Document:

Nortel Networks Corporation Key Executive Incentive Plan

 Exhibit 10.3 
 NORTEL NETWORKS CORPORATION 
 KEY EXECUTIVE INCENTIVE PLAN 
  

	I.	PLAN OBJECTIVE 

  

	    	The Nortel Networks Corporation Key Executive Incentive Plan (the “Plan”) is designed to provide cash incentive awards (the “Bonuses”) to certain
key executives of Nortel Networks Corporation (“NNC”) and certain of its direct and indirect subsidiaries and affiliates participating in the Plan (each a “Participating Employer” and, collectively with NNC, the
“Company”) to strive for the achievement of milestones important to a successful reorganization pursuant to the proceedings under the Companies’ Creditors Arrangement Act (Canada) and the US Bankruptcy Code (the
“Proceedings”). 

  

	II.	PARTICIPATING EMPLOYERS AND EMPLOYEES 

  

	 	(a)	The Participating Employers and the employees of the Participating Employers who may participate in the Plan have been selected in accordance with the criteria approved by the Board
of Directors of NNC and the Board of Directors of Nortel Networks Limited (“NNL”) (collectively, the “Boards”) upon the recommendation of the Compensation and Human Resources Committee of the Boards
(“Committee”). 

  

	 	(b)	Each employee of a Participating Employer selected for participation in the Plan shall receive a letter (each, a “Bonus Letter”) that sets forth the Bonus that he
or she may be eligible to receive under the Plan and requires such employee to (i) waive any payments or benefits for which he or she may be eligible under the Nortel Networks Corporation Change in Control Plan, other change in control
arrangements or any other retention plan or arrangement with the Company as of the Effective Date of the Plan (defined below) and (ii) agree that he or she will not file or make any claim against the Company for any such payments or benefits
under the Proceedings or otherwise. Upon execution and timely return of the Bonus Letter in accordance with its terms, such employee shall become a participant in the Plan (a “KEIP Participant”) and will be eligible to receive a
Bonus. 

  

	III.	BONUSES 

  

	 	(a)	Each KEIP Participant will be eligible to receive a Bonus in an amount set forth in the Bonus Letter determined in accordance with the criteria approved by the Boards upon the
recommendation of the Committee, pursuant to the guidelines established by the Committee from time to time. 

  

	 	(b)	Except as required by applicable law or the terms of Company benefit plans or programs, Bonuses will not be taken into account for purposes of the Company benefits in which a KEIP
Participant may participate and will not be included in “eligible earnings” for purposes of capital accumulation and retirement plans offered in various jurisdictions by the Company. Where required, deductions will be made from the Bonus
Awards, as defined below, in accordance with the specific capital accumulation and retirement plan in which the KEIP Participant participates. 

	IV.	VESTING AND PAYMENT OF BONUS AWARDS 

  

	 	(a)	Subject to Section VI, each KEIP Participant’s Bonus will vest in the amounts and on the dates (each a “Scheduled Vesting Date”) set forth below so long as
such KEIP Participant is actively employed by a Participating Employer on the applicable Scheduled Vesting Date: 

  

	 	(i)	25% of such Bonus (the “First Bonus Award”) upon the date of achievement of the First Milestone (as defined below); 

  

	 	(ii)	25% of such Bonus (the “Second Bonus Award”) upon the date of achievement of the Second Milestone (as defined below); and 

  

	 	(iii)	50% of such Bonus (the “Third Bonus Award,” and together with the First Bonus Award and the Second Bonus Award, the “Bonus Awards”) upon the date
of achievement of the Third Milestone (as defined below). 

  

	 	(b)	Subject to Section VI and IX(b), each Bonus Award that vests under this Section IV of the Plan will be made to a KEIP Participant by his or her Participating Employer in a lump sum
cash payment as soon as practicable following the applicable Scheduled Vesting Date. 

  

	 	(c)	For purposes of the Plan, a KEIP Participant will be considered to be “actively employed” on those days when he or she is classified as “active” on the
applicable Participating Employer’s payroll. 

  

	 	(d)	The “First Milestone” is the achievement of North American objectives of the Company’s cost reduction plan. The “Second Milestone” is the
achievement of certain parameters approved by the Boards upon recommendation of the Committee designed to result in a leaner and more focused organization. The “Third Milestone” is the later of the confirmation by the US court of a
plan of reorganization in the United States or the confirmation by the Canadian court of a plan or plans of restructuring and/or arrangement in Canada. 

  

	 	(e)	Notwithstanding anything in the Plan to the contrary, if the Committee, in its sole discretion, upon consideration of facts and circumstances determined by the Committee to be
relevant, concludes that a KEIP Participant has committed intentional misconduct, as defined in the Committee Policy Regarding Recoupment of Incentive Compensation relating to the forfeiture and/or recoupment of incentive compensation, the KEIP
Participant will forfeit any earned but unpaid Bonus Awards and/or reimburse his or her Participating Employer the amount of the Bonus Awards received, as determined by the Committee. 

  

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	V.	PLAN ADMINISTRATION 

  

	    	The Committee shall have full discretionary authority to administer the Plan, including discretionary authority to interpret and construe any and all provisions of the Plan and to
determine the achievement of each of the Milestones set forth in Section IV(d) above. 

  

	VI.	ELIGIBILITY TO RECEIVE BONUS PAYMENTS 

  

	 	(a)	Upon the involuntary termination of employment of a KEIP Participant for any reason (other than in connection with a divestiture (as described below)) by a Participating Employer,
resignation of employment by a KEIP Participant or termination of employment due to death or disability, each unvested Bonus Award of such KEIP Participant (the “Unvested Awards”) will be forfeited on the date of such employment
termination or resignation and such KEIP Participant will have no further rights under the Plan. 

  

	 	(b)	If a KEIP Participant is not actively employed by a Participating Employer on a Scheduled Vesting Date as a result of short- or long-term disability or other leaves of absence,
whether or not approved by the relevant Participating Employer, the Unvested Award related to that Scheduled Vesting Date will be forfeited on the Scheduled Vesting Date and such KEIP Participant will have no further rights with respect to such
Bonus Award, unless otherwise required by applicable law. 

  

	 	(c)	If a KEIP Participant is actively employed by a Participating Employer on a Scheduled Vesting Date, but was not actively employed for the entire period beginning on the day
following the immediately preceding Scheduled Vesting Date (or January 14, 2009 with respect to the First Bonus Award) through and including the Scheduled Vesting Date at issue (the “Bonus Award Period”) as a result of short-
or long-term disability or other leaves of absence approved by the relevant Participating Employer, a portion of the related Bonus Award will vest on such Scheduled Vesting Date in an amount equal to such Bonus Award multiplied by a fraction the
numerator of which is the number of calendar months (or portions thereof) in which the KEIP Participant was actively employed for at least one business day during the Bonus Award Period and the denominator of which is the total number of calendar
months (or portions thereof) occurring during the Bonus Award Period. Any unvested portion of such Bonus Award will be forfeited and such KEIP Participant will have no further rights under the Plan with respect to such forfeited portion. (See
Appendix I for an example of the calculation of a pro rated Bonus Award.) 

  

	 	(d)	 If a KEIP Participant’s employment with a Participating Employer is involuntarily terminated as a result of a divestiture (including any KEIP Participant who
is transferred to or hired by a third-party buyer in connection with a divestiture and any KEIP Participant in corporate staff or global operations whose employment is involuntarily terminated as a result of an organizational resizing following and
directly related to a divestiture), as determined by the Committee, and such KEIP Participant either (i) receives, with the Company’s consent, an opportunity to be 

  

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employed by the buyer (an “Offer of Continued Employment”), accepts the buyer’s Offer of Continued Employment and commences employment
with the buyer or (ii) does not receive an Offer of Continued Employment, any Unvested Awards of such KEIP Participant will be accelerated to the later to occur of the date of consummation of the applicable divestiture (the “Closing
Date”) or termination of employment and will vest automatically on such Closing Date or employment termination date, as applicable. If a KEIP Participant whose employment with a Participating Employer is terminated as a result of a
divestiture fails to accept an Offer of Continued Employment or, having accepted an Offer of Continued Employment, fails to commence employment with the buyer, any Unvested Awards will be forfeited on the date of such employment termination and such
KEIP Participant will have no further rights under the Plan. 

  

	 	(e)	Subject to Section IX(b), any payment of Bonus under this Section VI of the Plan will be made to a KEIP Participant by his or her Participating Employer as soon as practicable
following the applicable vesting date. 

  

	 	(f)	A KEIP Participant whose employment with a Participating Employer terminates after the vesting date of a Bonus Award but prior to the payment date of such Bonus Award, for reasons
determined by the Committee to be other than an involuntary termination for Cause, will receive his or her Bonus Award on such payment date; provided, however, that the Committee may deny payment of such Bonus Award if it determines that such KEIP
Participant engaged in conduct after the date of termination of employment and prior to the Bonus Award payment date that constitutes Cause. 

  

	 	(g)	For the purposes of the Plan, “Cause” shall mean inappropriate actions or inactions, misconduct, breach of an agreement with the Company or unsatisfactory
performance by a KEIP Participant or cause (as “cause” is legally defined, if at all, in the relevant jurisdiction) as determined by the Committee in its sole discretion. 

  

	VII.	EFFECTIVE DATE; EXPIRATION DATE OF THE PLAN 

  

	    	The Plan shall be effective as of March 6, 2009 (the “Effective Date”). The Plan shall expire on July 14, 2010 (the “Termination Date”).
All rights to unvested Bonuses shall lapse on the Termination Date. For the avoidance of doubt, no payments shall be made under the Plan in connection with any Bonus Award if such Bonus Award has not vested prior to the Termination Date.

  

	VIII.	NO PROMISE OF CONTINUED EMPLOYMENT 

  

	    	The Plan and any KEIP Participant’s selection as a participant in the Plan does not, and is in no manner intended to constitute, a promise of employment for any period of time
or to change a KEIP Participant’s employment status, if applicable, as an at will employee subject to employment termination at any time for any reason. 

  

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	IX.	TAXES; SECTION 409A 

  

	 	(a)	All payments made pursuant to the Plan shall be subject to applicable taxes and standard withholding and deductions as determined by the relevant Participating Employer. Neither the
Company nor its officers or agents makes or has made any representation about the tax consequences of any payments made or offered to any KEIP Participant under the Plan. 

  

	 	 (b)
	 All payments under the Plan are designed to comply with the short-term deferral exception from the requirements of
section 409A of the US Internal Revenue Code of 1986 and regulations promulgated thereunder (“Section 409A”). Each Bonus Award will be treated as a separate payment for purposes of Section 409A. Payment of a Bonus Award under
the Plan will be made on or prior to the 15th day of the third month following the end of the later of the relevant Participating Employer’s
tax year or the KEIP Participant’s tax year in which the right to payment of such Bonus Award vests. 

  

	X.	CONFIDENTIALITY 

  

	    	Subject to applicable law, a KEIP Participant’s participation in the Plan, Bonus and Bonus Awards are confidential and a KEIP Participant may not disclose, publicize or discuss
his or her participation in the Plan, Bonus or Bonus Awards with any current or former employee of the Company or any other person except a KEIP Participant’s spouse, accountant, financial advisor or attorney, who must be informed by the KEIP
Participant not to further disclose such confidential information. Notwithstanding the foregoing, the Company may disclose Participants’ participation in the Plan, Bonuses and Bonus Awards as required under applicable law and as it deems
necessary in the implementation and administration of the Plan and in the conduct of the Company’s business. 

  

	XI.	SEVERABILITY 

  

	    	If any provision of the Plan is determined to be invalid or unenforceable, in whole or in part, this determination shall not affect any other provision of the Plan and the provision
in question shall be modified as to be rendered enforceable in a manner consistent with the intent of the parties insofar as possible. Any waiver of or breach of any of the terms of the Plan shall not operate or be construed as a waiver of any other
breach of such terms or conditions or of any other terms and conditions, nor shall any failure to enforce any provision hereof operate or be construed as a waiver of such provision or of any other provision. 

  

	XII.	CHOICE OF LAW AND VENUE 

  

	    	 The Plan shall be governed by the laws of Ontario and the laws of Canada applicable therein. With respect to any KEIP Participant of a Participating Employer that
is subject to the Proceedings, such KEIP Participant and such Participating Employer will (a) irrevocably and unconditionally consent to the exclusive jurisdiction of the court in which such Participating Employer is subject to the Proceedings,
(b) will irrevocably and 

  

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unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of or related to the Plan or any Bonus in such court
and (c) will further irrevocably and unconditionally waive and agree not to plead or claim that any such action, suit or proceeding brought in such court has been brought in an inconvenient forum. 

  

	XIII.	ENTIRE AGREEMENT AND AMENDMENT 

  

	    	This Plan document (together with the Bonus Letters) constitutes the complete, final and exclusive embodiment of the terms and conditions of the Plan. Any amendments or
modifications of the Plan must be authorized by the Boards and implemented in writing by the Senior-Vice President, Human Resources and Chief Legal Officer of NNC; provided, in each case, subject to any approvals which may be required in light of
the Proceedings. Any agreement between any KEIP Participant and the Company with regard to the Plan and its subject matter is hereby superseded. 

  

	XIV.	NO ASSIGNMENT 

  

	    	The rights of a KEIP Participant or any other person to any payment or other benefits under the Plan may not be assigned, transferred, pledged or encumbered except by will or the
laws of descent and distribution. 

  

	XV.	FUNDING 

  

	    	The Plan is an unfunded plan and any and all amounts payable to a KEIP Participant under the Plan shall be paid from the general assets of his or her Participating Employer. The
obligation under the Plan with respect to any specific KEIP Participant shall be the several obligation of his or her Participating Employer and will not be a joint obligation of any other Company entity. 

  

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 Appendix I 
 The following is an example of the calculation of a pro rated bonus pursuant to Section VI(c) of the Plan. Please note that it is for explanatory purposes only and does not apply to any actual KEIP Participant, Bonus or Scheduled
Vesting Date. All capitalized terms have the meaning set forth in the Plan. 
 KEIP Participant is eligible for a Bonus of $15,000 and his or her
potential First Bonus Award is $3,750. KEIP Participant works from January 14, 2009 until April 7, 2009, goes on a leave of absence approved by his or her Participating Employer, and then returns to work on June 15, 2009. The First
Milestone is achieved on June 25, 2009. The amount paid to KEIP Participant as soon as practicable after June 25, 2009 is $3,125. The amount is calculated as follows: 
  

									
	 	 	 	 	 
	$3,750	    	x            	  	5 / 6	    	=        	  	$3,125
	First Bonus     Award	    	  	January, February, March,
April & June / January,
February, March, April,
May & June	    	  	Amount payable    

  

 7Form of Letter Agreement dated March 27, 2009

			
	

	  	

  

			
	Personal & Confidential	  	Exhibit 10.4

 March 27, 2009 
 To:    Name, KEIP Participant 
 From:    Manager—name 
 Subject:    KEY EXECUTIVE INCENTIVE PLAN 
 Dear Name:

 The Boards of Directors of Nortel Networks Corporation (“NNC”) and Nortel Networks Limited (“NNL”), upon the recommendation of the
Compensation and Human Resources Committee of the Boards, has recently approved the Nortel Networks Corporation Key Executive Incentive Plan (the “Plan”), which accompanies this letter (the “Plan Document”). The opportunity to
participate in the Plan is available to a limited group of executives in recognition of the critical role they will play in achieving milestones important to a successful reorganization pursuant to proceedings under the Companies’ Creditors
Arrangement Act (Canada) and the U.S. Bankruptcy Code (collectively, the “Proceedings”). 
 I am pleased to inform you that you have been identified as a key executive with the opportunity to participate in the Plan subject to its terms and conditions. Upon your participation in the Plan (“KEIP Participant”), you will be
eligible to receive a bonus (the “Bonus”) in the aggregate amount of $ x,xxx,xxx USD1. The Bonus will vest in increments (the “Bonus
Awards”) of 25%, 25% and 50% of the aggregate amount upon the date of achievement of the First Milestone, Second Milestone and Third Milestone, respectively, as those milestones are defined in Section IV(d) of the Plan Document, provided that
you are actively employed on the relevant vesting date.2 The impact of a KEIP Participant’s employment termination, leave of absence or death
on Bonus Awards is addressed in Section VI of the Plan Document. Each Bonus Award that vests under the Plan will be made to a KEIP Participant by his or her employer in a lump sum cash payment, less applicable taxes and standard withholdings and
deductions, as soon as practicable after the relevant vesting date, subject to the provisions of Section VI(f) and IX(b) of the Plan Document. The Plan expires on July 14, 2010 and no payments will be made with respect to unvested Bonus Awards
as of that expiration date. The Plan and your participation in the Plan is not a promise of employment for any particular period and does not change your employment status, if applicable, as an at will employee. 
 The Bonus is in addition to any bonus or incentive compensation for which you may be eligible under the Annual Incentive Plan or Global Sales Incentive Compensation
Plan, as applicable. However, as a condition of participation in the Plan, you must waive any payments or benefits for which you are eligible under the Nortel Networks Corporation Change in Control Plan, other change in control arrangements or any
other retention plan or arrangement with the Company, as defined in the Plan Document, as of March 6, 2009, the Plan effective date (the “Effective Date”), and agree that you will not file or make any claim with respect to those payments
or benefits under the Proceedings or otherwise. 
  
  
 1  This amount is stated in the currency of the payroll from which your base salary is paid as of March 21, 2009 (the “Original Currency”). 
 2  If the currency of the payroll from which your base salary is paid changes after March 21, 2009, due to your relocation or any other reason, any Bonus Awards for which you are eligible after that change will be paid in the
currency of the payroll from which your base salary is paid as of such Bonus Award payment date and in an amount equal to the value of the applicable Bonus Award in the Original Currency. 

			
		  	

 Although Nortel’s intention to implement the Plan has been announced publicly and some aspects of the Plan
have been or will be disclosed in documents filed in the Proceedings and elsewhere, your participation in the Plan and the amount of your Bonus and Bonus Awards are confidential and you are required to treat them as such as set out in Section X of
the Plan Document. 
 We eagerly anticipate your continued contributions to Nortel as a KEIP Participant. In order to signify your acceptance of the terms
and conditions of participation in the Plan, you must (i) sign and print your name and date this letter (the “Bonus Letter”) in the spaces provided below following the “Acknowledgement and Waiver” section and (ii) scan
and email or fax this Bonus Letter to johnsha@nortel.com or 905-863-7011(ESN 333), respectively, by no later than Friday April 17, 2009. You will not be a KEIP Participant unless and until you return this signed and dated Bonus Letter without
modification as specified above. You should retain a copy of the Bonus Letter and Plan Document. If you have any questions, you can contact John Shaughnessy at 905-863-1965(ESN333). 
 Sincerely, 
 Manager—name 
 Manager—title 
 ACKNOWLEDGEMENT AND WAIVER 
 I acknowledge that I have (i) received the Plan Document, (ii) had sufficient time to review and consider this Bonus Letter and the Plan Document and (iii) read, understood and agreed to the terms of
this Bonus Letter and the Plan Document. I agree that, if there is any difference between the Plan Document (as it may be amended or modified under its terms) and the summary of the terms and conditions of the Plan set out above in this Bonus Letter
or in any other written or verbal communication related to the Plan, the terms and conditions as set out in the Plan Document will govern. I further agree that, in consideration of my participation in the Plan, I hereby (x) waive and release
any payments or benefits for which I may be eligible under the Nortel Networks Corporation Change in Control Plan, other change in control arrangements or any other retention plan or arrangement with the Company as of the Effective Date and
(y) agree that I will not file or make any claim for any such payments or benefits under the Proceedings or otherwise. 
  

					
		 		 	
			
	  	 		 	  
	KEIP Participant signature	 		 	    Date

  

	
	
	
	  
	Printed First and Last Name

 Nortel Networks Corporation Key Executive Incentive Plan 
 Named Executive Officer Maximum Payout Range 
 The
estimated maximum payout under the Nortel Networks Corporation Key Executive Incentive Plan for the named executive officers* listed below ranges from US$695,456 – $1,211,315**. 
  

			
	 Named Executive Officer*
	 	Office and Position Currently Held
	 Paviter Binning
	 	Executive Vice-President, Chief Financial Officer and Chief Restructuring Officer
	 Dennis Carey
	 	Executive Vice-President, Corporate Operations
	 Steven Bandrowczak
	 	Vice-President, Enterprise Sales
	 Richard Lowe
	 	President, Carrier Networks

  

	*	Mike Zafirovski, President and Chief Executive Officer, is not currently a participant in the Nortel Networks Corporation Key Executive Incentive Plan. 

  

	**	Amounts have been converted to US dollars as applicable using the March 2009 12 month average exchange rate of US$1.00 = CAD$1.1277.

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