Document:

exv10w71

 

Exhibit 10.71     

PRIVATE AND CONFIDENTIAL

FINAL VERSION

Mike S. Zafirovski

Employment Terms and Conditions

1. Employment Relationship

Effective November 15, 2005, you shall be appointed President and Chief Executive Officer of Nortel
Networks Corporation and Nortel Networks Limited (collectively, “Nortel”). You shall be an officer
and director of each of these entities. You shall be considered an employee of Nortel effective
October 17, 2005. Your employment relationship is that of employment at will and not subject to a
specified term.

2. Salary

Your base salary will be US$1,200,000 per annum paid to you bi-weekly. Normally, salaries are
reviewed on an annual basis, typically in the first quarter, in accordance with the various
evaluation processes and market-driven guidelines.

3. Incentive Award

You will be eligible to participate in the annual SUCCESS Incentive Award Plan (“SUCCESS”) with a
target of 150% of your base salary to a maximum of 300% of your base salary. For 2005, you will be
eligible to participate in the 2005 SUCCESS plan pro-rated depending upon the number of months that
you are in active employment. In all other respects, your SUCCESS bonus will be assessed in
accordance with the terms of the SUCCESS plan.

4. Long-Term Incentives

You will be eligible to participate in the Nortel Networks Corporation 1986 Stock Option Plan As
Amended and Restated and the Nortel Networks Corporation 2000 Stock Option Plan (collectively, the
“Stock Option Plans”), the Nortel Networks Stock Purchase Plan and the Nortel 2005 Stock Incentive
Plan (the “Restricted Stock Unit Plan”).

You will receive a new hire grant of 5 million stock options under the applicable Stock Option
Plan. The stock options shall be exercisable as to 20% on or after the date that is one year from
the effective date of the grant, and as to an additional 20% on each anniversary of the effective
date of the grant, with 100% of such stock options exercisable on or after the date that is five
years from the effective date of the grant. The exercise price of the stock options shall be equal
to 100% of the market value of a Nortel Networks Corporation share on the date of the grant, as
determined under the applicable Stock Option Plan and approved by the Nortel Board of Directors.
The stock options shall be subject to the terms and conditions of the applicable Stock Option Plan
and Nortel’s policies and procedures. The anticipated effective date of the grant is November 15, 2005.

 

 

You will receive an award under the Restricted Stock Unit Plan valued at the time of award by an
industry recognized valuation tool approved by the Joint Leadership Resources Committee and the
Board of Directors equivalent to US$7.5 million. The restricted stock units awarded shall vest as
to 20% on or after the date that is one year from the effective date of the award, and as to an
additional 20% on each anniversary of the effective date of the award, with 100% of such restricted
stock units vested on or after the date that is five years from the effective date of the award.
The anticipated effective date of the award is November 15, 2005.

Your eligibility for additional stock option grants or restricted stock unit awards shall be
reviewed at the same time as other key employees on an annual basis, typically in the first
quarter, in accordance with the various evaluation processes and market-driven guidelines.

You will be entitled to an additional long term incentive award with a target of 200% of your base
salary to a maximum of 400% of your base salary. The terms and conditions of this long-term
incentive will be discussed with you and approved by the Joint Leadership Resources Committee and
the Board of Directors of Nortel.

5. Benefits

You will be eligible to participate in employee benefit plans in accordance with the terms of those
plans upon your commencement of employment. This currently includes medical, dental, vision, short
term disability, long term disability, business travel insurance, accidental death and
dismemberment, and life insurance coverages. You will also be eligible for benefits under the
Nortel relocation program, including reasonable moving and real estate expenses associated with the
sale of your home, if applicable. A Benefits summary and details of the Nortel relocation program
will be provided to you by the Executive Compensation Group.

You will also be eligible for 5 weeks of vacation per annum immediately upon your commencement of
employment.

6. Capital Accumulation and Retirement Programs

You will be offered the choice between two Capital Accumulation and Retirement Programs: the
Balanced Program or the Investor Program. All of our retirement programs are periodically reviewed
and changes may result to the programs as currently described. You shall be eligible for pension
benefits in accordance with the terms of the applicable Nortel plan.

In addition to your participation in the Capital Accumulation and Retirement Programs, you will be
eligible for certain additional pension benefits. Under this arrangement, you will receive a
special lifetime pension benefit of US$500,000, with a 60% joint and survivor provision, which will
accrue after 5 years of active employment. The special pension benefit will be payable monthly
following your retirement on or after age 60, and shall be inclusive of any other pension benefit
paid under Nortel plans. As part of this special pension arrangement, you shall also be entitled
after 5 years of active employment to benefit from the retirement provisions under
Nortel’s Stock Option Plans and Restricted Stock Unit Plan, and to the fullest extent permissible,
the retirement provisions of Nortel’s employee benefit plans.

2

 

Further details of your special
pension benefit will be provided to you by the Executive Compensation Group.

7. Participation in Executive Retention Termination Plan

You will be eligible to participate in our Executive Retention and Termination Plan (“ERTP”). The
ERTP, in part, defines the conditions for a change in control and includes the provisions available
to you should your employment be terminated as defined in ERTP within 24 months following a change
in control. You would be eligible for the benefits described for CEO participation.

8. Tax Preparation and Financial Planning

As a board appointed officer, tax preparation for your personal income tax will be provided at
company expense by a company assigned provider. In connection with your continued employment and
relocation, Nortel will cover your reasonable financial planning and legal expenses up to US$25,000
on an annual basis. Nortel will also cover your professional fees and expenses in connection with
your offer of employment up to US$25,000.

9. Tax Equalization

Nortel will “gross up” your compensation related to active employment with the corporation to the
extent required such that your after-tax compensation will be the same as if you were a resident of
the State of Illinois. Compensation for this purpose shall include your salary, annual incentive
awards, long-term incentive awards, benefits under Nortel employee benefit plans (including the
Nortel relocation plan) to the extent such benefits shall be considered income for tax purposes,
and any other similar payments or awards. Compensation shall not include any income resulting
from Capital Accumulation and Retirement Plans, including any special pension arrangements in
connection therewith, or any payments made under the ERTP or as a result of separation pursuant to
section 10 below.

10. Separation

In the event (i) Nortel initiates your separation of employment as President and Chief Executive
Officer, or (ii) you initiate your separation of employment because your responsibilities or
authority are involuntarily changed and are not substantially equivalent to your current role, or
because your total compensation is involuntarily changed in a manner that is materially
inconsistent with other key executive officers, you will be provided in lieu of any other payment
or benefit with the equivalent of two years base salary paid bi-weekly, the equivalent of two years
SUCCESS plan payment at target to be paid in a lump sum, the opportunity to continue health, life
insurance and AD&D benefits coverage in which you are then enrolled for two years following your
employment termination (“Salary Continuance Period”) at active employee rates, and the continued
vesting of outstanding stock options or restricted stock units during the Salary Continuance
Period, other than the new hire stock options and restricted stock units referred to in paragraph
4, which shall immediately vest on your date of separation. In addition to the
above, in the event any SUCCESS plan payment is made to key employees of Nortel in respect of the
year in which such separation of employment occurs, you shall be entitled to a pro-rata SUCCESS
plan payment at target. However, the foregoing payments and benefits will not be provided to you if
your separation of employment arises out of termination for Cause, as that term is defined in the
ERTP.

3

 

Additionally, the provision of any such payments and benefits will be conditioned upon your
execution of a separation agreement, which will be prepared by the corporation and will contain,
among other things, a full and final release of claims and a covenant not to compete against Nortel
or solicit its employees during the Salary Continuance Period. Such payments and benefits will be
provided at a time and in a manner that is consistent with Section 409A of the U.S. Internal
Revenue Code to the extent that such statutory provision is applicable to you. Payment to you of
the benefits described in this paragraph would make you ineligible for the payments/benefits
described above in paragraph 7.

11. Reporting Insider

You will be designated a Reporting Insider under applicable Canadian and U.S. securities
legislation with respect to trades of securities of Nortel as of October 17, 2005. Additional
details will be provided by the Securities Law Group, which will assist you in your reporting
obligations.

12. Share Ownership Guidelines

As a senior executive you will be expected under the Share Ownership Guidelines to own Nortel
shares equivalent to 500% of your base salary within 5 years from the date you commence employment.

4exv10w72

 

	 	 	 	 	 
	

	 	Exhibit 10.72
	 	

January 18, 2006

Mr. Mike S. Zafirovski

1291 North Green Bay Road

Lake Forest, Illinois 60045

Dear Mike:

This letter will confirm our discussions concerning the terms and conditions on which Nortel
Networks Corporation and/or Nortel Networks Limited (collectively or individually “Nortel”) will
indemnify you, net of any tax benefits received by you, for the loss of certain of your severance
benefits provided for in the Motorola Separation Agreement (as defined below) by reason of your
agreement to settle the legal proceeding commenced by Motorola, Inc. (“Motorola”) against you in
the Circuit Court of Cook County, Illinois, County Department, Chancery Division on October 18,
2005 (the “Motorola Proceeding”) in response to your acceptance of Nortel’s offer of employment as
the president and chief executive officer of Nortel.

In consideration of the foregoing, Nortel hereby agrees with you as follows:

	1.	 	Nortel will indemnify and hold you harmless for the full amount of your Indemnifiable Losses
net of any Tax Benefits (as defined below).
	 
	 	 	For the purposes of this agreement, “Indemnifiable Losses” means the $11.5 million which you
paid to Motorola pursuant to the terms of the Settlement Agreement.
	 
	 	 	“Motorola Separation Agreement” means the Separation and Release Agreement between you and
Motorola dated February 15, 2005.
	 
	 	 	“Settlement Agreement” means the agreement between Motorola, Nortel and you dated October
31, 2005.

	 	 	 	 	 
	2.

	 	(a)
	 	If Nortel is required to withhold or deduct any amount for or on account of Taxes (as
defined below) from any payment to you on account of Indemnifiable Losses pursuant to Section
1 hereof, Nortel will pay to you such additional amounts (the “Additional Amounts”), net of
any Tax Benefits, as may be necessary so that the net amount received by you (including the
Additional Amounts) after such withholding or deduction

Gordon A.Davies

General Counsel – Corporate

and Corporate Secretary

Nortel

8200 Dixie Road Suite 100 Brampton Ontario Canada L6T 5P6 T 905.863.1144 (ESN 333) F905.863.8386

nortel.com

 

 

Page 2 of 3

	 	 	 	will not be less than the amount you
would have received under Section 1 hereof if such Taxes had not been withheld or deducted,
net of any Tax Benefits.

	 	(b)	 	Nortel will also indemnify and hold you harmless for:

	 	(i)	 	the full amount of any Taxes, net of any Tax Benefits, levied
or imposed and paid by you in connection with the receipt by you of any payment
on account of Indemnifiable Losses pursuant to Section 1 hereof to the extent
such Taxes exceed the Additional Amounts paid to you pursuant to Section 2(a)
hereof, and
	 
	 	(ii)	 	any Taxes levied or imposed and paid by you with respect to any
payments made to you under clause (i) above and under this clause (ii).

	 	(c)	 	For the purposes of this agreement:
	 
	 	 	 	“Tax Benefits” means a reduction in Taxes payable by you as a result
of a deduction in computing wages or taxable income, or a credit against Taxes
payable by you, to which you are entitled as a result of a payment made by you
to Motorola pursuant to the terms of the Settlement Agreement in respect to the
Indemnifiable Losses. For greater certainty, Tax Benefits include but are not
limited to the following: i) the net reduction in taxes payable as a result of
your Motorola W-2 wages being reduced by the amount of your repayment to
Motorola (which was funded by Nortel), ii) the reduction in current, past or
future taxes that may be created as a result of repayments you make to Nortel
of other Tax Benefits (including non-operating losses created) and iii) foreign
tax credits against current, future or past taxes payable, created from
Canadian taxes paid by Nortel as a result of the Indemnifiable Loss
reimbursement to you.
	 
	 	 	 	“Taxes” means all United States, Canada and other nations’ federal, provincial,
state, local and foreign taxes, duties, assessments, social security taxes or
governmental charges imposed or levied in respect to the relevant amounts referred
to in this Section 2.

	3.	 	Nortel further agrees to pay or reimburse you for the reasonable legal fees and expenses
incurred by you in connection with the Motorola Proceeding and for the negotiation and
preparation of the Settlement Agreement and this agreement, and for advice and representation
since October 31, 2005 regarding your activities for Nortel under the Settlement Agreement.
	 
	4.	 	This agreement and the benefit of the obligations of Nortel hereunder shall inure to the
benefit of you, your heirs, estate, executors and administrators and shall be binding upon
Nortel’s successors and assigns.

 

 

Page 3 of 3

	5.	 	This agreement shall in all respects be governed by and construed in accordance with the laws
of the Province of Ontario and the federal laws of Canada applicable therein, and all
disputes, claims or matters arising out of or under it shall be governed by such laws.
	 
	6.	 	All dollar amounts used herein are expressed in United States dollars.

If the foregoing is acceptable, please indicate your agreement to the above terms and conditions by
signing the enclosed copy of this letter and returning it to me.

Yours truly,

Nortel Networks Corporation

Nortel Networks Limited

	 	 	 	 	 
	By:
	 	      /s/ Gordon A. Davies	 	 
	 

	 	 

Gordon A. Davies
	 	 
	 

	 	General Counsel – Corporate and	 	 
	 

	 	Corporate Secretary	 	 

The foregoing is accepted and agreed to by me this  26  day of  January
, 2006.

	 	 	 	 	 	 
	SIGNED AND DELIVERED

in the presence of

	 	ü

ï

ý

ï

þ
	 	 	 
	 	 	 	 	 
	/s/ D. L. Warnock
 

                Witness

	 	/s/ M. S. Zafirovski
 

                Mike Zafirovski

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00102-of-00352.parquet"}]]