportunity to seek separate fiscal, legal and taxation advice in relation
thereto; and (ii) agree to be bound by the terms and conditions stated in this Instrument
of Grant, including without limitation the terms and conditions of the Plan and the Rules
and Regulations incorporated by reference herein.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00088-of-00352.parquet"}]]