Document:

exv10w4

 

Exhibit 10.4

[Insert name and address of Director]

Indemnity

          In consideration of your service or continued service in any of the following capacities:

	 	•	 	as a director of Nortel Networks Corporation (the “Corporation”) ;
	 
	 	•	 	as an officer of the Corporation;
	 
	 	•	 	as a director of any other entity to the extent that you are serving in such
capacity at the request of the Corporation (and the Corporation hereby confirms its
request that you serve as a director of Nortel Networks Limited (“NNL”)) or
	 
	 	•	 	as an officer of any other entity to the extent that you are serving in such
capacity at the request of the Corporation,

such capacities referred to herein as the “Indemnified Capacities”, the Corporation with full power
and authority to grant an indemnity valid and binding upon and enforceable against it in the terms
hereinafter contained, hereby agrees to indemnify you to the full extent contemplated by this
agreement.

1. Scope of Indemnity

     (a) The Corporation shall indemnify and hold you harmless for the full amount of any “Cost”
(as hereinafter defined) reasonably incurred by you in connection with any “Proceeding” (as
hereinafter defined) that may be made or asserted against or affecting you or in which you are
required by law to participate or in which you participate at the request of the Corporation or in
which you choose to participate (based on your reasonable belief that you may be subsequently named
in that Proceeding or any Proceeding related to it) if it relates to, arises from or is based on
your service in an Indemnified Capacity, in any case whether or not you have been named (an
“Indemnified Claim”).

     (b) Subject to the terms hereof and any applicable policy of the Corporation relating to the
reimbursement of expenses, the Corporation shall also indemnify and hold you harmless for the full
amount of any other Cost reasonably incurred by you or to which you are subject if it relates to,
arises from or is based on your service in an Indemnified Capacity (provided however that you shall
not be entitled to indemnification in respect of any tax assessed on your income). Subject to the
terms of any applicable policy of the Corporation, the Corporation shall also reimburse you for
reasonable legal fees that you incur in connection with your retaining separate counsel in respect
of a matter being considered by the board of directors of the Corporation.

 

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	 	(c)	 	For the purposes of this agreement:

	 	(i)	 	“Indemnified Amount” means any amount which the
Corporation is obliged to pay pursuant hereto;
	 
	 	(ii)	 	“Cost” means all injury, liability, loss, damage,
charge, cost, expense, fine or settlement amount whatsoever which you may
reasonably incur, suffer or be required to pay (including, without
limitation, all reasonable legal and other professional fees as well as all
out-of-pocket expenses for attending discoveries, trials, hearings and
meetings); and
	 
	 	(iii)	 	“Proceeding” means any claim, action, suit,
application, litigation, charge, complaint, prosecution, assessment,
reassessment, investigation, inquiry, hearing or proceeding of any nature
or kind whatsoever, whether civil, criminal, administrative or otherwise.

2. Procedure for Making a Claim

	 	(a)	 	If you wish to make any claim for payment of an Indemnified Amount to you by
the Corporation hereunder, you shall deliver a written notice of such claim for payment
to the Corporation, together with reasonable details and supporting documentation with
respect to such claim (such written notice, together with such details and
documentation, referred to herein as an “Indemnification Notice”).
	 
	 	(b)	 	Subject to obtaining any required court approval, the Corporation shall pay all
Indemnified Amounts arising in connection with the matters described in the
Indemnification Notice to you (or as you may direct) no later than 30 days after the
date on which you deliver an Indemnification Notice on account of any such Indemnified
Amount to the Corporation.
	 
	 	(c)	 	The Corporation shall pay all Indemnified Amounts within the time period
contemplated in this Section 2, subject to Section 6 hereof.

3. Notice of Claim

	 	(a)	 	Notice to Corporation

          If you become aware of any Indemnified Claim or reasonably expect that an Indemnified Claim
will be made, you will give the Corporation notice in writing promptly of such Indemnified Claim or
potential Indemnified Claim.

	 	(b)	 	Notice to Director or Officer

          If the Corporation becomes aware of any Indemnified Claim or reasonably expects that an
Indemnified Claim will be made, the Corporation will give you notice in writing promptly of such
Indemnified Claim or potential Indemnified Claim.

 

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4. Defence of Action

	 	(a)	 	By Corporation

          The Corporation shall at its expense and in a timely manner contest and defend against any
Indemnified Claim (other than an Indemnified Claim brought by the Corporation or any of its
subsidiaries) and take all such steps as may be necessary or proper therein to prevent the
resolution thereof in a manner adverse to you, including the taking of such appeals as counsel to
the Corporation may advise are likely to succeed in the circumstances (which opinion shall be in
writing and a copy thereof provided to you). In this regard, the Corporation will keep you fully
informed on a timely basis of all steps and developments relating to the foregoing. The Corporation
shall not agree to any settlement on your behalf without your written consent.

	 	(b)	 	By Director 

          Notwithstanding Section 4(a) hereof, you will be entitled to assume carriage of your own
defence relating to any Indemnified Claim (and for greater certainty, the full amount of reasonable
expense you incur in connection with such defence shall be an Indemnified Amount) if:

	 	(i)	 	the Corporation does not in a timely manner:

	 	(A)	 	undertake appropriate action; or
	 
	 	(B)	 	take such legal steps as may be from time to
time required to properly defend against any such claim; or

	 	(ii)	 	in the reasonable opinion of your counsel (which
opinion shall be in writing and a copy thereof provided to the Corporation)
your interests in respect of the relevant matter conflict with the
interests of the Corporation in respect of such matter or with the
interests of any other director or officer of the Corporation in respect of
whose defence the Corporation has carriage;

provided that:

	 	(i)	 	you shall not agree to settle any Indemnified Claim
without the prior written consent of the Corporation (unless you have a
reasonable belief that the Corporation will not satisfy its obligations to
you hereunder if the Indemnified Claim proceeds); and
	 
	 	(ii)	 	if the Indemnified Claim would be covered by insurance
maintained by the Corporation, you shall comply with the applicable
conditions of such coverage (provided however, that failure to so comply
shall not relieve the Corporation of its obligation to indemnify you
hereunder).

 

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5. Former Directors and Officers

     (a) You shall continue to be entitled to indemnification and advances hereunder in accordance
with the terms hereof with respect to Indemnified Claims, even though you may no longer be acting
in an Indemnified Capacity.

     (b) You and your advisors shall at all times be entitled to review during regular business
hours all documents, records and other information with respect to the Corporation or any entity in
which you acted in an Indemnified Capacity which are under the Corporation’s control and which may
be reasonably necessary in order to defend yourself against any Proceeding that relates to, arises
from or is based on your service in an Indemnified Capacity, provided that you shall maintain all
such information in strictest confidence except to the extent necessary for your defence.

6. No Obligation to Pay Indemnities Prohibited by Law

     (a) Notwithstanding anything contained herein, the Corporation shall not pay any Indemnified
Amount hereunder if the payment of such amount would be prohibited under the provisions of the
Canada Business Corporations Act (the “CBCA”) or otherwise by law.

     (b) Without limitation to Section 6(a), you acknowledge that the CBCA prohibits the
Corporation from indemnifying you unless you:

	 	(i)	 	acted honestly and in good faith with a view to the
best interests of the Corporation or, as the case may be, of NNL or any
other entity to the extent that you are serving as a director or officer of
that entity at the request of the Corporation; and
	 
	 	(ii)	 	in the case of a criminal or administrative action or
proceeding that it enforced by a monetary penalty, you had reasonable
grounds for believing that your conduct was lawful (each of (i) and (ii) a
“Condition”).

     (c) If the Corporation pays an Indemnified Amount which it is prohibited from paying by law
(as determined by a court or administrative tribunal of competent jurisdiction in a final judgment
that has become non-appealable), then such amount shall be deemed to have been an advance of Costs
by the Corporation to you and upon written request by the Corporation, you shall repay such amounts
to the Corporation. For greater certainty, it is acknowledged that the Corporation shall advance
Costs to you or on your behalf in connection with an Indemnified Claim prior to the resolution of
the merits of any action, provided that if a court or administrative tribunal of competent
jurisdiction in a final judgment that has become non-appealable determines that you do not fulfill
either of the Conditions, you shall repay such amounts to the Corporation.

7. Court Approval

     (a) If the Corporation is required under applicable law to obtain the approval of the court in
order to pay any Indemnified Amount, the Corporation shall seek such approval forthwith upon demand
by you for indemnification or advance.

     (b) In the event of a dispute under this agreement, the Corporation shall apply to the court
to approve a payment under this agreement forthwith upon receiving a written request from you to do
so.

 

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8. Insurance

          The Corporation will advise you promptly after it becomes aware of any material change in or
withdrawal or lapse in coverage of any insurance policy of the Corporation’s existing directors and
officers, details of any claim made under such a policy and the triggering of any extended
reporting period applicable to any such policy.

9. Enurement

          This indemnity and the benefit of the obligations of the undersigned hereunder shall inure to
the benefit of you, your heirs, estate, executors and administrators and shall be binding upon the
Corporation’s successors and assigns.

10. Previous Indemnities

          This indemnity supersedes and replaces all prior indemnities entered into between the
Corporation and you with respect to the subject matter of this indemnity, provided however, that
nothing in this provision shall operate to restrict in any way any indemnity to which you are
entitled under the Corporation’s by-laws or otherwise at law.

11. Jurisdiction

          The courts of the Province of Ontario, Canada shall have exclusive jurisdiction with respect
to all matters dealing with the enforcement of or otherwise arising out of or in connection with
this indemnity, and by accepting and relying hereon you expressly and irrevocably submit and attorn
to the exclusive jurisdiction of, and irrevocably agree to be bound by a judgment of, any such
court relating to all such matters.

12. Notices

Any notice permitted or required hereunder shall be made:

	 	(i)	 	to the Corporation at: Nortel Networks Corporation,
8200 Dixie Rd., Brampton, Ontario, L6T 5P6, Attention: Chief Legal Officer
(fax 905-863-8544); and
	 
	 	(ii)	 	to you at [insert name of director] and [insert]

(or at such other address as you or the Corporation may from time to time specify)
and shall be sufficiently given if delivered personally, if sent by mail or
transmitted by fax and such notice shall be deemed to have been received on the date
it is sent (or, if not sent on a day on which the Corporation is open for business
at its head office (a “business day”), on the next business day), except for notices
sent by mail, which will be deemed to have been received on the fifth business day
following the date mailed.

13. Governing Law

          This indemnity shall in all respects be governed by and construed in accordance with the laws
of the Province of Ontario, Canada, and all disputes, claims or matters arising out of or under it
shall be governed by such laws.

 

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          DATED this          day of

	 	 	 	 	 
	 	 	NORTEL NETWORKS CORPORATION
	 
	 	 	 	 
	 

	 	by	 	 
	 

	 	 	 	 
	 

	 	 	 	Name: 
	 

	 	 	 	Title:   
	 

	 	 	 	            
	 
	 	 	 	 
	 

	 	by	 	 
	 

	 	 	 	 
	 

	 	 	 	Name: 
	 

	 	 	 	Title:   

The undersigned accepts the foregoing indemnity and agrees to comply with the terms and conditions
set out above.

 

	 	 	 
	 
	 	 
	[Insert name of Director]
	 	Witnessexv10w5

 

 

Exhibit 10.5

NORTEL NETWORKS CORPORATION – RESTRICTED STOCK UNITS

INSTRUMENT OF AWARD

United States

	 	 	 	 	 
	 

	 	NAME:
	 	Mike Zafirovski (5078718)
	 
	 	 	 	 
	 

	 	EFFECTIVE DATE:
	 	November 15, 2005
	 
	 	 	 	 
	 

	 	NUMBER OF RSUs:
	 	2,265,000
	 
	 	 	 	 
	 

	 	VESTING SCHEDULE:
	 	20% ON FIRST ANNIVERSARY OF THE EFFECTIVE DATE;
	 

	 	 	 	40% ON SECOND ANNIVERSARY OF THE EFFECTIVE;
	 

	 	 	 	60% ON THIRD ANNIVERSARY OF THE EFFECTIVE DATE;
	 

	 	 	 	80% ON FOURTH ANNIVERSARY OF THE EFFECTIVE DATE;
	 

	 	 	 	100% ON FIFTH ANNIVERSARY OF THE EFFECTIVE DATE
	 
	 	 	 	 
	 

	 	PLAN:
	 	NORTEL 2005 STOCK INCENTIVE PLAN

This instrument (hereinafter the “Instrument of Award”) evidences an Award to you of the number
of Restricted Stock Units (“RSUs”) indicated above, on the Effective Date indicated above,
pursuant to the Nortel 2005 Stock Incentive Plan (as may be amended from time to time, the
“Plan”). Each RSU covered by this Instrument of Award generally entitles you to receive one
common share (a “Share”) of Nortel Networks Corporation (the “Corporation”) at or as soon as
reasonably practicable following the date the RSU becomes Vested in accordance with the Vesting
schedule indicated above, or such earlier date as may be applicable pursuant to the provisions
of the Plan and this Instrument of Award. Capitalized terms not otherwise defined in this
Instrument of Award have the meanings set forth in the Plan.

1. All RSUs covered by this Instrument of Award are subject to the terms and conditions stated
in the Plan, except as specifically or additionally provided in this Instrument of Award 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 RSUs covered by this Instrument of Award depending on your country work
location, residency or payroll, whether on the Effective Date of the Award, on the date of
settlement of the RSUs, 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 Award.

2. You will have the right to receive one Share in settlement of each RSU once the RSU has
become Vested in accordance with the Vesting schedule indicated above, provided that you have
been in the continuous employment of the Company from the Effective Date to the applicable
Vesting date.

3. Vested RSUs will be settled by transfer of Shares to you on or as soon as reasonably
practicable following the Vesting date provided that you execute any required documentation as
provided in the Plan, this Instrument of Award or the Rules and Regulations, in such form or
manner as may be specified from time to time by the Corporation.

4. In consideration of the Award of RSUs, in the event that all or any part of the RSUs become
Vested 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 the Company;
	 
	 	(ii)	 	you fail to comply with or otherwise breach the terms or conditions of any
confidentiality agreement or non-disclosure agreement with the 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 the Company, to terminate their employment or
contractual arrangements with the 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 the Company or any of its distributors, representatives or vendors, which
you have had contact or communication with while employed at the Company;

 

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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 in
cash equal to the number of RSUs that Vested during the Applicable Period multiplied by the
Market Value on the applicable Vesting date (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 Vesting of the RSUs or your
receipt of Shares upon the settlement of Vested RSUs during the Applicable Period (and, where
applicable, in respect of the Award of such RSUs).

     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 Vesting of the RSUs or your receipt of Shares upon
the settlement of Vested RSUs 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 4:

“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
you; 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 of
Vesting of the RSUs or at the time you receive the Shares in settlement of the RSUs,
whichever is applicable (and, where applicable, at the time of the Effective Date of the
Award of such RSUs).

5. The Company may withhold from any amount payable to you, either under the Plan or this
Instrument of Award or otherwise, such amount as may be necessary so as to ensure that the
Company will be able to comply with the applicable provisions of any federal, provincial, state
or local law relating to the withholding of tax (collectively referred to herein as
“taxes”) or to ensure that any other required deductions are paid or otherwise satisfied,
including withholding of the amount, if any, includable in your income. The Company shall also
have the right in its discretion to satisfy any such liability for withholding or other required
deduction amounts by retaining or acquiring any Shares, or retaining any amount payable, which
would otherwise be issued or delivered, provided or paid to you hereunder. The Company may
require you, as a condition to the settlement of a RSU, to pay or reimburse the Company for any
such withholding or other required deduction amounts related to the settlement of the RSUs.

     The Corporation may require, as a condition of settlement of Vested RSUs, that you: (i) pay
any taxes which are required to be paid by you; (ii) reimburse any taxes which are required to
be withheld and remitted by the Company; (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 Award of the RSUs, the Vesting of the RSUs, the exercise of the
RSUs, and/or the forfeiture of the RSUs, and as may be specified in this Instrument of Award,
the Rules and Regulations or otherwise in accordance with the Plan. The Corporation may also
require, as a condition of the settlement of Vested RSUs, that all or a portion of the related
Shares be sold by you or on your behalf to generate proceeds sufficient to cover any tax
withholdings made by the Company on account of applicable taxes (hereinafter “tax
withholdings”), if you do not pay such tax withholdings within the designated time periods as
may be specified in this Instrument of Award, 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 received by you upon the settlement of the Vested RSUs may be
imposed on such Shares on account of taxes or tax withholdings in connection with the Award of
the RSUs, the Vesting of the RSUs, the settlement of the RSUs, and/or the forfeiture of the
RSUs, in each case as may be specified in this Instrument of Award, the Rules and Regulations or
otherwise in accordance with the Plan.

6. In the event of your Termination prior to the date that all of the RSUs awarded to you
pursuant to this Instrument of Award have become Vested, (i) if such Termination is a
termination described in Section 10 of your Employment Terms and Conditions dated as of October
16, 2005 (the “Employment Terms and Conditions”), all then outstanding unvested RSUs awarded to
you pursuant to this Instrument of Award shall immediately become Vested on the date of your
separation from the Corporation; (ii) if such Termination is due to your Retirement or death, a
“pro rata portion” of the then outstanding unvested RSUs awarded to you shall become immediately
Vested and, in accordance with the terms of the Plan and this Instrument of Award, settled and
the remaining portion of such RSUs shall be forfeited and cancelled for no consideration as of
the Date of Termination; and (iii) if such Termination is for any other reason (including by
your employer for Cause or by reason of your resignation for any reason other than in accordance
with Section 10 of your Employment Terms and Conditions), all then outstanding unvested RSUs
awarded to you pursuant to this Instrument of Award shall immediately be forfeited and
cancelled for no consideration; provided, however, that any vesting pursuant to this paragraph
shall be delayed until six months until after your Retirement or other type of Termination to
the extent necessary to avoid adverse tax treatment of the CEO under Section 409A of the U.S.
Internal Revenue Code.

     For purposes of this section 6, “pro rata portion” shall mean the product of one-fifth of
the Restricted Stock Units awarded to you pursuant to the Plan and this Instrument of Award
multiplied by a fraction, the numerator of which equals the number of days which have elapsed as
at the relevant date since the later of (i) the Effective Date of Award of the RSUs, (ii) the
date 20 percent of the RSUs became Vested; (iii) the date 40 percent of the RSUs became Vested;
(iv) the date 60 percent of the RSUs became vested; (v) the date 80 percent of the RSUs became
Vested; and the denominator of which is 365.

 

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7. In the event you are a Specified Executive (as defined under the Nortel Networks Corporation
Executive Retention and Termination Plan (the “ERTP Plan”)) and are subject to a Termination Due
to Change in Control (as defined in the ERTP Plan), the RSUs awarded to you in accordance with
this Instrument of Award shall be included as RSUs (as defined under the ERTP Plan) and receive
all of the benefits provided to RSUs under the ERTP Plan in the event of a Termination Due to
Change in Control.

8. This Instrument of Award: (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
Award 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 Award of RSUs evidenced by this Instrument of Award are specifically recorded
as a variation from the terms and conditions of the Plan or the Rules and Regulations, as the
case may be. Anything in the foregoing to the contrary notwithstanding, in the event of any
conflict between the terms of this Instrument of Grant, the Plan, the Rules and Regulations
(collectively, “Other Provision”) and the
Employment Terms and Conditions, the provisions of the Employment Terms and Conditions shall
govern over such Other Provision to the extent that the Employment Terms and Conditions are more
beneficial to you.

     You acknowledge that a copy of the Plan and the Rules and Regulations, if any, have been
delivered to you with this Instrument of Award.

9. You acknowledge that: (i) the Plan is discretionary and may be suspended or terminated by the
Corporation at any time; (ii) the Award of RSUs does not create any right to receive future
Awards of RSUs, or benefits in lieu of RSUs, and the terms and conditions of any future Awards
of RSUs, if any, will be communicated if and when new Awards of RSUs are to be made; (iii)
participation in the Plan is voluntary; (iv) the future value of the Shares is unknown and
cannot be predicted with certainty; (v) the RSUs 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; (vi) the Vesting of the RSUs ceases upon termination of
employment, whether lawful or otherwise, except as provided in the Employment Terms and
Conditions, Plan and this Instrument of Award, 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 forfeiture of RSUs or the early
settlement thereof on any such termination of employment; and (vii) the Award of the RSUs 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 Award or the RSUs, shall, to the
extent permitted by applicable law, be deemed irrevocably to have waived your entitlement to
pursue such claim.

10. The various provisions and sub-provisions of this Instrument of Award 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 Award, the Plan, the Rules and
Regulations, or any documents related to the Plan.

11. Nortel and its third party service providers may need to collect and use information about
employees for the purpose of the Award and/or settlement of RSUs, 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 Award or the RSUs, you are affirming
your consent to the collection, processing, storage, disclosure and transfer of your personal
information for these purposes.

12. By accepting this Instrument of Award or the RSUs, you expressly consent that the Plan, the
Rules and Regulations and any other document relating thereto, including this Instrument of
Award, be drawn up and/or available in English only. Par votre acceptation de la présente
Entente ou des RSUs, vous consentez expressément à ce que le Régime, les Règlements et tout
autre document connexe, y compris la présente Entente soient rédigés et/ou disponibles en
anglais seulement.

13. By accepting this Instrument of Award or the RSUs, you (i) acknowledge and confirm that you
have read and understood the Plan, the Rules and Regulations and this Instrument of Award, 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
Award, 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 Award of RSUs as described in this
Instrument of Award, please confirm your acceptance by signing where indicated below and
returning it to Nortel Stock Option Administration at the address indicated below.

Signature
of Employee:      /s/ MIKE S.
ZAFIROVSKI          

Nortel Executive Compensation

8200 Dixie Road, Suite 100

Brampton, Ontario, Canada L6T 5P6

Fax# : 905-863-8420 (ESN 333)

 

 

NORTEL
NETWORKS CORPORATION - STOCK OPTIONS

INSTRUMENT OF GRANT

US

	 	 	 	 	 
	 

	 	NAME OF OPTIONEE:
	 	Mike Zafirovski (5078718)
	 
	 	 	 	 
	 

	 	EFFECTIVE DATE:
	 	November 15, 2005
	 
	 	 	 	 
	 

	 	NUMBER OF OPTIONS:
	 	 5,000,000
	 
	 	 	 	 
	 

	 	SUBSCRIPTION PRICE:
	 	 $3.10 (USD)
	 
	 	 	 	 
	 

	 	EXPIRATION DATE:
	 	November 14, 2015
	 
	 	 	 	 
	 

	 	VESTING SCHEDULE:
	 	5YA – One-fifth of the Options become exercisable on
each of the first, second, third, fourth and fifth
anniversary of the Vesting Start Date
	 
	 	 	 	 
	 

	 	VESTING START DATE:
	 	November 15, 2005
	 
	 	 	 	 
	 

	 	PLAN:
	 	Nortel Networks 2000 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, provided further that upon termination of your employment as
provided in Section 10 of your Employment Terms and Conditions dated as of October 16, 2005 (the
“Employment Terms and Conditions”), the Options covered by this Instrument of Grant shall
immediately and fully vest on the date of your separation from the Corporation. 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.

 

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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.

 

3

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. Anything in the foregoing to the contrary notwithstanding, in the event of
any conflict between the terms of this Instrument of Grant, the Plan, the Rules and Regulations
(collectively, “Other Provision”) and the Employment Terms and Conditions, the provisions of the
Employment Terms and Conditions shall govern over such Other Provision to the extent that the
Employment Terms and Conditions are more beneficial to you.

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) participation in the Plan is voluntary; (iv) the future value of the Shares is
unknown and cannot be predicted with certainty; (v) 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; (vi) the vesting of the Options ceases upon
termination of employment, whether lawful or otherwise, except as provided in the Employment
Terms and Conditions and 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 (vii) 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:      /s/ MIKE S.
ZAFIROVSKI

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