exv10w2



 



Exhibit 10.2




N O R T E L   N E T W O R K S




Royal Bank of Canada

Royal Bank Plaza

5th Floor, South Tower

200 Bay Street

Toronto, Ontario M5J 2W7

Commitment Advice Letter Agreement




February 1, 2006




Nortel Networks Corporation

Nortel Networks Inc.

8200 Dixie Road Suite 100

Brampton, Ontario L6T 5P6




J.P. Morgan Securities Inc.

270 Park Avenue, 5th Floor

New York, NY 10017



Ladies and Gentlemen:



We refer to the Summary of Terms attached hereto (the “Term Sheet”; capitalized terms used
without definition herein have the meanings given in the Term Sheet) for Nortel Networks Inc. (the
“Company”). Subject only to the Conditions (as defined below) we are pleased to commit
$200,000,000 in the aggregate on a pro rata basis to the Tranche A Term Loan Facility and the
Tranche B Term Loan Facility, in proportion to the aggregate respective amounts thereof.



As used above, the term “Conditions” means:





	 	(i)	 	our receipt of satisfactory documentation for the Facilities; and
	 
	 	(ii)	 	our receipt of the fees from the Company separately agreed between the
Company and us to the extent payable on the Closing Date.




Our commitment is made solely on behalf of our institution and does not in any way include a
commitment or other arrangement from any other non-affiliated institution. Our commitment is based
on our independent credit analysis of the Company and its subsidiaries, without reliance upon the
Arrangers, the Company, or any of their respective affiliates or any other person, and based solely
on such documents and information as we have deemed appropriate. We acknowledge that J.P. Morgan
Securities Inc. reserves the right to allocate commitments at its sole discretion.



We confirm that we have not marketed or discussed this transaction in the primary or secondary
markets, and will not do so without the prior written consent of J.P. Morgan Securities Inc.



For the purpose of confirming to you our sophistication and experience in extending credit to
entities similar to the Company, we represent to you that we are a “qualified institutional buyer”
as defined under Rule 144A under the Securities Act of 1933.



We acknowledge that we may not assign our commitment and/or Loans except (i) unless an event of
default under the Facilities has occurred, with the consent of the Company (which consent shall not
be unreasonably withheld) and (ii) with the consent of J.P. Morgan Securities Inc. (which consent
shall not be unreasonably withheld following the syndication of the Facilities).



This letter agreement may not be amended or waived except by an instrument in writing signed by
each party hereto.




 









 








N O R T E L   N E T W O R K S



This letter agreement may be executed in any number of counterparts, each of which shall be an
original, and all of which, when taken together, shall constitute one agreement. This letter
agreement shall become effective upon delivery of an executed signature page of this letter
agreement by facsimile transmission to each of the parties hereto by each of the other parties
hereto. Except for any other written agreement among the parties hereto relating to the subject
matter hereof, this letter agreement sets forth the entire understanding of the parties hereto and
supersedes any prior written or oral understandings.




 









 








N O R T E L   N E T W O R K S



This letter agreement shall be governed by and construed in accordance with the laws of the State
of New York.




	 	 	 	 	 
	Very truly yours,	 	 
	 
	 	 	 	 
	ROYAL BANK OF CANADA	 	 
	 
	 	 	 	 
	By:

	 	/s/ Noel Curran
 

Authorized Officer: Noel Curran
	 	 
	 

	 	Title: Vice President	 	 
	 

	 	Lender: Royal Bank of Canada	 	 
	 

	 	Telephone Number: 416 842 3759	 	 
	 
	 	 	 	 
	Accepted and Agreed to:	 	 
	 
	 	 	 	 
	NORTEL NETWORKS CORPORATION	 	 
	 
	 	 	 	 
	By:

	 	/s/ Katharine B. Stevenson
 

Authorized Officer: Katharine B. Stevenson
	 	 
	 

	 	Title: Treasurer	 	 
	 
	 	 	 	 
	By:

	 	/s/ Gordon A. Davies
 

Authorized Officer: Gordon A. Davies
	 	 
	 

	 	Title: General Counsel — Corporate and	 	 
	 

	 	Corporate Secretary
	 	 
	 
	 	 	 	 
	NORTEL NETWORKS INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Lynn C. Egan
 

Authorized Officer: Lynn C. Egan
	 	 
	 

	 	Title: Assistant Secretary	 	 
	 
	 	 	 	 
	J.P. MORGAN SECURITIES INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Bruce Borden
 

Authorized Officer: Bruce Borden
	 	 
	 

	 	Title: Vice President	 	 






 









 






NORTEL NETWORKS CREDIT FACILITIES




Summary of Terms and Conditions




February 1, 2006



 





	 	 	 	 	 
	I.

	 	Parties	 	 
	 
	 	 	 	 
	 

	 	Borrower:
	 	Nortel Networks Inc., a Delaware corporation
(the “Borrower”).
	 
	 	 	 	 
	 

	 	Guarantors:
	 	Nortel Networks Corporation (“NNC”), Nortel Networks
Limited (“NNL”) and other future material
subsidiaries (excluding Nortel Government Solutions
Holdings Corporation and its subsidiaries) of NNC
formed under the laws of the U.S. or Canada to the
extent necessary so that the Borrower and the
Guarantors have at least 90% of the consolidated
revenues of all U.S. and Canadian subsidiaries (the
“Guarantors” and together with the Borrower, the
“Credit Parties”).
	 
	 	 	 	 
	 

	 	Joint Lead Arrangers
and Bookrunners:
	 	J.P. Morgan Securities Inc. (“JPMorgan”) and
Citigroup Global Markets Inc. (“CGMI” and together
with JPMorgan, the “Arrangers”).
	 
	 	 	 	 
	 

	 	Administrative Agent:
	 	JPMorgan Chase Bank, N.A. (“JPMCB”) as sole and
exclusive Administrative Agent (in such capacity,
the “Administrative Agent”).
	 
	 	 	 	 
	 

	 	Syndication Agent and


Co-Documentation Agents:
	 	Citigroup, as sole Syndication Agent and RBC as a
Co-Documentation Agent.
	 
	 	 	 	 
	 

	 	Managing Agent:
	 	EDC.
	 
	 	 	 	 
	 

	 	Lenders:
	 	A syndicate of financial institutions, including
JPMCB and an affiliate of CGMI.
	 
	 	 	 	 
	II.

	 	Facilities	 	 
	 
	 	 	 	 
	 

	 	Type and Amount of
Facilities:
	 	(i) A US$850 million Tranche A Term Loan Facility
(the loans thereunder, the “Tranche A Term Loans”)
and (ii) a US$450 million Tranche B Term Loan
Facility (the loans thereunder, the “Tranche B Term
Loans” and together with the Tranche A Term Loans,
the “Loans” or the “Facilities) to be documented
under a single credit agreement.
	 
	 	 	 	 
	 

	 	Availability:
	 	The Facilities shall be available in a single
drawing on February 14, 2006; provided that no
amount of the Tranche B Term Loans may be borrowed
unless the entire amount of the Tranche A






 









 






	 	 	 	 	 
	 

	 	 	 	Term Loans is borrowed.
	 
	 	 	 	 
	 

	 	Maturity:
	 	February 15, 2007.
	 
	 	 	 	 
	 

	 	Purpose:
	 	The proceeds of the Loans shall be used solely to
refinance the outstanding $1.275 billion aggregate
principal amount of NNL’s 6.125% Notes due February
15, 2006 and to pay related fees and expenses.
	 
	 	 	 	 
	III.

	 	Security
	 	The Tranche A Term Loans will be secured by a first
priority lien on all of the U.S. and Canadian assets
of the Credit Parties that can be effected through
the filings of UCC statements, Canadian personal
property security registrations and/or possession
(including through deposit and/or control accounts
or agreements) and intellectual property, in each
case, subject to carve-outs, exceptions and
materiality thresholds substantially the same as
those contained in the U.S. and Canadian Security
Agreement dated as of April 4, 2002 except as
otherwise agreed between NNC and the Administrative
Agent (the “Collateral”). The notes issued by NNL
under the Indenture dated as of November 30, 1988
and the U.S. $750 million EDC Facility will be
equally and ratably secured with the Tranche A Term
Loans under the security documents.
	 
	 	 	 	 
	IV.

	 	Certain Payment

Provisions	 	 
	 
	 	 	 	 
	 

	 	Fees and Interest Rates:
	 	As set forth on Annex I.
	 
	 	 	 	 
	 

	 	Optional Prepayments and
Commitment Reductions:
	 	LIBOR Loans may be prepaid and commitments may be
reduced by the Borrower in minimum amounts of $5
million on three business days’ notice and Base Rate
Loans may be prepaid and commitments may be reduced
by the Borrower in minimum amounts of $5 million on
one business day’s notice.
	 
	 	 	 	 
	 

	 	Mandatory Prepayments:
	 	Mandatory prepayments of the Facilities will be
required from the net proceeds of any debt or equity
offering (subject to limited exceptions to be
agreed) received by NNC or any of its subsidiaries
or from asset sales of Collateral in excess of $250
million in the aggregate (excluding intercompany
transfers between NNC and its subsidiaries and
subject to exceptions for ordinary course
dispositions of Collateral), provided that such
mandatory prepayments shall be applied pro rata to
the prepayment of all Loans.
	 
	 	 	 	 
	V.

	 	Certain Conditions	 	 
	 
	 	 	 	 
	 

	 	Initial Conditions:
	 	The availability of the Facilities shall be
conditioned upon satisfaction of, among other
things, the following conditions






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	 	 	 	precedent (the date upon which all such conditions precedent shall be satisfied, the “Closing Date”) on or before February 14, 2006:







	 	(a)	 	The Borrower and the Guarantors shall have
executed and delivered satisfactory definitive
financing documentation with respect to the
Facilities (the “Credit Documentation”).
	 
	 	(b)	 	The Lenders, the Administrative Agent and the
Arrangers shall have received all fees required to
be paid, and all expenses for which invoices have
been presented, on or before the Closing Date (after
giving effect to the Loans and the application of
proceeds thereof).
	 
	 	(c)	 	All governmental and third party approvals
necessary or, in the reasonable discretion of the
Arrangers, advisable in connection with the
financings contemplated hereby shall have been
obtained and be in full force and effect.
	 
	 	(d)	 	The Lenders shall have received such legal
opinions, documents and other instruments as are
customary for transactions of this type and as the
Arrangers may reasonably request.
	 
	 	(e)	 	All documents and instruments (including a
customary perfection certificate) required to
perfect the Administrative Agent’s security interest
in the Collateral for the benefit of the Lenders of
the Tranche A Term Loans shall have been executed
and/or delivered and be in proper form for filing,
as applicable. The Administrative Agent shall have
received reasonably satisfactory evidence that it
has been named as additional insured and loss payee
under all insurance policies relating to the
Collateral.





	 	 	 	 	 
	VI.

	 	Certain Documentation

Matters	 	 
	 

	 	 	 	The Credit Documentation (including the security
documents) shall contain representations,
warranties, covenants and events of default
customary for financings of this type and as set
forth below or otherwise mutually agreed between the
Borrower and the Arrangers, including:
	 
	 	 	 	 
	 

	 	Representations and Warranties:
	 	1.      Corporate existence and power.
	 

	 	 	 	2.      Corporate and governmental authorization; no
contravention; binding effect.
	 

	 	 	 	3.      Financial information (including material adverse
change representation).
	 

	 	 	 	4.      Absence of undisclosed litigation.






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	 	 	 	5.      Compliance with laws and agreements.
	 

	 	 	 	6.      Investment and holding company status.
	 

	 	 	 	7.      Payment of taxes.
	 

	 	 	 	8.      Solvency.
	 

	 	 	 	9.      ERISA; Canadian plans.
	 

	 	 	 	10.    Disclosure.
	 

	 	 	 	11.    Accuracy of representations in security
documents.
	 

	 	 	 	12.    No unlawful payments.
	 
	 	 	 	 
	 

	 	Affirmative Covenants:
	 	Delivery of financial statements, reports, officers’
certificates and other information reasonably
requested by the Lenders; payment of other
obligations; continuation of business and
maintenance of existence; right of the Lenders to
inspect property and books and records; notices of
defaults, litigation and other material events;
insurance; and further assurances.
	 
	 	 	 	 
	 

	 	Financial Covenants:
	 	The Tranche A Term Loan Facility will have a minimum
Adjusted EBITDA covenant, measured on a trailing
four quarter basis and tested quarterly, commencing
with the quarter ended March 31, 2006 which shall
require Adjusted EBITDA for the trailing four
quarter period ending on each of the dates set forth
below to be at least equal to the amount set for
opposite such date:






	 	 	 	 	 	 	 
	Date
	 	 	 	Minimum LTM 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	 






	 	 	 	 	 
	 

	 	 	 	In addition, total unrestricted cash and cash
equivalents must at all times exceed US$1.0 billion
(and the Borrower shall certify to such effect on a
monthly basis).
	 
	 	 	 	 
	 

	 	Negative Covenants:
	 	The Credit Documentation shall contain restrictions,
subject to exceptions to be agreed, on (i) liens and
(ii) the payment of dividends on, or purchases,
redemptions or acquisitions of common or preferred
stock; provided that any payment or distribution to
holders or former holders of common stock of NNC in
connection with the settlement of, or satisfaction
of a judgment resulting from, any shareholder
litigation or regulatory or enforcement proceeding
shall not be restricted unless the making of such
payment would result in a violation of the minimum
cash and cash equivalents requirement set forth
above. Additionally, the Borrower and the
Guarantors shall be restricted






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	 	 	 	from transferring any
Collateral to non-guarantor subsidiaries and joint
ventures (excluding ordinary course transfers and
transfers of cash) if after giving effect to any
such transfer, more than an amount of the Credit
Parties assets to be agreed would have been so
transferred.
	 
	 	 	 	 
	 

	 	Events of Default:
	 	Nonpayment of principal when due; nonpayment of
interest, fees or other amounts within five days of
the due date; material inaccuracy of representations
and warranties; violation of covenants (subject, in
the case of certain affirmative covenants, to a
grace period of 30 days); cross-default (including
debt or obligations in respect of hedging agreements
which are in an individual principal amount of at
least $10,000,000 and an aggregate principal amount
of at least $100,000,000); loss of lien perfection
or priority; unenforceability of guarantees;
bankruptcy events; certain ERISA/Canadian plan
events; material judgments; and a change of control.
	 
	 	 	 	 
	 

	 	Voting:
	 	Amendments and waivers with respect to the Credit
Documentation shall require the approval of Lenders
holding a majority of the aggregate amount of the
Loans, and unused commitments under the relevant
Facility, except that (a) the consent of each Lender
directly affected thereby shall be required with
respect to (i) reductions in the amount or
extensions of the scheduled date of maturity of any
Loan, (ii) reductions in the rate of interest or any
fee or extensions of any due date thereof, (iii)
increases in the amount or extensions of the expiry
date of any Lender’s commitment, (iv) release of all
or substantially all of the guarantees, (v) release
of all or substantially all of the collateral (which
shall only require the consent of each Lender of a
Tranche A Term Loan) and (vi) any waiver or
amendment to the minimum Adjusted EBITDA covenant or
amendment of any security document (which shall each
only require the consent of the Lenders of a
majority of the Tranche A Term Loans), (b) the
consent of 100% of the Lenders shall be required
with respect to modifications to any of the voting
percentages and (c) the consent of Lenders holding a
majority in aggregate principal amount of Tranche A
Term Loans or Tranche B Term Loans, as applicable,
voting as a class (without the consent of any other
Lender) shall be required with respect to certain
matters.
	 
	 	 	 	 
	 

	 	Assignments and
Participations:
	 	The Lenders shall be permitted to assign all or a
portion of their Loans and commitments with the
consent, not to be unreasonably withheld, of (a) the
Borrower, unless (i) the assignee is a Lender, an
affiliate of a Lender or an approved fund or (ii) an
Event of Default has occurred and is continuing and
(b) the Administrative Agent, unless the assignee is
a Lender, an affiliate of a Lender or an approved
fund. In the case of partial assignments (other than
to another Lender or to an affiliate of a






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	 	 	 	Lender),
the minimum assignment amount shall be U.S.
$1,000,000, unless otherwise agreed by the Borrower
and the applicable Administrative Agent.
Participants shall have the same benefits as the
participating Lender with respect to yield
protection and increased cost provisions. Voting
rights of participants shall be limited to those
matters with respect to which the affirmative vote
of the Lender from which it purchased its
participation would be required as described under
“Voting” above. Pledges of Loans to a Federal
Reserve Bank in accordance with applicable law shall
be permitted without restriction. Promissory notes
shall be issued under the Facilities only upon
request.
	 
	 	 	 	 
	 

	 	Yield Protection:
	 	The Credit Documentation shall contain customary
provisions (a) protecting the Lenders against
increased costs or loss of yield resulting from
withholding (excluding certain increased withholding
taxes resulting from assignments), changes in
reserve, tax, capital adequacy and other
requirements of law and from the imposition of or
changes in withholding or other taxes and (b)
indemnifying the Lenders for “breakage costs”
incurred in connection with, among other things, any
prepayment of a Loan (as defined in Annex I) on a
day other than the last day of an interest period
with respect thereto.
	 
	 	 	 	 
	 

	 	Expenses and
Indemnification:
	 	The Borrower shall pay (a) all reasonable
out-of-pocket expenses of the Administrative Agent
and the Arrangers associated with the syndication of
the Facilities and the preparation, execution,
delivery and administration of the Credit
Documentation and any amendment or waiver with
respect thereto (including the reasonable fees,
disbursements and other charges of outside counsel)
and (b) all out-of-pocket expenses of the
Administrative Agent and the Lenders (including the
fees, disbursements and other charges of outside
counsel) in connection with the enforcement of the
Credit Documentation.
	 
	 	 	 	 
	 

	 	 	 	The Administrative Agent, the Arrangers and the
Lenders (and their affiliates and their respective
officers, directors, employees, advisors and agents)
will have no liability for, and will be indemnified
and held harmless against, any loss, liability, cost
or expense incurred in respect of the financing
contemplated hereby or the use or the proposed use
of proceeds thereof (except to the extent resulting
from the gross negligence or willful misconduct of
the indemnified party).
	 
	 	 	 	 
	 

	 	Sharing of Payments:
	 	Customary sharing of setoff provisions.
	 
	 	 	 	 
	 

	 	Governing Law and Forum:
	 	State of New York.
	 
	 	 	 	 
	 

	 	U.S. Counsel to the
Administrative Agent	 	 






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	 	and the Arrangers:
	 	Cahill Gordon & Reindel llp.
	 
	 	 	 	 
	 

	 	Canadian Counsel to the
Administrative Agent
and the Arrangers:
	 	Blake, Cassels, & Graydon LLP






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Annex I-A




DRAFT




Annex I




Interest and Certain Fees




	 	 	 
	Interest:

	 	At Borrower’s option, loans will bear interest based on the Base Rate or LIBOR, as described below, plus the Applicable Margin:
	 
	 	 
	 

	 	A. Base Rate Option
	 
	 	 
	 

	 	Interest will be at the Base Rate plus the
Applicable Margin, calculated on the basis of the
actual number of days elapsed in a year of 365
days and payable quarterly in arrears. The Base
Rate is defined as the higher of the Federal Funds
Rate, as published by the Federal Reserve Bank of
New York, plus 1/2 of 1% and the prime commercial
lending rate of JPMCB, as established from time to
time.
	 
	 	 
	 

	 	Base Rate borrowings (“Base Rate Loans”) will
require one business day’s prior notice and will
be in minimum amounts to be agreed upon.
	 
	 	 
	 

	 	B. LIBOR Option
	 
	 	 
	 

	 	Interest will be determined for periods (“Interest
Periods”) of one or three months (as selected by
Borrower) and will be at an annual rate equal to
the reserve-adjusted London Interbank Offered Rate
(“LIBOR”) for the corresponding deposits of U.S.
dollars, plus the Applicable Margin. LIBOR will
be determined by the Administrative Agent at the
start of each Interest Period and will be fixed
through such period. Interest will be calculated
on the basis of the actual number of days elapsed
in a year of 360 days. LIBOR will be adjusted for
maximum statutory reserve requirements (if any).
	 
	 	 
	 

	 	LIBOR borrowings (“LIBOR Loans”), conversions or
continuations will require three business days’
prior notice and will be in minimum amounts to be
agreed upon.
	 
	 	 
	 

	 	“Applicable Margin” means 225 basis points in the
case of Tranche A Term Loans that are LIBOR Loans
(125 basis points if such Tranche A Term Loans are
Base Rate Loans) and 300 basis points in the case
of Tranche B Term Loans that are LIBOR Loans (200
basis points if such Tranche B Term Loans are Base
Rate Loans).
	 
	 	 
	Interest Payment Dates:

	 	On the last day of each relevant Interest Period
for LIBOR Loans and quarterly in arrears for Base
Rate Loans.






 









 






	 	 	 
	Default Rate:

	 	All amounts not paid when due under the Facilities
shall bear interest at 2% above the rate otherwise
applicable thereto.







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