NORTEL NETWORKS LIMITED
SHARE COMPENSATION PLAN
AS AMENDED AND RESTATED
Amended on December 7, 2005 and Restated effective June 29, 2005
NORTEL NETWORKS LIMITED
SHARE COMPENSATION PLAN
AS AMENDED AND RESTATED
SHARE COMPENSATION PLAN
AS AMENDED AND RESTATED
1. BACKGROUND; PURPOSE OF THE PLAN
The Nortel Networks Limited Directors Deferred Share Compensation Plan was amended and restated toreflect the transactions contemplated by the plan of arrangement (the Plan of Arrangement)described in the Amended and Restated Arrangement Agreement, made as of January 26, 2000, asamended and restated March 13, 2000, among BCE Inc., Nortel Networks Corporation, New Nortel Inc.and the other parties thereto. On May 1, 2000, the effective date of the Plan of Arrangement, NewNortel Inc. acquired from the holders of the common shares (other than BCE Inc. and its affiliates)of Nortel Networks Corporation all of the Nortel Networks Corporation common shares then held bysuch shareholders in exchange for an equal number of common shares of New Nortel Inc. and eachshareholder of BCE Inc. received approximately 0.78 common shares of New Nortel Inc. for eachcommon share of BCE Inc. then held by such BCE shareholder. In addition, the common shares of NewNortel Inc. were listed on the New York Stock Exchange and The Toronto Stock Exchange insubstitution for the common shares of Nortel Networks Corporation. Also, as part of the Plan ofArrangement, Nortel Networks Corporation changed its name to Nortel Networks Limited (NortelLimited) and New Nortel Inc. changed its name to Nortel Networks Corporation (NortelCorporation).
In connection with, and effective as of May 1, 2000, Share Units granted or to be granted under thePlan and the shares subject to the Plan were adjusted and common shares of Nortel Corporation weresubstituted for common shares of Nortel Limited. In all other respects, the terms and provisionsof the Plan were reaffirmed, as therein provided.
On May 25, 2000, the Board suspended the operation of the Plan, effective April 27, 2000, with theeffect that, notwithstanding any other provision of the Plan, (i) no further Share Units would becredited to Participants in respect of Annual Retainer Fees (as defined in the Plan as at thatdate) or any other fees payable on or after April 27, 2000 in respect of services rendered byParticipants to Nortel Limited or Nortel Corporation, (ii) Share Units, as so adjusted, credited toParticipants accounts prior to April 27, 2000 would remain outstanding, (iii) Share Units, as soadjusted, would continue to be credited under Section 7 of the Plan for the period prior to theSettlement Date, and (iv) Share Units, as so adjusted, would be settled subject to and inaccordance with the Plan and the terms and conditions of the Share Units.
On June 9, 2000, the Board approved the amendment and restatement of the Plan, (i) effective as ofMay 1, 2000, to provide that Share Units would be credited to Participants in respect of servicesrendered by Participants to Nortel Limited only and that the Plan would be administered by theBoard or by a Committee of the Board, and (ii) to reflect the suspension of the operation of thePlan, effective April 27, 2000, until otherwise specifically determined by the Board, with respectto the payment of Annual Retainer Fees (as defined in the Plan as at that date) or other feespayable to Participants after April 27, 2000.
On January 24, 2002, the Board approved a further amendment and restatement of the Plan, effectiveas of January 1, 2002, (i) to provide for the crediting of Share Units to Participants in respectof all services rendered by such Participants as members of the Board; (ii) to provide that eachmember of the Board who qualifies as an Eligible Director shall receive all fees payable to suchmember for services as a member of the Board in the form of Share Units credited in respect of suchmember under the Plan; and (iii) to reflect the re-commencement of the operation of the Plan asamended and restated herein.
On May 29, 2003, the Board approved an amendment to the Plan, effective immediately, to permitEligible Directors to elect to receive between 0 100% of all fees payable to such member forservices as a member of the Board in the form of Share Units, with the remainder of such fees to besettled in cash.
On December 18, 2003, the Board approved an amendment to the Plan, effective immediately, withrespect to the manner in which Eligible Directors may elect to receive cash in lieu of Share Unitsunder the Plan. On June 29, 2005, the Board approved amendments to the Plan, effectivelyimmediately, with respect to the election by Eligible Directors to receive Fees in the form ofShare Units, with the remainder of such Fees payable in cash.
The purpose of the Plan is to assist Nortel Limited in attracting and retaining individuals withexperience 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 Limited from time totime 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 Limited 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 Limited.
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 Limited toan Eligible Director (i) for all services rendered as a member of the Board, and/or any committeesthereof, and (ii) for all services rendered as an executive or non-executive chairperson of theBoard, and/or any committees thereof; except that, Fees shall not include any other fee that may bepayable by Nortel Limited to the Eligible Director in connection with services rendered by suchEligible Director to Nortel Limited in any capacity other than as a member or chairperson of theBoard, 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 of exchange of the Bank of Canada, ifrequired, then the Market Value of a Common Share shall be determined as provided above on thefirst day immediately preceding the relevant day for which there were such board lot trades in theCommon Shares and a noon rate of exchange. If at any time the Common Shares are no longer listedor traded on the TSE or the NYSE, the Market Value shall be calculated in such manner as may bedetermined by the Committee from time to time, but shall always be established in relation to thefair market value of a Common Share. The Market Value of a Common Share shall be rounded up to thenearest 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 Limited Directors Deferred Share Compensation Plan (asamended and restated) set forth herein and as may be further amended or restated from time to time.
Plan of Arrangement shall have the meaning assigned to such term in Section 1 hereof.
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 Limited as may be adoptedfrom time to time and, until the financial year of Nortel Limited is changed, shall mean thequarters 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, the Bankof 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 Limited or NortelCorporation within the meaning 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 Limited 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 Limited 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 Nortel Limited.For greater certainty, Nortel Limited shall not pay or be responsible for brokerage or other feesincurred by Participants in respect of the disposition of any Common Shares.
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 Fees for the nextcalendar year (and each calendar year thereafter unless and until such Eligible Director changessuch election with respect to Fees payable for the calendar year commencing after such change inelection is made) in the form of Share Units, with the remainder of such Fees to be paid in cash.Fees payable to an Eligible Director in the calendar quarter in which such Eligible Director isfirst appointed or elected to the Board shall be paid one hundred percent (100%) in the form ofcash, unless such Eligible Director elects prior to, or within 30 days of, becoming an EligibleDirector to receive, effective on the later of (i) the date he or she becomes an Eligible Directoror (ii) the date of his or her election during such 30-day period, between 0-100% of his or herFees for the remainder of such calendar year (and future calendar years) in the form of ShareUnits, with the remainder of such Fees to be paid in cash. The Board may, in its sole discretion,permit an Eligible Director who is not subject to income tax under the US Internal Revenue Code of1986, as amended, to elect at a time other than the times specified in this paragraph to receivebetween 0-100% of his of her Fees in the form of Share Units, with the remainder of such Fees to bepaid 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
Neither Nortel Limited nor Nortel Corporation shall be required to cause to be delivered CommonShares or certificates evidencing Common Shares pursuant to the Plan unless and until
such delivery is in 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. Neither Nortel Corporation nor Nortel Limited shall in any eventbe obligated to the Participants to take any action to comply with any such laws, regulations,rules, orders or requirements. Subject to the foregoing, Nortel Limited may from time to timeprovide a Broker with funds on the Settlement Date as herein provided to purchase Common Shares onbehalf of Participants on the open market or by private transaction as required in order toadminister the Plan in accordance with its terms.
In the event Nortel Limited or Nortel Corporation determines that Common Shares or certificatesevidencing Common Shares shall not be delivered to a Participant or Participants in accordance withthe foregoing, the Participant shall be entitled to receive from Nortel Limited, in cash, an amountequal to the Market Value of the Common Shares that would otherwise be delivered in settlement ofShare Units on the Settlement Date, less any amounts withheld by Nortel Limited 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 Limited deems appropriate, enter into an Election Form and Agreement in writing with NortelLimited and, if applicable, the Administrator with respect to his or her participation in the Plan.Such Election Form and Agreement shall set out certain rights and obligations of the partiesthereto pursuant to and in accordance with the Plan, and shall remain in full force and effectuntil all such Share Units credited to the account of such Participant shall have been settledand/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 the payment of any suchdividend, by (ii) the Market Value of a Common Share on the dividend payment date for suchdividend, 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 ResignationDate 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 Limited in connection with the satisfaction of theParticipants Share Units in accordance with Section 14. Any entitlement to fractional CommonShares shall be paid in cash by Nortel Limited 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 Limited 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 Limited, then the Settlement Date shall be the next following trading day on which such datais available to Nortel Limited.
On the Settlement Date, Nortel Limited shall notify the Broker as to the number of Common Shares tobe purchased by the Broker on behalf of the Participant on the TSE, the NYSE, or any other stockexchange approved by the Committee. As soon as practicable thereafter, the Broker shall purchasethe number of Common Shares which Nortel Limited has requested the Broker to purchase on behalf ofthe Participant and shall notify the Participant and Nortel Limited 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 Limited, the Broker shall deliver to the Participant, or to hisdesignated 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 Limited shall havethe right, in its sole discretion, to pay entirely in cash on the Settlement Date an amount equalto 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 Limited 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 Limited or by an Administrator on behalf of Nortel Limited to eachParticipant at least annually. A Participant shall not be entitled to any certificate or otherdocument 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 and Nortel Limited designated by the Participant and who is amember of the TSE, the NYSE, or any such other stock exchange as may be determined by the Committeefrom time to time (the Broker). Any such designation of a Broker may be changed from time totime. Upon designation of a Broker or at any time thereafter, Nortel Limited may elect to providethe designated Broker with a letter agreement to be executed by the Broker, the Participant andNortel Limited, setting forth, inter alia:
|(a)||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 forthe Participant in respect of the Common Shares to be purchased for the Participant, and todelivering to the Participant, or his or her representative, the share certificate for, or totransferring electronically to an account designated by the Participant, the Common Sharespurchased upon receipt from Nortel Limited of payment of the Aggregate Purchase Price andrelated reasonable brokerage commission; and|
|(b)||Nortel Limiteds agreement to notify the Broker of the number of Common Shares to bepurchased and to pay the Aggregate Purchase Price and the related reasonable brokeragecommission,|
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
Corporation or Nortel Limited for purposes of any applicable corporate, securities or stockexchange 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 neither Nortel Corporation nor Nortel Limited has any obligation to register such Share Unitsor Common Shares. Accordingly, the Common Shares delivered under the Plan may not be offered orsold in the United States unless they become registered or an exemption from registration isotherwise 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 NortelLimited.
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 Limited, failing which to the Participants legalrepresentative.
13. COMPLIANCE WITH APPLICABLE LAWS
Any obligation of Nortel Limited with respect to Common Shares pursuant to the terms of the Plan issubject to compliance with all applicable laws, regulations, rules, orders of governmental orregulatory authorities and the requirements of any stock exchange upon which shares of NortelCorporation are listed or traded. Should Nortel Limited, in its sole discretion, determine that itis not desirable or feasible to provide for the settlement of Share Units in Common Shares pursuantto 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 Limited equalto the Market Value of the Common Shares that would otherwise be delivered to a Participant insettlement of Share Units on the Settlement Date (less any applicable tax withholdings or requiredsource deductions). Each Participant shall comply with all such laws, regulations, rules, ordersand requirements, and shall furnish Nortel Limited with any and all information and undertakings asmay be required to ensure compliance therewith.
14. WITHHOLDING TAXES
Nortel Limited 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 lawrelating to the withholding of tax or the making of any other source deductions, including on theamount, if any, included in income of a Participant and may adopt and apply such rules andregulations that in its opinion will ensure that Nortel Limited will be able to so comply.
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 and
appropriately 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 Limited under the Plan shall be met by a payment in cashon the Settlement Date in such amount as is reasonably determined by the Committee to be fair andequitable 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 Limited under the Planshall be general unsecured obligations of Nortel Limited.
18. EFFECTIVE DATE OF THE PLAN
The Plan was originally effective with respect to certain fees payable to Eligible Directors on orafter June 30, 1998. The Plan was amended and restated on April 27, 2000, effective as of May 1,2000; was suspended on May 25, 2000, effective April 27, 2000; was amended and restated on June 9,2000, effective May 1, 2000; was amended and restated and the suspension lifted on January 24,2002, effective January 1, 2002; and was amended and restated on May 29, 2003. The Plan wasamended and restated on December 18, 2003, effective immediately. The Plan was amended on June 29,2005 and restated effective June 29, 2005. The Plan was amended on December 7, 2005 and restatedeffective 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
the Plan in effect at such time, or (b) remain outstanding and in effect and settled subject to andin accordance 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 asto the Participants agreement to be bound thereby. The Plan shall be construed in accordance withand governed by the laws of the Province of Ontario.