"There is nothing more difficult than notifying employees, and Nortel is extremely conscious of the personal financial burden this will cause affected employees and their families," said Mike Zafirovski, Nortel president and chief executive officer. "Nortel is a company driven by people and innovation. But with the unprecedented economic environment and resultant impacts on revenues, significant changes are required to regain our financial footing. Tough decisions are being made to restructure the company and work towards a successful emergence from creditor protection."
The company is currently in bankruptcy protection and seeking court approved restructuring.
"We remain deeply committed to our customers and are staffed to meet their needs as we take the necessary actions to strengthen the Company," said Zafirovski. "Throughout the process, we are committed to maintaining current high service levels and appropriate innovation investment levels to ensure best in class technology continues to be available to Nortel's global customer base."
Employee Compensation Program Changes
The Board has also approved management's recommendation to not pay any bonuses under the Nortel Annual Incentive Plan (AIP) for 2008. In addition, Nortel is seeking Canadian court approval to terminate its equity based compensation plans, including all outstanding equity under the plans (including stock options, restricted stock units and performance stock units), whether vested or unvested, and no further equity will be awarded in 2009.
Nortel will continue its AIP in 2009 for all eligible full and part-time employees. The plan is being modified to permit quarterly rather than annual award determinations and payouts. This will provide a more immediate incentive for employees upon the achievement of critical shorter-term corporate performance objectives, including specific operational metrics in support of customer service levels as the Company works through its business and financial restructuring. The Company will seek to implement, and request court approval where required, retention and incentive compensation for certain key eligible employees deemed essential to the business while under court protection.
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