Nortel strikes multi-million dollar CEO pay deal

CIOL Bureau
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Susan Taylor


OTTAWA: Nortel Networks Corp. plans to pay its incoming chief executive an annual base salary of $1.2 million and several million dollars more in bonuses and stock options, it said in a filing to U.S. regulators on Friday.

But the telecom equipment supplier must first resolve a lawsuit with his former employer, Motorola Inc.

Motorola this week filed a lawsuit against its former chief operating officer, alleging that he broke agreements by accepting the top job at Nortel and his new role will inevitably result in the disclosure of trade secrets.


Motorola has asked for an injunction to prevent Mike Zafirovski, slated to take over the top Nortel post on Nov. 15, from working there for two years, beginning July 29.

"The parties are in discussion to attempt to resolve this matter," Nortel spokeswoman Patricia Vernon told Reuters, adding that the talks involve the two companies and Zafirovski.

Nortel struck an employment agreement with Zafirovski on Oct. 17, it said in the filing. It includes a $1.2 million annual base salary and annual bonus under a so-called "Success Plan" between $1.8 million and $3.6 million.


He will also receive a long-term incentive compensation award of between $2.4 million and $4.8 million. The terms and conditions of that award have not yet been determined.

Nortel will also issue a new hire grant of 5 million stock options and restricted stock units, under its 2005 stock incentive plan, with a value at the time of award of $7.5 million. The stock will be vested in 20 percent annual installments over five years following the grant.

Zafirovski is also eligible for annual grants of options and restricted stock units under Nortel's stock incentive plan.


If his post is terminated, he could get continued payments of his $1.2 million base salary for two years and a lump sum equal to two times his target annual bonus under the success plan. Some outstanding stock would continue to vest during the two-year period.

Those payments would be triggered if Nortel terminated Zafirovski's employment, or if he resigned due to a "material change in his role or a change in his compensation that is materially inconsistent with other key employees."

Nortel said it has not finalized the terms and conditions of departure for outgoing chief executive Bill Owens, whose role as CEO, vice-chairman and board member will cease Nov. 15.


Owens spent 18 months helping stabilize Nortel after an accounting scandal that forced it to correct several years of financial statements that were later shown to have been manipulated to trigger bonus payments.

Nortel is still under investigation by U.S. and Canadian regulators for the bookkeeping chicanery. Late last month, a mediator was appointed to try and settle two class action lawsuits related to the scandal.