Exhibit 10.3
U.S. SECURITY AGREEMENT
dated as of
February 14, 2006
among
NORTEL NETWORKS INC.
the SUBSIDIARY LIEN GRANTORS
from time to time party hereto,
JPMORGAN CHASE BANK, N.A.,
as Collateral Agent
and
EXPORT DEVELOPMENT CANADA,
as provider of the EDC Support Facility

 

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TABLE OF CONTENTS

                  Page
SECTION 1.
  DEFINITIONS   1
SECTION 2.
  GRANT OF TRANSACTION LIENS   11
SECTION 3.
  GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS   13
SECTION 4.
  ADDITIONAL COVENANTS   16
SECTION 5.
  RECORDABLE INTELLECTUAL PROPERTY   17
SECTION 6.
  INVESTMENT PROPERTY   17
SECTION 7.
  CONTROLLED DEPOSIT ACCOUNTS   19
SECTION 8.
  CASH COLLATERAL ACCOUNTS   19
SECTION 9.
  OPERATION OF COLLATERAL ACCOUNTS   20
SECTION 10.
  TRANSFER OF RECORD OWNERSHIP   21
SECTION 11.
  RIGHT TO VOTE SECURITIES   21
SECTION 12.
  CERTAIN CASH DISTRIBUTIONS   21
SECTION 13.
  REMEDIES UPON EVENT OF DEFAULT OR SPECIFIED EVENT OF DEFAULT   22
SECTION 14.
  APPLICATION OF PROCEEDS   22
SECTION 15.
  FEES AND EXPENSES   24
SECTION 16.
  AUTHORITY TO ADMINISTER COLLATERAL   25
SECTION 17.
  LIMITATION ON DUTY IN RESPECT OF COLLATERAL   25
SECTION 18.
  GENERAL PROVISIONS CONCERNING THE COLLATERAL AGENT   25
SECTION 19.
  TERMINATION OF TRANSACTION LIENS; RELEASE OF COLLATERAL   27
SECTION 20.
  ADDITIONAL LIEN GRANTORS   28
SECTION 21.
  ADDITIONAL SECURED OBLIGATIONS   28
SECTION 22.
  NOTICES   29
SECTION 23.
  NO IMPLIED WAIVERS; REMEDIES NOT EXCLUSIVE   30
SECTION 24.
  SUCCESSORS AND ASSIGNS   30
SECTION 25.
  AMENDMENTS AND WAIVERS   30
SECTION 26.
  CHOICE OF LAW   30
SECTION 27.
  WAIVER OF JURY TRIAL   30
SECTION 28.
  SEVERABILITY   30

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SCHEDULES:
     
Schedule 1
  Pledged Equity Interests Owned Directly by Lien Grantors
 
   
Schedule 2
  Other Pledged Securities Owned Directly by Lien Grantors
 
   
Schedule 3
  Collateral Description
 
   
Schedule 4
  Asset and Revenue Disclosure
 
   
Schedule 5
  Principal U.S. Cash Management Accounts of Lien Grantors

     
EXHIBITS:
   
 
   
Exhibit A
  Security Agreement Supplement
 
   
Exhibit B
  Copyright Security Agreement
 
   
Exhibit C
  Patent Security Agreement
 
   
Exhibit D
  Trademark Security Agreement
 
   
Exhibit E
  Design Security Agreement
 
   
Exhibit F
  Perfection Certificate
 
   
Exhibit G
  Issuer Control Agreement
 
   
Exhibit H
  Securities Account Control Agreement

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U.S. SECURITY AGREEMENT
     AGREEMENT dated as of February 14, 2006 (the “Effective Date”) among NORTEL
NETWORKS INC. (with its successors, “NNI”), the SUBSIDIARY LIEN GRANTORS from
time to time party hereto, Export Development Canada, as provider of the EDC
Support Facility and JPMORGAN CHASE BANK, N.A., as Collateral Agent.
     WHEREAS, NNI, as borrower, certain financial institutions, as lenders and
agents, and JPMorgan Chase Bank, N.A., as Administrative Agent, are parties to a
Credit Agreement dated as of February 14, 2006 (as amended from time to time so
long as the principal amount of loans thereunder does not exceed
US$1,300,000,000, the “2006 Credit Agreement”); and
     WHEREAS, pursuant to the 2006 Credit Agreement, NNI and its U.S.
Subsidiaries (as defined below) are required to enter into a U.S. Security
Agreement in the form hereof;
     NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
     Section 1. Definitions.
     (a) Terms Defined in UCC. As used herein, each of the following terms has
the meaning specified in the UCC:

      Term   UCC
Account
  9-102
Authenticate
  9-102
Certificated Security
  8-102
Chattel Paper
  9-102
Commercial Tort Claim
  9-102
Commodity Account
  9-102
Commodity Contract
  9-102
Commodity Customer
  9-102
Commodity Intermediary
  9-102
Deposit Account
  9-102
Document
  9-102
Electronic Chattel Paper
  9-102
Entitlement Holder
  8-102
Entitlement Order
  8-102
Equipment
  9-102
Financial Asset
  8-102 & 103
General Intangibles
  9-102
Goods
  9-102
Instrument
  9-102
Inventory
  9-102
Investment Property
  9-102
Issuer
  5-102
Letter-of-Credit Right
  9-102
Record
  9-102
Securities Account
  8-501
Securities Intermediary
  8-102
Security
  8-102 & 103
Security Entitlement
  8-102
Supporting Obligations
  9-102
Tangible Chattel Paper
  9-102
Uncertificated Security
  8-102

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     (b) Additional Definitions. The following additional terms, as used herein,
have the following meanings:
     “1988 Indenture” means the Indenture dated as of November 30, 1988 among
NNL, the subsidiary guarantors party thereto and The Bank of New York, as
successor to The Toronto-Dominion Bank Trust Company as trustee, as amended from
time to time.
     “2023 Notes” means the 67/8% Notes due 2023 issued by NNL pursuant to the
1988 Indenture.
     “Additional Collateral Liens” means with respect to any item of Collateral,
Liens on such Collateral which are not in contravention of Section 5.09 of the
2006 Credit Agreement.
     “Bank Termination Date” means the first date on which all of the following
conditions are satisfied:
     (i) all commitments to extend credit under the 2006 Credit Agreement shall
have expired or been terminated;
     (ii) all Tranche A Obligations that are Non-Contingent Obligations
(including without limitation principal of and interest on the Loans) shall have
been indefeasibly paid in full; and
     (iii) no Tranche A Obligation that is a Contingent Secured Obligation shall
remain outstanding, other than any Tranche A Obligation arising under general
indemnification provisions (such as those set forth in Sections 8.03, 8.04 and
9.03 of the 2006 Credit Agreement) and the like, as to which no claim has been
asserted on or prior to such date.
     “Bond Obligations” means all principal of and interest (including, without
limitation, any Post-Petition Interest) on and other amounts payable under the
2023 Notes.
     “Business Day” means a day on which chartered banks are open for
over-the-counter business in New York and excludes Saturdays, Sundays and
statutory holidays therein.
     “Canadian Copyrights” means all the following:
     (i) all copyrights and intangibles of like nature under the laws of Canada
or any other country (other than the United States of America) (whether or not
the underlying works of authorship have been published) that any Lien Grantor
now or hereafter owns or uses, including:
     (ii) all registrations and recordings thereof, all copyrightable works of
authorship (whether or not published), and all applications for copyrights under
the laws of Canada or any other country, including all registrations, recordings
and applications in the Canadian Intellectual Property Office or in any similar
office or agency or in any other country or any political subdivision thereof
(other than the United States of America or any political subdivision thereof),
including those described in Schedule 1 to any Copyright Security Agreement,
     (iii) all restorations, extensions or renewals of any of the foregoing,
     (iv) all claims for, and rights to sue for, past or future infringements of
any of the foregoing, and
     (v) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments for
past or future infringements thereof.
     “Canadian Intellectual Property Filing” means (i) with respect to any
Patent, Design, Copyright or Trademark, the filing of the applicable Patent
Security Agreement, Design Security Agreement, Copyright Security Agreement or
Trademark Security Agreement with the Canadian Intellectual Property Office,
together with an appropriately completed recordation form and (ii) with respect
to any copyright, the filing of the applicable

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Copyright Security Agreement with the Canadian Intellectual Property Office,
together with an appropriately completed recordation form, in each case
sufficient to record the Transaction Lien granted to the Collateral Agent in
such Material Recordable Intellectual Property.
     “Canadian Patents” means:
     (i) all letters patent of invention issued by Canada or any other country
(other than the United States of America) and all applications for letters
patent and all registrations and recordings thereof pending before the Canadian
Intellectual Property Office including those described in Schedule 1 to any
Patent Security Agreement or in any similar office or agency in any other
country,
     (ii) all reissues, divisions, continuations, continuations-in-part,
revisions and extensions of any of the foregoing,
     (iii) all claims for, and rights to sue for, past or future infringements
of any of the foregoing, and
     (iv) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments for
past or future infringements thereof.
     “Canadian Security Agreement” means the Canadian security agreement dated
as of the date hereof among NNC, NNL, the Subsidiaries from time to time party
thereto, JPMorgan Chase Bank, N.A., as Collateral Agent, and EDC, as amended
from time to time.
     “Canadian Subsidiary” means, with respect to any Person, any Subsidiary of
such Person (which may be a corporation, limited liability company, partnership
or other legal entity) organized under the laws of Canada or one of the
Provinces or Territories of Canada.
     “Canadian Trademarks” means all of the following, whether registered or
unregistered and whether now owned, used or hereafter acquired or used by any
Lien Grantor:
     (i) all trademarks, trade names, corporate names, company names, business
names, fictitious business names, trade styles, service marks, logos, brand
names, trade dress, prints and labels on which any of the foregoing have
appeared or appear, package and other designs, and all other source or business
identifiers, and all general intangibles of like nature, all registrations and
recordings thereof, and the rights in any of the foregoing which arise under
applicable law;
     (ii) the goodwill of the business symbolized thereby or associated with
each of them;
     (iii) all registrations and applications in connection therewith, including
registrations, recordings and applications in the Canadian Intellectual Property
Office or in any similar office in any country (other than the United States of
America or any political subdivision thereof), including those described in
Schedule 1 to any Trademark Security Agreement;
     (iv) all extensions or renewals of any of the foregoing;
     (v) all claims for, and rights to sue for, past or future infringements of
any of the foregoing; and
     (vi) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments for
past or future infringements thereof.
     “Cash Collateral Accounts” has the meaning specified in Section 8(a).

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     “Cash Distributions” means dividends, interest and other distributions and
payments (including proceeds of liquidation, sale or other disposition) made or
received in cash upon or with respect to any Collateral.
     “Collateral” means all property of any Lien Grantor, whether now owned or
hereafter acquired, on which a Lien is granted or purports to be granted to the
Collateral Agent pursuant to, and has not been released in accordance with, the
Security Documents. When used with respect to a specific Lien Grantor, the term
“Collateral” means any of the foregoing Collateral in which such a Lien is so
granted or purports to be so granted by such Lien Grantor and has not been so
released.
     “Collateral Accounts” means the Cash Collateral Accounts, the Controlled
Deposit Accounts and the Controlled Securities Accounts.
     “Collateral Agent” means JPMorgan Chase Bank, N.A., in its capacity as
Collateral Agent under this Agreement and the other Security Documents, and its
successors in such capacity.
     “Commodity Account Control Agreement” means, with respect to any Commodity
Account as to which a Lien Grantor is the Commodity Customer, an agreement by
such Lien Grantor, the Collateral Agent and the relevant Commodity Intermediary
that the Commodity Intermediary will apply any value distributed on account of
the Commodity Contracts carried in such Commodity Account as directed by the
Collateral Agent without further consent by such Lien Grantor. Each such
agreement must be reasonably satisfactory in form and substance to the
Collateral Agent.
     “Consolidated Subsidiary” means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of NNC in accordance with
GAAP in its consolidated financial statements if such statements were prepared
as of such date.
     “Contingent Secured Obligation” means, at any time, any Secured Obligation
(or portion thereof) that is contingent in nature at such time, including any
Secured Obligation that is: (i) an obligation under a Designated Hedging
Agreement to make payments that cannot be quantified at such time, (ii) any
other obligation (including any guarantee) that is contingent in nature at such
time or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.
     “Control” has the following meanings: (i) when used with respect to any
Security or Security Entitlement, the meaning specified in UCC Section 8-106,
(ii) when used with respect to any Deposit Account, the meaning specified in UCC
Section 9-104, (iii) when used with respect to any Commodity Account or
Commodity Contract, the meaning specified in UCC Section 9-106(b) and (iv) when
used with respect to any right to payment or performance by the issuer or a
Nominated Person in respect of a letter of credit, the meaning specified in UCC
Section 9-107.
     “Controlled Commodity Account” means a Commodity Account as to which (i) a
Lien Grantor is the Commodity Customer and (ii) a Commodity Account Control
Agreement is in effect.
     “Controlled Deposit Account” means a Deposit Account (i) that is subject to
a Deposit Account Control Agreement or (ii) as to which the Collateral Agent is
the Depositary Bank’s “customer” (as defined in UCC Section 4-104).
     “Controlled Securities Account” means a Securities Account that (i) is
maintained in the name of a Lien Grantor at an office of a Securities
Intermediary whose jurisdiction (within the meaning of the UCC ) is in the
United States and (ii) together with all Financial Assets credited thereto and
all related Security Entitlements, is subject to a Securities Account Control
Agreement among such Lien Grantor, the Collateral Agent and such Securities
Intermediary.
     “Copyright License” means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor grants to
any other Person, any right to use, copy, reproduce, distribute, prepare

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derivative works, display or publish any records or other materials on which a
Canadian Copyright or U.S. Copyright is in existence or may come into existence.
     “Copyright Security Agreement” means a Copyright Security Agreement,
substantially in the form of Exhibit B, executed and delivered by a Lien Grantor
in favor of the Collateral Agent for the benefit of the Secured Parties.
     “Covered Canadian Asset” means accounts receivable, contract rights and
intellectual property that are “intangibles” as defined by the Ontario Personal
Property Security Act and, for greater certainty, that are not “goods”, “chattel
paper”, “documents of title”, “instruments”, “money” or “securities” as defined
by the Ontario Personal Property Security Act.
     “Credit Agreements” means the EDC Support Facility, and the 2006 Credit
Agreement; and any reference to the “principal amount” of or outstanding under
any Credit Agreement includes the outstanding principal or face amount of
obligations, contingent or otherwise, of NNL and its Subsidiaries under the EDC
Support Facility.
     “Deposit Account Control Agreement” means, with respect to any Deposit
Account of any Lien Grantor maintained with a Depositary Bank whose jurisdiction
(within the meaning of the UCC ) is in the United States of America, an
agreement among such Lien Grantor, the Collateral Agent and the relevant
Depositary Bank, set forth in an Authenticated Record, (i) that such Depositary
Bank will comply with instructions originated by the Collateral Agent directing
disposition of the funds in such Deposit Account without further consent by such
Lien Grantor and (ii) subordinating to the relevant Transaction Lien all claims
of the Depositary Bank to such Deposit Account (except its right to deduct its
normal operating charges and fees and any uncollected funds previously credited
thereto).
     “Depositary Bank” means a bank at which a Controlled Deposit Account is
maintained.
     “Designated Hedging Agreement” has the meaning specified in Section 21.
     “Design License” means any agreement now or hereafter in existence granting
to any Lien Grantor, or pursuant to which any Lien Grantor grants to any other
Person, any right with respect to any Design now or hereafter in existence,
whether or not registered or recorded and whether or not an application shall,
or is intended to be filed in respect thereof.
     “Design Security Agreement” means a Design Security Agreement,
substantially in the form of Exhibit E, executed and delivered by a Lien Grantor
in favor of the Collateral Agent for the benefit of the Secured Parties.
     “Designs” means all industrial designs, design patents and other designs
under the laws of Canada that any Lien Grantor now or hereafter owns or uses,
including:
     (i) all registrations and recordings thereof and all applications in
connection therewith including all registrations, recordings and applications
that have been or shall be made or filed in the Canadian Intellectual Property
Office,
     (ii) all records, reissues, extensions or renewals of any of the foregoing,
     (iii) all claims for and rights to sue for, past or future infringements of
any of the foregoing, and
     (iv) all income, royalties, damages and payments now or hereafter due or
payable with respect to any of the foregoing, including damages and payments for
past or future infringements thereof.
     “EDC” means Export Development Canada, in its capacity as provider of the
EDC Support Facility.
     “EDC Support Facility” means the facility made available by EDC to NNL
pursuant to the Amended and Restated Master Facility Agreement dated October 24,
2005, as such agreement may be amended or supplemented

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from time to time, guaranteed by NNI and NNC pursuant to the Guarantee Agreement
during the period in which the Guarantee Agreement is effective; provided that
the face amount of obligations thereunder shall not exceed US$750,000,000.
     “EDC Support Facility Obligations” means all reimbursement and indemnity
obligations, contingent or otherwise, and obligations to repay interest and fees
of NNL under the EDC Support Facility.
     “Effective Date” has the meaning specified in the preamble.
     “Equity Interest” means (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof,
(v) any warrant, option or other right to acquire any Equity Interest described
in this definition or (vi) any Security Entitlement in respect of any Equity
Interest described in this definition.
     “Event of Default” means the occurrence and continuance of any “Event of
Default” as defined in the 2006 Credit Agreement.
     “Financing Lease” has the meaning set forth in Section 1.01 of the 2006
Credit Agreement.
     “Foreign Subsidiary” means a Subsidiary (which may be a corporation,
limited liability company, partnership or other legal entity) organized under
the laws of a jurisdiction outside the United States and Canada.
     “GAAP” means generally accepted accounting principles as in effect from
time to time in the United States, applied on a basis consistent (except for
changes concurred in by NNC’s independent public accountants) with the most
recent audited consolidated financial statements of NNC and its Consolidated
Subsidiaries delivered to the Collateral Agent.
     “Guarantee Agreement” has the meaning set forth in Section 1.01 of the 2006
Credit Agreement.
     “Hedging Agreement” means (i) any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest rate, currency exchange rate or commodity price hedging
arrangement and (ii) any hedging agreement in respect of common stock entered
into in order to hedge exposure under stock option plans or other benefit plans
for employees, directors or consultants of NNC and its Subsidiaries, but in each
case only if such agreement or arrangement is entered into with a Lender or an
affiliate thereof.
     “Illiquid Collateral” means Collateral other than the Liquid Collateral.
     “Indenture Trustee” means The Bank of New York, as successor to The
Toronto-Dominion Bank Trust Company, as trustee under the 1988 Indenture and its
successors in such capacity.
     “Intellectual Property” means (i) Canadian Patents, (ii) Canadian Patent
Licenses, (iii) Canadian Trademarks, (iv) Designs, (v) Design Licenses
(vi) Canadian Copyrights, (vii) U.S. Patents, (viii) U.S. Trademarks, (ix) U.S.
Copyrights, and all rights in or under any of the foregoing.
     “Intellectual Property Filing” means any Canadian Intellectual Property
Filing or U.S. Intellectual Property Filing.
     “Intellectual Property Security Agreement” means a Copyright Security
Agreement, a Design Security Agreement, a Patent Security Agreement or a
Trademark Security Agreement.
     “Issuer Control Agreement” means an Issuer Control Agreement substantially
in the form of Exhibit F (with any changes that the Collateral Agent shall have
reasonably approved).

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     “Lender” means each Lender holding a Tranche A Commitment or a Tranche A
Loan under the 2006 Credit Agreement.
     “Lien” means, with respect to any asset, (i) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (ii) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
     “Lien Grantors” means NNL, NNI and the Subsidiary Lien Grantors.
     “Liquid Collateral” means (i) Pledged Accounts, (ii) Pledged Chattel Paper,
(iii) Pledged Instruments, (iv) the Cash Collateral Accounts, (v) the Controlled
Deposit Accounts, (vi) the Controlled Securities Accounts, (vii) Pledged
Intellectual Property and (viii) any Pledged Uncertificated Security evidencing
money market funds.
     “Liquid Investment” means a Permitted Investment (other than commercial
paper) that matures within 30 days after it is first included in the Collateral.
     “LLC Interest” means a membership interest or similar interest in a limited
liability company.
     “Loan” has the meaning set forth in Section 1.01 of the 2006 Credit
Agreement.
     “Loan Documents” means the Credit Agreements (including the notes
thereunder) and the Security Documents.
     “Material Commercial Tort Claim” means any Commercial Tort Claim with a
fair market value (as determined in good faith by the applicable Lien Grantor)
in excess of $10,000,000.
     “Material Government Contract” means a contract, between a Lien Grantor and
either (i) the federal government of the United States or any agency or
instrumentality thereof or (ii) a state or local government or any agency or
instrumentality thereof, that provides (or can reasonably be expected to
provide, based on orders received as of such time) for future payments to such
Lien Grantor in an aggregate amount exceeding (x) for the purpose of the first
sentence of Section 3(n), $50,000,000 and (y) for the purpose of the second
sentence of Section 3(n), $10,000,000.
     “Material Intellectual Property” means, with respect to any Lien Grantor
and at any time, any Intellectual Property that is one of the 100 most valuable
items of Intellectual Property owned by the NNC Companies at such time to the
business of the NNC Companies taken as a whole, as such business is presently
conducted or proposed to be conducted, as reasonably determined by the Lien
Grantors, acting in their reasonable discretion.
     “Material Recordable Intellectual Property” means, at any time, the
Recordable Intellectual Property that is Material Intellectual Property.
     “NGSH” means Nortel Government Solutions Holdings Corporation, a Delaware
corporation, and its successors.
     “NNC” means Nortel Networks Corporation, a Canadian corporation, and its
successors.
     “NNC Companies” means, collectively, NNC and any of its Subsidiaries.
     “NNL” means Nortel Networks Limited, a Canadian corporation, and its
successors.
     “Nominated Person” means a Person whom the issuer of a letter of credit
(i) designates or authorizes to pay, accept, negotiate or otherwise give value
under such letter of credit and (ii) undertakes by agreement or custom and
practice to reimburse.

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     “Non-Contingent Secured Obligation” means at any time any Secured
Obligation (or portion thereof) that is not a Contingent Secured Obligation at
such time.
     “own” refers to the possession of sufficient rights in property to grant a
security interest therein as contemplated by UCC Section 9-203, and “acquire”
refers to the acquisition of any such rights.
     “Partnership Interest” means a partnership interest, whether general or
limited.
     “Patent License” means any agreement now or hereafter in existence granting
to any Lien Grantor, or pursuant to which any Lien Grantor grants to any other
Person, any right with respect to any Canadian Patent or U.S. Patent or any
invention now or hereafter in existence, whether patentable or not, whether a
patent or application for patent is in existence on such invention or not, and
whether a patent or application for patent on such invention may come into
existence or not.
     “Patent Security Agreement” means a Patent Security Agreement,
substantially in the form of Exhibit C, executed and delivered by a Lien Grantor
in favor of the Collateral Agent for the benefit of the Secured Parties.
     “Perfection Certificate” means, with respect to any Lien Grantor, a
certificate substantially in the form of Exhibit E, completed and supplemented
with the schedules contemplated thereby to the satisfaction of the Collateral
Agent, and signed by an officer of such Lien Grantor.
     “Permitted Liens” means (i) the Transaction Liens and (ii) Additional
Collateral Liens.
     “Permitted Receivables Financing” means (i) any Qualified Receivables
Transaction and (ii) and any Receivables Transaction after giving effect to
which the mandatory prepayment provisions of the Syndicated Credit Agreement are
not contravened.
     “Person” means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
     “Pledged,” when used in conjunction with any type of asset, means at any
time an asset of such type that is included (or that creates rights that are
included) in the Collateral at such time pursuant to the terms of this
Agreement. For example, “Pledged Equity Interest” means an Equity Interest that
is included in the Collateral at such time and “Pledged letter of credit” means
a letter of credit that creates rights to payment or performance that are
included in the Collateral at such time.
     “Post-Petition Interest” means, with respect to any obligation of any
Person, any interest that accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization of such
Person (or would accrue but for the operation of applicable bankruptcy or
insolvency laws), whether or not such interest is allowed or allowable as a
claim in any such proceeding.
     “Proceeds” means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Collateral, including all claims of the relevant Lien Grantor against third
parties for loss of, damage to or destruction of, or for proceeds payable under,
or unearned premiums with respect to, policies of insurance in respect of, any
Collateral, and any condemnation or requisition payments with respect to any
Collateral.
     “Purchase Money Mortgage” means, with respect to any Lien Grantor, (i) a
mortgage on or security interest in property existing at the time of acquisition
thereof by such Lien Grantor and not incurred in contemplation of such
acquisition and (ii) any mortgage on or security interest in any property
acquired, constructed or improved by such Lien Grantor incurred after the date
hereof which is related solely to, and is created or assumed contemporaneously
with, or within 180 days after, such acquisition, or completion of such
construction or improvement, to secure or provide for the payment of the
purchase price thereof or the cost of construction or improvement thereon
incurred after the date hereof (including the cost of any underlying real
property); provided that in the case of any such acquisition, construction or
improvement, the mortgage or security interest shall not

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apply to any after acquired property of such Grantor (other than improvements
thereon and fixtures) or to any property previously owned by such Lien Grantor
other than, in the case of any such construction or improvement, any real
property, theretofore substantially unimproved for the purposes of such Lien
Grantor, on which the property so constructed, or the improvement, is located
and other than a fixture on the real property on which the property so
constructed, or the improvement, is located; and provided further that the
amount secured by the mortgage or security interest shall not exceed the
purchase price thereof or the cost of construction or improvement thereon plus
reasonable fees and expenses with respect thereto.
     “Qualified Receivables Transaction” has the meaning set forth in
Section 1.01 of the 2006 Credit Agreement.
     “Ratio” means, at any time, the ratio of (i) the principal amount of the
Bond Obligations to (ii) the sum of (A) the Tranche A Obligations at such time
and (B) the aggregate principal amount of any “Support” (as defined in the EDC
Support Facility) outstanding under the EDC Support Facility.
     “Receivables Transaction” has the meaning set forth in Section 1.01 of the
2006 Credit Agreement.
     “Recordable Intellectual Property” means (A) (i) U.S. Patents (other than
U.S. Patents described in clauses (iii) and (iv) of the definition thereof)
registered with the United States Patent and U.S. Trademarks (other than
Trademarks described in clauses (v) and (vi) of the definition thereof)
registered with the United States Patent and Trademark Office, (ii) U.S.
Copyrights (other than U.S. Copyrights described in clauses (iii) and (iv) of
the definition thereof) registered with the United States Copyright Office and
(iii) all rights in or under any of the foregoing.
     (B) (i) Canadian Patents (other than Canadian Patents described in clauses
(iii) and (iv) of the definition thereof) registered with the Canadian Patent
and Canadian Trademarks (other than Trademarks described in clauses (v) and
(vi) of the definition thereof) registered with the Canadian Patent and
Trademark Office, (ii) Canadian Copyrights (other than Canadian Copyrights
described in clauses (iii) and (iv) of the definition thereof) registered with
the Canadian Copyright Office and (iii) Designs (other than Designs described in
clauses (iii) and (iv) of the definition thereof) registered with the Canadian
Intellectual Property Office, and all rights in or under any of the foregoing.
     “Related Transferred Rights” means (i) Transferred Receivables, (ii) rights
to payment and collections in respect of such Transferred Receivables,
(iii) Supporting Obligations in respect of such Transferred Receivables,
(iv) all invoices, documents, books, records and other information with respect
to such Transferred Receivables or the obligors thereon, (v) with respect to any
such Transferred Receivables, the transferee’s interest in the product
(including returned product), the sale of which by such transferee gave rise to
such Transferred Receivables and (vi) all Proceeds of the items described in the
foregoing clauses.
     “Required Secured Lenders” means, with respect to any amendment or waiver
hereunder (including any release of Collateral pursuant to Section 19(g))
Lenders having the percentage of the Tranche A Commitments and Tranche A Loans
specified by Section 9.05 of the 2006 Credit Agreement in order to approve such
action; provided, that if any amendment or waiver hereunder that would
(A) provide any additional benefits to the Lenders which are not also provided
to EDC, (B) alter the application of proceeds of Collateral in any manner
adverse to EDC or (C) increase the amount of obligations that are permitted to
be secured by the Collateral (except as expressly contemplated hereby), then the
consent of the “Required Secured Lenders” shall not be deemed to have been
obtained unless EDC shall have also consented to such amendment or waiver.
     “Secured Agreement,” when used with respect to any Secured Obligation of
any Lien Grantor, refers collectively to each instrument, agreement or other
document that sets forth obligations of such Lien Grantor and/or rights of the
holder with respect to such Secured Obligation.
     “Secured Obligations” means (i) the Tranche A Obligations, (ii) the Bond
Obligations, (iii) the EDC Support Facility Obligations and (iv) any obligation
of any Lien Grantor under a Designated Hedging Agreement.

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     “Secured Parties” means the holders from time to time of the Secured
Obligations.
     “Securities Account Control Agreement” means, when used with respect to a
Securities Account, a Securities Account Control Agreement substantially in the
form of Exhibit G (with any changes that the Collateral Agent shall have
reasonably approved) among the relevant Securities Intermediary, the relevant
Lien Grantor and the Collateral Agent to the effect that such Securities
Intermediary will comply with Entitlement Orders originated by the Collateral
Agent with respect to such Securities Account without further consent by the
relevant Lien Grantor.
     “Security Agreement Supplement” means a Security Agreement Supplement,
substantially in the form of Exhibit A, signed and delivered to the Collateral
Agent for the purpose of adding a Subsidiary as a party hereto pursuant to
Section 20 and/or adding additional personal property to the Collateral.
     “Security Documents” means this Agreement, the Canadian Security Agreement,
the Security Agreement Supplements, the Commodity Account Control Agreements,
the Deposit Account Control Agreements, the Issuer Control Agreements, the
Securities Account Control Agreements, the Intellectual Property Security
Agreements and all other supplemental or additional security agreements, control
agreements or similar instruments delivered pursuant to any Credit Agreement or
any other Security Document.
     “Specified Canadian Assets” means all Chattel Paper, Goods, Equipment,
Instruments, Inventory (other than any Inventory in transit), Deposit Accounts
and all money contained therein, Security Accounts and all Investment Property
contained therein, in each case, that are directly owned by NNI and located in
Canada or any province thereof.
     “Specified Event of Default” means an event described in
Section 6.01(a)(including without limitation as a result of the acceleration of
the Loans prior to their stated maturity), (f), or (g) of the 2006 Credit
Agreement or any Event of Default caused by a breach of any financial covenant
contained in the 2006 Credit Agreement.
     “Subsidiary” means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, “Subsidiary” means a Subsidiary of NNI.
     “Subsidiary Guarantor” means NNI and any “Subsidiary Guarantor” as defined
in the Canadian Security Agreement.
     “Subsidiary Lien Grantors” means each Subsidiary of NNC that shall, at any
time after the date hereof, become a “Subsidiary Lien Grantor” pursuant to
Section 20.
     “Supporting Letter of Credit” means a letter of credit to the extent that
it constitutes a Supporting Obligation with respect to any Collateral.
     “Total Collateral” means all the “Collateral” as defined in any Security
Document, taken as a whole.
     “Trademark License” means any agreement now or hereafter in existence
granting to any Lien Grantor, or pursuant to which any Lien Grantor grants to
any other Person, any right to use any U.S. Trademark or Canadian Trademark.
     “Trademark Security Agreement” means a Trademark Security Agreement,
substantially in the form of Exhibit D, executed and delivered by a Lien Grantor
in favor of the Collateral Agent for the benefit of the Secured Parties.
     “Tranche A Commitment” has the meaning set forth in Section 1.01 of the
2006 Credit Agreement.
     “Tranche A Loan” has the meaning set forth in Section 1.01 of the 2006
Credit Agreement.

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     “Tranche A Note” has the meaning set forth in Section 1.01 of the 2006
Credit Agreement.
     “Tranche A Obligations” means (i) all principal of and interest (including,
without limitation, any Post-Petition Interest) on any Tranche A Loan and
(ii) all other amounts payable by NNL in connection with the Tranche A Loans
under the 2006 Credit Agreement.
     “Transaction Liens” means the Liens granted by the Lien Grantors under the
Security Documents.
     “Transferred Receivables” means any receivables that have been sold,
pledged, contributed or otherwise transferred in connection with a Permitted
Receivables Financing.
     “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, “UCC” means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.
     “U.S. Copyrights” means all the following: (i) all copyrights under the
laws of the United States (whether or not the underlying works of authorship
have been published), all registrations and recordings thereof, all
copyrightable works of authorship (whether or not published), and all
applications for copyrights under the laws of the United States, including
registrations, recordings and applications in the United States Copyright Office
or in any similar office or agency of the United States, any State thereof or
any other country or any political subdivision thereof, including those
described in Schedule 1 to any Copyright Security Agreement, (ii) all renewals
of any of the foregoing, (iii) all claims for, and rights to sue for, past or
future infringements of any of the foregoing and (iv) all income, royalties,
damages and payments now or hereafter due or payable with respect to any of the
foregoing, including damages and payments for past or future infringements
thereof.
     “U.S. Intellectual Property Filing” means (i) with respect to any Patent or
Trademark, the filing of the applicable Patent Security Agreement or Trademark
Security Agreement with the United States Patent and Trademark Office, together
with an appropriately completed recordation form and (ii) with respect to any
Copyright, the filing of the applicable Copyright Security Agreement with the
United States Copyright Office, together with an appropriately completed
recordation form, in each case sufficient to record the Transaction Lien granted
to the Collateral Agent in such Material Recordable Intellectual Property.
     “U.S. Subsidiary” means, with respect to any Person, any Subsidiary (which
may be a corporation, limited liability company, partnership or other legal
entity) organized under the laws of the United States or any state thereof.
     “U.S. Patents” means (i) all letters patent and design letters patent
issued by the United States and all applications for letters patent or design
letters patent pending before the United States Patent and Trademark Office or
in any similar office or agency of the United States or any State thereof,
including those described in Schedule 1 to any Patent Security Agreement,
(ii) all reissues, divisions, continuations, continuations in part, revisions
and extensions of any of the foregoing, (iii) all claims for, and rights to sue
for, past or future infringements of any of the foregoing and (iv) all income,
royalties, damages and payments now or hereafter due or payable with respect to
any of the foregoing, including damages and payments for past or future
infringements thereof.
     “U.S. Trademarks” means: (i) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles, service
marks, logos, brand names, trade dress, prints and labels on which any of the
foregoing have appeared or appear, package and other designs, and all other
source or business identifiers, and all general intangibles of like nature, and
the rights in any of the foregoing which arise under applicable law, (ii) the
goodwill of the business symbolized thereby or associated with each of them,
(iii) all registrations and applications in connection therewith, including
registrations and applications in the United States Patent and Trademark Office
or in any similar office or agency of the United States or any State thereof,
including those described in Schedule 1 to any Trademark Security Agreement,
(iv) all renewals of any of the foregoing, (v) all claims for, and rights to sue
for, past or future infringements of any of the foregoing and (vi) all income,

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royalties, damages and payments now or hereafter due or payable with respect to
any of the foregoing, including damages and payments for past or future
infringements thereof.
     (c) Terms Generally. The definitions of terms herein (including those
incorporated by reference to the UCC or to another document) apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. The words “include,” “includes” and “including” shall be deemed to be
followed by the phrase “without limitation.” The word “will” shall be construed
to have the same meaning and effect as the word “shall.” Unless the context
requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), any reference herein
to any Person shall be construed to include such Person’s successors and
assigns, the words “herein,” “hereof” and “hereunder,” and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, all references herein to Sections, Exhibits and
Schedules shall be construed to refer to Sections of, and Exhibits and Schedules
to, this Agreement and the word “property” shall be construed to refer to any
and all tangible and intangible assets and properties, including cash,
securities, accounts and contract rights.
     Section 2. Grant of Transaction Liens. (a) Each Lien Grantor, in order to
secure the Secured Obligations, grants to the Collateral Agent for the benefit
of the Secured Parties a continuing security interest in all the following
personal property of such Lien Grantor, as the case may be, whether now owned or
existing or hereafter acquired or arising and regardless of where located:
     (i) all Accounts;
     (ii) all Chattel Paper;
     (iii) all Deposit Accounts and all money contained therein;
     (iv) all Documents;
     (v) all Equipment;
     (vi) all Goods;
     (vii) all General Intangibles (including any Equity Interests in other
Persons that do not constitute Investment Property);
     (viii) all Instruments;
     (ix) all Inventory;
     (x) all Investment Property;
     (xi) all Letter-of-Credit Rights;
     (xii) all books and records (including customer lists, credit files,
computer programs, printouts and other computer materials and records) of such
Lien Grantor pertaining to any of its Collateral;
     (xiii) such Lien Grantor’s ownership interest in (1) its Collateral
Accounts, (2) all Financial Assets credited to its Collateral Accounts from time
to time and all Security Entitlements in respect thereof, (3) all cash held in
its Collateral Accounts from time to time and (4) all other money in the
possession of the Collateral Agent; and
     (xiv) all Proceeds of the Collateral described in the foregoing clauses
3(a)(i) through 3(a)(xiii);

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     provided that, with respect to the security interests granted by each Lien
Grantor, the following property shall be excluded from the foregoing security
interests: (A) rights of any Lien Grantor under a lease, general intangible or
other rights arising under any contract, instrument, license or other document
if (but only to the extent that) the grant of a Transaction Lien therein would
(i) violate any law applicable to such Lien Grantor, or (ii) violate any
restriction that is enforceable under applicable law in favor of any Person
(other than any NNC Company), or result in an enforceable right in any Person
(other than any NNC Company) to declare a default or an enforceable right to
terminate or annul such lease, general intangible or other right but only for so
long as any of the foregoing circumstances described in this clause (A) exists
with respect to any such property (including after the application of
Sections 9-406(d), 9-407(a), 9-408(a) and 9-409 of the UCC), (B) (i) the Equity
Interests and debt of NGSH, any direct or indirect Subsidiary of NGSH and, for
so long as it is a tax exempt organization under Sec. 501(3) of the Internal
Revenue Code, Nortel LearnIT, a Virginia non-stock corporation and (ii) any
Equity Interests in or any debt of any Person, in each case, to the extent and
only for so long as the grant of the Transaction Liens therein would constitute
a violation of any provision of any shareholder agreement or other agreement
with respect to such Equity Interests or debt among such Lien Grantors and any
other holders of Equity Interests or debt of such Person (other than any NNC
Company), (C) any assets of such Lien Grantor that constitute Transferred
Receivables and Related Transferred Rights on the date on which such Lien
Grantor becomes a party to this Agreement, (D) any asset of such Lien Grantor
for so long as such asset is subject to a Purchase Money Mortgage that purports
to prohibit a grant of the Transaction Liens thereon, (E) any Equity Interests
in any Person organized under the laws of any jurisdiction outside of the United
States or Canada, (F) any Equity Interests in any Canadian Subsidiary, to the
extent (but only to the extent) required to prevent the Collateral from
including more than 66% of all voting Equity Interests in such Subsidiary, (G)
any Equity Interests in any Person the grant of a Transaction Lien on which
would require the inclusion of separate financial statements of such Person in
the filings by any NNC Company under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”) (except to the extent such financial statements are
currently being provided in the Exchange Act filings of any NNC Company on the
Effective Date, (H) NNI’s securities account numbered 10-877864 with HSBC Bank
USA National Association or an affiliate thereof and the Investment Property
contained therein, (I) Deposit Accounts for which the relevant Depositary Bank’s
jurisdiction is in Canada, (J) Securities Accounts for which the relevant
Securities Intermediary’s jurisdiction is in Canada, and (K) any asset of NNI,
other than any Covered Canadian Assets, for which the conflict of laws rules
applicable in Canada or any province or territory thereof (a “Canadian
Jurisdiction”) provide that (i) the validity, perfection or effect of perfection
of the security interest purported to be created hereby would be governed by the
laws of a Canadian Jurisdiction (provided that this clause (i) shall not apply
as result of any change in the conflict of laws rules applicable to a Canadian
Jurisdiction which (X) becomes effective after the Effective Date and
(Y) provides that the validity, perfection or effect of perfection of the
security interest purported to be created hereby in Goods, Inventory or
Equipment located in the United States of America would be governed by the laws
of a Canadian Jurisdiction) or (ii) the situs of the asset is a Canadian
Jurisdiction.
     The security interests granted by each Lien Grantor pursuant to this
Section 2 shall terminate in accordance with Section 19.
     (b) With respect to each right to payment or performance included in the
Collateral from time to time, the Transaction Lien granted therein includes a
continuing security interest in any Supporting Obligation.
     (c) The Transaction Liens are granted as security only and shall not
subject the Collateral Agent or any other Secured Party to, or transfer or in
any way affect or modify, any obligation or liability of any Lien Grantor with
respect to any of the Collateral or any transaction in connection therewith.
     Section 3. General Representations, Warranties and Covenants. Each Lien
Grantor represents and warrants, on the Effective Date, and covenants, where
indicated below, as follows:
     (a) Each Lien Grantor represents and warrants that on the Effective Date
such Lien Grantor is a corporation or other business organization duly
organized, validly existing and in good standing under the laws of the
jurisdiction identified as its jurisdiction of organization in its Perfection
Certificate.
     (b) Each Lien Grantor represents and warrants, on the Effective Date, that
Schedule 1 lists all Pledged Equity Interests (except Equity Interests
constituting minority investments in any Person other than an NNC

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Company) owned by such Lien Grantor and held directly by such Lien Grantor
(i.e., not through a Subsidiary, a Securities Intermediary or any other Person).
     (c) Each Lien Grantor represents and warrants, on the Effective Date, that
Schedule 2 lists all Pledged Securities not credited to a Securities Account and
owned directly by such Lien Grantor on the date of delivery of such Schedule 2
(except (i) Securities listed on Schedule 1 and (ii) Equity Interests
constituting minority investments in any Person other than an NNC Company), each
Securities Account to which Financial Assets are credited in respect of which
such Lien Grantor owns Security Entitlements, so long as Financial Assets with a
fair market value in excess of $5,000,000 are credited to such Securities
Account as of the date of delivery of such Schedule 2 and all Commodity Accounts
in respect of which such Lien Grantor is the Commodity Customer on the date of
delivery of such Schedule 2.
     (d) Each Lien Grantor represents and warrants, on the Effective Date, that
such Lien Grantor has provided to the Collateral Agent a written notice setting
forth a list of the Material Intellectual Property at such time.
     (e) Each Lien Grantor represents and warrants, on the Effective Date, that
all Pledged Equity Interests owned by such Lien Grantor at such time are owned
by it free and clear of any Lien other than the Transaction Liens, and any tax
liens, judgment liens, put/call arrangements and Liens existing on the Effective
Date. Each Lien Grantor covenants that it will cause all Pledged Equity
Interests owned by such Lien Grantor from time to time to be owned by it free
and clear of any Lien other than (i) the Transaction Liens and (ii) any other
Permitted Liens. Such Lien Grantor represents and warrants, on the Effective
Date, that all shares of capital stock included in such Pledged Equity Interests
at such time with respect to a Subsidiary of such Lien Grantor (including shares
of capital stock in respect of which such Lien Grantor owns a Security
Entitlement) have been duly authorized and validly issued and are fully paid and
non-assessable. Such Lien Grantor covenants that it will ensure that none of the
Pledged Equity Interests with respect to a Subsidiary of such Lien Grantor are
subject to any option to purchase or similar right of any Person.
     (f) Each Lien Grantor represents and warrants that, on the Effective Date,
such Lien Grantor owns or has rights in all of its Collateral, free and clear of
any Lien other than Permitted Liens.
     (g) Each Lien Grantor represents and warrants that, on the Effective Date,
no financing statement, security agreement, mortgage or similar or equivalent
document or instrument covering all or part of the Collateral owned by such Lien
Grantor is on file or of record in any jurisdiction in the United States in
which such filing or recording would be effective to perfect or record a Lien on
such Collateral, except financing statements, mortgages or other similar or
equivalent documents with respect to Permitted Liens and no Collateral owned by
such Lien Grantor is in the possession or under the Control of any other Person
having a claim thereto or security interest therein, other than a Permitted
Lien.
     (h) Each Lien Grantor represents and warrants, on the Effective Date, that,
to the extent attachment and creation of the Transaction Liens is governed by
the laws of a jurisdiction in the United States (including the UCC), the
Transaction Liens on all Collateral owned by such Lien Grantor at such time have
been validly created, attach to each item of such Collateral on the date hereof
(or, if such Lien Grantor first obtains rights thereto on a later date, on such
later date) and when so attached, will secure all the Secured Obligations of
such Lien Grantor.
     (i) Each Lien Grantor represents and warrants that, on or prior to the
Effective Date, such Lien Grantor has delivered a Perfection Certificate to the
Collateral Agent and that the information set forth therein is correct and
complete as of the date of delivery thereof. Each Lien Grantor represents and
warrants that, as of September 30, 2005, the financial information set forth on
Schedule 4 fairly presented the asset and revenue information set forth therein.
     (j) Each Lien Grantor represents and warrants, on the Effective Date, that
when a UCC financing statement describing the Collateral as set forth in
Schedule 3 has been filed in the offices specified in such Perfection
Certificate (as amended pursuant to Section 3(a)) as being such Lien Grantor’s
jurisdiction of organization (if such Lien Grantor is a “registered
organization” within the meaning of the UCC) or chief executive office (if such
Lien Grantor is not a “registered organization” within the meaning of the UCC),
the Transaction Liens will constitute perfected security interests in the
Collateral owned by such Lien Grantor to the extent that a

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security interest therein may be perfected by filing pursuant to the UCC, prior,
in the case of Collateral other than (x) fixtures, (y) Collateral with respect
to which Intellectual Property Filings must be made in order to perfect a Lien
thereon and (z) unregistered Copyrights, to the extent applicable law does not
permit unregistered Copyrights to be perfected by the filing of a UCC financing
statement, to all Liens and rights of others therein except Permitted Liens.
When, in addition to the filing of such UCC financing statements, the applicable
Intellectual Property Filings have been made with respect to such Lien Grantor’s
Material Recordable Intellectual Property (including any future filings required
pursuant to Sections 4(a) and 5(a)), the Transaction Liens will constitute
perfected security interests in all right, title and interest of such Lien
Grantor in its Material Recordable Intellectual Property to the extent that
security interests therein may be perfected by such filings, prior to all Liens
and rights of others therein except Permitted Liens. Except for (i) the filing
of such UCC financing statements, (ii) such Intellectual Property Filings and
filings with respect to Intellectual Property (other than Material Recordable
Intellectual Property) to the extent applicable law does not permit a Lien
thereon to be perfected by the filing of a UCC financing statement and
(iii) with respect to motor vehicles, the delivery of the certificates of title
with respect thereto, no registration, recordation or filing with any U.S.
governmental body, agency or official is required in connection with the
execution or delivery of the Security Documents or is necessary for the validity
or enforceability thereof or for the perfection under the UCC or due recordation
of the Transaction Liens or for the enforcement of the Transaction Liens (it
being understood that any disposition of Collateral constituting Investment
Property is subject to applicable securities laws).
     (k) Each Lien Grantor represents and warrants that, on the Effective Date,
such Lien Grantor has taken all actions necessary under the UCC to perfect its
interest in any Accounts or Chattel Paper in an amount in excess of $3,000,000
(per Account or obligation evidenced by Chattel Paper) purchased or otherwise
acquired by it, as against its assignors and creditors of its assignors. Such
Lien Grantor covenants that it will take all actions necessary under the UCC to
perfect its interest in any Accounts or Chattel Paper in an amount in excess of
$3,000,000 (per Account or obligation evidenced by Chattel Paper) purchased or
otherwise acquired by it, as against its assignors and creditors of its
assignors.
     (l) Each Lien Grantor represents and warrants that, on the Effective Date,
no Lien Grantor is the claimant with respect to any Material Commercial Tort
Claim; provided that such representation is not made with respect to any
Commercial Tort Claim arising in a jurisdiction outside the United States. Such
Lien Grantor covenants that if it acquires a Material Commercial Tort Claim
arising in the United States, such Lien Grantor will promptly sign and deliver a
Security Agreement Supplement granting a Security Interest in such Commercial
Tort Claim (which shall be described therein in specificity required to satisfy
Official Comment 5 to UCC Section 9-108) to the Collateral Agent for the benefit
of the Secured Parties.
     (m) Each Lien Grantor represents and warrants that, on the Effective Date,
no Lien Grantor is the beneficiary under any Letter of Credit in a maximum face
amount in excess of $10,000,000 (other than a Supporting Letter of Credit) with
respect to which the Collateral Agent has not been granted Control.
     (n) Each Lien Grantor represents and warrants that, on the Effective Date,
such Lien Grantor is not a party to any Material Government Contract, except as
disclosed in writing to the Collateral Agent on or prior to such time. Each Lien
Grantor covenants that, if a Specified Event of Default shall have occurred and
is continuing, such Lien Grantor will, promptly at the request of the Collateral
Agent, execute and deliver to the Collateral Agent with respect to Pledged
Material Government Contracts all assignments, notices of assignment and other
documents required to be filed with (x) any state or local government or agency
or (y) the federal government of the United States or any agency or
instrumentality thereof in accordance with the Assignment of Claims Act of 1940,
as amended, 31 U.S.C. Section 3727 and 41 U.S.C. Section 15 (the “Assignment of
Claims Act”), in either case to insure compliance with the Assignment of Claims
Act; provided that no such execution and delivery shall be required with respect
to any Material Government Contract if such Material Government Contract is with
the federal government of the United States or any agency or instrumentality
thereof and such assignment is not of a type meeting the requirements of 31
U.S.C. Section 3727(c) of the Assignment of Claims Act, or a comparable
provision if such Section is amended.
     (o) NNI represents and warrants, on the Effective Date, that the aggregate
book value of the Specified Canadian Assets did not exceed $10,000,000 as of
September 30, 2005. NNI covenants that it will not permit the aggregate book
value of the Specified Canadian Assets to exceed $10,000,000 at any time.

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     Section 4. Additional Covenants. Each Lien Grantor covenants as follows:
     (a) Such Lien Grantor authorizes the Collateral Agent to file financing
statements or continuation statements with respect to the Collateral without any
further consent of such Lien Grantor. Such Lien Grantor agrees that a carbon,
photographic, photostatic or other reproduction of this Agreement or of a
financing statement is sufficient as a financing statement. Such Lien Grantor
constitutes the Collateral Agent its attorney-in-fact to execute and file all
Intellectual Property Filings in respect of Material Recordable Intellectual
Property, so long as a Specified Event of Default shall have occurred and is
continuing, Intellectual Property Filings with respect to other Recordable
Intellectual Property (other than Trademarks) and other filings in the United
States (other than Intellectual Property Filings with respect to Trademarks)
required or requested for the purposes of creating, perfecting and preserving
the Transaction Liens, all acts of such attorney being hereby ratified and
confirmed; and such power, being coupled with an interest, shall be irrevocable
until all the Transaction Liens granted by such Lien Grantor terminate pursuant
to Section 19. The relevant Lien Grantor will pay the reasonable costs of, or
incidental to, (i) any Intellectual Property Filings in respect of Material
Recordable Intellectual Property, (ii) so long as a Specified Event of Default
shall have occurred and is continuing, any Intellectual Property Filings with
respect to other Recordable Intellectual Property (other than Trademarks) and
(iii) any recording or filing of any UCC financing or continuation statements or
other documents recorded or filed pursuant hereto.
     (b) [intentionally omitted].
     (c) Such Lien Grantor will use commercially reasonable efforts consistent
with its customary commercial practice to cause to be collected from its account
debtors, when due, all amounts owing under its Pledged Accounts (including
delinquent Accounts, which will be collected in accordance with such Lien
Grantor’s customary collection procedures) and will apply all amounts collected
thereon, forthwith upon receipt thereof, to the outstanding balances of such
Accounts. Subject to the rights the Collateral Agent and the other Secured
Parties may exercise hereunder if a Specified Event of Default shall have
occurred and is continuing, such Lien Grantor may allow in the ordinary course
of business as adjustments to amounts owing under its Accounts any extension or
renewal of the time or times for payment, or settlement for less than the total
unpaid balance, that such Lien Grantor finds appropriate in accordance with
sound business judgment and refunds or credits, all in the ordinary course of
its business and consistent with such Lien Grantor’s historical collection
practices. The reasonable costs and out-of-pocket expenses (including reasonable
attorney’s fees) of collection incurred by such Lien Grantor, and the reasonable
costs and out-of-pocket expenses incurred by the Collateral Agent, shall be paid
by such Lien Grantor.
     (d) Upon the occurrence and during the continuance of a Specified Event of
Default, if payments with respect to any of such Lien Grantor’s Pledged Accounts
are to be received in a lockbox or similar account, such Lien Grantor will at
all times cause such lockbox or similar account to be a Controlled Deposit
Account.
     (e) If a Specified Event of Default shall have occurred and is continuing,
such Lien Grantor will, if requested to do so by the Collateral Agent, promptly
notify (and such Lien Grantor authorizes the Collateral Agent so to notify) each
account debtor in respect of any of its Pledged Accounts that such Accounts have
been assigned to the Collateral Agent hereunder, and that any payments due or to
become due in respect of such Accounts are to be made directly to the Collateral
Agent or its designee.
     (f) Such Lien Grantor will promptly deliver to the Collateral Agent as
Collateral hereunder any Pledged Tangible Chattel Paper and any Pledged
Instruments owned by such Lien Grantor, indorsed to the order of the Collateral
Agent, or accompanied by duly executed instruments of assignment, with
signatures appropriately guaranteed, all in form and substance reasonably
satisfactory to the Collateral Agent; provided that no Lien Grantor shall be
required to deliver any such Pledged Tangible Chattel Paper to the extent that
it was entered into or provided in connection with vendor financing and any such
Pledged Instrument or Pledged Tangible Chattel Paper to the extent the aggregate
principal or face amount of such Pledged Instrument or Pledged Tangible Chattel
Paper, as applicable, of such Lien Grantor does not exceed $10,000,000. Upon the
delivery of any Pledged Tangible Chattel Paper or Pledged Instrument owned by
such Lien Grantor to the Collateral Agent, the Transaction Lien on such
Collateral will be subject to no prior Liens or rights of others. So long as no
Specified Event of Default shall have occurred and is continuing, the Collateral
Agent will, promptly upon request by the relevant Lien Grantor, make appropriate
arrangements for making any Pledged Tangible Chattel Paper or Pledged Instrument
available to

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the relevant Lien Grantor for purposes of presentation, collection,
cancellation, amendment, compromise, sale or renewal.
     (g) No Lien Grantor shall be required to deliver to the Collateral Agent
any certificate of title with respect to any motor vehicle constituting
Collateral, or to stamp or otherwise mark any such certificate of title to
reflect the security interest therein granted to the Collateral Agent pursuant
to this Agreement.
     (h) Notwithstanding anything in this Agreement or any other Security
Document to the contrary, no Lien Grantor shall be required to take any action
in order to perfect the security interest of the Collateral Agent in any
Collateral under the law of any jurisdiction outside of the United States.
     Section 5. Recordable Intellectual Property. Each Lien Grantor covenants as
follows:
     (a) On the date on which it becomes a party to this Agreement, such Lien
Grantor will sign and deliver to the Collateral Agent Intellectual Property
Security Agreements with respect to all Material Recordable Intellectual
Property then owned by it. Within 30 days after each March 31, June 30,
September 30 and December 31, such Lien Grantor will sign and deliver to the
Collateral Agent any Intellectual Property Security Agreement provided by the
Collateral Agent and necessary to grant Transaction Liens on all Material
Recordable Intellectual Property owned by it on such March 31, June 30,
September 30 and December 31 that is not covered by any previous Intellectual
Property Security Agreement so signed and delivered by it. In each case, it
will, as soon as practicable upon the request of the Collateral Agent, provide
the Collateral Agent with all documentation necessary in order to enable the
Collateral Agent to make all Intellectual Property Filings necessary to perfect
the Transaction Liens on Material Recordable Intellectual Property.
     (b) Such Lien Grantor will maintain its Material Intellectual Property in a
commercially reasonable, prudent manner consistent with its past practices and
with respect to any Material Intellectual Property which has been infringed,
misappropriated or diluted, in each case in a material respect, by a third
party, the relevant Lien Grantor will, unless such Lien Grantor shall reasonably
determine that such action would be of negligible value, economic or otherwise,
take commercially reasonable steps consistent with its past practices to sue for
infringement, misappropriation or dilution and to recover any and all damages
for such infringement, misappropriation or dilution, and/or take such other
actions as such Lien Grantor shall reasonably deem appropriate under the
circumstances to protect such Material Intellectual Property.
     Section 6. Investment Property. Each Lien Grantor represents and warrants,
at the times set forth below, and covenants, where indicated below, as follows:
     (a) Certificated Securities. Such Lien Grantor represents and warrants
that, as of the Effective Date, such Lien Grantor has delivered to the
Collateral Agent as Collateral hereunder all certificates representing (i) any
Pledged Certificated Security of any Subsidiary and (ii) any other Pledged
Certificated Security owned as of such date by such Lien Grantor and not
credited to a Securities Account having a fair market value in excess of
$3,000,000 (other than certificates evidencing Equity Interests constituting
minority investments in privately held companies). Such Lien Grantor covenants
that whenever such Lien Grantor acquires any certificate representing a Pledged
Certificated Security described in clauses (i) or (ii) of the immediately
preceding sentence, such Lien Grantor will as promptly as practicable deliver
such certificate to the Collateral Agent as Collateral hereunder; provided that
such Lien Grantor shall not be required to deliver any Pledged Certificated
Security which such Lien Grantor intends to sell within 90 days of its
acquisition thereof until the 91st day following such acquisition provided that
no Event of Default shall have occurred and is continuing.
     (b) Uncertificated Securities. Each Lien Grantor covenants to enter into
(and cause the relevant issuer to enter into) an Issuer Control Agreement on or
prior to April 30, 2006 (or such later date as to which the Collateral Agent may
consent in its sole discretion) in respect of each Pledged Uncertificated
Security owned by such Lien Grantor as of such date and not credited to a
Securities Account evidencing any Pledged Uncertificated Security of a U.S. or
Canadian issuer owned by such Lien Grantor as of such date, not credited to a
Securities Account and having a fair market value in excess of $5,000,000
(except Securities evidencing Equity Interests in Subsidiaries and Equity
Interest constituting minority investments in privately held companies), and
deliver each such Issuer Control Agreement to the Collateral Agent (which shall
enter into the same). Each Lien Grantor represents and warrants

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that, as of the Effective Date, no Pledged Equity Interests of any U.S.
Subsidiary or any Canadian Subsidiary of any Lien Grantor is an Uncertificated
Security. Such Lien Grantor covenants that whenever such Lien Grantor acquires
any other Pledged Uncertificated Security meeting the requirements set forth in
the two immediately preceding sentences, such Lien Grantor will enter into (and
cause the relevant issuer to enter into), as promptly as practicable, an Issuer
Control Agreement in respect of such Pledged Uncertificated Security and deliver
such Issuer Control Agreement to the Collateral Agent (which shall enter into
the same); provided that such Lien Grantor shall not be deemed in breach of this
covenant if any such agreement shall fail to be finalized solely other than as a
result of any action or inaction on the part of such Lien Grantor or, if the
issuer under any such agreement is a Subsidiary, the issuer.
     (c) Security Entitlements. Each Lien Grantor covenants to enter into (and
cause the relevant Securities Intermediary to enter into) a Securities Account
Control Agreement on or prior to April 30, 2006 (or such later date as to which
the Collateral Agent may consent in its sole discretion) (the “Required
Securities Account Control Agreement Date”) in respect of any Pledged Security
Entitlement owned by it at such time with a fair market value (together with all
other Financial Assets credited to the same Securities Account) in excess of
$5,000,000 and the Securities Account to which such underlying Financial Asset
is credited and will deliver such Securities Account Control Agreement to the
Collateral Agent (which shall enter into the same) unless such agreement has not
been entered into solely other than as a result of any action or inaction on the
part of such Lien Grantor; provided that the Lien Grantors shall only be
required to comply with this covenant with respect to Securities Accounts for
which the relevant Securities Intermediary’s jurisdiction is in the United
States. Except as permitted by Section 19, such Lien Grantor shall not, on or
prior to the Required Securities Account Control Agreement Date, transfer
Pledged Securities Entitlements out of any Controlled Securities Account for the
principal purpose of preventing the Collateral Agent from having a perfected
lien in such Pledged Securities Entitlements (it being understood that nothing
herein shall prevent any Lien Grantor from withdrawing cash from any Pledged
Securities Entitlements for any other purpose). Such Lien Grantor covenants that
whenever such Lien Grantor acquires any other Pledged Security Entitlements the
underlying Financial Assets of which, together with all other Financial Assets
credited to the same Securities Account, have an aggregate fair market value in
excess of $5,000,000, such Lien Grantor will, as promptly as practicable, cause
the underlying Financial Asset to be credited to a Controlled Securities
Account; provided that the Lien Grantors shall not be so obligated if the
jurisdiction of the relevant Securities Intermediary is not in the United
States.
     (d) Commodity Accounts. Each Lien Grantor covenants to enter into (and
cause the relevant Commodity Intermediary to enter into) on or prior to
April 30, 2006 (or such later date as to which the Collateral Agent may consent
in its sole discretion) a Commodity Account Control Agreement in respect of each
Pledged Commodity Account owned by it at such time and will deliver such
Commodity Account Control Agreement to the Collateral Agent (which shall enter
into the same) so long as Pledged Commodity Contracts with a fair market value
in excess of $3,000,000 are credited to such account at such time unless such
agreement has not been entered into solely other than as a result of any action
or inaction on the part of such Lien Grantor; provided that the Lien Grantors
shall only be required to comply with this covenant with respect to Commodity
Accounts for which the relevant Commodity Intermediary’s jurisdiction is in the
United States. Such Lien Grantor covenants that such Lien Grantor will
thereafter cause, as promptly as practicable, each Pledged Commodity Contract
owned by it with a fair market value in excess of $3,000,000 to be carried at
all times in a Controlled Commodity Account; provided that the Lien Grantors
shall not be so obligated if the jurisdiction of the Commodity Intermediary for
the Commodity Account in which such Commodities Contract is carried is not in
the United States.
     (e) Perfection as to Certificated Securities. Such Lien Grantor represents
and warrants that, at the time that such Lien Grantor delivers the certificate
representing any Pledged Certificated Security owned by it to the Collateral
Agent in the United States and complies with Section 6(j) in connection with
such delivery, (i) the Transaction Lien on such Pledged Certificated Security
will be perfected, subject to no prior Liens or rights of others, and (ii) the
Collateral Agent will have Control of such Pledged Certificated Security.
     (f) Perfection as to Uncertificated Securities. Such Lien Grantor
represents and warrants that, at the time that such Lien Grantor, the Collateral
Agent and the U.S. issuer of any Pledged Uncertificated Security owned by such
Lien Grantor enter into an Issuer Control Agreement with respect thereto,
(i) the Transaction Lien on such Pledged Uncertificated Security will be
perfected, subject to no prior Liens or rights of others and (ii) the Collateral
Agent will have Control of such Pledged Uncertificated Security.

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     (g) Perfection as to Security Entitlements. Such Lien Grantor represents
and warrants that, at the time that the Financial Asset underlying any Pledged
Security Entitlement owned by such Lien Grantor is credited to the applicable
Controlled Securities Account, (i) the Transaction Lien on such Pledged Security
Entitlement will be perfected, subject to no prior Liens or rights of others
(except Liens and rights of the relevant Securities Intermediary that are
Permitted Liens or rights of set-off) other than Liens existing on the date of
this Agreement that are Permitted Liens and (ii) the Collateral Agent will have
Control of such Pledged Security Entitlement; provided that NNI shall be deemed
to have made this representation and warranty only with respect to Securities
Accounts for which the relevant Securities Intermediary’s jurisdiction is in the
United States.
     (h) Perfection as to Commodity Accounts. Each Lien Grantor covenants that
so long as any Commodity Account is subject to a Commodity Account Control
Agreement (i) the Transaction Liens on such Pledged Commodity Account and all
Pledged Commodity Contracts carried therein will be perfected, subject to no
prior Liens or rights of others (except Liens and rights of the relevant
Commodity Intermediary permitted by such Commodity Account Control Agreement)
other than Liens existing on the date of this Agreement that are Permitted Liens
and the Collateral Agent will have Control of such Commodity Account and all
Commodity Contracts carried therein from time to time; provided that the Lien
Grantors shall be deemed to have made this representation and warranty only with
respect to Commodity Accounts for which the relevant Commodity Intermediary’s
jurisdiction is in the United States.
     (i) Agreement as to Applicable Jurisdiction. Each Lien Grantor covenants
that in respect of all Pledged Security Entitlements owned by such Lien Grantor,
and all Securities Accounts to which the related Financial Assets are credited,
the Securities Intermediary’s jurisdiction (determined as provided in UCC
Section 8-110(e)) will at all times be located in the United States. In respect
of all Commodity Contracts owned by such Lien Grantor and all Commodity Accounts
in which such Commodity Contracts are carried, the Commodity Intermediary’s
jurisdiction (determined as provided in UCC Section 9-305(b)) will at all times
be located in the United States.
     (j) Delivery of Pledged Certificates. Each Lien Grantor covenants that all
Pledged Certificates, when delivered to the Collateral Agent, will be in
suitable form for transfer by delivery, or accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
satisfactory to the Collateral Agent.
     Section 7. Controlled Deposit Accounts. Each Lien Grantor covenants as
follows:
     (a) Such Lien Grantor covenants that, no later than April 30, 2006 (or such
later date as to which the Collateral Agent may consent in its sole discretion),
it will deliver to the Collateral Agent duly executed Deposit Account Control
Agreements with respect to each account listed on Schedule 5. Each Lien Grantor
agrees that the Deposit Accounts listed on Schedule 5 are the principal cash
management Deposit Accounts of the Lien Grantors with Depositary Banks’ whose
jurisdictions are in the United States. Upon the occurrence and during the
continuance of a Specified Event of Default, all cash owned by such Lien Grantor
(other than cash which is subject to a Lien incurred in reliance on
Section 19(e)) will be deposited, upon or promptly after the receipt thereof, in
one or more Controlled Deposit Accounts. Each Controlled Deposit Account will be
operated as provided in Section 9.
     (b) Such Lien Grantor covenants that, in respect of each Controlled Deposit
Account, the Depositary Bank’s jurisdiction (determined as provided in UCC
Section 9-304) will at all times be a jurisdiction in which Article 9 of the
Uniform Commercial Code (including without limitation the UCC) is in effect.
     (c) Such Lien Grantor covenants that, so long as the Collateral Agent has
Control of a Controlled Deposit Account, the Transaction Lien on such Controlled
Deposit Account will be perfected, subject to no prior Liens or rights of others
(except the Depositary Bank’s rights of set-off and right to deduct its normal
operating charges and fees and any uncollected funds previously credited
thereto) other than Liens existing on the date of this Agreement that are
Permitted Liens.
     (d) Such Lien Grantor covenants that, if such Lien Grantor opens a new
Deposit Account with a Depositary Bank whose jurisdiction is in the United
States (determined as provided in UCC Section 9-304) that it intends to use as a
principal cash management account for the NNC Companies (taken as a whole) as
determined by such Lien Grantor in good faith, such Lien Grantor shall promptly
notify the Collateral Agent thereof and will deliver to the Collateral Agent a
duly executed Deposit Account Control Agreement with respect thereto; provided

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that such Lien Grantor shall not be deemed in breach of this covenant if any
such agreement shall fail to be finalized solely other than as a result of any
action or inaction on the part of such Lien Grantor.
     (e) Except as permitted by Section 19, such Lien Grantor shall not transfer
cash out of any Controlled Deposit Account for the principal purpose of
preventing the Collateral Agent from having a perfected lien in such cash (it
being understood that nothing herein shall prevent any Lien Grantor from
withdrawing cash from any Controlled Deposit Account for any other purpose).
     Section 8. Cash Collateral Accounts. (a) If an Event of Default shall have
occurred and is continuing and the Required Secured Lenders shall have so
instructed the Collateral Agent, the Collateral Agent will establish with
respect to each Lien Grantor an account (its “Cash Collateral Account”), in the
name and under the exclusive control of the Collateral Agent, subject to
subsection 8(d). Each Cash Collateral Account will be operated as provided in
this Section 8 and Section 9.
     (b) The Collateral Agent shall deposit the following amounts, as and when
received by it, in each Lien Grantor’s Cash Collateral Account: each amount
required to be deposited therein by any provision of any Credit Agreement or
other Loan Document referred to therein, each Cash Distribution required by
Section 12 to be deposited therein and each amount realized or otherwise
received by the Collateral Agent with respect to assets of such Lien Grantor
upon any exercise of remedies pursuant to any Security Document upon the
occurrence and during the continuance of (x) with respect to Illiquid
Collateral, an Event of Default and (y) with respect to Liquid Collateral, a
Specified Event of Default.
     (c) The Collateral Agent shall maintain such records and/or establish such
sub-accounts as shall be required to enable it to identify the amounts held in
each Cash Collateral Account from time to time pursuant to Section 8(b).
     (d) Unless an Event of Default shall have occurred and is continuing and
the Required Secured Lenders shall have instructed the Collateral Agent to stop
withdrawing amounts from the Cash Collateral Accounts pursuant to this
subsection 8(d), any Cash Distributions or other amounts deposited in the Cash
Collateral Account shall, at the relevant Lien Grantor’s request, be withdrawn
and applied to pay Secured Obligations that are then due and payable.
     Section 9. Operation of Collateral Accounts. (a) All Cash Distributions
received with respect to assets held in any Collateral Account shall be
deposited therein promptly upon receipt thereof.
     (b) Funds held in any Controlled Securities Account may, until withdrawn,
be invested and reinvested as the relevant Lien Grantor shall determine from
time to time; provided that, if a Specified Event of Default shall have occurred
and is continuing, the Collateral Agent may select short term cash equivalents
(and the Collateral Agent shall not be liable to any Lien Grantor or any Secured
Party for any loss as a result of any disposition of any such short term cash
equivalent prior to maturity ).
     (c) So long as no Specified Event of Default shall have occurred and is
continuing, funds held in any Controlled Deposit Account or Cash Collateral
Account may, until withdrawn, be invested and reinvested as the relevant Lien
Grantor shall determine from time to time; provided that (i) if a Specified
Event of Default shall have occurred and is continuing, the Collateral Agent may
select short term cash equivalents in which any available funds may be invested
and (ii) if such amounts are to be held in a Securities Account, either (x) the
Collateral Agent is the Entitlement Holder with respect to such amounts or
(y) the relevant Entitlement Holder and the relevant Securities Intermediary
shall have theretofore entered into a Securities Account Control Agreement with
respect to such Securities Account and delivered it to the Collateral Agent
(which shall enter into the same).
     (d) With respect to each Collateral Account (except a Cash Collateral
Account, as to which Section 8 applies), the Collateral Agent will, if requested
by the applicable Lien Grantor, instruct the relevant Securities Intermediary or
Depositary Bank that the relevant Lien Grantor may withdraw, or direct the
disposition of, funds held therein unless and until the Collateral Agent
rescinds such instruction. The Collateral Agent will not rescind such
instructions unless a Specified Event of Default shall have occurred and is
continuing.

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     (e) So long as a Specified Event of Default shall have occurred and is
continuing, no Lien Grantor will cause funds to be transferred from a Collateral
Account to any other account owned by an NNC Company unless such other account
is a Collateral Account.
     (f) If a Specified Event of Default shall have occurred and is continuing,
the Collateral Agent may (i) retain, or instruct the relevant Securities
Intermediary or Depositary Bank to retain, all cash and investments then held in
any Collateral Account, (ii) liquidate, or instruct the relevant Securities
Intermediary or Depositary Bank to liquidate, any or all investments held
therein and/or (iii) withdraw any amounts held therein and apply such amounts as
provided in Section 14.
     (g) If a Specified Event of Default shall have occurred and is continuing,
and immediately available cash on deposit in any Collateral Account is not
sufficient to make any distribution or withdrawal to be made pursuant hereto,
the Collateral Agent will cause to be liquidated, as promptly as practicable,
such investments held in or credited to such Collateral Account as shall be
required to obtain sufficient cash to make such distribution or withdrawal and,
notwithstanding any other provision hereof, such distribution or withdrawal
shall not be made until such liquidation has taken place.
     Section 10. Transfer of Record Ownership. (a) At any time when an Event of
Default shall have occurred and is continuing, the Collateral Agent may (and to
the extent that action by it is required, the relevant Lien Grantor, if directed
to do so by the Collateral Agent, will as promptly as practicable): cause each
of the Pledged Certificated Securities (or any portion thereof specified in such
direction) to be transferred of record into the name of the Collateral Agent or
its nominee. Promptly upon receiving any such direction, the Collateral Agent
will notify each relevant Lien Grantor thereof, and from time to time thereafter
such Lien Grantor will take any and all actions reasonably requested by the
Collateral Agent to facilitate compliance with this subsection 10(a).
     (b) Communications after Transfer of Record Ownership. The Collateral Agent
will promptly give to the relevant Lien Grantor copies of any notices and other
communications received by the Collateral Agent with respect to Pledged
Certificated Securities registered in the name of the Collateral Agent or its
nominee.
     Section 11. Right to Vote Securities. (a) Unless (i) (x) with respect to
any Pledged Security not credited to a Securities Account other than any
Uncertificated Security representing shares in a money market fund, an Event of
Default shall have occurred and is continuing or (y) with respect to any Pledged
Security credited to a Securities Account and any Financial Asset underlying any
Pledged Security Entitlement owned by it and any Uncertificated Securities
representing shares in a money market fund, a Specified Event of Default shall
have occurred and is continuing and (ii) the Collateral Agent shall have
provided notice to the Lien Grantor of the Collateral Agent’s election to
terminate the right of such Lien Grantor to exercise such rights, each Lien
Grantor will have the right, from time to time, to vote and to give consents,
ratifications and waivers with respect to any Pledged Security owned by it and
the Financial Asset underlying any Pledged Security Entitlement owned by it, and
the Collateral Agent will, upon receiving a written request from such Lien
Grantor, promptly deliver to such Lien Grantor or as specified in such request
such proxies, powers of attorney, consents, ratifications and waivers in respect
of any such Pledged Security that is registered in the name of the Collateral
Agent or its nominee or any such Pledged Security Entitlement as to which the
Collateral Agent or its nominee is the Entitlement Holder, in each case as shall
be specified in such request and be in form and substance reasonably
satisfactory to the Collateral Agent. Unless (i)(x) with respect to any Pledged
Security not credited to a Securities Account other than any Uncertificated
Security representing shares in a money market fund, an Event of Default shall
have occurred and is continuing or (y) with respect to any Pledged Security
credited to a Securities Account and any Financial Asset underlying any Pledged
Security Entitlement owned by it and any Uncertificated Securities representing
shares in a money market fund, a Specified Event of Default shall have occurred
and is continuing and (ii) the Collateral Agent shall have provided notice to
the Lien Grantor of the Collateral Agent’s election to terminate the right of
such Lien Grantor to exercise such rights, the Collateral Agent will have no
right to take any action which the owner of a Pledged Security, Pledged
Partnership Interest or Pledged LLC Interest is entitled to take with respect
thereto, except the right to receive payments and other distributions to the
extent provided herein.
     (b) If (i)(x) with respect to any Pledged Security not credited to a
Securities Account other than any Uncertificated Security representing shares in
any money market fund, an Event of Default shall have occurred and is continuing
or (y) with respect to any Pledged Security credited to a Securities Account and
any Financial Asset

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underlying any Security Entitlement owned by it and any Uncertificated
Securities consisting of shares in a money market fund , a Specified Event of
Default shall have occurred and is continuing and (ii) the Collateral Agent
shall have provided notice to the Lien Grantor of the Collateral Agent’s
election to terminate the right of such Lien Grantor to exercise such rights,,
the Collateral Agent will have the right to the extent permitted by law (and, in
the case of a Pledged Security, Pledged Partnership Interest or Pledged LLC
Interest, by the relevant partnership agreement, limited liability company
agreement, operating agreement or other governing document) to vote, to give
consents, ratifications and waivers and to take any other action with respect to
the Pledged Investment Property, the other Pledged Equity Interests (if any) and
the Financial Assets underlying the Pledged Security Entitlements, with the same
force and effect as if the Collateral Agent were the absolute and sole owner
thereof, and each Lien Grantor will take all such action as the Collateral Agent
may reasonably request from time to time to give effect to such right.
     Section 12. Certain Cash Distributions. Cash Distributions with respect to
assets held in a Collateral Account shall be deposited and held therein, or
withdrawn therefrom, as provided in Section 8 and Section 9. If a Specified
Event of Default shall have occurred and is continuing, Cash Distributions
(other than in amounts less than $3,000,000) with respect to any Pledged Equity
Interest that is not held in a Collateral Account (whether held in the name of a
Lien Grantor or in the name of the Collateral Agent or its nominee) shall be
deposited, as soon as practicable upon receipt thereof, in a Controlled Deposit
Account of the relevant Lien Grantor if such account exists at such time and
otherwise, turned over to the Collateral Agent.
     Section 13. Remedies upon Event of Default or Specified Event of Default.
(a) If (x) with respect to Illiquid Collateral, an Event of Default shall have
occurred and is continuing or (y) with respect to Liquid Collateral, a Specified
Event of Default shall have occurred and is continuing, the Collateral Agent may
exercise (or cause its sub-agents to exercise) any or all of the remedies
available to it (or to such sub-agents) under the Security Documents with
respect to Illiquid Collateral or Liquid Collateral, as applicable. Without
limiting the generality of the foregoing, if (x) with respect to Illiquid
Collateral, an Event of Default shall have occurred and is continuing or
(y) with respect to Liquid Collateral, a Specified Event of Default shall have
occurred and is continuing, the Collateral Agent may exercise on behalf of the
Secured Parties all the rights of a secured party under the UCC (whether or not
in effect in the jurisdiction where such rights are exercised) with respect to
Illiquid Collateral or Liquid Collateral, as applicable, and, in addition, the
Collateral Agent may, if a Specified Event of Default shall have occurred and is
continuing, without being required to give any notice, except as herein provided
or as may be required by mandatory provisions of law, withdraw all cash held in
the Collateral Accounts and apply such cash as provided in Section 14 and, if
there shall be no such cash or if such cash shall be insufficient to pay all the
Secured Obligations in full, sell, lease, license or otherwise dispose of (x) if
a Event of Default has occurred and is continuing, the Illiquid Collateral or
any part thereof and (y) if Specified Event of Default shall have occurred and
is continuing, the Liquid Collateral or any part thereof. Notice of any such
sale or other disposition shall be given to the relevant Lien Grantor(s) as
required by Section 16.
     (b) Without limiting the generality of the foregoing, if a Specified Event
of Default shall have occurred and is continuing: the Collateral Agent may
license or sublicense, whether general, special or otherwise, and whether on an
exclusive or non-exclusive basis, any Pledged Intellectual Property (including
any Pledged Recordable Intellectual Property) throughout the world for such term
or terms, on such conditions and in such manner as the Collateral Agent shall in
its sole discretion determine; provided that the Collateral Agent shall notify
the relevant Lien Grantor of any license or sublicenses so granted (but failure
to give such notice shall not effect the validity of such license) and that such
licenses or sublicenses do not conflict with any existing license or applicable
law; the Collateral Agent may (without assuming any obligation or liability
thereunder), at any time and from time to time, in its sole and reasonable
discretion, enforce (and shall have the exclusive right to enforce) against any
licensee or sublicensee all rights and remedies of any Lien Grantor in, to and
under any of its Pledged Intellectual Property and take or refrain from taking
any action under any thereof, and each Lien Grantor releases the Collateral
Agent and each other Secured Party from liability for, and agrees to hold the
Collateral Agent and each other Secured Party free and harmless from and against
any claims and reasonable expenses arising out of, any lawful action so taken or
omitted to be taken with respect thereto, except for claims and reasonable
expenses arising from the Collateral Agent’s or such Secured Party’s gross
negligence or willful misconduct; and upon request by the Collateral Agent
(which shall not be construed as implying any limitation on rights or powers),
each Lien Grantor will execute and deliver to the Collateral Agent a power of
attorney, in form and substance satisfactory to the Collateral Agent, for the
implementation of any sale, lease, license or other disposition of any of such
Lien Grantor’s

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Pledged Intellectual Property or any action related thereto. In connection with
any such disposition, but subject to any confidentiality restrictions imposed on
such Lien Grantor in any license or similar agreement, such Lien Grantor will
supply to the Collateral Agent its know-how and expertise relating to the
relevant Intellectual Property or the products or services made or rendered in
connection with such Intellectual Property, and its customer lists and other
records relating to such Intellectual Property and to the distribution of said
products or services.
     Section 14. Application of Proceeds. (a) The Collateral Agent may (i) if a
Specified Event of Default shall have occurred and is continuing, apply any cash
held in the Collateral Accounts and (ii) if (x) with respect to Illiquid
Collateral, an Event of Default shall have occurred and is continuing or
(y) with respect to Liquid Collateral, a Specified Event of Default shall have
occurred and is continuing, apply the proceeds of any sale or other disposition
of all or any part of the Illiquid Collateral or Liquid Collateral, as
applicable, in either case in the following order of priorities:
     (1) to pay the expenses of such sale or other disposition, including
reasonable compensation to agents of and counsel for the Collateral Agent, and
all reasonable expenses, liabilities and advances incurred or made by the
Collateral Agent in connection with the Security Documents, and any other
amounts then due and payable to the Collateral Agent pursuant to Section 15 or
any amounts owing to the Indenture Trustee under Section 5.05 of the 1988
Indenture, or any amounts owing to EDC under the EDC Support Facility and
consisting of reimbursement obligations with respect to fees and expenses
incurred by EDC;
     (2) to pay the due and unpaid principal, face amount or termination amount
of the Secured Obligations ratably, on the basis of the principal or face amount
of such Secured Obligations (or, with respect to Contingent Secured Obligations,
provide for the payment thereof pursuant to Section 14(b)), until payment in
full of the principal of all Secured Obligations shall have been made (or, with
respect to Contingent Secured Obligations, so provided for);
     (3) to pay ratably the due and unpaid interest accrued on the Secured
Obligations in accordance with the provisions of the applicable Secured
Agreement, as applicable;
     (4) to pay all other due and unpaid Secured Obligations and all due and
unpaid commitment fees and participation fees under each Credit Agreement
ratably (or, with respect to Contingent Secured Obligations, provide for the
payment thereof pursuant to Section 14(b)), until payment in full of all such
other Secured Obligations and fees shall have been made (or, with respect to
Contingent Secured Obligations, so provided for); and
     (5) to pay to the relevant Lien Grantor, or as a court of competent
jurisdiction may direct, any surplus then remaining from the proceeds of the
Collateral owned by it;
provided that Collateral owned by any Subsidiary Lien Grantor and any proceeds
thereof shall be applied pursuant to the foregoing clauses (1), (2), (3) and
(4) of this Section 14 to the Secured Obligations of such Subsidiary Lien
Grantor only up to an aggregate amount equal to the largest amount that would
not render such application of Collateral or proceeds subject to avoidance under
Section 548 of the United States Bankruptcy Code or any comparable provisions of
applicable law. The Collateral Agent may make such distributions hereunder in
cash or in kind or, on a ratable basis, in any combination thereof.
     (b) If at any time any portion of any monies collected or received by the
Collateral Agent would, but for the provisions of this Section 14(b), be payable
pursuant to Section 14 in respect of a Contingent Secured Obligation, the
Collateral Agent shall not apply any monies to pay such Contingent Secured
Obligation but shall

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instead (x) notify the holder of such Contingent Secured Obligation and (y) with
respect to the holder of such Contingent Secured Obligations excluding the
holder of any Bond Obligation, request the holder thereof, at least 10 days
before each proposed distribution hereunder, to notify the Collateral Agent as
to the maximum amount of such Contingent Secured Obligation if then
ascertainable (e.g., in the case of a letter of credit, the maximum amount
available for subsequent drawings thereunder). If the holder of such Contingent
Secured Obligation (excluding the holder of any Bond Obligation) does not notify
the Collateral Agent of the maximum ascertainable amount thereof at least two
Business Days before such distribution, such holder will not be entitled to
share in such distribution. If such holder does so notify the Collateral Agent
as to the maximum ascertainable amount thereof, or if such holder is the holder
of any Bond Obligation (regardless of whether such holder has provided any
notice to the Collateral Agent), the Collateral Agent will allocate to such
holder a portion of the monies to be distributed in such distribution,
calculated as if such Contingent Secured Obligation were outstanding in such
maximum ascertainable amount. However, the Collateral Agent will not apply such
portion of such monies to pay such Contingent Secured Obligation, but instead
will hold such monies and invest such monies in short term cash equivalents
selected by the Collateral Agent. All such monies and short term cash
equivalents and all proceeds thereof will constitute Collateral hereunder, but
will be subject to distribution in accordance with this Section 14(b) rather
than Section 14(a). The Collateral Agent will hold all such monies and short
term cash equivalents and the net proceeds thereof in trust until all or part of
such Contingent Secured Obligation becomes a Non-Contingent Secured Obligation,
whereupon the Collateral Agent at the request of the relevant Secured Party will
apply the amount so held in trust to pay such Non-Contingent Secured Obligation;
provided that, if the other Secured Obligations theretofore paid pursuant to the
same clause of Section 14(a) (i.e., clause (2) or (3)) were not paid in full,
the Collateral Agent will apply the amount so held in trust to pay the same
percentage of such Non-Contingent Secured Obligation as the percentage of such
other Secured Obligations theretofore paid pursuant to the same clause of
Section 14(a). If (i) the holder of such Contingent Secured Obligation shall
advise the Collateral Agent that no portion thereof remains in the category of a
Contingent Secured Obligation and (ii) the Collateral Agent still holds any
amount held in trust pursuant to this Section 14(b) in respect of such
Contingent Secured Obligation (after paying all amounts payable pursuant to the
preceding sentence with respect to any portions thereof that became
Non-Contingent Secured Obligations), such remaining amount will be applied by
the Collateral Agent in the order of priorities set forth in Section 14(a).
     (c) With respect to any Bond Obligation, whether or not a Contingent
Secured Obligation, including, without limitation, the principal outstanding of
and interest on such Bond Obligation, an amount (the “Determined Amount”) with
respect to such Bond Obligation shall be required to be paid or held by the
Collateral Agent with respect to each of Sections 14(a)(2), 14(a)(3) and
14(a)(4) (each, a “Level”) equal to (x) the Ratio multiplied by (y) the sum of
(A) the proceeds of any sale or other disposition of Collateral that are, in
fact, being applied by the Collateral Agent to amounts owed under the Credit
Agreements at the applicable Level, plus (B) the proceeds of such Collateral
proposed to be held by the Collateral Agent pursuant to Section 14(b) to cover
the Contingent Secured Obligations relating to the Credit Agreements at such
Level in accordance with Section 14(b). Notwithstanding the foregoing, if the
amount to be applied to the Bond Obligations at any Level would be greater if
the Ratio were calculated by reference to a Secured Obligation (other than the
principal under the Credit Agreements) that constitutes “Funded Debt” under the
1988 Indenture, such Secured Obligation shall be used in order to determine the
amount to be applied to the Bond Obligations at such Level. Section 14 of this
Agreement (including this Section 14(c)) is intended to comply with the equal
and ratable negative pledge provisions of the 1988 Indenture and shall be
construed to give effect to such intention. The Collateral Agent shall be
obligated to offer to pay to the Indenture Trustee any portion of the Determined
Amounts that are, in fact, due and payable at such time as such Determined
Amounts are calculated, and the Collateral Agent shall deposit any remaining
portion of such Determined Amounts and any amounts not accepted by the Indenture
Trustee in a segregated account solely for the benefit of the holders of the
Bond Obligations (and all amounts on deposit in such account shall be invested
in short term cash equivalents).
     (d) In making the payments and allocations required by this Section 14, the
Collateral Agent may rely upon information supplied to it pursuant to
Section 18(e). All distributions made by the Collateral Agent pursuant to this
Section 14 shall be final (except in the event of manifest error) and the
Collateral Agent shall have no duty to inquire as to the application by any
Secured Party of any amount distributed to it.
     Section 15. Fees and Expenses. Each Lien Grantor will forthwith upon demand
pay to the Collateral Agent: the amount of any taxes that the Collateral Agent
may have been required to pay by reason of the Transaction Liens or to free any
Collateral from any other Lien thereon; the amount of any and all reasonable

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out-of-pocket expenses, including transfer taxes and reasonable fees and
expenses of outside counsel and other experts, that the Collateral Agent may
incur (except (x) so long as no Specified Event of Default shall have occurred
and is continuing, any filing fees with respect to Intellectual Property Filings
other than with respect to Material Recordable Intellectual Property and
(y) Intellectual Property Filings with respect to Trademarks which are not
Material Recordable Intellectual Property) in connection with (i) the
administration or enforcement of the Security Documents, including such
reasonable out-of-pocket expenses as are incurred to preserve the value of the
Collateral or the validity, perfection, rank or value of any Transaction Lien,
(ii) the collection, sale or other disposition of any Collateral or (iii) the
exercise by the Collateral Agent of any of its rights or powers under the
Security Documents; the amount of any fees that the Borrower shall have agreed
in writing to pay to the Collateral Agent and that shall have become due and
payable in accordance with such written agreement and the amount required to
indemnify the Collateral Agent for, or hold it harmless and defend it against,
any loss, liability or expense (including the reasonable fees and out-of-pocket
expenses of its counsel and any experts or sub-agents appointed by it hereunder)
incurred or suffered by the Collateral Agent in connection with the Security
Documents (except (x) so long as no Specified Event of Default shall have
occurred and is continuing, any filing fees with respect to or arising in
connection with Intellectual Property Filings other than with respect to
Material Recordable Intellectual Property and (y) Intellectual Property Filings
with respect to Trademarks which are not Material Recordable Intellectual
Property), except to the extent that such loss, liability or expense arises from
the Collateral Agent’s gross negligence or willful misconduct or a breach of any
duty that the Collateral Agent has under this Agreement (after giving effect to
Sections 17 and 18). Any such amount not paid to the Collateral Agent as soon as
practicable will bear interest for each day thereafter until paid at a rate per
annum equal to the sum of 2% plus the highest rate applicable to the base rate
loans under the 2006 Credit Agreement, if it shall not have been terminated, or
2% plus the overnight federal funds rate if the 2006 Credit Agreement shall have
been terminated. If any transfer tax, documentary stamp tax or other tax is
payable in connection with any transfer or other transaction provided for in the
Security Documents, the Lien Grantors will pay such tax and provide any required
tax stamps to the Collateral Agent or as otherwise required by law.
     Section 16. Authority to Administer Collateral. Each Lien Grantor
irrevocably appoints the Collateral Agent its true and lawful attorney, with
full power of substitution, in the name of such Lien Grantor, any Secured Party
or otherwise, for the sole use and benefit of the Secured Parties, but at NNL’s
expense, to the extent permitted by law to exercise, at any time and from time
to time while (x) an Event of Default with respect to Illiquid Collateral and
(y) a Specified Event of Default with respect to Liquid Collateral shall have
occurred and is continuing, all or any of the following powers with respect to
all or any of such Lien Grantor’s Collateral:
     (a) to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due upon or by virtue thereof;
     (b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto;
     (c) to sell, lease, license or otherwise dispose of the same or the
proceeds or avails thereof, as fully and effectually as if the Collateral Agent
were the absolute owner thereof; and
     (d) to extend the time of payment of any or all thereof and to make any
allowance or other adjustment with reference thereto;
provided that, except in the case of Collateral that is perishable or threatens
to decline speedily in value or is of a type customarily sold on a recognized
market, the Collateral Agent will give the relevant Lien Grantor at least ten
days’ prior written notice of the time and place of any public sale thereof or
the time after which any private sale or other intended disposition thereof will
be made. Any such notice shall (i) contain the information specified in UCC
Section 9-613, (ii) be Authenticated and (iii) be sent to the parties required
to be notified pursuant to UCC Section 9-611(c); provided that, if the
Collateral Agent fails to comply with this sentence in any respect, its
liability for such failure shall be limited to the liability (if any) imposed on
it as a matter of law under the UCC.
     Section 17. Limitation on Duty in Respect of Collateral. Beyond the
exercise of reasonable care in the custody and preservation thereof, the
Collateral Agent will have no duty as to any Collateral in its possession or
control or in the possession or control of any sub-agent or bailee selected by
it in good faith or any income therefrom or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Collateral
Agent

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will be deemed to have exercised reasonable care in the custody and preservation
of the Collateral in its possession or Control if such Collateral is accorded
treatment substantially equal to that which it accords its own property, and
will not be liable or responsible for any loss or damage to any Collateral, or
for any diminution in the value thereof, by reason of any act or omission of any
sub-agent or bailee selected by the Collateral Agent in good faith, except to
the extent that such liability arises from the Collateral Agent’s gross
negligence or willful misconduct.
     Section 18. General Provisions Concerning the Collateral Agent. (a)
Authority. Each Secured Party hereby appoints JPMorgan Chase Bank, N.A. to serve
as Collateral Agent hereunder. The Collateral Agent is authorized to take such
actions and to exercise such powers as are delegated to the Collateral Agent by
the terms of the Security Documents, together with such actions and powers as
are reasonably incidental thereto. The Collateral Agent agrees to hold that part
of the Collateral that is in its possession or control (or in the possession or
control of its agents or bailees), to the extent that possession thereof is
taken to perfect a Lien thereon under the UCC for the benefit of and on behalf
of the Secured Parties for the purpose of perfecting the security interest
granted under the Security Documents, subject to the terms of this Section 18.
     (b) Rights and Powers as a Secured Party. The bank serving as the
Collateral Agent shall, in its capacity as a Secured Party, have the same rights
and powers as any other Secured Party and may exercise the same as though it
were not the Collateral Agent. Such bank and its affiliates may accept deposits
from, lend money to and generally engage in any kind of business with any NNC
Company as if it were not the Collateral Agent hereunder.
     (c) Limited Duties and Responsibilities. The Collateral Agent shall not
have any duties or obligations under the Security Documents except those
expressly set forth therein. Without limiting the generality of the foregoing,
(i) the Collateral Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether an Event of Default has occurred and is
continuing, (ii) the Collateral Agent shall not be required to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers (x) which are expressly contemplated by the Security Documents
and (y) which it has been instructed to exercise by the Required Secured Lenders
and (iii) except as expressly set forth in the Loan Documents to which it is
party, the Collateral Agent shall not have any duty to disclose, and shall not
be liable for any failure to disclose, any information relating to any NNC
Company that is communicated to or obtained by the Collateral Agent or any of
its affiliates in any capacity. The Collateral Agent shall not be liable for any
action taken or not taken by it with the consent or at the request of the
Required Secured Lenders or in the absence of its own gross negligence or
willful misconduct. The Collateral Agent shall not be responsible for the
existence, genuineness or value of any Collateral or for the validity,
perfection, priority or enforceability of any Transaction Lien, whether impaired
by operation of law or by reason of any action or omission to act on its part
under the Security Documents, in either case absent its own gross negligence or
willful misconduct. The Collateral Agent shall be deemed not to have knowledge
of any Event of Default unless and until written notice thereof is given to the
Collateral Agent by any Lien Grantor or a Secured Party, and the Collateral
Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with any
Security Document, (ii) the contents of any certificate, report or other
document delivered thereunder or in connection therewith other than by it,
(iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth in any Security Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Security Document or any
other agreement, instrument or document or (v) the satisfaction of any condition
set forth in any Security Document.
     (d) Authority to Rely on Certain Writings, Statements and Advice. The
Collateral Agent shall be entitled to rely on, and shall not incur any liability
for relying on, any notice, request, certificate, consent, statement,
instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Collateral Agent also may rely on
any statement made to it orally or by telephone and believed by it to be made by
the proper Person, and shall not incur any liability for relying thereon. The
Collateral Agent may consult with legal counsel (who may be counsel for any NNC
Company), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountant or expert. The Collateral Agent may rely
conclusively on advice from the Indenture Trustee as to whether at any time the
maturity of the 2023 Notes has been accelerated.
     (e) Sub-Agents and Related Parties. The Collateral Agent may perform any of
its duties and exercise any of its rights and powers through one or more
sub-agents appointed by it in good faith. The Collateral Agent and any such
sub-agent may perform any of its duties and exercise any of its rights and
powers through its directors, officers,

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employees and agents (the “Related Parties”). The exculpatory provisions of
Section 17 and this Section 18 shall apply to any such sub-agent and to the
Related Parties of the Collateral Agent and any such sub-agent.
     (f) Information as to Secured Obligations and Actions by Secured Parties.
For all purposes of the Security Documents, including determining the amounts of
the Secured Obligations and whether a Secured Obligation is a Contingent Secured
Obligation or not, or whether any action has been taken under any Secured
Agreement, the Collateral Agent will be entitled to rely on information from (i)
its own records for information as to the Lenders, the Bank Obligations and
actions taken by the Lenders, (ii) the Indenture Trustee for information as to
the Bond Obligations and actions taken by the holders thereof, (iii) EDC for
information as to the EDC Support Facility Obligations and actions taken by the
holders thereof, (iv) any Secured Party for information as to its Secured
Obligations and actions taken by it, to the extent that the Collateral Agent has
not obtained such information from the foregoing sources and (v) NNI, to the
extent that the Collateral Agent has not obtained information from the foregoing
sources.
     (g) The Collateral Agent may refuse to act on any notice, consent,
direction or instruction from any Secured Parties or any agent, trustee or
similar representative thereof that, in the Collateral Agent’s opinion, (i) is
contrary to law or the provisions of any Security Document or (ii) may expose
the Collateral Agent to liability (unless the Collateral Agent shall have been
indemnified, to its reasonable satisfaction, for such liability by the Secured
Parties that gave such notice, consent, direction or instruction).
     (h) Resignation; Successor Collateral Agent. Subject to the appointment and
acceptance of a successor Collateral Agent as provided in this subsection 18(h),
the Collateral Agent may resign at any time by notifying EDC, the Lenders and
NNI. Upon any such resignation, the Required Secured Lenders shall have the
right to appoint a successor Collateral Agent reasonably acceptable to NNI. If
no successor shall have been so appointed by the Required Secured Lenders and
shall have accepted such appointment within 30 days after the retiring
Collateral Agent gives notice of its resignation, then the retiring Collateral
Agent may, on behalf of the Secured Parties, appoint a successor Collateral
Agent reasonably acceptable to NNI, which shall be a bank with an office in New
York, New York, or an affiliate of any such bank. Upon acceptance of its
appointment as Collateral Agent hereunder by a successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Collateral Agent hereunder, and the retiring Collateral Agent
shall be discharged from its duties and obligations hereunder. The fees payable
by NNI to a successor Collateral Agent shall be the same as those payable to its
predecessor unless otherwise agreed by NNI and such successor. After the
Collateral Agent’s resignation hereunder, the provisions of this Section 18 and
Section 17 shall continue in effect for the benefit of such retiring Collateral
Agent, its sub-agents and their respective Related Parties in respect of any
actions taken or omitted to be taken by any of them while the retiring
Collateral Agent was acting as Collateral Agent.
     Section 19. Termination of Transaction Liens; Release of Collateral.
(a) The Transaction Liens granted by each Lien Grantor shall terminate on the
Bank Termination Date.
     (b) Concurrently with any sale, exchange, assignment, lease, Financing
Lease or other disposition of any item of Collateral by any Lien Grantor (except
a lease or a sale, exchange, assignment, Financing Lease or other disposition to
another Lien Grantor whose “Secured Obligations” hereunder include “Secured
Obligations” of the Lien Grantor effecting such sale or other disposition) not
expressly prohibited by the 2006 Credit Agreement or by this Agreement, the
Transaction Liens on the assets sold or otherwise disposed of (but not in any
Proceeds arising from such sale or other disposition) will cease immediately
without any action by the Collateral Agent or any other Secured Party; provided
that no Specified Event of Default shall have occurred and is continuing or
would result therefrom.
     (c) Upon any Collateral of any Lien Grantor becoming Transferred
Receivables or Related Transferred Rights, the Transaction Lien thereon (but not
in any Proceeds thereof) shall cease, and shall be deemed to have ceased
immediately prior to such Collateral becoming Transferred Receivables or Related
Transferred Rights, without any action by the Collateral Agent or any other
Secured Party; provided that the Transaction Lien on any Transferred Receivable
or Related Transferred Right shall not be released if (i) a Specified Event of
Default shall have occurred and is continuing and (ii) the Required Secured
Lenders have delivered a notice to the Collateral Agent instructing that no
Transferred Receivable or Related Transferred Right be released from any
Transaction Lien during the continuance of such Specified Event of Default. The
Collateral Agent shall be fully protected in

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relying on a certificate of the relevant Lien Grantor stating that any
Collateral qualifies as Transferred Receivables or Related Transferred Rights.
     (d) Upon any Collateral of any Lien Grantor consisting of Investment
Property subject to a put/call arrangement not expressly prohibited by the terms
of any Credit Agreement being transferred to any Person other than another Lien
Grantor as a result of the exercise of such put/call arrangement, the
Transaction Lien thereon (but not in any Proceeds thereof) will cease
immediately without any action by the Collateral Agent or any other Secured
Party; provided that no Specified Event of Default shall have occurred and is
continuing or would result therefrom.
     (e) Upon any Collateral of any Lien Grantor consisting of cash or
Investment Property (any such Collateral, “Released Cash Collateral”) being
deposited in a Deposit Account or Securities Account which is not subject to the
Control of the Collateral Agent as security (a “Third Party Lien”) for the
benefit of any Person other than a Lien Grantor in a transaction that does not
contravene Section 5.09 of the 2006 Credit Agreement, the Transaction Lien
thereon (but not any Proceeds thereof other than, to the extent they might
otherwise constitute Proceeds, any amounts constituting payment on or with
respect to any Released Cash Collateral, or any investments made with such
Released Cash Collateral, in each case (x) made after the release of the
Transaction Lien thereon in accordance with this paragraph (e) and (y) only to
the extent that such Released Cash Collateral (or investments made with such
Released Cash Collateral) remain subject to the Third Party Lien) will cease
immediately without any action by the Collateral Agent or any other Secured
Party; provided that no Specified Event of Default shall have occurred and is
continuing or would result therefrom.
     (f) If the continued pledge of any Pledged Equity Interests of any person
results in a requirement of the inclusion of separate financial statements of
such Person in the filings by any NNC Company under the Exchange Act (except to
the extent such financial statements are currently being provided in the
Exchange Act filings of any NNC Company on the Effective Date), the Transaction
Lien thereon will cease immediately without any action by the Collateral Agent
or any other Secured Party; provided that no Specified Event of Default shall
have occurred and is continuing or would result therefrom.
     (g) In addition to the foregoing, the Collateral Agent may release
Collateral with the prior written consent of the Required Secured Lenders.
     (h) Upon any termination of a Transaction Lien or release of Collateral, or
change in the Secured Obligations of any Lien Grantor, the Collateral Agent will
promptly, at the expense of the relevant Lien Grantor, execute and deliver to
such Lien Grantor such documents as such Lien Grantor shall reasonably request
to evidence the termination of such Transaction Lien or the release of such
Collateral, or change in the Secured Obligations, as the case may be, and shall
deliver to such Lien Grantor any documents or instruments, including without
limitation stock certificates, evidencing any Collateral no longer subject to
any Transaction Liens in each case subject only to (i) the delivery of the
certificate referred to in paragraph (c) above and (ii) evidence reasonably
satisfactory to the Collateral Agent that the Collateral purported to be
released under any of paragraphs (b) through (f) above in fact qualifies for
such release (which evidence may take the form of a certificate to that effect
from NNL and NNI, and the Collateral Agent shall be fully protected in relying
on any such certificate).
     Section 20. Additional Lien Grantors. Any Person may become a party hereto
by signing and delivering to the Collateral Agent a Security Agreement
Supplement, whereupon such Person shall become a “Lien Grantor” as defined
herein.
     Section 21. Additional Secured Obligations. Additional Secured Obligations.
Each Lien Grantor may from time to time designate its obligations under any
Hedging Agreement (a “Designated Hedging Agreement”) with any Lender or
Affiliate of a Lender as an additional Secured Obligation for purposes hereof by
delivering to the Collateral Agent a certificate signed by a financial officer
that (i) identifies such Hedging Agreement, specifying the name and address of
the other party thereto, the notional principal amount thereof and the
expiration date thereof and (ii) states that such Lien Grantor’s obligations, as
applicable, thereunder are designated as Secured Obligations for purposes
hereof; provided that the holder of such Designated Hedging Agreement shall have
provided a supplement to this Agreement agreeing to be bound by the terms hereof
that are applicable to it including, without limitation, Section 18.

28

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     Section 22. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (a) when hand delivered or sent
by courier to such party at its address specified below, (b) when sent to such
party by facsimile or other electronic transmission, addressed to it at its
facsimile number or electronic address specified below, and such party sends
back an electronic confirmation of receipt or (c) ten days after being sent to
such party by certified or registered United States mail, addressed to it at its
address specified below, with first class or airmail postage prepaid:
     (i) in the case of any Lien Grantor listed on the signature pages hereof:
Nortel Networks Inc.
c/o Nortel Networks Limited
8200 Dixie Road, Suite 100
MS: 036/NO/230
Brampton, On L6T 5P6
Attention: Corporate Secretary
Facsimile: 905-863-8386
     (ii) in the case of any other Lien Grantor, its address, facsimile number
or e-mail address set forth in its first Security Agreement Supplement;
     (iii) in the case of the Collateral Agent:
JPMorgan Chase Bank, N.A.
270 Park Avenue
New York, NY 10017
Attention: David M. Mallett
Facsimile: 212-270-5127
     (iv) in the case of any other Secured Party, to the Collateral Agent to be
forwarded to such Secured Party at its address or facsimile number or e-mail
address, if any, specified in or pursuant to the relevant Secured Agreement.
Any party may change its address, facsimile number and/or e-mail address for
purposes of this Section 22 by giving notice of such change to the Collateral
Agent and the Lien Grantors in the manner specified above.
     Section 23. No Implied Waivers; Remedies Not Exclusive. No failure by the
Collateral Agent or any Secured Party to exercise, and no delay in exercising
and no course of dealing with respect to, any right or remedy under any Security
Document shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent or any Secured Party of any right or remedy
under any Loan Document preclude any other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies specified in the
Loan Documents are cumulative and are not exclusive of any other rights or
remedies provided by law.
     Section 24. Successors and Assigns. This Agreement is for the benefit of
the Collateral Agent and the Secured Parties. If all or any part of any Secured
Party’s interest in any Secured Obligation is assigned or otherwise transferred
in accordance with the transfer provisions applicable thereto, the transferor’s
rights hereunder, to the extent applicable to the obligation so transferred,
shall be automatically transferred with such obligation. This Agreement shall be
binding on the Lien Grantors and their respective successors and assigns.
     Section 25. Amendments and Waivers. Except as expressly provided herein,
neither this Agreement nor any provision hereof may be waived, amended, modified
or terminated except pursuant to an agreement or agreements in writing entered
into by the parties hereto, with the consent of the Required Secured Lenders.
     Section 26. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law. Each Lien Grantor

29

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hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York State court
sitting in New York City for purposes of all legal proceedings arising out of or
relating to this Agreement or the transactions contemplated hereby. Each Lien
Grantor irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
     Section 27. Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY
SECURITY DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
     Section 28. Severability. If any provision of any Security Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (a) the other provisions of the Security Documents shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Collateral Agent and the Secured Parties in order to
carry out the intentions of the parties thereto as nearly as may be possible and
(b) the invalidity or unenforceability of such provision in such jurisdiction
shall not affect the validity or enforceability thereof in any other
jurisdiction.

30

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     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

            NORTEL NETWORKS INC.
      By:   /s/  Karen Sledge        Name:   Karen Sledge        Title:  
President        JPMORGAN CHASE BANK, N.A.,
     as Collateral Agent and Administrative Agent
      By:   /s/  David M. Mallett        Name:   David M. Mallett       
Title:   Vice President        EXPORT DEVELOPMENT CANADA,
     as provider of the EDC Support Facility
      By:   /s/  David B. Guy        Name:   David B. Guy        Title:  
Director-Telecom              By:   /s/  Michael J. Fortner        Name:  
Michael J. Fortner        Title:   Financial Services Manager     

31

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SCHEDULE 1
PLEDGED EQUITY INTERESTS DIRECTLY OWNED BY LIEN GRANTORS
(as of the date hereof)

S-1-1

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SCHEDULE 2
PLEDGED SECURITIES
(other than Pledged Equity Interests)
OWNED DIRECTLY BY LIEN GRANTORS
(as of the date hereof)

S-2-1

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SCHEDULE 3
COLLATERAL DESCRIPTION
[To come]

S-3-1

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SCHEDULE 4
ASSET AND REVENUE DISCLOSURE
[To come]

S-4-1

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S-5-1

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SCHEDULE 5
PRINCIPAL U.S. CASH MANAGEMENT ACCOUNTS OF LIEN GRANTORS
[To come]

A-1

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EXHIBIT A
to Security Agreement
SECURITY AGREEMENT SUPPLEMENT
     SECURITY AGREEMENT SUPPLEMENT dated as of [the date of execution] between
[NAME OF LIEN GRANTOR] (the “Lien Grantor”) and JPMORGAN CHASE BANK, N.A., as
Collateral Agent.
     WHEREAS, Nortel Networks Inc., the Subsidiaries party thereto, JPMorgan
Chase Bank, N.A., as Collateral Agent, and Export Development Canada are parties
to a Security Agreement dated as of February 14, 2006 (as heretofore amended
and/or supplemented, the “Security Agreement”);
     WHEREAS, [name of Lien Grantor] [desires to become] [is] a party to the
Security Agreement as a Lien Grantor thereunder; and
     WHEREAS, terms defined in the Security Agreement and not otherwise defined
herein have, as used herein, the respective meanings provided for therein;
     NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
     1. Grant of Transaction Liens. (a) In order to secure the Secured
Obligations, the Lien Grantor grants to the Collateral Agent for the benefit of
the Secured Parties, effective on the date hereof a continuing security interest
in all the following property of the Lien Grantor, whether now owned or existing
or hereafter acquired or arising and regardless of where located (the “New
Collateral”):
     [describe property being added to the Collateral]1
     The security interests granted by the Lien Grantor pursuant hereto shall
terminate in accordance with Section 19 of the Security Agreement.
     (b) With respect to each right to payment or performance included in the
Collateral from time to time, the Transaction Lien granted therein includes a
continuing security interest in (i) any Supporting Obligation that supports such
payment or performance and (ii) any Lien that (x) secures such right to payment
or performance or (y) secures any such Supporting Obligation.
     (c) The foregoing Transaction Liens are granted as security only and shall
not subject the Collateral Agent or any other Secured Party to, or transfer or
in any way affect or modify, any obligation or liability of the Lien Grantor
with respect to any of the New Collateral or any transaction in connection
therewith.
     2. Delivery of Collateral. On the date of execution hereof, the Lien
Grantor has complied with the provisions of Section 4 of the Security Agreement
with respect to Chattel Paper and Instruments, and either Section 6 or 10(a) (as
applicable) of the Security Agreement with respect to Investment Property, in
each case if and to the extent included in the New Collateral at such time.
 

1   If the Lien Grantor is not already a party to the Security Agreement,
clauses (i) through (xiv) of, and the proviso to, Section 2 of the Security
Agreement may be appropriate.

A-2

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     3. Party to Security Agreement. Upon delivering this Security Agreement
Supplement to the Collateral Agent, the Lien Grantor will become a party to the
Security Agreement and will thereafter have all the rights and obligations of a
Lien Grantor thereunder and be bound by all the provisions thereof as fully as
if the Lien Grantor were one of the original parties thereto.2
     4. Address of Lien Grantor. The address, facsimile number and e-mail
address of the Lien Grantor for purposes of Section 22(b) of the Security
Agreement are:
     [address, facsimile number and e-mail address of Lien Grantor]
     5. Representations and Warranties.3 (a) The Lien Grantor represents and
warrants, on the date of execution hereof, that it is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction identified as its jurisdiction of organization in its Perfection
Certificate or such other jurisdiction of which the Lien Grantor gives prior
written notice to the Collateral Agent.
     (b) The Lien Grantor represents and warrants, on the date of execution
hereof, that it has delivered a Perfection Certificate to the Collateral Agent.
The information set forth therein is correct and complete as of the date of
delivery thereof.
     (c) The Lien Grantor represents and warrants, on the date of execution
hereof, that the execution and delivery of this Security Agreement Supplement by
the Lien Grantor and the performance by it of its obligations under the Security
Agreement as supplemented hereby (i) are within its corporate or other powers,
have been duly authorized by all necessary corporate or other action,
(ii) require no action by or in respect of, or filing with, any governmental
body, agency or official other than filings for perfection of Transaction Liens
on the New Collateral or filings by the Lien Grantor with respect to copyrights
and (iii) do not contravene, or constitute a default under, any provision of
applicable law or regulation or of its organizational documents, or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
it except, with respect to (ii) and (iii) above, any such action, filing or
contravention which would not have a material adverse affect on the ability of
the Lien Grantor to perform its obligations under this Security Agreement
Supplement or the Security Agreement.
     (d) The Lien Grantor represents and warrants that on the date of execution
hereof the Security Agreement as supplemented hereby constitutes a valid and
binding agreement of the Lien Grantor, enforceable in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, fraudulent conveyance or
other similar laws affecting creditors’ rights generally and general principles
of equity.
     (e) Each of the representations and warranties set forth in Sections 3
through 10 of the Security Agreement is true as applied to the Lien Grantor and
the New Collateral on the date specified therein. For purposes of the foregoing
sentence, references in said Sections to a “Lien Grantor” shall be deemed to
refer to the Lien Grantor, references to Schedules to the Security Agreement
shall be deemed to refer to the corresponding Schedules to this Security
Agreement Supplement, references to “Collateral” shall be deemed to refer to the
New Collateral and references to the “Effective Date” shall be deemed to refer
to the date of this Security Agreement Supplement.
     6. Governing Law. This Security Agreement Supplement shall be construed in
accordance with and governed by the laws of the State of New York.
 

2   Delete Sections 3 and 4 if the Lien Grantor is already a party to the
Security Agreement.   3   Modify as needed if the Lien Grantor is not a
corporation.

A-3

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
Supplement to be duly executed by their respective authorized officers as of the
day and year first above written.

                  [NAME OF LIEN GRANTOR]  
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    
 
                JPMORGAN CHASE BANK, N.A., as Collateral     Agent    
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    

A-4

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Schedule 1
to Security Agreement
Supplement
PLEDGED EQUITY INTERESTS IN SUBSIDIARIES AND AFFILIATES
OWNED BY LIEN GRANTOR4

                  Jurisdiction of   Percentage   Number of Issuer   Organization
  Owned   Shares or Units
 
           

 

4   To be used only for a new Lien Grantor

A-5

--------------------------------------------------------------------------------

 

Schedule 2
to Security Agreement
Supplement
INVESTMENT PROPERTY5
(other than Equity Interests in Subsidiaries and Affiliates)
OWNED BY LIEN GRANTOR
PART 1 Securities

              Issuer   Jurisdiction of Organization   Amount Owned   Type of
Security
 
           

PART 2 Securities Accounts
     The Lien Grantor owns Security Entitlements with respect to Financial
Assets credited to the following Securities Accounts:6

      Securities Intermediary   Account Number
 
   

 

5   To be used only for a new Lien Grantor   6   If any such Securities Account
holds material long-term investments and is not a trading account, more detailed
information as to such investments could appropriately be required to be
disclosed in this Schedule.

A-6

--------------------------------------------------------------------------------

 

PART 3 Commodity Accounts
The Lien Grantor is the Commodity Customer with respect to the following
Commodity Accounts:

      Commodity Intermediary   Account Number
 
   

A-7

--------------------------------------------------------------------------------

 

Schedule 3
to Security Agreement
Supplement
Material Commercial Tort
Claims7
 

7   To be used if applicable

A-8

--------------------------------------------------------------------------------

 

EXHIBIT B
to Security Agreement
COPYRIGHT SECURITY AGREEMENT
(Copyright Registrations)
     WHEREAS, [name of Lien Grantor], a                      corporation8
(herein referred to as the “Lien Grantor”) owns the Copyright Collateral (as
defined below);
     WHEREAS, pursuant to (i) a Security Agreement dated as of •, 2006 (as
amended and/or supplemented from time to time, the “Security Agreement”) among
Nortel Networks Inc., the Subsidiaries party thereto, JPMorgan Chase Bank, N.A.,
as Collateral Agent for the Secured Parties referred to therein (in such
capacity, together with its successors in such capacity, the “Grantee”), and the
other parties named therein, and (ii) certain other Security Documents
(including this Copyright Security Agreement), the Lien Grantor has secured
certain obligations (the “Secured Obligations”) by granting to the Grantee for
the benefit of such Secured Parties a continuing security interest in personal
property of the Lien Grantor, including all right, title and interest of the
Lien Grantor in, to and under the Copyright Collateral (as defined below);
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor grants to the
Grantee, to secure the Secured Obligations, a continuing security interest in
all of the Lien Grantor’s right, title and interest in, to and under the
following (all of the following items or types of property being herein
collectively referred to as the “Copyright Collateral”), whether now owned or
existing or hereafter acquired or arising:
          (i) each Copyright (as defined in the Security Agreement) owned by the
Lien Grantor, including, without limitation, each Copyright registration
referred to in Schedule 1 hereto; and
          (ii) all proceeds of, revenues from, and accounts and general
intangibles arising out of, the foregoing, including, without limitation, all
proceeds of and revenues from any claim by the Lien Grantor against third
parties for past, present or future infringement of any Copyright (including,
without limitation, any Copyright owned by the Lien Grantor and identified in
Schedule 1).
     The Lien Grantor irrevocably constitutes and appoints the Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of the Lien
Grantor or in the Grantee’s name, from time to time, in the Grantee’s
discretion, so long as any Event of Default shall have occurred and is
continuing, to take with respect to the Copyright Collateral any and all
appropriate action which the Lien Grantor might take with respect to the
Copyright Collateral and to execute any and all documents and instruments which
may be necessary or desirable to carry out the terms of this Copyright Security
Agreement and to accomplish the purposes hereof.
     The foregoing security interest is granted in conjunction with the security
interests granted by the Lien Grantor to the Grantee pursuant to the Security
Agreement. The Lien Grantor and the Grantee acknowledge and affirm that the
rights and remedies of the Grantee and the Lien Grantor with respect to the
security interest in the Copyright Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
 

8   Modify as needed if the Lien Grantor is not a corporation.

B-1

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Lien Grantor has caused this Copyright Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
___ day of ___, ___.

                                  [NAME OF LIEN GRANTOR]  
 
                                By:    
 
                   
 
              Name:    
 
              Title:    
 
                    Acknowledged:            
 
                    JPMORGAN CHASE BANK, N.A., as Collateral             Agent  
         
 
                    By:                
 
                   
 
  Name:                
 
  Title:                

B-2

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EXHIBIT C
to Security Agreement
PATENT SECURITY AGREEMENT
(Patents, Patent Applications)
     WHEREAS, [name of Lien Grantor], a                      corporation1
(herein referred to as the “Lien Grantor”) owns the Patent Collateral (as
defined below);
     WHEREAS, pursuant to (i) a Security Agreement dated as of February 14, 2006
(as amended and/or supplemented from time to time, the “Security Agreement”)
among Nortel Networks Inc., the Subsidiaries party thereto, JPMorgan Chase Bank,
N.A., as Collateral Agent for the Secured Parties referred to therein (in such
capacity, together with its successors in such capacity, the “Grantee”), and the
other parties named therein, and (ii) certain other Security Documents
(including this Patent Security Agreement), the Lien Grantor has secured certain
obligations (the “Secured Obligations”) by granting to the Grantee for the
benefit of such Secured Parties a continuing security interest in personal
property of the Lien Grantor, including all right, title and interest of the
Lien Grantor in, to and under the Patent Collateral (as defined below);
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor grants to the
Grantee, to secure the Secured Obligations, a continuing security interest in
all of the Lien Grantor’s right, title and interest in, to and under the
following (all of the following items or types of property being herein
collectively referred to as the “Patent Collateral”), whether now owned or
existing or hereafter acquired or arising:

  (iii)   each Patent (as defined in the Security Agreement) owned by the Lien
Grantor, including, without limitation, each Patent referred to in Schedule 1
hereto; and     (iv)   all proceeds of and revenues from the foregoing,
including, without limitation, all proceeds of and revenues from any claim by
the Lien Grantor against third parties for past, present or future infringement
of any Patent owned by the Lien Grantor (including, without limitation, any
Patent identified in Schedule 1 hereto).

     The Lien Grantor irrevocably constitutes and appoints the Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of the Lien
Grantor or in the Grantee’s name, from time to time, in the Grantee’s
discretion, so long as any Event of Default shall have occurred and is
continuing, to take with respect to the Patent Collateral any and all
appropriate action which the Lien Grantor might take with respect to the Patent
Collateral and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Patent Security Agreement
and to accomplish the purposes hereof.
     The foregoing security interest is granted in conjunction with the security
interests granted by the Lien Grantor to the Grantee pursuant to the Security
Agreement. The Lien Grantor and the Grantee acknowledge and affirm that the
rights and remedies of the Grantee and the Lien Grantor with respect to the
security interest in the Patent Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
     IN WITNESS WHEREOF, the Lien Grantor has caused this Patent Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
                    day of
                                        ,                     .
 

1   Modify as needed if the Lien Grantor is not a corporation.

C-1

--------------------------------------------------------------------------------

 

                                  [NAME OF LIEN GRANTOR]  
 
                                By:    
 
                   
 
              Name:    
 
              Title:    
 
                    Acknowledged:            
 
                    JPMORGAN CHASE BANK, N.A., as Collateral             Agent  
         
 
                    By:                
 
                   
 
  Name:                
 
  Title:                

C-2

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EXHIBIT D
to Security Agreement
TRADEMARK SECURITY AGREEMENT
(Trademark Registrations, Trademark
Applications)
     WHEREAS, [name of Lien Grantor], a                      corporation2
(herein referred to as the “Lien Grantor”) owns the Trademark Collateral (as
defined below);
     WHEREAS, pursuant to (i) a Security Agreement dated as of February 14, 2006
(as amended and/or supplemented from time to time, the “Security Agreement”)
among Nortel Networks Inc., the Subsidiaries party thereto, JPMorgan Chase Bank,
N.A., as Collateral Agent for the Secured Parties referred to therein (in such
capacity, together with its successors in such capacity, the “Grantee”), and the
other parties named therein, and (ii) certain other Security Documents
(including this Trademark Security Agreement), the Lien Grantor has secured
certain obligations (the “Secured Obligations”) by granting to the Grantee for
the benefit of such Secured Parties a continuing security interest in personal
property of the Lien Grantor, including all right, title and interest of the
Lien Grantor in, to and under the Trademark Collateral (as defined below);
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor grants to the
Grantee, to secure the Secured Obligations, a continuing security interest in
all of the Lien Grantor’s right, title and interest in, to and under the
following (all of the following items or types of property being herein
collectively referred to as the “Trademark Collateral”), whether now owned or
existing or hereafter acquired or arising:
          (v) each Trademark (as defined in the Security Agreement) owned by the
Lien Grantor, including, without limitation, each Trademark registration
referred to in Schedule 1 hereto, and all of the goodwill of the business
connected with the use of, or symbolized by, each Trademark; and
          (vi) all proceeds of and revenues from the foregoing, including,
without limitation, all proceeds of and revenues from any claim by the Lien
Grantor against third parties for past, present or future unfair competition
with, or violation of intellectual property rights in connection with or injury
to, or infringement or dilution of, any Trademark owned by the Lien Grantor
(including, without limitation, any Trademark identified in Schedule 1 hereto).
     The Lien Grantor irrevocably constitutes and appoints the Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of the Lien
Grantor or in the Grantee’s name, from time to time, in the Grantee’s
discretion, so long as any Event of Default shall have occurred and is
continuing, to take with respect to the Trademark Collateral any and all
appropriate action which the Lien Grantor might take with respect to the
Trademark Collateral and to execute any and all documents and instruments which
may be necessary or desirable to carry out the terms of this Trademark Security
Agreement and to accomplish the purposes hereof.
     The foregoing security interest is granted in conjunction with the security
interests granted by the Lien Grantor to the Grantee pursuant to the Security
Agreement. The Lien Grantor and the Grantee acknowledges and affirms that the
rights and remedies of the Grantee and the Lien Grantor with respect to the
security interest in the Trademark Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
 

2   Modify as needed if the Lien Grantor is not a corporation.

D-1

--------------------------------------------------------------------------------

 

     IN WITNESS WHEREOF, the Lien Grantor has caused this Trademark Security
Agreement to be duly executed by its officer thereunto duly authorized as of the
                     day of
                                        ,                     .

                                  [NAME OF LIEN GRANTOR]  
 
                                By:    
 
                   
 
              Name:    
 
              Title:    
 
                    Acknowledged:            
 
                    JPMORGAN CHASE BANK, N.A., as Collateral             Agent  
         
 
                    By:                
 
                   
 
  Name:                
 
  Title:                

D-2

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EXHIBIT E
to Security Agreement
CANADIAN INDUSTRIAL DESIGN SECURITY AGREEMENT
(Industrial Designs, Industrial Design Applications)
WHEREAS, [name of Lien Grantor], a                      corporation7 (herein
referred to as the “Lien Grantor”) owns the Design Collateral (as defined
below);
WHEREAS, pursuant to (i) a Canadian Security Agreement dated as of February 14,
2006, (as amended and/or supplemented from time to time, the “Security
Agreement”) among Nortel Networks Limited, Nortel Networks Corporation, the
Subsidiaries party thereto, JPMorgan Chase Bank, N.A. as Collateral Agent for
the Secured Parties referred to therein (in such capacity, together with its
successors in such capacity, the “Grantee”), and the other parties named
therein, and (ii) certain other Security Documents (including this Canadian
Industrial Design Security Agreement), the Lien Grantor has secured certain
obligations (the “Secured Obligations”) by granting to the Grantee for the
benefit of such Secured Parties a continuing security interest in personal
property of the Lien Grantor, including all right, title and interest of the
Lien Grantor in, to and under the Design Collateral (as defined below);
     NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Lien Grantor grants to the
Grantee, to secure the Secured Obligations, a continuing security interest in
all of the Lien Grantor’s right, title and interest in, to and under the
following (all of the following items or types of property being herein
collectively referred to as the “Design Collateral”), whether now owned or
existing or hereafter acquired or arising:

  (i)   each Design (as defined in the Security Agreement) owned by the Lien
Grantor, including, without limitation, each Design referred to in Schedule 1
hereto; and     (ii)   all proceeds of and revenues from the foregoing,
including, without limitation, all proceeds of and revenues from any claim by
the Lien Grantor against third parties for past, present or future infringement
of any Design owned by the Lien Grantor (including, without limitation, any
Design identified in Schedule 1 hereto).

The Lien Grantor irrevocably constitutes and appoints the Grantee and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full power and authority in the name of the Lien
Grantor or in the Grantee’s name, from time to time, in the Grantee’s
discretion, so long as any Event of Default shall have occurred and is
continuing, to take with respect to the Design Collateral any and all
appropriate action which the Lien Grantor might take with respect to the Design
Collateral and to execute any and all documents and instruments which may be
necessary or desirable to carry out the terms of this Canadian Industrial Design
Security Agreement and to accomplish the purposes hereof.
The foregoing security interest is granted in conjunction with the security
interests granted by the Lien Grantor to the Grantee pursuant to the Security
Agreement. The Lien Grantor and the Grantee acknowledge and affirm that the
rights and remedies of the Grantee and the Lien Grantor with respect to the
security interest in the Design Collateral granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.
IN WITNESS WHEREOF, the Lien Grantor has caused this Canadian Industrial Design
Security Agreement to be duly executed by its officer thereunto duly authorized
as of the                      day of
                                        ,                     .
 

7   Modify as needed if the Lien Grantor is not a corporation.

E-1

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                  [NAME OF LIEN GRANTOR]       By:    
 
     
 
   
 
           Name:    
 
           Treasurer    
 
                By:    
 
     
 
   
 
           Name:    
 
           Title:    

Acknowledged:

                  JPMORGAN CHASE BANK, N.A.,       as Collateral Agent
 
  By:        
 
     
 
   
 
           Name:    
 
           Title:    

E-2

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EXHIBIT F
to Security Agreement
PERFECTION CERTIFICATE
     The undersigned is a duly authorized officer of [Name of Lien Grantor] (the
“Lien Grantor”). With reference to the Security Agreement dated as of
February 14, 2006 among Nortel Networks Limited, Nortel Networks, Inc., each
Subsidiary Party thereto, JPMORGAN CHASE BANK, N.A., as Collateral Agent and the
other parties named therein (terms defined therein being used herein as therein
defined), the undersigned certifies to the Collateral Agent and each other
Secured Party as follows:
     A. Information Required for Filings and Searches for Prior Filings.
          1. Jurisdiction of Organization. The Lien Grantor is a [corporation]
organized under the laws of                                         .
          2. Name. The exact [corporate] name of the Lien Grantor as such name
appears in its [certificate of incorporation] is as follows:
          3. Prior Names. (i) Set forth below is each other corporate name that
the Lien Grantor has had within the past five years, together with the date of
the relevant change:
               (i) Except as set forth below, the Lien Grantor has not changed
its corporate structure in any way within the past five years3.
          4. Extraordinary Transactions. Except for (i) those purchases or
acquisitions of inventory, equipment and receivables set forth below, (ii) any
individual purchase or acquisition of inventory, equipment or receivables the
consideration for which was for less than $25,000,000, (iii) any purchase or
acquisition of inventory, equipment or receivables not made within the past five
years and (iv) any purchase or acquisition of inventory, equipment or
receivables made pursuant to a merger or consolidation described in Section 3(b)
above, (X) all Inventory and Equipment has been originated by the Lien Grantor
in the ordinary course of business or has been acquired by the Lien Grantor in
the ordinary course of business and (Y) all accounts receivable have been
originated by the Lien Grantor in the ordinary course of business or have been
acquired by the Lien Grantor in the ordinary course of business.
     B. Additional Information Required for Searches for Prior Filings Under Old
Article 9.
          1. Current Locations. (a) The chief executive office of the Lien
Grantor is located at the following address:

          Mailing Address   County   State
 
       

 

3   Changes in corporate structure need only include mergers and consolidations,
as well as any change in the Lien Grantor Q2’s form of organization from or to
LLP, LLC or corporation. If any such change has occurred, please include the
information required by Part A of this certificate (except that no response to
paragraphs 3(a) or (b) is required with respect to any period during which any
predecessor entity acquired by merger or consolidation was not an NNL Company)
as to each constituent party to a merger or consolidation. Restrict to US Lien
Grantors.

F-1

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The Lien Grantor [does] [does not] own or lease real property located in another
county of the State listed above.

  (b)   The following are all locations where there is real property owned or
leased in the United States by the Lien Grantor:

          Mailing Address   County   State
 
       

  (c)   The following are all current locations in the United States not
identified above where the Lien Grantor maintains any Inventory which is other
than inventory in transit and or with third party logistics providers, on
consignment, on loan, involved in the repair process, in third party marshalling
and distribution centers, on customer premises, with contract manufacturers or
component level providers or inventory that is not on the property at which a
system house is located:

          Mailing Address   County   State
 
       

  (d)   The following are the principal locations in the United States of third
party logistics providers and third party marshalling and distribution centers
where Inventory owned directly by the Lien Grantor is currently maintained.

          Mailing Address   County   State
 
       

          2. Prior Locations. Set forth below is the information required by
paragraphs (a) and (b) of Part B-1 above with respect to the chief executive
office maintained by the Lien Grantor, or where any real property leased or
owned in the United States by the Lien Grantor was located, at any time during
the past four months:
     IN WITNESS WHEREOF, I have hereunto set my hand this       day of      
January 15, 2002

         
 
 
 
   
 
  Name:    
 
  Title:    

F-2

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EXHIBIT G
to Security Agreement
ISSUER CONTROL AGREEMENT
     ISSUER CONTROL AGREEMENT dated as of [the date of execution hereof] among
                                        (the “Lien Grantor”), JPMORGAN CHASE
BANK, N.A., as Collateral Agent (the “Secured Party”), and
                    (the “Issuer”). All references herein to the “UCC” refer to
the Uniform Commercial Code as in effect from time to time in [Issuer’s
jurisdiction of incorporation].
W I T N E S S E T H :
     WHEREAS, the Lien Grantor is the registered holder of [specify Pledged
Uncertificated Securities issued by the Issuer] issued by the Issuer (the
“Securities”);
     WHEREAS, pursuant to a Security Agreement dated as of February 14, 2006 (as
such agreement may be amended and/or supplemented from time to time, the
“Security Agreement”), the Lien Grantor has granted to the Secured Party a
continuing security interest (the “Transaction Lien”) in all right, title and
interest of the Lien Grantor in, to and under the Securities, whether now
existing or hereafter arising; and
     WHEREAS, the parties hereto are entering into this Agreement in order to
perfect the Transaction Lien on the Securities;
     NOW, THEREFORE, the parties hereto agree as follows:
     Section 1. Nature of Securities. The Issuer confirms that (i) the
Securities are “uncertificated securities” (as defined in Section 8-102 of the
UCC) and (ii) the Lien Grantor is registered on the books of the Issuer as the
registered holder of the Securities.
     Section 2. Instructions. The Issuer agrees to comply with any “instruction”
(as defined in Section 8-102 of the UCC) originated by the Secured Party and
relating to the Securities without further consent by the Lien Grantor or any
other person. The Lien Grantor consents to the foregoing agreement by the
Issuer.
     Section 3. Waiver of Lien; Waiver of Set-off. The Issuer waives any
security interest, lien or right of setoff that it may now have or hereafter
acquire in or with respect to the Securities. The Issuer’s obligations in
respect of the Securities will not be subject to deduction, set-off or any other
right in favor of any person other than the Secured Party.
     Section 4. Choice of Law. This Agreement shall be governed by the laws of
[Issuer’s jurisdiction of incorporation].
     Section 5. Conflict with Other Agreements. There is no agreement (except
this Agreement) between the Issuer and the Lien Grantor with respect to the
Securities [except for [identify any existing other agreements] (the “Existing
Other Agreements”)]. In the event of any conflict between this Agreement (or any
portion hereof) and any other agreement [(including any Existing Other
Agreement)] between the Issuer and the Lien Grantor with respect to the
Securities, whether now existing or hereafter entered into, the terms of this
Agreement shall prevail.
     Section 6. Amendments. No amendment or modification of this Agreement or
waiver of any right hereunder shall be binding on any party hereto unless it is
in writing and is signed by all the parties hereto.
     Section 7. Notice of Adverse Claims. Except for the claims and interests of
the Secured Party and the Lien Grantor in the Securities, the Issuer does not
know of any claim to, or interest in, the Securities. If any person asserts any
lien, encumbrance or adverse claim (including any writ, garnishment, judgment,
attachment, execution or similar process) against the Securities, the Issuer
will promptly notify the Secured Party and the Lien Grantor thereof.

G-1

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     Section 8. Maintenance of Securities. In addition to, and not in lieu of,
the obligation of the Issuer to honor instructions as agreed in Section 2
hereof, the Issuer agrees as follows:
          (i) Lien Grantor Instructions; Notice of Exclusive Control. So long as
the Issuer has not received a Notice of Exclusive Control (as defined below),
the Issuer shall comply with instructions of the Lien Grantor or any duly
authorized agent of the Lien Grantor in respect of the Securities. After the
Issuer receives a written notice from the Secured Party that it is exercising
exclusive control over the Securities (a “Notice of Exclusive Control”), the
Issuer will cease complying with instructions of the Lien Grantor or any of its
agents.
          (ii) Non-Cash Dividends and Distributions. After the Issuer receives a
Notice of Exclusive Control, the Issuer shall deliver to the Secured Party all
dividends, interest and other distributions paid or made upon or with respect to
the Securities.
          (iii) Voting Rights. Until the Issuer receives a Notice of Exclusive
Control, the Lien Grantor shall be entitled to direct the Issuer with respect to
voting the Securities.
          (iv) Statements and Confirmations. The Issuer will promptly send
copies of all statements and other correspondence concerning the Securities
simultaneously to each of the Lien Grantor and the Secured Party at their
respective addresses specified in Section 11 hereof.
          (v) Tax Reporting. All items of income, gain, expense and loss
recognized in respect of the Securities shall be reported to the Internal
Revenue Service and all state and local taxing authorities under the name and
taxpayer identification number of the Lien Grantor.
     Section 9. Representations, Warranties and Covenants of the Issuer. The
Issuer makes the following representations, warranties and covenants:
          (i) This Agreement is a valid and binding agreement of the Issuer
enforceable in accordance with its terms.
          (ii) The Issuer has not entered into, and until the termination of
this Agreement will not without the consent of the Secured Party enter into, any
agreement with any other person relating to the Securities pursuant to which it
has agreed, or will agree, to comply with instructions (as defined in
Section 8-102 of the UCC) of such person. The Issuer has not entered into any
other agreement with the Lien Grantor or the Secured Party purporting to limit
or condition the obligation of the Issuer to comply with instructions as agreed
in Section 2 hereof.
     Section 10. Successors. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.
     Section 11. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (i) when delivered to such party
at its address specified below, (ii) when sent to such party by facsimile or
other electronic transmission, addressed to it at its facsimile number or
electronic address specified below, and such party sends back an electronic
confirmation of receipt or (iii) ten days after being sent to such party by
certified or registered United States mail, addressed to it at its address
specified below, with first class or airmail postage prepaid:
Lien Grantor:
Secured Party:
Issuer:

G-2

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     Any party may change its address, facsimile number and/or e-mail address
for purposes of this Section by giving notice of such change to the other
parties in the manner specified above.
     Section 12. Termination. The rights and powers granted herein to the
Secured Party (i) have been granted in order to perfect the Transaction Lien,
(ii) are powers coupled with an interest and (iii) will not be affected by any
bankruptcy of the Lien Grantor or any lapse of time. The obligations of the
Issuer hereunder shall continue in effect until the Secured Party has notified
the Issuer in writing that the Transaction Lien has been terminated pursuant to
the Security Agreement.
     Section 13. Counterparts. This Agreement may be executed in any number of
counterparts, all of which shall constitute one and the same instrument, and any
party hereto may execute this Agreement by signing and delivering one or more
counterparts.

                  [NAME OF LIEN GRANTOR]    
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    
 
                JPMORGAN CHASE BANK, N.A., as Collateral               Agent    
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    
 
                [NAME OF ISSUER]
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    

G-3

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Exhibit A
[Letterhead of Secured Party]
[Date]
[Name and Address of Issuer]
Attention:                                         
Re:     Notice of Exclusive Control
Ladies and Gentlemen:
     As referenced in the Issuer Control Agreement dated as of
                    ,                      among [name of Lien Grantor], us and
you (a copy of which is attached), we notify you that we will hereafter exercise
exclusive control over [specify Pledged Uncertificated Securities] registered in
the name of [name of Lien Grantor] (the “Securities”). You are instructed not to
accept any directions or instructions with respect to the Securities from any
person other than the undersigned unless otherwise ordered by a court of
competent jurisdiction.
     You are instructed to deliver a copy of this notice by facsimile
transmission to [name of Lien Grantor].

                  Very truly yours,  
 
                JPMORGAN CHASE BANK, N.A.,     as Collateral Agent
 
                By:    
 
     
 
   
 
      Title:    

cc: [name of Lien Grantor]

G-4

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EXHIBIT H
to Security Agreement
SECURITIES ACCOUNT CONTROL AGREEMENT
     SECURITIES ACCOUNT CONTROL AGREEMENT dated as of
                    ,                      among
                                        (the “Lien Grantor”), JPMORGAN CHASE
BANK, N.A., as Collateral Agent (the “Secured Party”), and                     
(the “Securities Intermediary”). All references herein to the “UCC” refer to the
Uniform Commercial Code as in effect from time to time in the State of New York.
Terms defined in the UCC have the same meanings when used herein.
W I T N E S S E T H :
     WHEREAS, the Lien Grantor is the entitlement holder with respect to the
Account (as defined below);
     WHEREAS, pursuant to a Security Agreement dated as of February 14, 2006 (as
such agreement may be amended and/or supplemented from time to time, the
“Security Agreement”), the Lien Grantor has granted to the Secured Party a
continuing security interest (the “Transaction Lien”) in all right, title and
interest of the Lien Grantor in, to and under the Account, all financial assets
credited thereto and all security entitlements in respect thereof, whether now
owned or existing or hereafter acquired or arising; and
     WHEREAS, the parties hereto are entering into this Agreement in order to
perfect the Transaction Lien on the Account, all financial assets from time to
time credited thereto and all security entitlements in respect thereof;
     NOW, THEREFORE, the parties hereto agree as follows:
     Section 1. Establishment of Account. The Securities Intermediary confirms
that:
          (i) the Securities Intermediary has established account number
[identify account number] in the name of “[name of Lien Grantor]” (such account
and any successor account, the “Account”);
          (ii) the Account is a “securities account” as defined in Section 8-501
of the UCC;
          (iii) the Securities Intermediary is acting as a “securities
intermediary” (as defined in Section 8-102 of the UCC) in respect of the
Account;
          (iv) the Securities Intermediary shall, subject to the terms of this
Agreement, treat the Lien Grantor as entitled to exercise the rights that
comprise all financial assets from time to time credited to the Account;
          (v) all property delivered to the Securities Intermediary by or on
behalf of the Lien Grantor will be promptly credited to the Account; and
          (vi) all financial assets (except cash) credited to the Account will
be registered in the name of the Securities Intermediary, indorsed to the
Securities Intermediary or in blank or credited to another securities account
maintained in the name of the Securities Intermediary and in no case will any
financial asset credited to the Account be registered in the name of the Lien
Grantor, payable to the order of the Lien Grantor or specially indorsed to the
Lien Grantor unless such financial asset has been further indorsed to the
Securities Intermediary or in blank.
     Section 2. “Financial Assets” Election. The parties hereto agree that each
item of property (whether investment property, financial asset, security,
instrument, cash or other property) credited to the Account shall be treated as
a “financial asset” within the meaning of Sections 8-102(a)(9) and 8-103 of the
UCC.

H-1

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     Section 3. Entitlement Orders. The Securities Intermediary agrees to comply
with any “entitlement order” (as defined in Section 8-102 of the UCC) originated
by the Secured Party and relating to the Account or any financial asset credited
thereto without further consent by the Lien Grantor or any other person. The
Lien Grantor consents to the foregoing agreement by the Securities Intermediary.
     Section 4. Waiver of Lien; Waiver of Set-off. The Securities Intermediary
waives any security interest, lien or right to make deductions or setoffs that
it may now have or hereafter acquire in or with respect to the Account, any
financial asset credited thereto or any security entitlement in respect thereof
except with respect to customary fees and commissions. Neither the financial
assets credited to the Account nor the security entitlements in respect thereof
will be subject to deduction, set-off, banker’s lien, or any other right in
favor of any person other than the Secured Party (except that the Securities
Intermediary may set off all amounts due to it in respect of its customary fees
and expenses for the routine maintenance and operation of the Account).
     Section 5. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York. The State of New York
shall be deemed to be the Securities Intermediary’s jurisdiction for purposes of
the UCC (including, without limitation, Section 8-110 thereof).
     Section 6. Conflict with Other Agreements. There is no agreement (except
this Agreement) between the Securities Intermediary and the Lien Grantor with
respect to the Account [except for [identify any existing other agreements] (the
“Existing Other Agreements”)]. In the event of any conflict between this
Agreement (or any portion hereof) and any other agreement [(including any
Existing Other Agreement)] between the Securities Intermediary and the Lien
Grantor with respect to the Account, whether now existing or hereafter entered
into, the terms of this Agreement shall prevail. [If any Existing Other
Agreement does not specify that it is governed by the laws of the State of New
York, such Existing Other Agreement is hereby amended to specify that it is
governed by the laws of the State of New York.]
     Section 7. Amendments. No amendment or modification of this Agreement or
waiver of any right hereunder shall be binding on any party hereto unless it is
in writing and is signed by all the parties hereto.
     Section 8. Notice of Adverse Claims. Except for the claims and interests of
the Secured Party and the Lien Grantor, the Securities Intermediary does not
know of any claim to, or interest in, the Account, any financial asset credited
thereto or any security entitlement in respect thereof. If any person asserts
any lien, encumbrance or adverse claim (including any writ, garnishment,
judgment, attachment, execution or similar process) against the Account, any
financial asset credited thereto or any security entitlement in respect thereof,
the Securities Intermediary will promptly notify the Secured Party and the Lien
Grantor thereof.
     Section 9. Maintenance of Account. In addition to, and not in lieu of, the
obligation of the Securities Intermediary to honor entitlement orders as agreed
in Section 3 hereof, the Securities Intermediary agrees to maintain the Account
as follows:
          (vii) Lien Grantor Entitlement Orders; Notice of Exclusive Control. So
long as the Securities Intermediary has not received a Notice of Exclusive
Control (as defined below), the Securities Intermediary shall, subject to
paragraph (iii) below, comply with entitlement orders of the Lien Grantor or any
duly authorized agent of the Lien Grantor in respect of the Account and any or
all financial assets credited thereto. After the Securities Intermediary
receives a written notice from the Secured Party that is exercising exclusive
control over the Account (a “Notice of Exclusive Control”), the Securities
Intermediary will cease complying with entitlement orders of the Lien Grantor or
any of its agents.
          (viii) Voting Rights. Until the Securities Intermediary receives a
Notice of Exclusive Control, the Lien Grantor shall be entitled to direct the
Securities Intermediary with respect to the voting of any financial assets
credited to the Account.
          (ix) Permitted Investments. Until the Securities Intermediary receives
a Notice of Exclusive Control, the Lien Grantor shall be entitled to direct the
Securities Intermediary with respect to the selection of investments to be made
and credited to the Account.

H-2

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          (x) Statements and Confirmations. The Securities Intermediary will
promptly send copies of all statements, confirmations and other correspondence
concerning the Account and/or any financial assets credited thereto
simultaneously to each of the Lien Grantor and the Secured Party at their
respective addresses specified in Section 12 hereof.
          (xi) Tax Reporting. All items of income, gain, expense and loss
recognized in the Account or in respect of any financial assets credited thereto
shall be reported to the Internal Revenue Service and all state and local taxing
authorities under the name and taxpayer identification number of the Lien
Grantor.
     Section 10. Representations, Warranties and Covenants of the Securities
Intermediary. The Securities Intermediary makes the following representations,
warranties and covenants:
          (xii) The Account has been established as set forth in Section 1 above
and will be maintained in the manner set forth herein until this Agreement is
terminated. The Securities Intermediary will not change the name or account
number of the Account without the prior written consent of the Secured Party.
          (xiii) No financial asset credited to the Account is or will be
registered in the name of the Lien Grantor, payable to the order of the Lien
Grantor, or specially indorsed to the Lien Grantor, unless such financial asset
has been further indorsed by the Lien Grantor to the Securities Intermediary or
in blank.
          (xiv) This Agreement is a valid and binding agreement of the
Securities Intermediary enforceable in accordance with its terms.
          (xv) The Securities Intermediary has not entered into, and until the
termination of this Agreement will not enter into, any agreement with any person
(other than the Secured Party) relating to the Account and/or any financial
asset credited thereto pursuant to which it has agreed, or will agree, to comply
with entitlement orders of such person. The Securities Intermediary has not
entered into any other agreement with the Lien Grantor or the Secured Party
purporting to limit or condition the obligation of the Securities Intermediary
to comply with entitlement orders as agreed in Section 3 hereof.
     Section 11. Successors. This Agreement shall be binding upon, and shall
inure to the benefit of, the parties hereto and their respective successors and
assigns.
     Section 12. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (i) when delivered to such party
at its address specified below, (ii) when sent to such party by facsimile or
other electronic transmission, addressed to it at its facsimile number or
electronic address specified below, and such party sends back an electronic
confirmation of receipt or (iii) ten days after being sent to such party by
certified or registered United States mail, addressed to it at its address
specified below, with first class or airmail postage prepaid:
Lien Grantor:
Secured Party:
Securities Intermediary:
Any party may change its address, facsimile number and/or e-mail address for
purposes of this Section by giving notice of such change to the other parties in
the manner specified above.

H-3

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     Section 13. Termination. The rights and powers granted herein to the
Secured Party (i) have been granted in order to perfect the Transaction Lien,
(ii) are powers coupled with an interest and (iii) will not be affected by any
bankruptcy of the Lien Grantor or any lapse of time. The obligations of the
Securities Intermediary hereunder shall continue in effect until the Secured
Party has notified the Securities Intermediary in writing that the Transaction
Lien has been terminated pursuant to the terms of the Security Agreement.

                  [NAME OF LIEN GRANTOR]    
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    
 
                JPMORGAN CHASE BANK, N.A., as Collateral               Agent    
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    
 
                [NAME OF SECURITIES INTERMEDIARY]
 
                By:    
 
     
 
   
 
      Name:    
 
      Title:    

H-4

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Exhibit A
[Letterhead of Secured Party]
[Date]
[Name and Address of Securities Intermediary]
Attention:                                         
Re:     Notice of Exclusive Control
Ladies and Gentlemen:
     As referenced in the Securities Account Control Agreement dated as of
                    ,                      among [name of Lien Grantor], us and
you (a copy of which is attached), we notify you that we will hereafter exercise
exclusive control over securities account number
                                        (the “Account”), all financial assets
from time to time credited thereto and all security entitlements in respect
thereof. You are instructed not to accept any directions, instructions or
entitlement orders with respect to the Account or the financial assets credited
thereto from any person other than the undersigned unless otherwise ordered by a
court of competent jurisdiction.
     You are instructed to deliver a copy of this notice by facsimile
transmission to [name of Lien Grantor].

                  Very truly yours,  
 
                JPMORGAN CHASE BANK, N.A.,     as Collateral Agent
 
                By:    
 
     
 
   

cc: [name of Lien Grantor]

H-5

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Schedule 2
PLEDGED INVESTMENT PROPERTY
(other than Pledged Equity Interests)
OWNED DIRECTLY BY LIEN GRANTORS
(as of the date hereof)
PART 1 Securities

                  Jurisdiction of         Issuer   Organization   Amount Owned  
Type of Security
The Reserve Fund
  NNI   US$295,800,000   Mutual Fund

PART 2 Securities Accounts
     The Lien Grantor owns Security Entitlements with respect to Financial
Assets credited to the following Securities Accounts:

                            Securities Intermediary   Account Number   US$ at
1/18/2006
Banc of America Securities LLC
  NNI     224-53989-1-8 QBR     $ 585,306,000  
J.P. Morgan Securities
  NNI       5015021     $ 299,000,000  
Citigroup Asset Management
  NNI       104132     $ 85,700,000  
JP Morgan
  NNI       30559371     $ 1,059,316  
Morgan Stanley
  NNI       369-058697-0-502     $ 339,544  
Deutsche Bank
  NNI     6TP-600519     $ 0  

 

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      Debtor:   Secured Party:
Nortel Networks Inc.
  JPMorgan Chase Bank, N.A.
c/o Nortel Networks Limited
  270 Park Avenue
8200 Dixie Road, Suite 100
  New York, NY 10017
MS: 036/NO/230
   
Brampton, Ontario L6T 5P6
   
Canada
   

ATTACHMENT A TO UCC FINANCING STATEMENT
     The collateral covered by this financing statement is all of the Debtor’s
right, title and interest in, to and under the following property, whether now
owned or existing, hereafter acquired or arising, or in which the Debtor now or
hereafter has any rights, and wheresoever located (the “Collateral”):
     (i) all Accounts;
     (ii) all Chattel Paper;
     (iii) all Deposit Accounts and all money contained therein;
     (iv) all Documents;
     (v) all Equipment;
     (vi) all Goods;
     (vii) all General Intangibles (including any Equity Interests in other
Persons that do not constitute Investment Property);
     (viii) all Instruments;
     (ix) all Inventory;
     (x) all Investment Property;
     (xi) all Letter-of-Credit Rights;
     (xii) all books and records (including customer lists, credit files,
computer programs, printouts and other computer materials and records) of Debtor
pertaining to any of its Collateral;
     (xiii) Debtor’s ownership interest in (1) its Collateral Accounts, (2) all
Financial Assets credited to its Collateral Accounts from time to time and all
Security Entitlements in respect thereof, (3) all cash held in its Collateral
Accounts from time to time and (4) all other money in the possession of the
Secured Party; and

1

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     (xiv) all Proceeds of the Collateral described in the foregoing clauses (i)
through (xiii) ;
provided that, with respect to the security interests granted by Debtor, the
following property shall be excluded from the foregoing security interests:
(A) rights of Debtor under a lease, general intangible or other rights arising
under any contract, instrument, license or other document if (but only to the
extent that) the grant of a Transaction Lien therein would (i) violate any law
applicable to Debtor, or (ii) violate any restriction that is enforceable under
applicable law in favor of any Person (other than any NNC Company), or result in
an enforceable right in any Person (other than any NNC Company) to declare a
default or an enforceable right to terminate or annul such lease, general
intangible or other right but only for so long as any of the foregoing
circumstances described in this clause (A) exists with respect to any such
property (including after the application of Sections 9-406(d), 9-407(a),
9-408(a) and 9-409 of the UCC), (B) (i) the Equity Interests and debt of NGSH,
any direct or indirect Subsidiary of NGSH and, for so long as it is a tax exempt
organization under Sec. 501(3) of the Internal Revenue Code, Nortel LearnIT, a
Virginia non-stock corporation and (ii) any Equity Interests in or any debt of
any Person, in each case, to the extent and only for so long as the grant of the
Transaction Liens therein would constitute a violation of any provision of any
shareholder agreement or other agreement with respect to such Equity Interests
or debt among the Debtor and any other holders of Equity Interests or debt of
such Person (other than any NNC Company), (C) any assets of Debtor that
constitute Transferred Receivables and Related Transferred Rights on the date
the Debtor executes the Security Agreement, (D) any asset of Debtor for so long
as such asset is subject to a Purchase Money Mortgage that purports to prohibit
a grant of the Transaction Liens thereon, (E) any Equity Interests in any Person
organized under the laws of any jurisdiction outside of the United States or
Canada, (F) any Equity Interests in any Canadian Subsidiary, to the extent (but
only to the extent) required to prevent the Collateral from including more than
66% of all voting Equity Interests in such Subsidiary, (G) any Equity Interests
in any Person the grant of a Transaction Lien on which would require the
inclusion of separate financial statements of such Person in the filings by any
NNC Company under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) (except to the extent such financial statements are currently being
provided in the Exchange Act filings of any NNC Company on the Effective Date),
(H) NNI’s securities account numbered 10-877864 with HSBC Bank USA National
Association or an affiliate thereof and the Investment Property contained
therein, (I) Deposit Accounts for which the relevant Depositary Bank’s
jurisdiction is in Canada, (J) Securities Accounts for which the relevant
Securities Intermediary’s jurisdiction is in Canada, and (K) any asset of NNI,
other than any Covered Canadian Assets, for which the conflict of laws rules
applicable in Canada or any province or territory thereof (a “Canadian
Jurisdiction”) provided that (i) the validity, perfection or effect of
perfection of the security interest purported to be created by the Security
Agreement would be governed by the laws of a Canadian Jurisdiction (provided
that this clause (i) shall not apply as result of any change in the conflict of
laws rules applicable to a Canadian Jurisdiction which (X) becomes effective
after the Effective Date and (Y) provides that the validity, perfection or
effect of perfection of the security interest purported to be created by the
Security Agreement in Goods, Inventory, or Equipment located in the United
States of America

2

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would be governed by the laws of a Canadian Jurisdiction) or (ii) the situs of
the asset is a Canadian Jurisdiction.
     The following terms shall have the following meanings. Such definition
shall be equally applicable to the singular and plural forms of the terms
defined.
     “2006 Credit Agreement” means that certain Credit Agreement dated as of
February 14, 2006, among Nortel Networks Inc., as borrower, certain financial
institutions, as lenders and agents, and JPMorgan Chase Bank, N.A., as
Administrative Agent, as the same may be amended, restated or otherwise modified
from time to time.
     “2023 Notes” means the 6?% Notes due 2023 issued by Nortel Networks Limited
pursuant to the Indenture dated as of November 30, 1988 among Nortel Networks
Limited, the subsidiary guarantors party thereto and The Bank of New York, as
successor to The Toronto-Dominion Bank Trust Company as trustee, as amended from
time to time.
     “Account” has the meaning assigned to such term in Article 9-102 of the
UCC.
     “Authenticate” has the meaning assigned to such term in Article 9-102 of
the UCC.
     “Bond Obligations” means all principal of and interest (including, without
limitation, any Post-Petition Interest) on and other amounts payable under the
2023 Notes.
     “Canadian Security Agreement” means the Canadian security agreement dated
as of February 14, 2006, among Nortel Networks Corporation, Nortel Networks
Limited, the Subsidiaries from time to time party thereto, JPMorgan Chase Bank,
N.A., as Collateral Agent, and Export Development Canada, as amended from time
to time.
     “Canadian Subsidiary” means, with respect to any Person, any Subsidiary of
such Person (which may be a corporation, limited liability company, partnership
or other legal entity) organized under the laws of Canada or one of the
Provinces or Territories of Canada.
     “Cash Collateral Accounts” means any cash collateral account established
pursuant to Section 8(a) of the Security Agreement.
     “Chattel Paper” has the meaning assigned to such term in Article 9-102 of
the UCC.
     “Collateral Account” means the Cash Collateral Accounts, the Controlled
Deposit Accounts and the Controlled Securities Accounts.
     “Collateral Agent” means JPMorgan Chase Bank, N.A., in its capacity as
collateral agent under the Security Agreement and the other security documents,
and its successors.

3

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     “Commodity Account” has the meaning assigned to such term in Section 9-102
of the UCC.
     “Commodity Account Control Agreements” means, with respect to any Commodity
Account as to which Debtor is the Commodity Customer, an agreement by Debtor,
the Collateral Agent and the relevant Commodity Intermediary that the Commodity
Intermediary will apply any value distributed on account of the Commodity
Contracts carried in such Commodity Account as directed by the Collateral Agent
without further consent by Debtor. Each such agreement must be reasonably
satisfactory in form and substance to the Collateral Agent.
     “Commodity Contract” has the meaning assigned to such term in Section 9-102
of the UCC.
     “Commodity Customer” has the meaning assigned to such term in Section 9-102
of the UCC.
     “Commodity Intermediary” has the meaning assigned to such term in
Section 9-102 of the UCC.
     “Controlled Deposit Accounts” means a Deposit Account (i) that is subject
to a Deposit Account Control Agreement or (ii) as to which the Collateral Agent
is the Depositary Bank’s “customer” (as defined in UCC Section 4-104).
     “Controlled Securities Accounts” means a Securities Account that (i) is
maintained in the name of Debtor at an office of a Securities Intermediary whose
jurisdiction (within the meaning of the UCC) is in the United States and
(ii) together with all Financial Assets credited thereto and all related
Security Entitlements, is subject to a Securities Account Control Agreement
among Debtor, the Secured Party and such Securities Intermediary.
     “Copyright Security Agreement” means a Copyright Security Agreement,
substantially in the form of Exhibit B to the Security Agreement, executed and
delivered by Debtor in favor of the Collateral Agent for the benefit of the
Secured Parties.
     “Covered Canadian Asset” means accounts receivable, contract rights and
intellectual property that are “intangibles” as defined by the Ontario Personal
Property Security Act and, for greater certainty, that are not “goods”, “chattel
paper”, “documents of title”, “instruments”, “money” or “securities” as defined
by the Ontario Personal Property Security Act.
     “Credit Agreement” means the EDC Support Facility, and the 2006 Credit
Agreement; and any reference to the “principal amount” of or outstanding under
any Credit Agreement includes the outstanding principal or face amount of
obligations, contingent or otherwise, of Nortel Networks Limited, a Canadian
corporation, and its Subsidiaries under the EDC Support Facility.

4

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     “Deposit Account” has the meaning assigned to such term in Article 9-102 of
the UCC.
     “Deposit Account Control Agreement” means, with respect to any Deposit
Account of Debtor maintained with a Depositary Bank whose jurisdiction (within
the meaning of the UCC) is in the United States of America, an agreement among
Debtor, the Collateral Agent and the relevant Depositary Bank, set forth in an
Authenticated Record, (i) that such Depositary Bank will comply with
instructions originated by the Collateral Agent directing disposition of the
funds in such Deposit Account without further consent by Debtor and
(ii) subordinating to the relevant Transaction Lien all claims of the Depositary
Bank to such Deposit Account (except its right to deduct its normal operating
charges and fees and any uncollected funds previously credited thereto).
     “Depositary Bank” means a bank at which a Controlled Deposit Account is
maintained.
     “Design Security Agreement” means a Design Security Agreement,
substantially in the form of Exhibit E to the Security Agreement (with any
changes that the Collateral Agent shall have reasonably approved).
     “Designated Hedging Agreement” obligations under any Hedging Agreement with
any Lender or affiliate of a Lender as an additional Secured Obligation,
designated by Debtor by delivering to the Collateral Agent a certificate signed
by a financial officer that (i) identifies such Hedging Agreement, specifying
the name and address of the other party thereto, the notional principal amount
thereof and the expiration date thereof and (ii) states that Debtor’s
obligations, as applicable, thereunder are designated as Secured Obligations for
purposes of the Security Agreement; provided that the holder of such Designated
Hedging Agreement shall have provided a supplement to the Security Agreement
agreeing to be bound by the terms of the Security Agreement that are applicable
to it including, without limitation, Section 18 of the Security Agreement.
     “Documents” has the meaning assigned to such term in Article 9-102 of the
UCC.
     “EDC Support Facility” means the facility made available by Export
Development Canada to Nortel Networks Limited pursuant to the Amended and
Restated Master Facility Agreement dated October 24, 2005, as such agreement may
be amended or supplemented from time to time, guaranteed by NNI and Nortel
Networks Corporation pursuant to the Guarantee Agreement during the period in
which the Guarantee Agreement is in effect; provided that the face amount of
obligations thereunder shall not exceed US$750,000,000.
     “EDC Support Facility Obligations” means all reimbursement and indemnity
obligations, contingent or otherwise, and obligations to repay interest and fees
of Nortel Networks Limited under the EDC Support Facility.
     “Effective Date” means February 14, 2006.

5

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     “Entitlement Orders” has the meaning assigned to such term in Section 8-102
of the UCC.
     “Equipment” has the meaning assigned to such term in Article 9-102 of the
UCC.
     “Equity Interests” means (i) in the case of a corporation, any shares of
its capital stock, (ii) in the case of a limited liability company, any
membership interest therein, (iii) in the case of a partnership, any partnership
interest (whether general or limited) therein, (iv) in the case of any other
business entity, any participation or other interest in the equity or profits
thereof, (v) any warrant, option or other right to acquire any Equity Interest
described in this definition or (vi) any Security Entitlement in respect of any
Equity Interest described in this definition.
     “Financial Assets” has the meaning assigned to such term in Article 8-102
and 103 of the UCC.
     “Goods” has the meaning assigned to such term in Article 9-102 of the UCC.
     “General Intangibles” has the meaning assigned to such term in
Article 9-102 of the UCC.
     “Guarantee Agreement” has the meaning set forth in Section 1.01 of the 2006
Credit Agreement, a copy of which may be obtained from the Secured Party.
     “Hedging Agreement” means (i) any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest rate, currency exchange rate or commodity price hedging
arrangement and (ii) any hedging agreement in respect of common stock entered
into in order to hedge exposure under stock option plans or other benefit plans
for employees, directors or consultants of Nortel Networks Corporation and its
Subsidiaries, but in each case only if such agreement or arrangement is entered
into with a Lender or an affiliate thereof.
     “Instruments” has the meaning assigned to such term in Article 9-102 of the
UCC.
     “Intellectual Property Security Agreement” means a Copyright Security
Agreement, a Design Security Agreement, a Patent Security Agreement or a
Trademark Security Agreement.
     “Inventory” has the meaning assigned to such term in Article 9-102 of the
UCC.
     “Investment Property” has the meaning assigned to such term in
Article 9-102 of the UCC.
     “Issuer Control Agreement” means an Issuer Control Agreement substantially
in the form of Exhibit F to the Security Agreement (with any changes that the
Collateral Agent shall have reasonably approved).

6

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     “Lender” means each Lender holding a Tranche A Commitment or a Tranche A
Loan under the 2006 Credit Agreement.
     “Letter-of-Credit Right” has the meaning assigned to such term in
Article 9-102 of the UCC.
     “Lien” means, with respect to any asset, (i) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (ii) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
     “NGSH” means Nortel Government Solutions Holdings Corporation, a Delaware
corporation, and any successors.
     “NNC Company” means, collectively, Nortel Networks Corporation, a Canadian
corporation, and any of its Subsidiaries.
     “NNI” means Nortel Networks Inc., a Delaware corporation, and any
successors.
     “Patent Security Agreement” means a Patent Security Agreement,
substantially in the form of Exhibit C to the Security Agreement, executed and
delivered by Debtor in favor of the Collateral Agent for the benefit of the
Secured Parties.
     “Permitted Receivables Financing” means (i) any Qualified Receivables
Transaction and (ii) and any Receivables Transaction after giving effect to
which the mandatory prepayment provisions of the 2006 Credit Agreement are not
contravened.
     “Person” means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
     “Post-Petition Interest” means, with respect to any obligation of any
Person, any interest that accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization of such
Person (or would accrue but for the operation of applicable bankruptcy or
insolvency laws), whether or not such interest is allowed or allowable as a
claim in any such proceeding.
     “Proceeds” means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, lease, exchange,
assignment, licensing or other disposition of, or other realization upon, any
Collateral, including all claims of the Debtor against third parties for loss
of, damage to or destruction of, or for proceeds payable under, or unearned

7

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premiums with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any Collateral.
     “Purchase Money Mortgage” means, (i) a mortgage on or security interest in
property existing at the time of acquisition thereof by Debtor and not incurred
in contemplation of such acquisition and (ii) any mortgage on or security
interest in any property acquired, constructed or improved by Debtor incurred
after the date hereof which is related solely to, and is created or assumed
contemporaneously with, or within 180 days after, such acquisition, or
completion of such construction or improvement, to secure or provide for the
payment of the purchase price thereof or the cost of construction or improvement
thereon incurred after February 14, 2006 (including the cost of any underlying
real property); provided that in the case of any such acquisition, construction
or improvement, the mortgage or security interest shall not apply to any after
acquired property of Debtor (other than improvements thereon and fixtures) or to
any property previously owned by Debtor other than, in the case of any such
construction or improvement, any real property, theretofore substantially
unimproved for the purposes of Debtor, on which the property so constructed, or
the improvement, is located and other than a fixture on the real property on
which the property so constructed, or the improvement, is located; and provided
further that the amount secured by the mortgage or security interest shall not
exceed the purchase price thereof or the cost of construction or improvement
thereon plus reasonable fees and expenses with respect thereto.
     “Qualified Receivables Transaction” has the meaning set forth in
Section 1.01 of the 2006 Credit Agreement, a copy of which may be obtained from
the Secured Party.
     “Receivables Transaction” has the meaning set forth in Section 1.01 of the
2006 Credit Agreement, a copy of which may be obtained from the Secured Party.
     “Record” has the meaning assigned to such term in Article 9-102 of the UCC.
     “Related Transferred Rights” means (i) Transferred Receivables, (ii) rights
to payment and collections in respect of such Transferred Receivables,
(iii) Supporting Obligations in respect of such Transferred Receivables,
(iv) all invoices, documents, books, records and other information with respect
to such Transferred Receivables or the obligors thereon, (v) with respect to any
such Transferred Receivables, the transferee’s interest in the product
(including returned product), the sale of which by such transferee gave rise to
such Transferred Receivables and (vi) all Proceeds of the items described in the
foregoing clauses.
     “Secured Obligations” means (i) the Tranche A Obligations, (ii) the Bond
Obligations, (iii) the EDC Support Facility Obligations and (iv) any obligation
of Debtor under a Designated Hedging Agreement.
     “Secured Parties” means the holders from time to time of the Secured
Obligations.
     “Securities Account” has the meaning assigned to such term in Article 8-501
of the UCC.

8

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     “Securities Account Control Agreement” means, when used with respect to a
Securities Account, a Securities Account Control Agreement substantially in the
form of Exhibit G to the Security Agreement (with any changes that the
Collateral Agent shall have reasonably approved) among the relevant Securities
Intermediary, Debtor and the Collateral Agent to the effect that such Securities
Intermediary will comply with Entitlement Orders originated by the Collateral
Agent with respect to such Securities Account without further consent by the
Debtor.
     “Securities Intermediary” has the meaning assigned to such term in
Article 8-102 of the UCC.
     “Security Agreement” means that certain U.S. Security Agreement, dated as
of February 14, 2006, among Nortel Networks Inc., the subsidiary lien grantors
from time to time party thereto, JPMorgan Chase Bank, N.A. and Export
Development Canada, as the same may be amended, restated or otherwise modified
from time to time.
     “Security Agreement Supplements” means a Security Agreement Supplement,
substantially in the form of Exhibit A to the Security Agreement, signed and
delivered to the Collateral Agent for the purpose of adding a Subsidiary as a
party to the Security Agreement pursuant to Section 20 of the Security Agreement
and/or adding additional personal property to the Collateral.
     “Security Documents” means the Security Agreement, the Canadian Security
Agreement, the Security Agreement Supplements, the Commodity Account Control
Agreements, the Deposit Account Control Agreements, the Issuer Control
Agreements, the Securities Account Control Agreements, the Intellectual Property
Security Agreements and all other supplemental or additional security
agreements, control agreements or similar instruments delivered pursuant to any
Credit Agreement or any other Security Document.
     “Security Entitlements” has the meaning assigned to such term in
Article 8-102 of the UCC.
     “Subsidiary” means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, “Subsidiary” means a Subsidiary of NNI.
     “Supporting Obligations” has the meaning assigned to such term in
Section 9-102 of the UCC.
     “Trademark Security Agreement” means a Trademark Security Agreement,
substantially in the form of Exhibit D to the Security Agreement, executed and
delivered by Debtor in favor of the Collateral Agent for the benefit of the
Secured Parties.

9

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     “Tranche A Commitment” has the meaning set forth in Section 1.01 of the
2006 Credit Agreement, a copy of which is available from the Secured Party.
     “Tranche A Loan” has the meaning set forth in Section 1.01 of the 2006
Credit Agreement, a copy of which is available from the Secured Party.
     “Tranche A Obligations” means (i) all principal of and interest (including,
without limitation, any Post-Petition Interest) on any Tranche A Loan and
(ii) all other amounts payable by Nortel Networks Limited in connection with the
Tranche A Loans under the 2006 Credit Agreement.
     “Transaction Lien” means the Liens granted by the Debtor under the Security
Documents.
     “Transferred Receivables” means any receivables that have been sold,
pledged, contributed or otherwise transferred in connection with a Permitted
Receivables Financing.
     “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, “UCC” means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.

10

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SCHEDULE 4
ASSET AND REVENUE DISCLOSURE
 
(as of September 30, 2005)
Credit Party revenue as of September 30th, 2005

                      ENTITY     REVENUE     ASSETS    
NNI
    $3.749B     $6.736B    
NNL
    $0.683B     $3.864B    
NNC
    $0B     $.091B    
TOTAL CREDIT PARTIES
    $4.432B     $10.691B    
TOTAL US/CDN
    $4.757B     $11.616B    
NNI/NNL/NNC COVERAGE
    93%     92%    

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SCHEDULE 5
PRINCIPAL U.S. CASH MANAGEMENT ACCOUNTS OF LIEN GRANTORS
(as of January 18, 2006)

                                      ACCOUNT     BANK   ENTITY   NUMBER   US $
AT 1/18/2006
Citibank NY
  NNI     30508403     $ 769,742  
Citibank NY
  NNI     30463444     $ 592,394