NORTEL NETWORKS CORP
GENERAL DESCRIPTION OF CASH BONUS
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<TYPE>EX-10.5
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<DESCRIPTION>GENERAL DESCRIPTION OF CASH BONUS
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<P align="right"><FONT size="2">EXHIBIT 10.5
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<P><FONT size="2"><B>General Description of Special Cash Bonus for
Employees and Executives of<BR>
Nortel Networks Corporation and Nortel Networks Limited</B>
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<P><FONT size="2">The Boards of Directors of Nortel Networks Corporation and Nortel Networks
Limited and their Joint Leadership Resources Committee have approved a &#147;Return
to Profitability&#148; bonus program to further align the interests of employees with the interests of shareholders in meeting the corporate
objective of achieving and maintaining profitability. Under this program,
substantially all employees will receive a special cash bonus if Nortel
Networks Corporation achieves profitability for a single fiscal quarter.
However, the payment of the full bonus for senior executives will require that
Nortel Networks Corporation maintains profitability for four consecutive fiscal
quarters, on a cumulative basis. For the purposes of this program,
&#147;profitability&#148; is defined as positive pro forma earnings from continuing
operations, as reported by Nortel Networks Corporation in its earnings press
release(s) for the applicable quarter or quarters, on a cumulative basis. The
special cash bonus will only be payable to employees who are
actively employed by Nortel Networks Limited or any other direct or indirect
subsidiaries of Nortel Networks Corporation, on the last day of the applicable
fiscal quarter or quarters in respect of which this bonus is payable.
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<P><FONT size="2">The special cash bonus for eligible employees (other than senior executives)
will be payable in full, if and when Nortel Networks Corporation first
achieves profitability for a single fiscal quarter (which may include the
fourth fiscal quarter of 2002), provided that this is achieved by the end of
2003.
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<P><FONT size="2">The special cash bonus for senior executives will be in an aggregate potential
amount, based on a multiple of base salary, to be determined by the Boards of
Directors of Nortel Networks Corporation and Nortel Networks Limited and their
Joint Leadership Resources Committee. For each such senior executive, the
first portion, in an amount up to 20% of the aggregate potential amount, will
be payable if and when Nortel Networks Corporation first achieves profitability
for a single fiscal quarter, provided that this is achieved by the end of 2003.
The second portion, in an amount up to 40% of the aggregate potential amount,
will be payable if and when Nortel Networks Corporation achieves and maintains
profitability for two consecutive fiscal quarters on a cumulative basis, which
may include the fiscal quarter in respect of which the first portion is payable
(but not the fourth quarter of 2002). The third and final portion, in an
amount up to 40% of the aggregate potential amount, will be payable if and when
Nortel Networks Corporation achieves and maintains profitability for four
consecutive fiscal quarters on a cumulative basis, which may include the two
consecutive fiscal quarters in respect of which the second portion is payable.
Neither the second nor third portions of the bonus will be payable if the
applicable payment performance criteria have not been satisfied by the end of
2004. In addition, if the first portion does not become payable (as a result
of not achieving profitability for a single fiscal quarter by the end of 2003),
then none of the second or third portions of the bonus will be payable.
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