Exhibit 10.1
U.S.$1,000,000,000 Floating Rate Senior Notes due 2011
U.S.$550,000,000 10.125% Senior Notes due 2013
U.S.$450,000,000 10.750% Senior Notes due 2016
NORTEL NETWORKS LIMITED
Purchase Agreement
June 29, 2006
[                              ]
As Representative of the
several Initial Purchasers listed
in Schedule 1 hereto
c/o [                              ]
[                              ]
New York, New York [          ]
Ladies and Gentlemen:
     Nortel Networks Limited, a Canadian corporation (the “Company”), proposes
to issue and sell to the several Initial Purchasers listed in Schedule 1 hereto
(the “Initial Purchasers”), for whom you are acting as representative (the
“Representative”), U.S.$450,000,000 aggregate principal amount of its 10.750%
Senior Notes due 2016 (the “2016 Fixed Rate Notes”), U.S.$550,000,000 aggregate
principal amount of its 10.125% Senior Notes due 2013 (the “2013 Fixed Rate
Notes” and, together with the 2016 Fixed Rate Notes, the “Fixed Rate Notes”) and
U.S.$1,000,000,000 aggregate principal amount of its Floating Rate Senior Notes
due 2011 (the “Floating Rate Notes” and together with the Fixed Rate Notes, the
“Notes”). The Notes will be issued pursuant to an Indenture to be dated as of
July 5, 2006, as it may be amended or supplemented from time to time (the
“Indenture”), among the Company, Nortel Networks Corporation, a Canadian
corporation (“NNC”), and Nortel Networks Inc., a Delaware corporation (“NNI”
and, together with NNC, the “Guarantors”), and The Bank of New York, as trustee
(the “Trustee”), and will be guaranteed on an unsecured senior basis by the
Guarantors (the “Guarantees” and, together with the Notes, the “Securities”).
The Company and the Guarantors are referred to herein together as the “Issuers”.
     The Securities will be sold to the Initial Purchasers without being
registered under the United States Securities Act of 1933, as amended (the
“Securities Act”), in reliance upon an exemption therefrom, and without the
filing of a prospectus with any securities regulatory authority in Canada (each,
a “Canadian Securities Regulator” and, together, the “Canadian Securities
Regulators”) under the securities laws, rules, regulations and written policy
statements of any province or territory of Canada (collectively, the “Canadian
Securities Laws”), in reliance upon exemptions from the prospectus requirements
of the applicable Canadian Securities Laws. The Company has prepared a
preliminary offering memorandum (including, with respect to sales in British
Columbia, Manitoba, Ontario, Alberta, Saskatchewan and Quebec (collectively, the

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“Relevant Provinces”), the preliminary Canadian offering memorandum (the
“Canadian Preliminary Offering Memorandum”)) dated June 15, 2006 (the
“Preliminary Offering Memorandum”) and will prepare an offering memorandum
(including, with respect to sales in the Relevant Provinces, a Canadian offering
memorandum (the “Canadian Offering Memorandum”)) dated the date hereof (the
“Offering Memorandum”), setting forth information concerning the Company, the
Guarantors and the Securities. Copies of the Preliminary Offering Memorandum
have been, and copies of the Offering Memorandum will be, delivered by the
Company to the Initial Purchasers pursuant to the terms of this Agreement. The
Issuers hereby confirm that they have authorized the use of the Preliminary
Offering Memorandum, the other Time of Sale Information (as defined below) and
the Offering Memorandum in connection with the offering and resale of the
Securities by the Initial Purchasers in the manner contemplated by this
Agreement. Capitalized terms used but not defined herein shall have the meanings
given to such terms in the Preliminary Offering Memorandum. References herein to
the Preliminary Offering Memorandum, the Time of Sale Information and the
Offering Memorandum shall be deemed to refer to and include all amendments and
supplements thereto and any document incorporated by reference therein.
     At or prior to the time when sales of the Securities were first made (which
is on the date of this Agreement) (the “Time of Sale”), the following
information shall have been prepared (collectively, the “Time of Sale
Information”): the Preliminary Offering Memorandum, as supplemented and amended
by the written communications listed on Part I of Annex A hereto.
     Holders of the Securities (including the Initial Purchasers and their
direct and indirect transferees) will be entitled to the benefits of a
Registration Rights Agreement to be dated the Closing Date (as defined below)
and substantially in the form attached hereto as Exhibit A (the “Registration
Rights Agreement”), pursuant to which the Issuers will agree to file with the
United Sates Securities and Exchange Commission (the “Commission”) (i) one or
more registration statements (collectively, the “Exchange Offer Registration
Statement”) registering issues of senior notes of the Company (the “Exchange
Notes”) and the guarantees of the Guarantors (the “Exchange Notes Guarantees”
and, together with the Exchange Notes, the “Exchange Securities”) evidencing the
same continuing indebtedness as and which are identical in all material respects
to the Fixed Rate Notes or the Floating Rate Notes, as applicable, and the
Guarantees, respectively (except that the Exchange Securities will not contain
terms with respect to transfer restrictions in the United States), and
(ii) under certain circumstances, a shelf registration statement pursuant to
Rule 415 under the Securities Act (the “Shelf Registration Statement”).
     Each Issuer hereby confirms its agreement with the several Initial
Purchasers concerning the purchase and resale of the Securities, as follows:
     1.     Purchase and Resale of the Securities.
     (a)   The Issuers agree to issue and sell the Securities to the several
Initial Purchasers as provided in this Agreement, and each Initial Purchaser, on
the basis of the representations, warranties and agreements set forth herein and
subject to the conditions set forth herein, agrees, severally and not jointly,
to purchase from the Issuers the respective principal amount of Securities set
forth opposite such Initial Purchaser’s name in Schedule 1 hereto at, in the
case of the 2016 Fixed Rate Notes, a price equal to 100% of the aggregate
principal amount thereof, in the

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case of the 2013 Fixed Rate Notes, a price equal to 100% of the aggregate
principal amount thereof and in the case of the Floating Rate Notes, a price
equal to 100% of the aggregate principal amount thereof, plus, in each case,
accrued interest, if any, from July 5, 2006 to the Closing Date. The Issuers
will pay the several Initial Purchasers a commission equal to 2.0% of the
respective principal amounts of the 2016 Fixed Rate Notes, the 2013 Fixed Rate
Notes and the Floating Rate Notes set forth opposite the names of the several
Initial Purchasers in Schedule 1 hereto. The Issuers will not be obligated to
deliver any of the Securities except upon payment for all the Securities to be
purchased as provided herein.
     (b)   The Issuers acknowledge and agree that the Initial Purchasers are
acting solely in the capacity of arm’s length contractual counterparties to the
Issuers with respect to the offering of Securities contemplated hereby
(including in connection with determining the terms of the offering) and not as
financial advisors or fiduciaries to, or as agents of, any Issuer or any other
person. Additionally, no Initial Purchaser is advising any Issuer or any other
person as to any legal, tax, investment, accounting or regulatory matters in any
jurisdiction. The Issuers shall consult with their own advisors concerning such
matters and shall be responsible for making their own independent investigation
and appraisal of the transactions contemplated hereby, and the Initial
Purchasers shall have no responsibility or liability to the Issuers with respect
thereto. Any review by the Initial Purchasers of the Issuers, the transactions
contemplated hereby or other matters relating to such transactions will be
performed solely for the benefit of the Initial Purchasers and shall not be on
behalf of the Issuers.
     (c)   The Issuers understand that the Initial Purchasers intend to offer
the Securities for resale on the terms set forth in the Time of Sale
Information. Each Initial Purchaser, severally and not jointly, represents,
warrants and agrees that:
     (i)   it is a qualified institutional buyer within the meaning of Rule 144A
under the Securities Act (a “QIB”) and an accredited investor within the meaning
of Rule 501(a) under the Securities Act and National Instrument
45-106-Prospectus and Registration Exemptions (“NI 45-106”) of Canada;
     (ii)   it has not solicited offers for, or offered or sold, and will not
solicit offers for, or offer or sell, the Securities by means of any form of
general solicitation or general advertising within the meaning of Rule 502(c) of
Regulation D under the Securities Act (“Regulation D”) or in any manner
involving a public offering within the meaning of Section 4(2) of the Securities
Act; and
     (iii)   it has not solicited offers for, or offered or sold, and will not
solicit offers for, or offer or sell, the Securities as part of their initial
offering except:
     (A)   within the United States to persons whom it reasonably believes to be
QIBs in transactions pursuant to Rule 144A under the Securities Act
(“Rule 144A”) and in connection with each such sale, it has taken or will take
reasonable steps to ensure that the purchaser of the Securities is aware that
such sale is being made in reliance on Rule 144A;

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     (B)   in accordance with the restrictions set forth in Annex C hereto and,
in Canada, and to residents of Canada who are accredited investors within the
meaning of NI 45-106, in transactions which are exempt from the prospectus
requirements of applicable Canadian Securities Laws.
     (d)   Each Initial Purchaser acknowledges and agrees that the Company and,
for purposes of the opinions to be delivered to the Initial Purchasers pursuant
to Sections 6(f) and 6(g) (to the extent such opinions relate to exemptions from
registration and prospectus requirements under applicable law), counsel for the
Company and counsel for the Initial Purchasers, respectively, may rely upon the
accuracy of the representations and warranties of the Initial Purchasers, and
compliance by the Initial Purchasers with their agreements, contained in
paragraph (c) above (including Annex C hereto), and each Initial Purchaser
hereby consents to such reliance.
     (e)   Each Issuer acknowledges and agrees that the Initial Purchasers may
offer and sell Securities to or through any affiliate of an Initial Purchaser
and that any such affiliate may offer and sell Securities purchased by it to or
through any Initial Purchaser so long as otherwise in compliance with the terms
and conditions of this Agreement.
     2.     Payment and Delivery.
     (a)   Payment for and delivery of the Securities will be made at the
offices of Cleary Gottlieb Steen & Hamilton LLP at 9:30 A.M., New York City
time, on July 5, 2006, or at such other time or place on the same or such other
date, not later than the fifth business day thereafter, as the Representative
and the Company may agree upon in writing. The time and date of such payment and
delivery is referred to herein as the “Closing Date”.
     (b)   Payment for the Securities shall be made by wire transfer in
immediately available funds to the account(s) specified by the Company to the
Representative against delivery to the nominee of The Depository Trust Company,
for the account of the Initial Purchasers, of global notes representing the
Securities (collectively, the “Global Notes”), with any transfer taxes payable
in connection with the sale of the Securities duly paid by the Company. The
Global Notes will be made available for inspection by the Representative not
later than 1:00 P.M., New York City time, on the business day prior to the
Closing Date.
     3.     Representations and Warranties of the Issuers. The Issuers represent
and warrant, jointly and severally, to, and agree with, the Initial Purchasers
as of the date hereof and the Closing Date (with respect to those
representations and warranties made as of the Closing Date, after giving effect
to the transactions contemplated by this Agreement) that:
     (a)   Preliminary Offering Memorandum, Time of Sale Information and
Offering Memorandum. The Preliminary Offering Memorandum, as of its date, did
not, the Time of Sale Information, taken as a whole, at the Time of Sale, did
not, and at the Closing Date will not, and the Offering Memorandum, as of its
date and as of the Closing Date will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided that the Issuers make no representation or
warranty with respect to any statements or omissions made in reliance upon and

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in conformity with information relating to any Initial Purchaser furnished to
the Company in writing by such Initial Purchaser through the Representative
expressly for use in the Preliminary Offering Memorandum, the other Time of Sale
Information or the Offering Memorandum, it being understood and agreed that the
only such information furnished by any Initial Purchaser consists of the
information described in Section 7(b) below.
     (b)   Additional Written Communications. Other than the Preliminary
Offering Memorandum and the Offering Memorandum, the Issuers (including their
agents and representatives, other than the Initial Purchasers in their capacity
as such) have not made, used, prepared, authorized, approved or referred to and
will not prepare, make, use, authorize, approve or refer to any written
communication that constitutes an offer to sell or solicitation of an offer to
buy the Securities other than the documents listed on Annex A hereto, including
a pricing supplement substantially in the form of Annex B hereto, and other
written communications used in accordance with Section 4(c) which has not been
reasonably objected to by the Representative in accordance with Section 4(c).
     (c)   Incorporated Documents. Except as otherwise disclosed therein, the
documents incorporated by reference in the Time of Sale Information and the
Offering Memorandum, when filed with the Commission and the Canadian Securities
Regulators, conformed or will conform, as the case may be, in all material
respects to the applicable requirements of the United States Securities Exchange
Act of 1934, as amended (the “Exchange Act”), the rules and regulations of the
Commission thereunder and applicable Canadian Securities Laws, and did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
     (d)   Financial Statements. The consolidated financial statements and the
related notes thereto of NNC and its subsidiaries included or incorporated by
reference in each of the Time of Sale Information and the Offering Memorandum
comply in all material respects with the applicable requirements of the
Securities Act, the Exchange Act and applicable Canadian Securities Laws and
present fairly the consolidated financial position of NNC and its subsidiaries
as of the dates indicated and the results of their operations and the changes in
their cash flows for the periods specified; such financial statements have been
prepared in conformity with generally accepted accounting principles in the
United States applied on a consistent basis throughout the periods covered
thereby; the other financial information included or incorporated by reference
in each of the Time of Sale Information and the Offering Memorandum has been
derived from the accounting records of NNC and its subsidiaries and presents
fairly the information shown thereby; and the “Summary selected historical
consolidated financial information of NNC” set forth in the Time of Sale
Information and the Offering Memorandum is accurately presented in all material
respects and prepared on a basis consistent with the audited and unaudited
historical consolidated financial statements from which it has been derived.

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     (e)   No Material Adverse Change. Since the date of the most recent
consolidated financial statements of NNC included or incorporated by reference
in the Time of Sale Information and the Offering Memorandum (exclusive of any
amendment or supplement thereto on or after the date of this Agreement), except
in each case as otherwise disclosed in, incorporated by reference in or
contemplated by the Time of Sale Information and the Offering Memorandum;
(i) there has not been any change in the capital stock or long-term debt of NNC
and its consolidated subsidiaries, or any dividend or distribution of any kind
declared, set aside for payment, paid or made by NNC on any class of its capital
stock, or any material adverse change, or any event that could reasonably be
expected to result in a material adverse change in the business, properties,
senior management, financial condition, stockholders’ equity or results of
operations of NNC and its subsidiaries taken as a whole; (ii) none of NNC or any
of its subsidiaries has entered into any transaction or agreement or incurred
any liability or obligations, direct or contingent, in each case, that is
material to NNC and its subsidiaries taken as a whole; and (iii) none of NNC or
any of its subsidiaries has sustained any loss or interference with its business
from fire, explosion, flood or other calamity, whether or not covered by
insurance, or from any labor disturbance or dispute or any action, order or
decree of any court or arbitrator or governmental or regulatory authority, in
each case, that is material to NNC and its subsidiaries, taken as a whole.
     (f)   Organization and Good Standing. The Issuers (i) have each been duly
organized and are validly existing and in good standing under the laws of their
respective jurisdictions of organization and (ii) have all corporate power and
authority necessary to conduct their businesses as described in the Time of Sale
Information and the Offering Memorandum, except where the failure to have such
power or authority would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the business, properties, senior
management, financial condition, stockholders’ equity or results of operations
of NNC and its subsidiaries taken as a whole or on the performance by the
Issuers of their obligations under the Securities (a “Material Adverse Effect”).
     (g)   Capitalization. NNC has an authorized capitalization as set forth in
the Time of Sale Information and the Offering Memorandum.
     (h)   Due Authorization. Each Issuer has the corporate power and authority
to execute and deliver this Agreement, the Notes, the Indenture (including the
Guarantees set forth therein), the Exchange Securities and the Registration
Rights Agreement (the “Transaction Documents”), as applicable, and to perform
its obligations hereunder and thereunder.
     (i)   The Indenture. The execution and delivery of the Indenture has been
duly authorized by each Issuer and assuming due authorization thereof by the
other parties thereto, when duly executed and delivered in accordance with its
terms by each of the parties thereto, will constitute a valid and binding
agreement of each Issuer enforceable against each such Issuer in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors’ rights (including applicable non-U.S. laws or
governmental actions) and to general principles of equity (it being understood
that the enforceability thereof in Canada may be limited by the Currency Act
(Canada), which precludes

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Canadian courts from awarding a judgment for an amount expressed in a currency
other than Canadian Dollars and to the extent that any requirement to pay
interest at a greater rate after than before default may not be enforceable in
Canada if the same is construed by a Canadian court to constitute a penalty)
(collectively, the “Enforceability Exceptions”); and on the Closing Date, the
Indenture will conform in all material respects to the requirements of the
United States Trust Indenture Act of 1939, as amended (the “Trust Indenture
Act”), and the rules and regulations of the Commission applicable to an
indenture that is qualified thereunder.
     (j)   The Notes and the Guarantees. The issuance and sale of the Notes have
been duly authorized by the Company and, when duly executed, authenticated,
issued and delivered as provided in the Indenture and paid for as provided
herein, the Notes will be duly issued and will constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, subject to the Enforceability Exceptions, and will be entitled to
the benefits of the Indenture; and the execution and delivery of each Guarantee
has been duly authorized by the applicable Guarantor and, when duly endorsed by
such Guarantor as provided in the Indenture, each Guarantee will constitute a
valid and binding agreement of such Guarantor, enforceable against such
Guarantor in accordance with its terms, subject to the Enforceability
Exceptions.
     (k)   The Exchange Securities. On the Closing Date, (i) the issuance of the
Exchange Notes will have been duly authorized by the Company and, when the
Exchange Notes have been duly executed, authenticated, issued and delivered in
exchange for the Notes as contemplated by the Registration Rights Agreement and
the Indenture, the Exchange Notes will be duly issued and will constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, subject to the Enforceability Exceptions, and will
be entitled to the benefits of the Indenture; and (ii) the execution and
delivery of the Exchange Note Guarantees, will have been duly authorized by the
applicable Guarantor and, when duly endorsed by such Guarantor as contemplated
by the Registration Rights Agreement and the Indenture, each Exchange Note
Guarantee of a Guarantor will constitute a valid and binding agreement of such
Guarantor, enforceable against such Guarantor in accordance with its terms,
subject to the Enforceability Exceptions.
     (l)   Purchase and Registration Rights Agreements. The execution and
delivery of this Agreement has been duly authorized by each Issuer; it has been
duly executed and delivered by each Issuer; and the Registration Rights
Agreement has been duly authorized by each Issuer and, when duly executed and
delivered in accordance with its terms by each of the parties thereto, will
constitute a valid and binding agreement of each such Issuer enforceable against
each such Issuer in accordance with its terms, subject to the Enforceability
Exceptions, and except that rights to indemnity and contribution thereunder may
be limited by applicable law and public policy considerations.

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     (m)   Descriptions of the Transaction Documents. The Indenture conforms,
and each of the Registration Rights Agreement, the Securities and the Exchange
Securities will conform, in all material respects to the description thereof,
contained in the Time of Sale Information and the Offering Memorandum.
     (n)   No Violation or Default. None of the Issuers is (i) in violation of
its charter or by-laws or similar organizational documents; (ii) in default, and
no event has occurred and is continuing that, with notice or lapse of time or
both, would constitute such a default, under any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which such Issuer is
bound or to which any of the property or assets of such Issuer is subject; or
(iii) in violation of any applicable law or statute or any applicable judgment,
order, rule or regulation of any relevant court or arbitrator or governmental or
regulatory authority, except, in each case as otherwise disclosed in,
incorporated by reference in or contemplated by the Time of Sale Information and
the Offering Memorandum, and except, in the case of clauses (ii) and
(iii) above, for any such default or violation that would not, individually or
in the aggregate, have a Material Adverse Effect.
     (o)   No Order or Proceedings. There is no order, ruling or direction of
any Canadian Securities Regulator which would deny the benefit of an exemption
otherwise provided for under applicable Canadian Securities Laws with respect to
the distribution of the Securities or the Exchange Securities, and no
proceedings which would reasonably be expected to result in any such order or
ruling have been instituted or are pending or, to the knowledge of the Issuers,
threatened.
     (p)   No Conflicts. The execution, delivery and performance by each Issuer
of each of the Transaction Documents to which each is a party, the issuance and
sale of the Securities and compliance by each Issuer with the terms thereof and
the consummation of the transactions contemplated by the Transaction Documents
by each Issuer will not (i) conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of any Issuer pursuant to, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which any Issuer is a party
or by which any Issuer is bound or to which any of the property or assets of any
Issuer is subject, (ii) result in any violation of the provisions of the charter
or by-laws or similar organizational documents of any Issuer, or (iii) result in
the violation of any applicable law or statute or any applicable judgment,
order, rule or regulation of any relevant court or arbitrator or governmental or
regulatory authority; except, in the case of clauses (i) and (iii) above, for
any such conflict, breach or violation that would not, individually or in the
aggregate, have a Material Adverse Effect.
     (q)   No Consents Required. No consent, approval, authorization, order,
registration or qualification of or with any court or arbitrator or governmental
or regulatory authority in the United States or Canada is required for the
execution, delivery and performance by each Issuer of each of the Transaction
Documents to which each is a party, the issuance and sale of the Securities and
compliance by each Issuer with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents and the issuance and
delivery of the Exchange Securities in exchange for the Notes, except for
(i) such consents, approvals, authorizations, orders and registrations or

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qualifications as may be required under applicable state securities laws in
connection with the purchase and resale of the Securities by the Initial
Purchasers, (ii) notices to be filed by the Company under s.12 of the Securities
Act (Quebec), (iii) the delivery of the requisite number of copies of the
Offering Memorandum to, and the filing of the required reports in the prescribed
form and executed in accordance with applicable securities laws of the Relevant
Provinces, together with the requisite filing fees and, in the case of British
Columbia, the requisite fee checklist, (iv) with respect to the Exchange
Securities, such consents, approvals, authorizations, orders and registrations
or qualifications as may be required under the Securities Act, and applicable
state securities laws, as contemplated by the Registration Rights Agreement,
(v) such consents, approvals, authorizations, orders and registrations or
qualifications as may be required with respect to the Exchange Securities, under
applicable provincial securities laws and Part VIII of the Canada Business
Corporations Act, and (vi) with respect to the filing of a shelf registration
statement as contemplated in the Registration Rights Agreement, such consents,
approvals, authorizations, orders and registrations or qualifications as may be
required under Part VIII of the Canada Business Corporations Act.
     (r)   Legal Proceedings. Except as described in, incorporated by reference
in or contemplated by the Time of Sale Information and the Offering Memorandum,
(i) there is no litigation, arbitration, legal proceeding or governmental or
regulatory investigation involving NNC or any of its subsidiaries that, if
determined adversely to NNC or such subsidiary, would individually or in the
aggregate, have a Material Adverse Effect, and (ii) to the knowledge of the
Issuers, no such litigation, arbitration, proceeding or investigation is pending
or threatened.
     (s)   Independent Accountants. Deloitte & Touche LLP, who have certified
certain consolidated financial statements of NNC and its subsidiaries and the
Company and its subsidiaries, are independent public accountants with respect to
NNC and its consolidated subsidiaries and the Company and its consolidated
subsidiaries within the meaning of Rule 101 of the Code of Professional Conduct
of the American Institute of Certified Public Accountants and its
interpretations and rulings thereunder.
     (t)   Title to Intellectual Property. Except as disclosed in the Time of
Sale Information and the Offering Memorandum, NNC and its subsidiaries maintain
its Material Intellectual Property (as defined below) in a commercially
reasonable, prudent manner consistent with its past practices and with respect
to any Material Intellectual Property that has been infringed, misappropriated
or diluted, in each case in a material respect, by a third party, NNC or the
relevant subsidiary has, unless NNC or such subsidiary has reasonably determined
that such action would be of negligible value, economic or otherwise, taken
commercially reasonable steps consistent with its past practices to sue for
infringement, misappropriation or dilution and recovered any and all damages for
such infringement, misappropriation or dilution, and/or taken such other actions
as NNC or such subsidiary reasonably deemed appropriate under the circumstances
to protect such Material Intellectual Property.

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     “Material Intellectual Property” means, at the time of determination, any
intellectual property that is one of the 100 most valuable items of intellectual
property owned by NNC and its subsidiaries taken as a whole at such time to the
business of NNC and its subsidiaries taken as a whole, as such business is
presently conducted or proposed to be conducted, as reasonably determined by NNC
and its subsidiaries, acting in their reasonable discretion.
     (u)   Investment Company Act. No Issuer is, and after giving effect to the
offering and sale of the Notes and the application of the proceeds thereof as
described in the Time of Sale Information and the Offering Memorandum, no Issuer
will be, an “investment company” or an entity “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940, as amended,
and the rules and regulations of the Commission thereunder (collectively,
“Investment Company Act”).
     (v)   Accounting Controls. NNC and the Company have each disclosed in the
Time of Sale Information and the Offering Memorandum and the documents
incorporated by reference therein, (x) all existing material weaknesses related
to its internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that it has identified or that its independent public
accountants have identified and disclosed to NNC or the Company, as the case may
be; (y) that its internal control over financial reporting was not effective as
at December 31, 2005; and (z) its disclosure controls and procedures (as defined
in Rule 13a-15(e) under the Exchange Act) are not effective to provide
reasonable assurance that information required to be disclosed in the reports
NNC or the Company, as the case may be, files and submits under the Exchange Act
is recorded, processed, summarized and reported as and when required (most
recently, as at March 31, 2006). Except as disclosed or incorporated by
reference in the Time of Sale Information and the Offering Memorandum, NNC and
its subsidiaries maintain systems of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed in accordance
with management’s general or specific authorizations; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain asset
accountability; (iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.
     (w)   No Unlawful Payments. NNC and the Company each has policies and
procedures in effect that prohibit the following activities by any director,
officer, agent, employee or other person associated with or acting on behalf of
either of them or any of their respective subsidiaries: (i) the use of corporate
funds for any unlawful contribution, gift, entertainment or other unlawful
expense relating to political activity; (ii) any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) the violation of any provision of the U.S. Foreign
Corrupt Practices Act of 1977; or (iv) any bribe, unlawful rebate, payoff,
influence payment, kickback or other unlawful payment.

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     (x)   Solvency. Except as disclosed in or incorporated by reference in the
Time of Sale Information and the Offering Memorandum, including without
limitation in the risk factors titled “NNC’s Guarantee may be unenforceable,
subordinated or limited in scope under the insolvency and creditor protection
laws of Canada”, “NNI’s Guarantee may be unenforceable under U.S. federal and
state fraudulent conveyance statutes” and “Material adverse legal judgments,
fines, penalties or settlements, including the Proposed Class Action Settlement,
could have a material adverse effect on our business, results of operations,
financial condition and liquidity, which could be very significant and could
prevent the Issuers from fulfilling, among other things, their obligations under
the Notes and the Guarantees”, immediately after the Closing Date, each Issuer
(after giving effect to the issuance of the Securities and the other
transactions related thereto as described in the Time of Sale Information and
the Offering Memorandum) will be Solvent. As used in this paragraph, the term
“Solvent” means, (A) with respect to NNI on a particular date, that on such date
(i) the fair market value of the assets of NNI, at a fair valuation viewing NNI
as a going concern, exceeds its debts and liabilities, subordinated, contingent
or otherwise; (ii) the present fair saleable value of the property of NNI
exceeds the amount that will be required to pay the probable liability of its
debts and other liabilities, subordinated, contingent or otherwise as such debts
and other liabilities become absolute and matured; (iii) NNI will be able to pay
its debts and liabilities, subordinated, contingent or otherwise as such debts
and liabilities become absolute and matured; and (iv) NNI will not have
unreasonably small capital with which to conduct the business in which it is
engaged as such business is now conducted and proposed to be conducted after the
Closing Date; and (B) with respect to NNC or the Company on a particular date,
(i) the aggregate property of NNC or the Company at fair valuation, or if
disposed of at a fairly conducted sale under legal process, is sufficient to
enable payment of all its obligations, due and accruing due; (ii) the property
of NNC or the Company is, at a fair valuation, greater than the total amount of
liabilities, including contingent liabilities, of NNC or the Company, as
applicable; (iii) NNC or the Company has not ceased paying its current
obligations in the ordinary course of business as they generally become due; and
(iv) NNC or the Company is not for any reason unable to meet its obligations as
they generally become due; in each case, it being understood that the Issuers
cannot be certain as to how a court would apply the foregoing standards to any
contingent liabilities in determining whether the relevant Issuer was solvent at
the relevant time.
     (y)   No Broker’s Fees. Neither NNC nor any of its subsidiaries is a party
to any contract, agreement or understanding with any person (other than this
Agreement) that would give rise to a valid claim against NNC or any of its
subsidiaries or any Initial Purchaser for a brokerage commission, finder’s fee
or like payment in connection with the offering and sale of the Securities.
     (z)   Rule 144A Eligibility. On the Closing Date, the Securities will not
be of the same class as securities listed on a U.S. national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S. automated
inter-dealer quotation system; and each of the Preliminary Offering Memorandum
and the Offering Memorandum, as of its respective date, contains or will contain
all the information that, if requested by a prospective purchaser of the
Securities, would be required to be provided to such prospective purchaser
pursuant to Rule 144A(d)(4) under the Securities Act.

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     (aa)   No Integration. Neither the Company nor any of its affiliates (as
defined in Rule 501(b) of Regulation D) has, directly or through any agent
(other than the Initial Purchasers, as to which no representation is made),
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Securities Act), that is or will be
integrated with the sale of the Securities in a manner that would require
registration of the Securities under the Securities Act.
     (bb)   No General Solicitation or Directed Selling Efforts. None of the
Company or any of its affiliates or any other person acting on its or their
behalf (other than the Initial Purchasers, as to which no representation is
made) has (i) solicited offers for, or offered or sold, the Securities by means
of (A) any form of general solicitation or general advertising within the
meaning of Rule 502(c) of Regulation D or (B) in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act, or
(ii) engaged in any directed selling efforts with respect to the Securities
within the meaning of Regulation S under the Securities Act (“Regulation S”),
and all such persons have complied with the offering restrictions requirements
of Regulation S.
     (cc)   Securities Law Exemptions. Assuming the accuracy of the
representations and warranties of the Initial Purchasers contained in Section
1(c) (including Annex C hereto) and their compliance with their agreements set
forth therein, and except in connection with the transactions contemplated by
the Registration Rights Agreement, it is not necessary, in connection with the
issuance and sale of the Securities to the Initial Purchasers and the offer,
resale and delivery of the Securities by the Initial Purchasers in the manner
contemplated by this Agreement, the Time of Sale Information and the Offering
Memorandum, to register the Securities under the Securities Act, to comply with
the “prospectus requirement” as that term is defined under applicable Canadian
Securities Laws or to qualify the Indenture under the Trust Indenture Act.
     (dd)   No Stabilization. None of the Issuers has taken, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Securities.
     (ee)   Margin Rules. Neither the issuance, sale and delivery of the Notes
nor the application of the proceeds thereof by the Company as described in the
Time of Sale Information and the Offering Memorandum will violate Regulation T,
U or X of the Board of Governors of the Federal Reserve System or any other
regulation of such Board of Governors.
     (ff)   Forward-Looking Statements. No forward-looking statement (within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act) contained in the Time of Sale Information and the Offering Memorandum has
been made or reaffirmed without a reasonable basis or has been disclosed other
than in good faith.

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     (gg)   Statistical and Market Data. Nothing has come to the attention of
the Issuers that has caused the Issuers to believe that the statistical and
market-related data included or incorporated by reference in the Time of Sale
Information and the Offering Memorandum is not based on or derived from sources
that are reliable and accurate in all material respects.
     (hh)   Sarbanes-Oxley Act. With respect to the period subsequent to the
filing of NNC’s Annual Report on Form 10-K/A for the year ended December 31,
2005, except as disclosed in or incorporated by reference in the Time of Sale
Information and the Offering Memorandum, to the knowledge of NNC, there is and
has been no failure on the part of NNC or its subsidiaries or their respective
directors or officers, in their capacities as such, to comply in all material
respects with any applicable provision of the United States Sarbanes-Oxley Act
of 2002 and the rules and regulations promulgated in connection therewith (the
“Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302
and 906 related to certifications.
     4.     Further Agreements of the Issuers. The Issuers jointly and severally
covenant and agree with each Initial Purchaser that:
     (a)   Delivery of Copies. The Company will deliver to the Initial
Purchasers as many copies of the Preliminary Offering Memorandum, any other Time
of Sale Information and the Offering Memorandum (including all amendments and
supplements thereto) as the Representative may reasonably request.
     (b)   Offering Memorandum, Amendments or Supplements. Before finalizing the
Offering Memorandum or making or distributing any amendment or supplement to any
of the Time of Sale Information or the Offering Memorandum or filing with the
Commission any document that will be incorporated by reference therein, the
Company will furnish to the Representative and counsel for the Initial
Purchasers a copy of the proposed Offering Memorandum or such amendment or
supplement or document to be incorporated by reference therein, for review, and
will not distribute any such proposed Offering Memorandum, amendment or
supplement or file any such document with the Commission to which the
Representative reasonably objects.
     (c)   Additional Written Communications. Before using, authorizing,
approving or referring to any written communication (as defined in the
Securities Act) that constitutes an offer to sell or a solicitation of an offer
to buy the Securities (an “Issuer Written Communication”) (other than written
communications that are listed on Annex A hereto and the Offering Memorandum),
the Company will furnish to the Representative and counsel for the Initial
Purchasers a copy of such written communication for review and will not use,
authorize, approve or refer to any such written communication to which the
Representative reasonably objects.
     (d)   Notice to the Representative. The Company will advise the
Representative promptly, and confirm such advice in writing, (i) of the issuance
by any governmental or regulatory authority of any order preventing or
suspending the use of the Time of Sale Information or the Offering Memorandum or
the initiation or threatening of any proceeding

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for that purpose; (ii) of the occurrence of any event at any time prior to the
completion of the initial offering of the Securities as a result of which any of
the Time of Sale Information, taken as a whole, or the Offering Memorandum as
then amended or supplemented would include any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
therein, in the light of the circumstances existing when the Time of Sale
Information or the Offering Memorandum is delivered to a purchaser, not
misleading; and (iii) of the receipt by the Company of any notice with respect
to any suspension of the qualification of the Securities for offer and sale in
any jurisdiction or the initiation or threatening of any proceeding for such
purpose; and the Company will use its reasonable best efforts to prevent the
issuance of any such order preventing or suspending the use of any of the Time
of Sale Information or the Offering Memorandum or suspending any such
qualification of the Securities and, if any such order is issued, will obtain as
soon as possible the withdrawal thereof.
     (e)   Ongoing Compliance of the Offering Memorandum and Time of Sale
Information. (1) If at any time prior to the earlier of (x) the completion of
the initial offering of the Securities and (y) the date that is nine months
following the Closing Date, (i) any event shall occur or condition shall exist
as a result of which the Offering Memorandum as then amended or supplemented
would include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in the light of
the circumstances existing when the Offering Memorandum is delivered to a
purchaser, not misleading or (ii) it is necessary to amend or supplement the
Offering Memorandum to comply with law, the Company will promptly notify the
Initial Purchasers thereof and promptly prepare and, subject to paragraph
(b) above, furnish to the Initial Purchasers such amendments or supplements to
the Offering Memorandum (or any document to be filed with the Commission or the
Canadian Securities Regulators and incorporated by reference therein) as may be
necessary so that the statements in the Offering Memorandum as so amended or
supplemented (or including such document to be incorporated by reference
therein) will not, in the light of the circumstances existing when the Offering
Memorandum is delivered to a purchaser, be misleading or so that the Offering
Memorandum will comply with law and (2) if at any time prior to the earlier of
(x) the completion of the initial offering of the Securities and (y) the date
that is nine months following the Closing Date (i) any event shall occur or
condition shall exist as a result of which the Time of Sale Information, taken
as a whole, as then amended or supplemented would include any untrue statement
of a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading or (ii) it is necessary to amend or supplement any of the
Time of Sale Information in order to comply with law, the Company will promptly
notify the Initial Purchasers thereof and promptly prepare and, subject to
paragraph (b) above, furnish to the Initial Purchasers, such amendments or
supplements to the Time of Sale Information (or any document to be filed with
the Commission or the Canadian Securities Regulators and incorporated by
reference therein) as may be necessary so that the statements in the Time of
Sale Information as so amended or supplemented (or including such document to be
incorporated by reference therein) will not, in the light of the circumstances
under which they were made, be misleading or so that any of the Time of Sale
Information as so amended or supplemented will comply with law.

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     (f)   Canadian Reports. The Issuers will file, within the time periods
prescribed by the applicable Canadian Securities Laws, such documents and
reports as may be required to be filed by the Issuers with Canadian Securities
Regulators under the applicable Canadian Securities Laws relating to the private
placement of Securities by the Initial Purchasers; provided that the Initial
Purchasers have delivered a request to effect such filings together with such
information as to permit the Issuers to do so, and the Issuers will pay any
filing fee prescribed with respect thereto.
     (g)   Blue Sky Compliance. The Company will arrange for the qualification
of the Securities for offer and sale under the securities or Blue Sky laws of
such jurisdictions as the Representative shall reasonably request and will
continue such qualifications in effect so long as required for the offering and
resale of the Securities; provided that none of the Issuers shall be required to
(i) qualify as a foreign corporation or other entity or as a dealer in
securities in any such jurisdiction where it would not otherwise be required to
so qualify, (ii) file any general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it
is not otherwise so subject.
     (h)   Clear Market. During the period from the date hereof through and
including the date that is 30 days after the date hereof, the Issuers will not,
without the prior written consent of the Representative, offer, sell, contract
to sell or otherwise dispose of any debt securities (other than any equity
linked or convertible securities or any intercompany debt or any related
external coupon stripping transactions) issued or guaranteed by any of the
Issuers and having a tenor of more than one year.
     (i)   Use of Proceeds. The Company will apply the net proceeds from the
sale of the Securities as described in the Time of Sale Information and the
Offering Memorandum under the heading “Use of Proceeds”.
     (j)   Supplying Information. While the Securities remain outstanding and
are “restricted securities” within the meaning of Rule 144(a)(3) under the
Securities Act, the Issuers will, during any period in which the Company is not
subject to and in compliance with Section 13 or 15(d) of the Exchange Act,
furnish to holders of the Securities and prospective purchasers of the
Securities designated by such holders, upon the request of such holders or such
prospective purchasers, the information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
     (k)   PORTAL and DTC. The Company will assist the Initial Purchasers in
arranging for the Securities to be designated Private Offerings, Resales and
Trading through Automated Linkages (“PORTAL”) Market securities in accordance
with the rules and regulations adopted by the National Association of Securities
Dealers, Inc. (“NASD”) relating to trading in the PORTAL Market and for the
Securities to be eligible for clearance and settlement through The Depository
Trust Company (“DTC”).

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     (l)   No Resales by the Company. Until the issuance of the Exchange
Securities, the Company will not, and will not permit any of its affiliates (as
defined in Rule 144 under the Securities Act) to, resell any of the Securities
that have been acquired by any of them, except for Securities purchased by the
Company or any of its affiliates and resold in a transaction registered under
the Securities Act.
     (m)   No Integration. None of the Company, any of its affiliates (as
defined in Rule 501(b) of Regulation D) or any person acting on behalf of the
Company or such affiliate will, directly or through any agent (other than the
Initial Purchasers, as to which no covenant is given), sell, offer for sale,
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act), that is or will be integrated with the sale of
the Securities in a manner that would require registration of the Securities
under the Securities Act.
     (n)   No General Solicitation or Directed Selling Efforts. None of the
Company or any of its affiliates or any other person acting on its or their
behalf (other than the Initial Purchasers, as to which no covenant is given)
will (i) solicit offers for, or offer or sell, the Securities by means of
(A) any form of general solicitation or general advertising within the meaning
of Rule 502(c) of Regulation D or (B) in any manner involving a public offering
within the meaning of Section 4(2) of the Securities Act, or (ii) engage in any
directed selling efforts with respect to the Securities within the meaning of
Regulation S, and all such persons will comply with the offering restrictions
requirement of Regulation S. The Company and its affiliates will not provide
access to the Electronic Roadshow (as defined in Annex A) to any prospective
investor in the Securities that is a resident in, or acting on behalf of an
entity resident in, any of the provinces or territories of Canada (it being
understood that no covenant is made by the Company with respect to any action
taken by any Initial Purchaser).
     (o)   No Stabilization. None of the Issuers will take, directly or
indirectly, any action designed to or that could reasonably be expected to cause
or result in any stabilization or manipulation of the price of the Securities.
     5.     Certain Agreements of the Initial Purchasers. Each Initial Purchaser
hereby represents and agrees that it has not and will not use, authorize use of,
refer to, or participate in the planning for use of, any written communication
that constitutes an offer to sell or the solicitation of an offer to buy the
Securities other than (i) a written communication that contains no “issuer
information” (as defined in Rule 433(h)(2) under the Securities Act) that was
not included (including through incorporation by reference) in the Preliminary
Offering Memorandum, (ii) any written communication listed on Annex A or
prepared pursuant to Section 4(c) above, (iii) any written communication
prepared by such Initial Purchaser and approved by the Company in advance in
writing or (iv) any written communication relating to or that contains the terms
of the Securities and/or other information that was included (including through
incorporation by reference) in the Preliminary Offering Memorandum.

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     6.     Conditions of Initial Purchasers’ Obligations. The obligation of
each Initial Purchaser to purchase Securities on the Closing Date as provided
herein is subject to the performance in all material respects by each Issuer of
their respective covenants and other obligations hereunder and to the following
additional conditions:
     (a)   Representations and Warranties. The representations and warranties of
each Issuer contained herein shall be true and correct on the date hereof and on
and as of the Closing Date; and the statements of each Issuer and their
respective officers made in any certificates delivered pursuant to this
Agreement shall be true and correct on and as of the Closing Date.
     (b)   No Downgrade. Subsequent to the execution and delivery of this
Agreement, (i) no downgrading shall have occurred in the rating accorded the
Securities or any other debt securities or preferred stock issued or guaranteed
by any Issuer by any “nationally recognized statistical rating organization”, as
such term is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act; and (ii) no such organization shall have publicly announced that
it has under surveillance or review, or has changed its outlook with respect to,
its rating of the Securities or of any other debt securities or preferred stock
issued or guaranteed by any Issuer (other than an announcement with positive
implications of a possible upgrading).
     (c)   No Material Adverse Change. Subsequent to the execution and delivery
of this Agreement, no event or condition of a type described in Section 3(e)
hereof shall have occurred or shall exist, which event or condition is not
described in or contemplated by the Time of Sale Information (excluding any
amendment or supplement thereto or any document filed with the Commission after
the Time of Sale and incorporated by reference therein) and the Offering
Memorandum (excluding any amendment or supplement thereto or any document filed
with the Commission after the date hereof and incorporated by reference therein)
and the effect of which in the reasonable judgment of the Representative, makes
it impracticable or inadvisable to proceed with the offering, sale or delivery
of the Securities on the terms and in the manner contemplated by this Agreement
and the Offering Memorandum.
     (d)   Officers’ Certificate. The Representative shall have received on and
as of the Closing Date a certificate, on behalf of NNC, of either (A) the chief
executive officer and the chief financial officer of NNC or (B) one of the
aforesaid officers and any one of the Corporate Secretary, the Controller or the
Treasurer of NNC (i) confirming that such officers have reviewed the Offering
Memorandum and, to the best knowledge of such officers after reasonable
investigation, the representation set forth in Section 3(a) hereof is true and
correct, (ii) confirming that the other representations and warranties of the
Issuers in this Agreement are true and correct (in each case, if not qualified
as to materiality or Material Adverse Effect, in all material respects) and that
the Issuers have complied with all agreements and satisfied all conditions on
their part to be performed or satisfied hereunder at or prior to the Closing
Date in all material respects and (iii) to the effect set forth in paragraphs
(b) and (c) above.

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     (e)   Comfort Letters. On the date of this Agreement and on the Closing
Date, Deloitte & Touche LLP shall have furnished to the Representative, at the
request of the Company, letters, dated the respective dates of delivery thereof
and addressed to the Initial Purchasers and the Board of Directors of each of
the Issuers, in form and substance reasonably satisfactory to the
Representative, containing statements and information of the type customarily
included in accountants’ “comfort letters” to initial purchasers with respect to
the financial statements and certain financial information contained or
incorporated by reference in the Time of Sale Information and the Offering
Memorandum.
     (f)   Opinion of Counsel for the Company. Gordon A. Davies, Esq., General
Counsel-Corporate and Corporate Secretary of NNC and the Company, Cleary
Gottlieb Steen & Hamilton LLP, special U.S. counsel for the Issuers, and Ogilvy
Renault LLP, Canadian counsel for the Issuers, shall have furnished to the
Representative, at the request of the Company, their written opinion or letter,
as the case may be, dated the Closing Date and addressed to the Initial
Purchasers, in form and substance reasonably satisfactory to the Representative,
to the effect set forth in Annexes D-1, D-2 and D-3, respectively, hereto.
     (g)   Opinion and 10b-5 Statement of Counsel for the Initial Purchasers.
The Representative shall have received on and as of the Closing Date an opinion
and 10b-5 statement from Cahill Gordon & Reindel llp, counsel for the Initial
Purchasers, and an opinion from Blake, Cassels & Graydon LLP, Canadian counsel
for the Initial Purchasers, with respect to such matters as the Representative
may reasonably request, and such counsel shall have received such documents and
information as they may reasonably request to enable them to pass upon such
matters.
     (h)   No Legal Impediment to Issuance. No action shall have been taken and
no statute, rule, regulation or order shall have been enacted, adopted or issued
by any United States federal or Canadian federal, state, provincial, territorial
or foreign governmental or regulatory authority that would, as of the Closing
Date, prevent the issuance or sale of the Notes or the issuance of the
Guarantees; and no injunction or order of any United States federal or Canadian
federal, state, provincial, territorial or foreign court shall have been issued
that would, as of the Closing Date, prevent the issuance or sale of the Notes or
the issuance of the Guarantees.
     (i)   Good Standing. The Representative shall have received on and as of
the Closing Date evidence reasonably satisfactory to the Representative of the
good standing of the Issuers in their respective jurisdictions of organization
and the jurisdictions of their principal executive offices, in each case in
writing or any standard form of telecommunication, from the appropriate
governmental authorities of such jurisdictions.
     (j)   Registration Rights Agreement. The Initial Purchasers shall have
received a counterpart of the Registration Rights Agreement that shall have been
executed and delivered by a duly authorized officer of each Issuer.
     (k)   PORTAL and DTC. The Securities shall have been approved by the NASD
for trading in the PORTAL Market and shall be eligible for clearance and
settlement through DTC.

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     (l)   Additional Documents. On or prior to the Closing Date, the Issuers
shall have furnished to the Representative such further certificates and
documents as the Representative may reasonably request.
     All opinions, letters, certificates and evidence mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Initial Purchasers.
     7.     Indemnification and Contribution.
     (a)   Indemnification of the Initial Purchasers. The Issuers, jointly and
severally, agree to indemnify and hold harmless each Initial Purchaser, its
affiliates, directors and officers and each person, if any, who controls such
Initial Purchaser within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, legal fees and other
expenses incurred in connection with any suit, action or proceeding or any claim
asserted, as such fees and expenses are incurred), joint or several, that arise
out of, or are based upon, any untrue statement or alleged untrue statement of a
material fact contained in the Preliminary Offering Memorandum, any of the other
Time of Sale Information, the Electronic Roadshow, any Issuer Written
Communication or the Offering Memorandum (or any amendment or supplement
thereto) or any omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except insofar as such
losses, claims, damages or liabilities arise out of, or are based upon, any
untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with any information relating to any Initial
Purchaser furnished to the Company in writing by such Initial Purchaser through
the Representative expressly for use therein, it being understood and agreed
that the only such information furnished by any Initial Purchaser consists of
the information described as such in subsection (b) below.
     (b)   Indemnification of the Issuers. Each Initial Purchaser agrees,
severally and not jointly, to indemnify and hold harmless each Issuer, each of
the Issuer’s officers and directors and each person, if any, who controls any
Issuer within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the indemnity set forth in paragraph (a)
above, but only with respect to any losses, claims, damages or liabilities that
arise out of, or are based upon, any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with any
information relating to such Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through the Representative expressly for use
in any of the Time of Sale Information and the Offering Memorandum (or any
amendment or supplement thereto), it being understood and agreed that the only
such information consists of the following: the information contained in (a) the
Preliminary Offering Memorandum and the Offering Memorandum in the third
paragraph, the fifth and sixth sentences of the eleventh paragraph and the
thirteenth paragraph under the caption “Plan of distribution” and (b) the
Canadian Preliminary Offering Memorandum and the Canadian Offering Memorandum in
the fourth and sixth paragraphs under the heading “Relationships between the
Company and certain Initial Purchasers”; provided, however, that the Initial
Purchasers shall not be liable for any losses, claims, damages or liabilities
arising out of or based upon the Company’s failure to amend or supplement any of
the Time of Sale Information or the Offering Memorandum pursuant to
Section 4(b).

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     (c)   Notice and Procedures. If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any person in respect of which indemnification may be sought
pursuant to either paragraph (a) or (b) above, such person (the “Indemnified
Person”) shall promptly notify the person against whom such indemnification may
be sought (the “Indemnifying Person”) in writing; provided that the failure to
notify the Indemnifying Person shall not relieve it from any liability that it
may have under this Section 7 except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure; and provided, further, that the failure to notify the Indemnifying
Person shall not relieve it from any liability that it may have to an
Indemnified Person otherwise than under this Section 7. If any such proceeding
shall be brought or asserted against an Indemnified Person and it shall have
notified the Indemnifying Person thereof, the Indemnifying Person shall retain
counsel reasonably satisfactory to the Indemnified Person (who shall not,
without the consent of the Indemnified Person, be counsel to the Indemnifying
Person) to represent the Indemnified Person and any others entitled to
indemnification pursuant to this Section 7 that the Indemnifying Person may
designate in such proceeding and shall pay the fees and expenses of such counsel
related to such proceeding, as incurred. In any such proceeding, any Indemnified
Person shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Person unless
(i) the Indemnifying Person and the Indemnified Person shall have mutually
agreed to the contrary; (ii) the Indemnifying Person has failed within a
reasonable time after notice of the action to retain counsel reasonably
satisfactory to the Indemnified Person; (iii) the named parties in any such
proceeding (including any impleaded parties) include both the Indemnifying
Person and the Indemnified Person and the Indemnified Person shall have
reasonably concluded that there may be legal defenses available to it that are
different from or in addition to those available to the Indemnifying Person; or
(iv) the named parties in any such proceeding (including any impleaded parties)
include both the Indemnifying Person and the Indemnified Person and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between them. It is understood and
agreed that the Indemnifying Person shall not, in connection with any proceeding
or related proceeding in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Indemnified Persons, and that all such fees and expenses shall be reimbursed
as they are incurred. Any such separate firm for any Initial Purchaser, its
affiliates, directors and officers and any control persons of such Initial
Purchaser shall be designated in writing by [                    ] and any such
separate firm for the Issuers, their respective officers and directors and any
control persons of the Issuers shall be designated in writing by the Company.
The Indemnifying Person shall not be liable for any settlement of any proceeding
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with such consent or if there be a final judgment for
the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the written consent of the
Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnification could have been sought hereunder by such Indemnified
Person, unless such settlement (x) includes an unconditional release of such
Indemnified Person, in form and substance reasonably satisfactory to such
Indemnified Person, from all liability on claims that are the subject matter of
such proceeding and (y) does not include any statement as to or any admission of
fault, culpability or a failure to act by or on behalf of any Indemnified
Person.

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     (d)   Contribution. If the indemnification provided for in paragraphs
(a) and (b) above is unavailable to an Indemnified Person or insufficient in
respect of any losses, claims, damages or liabilities referred to therein, then
each Indemnifying Person under such paragraph, in lieu of indemnifying such
Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Issuers on the one hand and the Initial Purchasers on
the other from the offering of the Securities or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) but also the relative fault of the Issuers on the one hand and the Initial
Purchasers on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the Issuers
on the one hand and the Initial Purchasers on the other shall be deemed to be in
the same respective proportions as the net proceeds (before deducting expenses)
received by the Company from the sale of the Securities and the total discounts
and commissions received by the Initial Purchasers in connection therewith, as
provided in this Agreement, bear to the aggregate offering price of the
Securities. The relative fault of the Issuers on the one hand and the Initial
Purchasers on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by any Issuer or by the Initial Purchasers and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.
     (e)   Limitation on Liability. The Issuers and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this
Section 7 were determined by pro rata allocation (even if the Initial Purchasers
were treated as one entity for such purpose) or by any other method of
allocation that does not take account of the equitable considerations referred
to in paragraph (d) above. The amount paid or payable by an Indemnified Person
as a result of the losses, claims, damages and liabilities referred to in
paragraph (d) above shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such Indemnified Person in
connection with any such action or claim. Notwithstanding the provisions of this
Section 7, in no event shall an Initial Purchaser be required to contribute any
amount in excess of the amount by which the total discounts and commissions
received by such Initial Purchaser with respect to the offering of the
Securities exceeds the amount of any damages that such Initial Purchaser has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Initial Purchasers’ obligations to contribute
pursuant to this Section 7 are several in proportion to their respective
purchase obligations hereunder and not joint.

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     (f)   Non-Exclusive Remedies. The remedies provided for in this Section 7
are not exclusive and shall not limit any rights or remedies that may otherwise
be available to any Indemnified Person at law or in equity.
     8.     Termination. This Agreement may be terminated in the absolute
discretion of the Representative, by notice to the Company, if after the
execution and delivery of this Agreement and prior to the Closing Date
(i) trading generally shall have been suspended or materially limited on the New
York Stock Exchange, the Nasdaq National Market, the Toronto Stock Exchange or
the over-the-counter market; (ii) trading of any securities issued or guaranteed
by any Issuer shall have been suspended on any exchange or in any
over-the-counter market; (iii) a general moratorium on commercial banking
activities shall have been declared by New York, Ontario, United States federal
or Canadian federal authorities; or (iv) there shall have occurred any outbreak
or escalation of hostilities or any change in financial markets or any calamity
or crisis, either within or outside the United States or Canada, that, in the
reasonable judgment of the Representative, is material and adverse and makes it
impracticable or inadvisable to proceed with the offering, sale or delivery of
the Securities on the terms and in the manner contemplated by this Agreement,
the Time of Sale Information and the Offering Memorandum.
     9.     Defaulting Initial Purchaser.
     (a)   If, on the Closing Date, any Initial Purchaser defaults on its
obligation to purchase the Securities that it has agreed to purchase hereunder,
the non-defaulting Initial Purchasers may in their discretion arrange for the
purchase of such Securities by other persons satisfactory to the Company on the
terms contained in this Agreement. If, within 36 hours after any such default by
any Initial Purchaser, the non-defaulting Initial Purchasers do not arrange for
the purchase of such Securities, then the Company shall be entitled to a further
period of 36 hours within which to procure other persons satisfactory to the
non-defaulting Initial Purchasers to purchase such Securities on such terms. If
other persons become obligated or agree to purchase the Securities of a
defaulting Initial Purchaser, either the non-defaulting Initial Purchasers or
the Company may postpone the Closing Date for up to five full business days in
order to effect any changes that in the opinion of counsel for the Company or
counsel for the Initial Purchasers may be necessary in the Time of Sale
Information, the Offering Memorandum or in any other document or arrangement,
and the Company agrees to promptly prepare any amendment or supplement to the
Time of Sale Information or the Offering Memorandum that effects any such
changes. As used in this Agreement, the term “Initial Purchaser” includes, for
all purposes of this Agreement unless the context otherwise requires, any person
not listed in Schedule 1 hereto that, pursuant to this Section 9, purchases
Securities that a defaulting Initial Purchaser agreed but failed to purchase.
     (b)   If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Initial Purchaser or Initial Purchasers by the
non-defaulting Initial Purchasers and the Company as provided in paragraph
(a) above, the aggregate principal amount of such Securities that remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
all the Securities, then the Company shall have the right to require each
non-defaulting Initial Purchaser to purchase the principal amount of Securities
that such Initial Purchaser agreed to purchase hereunder plus such Initial
Purchaser’s pro rata share (based on the principal amount of Securities that
such Initial Purchaser agreed to purchase hereunder) of the Securities of such
defaulting Initial Purchaser or Initial Purchasers for which such arrangements
have not been made.

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     (c)   If, after giving effect to any arrangements for the purchase of the
Securities of a defaulting Initial Purchaser or Initial Purchasers by the
non-defaulting Initial Purchasers and the Company as provided in paragraph
(a) above, the aggregate principal amount of such Securities that remains
unpurchased exceeds one-eleventh of the aggregate principal amount of all the
Securities, or if the Company shall not exercise the right described in
paragraph (b) above, then this Agreement shall terminate without liability on
the part of the non-defaulting Initial Purchasers. Any termination of this
Agreement pursuant to this Section 9 shall be without liability on the part of
the Issuers, except that the Issuers will continue to be liable for the payment
of expenses as set forth in Section 10(a) hereof and except that the provisions
of Section 7 hereof shall not terminate and shall remain in effect.
     (d)   Nothing contained herein shall relieve a defaulting Initial Purchaser
of any liability it may have to the Company, the Guarantor or any non-defaulting
Initial Purchaser for damages caused by its default.
10.     Payment of Expenses.
     (a)   Whether or not the transactions contemplated by this Agreement are
consummated or this Agreement is terminated, the Issuers, jointly and severally,
agree to pay or cause to be paid all costs and expenses incident to the
performance of their respective obligations hereunder, including without
limitation, (i) the costs incident to the authorization, issuance, sale,
preparation and delivery of the Securities; (ii) the costs incident to the
preparation and printing of the Preliminary Offering Memorandum, any other Time
of Sale Information and the Offering Memorandum (including any amendment or
supplement thereto) and the distribution thereof; (iii) the costs of reproducing
and distributing each of the Transaction Documents; (iv) the fees and expenses
of the Issuers’ counsel and independent accountants; (v) the reasonable fees and
expenses incurred in connection with the registration or qualification and
determination of eligibility for investment of the Securities under the laws of
such jurisdictions as the Representative may reasonably designate and the
preparation, printing and distribution of a Blue Sky Memorandum (including the
reasonable related fees and expenses of counsel for the Initial Purchasers);
(vi) any fees charged by rating agencies for rating the Securities; (vii) the
fees and expenses of the Trustee and any paying agent (including related fees
and expenses of any counsel to such parties); (viii) all expenses and
application fees incurred in connection with the application for the inclusion
of the Securities on the PORTAL Market and the approval of the Securities for
book-entry transfer by DTC; and (ix) all expenses incurred by the Company in
connection with any “road show” presentation to potential investors, including
all air travel expenses relating thereto (but excluding any expenses associated
with accommodations of any employees of the Initial Purchasers in connection
with any such “road show” presentation and any expenses associated with any
meals in connection with any such “road show” presentation).
     (b)   If (i) this Agreement is terminated pursuant to Section 8(ii),
(ii) the Company for any reason fails to tender the Securities for delivery to
the Initial Purchasers or (iii) the Initial Purchasers decline to purchase the
Securities for any reason permitted under this Agreement, the

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Issuers, jointly and severally, agree to reimburse the Initial Purchasers for
all out-of-pocket costs and expenses (including the reasonable fees and expenses
of their counsel) reasonably incurred by the Initial Purchasers in connection
with this Agreement and the offering contemplated hereby.
     11.     Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective successors and any controlling persons referred to herein, and the
affiliates, officers and directors of each Initial Purchaser and the respective
officers and directors of the Issuers referred to in Section 7 hereof. Nothing
in this Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or in respect of this Agreement
or any provision contained herein. No purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor merely by reason of such purchase.
     12.     Survival. The respective indemnities, rights of contribution,
representations, warranties and agreements of the Issuers, and the Initial
Purchasers contained in this Agreement or made by or on behalf of the Issuers,
or the Initial Purchasers pursuant to this Agreement or any certificate
delivered pursuant hereto shall survive the delivery of and payment for the
Securities and shall remain in full force and effect, regardless of any
termination of this Agreement or any investigation made by or on behalf of the
Issuers or the Initial Purchasers.
     13.     Certain Defined Terms. For purposes of this Agreement, (a) except
where otherwise expressly provided, the term “affiliate” has the meaning set
forth in Rule 405 under the Securities Act; (b) the term “business day” means
any day other than a day on which banks are permitted or required to be closed
in New York City; (c) the term “subsidiary” has the meaning set forth in Rule
405 under the Securities Act; and (d) the term “written communication” has the
meaning set forth in Rule 405 under the Securities Act.
     14.     Miscellaneous.
     (a)   Authority of the Representative. Any action by the Initial Purchasers
hereunder may be taken by [                      ] on behalf of the Initial
Purchasers, and any such action taken by [                      ] shall be
binding upon the Initial Purchasers.
     (b)   Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or transmitted and
confirmed by any standard form of telecommunication. Notices to the Initial
Purchasers shall be given to the Representative c/o [                    ] (fax:
[                      ]; Attention: [                      ], with a copy to
Michael A. Becker, Esq., Cahill Gordon & Reindel llp, 80 Pine Street, New York,
New York 10005 (fax: (212) 269-5420). Notices to the Company shall be given to
it at 8200 Dixie Road, Brampton, Ontario, Canada L6T 5P6 (fax: (905) 863-8386)
(or such other address and fax number as shall be furnished to the
Representative); Attention: Gordon A. Davies, with a copy to Craig B. Brod, Esq.
and Sandra L. Flow, Esq., Cleary Gottlieb Steen & Hamilton LLP, One Liberty
Plaza, New York, New York 10006 (fax: (212) 225-3999).

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     (c)   Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
     (d)   Judgment Currency. The Issuers shall, jointly and severally,
indemnify each Initial Purchaser, their respective affiliates, each person, if
any, who controls any of such parties within the meaning of the Securities Act
or the Exchange Act and each of their respective officers, directors, employees
and agents against any loss incurred by such party as a result of any judgment
or order being given or made in favor of such party for any amount due under
this Agreement and such judgment or order being expressed and paid in a currency
(the “Judgment Currency”) other than United States dollars and as a result of
any negative variance between (i) the rate of exchange at which the United
States dollar amount is converted into the Judgment Currency for the purpose of
such judgment or order and (ii) the spot rate of exchange in The City of New
York at which such party on the date of payment of such judgment or order is
able to purchase United States dollars with the amount of the Judgment Currency
actually received by such party. The foregoing indemnity shall continue in full
force and effect notwithstanding any such judgment or order as aforesaid. The
term “spot rate of exchange” shall include any premiums and costs of exchange
payable in connection with the purchase of, or conversion into, United States
dollars.
     (e)   Consent to Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement, the Transactions Document or the transactions contemplated
hereby or thereby may be brought in any federal or New York State court located
in New York City, New York County, and the Issuers hereby consent to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venues of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient form. Process in any such suit, action or proceeding
may be served on any of the Issuers anywhere in the world, whether within or
without the jurisdiction of any such court. Without limiting the foregoing, each
Issuer agrees that service of process on any such Issuer as provided in clause
(b) above shall be deemed effective service of process on such Issuer.
     (f)   Counterparts. This Agreement may be signed in counterparts (which may
include counterparts delivered by any standard form of telecommunication), each
of which shall be an original and all of which together shall constitute one and
the same instrument.
     (g)   Amendments or Waivers. No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto.
     (h)   Headings. The headings herein are included for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.

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     If the foregoing is in accordance with your understanding, please indicate
your acceptance of this Agreement by signing in the space provided below.
Very truly yours,

             
NORTEL NETWORKS LIMITED
 
      By:   /s/  Katharine B. Stevenson         Name:   Katharine B. Stevenson 
      Title:   Treasurer              By:   /s/  Gordon A. Davies        
Name:   Gordon A. Davies        Title:   General Counsel – Corporate and
Corporate Secretary            NORTEL NETWORKS CORPORATION
 
      By:   /s/  Katharine B. Stevenson         Name:   Katharine B. Stevenson 
      Title:   Treasurer              By:   /s/  Gordon A. Davies        
Name:   Gordon A. Davies        Title:   General Counsel – Corporate and
Corporate Secretary            NORTEL NETWORKS INC.
 
      By:   /s/  Allen K. Stout         Name:   Allen K. Stout        Title:  
Vice President, Finance   

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Accepted: June 29, 2006
[                              ]
For itself and on behalf of the
several Initial Purchasers listed
in Schedule 1 hereto.

                By:   /s/  Authorized Signatory         Authorized Signatory   
           

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