U.S.$1,300,000,000
 
CREDIT AGREEMENT
 
dated as of
 
February 14, 2006
 
among
 
Nortel Networks Inc.,
as Borrower,
 
The Lenders Party Hereto,
 
JPMorgan Chase Bank, N.A.,
as Administrative Agent,
 
J.P. Morgan Securities Inc.
and
Citigroup Global Markets Inc.,
as Joint Bookrunners and Joint Lead Arrangers,
 
Citicorp USA, Inc.,
as Syndication Agent,
 
and
 
Royal Bank of Canada,
as Documentation Agent
 
and
 
Export Development Canada,
as Managing Agent

 

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TABLE OF CONTENTS

                      Page
 
  ARTICLE I        
 
           
 
  DEFINITIONS        
 
           
Section 1.01.
  Definitions     1  
Section 1.02.
  Accounting Terms and Determinations     27  
Section 1.03.
  Types of Borrowings     27  
 
           
 
  ARTICLE II        
 
           
 
  THE CREDITS        
 
           
Section 2.01.
  Commitments to Lend     28  
Section 2.02.
  Notice of Borrowing     28  
Section 2.03.
  Notice to Lenders; Funding of Loans     29  
Section 2.04.
  Repayment of Loans; Evidence of Debt     29  
Section 2.05.
  Maturity of Loans     30  
Section 2.06.
  Interest Rates     30  
Section 2.07.
  Fees     31  
Section 2.08.
  Termination or Reduction of Commitments     31  
Section 2.09.
  Method of Electing Interest Rates     31  
Section 2.10.
  Prepayments     32  
Section 2.11.
  General Provisions as to Payments; Pro Rata Treatment     33  
Section 2.12.
  Funding Losses     33  
Section 2.13.
  Computation of Interest and Fees     34  
Section 2.14.
  Interest Act Equivalency     34  
 
           
 
  ARTICLE III        
 
           
 
  CONDITIONS        
 
           
 
  ARTICLE IV        
 
           
 
  REPRESENTATIONS AND WARRANTIES        
 
           
Section 4.01.
  Corporate Existence and Power     36  
Section 4.02.
  Corporate and Governmental Authorization; No Contravention     36  
Section 4.03.
  Binding Effect     36  
Section 4.04.
  Financial Information     37  
Section 4.05.
  Litigation     37  
Section 4.06.
  Taxes     37  
Section 4.07.
  Solvency     37  
Section 4.08.
  ERISA; Canadian Plans     38  

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                      Page
Section 4.09.
  Security Agreement Representations and Warranties     38  
Section 4.10.
  Disclosure     38  
Section 4.11.
  Investment Company Status     39  
Section 4.12.
  No Unlawful Payments     39  
Section 4.13.
  Compliance with Laws and Agreements     39  
 
           
 
  ARTICLE V        
 
           
 
  COVENANTS        
 
           
Section 5.01.
  Information     40  
Section 5.02.
  Notice of Material Events     41  
Section 5.03.
  Information Regarding Collateral     41  
Section 5.04.
  Existence; Conduct of Business     42  
Section 5.05.
  Use of Proceeds     42  
Section 5.06.
  Maintenance of Properties; Payment of Obligations     42  
Section 5.07.
  Insurance     42  
Section 5.08.
  Proper Records; Rights to Inspect     43  
Section 5.09.
  Liens     43  
Section 5.10.
  [Omitted]     44  
Section 5.11.
  Fundamental Changes     44  
Section 5.12.
  Restricted Payments     45  
Section 5.13.
  Minimum Adjusted EBITDA     46  
Section 5.14.
  Minimum Cash and Cash Equivalents     46  
Section 5.15.
  Restricted Asset Transfers by Credit Parties     46  
Section 5.16.
  Future Guarantors     47  
Section 5.17.
  Further Assurances     47  
 
           
 
  ARTICLE VI        
 
           
 
  DEFAULTS        
 
           
Section 6.01.
  Tranche A Events of Default     47  
Section 6.02.
  Tranche B Events of Default     49  
Section 6.03.
  Notice of Default     51  
 
           
 
  ARTICLE VII        
 
           
 
  AGENCY        
 
           
 
  ARTICLE VIII        
 
           
 
  CHANGE IN CIRCUMSTANCES        
 
           
Section 8.01.
  Basis for Determining Interest Rate Inadequate or Unfair     54  
Section 8.02.
  Illegality     55  

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                      Page
Section 8.03.
  Increased Cost and Reduced Return     55  
Section 8.04.
  Taxes     56  
Section 8.05.
  Base Rate Loans Substituted for Affected Euro-Dollar Loans     58  
Section 8.06.
  Mitigation Obligations; Replacement of Lenders     59  
 
           
 
  ARTICLE IX        
 
           
 
  MISCELLANEOUS        
 
           
Section 9.01.
  Notices     59  
Section 9.02.
  No Waivers     60  
Section 9.03.
  Expenses; Indemnification     60  
Section 9.04.
  Sharing of Set-offs     61  
Section 9.05.
  Amendments and Waivers     62  
Section 9.06.
  Successors and Assigns     63  
Section 9.07.
  Collateral     65  
Section 9.08.
  Governing Law; Submission to Jurisdiction     65  
Section 9.09.
  Counterparts; Integration; Effectiveness     66  
Section 9.10.
  WAIVER OF JURY TRIAL     66  
Section 9.11.
  Confidentiality     66  
Section 9.12.
  USA PATRIOT Act     67  
 
           
Schedule 1.01
  Existing Funded Debt        
Schedule 2.01
  Commitments        
Schedule 5.09
  Existing Liens        
 
           
EXHIBIT A
  — Tranche A Note        
EXHIBIT B
  — Tranche B Note        
EXHIBIT C
  — Opinion of Special U.S. Counsel for the Credit Parties        
EXHIBIT D
  — Opinion of General Counsel-Corporate and Corporate Secretary of NNC        
EXHIBIT E-1
  — Opinion of Special Canadian Counsel for the Credit Parties        
EXHIBIT E-2
  — Opinion of Special Quebec Counsel for the Credit Parties        
EXHIBIT F
  — Assignment and Assumption Agreement        
EXHIBIT G
  — Form of Perfection Certificate        
EXHIBIT H
  — Form of Guarantee Agreement        
EXHIBIT I
  — Form of U.S. Security Agreement        
EXHIBIT J
  — Form of Canadian Security Agreement        

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     CREDIT AGREEMENT dated as of February 14, 2006 among NORTEL NETWORKS INC.,
as Borrower, the Lenders party hereto, and JPMorgan Chase Bank, N.A., as
Administrative Agent.
     The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
     Section 1.01.   Definitions. The following terms, as used herein, have the
following meanings:
     “1988 Indenture” means the Indenture dated as of November 30, 1988 between
NNL and The Bank of New York, as successor to The Toronto-Dominion Bank Trust
Company, as trustee, as the same may be amended from time to time.
     “1996 Indenture” means the Indenture dated as of February 15, 1996 among
NNCC, as issuer, NNL, as guarantor, and The Bank of New York, as trustee, as the
same may be amended from time to time.
     “2001 Indenture” means the Indenture dated as of August 15, 2001 among NNC,
as issuer, NNL, as guarantor, and Deutsche Bank Trust Company Americas, as
successor to The Bankers Trust Company, as trustee, as the same may be amended
from time to time.
     “Adjusted EBITDA” means, with respect to NNC, for any period, the sum, all
as determined on a consolidated basis for NNC and its Subsidiaries in accordance
with GAAP (without duplication), of:
     (1)   Consolidated Net Income; plus
     (2)   to the extent Consolidated Net Income has been reduced thereby
(without duplication):
     (a)   all income taxes and related interest and penalties of NNC and its
Subsidiaries paid or accrued (net of any income tax credits or gains) in
accordance with GAAP for such period;
     (b)   Consolidated Fixed Charges;
     (c)   any non-cash expenses, charges or losses that decreased Consolidated
Net Income during such period;
     (d)   any loss, charge or cost attributable to exit or disposal activities
approved by the board of directors of NNC as part of a restructuring plan;
     (e)   any loss, charge or cost attributable to the restatements described
in the Disclosure Schedule;

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     (f)   any loss, charge or cost attributable to the actual and contemplated
transactions with Flextronics described in the Disclosure Schedule; and
     (g)   any loss, charge or cost attributable to the contracts existing on
the Effective Date with Bharat Sanchar Nigam Limited described in the Disclosure
Schedule but not any expansion option, extension, renewal or replacement
thereof; minus
     (3)   any non-cash credits and gains that increased Consolidated Net Income
during such period, including any reversal of a charge referred to in clauses
(2)(c) or (g) above; minus
     (4)   to the extent Consolidated Net Income has been increased thereby:
     (a)   any gains attributable to reversals prior to the Effective Date of
provisions relating to a certain customer bankruptcy settlement during the year
ended December 31, 2003 as disclosed in note 4 “Consolidated financial statement
details — Cost of revenue” to NNC’s consolidated financial statements contained
in NNC’s 2004 Form 10-K; and
     (b)   any credits and gains attributable to the restructuring of customer
financing receivables prior to the Effective Date.
Furthermore, the determination of the amount of Adjusted EBITDA for any four
full fiscal quarter period (the “Four Quarter Period”) shall be made on a pro
forma basis (as reasonably estimated by the Borrower in detail reasonably
satisfactory to the Agent) for:
(x)   any asset sale involving the sale of a Subsidiary or line of business by
NNC or any of its Subsidiaries, in each case, that accounted for $150,000,000 of
NNC’s consolidated revenues for the most recently ended period of four fiscal
quarters of NNC for which financial statements are available; and
(y)   any Asset Acquisition by NNC or any of its Subsidiaries which would have
accounted for at least $150,000,000 of NNC’s consolidated revenue for the most
recently ended period of four fiscal quarters of NNC for which financial
statements are available,
in each case, occurring (A) following the Effective Date and (B) during the Four
Quarter Period or at any time subsequent to the last day of the Four Quarter
Period and on or prior to the date of determination, so as to exclude or
include, as the case may be, the Borrower’s good faith estimate of any Adjusted
EBITDA (including any pro forma expense and cost reductions calculated on a
basis consistent with Regulation S-X under the Exchange Act) attributable to the
assets which are the subject of such asset sale or Asset Acquisition, as if such
asset sale or Asset Acquisition occurred on the first day of the Four Quarter
Period.
     “Adjusted LIBO Rate” means, with respect to any Euro-Dollar Borrowing for
any Interest Period, an interest rate per annum (rounded upwards, if necessary,
to the next 1/16 of 1%) equal to (a) the LIBO Rate for such Interest Period
multiplied by (b) the Statutory Reserve Rate.

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     “Administrative Questionnaire” means an administrative questionnaire in a
form supplied by the Agent.
     “Affiliate” means, as to any Person, (i) any other Person (a “Controlling
Person”) that directly, or indirectly through one or more intermediaries,
controls such Person or (ii) any Person (other than such Person and its
Subsidiaries) which is controlled by or is under common control with a
Controlling Person. As used herein, the term “control” means possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
     “Agent” means JPMorgan Chase Bank, N.A., in its capacity as administrative
agent for the Lenders hereunder, and its successors in such capacity.
     “Agreement” means this Credit Agreement and any Annexes, Appendices,
Exhibits and Schedules attached hereto, each of which is hereby incorporated in
the terms of this Agreement, as amended from time to time.
     “Applicable Margin” means, with respect to any Borrowing consisting of
Tranche A Loans or Tranche B Loans, the rate per annum set forth below opposite
the applicable tranche of Loans for such type of Borrowing:

              Euro-Dollar Borrowings   Base Rate Borrowings
Tranche A Loans
  2.25%   1.25%
Tranche B Loans
  3.00%   2.00%

     “Applicable Percentage” means, with respect to any Lender, the percentage
of the total Commitments and Loans, taken as a single class, represented by such
Lender’s Commitments and Loans.
     “Approved Fund” means any Person (other than a natural person) that is
engaged in making, purchasing, holding or investing in bank loans and similar
extensions of credit in the ordinary course of its business and that is
administered or managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.
     “Asset Acquisition” means (1) an investment by NNC or any Subsidiary of NNC
in any other Person pursuant to which such Person shall become a Subsidiary of
NNC or shall be merged, consolidated or amalgamated with or into NNC or any
Subsidiary of NNC, or (2) the acquisition by NNC or any Subsidiary of NNC of the
assets of any Person (other than a Subsidiary of NNC) which constitute all or
substantially all of the assets of such Person or comprise any division or line
of business of such Person or any other properties or assets of such Person
other than in the ordinary course of business.
     “Assignment and Assumption Agreement” means an Assignment and Assumption
Agreement substantially in the form of Exhibit F or such other form as may be
provided by the Agent from time to time.

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     “Attributable Debt” in respect of a Financing Lease means the present value
of the obligations of the lessee thereunder for rental payments during the
remaining term of such lease.
     “Base Rate” means, for any day, a rate per annum equal to the greater of
(a) the Prime Rate in effect on such day and (b) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. Any change in the Base Rate due to a
change in the Prime Rate or the Federal Funds Effective Rate shall be effective
from and including the effective date of such change in the Prime Rate or the
Federal Funds Effective Rate, respectively.
     “Base Rate Borrowing” has the meaning specified in Section 1.03.
     “Base Rate Loan” means a Loan to be made by a Lender as a Base Rate Loan or
converted to a Base Rate Loan in accordance with the applicable Notice of
Borrowing or Notice of Interest Rate Election or pursuant to Section 2.09 or
Article VIII.
     “Board” means the Board of Governors of the Federal Reserve System of the
United States of America.
     “Borrower” means Nortel Networks Inc., a Delaware corporation.
     “Borrowing” has the meaning set forth in Section 1.03.
     “Business Day” means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain closed; provided that, when used in connection with a Euro-Dollar Loan,
the term “Business Day” shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
     “Canadian Benefit Plans” means all material employee benefit plans of any
nature or kind whatsoever that are not Canadian Pension Plans and are maintained
or contributed to by NNC or any Subsidiary having employees in Canada.
     “Canadian Credit Parties” means NNC and the Canadian Subsidiary Guarantors.
     “Canadian Custodian” has the meaning set forth in Article VII.
     “Canadian Dollars” means lawful money of Canada.
     “Canadian Hypothec” has the meaning set forth in Article VII.
     “Canadian fondé de pouvoir” has the meaning set forth in Article VII.
     “Canadian Pension Plans” means each plan which is considered to be a
pension plan for the purposes of any applicable pension benefits standards
statute and/or regulation in Canada established, maintained or contributed to by
NNC or any Subsidiary for its employees or former employees.

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     “Canadian Security Agreement” means the Canadian Security and Pledge
Agreement, dated as of the Closing Date, by and among the Canadian Credit
Parties, the Collateral Agent and the other parties named therein in the form of
Exhibit J.
     “Canadian Subsidiary” means any Restricted Subsidiary organized under the
laws of Canada or any province or territory therein.
     “Canadian Subsidiary Guarantors” means NNL and each other Canadian
Subsidiary that becomes a Canadian Subsidiary Guarantor pursuant to
Section 5.16.
     “Capital Lease Obligations” of any Person means obligations of such Person
to pay rent or other amounts under any lease of (or other arrangement conveying
the right to use) real or personal property, or a combination thereof, which
obligations are required under GAAP to be classified and accounted for as
capital leases on a balance sheet of such Person. The amount of such obligations
will be the capitalized amount thereof determined in accordance with GAAP.
     “Capital Stock” means:
     (1)   with respect to any Person that is a corporation, any and all shares,
interests, participations or other equivalents (however designated and whether
or not voting) of corporate stock, including each class of Common Stock and
Preferred Stock of such Person; and
     (2)   with respect to any Person that is not a corporation, any and all
partnership, membership or other equity interests of such Person.
     “Change in Law” means (a) the adoption of any law, rule or regulation after
the date of this Agreement, (b) any change in any law, rule or regulation or in
the interpretation or application thereof by any Governmental Authority after
the date of this Agreement or (c) compliance by any Lender (or, for purposes of
Section 8.03(b), by any lending office of such Lender or by such Lender’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law, but if not having the force of law, the compliance
with which is in accordance with the general practice of Persons to whom such
request or directive is addressed) of any Governmental Authority made or issued
after the date of this Agreement.
     “Change of Control” means the occurrence of one or more of the following
events:
     (1)   any “person,” including its affiliates and associates, other than
NNC, any one or more Subsidiaries of NNC or NNC’s or such Subsidiaries’ employee
benefit plans, or any “group,” files a Schedule 13D or Schedule TO (or any
successor schedule, form or report under the Exchange Act) disclosing that such
person or group has become the “beneficial owner” of 50% or more of the combined
voting power of NNC’s Capital Stock having ordinary power to elect directors, or
has the power to, directly or indirectly, elect a majority of the members of
NNC’s Board of Directors;

5

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     (2)   NNC (or any successor to NNC in a transaction that does not
contravene the terms of Section 5.11) ceases to, directly or indirectly, be the
“beneficial owner” of 100% of the voting power of the Common Stock of NNL or the
Borrower (or any successor to NNL in a transaction that does not contravene the
terms of Section 5.11), except as permitted by the last paragraph of this
definition;
     (3)   there shall be consummated any share exchange, consolidation or
merger of NNC pursuant to which NNC’s Common Stock would be converted into cash,
securities or other property, or NNL or NNC sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets, in each
case other than pursuant to a share exchange, consolidation or merger of NNL or
NNC in which the holders of NNL’s or NNC’s Common Stock immediately prior to the
share exchange, consolidation or merger have, directly or indirectly, at least a
majority of the total voting power in the aggregate of all classes of Capital
Stock of the continuing or surviving corporation immediately after the share
exchange, consolidation or merger; or
     (4)   NNL, NNC or the Borrower is dissolved or liquidated, except as
permitted by the last paragraph of this definition.

    For purposes of this “Change of Control” definition:

     (1)   “person” or “group” has the meaning given to it for purposes of
Sections 13(d) and 14(d) of the Exchange Act or any successor provisions, and
the term “group” includes any group acting for the purpose of acquiring, holding
or disposing of securities within the meaning of Rule 13d-5(b)(1) under the
Exchange Act or any successor provision;
     (2)   a “beneficial owner” will be determined in accordance with Rule 13d-3
under the Exchange Act, as in effect on the Closing Date; and
     (3)   the number of shares of NNL’s voting stock outstanding will be deemed
to include, in addition to all outstanding shares of NNL’s voting stock and
unissued shares deemed to be held by the “person” or “group” or other person
with respect to which the Change of Control determination is being made, all
unissued shares deemed to be held by all other persons.
     Notwithstanding the foregoing, any (i) amalgamation, consolidation or
merger of NNC with or into NNL (whether directly or indirectly by merger with or
into an entity with only nominal assets and liabilities created in anticipation
or contemplation of such amalgamation, consolidation or merger), (ii) transfer
of assets solely between and among NNC, NNL and any successor entity to NNC or
NNL or (iii) liquidation or dissolution of NNL resulting in the transfer of all
of the assets of NNL to NNC shall not constitute a Change of Control.
     “Closing Date” means the date on or after the Effective Date on which the
conditions set forth in Article III have been satisfied.

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     “Collateral” means any and all “Collateral” as defined in any Security
Document, and all other property in which the Collateral Agent purportedly
acquires a security interest pursuant to any Security Document.
     “Collateral Agent” means JPMorgan Chase Bank, N.A., in its capacity as
Collateral Agent under the Security Agreement and the other Security Documents,
and its successors in such capacity.
     “Commission” means the United States Securities and Exchange Commission.
     “Commitment” means, with respect to each Lender, the aggregate of its
Tranche A Commitment and Tranche B Commitment.
     “Commitment Termination Date” means the earliest of (i) a date on which any
Borrowing has occurred, (ii) the date on which all of the Commitments have been
terminated pursuant to Section 2.08 and (iii) February 15, 2006.
     “Common Stock” of any Person means any and all shares, interests or other
participations in, and other equivalents (however designated and whether voting
or non-voting) of, such Person’s common equity interests, whether outstanding on
the Effective Date or issued after the Effective Date, and includes, without
limitation, all series and classes of such equity interests.
     “Consolidated Fixed Charges” means, for any period, the sum, without
duplication, of:
     (1)   Consolidated Interest Expense for such period; plus
     (2)   the amount of all dividends on the Existing Preferred Stock paid,
declared or accrued during such period.
     “Consolidated Interest Expense” means, for any period, total interest
expense (including that portion attributable to Capital Lease Obligations in
accordance with GAAP) of NNC and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP (without duplication).
     “Consolidated Net Income” means for any period, the aggregate net income
(or loss) of NNC and its Subsidiaries for such period on a consolidated basis,
determined in accordance with GAAP; provided that there shall be excluded
therefrom (without duplication):
     (1)   net after-tax gains or losses classified in NNC’s consolidated
statement of operations as gains or losses on the sale of businesses or assets;
     (2)   net after-tax items classified as extraordinary gains or losses;
     (3)   the net after-tax expense resulting from any payment or distribution
in connection with the settlement of, or satisfaction of a judgment resulting
from, any shareholder litigation or regulatory or law enforcement investigation,
in each case, relating to the circumstances described in the Disclosure
Schedule;

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     (4)   the net income (but not loss) of any Subsidiary (other than any
Credit Party) to the extent that (a) the declaration of dividends by such
Subsidiary of that income is prohibited by a contract, operation of law (other
than as a result of any solvency or minimum capital requirement) or applicable
judgment and (b) such net income cannot otherwise be distributed or transferred
to NNC;
     (5)   the net income or loss of any Person that is not a Subsidiary of NNC,
and any Joint Ventures in which NNC or any Subsidiary is a party, except to the
extent of cash dividends or distributions paid to NNC or to a Subsidiary of NNC
by such Person;
     (6)   after-tax income or loss attributable to discontinued operations; and
     (7)   the cumulative effect of changes in accounting principles.
     “Consolidated Subsidiary” means, at any date, any Subsidiary or other
entity the accounts of which would, in accordance with GAAP, be consolidated
with those of NNC in its consolidated financial statements if such statements
were prepared as of such date.
     “Credit Enhanced Foreign Subsidiary Debt” means any Funded Debt of a
Foreign Subsidiary payable to a financial institution that has (i) sold a
participation for cash consideration in the full principal amount of such Funded
Debt to NNC or any Subsidiary or (ii) a Lien on or right of set-off against
deposits of cash, cash equivalents or investment securities of NNC or any
Subsidiary; provided, in the case of clause (ii) above, that the principal
amount of such Funded Debt does not exceed the amount of cash, cash equivalents
or investment securities so deposited.
     “Credit Parties” means the Borrower and the Guarantors.
     “Debt Rating” means the NNL Corporate Credit Rating, the NNL Corporate
Family Rating and any rating by Moody’s or S&P with respect to the Loans or the
Guarantees of the Loans.
     “Default” means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
     “Disbursement Period” means the period from and including the Closing Date
to but excluding the Commitment Termination Date.
     “Disclosure Schedule” means the written materials delivered by the Borrower
to the Lenders on the Effective Date labeled as “Disclosure Schedule.”
     “Disqualified Capital Stock” means that portion of any Capital Stock which,
by its terms (or by the terms of any security into which it is convertible or
for which it is exchangeable at the option of the holder thereof), or upon the
happening of any event (other than an event which would constitute an asset sale
or Change of Control), matures or is mandatorily redeemable (other than such
Capital Stock that will be redeemed with Qualified Capital Stock), pursuant

8

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to a sinking fund obligation or otherwise, or is redeemable at the sole option
of the holder thereof (except, in each case, upon the occurrence of an asset
sale or Change of Control) on or prior to the final maturity date of the Loans.
     “Dollars” and “$” refer to lawful money of the United States of America.
     “Effective Date” means the date this Agreement becomes effective in
accordance with Section 9.09.
     “Equity Interests” means (i) Capital Stock in a Person or (ii) any
warrants, options or other rights to acquire such Capital Stock.
     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
     “ERISA Affiliate” means any trade or business (whether or not incorporated)
that, together with the Borrower or any Subsidiary, is treated as a single
employer under Section 414(b) or (c) of the Internal Revenue Code or, solely for
purposes of Section 302 of ERISA and Section 412 of the Internal Revenue Code,
is treated as a single employer under Section 414 of the Internal Revenue Code.
     “ERISA Event” means (a) any “reportable event,” as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (except an
event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an “accumulated funding deficiency” (as defined in
Section 412 of the Internal Revenue Code or Section 302 of ERISA), whether or
not waived; (c) the filing pursuant to Section 412(d) of the Internal Revenue
Code or Section 303(d) of ERISA of an application for a waiver of the minimum
funding standard with respect to any Plan; (d) the incurrence by the Borrower or
any ERISA Affiliate of any liability under Title IV of ERISA with respect to the
termination of any Plan; (e) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(f) the incurrence by the Borrower or any ERISA Affiliate of any liability with
respect to withdrawal or partial withdrawal from any Plan or Multiemployer Plan;
or (g) the receipt by the Borrower or any ERISA Affiliate of any notice, or the
receipt by any Multiemployer Plan from the Borrower or any ERISA Affiliate of
any notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA.
     “Euro-Dollar Borrowing” has the meaning specified in Section 1.03.
     “Euro-Dollar Loan” means a Loan to be made by a Lender as a Euro-Dollar
Loan in accordance with the applicable Notice of Borrowing or Notice of Interest
Rate Election.
     “Event of Default” means a Tranche A Event of Default or a Tranche B Event
of Default.
     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

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     “Excluded Taxes” means, with respect to the Agent, any Lender or any other
recipient of any payment to be made by or on account of any obligation of the
Borrower hereunder, (a) income or franchise taxes (imposed in lieu of net income
taxes) imposed on (or measured by) its net income by a taxing jurisdiction as a
result of such recipient being organized or having its principal office or, in
the case of any Lender, having its applicable lending office in such
jurisdiction or having any other connection to such jurisdiction other than a
connection arising out of this Agreement or the transactions contemplated
hereby, (b) any branch profits taxes or any similar tax imposed by a
jurisdiction described in clause (a) above and (c) in the case of a Non-U.S.
Lender (other than an assignee pursuant to a request by the Borrower under
Section 8.06(b)), any U.S. federal withholding tax to the extent that such tax
is imposed on amounts payable to such Non-U.S. Lender as of the time such
Non-U.S. Lender becomes a party to this Agreement (or designates a new lending
office) or is attributable to such Non-U.S. Lender’s failure to comply with
Section 8.04(e), except to the extent that such Non-U.S. Lender (or its
assignor, if any) was entitled, immediately prior to such designation of a new
lending office (or assignment), to receive additional amounts from the Borrower
with respect to such withholding tax pursuant to Section 8.04(a).
     “Executive Officer” means any of the Chairman of the Board of Directors,
the President and Chief Executive Officer, the Chief Financial Officer, the
Treasurer, the Assistant Treasurer or the Controller of NNC.
     “Existing NNC Convertible Notes” means the 4.25% Convertible Senior Notes
Due 2008 issued by NNC and guaranteed by NNL pursuant to the 2001 Indenture, as
the same may be amended from time to time.
     “Existing NNCC 2006 Notes” means the 7.40% Notes due 2006 issued by NNCC
and guaranteed by NNL pursuant to the 1996 Indenture, as the same may be amended
from time to time.
     “Existing NNCC 2026 Notes” means the 7.875% Notes due 2006 issued by NNCC
and guaranteed by NNL pursuant to the 1996 Indenture, as the same may be amended
from time to time.
     “Existing NNL 2023 Notes” means the 6.875% Notes due 2023 issued by NNL
pursuant to the 1988 Indenture, as the same may be amended from time to time.
     “Existing Notes” means the Existing NNC Convertible Notes, the Existing
NNCC 2006 Notes, the Existing NNCC 2026 Notes and the Existing NNL 2023 Notes.
     “Existing Preferred Stock” means NNL’s Redeemable Class A Preferred Shares
Series 5, of which approximately 16,000,000 shares are outstanding on the
Effective Date (and NNL’s Redeemable Class A Preferred Shares Series 6 into
which such shares are convertible), and Non-cumulative Redeemable Class A
Preferred Shares Series 7, of which approximately 14,000,000 shares are
outstanding on the Effective Date (and NNL’s Redeemable Class A Preferred Shares
Series 8 into which such shares are convertible), in each case as the same may
be amended from time to time.

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     “fair market value” means with respect to any asset, the price that could
be obtained on an arm’s-length basis from an unrelated third party for such
asset as determined in good faith by NNC (it being understood that any price
which is intended to represent fair market value of an asset as determined in
accordance with NNC’s policies and relevant tax or regulatory requirements as
customarily applied by NNC will be deemed to be on an arms’ length basis).
     “Federal Funds Effective Rate” means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Agent from three Federal funds brokers of
recognized standing selected by it.
     “Financing Leases” means sale and leaseback transactions.
     “Foreign Subsidiary” means a Restricted Subsidiary that is not a Canadian
Subsidiary or a U.S. Subsidiary.
     “Funded Debt” means with respect to any Person, without duplication:
     (1)   all indebtedness of such Person for borrowed money;
     (2)   all indebtedness of such Person evidenced by bonds, debentures, notes
or other similar instruments;
     (3)   all Capital Lease Obligations of such Person;
     (4)   all Guarantees of indebtedness of another Person of the type referred
to in clauses (1) through (3) above and clause (5) below (each such guarantee to
constitute Funded Debt in an amount equal to the maximum amount of such other
Person’s Funded Debt guaranteed thereby);
     (5)   all indebtedness of any other Person of the type referred to in
clauses (1) through (4) which is secured by any Lien on any property or asset of
such Person, the amount of such indebtedness being deemed to be the lesser of
the fair market value of such property or asset or the amount of the
indebtedness so secured; and
     (6)   all Disqualified Capital Stock (including the Existing Preferred
Stock) issued by such Person with the amount of Funded Debt thereby being equal
to the greater of its voluntary or involuntary liquidation preference and its
maximum fixed repurchase price, if any, but excluding accrued dividends, if any.
     For greater certainty (i) proceeds received in respect of any Receivables
Transaction, (ii) obligations in respect of the performance of bids, trade
contracts, leases, statutory obligations, surety and appeal bonds, performance
bonds and obligations of a like nature, (iii) guarantees of, and indemnity
arrangements with respect to, obligations described in clauses (i) and

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(ii) of this paragraph, or (iv) obligations under letters of credit and letters
of guarantee issued to support (A) trade or performance obligations or
(B) obligations under operating leases will not be considered Funded Debt.
     For purposes hereof, the “maximum fixed repurchase price” of any
Disqualified Capital Stock which does not have a fixed repurchase price shall be
calculated in accordance with the terms of such Disqualified Capital Stock as if
such Disqualified Capital Stock were purchased on any date on which Funded Debt
shall be required to be determined pursuant to this Agreement, and if such price
is based upon, or measured by, the fair market value of such Disqualified
Capital Stock shall be determined in accordance with the definition thereof.
     Accrual of interest, accrual of dividends, the accretion of accreted value,
the payment of interest in the form of additional Funded Debt and the payment of
dividends in the form of additional shares of Preferred Stock will not be deemed
to be an incurrence of Funded Debt. The amount of any Funded Debt outstanding as
of any date shall be (i) the accreted value of the Funded Debt, in the case of
any Funded Debt issued with original issue discount or (ii) the principal amount
or liquidation preference of the Funded Debt, in any other case.
     “Funding Failure” has the meaning specified in Section 5.02.
     “GAAP” means generally accepted accounting principles as in effect from
time to time in the United States, applied on a basis consistent (except for
changes concurred in by NNC’s independent public accountants) with the most
recent audited consolidated financial statements of NNC and its Consolidated
Subsidiaries delivered to the Agent. It is understood that the application of
GAAP to the operation of the covenants in Article V is subject to Section 1.02.
     “Governmental Authority” means the government of the United States of
America, any other nation or any political subdivision thereof, whether state,
provincial or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.
     “Group of Loans” means at any time a group of Loans consisting of (i) all
Loans of the same tranche which are Base Rate Loans at such time or (ii) all
Loans of the same tranche which are Euro-Dollar Loans having the same Interest
Period at such time.
     “Guarantee” by any Person (the “guarantor”) means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any debt or other obligation of any other Person (the
“primary obligor”) in any manner, whether directly or indirectly, and including
any obligation of the guarantor, direct or indirect, (a) to purchase or pay (or
advance or supply funds for the purchase or payment of) such debt or other
obligation or to purchase (or advance or supply funds for the purchase of) any
security for the payment thereof, (b) to purchase or lease property, securities
or services for the purpose of assuring the owner of such debt or other
obligation of the payment thereof, (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such debt or other obligation
or (d) as an account party in

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respect of any letter of credit or letter of guaranty issued to support such
debt or other obligation; provided that the term “Guarantee” shall not include
endorsements for collection or deposit in the ordinary course of business.
     “Guarantee Agreement” means the guarantee agreement, substantially in the
form of Exhibit H hereto among NNC, the Subsidiary Guarantors and the Agent.
     “Guarantors” means NNC and the Subsidiary Guarantors.
     “Hedging Agreement” means (a) any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest rate, currency exchange rate or commodity price hedging
arrangement, and (b) any hedging agreement in respect of NNC’s common stock
entered into in order to hedge NNC’s or NNL’s exposure under its stock option
plans or other benefit plans for employees, directors or consultants of NNC, NNL
and their Subsidiaries.
     “Indemnified Taxes” means Taxes other than Excluded Taxes and Other Taxes.
     “Indemnitee” has the meaning specified in Section 9.03(b).
     “Interest Period” means with respect to each Euro-Dollar Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing or Notice of Interest Rate Election and ending one or three months
thereafter, as the Borrower may elect in the applicable notice; provided that:
     (a)   any Interest Period which would otherwise end on a day which is not a
Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day;
     (b)   any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Business Day of a calendar month; and
     (c)   any Interest Period beginning prior to the Maturity Date which would
otherwise end after the Maturity Date shall end on the Maturity Date.
     “Internal Revenue Code” means the Internal Revenue Code of 1986, as amended
from time to time.
     “Joint Venture” means a corporation, partnership, limited liability
company, joint venture or other similar legal arrangement (whether created by
contract or conducted through a separate legal entity) now or hereafter formed
by NNC or any Restricted Subsidiary with one or more Persons in order to conduct
a common venture or enterprise with such Person(s); provided that no Subsidiary
shall be considered to be a Joint Venture.

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     “Lenders” means the Persons listed on the signature page hereto as Lenders
and any other Person that shall have become a party hereto pursuant to an
Assignment and Assumption Agreement, other than any such Person that ceases to
be a party hereto pursuant to an Assignment and Assumption Agreement.
     “Lien” means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any Financing
Lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
     “LIBO Rate” means, with respect to any Euro-Dollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Telerate Service (or on
any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Agent from
time to time for purposes of providing quotations of interest rates applicable
to dollar deposits in the London interbank market) at approximately 11:00 a.m.,
London time, two Business Days prior to the commencement of such Interest
Period, as the rate for dollar deposits with a maturity comparable to such
Interest Period. In the event that such rate is not available at such time for
any reason, then the “LIBO Rate” with respect to such Euro-Dollar Borrowing for
such Interest Period shall be the rate at which dollar deposits of $5,000,000
and for a maturity comparable to such Interest Period are offered by the
principal London office of the Agent in immediately available funds in the
London interbank market at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period.
     “Loan” means a Tranche A Loan or a Tranche B Loan and “Loans” means Tranche
A Loans or Tranche B Loans or any combination of the foregoing.
     “Loan Documents” means this Agreement, the Notes, the Guarantee Agreement
and the Security Documents.
     “Managed Service Contract Liens” means any Lien in favor of a customer of
NNC or any Subsidiary and/or a third party financing company relating to
equipment owned by NNC or any Subsidiary that is (i) used by such customer in
the conduct of its business and (ii) managed by NNC or any Subsidiary under a
managed services or hosting services contract between Nortel, such customer
and/or such third party financing company.
     “Material Adverse Effect” means 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. It is
understood that a change in Debt Rating shall not, in itself, constitute a
Material Adverse Effect.
     “Material Debt” means Funded Debt (other than obligations in respect of the
Loans), or obligations in respect of one or more Hedging Agreements, of the
Borrower, NNC and/or one or more of its Restricted Subsidiaries in an individual
principal amount of at least $10,000,000 and which in aggregate principal amount
exceeds $100,000,000. For purposes of

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determining Material Debt, the “principal amount” of the obligations of the
Borrower, NNC and/or one or more of its Restricted Subsidiaries in respect of
any Hedging Agreement at any time will be the maximum aggregate amount (after
giving effect to any netting provisions or agreements) that such Person would be
required to pay if such Hedging Agreement were terminated at such time.
     “Maturity Date” means February 15, 2007, or, if such day is not a Business
Day, the next preceding Business Day.
     “Moody’s” means Moody’s Investors Service, Inc.
     “Multiemployer Plan” means a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
     “Net Cash Proceeds” means:
     (i)   with respect to any Prepayment Event of the type specified in clause
(A) of the definition thereof, the cash proceeds received by NNC, the Borrower
or any Restricted Subsidiary as a result of any Prepayment Event, net of
reasonable attorneys’ fees, investment banking fees, accountants’ fees,
underwriting discounts and commissions and other customary fees and expenses
actually incurred in connection therewith;
     (ii)   with respect to any Prepayment Event of the type specified in clause
(B) of the definition thereof, the principal amount of Funded Debt incurred by
NNC or the applicable Restricted Subsidiary, net of reasonable attorneys’ fees,
investment banking fees, accountants’ fees, underwriting discounts and
commissions and other customary fees and expenses actually incurred in
connection therewith;
     (iii)   with respect to any Prepayment Event of the type specified in
clause (C) of the definition thereof, the excess, if any, of (i) the fair market
value of all consideration received by a Credit Party in connection with such
Specified Asset Sale (other than Restricted Assets) over (ii) the sum of (A) the
principal amount and premium, if any, of any indebtedness that is secured by a
Lien permitted by Section 5.09 (other than any Lien created by the Security
Documents) that is required to be repaid in connection with such Specified Asset
Sale, (B) the out-of-pocket expenses incurred by the applicable Credit Party in
connection with such Specified Asset Sale, (C) taxes paid or reasonably
estimated to be actually payable in connection therewith, and (D) any reserve
for adjustment in respect of (x) the sale price of such asset or assets
established in accordance with GAAP and (y) any liabilities associated with such
asset or assets and retained by such Credit Party after such Specified Asset
Sale;
     (iv)   with respect to any Prepayment Event of the type described in clause
(D) of the definition thereof, the fair market value of the Restricted Assets so
transferred (whether or not any amounts received by the Credit Parties in
connection therewith is in the form of cash), net of the amount of liabilities
secured by a Lien on the Restricted Assets so transferred which are
(x) transferred to or assumed by any Non-Credit Party Subsidiary or Joint
Venture in connection therewith, but only to the extent that there has been

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   a novation of such Credit Party’s obligations with respect to such
liabilities or (y) required to be repaid in connection therewith.
     “Net Transferred Amount” shall mean the excess, if any, of (A) the excess
of (i) the fair market value of all Restricted Assets sold, transferred or
otherwise disposed of by any Credit Party to any Non-Credit Party Subsidiary or
Joint Venture (other than pursuant to clauses (1), (2), (3) or (4) of the
definition of Permitted Asset Transfer) subsequent to September 30, 2005 over
(ii) the stated amount of any liabilities which are secured by a Lien on such
Restricted Assets which are transferred to or assumed by any Non-Credit Party
Subsidiary or Joint Venture in connection therewith, but only to the extent that
there has been a novation of such Credit Party’s obligations with respect to
such liabilities over (B) the excess of (i) the aggregate fair market value of
all Restricted Assets sold, transferred or otherwise disposed of by any Joint
Venture or Non-Credit Party to any Credit Party subsequent to September 30, 2005
over (ii) the stated amount of any liabilities which are secured by a Lien on
such Restricted Assets which are transferred to or assumed by any Credit Party
in connection therewith.
     “NGSH” means Nortel Government Solutions Holdings Corporation, a Delaware
corporation, and its successors.
     “NNC” means Nortel Networks Corporation, a Canadian corporation, and its
successors.
     “NNC’s 2004 Form 10-K” means NNC’s annual report on Form 10-K for the year
ended December 31, 2004, as filed with the Commission pursuant to the Exchange
Act.
     “NNC’s 2005 Q3 Form 10-Q” means NNC’s quarterly report on Form 10-Q for the
period ended September 30, 2005, as filed with the Commission pursuant to the
Exchange Act.
     “NNCC” means Nortel Networks Capital Corporation, a Delaware corporation,
and its successors.
     “NNL” means Nortel Networks Limited, a Canadian corporation, and its
successors.
     “NNL Corporate Credit Rating” means the credit rating applied by S&P to
NNL’s outstanding senior long-term debt.
     “NNL Corporate Family Rating” means the credit rating applied by Moody’s to
NNL’s outstanding senior long-term debt.
     “Non-Credit Party Subsidiary” means any Subsidiary of NNC that is not a
Credit Party.
     “Non-U.S. Lender” means any Lender that is organized under the laws of a
jurisdiction other than the United States of America. For purposes of this
definition, the United

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States of America, each State thereof and the District of Columbia shall be
deemed to constitute a single jurisdiction.
     “Notes” means the Tranche A Notes and the Tranche B Notes, and “Note” means
any one of such Tranche A Notes or Tranche B Notes issued hereunder.
     “Notice of Borrowing” has the meaning set forth in Section 2.02.
     “Notice of Interest Rate Election” has the meaning set forth in
Section 2.09(a).
     “Other Taxes” means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made hereunder or from the execution, delivery or enforcement
of, or otherwise with respect to, this Agreement.
     “PPSA” means an applicable personal property security legislation in each
province and territory of Canada.
     “Participant” has the meaning set forth in Section 9.06(c).
     “Perfection Certificate” means, collectively, certificates in the form of
Exhibit G to each of the agreements referred to in the definition of “Security
Agreement” or any other form approved by the Collateral Agent.
     “Permitted Asset Transfer” shall mean:
     (1)   any sale, transfer or other disposition of equipment or inventory in
the ordinary course of business on terms determined in accordance with NNC’s
policies and relevant tax or regulatory requirements as customarily applied by
NNC and its Subsidiaries to such transfers;
     (2)   non-exclusive licenses of intellectual property or technology;
     (3)   exclusive licenses of intellectual property or technology granted by
NNL in the ordinary course of its business to its direct or indirect
Subsidiaries for use solely within their respective regions;
     (4)   any other contemplated sale, transfer or other disposition of a
Restricted Asset described in the Disclosure Schedule; and
     (5)   any other sale, transfer or disposition of a Restricted Asset,
provided that, after giving effect thereto, the Net Transferred Amount does not
exceed $250,000,000.
     “Permitted Capital Stock” means, without duplication, each of the
following:
     (a)   the issuance or sale of Capital Stock of NNC to the Borrower or any
Subsidiary;

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     (b)   the issuance or sale of Capital Stock of NNC (or any warrants, rights
or options to purchase or acquire shares of any such Capital Stock or securities
convertible into Capital Stock of NNC) to current or former employees,
directors, consultants or contractors of NNC or any Subsidiary (or permitted
transferees of such current or former employees, directors, consultants or
contractors), in their capacities as such, pursuant to the terms of the
agreements (including employment or severance agreements) or plans (or
amendments thereto) under which such individuals purchase or sell, or are
granted the option to purchase or sell, shares of such Capital Stock;
     (c)   the issuance of any rights to purchase shares of Common Stock of NNC
outstanding from time to time under the amended and restated shareholder rights
plan agreement between NNC and Computershare Trust Company of Canada, as rights
agent, dated as of February 14, 2003, as the same may be further amended and
restated from time to time, in accordance with the terms thereof;
     (d)   the issuance of Capital Stock of NNC to the holders of Existing NNC
Convertible Notes upon conversion of such Existing NNC Convertible Notes in
accordance with the terms thereof;
     (e)   any issuance or distribution of Capital Stock in connection with the
settlement of, or satisfaction of a judgment resulting from, any shareholder
litigation or regulatory or enforcement proceeding; and
     (f)   any issuance of Capital Stock of NNC (i) as a portion of the
consideration for any acquisition or other investment or (ii) for which NNC and
its Subsidiaries receive no Net Cash Proceeds.
     “Permitted Financing Leases” means Financing Leases consisting of
(a) temporary leases for a term, including any renewal thereof, of no more than
three years and (b) leases for properties executed within 365 days of the latest
of acquisition, completion of construction and commencement of commercial
operation thereof.
     “Permitted Funded Debt” means, without duplication, each of the following:
     (a)   Funded Debt of NNC and/or any Subsidiary outstanding on the Effective
Date (other than the Loans and any Existing Notes) and listed on Schedule 1.01;
     (b)   Funded Debt of NNC and/or any Subsidiary to NNC, the Borrower and/or
any Restricted Subsidiary;
     (c)   Qualified Subordinated Debt of NNC and/or any Restricted Subsidiary
owing to any Joint Venture in which NNC or such Subsidiary has a minority
holding;
     (d)   any guarantee of Funded Debt of NNC or a Restricted Subsidiary by NNC
or any Subsidiary so long as the incurrence of such Funded Debt would otherwise
be permitted or is otherwise not restricted under this Agreement;

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     (e)   Funded Debt of NNC or any Subsidiary for which NNC and its
Subsidiaries receive Net Cash Proceeds not in excess of $50,000,000, including,
without limitation, any such issuance (i) that finances any acquisition or other
investment or (ii) for which NNC and its Subsidiaries receive no Net Cash
Proceeds;
     (f)   Refinancing Funded Debt;
     (g)   any Credit Enhanced Foreign Subsidiary Debt and any Funded Debt
arising out of the deposit of cash or cash equivalents to secure any Credit
Enhanced Foreign Subsidiary Debt;
     (h)   additional Funded Debt of any Foreign Subsidiary of NNC under any
working capital facilities in an aggregate outstanding principal amount not to
exceed $250,000,000 at any time outstanding;
     (i)   any other Funded Debt of any Foreign Subsidiary; provided that the
aggregate outstanding principal amount of Funded Debt issued or assumed pursuant
to this clause (i) by any individual Foreign Subsidiary would not, after giving
effect to the relevant transaction, exceed $5,000,000; and
     (j)   Funded Debt incurred to finance the acquisition, improvement or
construction of assets that is secured by a Purchase Money Mortgage on the
assets so acquired, improved or constructed.
     “Permitted Liens” means:
     (a)   Liens imposed by law for taxes, assessments, governmental charges or
levies (and related interest and penalties), in each case that are not yet
delinquent or in default or are being contested in good faith by appropriate
proceeding;
     (b)   carriers’, warehousemen’s, mechanics’, materialmen’s, landlord’s,
repairmen’s and other like Liens imposed by law, arising in the ordinary course
of business and securing obligations that are not overdue by more than 90 days
or are being contested in good faith by appropriate proceeding;
     (c)   pledges and deposits made in the ordinary course of business in
compliance with workers’ compensation, unemployment insurance and other social
security laws or regulations;
     (d)   Liens in favor of the United States of America or any State thereof,
Canada or any Province or territory thereof, or any department, agency or
instrumentality or political subdivision thereof, or in favor of any other
country or political subdivision, to secure partial, progress, advance or other
payments pursuant to any contract or statute or to secure any indebtedness
incurred or guaranteed for the purpose of financing or refinancing all or any
part of the purchase price of the property, shares of capital stock or
indebtedness subject to such Liens, or the cost of constructing or improving the
property subject to such Liens (including, without limitation, Liens incurred in
connection with

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pollution control, industrial revenue or similar financings or relating to the
development, restoration, demolition or remediation of property);
     (e)   easements, zoning restrictions, rights-of-way, servitudes and similar
encumbrances on real property imposed by law or arising in the ordinary course
of business that do not secure any monetary obligation and do not materially
detract from the value of the affected property or interfere with the ordinary
conduct of business of NNC or any Subsidiary;
     (f)   Liens of a bank, broker or securities intermediary on whose records a
deposit account or a securities account of NNC or any Subsidiary is maintained
securing the payment of customary fees and commissions to the bank, broker or
securities intermediary or, with respect to a deposit account, items deposited
but returned unpaid and other unexercised bankers’ Liens;
     (g)   Liens of any third party logistics providers on inventory or
equipment in transit;
     (h)   Liens of any customer, contract manufacturer, component level
producer, contract research and development lab, Joint Venture or any
co-investor in such a Joint Venture, in each case, on any equipment, inventory
or software (or intellectual property rights related thereto) of NNC or any
Subsidiary that is on the premises of such Person in the ordinary course of
business of NNC, any Subsidiary or such other Person;
     (i)   Liens on any property of NNC or any Subsidiary under any purchase
agreement or similar document, pursuant to which a third-party has agreed to
acquire such property from NNC or its Subsidiaries, to secure representations,
warranties and indemnities thereunder;
     (j)   judgment liens, and Liens securing appeal bonds (or letters of credit
or other similar instruments issued in support of or in lieu of appeal bonds) in
respect of judgments, in each case, that do not constitute an Event of Default;
     (k)   any interest or title of a lessor or sublessor of any lease of real
estate;
     (l)   purported Liens evidenced by the filing of precautionary UCC
financing statements relating solely to operating leases of personal property;
     (m)   Liens in favor of customs and revenue authorities arising as a matter
of law to secure payment of customs duties;
     (n)   any license of a patent, trademark or other intellectual property
rights granted by NNC or any Subsidiary; provided such license does not
contravene this Agreement; and
     (o)   Liens securing obligations in an aggregate amount which shall not at
any time exceed $25,000,000.

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     “Person” means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
     “PBGC” means the Pension Benefit Guaranty Corporation.
     “Plan” means any employee pension benefit plan (except a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the
Internal Revenue Code or Section 302 of ERISA, and in respect of which NNC or
any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) a “contributing sponsor” as defined in
Section 4001(a)(13) of ERISA.
     “Preferred Stock” of any Person means any Capital Stock of such Person that
has preferential rights to any other Capital Stock of such Person with respect
to dividends or redemptions or upon liquidation.
     “Prepayment Event” means (A) the issuance or incurrence by NNC or any of
its Restricted Subsidiaries of any Qualified Capital Stock other than Permitted
Capital Stock, (B) the issuance or incurrence by NNC or any of its Restricted
Subsidiaries of any Funded Debt other than Permitted Funded Debt, (C) the
consummation by any Credit Party of any Specified Asset Sale and (D) a transfer
of any Restricted Assets of a Credit Party to a Non-Credit Party Subsidiary or
Joint Venture that is not permitted by Section 5.15(a).
     “Prime Rate” means the rate of interest per annum publicly announced from
time to time by JPMorgan Chase Bank, N.A. as its prime rate in effect for
dollars at its principal office in New York City.
     “Purchase Money Mortgage” means, with respect to NNC or any Restricted
Subsidiary, (i) a mortgage on or security interest in property existing at the
time of acquisition thereof by such Person and not incurred in contemplation of
such acquisition and (ii) any mortgage on or security interest in any property
acquired, constructed or improved by such Person incurred after the date hereof
which is related solely to, and is created or assumed contemporaneously with, or
within 180 days after, such acquisition, or completion of such construction or
improvement, to secure or provide for the payment of the purchase price thereof
or the cost of construction or improvement thereon incurred after the date
hereof (including the cost of any underlying real property); provided that in
the case of any such acquisition, construction or improvement, the mortgage or
security interest shall not apply to any after acquired property of such Person
(other than improvements thereon and fixtures) or to any property previously
owned by such Person other than, in the case of any such construction or
improvement, any real property, theretofore substantially unimproved for the
purposes of such Person, on which the property so constructed, or the
improvement, is located and other than a fixture on the real property on which
the property so constructed, or the improvement, is located; and provided
further that the amount secured by the mortgage or security interest shall not
exceed the purchase price thereof or the cost of construction or improvement
thereon plus reasonable fees and expenses with respect thereto.

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     “Qualified Capital Stock” means any Capital Stock of NNC that is not
Disqualified Capital Stock.
     “Qualified Receivables Transaction” means any Receivables Transaction
designated as such by the Borrower; provided that the aggregate outstanding
amount of advances in respect of receivables transferred by the Credit Parties
pursuant to all Qualified Receivables Transactions which have not been collected
by the applicable Person or Securitization Subsidiary to which such receivables
were transferred shall not exceed $100,000,000 at any time outstanding.
     “Qualified Subordinated Debt” means Funded Debt of NNC or any of its
Restricted Subsidiaries that is subordinated to the prior payment in full of the
obligations of the Credit Parties under the Loan Documents following an Event of
Default and which does not permit the repayment of such Funded Debt by NNC or
such Restricted Subsidiaries during the continuance of an Event of Default.
     “Quebec Hypothec” has the meaning set forth in subparagraph (f) of
Article III.
     “Receivables Transaction” means any financing transaction in which NNC, the
Borrower or a Restricted Subsidiary transfers receivables and related assets to
either (x) a Person other than NNC or a Subsidiary for cash or (y) a
Securitization Subsidiary in a transaction where (i) such transfer is in
exchange for an equity interest or intercompany obligation of such
Securitization Subsidiary, (ii) such Securitization Subsidiary may but shall not
be required to pledge its assets to secure advances from a third party,
(iii) such third party advances amounts to such Securitization Subsidiary in
anticipation of collection of the receivables held by such Securitization
Subsidiary and (iv) any amounts collected in respect of such receivables in
excess of the amount of advances to such Securitization Subsidiary from such
third party are retained by such Securitization Subsidiary or distributed to NNC
or a Restricted Subsidiary.
     “Refinance” means, in respect of any security or Funded Debt, to refinance,
extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue a
security or any Funded Debt in exchange or replacement for, such security or
Funded Debt in whole or in part. “Refinanced” and “Refinancing” shall have
correlative meanings.
     “Refinancing Funded Debt” means any Refinancing by NNC or any Subsidiary of
Permitted Funded Debt (other than any Funded Debt described in (b), (c), (d),
(g), (h), (i) or (j) of the definition of Permitted Funded Debt), in each case
that does not:
     (1)   result in an increase in the aggregate principal amount of Funded
Debt of such Person as of the date of such proposed Refinancing (plus the amount
of any premium required to be paid under the terms of the instrument governing
such Funded Debt and plus the amount of reasonable expenses incurred by NNC or
any Subsidiary in connection with such Refinancing); or
     (2)   create Funded Debt with (a) a Weighted Average Life to Maturity that
is less than the Weighted Average Life to Maturity of the Funded Debt being
Refinanced;

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or (b) a final maturity earlier than the final maturity of the Funded Debt being
Refinanced.
     “Register” has the meaning specified in Section 9.06(b).
     “Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
     “Related Parties” means, with respect to any specified Person, such
Person’s Affiliates and the respective directors, officers, employees, agents
and advisors of such Person and such Person’s Affiliates.
     “Required Lenders” means, at any time, Lenders having more than 50% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding more than 50% of the aggregate unpaid principal amount of
the Loans.
     “Required Tranche A Lenders” means, at any time, Lenders having more than
50% of the aggregate amount of the Tranche A Commitments or, if the Tranche A
Commitments shall have been terminated, holding more than 50% of the aggregate
unpaid principal amount of the Tranche A Loans.
     “Required Tranche B Lenders” means, at any time, Lenders having more than
50% of the aggregate amount of the Tranche B Commitments or, if the Tranche B
Commitments shall have been terminated, holding more than 50% of the aggregate
unpaid principal amount of the Tranche B Loans.
     “Restricted Assets” shall mean any asset used or useful in the business of
NNC or its Restricted Subsidiaries other than (i) cash and cash equivalents,
(ii) assets (other than intellectual property) that would be shown as intangible
assets in NNC’s consolidated balance sheet, (iii) Funded Debt, accounts payable
or Equity Interests, in each case, issued by a Non-Credit Party Subsidiary,
Joint Venture or other Person that is not a Subsidiary and (iv) with respect to
any transfer between a Credit Party and a Non-Credit Party Subsidiary, Funded
Debt or accounts payable issued by a Credit Party.
     “Restricted Payment” shall have the meaning specified in Section 5.12.
     “Restricted Subsidiary” means any Subsidiary of NNC other than (i) the
Borrower, (ii) NGSH and any direct or indirect Subsidiary of NGSH, (iii) for so
long as it is a tax exempt organization under Section 501(3) of the Internal
Revenue Code, Nortel LearnIT, a Delaware corporation and (iv) any Securitization
Subsidiary.
     “S&P” means Standard & Poor’s Ratings Services, a division of The
McGraw-Hill Companies, Inc.
     “Secured Obligations” has the meaning specified in Section 1 of the
Security Agreement.

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     “Secured Parties” has the meaning specified in Section 1 of the Security
Agreement.
     “Securitization Subsidiary” means any Subsidiary of NNC created solely for
the purpose of engaging only in activities reasonably related to or in
connection with Receivables Transactions and for which neither NNC nor any of
its other Subsidiaries provides credit support.
     “Security Agreement” means, collectively, the U.S. Security Agreement, the
Canadian Security Agreement and the Quebec Hypothec.
     “Security Documents” means the Security Agreement and each other security
agreement, instrument or document executed and delivered pursuant to the
Security Agreement or Section 5.17 to secure any of the Secured Obligations.
     “Specified Asset Sale” means any direct or indirect sale, issuance,
conveyance, transfer, lease (other than operating leases entered into in the
ordinary course of business), assignment or other transfer (or series of related
transfers) for value by any Credit Party to any Person other than another Credit
Party of:
     (i)   any Capital Stock of any Restricted Subsidiary (other than
(x) directors’ qualifying shares, (y) shares required by applicable law to be
held by a Person other than a Credit Party and (z) shares of any Foreign
Subsidiary); or
     (ii)   any other property or assets (other than (x) cash or cash
equivalents or (y) property listed in the Disclosure Schedule) of any Credit
Party other than in the ordinary course of business;
in each case, which results in the receipt by the Credit Parties of Net Cash
Proceeds of at least $5,000,000; provided, however, that “Specified Asset Sale”
shall not include any such sale or disposition until the aggregate fair market
value of all property disposed of by the Credit Parties in all such transactions
(excluding any transaction which is excluded from the definition of “Specified
Asset Sale” by the following proviso) exceeds $250,000,000; provided, further,
that “Specified Asset Sale” shall not include: (a) any Restricted Payment
permitted by Section 5.12; (b) any transfer of assets to a Non-Credit Party
Subsidiary or Joint Venture that does not contravene Section 5.15; (c) a
disposition of inventory, equipment or other property that is no longer useful
in the conduct of the business of a Credit Party, in each case, in the ordinary
course of business; (d) the disposition by a Credit Party for less than the face
value thereof of notes or accounts receivable arising in the ordinary course of
business that are overdue, but only in connection with the compromise or
collection thereof; (e) easements or other similar covenant agreements that
relate to and/or benefit the operation of the property of a Credit Party, do not
materially or adversely affect the use and operation of the same and are granted
in the ordinary course of business within reasonable commercial standards;
(f) with respect to intellectual property, non-exclusive assignments or licenses
or abandonments of such intellectual property, in each case, in the ordinary
course of business; and (g) sales and dispositions constituting Qualified
Receivables Transactions.

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     “Statutory Reserve Rate” means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Agent is subject for eurocurrency funding
(currently referred to as “Eurocurrency Liabilities” in Regulation D of the
Board). Such reserve percentages shall include those imposed pursuant to such
Regulation D. Euro-Dollar Loans shall be deemed to constitute eurocurrency
funding and to be subject to such reserve requirements without benefit of or
credit for proration, exemptions or offsets that may be available from time to
time to any Lender under such Regulation D or any comparable regulation. The
Statutory Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
     “Subsidiary” means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, “Subsidiary” means a Subsidiary of NNC.
     “Subsidiary Guarantors” means, collectively, the U.S. Subsidiary Guarantors
and the Canadian Subsidiary Guarantors.
     “Synthetic Purchase Agreement” means any derivative or similar agreement
pursuant to which NNC or any of its Subsidiaries is or may become obligated to
make any payment the amount of which is determined by reference to the price or
value at any time of any Capital Stock of NNC; provided that no phantom stock or
similar plan providing for payments only to current or former directors,
officers, employees, consultants or contractors of NNC or any Subsidiary of NNC
(or to their heirs or estates or successors or assigns) shall be deemed to be a
Synthetic Purchase Agreement.
     “Taxes” means any and all present or future taxes, levies, imposts, duties,
deductions, charges or withholdings imposed by any Governmental Authority.
     “Tranche A Borrowing” has the meaning specified in Section 1.03.
     “Tranche A Commitment” means, with respect to each Lender, the amount
designated as its “Tranche A Commitment” opposite the name of such Lender on
Schedule 2.01, as such amount may be reduced from time to time pursuant to
Section 2.08.
     “Tranche A Event of Default” has the meaning specified in Section 6.01.
     “Tranche A Loan” means a Loan advanced pursuant to Section 2.01(a).
     “Tranche A Notes” means promissory notes of the Borrower, substantially in
the form of Exhibit A hereto, as it may be amended, supplemented or otherwise
modified from time to time, and “Tranche A Note” means any of such promissory
notes issued hereunder.
     “Tranche B Borrowing” has the meaning specified in Section 1.03.

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     “Tranche B Commitment” means, with respect to each Lender, the amount
designated as its “Tranche B Commitment” opposite the name of such Lender on
Schedule 2.01, as such amount may be reduced from time to time pursuant to
Section 2.08.
     “Tranche B Documents” means this Agreement (other than Section 5.13,
Section 5.15 (including any related Prepayment Event), Section 5.17,
Section 6.01, any Prepayment Event arising from a Specified Asset Sale or any
provision of this Agreement which relates to any representation, warranty or
covenant relating to the Collateral or the Security Documents) and the Guarantee
Agreement.
     “Tranche B Event of Default” has the meaning specified in Section 6.02.
     “Tranche B Loan” means a Loan advanced pursuant to Section 2.01(b).
     “Tranche B Notes” means promissory notes of the Borrower, substantially in
the form of Exhibit B hereto, as it may be amended, supplemented or otherwise
modified from time to time, and “Tranche B Note” means any of such promissory
notes issued hereunder.
     “Transaction Liens” means the Liens on Collateral granted by the Credit
Parties under the Security Documents.
     “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, “UCC” means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.
     “United States” means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
     “Unrestricted Cash” means, at any time, the excess of (x) the amount that
would, in accordance with GAAP, be reflected on a consolidated balance sheet of
NNC as “Cash and cash equivalents” as of such time other than any such amount
that would be classified as “Restricted Cash” (as determined in accordance with
GAAP) over (y) to the extent not otherwise reflected as a reduction of the
amount determined in accordance with clause (x), the amount of cash and cash
equivalents of NNC and its Consolidated Subsidiaries (other than any cash or
cash equivalents pledged under the Security Documents) which have been deposited
as security for any obligations under a pledge agreement that prohibits NNC or
such Consolidated Subsidiaries from withdrawing such cash or cash equivalents at
such time.
     “U.S. Credit Party” means each of the Borrower and each U.S. Subsidiary
Guarantor.
     “U.S. Security Agreement” means the U.S. Security and Pledge Agreement,
dated as of the Closing Date, by and among the U.S. Credit Parties, the
Collateral Agent and the other parties named therein, in the form of Exhibit I.

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     “U.S. Subsidiary” means any Restricted Subsidiary organized under the laws
of the United States or any state therein.
     “U.S. Subsidiary Guarantors” means each U.S. Subsidiary that becomes a U.S.
Subsidiary Guarantor pursuant to Section 5.16.
     “Weighted Average Life to Maturity” means, when applied to any Funded Debt
at any date, the number of years obtained by dividing (a) the then outstanding
aggregate principal amount of such Funded Debt into (b) the sum of the products
obtained by multiplying (i) the amount of each then-remaining installment,
sinking fund, serial maturity or other required payment of principal, including
payment at final maturity, in respect thereof, by (ii) the number of years
(calculated to the nearest one-twelfth) which will elapse between such date and
the making of such payment.
     “Withdrawal Liability” means liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
     Section 1.02.   Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time in the
United States, applied on a basis consistent (except for changes concurred in by
NNC’s independent public accountants) with the most recent audited consolidated
financial statements of NNC and its Consolidated Subsidiaries delivered to the
Lenders; provided that, if the Borrower notifies the Agent that the Borrower
wishes to amend any covenant in Article V to eliminate the effect of any change
in such generally accepted accounting principles on the operation of such
covenant (or if the Agent notifies the Borrower that the Required Lenders wish
to amend Article V for such purpose), then the Borrower’s compliance with such
covenant shall be determined on the basis of generally accepted accounting
principles in effect in the United States immediately before the relevant change
in generally accepted accounting principles became effective, until either such
notice is withdrawn or such covenant is amended in a manner satisfactory to the
Borrower and the Required Lenders.
     Section 1.03.   Types of Borrowings. The term “Borrowing” denotes the
aggregation of Loans of one or more Lenders to be made to the Borrower pursuant
to Article II on a single date, all of which Loans are of the same type (subject
to Article VIII) and, except in the case of Base Rate Loans, have the same
Interest Period or initial Interest Period. Borrowings are classified for
purposes of this Agreement either by reference to the tranche of Loans
comprising such Borrowing (e.g., a “Tranche A Borrowing” is a Borrowing
comprised of Tranche A Loans, and a “Tranche B Borrowing” is a Borrowing
comprised of Tranche B Loans) or by reference to the pricing of Loans comprising
such Borrowing (e.g., a “Euro-Dollar Borrowing” is a Borrowing comprised of
Euro-Dollar Loans and a “Base Rate Borrowing” is a Borrowing comprised of Base
Rate Loans).

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ARTICLE II
 
THE CREDITS
     Section 2.01.   Commitments to Lend.
     (a)   Tranche A Loans. During the Disbursement Period, each Lender with a
Tranche A Commitment severally agrees, on the terms and conditions set forth in
this Agreement, to make a Tranche A Loan to the Borrower pursuant to this
subsection (a) in an amount up to such Lender’s Tranche A Commitment. The
Borrower may make only one Tranche A Borrowing pursuant to this subsection (a).
Such Tranche A Borrowing shall be made from the several Lenders ratably in
proportion to their respective Tranche A Commitments. Any amount borrowed under
this subsection (a) and subsequently repaid or prepaid may not be reborrowed.
Unless previously borrowed under this subsection (a), the Tranche A Commitments
shall terminate at the close of business on the Commitment Termination Date.
     (b)   Tranche B Loans. During the Disbursement Period, each Lender with a
Tranche B Commitment severally agrees, on the terms and conditions set forth in
this Agreement, to make a Tranche B Loan to the Borrower pursuant to this
subsection (b) in an amount up to such Lender’s Tranche B Commitment. The
Borrower may make only one Tranche B Borrowing pursuant to this subsection (b).
Such Tranche B Borrowing shall be made from the several Lenders ratably in
proportion to their respective Tranche B Commitments, shall be made on the same
date as the Tranche A Borrowing; provided that no Tranche B Borrowing shall be
made on any date unless Tranche A Loans have been made in an amount equal to the
full amount of the Tranche A Commitments on such date. Any amount borrowed under
this subsection (b) and subsequently repaid or prepaid may not be reborrowed.
Unless previously borrowed under this subsection (b), the Tranche B Commitments
shall terminate at the close of business on the Commitment Termination Date.
     Section 2.02.   Notice of Borrowing. The Borrower shall give the Agent
notice (a “Notice of Borrowing”) not later than (a) 11:00 A.M. (New York time)
one day prior to the Borrowing, in the case of Base Rate Borrowings and (b) 1:00
P.M. (New York time) on the third Business Day before a Borrowing (or, in the
case of the Borrowings to be made on the Closing Date, two Business Days before
such Borrowings), in the case of Euro-Dollar Borrowings, specifying:
     (i)   the date of such Borrowing, which shall be a Business Day;
     (ii)   the aggregate amount of such Borrowing;
     (iii)   whether the Loans comprising such Borrowing bear interest initially
at the Base Rate or by reference to the Adjusted LIBO Rate; and
     (iv)   in the case of a Euro-Dollar Borrowing, the duration of the initial
Interest Period applicable thereto, subject to the provisions of the definition
of Interest Period.

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Notwithstanding the foregoing, at no time shall there be more than five
(5) Interest Periods applicable to all outstanding Euro-Dollar Loans.
     Section 2.03.   Notice to Lenders; Funding of Loans.
     (a)   Promptly upon receipt of a Notice of Borrowing submitted in
accordance with the terms of this Agreement, the Agent shall notify each Lender
of the contents thereof and of such Lender’s share (if any) of such Borrowing
and (except as provided in Section 8.01) such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
     (b)   Not later than 10:00 A.M. (New York time) on the date of each
Borrowing, each Lender participating therein shall make available its share of
such Borrowing, in funds in U.S. Dollars immediately available in New York to
the Agent at its address referred to in Section 9.01. Unless the Agent
determines that any applicable condition specified in Article III has not been
satisfied, when each Lender has funded the amount required to be funded by it to
the Agent, the Agent will promptly make the funds so received from the Lenders
available to the Borrower in like funds, by crediting an account of the Borrower
designated by the Borrower in the Notice of Borrowing.
     (c)   Unless the Agent shall have received notice from a Lender prior to
the date of any Borrowing that such Lender will not make available to the Agent
such Lender’s share of such Borrowing, the Agent may assume that such Lender has
made such share available to the Agent on the date of such Borrowing in
accordance with subsection (b) of this Section and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such share available to the Agent, such Lender and the Borrower severally
agree to repay to the Agent promptly on demand (and in any event within three
Business Days) such corresponding amount together with interest thereon, for
each day from the date such amount is made available to the Borrower until the
date such amount is repaid to the Agent, at (i) in the case of the Borrower, a
rate per annum equal to the interest rate applicable thereto pursuant to
Section 2.06 and (ii) in the case of such Lender, the greater of the Federal
Funds Effective Rate and a rate determined by the Agent in accordance with
banking industry rules on interbank compensation. If such Lender shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Lender’s Loan included in such Borrowing for purposes of this Agreement.
     Section 2.04.   Repayment of Loans; Evidence of Debt.
     (a)   The Borrower hereby unconditionally promises to pay (i) to the Agent
for the account of each Lender holding Tranche A Loans the then unpaid principal
amount of each Tranche A Loan on the Maturity Date, and (ii) to the Agent for
the account of each Lender holding Tranche B Loans the then unpaid principal
amount of each Tranche B Loan on the Maturity Date.
     (b)   Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such Lender
resulting from each Loan made by such Lender, including the amounts of principal
and interest payable and paid to such Lender from time to time hereunder.

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     (c)   The Agent shall maintain accounts in which it shall record (i) the
amount of each Loan made hereunder, the tranche and type thereof and the
Interest Period, if any, applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Agent hereunder
for the account of the Lenders and each Lender’s share thereof.
     (d)   The entries made in the accounts maintained pursuant to subsection
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Agent to maintain such accounts or any error therein shall not in
any manner affect the obligation of the Borrower to repay the Loans in
accordance with the terms of this Agreement.
     (e)   Any Lender may request that Tranche A Loans made by it be evidenced
by a Tranche A Note and any Lender may request that Tranche B Loans made by it
be evidenced by a Tranche B Note. In the event that any Lender requests a Note
be issued to represent its Loans, the Borrower shall promptly prepare, execute
and deliver to such Lender a Note. Thereafter, the Loans evidenced by such Note
and interest thereon shall at all times (including after assignment pursuant to
Section 9.06) be represented by one or more Notes in such form payable to the
order of the payee named therein (or, if such Note is a registered note, to such
payee and its registered assigns).
     Section 2.05.   Maturity of Loans. Each Loan included in any Borrowing made
pursuant to Section 2.01(a) or (b) shall mature, and the principal amount
thereof shall be due and payable, together with accrued interest thereon, on the
Maturity Date.
     Section 2.06.   Interest Rates.
     (a)   Each Base Rate Loan shall bear interest on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due (or prepaid), at a rate per annum equal to the Base Rate for such day plus
the Applicable Margin for Base Rate Loans of such tranche. Such interest shall
be payable quarterly in arrears on the last day of each quarter and, with
respect to the principal amount of any Base Rate Loan converted to a Euro-Dollar
Loan, on the date of such conversion.
     (b)   Each Euro-Dollar Loan of any tranche shall bear interest on the
outstanding principal amount thereof, for each day during each Interest Period
applicable thereto (or portion of the Interest Period, in the case of a
prepayment made on a date other than the last day of an Interest Period), at a
rate per annum equal to the sum of (X) the Adjusted LIBO Rate applicable to such
Interest Period plus (Y) the Applicable Margin for Euro-Dollar Loans of such
tranche. Such interest shall be payable for each Interest Period on the last day
thereof.
     (c)   Notwithstanding the foregoing, if any principal of or interest on any
Loan or any fee or other amount payable by the Borrower hereunder is not paid
when due, whether at stated maturity, upon acceleration or otherwise, such
overdue amount shall bear interest, after as well as before judgment, at a rate
per annum equal to (i) in the case of overdue principal of or interest on any
Loan, 2% plus the rate otherwise applicable to such Loan as provided in the
preceding subparagraphs of this Section 2.06 or (ii) in the case of any other
amount, 2% plus the

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rate applicable to Base Rate Loans of the applicable tranche as provided in
subsection (a) of this Section 2.06.
     (d)   The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall give prompt notice to the Borrower and the
participating Lenders of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
     Section 2.07.   Fees. The Borrower shall pay to the Agent for the Agent’s
account the administrative fee separately agreed to by the Borrower and the
Agent.
     Section 2.08.   Termination or Reduction of Commitments. During the
Disbursement Period, the Borrower may, upon at least three Business Days’ notice
to the Agent, (i) terminate the Commitments at any time or (ii) ratably reduce
from time to time by an aggregate amount of $25,000,000 or a larger multiple of
$5,000,000, the aggregate amount of the Commitments.
     Section 2.09.   Method of Electing Interest Rates.
     (a)   The Loans included in each Borrowing shall bear interest initially at
the type of rate specified by the Borrower in the applicable Notice of
Borrowing. Thereafter, the Borrower may from time to time elect to change or
continue the type of interest rate borne by each Group of Loans (subject in each
case to the provisions of Article VIII), as follows: (i) if such Loans are Base
Rate Loans, the Borrower may elect to convert such Base Rate Loans to
Euro-Dollar Loans as of any Business Day, or (ii) if such Loans are Euro-Dollar
Loans, the Bor rower may elect to convert such Loans to Base Rate Loans or elect
to continue such Loans as Euro-Dollar Loans for an additional Interest Period,
in each case effective on the last day of the then current Interest Period
applicable to such Euro-Dollar Loans. Each such election shall be made by
delivering a notice (a “Notice of Interest Rate Election”) to the Agent at least
three Business Days before the conversion or continuation selected in such
notice is to be effective. A Notice of Interest Rate Election may, if it so
specifies, apply to only a portion of the aggregate principal amount of the
relevant Group of Loans; provided that (i) such portion is allocated ratably
among the Loans comprising such Group, (ii) the portion to which such Notice
applies, and the remaining portion to which it does not apply, are each
$25,000,000 or any larger multiple of $5,000,000 and (iii) at no time shall
there be more than five (5) Interest Periods in effect for all Euro-Dollar
Loans.
     (b)   Each Notice of Interest Rate Election shall specify: (i) the Group of
Loans (or portion thereof) to which such notice applies; (ii) the date on which
the conversion or continuation selected in such notice is to be effective, which
shall comply with the applicable clause of subsection (a) above; (iii) if the
Loans comprising such Group are to be converted, the new type of Loans and, if
such new Loans are Euro-Dollar Loans, the duration of the initial Interest
Period applicable thereto; and (iv) if such Loans are to be continued as
Euro-Dollar Loans for an additional Interest Period, the duration of such
additional Interest Period. Each Interest Period specified in a Notice of
Interest Rate Election shall comply with the provisions of the definition of
Interest Period.

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     (c)   Upon receipt of a Notice of Interest Rate Election from the Borrower
pursuant to subsection (a) above, the Agent shall promptly notify each Lender of
the contents thereof and such notice shall not thereafter be revocable by the
Borrower. If the Borrower fails to deliver a timely Notice of Interest Rate
Election with respect to any Group of Euro-Dollar Loans prior to the end of the
Interest Period applicable thereto, then, unless such Borrowing is repaid as
provided herein, at the end of such Interest Period such Borrowing shall be
converted to a Base Rate Borrowing. Notwithstanding any contrary provision
hereof, if an Event of Default has occurred and is continuing and the Agent, at
the request of the Required Tranche A Lenders (in the case of the Tranche A
Loans) or the Required Tranche B Lenders (in the case of the Tranche B Loans),
so notifies the Borrower, then, so long as such Event of Default is continuing
(i) no outstanding Loans under the applicable tranche may be converted to or
continued as a Euro-Dollar Borrowing and (ii) unless repaid, each Euro-Dollar
Borrowing under the applicable tranche shall be converted to a Base Rate
Borrowing at the end of the Interest Period applicable thereto.
     Section 2.10.   Prepayments.
     (a)   The Borrower may, upon at least one Business Day’s notice to the
Agent, prepay any Group of Base Rate Loans or, subject to Section 2.12, upon at
least three Business Days’ notice to the Agent, prepay any Group of Euro-Dollar
Loans, in each case, in whole at any time, or from time to time in part in
amounts aggregating $5,000,000 or any larger multiple of $5,000,000, as the case
may be, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment.
     (b)   Within three Business Days after any Net Cash Proceeds are received
by or on behalf of NNC, the Borrower or any Restricted Subsidiary in respect of
any Prepayment Event, the Borrower shall ratably prepay the Loans in an
aggregate principal amount equal to such Net Cash Proceeds in accordance with
subsection (e) below.
     (c)   The Borrower shall notify the Agent of any prepayment pursuant to
subsection (b) above of any Borrowing hereunder (i) in the case of Base Rate
Loans, not later than 1:00 p.m. (New York time), one Business Day before the
date of prepayment and (ii) in the case of Euro-Dollar Loans, not later than
1:00 p.m. (New York time), three Business Days before the date of prepayment.
Each such notice shall specify the prepayment date, the principal amount of
Loans to be prepaid and a reasonably detailed calculation of the amount of such
prepayment.
     (d)   Upon receipt of a notice of prepayment pursuant to this Section 2.10,
the Agent shall promptly notify each Lender of the contents thereof and of such
Lender’s ratable share of such prepayment and such notice shall not thereafter
be revocable by the Borrower; provided, that any notice of a prepayment of all
then outstanding Loans may be conditioned upon the consummation of a
contemplated issuance or incurrence of Funded Debt or Qualified Capital Stock or
the consummation of any Specified Asset Sale or transfer of Restricted Assets,
in each case, by NNC or its Subsidiaries.
     (e)   Any prepayment pursuant to this Section 2.10 arising from a
Prepayment Event of the type described in clauses (A) or (B) of the definition
thereof shall be applied ratably to all Loans in proportion to the outstanding
amount thereof. Any prepayment pursuant to sub-

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section (b) above relating to a Prepayment Event of the type described in
clauses (C) or (D) of the definition thereof shall be applied ratably to all
Tranche A Loans.
     Section 2.11.   General Provisions as to Payments; Pro Rata Treatment.
     (a)   Each Borrowing shall be repaid or prepaid in Dollars and interest
payable thereon shall be paid in Dollars.
     (b)   The Borrower shall make each payment of principal of, and interest
on, the Loans and of fees hereunder, not later than 12:00 P.M. (New York time)
on the date when due, in funds immediately available in New York, to the Agent
at its address referred to in Section 9.01. The Agent will promptly distribute
to each Lender its ratable share of each such payment received by the Agent for
the account of the Lenders. Whenever any payment of principal of, or interest
on, the Base Rate Loans or of fees shall be due on a day which is not a Business
Day, the date for payment thereof shall be extended to the next succeeding
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Business Day, the date
for payment thereof shall be extended to the next succeeding Business Day unless
such Business Day falls in another calendar month, in which case the date for
payment thereof shall be the next preceding Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
     (c)   Unless the Agent shall have received notice from the Borrower prior
to the date on which any payment is due from the Borrower to the Lenders
hereunder that the Borrower will not make such payment in full, the Agent may
assume that the Borrower has made such payment in full to the Agent on such date
and the Agent may, in reliance upon such assumption, cause to be distributed to
each Lender on such due date an amount equal to the amount then due such Lender.
If and to the extent that the Borrower shall not have so made such payment, each
Lender shall repay to the Agent forthwith on demand such amount distributed to
such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Base Rate.
     (d)   If at any time insufficient funds are received by and available to
the Agent to pay fully all amounts of principal and interest then due hereunder,
such funds (other than any funds received on account of the Collateral, which
shall be applied as set forth in the Security Agreement) shall be applied
(i) first, towards payment of interest and fees then due hereunder, ratably
among the parties entitled thereto in accordance with the amounts of interest
and fees then due to such parties, and (ii) second, towards payment of principal
then due hereunder, ratably among the parties entitled thereto in accordance
with the amounts of principal then due to such parties.
     Section 2.12.   Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan (pursuant to Article II, VI or
VIII or otherwise) on any day other than the last day of the Interest Period
applicable thereto, or if the Borrower fails to borrow or prepay any Euro-Dollar
Loans after notice has been given to any Lender in accordance with Section
2.03(a) or 2.10(a) (except as a result of a default by the Agent or any Lender
in observing the terms of this Agreement), the Borrower shall reimburse each
Lender within 15 days after

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demand for any resulting loss or expense directly incurred by it, including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding consequential and incidental damages,
any administrative expenses and loss of margin or loss of anticipated profits
for the period after any such payment or failure to borrow or prepay; provided
that such Lender (x) shall have delivered to the Borrower a certificate as to
the amount of such loss or expense and a reasonably detailed calculation of such
amount, and (y) shall use all reasonable efforts to mitigate the amount payable
by the Borrower under this Section 2.12.
     Section 2.13.   Computation of Interest and Fees. All interest hereunder
shall be computed on the basis of a year of 360 days, except that interest
computed by reference to the Base Rate at times when the Base Rate is based on
the Prime Rate shall be computed on the basis of a year of 365 days (or 366 days
in a leap year), and in each case shall be payable for the actual number of days
elapsed (including the first day but excluding the last day).
     Section 2.14.   Interest Act Equivalency. For purposes of disclosure
pursuant to the Interest Act (Canada), the yearly rate of interest to which any
rate of interest is equivalent (other than the interest rate on Base Rate Loans
determined by reference to the Prime Rate), may be determined by multiplying the
applicable rate by a fraction, the numerator of which is the number of days in
the calendar year in which the period for which such interest payable occurs and
the denominator of which is 360.
ARTICLE III
 
CONDITIONS
     The obligations of the Lenders to make Loans pursuant to Section 2.01 are
subject to the satisfaction of the following conditions on or prior to
February 15, 2006:
     (a)   the Agent shall have received a duly executed Tranche A Note of the
Borrower for the account of each Lender with a Tranche A Commitment that has
requested a Tranche A Note at least two Business Days prior to the Closing Date
and a duly executed Tranche B Note for the account of each Lender with a Tranche
B Commitment that has requested a Tranche B Note at least two Business Days
prior to the Closing Date, each dated the Closing Date and complying with the
provisions of Section 2.04;
     (b)   the Agent shall have received a duly executed Guarantee Agreement,
dated the Closing Date;
     (c)   the Agent shall have received a duly executed U.S. Security
Agreement, dated the Closing Date;
     (d)   the Agent shall have received a duly executed Canadian Security
Agreement dated the Closing Date;
     (e)   The Collateral Agent shall have received (i) a duly completed
Perfection Certificate for the Borrower, (ii) a duly executed Patent Security
Agreement and Trademark Security Agreement of the Borrower, each as defined in
and to the extent required

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by the U.S. Security Agreement, (iii) certificates or other instruments
representing Equity Interests and all other Pledged Securities (as defined in
the U.S. Security Agreement) held by any U.S. Credit Party as of the Closing
Date, together with stock powers or other instruments of transfer with respect
thereto endorsed in blank, in each case, to the extent required by the U.S.
Security Agreement, and (iv) a UCC-1 financing statement in appropriate form for
filing in the jurisdiction of incorporation of the Borrower.
     (f)   the Collateral Agent shall have received (i) a duly completed
Perfection Certificate for NNC and NNL, (ii) duly executed Patent Security
Agreements and Trademark Security Agreements, each as defined in and to the
extent required by the Canadian Security Agreement, of the Canadian Credit
Parties, (iii) certificates or other instruments representing Equity Interests
and all other Pledged Securities (as defined in the Canadian Security Agreement)
held by any Canadian Credit Party as of the Closing Date, together with stock
powers or other instruments of transfer with respect thereto endorsed in blank,
in each case, to the extent required by the Canadian Security Agreement,
(iv) with respect to all moveable property of the Canadian Credit Parties
located in Quebec, a duly executed deed of hypothec, bond, delivery order, bond
pledge agreement and receipt (collectively the “Quebec Hypothec”) substantially
in the form contemplated by the Canadian Security Agreement, and (v) all PPSA
financing statements requested by the Collateral Agent to perfect its security
interests in the Collateral purported to be granted under the Security
Agreement.
     (g)   the Collateral Agent shall have received such closing documents with
respect to the Credit Parties (including secretary’s certificates, certificates
of good standing and insurance certificates complying with Section 5.07(b)) as
it shall have reasonably requested;
     (h)   the Agent shall have received an opinion of Cleary Gottlieb Steen &
Hamilton LLP, special U.S. counsel for the Credit Parties, substantially in the
form of Exhibit C hereto;
     (i)   the Agent shall have received an opinion of Gordon A. Davies, General
Counsel-Corporate and Corporate Secretary of NNC, substantially in the form of
Exhibit D hereto;
     (j)   the Agent shall have received an opinion of Ogilvy Renault LLP, as
(x) special Canadian counsel for the Credit Parties (other than with respect to
matters relating to the laws of Quebec), substantially in the form of
Exhibit E-1 hereto and (y) special Quebec counsel for the Credit Parties
substantially in the form of Exhibit E-2;
     (k)   the Agent shall have received a duly completed Notice of Borrowing
complying with Section 2.02; and
     (l)   the Agent shall have received an officer’s certificate of NNC to the
effect that:

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  (i)   immediately before and after such Borrowing, no Default shall have
occurred and be continuing;     (ii)   the representations and warranties of the
Credit Parties contained in the Loan Documents shall be true in all material
respects on and as of the date of such Borrowing; and     (iii)   since
September 30, 2005, except as set forth in the Disclosure Schedule, there has
been no Material Adverse Effect.

ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES
     The Borrower represents and warrants that:
     Section 4.01.   Corporate Existence and Power. Each Credit Party is a
corporation duly incorporated and validly existing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, the absence of which would have a Material
Adverse Effect or a material adverse effect on the ability of such Credit Party
to perform its obligations under the Loan Documents or on the rights and
remedies of the Lenders under the Loan Documents.
     Section 4.02.   Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by each Credit Party of the Loan
Documents to which it is a party (i) are within such Credit Party’s corporate
powers and have been duly authorized by all necessary corporate action,
(ii) require no action by or in respect of, or filing with, any governmental
body, agency or official and (iii) do not contravene any provision of applicable
law or regulation or any provision of the certificate of incorporation or
by-laws of such Credit Party or any contractual restriction, order, decree or
other instrument binding upon such Credit Party or any of its Subsidiaries,
except, in the case of clauses (ii) and (iii) above, any such action, filing or
contravention which would not have a Material Adverse Effect or a material
adverse effect on the ability of such Credit Party to perform its obligations
under the Loan Documents or on the rights and remedies of the Lenders under the
Loan Documents.
     Section 4.03.   Binding Effect. The Loan Documents constitute or, when
executed, will constitute valid and binding agreements of the Credit Parties
that are parties to them, in each case enforceable in accordance with its terms,
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors’ rights generally and by general principles of equity (it
being understood that the enforceability thereof in Canada may be limited by the
Currency Act (Canada), which precludes 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).

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     Section 4.04.   Financial Information.
     (a)   The (i) consolidated balance sheet of NNC and its Consolidated
Subsidiaries as of December 31, 2004 and the related consolidated statements of
operations, cash flows and retained earnings for the fiscal year then ended,
reported on by Deloitte & Touche LLP and set forth in NNC’s 2004 Form 10-K, and
(ii) unaudited consolidated balance sheet of NNC and its Consolidated
Subsidiaries as of September 30, 2005 and the related consolidated statements of
operations, cash flows and retained earnings for the three quarters then ended,
and set forth in NNC’s 2005 Q3 Form 10-Q, fairly present, in conformity with
GAAP, the consolidated financial position of NNC and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such fiscal year or such portion of such fiscal year, as
applicable, subject, in the case of the statements as of and for the period
ended September 30, 2005, to normal year-end adjustments.
     (b)   Since September 30, 2005, except as set forth in the Disclosure
Schedule, there has been no material adverse change in the business, financial
position or results of operations of NNC and its Consolidated Subsidiaries,
taken as a whole.
     Section 4.05.   Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of NNC, NNL or the Borrower threatened against or
affecting, NNC or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official (i) in which there is a reasonable
possibility of an adverse decision which could have a material adverse effect on
the ability of a Credit Party to perform its obligations under the Loan
Documents to which it is party, except as disclosed in NNC’s Exchange Act
reports filed prior to the Effective Date or as set forth in the Disclosure
Schedule, or (ii) which in any manner draws into question the validity of the
Loan Documents.
     Section 4.06.   Taxes. Each of NNC and its Consolidated Subsidiaries has
timely filed or caused to be filed all tax returns and reports required to have
been filed by it and has timely paid or caused to be paid all taxes required to
have been paid by it, except (a) any taxes that are being contested in good
faith by appropriate proceedings and for which the relevant obligor has set
aside on its books adequate reserves or (b) to the extent that failures to do
so, in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect.
     Section 4.07.   Solvency.
     (a)   As of the Effective Date, the Borrower reasonably believes that
(i) the fair value of the assets of the Borrower, at a fair valuation viewing
the Borrower as a going concern, will exceed its debts and liabilities,
subordinated, contingent or otherwise; (ii) the present fair saleable value of
the property of the Borrower will exceed 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) the Borrower will be able to pay its debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured; and (iv) the Borrower 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 Effective Date;
in each case, it being understood that the Bor-

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rower cannot be certain as to how a court would apply the foregoing standards to
any contingent liabilities in determining whether the Borrower was solvent at
the relevant time.
     (b)   As of the Effective Date, with respect to NNC and NNL, the Borrower
reasonably believes that (i) the aggregate property of such Person 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 such Person is, at a fair valuation, greater than the total
amount of liabilities, including contingent liabilities, of such Person;
(iii) such Person has not ceased paying its current obligations in the ordinary
course of business as they generally become due; and (iv) such Person is not for
any reason unable to meet its obligations as they generally become due; in each
case, it being understood that the Borrower cannot be certain as to how a court
would apply the foregoing standards to any contingent liabilities in determining
whether NNC or NNL was solvent at the relevant time.
     Section 4.08.   ERISA; Canadian Plans.
     (a)   No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other ERISA Events for which liability is
reasonably expected to occur, could reasonably be expected to result in a
Material Adverse Effect.
     (b)   The Canadian Pension Plans are duly registered under all applicable
laws which require registration and no event has occurred which is reasonably
likely to cause the loss of such registered status. All material obligations of
each Credit Party (including fiduciary, funding, investment and administration
obligations) required to be performed in connection with the Canadian Pension
Plans and the funding agreements therefor have been performed in a timely
fashion. There are no outstanding disputes concerning the assets of the Canadian
Pension Plans or the Canadian Benefit Plans that could reasonably be expected to
have a Material Adverse Effect. Except as set forth in the Disclosure Schedule,
there have been no improper withdrawals or applications of the assets of the
Canadian Pension Plans or the Canadian Benefit Plans. Each Credit Party has made
all required contributions to each Canadian Pension Plan in accordance with
applicable law. With respect to each Canadian Pension Plan that provides defined
benefits, all contributions required to the date hereof in order for such
Canadian Pension Plan to comply with the minimum funding standards imposed by
applicable federal or provincial statutory and regulatory requirements have been
made or properly accrued, and the funding of each of such Canadian Pension Plans
is properly disclosed in the most recent actuarial valuation reports filed with
(and accepted for filing by) the applicable Governmental Authorities in respect
of each such Canadian Pension Plan, as at the date of such reports and subject
to the actuarial assumptions and methods disclosed in such reports.
     Section 4.09.   Security Agreement Representations and Warranties.
     Each of the representations and warranties of the Credit Parties contained
in the Security Agreement is true and correct.
     Section 4.10.   Disclosure.
     On the Effective Date, the Borrower has disclosed to the Lenders all
matters known to it, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect. The information, taken as a
whole, furnished by or on behalf of the

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Borrower to the Agent and each Lender in connection with the negotiation of this
Agreement or delivered hereunder (as modified or supplemented by other
information so furnished) does not contain any material misstatement of fact or
omit to state any fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided that,
with respect to projected financial information, the Borrower represents only
that such information was prepared in good faith based upon assumptions believed
to be reasonable at the time, it being understood that actual results may
materially vary from such projections and such forward-looking information must
be read in the context of cautionary language including, without limitation, the
risk factors contained in NNC’s filings made pursuant to the Exchange Act.
Except for the Liens securing Funded Debt of Foreign Subsidiaries that are
specifically disclosed on Schedule 5.09, after reasonable inquiry, the Borrower
is not aware of any Liens on any property of any Foreign Subsidiary securing
Funded Debt.
     Section 4.11.   Investment Company Status.
     None of the Credit Parties is an “investment company” or an entity
“controlled” by an “investment company”, in each case, as defined in the
Investment Company Act of 1940.
     Section 4.12.   No Unlawful Payments.
     NNC 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 NNC or any of its 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.
     Section 4.13.   Compliance with Laws and Agreements.
     None of the Credit Parties is (i) in violation of its charter or by-laws or
similar organizational documents; (ii) in default, and no event has occurred
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 Credit Party is bound or to which any of the
property or assets of such Credit Party is subject; or (iii) in violation of any
applicable law or statute or any applicable judgment, order, rule or regulation
of any Governmental Authority, except, in each case as otherwise disclosed in
NNC’s Exchange Act reports filed prior to the Effective Date, 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.

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ARTICLE V
 
COVENANTS
     The Borrower agrees, and will cause NNC and each Restricted Subsidiary to
agree, that, so long as any Lender has any Commitment hereunder or any amount
payable under any Loan remains unpaid:
     Section 5.01.   Information.   The Borrower will deliver to the Agent on
behalf of each of the Lenders:
     (a)   as soon as available and in any event on or prior to March 16, 2006,
NNC’s annual report on Form 10-K for the year ended December 31, 2005 as filed
with the Commission, including a consolidated balance sheet of NNC and its
Consolidated Subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, cash flows and retained earnings for such
fiscal year, setting forth in each case in comparative form the figures for the
previous fiscal year, all reported on without any “going concern” qualification
or qualification as to the scope of the audit procedures performed by Deloitte &
Touche LLP or other independent public accountants of nationally recognized
standing;
     (b)   as soon as available and in any event within 45 days after the end of
each of the first three quarters of 2006, NNC’s quarterly report on Form 10-Q as
filed with the Commission, including a consolidated balance sheet of NNC and its
Consolidated Subsidiaries as of the end of such quarter and the related
consolidated statements of operations, cash flows and retained earnings for such
quarter and for the portion of NNC’s fiscal year ended at the end of such
quarter, setting forth in the case of such statements of operations, cash flows
and retained earnings, in comparative form the figures for the corresponding
quarter and the corresponding portion of NNC’s previous fiscal year;
     (c)   within seven (7) days after delivery of each set of financial
statements referred to in subsections (a) and (b) above, a copy of a certificate
of the Treasurer or Assistant Treasurer of NNC (i) stating whether to the best
of such Person’s knowledge, after having conducted a reasonable investigation,
any Default exists on the date of such certificate and, if any Default then
exists, setting forth reasonable details thereof, (ii) setting forth reasonably
detailed calculations demonstrating compliance with Section 5.13 for the
twelve-month period ending on the last day of the most recent financial
statements delivered pursuant to subsection (a) or (b) above, as the case may
be, and Section 5.15 as of the date of the most recent balance sheet included in
the financial statements delivered pursuant to subsection (a) or (b) above, as
the case may be;
     (d)   promptly after the mailing thereof to the shareholders of NNC or NNL
generally, copies of all other reports and proxy statements so mailed;
     (e)   promptly after the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements on
Form S-8 or its equiva-

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lent) and reports on Form 8-K (or its equivalent) which NNC or NNL shall have
filed with the Commission;
     (f)   from time to time such additional information regarding the financial
position or business of NNC and its Restricted Subsidiaries as any Lender may
reasonably request through the Agent as being desirable to enable such Lender to
protect its rights under this Agreement; provided that the Borrower shall not be
under any obligation to supply any information the supply of which would be
contrary to any confidentiality obligation binding on NNC or any of its
Restricted Subsidiaries or which, in the Borrower’s opinion, is unpublished
price sensitive information or the supply of which would, in the Borrower’s
opinion, be contrary to any applicable securities laws or the regulations of any
relevant stock exchange;
     (g)   within five Business Days after the end of each calendar month, a
certificate of the Treasurer or Assistant Treasurer of NNC stating that NNC was
in compliance with Section 5.14 as of the last Business Day in such calendar
month.
     Section 5.02.   Notice of Material Events.   As soon as practicable, and in
any event within five days after an Executive Officer acquires knowledge
thereof, the Borrower will furnish to the Agent and each Lender prompt written
notice of the following:
     (a)   the occurrence of any Default;
     (b)   the filing or commencement of any action, suit or proceeding by or
before any arbitrator or governmental authority against or affecting NNC or any
Subsidiary that has a reasonable possibility of being adversely determined and,
if adversely determined, could reasonably be expected to result in a Material
Adverse Effect;
     (c)   any change in any Debt Rating with negative implications;
     (d)   the occurrence of any ERISA Event or any failure to make all required
contributions in accordance with applicable law under any Canadian Pension Plan
or Canadian Benefit Plan (such failure, a “Funding Failure”) that, alone or
together with any other ERISA Events or Funding Failures that have occurred and
are continuing at such time, could reasonably be expected to result in
liabilities of NNC and its Subsidiaries that could reasonably be expected to
result in a Material Adverse Effect; and
     (e)   the occurrence of a Material Adverse Effect.
Each notice delivered under this Section (other than clause (c) above) shall be
accompanied by a statement of an Executive Officer setting forth the details of
the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.
     Section 5.03.   Information Regarding Collateral.   The Borrower will
furnish to the Collateral Agent prompt written notice of any change in (i) any
Credit Party’s corporate name or any trade name used to identify it in the
conduct of its business or any Credit Party’s chief executive office or its
principal place of business, (ii) any Credit Party’s identity or corpo-

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rate structure (including, without limitation, its jurisdiction of organization)
or (iii) any Credit Party’s Federal Taxpayer Identification Number.
     Section 5.04.   Existence; Conduct of Business.   The Borrower will, and
will cause NNC and each Credit Party to, preserve, renew and keep in full force
and effect its legal existence and the rights, licenses, permits, privileges,
franchises, patents, copyrights, trademarks and trade names, in each case as
necessary or desirable to the normal conduct of the business of NNC and its
Subsidiaries, taken as a whole; provided that the foregoing shall not prohibit
any amalgamation, merger, consolidation, liquidation or dissolution permitted
under Section 5.11.
     Section 5.05.   Use of Proceeds.   The proceeds of the Loans made under
this Agreement will be used by NNC and its Restricted Subsidiaries to repay
NNL’s 6.125% Notes due February 15, 2006 and related fees and expenses. None of
such proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any “margin stock”
within the meaning of Regulation U.
     Section 5.06.   Maintenance of Properties; Payment of Obligations.   The
Borrower will, and will cause each Credit Party to, maintain all property
material to the conduct of the business of NNC and its Restricted Subsidiaries,
taken as a whole, in good working order and condition, ordinary wear and tear
excepted. The Borrower will, and will cause NNC and each of its Restricted
Subsidiaries to, pay its obligations, including tax obligations, that, if not
paid, could result in a Material Adverse Effect, before the same shall become
delinquent or in default, except where (a) the validity or amount thereof is
being contested in good faith by appropriate proceedings, (b) NNC, the Borrower
or the Restricted Subsidiary has set aside on its books adequate reserves with
respect thereto in accordance with GAAP and (c) the failure to make payment
pending such contest could not reasonably be expected to result in a Material
Adverse Effect.
     Section 5.07.   Insurance.
     (a)   The Borrower will, and will cause each Credit Party to, maintain,
with reputable insurance carriers, insurance in such amounts and against such
risks as are customarily maintained by companies engaged in the same or similar
business, owning similar properties and located in the same general areas in
which NNC, the Borrower or such Credit Party, as the case may be, operates;
provided that insurance coverage against terrorist acts shall be required only
so long as such coverage is available on commercially reasonable terms. It is
understood that the insurance policies maintained by NNC, the Borrower and the
Credit Parties on the date hereof shall be deemed adequate for purposes of this
subsection.
     (b)   In addition, the insurers or their representative under any casualty
insurance covering the Collateral shall deliver a certificate to the Collateral
Agent which (i) provides that no cancellation, material reduction in amount or
material change in coverage thereof shall be effective until at least 30 days
after receipt by the Collateral Agent of written notice thereof, (ii) names the
Collateral Agent as insured party or loss payee with respect to its interest, as
applicable (provided that so long as no Event of Default has occurred and is
continuing the Collateral Agent shall make such proceeds available to the
Borrower for the repair, reconstruction or replacement of the damaged property),
(iii) if reasonably requested by the Collateral Agent, in-

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cludes a breach of warranty clause and (iv) is reasonably satisfactory in all
other respects to the Collateral Agent.
     Section 5.08.   Proper Records; Rights to Inspect.   The Borrower will
cause NNC and NNL to, record, summarize and report all financial information in
accordance with GAAP, which information will include information on such
Person’s Subsidiaries prepared on a consolidated basis; provided that NNC and
NNL shall not be under any obligation to record, summarize or report any
information to the extent contrary to any confidentiality obligation binding on
NNC or any of its Subsidiaries or which, in the Borrower’s opinion, is
unpublished price sensitive information or the report of which would, in the
Borrower’s opinion, be contrary to any applicable securities laws or the
regulations of any relevant stock exchange. Each Credit Party will permit any
representatives designated by the Agent or any Lender, upon reasonable prior
notice, to visit and inspect its properties (including, without limitation, the
Collateral), to examine and make extracts from its books and records, and to
discuss its affairs, finances and condition and the Collateral with any officers
designated for such purpose by an Executive Officer and (after reasonable prior
notice to the Borrower and subject to the right of such designated officers to
be present during such discussions) independent accountants, all at such
reasonable times during normal business hours and as often as reasonably
requested; provided that unless an Event of Default has occurred and is
continuing, each of the Agent and the Lenders may take such actions only once
during each fiscal quarter of NNC.
     Section 5.09.   Liens.   Subject to the second succeeding sentence, the
Borrower will not, and will not permit any other Credit Party to create, incur
or suffer to exist any Lien upon any property of any Credit Party (whether now
owned or hereinafter acquired). Subject to the succeeding sentence, the Borrower
will not permit any Non-Credit Party Subsidiary that is a Restricted Subsidiary
to create, incur or suffer to exist any Lien upon any property of such
Non-Credit Party Subsidiary (whether now owned or hereafter acquired) which
secures Funded Debt. The restrictions contained in the two preceding sentences
shall not apply to:
     (i)   the Transaction Liens;
     (ii)   any Lien on assets of NNC and its Subsidiaries securing any
Refinancing Funded Debt but only to the extent that the Funded Debt that is
refinanced was secured thereby;
     (iii)   any Permitted Lien;
     (iv)   Liens under any Purchase Money Mortgage incurred after the Effective
Date;
     (v)   any Lien on property of a Person or group of Persons existing at the
time that such Person or group of Persons is merged into, or amalgamated or
consolidated with NNC, the Borrower or any Restricted Subsidiary, or at the time
the properties of or equity interests in the Person are sold, leased or
otherwise transferred to NNC, the Borrower or any Restricted Subsidiary which
Lien does not extend to any other property of NNC or any other Subsidiary (other
than improvements or construction on such acquired property or properties);

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     (vi)   any Lien securing intercompany Funded Debt (x) among or between
Credit Parties, (y) among or between Non-Credit Party Subsidiaries or (z) owed
to a Credit Party by a Non-Credit Party Subsidiary;
     (vii)   deposits of cash, cash equivalents or investment securities against
which the lender of any Credit Enhanced Foreign Subsidiary Debt has a Lien or
right of set-off;
     (viii)   any Lien on property of a Foreign Subsidiary securing any Funded
Debt incurred pursuant to clause (h) of the definition of Permitted Funded Debt;
     (ix)   any Lien created by or resulting from litigation or other proceeding
against, or upon property of, NNC, the Borrower or any Restricted Subsidiary, or
any Lien for workmen’s compensation awards or similar awards, so long as the
finality of such judgment or award is being contested and execution thereon is
stayed or such Lien relates to a final unappealable judgment which is satisfied
within 30 days of such judgment or any Lien incurred by NNC, the Borrower or any
Restricted Subsidiary for the purpose of obtaining a stay or discharge in the
course of any litigation or other proceeding;
     (x)   any other Liens securing Funded Debt of any Foreign Subsidiary;
provided that the aggregate outstanding principal amount of Funded Debt secured
pursuant to this clause (x) by any individual Foreign Subsidiary would not,
after giving effect to the relevant transaction, exceed $5,000,000;
     (xi)   Liens existing on the Effective Date (x) on any assets of any
Non-Credit Party Subsidiary and (y) on any assets of any Credit Party (but in
the case of this clause (y), only to the extent such Liens are disclosed on
Schedule 5.09) and any extension, renewal or replacement in whole or in part of
any Lien permitted by this clause (xi) or referred to in clauses (i) through
(x) above, so long as the total amount of obligations secured thereby does not
increase, and the property securing such obligations is not expanded, as a
result of the extension, renewal or replacement;
     (xii)   Liens securing Permitted Financing Leases;
     (xiii)   Liens securing other Financing Leases and Capital Lease
Obligations; provided that the aggregate Attributable Debt under such Financing
Leases together with the aggregate amount of such Capital Lease Obligations
shall not exceed $100,000,000 at any time; and
     (xiv)   Managed Service Contract Liens.
     Section 5.10.   [Omitted].
     Section 5.11.   Fundamental Changes.
     (a)   The Borrower will not, and will not permit NNC or any Restricted
Subsidiary to, amalgamate, merge or consolidate with or into any other Person,
or liquidate or dissolve, or permit any other Person to amalgamate, merge or
consolidate with or into it; provided

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that, if at the time thereof and immediately after giving effect thereto no
Default shall have occurred and be continuing, (i) any Restricted Subsidiary may
amalgamate, merge or consolidate with or into or be liquidated or dissolved into
any Credit Party in a transaction in which such Credit Party is the surviving or
resulting corporation, (ii) any Restricted Subsidiary may amalgamate, merge or
consolidate with or into or liquidate or dissolve into any Person that is not a
Credit Party in a transaction which does not contravene Section 5.15; provided
that to the extent such transaction constitutes a Prepayment Event, the Borrower
shall comply with Section 2.10, and (iii) NNL may be liquidated or dissolved if,
as a result of such liquidation or dissolution, all of the assets of NNL are
transferred to NNC or any other Credit Party.
     (b)   Neither NNC, the Borrower nor any Restricted Subsidiary will engage
to any material extent in any business except businesses of the types conducted
by NNC, the Borrower and the Restricted Subsidiaries on the date of this
Agreement and businesses reasonably related thereto.
     Section 5.12.   Restricted Payments.   The Borrower will not, and will not
permit NNC or any Restricted Subsidiary to, directly or indirectly:
     (a)   declare or pay any dividend or make any distribution (other than
dividends or distributions payable in Qualified Capital Stock) on or in respect
of shares of NNC’s Capital Stock or NNL’s Preferred Stock to holders of such
Capital Stock or Preferred Stock, as the case may be, in their capacity as such;
or
     (b)   purchase, redeem or otherwise acquire or retire for value any Equity
Interests of NNC or any Preferred Stock of NNL or any warrants, options or other
rights to acquire such Preferred Stock or make any payments with respect to
Synthetic Purchase Agreements,
(each of the foregoing actions set forth in subsections (a) and (b) being
referred to as a "Restricted Payment”), other than:
     (i)   the repurchase or other acquisition of Capital Stock of NNC or any
warrants, rights or options to purchase or acquire shares of any such Capital
Stock or securities convertible into Capital Stock of NNC, from or on behalf of
current or former employees, directors, consultants, or contractors of NNC or
any of its Subsidiaries (or permitted transferees of such current or former
employees, directors, consultants, or contractors), pursuant to the terms of the
agreements (including employment or severance agreements) or plans (or
amendments thereto) under which such individuals purchase or sell, or are
granted the option to purchase or sell, shares of such Capital Stock;
     (ii)   the redemption by NNC of any rights to purchase shares of Common
Stock of NNC outstanding from time to time under the amended and restated
shareholder rights plan agreement between NNC and Computershare Trust Company of
Canada, as rights agent, dated as of February 14, 2003, as the same may be
further amended and restated from time to time, in accordance with the terms
thereof; provided that such rights are redeemed for nominal consideration;

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     (iii)   payments to holders or former holders of Capital Stock of NNC or
NNL pursuant to a statutory dissent right or appraisal remedy;
     (iv)   payments to holders of Capital Stock (or to the holders of Funded
Debt or Disqualified Capital Stock that is convertible into or exchangeable for
Capital Stock upon such conversion or exchange) in lieu of the issuance of
fractional shares;
     (v)   payments to holders of Capital Stock of NNC under any stock purchase
plan or similar employee or director benefit plan in settlement of fractional
shares issued under such plan;
     (vi)   so long as no Event of Default has occurred and is continuing on the
date of declaration, the declaration and payment by NNL of regularly scheduled
cash dividends with respect to the Existing Preferred Stock; and
     (vii)   any payment or distribution to holders or former holders of Capital
Stock of NNC in connection with the settlement of, or satisfaction of a judgment
resulting from, any shareholder litigation or regulatory or enforcement
proceeding (including, without limitation, any dividend on Preferred Stock
issued in connection therewith); provided that Section 5.14 is not contravened
thereby.
     Section 5.13.   Minimum Adjusted EBITDA.   The Borrower shall not permit
Adjusted EBITDA for any twelve month period ending on each date set forth below
(tested only at the time of delivery of the certificate required by
Section 5.01(c)) to be less than the amount set forth below opposite such date:

          Last Day of Twelve-Month Period   Minimum Adjusted
EBITDA  
March 31, 2006
  $ 850,000,000  
June 30, 2006
  $ 750,000,000  
September 30, 2006
  $ 850,000,000  
December 31, 2006
  $ 900,000,000  

     Section 5.14.   Minimum Cash and Cash Equivalents.   The Borrower will not
permit the amount of Unrestricted Cash at any time to be less than
$1,000,000,000.
     Section 5.15.   Restricted Asset Transfers by Credit Parties.
     (a)   No Credit Party will, directly or indirectly, sell, transfer or
otherwise dispose of (including through any merger or amalgamation) any
Restricted Asset to any Non-Credit Party Subsidiary or Joint Venture other than
pursuant to a Permitted Asset Transfer.
     (b)   Notwithstanding subsection (a) of this Section 5.15, the Credit
Parties may transfer (including through any merger or amalgamation) Restricted
Assets to Non-Credit Party Subsidiaries and Joint Ventures, provided that the
Borrower applies the Net Cash Proceeds (as defined in clause (iv) of such
definition) from such transfer within five Business Days to a prepayment of the
Tranche A Loans in accordance with Section 2.10(b).

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     Section 5.16.   Future Guarantors.   In the event that (i) as of the date
of the most recent financial statements delivered pursuant to Section 5.01 or
(ii) after giving effect to any sale or disposition of a Subsidiary or line of
business by any Credit Party, determined as of the last day of the period
covered by the most recent financial statements delivered pursuant to
Section 5.01 on a pro forma basis as though such sale or disposition had
occurred on such date, the Credit Parties would have accounted for less than 90%
of the consolidated revenues of NNC and its Restricted Subsidiaries that are
U.S. Subsidiaries or Canadian Subsidiaries, then NNC shall, within 20 days after
the date of delivery of such financial statements (in the case of clause
(i) above) or 20 days after the date of such sale or disposition (in the case of
clause (ii) above), cause other U.S. Subsidiaries and/or Canadian Subsidiaries
to execute supplements to the Guarantee Agreement and the applicable Security
Agreement in order to become a Canadian Subsidiary Guarantor or U.S. Subsidiary
Guarantor, as the case may be such that such 90% condition would have been
satisfied as of such date or as of such date on a pro forma basis for such sale
or disposition, as the case may be had such Subsidiaries been Guarantors as of
such date.
     Section 5.17.   Further Assurances.
     (a)   The Borrower hereby authorizes the Collateral Agent, without further
action on the part of the Borrower or any other Credit Party or any other Person
to file, register or record any Security Documents or notices thereof in order
to effect the execution and delivery thereof or the perfection, registration or
recordation of any Liens created under any Security Document.
     (b)   Each Credit Party will execute and deliver any and all further
documents, financing statements, agreements and instruments, and take all such
further actions (including the filing and recording of financing statements and
other documents), that may be required under any applicable law, or that the
Collateral Agent or the Required Tranche A Lenders may reasonably request, to
(i) create, preserve, perfect, confirm or validate the Transaction Liens with
respect to such Credit Party’s Collateral, (ii) enable the Collateral Agent to
obtain the full benefits of the Security Documents or (iii) enable the
Collateral Agent to exercise and enforce any of its rights, powers and remedies
with respect to any of such Credit Party’s Collateral. The Borrower will provide
to the Agent and the Collateral Agent, from time to time upon request, evidence
reasonably satisfactory to the Agent and the Collateral Agent as to the
perfection and priority of the Transaction Liens created or intended to be
created by the Security Documents.
ARTICLE VI
 
DEFAULTS
     Section 6.01.   Tranche A Events of Default.   If one or more of the
following events (“Tranche A Events of Default”) shall have occurred and be
continuing:
     (a)   the Borrower shall (i) fail to pay when due any principal of any
Tranche A Loan or (ii) fail to pay any interest on any Tranche A Loan or any
fees or any other amount under the Loan Documents (other than principal of or
interest on any Tranche B Loan) within five days of the due date thereof;

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     (b)   the Borrower shall fail to observe or perform any covenant contained
in Sections 5.01, 5.02, 5.04 (with respect to the existence of NNC, the Borrower
or NNL), 5.05 or 5.09 through 5.17;
     (c)   any Credit Party shall fail to observe or perform any covenant or
agreement contained in the Loan Documents (other than those covered by
subsection (a) or (b) above) and does not remedy the failure on or before thirty
days after notice thereof has been given to the Borrower by the Agent at the
request of any Lender;
     (d)   any representation or warranty made by any Credit Party in the Loan
Documents or in any certificate delivered pursuant to the Loan Documents shall
prove to have been incorrect in any material respect when made (or deemed made);
     (e)   (i) NNC, the Borrower or any Restricted Subsidiary shall fail to make
a payment or payments (whether of principal or interest and regardless of
amount) in respect of Material Debt or any Tranche B Loan when the same shall
become due, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise and such failure shall continue beyond any applicable grace
period; or (ii) except for any Prepayment Event, any event or condition occurs
that results in Material Debt or any Tranche B Loan becoming due before its
scheduled maturity or that enables or permits (with or without the giving of
notice, the lapse of time or both) the holder or holders of Material Debt or any
Tranche B Loan or any trustee or agent on its or their behalf to cause Material
Debt or Tranche B Loan to become due, or to require the prepayment, repurchase,
redemption or any defeasance thereof, before its scheduled maturity; provided
that this clause (ii) shall not apply to secured Funded Debt that becomes due as
a result of a voluntary sale or transfer of the property securing such Funded
Debt (so long as such Funded Debt is repaid in accordance with its terms);
     (f)   NNC, the Borrower or any Restricted Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
     (g)   an involuntary case or other proceeding shall be commenced against
NNC, the Borrower or any Restricted Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against NNC, the
Borrower or any Restricted Subsidiary under the bankruptcy or insolvency laws as
now or hereafter in effect in Canada or the United States;

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     (h)   one or more judgments or orders for the payment of money in excess of
$100,000,000 shall be rendered against NNC, the Borrower or any Restricted
Subsidiary and such judgments or orders shall continue undischarged, unpaid in
accordance with its terms or unstayed for a period of 30 days after such
judgment or judgments become final and non-appealable, or a judgment creditor
shall attach or levy upon any assets of NNC, the Borrower or any Restricted
Subsidiary to enforce any such judgment;
     (i)   a Change of Control shall occur;
     (j)   any Lien purported to be created under any Security Document relating
to one or more items of Collateral with an aggregate value determined by the
Collateral Agent in its sole discretion (which determination may be based solely
upon information furnished by the Borrower or the Collateral Agent) to exceed
$5,000,000 shall cease to be, or shall be asserted by any Secured Party not to
be, a valid and perfected Lien on such Collateral, with the priority required by
the applicable Security Document, except (i) as a result of a sale or other
disposition of the applicable Collateral in a transaction permitted under the
Loan Documents or (ii) as a result of the Collateral Agent’s failure to maintain
possession of any stock certificates, promissory notes or other documents
delivered to it under the Security Agreement;
     (k)   any Guarantor’s Guarantee under the Guarantee Agreement shall at any
time fail to constitute a valid and binding agreement of such Guarantor (except
as expressly permitted by any Security Document) or any Guarantor, or any Person
acting on behalf of any Guarantor, shall so assert in writing; or
     (l)   an ERISA Event or a Funding Failure shall have occurred that, in the
opinion of the Required Lenders, when taken together with all other ERISA Events
and Funding Failures that have occurred, could reasonably be expected to result
in a Material Adverse Effect;
then, and in every such event, the Agent shall if requested by Lenders having
more than 50% in aggregate amount of the Tranche A Loans, by notice to the
Borrower declare the Tranche A Loans (together with accrued interest thereon) to
be, and the Tranche A Loans shall thereupon become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower; provided that in the case of any of the
Events of Default specified in subsection (f) or (g) above with respect to the
Borrower, without any notice to the Borrower or any other act by the Agent or
the Lenders, the Tranche A Loans (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
     Section 6.02.   Tranche B Events of Default.   If one or more of the
following events (“Tranche B Events of Default”) shall have occurred and be
continuing:
     (a)   the Borrower shall fail to pay when due any principal of any Tranche
B Loan or shall fail to pay any interest, or any Tranche B Loan or any fees or
any other

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amount under the Loan Documents (other than principal of or interest on any
Tranche A Loan) within five days of the due date thereof;
     (b)   the Borrower shall fail to observe or perform any covenant contained
in Sections 5.01, 5.02, 5.04 (with respect to the existence of NNC, the Borrower
or NNL), 5.05, 5.09 through 5.12, 5.14 or 5.16;
     (c)   any Credit Party shall fail to observe or perform any covenant or
agreement contained in the Tranche B Documents (other than those covered by
subsection (a) or (b) above) and does not remedy the failure on or before thirty
days after notice thereof has been given to the Borrower by the Agent at the
request of any Lender;
     (d)   any representation or warranty made by any Credit Party in the
Tranche B Documents or in any certificate delivered pursuant to the Tranche B
Documents shall prove to have been incorrect in any material respect when made
(or deemed made);
     (e)   (i) NNC, the Borrower or any Restricted Subsidiary shall fail to make
a payment or payments (whether of principal or interest and regardless of
amount) in respect of Material Debt or any Tranche A Loan when the same shall
become due, whether at the due date thereof or at a date fixed for prepayment
thereof or otherwise and such failure shall continue beyond any applicable grace
period; or (ii) except for any Prepayment Event, any event or condition occurs
that results in Material Debt or any Tranche A Loan becoming due before its
scheduled maturity or that enables or permits (with or without the giving of
notice, the lapse of time or both) the holder or holders of such Material Debt
or Tranche A Loan or any trustee or agent on its or their behalf to cause such
Material Debt or Tranche A Loan to become due, or to require the prepayment,
repurchase, redemption or defeasance thereof, before its scheduled maturity;
provided that this clause (ii) shall not apply to secured Funded Debt that
becomes due as a result of a voluntary sale or transfer of the property securing
such Funded Debt (so long as such Funded Debt is repaid in accordance with its
terms);
     (f)   NNC, the Borrower or any Restricted Subsidiary shall commence a
voluntary case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or shall make a general assignment for
the benefit of creditors, or shall fail generally to pay its debts as they
become due, or shall take any corporate action to authorize any of the
foregoing;
     (g)   an involuntary case or other proceeding shall be commenced against
NNC, the Borrower or any Restricted Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or other
similar official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed for a
period of

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60 days; or an order for relief shall be entered against NNC, the Borrower or
any Restricted Subsidiary under the bankruptcy or insolvency laws as now or
hereafter in effect in Canada or the United States;
     (h)   one or more judgments or orders for the payment of money in excess of
$100,000,000 shall be rendered against NNC, the Borrower or any Restricted
Subsidiary and such judgments or orders shall continue undischarged, unpaid in
accordance with its terms or unstayed for a period of 30 days after such
judgment or judgments become final and non-appealable, or a judgment creditor
shall attach or levy upon any assets of the Borrower or any Restricted
Subsidiary to enforce any such judgment;
     (i)   a Change of Control shall occur;
     (j)   any Guarantor’s Guarantee under the Guarantee Agreement shall at any
time fail to constitute a valid and binding agreement of such Guarantor (except
as expressly permitted by any Security Document) or any Guarantor, or any Person
acting on behalf of any Guarantor, shall so assert in writing; or
     (k)   an ERISA Event or a Funding Failure shall have occurred that, in the
opinion of the Required Lenders, when taken together with all other ERISA Events
and Funding Failures that have occurred, could reasonably be expected to result
in a Material Adverse Effect;
then, and in every such event, the Agent shall (i) if requested by Lenders
having more than 50% in aggregate amount of the Tranche B Loans, by notice to
the Borrower declare the Tranche B Loans (together with accrued interest
thereon) to be, and the Tranche B Loans shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower; provided that in the case of any
of the Events of Default specified in Section 6.02(f) or (g) with respect to the
Borrower, without any notice to the Borrower or any other act by the Agent or
the Lenders, the Tranche B Loans (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower.
     Section 6.03.   Notice of Default.   The Agent shall give notice to the
Borrower under Section 6.01(c) or 6.02(c) promptly upon being requested to do so
by any Lender and shall thereupon notify all the Lenders thereof.
ARTICLE VII
 
AGENCY
     Each of the Lenders hereby irrevocably appoints the Agent as its agent and
authorizes the Agent to take such actions on its behalf and to exercise such
powers as are delegated to the Agent by the terms hereof, together with such
actions and powers as are reasonably incidental thereto.

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     The bank serving as the Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same
as though it were not the Agent, and such bank and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
NNC or any Subsidiary or other Affiliate thereof as if it were not the Agent
hereunder.
     The Agent shall not have any duties or obligations except those expressly
set forth herein. Without limiting the generality of the foregoing, (a) the
Agent shall not be subject to any fiduciary or other implied duties, regardless
of whether a Default has occurred and is continuing, (b) the Agent shall not
have any duty to take any discretionary action or exercise any discretionary
powers, except discretionary rights and powers expressly contemplated hereby
that the Agent is required to exercise in writing as directed by the Required
Lenders (or such other number or percentage of the Lenders as shall be necessary
under the circumstances as provided in Section 9.05), and (c) except as
expressly set forth herein, the Agent shall not have any duty to disclose, and
shall not be liable for the failure to disclose, any information relating to the
Borrower or any of its Subsidiaries that is communicated to or obtained by the
bank serving as Agent or any of its Affiliates in any capacity. The Agent shall
not be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in
Section 9.05) or in the absence of its own gross negligence or willful
misconduct. The Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Agent by the Borrower or
a Lender, and the Agent shall not be responsible for or have any duty to
ascertain or inquire into (i) any statement, warranty or representation made in
or in connection with this Agreement, (ii) the contents of any certificate,
report or other document delivered hereunder or in connection herewith,
(iii) the performance or observance of any of the covenants, agreements or other
terms or conditions set forth herein, (iv) the validity, enforceability,
effectiveness or genuineness of this Agreement or any other agreement,
instrument or document, or (v) the satisfaction of any condition set forth in
Article III or elsewhere herein, other than to confirm receipt of items
expressly required to be delivered to the Agent.
     The Agent shall be entitled to rely upon, and shall not incur any liability
for relying upon, any notice, request, certificate, consent, statement,
instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Agent also may rely upon any
statement made to it orally or by telephone and believed by it to be made by the
proper Person, and shall not incur any liability for relying thereon. The Agent
may consult with legal counsel (who may be counsel for NNC or its Subsidiaries),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice of
any such counsel, accountants or experts.
     The Agent may perform any and all its duties and exercise its rights and
powers by or through any one or more sub-agents appointed by the Agent. The
Agent and any such sub-agent may perform any and all its duties and exercise its
rights and powers through their respective Related Parties. The exculpatory
provisions of the preceding paragraphs shall apply to any such sub-agent and to
the Related Parties of the Agent and any such sub-agent, and shall apply to
their respective activities in connection with the syndication of the credit
facilities provided for herein as well as activities as Agent. Without
limitation of the foregoing, the Agent may, in its

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sole discretion, appoint a Lender holding Tranche B Loans or other Person to act
as the representative of all Lenders holding Tranche B Loans in connection with
any amendment, waiver or enforcement action under the Loan Documents.
     Subject to the appointment and acceptance of a successor Agent as provided
in this paragraph, the Agent may resign at any time by notifying the Lenders and
the Borrower. Upon any such resignation, the Required Lenders shall have the
right, in consultation with the Borrower, to appoint a successor. If no
successor shall have been so appointed by the Required Lenders and shall have
accepted such appointment within 30 days after the retiring Agent gives notice
of its resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent which shall be a bank with an office in New York, New
York, or an Affiliate of any such bank. Upon the acceptance of its appointment
as Agent hereunder by a successor, such successor shall succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After the Agent’s resignation hereunder, the provisions of this
Article VII and Section 9.03 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as Agent.
     Each Lender acknowledges that it has, independently and without reliance
upon the Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agent or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any related agreement or any document furnished hereunder
or thereunder.
     Each Lender holding any Tranche A Loan hereby appoints the Collateral Agent
to act as Collateral Agent under the Security Documents and agrees that the
Collateral Agent and its Related Parties shall, in acting in such capacity, be
entitled to the protections set forth above to the same extent as if it was the
Agent acting under this Agreement. Furthermore, each Lender holding any Tranche
A Loan agrees that the Collateral Agent may release the Liens of the Security
Documents on any Collateral under the conditions set forth in the Security
Agreement and take the other actions contemplated by the Security Documents on
the terms set forth therein without the consent of any Tranche A Lender except
as expressly set forth therein. Without prejudice to the foregoing, each Lender
holding any Tranche A Loan hereby irrevocably appoints and authorizes the
Collateral Agent (and any successor acting as the Collateral Agent) to act as
the person holding the power of attorney (in such capacity, the “Canadian fondé
de pouvoir”) of such Lender and as contemplated under Article 2692 of the Civil
Code of Quebec, and to enter into, to take and to hold on their behalf, and for
their benefit, each hypothec granted by the Canadian Credit Parties under the
Civil Code of Quebec (a “Canadian Hypothec”), and to exercise such powers and
duties which are conferred upon the Canadian fondé de pouvoir under each
Canadian Hypothec. Moreover, without prejudice to such appointment and
authorization to act as the Person holding the power of attorney as aforesaid,
each Lender holding any Tranche A Loan, hereby irrevocably appoints and
authorizes the Collateral Agent (in such capacity, the “Canadian Custodian”) to
act as agent and custodian for and on behalf of such Lender to hold and to

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be the sole registered holder of any debenture or bond which may be issued under
any Canadian Hypothec, the whole notwithstanding Section 32 of the Act
Respecting the Special Powers of Legal Persons (Quebec) or any other applicable
Law. In this respect, (i) (as specified in Section 9.06) records shall be kept
indicating the names and addresses of, and the pro rata portion of the
obligations and indebtedness secured by any pledge of any such debenture or bond
and owing to, each Lender, and (ii) each Lender holding any Tranche A Loan will
be entitled to the benefits of any Collateral covered by any Canadian Hypothec
and will participate in the proceeds of realization of any such Collateral, the
whole in accordance with the terms hereof. Each of the Canadian fondé de pouvoir
and the Canadian Custodian shall (a) exercise, in accordance with the terms
hereof, all rights and remedies given to the Canadian fondé de pouvoir and the
Canadian Custodian (as applicable) with respect to the Collateral under any
Canadian Hypothec, any debenture or bond or pledge thereof relating to any
Canadian Hypothec, applicable laws or otherwise, (b) benefit from and be subject
to all provisions hereof with respect to the Collateral Agent mutatis mutandis,
including, without limitation, all such provisions with respect to the liability
or responsibility to and indemnification by the Lenders holding Tranche A Loans,
and (c) be entitled to delegate from time to time any of its powers or duties
under any Canadian Hypothec, any debenture or bond or pledge thereof relating to
any Canadian Hypothec, applicable laws or otherwise and on such terms and
conditions as it may determine from time to time. Any Person who becomes a
Lender with a Tranche A Loan shall be deemed to have consented to and confirmed:
(i) the Canadian fondé de pouvoir as the Person holding the power of attorney as
aforesaid, and to have ratified, as of the date it acquired its Tranche A Loan,
all actions taken by the Canadian fondé de pouvoir as the Person holding the
power of attorney as aforesaid; and (ii) the Canadian Custodian as the agent and
custodian as aforesaid and to have ratified, as the date it acquired its Tranche
A Loan, all actions taken by the Canadian Custodian in such capacity. The
Collateral Agent accepts the foregoing appointments as Canadian fondé de pouvoir
and Canadian Custodian and agrees to act in such capacities.
     The execution by the Canadian fondé de pouvoir, as the person holding the
power of attorney, prior to the Credit Agreement, of any deed of hypothec or
other security document is hereby ratified and confirmed.
     The Persons named as “Joint Lead Arrangers,” “Joint Bookrunners,”
“Syndication Agent,” “Documentation Agent” and “Managing Agent” shall have no
responsibilities or obligations under this Agreement in their capacities as
such.
ARTICLE VIII
 
CHANGE IN CIRCUMSTANCES
     Section 8.01.   Basis for Determining Interest Rate Inadequate or
Unfair.   If on or prior to the first day of any Interest Period for any
Euro-Dollar Loan:
     (a)   the Agent determines (which determination shall be conclusive absent
manifest error) that adequate and reasonable means do not exist for ascertaining
the Adjusted LIBO Rate or the LIBO Rate, as applicable, for such Interest
Period; or

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     (b)   the Agent is advised by the Required Lenders that the Adjusted LIBO
Rate or the LIBO Rate, as applicable, for such Interest Period will not
adequately and fairly reflect the cost to such Lenders of making or maintaining
their Loans (or its Loan) included in such Borrowing for such Interest Period;
then the Agent shall give notice thereof to the Borrower and the Lenders by
telephone or telecopy as promptly as practicable thereafter and, until the Agent
notifies the Borrower and the Lenders that the circumstances giving rise to such
notice no longer exist, (i) any Notice of Interest Rate Election that requests
the conversion of any Borrowing to, or continuation of any Borrowing as, a
Euro-Dollar Borrowing shall be ineffective, and (ii) if any Notice of Borrowing
requests a Euro-Dollar Borrowing, such Borrowing shall be made as a Base Rate
Borrowing.
     Section 8.02.   Illegality.   If, on or after the date of this Agreement,
any Change in Law shall make it unlawful or impossible for any Lender (or its
applicable lending office) to make, maintain or fund its Euro-Dollar Loans to
the Borrower and such Lender shall so notify the Agent, the Agent shall
forthwith give notice thereof to the other Lenders and the Borrower, whereupon
until such Lender notifies the Borrower and the Agent that the circumstances
giving rise to such suspension no longer exist, the obligation of such Lender to
make Euro-Dollar Loans to the Borrower, or to convert outstanding Loans into
Euro-Dollar Loans, shall be suspended. Before giving any notice to the Agent
pursuant to this Section 8.02, such Lender shall designate a different lending
office if such designation will avoid the need for giving such notice and will
not, in the judgment of such Lender, be otherwise materially disadvantageous to
such Lender. If such notice is given, each Euro-Dollar Loan of such Lender then
outstanding shall be converted to a Base Rate Loan either (a) on the last day of
the then current Interest Period applicable to such Euro-Dollar Loan if such
Lender may lawfully continue to maintain and fund such Loan to such day or
(b) immediately if such Lender shall determine that it may not lawfully continue
to maintain and fund such Loan to such day.
     Section 8.03.   Increased Cost and Reduced Return.
     (a)   If any Change in Law shall:
     (i)   impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by, any Lender (except any such reserve requirement reflected in
the Adjusted LIBO Rate); or
     (ii)   impose on any Lender or the London interbank market any other
condition affecting this Agreement or Euro-Dollar Loans made by such Lender;
and the result of any of the foregoing shall be to increase the cost to such
Lender of making or maintaining any Euro-Dollar Loan (or of maintaining its
obligation to make any such Loan) or to reduce the amount of any sum received or
receivable by such Lender hereunder (whether of principal, interest or
otherwise), then the Borrower will within 15 days after demand by such Lender
pay to such Lender such additional amount or amounts as will compensate such
Lender for such additional costs incurred or reduction suffered.

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     (b)   If any Lender determines that any Change in Law regarding capital
requirements has or would have the effect of reducing the rate of return on such
Lender’s capital or on the capital of such Lender’s holding company, if any, as
a consequence of this Agreement or the Loans made by such Lender to a level
below that which such Lender or such Lender’s holding company could have
achieved but for such Change in Law (taking into consideration such Lender’s
policies and the policies of such Lender’s holding company with respect to
capital adequacy), then from time to time the Borrower will pay to such Lender
within 15 days after receipt by the Borrower of the information required by
paragraph (c) below such additional amount or amounts as will compensate such
Lender or such Lender’s holding company for any such reduction suffered.
     (c)   A certificate of a Lender setting forth a reasonably detailed
calculation (which shall not be required to include any information which such
Lender considers to be confidential so long as such Lender certifies that such
calculation is in accordance with this Section 8.03) of the amount or amounts
necessary to compensate such Lender or its holding company, as the case may be,
as specified in paragraph (a) or (b) of this Section 8.03 shall be delivered to
the Borrower and shall be conclusive absent manifest error. If any element of
any such calculation subsequently changes, so as to change materially such
amount or amounts, such Lender will submit a revised certificate promptly to the
Borrower.
     (d)   Failure or delay on the part of any Lender to demand compensation
pursuant to this Section 8.03 shall not constitute a waiver of such Lender’s
right to demand such compensation; provided that the Borrower shall not be
required to compensate a Lender pursuant to this Section 8.03 for any increased
costs or reductions incurred more than 180 days prior to the date that such
Lender notifies the Borrower of the Change in Law giving rise to such increased
costs or reductions and of such Lender’s intention to claim compensation
therefor; provided, further that, if the Change in Law giving rise to such
increased costs or reductions is retroactive, then the 180-day period referred
to above shall be extended to include the period of retroactive effect thereof.
     Section 8.04.   Taxes.
     (a)   Any and all payments by or on account of any obligation of the
Borrower hereunder, including for the avoidance of doubt any payments made on
behalf of any Credit Party under the Guarantee Agreement, shall be made without
withholding or deduction for any Indemnified Taxes or Other Taxes; provided that
if the Borrower shall be required to deduct any Indemnified Taxes or Other Taxes
from such payments, then (i) the sum payable shall be increased as necessary so
that after making all required deductions (including deductions applicable to
additional sums payable under this Section) the Agent or Lender (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant Governmental
Authority in accordance with applicable law.
     (b)   In addition, the Borrower shall pay any Other Taxes to the relevant
Governmental Authority in accordance with applicable law.

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     (c)   The Borrower shall indemnify the Agent and each Lender, within
15 days after written demand therefor, (i) for the full amount of any
Indemnified Taxes payable by the Agent or such Lender, as the case may be, on or
with respect to any payment by or on account of any obligation of the Borrower
hereunder (including for the avoidance of doubt any payments made on behalf of
any Credit Party under the Guarantee Agreement) and (ii) for the full amount of
any Other Taxes payable by the Agent or such Lender. Such indemnification shall
include Indemnified Taxes or Other Taxes imposed or asserted on or attributable
to amounts payable under this Section 8.04 and, in each case, any penalties,
interest and reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority. A certificate as to
the amount of such payment or liability delivered to the Borrower by a Lender or
by the Agent on its own behalf or on behalf of a Lender containing a reasonably
detailed calculation of the amount claimed under this Section 8.04 (which shall
not be required to include any information which such Lender considers to be
confidential so long as the Agent or such Lender certifies that such calculation
is in accordance with this Section 8.04), shall be conclusive absent manifest
error.
     (d)   As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority, the Borrower shall
deliver to the Agent the original or a certified copy of a receipt issued by
such Governmental Authority evidencing such payment, a copy of the return
reporting such payment or other evidence of such payment reasonably satisfactory
to the Agent.
     (e)   Each Non-U.S. Lender shall, to the extent it may lawfully do so,
deliver to the Borrower and the Administrative Agent (in such number of original
copies as shall be requested by the recipient) on or prior to the date on which
such Non-U.S. Lender becomes a Lender under this Agreement (and from time to
time thereafter upon the reasonable request of the Borrower or the
Administrative Agent), whichever of the following is applicable:
     (i)   duly completed and executed original copies of Internal Revenue
Service Form W-8BEN (or any successor thereto) claiming eligibility for benefits
of an income tax treaty to which the United States is a party and entitlement to
exemption from (or reduction in) U.S. federal withholding tax on interest
payable hereunder to or for the account of such Non-U.S. Lender,
     (ii)   duly completed and executed original copies of Internal Revenue
Service Form W-8ECI (or any successor thereto),
     (iii)   in the case of a Non-U.S. Lender claiming the benefits of the
exemption for portfolio interest under Section 881(c) of the Code, (x) a
certificate to the effect that such Non-U.S. Lender or beneficial owner is not
(A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a
“10 percent shareholder” of the Borrowers within the meaning of
Section 881(c)(3)(B) of the Code, or (C) a “controlled foreign corporation”
described in Section 881(c)(3)(C) of the Code and (y) duly completed and
executed original copies of Internal Revenue Service Form W-8BEN (or any
successor thereto), or

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     (iv)   in the case of a Non-U.S. Lender that is a pass-through entity or a
non-U.S. intermediary for U.S. federal income tax purposes, duly completed and
executed original copies of Internal Revenue Service W-8IMY (or any successor
thereto) with duly completed and executed original copies of any applicable
forms (and, if applicable, certificates) described in clause (i), (ii) or
(iii) of this Section 8.04(e).
Each Non-U.S. Lender further agrees to complete and deliver to the Borrower from
time to time, to the extent it may lawfully do so, any additional form required
by the Internal Revenue Service that is reasonably requested by the Borrower in
order to secure an exemption from, or reduction in the rate of, U.S. federal
withholding tax. Each Lender further agrees to complete and deliver to any
Guarantor from time to time, to the extent it may lawfully do so, any additional
form required by any Canadian taxing authority that is reasonably requested by
such Guarantor in order to secure an exemption from, or reduction in the rate
of, Canadian withholding tax; provided, that no Lender shall be required to
provide any such form if in such Lender’s reasonable discretion, providing such
form would subject it to unreimbursed expense or would otherwise be
disadvantageous to such Lender.
     (f)   If the Agent or a Lender determines, in its sole discretion, that it
has received a refund of any Indemnified Taxes or Other Taxes as to which it has
been indemnified by the Borrower or with respect to which the Borrower have paid
additional amounts pursuant to this Section 8.04, it shall pay over the portion
of such refund to the Borrower (but only to the extent of indemnity payments
made, or additional amounts paid, by the Borrower under this Section 8.04 with
respect to the Taxes or Other Taxes giving rise to such refund), that will leave
it (taking into account of all out-of-pocket expenses of the Agent or such
Lender and without interest (other than any interest paid by the relevant
Governmental Authority with respect to such refund)) in no better or worse
condition after tax financial position than if the Indemnified Taxes or other
Taxes giving rise to such payments had never been imposed in the first instance;
provided, that the Borrower, upon the request of the Agent or such Lender,
agrees to repay the amount paid over to the Credit Parties (plus any penalties,
interest or other charges imposed by the relevant Governmental Authority) to the
Agent or such Lender in the event the Agent or such Lender is required to repay
such refund to such Governmental Authority. This Section 8.04 shall not be
construed to require the Agent or any Lender to make available its tax returns
(or any other information relating to its taxes which it deems confidential) to
the Borrower or any other Person.
     Section 8.05.   Base Rate Loans Substituted for Affected Euro-Dollar
Loans.   If (i) the obligation of any Lender to make Euro-Dollar Loans to the
Borrower has been suspended pursuant to Section 8.02 or (ii) any Lender has
demanded compensation under Section 8.03 or 8.04 with respect to its Euro-Dollar
Loans and the Borrower shall, by at least five Business Days’ prior notice to
such Lender through the Agent, have elected that the provisions of this
Section 8.05 shall apply to such Lender, then, unless and until such Lender
notifies the Borrower that the circumstances giving rise to such suspension or
demand for compensation no longer exist:
     (a)   all Loans to the Borrower which would otherwise be made by such
Lender as (or continued as or converted into) Euro-Dollar Loans shall instead be
Base Rate

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Loans (on which interest and principal shall be payable contemporaneously with
the related Euro-Dollar Loans of the other Lenders); and
     (b)   after each of its Euro-Dollar Loans to the Borrower has been repaid
(or converted to a Base Rate Loan), all payments of principal which would
otherwise be applied to repay such Euro-Dollar Loans shall be applied to repay
its Base Rate Loans instead.
     Section 8.06.   Mitigation Obligations; Replacement of Lenders.
     (a)   If any Lender requests compensation under Section 8.03, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 8.04,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the judgment of such Lender, such designation or assignment (i) would eliminate
or reduce amounts payable pursuant to Section 8.03 or 8.04, as the case may be,
in the future and (ii) would not subject such Lender to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender. The Borrower
hereby agrees to pay all reasonable costs and expenses incurred by any Lender in
connection with any such designation or assignment.
     (b)   If any Lender requests compensation under Section 8.03, or if the
Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 8.04,
then the Borrower may, at its sole expense and effort, upon notice to such
Lender and the Agent, require such Lender to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.06), all its interests, rights and obligations under this Agreement to
an assignee that shall assume such obligations (which assignee may be another
Lender, if a Lender accepts such assignment); provided that (i) the Borrower
shall have received the prior written consent of the Agent, which consent shall
not unreasonably be withheld, (ii) such Lender shall have received payment of an
amount equal to the outstanding principal of its Loans, accrued interest
thereon, and all other amounts payable to it hereunder, from the assignee (to
the extent of such outstanding principal and accrued interest) or the Borrower
(in the case of all other amounts) and (iii) such assignment will result in a
reduction in such compensation or payments. A Lender shall not be required to
make any such assignment and delegation if, prior thereto, as a result of a
waiver by such Lender or otherwise, the circumstances entitling the Borrower to
require such assignment and delegation cease to apply.
ARTICLE IX
 
MISCELLANEOUS
     Section 9.01.   Notices.   Except in the case of notices and other
communications expressly permitted to be given by telephone (and subject to the
following paragraph), all notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed by certified or registered mail or sent by telecopy, as follows:

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     (i)   if to the Borrower, to it at Nortel Networks Inc. c/o Nortel Networks
Limited, 8200 Dixie Road, Suite 100, MS: 036/NO/230, Brampton, On L6T 5P6,
Attention of Corporate Secretary (Facsimile: 905-863-8386);
     (ii)   if to the Agent, to JPMorgan Chase Bank, Loan and Agency Services
Group, 1111 Fannin, 10th Floor, Houston, Texas 77002, Attention of Maryann Bui
(Facsimile No. (713) 750-2358), with a copy to JPMorgan Chase Bank, 270 Park
Avenue, New York 10017, Attention of David M. Mallett (Facsimile No.
(212) 270-5127); and
     (iii)   if to any other Lender, to it at its address (or telecopy number)
set forth in its Administrative Questionnaire.
Notices and other communications to the Lenders hereunder may be delivered or
furnished by electronic communications pursuant to procedures approved by the
Agent; provided that the foregoing shall not apply to notices pursuant to
Article II unless otherwise agreed by the Agent and the applicable Lender. The
Agent or the Borrower may, in its discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.
     Any party hereto may change its address or telecopy number for notices and
other communications hereunder by notice to the other parties hereto. All
notices and other communications given to any party hereto in accordance with
the provisions of this Agreement shall be deemed to have been given on the date
of receipt.
     Section 9.02.   No Waivers.   No failure or delay by the Agent or any
Lender in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
     Section 9.03.   Expenses; Indemnification.
     (a)   The Borrower shall pay (i) all reasonable out-of-pocket expenses of
the Agent, including reasonable fees and disbursements of special counsel for
the Agent, in connection with the preparation of any amendment or waiver and
administration of this Agreement, (ii) any waiver or consent hereunder or any
amendment hereof (whether or not such waiver, consent or amendment becomes
effective) and (iii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by the Agent and each Lender, including (without duplication)
the fees and disbursements of outside counsel, in connection with such Event of
Default and collection, bankruptcy, insolvency and other enforcement proceedings
resulting therefrom.
     (b)   The Borrower agrees to indemnify the Agent and each Lender, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee”) and hold each Indemnitee
harmless from and against any and all liabilities (including environmental
liabilities), losses, damages, costs and expenses of any kind, including,
without limitation, the reasonable fees and disbursements of counsel, which may
be in-

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curred by such Indemnitee in connection with any investigative, administrative
or judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened by a Person which is not a party hereto or
an Affiliate of a party hereto relating to any actual, proposed or potential use
of proceeds of Loans hereunder; provided that no Indemnitee shall have the right
to be indemnified hereunder for such Indemnitee’s own gross negligence or
willful misconduct as determined by a court of competent jurisdiction.
     (c)   To the extent that the Borrower fails to pay any amount required to
be paid by it to the Agent or the Collateral Agent under subsection (a) or
(b) of this Section 9.03, each Lender severally agrees to pay to the Agent or
the Collateral Agent, as the case may be, such Lender’s Applicable Percentage
(determined as of the time that the applicable unreimbursed expense or indemnity
payment is sought) of such unpaid amount; provided that the unreimbursed expense
or indemnified loss, claim, damage, liability or related expense, as the case
may be, was incurred by or asserted against the Agent or the Collateral Agent in
its capacity as such.
     (d)   To the extent permitted by applicable law, the Borrower shall not
assert, and hereby waives, any claim against any Indemnitee, on any theory of
liability, for special, indirect, consequential or punitive damages (as opposed
to direct or actual damages) arising out of, in connection with, or as a result
of, this Agreement or any agreement or instrument contemplated hereby, any Loan
or the use of the proceeds thereof.
     (e)   All amounts due under this Section 9.03 shall be payable promptly
after written demand therefor.
     Section 9.04.   Set-offs; Sharing of Set-offs.
     (a)   If an Event of Default shall have occurred and be continuing, each
Lender and each of its Affiliates is hereby authorized at any time and from time
to time, to the fullest extent permitted by applicable law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final,
in whatever currency) at any time held and other obligations (in whatever
currency) at any time owing by such Lender or any such Affiliate to or for the
credit or the account of the Credit Parties against any and all of the
obligations of any Credit Party now or hereafter existing under this Agreement
or any other Loan Document to such Lender, irrespective of whether or not such
Lender shall have made any demand under this Agreement or any other Loan
Document and although such obligations of the Credit Parties may be contingent
or unmatured or are owed to a branch or office of such Lender different from the
branch or office holding such deposit or obligated on such indebtedness. The
rights of each Lender and its Affiliates under this Section 9.04(a) are in
addition to other rights and remedies (including other rights of setoff) that
such Lender or its respective Affiliates may have. Each Lender agrees to notify
the Borrower and the Agent promptly after any such setoff and application;
provided that the failure to give such notice shall not affect the validity of
such setoff and application.
     (b)   If any Lender shall, by exercising any right of set-off or
counterclaim or otherwise, obtain payment in respect of any principal of or
interest on any of its Loans resulting in such Lender receiving payment of a
greater proportion of the aggregate amount of its Loans and accrued interest
thereon than the proportion received by any other Lender, then the Lender

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receiving such greater proportion shall purchase (for cash at face value)
participations in the Loans of other Lenders to the extent necessary so that the
benefit of all such payments shall be shared by the Lenders ratably in
accordance with the aggregate amount of principal of and accrued interest on
their respective Loans; provided that (i) if any such participations are
purchased and all or any portion of the payment giving rise thereto is
recovered, such participations shall be rescinded and the purchase price
restored to the extent of such recovery, without interest, and (ii) the
provisions of this Section 9.04 shall not be construed to apply to any payment
made by the Borrower pursuant to and in accordance with the express terms of
this Agreement or any payment obtained by a Lender as consideration for the
assignment of or sale of a participation in any of its Loans to any assignee or
Participant, other than to the Borrower or any Subsidiary or Affiliate thereof
(as to which the provisions of this Section 9.04 shall apply). The Borrower
consents to the foregoing and agrees, to the extent it may effectively do so
under applicable law, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against the Borrower rights of set-off and
counterclaim with respect to such participation as fully as if such Lender were
a direct creditor of the Borrower in the amount of such participation.
     Section 9.05.   Amendments and Waivers.   Any provision of this Agreement
(other than Section 5.13, Section 5.15 (including any related Prepayment Event),
Section 5.17, 6.01, 6.02, any Prepayment Event arising from a Specified Asset
Sale or any provision of this Agreement which relates to any representation,
warranty or covenant relating to the Collateral or the Security Documents) may
be amended or waived if, but only if, such amendment or waiver is in writing and
is signed by the Borrower and the Required Lenders (and, if the rights or duties
of the Agent are affected thereby, by the Agent); provided that no such
amendment or waiver shall, unless signed by all the Lenders, (i) increase or
decrease the Commitment of any Lender (except for a ratable decrease in the
Commitments of all Lenders) or subject any Lender to any additional obligation,
(ii) reduce the principal of or rate of interest on any Loan, or any fees
hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan, or any fees hereunder or for any scheduled reduction or
termination of any Commitment, (iv) change the percentage of the Commitments or
of the aggregate unpaid principal amount of the Loans, or the number of Lenders,
which shall be required for the Lenders or any of them to take any action under
this Section or any other provision of this Agreement, (v) release all or
substantially all of the value of the Guarantees from the Guarantee Agreement or
(vi) alter the provisions of Section 9.04 in a manner adverse to such Lender;
provided further, that, (x) without the consent of the Required Tranche A
Lenders or the Required Tranche B Lenders, as the case may be, no such amendment
or waiver may alter the provisions of Section 2.11(d) in a manner that would
reduce the amount of any prepayment applied to Loans under such tranche,
(y) without the consent of the Required Tranche B Lenders, no amendment hereto
shall increase the amount of Funded Debt that is permitted to be secured by a
Lien on any assets of NNC or any of its Subsidiaries unless effective action is
taken to secure the Tranche B Loans on a pari passu basis with such other Funded
Debt and (z) without the consent of each Tranche A Lender (which consents shall
be sufficient without the consent of any other Lender), no such amendment or
waiver may release all or substantially all of the Collateral from the Security
Documents. Any provision of Section 5.13, Section 5.15 (including any related
Prepayment Event), Section 5.17, 6.01, any Prepayment Event arising from a
Specified Asset Sale or any provision of this Agreement which relates to any
representation, warranty or covenant relating to the Collateral or the Security
Documents may be amended or waived if, but only if, such amendment or waiver is
in writing

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and is signed by the Borrower and the Required Tranche A Lenders. Any provision
of Section 6.02 may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed by the Borrower and the Required Tranche B
Lenders. Notwithstanding the foregoing provisions of this Section 9.05, no
amendment or waiver to any Loan Document that affects the rights or duties of
the Agent shall be permitted unless the Agent shall have consented thereto.
     Section 9.06.   Successors and Assigns.
     (a)   The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
permitted hereby, except that (i) the Borrower may not assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of each Lender (and any attempted assignment or transfer by the Borrower
without such consent shall be null and void) and (ii) no Lender may assign or
otherwise transfer its rights or obligations hereunder except in accordance with
this Section 9.06. Nothing in this Agreement, expressed or implied, shall be
construed to confer upon any Person (other than the parties hereto, their
respective successors and assigns permitted hereby, Participants (to the extent
provided in subsection (c) of this Section 9.06) and, to the extent expressly
contemplated hereby, the Related Parties of each of the Agent and the Lenders)
any legal or equitable right, remedy or claim under or by reason of this
Agreement.
     (b)   (i) Subject to the conditions set forth in subsection (b)(ii) below,
any Lender may assign to one or more assignees all or a portion of its rights
and obligations under this Agreement (including all or a portion of its
Commitment and the Loans at the time owing to it) with the prior written consent
(such consent not to be unreasonably withheld) of:
     (A)   the Borrower, provided that no consent of the Borrower shall be
required for an assignment to a Lender, an Affiliate of a Lender, an Approved
Fund or, if an Event of Default has occurred and is continuing, any other
assignee;
     (B)   the Agent, provided that no consent of the Agent shall be required
for an assignment to a Lender, an Affiliate of a Lender or an Approved Fund.
     (ii)   Assignments shall be subject to the following additional conditions:
     (A)   except in the case of an assignment to a Lender or an Affiliate of a
Lender or an assignment of the entire remaining amount of the assigning Lender’s
Commitment or Loans of any tranche, the amount of the Commitment or Loans of the
assigning Lender subject to each such assignment (determined as of the date the
Assignment and Assumption Agreement with respect to such assignment is delivered
to the Agent) shall not be less than $1,000,000 unless each of the Borrower and
the Agent otherwise consent, provided that no such consent of the Borrower shall
be required if an Event of Default has occurred and is continuing;
     (B)   each partial assignment shall be made as an assignment of a
proportionate part of all the assigning Lender’s rights and obligations under
this Agreement, provided that this clause shall not be construed to prohibit the
assignment of a proportionate part of

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all the assigning Lender’s rights and obligations in respect of one tranche of
Commitments or Loans;
     (C)   the parties to each assignment shall execute and deliver to the Agent
an Assignment and Assumption Agreement, together with a processing and
recordation fee of $3,500; and
     (D) the assignee, if it shall not be a Lender, shall deliver to the Agent
an Administrative Questionnaire.
     (iii)   Subject to acceptance and recording thereof pursuant to subsection
(b)(iv) of this Section 9.06, from and after the effective date specified in
each Assignment and Assumption Agreement the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Assumption Agreement, have the rights and obligations of a Lender under this
Agreement, and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Assumption Agreement, be released from
its obligations under this Agreement (and, in the case of an Assignment and
Assumption Agreement covering all of the assigning Lender’s rights and
obligations under this Agreement, such Lender shall cease to be a party hereto
but shall continue to be entitled to the benefits of Sections 2.12, 8.03, 8.04
and 9.03). Any assignment or transfer by a Lender of rights or obligations under
this Agreement that does not comply with this Section 9.06 shall be treated for
purposes of this Agreement as a sale by such Lender of a participation in such
rights and obligations in accordance with subsection (c) of this Section.
     (iv)   The Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices a copy of each Assignment and Assumption
Agreement delivered to it and a register for the recordation of the names and
addresses of the Lenders, and the Commitment of, and principal amount of the
Loans owing to, each Lender pursuant to the terms hereof from time to time (the
"Register”). The entries in the Register shall be conclusive, and the Borrower,
the Agent and the Lenders shall treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all purposes of
this Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrower and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.
     (v)   Upon its receipt of a duly completed Assignment and Assumption
Agreement executed by an assigning Lender and an assignee, the assignee’s
completed Administrative Questionnaire (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in subsection
(b) of this Section 9.06 and any written consent to such assignment required by
subsection (b) of this Section 9.06, the Agent shall accept such Assignment and
Assumption Agreement and record the information contained therein in the
Register; provided that if either the assigning Lender or the assignee shall
have failed to make any payment required to be made by it pursuant to
Section 9.03(c), the Agent shall have no obligation to accept such Assignment
and Assumption Agreement and record the information therein in the Register
unless and until such payment shall have been made in full, together with all
accrued interest thereon. No assignment shall be effective for purposes of this
Agreement unless it has been recorded in the Register as provided in this
subsection.

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     (c)   (i) Any Lender may, without the consent of the Borrower or the Agent,
sell participations to one or more banks or other entities (a “Participant”) in
all or a portion of such Lender’s rights and obligations under this Agreement
(including all or a portion of its Loans owing to it); provided that (A) such
Lender’s obligations under this Agreement shall remain unchanged, (B) such
Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations and (C) the Borrower, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender’s rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver that requires the consent of each Lender or
each Lender of the applicable tranche of Loans that affects such Participant.
Subject to subsection (c)(ii) of this Section, the Borrower agrees that each
Participant shall be entitled to the benefits of Sections 2.12, 8.03 and 8.04 to
the same extent as if it were a Lender and had acquired its interest by
assignment pursuant to subsection (b) of this Section 9.03. To the extent
permitted by law, each Participant also shall be entitled to the benefits of
Section 9.08 as though it were a Lender, provided such Participant agrees to be
subject to Section 9.08 as though it were a Lender.
     (ii)   A Participant shall not be entitled to receive any greater payment
under Section 8.03 or 8.04 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower’s
prior written consent. A Participant shall be subject to the requirements and
limitations of Section 8.04 to the same extent as though it were a Lender.
     (d)   Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including without limitation any pledge or assignment to secure
obligations to a Federal Reserve Bank, and this Section 9.06 shall not apply to
any such pledge or assignment of a security interest; provided that no such
pledge or assignment of a security interest shall release a Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.
     Section 9.07.   Collateral.   Each of the Lenders represents to the Agent
and each of the other Lenders that it in good faith is not relying upon any
“margin stock” (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
     Section 9.08.   Governing Law; Submission to Jurisdiction.   This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of

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any such proceeding brought in such a court and any claim that any such
proceeding brought in such a court has been brought in an inconvenient forum.
     Section 9.09.   Counterparts; Integration; Effectiveness.   This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement (together with the Security Documents any other
agreements entered into in connection herewith) constitute the entire agreement
and understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof except as may be expressly set forth or referred to herein or the
Security Documents or any other written agreement entered into in connection
herewith between any of the parties hereto which contemplates actions to be
taken at or following the time of effectiveness of this Agreement (which shall
continue to be binding among the parties thereto). This Agreement shall become
effective upon receipt by the Agent of counterparts hereof signed by each of the
Borrower, the Lenders set forth on the signature pages herein and the Agent (or,
in the case of any party as to which an executed counterpart shall not have been
received, receipt by the Agent in form satisfactory to it of telegraphic, telex,
facsimile or other written confirmation from such party of execution of a
counterpart hereof by such party).
     Section 9.10.   WAIVER OF JURY TRIAL.   EACH OF THE BORROWER, THE AGENT AND
THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
     Section 9.11.   Confidentiality.   The Agent and each Lender agree to keep
confidential any information obtained by the Agent or such Lender from the
Borrower to the extent such information has been stated by the Borrower to be
confidential; provided that nothing herein shall prevent the Agent or any Lender
from disclosing such information (i) to the Agent or any other Lender in
connection with the transactions contemplated by this Agreement, (ii) to its
officers, directors, employees, Affiliates, agents, attorneys and accountants
who are involved in evaluating the transactions contemplated by this Agreement
and who receive such information having been made aware of the restrictions set
forth in this Section 9.11, (iii) upon the order of any court or administrative
agency or as otherwise required by law or upon request of any regulatory
authority having jurisdiction over such Lender (in which case such Agent or
Lender will inform the Borrower promptly thereof unless prohibited by law),
(iv) upon the request or demand of any regulatory agency or authority having
jurisdiction over such party, (v) which has been publicly disclosed, (vi) which
has been obtained from any Person other than the Borrower and its Affiliates,
provided that such Person is not known to it to be bound by a confidentiality
agreement with the Borrower or its Affiliates or known to it to be otherwise
prohibited from transmitting the information to it by a contractual, legal or
fiduciary obligation, (vii) in connection with the exercise of any remedy
hereunder in any judicial proceeding or (viii) to the extent such Agent or such
Lender is otherwise subject to an effective confidentiality agreement with NNC
entered into in connection with the transactions contemplated by this Agreement
and such disclosure would be permitted under the terms of such confidentiality
agreement.

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     Section 9.12.   USA PATRIOT Act.   Each Lender that is subject to the
requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into
law October 26, 2001)) (the “Act”) hereby notifies the Borrower that pursuant to
the requirements of the Act, it is required to obtain, verify and record
information that identifies the Borrower, which information includes the name
and address of the Borrower and other information that will allow such Lender to
identify the Borrower in accordance with the Act.

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

            NORTEL NETWORKS INC.,
     as Borrower

 
      By:   /s/  Karen Sledge        Name:  Karen Sledge        Title: 
President         JPMORGAN CHASE BANK, N.A.,
     as Administrative Agent

 
      By:   /s/  David M. Mallett        Name:  David M. Mallett        Title: 
Vice President        JPMORGAN CHASE BANK, N.A.,
     as a Lender

 
      By:   /s/  David M. Mallett        Name:  David M. Mallett        Title: 
Vice President        CITICORP USA, INC.,
     as a Lender

 
      By:   /s/  Tim Dilworth        Name:  Tim Dilworth        Title:  Vice
President          ROYAL BANK OF CANADA,
     as a Lender

 
      By:   /s/  Suzanne Kaicher        Name:  Suzanne Kaicher        Title: 
Attorney-in-Fact   

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            EXPORT DEVELOPMENT CANADA,
     as a Lender

 
      By:   /s/  David B. Guy        Name:  David B. Guy        Title: 
Director-Telecom         
      By:   /s/  Michael J. Fortner        Name:  Michael J. Fortner       
Title:  Financial Services Manager     

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SCHEDULE 1.01
FUNDED DEBT

                              Description / Lender             Party   Capital
Leases   Commitment US$ ’000   Drawn Amount US$ ’000   Maturity
NNL
  101 — 16 Assets — CSC         486     Dec-06
NNL
  145 — Sanmina         1,748     Mar-07
NNL
  107 — Calgary SH         234     Jun-06
NNL
  108 — EITF 01-08         836     Jun-07
NNL
  167 — EITF 01-08         328     Jun-07
NNI
  598 — Energy Management System Johnson Control         230     Mar-07
NNI
  598 — GE SL 100 Switches — GE Capital         3,442     Jun-08
NNI
  540 — Selectron — Tooling & Test Equip — Selectron         33       2007  
NNI
  540 — CSC Computer Devices — CSC         806     Mar-06
NNI
  540 — Motorola         205     Oct-06
NNI
  540 — JCI/SBC         299     Jun-07
NNI
  540 — JCI/NTFC (GE Capital)         95     Oct-06
NNI
  620 — EITF 01-08         387     Jul-07
NN ASIA
  460 — Pakistan — Motor Vehicles         157       2008  
NN UK
  710 — Motorola         32          
NN UK
  710 — EITF 01-08 Flex, Cel, Sol         236     Jun-06
 
  Capital Leases (Sale Leasebacks)                    
NNL
  101 — Belleville — Sidney Street Valley         501     Dec-06
NNL
  051 — Palladium — Canada H&R REIT         19,037     Dec-15
NN CALA
  313 — Sunrise — 1500 Concord Terrace LP         21,526     Feb-13
NNI
  540 — RTP Gateway Centre — Wachovia Bank         114,978     Jun-16
NN SA
  814 — Chateaufort — GIE les jeunes         82,806     May-13
NN CHINA
  342 — STG-NCL Wangjing Project         20,995          
 
  Operating Leases (Sale Leasebacks)                    
NNI
  Santa Clara — Prudential         146,738     Dec-16
NNI
  Rochester — Harris Corp         1,354     May-08
NNI
  McLean, VA — Teachers REA         1,431     Aug-06

 

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                              Party   Description / Lender   Commitment US$ ’000
  Drawn Amount US$ ’000   Maturity
NNI
  Galatyn III, Richardson, TX — Wireless (TX) LP             45,082     Nov-06
NNI
  880 Technology Park, Billerica — Technology Park VLP             17,851    
Mar-15
NN UK
  Harlow — Goldacres Offices Ltd             116,000     Jul-2022
NNL
  Brampton — Rogers             1,821     Dec-10
NN SA
  Chateaudun — Flextronics             653     Aug-12
NNL
  Montreal             7,600       2011  
NN IRELAND
  Galway                        
NN CALA
  Campinas                        
 
  Long Term Debt (other than Existing
Notes)                        
NNL
  Marked to Market IR Swap             2,800     Feb-06
NN UK
  Italy R&D costs — Ministro             263     Sep-10
NN UK
  710 — IDB NITEC Loan — Invest NI             892     Sep-09
 
  Other Debt                        
NN ARGENTINA
  CITIBANK             1,000     6 months
NN CHINA
  342 — China — Bank of China     6,201       0     Nov-06
NN CHINA
  342 — China — China Minisheng     12,403       0     Dec-06
NN CHINA
  342 — China — CITIC Industrial     37,210       0     Dec-06
NN CHINA
  342 — China — Bank of Communications     12,403       0     Jun-07
NN CHINA
  342 — China — Industrial & Commercial Bank of China     6,201       0    
Dec-06
NN ASIA
  468 — LG JV     2,177       2,177     Mar-15

 

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Schedule 2.01
Commitments

                  Lender   Tranche A Commitment   Tranche B Commitment
JPMorgan Chase Bank, N.A.
  $ 326,923,076.92     $ 173,076,923.08  
Citicorp USA, Inc.
    261,538,461.54       138,461,538.46  
Royal Bank of Canada
    130,769,230.77       69,230,769.23  
Export Development Canada
    130,769,230.77       69,230,769.23  
Total
  $ 850,000,000.00     $ 450,000,000.00  

 

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SCHEDULE 5.09
LIENS EXISTING ON EFFECTIVE DATE

                                  Description / Lender                 Party  
Non-Credit Parties-Liens Securing Debt   Commitment US$ ’000   Drawn Amount US$
’000   Maturity   Security
 
  Capital Leases                        
NN ASIA
  460 — Pakistan — Motor Vehicles         157       2008     Motor Vehicles
NN UK
  710 — Motorola         32             Equipment
NN UK
  710 — EITF 01-08 Flex, Cel, Sol         236       Jun-06     Equipment
 
                           
 
  Capital Leases (Sale Leasebacks)                        
NN CALA
  313 — Sunrise — 1500 Concord Terrace LP         21,526       Feb-13     Real
Estate
NN SA
  814 — Chateaufort — GIE les jeunes         82,806       May-13     Real Estate
NN CHINA
  342 — STG-NCL Wangjing Project         20,995             Real Estate
 
                           
 
  Operating Leases (Sale Leasebacks)                        
NN UK
  Harlow — Goldacres Offices Ltd         116,000       Jul-2022     Real Estate
NN SA
  Chateaudun — Flextronics         653       Aug-12     Real Estate
NN IRELAND
  Galway                       Real Estate
NN CALA
  Campinas                       Real Estate
 
                           
 
  Credit Parties — Secured Debt
Operating Leases (Sale Leasebacks)                        
NNI
  Santa Clara — Prudential         146,738       Dec-16     Real Estate
NNI
  Galatyn III, Richardson, TX — Wireless (TX) LP         45,082       Nov-06    
Real Estate

 

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EXHIBIT A — Tranche A Note
February 14 , 2006
          For value received, NORTEL NETWORKS INC., a Delaware corporation (the
“Borrower”), promises to pay to the order of _________________ (the “Lender”) in
the manner specified in Article II of the Credit Agreement referred to below,
the unpaid principal amount of each Tranche A Loan made by the Lender to the
Borrower pursuant to the Credit Agreement on the maturity date specified
therefor in the Credit Agreement. The Borrower promises to pay interest on the
unpaid principal amount of each such Tranche A Loan on the dates and at the rate
or rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in funds immediately available in New York at the
office of the Agent specified in the Credit Agreement.
          All Tranche A Loans made by the Lender, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Tranche A Loan then outstanding may be endorsed by the
Lender on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Lender to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
          This note is one of the Tranche A Notes referred to in the Credit
Agreement dated as of February 14, 2006 among Nortel Networks Inc., the Lenders
party thereto and JPMorgan Chase Bank, N.A., as Agent (as the same may be
amended from time to time, the “Credit Agreement”). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.

             
NORTEL NETWORKS INC.
      By:           Name:           Title:        

 

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                      LOANS AND PAYMENTS OF PRINCIPAL     Principal   Type  
Amount of             Amount of   of   Principal       Notation Date   Loan  
Loan   Repaid   Maturity Date   Made by                                        
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                               

 

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EXHIBIT B — Tranche B Note
February 14, 2006
          For value received, NORTEL NETWORKS INC., a Delaware corporation (the
“Borrower”), promises to pay to the order of _________________ (the “Lender”) in
the manner specified in Article II of the Credit Agreement referred to below,
the unpaid principal amount of each Tranche B Loan made by the Lender to the
Borrower pursuant to the Credit Agreement on the maturity date specified
therefor in the Credit Agreement. The Borrower promises to pay interest on the
unpaid principal amount of each such Tranche B Loan on the dates and at the rate
or rates provided for in the Credit Agreement. All such payments of principal
and interest shall be made in funds immediately available in New York at the
office of the Agent specified in the Credit Agreement.
          All Tranche B Loans made by the Lender, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Tranche B Loan then outstanding may be endorsed by the
Lender on the schedule attached hereto, or on a continuation of such schedule
attached to and made a part hereof; provided that the failure of the Lender to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Credit Agreement.
          This note is one of the Tranche B Notes referred to in the Credit
Agreement dated as of February 14, 2006 among Nortel Networks Inc., the Lenders
party thereto and JPMorgan Chase Bank, N.A., as Agent (as the same may be
amended from time to time, the “Credit Agreement”). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.

             
NORTEL NETWORKS INC.
      By:           Name:           Title:        

                  By:           Name:           Title:        

 

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                      LOANS AND PAYMENTS OF PRINCIPAL     Principal   Type  
Amount of             Amount of   of   Principal       Notation Date   Loan  
Loan   Repaid   Maturity Date   Made by                                        
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                                                                               
                               

 

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Exhibit C—Opinion of Special U.S. Counsel for the Credit Parties
Writer’s Direct Dial: (212) 225-2730
E-Mail: wolson@cgsh.com
February 14, 2006
To each of the Lenders, the Administrative Agent and
the Collateral Agent referred to below
c/o JPMorgan Chase Bank, N.A.
as Administrative Agent and Collateral Agent
270 Park Avenue
New York, NY 10017
To Export Development Canada,
as provider of the EDC Support Facility (as defined in
the U.S. Security Agreement)
151 O’Connor
Ottawa, Ontario K1A 1K3
Canada
Ladies and Gentlemen:
          We have acted as special United States counsel to Nortel Networks
Inc., a Delaware corporation (the “Corporation”), Nortel Networks Limited, a
Canadian corporation (“NNL”), and Nortel Networks Corporation, a Canadian
corporation (“NNC” and together with the Corporation and NNL, the “Covered
Companies”), in connection with the Credit Agreement dated as of February 14,
2006 (the “Credit Agreement”) among the Corporation, as Borrower, the Lenders
party thereto, JPMorgan Chase Bank, N.A., as Administrative Agent, J.P. Morgan
Securities Inc. and Citigroup Global Markets, Inc., as Joint Bookrunners and
Joint Lead Arrangers, Citicorp USA, Inc., as Syndication Agent, Royal Bank of
Canada, as Documentation Agent, and Export Development Canada (“EDC”), as
Managing Agent. This opinion is furnished to you pursuant to Section 3.01(h) of
the Credit Agreement.

 

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JPMorgan Chase Bank, N.A.
As Administrative Agent and Collateral Agent, et. al.
February 14, 2006
p. 2
          Unless otherwise defined herein, capitalized terms defined in the
Credit Agreement or the U.S. Security Agreement are used herein as defined
therein.
          In arriving at the opinions expressed below, we have reviewed the
following documents:

  (a)   an executed copy of the Credit Agreement;     (b)   an executed copy of
the U.S. Security Agreement dated as of February 14, 2006 (the “U.S. Security
Agreement”) among the Corporation, JPMorgan Chase Bank, N.A., as Collateral
Agent, and EDC;     (c)   an executed copy of the Guarantee Agreement dated as
of February 14, 2006 (the “Guarantee Agreement”) among the Corporation, NNC,
NNL, JPMorgan Chase Bank, N.A., as Administrative Agent, and EDC;     (d)   an
executed copy of the Canadian Security Agreement dated as of February 14, 2006
(the “Canadian Security Agreement”) among NNC, NNL, JPMorgan Chase Bank, N.A.,
as Collateral Agent, and EDC;     (e)   copies of the indentures identified by
the Corporation pursuant to which certain debt securities of NNL, NNC and Nortel
Networks Capital Corporation (“NNCC”), a Delaware corporation, are outstanding,
each of which are stated to be governed by New York law and which are listed on
Schedule I hereto (the “Existing Indentures,” including as defined in
Schedule I, the 1996 Indenture and the 2001 Indenture); and     (f)   the other
documents delivered by the Covered Companies at the closing pursuant to the
Covered Documents, including copies of the Corporation’s Certificate of
Incorporation, as amended, and By-Laws, certified by the Secretary of State of
the State of Delaware and the corporate secretary of the Corporation,
respectively.

          The documents referenced in clauses (a) through (c) above are
collectively referred to herein as the “Covered Documents.”
          In addition, we have reviewed the originals or copies certified or
otherwise identified to our satisfaction of all such corporate records of the
Corporation and such other instruments and other certificates of public
officials, officers and representatives of the Corporation and such other
persons, and we have made such investigations of law, as we have deemed
appropriate as a basis for the opinions expressed below.

 

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

 

JPMorgan Chase Bank, N.A.
As Administrative Agent and Collateral Agent, et. al.
February 14, 2006
p. 3
          In rendering the opinions expressed below, we have assumed the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies. In addition, we have
assumed and have not verified the accuracy as to factual matters of each
document we have reviewed (including, without limitation, the accuracy of the
representations and warranties of each Covered Company in the Covered
Documents).
          Based on the foregoing, and subject to the further assumptions and
qualifications set forth below, it is our opinion that:
          1. The Corporation is validly existing as a corporation in good
standing under the laws of the State of Delaware.
          2. The Corporation has corporate power to enter into each Covered
Document to which it is a party and to perform its obligations thereunder.
          3. The execution and delivery of each Covered Document to which it is
a party have been duly authorized by all necessary corporate action of the
Corporation, and each Covered Document has been duly executed and delivered
under the law of the State of New York by each Covered Company party thereto.
Each Covered Document is a valid and binding obligation of each Covered Company
party thereto, enforceable in accordance with its terms.
          4. The execution and delivery of each Covered Document by each Covered
Company party thereto do not, and the performance by each such Covered Company
of its obligations under each Covered Document (a) will not require any consent,
approval, authorization, registration or qualification of or with any
governmental authority of the United States of America or the State of New York
that in our experience normally would be applicable to general business entities
with respect to such execution, delivery or performance, except (i) such filings
and other actions as may be required to perfect the security interest in favor
of the Collateral Agent which the U.S. Security Agreement purports to create,
(ii) intellectual property filings, (iii) any other filings required after the
date hereof pursuant to Section 5.17 of the Credit Agreement, when required, and
(iv) such other consents, authorizations, approvals or filings, if any, as may
be required in connection with the performance of the Covered Documents due to
the specific nature or scope of any particular business or activity conducted,
or asset held, by a Covered Company, or (b) result in a breach of any of the
terms and provisions of, or constitute a default under, any of the Existing
Indentures.
          5. The U.S. Security Agreement creates a security interest, in favor
of the Collateral Agent for the benefit of the Secured Parties, in the
Corporation’s rights in the items of collateral pledged by it and listed (and
not excluded) in Section 2 of the U.S. Security Agreement, to the extent
Article 9 of the Uniform Commercial Code as in effect in the State of New York
(the “UCC”) is applicable thereto (the “Collateral”), to secure the Secured

 

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JPMorgan Chase Bank, N.A.
As Administrative Agent and Collateral Agent, et. al.
February 14, 2006
p. 4
Obligations, except that the U.S. Security Agreement will create a security
interest in any such portion of the Collateral pledged by the Corporation in
which the Corporation has no present rights only when the Corporation acquires
rights therein.
          6. With respect to that portion of the Collateral that consists of
instruments (within the meaning of Section 9-102 of the UCC) or certificated
securities (within the meaning of Section 8-102(a)(4) of the UCC), the
Collateral Agent will have a perfected security interest in each such instrument
or certificated security from time to time delivered, duly indorsed in the name
of the Collateral Agent or in blank, to the Collateral Agent in the State of New
York, which security interest will have priority over the claims of other
creditors to the extent such priority is determined pursuant to the UCC and
which security interest will remain a perfected security interest for as long as
possession thereof is continuously maintained in the State of New York by the
Collateral Agent.
          7. The security interest in the Collateral will continue in any
“identifiable proceeds” (within the meaning of the UCC) of such Collateral to
the extent and subject to the limitations provided in Section 9-315 of the UCC.
          8. The making of the Loans as contemplated by the Credit Agreement
does not violate Regulation T, U or X of the Board of Governors of the Federal
Reserve System (the “Board”).
          In rendering the opinions set forth above, we express no opinion with
respect to:
          (i) the validity, binding effect or enforceability of any provision in
any Covered Document that purports to (a) impose on the Collateral Agent or any
other person standards for the care of Collateral in its possession other than
as provided for in Section 9-207 of the UCC, (b) permit the Collateral Agent or
any other person to vote or otherwise exercise any rights with respect to any
Collateral absent compliance with the requirements of applicable laws and
regulations as to the voting of or other exercise of rights with respect to such
Collateral, (c) waive, or consent to the absence of compliance with, any rights
of any Covered Company, or duties owing to it as a matter of law, except to the
extent that the Covered Company may so waive or consent under applicable law, or
(d) provide indemnification of any person to the extent such provision covers or
could be construed to cover losses or claims under federal or state securities
laws or to the extent inconsistent with public policy; and
          (ii) the priority of any security interest in or to any of the
Collateral or the perfection of any security interest in or to any of the
Collateral, other than as specifically expressed in such opinions.

 

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

 

JPMorgan Chase Bank, N.A.
As Administrative Agent and Collateral Agent, et. al.
February 14, 2006
p. 5
          In addition, we have assumed that:
          (i) the Corporation has rights in the Collateral pledged by it (and we
express no opinion with respect thereto);
          (ii) in rendering the opinion in paragraph 6 above, we have assumed
that as of the date hereof and at any time an instrument or a certificated
security is delivered to the Collateral Agent for the benefit of the Secured
Parties, the Collateral Agent takes delivery (x) in the case of any instrument,
in good faith and without knowledge that the Collateral Agent’s interest
violates the rights of any other secured party, (y) in the case of any
certificated securities, without notice of any adverse claim, within the meaning
of the UCC and (z) each signature on any indorsement or power is genuine and
duly authorized and there has been compliance with any restrictive indorsements
or other restrictions on or procedures required for transfer of interests in
such Collateral. We express no opinion with respect to the priority of the
security interest of the Collateral Agent for the benefit of the Secured Parties
against (a) any lien, claim or other interest that arises by operation of law
and is given priority over perfected security interests, (b) any lien or claim
in favor of the United States or any agency or instrumentality thereof
(including without limitation liens arising under the federal or state tax laws
or ERISA), and (c) any claim given priority pursuant to 31 U.S.C. §3713. We have
also assumed that any certificated securities of any Person organized in a
jurisdiction other than a State of the United States constitute “securities”
within the meaning of the UCC. In addition, insofar as the security interest
granted to the Collateral Agent in the U.S. Security Agreement secures “future
advances” within the meaning of the UCC, the priority of such security interest
will be subject to the limitations set forth in Section 9-323 of the UCC;
          (iii) we have assumed that the Canadian Security Agreement would be
enforced as written;
          (iv) in rendering the opinion in paragraph 4(b) above, we have assumed
that, as of the date hereof, (a) the aggregate amount of (1) all indebtedness
for borrowed money secured by a Lien upon any property of the Corporation, NNL
or NNCC and (2) all Attributable Debt (as defined in the 1996 Indenture) in
respect of all Financing Leases (as defined in the 1996 Indenture) entered into
on or after February 15, 1996 does not exceed 15% of NNL’s Consolidated Net
Tangible Assets (as defined in the 1996 Indenture) as of September 30, 2005 and
(b) the aggregate amount of all indebtedness for borrowed money secured by a
Lien upon any property of the Corporation, NNC, NNL or NNCC does not exceed 15%
of NNL’s Consolidated Net Tangible Assets (as defined in the 2001 Indenture) as
of September 30, 2005; and

 

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JPMorgan Chase Bank, N.A.
As Administrative Agent and Collateral Agent, et. al.
February 14, 2006
p. 6
          (v) in rendering the opinion in paragraph 8 above, we have assumed
that none of the Lenders is a “creditor” within the meaning of Regulation T of
the Board or a “foreign branch of a broker-dealer” within the meaning of
Regulation X of the Board.
          Insofar as the foregoing opinions relate to the valid existence and
good standing of the Corporation, they are based solely on a certificate of good
standing received from the Secretary of State of the State of Delaware and on a
telephonic confirmation from such Secretary of State.
          Insofar as the foregoing opinions relate to the validity, binding
effect or enforceability of any agreement or obligation of any Covered Company
or the creation or perfection of any security interest, we have assumed that
(a) each Covered Company and each other party to such agreement or obligation
has satisfied those legal requirements that are applicable to it to the extent
necessary to make such agreement or obligation enforceable against it (except
that no such assumption is made as to any Covered Company regarding matters of
the federal law of the United States of America, the General Corporation Law of
the State of Delaware or the law of the State of New York that in our experience
normally would be applicable to general business entities with respect to such
Covered Document), (b) such opinions are subject to applicable bankruptcy,
insolvency and similar laws affecting creditors’ rights generally and to general
principles of equity and (c) with regard to NNC and NNL, such opinions are
subject to the effect of judicial application of foreign laws or foreign
governmental actions affecting creditor’s rights. In addition, certain of the
remedial provisions of the Security Agreement may be further limited or rendered
unenforceable by other applicable laws or judicially adopted principles which,
however, in our judgment do not make the remedies provided for therein (taken as
a whole) inadequate for the practical realization of the principal benefits
purported to be afforded thereby (except for the economic consequence of
procedural or other delay).
          The opinions set forth above are subject to the following
qualifications:
          (a) We express no opinion as to (i) Section 9.04 of the Credit
Agreement or Section 4.07 of the Guarantee Agreement insofar as it provides that
any Person may exercise set-off or similar rights and (ii) the effect of the law
of any jurisdiction other than the State of New York wherein any Lender may be
located or wherein enforcement of any Covered Document may be sought that limits
the rates of interest legally chargeable or collectible.
          (b) With respect to the submission in any Covered Document to the
jurisdiction of a United States federal court sitting in the State of New York,
we express no opinion as to the subject matter jurisdiction of any such court to
adjudicate any action relating to such Covered Document where jurisdiction based
on diversity of citizenship under 28 U.S.C. §1332 does not exist.

 

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JPMorgan Chase Bank, N.A.
As Administrative Agent and Collateral Agent, et. al.
February 14, 2006
p. 7
          (c) We have assumed that any assignments made by or among the Lenders
of their rights and obligations under the Credit Agreement will not contravene
New York Judiciary Law Section 489 (which makes it a criminal offense to take an
assignment of a debt obligation with the intent of and for the purpose of
bringing an action or proceeding thereon).
          (d) We express no opinion with respect to the enforceability of the
restriction on assignment contained in Section 9.06(a) of the Credit Agreement.
          (e) We express no opinion with respect to the enforceability of
Section 2.01 of the Guarantee Agreement to the effect the guarantors are liable
as primary rather than secondary obligors.
          (f) The waiver of defenses contained in Section 2.02 of the Guarantee
Agreement may be ineffective to the extent that any such defense involves a
matter of public policy in New York.
          The foregoing opinions are limited to the federal law of the United
States of America, the General Corporation Law of the State of Delaware and the
law of the State of New York.

 

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JPMorgan Chase Bank, N.A.
As Administrative Agent and Collateral Agent, et. al.
February 14, 2006
p. 8
          We are furnishing this opinion letter to each of you, as a Lender, and
in the case of JPMorgan Chase Bank, N.A., as Administrative Agent and Collateral
Agent, solely for your benefit in your capacity as such in connection with the
transactions contemplated by the Covered Documents. This opinion letter is not
to be relied on by or furnished to any other person or used, circulated, quoted
or otherwise referred to for any other purpose. Notwithstanding the foregoing, a
copy of this opinion may be furnished to, and relied upon by, any transferee of
a Lender’s rights and obligations under the Credit Agreement properly
transferred in accordance with the Credit Agreement, and you or any such
transferee may show this opinion to any governmental authority pursuant to
requirements of applicable law or regulations. The opinions expressed herein are
rendered on and as of the date hereof, and we assume no obligation to advise you
or any such transferee or governmental authority or any other person, or to make
any investigations, as to any legal developments or factual matters arising
subsequent to the date hereof that might affect the opinions expressed herein.

              Very truly yours,
 
            CLEARY GOTTLIEB STEEN & HAMILTON LLP
 
       
 
  By   /s/  Wanda J. Olson 
 
       
 
      Wanda J. Olson, a Partner

 

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SCHEDULE I
1. The Indenture, dated as of November 30, 1988, between NNL and The
Toronto-Dominion Bank Trust Company, as trustee, as amended from time to time.
2. The Indenture, dated as of February 15, 1996 (the “1996 Indenture”), among
NNL, as guarantor, the NNCC, as issuer, and The Bank of New York, as trustee, as
amended from time to time.
3. The Indenture, dated as of December 15, 2000, among NNL, NNC and Deutsche
Bank Trust Company Americas, as successor to Citibank, N.A., as trustee, as
amended from time to time.
4. The Indenture, dated as of August 15, 2001 (the “2001 Indenture”), among NNC,
as issuer, NNL, as guarantor, and Deutsche Bank Trust Company Americas, as
successor to The Bankers Trust Company, as trustee, as amended from time to
time.

 

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Exhibit D—Opinion of General Counsel-Corporate and Corporate Secretary of NNC
February 14, 2006

     
JPMorgan Chase Bank, N.A.
  JPMorgan Chase Bank, N.A.
as Collateral Agent for the Secured Parties
  as Administrative Agent for the Lenders
270 Park Avenue
  270 Park Avenue
New York, NY 10017
  New York, NY 10017
 
   
The Secured Parties under the Security
  The Lenders under the Credit Agreement
Agreements referred to below
  referred to below

Ladies and Gentlemen:
          I am the General Counsel – Corporate and Corporate Secretary of Nortel
Networks Corporation (the “NNC”) and give this opinion pursuant to Article III,
clause (i) of the Credit Agreement dated as of February 14, 2006 (the “Credit
Agreement”) among Nortel Networks Inc. (“NNI”), as Borrower, the Lenders party
thereto, JPMorgan Chase Bank, N.A., (“JPMorgan”) as Administrative Agent, J.P.
Morgan Securities Inc. and Citigroup Global Markets, Inc., as Joint Bookrunners
and Joint Lead Arrangers, Citicorp USA, Inc., as Syndication Agent, Royal Bank
of Canada, as Documentation Agent, and Export Development Canada, as Managing
Agent.
          I have examined executed copies of:

  (a)   the Credit Agreement;

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  (b)   the U.S. Security Agreement dated as of February 14, 2006 (the “U.S.
Security Agreement”) among NNI, JPMorgan Chase Bank, N.A., as Collateral Agent
and Export Development Canada (“EDC”), as provider of the EDC support facility;
    (c)   the Guarantee Agreement dated as of February 14, 2006 among NNI, as
borrower and guarantor, Nortel Networks Limited (“NNL”), as guarantor, NNC, as
guarantor, and JPMorgan Chase Bank, N.A., as administrative agent;     (d)   the
Canadian Security Agreement dated as of February 14, 2006 (together with the
U.S. Security Agreement, the “Security Agreements”) among NNC, NNL, JPMorgan
Chase Bank, N.A., as Collateral Agent and EDC, as provider of the EDC support
facility;     (e)   Deed of hypothec and issue of bonds entered into on
February 14, 2006 before a notary by NNL in favour of JPMorgan Chase Bank, N.A.,
as fonde de pouvoir for the holders of the bonds issued thereunder (the “NNL
Hypothec”);     (f)   Deed of hypothec and issue of bonds entered into on
February 14, 2006 before a notary by NNC in favour of JPMorgan Chase Bank, N.A.,
as fonde de pouvoir for the holders of the bonds issued thereunder (the “NNC
Hypothec”, and together with the NNL Hypothec, the “Hypothecs” and individually
a “Hypothec”);     (g)   Pledge agreement dated as of February 14, 2006 executed
by and between NNL and the Collateral Agent, in respect of the bond issued under
the NNL Hypothec;     (h)   Pledge agreement dated as of February 14, 2006
executed by and between NNC and the Collateral Agent , in respect of the bond
issued under the NNC Hypothec;     (i)   A $5,000,000,000 25% demand bond dated
February 14, 2006 issued by NNL in favour of the Collateral Agent (the “NNL
Bond”);     (j)   A $5,000,000,000 25% demand bond dated February 14, 2006
issued by NNC in favour of the Collateral Agent (the “NNC Bond”);     (k)  
Delivery order dated February 14, 2006 executed by NNL in respect of the NNL
Bond; and     (l)   Delivery order dated February 14, 2006 executed by NNC in
respect of the NNC Bond.

     The documents referenced in clauses (a) through (l) above are collectively
referred to herein as the “Covered Documents.”
          I have also examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and considered such questions of law as I have
deemed necessary or advisable for purposes of this opinion.

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          I am qualified to practice law solely in the Province of Ontario,
Canada and accordingly express no opinion as to any laws or matters governed by
any laws other than the laws of the Province of Ontario and the federal laws of
Canada applicable therein (collectively, “Ontario Law”).
          In rendering this opinion, I have assumed:

  (a)   the genuineness of all signatures (other than mine) whether on originals
or copies of the documents I have examined and the legal capacity at all
relevant times of all natural persons signing any such documents;     (b)   that
all original documents reviewed by me are authentic;     (c)   that all copies
of documents reviewed by me conform to the originals of such documents;     (d)
  that all certificates of public officials are accurate; and     (e)   that all
information provided to me by all federal and provincial government agencies and
departments was correct on the currency dates thereof, and that such information
remains correct to the date hereof.

          No opinion is given with respect to (i) the enforceability of the
Covered Documents and (ii) whether the formal requirements of execution
applicable in the Province of Quebec have been met with respect to the execution
of the Covered Documents listed in paragraphs (e) to (l) inclusively above, to
the extent that such requirements may be applicable.
          With respect to the opinion in paragraph 1 below, I have relied
exclusively as to certain matters of fact upon a certificate of compliance for
each of NNC and NNL (collectively, the “Corporations”) each dated February 14,
2006, issued by Industry Canada, a copy of which is attached.
          Upon the basis of the foregoing, I am of the opinion that:
1. Each Corporation is a corporation validly existing under the Canada Business
Corporations Act and has not been dissolved.
2. Each Corporation has the corporate power and capacity to own or lease its
properties and assets, to carry on its business as it is currently being
conducted and to authorize, execute and deliver the Covered Documents to which
it is a party and to exercise its rights and perform its obligations thereunder.
3. Each Corporation has taken all necessary corporate action to authorize the
execution, delivery and performance by it of the Covered Documents.
4. The Covered Documents have been duly executed by each Corporation party
thereto.

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5. To the extent Ontario Law applies, the Covered Documents have been duly
delivered by each Corporation party thereto.
6. The execution and delivery of each of the Covered Documents by each
Corporation party thereto and the performance by such Corporation of its
obligations thereunder do not and will not result in any breach or default by
such Corporation under:

  (a)   any provision of the constating documents or by-laws of such
Corporation; or     (b)   any statute or regulation of the Province of Ontario,
or of Canada applicable in Ontario, to which such Corporation is subject.

4

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          I am furnishing this opinion letter to you, as a Lender and as a
Secured Party, and in the case of JPMorgan Chase Bank, N.A. as Administrative
Agent and Collateral Agent, solely for your benefit in your capacity as such in
connection with the transactions contemplated by the Covered Documents. This
opinion letter is not to be relied on by or furnished to any other person or
used, circulated, quoted or otherwise referred to for any other purpose.
Notwithstanding the foregoing, a copy of this opinion may be furnished to, and
relied upon by, any transferee of a Lender’s rights and obligations under the
Credit Agreement properly transferred in accordance with the Credit Agreement,
and you or any such transferee may show this opinion to any governmental
authority pursuant to requirements of applicable law or regulations. The
opinions expressed herein are rendered on and as of the date hereof, and I
assume no obligation to advise you or any such transferee or governmental
authority or any other person, or to make any investigations, as to any legal
developments or factual matters arising subsequent to the date hereof that might
affect the opinions expressed herein.

     
 
  Very truly,
 
   
 
  /s/  Gordon A. Davies 
 
   
 
  Gordon A. Davies
 
  General Counsel — Corporate and Corporate Secretary

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Exhibit E-1—Opinion of Special Canadian Counsel for the Credit Parties
February 14, 2006
JPMorgan Chase Bank, N.A
as Administrative Agent
under the Credit Agreement and the Lenders
from time to time party to the Credit Agreement
as each such term is hereinafter defined
270 Park Avenue
New York, NY 10017
Export Development Canada
as provider of the EDC Support Facility
referred to in the Canadian Security Agreement
as each such term is hereinafter defined
50 O’Connor Street, Suite 1100
Ottawa, ON K1A 0S6
Ladies and Gentlemen:

Re:   Canadian Security Agreement dated as of February 14, 2006 among Nortel
Networks Limited, Nortel Networks Corporation, the Subsidiary Lien Grantors from
time to time party thereto and JPMorgan Chase Bank, N.A., as collateral agent,
and Export Development Canada as provider of the EDC Support Facility

        We have acted as special counsel to each of Nortel Networks Corporation
and Nortel Networks Inc. (collectively, the “Financing Parties” and
individually, a “Financing Party”) in connection with a Canadian Security
Agreement dated as of February 14, 2006 (the “Canadian Security Agreement”)
among Nortel Networks Limited (“NNL”), Nortel Networks Corporation. (“NNC”) and
JPMorgan Chase Bank, as Collateral Agent for the Secured Parties (in such
capacity, the “Collateral Agent”) and Export Development Canada (“EDC”) as
provider of the EDC Support Facility.
        This opinion is being delivered to you pursuant to section 3.01(j) of
the Credit Agreement dated as of February 14, 2006 among Nortel Networks Inc.
(“NNI”), the lenders party thereto, and JPMorgan Chase Bank, N.A., as
administrative agent (the “Credit Agreement”). Unless otherwise defined herein,
all capitalized terms used herein have the respective meanings ascribed to them
in the Canadian Security Agreement.

 

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1.   Documentation

          In acting as such counsel, we have participated in the preparation of
the Canadian Security Agreement.
          In addition, we have reviewed the Credit Agreement, the Guarantee
Agreement dated as of February 14, 2006 (the “Guarantee Agreement”) among NNI,
as borrower and guarantor, NNL, as guarantor, NNC, as guarantor, JPMorgan Chase
Bank, N.A., as administrative agent, and EDC, as provider of the EDC Support
Facility and the U.S. Security Agreement dated as of February 14, 2006 (the
“U.S. Security Agreement”) among NNI, the subsidiary lien grantors from time to
time party thereto, JPMorgan Chase Bank, N.A., as collateral agent and EDC, as
provider of the EDC Support Facility. The Credit Agreement, the Guarantee
Agreement and the U.S. Security Agreement are referred to collectively as the
“Foreign Law Agreements” and the Foreign Law Agreements and the Canadian
Security Agreement are referred to collectively as the “Credit Documents”.

2.   Jurisdiction and Effective Date

          We are qualified to practice law only in the Province of Ontario. We
express no opinion herein as to any laws, or any other matters governed by any
laws, other than the laws of the Province of Ontario and the federal laws of
Canada applicable therein in force on the date hereof (“Ontario Law”). Without
limiting the generality of the immediately preceding sentence, we express no
opinion with respect to the laws of any other jurisdiction to the extent that
those laws may govern the validity, perfection, effect of perfection or
non-perfection or enforcement of the security interest created by the Canadian
Security Agreement as a result of the application of Ontario conflict of laws
rules, including, without limitation, sections 5 to 8 of the Personal Property
Security Act (Ontario) (“PPSA”).

3.   Scope of Examinations

          We have considered such questions of law and examined such public and
corporate records, certificates and other documents and conducted such other
examinations as we have considered necessary, or appropriate to enable us to
express the opinions expressed herein.
          We have also relied upon searches that we conducted, or caused to be
conducted, in the Province of Ontario as of the dates specified in Schedule “A”
hereto, for registrations, filings or recordings made in offices of public
record listed in Schedule “A” (the “Searches”). The searches were conducted
against the current names of each of the Financing Parties (including, in each
case, both the English and French versions, if any) specified in Schedule “A”.
Our searches revealed that none of the Financing Parties had names other than
their current names since May 1, 2000. The results of the Searches are set out
in Schedule “A”.
          We have registered financing statements under the PPSA in connection
with the Canadian Security Agreement. A summary of the information contained in
the verification statements issued in respect of such registrations is set out
in Schedule “B” hereto.

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4.   Assumptions and Reliances

          For the purposes of the opinions herein expressed, we have, with your
permission and without independent investigation or verification:

  (a)   assumed the genuineness of all signatures (whether on originals or
copies of documents) and the authority of all persons signing documents examined
by us, the legal capacity at all relevant times of any natural persons signing
any documents, the authenticity of all documents and instruments submitted to us
as originals, the conformity to authentic originals of all documents submitted
to us as notarial, certified, conformed, photostatic, facsimile or
electronically reproduced copies thereof, the authenticity of the originals of
such copies and facsimiles and the accuracy of all certificates of public
officials and corporate officers;     (b)   assumed the accuracy and
completeness of and have assumed the continued accuracy on the date hereof, and
have relied on the indices and filing system maintained at the public offices
where the public searches referred to in Schedule “A” were conducted;     (c)  
assumed the accuracy as to factual matters of each document we have reviewed
(including, without limitation, the accuracy of the representations and
warranties in the Canadian Security Agreement and the Credit Agreement);     (d)
  assumed that each of the Financing Parties is a corporation validly existing
under the laws of its jurisdiction of incorporation, amalgamation, merger or
continuance, as applicable, and has the corporate power and authority to
authorize, execute and deliver the Canadian Security Agreement and to exercise
its rights and perform its obligations thereunder;     (e)   assumed that the
Canadian Security Agreement has been duly authorized, executed and delivered by
the parties or signatories thereto;     (f)   assumed that the Canadian Security
Agreement is a legal, valid and binding obligation of the Collateral Agent, EDC
and each of the Secured Parties enforceable against such persons in accordance
with its terms;     (g)   assumed that each of the Secured Obligations (as that
term is defined in the Canadian Security Agreement) constitutes a legal, valid
and binding obligation of each of the parties thereto, enforceable against such
parties in accordance with their terms;     (h)   assumed that value has been
given by the Collateral Agent or one or more Secured Parties to the Financing
Parties and that the Financing Parties have rights in the personal property
described in the Canadian Security Agreement (the “Collateral”);

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  (i)   assumed that the execution and delivery of the Canadian Security
Agreement by each of the Financing Parties and the performance by each of the
Financing Parties of its obligations thereunder does not constitute or result in
a violation or a breach of or a default under (a) its articles or by-laws or
(b) any law, rule or regulation having force of law applicable in the Province
of Ontario; and     (j)   assumed, for the purposes of the opinion expressed in
paragraph 5(h), to the extent such opinion relates to the Foreign Law
Agreements, that the laws of the State of New York are identical to Ontario Law.

5.   Opinions

       Based on the foregoing and subject to the qualifications hereinafter set
forth, we are of the opinion that:

  (a)   The Canadian Security Agreement constitutes a legal, valid and binding
obligation of each Financing Party, enforceable against such Financing Party in
accordance with its terms.     (b)   The Canadian Security Agreement creates a
security interest in favour of the Collateral Agent for its benefit and the
benefit of the Secured Parties in the Collateral to which the PPSA applies to
secure the payment and performance of the obligations described therein as being
secured thereby.     (c)   Registration has been made in all public offices
provided for under the laws of the Province of Ontario or the federal laws of
Canada applicable therein where such registrations are necessary to protect,
preserve or perfect the security interest created by the Canadian Security
Agreement in the Collateral in favour of the Collateral Agent for the benefit of
the Secured Parties.     (d)   Assuming possession by the Collateral Agent of
the Pledged Certificated Securities and the Pledged Uncertificated Securities
listed on Schedule “C” hereto (collectively, the “Pledged Securities”) in the
Province of Ontario on the date hereof the PPSA provides that the laws of the
Province of Ontario will govern the perfection and effect of perfection or
non-perfection of the security interest therein in favour of the Collateral
Agent.     (e)   Assuming possession by the Collateral Agent of the Pledged
Securities in the Province of Ontario on the date hereof the Collateral Agent
has a security interest in the Pledged Securities that is perfected by
possession, provided that possession of the Pledged Securities as collateral is
retained by the Collateral Agent or a person on its behalf other than the
Financing Parties or their agent.     (f)   Provided that the Collateral Agent
(i) has acted in good faith, (ii) has had no notice of any adverse claim
affecting the Pledged Securities and (iii) has possession of the Pledged
Securities in the Province of Ontario, the security interest created by the
Canadian Security Agreement in the Pledged Securities in favour of the
Collateral Agent for its benefit and the benefit of the Secured

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      Parties has priority over any other security interest in the Pledged
Securities perfected by registration or temporarily perfected under the PPSA.  
  (g)   The Searches disclosed no registration which is sufficient to perfect a
security interest in the Collateral under the PPSA other than the registrations
identified in Schedule “A”.     (h)   The execution, delivery and performance by
each of NNL, NNI and NNC of each of the Credit Documents to which it is a party
do not breach the Amended and Restated Master Facility Agreement dated
October 24, 2005 between NNL and EDC (the “EDC Agreement”). The review
undertaken for the purposes of providing this opinion has been limited to
identifying breaches of the EDC Agreement that would be apparent to us as legal
professionals and no further steps, such as the making of calculations or the
testing of financial or other covenants, have been taken.     (i)   The choice
of the State of New York law (the “Foreign Law”) as the governing law of each of
the Foreign Law Agreements will be upheld as a valid choice of law by courts of
competent jurisdiction in the Province of Ontario (“Ontario Courts”), provided
that such choice of law is bona fide (in the sense that it was not made with a
view to avoiding the consequences of the law of any other jurisdiction) and
further provided that it is not contrary to public policy, as that term is
understood under Ontario Law (“Public Policy”). We have no reason to believe
that the choice of Foreign Law in this context would not be bona fide or would
be contrary to Public Policy.     (j)   In a proceeding brought before an
Ontario Court for the enforcement of any of the Foreign Law Agreements, the
Ontario Court would apply the Foreign Law, in accordance with the parties’
choice of the Foreign Law as the governing law of the Guarantee Agreement, to
all issues which, under Ontario Law, are to be determined in accordance with the
chosen law of the contract, provided that:

  (i)   the parties’ choice of the Foreign Law is bona fide and is not contrary
to Public Policy; and     (ii)   in any such proceeding, and notwithstanding the
parties’ choice of law, the Ontario Court:

  (1)   will not take judicial notice of the provisions of the Foreign Law but
will only apply such provisions if they are pleaded and proven by expert
testimony;     (2)   will apply Ontario Law that under such law would be
characterized as procedural and will not apply any Foreign Law that under
Ontario Law would be characterized as procedural;

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  (3)   will apply provisions of Ontario Law that have overriding effect;    
(4)   will not apply the Foreign Law if such application would be characterized
under Ontario Law as the direct or indirect enforcement of a foreign revenue,
expropriatory or penal law or if its application would be contrary to Public
Policy; and     (5)   will not enforce the performance of any obligation that is
illegal under the laws of any jurisdiction in which the obligation is to be
performed.

  (k)   An Ontario Court would give a judgment based upon a final and conclusive
in personam judgment of a United States District Court for the Southern District
of New York and of any New York State Court sitting in New York City
(collectively, “Foreign Court”) for a sum certain, obtained against NNC or NNL
with respect to a claim arising out of the any of the Foreign Law Agreements (a
“Foreign Judgment”), without reconsideration of the merits:

  (i)   provided that:

  (1)   the Foreign Court had jurisdiction over the subject matter and the
parties to the applicable Foreign Law Agreement as recognized by the Ontario
Court and the Foreign Court;     (2)   no new admissible evidence, right or
defence relevant to the action accrues or is discovered prior to the rendering
of a judgment by the Ontario Court;     (3)   an action to enforce the Foreign
Judgment is commenced in the Ontario Court within any applicable limitation
period;     (4)   the Ontario Court has discretion to stay or decline to hear an
action on the Foreign Judgment if the Foreign Judgment is under appeal, or there
is another subsisting judgment in any jurisdiction relating to the same cause of
action; and     (5)   the Ontario Court will render judgment only in Canadian
dollars.

  (ii)   subject to the following defences:

  (1)   the Foreign Judgment was obtained by fraud or in a manner contrary to
the principles of natural justice;     (2)   the Foreign Judgment is for a claim
which under Ontario Law would be characterized as based on a foreign revenue,
expropriatory or penal law;

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  (3)   the Foreign Judgment is contrary to Public Policy or to an order made by
the Attorney General of Canada under the Foreign Extraterritorial Measures Act
(Canada) or by the Competition Tribunal under the Competition Act (Canada) in
respect of certain judgments referred to therein; or     (4)   the Foreign
Judgment has been satisfied or is void or voidable under Foreign Law.

  (l)   The submission to the non-exclusive jurisdiction of the Foreign Court
pursuant to the Foreign Law Agreements would be recognized by an Ontario Court
as conferring jurisdiction on the Foreign Court.

6.   Qualifications

      The opinions herein set forth are subject to the following qualifications:

  (a)   The enforceability of the Canadian Security Agreement is subject to or
may be limited by bankruptcy, insolvency, arrangement, reorganization,
winding-up, moratorium or other similar laws of general application relating to
or affecting the enforcement of creditors’ rights generally.     (b)   The
enforceability of the Canadian Security Agreement is subject to general
equitable principles, including the fact that the availability of equitable
remedies, such as injunctive relief and specific performance, are in the
discretion of the court.     (c)   No opinion is expressed regarding the
enforceability of any provision contained in the Canadian Security Agreement
which purports to provide that any portion thereof which is unenforceable may be
severed without affecting the enforceability of the remaining provisions.    
(d)   The Currency Act (Canada) precludes the courts in Canada from awarding a
monetary judgment in any currency other than Canadian dollars.     (e)   The
recoverability of costs and expenses may be limited to those a court considers
to be reasonably incurred and the court has the discretion to determine by whom
and to what extent costs and expenses incidental to court proceedings shall be
paid.     (f)   Rights of indemnification may be limited by applicable law.    
(g)   Any requirement to pay interest at a greater rate after than before
default may not be enforceable if it is construed by a court to constitute a
penalty or is contrary to the Interest Act (Canada).     (h)   The Collateral
Agent and the Secured Parties may be required to demand payment of the
applicable Financing Party and to give a reasonable time to repay following a
demand for payment prior to taking any action to enforce

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      rights of repayment or before exercising any of the rights and remedies
expressed to be exercisable by the Collateral Agent and the Secured Parties in
the Canadian Security Agreement.     (i)   We express no opinion as to the
enforceability of any provision of the Canadian Security Agreement:

  (i)   which purports to waive any statutory rights;     (ii)   which purports
to waive any or all defences which might be available to, or constitute a
discharge of the liability of, any Financing Party;     (iii)   to the extent it
purports to exculpate the Collateral Agent or any Secured Party from liability
in respect of acts or omissions which may be illegal, fraudulent or involve
gross negligence or wilful misconduct; and     (iv)   which states that
modifications, amendments or waivers are not binding unless in writing.

  (j)   The PPSA imposes certain obligations on secured creditors which cannot
be varied by contract. The PPSA may also affect the enforcement of certain
rights and remedies under the Canadian Security Agreement to the extent that
those rights and remedies are inconsistent with or contrary to certain
provisions of the PPSA including, without limitation, Sections 16, 17 and 39 and
Part V of the PPSA.     (k)   Changes in a debtor’s name or the transfer by it
to a third party of any of its personal property would require timely
registration of a financing change statement properly completed in the manner
prescribed under the PPSA to preserve perfection of the security interests
therein.     (l)   Any security interests hereafter arising in proceeds of
collateral that are motor vehicles or that may hereafter be or become a fixture
or an accession or that may be commingled with the other goods will be subject
to the rights of certain claimants in the circumstances prescribed in the PPSA,
unless specific notifications or registrations are made.     (m)   With respect
to the opinions expressed in paragraphs 5(d) to 5(f) hereof, possession of an
uncertificated security is taken only where the pledge and security interest are
effected by the making of an appropriate entry in the records of the clearing
agency or custodian of such uncertificated securities.     (n)   No opinion is
expressed with respect to the existence of, or right, title or interest of the
Financing Parties, to any property.     (o)   Except as specifically expressed
in paragraph 5(f) hereof, we express no opinion regarding the priority of the
security interest created by the Canadian Security Agreement.

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  (p)   No opinion is expressed regarding the creation, validity, enforceability
or perfection of any security interests or other interest expressed to be
created by or under the Canadian Security Agreement in any property of the
Financing Parties or any proceeds of such property that are not identifiable or
traceable or in any property to which the PPSA does not apply.     (q)   A
mortgage, charge, assignment or security interest in any property which is in
the nature of a trade-mark, copyright, patent, licence, approval, privilege,
franchise, permit, lease, instrument, contract or agreement, or in any property
subject to the Financial Administration Act (Canada), (“Special Property”) may
not be valid, binding or enforceable because of the terms of the Special
Property or any statute, rule or regulation requiring a consent, approval or
other authorization or registration which has not been given or made.     (r)  
Enforceability of the Canadian Security Agreement will be subject to the
limitations contained in the Limitations Act, 2002 (Ontario) and we express no
opinion as to whether a court may find any provision of the Canadian Security
Agreement to be enforceable on the basis that it is an attempt to vary or
exclude a limitation under that Act.     (s)   We express no opinion as to
whether it may be necessary, in connection with the enforcement of the Canadian
Security Agreement, for any person proposing to take possession of, acquire, own
or operate all or any part of the Collateral, to obtain any licence, franchise,
permit, consent, approval, registration or other authorization or exemption.    
(t)   A receiver, a manager or a receiver and manager appointed pursuant to the
Canadian Security Agreement may, for certain purposes, be treated as the agent
of the creditor and not solely as the agent of the debtor and the creditor may
not be deemed to be acting as the agent and attorney of the debtor in making
such appointment, notwithstanding any provision in the Canadian Security
Agreement to the contrary.

       This opinion is provided solely for the benefit of the parties to whom it
is addressed and their respective successors and assigns, relates exclusively to
the transactions outlined above and may not be used or relied upon by any such
party for any other purpose or relied upon by any other person for any purpose
whatsoever without our prior written consent.
Yours truly,

9

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SCHEDULE “A”
PERSONAL PROPERTY SEARCH RESULTS
The following sets forth the searches made in the records of the central office
of the Ontario Personal Property Security Registration System.

1.   NORTEL NETWORKS LIMITED/CORPORATION NORTEL NETWORKS LIMITEE   A.   PPSA
Searches

The registrations annexed hereto as Appendix B-1 were found in searches, current
as at February 9, 2006, of the names “NORTEL NETWORKS LIMITED”, “CORPORATION
NORTEL NETWORKS LIMITEE”, “NORTEL NETWORKS LIMITED/CORPORATION NORTEL NETWORKS
LIMITEE” and “CORPORATION NORTEL NETWORKS LIMITEE/NORTEL NETWORKS LIMITED”.

B.   Bankruptcy Searches   (a)   Our search of the records for the
Superintendent of Bankruptcy (Official Receiver) for all districts and divisions
in Canada disclosed no record involving the name “NORTEL NETWORKS LIMITED”,
“NORTEL NETWORKS LIMITED/CORPORATION NORTEL NETWORKS LIMITEE”, “CORPORATION
NORTEL NETWORKS LIMITEE” and “CORPORATION NORTEL NETWORKS LIMITEE/NORTEL
NETWORKS LIMITED” as of January 27, 2006.   (b)   Bankruptcy search at the
office of the Registrar in Bankruptcy of the Bankruptcy/Commercial Courts
(Toronto Office) (current to January 31, 2006)*:

     
File Number:
  01-CL-004013
 
   
Date Filed:
  02/06/2001
 
   
Bankrupt/Applicant/Petitioner:
  Nortel Networks Ltd.
Type:
  Applicant
 
   
Respondents:
  Connect Communications Inc.
 
  (Plus Group Respondents)
Type:
  Respondents
 
   
Case Type:
  Civil — Bankruptcy Act

C.   Bank Act

Notice of Intention to Give Security Under The Bank Act (current to February 1,
2006):
Nil.

 

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

 

D.   Execution Searches

Search for registrations under the Executions Act (Sheriff: Land Titles, 66
Toronto, LRO #43 Brampton, LRO#4 Ottawa, LRO #33 Middlesex and LRO #21 Hastings)
with a Certificate date of February 1, 2006:
Nil.

2.   NORTEL NETWORKS CORPORATION/CORPORATION NORTEL NETWORKS   A.   PPSA
Searches

The registrations annexed hereto as Appendix B-2 were found in searches, current
as at February 9, 2006, of the names “NORTEL NETWORKS CORPORATION”, “CORPORATION
NORTEL NETWORKS”, “NORTEL NETWORKS CORPORATION/CORPORATION NORTEL NETWORKS” and
“CORPORATION NORTEL NETWORKS/NORTEL NETWORKS CORPORATION”.

B.   Bankruptcy Searches   (a)   Our search of the records for the
Superintendent of Bankruptcy (Official Receiver) for all districts and divisions
in Canada disclosed no record involving the name “NORTEL NETWORKS CORPORATION”,
“NORTEL NETWORKS CORPORATION/CORPORATION NORTEL NETWORKS”, “CORPORATION NORTEL
NETWORKS” and “CORPORATION NORTEL NETWORKS/NORTEL NETWORKS CORPORATION” as of
January 27, 2006.   (b)   Bankruptcy search at the office of the Registrar in
Bankruptcy of the Bankruptcy/Commercial Courts (Toronto Office) (current to
January 31, 2006)*:

     
File Number:
  00-CL-003687
 
   
Date Filed:
  03/13/2000
 
   
Bankrupt/Applicant/Petitioner:
  Nortel Networks Corporation
 
  BCE Inc.
Type:
  Applicants
 
   
Case Type:
  Civil — Bankruptcy or Insolvency
 
   
 
   
File Number:
  00-CL-003757
 
   
Date Filed:
  03/23/2000
 
   
Bankrupt/Applicant/Petitioner:
  Nortel Networks Corp. (Plus Group
 
  Applicants)
Type:
  Applicants
 
   
Case Type:
  Civil — Bankruptcy or Insolvency
 
   

2

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

 

C.   Bank Act

Notice of Intention to Give Security Under The Bank Act (current to February 1,
2006):
Nil.

D.   Execution Searches

Search for registrations under the Executions Act (Sheriff: Land Titles, 66
Toronto and LRO #43 Brampton) with a Certificate date of February 1, 2006:
Nil.

3.   NORTEL NETWORKS INC.   A.   PPSA Searches

The registrations annexed hereto as Appendix B-3 were found in searches, current
as at February 9, 2006, of the name “NORTEL NETWORKS INC.”.

B.   Bankruptcy Searches   (a)   Our search of the records for the
Superintendent of Bankruptcy (Official Receiver) for all districts and divisions
in Canada disclosed no record involving the name “NORTEL NETWORKS INC.” as of
January 27, 2006.   (b)   Bankruptcy search at the office of the Registrar in
Bankruptcy of the Bankruptcy/Commercial Courts (Toronto Office) (current to
January 31, 2006)*:       Nil.   C.   Bank Act

Notice of Intention to Give Security Under The Bank Act (current to February 1,
2006):
Nil.

D.   Execution Searches

Search for registrations under the Executions Act (Sheriff: Land Titles, 66
Toronto, and LRO#4 Ottawa) with a Certificate date of February 1, 2006:
Nil.
*Note: Due to processing delays at the Superior Court of Justice (Toronto),
search results are not current to the date the search was conducted and may be
3-6 weeks behind.

3

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

 

APPENDIX B-1
NORTEL NETWORKS LIMITED/CORPORATION NORTEL NETWORKS LIMITEE
NORTEL NETWORKS LIMITED
CORPORATION NORTEL NETWORKS LIMITEE
CORPORATION NORTEL NETWORKS LIMITEE/NORTEL NETWORKS LIMITED/

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
(1)
  Nortel
Networks
Limited/Corporation
Nortel Networks
Limitee Nortel Networks Limited
Corporation Nortel
Networks Limitee
Corporation Nortel Networks
Limitee/Nortel
Networks Limited   JPMorgan Chase Bank, N.A., as Collateral Agent   Inventory,
Equipment, Accounts, Other and Motor Vehicle Included       622623879
20060209
1226 1862 5243 (3 years)
 
                   
(2)
  Nortel Networks
Corporation/Corporation Nortel Networks
Nortel Networks Corporation
Corporation Nortel Networks
Corporation Nortel Networks/Nortel Networks Corporation   JPMorgan Chase Bank,
N.A., as Collateral Agent   Inventory, Equipment, Accounts, Other and Motor
Vehicle Included       622623888
20060209
1226 1862 5244 (3 years)
 
                   
(3)
  Nortel Networks Limited
Nortel Networks
Limited/Corporation
Nortel Networks Limitee
Corporation Nortel
  GE Capital Canada Leasing Services Inc.   Inventory, Equipment, Accounts and
Other   Without limitation, one (1) 1996 Canadian Challenger 604 aircraft
bearing Canadian registration mark C-FNNT and airframe manufacturer??s [sic]
serial number 5317, together with two (2) general   621765072
20060105
1032 5064 0901 (5 years)

 

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
Networks Limitee
              electric model CF34-3B engines bearing manufacturer??s[sic] serial
numbers 872050 and 872048, and any airframe replacing the foregoing aircraft, or
any other engine from time to time attached to such airframe (including any
engine replacing the foregoing engines), and all parts, accessories, appliances,
appurtenances, components, furnishings, instruments, modules, navigational and
communications equipment and all other goods, tangible personal property and
other equipment of whatever nature (the ??Parts??) [sic] that may from time to
time be incorporated or installed in or attached to the foregoing airframe or
engines, and any and all parts removed from the foregoing airframe or engines
(collectively, the ??Aircraft??) [sic] and all records, logs, maintenance
records, manuals, technical data, training aids, computer software and other
materials relating to the aircraft, and any property substituted for any of the
foregoing. This registration, and this note, refer to original file number
866304369 which was discharged in error. File Number 866304369 consisted
of?[sic] initial registration number 20001003 1644 9065 2669, amended by
registration number 20020626 1132 1862 4427, (further amended by 20041126 1559
1862 8241,) and accidentally discharged by registration number 20051129 1513
5064 0440    

2

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
(4)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited/Corporation
Nortel Networks
Limitee   General Electric Canada Equipment Finance G.P.   Inventory, Equipment,
Accounts and Other   One (1) 1990 Canadair Challenger 601-3A/ER bearing Canadian
registration mark C-FNNS and airframe manufacturer??s [sic] serial number 5068
together with two engines model general electric CF-34-3A bearing
manufacturer??s[sic] serial numbers 350381 and 350384 and any engine replacing
any of the foregoing engines and together with all parts, accessories,
appliances, appurtenances, components, furnishings, instruments, modules,
navigational and communications equipment and other equipment incorporated or
installed in or attached to the foregoing airframe or engines, and all records,
logs, manuals, technical data, computer software and other materials relating to
the aircraft, airframe or any engine, and any property substituted for any of
the foregoing. This registration, and this note, refer to original file number
833549544 which was discharged in error. File Number 833549544 consisted of —
initial registration 970818 1459 1081 2363, amended by registration number
990512 1641 9065 9168, (further amended by 20041119 1005 1862 7733, 20000718
1433 9065 0219,) and accidentally discharged by registration number 20051129
1517 5064 0443   621765117
20060105
1036 5064 0902 (4 years)

3

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
(5)
  Nortel Networks
Corporation   GE Canada Leasing
Services Company   Equipment and Other   Furniture and Equipment as described in
Lease Schedule #03001903 together with all proceeds thereof. This registration,
and this note, refer to original file number 868869972 which was discharged in
error. File Number 868869972 consisted of – initial registration 20010108 1044
7029 4128, amended by registration number 20020307 1220 5064 2320 and
accidentally discharged by registration number 20051129 1524 5064 0449  
621765153
20060105
1038 5064 0903 (2 years)
 
                   
(6)
  Nortel Networks
Corporation   GE Canada Leasing
Services Company   Equipment and Other   Furniture and Equipment as described in
Lease Schedule #00135867 together with all proceeds thereof. This registration,
and this note, refer to original file number 867325014 which was discharged in
error. File Number 867325014 consisted of – initial registration 20001107 1057
7029 2770, amended by registration number 20020307 1451 5064 2345 and
accidentally discharged by registration number 20051129 1525 5064 0450  
621765207
20060105
1043 5064 0904 (2 years)
 
                   
(7)
  Nortel Networks Corporation
Nortel Networks
Corporation/Corporation Nortel Networks
  GE Capital Technology Services Inc.
GE Capital Services Technologiques Inc.   Equipment and Other   All property
leased by Secured Party to Debtor from time to time. This registration, and this
note, refer to original file number 822334581 which was   621747648
20060104
1716 5064 0899 (1 year)

4

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
  Corporation Nortel
Networks             discharged on error. File Number 822334581 consisted
of?[sic] initial registration number 960531 1902 1529 0956, amended by
registration number 19990714 1039 1529 3522, (further amended by 19990719 1750
1531 8399), and accidentally discharged by registration number 20051129 1510
5064 0438       
(8)
  Nortel
Networks
Limited/Corporation
Nortel Networks
Limitee   GE Capital Leasing Services Inc.   Inventory, Equipment, Accounts,
Other and Motor Vehicle Included   All items set forth in Mellon Bank of Canada
Master Lease Agreement and Lease Schedules, discharge in eror[sic] on
December 13, 2005, by Registration number 20051213 1708 5064 0642 original file
number 894233151 was registered on May 12, 2003 as registration number 20030512
1035 9065 7664   621670779
20051230
1416 5064 0875 (1 year)
 
                   
(9)
  Nortel
Networks
Corporation   GE Canada Leasing
Services Company   Equipment and Other   Furniture and Equipment as described in
Lease Schedule #00135570 together with all proceeds thereof. Discharged in error
on November 29, 2005 by registration number 20051129 1520 6054 0445, original
file number 610462944 was registered on November 9, 2004 as registration number
20041109 1241 5064 7125   621670896
20051230
1428 5064 0877 (2 years)
 
                   
(10)
  Nortel
Networks Limited   Hewlett-Packard
Financial Services
Canada Company   Equipment and Other   Master Lease. Any and all Equipment,
tangible and intangible, leased pursuant to schedules under Master Lease
Agreement No. 100691 dated and any proceeds therefrom.   621392193
20051216
1433 8077 7775 (5 years) as amended by 20051229 1156 8077 8794 to add general

5

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
(11)
  Nortel Networks Corporation   GE Capital Canada Leasing Services Inc.  
Equipment and Other   Furniture and equipment ad described in equipment schedule
#03002385 together with all proceeds thereof. Original file number 870423318 was
discharged in error on September 28, 2005   619269174 20050928 1633 5064 9500
(5 years)
 
                   
(12)
  Nortel Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited/Corporation
Nortel Networks
Limitee Corporation Nortel Networks Limitee/Nortel
Networks Limited   Fortress Credit Corp.   Equipment, Accounts and Other   All
of the goods, furniture, fixtures, software, equipment, and other tangible and
intangible personal property now or hereafter leased by Insight Investments,
Corp., as lessor, to Nortel Networks Limited, as lessee, wherever located, under
master lease agreement no. 04-139, lease order no. 5, including, but not limited
to software, maintenance and support, together with all repairs, replacements,
substitutions, additions, attachments, accessions, modifications, updates,
revisions, new versions, enhancements, and accessories, all documentation and
records relating thereto, and all proceeds thereof.   611591247 20041223 1118
1590 2103 (3 years)
 
                   
(13)
  Nortel Networks
Corporation   ARI Financial Services Inc.   Equipment, Other and Motor Vehicle
Included   This is a re-registration of registration number
19990721182515310696, reference file number 853259346, made pursuant to section
30(6) of the Personal Property Security Act   608419467 20040824 1951 1531 7185
(5 years)
 
                   
(14)
  Nortel Networks
Limited/Corporation
Nortel Networks Limitee   IKON Office Solutions Inc.   Equipment and Other      
DISCHARGED
607867974
20040804 1453 1530 2954 (4

6

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
                  years)
as discharged by
20051222 1455 1530 7573
 
                   
(15)
  Nortel
Networks Limited   Insight Investments, Corp. Fortress Credit Corp.   Inventory,
Equipment, Accounts and Other   Master Lease Agreement No. 04-139 Lease Order
No. 2   607115907 20040708 1317 5061 4429 (5 years)
 
                   
(16)
  Nortel
Networks Limited
Nortel Networks
Limited/Corporation
Nortel Networks
Limitee
Corporation Nortel
Networks
Limitee/Nortel
Networks Limited   Drawbridge Special
Opportunities Fund
LP   Inventory, Equipment, Accounts and Other   All of the goods, furniture,
fixtures, equipment, and other tangible and intangible and other personal
property now or hereafter leased by lessor to lessee, wherever located, under
Master Lease Agreement No. 04-139, Lease Order No.4, plus all replacement parts,
substitutions, additions, attachments, modifications, updates, revisions, new
versions, enhancements, accessories and the proceeds thereof.   607064328
20040707 0912 5061 4422 (5 years)
 
                   
 
                  as amended by
20040714 1734 5061 4438
 
                   
 
                  as amended by
20040820 1706 1862 1309
 
                   
 
                  as amended by
20040903 1642 1862 2625
 
                   
 
                  as amended by
20040920 1149 1590 7415
 
                   
 
                  as amended by
20040922 1502 1590 7537

7

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
(17)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited/Corporation
Nortel Networks
Limitee
Corporation Nortel
Networks
Limitee/Nortel
Networks Limited   Fortress Credit Corp.   Inventory, Equipment, Accounts and
Other   All of the goods, furniture, fixtures, equipment, and other tangible and
intangible and other personal property now or hereafter leased by Lessor to
Lessee, wherever located, under Master Lease Agreement No. 04-139, Lease Order
No. 1, plus all replacement parts, substitutions, additions, attachments,
modifications, updates, revisions, new versions, enhancements, accessories and
the proceeds thereof.   607064742 20040707 1019 5061 4423 (5 years)
 
                   
 
                  as amended by
20040714 1728 5061 4437
 
                   
 
                  as amended by
20040916 1559 1590 7337
 
                   
 
                  as amended by
20040920 1147 1590 7413
 
                   
 
                  as amended by
20040922 1500 1590 7532
 
                   
(18)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited/Corporation
Nortel Networks
Limitee
Corporation Nortel
Networks
Limitee/Nortel
Networks Limited   Fortress Credit Corp. Drawbridge Special Opportunities Fund,
LP   Inventory, Equipment, Accounts and Other   All of the goods, furniture,
fixtures, equipment, and other tangible and intangible and other personal
property now or hereafter leased by Lessor to Lessee, wherever located, under
Master Lease Agreement No. 04-139, Lease Order No. 2, plus all replacement
parts, substitutions, additions, attachments, modifications, updates, revisions,
new versions, enhancements,   607086972 20040707 1534 5061 4424 (5 years)

8

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
              accessories and the proceeds thereof.    
 
                   
 
                  as amended by
20040714 1721 5061 4436
 
                   
 
                  as amended by
20040916 1600 1590 7338
 
                   
 
                  as amended by
20040920 1148 1590 7414
 
                   
 
                  as amended by
20040922 1501 1590 7533
 
                   
(19)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee   ABN AMRO Bank N.V. Canada Branch   Accounts and Other      
602995239 20040210 1159 1862 0353 (5 years)
 
                   
(20)
  Nortel
Networks
Limited/Corporation
Nortel Networks
Limitee   GE Capital Leasing Services Inc.   Inventory,
Equipment,
Accounts, Other,
Motor Vehicle
Included   All items set forth in Mellon Bank of Canada Master Lease Agreement
and Lease Schedules   DISCHARGED 894233151 20030512 1035 9065 7664 (3 years) as
amended by 20051213 1708 5064 0642
 
                   
(21)
  Nortel Networks Limited   Dell Financial
Services Canada
Limited   Equipment, Other   All Dell and non Dell computer equipment and
peripherals wherever located heretofore or hereafter leased to debtor by secured
party pursuant to an equipment lease# 519421-001 together with all
substitutions, additions, accessions [sic] and replacements thereto and thereof
now and hereafter installed in, affixed to, or used in conjunction with such
equipment and proceeds   891979101 20030226 1454 80770490 (3 years)

9

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
              thereof together with all rental or installment payments,
insurance proceeds, other proceeds and payments due or to become due and arising
from or relating to such equipment. Proceeds all present and after-acquired
personal property.    
 
                   
(22)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited/Corporation
Nortel
Networks Limitee   Sun Microcsystems
Finance   Equipment, Other       DISCHARGED 891452709 - 20030205 1442 1530 9458
(4 years) as amended by 20030227 1038 1529 6633 as discharged by 20051230 1046
1529 9973
 
                   
(23)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited/Corporation
Nortel
Networks Limitee
Corporation Nortel
Networks Limitee/Nortel
Networks
Limited   The
Toronto-Dominion
Bank, Singapore
Branch   Accounts, Other   Absolute sale and assignment pursuant to an amended
and restated receivables purchase agreement among the secured party,
Toronto-Dominion (South East Asia) Limited, The Toronto Dominion Bank, Taipei
branch, the debtor, The Toronto Dominion Bank, Nortel Networks (Asia) Limited
and each additional seller, as amended and as the same may be further amended,
supplemented or modified from time to time.   DISCHARGED 891292248 - 20030130
0954 1590 0925 (15 years) as discharged by 20051215 1939 1531 2040
 
                   
(24)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee   ABN AMRO Bank N.V., Banque ABN AMRO N.V.   Accounts, Other  
    891079047 - 20030122 1430 1862 9004 (5 years)
 
                   
(25)
  Nortel
Networks Limited   Sun Microsystems
Finance   Equipment, Other       DISCHARGED
881443908 –
20020510 0937

10

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                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
                  1530 9831 (4 years) as discharged by 20051230 1452 1530 4812
 
                   
(26)
  Nortel
Networks Limited   Nexcap Finance Corporation
The Bank of Nova Scotia   Equipment,
Accounts, Other   Lease Agreements
(Operating)   DISCHARGED 879081309 – 20011221 1458 1530 7923 (7 years) amended
by: 20020130 1758 1531 7181 renewed for 4 years by 20041129 1944 1531 1390 as
discharged by 20051214 1948 1531 0719
 
                   
(27)
  Nortel
Networks Limited   Nexcap Finance Corporation
The Bank of Nova Scotia   Equipment,
Accounts, Other   Lease Agreements
(Operating)   DISCHARGED 879081318 – 20011221 1458 1530 7924 (7 years) renewed
for 4 years by 20041129 1944 1531 1391 as discharged by 20051214 1948 1531 0718
 
                   
(28)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited/Corporation
Nortel
Networks Limitee   The
Toronto-Dominion
Bank   Accounts, Other   Please note that the complete address of the secured
party is 77 King Street West, TD Centre, 19th Floor, Royal Trust Tower, Toronto,
Ontario, M5K 1A2.   DISCHARGED 878948217 – 20011218 1451 1530 1852 (5 years) as
discharged by 20051228 1455 1530 0489

11

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
  Corporation Nortel
Networks Limitee/Nortel
Networks
Limited                
 
                   
(29)
  Nortel
Networks Limited
Corporation Nortel
Networks Limitee
Nortel Networks
Limited /Corporation
Nortel Networks Limitee
Corporation Nortel
Networks Limitee /Nortel
Networks
Limited
  Comdisco Canada Ltd.   Equipment,
Accounts, Other   All present and after acquired computers, peripherals,
telecommunications devices, cables, routers, accessories, attachments, hardware,
software, maintenance agreements, licences, and related goods, now or hereafter
supplied by the secured party, and all proceeds thereof in any form, including
money, chattel paper, intangibles, goods, documents of title, instruments,
securities, substitutions, accounts receivable, rental and loan contracts, all
personal property returned,   DISCHARGED
875344824-20010814 1453 1530 2510 (5 years) as discharged by 20060103 1942 1531
 
              traded-in or repossessed and all insurance proceeds and any other
form of proceeds    
 
                   
(30)
  Nortel
Networks Limited   Onmark Inc.   Equipment, Other   All personal property now
and hereafter leased by secured party to debtor and documented with a schedule
pursuant to Master Lease Agreement dated July 6, 2000 between secured party
(Lessor) and debtor (Lessee). This filing is for precautionary purpose in
connection with an equipment leasing transaction and is   DISCHARGED
871589601-20010418 1816 1531 0764 (5 years) as discharged by 20051215 1939 1531
1279
 
              not to be construed as indicating that the transaction is other
than a true lease.    
 
                   
(31)
  Nortel
Networks Limited   Onmark Inc.   Equipment, Other   All personal property now
and hereafter leased by secured party to debtor and   DISCHARGED
871546698-
20010417 1758

12

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                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
              documented with a schedule pursuant to Master Lease Agreement
dated July 6, 2000 between secured party (Lessor) and debtor (Lessee). This
filing is for precautionary purpose in connection with an equipment leasing
transaction and is not to be construed as indicating that the transaction is
other than a true lease.   1531 9061 (5 years)
as discharged by 20051215 1939 1531 1278
 
                   
(32)
  Nortel
Networks Limited   Nexcap Finance
Corporation   Other   All personal property now and hereafter leased by secured
party to debtor and documented with a schedule pursuant to Master Lease
Agreement dated July 6, 2000 between secured party (Lessor) and debtor (Lessee).
This filing is for precautionary purpose in connection with an   870293853-
20010301 1802 1531 2533 (5 years)
amended by: 20010402 1750 1531
3347
renewed by: 20040206 1947 1531
0304
for an additional 2
years
 
              equipment leasing transaction and is not to be construed as
indicating that the transaction is other than a true lease.    
 
                   
(33)
  Nortel
Networks Limited   Nexcap Finance
Corporation   Other   All personal property now and hereafter leased by secured
party ot [sic] debtor and documented with a schedule pursuant to Master Lease
Agreement dated July 6, 2000 between secured party (Lessor) and debtor (Lessee).
This filing is for precautionary purpose in connection with an equipment lease
transaction and is not to be construed as indicated that the transaction is
other than a true lease.   870293862- 20010301 1802 1531 2534 (2 years)
amended by: 20010402 1750 1531
3346
amended by: 20020130 1758 1531 7180
as renewed by 20030205 1812 1531 1170 (2 years)
as renewed by 20050222 1951
 
                   
 
                   

13

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                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description     Number(s)
 
                  1531 1859 (1 year)
 
                   
(34)
  Nortel Networks
Limited/Corporation
Nortel Networks
Limitee
Corporation Nortel
Networks Limitee/Nortel
Networks Limited   The
Toronto-Dominion
Bank   Accounts, Other   The complete address of the secured party is “77 King
Street West, TD Centre, 19th Floor, Royal Trust Tower, Toronto, Ontario M5K 1A2
Attention-Wolfgang Mersch, Charles Attard”.   DISCHARGED
868330593-20001213 1440 1530 0784 (10 years)
as discharged by 20051228 1455 1530 0490
 
  Nortel Networks Limited
Corporation Nortel
Networks Limitee                
 
                   
(35)
  Nortel
Networks Limited   STMicroelectronics (Canada), Inc.   Equipment,
Accounts, Other   Full transfer and assignment of all right, title and interest
in and to equipment leases from Nortel Networks Limited to STMicroelectronics
(Canada), Inc. whose full address is c/o STMicroelectronics (Canada), Inc., 1310
Electronics   084073464-20000619 1245 0028 3040 (15 years)
 
              Drive, Carrollton,
Texas, 75006    
 
                   
(36)
  Nortel Networks Corporation
Nortel Networks Corporation/Corporation
Nortel Networks Corporation Nortel Networks   Steelcase Financial Services Ltd.
  Equipment, Other   All furniture and equipment leased or financed from
Steelcase Financial Services, Ltd. including but not limited to the items set
forth in Master Lease No. 10068 and any master lease equipment schedules,
including proceeds.   828900684- 19970306 0946 1560 1816 (5 years)
amended by: 19990514 1328 7029
1126
renewed by: 20020104 1401 7029 1991 (5 years)
 
                   
 
                   
 
                   
(37)
  Nortel Networks
Corporation /Corporation
Nortel Networks   GE Capital
Information
Technology
Solutions Inc
GE Capital
Solutions   Equipment, Other   All property leased by secured party to debtor
from time to time.   DISCHARGED 853164027- 19990719 1750 1531 7390 (10 years)
as discharged by

14

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

 

                                          Reference File                     No.
&         Secured   Collateral   General Collateral   Registration     Debtor(s)
  Party(ies)   Classification   Description   Number(s)
 
      Technologiques Inc.           20051212 1619 6086 5739
 
                   
(38)
  Nortel Networks Limited/Corporation
Nortel Networks Limitee   Bank of America Canada   Equipment, Other      
DISCHARGED 076268223- 19961127 1546 0043 6045 (13 years) amended by:
 
                  20000613 1033 9065 9256
as amended by
20041007 1556 1902 4636
as discharged by
20051215 1939 1531 1277

15

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APPENDIX B-2
NORTEL NETWORKS CORPORATION/CORPORATION NORTEL NETWORKS
NORTEL NETWORKS CORPORATION
CORPORATION NORTEL NETWORKS
CORPORATION NORTEL NETWORKS/NORTEL NETWORKS CORPORATION
See Appendix B-1 for registration particulars found in PPSA searches against
these names.

 

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

 

APPENDIX B-3
NORTEL NETWORKS INC.
See Appendix B-1 for registration particulars found in PPSA searches against
this name

 

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

 

SCHEDULE “B”
PPSA Registrations in favour of
JPMorgan Chase Bank, N.A., as Collateral Agent
Financing statement filed for a term of three (3) years against Nortel Networks
Limited/Corporation Nortel Networks Limitee, Nortel Networks Limited,
Corporation Nortel Networks Limitee, Corporation Nortel Networks Limitee/Nortel
Networks Limited, claiming a security interest in collateral described as
“Inventory”, “Equipment”, “Accounts”, “Other”, and “Motor Vehicles Included”,
registered pursuant to the PPSA on February 9, 2006 as Registration No. 20060209
1226 1862 5243 and Reference File No. 622623879.
Financing statement filed for a term of three (3) years against Nortel Networks
Corporation/Corporation Nortel Networks, Nortel Networks Corporation,
Corporation Nortel Networks, Corporation Nortel Networks/Nortel Networks
Corporation, claiming a security interest in collateral described as
“Inventory”, “Equipment”, “Accounts”, “Other”, and “Motor Vehicles Included”,
registered pursuant to the PPSA on February 9, 2006 as Registration No. 20060209
1226 1862 5244 and Reference File No. 622623888

 

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SCHEDULE “C”
PLEDGED SECURITIES

                                        Stock certificate  
 
  US ISSUERS     number     Number of shares or units
1
  Alteon WebSystems, Inc.     1     1 Preferred
 
        2     300,000 Preferred
 
        1     44,696,306 Common
2
  CoreTek, Inc.     1     1 Preferred
 
        1     14,487,293 Common
 
        2     7,573,728 Common
3
  Nortel Networks Applications Management Solutions Inc.   CS-1   21,523,376
Common
 
        X-1     1 Series 1 Preferred
 
        Y-1     2,762,972 Series 2
 
              Convertible Preferred
4
  Nortel Networks Optical Components Inc.     4     13,974 Class A Common
 
        5     55,899 Class A Common
 
        1     85,106,799 Class B Common
 
        2     21,276,699 Class B Common
5
  Sonoma Systems     1     35,659,018 Common
 
        1     1 Preferred
 
        2     2 Common
6
  Xros, Inc.     A-1     1 Series A Preferred
 
        C-1     52,953,008 Common
 
  CANADIAN ISSUERS            
7
  1328556 Ontario Inc.           19,074,418 Common Shares
8
  Architel Systems Corporation     C-1     6,028,277 Common
 
      P-1   1 Preferred Share, Series 1
9
  Capital Telecommunications Funding Corporation     C-1     1,000 Common
10
  CTFC Canada Inc.     C-1     1,000 Common
11
  Nortel Communications Inc.   CL-1.6   100 Class One Common Shares

 

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

 

                          Stock certificate             number   Number of
shares or units
12
  Nortel Networks Electronics Corporation     1     1 Common
 
        2     1,000 Common Shares
13
  Nortel Networks Global Corporation     2     5,060,201 Common Shares
14
  Nortel Networks International Corporation     2     10,000 Common Shares
15
  Nortel Networks Technology Corporation     C-1     170,000 Common
 
        C-2     2 Common
 
        P1-4     142,698 Class I Preferred Shares
 
        P1-6     738 Class I Preferred Shares
 
        P1-7     7,970 Class I Preferred Shares
16
  Northern Telecom Canada Limited     2     1 Common
 
        3     39,999 Common Shares
17
  Regional Telecommunications Funding Corporation     C-1     1,000 Common
18
  TSFC Canada Inc.     C-1     1,000 Common

2

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

 

Exhibit E-2—Opinion of Special Quebec Counsel for the Credit Parties
Direct Dial: (514) 847-4533
jbogaty@ogilvyrenault.com
Montréal, February 14, 2006
JPMORGAN CHASE BANK, N.A.
as Administrative Agent, Collateral Agent (as defined in the
Canadian Security Agreement defined below) and fondé de pouvoir
270 Park Avenue
New York, N.Y. 10017
U.S.A.
— and —
TO THE SECURED PARTIES (as defined in the
Canadian Security Agreement defined below)
— and —
BLAKE, CASSELS & GRAYDON LLP
KPMG Tower
Suite 2200
600 de Maisonneuve Blvd. West
Montréal, Quebec H3A 3J2
Dear Sirs:
RE: Nortel Networks Limited/Corporation Nortel Networks Limitée (“NNL”)
This opinion is furnished to you pursuant to the Credit Agreements, as such term
is defined in that certain Canadian Security Agreement by and among NNL, Nortel
Networks Corporation (“NNC”), the Subsidiary Lien Grantors (as such term is
defined therein) party thereto, JPMorgan Chase Bank, N.A., as Collateral Agent
and Administrative Agent (as such terms are defined therein) and as fondé de
pouvoir and Export Development Canada, as provider of the EDC Facility (as such
term is defined therein) (the “Canadian Security Agreement”).
We have acted as Quebec counsel to NNL and NNC (being hereinafter collectively
referred to sometimes as the “Grantors”, and individually as a “Grantor”) in
connection with the

 

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 Page 2
execution and delivery of the Credit Documents (as hereinafter defined). As used
herein, the term “Credit Documents” means each of the documents listed on
Schedule 1 hereto. The capitalized terms used in this opinion which are defined
in the Canadian Security Agreement have the respective meanings therein
specified unless such terms are otherwise defined in this opinion or its
schedules.
In such capacity we have examined originals or copies of executed copies of each
of the Credit Documents.
We are qualified to practice law only in the Province of Quebec. We express no
opinion herein as to any laws, or any other matters governed by any laws, other
than the laws of the Province of Quebec and the federal laws of Canada
applicable therein in force on the date hereof and we give no undertaking to
update our opinion in the event of a change in applicable law after the date
hereof.
We have examined such statutes, public records, certificates (including
officers’ certificates) and other documents and have considered such questions
of law and made such searches as we have deemed necessary for the purposes of
the opinions hereinafter expressed. We have relied, without independent
verification or investigation, on all statements as to matters of fact contained
in such documents.
In rendering this opinion, we have assumed the genuineness of all signatures and
the authenticity of all documents and papers submitted to us as originals and
the conformity to authentic original documents of all documents submitted to us
as copies. We have also assumed, without independent verification or
investigation, that each of the parties to the Credit Documents (i) is validly
constituted, organized and existing under its governing laws and (ii) has full
capacity, power and authority to enter into and has duly authorized, executed
and delivered the Credit Documents, to the extent it is a party thereto and
(iii) has not contravened and will not contravene any laws applicable to it by
negotiating, executing, delivering and performing its obligations under, the
Credit Documents to which it is a party. Finally, we have assumed the legal
capacity of all individuals and that the domiciles of NNC and NNL are located
respectively in the Provinces of Ontario and Québec.
Based on the foregoing but subject to the qualifications hereinafter set forth,
we are of the opinion that:

1.   Each of the Grantors has been duly registered under An Act Respecting the
Legal Publicity of Sole Proprietorships, Partnerships and Legal Persons (Quebec)
(the “Publicity Act”), is not in default to file an annual declaration and is
not in default to comply with a request made to it under Section 38 of the
Publicity Act;

 

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 Page 3

2.   Each of the Credit Documents to which NNL or NNC is a party constitutes a
legal, valid and binding obligation of NNL or NNC party thereto enforceable
against such party in accordance with its terms;

3.   Neither the execution of the Credit Documents nor the performance by NNL
and NNC of the obligations set out therein contravene or constitute a breach
under any applicable laws of the Province of Québec or any applicable regulation
thereunder;

4.   Subject to due registration of the Hypothecs in the Register of Personal
and Movable Real Rights, the Hypothecs constitute valid hypothecs up to the
amounts thereof, in favour of the fondé de pouvoir on the property (including
incorporeal movable property established by title in bearer form) described
therein located in the Province of Quebec as well as on any incorporeal property
of NNL and property of NNL ordinarily used in more than one jurisdiction. As
instructed, we are attending to the registration of the Hypothecs;

5.   The delivery and continued possession in the Province of Quebec by the
Collateral Agent of each Bond pursuant to the applicable Bond Pledge Agreement
creates a valid and enforceable pledge of such Bond under the laws of the
Province of Quebec;

6.   To the extent Quebec law applies, the Credit Documents have been duly
delivered by each of NNC and NNL to the extent that each is a party thereto;

7.   The formal requirements of execution applicable in the Province of Quebec
have been met with respect to the execution of the Credit Documents to the
extent that such requirements may be applicable; and

8.   No authorizations, approvals or consents of, or filings or registrations
with any governmental or regulatory authority or agency of or in the Province of
Quebec are necessary for the execution, delivery or performance by NNL and NNC
of the Credit Documents or for the validity or enforceability thereof as against
the Collateral Agent and the fondé de pouvoir under the Hypothecs (the
Collateral Agent and the fondé de pouvoir are hereinafter collectively referred
to as the “Agent”), except for (i) registrations that are referred to in
paragraph 4 above and the renewals thereof upon their respective expiry date
(ii) such filings, registrations and notices which may be required in the future
as set forth in our qualifications herein and (iii) court filings which may be
required to enforce the Credit Documents.

The opinions expressed above are subject to the following qualifications:

(i)   The rights and remedies of the Agent under or in respect of the Credit
Documents are subject to applicable bankruptcy, insolvency, moratorium,
reorganization,

 

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 Page 4

    prescription, statutes of limitation or other similar laws affecting
creditors’ rights generally;   (ii)   No opinion is expressed herein with
respect to the effectiveness of any provision of the Credit Documents providing
for cash to be held in the circumstances stated therein by the Agent as
collateral security;   (iii)   No opinion is herein expressed on the ranking or
priority of the Hypothecs or the Bond Pledge Agreements;   (iv)   The opinions
expressed herein as to the validity of any charge, hypothec and security created
under any of the Credit Documents are limited to the extent that the Grantors
have or will have good and valid title to their respective movable properties,
rights and assets charged thereunder and we express herein no opinion as to such
title;   (v)   Pursuant to Article 2959 of the Civil Code of Quebec (the “Civil
Code”), the registration of the Hypothecs preserves the same rank for interest
due for the current year and the three preceding years as for the capital;  
(vi)   The preservation of the Hypothecs registered under the name of the
Grantors on movable property that is not alienated in the ordinary course of
business is subject to the filing of a notice of preservation of hypothec in the
Register of Personal and Movable Real Rights within 15 days after the creditors
have been informed in writing of the transfer of the property and the name of
the purchaser, or after the creditors have consented in writing to the transfer,
all as provided for in Article 2700 of the Civil Code;   (vii)   The hypothecs
created by the Hypothecs on claims held by a Grantor against third parties must,
where the claims are themselves secured by a registered hypothec, be published
by registration and a copy of a certified statement of registration of the
hypothecated claim must be remitted to the debtor of such hypothecated claim,
all as provided for in Article 2712 of the Civil Code;   (viii)   The hypothecs
created pursuant to the Hypothecs on property alienated in the ordinary course
of business will cease to apply to such properties but will extend to the
properties of the same nature which replace the properties so alienated; if no
property replaces the alienated property, the hypothecs shall subsist
nonetheless but extend only to the proceeds of the alienation, provided such
proceeds may be identified, the whole in accordance with Article 2674 of the
Civil Code;

 

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 Page 5

(ix)   The enforceability of the Hypothecs against the debtors of the Grantors
under any claims charged thereunder, if any, is subject to the said debtors
receiving evidence of such hypothec as required by Articles 2710 and 1641 of the
Civil Code;   (x)   To withdraw at any time the authority given to the Grantors
pursuant to the Hypothecs to collect claims hypothecated thereby, the fondé de
pouvoir thereunder must serve notice to such grantor and the debtors of the
hypothecated claims and the withdrawal of such authority must be registered, all
as provided for in Article 2745 of the Civil Code;   (xi)   The hypothecs
created by the Hypothecs on movables that are subsequently transformed, mixed or
combined to form new movables belonging to third parties should be renewed
against such new movables so as to preserve their enforceability and ranking as
provided for in Article 2953 of the Civil Code;   (xii)   The enforceability
against third parties of the Hypothecs on movable properties subsequently
incorporated into immovable property is subject to the registration of the
Hypothecs in the applicable land register as set forth in Articles 2796 and 2951
of the Civil Code;   (xiii)   The enforceability of the Hypothecs on rights
resulting from insurance contracts is subject to the insurers receiving notice
thereof as required by Articles 2461 and 2497 of the Civil Code;   (xiv)   The
enforceability of certain provisions of the Hypothecs relating to enforcement
and realization proceedings and remedies, may be limited by the provisions of
the Civil Code. However, such limitations should not make the remedies intended
to be provided by the Hypothecs inadequate for the practical realization of the
benefits intended to be provided thereby if the Agent acts in good faith and in
a commercially reasonable manner;   (xv)   The exercise of a hypothecary right
pursuant to the Hypothecs is subject to the filing of a prior notice at the
registry office together with evidence of said notice having been served on the
grantor of such Hypothec, as the case may be, and on any other person against
whom the beneficiaries of the hypothecs intend to exercise their rights, all as
provided for in Article 2757 et seq. of the Civil Code;   (xvi)   To the extent
that any of the parties thereto now or at any time in the future becomes a
creditor of a debt of the Crown in Right of Canada, the charges created by the
Credit Documents with respect to such debt or other rights of action (to the
extent same is assignable or may be hypothecated) may not be opposable to the
Crown

 

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 Page 6

    unless the provisions of the Financial Administration Act (Canada) are
complied with;   (xvii)   No opinion is expressed herein regarding the validity
of the charges, if any, created by the Credit Documents with respect to (a) any
amount owing by Her Majesty in right of Quebec in respect of a fiscal law as a
refund or (b) debts, claims, demands, shares, permits, licenses and other
rights, which by their terms or by law are not assignable or which may not be
hypothecated or which require the consent of a third party to be assigned or
hypothecated where such consent has not been obtained;   (xviii)   To the extent
that the rights or properties subject to the Hypothecs include patents,
trade-marks or copyrights, registration thereof may not be effective to fully
preserve, perfect or protect the security constituted thereby unless the
relevant documents or a proper notice thereof is duly filed with the appropriate
patent, trade-mark or copyright registrars, as the case may be;   (xix)   The
question of whether or not any of the provisions of the Credit Documents which
may be rendered invalid on account of illegality may be severed from the other
provisions thereof in order to save those other provisions would be determined
by a Quebec court in its discretion;   (xx)   We express no opinion herein with
respect to any provisions of the Credit Documents which purport (a) to enable
the Agent to recover from a party any costs in excess of the legal tariff or any
fines, penalties or costs levied against or imposed upon such other party by
applicable law or by order of court or (b) to waive the rights of any party
under any legislation which preclude such waiver. Pursuant to Articles 2667 and
2762 of the Civil Code, notwithstanding any stipulation to the contrary, the
costs secured by the Hypothecs and the Bond Pledge Agreements exclude
extra-judicial professional fees payable by the Agent and/or the other Secured
Parties or any other person for services required by the Agent and/or the other
Secured Parties in order to recover the capital and interest secured by the
Hypothecs or the Bond Pledge Agreements or to conserve the charged property
mentioned therein;   (xxi)   The provisions of the Credit Documents which
entitle the Agent to accelerate the indebtedness of the Grantors following the
occurrence of an Event of Default may be limited by the provisions of
Article 2761 of the Civil Code which permit the debtor or other interested
persons to defeat the exercise of a creditor’s hypothecary rights by remedying
the omission or breach set forth in the prior notice relating to the exercise of
such creditor’s hypothecary rights;   (xxii)   A receiver or receiver and
manager appointed pursuant to the provisions of the Credit Documents may for
certain purposes be treated by a court as the agent of the Agent

 

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 Page 7

    and not solely the agent of the Grantors notwithstanding any agreement to
the contrary;   (xxiii)   We express no opinion as to the effectiveness of any
provision of the Credit Documents which purport to allow for the compensation or
set-off of unmatured or unliquidated claims;   (xxiv)   In the event that
litigation should ensue outside Quebec, such litigation may be subject to
Section 2 of the Business Concerns Records Act (Quebec) which provides that
“Subject to section 3, no person shall, pursuant to or under any requirement
issued by any legislative, judicial or administrative authority outside Quebec,
remove or cause to be removed, or send or cause to be sent, from any place in
Quebec to a place outside Quebec, any document or résumé or digest of any
document relating to any concern”; for the purposes of the Business Concerns
Records Act (Quebec), “document” means any account, balance sheet, statement of
receipts and expenditure, profit and loss statement, statement of assets and
liabilities, inventory, report and any other writing or material forming part of
the records or archives of a business concern;   (xxv)   With respect to (a) any
corporeal movable property of any of the Grantors situated outside the Province
of Québec (other than, in the case of NNL, such property ordinarily used in more
than one jurisdiction), any incorporeal movable property of NNC, and any
incorporeal movable property of NNL established by title in bearer form located
outside the Province of Québec at the time of creation of the security
constituted pursuant to the Hypothecs or the Bond Pledge Agreements or
thereafter, or (b) a security published by the holding of the title exercised by
the creditor outside the Province of Québec, we express no opinion herein as to
the validity of the charges created thereon under the Hypothecs or the Bond
Pledge Agreements or as to the enforceability of the Hypothecs or the Bond
Pledge Agreements against such property; no opinion is expressed herein either
as to the additional registrations that may be required to be made outside the
Province of Québec to maintain the enforceability of the charges created
pursuant to the NNL Hypothec on corporeal movables ordinarily used in more than
one jurisdiction or incorporeal movables should the domicile of NNL be moved to
a location outside the Province of Québec;   (xxvi)   We express no opinion on
any provision of the Credit Documents to the extent it purports to waive or
renounce to the application of any prescription or limitation statute prior to
the expiry of the relevant prescription or limitation period;   (xxvii)   No
opinion is herein expressed on the benefit which the Collateral Agent may derive
from the Bonds should bonds be issued in the future under the Hypothecs to a
party other than the Collateral Agent in light of Section 32 of the Special
Corporate Powers

 

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 Page 8

    Act (Quebec) which stipulates that “the person holding the power of attorney
of the creditors in whose favour a hypothec is granted to secure payment of
bonds or other titles of indebtedness cannot purchase from the company the first
issue, by underwriting, purchase, subscription or otherwise, of the bonds or
other titles of indebtedness secured by hypothec ...”;   (xxviii)   No opinion
is expressed herein as to the validity or enforceability of any provision of the
Credit Documents providing for the creation of an irrevocable mandate;   (xxix)
  The obligation of the parties to the Credit Documents and the enforceability
thereof are subject to all qualifications which, by law, equity or usage, are
incidental thereto by their nature, including without limitation:

  (A)   the parties must have exercised and must continue to exercise good faith
in the negotiation, implementation and enforcement of the Credit Documents;    
(B)   any realization upon the security forming part of the Credit Documents
should be made upon commercially reasonable terms in the circumstances;     (C)
  equitable remedies such as specific performance and injunctive relief which
may be ordered by a court in its discretion and accordingly may not be available
as a remedy in an action brought to enforce such documents;     (D)   the powers
of the courts to stay proceedings before them and to stay the execution of
judgments;     (E)   the Currency Act (Canada) precludes a Canadian court from
rendering a judgment for an amount expressed in a currency other than Canadian
currency. In addition, Article 3161 of the Civil Code provides, inter alia,
that, where a foreign decision orders a debtor to pay a sum of money expressed
in foreign currency, a Quebec authority (for example, a Quebec court) converts
the sum into Canadian currency at the rate of exchange prevailing on the day the
decision became enforceable at the place where it was rendered;     (F)   the
discretion that a Court may reserve to itself to decline to hear an action if it
is contrary to public policy for it to do so or if it is not the proper forum to
hear such action;     (G)   court decisions which may limit the rights of
secured creditors to forcibly realize on their security without appropriate
judicial proceedings;

 

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 Page 9

  (H)   limitations which may be imposed by law on the effectiveness of terms
exculpating a party from a liability resulting from gross negligence or wilful
misconduct;     (I)   the discretion that a court may reserve to itself to
impose restrictions on the rights of creditors to enforce immediate payment of
amounts stated to be payable on demand and to decline to be bound by
determinations of fact stated to be conclusive by the contracting parties;    
(J)   limitations upon the right of a party to the Credit Documents to enforce
such documents on the basis of a purely technical default, such as the failure
to timely produce a document;     (K)   any requirements that interest
(including all fees and costs of borrowing) be paid at a rate in excess of 60%
per annum may contravene Section 347 of the Criminal Code (Canada) and may not
be enforceable;     (L)   in accordance with Article 2332 of the Civil Code, the
possibility of cancellation or reduction by a court of the obligations arising
from the Credit Documents or, the revision by a court of the terms and
conditions of the performance of these obligations to the extent that if it
finds that, having regard to the risk and to all the circumstances, one of the
parties has suffered lesion; and     (M)   the provisions of the said documents
that certain calculations or certificates will be conclusive and binding will
not be effective if such calculations or certificates are fraudulent or
erroneous on their face and will not necessarily prevent judicial enquiry into
the merits of any claim by an aggrieved party.

We draw to your attention that we assume no responsibility for any
registrations, filings, notices, recordings or renewals that may be required as
set forth hereinabove, except with respect to the registration provided in
paragraph 4, and that you should therefore make appropriate diary entries to
ensure the timely effecting of any such registrations, filings, notices,
recordings or renewals thereof.
This opinion may only be relied upon by the persons to whom it is addressed and
their successors and assigns and for the purposes of the transactions
contemplated in the Credit Documents.
Yours truly,

 

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SCHEDULE 1
CREDIT DOCUMENTS

1.   Deed of hypothec and issue of bonds entered into on February 14, 2006
before a notary by NNL in favour of JPMorgan Chase Bank, N.A., as fondé de
pouvoir for the holders of the bonds issued thereunder (the “NNL Hypothec”);  
2.   Deed of hypothec and issue of bonds entered into on February 14, 2006
before a notary by NNC in favour of JPMorgan Chase Bank, N.A., as fondé de
pouvoir for the holders of the bonds issued thereunder (the “NNC Hypothec”) and
together with the NNL Hypothec, the “Hypothecs” and individually a “Hypothec”;  
3.   Pledge agreement dated as of February 14, 2006 executed by and between NNL
and the Collateral Agent, in respect of the bond issued under the NNL Hypothec;
  4.   Pledge agreement dated as of February 14, 2006 executed by and between
NNC and the Collateral Agent , in respect of the bond issued under the NNC
Hypothec;       (Items 3 and 4 being individually referred to as a “Bond Pledge
Agreement” and collectively as the “Bond Pledge Agreements”)   5.   A
$5,000,000,000 25% demand bond dated February 14, 2006 issued by NNL in favour
of the Collateral Agent (the “NNL Bond”);   6.   A $5,000,000,000 25% demand
bond dated February 14, 2006 issued by NNC in favour of the Collateral Agent
(the “NNC Bond”);       (Items 5 and 6 being individually referred to as a
“Bond” and collectively as the “Bonds”)   7.   Delivery order dated February 14,
2006 executed by NNL in respect of the NNL Bond;   8.   Delivery order dated
February 14, 2006 executed by NNC in respect of the NNC Bond.

 

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EXHIBIT F—ASSIGNMENT AND ASSUMPTION
          This Assignment and Assumption (the “Assignment and Assumption”) is
dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] (the “Assignor”) and [Insert name of Assignee]
(the “Assignee”). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
“Credit Agreement”), receipt of a copy of which is hereby acknowledged by the
Assignee. The Standard Terms and Conditions set forth in Annex 1 attached hereto
are hereby agreed to and incorporated herein by reference and made a part of
this Assignment and Assumption as if set forth herein in full.
          For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Agent as contemplated below (i) all of the Assignor’s rights and obligations
in its capacity as a Lender under the Credit Agreement and any other documents
or instruments delivered pursuant thereto to the extent related to the amount
and percentage interest identified below of all of such outstanding rights and
obligations of the Assignor under the respective facilities identified below and
(ii) to the extent permitted to be assigned under applicable law, all claims,
suits, causes of action and any other right of the Assignor (in its capacity as
a Lender) against any Person, whether known or unknown, arising under or in
connection with the Credit Agreement, any other documents or instruments
delivered pursuant thereto or the loan transactions governed thereby or in any
way based on or related to any of the foregoing, including contract claims, tort
claims, malpractice claims, statutory claims and all other claims at law or in
equity related to the rights and obligations sold and assigned pursuant to
clause (i) above (the rights and obligations sold and assigned pursuant to
clauses (i) and (ii) above being referred to herein collectively as the
“Assigned Interest”). Such sale and assignment is without recourse to the
Assignor and, except as expressly provided in this Assignment and Assumption,
without representation or warranty by the Assignor.

         
1.
  Assignor:                                                               
 
       
2.
  Assignee:                                                               
 
      [and is an Affiliate/Approved Fund of [identify Lender]2]
 
       
3.
  Borrower:   Nortel Networks Inc., a Delaware corporation
 
       
4.
  Agent:   JPMorgan Chase Bank, N.A., as the Agent under the Credit Agreement
 
       
5.
  Credit Agreement:   The $1,300,000,000 Credit Agreement dated as of
February 14, 2006 among Nortel Networks Inc., the Lenders parties thereto,
JPMorgan Chase Bank, N.A., as Agent, and the other agents named therein

 

2   Select as applicable.

 

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6.   Assigned Interest:

                              Aggregate Amount of     Amount of     Percentage
Assigned of       [Tranche A] [Tranche B]     [Tranche A][Tranche B]   [Tranche
A][Tranche B]   Loans Assigned3   Loans for all Lenders     Loans Assigned    
Loans4  
 
  $       $         %  
 
  $       $         %  
 
  $       $         %  

Effective Date:                      ___, 20___ [TO BE INSERTED BY AGENT AND
WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER
THEREFOR.]
The terms set forth in this Assignment and Assumption are hereby agreed to:

              ASSIGNOR
 
            [NAME OF ASSIGNOR]
 
       
 
  By:    
 
                 Title:
 
            ASSIGNEE
 
            [NAME OF ASSIGNEE]
 
       
 
  By:    
 
                 Title:

 

3   Fill in the appropriate terminology for the types of facilities under the
Credit Agreement that are being assigned under this Assignment (i.e., “Tranche A
Loan” “Tranche B Loan”)   4   Set forth, to at least 9 decimals, as a percentage
of the Tranche A Loans or Tranche B Loans, as applicable, of all Lenders.

2

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          [Consented to and]5 Accepted:    
 
        JPMORGAN CHASE BANK, N.A., as     Agent    
 
       
By
       
 
             Title:    
 
        [Consented to:]6    
 
        NORTEL NETWORKS INC.    
 
       
By
       
 
             Title:    

 

5   To be added only if the consent of the Agent is required by the terms of the
Credit Agreement.   6   To be added only if the consent of the Borrower is
required by the terms of the Credit Agreement.

3

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ANNEX 1
STANDARD TERMS AND CONDITIONS FOR
ASSIGNMENT AND ASSUMPTION
          1. Representations and Warranties.
          1.1 Assignor. The Assignor (a) represents and warrants that (i) it is
the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby; and (b) assumes no responsibility with respect
to (i) any statements, warranties or representations made in or in connection
with the Credit Agreement or any other Loan Document, (ii) the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Loan Documents or any collateral thereunder, (iii) the financial condition of
the Borrower, any of its Subsidiaries or Affiliates or any other Person
obligated in respect of any Loan Document or (iv) the performance or observance
by the Borrower, any of its Subsidiaries or Affiliates or any other Person of
any of their respective obligations under any Loan Document.
          1.2. Assignee. The Assignee (a) represents and warrants that (i) it
has full power and authority, and has taken all action necessary, to execute and
deliver this Assignment and Assumption and to consummate the transactions
contemplated hereby and to become a Lender under the Credit Agreement, (ii) it
satisfies the requirements, if any, specified in the Credit Agreement that are
required to be satisfied by it in order to acquire the Assigned Interest and
become a Lender, (iii) from and after the Effective Date, it shall be bound by
the provisions of the Credit Agreement as a Lender thereunder and, to the extent
of the Assigned Interest, shall have the obligations of a Lender thereunder,
(iv) it has received a copy of the Credit Agreement, together with copies of the
most recent financial statements delivered pursuant to Section 5.01 thereof (or,
if no such financial statements have been delivered, referred to in Section 4.04
thereof), as applicable, and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Assumption and to purchase the Assigned Interest on the
basis of which it has made such analysis and decision independently and without
reliance on the Agent or any other Lender, and (v) if it is a Non-U.S. Lender,
attached to the Assignment and Assumption is any documentation required to be
delivered by it pursuant to the terms of the Credit Agreement, duly completed
and executed by the Assignee; and (b) agrees that (i) it will, independently and
without reliance on the Agent, the Assignor or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents, and (ii) it will perform in accordance with their terms all
of the obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender.
          2. Payments. From and after the Effective Date, the Agent shall make
all payments in respect of the Assigned Interest (including payments of
principal, interest and other amounts) to the Assignor for amounts which have
accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.
          3. General Provisions. This Assignment and Assumption shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns. This Assignment and Assumption may be executed in any
number of counterparts, which together shall constitute one instrument. Delivery
of an executed counterpart of a signature page of this Assignment and Assumption
by telecopy shall be effective as delivery of a manually executed counterpart of
this Assignment and Assumption. This Assignment and

 

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Assumption shall be governed by, and construed in accordance with, the law of
the State of New York.

2

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Exhibit G—Form of Perfection Certificate
[See Exhibit F to each of the U.S. Security Agreement and the Canadian Security
Agreement]

 

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Exhibit H—Form of Guarantee Agreement
Filed as Exhibit 10.2.

 

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Exhibit I—Form of U.S. Security Agreement
Filed as Exhibit 10.3.

 

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Exhibit J—Form of Canadian Security Agreement
Filed as Exhibit 10.4.