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.
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.
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.
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.
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
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