Document:

EXHIBIT 10.11
                                 -------------
                                   AMENDMENT
                                      NO. 1
                                       TO
                              AMENDED AND RESTATED
                                CREDIT AGREEMENT

         This AMENDMENT (this "Amendment") is entered into as of this 27th day
of June, 2003, by and among STANDARD MOTOR PRODUCTS, INC., a New York
corporation ("SMP"), STANRIC, INC., a Delaware corporation ("SI"), MARDEVCO
CREDIT CORP., a New York corporation ("MCC") (SMP, SI and MCC are sometimes
collectively referred to herein as "Borrowers" and individually as a
"Borrower"), the other Credit Parties signatory to the Credit Agreement (as
herein defined), lenders who are party to the Credit Agreement ("Lenders"),
GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware corporation, in its capacity as
Agent for Lenders ("Agent"), BANK OF AMERICA, N.A., for itself, as Lender, and
as Syndication Agent, and GMAC COMMERCIAL FINANCE LLC (as successor by merger to
GMAC Commercial Credit LLC), for itself, as Lender, and as Documentation Agent.

         WHEREAS, pursuant to that certain Amended and Restated Credit Agreement
dated as of February 7, 2003, by and among Borrowers, Credit Parties, Agent,
Syndication Agent, Documentation Agent and Lenders (including all annexes,
exhibits and schedules thereto, as from time to time hereafter amended,
restated, supplemented or otherwise modified, the "Credit Agreement"), Lenders
have made Loans to, and incurred Letter of Credit Obligations on behalf of
Borrowers;

         WHEREAS, Borrowers have informed Agent that SMP intends to transfer
ownership of the Real Estate of SMP located in Long Island City, New York to SMP
Real Estate LLC (the "SPV") and, in conjunction with such transfer, SPV will be
obtaining mortgage financing on such Real Estate; and

         WHEREAS, Borrowers have informed Agent that programs similar to the
Autozone/Sun Trust Program may be instituted by significant Account Debtors and
Borrowers would like to enter into such programs on a basis similar to that
permitted for the Autozone/SunTrust Program; and

         WHEREAS, in contemplation of the Acquisition and the determination of
actual financial results, Borrowers have requested Agent and Lenders to amend
certain financial covenants and Borrowing Availability requirements; and

         WHEREAS, Borrowers have requested the ability to convert additional
loans due from Subsidiaries to equity, and Agent and Requisite Lenders are
willing to provide for such amendments as may be necessary to effectuate the
foregoing on the terms and conditions hereafter set forth.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and in furtherance of the
Borrowers' duties to give further assurances to the Agent and Lenders pursuant
to the terms of the Credit Agreement, the parties hereto agree as follows:

     1. DEFINITIONS. All capitalized terms not otherwise defined herein shall
have the meanings given to them in the Credit Agreement.

     2. AMENDMENTS TO CREDIT AGREEMENT. Subject to satisfaction of the
conditions precedent set forth in Section 4 below, the Credit Agreement is
hereby amended as follows:

(a)         Section 1.6. of the Credit Agreement is hereby amended by amending
            the last sentence thereof in its entirety to provide as follows:

            "For purposes of this SECTION 1.6, the SunTrust Drafts and Customer
            Drafts received by SMP from (x) Autozone in connection with the
            Autozone/SunTrust Program, and (y) other Account Debtors in
            connection with the applicable Customer Program, respectively, shall
            be treated as if they constituted "Accounts" so long as Agent or its
            designee has possession of such SunTrust Drafts or Customers Drafts,
            as applicable."

(b)         Section 6.2(h) of the Credit Agreement is hereby amended by deleting
            "$5,000,000" and inserting "$6,000,000" in its place and stead.

(c)         Section 6.6 of the Credit Agreement is hereby amended by deleting
            the word "and" immediately preceding clause (b) and inserting
            immediately following the last sentence the following:

            ", and (c) for Guaranteed Indebtedness incurred pursuant to the
            Guaranty dated June __, 2003 made by SMP in favor of JPMorgan Chase
            Bank in connection with the transfer of ownership to SMP LLC of the
            Real Estate of SMP located in Long Island City, New York."

(d)         Section 6.8(f) of the Credit Agreement is hereby deleted in its
            entirety and replaced with the following:

            "(f) the sale of any (x) Sun Trust Drafts pursuant to the
            AutoZone/Sun Trust Program, and (y) Customer Drafts pursuant to the
            applicable Customer Programs;"

(e)         Section 6.18 of the Credit Agreement is hereby amended by adding as
            a new last sentence the following:

            "For purposes of determining compliance with this Section 6.18 for
            Fiscal Year 2003, the lease payments during Fiscal Year 2003 shall
            exclude the lease payments relating to the Real Property leased
            pursuant to the Acquisition and the lease of the Long Island City
            Real Property."

(f)         Annex A of the Credit Agreement is hereby amended by adding the
            following definitions in the correct alphabetical order:

            "CUSTOMER DRAFTS" means the negotiable drafts issued by an Account
            Debtor in connection with a Customer Program.

                                       1
<PAGE>

            "CUSTOMER PROGRAM" means a program established between an Account
            Debtor and SunTrust Bank, or another bank acceptable to Agent,
            pursuant to which such Account Debtor consolidates multiple invoices
            from a supplier into a single large payment and issues a negotiable
            draft to the supplier, which draft is purchased by SunTrust Bank, or
            such other acceptable bank, from the supplier at an agreed upon
            purchase price.

            "SMP LLC" means SMP Real Estate LLC, a Delaware limited liability
            company.

(g)         Annex D-2 of the Credit Agreement is hereby amended by amending
            J.(y) thereof by deleting "$47,000,000" and inserting "$60,000,000"
            in its place and stead.

(h)         Annex G of the Credit Agreement is hereby amended as follows:

            (i) Section 2(a) of Annex G is hereby amended by amending the EBITDA
            requirements in their entirety as follows:

                           FISCAL QUARTER ENDING                     EBITDA

                           March 31, 2003                         $ 5,000,000
                           June 30, 2003                          $15,000,000
                           September 30, 2003                     $30,000,000
                           December 31, 2003                      $33,000,000
                           March 31, 2004                         $38,000,000
                           June 30, 2004                          $45,000,000
                           September 30, 2004                     $50,000,000
                           December 31, 2004                      $55,000,000

            (ii) Section 2(b) of Annex G is hereby amended by amending the
            minimum Fixed Charge Coverage Ratio requirements as follows:

                           FISCAL QUARTER ENDING     FIXED CHARGE COVERAGE RATIO

                           September 30, 2004                 1.00 to 1.00
                           December 31, 2004                  1.10 to 1.00
                           March 31, 2005 and each Fiscal     1.25 to 1.00
                           Quarter ending thereafter

            (iii) Section 2(c) of Annex G is hereby amended by amending the
            Maximum Capital Expenditure limitations as follows:

                          FISCAL YEAR         MAXIMUM CAPITAL EXPENDITURE

                          2003                     $17,000,000
                          2004                     $18,000,000
                          2005                     $18,000,000
                          2006                     $18,000,000
                          2007                     $18,500,000

                                       2
<PAGE>

     3. CONSENT. Anything in the Credit Agreement to the contrary
notwithstanding, SMP may establish SMP LLC and contribute the Long Island City
Real Property to SMP LLC subject to the following conditions: (i) the net
proceeds (such proceeds to be at least $9,000,000) of the mortgage loan in the
original principal amount of $10,000,000, from JP Morgan Chase Bank to SMP LLC
are distributed to SMP and remitted by SMP to Agent to be applied to the
Revolving Credit Advances, (ii) SMP obtains a Nondisturbance and Attornment
Agreement from JP Morgan Chase Bank in form and substance reasonably
satisfactory to Agent, and (iii) Agent shall have received an executed Agreement
and Landlord/Mortgagee Waiver and Consent in substantially the form of Exhibit A
to this Amendment.

     4. CONDITIONS OF EFFECTIVENESS. This Amendment shall become effective as of
the date upon which Agent shall have received (a) four (4) copies of this
Amendment executed by Borrowers, Requisite Lenders and each of the Guarantors,
(b) a true copy of the Limited Liability Company Agreement of SMP LLC and the
Loan Documents as that term is defined therein, and (c) a good standing
certificate for SMP LLC.

     5. REPRESENTATIONS AND WARRANTIES. Borrowers hereby represent and warrant
as follows:

                           (a) This Amendment and the Credit Agreement, as
         amended hereby, constitute legal, valid and binding obligations of
         Borrowers and are enforceable against Borrowers in accordance with
         their respective terms.

                           (b) Upon the effectiveness of this Amendment, each
         Borrower hereby reaffirms all covenants, representations and warranties
         made in the Credit Agreement as amended hereby and agree that all such
         covenants, representations and warranties shall be deemed to have been
         remade as of the effective date of this Amendment.

                           (c) No Event of Default or Default has occurred and
         is continuing or would exist after giving effect to this Amendment.

                           (d) Borrowers have no defense, counterclaim or offset
         with respect to the Credit Agreement.

     6. NO WAIVER. Except as set forth in Section 3 hereof, the execution,
delivery and effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of Agent or any Lender, nor constitute a waiver of
any provision of the Credit Agreement, or any other documents, instruments or
agreements executed and/or delivered under or in connection therewith.

     7. EFFECT ON THE CREDIT AGREEMENT. All references in the Credit Agreement
and the other Loan Documents to the Credit Agreement shall be deemed to refer to
the Credit Agreement as amended hereby.

                                       3
<PAGE>

     8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF NEW YORK (WITHOUT GIVING EFFECT TO ITS CONFLICTS OF LAW RULES).

     9. HEADINGS. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

     10. COUNTERPARTS; FACSIMILE. This Amendment may be executed in any number
of several counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument. Any signature
delivered by a party by facsimile transmission shall be deemed to be an original
signature hereto.

                                       4
<PAGE>

         IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to be executed and delivered by its duly authorized officer as of the
date first set forth above.

                                      STANDARD MOTOR PRODUCTS, INC.

                                      By:
                                         -----------------------------
                                      Name:
                                           ---------------------------
                                      Title:
                                            --------------------------

                                      STANRIC, INC.

                                      By:
                                         -----------------------------
                                      Name:
                                           ---------------------------
                                      Title:
                                            --------------------------

                                      MARDEVCO CREDIT CORP.

                                      By:
                                         -----------------------------
                                      Name:
                                           ---------------------------
                                      Title:
                                            --------------------------

                                      GENERAL ELECTRIC CAPITAL
                                      CORPORATION,
                                      as Agent and Lender

                                      By:
                                          -----------------------------
                                      Name:
                                           ----------------------------
                                      Title:
                                            ---------------------------

Duly Authorized Signatory

                                       5
<PAGE>

                          GMAC COMMERCIAL FINANCE LLC (as
                          successor by merger to
                          GMAC COMMERCIAL CREDIT LLC), as
                          Documentation Agent and Lender

                          By:
                              -------------------------------
                          Name:
                               ------------------------------
                          Title:
                                 ----------------------------

                          BANK OF AMERICA, N.A.,
                          as Syndication Agent and Lender

                          By:
                              -------------------------------
                          Name:
                               ------------------------------
                          Title:
                                 ----------------------------

                          TRANSAMERICA BUSINESS CAPITAL CORPORATION,
                          as Lender

                          By:
                              --------------------------------
                          Name:
                               -------------------------------
                          Title:
                                 -----------------------------

                          CONGRESS FINANCIAL CORPORATION,
                          as Lender

                          By:
                              --------------------------------
                          Name:
                               -------------------------------
                          Title:
                                 -----------------------------

                          JPMORGAN CHASE BANK,
                          as Lender

                          By:
                              --------------------------------
                          Name:
                               -------------------------------
                          Title:
                                 -----------------------------

                                       6
<PAGE>

                          HSBC BANK USA,
                          as Lender

                          By:
                              --------------------------------
                          Name:
                               -------------------------------
                          Title:
                                 -----------------------------

                          FOOTHILL CAPITAL CORPORATION,
                          as Lender

                          By:
                              --------------------------------
                          Name:
                               -------------------------------
                          Title:
                                 -----------------------------

                          MERRILL LYNCH CAPITAL, a Division of MERRILL LYNCH
                          BUSINESS FINANCIAL SERVICES INC.,
                          as Lender

                          By:
                              --------------------------------
                          Name:
                               -------------------------------
                          Title:
                                 -----------------------------

CONSENTED TO:

SMP MOTOR PRODUCTS LTD.
By:
    ---------------------------------
Name:
     --------------------------------
Title:
         ----------------------------

RENO STANDARD INCORPORATED

By:
    ---------------------------------
Name:
     --------------------------------
Title:
      -------------------------------

                                       7
<PAGE>

EAGLEMOTIVE CORPORATION

By:
   ----------------------------------
Name:
     --------------------------------
Title:
      -------------------------------

MARATHON AUTO PARTS & PRODUCTS, INC.

By:
     --------------------------------
Name:
     --------------------------------
Title:
      -------------------------------

MOTORTRONICS, INC.

By:
   ----------------------------------
Name:
     --------------------------------
Title:
      -------------------------------

                                       8
<PAGE>exv10w1

 

Exhibit 10.1

Nortel Networks Limited SUCCESS Incentive Plan

Section 1:     Introduction

     The Nortel Networks Limited SUCCESS Incentive Plan (the “SUCCESS Plan”) is
a short-term, incentive bonus plan that provides the potential for “Eligible
Employees” (as defined below) to receive cash awards based on their
contributions to the success of the “Company”1, conditioned on the Company
meeting its objectives.

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

Section 2:     SUCCESS Plan Eligibility

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

	 	(1)	 	Employees who participate in other incentive plans are
ineligible for the SUCCESS Plan during the full calendar month(s)
when they participate in the other incentive plan(s). “Other
incentive plans” include sales incentive compensation or any other
incentive/bonus arrangements being offered in lieu of the SUCCESS
Plan. As set out below, employees who participate in other

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

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

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

 

 

	 	 	 	incentive plans for a portion of the month and the SUCCESS Plan for a
portion of the month are eligible for the SUCCESS Plan for that
month;
	 
	 	(2)	 	Individuals determined by the Company to be students, co-op
students, interns, temporary, or non-payroll workers are ineligible
for the SUCCESS Plan;
	 
	 	(3)	 	Regular full-time and regular part-time employees who are
eligible for participation in Company health benefit plans based on
their regularly scheduled hours will be eligible for the SUCCESS
Plan;
	 
	 	(4)	 	The Joint Leadership Resources Committee of the Boards of
Directors of Nortel Networks Corporation and Nortel Networks Limited
(“JLRC”) and the Board of Directors of Nortel Networks Limited (the
“Board of Directors”) may determine that certain Company employees
(including employees who are not eligible for the SUCCESS Plan) may
be eligible to receive an award from a Discretionary Bonus Pool
created pursuant to Section 5 hereof;
	 
	 	(5)	 	Subject to applicable law, to be eligible for either a full
or pro-rated award for any given Plan Period: (a) an employee must
have been actively employed in an eligible role under the SUCCESS
Plan for at least six full calendar months in that Plan Period4 (an
employee is not eligible for a payout for any period(s) of inactive
service in a Plan Period unless required by applicable law) and (b)
the employee must have been an active employee in an eligible role
or in a role that is eligible for another incentive award, such as
sales incentive compensation, on or before July 1 and on December
315. Except where otherwise required by contract or applicable law,
an employee who is on “notice” of the termination of his/her
employment will be considered on inactive service for the purposes
of the SUCCESS Plan, unless that employee continues at the Company’s
express request to perform work for the Company throughout the
notice period;
	 
	 	(6)	 	Pro-rated awards, based on the number of months that an
employee is actively employed (as defined by sub section 2(5) above)
in a position that is eligible under the SUCCESS Plan, shall also be
made to employees who transfer into or out of positions covered by
other incentive programs (for example, sales incentive
compensation), or who are moved to a job that is ineligible for the
SUCCESS Plan. For any Plan Period when the employee is partially
eligible for the SUCCESS Plan, the employee’s award will be based on
the number of months the employee was eligible for the SUCCESS Plan
divided by the Plan Period. For the purposes of determining
pro-rata awards, an employee’s

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

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

- 2 -

 

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

Section 3:     Award Elements

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

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

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

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

- 3 -

 

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

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

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

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

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

- 4 -

 

Section 4:     SUCCESS Plan Awards

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

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

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

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

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

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

- 5 -

 

Section 5:     Discretionary Bonus Pool

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

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

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

Section 6:     Interpretations and Amendments

This document, as amended from time to time, constitutes the “Nortel Networks
Limited SUCCESS Incentive Plan”. In the event of any conflicts or
inconsistencies between the provisions of the SUCCESS Plan and any other
document or communication, written or oral, concerning the SUCCESS Plan, the
provisions of this document, as amended from time to time, shall govern.

The Senior Vice-President, HR, subject to approval of the JLRC and the Board of
Directors in certain cases, shall interpret the provisions of the SUCCESS Plan,
which shall be final and binding on the Company and all SUCCESS Plan
participants. This document is subject to interpretation to comply with
applicable laws. It is not and shall not be construed as either an employment
contract or as a contract concerning the subject matter contained herein.
There is no guarantee that any award under the SUCCESS Plan will actually be
paid. Any award to an “Eligible Employee”, based on individual contribution
and measures of corporate performance, is determined at the discretion of an

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Eligible Employee’s Management Team, the Senior Management Team and the JLRC
and the Board of Directors as the case may be. If such awards, however, are
made, they shall be made in accordance with the provisions herein.

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

As adopted by the Board of Directors of Nortel Networks Limited on July 25,
2002, as amended on
January 23, 2003 with effect from
January 1, 2003, as amended on July 28, 2003 with effect from
January 1, 2003.

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