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Table II
On April 27, 2004, the Company and Nortel Networks Limited terminated for cause the employment of each of their then president and
chief executive officer, chief financial officer and controller. On August 19, 2004, the Company announced that seven individuals with, or who
had, significant responsibilities for financial reporting at the line of business and regional levels were terminated for cause and that Nortel
Networks will demand repayment of payments made under bonus plans in respect of 2003. As a result, where applicable and permitted under
applicable law, the pension benefits for the terminated executives were recalculated to include base salary only in 2003.
As a result of the termination of Mr. Dunn’s employment for cause on April 27, 2004, he was no longer eligible for any SERP benefit that
would have otherwise applied as a result of his past election to remain in Part I of the pension plan. Upon the termination of his employment
for cause, Mr. Dunn received Cdn$2,416,517.18 representing the commuted value of the pension benefits accrued pursuant to the Nortel
Networks Limited Managerial and Non-Negotiated Pension Plan. The payment was calculated based on Mr. Dunn’s 27.92 years of service in
accordance with the Part I formula described under “Defined Benefit Pension Plan — Canada”.
Certain employment arrangements
On August 31, 2004, the Company and Nortel Networks Limited entered into an employment agreement with William A. Owens
confirming Mr. Owens’ appointment as President and Chief Executive Officer of the Company and Nortel Networks Limited as of April 27,
2004. The agreement provides that Mr. Owens will receive a base salary of $1,000,000 and will be eligible for a targeted annual bonus of
170% of base salary under the Nortel Networks Limited SUCCESS Incentive Plan. Under the agreement, Mr. Owens will receive a special
pension benefit that will accrue ratably over the first five years of his employment as President and Chief Executive Officer. Assuming
retirement at the end of such five years, Mr. Owens will receive an estimated monthly pension benefit of $33,540, payable over the five year
period following his retirement.
Mr. Owens is based at the registrant’s offices in Ontario, Canada. In connection with his relocation to Ontario, Mr. Owens will be eligible
for certain benefits under the Nortel Networks-International Assignment Relocation program, in accordance with the generally applicable terms
of such program and consistent with his senior executive position.
Mr. DeRoma entered into an employment agreement in April 1997, prior to commencing employment as Vice-President and Deputy
General Counsel. Pursuant to the agreement, the Company agreed to make a gross-up payment to Mr. DeRoma for calendar years 1997 through
2000. The gross-up payment was intended to place Mr. DeRoma in the same after-tax position with respect to his base salary and any annual
incentive award as if he were a resident of the State of Connecticut and a taxpayer in the United States. After June 2000, this gross-up was
subject to annual review by the joint
158
Years of Service
Total Earnings 5 10 15 20 25 30 35
$600,000 $10,330 $20,659 $30,989 $41,318 $51,648 $61,978 $72,308
700,000 12,051 24,102 36,153 48,204 60,256 72,307 84,359
800,000 13,773 27,546 41,318 55,091 68,864 82,637 96,411
900,000 15,494 30,989 46,483 61,977 77,472 92,967 108,462
1,000,000 17,216 34,432 51,648 68,863 86,080 103,296 120,513
1,100,000 18,938 37,875 56,813 75,750 94,688 113,626 132,565
1,200,000 20,659 41,318 61,977 82,636 103,296 123,956 144,616
1,300,000 22,381 44,762 67,142 89,522 111,904 134,285 156,667
1,400,000 24,103 48,205 72,307 96,409 120,512 144,615 168,719
1,500,000 25,824 51,648 77,472 103,295 129,120 154,945 180,770
1,600,000 27,546 55,091 82,636 110,181 137,728 165,274 192,821
1,700,000 29,267 58,534 87,801 117,068 146,336 175,604 204,873
1,800,000 30,989 61,978 92,966 123,954 154,944 185,933 216,924
1,900,000 32,711 65,421 98,131 130,840 163,552 196,263 228,975
2,000,000 34,432 68,864 103,296 137,727 172,160 206,593 241,027