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under the incentive plan for the remaining four segments. Although the joint leadership resources committee determined that certain of the distinct performance objectives
were not achieved, it exercised its discretion in May 2003 to authorize the issuance and settlement in the form of common shares of the Company (net of withholding
taxes) of 90 percent of the restricted stock units allocated under the 2001 program based on its consideration of the improved financial performance oftheCompany
during the two-year performance period and the Company’s overall performance over that period as compared to its key competitors. The total before tax value of the
restricted stock units that were issued and settled, using the purchase price of our common shares on the date of purchase, was: Cdn$945,293 ($672,902) for Mr. Dunn;
$274,050 for Mr. Debon; Cdn$567,176 ($403,741) for Mr. Bolouri; and Cdn$567,176 ($403,741) for Mr. DeRoma. Amounts have been converted using the exchange
rates listed in footnote (5) below.
(4) Represents contributions made under the Nortel Networks Limited Investment Plan for Employees — Canada.
(5) Represents the United States dollar equivalent of payments actually earned or paid in Canadian dollars. Amounts have been converted using the average of the exchange
rates in effect during each year equal to US$1.00 = Cdn$1.4048 for 2003, US$1.00 = Cdn$1.5708 for 2002 and US$1.00 = Cdn$1.5489 for 2001.
(6) Represents a Return to Profitability program award under the SUCCESS Plan. Nortel Networks has demanded that the individuals described in footnote (1) whose
employment was terminated for cause repay any payments made under bonus plans in respect of 2003, including any Return to Profitability program awards. See footnotes
(1), (7) and (14).
(7) As a result of the termination of Mr. Dunn’s employment for cause on April 27, 2004, the Company and Nortel Networks Limited have demanded repayment of the
Return to Profitability program bonus award under the SUCCESS Plan of $3,540,000 and the 745,000 restricted stock units issued and settled in respect of restricted stock
units allocated under the 2003 program of the RSU Plan. See footnotes (6) and (8).
(8) Represents the number of restricted stock units issued and settled in respect of restricted stock units allocated under the 2003 program of the RSU Plan. Each unit entitled
the holder to receive one common share of the Company or, subject to certain conditions, a cash payment equal to the common share value. In respect of payments made
under the 2003 program of the RSU Plan, each named executive officer, other than Mr. Dunn, received in July 2003 restricted stock units in connection with the
achievement of the first performance threshold as at the end of the secondfiscal quarter of 2003 (100% in the form of common shares) and in February 2004 restricted
stock units in connection with the achievement of the second performance threshold as at the end of the third fiscal quarter of 2003 (50% in the form of common shares
and 50% in the form of cash). These individuals continue to hold the common shares received as a result of the settlement of their restricted stock units. Mr. Dunn received
in July 2003 restricted stock units in connection with the achievement of the first performance threshold (100% in the form of common shares) but did not receive
restricted stock units in connection with the achievement of the second performance threshold. The before tax total value of restricted stock units issued and settled was:
Cdn$2,983,204 ($2,123,579) for Mr. Dunn; $3,783,743 for Mr. Debon; $2,920,339 for Ms Spradley; Cdn$3,652,271 ($2,599,851) for Mr. Bolouri; and Cdn$3,652,271
($2,599,851) for Mr. DeRoma. Restricted stock units are valued using the purchase price of the common shares on the date of purchase (for share settlement) and on the
average price for the specified 20 day trading period for cash settlement (where applicable). Amounts have been converted using the exchange rates listed in footnote (5)
above. See “Long-term incentive plans — awards in last two fiscal years — 2003” for a description of the applicable performance criteria. See footnote (7) above.
(9) These options terminated and expired automatically upon the termination of Mr. Dunn’s employment for cause on April 27, 2004.
(10) This amount has been reduced from the previously reported amount to reflect Mr. Dunn’s voluntary return for immediate cancellation in June 2003 of 250,000 stock
options that were originally granted in 2001.
(11) Represents a SUCCESS Plan annual incentive award. Nortel Networks has demanded that the individuals described in footnote (1) whose employment was terminated for
cause repay any payments made under bonus plans in respect of 2003, including any SUCCESS Plan annual incentive awards.
(12) Certain payments paid in euros have been converted and included in this amount. Payments have been converted using the average of the exchange rates in effect during
each year equal to US$1.00 = .8830 euros for 2003 and US$1.00 = 1.0615 euros for 2002.