Exhibit 10.3
EXECUTION COPY
AMENDED AND RESTATED MASTER INDEMNITY AGREEMENT dated the 24th day of October,
2005 and entered into by
NORTEL NETWORKS LIMITED
(the “Principal”)
and
EXPORT DEVELOPMENT CANADA
(“EDC”)

    WHEREAS the Principal has entered into an amended and restated master
facility agreement dated the 24th day of October, 2005 with EDC (the “Amended
and Restated Facility Agreement”) pursuant to which EDC has agreed to provide
certain types of support to the Principal under the Small Bonds Facility and the
General Support Facility through the issuance of guarantee bonds and other
instruments so as to enable the Principal, or other affiliated entities
designated by the Principal, to obtain assistance from financial institutions;  
    AND WHEREAS the Amended and Restated Facility Agreement contemplates the
execution and delivery of this amended and restated master indemnity agreement,
reflecting amendments to the master indemnity agreement dated February 14, 2003
between the parties hereto;       NOW THEREFORE in consideration of the
premises, the agreement of EDC under the Amended and Restated Facility Agreement
to provide support to the Principal and other good and valuable consideration,
the receipt and sufficiency of which the Principal hereby acknowledges, the
Principal covenants and agrees with EDC as follows:   1.   DEFINITIONS      
Capitalized words and phrases used in this Indemnity Agreement shall have the
meaning attributed to them herein or where they are not specifically defined
herein shall have the same meaning as given to them in the Amended and Restated
Facility Agreement.       In this Indemnity Agreement the plural includes the
singular and vice versa.       References to any agreement (including without
limitation the Amended and Restated Facility Agreement) or other instrument are
deemed to include such agreement or other instrument as it may be modified,
amended, supplemented or restated in accordance with its terms.      
"Beneficiary” means any Person with whom EDC has entered into an EDC Support
Agreement in order to provide Support;

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    "Business Day” means any day excluding Saturday, Sunday and any other day
which is a legal holiday in Ottawa, Canada;       "EDC Support Agreement” and
“EDC Support Agreements” means any agreements heretofore or hereafter entered
into by EDC that provide Support on behalf of the Principal or any of its
affiliates pursuant to the Small Bonds Facility or the General Support Facility
(including, for greater certainty, and without limitation, pursuant to the Small
Bonds Facility, Receivables Bonding Facility and General Support Facility, as
such terms were defined in the Original Agreement) but does not include any
reinsurance agreements that EDC may enter into in order to reinsure itself with
respect to any of the risks assumed by EDC under any EDC Support Agreements;    
  "Indemnity Agreement” means this amended and restated Master Indemnity
Agreement dated the 24th day of October, 2005;       "Libor” means the rate per
annum (calculated on the basis of a 360-day year) for one month deposits of
CDN$, Euro, Sterling or US$, as the case may be, appearing on the Telerate Page
3750 at approximately 11:00 a.m., London time, on the day that is two (2) London
banking days preceding the first day of the period for which interest must be
determined, or if such page is not available, on a similar quote from a
comparable source.       "Termination Instruction Letter” means the letter dated
October 24, 2005 from the Principal and certain of its Subsidiaries to JPMorgan
Chase Bank, N.A., as Collateral Agent, and EDC, requesting EDC, among other
things, to consent to the release and discharge of security.   2.   LIABILITY OF
THE PRINCIPAL

  (a)   In consideration of the Support to be provided by EDC under the Small
Bonds Facility pursuant to the Amended and Restated Facility Agreement, the
Principal hereby unconditionally and irrevocably agrees to indemnify EDC,
against all claims and demands made against EDC under or with respect to the EDC
Support Agreements executed with respect to the Small Bonds Facility, including
any amount that EDC pays under such EDC Support Agreements, and against all
costs (including the costs of enforcing the indemnity under this Section 2(a)),
expenses and damages incurred by EDC, directly or indirectly, and arising or
resulting from such claims or demands. The Principal also agrees, as part of its
indemnification obligations under this Section 2(a), to pay interest to EDC at
Libor plus such margin per annum as is separately agreed in writing by EDC and
the Principal on any amount for which indemnification is to be provided under
this Section 2(a) (including the said costs and expenses), such interest to
accrue from the date of demand by EDC to the date of payment both before and
after demand and judgment.     (b)   In consideration of the Support to be
provided by EDC under the General Support Facility pursuant to the Amended and
Restated Facility Agreement, the Principal hereby unconditionally and
irrevocably agrees to indemnify EDC against all

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      claims and demands made against EDC under or with respect to the EDC
Support Agreements executed with respect to the General Support Facility,
including any amount that EDC pays under such EDC Support Agreements or any
unpaid amount owed to EDC as a result of the exercise by EDC of any put or
similar right in respect of any such EDC Support Agreements, and against all
costs (including the costs of enforcing the indemnity under this Section 2(b)),
expenses and damages incurred by EDC, directly or indirectly, and arising or
resulting from such claims or demands. The Principal also agrees, as part of its
indemnification obligations under this Section 2(b), to pay interest to EDC at
Libor plus such margin per annum as is separately agreed in writing by EDC and
the Principal on any amount for which indemnification is to be provided under
this Section 2(b) (including the said costs and expenses), such interest to
accrue from the date of demand by EDC to the date of payment both before and
after demand and judgment.     (c)   Payments due to EDC hereunder shall be made
to EDC in the currency in which the relevant payment or payments under the EDC
Support Agreements for which indemnification is being sought under Section 2(a)
or Section 2(b), as applicable, were made by EDC and, in the case of costs and
expenses, in the currency in which such costs and expenses were incurred.    
(d)   The Principal agrees that its liability hereunder shall not be varied or
discharged by reason of the EDC Support Agreements or any of them, or any
related document, being or becoming, in whole or in part, illegal,
unenforceable, void or discharged, or by reason of any negligence on the part of
EDC except to the extent that such negligence constitutes gross negligence or
wilful misconduct in which case the liability of the Principal hereunder shall
be varied or discharged, but only to the extent that such gross negligence or
wilful misconduct: (i) was the direct and primary cause of a claim or demand
being made against EDC under an EDC Support Agreement; or (ii) increased the
liability of the Principal hereunder. The Principal’s liability hereunder shall
not otherwise be varied, discharged or released except by full payment to EDC of
all amounts payable to EDC hereunder. Without limiting the foregoing, the
Principal’s liability hereunder shall continue with respect to and include any
amounts that EDC may be required to pay pursuant to the terms of an EDC Support
Agreement that deem such EDC Support Agreement to continue to be effective or to
be reinstated after the date on which EDC’s liability under such EDC Support
Agreement would otherwise have expired.     (e)   Any computation of interest
hereunder shall take into account the actual number of days occurring in the
period for which interest is payable and on the basis of a 360-day year. For the
purposes of the Interest Act (Canada), (i) the interest rate payable, expressed
as an annual rate, shall be equivalent to the applicable rate based on a year of
360 days, multiplied by the actual number of days in the calendar year in which
the period for which such interest is payable (or compounded) ends, and divided
by 360, (ii) the principle of deemed reinvestments of interest does not apply to
any such interest calculation and (iii)

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      the rate of interest specified in this Indemnity Agreement is intended to
be a nominal rate and not an effective rate or yield.

3.   EDC MAY ACT IN ITS DISCRETION

  (a)   The Principal absolutely and irrevocably authorizes EDC to: (i) pay
immediately at EDC’s absolute and sole discretion, in whole or in part, any
amounts which, in EDC’s reasonable opinion, are required to be paid pursuant to
the requirements of any EDC Support Agreement; and (ii) enter into any agreement
with a Beneficiary for the purpose of discharging, in whole or in part, EDC’s
obligations under an EDC Support Agreement. EDC will give written notice to the
Principal no less than one (1) Business Day prior to making any payment under an
EDC Support Agreement or entering into any such agreement with a Beneficiary.  
  (b)   The Principal waives any requirement that EDC make demand upon, or seek
to enforce remedies against, any Person before making demand for payment
hereunder, or seeking to enforce any of its rights hereunder, or enforcing any
security therefor, and EDC shall not be bound to exhaust its recourse against
any Person or any collateral it may hold (or that may be held on its behalf),
before demanding or being entitled to a payment hereunder.     (c)   EDC will
not enter into, or consent to any amendments to the provisions of, or issue any
substitute for, or renew, any EDC Support Agreement without the prior written
consent of the Principal provided that in no event shall any failure of EDC to
obtain such consent release the Principal from any liability or obligations
hereunder except to the extent that such failure may result in the Principal
incurring a liability hereunder that it would not otherwise have incurred or
incurring a greater liability hereunder than it would otherwise have incurred.

4.   UNDERTAKINGS OF THE PRINCIPAL

  (d)   Without prejudice to the Principal’s rights under Section 2(d) hereof
and to the fullest extent permitted by law, the Principal hereby waives any
right of counterclaim, right of set-off or deduction and the benefit of all
privileges and defences which now or hereafter may be available to the
Principal, including the benefit of discussion and division, and the Principal
waives diligence, presentment, demand, protest and notice of every kind except
as specifically required hereunder or under any other Facility Document.     (e)
  If requested by EDC, the Principal will assign to EDC, by instruments
satisfactory to EDC and to the extent that the Principal is not legally or
contractually prohibited from doing so, any rights that the Principal may have
against any party to recover any sums demanded and paid under an EDC Support
Agreement until all such sums owed to EDC by the Principal under this Indemnity
Agreement with respect to such EDC Support Agreement have been paid to EDC in
full.

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  (f)   Unless all sums owed by the Principal to EDC under this Indemnity
Agreement with respect to a particular EDC Support Agreement have been paid in
full, the Principal agrees that (i) its right to receive payments or
distributions of any kind shall be, and it shall cause any such rights of its
affiliates to be, subordinate to the rights of EDC and (ii) it shall, and it
shall cause its affiliates to, hold in trust for, and pay over to, EDC any
payments or distributions of any kind received by the Principal or any such
affiliate, in each case, in respect of any claim that the Principal or any such
affiliate may make as a creditor in the bankruptcy or liquidation of the Person
whose non-payment or whose call on an instrument that was, in either case,
covered by the terms of such EDC Support Agreement resulted in a payment by EDC
under such EDC Support Agreement and further resulted in such sums being owed to
EDC hereunder.

5.   REPRESENTATIONS OF THE PRINCIPAL       The Principal represents and
warrants to EDC that:

  (g)   it is duly incorporated and validly subsisting under the laws of its
place of incorporation and that this Indemnity Agreement has been duly
authorized, executed and delivered by it and is valid and binding on it; and    
(h)   each action to which the Principal requests EDC’s consent and/or
instruction in the Termination Instruction Letter does not contravene the terms
of, or result in the breach of, the Agreements, the other Security Documents (as
“Agreements” and “Security Documents” are defined in or for the purposes of the
Termination Instruction Letter) or the Indentures (as such term is defined in
the Security Agreements).

6.   APPLICATION OF RECOVERIES       Any sums recovered in respect of a payment
made pursuant to an EDC Support Agreement shall be first applied to the costs
and expenses incurred by EDC to effect such recovery and then retained by EDC to
the extent that any monies are due to EDC from the Principal pursuant to this
Indemnity Agreement, provided that any monies remaining thereafter shall,
subject to applicable law, be paid to the Principal.   7.   RIGHTS UNIMPAIRED  
    EDC’s rights and remedies under this Indemnity Agreement are cumulative and
are in addition to, and not in substitution for, any rights or remedies provided
by law, in equity or otherwise and any waiver by EDC of the strict observance or
performance of, or compliance with, any term of this Indemnity Agreement shall
not be deemed to be a waiver of any other term or of any subsequent default or
breach.

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8.   TERMINATION OR SUSPENSION OF EDC SUPPORT AGREEMENTS       EDC will not
exercise any rights that it may have under any EDC Support Agreement to notify
the Beneficiary thereof that such EDC Support Agreement has been terminated or
suspended unless: (i) an Event of Default has occurred; or (ii) any call has
been made on any Instrument issued on behalf of the Principal or any Subsidiary,
whether or not such Instrument is subject to the Amended and Restated Facility
Agreement, which, together with any other calls for performance on any such
Instruments after February 14, 2003, aggregates in excess of US $100,000,000;
(iii) until the Trigger Date, the NNL Corporate Family Rating or the NNL
Corporate Credit Rating with respect to senior secured long-term debt of the
Principal shall have ceased to exist or shall have been downgraded to less than
“B3” or to less than “B minus”, respectively, and, after the Trigger Date, the
NNL Corporate Family Rating or the NNL Corporate Credit Rating with respect to
senior unsecured long-term debt of the Principal shall have ceased to exist or
shall be rated at less than “B3” or “B minus”, respectively; provided, however,
that if at any time after the Trigger Date the provisions of Section 5.8 of the
Amended and Restated Facility Agreement have resulted in the Facilities and all
obligations (whether absolute or contingent) to EDC being secured, the tests in
this clause (iii) with respect to the ratings for senior secured long-term debt
shall again apply; or (iv) in the case of a suspension pursuant to
Section 2.2(B) of the Amended and Restated Facility Agreement, an event shall
have occurred or circumstance shall exist that could reasonably be expected to
have a Material Adverse Effect; and in each and every such case, the Principal
acknowledges that EDC shall be entitled to exercise any such rights. EDC agrees
to provide written notice to the Principal contemporaneously with any written
notice provided to any Beneficiary under this Section 8; provided that failure
to give any such notice to the Principal shall not affect EDC’s ability to
terminate or suspend any such EDC Support Agreement in the circumstances
described in this Section 8.   9.   GOVERNING LAW       This Indemnity Agreement
shall be deemed to be made under and shall be governed by and be construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.   10.   NOTICE       Any demand or notice to be given
hereunder shall be given in writing to the other party and shall be sent by
facsimile or prepaid registered mail and shall be deemed to have been received,
if sent by facsimile, on the day following the transmission thereof and if sent
by prepaid registered mail on the fifth (5) day after mailing, excluding
Saturdays, Sundays and those statutory holidays upon which the offices of the
addressee are normally closed for business. The addresses and facsimile numbers
of the parties for the purposes of giving notice hereunder are as follows, or as
may be notified in writing to the other party:

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for EDC:
Export Development Canada
151 O’Connor Street
Ottawa, Ontario
Canada K1A 1K3

Facsimile: (613) 598-6858
for the Principal:
Nortel Networks Limited
8200 Dixie Road, Suite 100
Brampton, Ontario
Canada L6T 5P6
Attention: Assistant Treasurer
Facsimile: (905) 863-8563

11.   SUCCESSORS AND ASSIGNS       This Indemnity Agreement is binding upon the
Principal and its successors and permitted assigns and shall enure to the
benefit of EDC and its successors and assigns.   12.   COUNTERPARTS       This
Indemnity Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all such separate counterparts shall
together constitute but one and the same instrument.   13.   ORIGINAL MASTER
INDEMNITY AGREEMENT       The master indemnity agreement dated as of
February 14, 2003 between the parties hereto as amended and restated by this
Indemnity Agreement shall continue to be in full force and effect as amended
hereby and is hereby ratified and confirmed in the form of this Indemnity
Agreement. For greater certainty, all liability of the Principal thereunder or
in connection therewith shall continue to apply hereunder on the terms and
conditions herein set forth.       IN WITNESS WHEREOF, the Principal and EDC
have duly executed and delivered this Indemnity Agreement as of the date first
above written.

            NORTEL NETWORKS LIMITED

      Per:           Name:   Katharine B. Stevenson        Title:   Treasurer   

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                  Per:           Name:   Gordon A. Davies        Title:  
General Counsel - Corporate and
Corporate Secretary     

            EXPORT DEVELOPMENT CANADA
      Per:           Name:   Howard Clysdale        Title:   Senior Financial
Services Manager
Telecom Team              Per:           Name:   David Guy        Title:  
Director
Telecom Team