NORTEL NETWORKS CORPORATION
SHARE COMPENSATION PLAN
AS AMENDED AND RESTATED
Amended on December 7, 2005 and Restated effective June 29, 2005
NORTEL NETWORKS CORPORATION
SHARE COMPENSATION PLAN
AS AMENDED AND RESTATED
SHARE COMPENSATION PLAN
AS AMENDED AND RESTATED
1. BACKGROUND; PURPOSE OF THE PLAN
On January 24, 2002, the Board approved this Nortel Networks Corporation Directors Deferred ShareCompensation Plan, effective as of January 1, 2002, (i) to provide for the crediting of Share Unitsto Participants in respect of all services rendered by such Participants as members of the Board;and (ii) to provide that each member of the Board who qualifies as an Eligible Director shallreceive all annual fees payable to such member for services as a member of the Board in the form ofShare Units credited in respect of such member under the Plan. On May 29, 2003, the Board approvedan amendment to the Plan, effective immediately, to permit Eligible Directors to elect to receivebetween 0-100% of all fees payable to such member for services as a member of the Board in the formof Share Units, with the remainder of such fees to be settled in cash. On December 18, 2003, theBoard approved an amendment to the Plan, effective immediately, with respect to the manner in whichEligible Directors may elect to receive cash in lieu of Share Units under the Plan. On June 29,2005, the Board approved amendments to the Plan, effectively immediately, with respect to theelection by Eligible Directors to receive Fees in the form of Share Units, with the remainder ofsuch Fees payable in cash.
The purpose of the Plan is to assist Nortel Corporation in attracting and retaining individualswith experience and ability to serve as members of the Board and to promote a greater alignment ofinterests between Eligible Directors and the shareholders of Nortel Corporation.
For the purposes of the Plan, the terms contained in this Section shall have the followingmeanings.
Administrator shall mean such administrator as may be appointed by Nortel Corporation from timeto time to assist in the administration of the Plan in accordance with Section 3 hereof.
affiliated companies shall have the meaning ascribed to the term affiliated bodies corporate inSection 2(2) of the CBCA or such other meaning, and shall include such other entities, as may bedetermined by the Committee.
Election Form and Agreement shall mean the election form and agreement, as it may be amended fromtime to time, entered into between Nortel Corporation and an Eligible Director in accordance withSection 6 hereof.
Aggregate Purchase Price shall have the meaning assigned thereto in Section 8 hereof.
Board shall mean the Board of Directors of Nortel Corporation.
Broker shall have the meaning assigned thereto in Section 10 hereof.
Business Day shall mean a day, other than a Saturday or Sunday, on which banking institutions inCanada and the United States are not authorized or obligated by law to close.
CBCA shall mean the Canada Business Corporations Act, R.S.C. 1985, c.C-44, as amended from timeto time.
Committee shall mean such committee of the Board comprised of members of the Board as the Boardshall from time to time appoint to administer the Plan; provided, however, that if the Board doesnot appoint a Committee to administer the Plan, all references to the Committee shall be deemed tobe references to the Board, mutatis mutandis.
Common Share shall mean a common share of Nortel Corporation, subject to Section 16.
Eligible Director shall mean each member of the Board who, at the relevant time, is not anemployee of a Nortel Networks Company and such member shall continue to be an Eligible Director forso long as such member continues to be a member of the Board and is not an employee of a NortelNetworks Company; provided, however, that the Committee, in its sole discretion, may determine fromtime to time that one or more members of the Board who is or are employees of a Nortel NetworksCompany shall be an Eligible Director or Eligible Directors or that one or more members of theBoard, who would otherwise be an Eligible Director or Eligible Directors, shall not be.
Fees shall mean the amount, expressed in U.S. dollars, of all fees payable by Nortel Corporationto an Eligible Director (i) for all services rendered as a member of the Board, and/or anycommittees thereof, and (ii) for all services rendered as an executive or non-executive chairpersonof the Board, and/or any committees thereof; except that, Fees shall not include any other fee thatmay be payable by Nortel Corporation to the Eligible Director in connection with services renderedby such Eligible Director to Nortel Corporation in any capacity other than as a member orchairperson of the Board, and/or any committees thereof.
Market Value of a Common Share shall mean the fair market value thereof, which shall be the priceper common share which is equal to the average of the high and low prices for a board lot of theCommon Shares traded in Canadian dollars on The Toronto Stock Exchange (TSE) on the relevant dayor, if the volume of Common Shares traded on the composite tape in the United States exceeds thevolume of Common Shares traded in Canadian dollars on the TSE on such relevant day, the average ofthe high and low prices for a board lot of Common Shares on the New York Stock Exchange (NYSE).The Market Value so determined may be in Canadian dollars or in U.S. dollars. As a result, theMarket Value of a Common Share covered by a Share Unit shall be either (a) such Market Value asdetermined above, if in Canadian dollars, or (b) such Market Value as determined above convertedinto Canadian dollars at the noon rate of exchange of the Bank of Canada on the relevant day, if inU.S. dollars. If on the relevant day, there is not a board lot trade in the Common Shares on theTSE or NYSE, any of such exchanges are not open for trading, or there is not a noon rate ofexchange of the Bank of Canada, if required, then the Market Value of a Common Share shall bedetermined as provided above on
the first day immediately preceding the relevant day for whichthere were such board lot trades in the Common Shares and a noon rate of exchange. If at any timethe Common Shares are no longer listed or traded on the TSE or the NYSE, the Market Value shall becalculated in such manner as may be determined by the Committee from time to time, but shall alwaysbe established in relation to the fair market value of a Common Share. The Market Value of aCommon Share shall be rounded up to the nearest whole cent.
Nortel Corporation shall mean Nortel Networks Corporation (known prior to May 1, 2000 as NewNortel Inc.) or its successors.
Nortel Limited shall mean Nortel Networks Limited (known prior to May 1, 2000 as Nortel NetworksCorporation) or its successors.
Nortel Networks Companies shall mean, collectively, Nortel Corporation, Nortel Limited and theirrespective Subsidiaries and affiliated companies or, individually, any corporate entity includedwithin such group, as the context indicates, and Nortel Networks Company shall mean any one of suchcorporate entities.
Participant shall mean an Eligible Director who participates in the Plan.
Plan shall mean the Nortel Networks Corporation Directors Deferred Share Compensation Plan (asamended and restated) set forth herein and as may be further amended or restated from time to time.
Price per Common Share shall have the meaning assigned thereto in Section 8 hereof.
Quarter means any of the four quarters of any financial year of Nortel Corporation as may beadopted from time to time and, until the financial year of Nortel Corporation is changed, shallmean the quarters ending March 31, June 30, September 30 and December 31.
Quarterly Fee shall mean the Fees earned for services rendered by an Eligible Director in theapplicable Quarter.
Reference Date shall mean, with respect to any Quarter, the date used to determine the MarketValue of a Common Share for purposes of determining the number of Share Units to be credited inrespect of such Quarter to a Participants account and the Canadian dollar equivalent of theQuarterly Fee in respect to such Quarter pursuant to Section 4 hereof; which date shall be, unlessotherwise determined by the Committee and approved by the Board,
|(i)||the last trading day of such Quarter on which the Market Value of a CommonShare may be determined and on which the Bank of Canada published a noon rate ofexchange for U.S. dollars, or|
|(ii)||the Resignation Date of such Participant, if the Settlement Date with respectto a Participant occurs during the Quarter prior to the last trading day of suchQuarter; provided that, if such Resignation Date is not a trading day on which theMarket Value of a Common Share or, if required, a day on which the Bank of Canada noonrate of exchange for U.S. dollars may be determined, the Reference Date|
|shall be theimmediately preceding trading day on which such Market Value and, if required, theBank of Canada noon rate of exchange for U.S. dollars may be determined.|
Resignation Date shall mean, in respect of a Participant, the earliest date on which both of thefollowing conditions are met:
|(a)||the Participant has ceased to be a member of the Board for any reason whatsoever, includingthe death of the Participant; and|
|(b)||the Participant is neither an employee nor a member of the board of directors of any NortelNetworks Company.|
Settlement Date shall mean, unless otherwise determined by the Committee for the purpose ofSection 8, the date on which Common Shares shall be delivered in settlement of Share Units inaccordance with Section 8 hereof.
Share Unit shall mean a unit credited to a Participants account in accordance with the terms andconditions of the Plan.
Subsidiary shall mean a body corporate that is a subsidiary of Nortel Corporation within themeaning of Section 2(5) of the CBCA.
3. ADMINISTRATION OF THE PLAN
Except as herein otherwise specifically provided, the Plan shall be administered by the Committeein accordance with its terms, the whole subject to applicable law. The Committee shall have fulland complete authority to interpret the Plan, to prescribe such rules and regulations and to makesuch other determinations as it deems necessary or desirable for the administration of the Plan.The Committee may from time to time, subject to the terms of the Plan, delegate to officers oremployees of a Nortel Networks Company or to third parties, including an Administrator if one isappointed, the whole or any part of the administration of the Plan and shall determine the scopeand terms and conditions of such delegation, including the authority to prescribe rules andregulations. Any interpretation, rule, regulation or determination made or other act of theCommittee shall be final and binding on the Participants and their beneficiaries and legalrepresentatives and Nortel Corporation and its shareholders.
No member of the Committee or the Board shall be liable for any action or determination made ingood faith pursuant to the Plan. To the full extent permitted by law, Nortel Corporation shallindemnify and save harmless each person made, or threatened to be made, a party to any action orproceeding by reason of the fact that such person is or was a member of the Committee or is or wasa member of the Board and, as such, is or was required or entitled to take action pursuant to theterms of the Plan.
Except as Participants may otherwise be advised by prior written notice of at least thirty (30)days, all costs of the Plan, including any administration fees and reasonable brokerage feesrelated to the purchase of Common Shares pursuant to Section 8, shall be paid by NortelCorporation. For greater certainty, Nortel Corporation shall not pay or be responsible for
brokerage or other fees incurred by Participants in respect of the disposition of any CommonShares.
All Eligible Directors shall participate in the Plan. Each Eligible Director shall be paid onehundred percent (100%) of his or her Fees in the form of cash, unless the Eligible Director electsprior to the beginning of a calendar year to receive between 0-100% of his or her Feesfor the next calendar year (and each calendar year thereafter unless and until such EligibleDirector changes such election with respect to Fees payable for the calendar year commencing aftersuch change in election is made) in the form of Share Units, with the remainder of such Fees to bepaid in cash. Fees payable to an Eligible Director in the calendar quarter in which such EligibleDirector is first appointed or elected to the Board shall be paid one hundred percent (100%) in theform of cash, unless such Eligible Director elects prior to, or within 30 days of, becoming anEligible Director to receive, effective on the later of (i) the date he or she becomes an EligibleDirector or (ii) the date of his or her election during such 30-day period, between 0-100% of hisor her Fees for the remainder of such calendar year (and future calendar years) in the form ofShare Units, with the remainder of such Fees to be paid in cash. The Board may, in its solediscretion, permit an Eligible Director who is not subject to income tax under the US InternalRevenue Code of 1986, as amended, to elect at a time other than the times specified in thisparagraph to receive between 0-100% of his of her Fees in the form of Share Units, with theremainder of such Fees to be paid in cash.
The number of Share Units (including fractional Share Units rounded to four decimal places) to becredited on a quarterly basis with effect on the last day of each Quarter to an Eligible Directorsaccount under Section 9 hereof with respect to each Quarter shall be equal to the quotientdetermined by dividing: (i) the entire amount, expressed in U.S. dollars, of the EligibleDirectors Quarterly Fee for such Quarter which is to be paid in Share Units, converted intoCanadian dollars at the noon rate of exchange of the Bank of Canada on the Reference Date for suchQuarter; by (ii) the Market Value of a Common Share on the Reference Date for such Quarter,expressed in Canadian dollars.
A Participant who becomes an employee of a Nortel Networks Company or who, as a result of adetermination by the Committee, shall no longer be eligible to continue to participate in the Plan,shall not be entitled to receive Share Units under this Section 4 in respect of any of his or herfuture Fees. Share Units already credited to any such Participants account shall remain governedby the Plan and the Election Form and Agreement, and such Participant shall be entitled to continueto receive Share Units under Section 7 until such Participants Settlement Date.
5. SHARES SUBJECT TO THE PLAN
Nortel Corporation shall not be required to cause to be delivered Common Shares or certificatesevidencing Common Shares pursuant to the Plan unless and until such delivery is in compliance withall applicable laws, regulations, rules, orders of governmental or regulatory authorities and therequirements of any stock exchange upon which shares of Nortel Corporation are listed or traded.Nortel Corporation shall not in any event be obligatedto the Participants to take
any action to comply with any such laws, regulations, rules, orders orrequirements. Subject to the foregoing, Nortel Corporation may from time to time provide a Brokerwith funds on the Settlement Date as herein provided to purchase Common Shares on behalf ofParticipants on the open market or by private transaction as required in order to administer thePlan in accordance with its terms.
In the event Nortel Corporation determines that Common Shares or certificates evidencing CommonShares shall not be delivered to a Participant or Participants in accordance with the foregoing,the Participant shall be entitled to receive from Nortel Corporation, in cash, an amount equal tothe Market Value of the Common Shares that would otherwise be delivered in settlement of ShareUnits on the Settlement Date, less any amounts withheld by Nortel Corporation in accordance withSection 14 in respect of taxes payable or other source deductions in respect of such cash payment.
6. EXECUTION OF ELECTION FORM AND AGREEMENT
Each Eligible Director shall, in accordance with Section 4 and the Plan or at such other times asNortel Corporation deems appropriate, enter into an Election Form and Agreement in writing withNortel Corporation and, if applicable, the Administrator with respect to his or her participationin the Plan. Such Election Form and Agreement shall set out certain rights and obligations of theparties thereto pursuant to and in accordance with the Plan, and shall remain in full force andeffect until all such Share Units credited to the account of such Participant shall have beensettled and/or cancelled.
7. DIVIDENDS AND RELATED AMOUNTS
A Participant shall, from time to time during such Participants period of participation under thePlan, including the period following the Resignation Date and until the Settlement Date referred toin Section 8 hereof, be credited on each dividend payment date in respect of Common Shares withadditional Share Units, the number of which shall be equal to the quotient determined by dividing:(i) the product determined by multiplying (a) one hundred percent (100%) of each dividend declaredand paid by Nortel Corporation on its Common Shares on a per share basis (excluding stock dividendspayable in Common Shares, but including dividends which may be paid in cash or in shares at theoption of the shareholder), which, if declared in U.S. dollars, shall be converted into Canadiandollars at the noon rate of exchange of the Bank of Canada on the dividend payment date for suchdividend, or if on such dividend payment date a noon rate of exchange of the Bank of Canada is notavailable, converted into Canadian dollars at the noon rate of exchange of the Bank of Canada onthe immediately preceding day on which such exchange rate may be determined, by (b) the number ofShare Units recorded in the Participants account on the record date for thepayment of any such dividend, by (ii) the Market Value of a Common Share on the dividend paymentdate for such dividend, in each case, with fractions computed to four decimal places.
8. SETTLEMENT OF SHARE UNITS
Except as may be otherwise determined by the Committee or except as set forth below in this Section8, the settlement date (Settlement Date) for a Participant with respect to whom a
Resignation Date shall have occurred shall be the fourth trading day following the release of NortelCorporations quarterly or annual financial results immediately following the Resignation Date withrespect to such Participant, provided that, if such Resignation Date occurs on the same date as therelease of Nortel Corporations financial results, the Settlement Date shall, in such a case, bethe fifth trading day immediately following such release of Nortel Corporations financial results.A Participant shall receive, in full satisfaction of the number of Share Units recorded in theParticipants account on the Settlement Date, a whole number of Common Shares equal to the wholenumber of Share Units then recorded in the account of the Participant (or as may be adjustedpursuant to Section 16 hereof), reduced to reflect the amount of any applicable withholding taxesand other source deductions withheld by Nortel Corporation in connection with the satisfaction ofthe Participants Share Units in accordance with Section 14. Any entitlement to fractional CommonShares shall be paid in cash by Nortel Corporation based on the Price per Common Share (as definedbelow) on the Settlement Date.
If the Settlement Date would otherwise fall between the record date for a dividend on the CommonShares and the related dividend payment date, the Settlement Date shall be the day immediatelyfollowing the date of payment of such dividend for purposes of recording in the account of theParticipant the additional Share Units referred to in Section 7 hereof and making the calculationof Share Units recorded in the Participants account pursuant to this Section 8. Notwithstandingany other provision of the Plan, the Settlement Date shall not be later than the last day of thefirst calendar year that begins after the Resignation Date.
In the event that Nortel Corporation is unable, by a Participants Settlement Date, to compute thefinal number of Share Units credited to such Participants account by reason of the fact that anyof the data required in order to compute the Market Value of a Common Share is not available toNortel Corporation, then the Settlement Date shall be the next following trading day on which suchdata is available to Nortel Corporation.
On the Settlement Date, Nortel Corporation shall notify the Broker as to the number of CommonShares to be purchased by the Broker on behalf of the Participant on the TSE, the NYSE, or anyother stock exchange approved by the Committee. As soon as practicablethereafter, the Broker shall purchase the number of Common Shares which Nortel Corporation hasrequested the Broker to purchase on behalf of the Participant and shall notify the Participant andthe Corporation of:
|(a)||the aggregate purchase price (Aggregate Purchase Price) of the Common Shares;|
|(b)||the purchase price per Common Share or, if the Common Shares were purchased at differentprices, the average purchase price (computed on a weighted average basis) per Common Share(Price per Common Share);|
|(c)||the amount of any reasonable brokerage commission related to such purchase of Common Shares;and|
|(d)||the Settlement Date for such purchase of Common Shares.|
On such Settlement Date, upon payment of the Aggregate Purchase Price and related reasonablebrokerage commission by Nortel Corporation, the Broker shall deliver to the Participant, or to his
designated representative, the certificate representing the Common Shares purchased on behalf ofsuch Participant or shall cause such Common Shares to be transferred electronically to an accountdesignated by such Participant.
If a Participant is a citizen or resident of a country other than Canada, Nortel Corporation shallhave the right, in its sole discretion, to pay entirely in cash on the Settlement Date an amountequal to the Market Value of the Common Shares as of the Settlement Date that would otherwise bedelivered in settlement of Share Units (less any applicable tax withholdings or required sourcedeductions), should it deem it desirable to do so in light of the regulatory or other requirementsof the applicable foreign jurisdiction associated with the purchase of, or payment in, CommonShares.
9. PARTICIPANTS ACCOUNT
Nortel Corporation shall maintain or cause to be maintained in its records an account for eachParticipant recording at all times the number of Share Units credited to the Participant. Uponpayment in satisfaction of Share Units pursuant to Section 8 herein, such Share Units shall becancelled. A written notification of the balance in the account maintained for each Participantshall be mailed by Nortel Corporation or by an Administrator on behalf of Nortel Corporation toeach Participant at least annually. A Participant shall not be entitled to any certificate orother document evidencing the Share Units.
10. PURCHASES ON THE OPEN MARKET
Purchases of Common Shares pursuant to the Plan shall be made on the open market by a brokerindependent from Nortel Corporation designated by the Participant and who is a member of the TSE,the NYSE, or any such other stock exchange as may be determined by the Committee from time to time(the Broker). Any such designation of a Broker may be changed from time to time. Upondesignation of a Broker or at any time thereafter, Nortel Corporation may elect to provide thedesignated Broker with a letter agreement to be executed by the Broker, the Participant and NortelCorporation, setting forth, inter alia:
the Brokers agreement with being so designated, to acting for the Participants account inaccordance with customary usage of the trade with a view to obtaining the best share price for theParticipant in respect of the Common Shares to be purchased for the Participant, and to deliveringto the Participant, or his or her representative, the share certificate for, or to transferringelectronically to an account designated by the Participant, the Common Shares purchased uponreceipt from Nortel Corporation of payment of the Aggregate Purchase Price and related reasonablebrokerage commission; and
Nortel Corporations agreement to notify the Broker of the number of Common Shares to be purchasedand to pay the Aggregate Purchase Price and the related reasonable brokerage commission,
provided, however, that none of the terms of such letter agreement shall have the effect of makingthe Broker or deeming the Broker to be an affiliate of, or not independent from, Nortel Corporationfor purposes of any applicable corporate, securities or stock exchange requirement.
The Share Units, and any related Common Shares that may be delivered under the Plan, have not beenregistered under the U.S. Securities Act of 1933, as amended, as of the effective date of the Planand Nortel Corporation has no obligation to register such Share Units or Common Shares.Accordingly, the Common Shares delivered under the Plan may not be offered or sold in the UnitedStates unless they become registered or an exemption from registration is otherwise available.
11. RIGHTS OF PARTICIPANTS
Except as specifically herein provided or provided in the Election Form and Agreement, no EligibleDirector, Participant or other person shall have any claim or right to any Common Shares to bedelivered in settlement of Share Units credited pursuant to the Plan. Nothing herein shall provideany Participant with an entitlement or right to be elected or appointed a director of NortelCorporation.
Under no circumstances shall Share Units be considered Common Shares nor shall they entitle anyParticipant to exercise voting rights or any other rights attaching to the ownership or control ofCommon Shares, nor shall any Participant be considered the owner of any Common Shares to bedelivered under the Plan until after the date of purchase of such Common Shares for the account ofsuch Participant as specifically provided herein.
12. DEATH OF PARTICIPANT
In the event of a Participants death, any and all Share Units then credited to the Participantsaccount shall become payable to a dependant or relation of the Participant designated in writing bythe Participant and provided to Nortel Corporation, failing which to the Participants legalrepresentative.
13. COMPLIANCE WITH APPLICABLE LAWS
Any obligation of Nortel Corporation with respect to Common Shares pursuant to the terms of thePlan is subject to compliance with all applicable laws, regulations, rules, orders of governmentalor regulatory authorities and the requirements of any stock exchange upon which shares of NortelCorporation are listed or traded. Should Nortel Corporation, in its sole discretion, determinethat it is not desirable or feasible to provide for the settlement of Share Units in Common Sharespursuant to Section 8 hereof, including by reason of any such laws, regulations, rules, orders orrequirements, such obligation shall be satisfied by means of a cash payment by Nortel Corporationequal to the Market Value of the Common Shares that would otherwise be delivered to a Participantin settlement of Share Units on the Settlement Date (less any applicable tax withholdings orrequired source deductions). Each Participant shall comply with all such laws, regulations, rules,orders and requirements, and shall furnish Nortel Corporation with any and all information andundertakings as may be required to ensure compliance therewith.
14. WITHHOLDING TAXES
Nortel Corporation may withhold from any payment to or for the benefit of a Participant any amountrequired to comply with the applicable provisions of any federal, provincial, state or
local law relating to the withholding of tax or the making of any other source deductions,including on the amount, if any, included in income of a Participant and may adopt and apply suchrules and regulations that in its opinion will ensure that Nortel Corporation will be able to socomply.
The rights or interests of a Participant under the Plan, including the Share Units, shall not beassignable or transferable, otherwise than in case of death as set out in the Plan, and such rightsor interests shall not be encumbered.
16. ALTERATION OF NUMBER OF SHARE UNITS SUBJECT TO THE PLAN
In the event that:
|(a)||a dividend shall be declared upon the Common Shares or other securities of Nortel Corporationpayable in Common Shares or other securities of Nortel Corporation (other than a dividendwhich may be paid in cash or in Common Shares at the option of the shareholder);|
|(b)||the outstanding Common Shares shall be changed into or exchanged for a different number orkind of shares or other securities of Nortel Corporation or of another corporation, whetherthrough an arrangement, plan of arrangement, amalgamation or other similar statutoryprocedure, or a share recapitalization, subdivision or consolidation or otherwise;|
|(c)||there shall be any change, other than those specified in paragraphs (a) and (b) of thisSection 16, in the number or kind of outstanding Common Shares or of any shares or othersecurities into which such Common Shares shall have been changed or for which they shall havebeen exchanged; or|
|(d)||there shall be a distribution of assets or shares to shareholders of Nortel Corporation outof the ordinary course of business,|
then, if the Board shall in its sole discretion determine that such change equitably requires anadjustment in the number of Share Units credited to Participants pursuant to the Plan but not yetsettled and cancelled, and/or a substitution, for each Common Share, of the kind of securities intowhich each outstanding Common Share has been so changed or exchanged and/or any other adjustment,then such adjustment and/or substitution shall be made by the Board and shall be effective andbinding for all purposes.
In the case of any such substitution, change or adjustment as provided for in this Section 16, thevariation shall generally require that the dollar value of the Share Units then recorded in theParticipants account prior to such substitution, change or adjustment will be proportionately andappropriately varied so that it shall be approximately equal to such dollar value after thevariation.
No adjustment provided for in this Section shall entitle a Participant to receive a fractionalCommon Share or other security and the total adjustment with respect to each Share Unit shall belimited accordingly.
In the event that, at the time contemplated for the purchase of Common Shares under the Plan, thereis no public market for the Common Shares or for securities substituted therefor as provided bythis Section 16, the obligations of Nortel Corporation under the Plan shall be met by a payment incash on the Settlement Date in such amount as is reasonably determined by the Committee to be fairand equitable in the circumstances, but shall always be established in relation to the fair marketvalue of a Common Share within the period that begins one year before the Resignation Date and endson the Settlement Date.
17. UNSECURED PLAN
Unless otherwise determined by the Committee, the obligations of Nortel Corporation under the Planshall be general unsecured obligations of Nortel Corporation.
18. EFFECTIVE DATE OF THE PLAN
The Plan shall be effective with respect to fees payable to Eligible Directors on or after January1, 2002. The Plan was amended and restated on May 29, 2003. The Plan was amended and restated onDecember 18, 2003, effective immediately. The Plan was amended on June 29, 2005 and restatedeffective June 29, 2005. The Plan was amended on December 7, 2005 and restated effective June 29,2005.
19. AMENDMENTS TO, SUSPENSION OR TERMINATION OF, THE PLAN
The Board may from time to time amend, suspend or terminate, in whole or in part, the Plan or amendthe terms of Share Units credited in accordance with the Plan. If any such amendment willmaterially adversely affect the rights of a Participant with respect to Share Units credited tosuch Participant or under any Election Form and Agreement, the written consent of such Participantto such amendment shall be obtained. Notwithstanding the foregoing, the obtaining of the writtenconsent of any Participant to an amendment which materially adversely affects the rights of suchParticipant with respect to any credited Share Unit or under any Election Form and Agreement shallnot be required if such amendment is required to comply with applicable laws, regulations, rules,orders of governmental or regulatory authorities or the requirements of any stock exchange on whichshares of Nortel Corporation are listed or traded.
If the Board terminates the Plan, Share Units previously credited to Participants shall, at thediscretion of the Board, either (a) become immediately payable in accordance with the terms of thePlan in effect at such time, or (b) remain outstanding and in effect and settled subject to and inaccordance with their applicable terms and conditions.
20. GOVERNING LAW
Consent to membership on the Board and the resulting participation in the Plan by any Participantshall be construed as acceptance of the terms and conditions of the Plan by the
Participant and as to the Participants agreement to be bound thereby. The Plan shall be construedin accordance with and governed by the laws of the Province of Ontario.