exv10w1



 



EXHIBIT 10.1



FINAL



 



NORTEL NETWORKS LIMITED



and the other members of the NORTEL NETWORKS LIMITED GROUP


 


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NORTEL NETWORKS CORPORATION


and the other members of the NORTEL NETWORKS CORPORATION GROUP







THIRD AMENDED AND RESTATED RECIPROCAL CREDIT AGREEMENT








Dated as of December 19, 2002


 







 


TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	ARTICLE 1 DEFINITIONS	 	 	2	 
	Section 1.1.	 	Defined Terms
	 	 	2	 
	Section 1.2.	 	Wholly Owned Subsidiary
	 	 	4	 
	Section 1.3.	 	Currency
	 	 	4	 
	 	 	 	 	 
	ARTICLE 2 ADVANCES	 	 	4	 
	Section 2.1.	 	Commitments
	 	 	4	 
	Section 2.2.	 	Advances
	 	 	5	 
	Section 2.3.	 	Term and Termination
	 	 	6	 
	 	 	 	 	 
	ARTICLE 3 INTEREST	 	 	6	 
	Section 3.1.	 	Interest on Advances
	 	 	6	 
	Section 3.2.	 	No Interest
	 	 	7	 
	Section 3.3.	 	Tax Withholding
	 	 	7	 
	 	 	 	 	 
	ARTICLE 4 REPAYMENT	 	 	8	 
	Section 4.1.	 	Promise to Repay
	 	 	8	 
	Section 4.2.	 	Repayment
	 	 	8	 
	Section 4.3.	 	Prepayment
	 	 	8	 
	Section 4.4.	 	Currency
	 	 	8	 
	Section 4.5.	 	Waiver of Presentment and Notice
	 	 	8	 
	Section 4.6.	 	Conversion Right of Nortel Corporation
	 	 	8	 
	 	 	 	 	 
	ARTICLE 5 BORROWINGS GRIDS AND QUARTERLY REPORTS	 	 	10	 
	Section 5.1.	 	Individual Borrowings Grids
	 	 	10	 
	Section 5.2.	 	Consolidated Borrowings Grids
	 	 	10	 
	Section 5.3.	 	Borrowings Grid Information
	 	 	10	 
	Section 5.4.	 	Provision of Borrowings Grid
	 	 	10	 
	Section 5.5.	 	Obligations Ongoing
	 	 	10	 
	Section 5.6.	 	Quarterly Grid Reports
	 	 	11	 
	Section 5.7.	 	Unpaid Balance
	 	 	11	 
	 	 	 	 	 
	ARTICLE 6 CONDITIONS TO ADVANCES	 	 	11	 
	Section 6.1.	 	Conditions to Advances
	 	 	11	 
	Section 6.2.	 	Payments in Trust
	 	 	14	 
	 	 	 	 	 
	ARTICLE 7 COVENANTS	 	 	15	 
	Section 7.1.	 	Nortel Corporation
	 	 	15	 
	Section 7.2.	 	Nortel Limited
	 	 	15	 
	 	 	 	 	 
	ARTICLE 8 CHANGE IN OWNERSHIP OR CONTROL	 	 	16	 
	Section 8.1.	 	Change in Ownership or Control
	 	 	16	 



 






 




	 	 	 	 	 	 	 	 	 
	ARTICLE 9 GENERAL PROVISIONS	 	 	17	 
	Section 9.1.	 	Payments
	 	 	17	 
	Section 9.2.	 	Waiver
	 	 	17	 
	Section 9.3.	 	Notices
	 	 	17	 
	Section 9.4.	 	Further Assurances
	 	 	18	 
	Section 9.5.	 	Headings
	 	 	19	 
	Section 9.6.	 	Successors and Assigns
	 	 		 
	Section 9.7	 	Severability
	 	 	 	 
	Section 9.8.	 	Governing Law
	 	 	19	 
	Section 9.9.	 	Counterparts
	 	 	19	 
	Section 9.10	 	Reference
to and Effect on the Second Amended and Restated

Reciprocal Credit Agreement
	 	 	19	 
	 	 	 	 	 
	Schedule A	 	 	1	 
	THIRD AMENDED AND RESTATED RECIPROCAL CREDIT AGREEMENT

ADDITIONAL NOTICE INFORMATION	 	 	1	 
	 	 	 	 	 
	Schedule B	 	 	1	 
	FORM OF CONSENT AGREEMENT	 	 	1	 
	 	 	 	 	 
	Schedule C	 	 	1	 
	FORM OF BORROWINGS
GRID FORMAT ADVANCES AND PAYMENTS OF
PRINCIPAL	 	 	1	 








 



          Third Amended and Restated Reciprocal Credit Agreement made among Nortel
Networks Corporation (“Nortel Corporation”), Nortel Networks Limited (“Nortel
Limited”), and the other parties who have executed this Agreement, dated as of
December 19, 2002.


          WHEREAS Nortel Corporation and Nortel Limited entered into a reciprocal
credit agreement (the “Original Reciprocal Credit Agreement”) dated May 1,
2000;


          AND WHEREAS Nortel Corporation, Nortel Limited amended and restated the
Original Reciprocal Credit Agreement and the other parties hereto became
parties thereto in an amended and restated reciprocal credit agreement dated as
of November 4, 2001 and further amended and restated that amended and restated
reciprocal credit agreement pursuant to a second amended and restated
reciprocal credit agreement dated as of December 20, 2001, as further amended
by an amending agreement (designated Amendment No. 1) dated as of December 20,
2001 (collectively, the “Second Amended and Restated Reciprocal Credit
Agreement”);


          AND WHEREAS the parties to the Second Amended and Restated Reciprocal
Credit Agreement wish to further amend and restate the Second Amended and
Restated Reciprocal Credit Agreement on the terms and conditions provided for
herein;


          AND WHEREAS Nortel Limited will use and will continue to use the amount
borrowed from Nortel Corporation for the purpose of earning income from Nortel
Limited’s business or property;


          AND WHEREAS the conversion by Nortel Corporation of any of its loan to
Nortel Limited into common shares of Nortel Limited, as contemplated in this
Agreement, is not intended by Nortel Corporation and Nortel Limited directly or
indirectly in any way to derogate from or otherwise change or compromise Nortel
Corporation’s income earning purpose or income earning use of any amount
borrowed by Nortel Corporation and subsequently loaned by it to Nortel Limited,
and upon and by any such conversion of all or part of any such loan into a
common share of Nortel Limited as contemplated in this Agreement, it was and is
Nortel Corporation’s continuing intention to maintain and enhance its ability
to earn income from its business or property, including in particular Nortel
Corporation’s investment in Nortel Limited;


          IN CONSIDERATION OF the mutual covenants, agreements and undertakings
contained or referred to in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the
parties to this Agreement agree to amend and restate the Second Amended and
Restated Reciprocal Credit Agreement as follows:


 






 


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ARTICLE 1

DEFINITIONS




                      Section 1.1. Defined Terms. As used in this Agreement, the following terms
have the following meanings:


“Advance” means any amount advanced by a Lender to a Borrower pursuant to
Article 2;


“Agreement” means this third amended and restated reciprocal credit agreement
among the parties hereto, including the schedules referred to herein and
attached hereto, as the same may be amended or supplemented in writing from
time to time;


“Banking Day” means any day other than a Saturday or a Sunday on which banks in
both Canada and the United States are open for business;


“Borrower” means any member of the Nortel Corporation Group or the Nortel
Limited Group when acting in its capacity as the recipient of Advances
hereunder;


“Borrowings Grid” shall have the meaning given to it in Section 5.1;


“Canadian Dollars” and “Cdn. $” each means lawful money of Canada;


“Canadian Interest Rate” means 100 percent, 110 percent, 120 percent or 130
percent of the floating one-month Bankers’ Acceptance (BA) rate, as mutually
agreed by the Lender and the Borrower on the date of the Advance, and on the
first Banking Day of each month thereafter;


“Common Shares” means fully paid and non-assessable common shares in the
capital of Nortel Limited;


“Conversion Date” shall have the meaning given to it in Section 4.6(2);


“Convertible Advances” shall have the meaning given to it in Section 4.6(1);


“Corporation Group Commitment” means seven hundred and fifty million U.S.
Dollars (U.S. $750,000,000) or the Equivalent Cdn. $ Amount thereof;


“Eligible Bank” means (i) a Canadian bank listed in Schedule I or Schedule II
of the Bank Act (Canada); (ii) a bank organized in one of the United States and
rated A or better by Moody’s, or with an equivalent credit rating; or (iii) a
syndicate of banks all of which are institutions described in (i), (ii) or
both;


“Equivalent Cdn. $ Amount” means, on any day with respect to any amount of U.S.
Dollars, the amount of Canadian Dollars which would be required to buy such








 


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amount of U.S. Dollars using the spot rate of the Bank of Canada at
approximately 12:00 noon (Toronto time) on the day;



“Lender” means any member of the Nortel Corporation Group or the Nortel Limited
Group when acting in its capacity as the maker of Advances hereunder;


“Limited Group Commitment” means seven hundred and fifty million U.S. Dollars
(U.S. $750,000,000) or the Equivalent Cdn. $ Amount thereof;


“Nortel Corporation” means Nortel Networks Corporation, a Canadian corporation;


“Nortel Corporation Corporate Advances” shall have the meaning given to it in
Section 2.2(b);


“Nortel Corporation Debt Repayment Advances” shall have the meaning given to it
in Section 2.2(b);


“Nortel Corporation Group” means Nortel Corporation, Alteon WebSystems, Inc. (a
Delaware corporation), CoreTek, Inc. (a Delaware corporation), Xros, Inc. (a
Delaware corporation), and any other wholly owned subsidiary or subsidiaries of
Nortel Corporation (excluding Nortel Limited and its subsidiaries) that agree
in writing to be bound by the terms and conditions of this Agreement by
executing a consent agreement substantially in the form attached as Schedule B;


“Nortel Corporation Group Borrowings Grid” means the borrowings grid for the
Nortel Corporation Group maintained by Nortel Limited and prepared
substantially in the form of Schedule C;


“Nortel Limited” means Nortel Networks Limited, a Canadian corporation;


“Nortel Limited Group” means Nortel Limited, Nortel Networks Inc. (a Delaware
corporation), and Nortel Networks U.S. Finance Inc. (a Delaware corporation),
and any other wholly owned subsidiary or subsidiaries of Nortel Limited that
agree in writing to be bound by the terms and conditions of this Agreement by
executing a consent agreement substantially in the form attached as Schedule B;


“Nortel Limited Group Borrowings Grid” means the borrowings grid for the Nortel
Limited Group maintained by Nortel Corporation and prepared substantially in
the form of Schedule C;


“Notice of Conversion” shall have the meaning given to it in Section 4.6(2);


“Original Restatement Date” means November 4, 2001;


“Quarterly Grid Report” shall have the meaning given to it in Section 5.6;









 


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“Second Amended and Restated Reciprocal Credit Agreement” shall have the
meaning given to it in the recitals hereto;



“Term” means the period commencing on the date hereof and ending December 31,
2008;


“U.S. Dollars” and “U.S. $” each means lawful money of the United States of
America; and


“U.S. Interest Rate” means an interest rate, as mutually agreed by the Borrower
and the Lender at the time of the making of an Advance, which is 100 percent,
110 percent, 120 percent, or 130 percent of the short-term monthly Applicable
Federal Rate (AFR), as published each month by the U.S. Internal Revenue
Service pursuant to Section 1274(d) of the Internal Revenue Code.



     Section 1.2. Wholly Owned Subsidiary. For the purposes of this Agreement, a
corporation is a “wholly owned subsidiary” of another corporation if all of the
issued and outstanding voting securities of the corporation are held, other
than by way of collateral security only, by or for the benefit of that other
corporation.



     Section 1.3. Currency. All references to currency or dollar amounts in this
Agreement, unless otherwise specifically indicated, are to U.S. Dollars.



ARTICLE 2

ADVANCES




                      Section 2.1. Commitments.


(a)     Subject to the terms and conditions of this Agreement, each member of the
Nortel Corporation Group agrees to make Advances to any member of the Nortel
Limited Group during the Term, provided that the aggregate outstanding
principal amount of all Advances made from time to time by members of the
Nortel Corporation Group to members of the Nortel Limited Group shall not
exceed the principal amount of the Corporation Group Commitment in accordance
with this Agreement. Each member of the Nortel Limited Group shall be
responsible for repaying only those Advances made to it, and no member of the
Nortel Limited Group shall be responsible for repaying any Advances made to any
other member of the Nortel Limited Group.


(b)     Subject to the terms and conditions of this Agreement, each member of the
Nortel Limited Group agrees to make Advances to any member of the Nortel
Corporation Group during the Term, provided that the aggregate outstanding
principal amount of all Advances made from time to time by members of the
Nortel








 


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Limited Group to members of the Nortel Corporation Group shall not
exceed the principal amount of the Limited Group Commitment in accordance with
this Agreement. Each member of the Nortel Corporation Group shall be
responsible for repaying only those Advances made to it, and no member of the Nortel
Corporation Group shall be responsible for repaying any Advances made to any
other member of the Nortel Corporation Group.




                      Section 2.2. Advances.


(a)     Regular Advances — Subject to Article 6, a Lender will make Advances
available to a Borrower in either Canadian dollars or U.S. dollars on any
Banking Day upon the request of the Borrower received by the Lender at least
one (1) Banking Day prior to the date on which the Advance is to be deposited.
The request must specify the amount, currency and date of the Advance as well
as the bank account to which the Advance is to be deposited. The request may
be made verbally, provided the Lender shall at all times have the right to
request confirmation of a request in writing. Advances will be made by deposit
to the bank account specified in the Borrower’s request.


(b)     Nortel Corporation Advances — Notwithstanding Subsection 2.2(a) above,
Advances to Nortel Corporation shall be either (i) Advances used solely for
payment of the principal of, premium, if any, interest or additional interest,
if any, on, any indebtedness of Nortel Corporation to an arm’s length entity
and which is guaranteed by Nortel Limited or the Lender (“Nortel Corporation
Debt Repayment Advances”), or (ii) Advances for other general corporate
purposes of Nortel Corporation (“Nortel Corporation Corporate
Advances”).
Outstanding Nortel Corporation Corporate Advances shall not at any time exceed
fifty million U.S. Dollars (U.S. $50,000,000). All Nortel Corporation Debt
Repayment Advances shall be advanced by the Lender directly to the person to
whom the relevant debt repayment is to be made, including, for greater
certainty, any authorized paying agent for such debt repayment, on the written
direction of Nortel Corporation.


(c)     Deemed Advances — Notwithstanding Subsection 2.2(a) above, each advance
made prior to the Original Restatement Date by a member of the Nortel
Corporation Group to a member of the Nortel Limited Group, or vice versa, shall
be deemed to be an Advance made under this Agreement, effective as of the
Original Restatement Date,



	 	(i)	 	in a principal amount equal to the principal amount
outstanding as of the Original Restatement Date plus accrued and
unpaid interest,
	 
	 	(ii)	 	in the currency of the original advance, and
	 
	 	(iii)	 	at an interest rate (if any) determined in accordance with
Article 3;




 







 


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except that, if any such advance does not comply with the terms and conditions
of this Agreement, including but not limited to the conditions contained in
Section 3.2 and Section 6.1, as though the advance was a new Advance made as of
the Original Restatement Date, then such advance shall not be deemed to be an Advance made
under this Agreement and shall be fully excluded from this Agreement.


(d)     Pooling of Funds — The notional pooling of funds pursuant to the terms and
conditions of a cash pooling agreement or other form of banking agreement (i)
by any member or members of the Nortel Corporation Group with the funds of any
member or members of the Nortel Limited Group, or (ii) by any member or members
of the Nortel Limited Group with the funds of any member or members of the
Nortel Corporation Group, shall not be deemed to be, constitute or otherwise
entail an Advance made under this Agreement. The members of the Nortel Limited
Group shall not at any time, individually or collectively, notionally pool
funds of one or more members of the Nortel Limited Group in an aggregate amount
exceeding fifty million U.S. Dollars (U.S.$50,000,000) with the funds of any
member or members of the Nortel Corporation Group. The members of the Nortel
Corporation Group shall not at any time, individually or collectively,
notionally pool funds of one or more members of the Nortel Corporation Group in
an aggregate amount exceeding fifty million U.S. Dollars (U.S.$50,000,000) with
the funds of any member or members of the Nortel Limited Group.



                      Section 2.3. Term and Termination. This Agreement shall terminate and all then
outstanding Advances shall become due and payable on the last day of the Term.



ARTICLE 3

INTEREST




                      Section 3.1. Interest on Advances. Subject to Section 3.2, Advances made to a
Borrower shall bear interest at a U.S. Interest Rate, for Advances made in U.S.
Dollars, or at a Canadian Interest Rate, for Advances made in Canadian Dollars.
Such interest amounts shall be computed and compounded monthly, shall be
documented in the applicable Quarterly Grid Report, and shall be payable on the
net month-end balance by the applicable Borrower 10 days after each September
30 and March 31. Notwithstanding the foregoing, a Lender and the relevant
Borrower may agree in writing at each September 30 or March 31 that the accrued
interest from that semi-annual period is not payable and will be compounded and
included in the aggregate indebtedness of the relevant Borrower, provided that
the Corporation Group Commitment or the Limited Group Commitment, as
applicable, will not have been exceeded as a result of the inclusion of such
accrued interest in the Borrower’s aggregate indebtedness. All interest
calculations shall be documented in the applicable Quarterly Grid Report.









 


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                      Section 3.2. No Interest. If, in respect of an Advance, the Borrower and the
Lender are both resident in Canada, then the Borrower and the Lender may agree
at the time of the making of the Advance that the Advance shall bear no interest, provided that the following conditions, and the conditions in
Article 6, are met:



	 	(a)	 	if Nortel Limited is the Borrower, it has, at the time of
making of the Advance, an established committed credit facility with
an Eligible Bank, with sufficient availability thereunder, capable
of being used to finance the repayment to the Lender of all Advances
outstanding from time to time when due pursuant to demand or
otherwise; and
	 
	 	(b)	 	in the case of Advances made by a member of the Nortel
Limited Group, the Lender and Nortel Limited are each able,
financially and legally, at the time of the Advance to declare and
pay a dividend on its common shares outstanding at the time of the
Advance in an amount equal to the amount of the Advance.




                      Section 3.3. Tax Withholding. If withholding of any tax is required in respect
of any payment by any Borrower to any Lender hereunder,



	 	(a)	 	the Lender shall complete and provide to the Borrower, or if
required, to the applicable taxing authority, within a reasonable
period of time, such forms, certifications or other documents in
order to allow the Borrower to make payments to the Lender without
any deduction or withholding, or deduction at a reduced rate, on
account of withholding taxes; and,
	 
	 	(b)	 	the Borrower shall:



	 
	 	(i)	 	withhold the appropriate tax amount,
if any, from such payment;
	 
	 	(ii)	 	pay such tax amount to the relevant
authorities in accordance with applicable law; and
	 
	 	(iii)	 	furnish to the Lender within 30
calendar days of the tax payment, all original tax
receipts or certified copies, in the Lender’s name
showing payment of the tax and such other documentation
relating to the tax payment which Lender may reasonably
request; provided that, if such tax receipts are not
provided to the Lender, it shall be assumed that the
Borrower made no payment of tax to the relevant
authorities and the amount previously withheld from such
payment shall be paid to the Lender.




 







 


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ARTICLE 4

REPAYMENT




                      Section 4.1. Promise to Repay. Each Borrower promises to pay, in accordance
with Section 4.2, the principal amount of, and accrued and unpaid interest on,
all Advances made under this Agreement to such Borrower by any Lender, and
outstanding against such Borrower as recorded in the column headed “Unpaid
Principal Balance” on the applicable Borrowings Grid, to or to the order of
such Lender, at the Lender’s offices, or such other place as the Lender may
designate.



                      Section 4.2. Repayment. The principal outstanding in respect of all Advances,
together with accrued and unpaid interest, is due and payable on the earlier of
(a) written demand for repayment being made by the Lender to the Borrower at
least three (3) Banking Days in advance of the specified repayment date, (b) a
change in ownership or control in accordance with Section 8.1, and (c) the last
Banking Day of the Term.



                      Section 4.3. Prepayment. A Borrower may, in its sole and absolute discretion,
from time to time without notice, bonus or penalty, make prepayments in any
amounts desired, on account of the principal and interest, if applicable,
outstanding on any Advance. If more than one Advance is outstanding at the
time a Borrower elects to make a prepayment, the Borrower shall be entitled to
specify at the time it makes said prepayment the specific Advance to which the
prepayment will apply. All prepayments will be applied first on account of
interest, if any, and then on account of principal due hereunder for the
Advance to which the prepayment applies.



                      Section 4.4. Currency. All repayments and prepayments of amounts on account of
principal and interest shall be made in the currency in which the applicable
Advance was made.



                      Section 4.5. Waiver of Presentment and Notice. Each Borrower under this
Agreement waives presentment for payment and notice of non-payment.



                      Section 4.6. Conversion Right of Nortel Corporation. (1) Nortel
Corporation shall have the right at any time and from time to time, prior to
repayment of Advances by Nortel Corporation to Nortel Limited (the “Convertible
Advances”), to convert the whole, or any part in excess of $100 million, of the
principal amount outstanding under the Convertible Advances into one (1) Common
Share (rather than any other number of Common Shares that would result from
dividing such principal amount by a conversion price that otherwise would be
specified); provided that, at the time of such conversion, Nortel Corporation
beneficially owns, directly or indirectly, all of the outstanding Common
Shares.








 


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          (2)  Subject to Section 4.6(1) above, Nortel Corporation may convert all or
part of the Convertible Advances outstanding by delivering to Nortel Limited a
notice of conversion, in writing, specifying that portion of the Principal
Amount outstanding that Nortel Corporation elects to convert (the “Notice of
Conversion”). Nortel Limited shall, within two Banking Days following the
receipt of the Notice of Conversion (the “Conversion
Date”) deliver to Nortel
Corporation one (1) Common Share, provided, however, that there shall be no
payment or adjustment by Nortel Limited on account of any interest accrued or
accruing from the date of the last preceding interest payment date on the
principal amount of the Convertible Advances so converted. Subject to the
foregoing provisions of this Section 4.6(2), at the close of business on the
Conversion Date: (i) such conversion shall be deemed to have been made, and
(ii) Nortel Corporation shall be treated for all purposes as having become the
holder of record of such Common Share. The Common Share issued upon such
conversion shall rank only in respect of dividends declared in favour of
shareholders of record on or after the Conversion Date.


          (3)  Notwithstanding Section 4.6(1), above, should it be determined by any
relevant taxing authority subsequently to a conversion of the whole or any part
of the Convertible Advances that such conversion into one (1) Common Share is
insufficient to be consistent with and satisfy the income earning purposes and
uses of and by Nortel Corporation and Nortel Limited, Nortel Limited shall
issue and Nortel Corporation shall cause Nortel Limited to issue such
additional Common Shares as shall be sufficient to be consistent with and to
satisfy the income earning purposes and uses of and by Nortel Corporation and
Nortel Limited.









 


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     (4)



ARTICLE 5

BORROWINGS GRIDS AND QUARTERLY REPORTS




                      Section 5.1. Individual Borrowings Grids. All Advances and all payments on
account of such Advances by a given Lender to a given Borrower shall be
recorded by a notation on a borrowings grid (a “Borrowings Grid”) maintained by
the Lender. Any failure to make any required notation on the applicable
Borrowings Grid shall not affect the liability of a Borrower to the respective
Lender in respect of the relevant Advance.



                      Section 5.2. Consolidated Borrowings Grids. In addition to the individual
Borrowings Grids, all Advances and all payments on account of such Advances
shall be evidenced by a notation on the consolidated Nortel Limited Group
Borrowings Grid, in the case of borrowings by members of the Nortel Limited
Group, and on the consolidated Nortel Corporation Group Borrowings Grid, in the
case of borrowings by members of the Nortel Corporation Group. Nortel
Corporation shall maintain the Nortel Limited Group Borrowings Grid, and Nortel
Limited shall maintain the Nortel Corporation Group Borrowings Grid. Any
failure to make any required notation on the applicable Borrowings Grid shall
not affect the liability of a Borrower to the respective Lender in respect of
the relevant Advance.



                      Section 5.3. Borrowings Grid Information. Each Borrowings Grid shall contain
the following information: (i) the name(s) of the Borrower(s) and the
Lender(s), as well as the date, currency and amount of each Advance and the
resulting increase in the Unpaid Principal Balance; (ii) the Interest Rate
applicable to each Advance, if applicable; (iii) the date and amount of each
repayment or prepayment on account of the principal paid to the Lender and the
resulting decrease of the Unpaid Principal Balance; and, in the case where
Nortel Corporation is the Borrower, (iv) whether the Advance is a Nortel
Corporation Corporate Advance or a Nortel Corporation Debt Repayment Advance.



                      Section 5.4. Provision of Borrowings Grid. As may be requested by a Borrower
from time to time, each Lender shall obtain and provide a copy of the relevant
Borrowings Grid to its respective Borrower.



                      Section 5.5. Obligations Ongoing. The reduction of the Unpaid Principal
Balance on the relevant Borrowings Grid to zero at any time or from time to
time shall not affect the ongoing validity of this Agreement or the obligations of any Borrower with respect to any Unpaid
Principal Balance subsequently recorded against such Borrower on the relevant
Borrowings Grid.








 


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                      Section 5.6. Quarterly Grid Reports. (a) Nortel Limited shall prepare a report
(a “Quarterly Grid Report”) attaching the Nortel Corporation Group Borrowings
Grid and also evidencing the appropriate interest calculations for any and all
Advances under this Agreement by members of the Nortel Limited Group to members
of the Nortel Corporation Group. Nortel Limited shall submit its Quarterly
Grid Report to Nortel Corporation and the applicable Borrowers for approval on
the last Banking Day of each quarter.


(b)       Nortel Corporation shall prepare a Quarterly Grid Report attaching the
Nortel Limited Group Borrowings Grid and also evidencing the appropriate
interest calculations for any and all Advances under this Agreement by members
of the Nortel Corporation Group to members of the Nortel Limited Group. Nortel
Corporation shall submit its Quarterly Grid Report to Nortel Limited and the
applicable Borrowers for approval on the last Banking Day of each quarter.



                      Section 5.7. Unpaid Balance. Each Borrower acknowledges, confirms and agrees
with each Lender that all amounts recorded on the Quarterly Grid Reports
prepared by Nortel Corporation and Nortel Limited in accordance with this
Article 5 will constitute prima facie evidence of any and all balances owing as
indicated in such Quarterly Grid Reports, and, in the absence of evidence to
the contrary, will be conclusive evidence of any unpaid balance. In the event
of a conflict between a Borrowings Grid and a Quarterly Grid Report, the
Quarterly Grid Report shall govern. If a Quarterly Grid Report has not yet
been prepared in respect of a given quarter, then each Borrower acknowledges,
confirms and agrees with each Lender that all amounts recorded on the
applicable Group Borrowings Grid prepared by Nortel Corporation or Nortel
Limited, as the case may be, in accordance with this Article 5 will constitute
prima facie evidence of any and all balances owing as indicated in such Group
Borrowings Grid, and, in the absence of evidence to the contrary, will be
conclusive evidence of any unpaid balance.



ARTICLE 6

CONDITIONS TO ADVANCES




                      Section 6.1. Conditions to Advances. The obligation of a Lender to make any
Advances will be conditional upon the following:



	 	(a)	 	receipt by such Lender of the following in form and substance
reasonably satisfactory to such Lender:



	 
	 	(i)	 	the request required under Section
2.2; and
	 
	 	(ii)	 	any other documents or assurances
that the Lender may reasonably require;




 







 


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	 	(b)	 	there has not occurred and there is not continuing a default
or breach under any other agreement, document or instrument (i)
involving the failure of Nortel Corporation, Nortel Limited, the
Borrower or the Lender to make any payment when due in respect of
any borrowed money, or a guarantee for borrowed money, in excess of
$100,000,000 (or the equivalent amount in any other currency or
currencies), in the aggregate, or (ii) causing, or permitting any
creditor or a trustee to cause, any indebtedness of Nortel
Corporation, Nortel Limited, the Borrower or the Lender in excess of
$100,000,000 (or the equivalent amount in any other currency or
currencies), in the aggregate, to become due prior to its stated
maturity or prior to its regularly scheduled dates of payment;
	 
	 	(c)	 	in the case of Advances by any member of the Nortel Limited
Group, there are no arrears of dividends (other than non-cumulative
dividends the entitlement to which has been extinguished) on any
series of preference shares of Nortel Limited or of the Lender
outstanding from time to time; except that, Nortel Limited and the
Lender may waive the condition in this paragraph (c): (i) if and to
the extent that the Advance is being made to permit the Borrower to
make any payment of the principal of, premium, if any, interest or
additional interest, if any, on any outstanding indebtedness of the
Borrower to an arm’s length entity and which is guaranteed by Nortel
Limited or the Lender; or (ii) upon a good faith determination by
the board of directors of each of Nortel Limited and the Lender,
after consideration of the interests of the holders of the
outstanding preference shares, that making such Advance would be in
the best interests of Nortel Limited and the Lender, respectively;
	 
	 	(d)	 	in the case of Advances by any member of the Nortel
Corporation Group (other than Nortel Corporation), there are no
arrears of dividends (other than non-cumulative dividends the
entitlement to which has been extinguished) on any series of
preference shares of the Lender outstanding from time to time;
except that, the Lender may waive the condition in this paragraph
(d): (i) if and to the extent that the Advance is being made to
permit the Borrower to make any payment of the principal of,
premium, if any, interest or additional interest, if any, on any outstanding indebtedness of the Borrower
to an arm’s length entity and which is guaranteed by the Lender; or
(ii) upon a good faith determination by the board of directors of
the Lender, after consideration of the interests of the holders of
the outstanding preference shares, that making such Advance would
be in the best interests of the Lender;




 







 


- 13 -




	 	(e)	 	at the time of the making of the Advance:


	 
	 	(i)	 	if the Lender is a corporation formed
under the laws of a jurisdiction in United States of
America, the Lender is not, nor after making the Advance
would be, unable to pay its liabilities as they become
due; and
	 
	 	(ii)	 	none of Nortel Corporation, Nortel
Limited, or, if the Lender is a corporation formed under
the laws of a jurisdiction in Canada or the laws of
Canada, the Lender, has ceased paying its current
obligations in the ordinary course of business as they
generally become due;


	 
	 	(f)	 	the making of the Advance is not prohibited financial
assistance under the corporate law governing the Lender;
	 
	 	(g)	 	the Lender has surplus funds available to it to make the
Advance based on the Lender’s cash flow forecast for the six-month
period immediately following the date on which the Advance is to be
made;
	 
	 	(h)	 	no decree, judgment, or order by a court having jurisdiction
in the premises having been entered adjudging Nortel Corporation,
Nortel Limited or the Borrower a bankrupt or insolvent or approving
as properly filed a petition seeking reorganization, readjustment,
arrangement, composition or similar relief for Nortel Corporation,
Nortel Limited or the Borrower under any bankruptcy, insolvency or
other similar applicable law or appointing a receiver or liquidator
or trustee or assignee in bankruptcy or insolvency of Nortel
Corporation, Nortel Limited or the Borrower, as the case may be, of
a substantial part of its property, or for the winding up or
liquidation of its affairs and no substantial part of the property
of the Nortel Corporation, Nortel Limited or the Borrower having
been sequestered or attached;
	 
	 	(i)	 	none of Nortel Corporation, Nortel Limited or the Borrower
having instituted proceedings to be adjudicated a voluntary
bankrupt, or having consented to the filing of a bankruptcy
proceeding against it, or having filed a petition or answer or
consent seeking reorganization, readjustment, arrangement,
composition or similar relief under any bankruptcy, insolvency or
other similar applicable law and none of Nortel Corporation, Nortel Limited or the Borrower having consented
to the filing of any such petition, or having consented to the
appointment of a receiver or liquidator or trustee or assignee in
bankruptcy or insolvency for it or of a substantial part of its
property, or having made an assignment for the benefit of creditors
and no



 







 


- 14 -




	 	 	 	corporate action having been taken by Nortel Corporation,
Nortel Limited or the Borrower in furtherance of any of the
foregoing actions;
	 
	 	(j)	 	in the case of Advances by any member of the Nortel
Corporation Group (other than Nortel Corporation), the prior
approval of the Treasurer or Assistant Treasurer of Nortel
Corporation or of any other person as may be designated in writing
for the purposes hereof by Nortel Corporation, and such prior
approval shall be evidenced by an electronic mail message
transmitted from the person approving the Advance, or, in
circumstances where electronic mail is not available or practicable,
by such other reasonable form of written communication from the
person approving the Advance as such person may deem appropriate in
the circumstances; and
	 
	 	(k)	 	in the case of Advances by any member of the Nortel Limited
Group (other than Nortel Limited), the prior approval of the
Treasurer or Assistant Treasurer of Nortel Limited or of any other
person as may be designated in writing for the purposes hereof by
Nortel Limited, and such prior approval shall be evidenced by an
electronic mail message transmitted from the person approving the
Advance, or, in circumstances where electronic mail is not available
or practicable, by such other reasonable form of written
communication from the person approving the Advance as such person
may deem appropriate in the circumstances.




                      Section 6.2. Payments in Trust. A Lender shall not, and shall not be deemed,
in any circumstances, to have waived compliance with any conditions precedent
listed in Section 6.1 hereof. In the event any Advance is made without
compliance with all of the conditions precedent listed in Section 6.1 hereof,
the Advance shall be deemed to have been paid by the Lender to the Borrower in
trust for the Lender and the Borrower shall forthwith repay the amount of the
said Advance to the Lender.








 


- 15 -




ARTICLE 7

COVENANTS




                      Section 7.1. Nortel Corporation. Nortel Corporation covenants that it shall
cause every other member of the Nortel Corporation Group to have sufficient
funds at all times to meet such member’s obligations to make any and all
payments on account of principal and/or interest due and payable in connection
with any and all Advances made to such member under this Agreement. Nothing in
this Section 7.1 shall (i) constitute Nortel Corporation a guarantor of any
Advance made under this Agreement to any other member of the Nortel Corporation
Group, or (ii) deem Nortel Corporation to have assumed any Advance, or any
obligations in connection with any Advance, made under this Agreement to any
other member of the Nortel Corporation Group.



                      Section 7.2. Nortel Limited. Nortel Limited covenants that it shall cause
every other member of the Nortel Limited Group to have sufficient funds at all
times to meet such member’s obligations to make any and all payments on account
of principal and/or interest due and payable in connection with any and all
Advances made to such member under this Agreement. Nothing in this Section 7.2
shall (i) constitute Nortel Limited a guarantor of any Advance made under this
Agreement to any other member of the Nortel Limited Group, or (ii) deem Nortel
Limited to have assumed any Advance, or any obligations in connection with any
Advance, made under this Agreement to any other member of the Nortel Limited
Group.








 


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ARTICLE 8

CHANGE IN OWNERSHIP OR CONTROL




                      Section 8.1. Change in Ownership or Control. If a party to this Agreement (a
“Removed Party”):



	(a)	 	is acquired by another corporation, or is merged into or consolidated
with another corporation, or engages in any amalgamation, or plan of
arrangement, or any other transaction, and, upon completion of any such
acquisition, merger, or other transaction, the Removed Party, or the
successor corporation resulting from any such transaction, is no longer a
direct or indirect wholly owned subsidiary of Nortel Corporation and/or
Nortel Limited, or
	 
	(b)	 	is liquidated or sells or otherwise disposes of all or substantially all
of its assets to another corporation, whether or not such other
corporation is a direct or indirect wholly owned subsidiary of Nortel
Corporation and/or Nortel Limited, or
	 
	(c)	 	is a member of the Nortel Limited Group (other than Nortel Limited) and
becomes a direct or indirect wholly owned subsidiary of Nortel Corporation
(and is not also a direct or indirect wholly owned subsidiary of Nortel
Limited), or is a member of the Nortel Corporation Group and becomes a
direct or indirect wholly owned subsidiary of Nortel Limited,



then, upon completion of any such transaction or event, (i) the principal
outstanding in respect of all Advances made to the Removed Party, together with
accrued and unpaid interest, shall immediately become due and payable by the
Removed Party without notice; (ii) the principal outstanding in respect of all
Advances made by the Removed Party to another party under this Agreement,
together with accrued and unpaid interest, shall immediately become due and
payable by the other party without notice; and (iii) no additional Advances
shall be made under this Agreement by or to the Removed Party. Notwithstanding
the foregoing, if the Removed Party is a Removed Party by virtue of clause (c)
above, then the Removed Party and the applicable Borrower(s) or Lender(s), as
the case may be, may deem any or all of the outstanding Advances made under
this Agreement by or to the Removed Party to have been fully repaid by
negotiating independent loan documentation in respect of any or all such
Advances in lieu of actual repayment thereof. Upon the repayment of the
principal amount outstanding, and accrued and unpaid interest, in respect of
all Advances made under this Agreement by or to the Removed Party, or upon
deemed repayment pursuant to the execution of independent loan documentation,
the Removed Party shall cease to be a party to this Agreement and all such








 


- 17 -



Advances shall cease to be governed by this Agreement and shall be removed from
all Borrowings Grids and Quarterly Grid Reports prepared under this Agreement.



ARTICLE 9

GENERAL PROVISIONS




                      Section 9.1. Payments. All payments required will be made in immediately
available funds at the office of the respective Lender at the address listed
for such Lender under Section 9.3 or to any other place that such Lender
directs.



                      Section 9.2. Waiver. Subject to Section 6.2,



	 	(a)	 	a Lender may in writing waive any breach by the respective
Borrower of any of the provisions contained in this Agreement or any
default by the respective Borrower in the observance or performance
of any covenant required to be observed or performed under this
Agreement; and
	 
	 	(b)	 	the parties to this Agreement may in writing waive compliance
with Section 8.1, notwithstanding the occurrence of a transaction or
event contemplated by Subsections 8.1(a), (b), or (c), and deem the
party to this Agreement that would have otherwise been a Removed
Party to continue to be a full and participating party to this
Agreement in all respects as if the transaction or event
contemplated by Subsections 8.1(a), (b), or (c) had not occurred;



provided that no act or omission by a Lender will be taken in any manner
whatsoever to affect any subsequent breach, or default, or the rights resulting
therefrom.



                      Section 9.3. Notices. Any request, notice or demand made or given in
connection with this Agreement may be given by delivery to the relevant party
at its address or facsimile number set forth below, or any other address or
facsimile number that a party may direct:



	 	(a)	 	if to Nortel Corporation:


	 
	 	 	 	Nortel Networks Corporation
	 	 	 	c/o Nortel Networks Limited
	 	 	 	8200 Dixie Road, Suite 100
	 	 	 	Brampton, Ontario
	 	 	 	L6T 5P6
	 



 







 


- 18 -





	 	 	 	Attention: Assistant Treasurer
	 	 	 	Facsimile Number: (905) 863-8563
	 
	 	 	 	with a copy to:


	 
	 	 	 	Attention: Corporate Secretary
	 	 	 	Facsimile Number: (905) 863-8386
	 


	 	(b)	 	if to Nortel Limited:
	 


	Nortel Networks Limited	 	 	 


	 	 	 	8200 Dixie Road, Suite 100

Brampton, Ontario

L6T 5P6
	 
	 	 	 	Attention: Assistant Treasurer
	 	 	 	Facsimile Number: (905) 863-8563


	 
	 	 	 	with a copy to:
	 


	 	 	 	Attention: Corporate Secretary
	 	 	 	Facsimile Number: (905) 863-8386
	 


	 	(c)	 	if to a member of the Nortel Corporation Group (other than
Nortel Corporation), to the member’s address listed in Schedule A,
with a copy to Nortel Corporation;
	 
	 	(d)	 	if to a member of the Nortel Limited Group (other than Nortel
Limited), to the member’s address listed in Schedule A, with a copy
to Nortel Limited; and
	 
	 	(e)	 	if to a member of the Nortel Corporation Group or the Nortel
Limited Group who becomes a party to this Agreement by executing a
consent agreement after the date hereof, to the member’s address
listed in the applicable consent agreement, with copies to such
other persons as may be indicated in the consent agreement.




                      Section 9.4. Further Assurances. Each Borrower agrees that it will, from time
to time, at the request of a Lender, execute and deliver or obtain and deliver
any agreements, instruments and documents and take all further action as may be
reasonably required by such Lender to accomplish the purposes of this
Agreement.








 


- 19 -




                      Section 9.5. Headings. The headings of this Agreement are included for
convenience of reference only and do not constitute a part of this Agreement
for any other purpose.



                      Section 9.6. Successors and Assigns. All of the covenants, stipulations,
promises and agreements in this Agreement shall bind the
parties’ respective successors and permitted assigns, whether so expressed or not; provided,
however, that no party may, without the prior consent of the others, assign any
rights, powers, duties, or obligations under this Agreement.



                      Section 9.7. Severability. Any provision of this Agreement which is or becomes
prohibited or unenforceable in any jurisdiction, does not invalidate, affect or
impair the remaining provisions thereof and any such prohibition or
unenforceability in any jurisdiction does not invalidate or render
unenforceable such provision in any other jurisdiction.



                      Section 9.8. Governing Law. This Agreement and all other documents and
instruments referred to will be construed in accordance with and governed by
the laws of the Province of Ontario and the laws of Canada applicable therein.



                      Section 9.9. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.



                      Section 9.10. Reference to and Effect on the Second Amended and Restated
Reciprocal Credit Agreement. On and after the date hereof, each reference in
the Second Amended and Restated Reciprocal Credit Agreement to “this
Agreement”, “hereunder”, “hereof”, “herein” or words like import, and each
reference to the Second Amended and Restated Reciprocal Credit Agreement in all
other agreements, documents, instruments delivered by all or any one or more of
the parties hereto shall mean and be a reference to the Second Amended and
Restated Reciprocal Credit Agreement as amended and restated hereby, and except
as this Third Amended and Restated Reciprocal Credit Agreement may be further
amended, restated or supplemented, the Second Amended and Restated Reciprocal
Credit Agreement shall remain in full force and effect and is hereby ratified
and confirmed.


[The remainder of this page intentionally left blank.]









 


- 20 -




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



	 	 	 	 
	 	 	
NORTEL NETWORKS CORPORATION
	 	 	 
	 	 	
By: 	/s/ Katharine B. Stevenson


	 	 	
Name:  Katharine B. Stevenson
	 	 	
Title:    Treasurer
	 	 	 
	 	 	
By:	/s/ Douglas C. Beatty


	 	 	
Name:  Douglas C. Beatty
	 	 	
Title:    Chief Financial Officer
	 	 	 	 
	 	 	 	 
	 	 	
NORTEL NETWORKS LIMITED
	 	 	 	 
	 	 	
By:	/s/ Katharine B. Stevenson


	 	 	
Name:  Katharine B. Stevenson
	 	 	
Title:    Treasurer
	 	 	 	 
	 	 	
By:	/s/ Douglas C. Beatty


	 	 	
Name:  Douglas C. Beatty
	 	 	
Title:    Chief Financial Officer
	 	 	 
	 	 	 
	 	 	
NORTEL NETWORKS INC.
	 	 	 
	 	 	
By:	/s/ Mary Cross


	 	 	
Name:  Mary Cross
	 	 	
Title:    President
	 	 	 
	 	 	 
	 	 	
NORTEL NETWORKS U.S.
FINANCE INC.
	 	 	 
	 	 	
By:	/s/ Katharine Stevenson


	 	 	
Name:  Katharine Stevenson
	 	 	
Title:    President



[Third Amended and Restated Reciprocal Credit Agreement – Signature Page]








 


- 21 -





	 	 	 	 
	 	 	
ALTEON WEBSYSTEMS, INC.
	 	 	 
	 	 	
By:	/s/ Mary Cross


	 	 	
Name:  Mary Cross
	 	 	
Title:    President
	 	 	 
	 	 	 
	 	 	
CORETEK, INC.
	 	 	 
	 	 	
By:	/s/ Craig Johnson


	 	 	
Name:  Craig Johnson
	 	 	
Title:    President
	 	 	 
	 	 	 
	 	 	
XROS, INC.
	 	 	 
	 	 	
By:	/s/ Craig Johnson


	 	 	
Name:  Craig Johnson
	 	 	
Title:    President



[Third Amended and Restated Reciprocal Credit Agreement – Signature Page]









 






Schedule A




THIRD AMENDED AND RESTATED

RECIPROCAL CREDIT AGREEMENT

 

ADDITIONAL NOTICE INFORMATION



Nortel Networks Inc.



Nortel Networks Plaza

200 Athens Way

Nashville, Tennessee

United States

37228-1397

Attn: Treasurer

          cc: Secretary

Facsimile: 615-734-4067


Nortel Networks U.S. Finance Inc.



Nortel Networks Plaza

200 Athens Way

Nashville, TN

USA

37228-1397

Attn: Treasurer

          cc: Secretary

Facsimile: 615-734-4067


Alteon WebSystems, Inc.



Nortel Networks Plaza

200 Athens Way

Nashville, TN

U.S.A.

37228-1397

Attn: Treasurer

Facsimile: 615-734-4067


 






 


- 2 -


CoreTek, Inc.



Nortel Networks Plaza

200 Athens Way

Nashville, TN

U.S.A.

37228-1397

Attn: Treasurer

Facsimile: 615-734-4067


Xros, Inc.



Nortel Networks Plaza

200 Athens Way

Nashville, TN

U.S.A.

37228-1397

Attn: Treasurer

Facsimile: 615-734-4067








 



Schedule B




FORM OF CONSENT AGREEMENT



Date: __________________


The undersigned (the “Member”) is a [jurisdiction] corporation and a wholly
owned subsidiary of Nortel Networks [Corporation/Limited]. The Member hereby
executes this Consent Agreement to evidence the following matters to the
parties to the Third Amended and Restated Reciprocal Credit Agreement among
Nortel Networks Corporation, Nortel Networks Limited, and the other parties
thereto (the “Reciprocal Credit Agreement”):



	1.	 	The Member agrees to become a member of the Nortel [Corporation/Limited]
Group, effective as of the date of this Consent Agreement, and agrees to
be bound by the terms and conditions of the Reciprocal Credit Agreement;
and
	 
	2.	 	The Member agrees that for the purposes of Subsection 9.3(e) of the
Reciprocal Credit Agreement, any request, notice or demand made or given
in connection with the Reciprocal Credit Agreement may be given to the
Member by delivery to the address or facsimile number listed below, with a
copy to Nortel Networks [Corporation/Limited].



Capitalized terms used but not otherwise defined in this Consent Agreement
shall have the meanings given to them in the Reciprocal Credit Agreement.


IN WITNESS WHEREOF the Member has caused this Consent Agreement to be executed
by its duly authorized officers as of the date first written above.



	 	 	 
	 	 	

(Member Name)
	 	 	 
	 	 	

(Signature)
	 	 	 
	 	 	

(Officer’s Title)
	 	 	 
	 	 	

(Address)
	 	 	 
	 	 	


	 	 	 
	 	 	

(Facsimile)



 






 




Schedule C




FORM OF BORROWINGS GRID FORMAT

 

ADVANCES AND PAYMENTS OF PRINCIPAL




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Principal	 	 	 	 	 	 
	 	 	 	 	 	 	Amount	 	Currency	 	Interest	 	 	 	Repaid	 	Unpaid	 	 	 	 
	 	 	 	 	 	 	of	 	of	 	Rate	 	Type of	 	or	 	Principal	 	Approved	 	Notation
	Date	 	Borrower	 	Lender	 	Advance	 	Advance	 	Applicable	 	Advance	 	Prepaid	 	Balance	 	by	 	made by