Document:

exv10w1

 

EXHIBIT 10.1

FINAL

 

NORTEL NETWORKS LIMITED

and the other members of the NORTEL NETWORKS LIMITED GROUP

 

- and -

 

NORTEL NETWORKS CORPORATION

and the other members of the NORTEL NETWORKS CORPORATION GROUP

THIRD AMENDED AND RESTATED RECIPROCAL CREDIT AGREEMENT

Dated as of December 19, 2002

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 
	ARTICLE 1 DEFINITIONS	 	 	2	 
	Section 1.1.	 	Defined Terms
	 	 	2	 
	Section 1.2.	 	Wholly Owned Subsidiary
	 	 	4	 
	Section 1.3.	 	Currency
	 	 	4	 
	 	 	 	 	 
	ARTICLE 2 ADVANCES	 	 	4	 
	Section 2.1.	 	Commitments
	 	 	4	 
	Section 2.2.	 	Advances
	 	 	5	 
	Section 2.3.	 	Term and Termination
	 	 	6	 
	 	 	 	 	 
	ARTICLE 3 INTEREST	 	 	6	 
	Section 3.1.	 	Interest on Advances
	 	 	6	 
	Section 3.2.	 	No Interest
	 	 	7	 
	Section 3.3.	 	Tax Withholding
	 	 	7	 
	 	 	 	 	 
	ARTICLE 4 REPAYMENT	 	 	8	 
	Section 4.1.	 	Promise to Repay
	 	 	8	 
	Section 4.2.	 	Repayment
	 	 	8	 
	Section 4.3.	 	Prepayment
	 	 	8	 
	Section 4.4.	 	Currency
	 	 	8	 
	Section 4.5.	 	Waiver of Presentment and Notice
	 	 	8	 
	Section 4.6.	 	Conversion Right of Nortel Corporation
	 	 	8	 
	 	 	 	 	 
	ARTICLE 5 BORROWINGS GRIDS AND QUARTERLY REPORTS	 	 	10	 
	Section 5.1.	 	Individual Borrowings Grids
	 	 	10	 
	Section 5.2.	 	Consolidated Borrowings Grids
	 	 	10	 
	Section 5.3.	 	Borrowings Grid Information
	 	 	10	 
	Section 5.4.	 	Provision of Borrowings Grid
	 	 	10	 
	Section 5.5.	 	Obligations Ongoing
	 	 	10	 
	Section 5.6.	 	Quarterly Grid Reports
	 	 	11	 
	Section 5.7.	 	Unpaid Balance
	 	 	11	 
	 	 	 	 	 
	ARTICLE 6 CONDITIONS TO ADVANCES	 	 	11	 
	Section 6.1.	 	Conditions to Advances
	 	 	11	 
	Section 6.2.	 	Payments in Trust
	 	 	14	 
	 	 	 	 	 
	ARTICLE 7 COVENANTS	 	 	15	 
	Section 7.1.	 	Nortel Corporation
	 	 	15	 
	Section 7.2.	 	Nortel Limited
	 	 	15	 
	 	 	 	 	 
	ARTICLE 8 CHANGE IN OWNERSHIP OR CONTROL	 	 	16	 
	Section 8.1.	 	Change in Ownership or Control
	 	 	16	 

 

 

	 	 	 	 	 	 	 	 	 
	ARTICLE 9 GENERAL PROVISIONS	 	 	17	 
	Section 9.1.	 	Payments
	 	 	17	 
	Section 9.2.	 	Waiver
	 	 	17	 
	Section 9.3.	 	Notices
	 	 	17	 
	Section 9.4.	 	Further Assurances
	 	 	18	 
	Section 9.5.	 	Headings
	 	 	19	 
	Section 9.6.	 	Successors and Assigns
	 	 		 
	Section 9.7	 	Severability
	 	 	 	 
	Section 9.8.	 	Governing Law
	 	 	19	 
	Section 9.9.	 	Counterparts
	 	 	19	 
	Section 9.10	 	Reference
to and Effect on the Second Amended and Restated

Reciprocal Credit Agreement
	 	 	19	 
	 	 	 	 	 
	Schedule A	 	 	1	 
	THIRD AMENDED AND RESTATED RECIPROCAL CREDIT AGREEMENT

ADDITIONAL NOTICE INFORMATION	 	 	1	 
	 	 	 	 	 
	Schedule B	 	 	1	 
	FORM OF CONSENT AGREEMENT	 	 	1	 
	 	 	 	 	 
	Schedule C	 	 	1	 
	FORM OF BORROWINGS
GRID FORMAT ADVANCES AND PAYMENTS OF
PRINCIPAL	 	 	1	 

 

          Third Amended and Restated Reciprocal Credit Agreement made among Nortel
Networks Corporation (“Nortel Corporation”), Nortel Networks Limited (“Nortel
Limited”), and the other parties who have executed this Agreement, dated as of
December 19, 2002.

          WHEREAS Nortel Corporation and Nortel Limited entered into a reciprocal
credit agreement (the “Original Reciprocal Credit Agreement”) dated May 1,
2000;

          AND WHEREAS Nortel Corporation, Nortel Limited amended and restated the
Original Reciprocal Credit Agreement and the other parties hereto became
parties thereto in an amended and restated reciprocal credit agreement dated as
of November 4, 2001 and further amended and restated that amended and restated
reciprocal credit agreement pursuant to a second amended and restated
reciprocal credit agreement dated as of December 20, 2001, as further amended
by an amending agreement (designated Amendment No. 1) dated as of December 20,
2001 (collectively, the “Second Amended and Restated Reciprocal Credit
Agreement”);

          AND WHEREAS the parties to the Second Amended and Restated Reciprocal
Credit Agreement wish to further amend and restate the Second Amended and
Restated Reciprocal Credit Agreement on the terms and conditions provided for
herein;

          AND WHEREAS Nortel Limited will use and will continue to use the amount
borrowed from Nortel Corporation for the purpose of earning income from Nortel
Limited’s business or property;

          AND WHEREAS the conversion by Nortel Corporation of any of its loan to
Nortel Limited into common shares of Nortel Limited, as contemplated in this
Agreement, is not intended by Nortel Corporation and Nortel Limited directly or
indirectly in any way to derogate from or otherwise change or compromise Nortel
Corporation’s income earning purpose or income earning use of any amount
borrowed by Nortel Corporation and subsequently loaned by it to Nortel Limited,
and upon and by any such conversion of all or part of any such loan into a
common share of Nortel Limited as contemplated in this Agreement, it was and is
Nortel Corporation’s continuing intention to maintain and enhance its ability
to earn income from its business or property, including in particular Nortel
Corporation’s investment in Nortel Limited;

          IN CONSIDERATION OF the mutual covenants, agreements and undertakings
contained or referred to in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties to this Agreement agree to amend and restate the Second Amended and
Restated Reciprocal Credit Agreement as follows:

 

 

- 2 -

ARTICLE 1

DEFINITIONS

                      Section 1.1. Defined Terms. As used in this Agreement, the following terms
have the following meanings:

“Advance” means any amount advanced by a Lender to a Borrower pursuant to
Article 2;

“Agreement” means this third amended and restated reciprocal credit agreement
among the parties hereto, including the schedules referred to herein and
attached hereto, as the same may be amended or supplemented in writing from
time to time;

“Banking Day” means any day other than a Saturday or a Sunday on which banks in
both Canada and the United States are open for business;

“Borrower” means any member of the Nortel Corporation Group or the Nortel
Limited Group when acting in its capacity as the recipient of Advances
hereunder;

“Borrowings Grid” shall have the meaning given to it in Section 5.1;

“Canadian Dollars” and “Cdn. $” each means lawful money of Canada;

“Canadian Interest Rate” means 100 percent, 110 percent, 120 percent or 130
percent of the floating one-month Bankers’ Acceptance (BA) rate, as mutually
agreed by the Lender and the Borrower on the date of the Advance, and on the
first Banking Day of each month thereafter;

“Common Shares” means fully paid and non-assessable common shares in the
capital of Nortel Limited;

“Conversion Date” shall have the meaning given to it in Section 4.6(2);

“Convertible Advances” shall have the meaning given to it in Section 4.6(1);

“Corporation Group Commitment” means seven hundred and fifty million U.S.
Dollars (U.S. $750,000,000) or the Equivalent Cdn. $ Amount thereof;

“Eligible Bank” means (i) a Canadian bank listed in Schedule I or Schedule II
of the Bank Act (Canada); (ii) a bank organized in one of the United States and
rated A or better by Moody’s, or with an equivalent credit rating; or (iii) a
syndicate of banks all of which are institutions described in (i), (ii) or
both;

“Equivalent Cdn. $ Amount” means, on any day with respect to any amount of U.S.
Dollars, the amount of Canadian Dollars which would be required to buy such

 

- 3 -

amount of U.S. Dollars using the spot rate of the Bank of Canada at
approximately 12:00 noon (Toronto time) on the day;

“Lender” means any member of the Nortel Corporation Group or the Nortel Limited
Group when acting in its capacity as the maker of Advances hereunder;

“Limited Group Commitment” means seven hundred and fifty million U.S. Dollars
(U.S. $750,000,000) or the Equivalent Cdn. $ Amount thereof;

“Nortel Corporation” means Nortel Networks Corporation, a Canadian corporation;

“Nortel Corporation Corporate Advances” shall have the meaning given to it in
Section 2.2(b);

“Nortel Corporation Debt Repayment Advances” shall have the meaning given to it
in Section 2.2(b);

“Nortel Corporation Group” means Nortel Corporation, Alteon WebSystems, Inc. (a
Delaware corporation), CoreTek, Inc. (a Delaware corporation), Xros, Inc. (a
Delaware corporation), and any other wholly owned subsidiary or subsidiaries of
Nortel Corporation (excluding Nortel Limited and its subsidiaries) that agree
in writing to be bound by the terms and conditions of this Agreement by
executing a consent agreement substantially in the form attached as Schedule B;

“Nortel Corporation Group Borrowings Grid” means the borrowings grid for the
Nortel Corporation Group maintained by Nortel Limited and prepared
substantially in the form of Schedule C;

“Nortel Limited” means Nortel Networks Limited, a Canadian corporation;

“Nortel Limited Group” means Nortel Limited, Nortel Networks Inc. (a Delaware
corporation), and Nortel Networks U.S. Finance Inc. (a Delaware corporation),
and any other wholly owned subsidiary or subsidiaries of Nortel Limited that
agree in writing to be bound by the terms and conditions of this Agreement by
executing a consent agreement substantially in the form attached as Schedule B;

“Nortel Limited Group Borrowings Grid” means the borrowings grid for the Nortel
Limited Group maintained by Nortel Corporation and prepared substantially in
the form of Schedule C;

“Notice of Conversion” shall have the meaning given to it in Section 4.6(2);

“Original Restatement Date” means November 4, 2001;

“Quarterly Grid Report” shall have the meaning given to it in Section 5.6;

 

- 4 -

“Second Amended and Restated Reciprocal Credit Agreement” shall have the
meaning given to it in the recitals hereto;

“Term” means the period commencing on the date hereof and ending December 31,
2008;

“U.S. Dollars” and “U.S. $” each means lawful money of the United States of
America; and

“U.S. Interest Rate” means an interest rate, as mutually agreed by the Borrower
and the Lender at the time of the making of an Advance, which is 100 percent,
110 percent, 120 percent, or 130 percent of the short-term monthly Applicable
Federal Rate (AFR), as published each month by the U.S. Internal Revenue
Service pursuant to Section 1274(d) of the Internal Revenue Code.

     Section 1.2. Wholly Owned Subsidiary. For the purposes of this Agreement, a
corporation is a “wholly owned subsidiary” of another corporation if all of the
issued and outstanding voting securities of the corporation are held, other
than by way of collateral security only, by or for the benefit of that other
corporation.

     Section 1.3. Currency. All references to currency or dollar amounts in this
Agreement, unless otherwise specifically indicated, are to U.S. Dollars.

ARTICLE 2

ADVANCES

                      Section 2.1. Commitments.

(a)     Subject to the terms and conditions of this Agreement, each member of the
Nortel Corporation Group agrees to make Advances to any member of the Nortel
Limited Group during the Term, provided that the aggregate outstanding
principal amount of all Advances made from time to time by members of the
Nortel Corporation Group to members of the Nortel Limited Group shall not
exceed the principal amount of the Corporation Group Commitment in accordance
with this Agreement. Each member of the Nortel Limited Group shall be
responsible for repaying only those Advances made to it, and no member of the
Nortel Limited Group shall be responsible for repaying any Advances made to any
other member of the Nortel Limited Group.

(b)     Subject to the terms and conditions of this Agreement, each member of the
Nortel Limited Group agrees to make Advances to any member of the Nortel
Corporation Group during the Term, provided that the aggregate outstanding
principal amount of all Advances made from time to time by members of the
Nortel

 

- 5 -

Limited Group to members of the Nortel Corporation Group shall not
exceed the principal amount of the Limited Group Commitment in accordance with
this Agreement. Each member of the Nortel Corporation Group shall be
responsible for repaying only those Advances made to it, and no member of the Nortel
Corporation Group shall be responsible for repaying any Advances made to any
other member of the Nortel Corporation Group.

                      Section 2.2. Advances.

(a)     Regular Advances — Subject to Article 6, a Lender will make Advances
available to a Borrower in either Canadian dollars or U.S. dollars on any
Banking Day upon the request of the Borrower received by the Lender at least
one (1) Banking Day prior to the date on which the Advance is to be deposited.
The request must specify the amount, currency and date of the Advance as well
as the bank account to which the Advance is to be deposited. The request may
be made verbally, provided the Lender shall at all times have the right to
request confirmation of a request in writing. Advances will be made by deposit
to the bank account specified in the Borrower’s request.

(b)     Nortel Corporation Advances — Notwithstanding Subsection 2.2(a) above,
Advances to Nortel Corporation shall be either (i) Advances used solely for
payment of the principal of, premium, if any, interest or additional interest,
if any, on, any indebtedness of Nortel Corporation to an arm’s length entity
and which is guaranteed by Nortel Limited or the Lender (“Nortel Corporation
Debt Repayment Advances”), or (ii) Advances for other general corporate
purposes of Nortel Corporation (“Nortel Corporation Corporate
Advances”).
Outstanding Nortel Corporation Corporate Advances shall not at any time exceed
fifty million U.S. Dollars (U.S. $50,000,000). All Nortel Corporation Debt
Repayment Advances shall be advanced by the Lender directly to the person to
whom the relevant debt repayment is to be made, including, for greater
certainty, any authorized paying agent for such debt repayment, on the written
direction of Nortel Corporation.

(c)     Deemed Advances — Notwithstanding Subsection 2.2(a) above, each advance
made prior to the Original Restatement Date by a member of the Nortel
Corporation Group to a member of the Nortel Limited Group, or vice versa, shall
be deemed to be an Advance made under this Agreement, effective as of the
Original Restatement Date,

	 	(i)	 	in a principal amount equal to the principal amount
outstanding as of the Original Restatement Date plus accrued and
unpaid interest,
	 
	 	(ii)	 	in the currency of the original advance, and
	 
	 	(iii)	 	at an interest rate (if any) determined in accordance with
Article 3;

 

 

- 6 -

except that, if any such advance does not comply with the terms and conditions
of this Agreement, including but not limited to the conditions contained in
Section 3.2 and Section 6.1, as though the advance was a new Advance made as of
the Original Restatement Date, then such advance shall not be deemed to be an Advance made
under this Agreement and shall be fully excluded from this Agreement.

(d)     Pooling of Funds — The notional pooling of funds pursuant to the terms and
conditions of a cash pooling agreement or other form of banking agreement (i)
by any member or members of the Nortel Corporation Group with the funds of any
member or members of the Nortel Limited Group, or (ii) by any member or members
of the Nortel Limited Group with the funds of any member or members of the
Nortel Corporation Group, shall not be deemed to be, constitute or otherwise
entail an Advance made under this Agreement. The members of the Nortel Limited
Group shall not at any time, individually or collectively, notionally pool
funds of one or more members of the Nortel Limited Group in an aggregate amount
exceeding fifty million U.S. Dollars (U.S.$50,000,000) with the funds of any
member or members of the Nortel Corporation Group. The members of the Nortel
Corporation Group shall not at any time, individually or collectively,
notionally pool funds of one or more members of the Nortel Corporation Group in
an aggregate amount exceeding fifty million U.S. Dollars (U.S.$50,000,000) with
the funds of any member or members of the Nortel Limited Group.

                      Section 2.3. Term and Termination. This Agreement shall terminate and all then
outstanding Advances shall become due and payable on the last day of the Term.

ARTICLE 3

INTEREST

                      Section 3.1. Interest on Advances. Subject to Section 3.2, Advances made to a
Borrower shall bear interest at a U.S. Interest Rate, for Advances made in U.S.
Dollars, or at a Canadian Interest Rate, for Advances made in Canadian Dollars.
Such interest amounts shall be computed and compounded monthly, shall be
documented in the applicable Quarterly Grid Report, and shall be payable on the
net month-end balance by the applicable Borrower 10 days after each September
30 and March 31. Notwithstanding the foregoing, a Lender and the relevant
Borrower may agree in writing at each September 30 or March 31 that the accrued
interest from that semi-annual period is not payable and will be compounded and
included in the aggregate indebtedness of the relevant Borrower, provided that
the Corporation Group Commitment or the Limited Group Commitment, as
applicable, will not have been exceeded as a result of the inclusion of such
accrued interest in the Borrower’s aggregate indebtedness. All interest
calculations shall be documented in the applicable Quarterly Grid Report.

 

- 7 -

                      Section 3.2. No Interest. If, in respect of an Advance, the Borrower and the
Lender are both resident in Canada, then the Borrower and the Lender may agree
at the time of the making of the Advance that the Advance shall bear no interest, provided that the following conditions, and the conditions in
Article 6, are met:

	 	(a)	 	if Nortel Limited is the Borrower, it has, at the time of
making of the Advance, an established committed credit facility with
an Eligible Bank, with sufficient availability thereunder, capable
of being used to finance the repayment to the Lender of all Advances
outstanding from time to time when due pursuant to demand or
otherwise; and
	 
	 	(b)	 	in the case of Advances made by a member of the Nortel
Limited Group, the Lender and Nortel Limited are each able,
financially and legally, at the time of the Advance to declare and
pay a dividend on its common shares outstanding at the time of the
Advance in an amount equal to the amount of the Advance.

                      Section 3.3. Tax Withholding. If withholding of any tax is required in respect
of any payment by any Borrower to any Lender hereunder,

	 	(a)	 	the Lender shall complete and provide to the Borrower, or if
required, to the applicable taxing authority, within a reasonable
period of time, such forms, certifications or other documents in
order to allow the Borrower to make payments to the Lender without
any deduction or withholding, or deduction at a reduced rate, on
account of withholding taxes; and,
	 
	 	(b)	 	the Borrower shall:

	 
	 	(i)	 	withhold the appropriate tax amount,
if any, from such payment;
	 
	 	(ii)	 	pay such tax amount to the relevant
authorities in accordance with applicable law; and
	 
	 	(iii)	 	furnish to the Lender within 30
calendar days of the tax payment, all original tax
receipts or certified copies, in the Lender’s name
showing payment of the tax and such other documentation
relating to the tax payment which Lender may reasonably
request; provided that, if such tax receipts are not
provided to the Lender, it shall be assumed that the
Borrower made no payment of tax to the relevant
authorities and the amount previously withheld from such
payment shall be paid to the Lender.

 

 

- 8 -

ARTICLE 4

REPAYMENT

                      Section 4.1. Promise to Repay. Each Borrower promises to pay, in accordance
with Section 4.2, the principal amount of, and accrued and unpaid interest on,
all Advances made under this Agreement to such Borrower by any Lender, and
outstanding against such Borrower as recorded in the column headed “Unpaid
Principal Balance” on the applicable Borrowings Grid, to or to the order of
such Lender, at the Lender’s offices, or such other place as the Lender may
designate.

                      Section 4.2. Repayment. The principal outstanding in respect of all Advances,
together with accrued and unpaid interest, is due and payable on the earlier of
(a) written demand for repayment being made by the Lender to the Borrower at
least three (3) Banking Days in advance of the specified repayment date, (b) a
change in ownership or control in accordance with Section 8.1, and (c) the last
Banking Day of the Term.

                      Section 4.3. Prepayment. A Borrower may, in its sole and absolute discretion,
from time to time without notice, bonus or penalty, make prepayments in any
amounts desired, on account of the principal and interest, if applicable,
outstanding on any Advance. If more than one Advance is outstanding at the
time a Borrower elects to make a prepayment, the Borrower shall be entitled to
specify at the time it makes said prepayment the specific Advance to which the
prepayment will apply. All prepayments will be applied first on account of
interest, if any, and then on account of principal due hereunder for the
Advance to which the prepayment applies.

                      Section 4.4. Currency. All repayments and prepayments of amounts on account of
principal and interest shall be made in the currency in which the applicable
Advance was made.

                      Section 4.5. Waiver of Presentment and Notice. Each Borrower under this
Agreement waives presentment for payment and notice of non-payment.

                      Section 4.6. Conversion Right of Nortel Corporation. (1) Nortel
Corporation shall have the right at any time and from time to time, prior to
repayment of Advances by Nortel Corporation to Nortel Limited (the “Convertible
Advances”), to convert the whole, or any part in excess of $100 million, of the
principal amount outstanding under the Convertible Advances into one (1) Common
Share (rather than any other number of Common Shares that would result from
dividing such principal amount by a conversion price that otherwise would be
specified); provided that, at the time of such conversion, Nortel Corporation
beneficially owns, directly or indirectly, all of the outstanding Common
Shares.

 

- 9 -

          (2)  Subject to Section 4.6(1) above, Nortel Corporation may convert all or
part of the Convertible Advances outstanding by delivering to Nortel Limited a
notice of conversion, in writing, specifying that portion of the Principal
Amount outstanding that Nortel Corporation elects to convert (the “Notice of
Conversion”). Nortel Limited shall, within two Banking Days following the
receipt of the Notice of Conversion (the “Conversion
Date”) deliver to Nortel
Corporation one (1) Common Share, provided, however, that there shall be no
payment or adjustment by Nortel Limited on account of any interest accrued or
accruing from the date of the last preceding interest payment date on the
principal amount of the Convertible Advances so converted. Subject to the
foregoing provisions of this Section 4.6(2), at the close of business on the
Conversion Date: (i) such conversion shall be deemed to have been made, and
(ii) Nortel Corporation shall be treated for all purposes as having become the
holder of record of such Common Share. The Common Share issued upon such
conversion shall rank only in respect of dividends declared in favour of
shareholders of record on or after the Conversion Date.

          (3)  Notwithstanding Section 4.6(1), above, should it be determined by any
relevant taxing authority subsequently to a conversion of the whole or any part
of the Convertible Advances that such conversion into one (1) Common Share is
insufficient to be consistent with and satisfy the income earning purposes and
uses of and by Nortel Corporation and Nortel Limited, Nortel Limited shall
issue and Nortel Corporation shall cause Nortel Limited to issue such
additional Common Shares as shall be sufficient to be consistent with and to
satisfy the income earning purposes and uses of and by Nortel Corporation and
Nortel Limited.

 

- 10 -

     (4)

ARTICLE 5

BORROWINGS GRIDS AND QUARTERLY REPORTS

                      Section 5.1. Individual Borrowings Grids. All Advances and all payments on
account of such Advances by a given Lender to a given Borrower shall be
recorded by a notation on a borrowings grid (a “Borrowings Grid”) maintained by
the Lender. Any failure to make any required notation on the applicable
Borrowings Grid shall not affect the liability of a Borrower to the respective
Lender in respect of the relevant Advance.

                      Section 5.2. Consolidated Borrowings Grids. In addition to the individual
Borrowings Grids, all Advances and all payments on account of such Advances
shall be evidenced by a notation on the consolidated Nortel Limited Group
Borrowings Grid, in the case of borrowings by members of the Nortel Limited
Group, and on the consolidated Nortel Corporation Group Borrowings Grid, in the
case of borrowings by members of the Nortel Corporation Group. Nortel
Corporation shall maintain the Nortel Limited Group Borrowings Grid, and Nortel
Limited shall maintain the Nortel Corporation Group Borrowings Grid. Any
failure to make any required notation on the applicable Borrowings Grid shall
not affect the liability of a Borrower to the respective Lender in respect of
the relevant Advance.

                      Section 5.3. Borrowings Grid Information. Each Borrowings Grid shall contain
the following information: (i) the name(s) of the Borrower(s) and the
Lender(s), as well as the date, currency and amount of each Advance and the
resulting increase in the Unpaid Principal Balance; (ii) the Interest Rate
applicable to each Advance, if applicable; (iii) the date and amount of each
repayment or prepayment on account of the principal paid to the Lender and the
resulting decrease of the Unpaid Principal Balance; and, in the case where
Nortel Corporation is the Borrower, (iv) whether the Advance is a Nortel
Corporation Corporate Advance or a Nortel Corporation Debt Repayment Advance.

                      Section 5.4. Provision of Borrowings Grid. As may be requested by a Borrower
from time to time, each Lender shall obtain and provide a copy of the relevant
Borrowings Grid to its respective Borrower.

                      Section 5.5. Obligations Ongoing. The reduction of the Unpaid Principal
Balance on the relevant Borrowings Grid to zero at any time or from time to
time shall not affect the ongoing validity of this Agreement or the obligations of any Borrower with respect to any Unpaid
Principal Balance subsequently recorded against such Borrower on the relevant
Borrowings Grid.

 

- 11 -

                      Section 5.6. Quarterly Grid Reports. (a) Nortel Limited shall prepare a report
(a “Quarterly Grid Report”) attaching the Nortel Corporation Group Borrowings
Grid and also evidencing the appropriate interest calculations for any and all
Advances under this Agreement by members of the Nortel Limited Group to members
of the Nortel Corporation Group. Nortel Limited shall submit its Quarterly
Grid Report to Nortel Corporation and the applicable Borrowers for approval on
the last Banking Day of each quarter.

(b)       Nortel Corporation shall prepare a Quarterly Grid Report attaching the
Nortel Limited Group Borrowings Grid and also evidencing the appropriate
interest calculations for any and all Advances under this Agreement by members
of the Nortel Corporation Group to members of the Nortel Limited Group. Nortel
Corporation shall submit its Quarterly Grid Report to Nortel Limited and the
applicable Borrowers for approval on the last Banking Day of each quarter.

                      Section 5.7. Unpaid Balance. Each Borrower acknowledges, confirms and agrees
with each Lender that all amounts recorded on the Quarterly Grid Reports
prepared by Nortel Corporation and Nortel Limited in accordance with this
Article 5 will constitute prima facie evidence of any and all balances owing as
indicated in such Quarterly Grid Reports, and, in the absence of evidence to
the contrary, will be conclusive evidence of any unpaid balance. In the event
of a conflict between a Borrowings Grid and a Quarterly Grid Report, the
Quarterly Grid Report shall govern. If a Quarterly Grid Report has not yet
been prepared in respect of a given quarter, then each Borrower acknowledges,
confirms and agrees with each Lender that all amounts recorded on the
applicable Group Borrowings Grid prepared by Nortel Corporation or Nortel
Limited, as the case may be, in accordance with this Article 5 will constitute
prima facie evidence of any and all balances owing as indicated in such Group
Borrowings Grid, and, in the absence of evidence to the contrary, will be
conclusive evidence of any unpaid balance.

ARTICLE 6

CONDITIONS TO ADVANCES

                      Section 6.1. Conditions to Advances. The obligation of a Lender to make any
Advances will be conditional upon the following:

	 	(a)	 	receipt by such Lender of the following in form and substance
reasonably satisfactory to such Lender:

	 
	 	(i)	 	the request required under Section
2.2; and
	 
	 	(ii)	 	any other documents or assurances
that the Lender may reasonably require;

 

 

- 12 -

	 	(b)	 	there has not occurred and there is not continuing a default
or breach under any other agreement, document or instrument (i)
involving the failure of Nortel Corporation, Nortel Limited, the
Borrower or the Lender to make any payment when due in respect of
any borrowed money, or a guarantee for borrowed money, in excess of
$100,000,000 (or the equivalent amount in any other currency or
currencies), in the aggregate, or (ii) causing, or permitting any
creditor or a trustee to cause, any indebtedness of Nortel
Corporation, Nortel Limited, the Borrower or the Lender in excess of
$100,000,000 (or the equivalent amount in any other currency or
currencies), in the aggregate, to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment;
	 
	 	(c)	 	in the case of Advances by any member of the Nortel Limited
Group, there are no arrears of dividends (other than non-cumulative
dividends the entitlement to which has been extinguished) on any
series of preference shares of Nortel Limited or of the Lender
outstanding from time to time; except that, Nortel Limited and the
Lender may waive the condition in this paragraph (c): (i) if and to
the extent that the Advance is being made to permit the Borrower to
make any payment of the principal of, premium, if any, interest or
additional interest, if any, on any outstanding indebtedness of the
Borrower to an arm’s length entity and which is guaranteed by Nortel
Limited or the Lender; or (ii) upon a good faith determination by
the board of directors of each of Nortel Limited and the Lender,
after consideration of the interests of the holders of the
outstanding preference shares, that making such Advance would be in
the best interests of Nortel Limited and the Lender, respectively;
	 
	 	(d)	 	in the case of Advances by any member of the Nortel
Corporation Group (other than Nortel Corporation), there are no
arrears of dividends (other than non-cumulative dividends the
entitlement to which has been extinguished) on any series of
preference shares of the Lender outstanding from time to time;
except that, the Lender may waive the condition in this paragraph
(d): (i) if and to the extent that the Advance is being made to
permit the Borrower to make any payment of the principal of,
premium, if any, interest or additional interest, if any, on any outstanding indebtedness of the Borrower
to an arm’s length entity and which is guaranteed by the Lender; or
(ii) upon a good faith determination by the board of directors of
the Lender, after consideration of the interests of the holders of
the outstanding preference shares, that making such Advance would
be in the best interests of the Lender;

 

 

- 13 -

	 	(e)	 	at the time of the making of the Advance:

	 
	 	(i)	 	if the Lender is a corporation formed
under the laws of a jurisdiction in United States of
America, the Lender is not, nor after making the Advance
would be, unable to pay its liabilities as they become
due; and
	 
	 	(ii)	 	none of Nortel Corporation, Nortel
Limited, or, if the Lender is a corporation formed under
the laws of a jurisdiction in Canada or the laws of
Canada, the Lender, has ceased paying its current
obligations in the ordinary course of business as they
generally become due;

	 
	 	(f)	 	the making of the Advance is not prohibited financial
assistance under the corporate law governing the Lender;
	 
	 	(g)	 	the Lender has surplus funds available to it to make the
Advance based on the Lender’s cash flow forecast for the six-month
period immediately following the date on which the Advance is to be
made;
	 
	 	(h)	 	no decree, judgment, or order by a court having jurisdiction
in the premises having been entered adjudging Nortel Corporation,
Nortel Limited or the Borrower a bankrupt or insolvent or approving
as properly filed a petition seeking reorganization, readjustment,
arrangement, composition or similar relief for Nortel Corporation,
Nortel Limited or the Borrower under any bankruptcy, insolvency or
other similar applicable law or appointing a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency of Nortel
Corporation, Nortel Limited or the Borrower, as the case may be, of
a substantial part of its property, or for the winding up or
liquidation of its affairs and no substantial part of the property
of the Nortel Corporation, Nortel Limited or the Borrower having
been sequestered or attached;
	 
	 	(i)	 	none of Nortel Corporation, Nortel Limited or the Borrower
having instituted proceedings to be adjudicated a voluntary
bankrupt, or having consented to the filing of a bankruptcy
proceeding against it, or having filed a petition or answer or
consent seeking reorganization, readjustment, arrangement,
composition or similar relief under any bankruptcy, insolvency or
other similar applicable law and none of Nortel Corporation, Nortel Limited or the Borrower having consented
to the filing of any such petition, or having consented to the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency for it or of a substantial part of its
property, or having made an assignment for the benefit of creditors
and no

 

 

- 14 -

	 	 	 	corporate action having been taken by Nortel Corporation,
Nortel Limited or the Borrower in furtherance of any of the
foregoing actions;
	 
	 	(j)	 	in the case of Advances by any member of the Nortel
Corporation Group (other than Nortel Corporation), the prior
approval of the Treasurer or Assistant Treasurer of Nortel
Corporation or of any other person as may be designated in writing
for the purposes hereof by Nortel Corporation, and such prior
approval shall be evidenced by an electronic mail message
transmitted from the person approving the Advance, or, in
circumstances where electronic mail is not available or practicable,
by such other reasonable form of written communication from the
person approving the Advance as such person may deem appropriate in
the circumstances; and
	 
	 	(k)	 	in the case of Advances by any member of the Nortel Limited
Group (other than Nortel Limited), the prior approval of the
Treasurer or Assistant Treasurer of Nortel Limited or of any other
person as may be designated in writing for the purposes hereof by
Nortel Limited, and such prior approval shall be evidenced by an
electronic mail message transmitted from the person approving the
Advance, or, in circumstances where electronic mail is not available
or practicable, by such other reasonable form of written
communication from the person approving the Advance as such person
may deem appropriate in the circumstances.

                      Section 6.2. Payments in Trust. A Lender shall not, and shall not be deemed,
in any circumstances, to have waived compliance with any conditions precedent
listed in Section 6.1 hereof. In the event any Advance is made without
compliance with all of the conditions precedent listed in Section 6.1 hereof,
the Advance shall be deemed to have been paid by the Lender to the Borrower in
trust for the Lender and the Borrower shall forthwith repay the amount of the
said Advance to the Lender.

 

- 15 -

ARTICLE 7

COVENANTS

                      Section 7.1. Nortel Corporation. Nortel Corporation covenants that it shall
cause every other member of the Nortel Corporation Group to have sufficient
funds at all times to meet such member’s obligations to make any and all
payments on account of principal and/or interest due and payable in connection
with any and all Advances made to such member under this Agreement. Nothing in
this Section 7.1 shall (i) constitute Nortel Corporation a guarantor of any
Advance made under this Agreement to any other member of the Nortel Corporation
Group, or (ii) deem Nortel Corporation to have assumed any Advance, or any
obligations in connection with any Advance, made under this Agreement to any
other member of the Nortel Corporation Group.

                      Section 7.2. Nortel Limited. Nortel Limited covenants that it shall cause
every other member of the Nortel Limited Group to have sufficient funds at all
times to meet such member’s obligations to make any and all payments on account
of principal and/or interest due and payable in connection with any and all
Advances made to such member under this Agreement. Nothing in this Section 7.2
shall (i) constitute Nortel Limited a guarantor of any Advance made under this
Agreement to any other member of the Nortel Limited Group, or (ii) deem Nortel
Limited to have assumed any Advance, or any obligations in connection with any
Advance, made under this Agreement to any other member of the Nortel Limited
Group.

 

- 16 -

ARTICLE 8

CHANGE IN OWNERSHIP OR CONTROL

                      Section 8.1. Change in Ownership or Control. If a party to this Agreement (a
“Removed Party”):

	(a)	 	is acquired by another corporation, or is merged into or consolidated
with another corporation, or engages in any amalgamation, or plan of
arrangement, or any other transaction, and, upon completion of any such
acquisition, merger, or other transaction, the Removed Party, or the
successor corporation resulting from any such transaction, is no longer a
direct or indirect wholly owned subsidiary of Nortel Corporation and/or
Nortel Limited, or
	 
	(b)	 	is liquidated or sells or otherwise disposes of all or substantially all
of its assets to another corporation, whether or not such other
corporation is a direct or indirect wholly owned subsidiary of Nortel
Corporation and/or Nortel Limited, or
	 
	(c)	 	is a member of the Nortel Limited Group (other than Nortel Limited) and
becomes a direct or indirect wholly owned subsidiary of Nortel Corporation
(and is not also a direct or indirect wholly owned subsidiary of Nortel
Limited), or is a member of the Nortel Corporation Group and becomes a
direct or indirect wholly owned subsidiary of Nortel Limited,

then, upon completion of any such transaction or event, (i) the principal
outstanding in respect of all Advances made to the Removed Party, together with
accrued and unpaid interest, shall immediately become due and payable by the
Removed Party without notice; (ii) the principal outstanding in respect of all
Advances made by the Removed Party to another party under this Agreement,
together with accrued and unpaid interest, shall immediately become due and
payable by the other party without notice; and (iii) no additional Advances
shall be made under this Agreement by or to the Removed Party. Notwithstanding
the foregoing, if the Removed Party is a Removed Party by virtue of clause (c)
above, then the Removed Party and the applicable Borrower(s) or Lender(s), as
the case may be, may deem any or all of the outstanding Advances made under
this Agreement by or to the Removed Party to have been fully repaid by
negotiating independent loan documentation in respect of any or all such
Advances in lieu of actual repayment thereof. Upon the repayment of the
principal amount outstanding, and accrued and unpaid interest, in respect of
all Advances made under this Agreement by or to the Removed Party, or upon
deemed repayment pursuant to the execution of independent loan documentation,
the Removed Party shall cease to be a party to this Agreement and all such

 

- 17 -

Advances shall cease to be governed by this Agreement and shall be removed from
all Borrowings Grids and Quarterly Grid Reports prepared under this Agreement.

ARTICLE 9

GENERAL PROVISIONS

                      Section 9.1. Payments. All payments required will be made in immediately
available funds at the office of the respective Lender at the address listed
for such Lender under Section 9.3 or to any other place that such Lender
directs.

                      Section 9.2. Waiver. Subject to Section 6.2,

	 	(a)	 	a Lender may in writing waive any breach by the respective
Borrower of any of the provisions contained in this Agreement or any
default by the respective Borrower in the observance or performance
of any covenant required to be observed or performed under this
Agreement; and
	 
	 	(b)	 	the parties to this Agreement may in writing waive compliance
with Section 8.1, notwithstanding the occurrence of a transaction or
event contemplated by Subsections 8.1(a), (b), or (c), and deem the
party to this Agreement that would have otherwise been a Removed
Party to continue to be a full and participating party to this
Agreement in all respects as if the transaction or event
contemplated by Subsections 8.1(a), (b), or (c) had not occurred;

provided that no act or omission by a Lender will be taken in any manner
whatsoever to affect any subsequent breach, or default, or the rights resulting
therefrom.

                      Section 9.3. Notices. Any request, notice or demand made or given in
connection with this Agreement may be given by delivery to the relevant party
at its address or facsimile number set forth below, or any other address or
facsimile number that a party may direct:

	 	(a)	 	if to Nortel Corporation:

	 
	 	 	 	Nortel Networks Corporation
	 	 	 	c/o Nortel Networks Limited
	 	 	 	8200 Dixie Road, Suite 100
	 	 	 	Brampton, Ontario
	 	 	 	L6T 5P6
	 

 

 

- 18 -

	 	 	 	Attention: Assistant Treasurer
	 	 	 	Facsimile Number: (905) 863-8563
	 
	 	 	 	with a copy to:

	 
	 	 	 	Attention: Corporate Secretary
	 	 	 	Facsimile Number: (905) 863-8386
	 

	 	(b)	 	if to Nortel Limited:
	 

	Nortel Networks Limited	 	 	 

	 	 	 	8200 Dixie Road, Suite 100

Brampton, Ontario

L6T 5P6
	 
	 	 	 	Attention: Assistant Treasurer
	 	 	 	Facsimile Number: (905) 863-8563

	 
	 	 	 	with a copy to:
	 

	 	 	 	Attention: Corporate Secretary
	 	 	 	Facsimile Number: (905) 863-8386
	 

	 	(c)	 	if to a member of the Nortel Corporation Group (other than
Nortel Corporation), to the member’s address listed in Schedule A,
with a copy to Nortel Corporation;
	 
	 	(d)	 	if to a member of the Nortel Limited Group (other than Nortel
Limited), to the member’s address listed in Schedule A, with a copy
to Nortel Limited; and
	 
	 	(e)	 	if to a member of the Nortel Corporation Group or the Nortel
Limited Group who becomes a party to this Agreement by executing a
consent agreement after the date hereof, to the member’s address
listed in the applicable consent agreement, with copies to such
other persons as may be indicated in the consent agreement.

                      Section 9.4. Further Assurances. Each Borrower agrees that it will, from time
to time, at the request of a Lender, execute and deliver or obtain and deliver
any agreements, instruments and documents and take all further action as may be
reasonably required by such Lender to accomplish the purposes of this
Agreement.

 

- 19 -

                      Section 9.5. Headings. The headings of this Agreement are included for
convenience of reference only and do not constitute a part of this Agreement
for any other purpose.

                      Section 9.6. Successors and Assigns. All of the covenants, stipulations,
promises and agreements in this Agreement shall bind the
parties’ respective successors and permitted assigns, whether so expressed or not; provided,
however, that no party may, without the prior consent of the others, assign any
rights, powers, duties, or obligations under this Agreement.

                      Section 9.7. Severability. Any provision of this Agreement which is or becomes
prohibited or unenforceable in any jurisdiction, does not invalidate, affect or
impair the remaining provisions thereof and any such prohibition or
unenforceability in any jurisdiction does not invalidate or render
unenforceable such provision in any other jurisdiction.

                      Section 9.8. Governing Law. This Agreement and all other documents and
instruments referred to will be construed in accordance with and governed by
the laws of the Province of Ontario and the laws of Canada applicable therein.

                      Section 9.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

                      Section 9.10. Reference to and Effect on the Second Amended and Restated
Reciprocal Credit Agreement. On and after the date hereof, each reference in
the Second Amended and Restated Reciprocal Credit Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein” or words like import, and each
reference to the Second Amended and Restated Reciprocal Credit Agreement in all
other agreements, documents, instruments delivered by all or any one or more of
the parties hereto shall mean and be a reference to the Second Amended and
Restated Reciprocal Credit Agreement as amended and restated hereby, and except
as this Third Amended and Restated Reciprocal Credit Agreement may be further
amended, restated or supplemented, the Second Amended and Restated Reciprocal
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed.

[The remainder of this page intentionally left blank.]

 

- 20 -

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first written above.

	 	 	 	 
	 	 	
NORTEL NETWORKS CORPORATION
	 	 	 
	 	 	
By: /s/ Katharine B. Stevenson

	 	 	 	

	 	 	
Name:  Katharine B. Stevenson
	 	 	
Title:    Treasurer
	 	 	 
	 	 	
By: /s/ Douglas C. Beatty
	 	 	 	

	 	 	
Name:  Douglas C. Beatty
	 	 	
Title:    Chief Financial Officer
	 	 	 	 
	 	 	 	 
	 	 	
NORTEL NETWORKS LIMITED
	 	 	 	 
	 	 	
By: /s/ Katharine B. Stevenson
	 	 	 	

	 	 	
Name:  Katharine B. Stevenson
	 	 	
Title:    Treasurer
	 	 	 	 
	 	 	
By: /s/ Douglas C. Beatty
	 	 	 	

	 	 	
Name:  Douglas C. Beatty
	 	 	
Title:    Chief Financial Officer
	 	 	 
	 	 	 
	 	 	
NORTEL NETWORKS INC.
	 	 	 
	 	 	
By: /s/ Mary Cross
	 	 	 	

	 	 	
Name:  Mary Cross
	 	 	
Title:    President
	 	 	 
	 	 	 
	 	 	
NORTEL NETWORKS U.S.
FINANCE INC.
	 	 	 
	 	 	
By: /s/ Katharine Stevenson
	 	 	 	

	 	 	
Name:  Katharine Stevenson
	 	 	
Title:    President

[Third Amended and Restated Reciprocal Credit Agreement – Signature Page]

 

- 21 -

	 	 	 	 
	 	 	
ALTEON WEBSYSTEMS, INC.
	 	 	 
	 	 	
By: /s/ Mary Cross
	 	 	 	

	 	 	
Name:  Mary Cross
	 	 	
Title:    President
	 	 	 
	 	 	 
	 	 	
CORETEK, INC.
	 	 	 
	 	 	
By: /s/ Craig Johnson
	 	 	 	

	 	 	
Name:  Craig Johnson
	 	 	
Title:    President
	 	 	 
	 	 	 
	 	 	
XROS, INC.
	 	 	 
	 	 	
By: /s/ Craig Johnson
	 	 	 	

	 	 	
Name:  Craig Johnson
	 	 	
Title:    President

[Third Amended and Restated Reciprocal Credit Agreement – Signature Page]

 

Schedule A

THIRD AMENDED AND RESTATED

RECIPROCAL CREDIT AGREEMENT

 

ADDITIONAL NOTICE INFORMATION

Nortel Networks Inc.

Nortel Networks Plaza

200 Athens Way

Nashville, Tennessee

United States

37228-1397

Attn: Treasurer

          cc: Secretary

Facsimile: 615-734-4067

Nortel Networks U.S. Finance Inc.

Nortel Networks Plaza

200 Athens Way

Nashville, TN

USA

37228-1397

Attn: Treasurer

          cc: Secretary

Facsimile: 615-734-4067

Alteon WebSystems, Inc.

Nortel Networks Plaza

200 Athens Way

Nashville, TN

U.S.A.

37228-1397

Attn: Treasurer

Facsimile: 615-734-4067

 

 

- 2 -

CoreTek, Inc.

Nortel Networks Plaza

200 Athens Way

Nashville, TN

U.S.A.

37228-1397

Attn: Treasurer

Facsimile: 615-734-4067

Xros, Inc.

Nortel Networks Plaza

200 Athens Way

Nashville, TN

U.S.A.

37228-1397

Attn: Treasurer

Facsimile: 615-734-4067

 

Schedule B

FORM OF CONSENT AGREEMENT

Date: __________________

The undersigned (the “Member”) is a [jurisdiction] corporation and a wholly
owned subsidiary of Nortel Networks [Corporation/Limited]. The Member hereby
executes this Consent Agreement to evidence the following matters to the
parties to the Third Amended and Restated Reciprocal Credit Agreement among
Nortel Networks Corporation, Nortel Networks Limited, and the other parties
thereto (the “Reciprocal Credit Agreement”):

	1.	 	The Member agrees to become a member of the Nortel [Corporation/Limited]
Group, effective as of the date of this Consent Agreement, and agrees to
be bound by the terms and conditions of the Reciprocal Credit Agreement;
and
	 
	2.	 	The Member agrees that for the purposes of Subsection 9.3(e) of the
Reciprocal Credit Agreement, any request, notice or demand made or given
in connection with the Reciprocal Credit Agreement may be given to the
Member by delivery to the address or facsimile number listed below, with a
copy to Nortel Networks [Corporation/Limited].

Capitalized terms used but not otherwise defined in this Consent Agreement
shall have the meanings given to them in the Reciprocal Credit Agreement.

IN WITNESS WHEREOF the Member has caused this Consent Agreement to be executed
by its duly authorized officers as of the date first written above.

	 	 	 
	 	 	

(Member Name)
	 	 	 
	 	 	

(Signature)
	 	 	 
	 	 	

(Officer’s Title)
	 	 	 
	 	 	

(Address)
	 	 	 
	 	 	

	 	 	 
	 	 	

(Facsimile)

 

 

Schedule C

FORM OF BORROWINGS GRID FORMAT

 

ADVANCES AND PAYMENTS OF PRINCIPAL

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Principal	 	 	 	 	 	 
	 	 	 	 	 	 	Amount	 	Currency	 	Interest	 	 	 	Repaid	 	Unpaid	 	 	 	 
	 	 	 	 	 	 	of	 	of	 	Rate	 	Type of	 	or	 	Principal	 	Approved	 	Notation
	Date	 	Borrower	 	Lender	 	Advance	 	Advance	 	Applicable	 	Advance	 	Prepaid	 	Balance	 	by	 	made byexv10w2

 

EXHIBIT 10.2

FINAL – October 23, 2002

NORTEL NETWORKS

SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN

 

CONTENTS

	 	 	 	 	 	 	 	 	 
	SECTION	 	 	 	 	 	PAGE
	
	 	 	 	 	 	

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

 

NORTEL NETWORKS

SUPPLEMENTARY EXECUTIVE RETIREMENT PLAN

1.  PURPOSE OF PLAN

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

2.  DEFINITIONS

     In the Plan,

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

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

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

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

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

-1-

 

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

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

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

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

     “Corporation” means Nortel Networks Limited or its successors;

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

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

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

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

-2-

 

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

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

	 	 	 	 	 
	Date	 	Amount*1
	
	 	

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

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

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

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

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

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

1
Canadian or US dollars, as applicable.

-3-

 

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

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

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

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

	 	 	 	 	 
	Sum of Age Plus Service Points	 	Percentage Credit
	
	 	

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

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

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

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

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

-4-

 

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

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

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

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

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

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

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

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

-5-

 

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

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

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

-6-

 

3.  ELIGIBILITY TO PARTICIPATE IN THE PLAN

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

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

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

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

4.  TOTAL RETIREMENT BENEFIT

     “Total Retirement Benefit” in respect of an Executive

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

-7-

 

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

     SERP Benefits shall be calculated as follows:

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

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

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

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

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

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

-8-

 

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

5.  SERP BENEFIT

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

-9-

 

6.    TRANSFERS

6.1  Transfers Prior to May 1, 2000

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

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

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

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

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

6.2  Transfers after April 30, 2000

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

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

-10-

 

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

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

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

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

7.  SURVIVOR BENEFIT

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

8.    PAYMENT OF BENEFITS

8.1  Mode of Payment

       (a) 
Canadian Pension Plan, Part I Benefit

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

-11-

 

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

     (b)  Canadian Pension Plan, Part II Benefit

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

     (c)  U.S. Pension Plan Benefit

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

8.2 Company Effecting Payment

-12-

 

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

8.3  Currency

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

9.    ADMINISTRATION

9.1  Committee

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

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

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

9.2  Limitation of Liability

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

-13-

 

9.3  Evidence of Entitlement to Benefits

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

10.  EFFECTIVE DATE OF PLAN

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

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

11.  AMENDMENT, TERMINATION

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

12.   GENERAL PROVISIONS

12.1 Assignment

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

-14-

 

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

12.2  No Right to Continuation of Employment

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

12.3  No Additional Rights to benefits under Pension Plan

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

12.4  Funding

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

12.5  Tax Treatment

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

-15-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00047-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00047-of-00352.parquet"}]]