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purchased on the open market, or at the discretion of the Committee, or at the election of the holder in certain circumstances, cash in lieu
of shares.
The number of RSUs (in millions) allocated as of December 31, 2003, 2002 and 2001 was approximately 20, 2 and 2, respectively.
The RSUs allocated in 2003 may be issued and settled in four tranches at the discretion of the Committee. The Committee’s discretion is
to be based, among other things, on the achievement of four performance thresholds over a three year term ending December 31, 2005.
The performance criteria for each of the four performance thresholds are distinct and incremental “Return on Sales before Tax”
percentage targets, calculated on a rolling four-quarter basis. In order to receive payout, the recipient must have continued employment
until the date the allocated RSUs are issued and settled. Once the Committee determines that a threshold has been achieved, the
Committee uses its discretion to determine whether additional factors should be considered in determining the number of allocated RSUs
to be issued and settled. Such additional factors may include the performance of competitors and other relevant business, financial,
competitive, political and other criteria deemed appropriate by the Committee. In the third quarter of 2003, Nortel Networks issued and
settled approximately 7 million units of the RSUs allocated in 2003 (see note 23).
The RSUs allocated in 2001 were issued at the discretion of the Committee based, among other things, on the achievement of five
performance targets over a two year term ended March 31, 2003. Once the Committee determined whether the five performance targets
had been achieved, it used its discretion to determine the number of allocated RSUs to be issued and settled. On May 29, 2003, Nortel
Networks issued and settled approximately 1.5 million units in respect of the RSUs allocated in 2001.
Directors’ deferred share com
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Under the Nortel Networks Corporation Directors’ Deferred Share Compensation Plan and the Nortel Networks Limited Directors’
Deferred Share Compensation Plan, non-employee directors can elect to receive all or a portion of their compensation for services
rendered as a director of Nortel Networks Corporation or NNL, any committees thereof, and as board or committee chairperson, in the
form of share units, instead of cash. The share units are settled a specified number of trading days following the release of Nortel
Networks financial results after the director ceases to be a member of the applicable board, and each share unit entitles the holder to
receive one common share of Nortel Networks Corporation purchased on the open market. As of December 31, 2003 and 2002, the
number of share units issued (in millions) was 1 and 1, respectively.
Em
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urchase
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Nortel Networks has ESPPs to facilitate the acquisition of common shares of Nortel Networks Corporation at a discount and the retention
of such common shares by eligible employees (see note 23). The ESPPs have four offering periods each year, with each offering period
beginning on the first day of each calendar quarter. Eligible employees may have up to 10 percent of their eligible compensation
deducted from their pay during each offering period to contribute towards the purchase of Nortel Networks Corporation common shares.
The Nortel Networks Corporation common shares are purchased by an independent broker through the facilities of the TSX and/or
NYSE, and held by a custodian on behalf of the plan participants.
For North American eligible employees, Nortel Networks Corporation common shares are purchased at a purchase price of 85 percent of
the market price of the Nortel Networks Corporation common shares on the last trading day of the offering period. For non-North
American eligible employees, common shares are purchased at a purchase price equal to the greater of:
(i) 85 percent of the average of the high and low prices of common shares on the first trading day of the offering period; and
(ii) 71.5 percent of the market price of the common shares on the last trading day of the offering period; or
(iii) if the market price on the last trading day is equal to or less than the average of the high and low on the first trading day, the
purchase price shall be 85 percent of the market price on the last trading day of the offering period.
The purchases under the ESPPs for the years ended December 31 are shown below: