Document:

exv10w63

 

Exhibit 10.63

September 29, 2005

To: Steve Pusey

Subject: Special Bonus

Dear Steve,

Based on the critical work and strategic value of the role you hold in driving Nortel’s future
success, I’m pleased to inform you that the Joint Leadership Resources Committee of the Board of
Directors has authorized the payment of a one-off special bonus as described below and in the
attached Schedule A.

Conditional upon your satisfaction of all terms and conditions described in this letter and the
attached Schedule A, Nortel will pay you the special bonus in two installments: (i) GBP £262,500
within 30 days of August 1, 2006 (the “Interim Retention Payment”); and (ii) GBP £262,500 within 30
days of August 1, 2007 (the “Final Retention Payment”).

The installments of the special bonus will be reported as part of your taxable income in the year
in which they are received. All appropriate taxes and other withholdings will be deducted from any
gross payment amount as required by applicable law. This special bonus will not be included in
“eligible earnings” for purposes of capital accumulation and retirement plans offered by Nortel
unless required by the applicable plan or law.

This special bonus is additional to any other bonus or incentive payments for which you are or may
become eligible, as applicable, such as SUCCESS or Sales Incentive Compensation. If you have any
questions, please contact me at your convenience.

Once you have reviewed this letter, including the attached Schedule A, and provided that you are in
agreement with the terms and conditions applicable to the special bonus, please signify your
acceptance by signing below and returning the original to the attention of: Su Taylor, Executive
Compensation, Dept. 1477, LOC Brampton or by fax at 905-863-8420 (ESN 333) by October 15, 2005.

William J. Donovan

Senior-Vice President

Human Resources

Nortel

8200 Dixie Road Suite 100 Brampton ON Canada L6T 5P6 T 905.863.1100 F 905.863.8412 E billdono@nortel.com

 

 

Schedule A — Terms and Conditions

Payment of the Special Bonus is subject to the following:

	 	1.	 	In order to receive the Interim Retention Payment, you must remain an active
employee of Nortel from August 1, 2005 through July 31, 2006 (the “Interim Retention
Period”) in your current role or in another role initiated or approved by Nortel, in
its sole discretion.
	 
	 	2.	 	In order to receive the Final Retention Payment, you must remain an active
employee of Nortel from August 1, 2005 through July 31, 2007 (the “Full Retention
Period”) in your current role or in another role initiated or approved by Nortel, in
its sole discretion.
	 
	 	3.	 	Your performance throughout the Interim Retention Period or the Full
Retention Period, as applicable, must be assessed by Nortel, in its sole discretion,
to be, at a minimum, fully satisfactory. The Interim Retention Payment and Final
Retention Payment shall together constitute and be known as the “Special Bonus”.
	 
	 	4.	 	You must comply with your obligations under any other agreement in effect
between you and Nortel such as, but not limited to, agreements to maintain the
confidentiality of Nortel trade secrets and proprietary information.
	 
	 	5.	 	You must sign, date and return the attached letter without modification to Su
Taylor, Executive Compensation, Dept. 1477, LOC Brampton or by fax at 905-863-8420
(ESN 333) by October 15, 2005.
	 
	 	6.	 	It is agreed that the Special Bonus will be paid on a pro-rata basis, as set
forth below, in the event of any of the following occurrences:

	 	(a)	 	If your employment is involuntarily terminated by Nortel
during the Full Retention Period for a reason other than your unsatisfactory
performance or misconduct or, in those countries where applicable, “cause” as
defined under applicable law, then the Special Bonus which you will receive
will be based on the number of your active days of employment during the Full
Retention Period;
	 
	 	(b)	 	If you have a Nortel approved leave of absence during the
Full Retention Period, then the days that you are on leave of absence will be
considered to be inactive, and the Special Bonus shall be based on the number
of your active days of employment during the Full Retention Period;
	 
	 	(c)	 	In the event of your death during the Full Retention Period,
the Special Bonus would be based on the number of your active days of
employment during the Full Retention Period through the date of your death.

 

 

	 	 	Any pro-rata bonus will be an amount equal to the product of the total Special Bonus
amount for which you are eligible, as set out in the attached letter, multiplied by a
fraction, the numerator of which is the number of your active days of employment during
the Full Retention Period and the denominator of which is 730. For greater certainty,
any such pro-rata amount payable to you shall be inclusive of all amounts, if any,
previously received by you in respect of the Initial Retention Payment.
	 
	7.	 	For avoidance of doubt:

(a) you will not be eligible for the Initial Retention Payment or the Final Retention
Payment if at any time prior to the end of the Initial Retention Period:

	 	(i)	 	you voluntarily terminate your employment including, without
limitation, voluntarily retiring;
	 
	 	(ii)	 	Nortel initiates termination of your employment due to your
unsatisfactory performance, misconduct or, in those countries where
applicable, “cause”, as defined under applicable law; or
	 
	 	(iii)	 	you voluntarily transfer to another position within Nortel
without Nortel approval; and

(b) you will not be eligible for the Final Retention Payment if at any time following
the Initial Retention Period and prior to the end of the Full Retention Period:

	 	(i)	 	you voluntarily terminate your employment including, without
limitation, voluntarily retiring;
	 
	 	(ii)	 	Nortel initiates termination of your employment due to your
unsatisfactory performance, misconduct or, in those countries where
applicable, “cause”, as defined under applicable law; or
	 
	 	(iii)	 	you voluntarily transfer to another position within Nortel
without Nortel approval.

 

 

Thank you again for all your contributions to Nortel.

Best Regards,

Bill Donovan

I acknowledge receipt of this letter, including Schedule A, and understand and agree to the terms
and conditions concerning the special bonus as outlined in these documents.

	 	 	 	 	 
	     /s/ Steve Pusey

	 	4/10/05	 	 
	 
	 

Steve Pusey

	 	Dateexv10w64

 

Exhibit 10.64     

PRIVATE AND CONFIDENTIAL

FINAL VERSION

Mike S. Zafirovski

Employment Terms and Conditions

1. Employment Relationship

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

2. Salary

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

3. Incentive Award

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

4. Long-Term Incentives

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

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

 

 

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

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

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

5. Benefits

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

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

6. Capital Accumulation and Retirement Programs

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

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

2

 

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

7. Participation in Executive Retention Termination Plan

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

8. Tax Preparation and Financial Planning

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

9. Tax Equalization

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

10. Separation

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

3

 

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

11. Reporting Insider

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

12. Share Ownership Guidelines

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

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