Document:

exv4w2

 

Exhibit 4.2

NORTEL NETWORKS LIMITED

as Issuer,

NORTEL NETWORKS CORPORATION

AND

NORTEL NETWORKS INC.

as Guarantors,

AND

THE BANK OF NEW YORK

as Trustee and Calculation Agent

 

FIRST SUPPLEMENTAL INDENTURE

Dated as of July 5, 2006

to

Indenture Dated as of July 5, 2006

 

 

 

FIRST SUPPLEMENTAL INDENTURE dated as of July 5, 2006 (this “First Supplemental Indenture”) to the
Indenture dated as of July 5, 2006 among Nortel Networks Limited (together with any successors,
“NNL” or the “Issuer”), a Canadian corporation having its principal place of business at 8200 Dixie
Road, Suite 100, Brampton, Ontario, Canada L6T 5P6, Nortel Networks Corporation (together with any
successors, “NNC”), a Canadian corporation having its principal place of business at 8200 Dixie
Road, Suite 100, Brampton, Ontario, Canada L6T5P6 and Nortel Networks Inc. (together with any
successors, “NNI”), a Delaware corporation having its principal place of business at 4008 Chapel
Hill — Nelson Highway, Research Triangle Park, North Carolina, U.S.A., 27709, and The Bank of New
York (the “Trustee”), a New York corporation authorized to conduct a banking business, having its
Corporate Trust Office at 101 Barclay Street 21W, New York, New York, U.S.A., 10286 (the “Original
Indenture,” and as supplemented by this First Supplemental Indenture, the “Indenture”).

     WHEREAS, NNC, NNL, NNI and the Trustee have heretofore executed and delivered the Original
Indenture to provide for the issuance of securities of NNL in one or more registered series;

     WHEREAS, Article Nine of the Original Indenture provides, among other things, that NNC, NNL,
NNI and the Trustee may enter into indentures supplemental to the Original Indenture to, among
other things, provide for the issuance of any series of securities and to set forth the terms
thereof;

     WHEREAS, NNL has duly authorized the creation of an issue of its 10.750% Senior Notes due 2016
of substantially the tenor and amount hereinafter set forth (the “Original 2016 Fixed Rate Notes”)
and an issue of securities evidencing the same continuing indebtedness and with substantially
identical terms (except that such securities shall be registered under the Securities Act and shall
not have a provision for additional interest pursuant to the Issue Date Registration Rights
Agreement) in exchange for such Notes (herein called the “2016 Fixed Rate Exchange Notes,” and
together with the Original 2016 Fixed Rate Notes, the “2016 Fixed Rate Notes”);

     WHEREAS, NNL has duly authorized the creation of an issue of its 10.125% Senior Notes due 2013
of substantially the tenor and amount hereinafter set forth (the “Original 2013 Fixed Rate Notes”)
and an issue of securities evidencing the same continuing indebtedness and with substantially
identical terms (except that such securities shall be registered under the Securities Act and shall
not have a provision for additional interest pursuant to the Issue Date Registration Rights
Agreement) to be issued in exchange for such Notes (herein called the “2013 Fixed Rate Exchange
Notes,” and together with the Original 2013 Fixed Rate Notes, the “2013 Fixed Rate Notes”);

     WHEREAS, NNL has duly authorized the creation of an issue of its Floating Rate Senior Notes
due 2011 of substantially the tenor and amount hereinafter set forth (the “Original Floating Rate
Notes”) and an issue of securities evidencing the same continuing indebtedness and with
substantially identical terms (except that such securities shall be registered under the Securities
Act and shall not have a provision for additional interest pursuant to the Issue Date Registration
Rights Agreement) to be issued in exchange for such Notes (herein called the “Floating Rate
Exchange Notes,” and together with the Original Floating Rate Notes, the “Floating Rate

 

 

Notes”). We refer herein to the 2016 Fixed Rate Notes, the 2013 Fixed Rate Notes and the
Floating Rate Notes collectively, or separately as to any series thereof as the context requires,
as the “Notes;”

     WHEREAS, each of NNC and NNI (collectively, the “Guarantors”) has duly authorized its
guarantee of the Notes and to provide therefor, each of the Guarantors has duly authorized the
execution and delivery of the Original Indenture, this First Supplemental Indenture and its
Guarantee under the terms set forth herein; and

     WHEREAS, all acts and things necessary to make the Notes, when executed by NNL, endorsed by
the Guarantors and authenticated and delivered by the Trustee as provided in the Original
Indenture, the valid and binding obligations of NNL and the Guarantors and to constitute a valid
and binding supplemental indenture according to its terms binding on NNL and the Guarantors have
been done and performed;

     NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:

SECTION 1.  Creation of Notes.

     (a)   Pursuant to Section 301 of the Original Indenture, there is hereby created a new series of
Debt Securities designated as the “10.750% Senior Notes due 2016” issuable by NNL and guaranteed by
NNC and NNI.

     (b)   Pursuant to Section 301 of the Original Indenture, there is hereby created a new series of
Debt Securities designated as the “10.125% Senior Notes due 2013” issuable by NNL and guaranteed by
NNC and NNI.

     (c)   Pursuant to Section 301 of the Original Indenture, there is hereby created a new series of
Debt Securities designated as the “Floating Rate Senior Notes due 2011” issuable by NNL and
guaranteed by NNC and NNI.

     (d)   Each series of Notes shall be issued as one or more Global Securities in the form
specified in Exhibit A to this First Supplemental Indenture, shall have the terms set forth therein
and shall be entitled to the benefits of the other provisions of the Original Indenture as modified
by this First Supplemental Indenture and specified herein. The Depository Trust Company (“DTC”)
and its nominees and any successor corporation of DTC and such successor’s nominees are hereby
designated as the Depositary for the Global Securities representing the Notes.

SECTION 2.  Definitions.

     (a)   Capitalized terms used herein and not otherwise defined shall have the respective meanings
assigned thereto in the Original Indenture.

     (b)   Solely for purposes of this First Supplemental Indenture and the Notes and except as
otherwise expressly provided or unless the context otherwise requires, the following terms shall
have the indicated meanings (such meanings shall apply equally to both the singular and plural
forms of the respective terms):

2

 

     “2013 Applicable Premium” means with respect to any 2013 Fixed Rate Note at any
Redemption Date, the greater of (1) 1.0% of the principal amount of such 2013 Fixed Rate
Note and (2) the excess of (a) the present value at such Redemption Date of (i) the
principal amount of such 2013 Fixed Rate Note on July 15, 2013, plus (ii) all required
remaining scheduled interest payments due on such 2013 Fixed Rate Note through July 15, 2013
(other than interest accrued to such Redemption Date), computed using a discount rate equal
to the Treasury Rate plus 50 basis points over (b) the principal amount of such 2013 Fixed
Rate Note on such Redemption Date. Calculation of the 2013 Applicable Premium will be made
by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate;
provided that such calculation shall not be a duty or obligation of the Trustee or the
Calculation Agent.

     “2013 Fixed Rate Exchange Notes” has the meaning specified in the recitals of the
Issuer in this First Supplemental Indenture.

     “2013 Fixed Rate Notes” has the meaning specified in the recitals of the Issuer in this
First Supplemental Indenture.

     “2016 Applicable Premium” means with respect to any 2016 Fixed Rate Note at any
Redemption Date, the greater of (1) 1.0% of the principal amount of such 2016 Fixed Rate
Note and (2) the excess of (a) the present value at such Redemption Date of (i) the
redemption price of such 2016 Fixed Rate Note on July 15, 2011 plus (ii) all required
remaining scheduled interest payments due on such 2016 Fixed Rate Note through July 15, 2011
(other than interest accrued to such Redemption Date), computed using a discount rate equal
to the Treasury Rate plus 50 basis points over (b) the principal amount of such 2016 Fixed
Rate Note on such Redemption Date. Calculation of the 2016 Applicable Premium will be made
by the Issuer or on behalf of the Issuer by such Person as the Issuer shall designate;
provided that such calculation shall not be a duty or obligation of the Trustee or the
Calculation Agent.

     “2016 Fixed Rate Exchange Notes” has the meaning specified in the recitals of the
Issuer in this First Supplemental Indenture.

     “2016 Fixed Rate Notes” has the meaning specified in the recitals of the Issuer in this
First Supplemental Indenture.

     “Calculation Agent” means the agent appointed by the Issuer to calculate Three-Month
LIBOR for purposes of this First Supplemental Indenture, which shall initially be the
Trustee.

     “Determination Date,” with respect to an Interest Period, will be the second London
Banking Day preceding the first day of such Interest Period.

     “Floating Rate Exchange Notes” has the meaning specified in the recitals of the Issuer
of this First Supplemental Indenture.

     “Floating Rate Notes” has the meaning specified in the recitals of the Issuer of this
First Supplemental Indenture.

3

 

     “Interest Period” means the period commencing on and including an interest payment date
and ending on and including the day immediately preceding the next succeeding Interest
Payment Date, with the exception that the first Interest Period shall commence on and
include the Issue Date and end on and include October 15, 2006.

     “London Banking Day” means any day in which dealings in Dollars are transacted or, with
respect to any future date, are expected to be transacted in the London interbank market.

     “Original 2013 Fixed Rate Notes” has the meaning specified in the recitals of the
Issuer in this First Supplemental Indenture.

     “Original 2016 Fixed Rate Notes” has the meaning specified in the recitals of the
Issuer in this First Supplemental Indenture.

     “Original Floating Rate Notes” has the meaning specified in the recitals of the Issuer
in this First Supplemental Indenture.

     “Original Notes” means the Original 2013 Fixed Rate Notes, the Original 2016 Fixed Rate
Notes and the Original Floating Rate Notes.

     “Representative Amount” means a principal amount of not less than $1,000,000 for a
single transaction in the relevant market at the relevant time.

     “Reuters Screen LIBO Page” means the display designated as page “LIBO” on the Reuters
Monitor Money Rates Service (or such other page as may replace the LIBO page on that service
or a successor service for the purpose of displaying London interbank offered rates of major
banks).

     “Three-Month LIBOR,” with respect to an Interest Period, will be the offered rate (or,
if more than one such rate appears, the arithmetic mean of the rates), expressed as a
percentage per annum, for deposits in United States dollars for a three-month period that
appears on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on the Determination
Date for such Interest Period. If fewer than two rates appear on the Reuters Screen LIBO
Page or the Reuters Screen LIBO Page is unavailable on such Determination Date, the
Calculation Agent will request the principal London office of each of four major banks in
the London interbank market, as selected by the Calculation Agent, to provide such bank’s
offered quotation (expressed as a percentage per annum), as of approximately 11:00 a.m.,
London time, on such Determination Date, to prime banks in the London interbank market for
deposits in a Representative Amount in United States dollars for a three-month period
beginning on the first day of such Interest Period. If at least two such offered quotations
are so provided, Three-Month LIBOR for the Interest Period will be the arithmetic mean of
such quotations. If fewer than two such quotations are so provided, the Calculation Agent
will request each of four major banks in New York City, as selected by the Calculation
Agent, to provide such bank’s rate (expressed as a percentage per annum), as of
approximately 11:00 a.m., New York City time, on such Determination Date, for loans in a
Representative Amount in United States dollars to leading European banks for a three-month
period beginning on such

4

 

Determination Date. If at least two such rates are so provided, Three-Month LIBOR for
the applicable Interest Period will be the arithmetic mean of such rates. If fewer than two
such rates are so provided, then Three-Month LIBOR for the applicable Interest Period will
be Three-Month LIBOR in effect with respect to the immediately preceding Interest Period.

     “Treasury Rate” means, with respect to any Redemption Date, the yield to maturity at
the time of computation (which shall be at approximately 11:00 a.m. on the second business
day preceding such Redemption Date) of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve Statistical Release
H.15(519) that has become publicly available at least two business days prior to such
Redemption Date (or, if such Statistical Release is no longer published, any publicly
available source of similar market data selected by the Issuer)) most nearly equal to the
period from such Redemption Date to July 15, 2011 with respect to the 2016 Fixed Rate Notes
(the “2016 Fixed Rate Notes Applicable Period”) and to July 15, 2013 with respect to the
2013 Fixed Rate Notes (the “2013 Fixed Rate Notes Applicable Period”); provided that if the
2016 Fixed Rate Notes Applicable Period or the 2013 Fixed Rate Notes Applicable Period, as
the case may be, is not equal to the constant maturity of the United States Treasury
security for which a weekly average yield is given, the Treasury Rate shall be obtained by
linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are given, except
that if the 2016 Fixed Rate Notes Applicable Period or the 2013 Fixed Rate Notes Applicable
Period, as the case may be, is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant maturity of one year shall
be used.

SECTION 3.  Appointment of Calculation Agent.

     (a)  The Issuer hereby appoints The Bank of New York (“BONY”) as its Calculation Agent with
respect to the Floating Rate Notes, and BONY hereby accepts such appointment. BONY agrees to
perform the duties and obligations of the Calculation Agent for the Floating Rate Notes as set
forth in the form of Note for the Floating Rate Notes attached hereto.

     (b)  The rights, privileges, protections, immunities and benefits given to the Trustee under
Article Six of the Indenture, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in its capacity hereunder as Calculation
Agent for the Floating Rate Notes

     (c)  BONY may at any time resign or be removed from such appointment as Calculation Agent;
provided that BONY simultaneously resigns or is removed as Trustee under the Indenture, in which
case a successor Calculation Agent with respect to the Floating Rate Notes shall be appointed in
the same manner in which a successor Trustee is appointed under Section 607 of the Indenture.

5

 

SECTION 4.  Optional Redemption.

     (a)  At any time prior to July 15, 2011, the Issuer may redeem the 2016 Fixed Rate Notes at its
option, in whole at any time or in part from time to time, at a redemption price equal to 100% of
the principal amount plus the 2016 Applicable Premium as of, and accrued and unpaid interest, if
any, to, the applicable Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant Interest Payment Date). At any time on or
after July 15, 2011, the Issuer may redeem the 2016 Fixed Rate Notes at its option, in whole at any
time or in part from time to time at the redemption prices (expressed as percentages of the
principal amount) set forth below plus accrued and unpaid interest on the 2016 Fixed Rate Notes
redeemed to the applicable Redemption Date (subject to the right of Holders of record on the
relevant record date to receive interest due on the relevant Interest Payment Date), if redeemed
during the twelve-month period beginning on July 15 of the years indicated below:

	 	 	 	 	 
	Year	 	Redemption Price
	2011
	 	 	105.375	%
	2012
	 	 	103.583	%
	2013
	 	 	101.792	%
	2014 and each year thereafter
	 	 	100.000	%

     (b)  The Issuer may redeem the 2013 Fixed Rate Notes at its option, in whole at any time or in
part from time to time, at a redemption price equal to 100% of the principal amount plus the 2013
Applicable Premium as of, and accrued and unpaid interest, if any, to, the Redemption Date (subject
to the right of Holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date).

     (c)  Any redemption pursuant to this Section 4 shall be in accordance with the procedures of
Article XI of the Original Indenture.

SECTION 5.  Optional Redemption with Qualified Equity Proceeds.

     On or prior to July 15, 2009, the Issuer may, at its option, in whole at any time or in part
from time to time, use Qualified Equity Proceeds to redeem up to 35% of the original aggregate
principal amount of any series of Notes (including any Additional Debt Securities of such series),
in whole at any time or in part from time to time, at a redemption price equal to (i) in the case
of the 2016 Fixed Rate Notes, 110.750% of the principal amount thereof, (ii) in the case of the
2013 Fixed Rate Notes, 110.125% of the principal amount thereof and (iii) in the case of the
Floating Rate Notes, 100% of the principal amount so redeemed plus a premium equal to the interest
rate per annum of such Floating Rate Notes applicable on the Redemption Date, in each case, plus
accrued and unpaid interest thereon, if any, to the applicable Redemption Date; provided that, in
each case, the Issuer makes such redemption not more than 90 days after the receipt by NNC or the
Issuer of such Qualified Equity Proceeds; provided further that such redemption shall be in
accordance with the procedures of Article XI of the Original Indenture.

6

 

SECTION 6.  Redemption for Changes in Applicable Withholding Taxes.

     The Notes of each series are also subject to redemption in whole, but not in part, at the
Issuer’s option at any time in cash, on not less than 30 nor more than 60 days’ notice to the
Holders, at a price equal to 100% of the aggregate principal amount, together with accrued and
unpaid interest to the Redemption Date and all Additional Amounts then due or becoming due on the
Redemption Date, in the event the Issuer or a Guarantor is, has become or would become obligated to
pay, on the next date on which any amount would be payable by the Issuer or the Guarantor, as the
case may be, with respect to the Notes of such Series, any Additional Amount as a result of an
actual or proposed change or amendment in the laws (including any regulations promulgated
thereunder) or treaties of any jurisdiction (including Canada or any province or territory thereof)
or any change in or new or different position regarding the application, interpretation or
administration of such laws, treaties or regulations (including a holding, judgment or order by a
court of competent jurisdiction), which change is announced or becomes effective on or after the
Issue Date; provided that the Issuer delivers to the Trustee an Opinion of Counsel attesting to
such change or amendment. For greater certainty, the provisions of this Section 6 shall only apply
to any series of the Notes in the case of a Guarantor if the Guarantee of such Guarantor has been
called and such Guarantor is required under its Guarantee to make payments of principal, interest
or premium, if any, in respect of such series of Notes.

SECTION 7.  Governing Law.

     This First Supplemental Indenture and each of the Notes shall be governed by, and construed in
accordance with, the laws of the State of New York, but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.

SECTION 8.  No Recourse Against Others.

     No recourse for the payment of the principal of, premium, if any, or interest on any of the
Notes, or payment under any of the Guarantees, or for any claim based thereon or otherwise in
respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Issuer
or any Guarantor contained in this First Supplemental Indenture, or in any of the Notes or
Guarantees, or because of the creation of any indebtedness represented thereby shall be had against
any incorporator or against any past, present or future partner, shareholder, other equityholder,
officer, director, employee or controlling person, as such, of the Issuer, any Guarantor or of any
successor Person thereof, either directly or through the Issuer, any Guarantor or any successor
Person thereof, whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, it being expressly understood that all such
liability is hereby expressly waived and released as condition of, and as a consideration for, the
execution of this First Supplemental Indenture and the issuance of the Notes and the Guarantees.

7

 

SECTION 9.  Counterparts.

     This First Supplemental Indenture may be executed in any number of counterparts, each of which
shall be an original but such counterparts shall together constitute but one and the same
instrument.

8

 

     IN WITNESS WHEREOF, the parties hereto have caused this First Supplemental Indenture to be
duly executed as of the day, month and year first above written.

	 	 	 	 	 
	 	NORTEL NETWORKS LIMITED, 

          as Issuer

 

 	 
	 	By:  	
/s/  Katharine B. Stevenson
 	 
	 	 	Name:  	Katharine B. Stevenson 	 
	 	 	Title:  	Treasurer 	 
	 
	 	 	 
	 	By:  	/s/  Gordon A. Davies
 	 
	 	 	Name:  	Gordon A. Davies 	 
	 	 	Title:  	General Counsel – Corporate and

Corporate Secretary 	 
	 
	 
	 
	 	NORTEL NETWORKS CORPORATION,

          as Guarantor

 

 	 
	 	By:  	/s/  Katharine B. Stevenson
 	 
	 	 	Name:  	Katharine B. Stevenson 	 
	 	 	Title:  	Treasurer 	 
	 
	 	 	 
	 	By:  	/s/  Gordon A. Davies
 	 
	 	 	Name:  	Gordon A. Davies 	 
	 	 	Title:  	General Counsel – Corporate and

Corporate Secretary 	 
	 
	 
	 
	 	NORTEL NETWORKS INC.,

          as Guarantor

 

 	 
	 	By:  	/s/  Allen K. Stout
 	 
	 	 	Name:  	Allen K. Stout 	 
	 	 	Title:  	Vice President, Finance 	 
	 
	 
	 
	 	THE BANK OF NEW YORK,

as Trustee and Calculation Agent

 

 	 
	 	By:  	/s/  Vanessa Mack
 	 
	 	 	Name:  	Vanessa Mack 	 
	 	 	Title:  	Vice President 	 
	 

 

 

EXHIBIT A

[If a 2016 Fixed Rate Note, then insert — 10.750 % Senior Notes due 2016]

[If a 2013 Fixed Rate Note, then insert — 10.125 % Senior Notes due 2013]

[If a Floating Rate Note, then insert — Floating Rate Senior Notes due 2011]

[Insert the Global Note Legend, if applicable, pursuant to Section 307(a) of the Original Indenture —

THIS IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE REFERRED TO HEREINAFTER.

TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO
NOMINEES OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”) OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR’S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE
REVERSE HEREOF.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC, NEW YORK, NEW YORK, TO
THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.]

[If Rule 144A Note or Regulation S Note issued during the Restricted Period therefor, then insert
the following legend (the “Restricted Notes Legend”) pursuant to Section 307(b) of the Original
Indenture —

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED,
PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION. THE HOLDER OF THIS SECURITY, BY
ITS ACCEPTANCE HEREOF, AGREES ON ITS OWN BEHALF AND ON BEHALF OF ANY INVESTOR ACCOUNT FOR WHICH IT
HAS PURCHASED SECURITIES, TO OFFER, SELL OR

A-1

 

OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE RESTRICTION TERMINATION DATE”)
THAT IS TWO YEARS (IN THE CASE OF RULE 144A DEBT SECURITIES (AS DEFINED IN THE ORIGINAL INDENTURE)
OR 40 DAYS (IN THE CASE OF REGULATION S DEBT SECURITIES (AS DEFINED IN THE ORIGINAL INDENTURE)
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER, ANY
GUARANTOR OR ANY AFFILIATE OF THE ISSUER OR ANY GUARANTOR WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER OR GUARANTOR, (B) PURSUANT TO A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE
SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT, TO A PERSON IT
REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS
DEFINED IN RULE 144A UNDER THE
SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D)
PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION
S UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL “ACCREDITED INVESTOR” WITHIN THE MEANING OF
RULE 501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS AN INSTITUTIONAL ACCREDITED
INVESTOR ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE SECURITIES OF $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY DISTRIBUTION
IN VIOLATION OF THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE ISSUER’S, ANY GUARANTOR’S AND THE
TRUSTEE’S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (D), (E) OR (F) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY
TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE.]

A-2

 

[Insert the Canadian Securities Legend, if applicable, pursuant to ( 307(c) of the Original
Indenture —

UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THE SECURITY MUST NOT TRADE
THE SECURITY IN CANADA BEFORE [INSERT DATE THAT IS FOUR MONTHS PLUS ONE DAY AFTER THE ISSUE DATE].]

CUSIP/CINS                               

 

No.                                                      $                    
          

NORTEL NETWORKS LIMITED (together with any successors, the “Issuer”), a Canadian corporation,
promises to pay to                            or registered assigns, the principal sum of
                                                     DOLLARS on

[If a 2016 Fixed Rate Note, then insert — July 15, 2016], [If a 2013 Fixed Rate Note, then insert
— July 15, 2013], [If a Floating Rate Note, then insert — July 15, 2011] (which principal sum may
from time to time be reduced or increased as appropriate to reflect exchanges, redemptions,
repurchases and transfers of interest, but which, when taken together with the aggregate principal
sum of all other Notes of the series (excluding Additional Debt Securities, if any), shall not
exceed $[ ] at any time, subject to increase as provided in Section 5 on the reverse of
this Note).

Interest Payment Dates: [If a 2016 Fixed Rate Note, then insert — January 15 and July 15, [If a
2013 Fixed Rate Note, then insert — January 15 and July 15], [If a Floating Rate Note, then insert
— January 15, April 15, July 15 and October 15].

Regular Record Dates: [If a 2016 Fixed Rate Note, then insert — January 1 and July 1], [If a 2013
Fixed Rate Note, then insert — January 1 and July 1], [If a Floating Rate Note, then insert —
January 1, April 1, July 1 and October 1].

A-3

 

     IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly executed as of the date
below.

Dated: [                    ]

	 	 	 	 	 
	 	NORTEL NETWORKS LIMITED

 

 	 
	 	By:  	 	 
	 	 	Name:  	Katharine B. Stevenson 	 
	 	 	Title:  	Treasurer 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	Gordon A. Davies 	 
	 	 	Title:  	General Counsel – Corporate
and Corporate
Secretary 	 
	 

A-4

 

GUARANTEE

OF

NORTEL NETWORKS CORPORATION

AND

NORTEL NETWORKS INC.

For value received, each Guarantor hereby unconditionally and irrevocably guarantees, jointly and
severally to the Holder of this Note upon which this Guarantee is endorsed and to the Trustee on
behalf of each such Holder the due and punctual payment of the principal of, premium, if any,
interest and Additional Amounts, if any, on this Note, when and as the same shall become due and
payable, whether on the Stated Maturity Date, by declaration of acceleration, call for redemption
or otherwise, according to the terms thereof and of the indenture dated as of July 5, 2006 among
Nortel Networks Limited, as issuer, Nortel Networks Corporation and Nortel Networks Inc., as
guarantors and The Bank of New York, as trustee (the “Original Indenture” and as supplemented by
the First Supplemental Indenture dated as of July 5, 2006 among Nortel Networks Limited, as issuer,
Nortel Networks Corporation and Nortel Networks Inc., as guarantors and The Bank of New York, as
trustee, the “Indenture”). In case of the failure of Nortel Networks Limited, a corporation
organized under the laws of Canada (herein called the “Issuer,” which term includes any successor
Person under the Indenture, punctually to make any such payment of principal, premium, if any, or
interest, and Additional Amounts, if any, each Guarantor, for so long as this Guarantee shall be in
effect, hereby agrees to cause any such payment to be made to or to the order of the Trustee
punctually when and as the same shall become due and payable, whether on the Stated Maturity Date
or by declaration of acceleration, call for redemption or otherwise, and as if such payment were
made by the Issuer.

Each Guarantor hereby agrees that its obligations hereunder shall be as if it were the principal
debtor and not merely surety, and shall be absolute and unconditional, irrespective of, and shall
be unaffected by, any invalidity, irregularity or unenforceability of this Note or the Indenture,
any failure to enforce the provisions of this Note or the Indenture, or any waiver, modification or
indulgence granted to the Issuer with respect thereto, by the Holder of this Note or the Trustee or
any other circumstance which may otherwise constitute a legal or equitable discharge of a surety or
guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of
claims with a court in the event of merger or bankruptcy of the Issuer, any right to require a
proceeding first against the Issuer, protest or notice with respect to this Note or the
indebtedness evidenced and all demands whatsoever, and covenants that this Guarantee will not be
discharged except by payment in full of the principal of, premium, if any, and interest on this
Note or as otherwise described in Section 203 of the Original Indenture.

     The Guarantee of each Guarantor hereunder shall be automatically and unconditionally released
on the terms set forth in Section 203(b) of the Original Indenture.

     Each Guarantor shall be subrogated to all rights of the Holder of this Note and the Trustee
against the Issuer in respect of any amounts paid to such Holder by such Guarantor pursuant to the
provisions of this Guarantee; provided that no such Guarantor shall be entitled to

A-5

 

enforce, or to receive any payments arising out of or based upon such right of subrogation
until the principal of, premium, if any, and interest on all Notes of the same series issued under
the Indenture shall have been paid in full.

Each Guarantor hereby agrees that its obligations hereunder shall be direct, unconditioned and
unsubordinated and will rank equally and ratably without preference and at least equally with other
senior unsecured obligations of such Guarantor, except to the extent prescribed by law. The Holder
of a guaranteed Note will be entitled to payment under this Guarantee without taking any action
whatsoever against the Issuer.

No reference herein to the Indenture and no provision of this Guarantee or of the Indenture shall
alter or impair the guarantees of the Guarantors, which are absolute and unconditional, of the due
and punctual payment of the principal of, premium, if any, and interest on, the Note upon which
this Guarantee is endorsed.

This Guarantee shall not be valid or obligatory for any purpose until the certificate of
authentication of this Note shall have been manually executed by or on behalf of the Trustee under
the Indenture.

All terms used in this Guarantee which are defined in the Indenture shall have the meanings
assigned to them in the Indenture.

This Guarantee shall be governed by and construed in accordance with the laws of the State of New
York, but without giving effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.

A-6

 

Executed and dated the date on the face hereof.

	 	 	 	 	 
	 	NORTEL NETWORKS CORPORATION

 

 	 
	 	By:  	 	 
	 	 	Name:  	Katharine B. Stevenson 	 
	 	 	Title:  	Treasurer 	 
	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	Gordon A. Davies 	 
	 	 	Title:  	General Counsel – Corporate and

Corporate Secretary 	 
	 

A-7

 

Executed and dated the date on the face hereof.

	 	 	 	 	 
	 	NORTEL NETWORKS INC.

 

 	 
	 	By:  	 	 
	 	 	Name:  	Allen K. Stout 	 
	 	 	Title:  	Vice President, Finance 	 
	 

A-8

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

     [If a 2016 Fixed Rate Note, then insert—This is one of the 2016 Fixed Rate Notes issued under
the within-mentioned Indenture.][If a 2013 Fixed Rate Note, then insert — This is one of the 2013
Fixed Rate Notes issued under the within-mentioned Indenture.] [If a Floating Rate Note, then
insert — This is one of the Floating Rate Notes issued under the within-mentioned Indenture.]

	 	 	 	 	 
	 	THE BANK OF NEW YORK,

          as Trustee

 	 
	 	By:  	 	 
	 	 	Authorized Signatory 	 
	 	 	 	 

A-9

 

	 	 	 	 	 

Back of Note

[If a 2016 Fixed Rate Note, then insert—10.750% Senior Notes Due 2016]

[If a 2013 Fixed Rate Note, then insert—10.125% Senior Notes Due 2013]

[If a Floating Rate Note, then insert—Floating Rate Senior Notes Due 2011]

     Capitalized terms used herein shall have the meanings assigned to them in the Indenture
referred to below unless otherwise indicated.

	 	1.	 	Interest. [If a 2016 Fixed Rate Note or a 2013 Fixed Rate Note, then
insert—Nortel Networks Limited, a Canadian corporation (such corporation, and its
successors and assigns under the Indenture hereinafter referred to, being herein called
the “Issuer”), promises to pay interest on the principal amount of this Note at the
rate per annum shown above. The Issuer will pay interest semiannually on January 15
and July 15 of each year commencing on January 15, 2007 (or, if any such day is not a
Business Day, the next succeeding Business Day) (each, an “Interest Payment Date”).
Interest on the Notes will accrue from the most recent date to which interest has been
paid on the Notes or, if no interest has been paid, from the Issue Date. Interest will
be computed on the basis of a 360-day year of twelve 30-day months.
	 
	 	 	 	[If Original Note, then insert—The Issuer agrees to pay Additional Interest, if
any, on the principal amount of this Note as and to the extent set forth in the
Issue Date Registration Rights Agreement.]
	 
	 	 	 	[If a Floating Rate Note, then insert— Nortel Networks Limited, a Canadian
corporation (such corporation, and its successors and assigns under the Indenture
hereinafter referred to, being herein called the “Issuer”), promises to pay interest
on the principal amount of this Note at the rate per annum, reset quarterly, equal
to Three-Month LIBOR plus 4.250%, in each case, as determined by the Calculation
Agent, which shall initially be the Trustee. The Issuer will pay interest quarterly
in arrears on each January 15, April 15, July 15 and October 15 of each year
commencing on October 15, 2006 (or, if any such day is not a Business Day, the next
succeeding Business Day).
	 
	 	 	 	[If Original Note, then insert—The Issuer agrees to pay Additional Interest, if
any, on the principal amount of this Note as and to the extent set forth in the
Issue Date Registration Rights Agreement.]
	 
	 	 	 	Interest on the Notes will accrue from the most recent date to which interest has
been paid on the Notes or, if no interest has been paid, from and including the
Issue Date. The amount of interest to be paid on the Notes for each Interest Period
will be calculated by multiplying the principal amount of the Notes by a fraction,
the numerator of which is the product of the interest rate and the number of days in
such Interest Period and the denominator of which is 360.

	 	a.	 	All percentages resulting from any of the above calculations
will be rounded, if necessary, to the nearest one hundred-thousandth of a

A-10

 

	 	 	 	percentage point, with five one-millionths of a percentage point being
rounded upwards (e.g., 9.876545% (or 0.09876545) being rounded to 9.87655%
(or 0.0987655)) and all dollar amounts used in or resulting from such
calculations will be rounded to the nearest cent (with one-half cent being
rounded upwards).

	 	b.	 	The interest rate on the Notes will in no event be higher than
the maximum rate or amount that could be received by a Holder of Notes without
such Holder receiving interest at a criminal rate (within the meaning of the
Criminal Code (Canada)); provided that until the Calculation Agent has received
an Opinion of Counsel notifying it that such maximum rate has been lawfully
amended and specifying the amended maximum rate then applicable, the
Calculation Agent shall be entitled to assume, without further inquiry, that
such maximum rate is 60% per annum calculated in accordance with generally
accepted actuarial practices and principles. After the Calculation Agent has
received such notification, the above proviso shall be read by substituting the
amended maximum rate so notified for the previously applicable maximum rate.]

	 	 	 	Solely for purposes of disclosure pursuant to the Interest Act (Canada) and without
affecting the calculation of interest on the Notes, the yearly rate of interest for
any portion of an interest period of less than one year is the percent rate per
annum noted on the Notes multiplied by the number of days in the calendar year in
which interest is paid divided by 360.
	 
	 	2.	 	Guarantees. This Note is entitled to the benefits of the certain senior,
unsecured Guarantees of the Guarantors. Reference is hereby made to Article II of the
Original Indenture and to the Guarantees endorsed on this Note for a statement of the
respective rights, limitations of rights, duties and obligations thereunder of the
Guarantors, the Trustee and the Holders. The Guarantee of each Guarantor hereunder
shall be automatically and unconditionally released on the terms set forth in Section
203(b) of the Original Indenture.
	 
	 	3.	 	Method of Payment. By no later than 11:00 a.m. (New York City time) on the
date on which any principal of or interest on any Note is due and payable, the Issuer
shall irrevocably deposit with the Trustee or the Paying Agent (as defined below) money
sufficient to pay such principal and/or interest. The Issuer will pay interest (except
Defaulted Interest) on the principal amount of the Notes on each [If a 2016 Fixed Rate
Note or 2013 Fixed Rate Note, then insert— January 15 and July 15 to the Persons who
are registered Holders of Notes at the close of business on the January 1 or July 1
next preceding the Interest Payment Date] [If a Floating Rate Note, then insert —
January 15, April 15, July 15 and October 15 to the Persons who are registered Holders
of Notes at the close of business on the January 1, April 1, July 1 and October 1 (or,
if any such day is not a Business Day, the next succeeding Business Day)] even if Notes
are canceled or repurchased after the Regular Record Date and on or before the Interest
Payment Date. Holders must surrender Notes to a Paying Agent to collect principal
payments. The Issuer will pay principal and interest in Dollars of the United

A-11

 

	 	 	 	States that at the time of payment is legal tender for payment of public and private
debts. The Issuer will make all payments in respect of a Note (including principal
and interest) in Dollars at the office of the Trustee. At the Issuer’s option,
however, the Issuer may make such payments by mailing a check to the registered
address of each Holder thereof as such address shall appear on the Security Register
or, with respect to Notes represented by a Global Note, by wire transfer of
immediately available funds to the accounts specified by the Depositary or its
nominee. [If a 2016 Fixed Rate Note or 2013 Fixed Rate Note,
then insert—If a
payment date is a date other than a Business Day, payment may be made at that place
on the next succeeding day that is a Business Day and no interest shall accrue for
the intervening period.]
	 
	 	4.	 	Paying Agent and Security Registrar. Initially, The Bank of New York, the
Trustee under the Indenture, will act as paying agent (in such capacity, the “Paying
Agent”) and registrar (in such capacity, the “Security Registrar”). The Issuer may
change any Paying Agent or the Security Registrar without notice to any Holder. The
Issuer or any of its Subsidiaries may act in any such capacity.
	 
	 	5.	 	Indenture. The Issuer issued the Notes under an Indenture dated as of July 5,
2006 (the “Original Indenture”) among Nortel Networks Limited, as Issuer, Nortel
Networks Corporation and Nortel Networks Inc., as Guarantors, and the Trustee as
supplemented by the First Supplemental Indenture dated as of July 5, 2006 (the “First
Supplemental Indenture”) among Nortel Networks Limited, as Issuer, Nortel Networks
Corporation and Nortel Networks Inc., as Guarantors, and The Bank of New York, as
Trustee and Calculation Agent. The Original Indenture as supplemented by the First
Supplemental Indenture is referred to herein as the “Indenture.” The terms of the
Notes include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Notes are subject to all such terms, and
Holders are referred to the Indenture and such Trust Indenture Act for a statement of
such terms. To the extent any provision of this Note conflicts with the express
provisions of the Indenture, the provisions of the Indenture shall govern and be
controlling. The Notes are obligations of the Issuer. Subject to the conditions set
forth in the Indenture and without the consent of the Holders, the Issuer may issue
Additional Debt Securities. All Notes of a series, including any Exchange Debt
Securities or Additional Debt Securities, will be treated as a single class of
securities under the Indenture.
	 
	 	6.	 	Optional Redemption. [If a 2016 Fixed Rate
Note, then insert—(a) At any time
prior to July 15, 2011, the Issuer may redeem the Notes at its option, in whole at any
time or in part from time to time, at a Redemption Price equal to 100% of the principal
amount plus the 2016 Applicable Premium as of, and accrued and unpaid interest, if any,
to, the Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant Interest Payment Date).

A-12

 

	 	(b)	 	At any time on or after July 15, 2011, the Issuer may redeem
the Notes at its option, in whole at any time or in part from time to time, at
the Redemption Prices (expressed as percentages of the principal amount) set
forth below plus accrued and unpaid interest and Additional Interest, if any,
on the Notes redeemed to the applicable Redemption Date (subject to the right
of Holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date), if redeemed during the twelve-month period
beginning on July 15 of the years indicated below:

A-13

 

	 	 	 	 	 
	 	 	Redemption
	Year	 	Price
	2011
	 	 	105.375	%
	2012
	 	 	103.583	%
	2013
	 	 	101.792	%
	2014 and each year thereafter
	 	 	100.000	%

	 	(c)	 	Any redemption pursuant to this Section 6 shall be in
accordance with the procedures of Article XI of the Original Indenture.

	 	 	 	[If a 2013 Fixed Rate Note, then insert—(a) The Issuer may redeem the Notes at its
option, in whole at any time or in part from time to time, at a redemption price
equal to 100% of the principal amount plus the 2013 Applicable Premium as of, and
accrued and unpaid interest, if any, to, the Redemption Date (subject to the right
of Holders of record on the relevant record date to receive interest due on the
relevant Interest Payment Date.

	 	(b)	 	A notice of redemption complying with Section 1104(a) of the
Original Indenture shall be mailed at least 30 days but not more than 60 days
before the redemption date to each Holder whose Notes are to be redeemed at its
address set forth in the Securities Register. Notes in denominations equal to
or greater than $1,000 may be redeemed in part but only in whole multiples of
$1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the Redemption Date, interest shall cease to accrue on Notes or portions
thereof called for redemption as long as the Issuer has deposited with the
Paying Agent funds in satisfaction of the applicable Redemption Price.

	 	(c)	 	Any redemption pursuant to this Section 6 shall be in
accordance with the procedures of Article XI of the Original Indenture.]

	 	7.	 	Optional Redemption with Qualified Equity Proceeds. (a) [If a 2016 Fixed Rate
Note, then insert—At any time, or from time to time, on or prior to July 15, 2009, the
Issuer may, at its option, use Qualified Equity Proceeds to redeem up to 35% of the
original aggregate principal amount of the Notes plus any Additional Debt Securities,
in whole at any time or in part from time to time, at a Redemption Price equal to
110.750% of the principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the applicable Redemption Date; provided that the Issuer makes such redemption
not more than 90 days after the receipt by the Issuer of such Qualified Equity
Proceeds.] [If a 2013 Fixed Rate Note, then insert—At any time, or from time to time,
on or prior to July 15, 2009, the Issuer may, at its option, use Qualified Equity
Proceeds to redeem up to 35% of the original aggregate principal amount of the Notes
plus any Additional Debt Securities, in whole at any time or in part from time to time,
at a Redemption Price equal to 110.125% of the principal amount thereof, plus accrued
and unpaid interest thereon, if any, to the applicable Redemption Date;

A-14

 

	 	 	 	provided that the Issuer makes such redemption not more than 90 days after the
receipt by the Issuer of such Qualified Equity Proceeds.] [If a Floating Rate Note,
then insert—At any time, or from time to time, on or prior to July 15, 2009, the
Issuer may, at its option, use Qualified Equity Proceeds to redeem up to 35% of the
original aggregate principal amount of the Notes plus any Additional Debt Securities
at a Redemption Price equal to 100% of the principal amount so redeemed plus a
premium equal to the interest rate per annum on the Notes applicable on the
Redemption Date, plus accrued and unpaid interest thereon, if any, to the applicable
Redemption Date; provided that the Issuer makes such redemption not more than 90
days after the receipt by the Issuer of such Qualified Equity Proceeds.]

	 	(b)	 	A notice of redemption complying with Section 1104(a) of the
Original Indenture shall be mailed at least 30 days but not more than 60 days
before the Redemption Date to each Holder whose Notes are to be redeemed at its
address as set forth in the Securities Register. Notes in denominations equal
to or greater than $1,000 may be redeemed in part but only in whole multiples
of $1,000, unless all of the Notes held by a Holder are to be redeemed. On and
after the Redemption Date, interest shall cease to accrue on Notes or portions
thereof called for redemption as long as the Issuer has deposited with the
Paying Agent funds in satisfaction of the applicable Redemption Price.

	 	8.	 	Redemption for Changes in applicable Withholding Taxes. The Notes of each
series are also subject to redemption in whole, but not in part, at the Issuer’s option
at any time in cash, on not less than 30 nor more than 60 days’ notice to the Holders,
at a price equal to 100% of the aggregate principal amount, together with accrued and
unpaid interest to the date fixed for redemption and all Additional Amounts then due or
becoming due on the Redemption Date, in the event the Issuer or a Guarantor is, has
become or would become obligated to pay, on the next date on which any amount would be
payable, by the Issuer or the Guarantor, as the case may be, with respect to the Notes
of such series, any Additional Amount as a result of an actual or proposed change or
amendment in the laws (including any regulations promulgated thereunder) or treaties of
any jurisdiction (including Canada or any province or territory thereof) or any change
in or new or different position regarding the application, interpretation or
administration of such laws, treaties or regulations (including a holding, judgment or
order by a court of competent jurisdiction), which change is announced or becomes
effective on or after the Issue Date and provided that the Issuer delivers to the
Trustee an Opinion of Counsel attesting to such change or amendment. For greater
certainty, the provisions of this Section 8 shall only apply to any series of Notes in
the case of a Guarantor if the Guarantee of such Guarantor has been called and such
Guarantor is required under its Guarantee to make payments of principal, interest or
premium, if any, in respect of such series of Notes.

	 	9.	 	No Mandatory Redemption. The Issuer shall not be required to make mandatory
redemption payments with respect to the Notes.

A-15

 

	 	10.	 	Offer to Repurchase. (a) If a Change of Control occurs, the Issuer shall make
a Change of Control Offer to each Holder to purchase all or any part (equal to $1,000
or an integral multiple thereof) of each Holder’s Notes at a purchase price, in cash,
equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereto, if any, up to but excluding the date of purchase (the “Change of
Control Payment”). Within 30 days following the date upon which the Change of Control
occurs, the Issuer must send, or cause the Trustee to send, by first-class mail, a
notice to each Holder, with a copy to the Trustee, which notice shall govern the terms
of the Change of Control Offer. Such notice shall state, among other things, the
purchase date (the “Change of Control Payment Date”), which must be no earlier than 30
days nor later than 60 days after the date such notice is mailed, other than as may be
required to comply with any applicable laws. Each Holder who accepts the Change of
Control Offer will be required to deliver the form entitled “Option of Holder to Elect
Purchase” on the reverse of this Note completed and specifying the portion (in integral
multiples of $1,000) of such Holder’s Notes that it agrees to sell to the Issuer
pursuant to the Change of Control Offer, to the Paying Agent at the address specified
in the notice prior to the close of business on the third Business Day prior to the
Change of Control Payment Date.

	 	11.	 	Denominations, Transfer, Exchange. The Notes are issued in registered form
without coupons in denominations of $2,000 and integral multiples of $1,000. The
transfer of Notes may be registered and Notes may be exchanged as provided in the
Indenture. The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuer may require a
Holder to pay any taxes and fees required by law or permitted by the Indenture. The
Issuer need not exchange or register the transfer of any Note or portion of a Note
selected for redemption, except for the unredeemed portion of any Note being redeemed
in part. Also, the Issuer need not exchange or register the transfer of any Notes for
a period of 15 days before a selection of Notes to be redeemed or during the period
between a record date and the corresponding Interest Payment Date.

	 	12.	 	Persons Deemed Owners. The registered Holder of a Note may be treated as its
owner for all purposes.

	 	13.	 	Amendment, Supplement and Waiver. Subject to certain exceptions, the Indenture
and the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the then-outstanding Notes and any existing
default or non-compliance with any provision of the Indenture or the Notes may be
waived with the consent of the Holders of a majority in principal amount of the
then-outstanding Notes (including any Additional Debt Securities), voting as a single
class. Without the consent of any Holder of Notes, the Indenture or the Notes may be
amended or supplemented to the extent permitted under Section 901 of the Original
Indenture.

A-16

 

	 	14.	 	Defaults and Remedies. (a) This Note shall be subject to the following Events
of Default: (i) the failure to pay the principal of the Notes when such principal
becomes due and payable, whether at Maturity, upon redemption or otherwise; (ii) the
failure to pay interest on the Notes when the same becomes due and payable and the
Default continues for a continuous period of 30 days; (iii) a Default by NNC, the
Issuer, or during any period in which NNI is a Guarantor, NNI, in the performance or
observance of any of their respective covenants, agreements or other obligations set
forth in the Original Indenture for a continuous period of 90 days after the Issuer or
such Guarantor receives written notice specifying the Default (and demanding that such
Default be remedied) from the Holders of at least 25% of the outstanding principal
amount of the Notes (including any Additional Debt Securities); (iv) a decree, judgment
or order by a court having jurisdiction in the premises shall have been entered
adjudging the Issuer or any Guarantor a bankrupt or insolvent or approving as properly
filed a petition seeking reorganization, readjustment, arrangement, composition or
similar relief for the Issuer or any Guarantor under any bankruptcy, insolvency or
other similar applicable law and such decree, judgment or order of a court having
jurisdiction in the premises for the appointment of a receiver or liquidator or trustee
or assignee in bankruptcy or insolvency of the Issuer or such Guarantor, as the case
may be, of a substantial part of its property, or for the winding up or liquidation of
its affairs, shall have remained in force for a period of 60 consecutive days; or any
substantial part of the property of the Issuer or such Guarantor shall be sequestered
or attached and shall not be returned to the possession of the Issuer or such Guarantor
or released from such attachment whether by filing of a bond, or stay or otherwise
within 60 consecutive days thereafter; (v) the Issuer or any Guarantor shall institute
proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent seeking
reorganization, readjustment, arrangement, composition or similar relief under any
bankruptcy, insolvency or other similar applicable law or the Issuer or such Guarantor
shall consent to the filing of any such petition, or shall consent 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 shall make an assignment for the benefit
of creditors, or shall be unable, or admit in writing its inability, to pay its debts
generally as they become due, or corporate action shall be taken by the Issuer or such
Guarantor in furtherance of any of the aforesaid actions; (vi) a Default by NNC, the
Issuer or, during any period in which NNI is a Guarantor, NNI, under a single
obligation in respect of Funded Debt that exceeds on its face $100,000,000 in principal
amount which results in such Funded Debt becoming or being declared due and payable
prior to the date on which it would otherwise become due and payable and such
acceleration shall not be rescinded or annulled within 10 days after written notice (i)
specifying such Default, and (ii) stating that such notice is a “Notice of Default”
hereunder, shall have been given to such defaulting entity by Holders of at least 25%
of the outstanding principal amount of the Notes; (vii) any Guarantee ceases to be in
full force and effect (other than in accordance with the terms of the Original
Indenture) or any Guarantor denies or disaffirms its obligations under its

A-17

 

	 	 	 	Guarantee; (viii) a failure by the Issuer to make a Change of Control Offer; and
(ix) one or more judgments in an aggregate amount in excess of $100,000,000 shall
have been rendered against the Issuer, NNC or, during any period in which NNI is
Guarantor, NNI, and such judgments remain undischarged, unpaid in accordance with
its or their respective terms or unstayed for a period of 90 days after such
judgment or judgments become final and non-appealable.

	 	(b)	 	If any Event of Default occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the Outstanding Notes
(including any Additional Debt Securities) may declare the principal amount of,
premium, if any, and any accrued and unpaid interest, including Additional
Interest, if any, on all the Notes (including any Additional Debt Securities)
to be due and payable immediately, by a notice in writing to the Issuer and the
Guarantors, and to the Trustee if given by the Holders, and upon any such
declaration such principal amount, together with accrued interest thereon shall
become immediately due and payable.
	 
	 	(c)	 	Holders of the Notes may not enforce the Indenture or the Notes
except as provided in the Indenture. The Trustee may refuse to enforce the
Indenture or the Notes unless it receives reasonable indemnity or security.
Subject to certain limitations, Holders of a majority in principal amount of
the Outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders notice of any continuing Default
or Event of Default (except a Default or Event of Default in payment of
principal or interest) if it determines that withholding notice is in their
interest.

	 	15.	 	Defeasance. The Issuer and/or the Guarantors may defease and be discharged
from any and all obligations with respect to this Note or the Guarantees, as
applicable, or be released from its obligations with respect to certain covenants
applicable to this Note in accordance with the terms of the Indenture.

	 	16.	 	No Recourse Against Others. A director, officer, employee, incorporator or
stockholder of the Issuer, as such, shall not have any liability for any obligations of
the Issuer under the Notes or the Indenture or for any claim based on, in respect of,
or by reason of, such obligations or their creation. Each Holder by accepting a Note
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Notes.

	 	17.	 	Authentication. This Note shall not be valid until authenticated by the manual
signature of the Trustee or an authenticating agent.

	 	18.	 	Abbreviations. Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as

A-18

 

	 	 	 	tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).
	 
	 	19.	 	CUSIP Numbers. Pursuant to a recommendation promulgated by the Committee on
Uniform Security Identification Procedures, the Issuer has caused CUSIP numbers to be
printed on the Notes and the Trustee may use CUSIP numbers in notices of redemption as
a convenience to Holders. No representation is made as to the accuracy of such numbers
either as printed on the Notes or as contained in any notice of redemption and reliance
may be placed only on the other identification numbers placed thereon.
	 
	 	20.	 	Governing Law. This Note shall be governed by, and construed in accordance
with, the law of the State of New York, but without giving effect to applicable
principles of conflicts of law to the extent that the application of the law of another
jurisdiction would be required thereby.
	 
	 	21.	 	Submission to Jurisdiction; Waiver of Immunities. The Issuer and the
Guarantors have agreed that any suit, action or proceeding against the Issuer or the
Guarantors brought by any Holder or the Trustee arising out of or based upon the
Indenture, the Notes or the Guarantees may be instituted in any state or federal court
in the Borough of Manhattan, The City of New York, New York, United States, and any
appellate court from any thereof. The Issuer and the Guarantors have irrevocably
submitted to the non-exclusive jurisdiction of such courts for such purpose and waived,
to the fullest extent permitted by law, trial by jury and any objection any of them may
now or hereafter have to the laying of venue of any such proceeding, and any claim any
of them may now or hereafter have that any proceeding in any such court is brought in
an inconvenient forum.

The Issuer shall furnish to any Holder upon written request and without charge a copy of the
Indenture. Requests may be made to: Nortel Networks Limited, 8200 Dixie Road, Suite 100,
Brampton, Ontario, Canada L6T 5P6, Attention: Corporate Secretary.

A-19

 

Assignment Form

To assign this Note, fill in the form below:

(I) or (we) assign and transfer this Note to:                                                      

(Insert assignee’s legal name)

(Insert assignee’s soc. sec. or tax I.D. no.)

(Print or type assignee’s name, address and zip code)

and irrevocably appoint                                          , as agent, to transfer this Note on the books of the
Issuer. The agent may substitute another to act for him.

Date:                                          

Your Signature:        
             
                                       

(Sign exactly as your name appears on

the face of this Note)

Signature Guarantee:                                                      

A-20

 

Option of Holder to Elect Purchase upon a Change of Control

If you want to elect to have this Note purchased by the Issuer pursuant to Section 10 of the terms
set forth on the reverse of this Note (the “Terms”), check the appropriate box below:

o  The undersigned Holder hereby elects to have the Issuer purchase its Note pursuant to
Section 10 of the Terms.

If you want to elect to have only part of this Note purchased by the Issuer pursuant to Section 10
of the Terms, state the amount you elect to have purchased:

$                                          

Date:                                         

Your Signature:                   
                                        

(Sign exactly as your name appears on

the face of this Note)

Tax Identification No.:                                          

Signature Guarantee:                                                      

A-21

 

SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL SECURITY*

The following exchanges of a part of this Global Security for an interest in another Global
Security or for a Certificated Security, or exchanges of a part of another Global Security or
Certificated Security for an interest in this Global Security, have been made:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Principal Amount	 	 	 	 
	 	 	Amount of	 	 	Amount of	 	 	of this Global	 	 	Signature of	 
	 	 	decrease in	 	 	increase in	 	 	Security	 	 	authorized officer	 
	 	 	Principal Amount	 	 	Principal Amount	 	 	following such	 	 	of	 
	 	 	of this	 	 	of this	 	 	decrease	 	 	Trustee or	 
	Date of Exchange	 	Global Security	 	 	Global Security	 	 	(or increase)	 	 	Note Custodian	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

 

*  This schedule should be included only if the Note is issued in global form.

A-22exv10w1

 

Exhibit 10.1

U.S.$1,000,000,000 Floating Rate Senior Notes due 2011

U.S.$550,000,000 10.125% Senior Notes due 2013

U.S.$450,000,000 10.750% Senior Notes due 2016

NORTEL NETWORKS LIMITED

Purchase Agreement

June 29, 2006

[                              ]

As Representative of the

several Initial Purchasers listed

in Schedule 1 hereto

c/o [                              ]

[                              ]

New York, New York [          ]

Ladies and Gentlemen:

     Nortel Networks Limited, a Canadian corporation (the “Company”), proposes to issue and sell to
the several Initial Purchasers listed in Schedule 1 hereto (the “Initial Purchasers”), for whom you
are acting as representative (the “Representative”), U.S.$450,000,000 aggregate principal amount
of its 10.750% Senior Notes due 2016 (the “2016 Fixed Rate Notes”), U.S.$550,000,000 aggregate
principal amount of its 10.125% Senior Notes due 2013 (the “2013 Fixed Rate Notes” and, together
with the 2016 Fixed Rate Notes, the “Fixed Rate Notes”) and U.S.$1,000,000,000 aggregate principal
amount of its Floating Rate Senior Notes due 2011 (the “Floating Rate Notes” and together with the
Fixed Rate Notes, the “Notes”). The Notes will be issued pursuant to an Indenture to be dated as
of July 5, 2006, as it may be amended or supplemented from time to time (the “Indenture”), among
the Company, Nortel Networks Corporation, a Canadian corporation (“NNC”), and Nortel Networks Inc.,
a Delaware corporation (“NNI” and, together with NNC, the “Guarantors”), and The Bank of New York,
as trustee (the “Trustee”), and will be guaranteed on an unsecured senior basis by the Guarantors
(the “Guarantees” and, together with the Notes, the “Securities”). The Company and the Guarantors
are referred to herein together as the “Issuers”.

     The Securities will be sold to the Initial Purchasers without being registered under the
United States Securities Act of 1933, as amended (the “Securities Act”), in reliance upon an
exemption therefrom, and without the filing of a prospectus with any securities regulatory
authority in Canada (each, a “Canadian Securities Regulator” and, together, the “Canadian
Securities Regulators”) under the securities laws, rules, regulations and written policy statements
of any province or territory of Canada (collectively, the “Canadian Securities Laws”), in reliance
upon exemptions from the prospectus requirements of the applicable Canadian Securities Laws. The
Company has prepared a preliminary offering memorandum (including, with respect to sales in British
Columbia, Manitoba, Ontario, Alberta, Saskatchewan and Quebec (collectively, the

1

 

“Relevant Provinces”), the preliminary Canadian offering memorandum (the “Canadian Preliminary
Offering Memorandum”)) dated June 15, 2006 (the “Preliminary Offering Memorandum”) and will prepare
an offering memorandum (including, with respect to sales in the Relevant Provinces, a Canadian
offering memorandum (the “Canadian Offering Memorandum”)) dated the date hereof (the “Offering
Memorandum”), setting forth information concerning the Company, the Guarantors and the Securities.
Copies of the Preliminary Offering Memorandum have been, and copies of the Offering Memorandum will
be, delivered by the Company to the Initial Purchasers pursuant to the terms of this Agreement.
The Issuers hereby confirm that they have authorized the use of the Preliminary Offering
Memorandum, the other Time of Sale Information (as defined below) and the Offering Memorandum in
connection with the offering and resale of the Securities by the Initial Purchasers in the manner
contemplated by this Agreement. Capitalized terms used but not defined herein shall have the
meanings given to such terms in the Preliminary Offering Memorandum. References herein to the
Preliminary Offering Memorandum, the Time of Sale Information and the Offering Memorandum shall be
deemed to refer to and include all amendments and supplements thereto and any document incorporated
by reference therein.

     At or prior to the time when sales of the Securities were first made (which is on the date of
this Agreement) (the “Time of Sale”), the following information shall have been prepared
(collectively, the “Time of Sale Information”): the Preliminary Offering Memorandum, as
supplemented and amended by the written communications listed on Part I of Annex A hereto.

     Holders of the Securities (including the Initial Purchasers and their direct and indirect
transferees) will be entitled to the benefits of a Registration Rights Agreement to be dated the
Closing Date (as defined below) and substantially in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”), pursuant to which the Issuers will agree to file with the United
Sates Securities and Exchange Commission (the “Commission”) (i) one or more registration statements
(collectively, the “Exchange Offer Registration Statement”) registering issues of senior notes of
the Company (the “Exchange Notes”) and the guarantees of the Guarantors (the “Exchange Notes
Guarantees” and, together with the Exchange Notes, the “Exchange Securities”) evidencing the same
continuing indebtedness as and which are identical in all material respects to the Fixed Rate Notes
or the Floating Rate Notes, as applicable, and the Guarantees, respectively (except that the
Exchange Securities will not contain terms with respect to transfer restrictions in the United
States), and (ii) under certain circumstances, a shelf registration statement pursuant to Rule 415
under the Securities Act (the “Shelf Registration Statement”).

     Each Issuer hereby confirms its agreement with the several Initial Purchasers concerning the
purchase and resale of the Securities, as follows:

     1.     Purchase and Resale of the Securities.

     (a)   The Issuers agree to issue and sell the Securities to the several Initial Purchasers as
provided in this Agreement, and each Initial Purchaser, on the basis of the representations,
warranties and agreements set forth herein and subject to the conditions set forth herein, agrees,
severally and not jointly, to purchase from the Issuers the respective principal amount of
Securities set forth opposite such Initial Purchaser’s name in Schedule 1 hereto at, in the case of
the 2016 Fixed Rate Notes, a price equal to 100% of the aggregate principal amount thereof, in the

2

 

case of the 2013 Fixed Rate Notes, a price equal to 100% of the aggregate principal amount thereof
and in the case of the Floating Rate Notes, a price equal to 100% of the aggregate principal amount
thereof, plus, in each case, accrued interest, if any, from July 5, 2006 to the Closing Date. The
Issuers will pay the several Initial Purchasers a commission equal to 2.0% of the respective
principal amounts of the 2016 Fixed Rate Notes, the 2013 Fixed Rate Notes and the Floating Rate
Notes set forth opposite the names of the several Initial Purchasers in Schedule 1 hereto. The
Issuers will not be obligated to deliver any of the Securities except upon payment for all the
Securities to be purchased as provided herein.

     (b)   The Issuers acknowledge and agree that the Initial Purchasers are acting solely in the
capacity of arm’s length contractual counterparties to the Issuers with respect to the offering of
Securities contemplated hereby (including in connection with determining the terms of the offering)
and not as financial advisors or fiduciaries to, or as agents of, any Issuer or any other person.
Additionally, no Initial Purchaser is advising any Issuer or any other person as to any legal, tax,
investment, accounting or regulatory matters in any jurisdiction. The Issuers shall consult with
their own advisors concerning such matters and shall be responsible for making their own
independent investigation and appraisal of the transactions contemplated hereby, and the Initial
Purchasers shall have no responsibility or liability to the Issuers with respect thereto. Any
review by the Initial Purchasers of the Issuers, the transactions contemplated hereby or other
matters relating to such transactions will be performed solely for the benefit of the Initial
Purchasers and shall not be on behalf of the Issuers.

     (c)   The Issuers understand that the Initial Purchasers intend to offer the Securities for
resale on the terms set forth in the Time of Sale Information. Each Initial Purchaser, severally
and not jointly, represents, warrants and agrees that:

     (i)   it is a qualified institutional buyer within the meaning of Rule 144A under the
Securities Act (a “QIB”) and an accredited investor within the meaning of Rule 501(a) under
the Securities Act and National Instrument 45-106-Prospectus and Registration Exemptions
(“NI 45-106”) of Canada;

     (ii)   it has not solicited offers for, or offered or sold, and will not solicit offers
for, or offer or sell, the Securities by means of any form of general solicitation or
general advertising within the meaning of Rule 502(c) of Regulation D under the Securities
Act (“Regulation D”) or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act; and

     (iii)   it has not solicited offers for, or offered or sold, and will not solicit offers
for, or offer or sell, the Securities as part of their initial offering except:

     (A)   within the United States to persons whom it reasonably believes to be QIBs
in transactions pursuant to Rule 144A under the Securities Act (“Rule 144A”) and in
connection with each such sale, it has taken or will take reasonable steps to ensure
that the purchaser of the Securities is aware that such sale is being made in
reliance on Rule 144A;

3

 

     (B)   in accordance with the restrictions set forth in Annex C hereto and, in
Canada, and to residents of Canada who are accredited investors within the meaning
of NI 45-106, in transactions which are exempt from the prospectus requirements of
applicable Canadian Securities Laws.

     (d)   Each Initial Purchaser acknowledges and agrees that the Company and, for purposes of the
opinions to be delivered to the Initial Purchasers pursuant to Sections 6(f) and 6(g) (to the
extent such opinions relate to exemptions from registration and prospectus requirements under
applicable law), counsel for the Company and counsel for the Initial Purchasers, respectively, may
rely upon the accuracy of the representations and warranties of the Initial Purchasers, and
compliance by the Initial Purchasers with their agreements, contained in paragraph (c) above
(including Annex C hereto), and each Initial Purchaser hereby consents to such reliance.

     (e)   Each Issuer acknowledges and agrees that the Initial Purchasers may offer and sell
Securities to or through any affiliate of an Initial Purchaser and that any such affiliate may
offer and sell Securities purchased by it to or through any Initial Purchaser so long as otherwise
in compliance with the terms and conditions of this Agreement.

     2.     Payment and Delivery.

     (a)   Payment for and delivery of the Securities will be made at the offices of Cleary Gottlieb
Steen & Hamilton LLP at 9:30 A.M., New York City time, on July 5, 2006, or at such other time or
place on the same or such other date, not later than the fifth business day thereafter, as the
Representative and the Company may agree upon in writing. The time and date of such payment and
delivery is referred to herein as the “Closing Date”.

     (b)   Payment for the Securities shall be made by wire transfer in immediately available funds
to the account(s) specified by the Company to the Representative against delivery to the nominee of
The Depository Trust Company, for the account of the Initial Purchasers, of global notes
representing the Securities (collectively, the “Global Notes”), with any transfer taxes payable in
connection with the sale of the Securities duly paid by the Company. The Global Notes will be made
available for inspection by the Representative not later than 1:00 P.M., New York City time, on the
business day prior to the Closing Date.

     3.     Representations and Warranties of the Issuers. The Issuers represent and warrant,
jointly and severally, to, and agree with, the Initial Purchasers as of the date hereof and the
Closing Date (with respect to those representations and warranties made as of the Closing Date,
after giving effect to the transactions contemplated by this Agreement) that:

     (a)   Preliminary Offering Memorandum, Time of Sale Information and Offering Memorandum.
The Preliminary Offering Memorandum, as of its date, did not, the Time of Sale Information,
taken as a whole, at the Time of Sale, did not, and at the Closing Date will not, and the
Offering Memorandum, as of its date and as of the Closing Date will not contain any untrue
statement of a material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were made, not
misleading; provided that the Issuers make no representation or warranty with
respect to any statements or omissions made in reliance upon and

4

 

in conformity with information relating to any Initial Purchaser furnished to the Company in
writing by such Initial Purchaser through the Representative expressly for use in the
Preliminary Offering Memorandum, the other Time of Sale Information or the Offering
Memorandum, it being understood and agreed that the only such information furnished by any
Initial Purchaser consists of the information described in Section 7(b) below.

     (b)   Additional Written Communications. Other than the Preliminary Offering Memorandum
and the Offering Memorandum, the Issuers (including their agents and representatives, other
than the Initial Purchasers in their capacity as such) have not made, used, prepared,
authorized, approved or referred to and will not prepare, make, use, authorize, approve or
refer to any written communication that constitutes an offer to sell or solicitation of an
offer to buy the Securities other than the documents listed on Annex A hereto, including a
pricing supplement substantially in the form of Annex B hereto, and other written
communications used in accordance with Section 4(c) which has not been reasonably objected
to by the Representative in accordance with Section 4(c).

     (c)   Incorporated Documents. Except as otherwise disclosed therein, the documents
incorporated by reference in the Time of Sale Information and the Offering Memorandum, when
filed with the Commission and the Canadian Securities Regulators, conformed or will conform,
as the case may be, in all material respects to the applicable requirements of the United
States Securities Exchange Act of 1934, as amended (the “Exchange Act”), the rules and
regulations of the Commission thereunder and applicable Canadian Securities Laws, and did
not and will not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading.

     (d)   Financial Statements. The consolidated financial statements and the related notes
thereto of NNC and its subsidiaries included or incorporated by reference in each of the
Time of Sale Information and the Offering Memorandum comply in all material respects with
the applicable requirements of the Securities Act, the Exchange Act and applicable Canadian
Securities Laws and present fairly the consolidated financial position of NNC and its
subsidiaries as of the dates indicated and the results of their operations and the changes
in their cash flows for the periods specified; such financial statements have been prepared
in conformity with generally accepted accounting principles in the United States applied on
a consistent basis throughout the periods covered thereby; the other financial information
included or incorporated by reference in each of the Time of Sale Information and the
Offering Memorandum has been derived from the accounting records of NNC and its subsidiaries
and presents fairly the information shown thereby; and the “Summary selected historical
consolidated financial information of NNC” set forth in the Time of Sale Information and the
Offering Memorandum is accurately presented in all material respects and prepared on a basis
consistent with the audited and unaudited historical consolidated financial statements from
which it has been derived.

5

 

     (e)   No Material Adverse Change. Since the date of the most recent consolidated
financial statements of NNC included or incorporated by reference in the Time of Sale
Information and the Offering Memorandum (exclusive of any amendment or supplement thereto on
or after the date of this Agreement), except in each case as otherwise disclosed in,
incorporated by reference in or contemplated by the Time of Sale Information and the
Offering Memorandum; (i) there has not been any change in the capital stock or long-term
debt of NNC and its consolidated subsidiaries, or any dividend or distribution of any kind
declared, set aside for payment, paid or made by NNC on any class of its capital stock, or
any material adverse change, or any event that could reasonably be expected to result in a
material adverse change in the business, properties, senior management, financial condition,
stockholders’ equity or results of operations of NNC and its subsidiaries taken as a whole;
(ii) none of NNC or any of its subsidiaries has entered into any transaction or agreement or
incurred any liability or obligations, direct or contingent, in each case, that is material
to NNC and its subsidiaries taken as a whole; and (iii) none of NNC or any of its
subsidiaries has sustained any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor disturbance
or dispute or any action, order or decree of any court or arbitrator or governmental or
regulatory authority, in each case, that is material to NNC and its subsidiaries, taken as a
whole.

     (f)   Organization and Good Standing. The Issuers (i) have each been duly organized and
are validly existing and in good standing under the laws of their respective jurisdictions
of organization and (ii) have all corporate power and authority necessary to conduct their
businesses as described in the Time of Sale Information and the Offering Memorandum, except
where the failure to have such power or authority would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the business,
properties, senior management, financial condition, stockholders’ equity or results of
operations of NNC and its subsidiaries taken as a whole or on the performance by the Issuers
of their obligations under the Securities (a “Material Adverse Effect”).

     (g)   Capitalization. NNC has an authorized capitalization as set forth in the Time of
Sale Information and the Offering Memorandum.

     (h)   Due Authorization. Each Issuer has the corporate power and authority to execute
and deliver this Agreement, the Notes, the Indenture (including the Guarantees set forth
therein), the Exchange Securities and the Registration Rights Agreement (the “Transaction
Documents”), as applicable, and to perform its obligations hereunder and thereunder.

     (i)   The Indenture. The execution and delivery of the Indenture has been duly
authorized by each Issuer and assuming due authorization thereof by the other parties
thereto, when duly executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and binding agreement of each Issuer enforceable
against each such Issuer in accordance with its terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights (including applicable non-U.S. laws or
governmental actions) and to general principles of equity (it being understood that the
enforceability thereof in Canada may be limited by the Currency Act (Canada), which
precludes

6

 

Canadian courts from awarding a judgment for an amount expressed in a currency other than
Canadian Dollars and to the extent that any requirement to pay interest at a greater rate
after than before default may not be enforceable in Canada if the same is construed by a
Canadian court to constitute a penalty) (collectively, the “Enforceability Exceptions”); and
on the Closing Date, the Indenture will conform in all material respects to the requirements
of the United States Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”),
and the rules and regulations of the Commission applicable to an indenture that is qualified
thereunder.

     (j)   The Notes and the Guarantees. The issuance and sale of the Notes have been duly
authorized by the Company and, when duly executed, authenticated, issued and delivered as
provided in the Indenture and paid for as provided herein, the Notes will be duly issued and
will constitute valid and binding obligations of the Company enforceable against the Company
in accordance with their terms, subject to the Enforceability Exceptions, and will be
entitled to the benefits of the Indenture; and the execution and delivery of each Guarantee
has been duly authorized by the applicable Guarantor and, when duly endorsed by such
Guarantor as provided in the Indenture, each Guarantee will constitute a valid and binding
agreement of such Guarantor, enforceable against such Guarantor in accordance with its
terms, subject to the Enforceability Exceptions.

     (k)   The Exchange Securities. On the Closing Date, (i) the issuance of the Exchange
Notes will have been duly authorized by the Company and, when the Exchange Notes have been
duly executed, authenticated, issued and delivered in exchange for the Notes as contemplated
by the Registration Rights Agreement and the Indenture, the Exchange Notes will be duly
issued and will constitute valid and binding obligations of the Company, enforceable against
the Company in accordance with their terms, subject to the Enforceability Exceptions, and
will be entitled to the benefits of the Indenture; and (ii) the execution and delivery of
the Exchange Note Guarantees, will have been duly authorized by the applicable Guarantor
and, when duly endorsed by such Guarantor as contemplated by the Registration Rights
Agreement and the Indenture, each Exchange Note Guarantee of a Guarantor will constitute a
valid and binding agreement of such Guarantor, enforceable against such Guarantor in
accordance with its terms, subject to the Enforceability Exceptions.

     (l)   Purchase and Registration Rights Agreements. The execution and delivery of this
Agreement has been duly authorized by each Issuer; it has been duly executed and delivered
by each Issuer; and the Registration Rights Agreement has been duly authorized by each
Issuer and, when duly executed and delivered in accordance with its terms by each of the
parties thereto, will constitute a valid and binding agreement of each such Issuer
enforceable against each such Issuer in accordance with its terms, subject to the
Enforceability Exceptions, and except that rights to indemnity and contribution thereunder
may be limited by applicable law and public policy considerations.

7

 

     (m)   Descriptions of the Transaction Documents. The Indenture conforms, and each of the
Registration Rights Agreement, the Securities and the Exchange Securities will conform, in
all material respects to the description thereof, contained in the Time of Sale Information
and the Offering Memorandum.

     (n)   No Violation or Default. None of the Issuers is (i) in violation of its charter or
by-laws or similar organizational documents; (ii) in default, and no event has occurred and
is continuing that, with notice or lapse of time or both, would constitute such a default,
under any indenture, mortgage, deed of trust, loan agreement or other agreement or
instrument to which such Issuer is bound or to which any of the property or assets of such
Issuer is subject; or (iii) in violation of any applicable law or statute or any applicable
judgment, order, rule or regulation of any relevant court or arbitrator or governmental or
regulatory authority, except, in each case as otherwise disclosed in, incorporated by
reference in or contemplated by the Time of Sale Information and the Offering Memorandum,
and except, in the case of clauses (ii) and (iii) above, for any such default or violation
that would not, individually or in the aggregate, have a Material Adverse Effect.

     (o)   No Order or Proceedings. There is no order, ruling or direction of any Canadian
Securities Regulator which would deny the benefit of an exemption otherwise provided for
under applicable Canadian Securities Laws with respect to the distribution of the Securities
or the Exchange Securities, and no proceedings which would reasonably be expected to result
in any such order or ruling have been instituted or are pending or, to the knowledge of the
Issuers, threatened.

     (p)   No Conflicts. The execution, delivery and performance by each Issuer of each of
the Transaction Documents to which each is a party, the issuance and sale of the Securities
and compliance by each Issuer with the terms thereof and the consummation of the
transactions contemplated by the Transaction Documents by each Issuer will not (i) conflict
with or result in a breach or violation of any of the terms or provisions of, or constitute
a default under, or result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of any Issuer pursuant to, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to which any Issuer is a party or by
which any Issuer is bound or to which any of the property or assets of any Issuer is
subject, (ii) result in any violation of the provisions of the charter or by-laws or similar
organizational documents of any Issuer, or (iii) result in the violation of any applicable
law or statute or any applicable judgment, order, rule or regulation of any relevant court
or arbitrator or governmental or regulatory authority; except, in the case of clauses (i)
and (iii) above, for any such conflict, breach or violation that would not, individually or
in the aggregate, have a Material Adverse Effect.

     (q)   No Consents Required. No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or regulatory authority in
the United States or Canada is required for the execution, delivery and performance by each
Issuer of each of the Transaction Documents to which each is a party, the issuance and sale
of the Securities and compliance by each Issuer with the terms thereof and the consummation
of the transactions contemplated by the Transaction Documents and the issuance and delivery
of the Exchange Securities in exchange for the Notes, except for (i) such consents,
approvals, authorizations, orders and registrations or

8

 

qualifications as may be required under applicable state securities laws in connection with
the purchase and resale of the Securities by the Initial Purchasers, (ii) notices to be
filed by the Company under s.12 of the Securities Act (Quebec), (iii) the delivery of the
requisite number of copies of the Offering Memorandum to, and the filing of the required
reports in the prescribed form and executed in accordance with applicable securities laws of
the Relevant Provinces, together with the requisite filing fees and, in the case of British
Columbia, the requisite fee checklist, (iv) with respect to the Exchange Securities, such
consents, approvals, authorizations, orders and registrations or qualifications as may be
required under the Securities Act, and applicable state securities laws, as contemplated by
the Registration Rights Agreement, (v) such consents, approvals, authorizations, orders and
registrations or qualifications as may be required with respect to the Exchange Securities,
under applicable provincial securities laws and Part VIII of the Canada Business
Corporations Act, and (vi) with respect to the filing of a shelf registration statement as
contemplated in the Registration Rights Agreement, such consents, approvals, authorizations,
orders and registrations or qualifications as may be required under Part VIII of the Canada
Business Corporations Act.

     (r)   Legal Proceedings. Except as described in, incorporated by reference in or
contemplated by the Time of Sale Information and the Offering Memorandum, (i) there is no
litigation, arbitration, legal proceeding or governmental or regulatory investigation
involving NNC or any of its subsidiaries that, if determined adversely to NNC or such
subsidiary, would individually or in the aggregate, have a Material Adverse Effect, and (ii)
to the knowledge of the Issuers, no such litigation, arbitration, proceeding or
investigation is pending or threatened.

     (s)   Independent Accountants. Deloitte & Touche LLP, who have certified certain
consolidated financial statements of NNC and its subsidiaries and the Company and its
subsidiaries, are independent public accountants with respect to NNC and its consolidated
subsidiaries and the Company and its consolidated subsidiaries within the meaning of Rule
101 of the Code of Professional Conduct of the American Institute of Certified Public
Accountants and its interpretations and rulings thereunder.

     (t)   Title to Intellectual Property. Except as disclosed in the Time of Sale
Information and the Offering Memorandum, NNC and its subsidiaries maintain its Material
Intellectual Property (as defined below) in a commercially reasonable, prudent manner
consistent with its past practices and with respect to any Material Intellectual Property
that has been infringed, misappropriated or diluted, in each case in a material respect, by
a third party, NNC or the relevant subsidiary has, unless NNC or such subsidiary has
reasonably determined that such action would be of negligible value, economic or otherwise,
taken commercially reasonable steps consistent with its past practices to sue for
infringement, misappropriation or dilution and recovered any and all damages for such
infringement, misappropriation or dilution, and/or taken such other actions as NNC or such
subsidiary reasonably deemed appropriate under the circumstances to protect such Material
Intellectual Property.

9

 

     “Material Intellectual Property” means, at the time of determination, any intellectual
property that is one of the 100 most valuable items of intellectual property owned by NNC
and its subsidiaries taken as a whole at such time to the business of NNC and its
subsidiaries taken as a whole, as such business is presently conducted or proposed to be
conducted, as reasonably determined by NNC and its subsidiaries, acting in their reasonable
discretion.

     (u)   Investment Company Act. No Issuer is, and after giving effect to the offering and
sale of the Notes and the application of the proceeds thereof as described in the Time of
Sale Information and the Offering Memorandum, no Issuer will be, an “investment company” or
an entity “controlled” by an “investment company” within the meaning of the Investment
Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder
(collectively, “Investment Company Act”).

     (v)   Accounting Controls. NNC and the Company have each disclosed in the Time of Sale
Information and the Offering Memorandum and the documents incorporated by reference therein,
(x) all existing material weaknesses related to its internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) that it has identified or
that its independent public accountants have identified and disclosed to NNC or the Company,
as the case may be; (y) that its internal control over financial reporting was not effective
as at December 31, 2005; and (z) its disclosure controls and procedures (as defined in Rule
13a-15(e) under the Exchange Act) are not effective to provide reasonable assurance that
information required to be disclosed in the reports NNC or the Company, as the case may be,
files and submits under the Exchange Act is recorded, processed, summarized and reported as
and when required (most recently, as at March 31, 2006). Except as disclosed or
incorporated by reference in the Time of Sale Information and the Offering Memorandum, NNC
and its subsidiaries maintain systems of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with management’s
general or specific authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.

     (w)   No Unlawful Payments. NNC and the Company each has policies and procedures in
effect that prohibit the following activities by any director, officer, agent, employee or
other person associated with or acting on behalf of either of them or any of their
respective subsidiaries: (i) the use of corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expense relating to political activity; (ii) any direct or
indirect unlawful payment to any foreign or domestic government official or employee from
corporate funds; (iii) the violation of any provision of the U.S. Foreign Corrupt Practices
Act of 1977; or (iv) any bribe, unlawful rebate, payoff, influence payment, kickback or
other unlawful payment.

10

 

     (x)   Solvency. Except as disclosed in or incorporated by reference in the Time of Sale
Information and the Offering Memorandum, including without limitation in the risk factors
titled “NNC’s Guarantee may be unenforceable, subordinated or limited in scope under the
insolvency and creditor protection laws of Canada”, “NNI’s Guarantee may be unenforceable
under U.S. federal and state fraudulent conveyance statutes” and “Material adverse legal
judgments, fines, penalties or settlements, including the Proposed Class Action Settlement,
could have a material adverse effect on our business, results of operations, financial
condition and liquidity, which could be very significant and could prevent the Issuers from
fulfilling, among other things, their obligations under the Notes and the Guarantees”,
immediately after the Closing Date, each Issuer (after giving effect to the issuance of the
Securities and the other transactions related thereto as described in the Time of Sale
Information and the Offering Memorandum) will be Solvent. As used in this paragraph, the
term “Solvent” means, (A) with respect to NNI on a particular date, that on such date (i)
the fair market value of the assets of NNI, at a fair valuation viewing NNI as a going
concern, exceeds its debts and liabilities, subordinated, contingent or otherwise; (ii) the
present fair saleable value of the property of NNI exceeds the amount that will be required
to pay the probable liability of its debts and other liabilities, subordinated, contingent
or otherwise as such debts and other liabilities become absolute and matured; (iii) NNI will
be able to pay its debts and liabilities, subordinated, contingent or otherwise as such
debts and liabilities become absolute and matured; and (iv) NNI will not have unreasonably
small capital with which to conduct the business in which it is engaged as such business is
now conducted and proposed to be conducted after the Closing Date; and (B) with respect to
NNC or the Company on a particular date, (i) the aggregate property of NNC or the Company at
fair valuation, or if disposed of at a fairly conducted sale under legal process, is
sufficient to enable payment of all its obligations, due and accruing due; (ii) the property
of NNC or the Company is, at a fair valuation, greater than the total amount of liabilities,
including contingent liabilities, of NNC or the Company, as applicable; (iii) NNC or the
Company has not ceased paying its current obligations in the ordinary course of business as
they generally become due; and (iv) NNC or the Company is not for any reason unable to meet
its obligations as they generally become due; in each case, it being understood that the
Issuers cannot be certain as to how a court would apply the foregoing standards to any
contingent liabilities in determining whether the relevant Issuer was solvent at the
relevant time.

     (y)   No Broker’s Fees. Neither NNC nor any of its subsidiaries is a party to any
contract, agreement or understanding with any person (other than this Agreement) that would
give rise to a valid claim against NNC or any of its subsidiaries or any Initial Purchaser
for a brokerage commission, finder’s fee or like payment in connection with the offering and
sale of the Securities.

     (z)   Rule 144A Eligibility. On the Closing Date, the Securities will not be of the same
class as securities listed on a U.S. national securities exchange registered under Section 6
of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system; and each of
the Preliminary Offering Memorandum and the Offering Memorandum, as of its respective date,
contains or will contain all the information that, if requested by a prospective purchaser
of the Securities, would be required to be provided to such prospective purchaser pursuant
to Rule 144A(d)(4) under the Securities Act.

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     (aa)   No Integration. Neither the Company nor any of its affiliates (as defined in Rule
501(b) of Regulation D) has, directly or through any agent (other than the Initial
Purchasers, as to which no representation is made), sold, offered for sale, solicited offers
to buy or otherwise negotiated in respect of, any security (as defined in the Securities
Act), that is or will be integrated with the sale of the Securities in a manner that would
require registration of the Securities under the Securities Act.

     (bb)   No General Solicitation or Directed Selling Efforts. None of the Company or any
of its affiliates or any other person acting on its or their behalf (other than the Initial
Purchasers, as to which no representation is made) has (i) solicited offers for, or offered
or sold, the Securities by means of (A) any form of general solicitation or general
advertising within the meaning of Rule 502(c) of Regulation D or (B) in any manner involving
a public offering within the meaning of Section 4(2) of the Securities Act, or (ii) engaged
in any directed selling efforts with respect to the Securities within the meaning of
Regulation S under the Securities Act (“Regulation S”), and all such persons have complied
with the offering restrictions requirements of Regulation S.

     (cc)   Securities Law Exemptions. Assuming the accuracy of the representations and
warranties of the Initial Purchasers contained in Section 1(c) (including Annex C hereto)
and their compliance with their agreements set forth therein, and except in connection with
the transactions contemplated by the Registration Rights Agreement, it is not necessary, in
connection with the issuance and sale of the Securities to the Initial Purchasers and the
offer, resale and delivery of the Securities by the Initial Purchasers in the manner
contemplated by this Agreement, the Time of Sale Information and the Offering Memorandum, to
register the Securities under the Securities Act, to comply with the “prospectus
requirement” as that term is defined under applicable Canadian Securities Laws or to qualify
the Indenture under the Trust Indenture Act.

     (dd)   No Stabilization. None of the Issuers has taken, directly or indirectly, any
action designed to or that could reasonably be expected to cause or result in any
stabilization or manipulation of the price of the Securities.

     (ee)   Margin Rules. Neither the issuance, sale and delivery of the Notes nor the
application of the proceeds thereof by the Company as described in the Time of Sale
Information and the Offering Memorandum will violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System or any other regulation of such Board of Governors.

     (ff)   Forward-Looking Statements. No forward-looking statement (within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in the Time
of Sale Information and the Offering Memorandum has been made or reaffirmed without a
reasonable basis or has been disclosed other than in good faith.

12

 

     (gg)   Statistical and Market Data. Nothing has come to the attention of the Issuers
that has caused the Issuers to believe that the statistical and market-related data included
or incorporated by reference in the Time of Sale Information and the Offering Memorandum is
not based on or derived from sources that are reliable and accurate in all material
respects.

     (hh)   Sarbanes-Oxley Act. With respect to the period subsequent to the filing of NNC’s
Annual Report on Form 10-K/A for the year ended December 31, 2005, except as disclosed in or
incorporated by reference in the Time of Sale Information and the Offering Memorandum, to
the knowledge of NNC, there is and has been no failure on the part of NNC or its
subsidiaries or their respective directors or officers, in their capacities as such, to
comply in all material respects with any applicable provision of the United States
Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith
(the “Sarbanes-Oxley Act”), including Section 402 related to loans and Sections 302 and 906
related to certifications.

     4.     Further Agreements of the Issuers. The Issuers jointly and severally covenant and
agree with each Initial Purchaser that:

     (a)   Delivery of Copies. The Company will deliver to the Initial Purchasers as many
copies of the Preliminary Offering Memorandum, any other Time of Sale Information and the
Offering Memorandum (including all amendments and supplements thereto) as the Representative
may reasonably request.

     (b)   Offering Memorandum, Amendments or Supplements. Before finalizing the Offering
Memorandum or making or distributing any amendment or supplement to any of the Time of Sale
Information or the Offering Memorandum or filing with the Commission any document that will
be incorporated by reference therein, the Company will furnish to the Representative and
counsel for the Initial Purchasers a copy of the proposed Offering Memorandum or such
amendment or supplement or document to be incorporated by reference therein, for review, and
will not distribute any such proposed Offering Memorandum, amendment or supplement or file
any such document with the Commission to which the Representative reasonably objects.

     (c)   Additional Written Communications. Before using, authorizing, approving or
referring to any written communication (as defined in the Securities Act) that constitutes
an offer to sell or a solicitation of an offer to buy the Securities (an “Issuer Written
Communication”) (other than written communications that are listed on Annex A hereto and the
Offering Memorandum), the Company will furnish to the Representative and counsel for the
Initial Purchasers a copy of such written communication for review and will not use,
authorize, approve or refer to any such written communication to which the Representative
reasonably objects.

     (d)   Notice to the Representative. The Company will advise the Representative promptly,
and confirm such advice in writing, (i) of the issuance by any governmental or regulatory
authority of any order preventing or suspending the use of the Time of Sale Information or
the Offering Memorandum or the initiation or threatening of any proceeding

13

 

for that purpose; (ii) of the occurrence of any event at any time prior to the completion of
the initial offering of the Securities as a result of which any of the Time of Sale
Information, taken as a whole, or the Offering Memorandum as then amended or supplemented
would include any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the circumstances
existing when the Time of Sale Information or the Offering Memorandum is delivered to a
purchaser, not misleading; and (iii) of the receipt by the Company of any notice with
respect to any suspension of the qualification of the Securities for offer and sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose; and the
Company will use its reasonable best efforts to prevent the issuance of any such order
preventing or suspending the use of any of the Time of Sale Information or the Offering
Memorandum or suspending any such qualification of the Securities and, if any such order is
issued, will obtain as soon as possible the withdrawal thereof.

     (e)   Ongoing Compliance of the Offering Memorandum and Time of Sale Information. (1) If
at any time prior to the earlier of (x) the completion of the initial offering of the
Securities and (y) the date that is nine months following the Closing Date, (i) any event
shall occur or condition shall exist as a result of which the Offering Memorandum as then
amended or supplemented would include any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in the light of
the circumstances existing when the Offering Memorandum is delivered to a purchaser, not
misleading or (ii) it is necessary to amend or supplement the Offering Memorandum to comply
with law, the Company will promptly notify the Initial Purchasers thereof and promptly
prepare and, subject to paragraph (b) above, furnish to the Initial Purchasers such
amendments or supplements to the Offering Memorandum (or any document to be filed with the
Commission or the Canadian Securities Regulators and incorporated by reference therein) as
may be necessary so that the statements in the Offering Memorandum as so amended or
supplemented (or including such document to be incorporated by reference therein) will not,
in the light of the circumstances existing when the Offering Memorandum is delivered to a
purchaser, be misleading or so that the Offering Memorandum will comply with law and (2) if
at any time prior to the earlier of (x) the completion of the initial offering of the
Securities and (y) the date that is nine months following the Closing Date (i) any event
shall occur or condition shall exist as a result of which the Time of Sale Information,
taken as a whole, as then amended or supplemented would include any untrue statement of a
material fact or omit to state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not misleading or
(ii) it is necessary to amend or supplement any of the Time of Sale Information in order to
comply with law, the Company will promptly notify the Initial Purchasers thereof and
promptly prepare and, subject to paragraph (b) above, furnish to the Initial Purchasers,
such amendments or supplements to the Time of Sale Information (or any document to be filed
with the Commission or the Canadian Securities Regulators and incorporated by reference
therein) as may be necessary so that the statements in the Time of Sale Information as so
amended or supplemented (or including such document to be incorporated by reference therein)
will not, in the light of the circumstances under which they were made, be misleading or so
that any of the Time of Sale Information as so amended or supplemented will comply with law.

14

 

     (f)   Canadian Reports. The Issuers will file, within the time periods prescribed by the
applicable Canadian Securities Laws, such documents and reports as may be required to be
filed by the Issuers with Canadian Securities Regulators under the applicable Canadian
Securities Laws relating to the private placement of Securities by the Initial Purchasers;
provided that the Initial Purchasers have delivered a request to effect such filings
together with such information as to permit the Issuers to do so, and the Issuers will pay
any filing fee prescribed with respect thereto.

     (g)   Blue Sky Compliance. The Company will arrange for the qualification of the
Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as
the Representative shall reasonably request and will continue such qualifications in effect
so long as required for the offering and resale of the Securities; provided that
none of the Issuers shall be required to (i) qualify as a foreign corporation or other
entity or as a dealer in securities in any such jurisdiction where it would not otherwise be
required to so qualify, (ii) file any general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not
otherwise so subject.

     (h)   Clear Market. During the period from the date hereof through and including the
date that is 30 days after the date hereof, the Issuers will not, without the prior written
consent of the Representative, offer, sell, contract to sell or otherwise dispose of any
debt securities (other than any equity linked or convertible securities or any intercompany
debt or any related external coupon stripping transactions) issued or guaranteed by any of
the Issuers and having a tenor of more than one year.

     (i)   Use of Proceeds. The Company will apply the net proceeds from the sale of the
Securities as described in the Time of Sale Information and the Offering Memorandum under
the heading “Use of Proceeds”.

     (j)   Supplying Information. While the Securities remain outstanding and are “restricted
securities” within the meaning of Rule 144(a)(3) under the Securities Act, the Issuers will,
during any period in which the Company is not subject to and in compliance with Section 13
or 15(d) of the Exchange Act, furnish to holders of the Securities and prospective
purchasers of the Securities designated by such holders, upon the request of such holders or
such prospective purchasers, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.

     (k)   PORTAL and DTC. The Company will assist the Initial Purchasers in arranging for
the Securities to be designated Private Offerings, Resales and Trading through Automated
Linkages (“PORTAL”) Market securities in accordance with the rules and regulations adopted
by the National Association of Securities Dealers, Inc. (“NASD”) relating to trading in the
PORTAL Market and for the Securities to be eligible for clearance and settlement through The
Depository Trust Company (“DTC”).

15

 

     (l)   No Resales by the Company. Until the issuance of the Exchange Securities, the
Company will not, and will not permit any of its affiliates (as defined in Rule 144 under
the Securities Act) to, resell any of the Securities that have been acquired by any of them,
except for Securities purchased by the Company or any of its affiliates and resold in a
transaction registered under the Securities Act.

     (m)   No Integration. None of the Company, any of its affiliates (as defined in Rule
501(b) of Regulation D) or any person acting on behalf of the Company or such affiliate
will, directly or through any agent (other than the Initial Purchasers, as to which no
covenant is given), sell, offer for sale, solicit offers to buy or otherwise negotiate in
respect of any security (as defined in the Securities Act), that is or will be integrated
with the sale of the Securities in a manner that would require registration of the
Securities under the Securities Act.

     (n)   No General Solicitation or Directed Selling Efforts. None of the Company or any of
its affiliates or any other person acting on its or their behalf (other than the Initial
Purchasers, as to which no covenant is given) will (i) solicit offers for, or offer or sell,
the Securities by means of (A) any form of general solicitation or general advertising
within the meaning of Rule 502(c) of Regulation D or (B) in any manner involving a public
offering within the meaning of Section 4(2) of the Securities Act, or (ii) engage in any
directed selling efforts with respect to the Securities within the meaning of Regulation S,
and all such persons will comply with the offering restrictions requirement of Regulation S.
The Company and its affiliates will not provide access to the Electronic Roadshow (as
defined in Annex A) to any prospective investor in the Securities that is a resident in, or
acting on behalf of an entity resident in, any of the provinces or territories of Canada (it
being understood that no covenant is made by the Company with respect to any action taken by
any Initial Purchaser).

     (o)   No Stabilization. None of the Issuers will take, directly or indirectly, any
action designed to or that could reasonably be expected to cause or result in any
stabilization or manipulation of the price of the Securities.

     5.     Certain Agreements of the Initial Purchasers. Each Initial Purchaser hereby
represents and agrees that it has not and will not use, authorize use of, refer to, or participate
in the planning for use of, any written communication that constitutes an offer to sell or the
solicitation of an offer to buy the Securities other than (i) a written communication that contains
no “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) that was not
included (including through incorporation by reference) in the Preliminary Offering Memorandum,
(ii) any written communication listed on Annex A or prepared pursuant to Section 4(c) above, (iii)
any written communication prepared by such Initial Purchaser and approved by the Company in advance
in writing or (iv) any written communication relating to or that contains the terms of the
Securities and/or other information that was included (including through incorporation by
reference) in the Preliminary Offering Memorandum.

16

 

     6.     Conditions of Initial Purchasers’ Obligations. The obligation of each Initial
Purchaser to purchase Securities on the Closing Date as provided herein is subject to the
performance in all material respects by each Issuer of their respective covenants and other
obligations hereunder and to the following additional conditions:

     (a)   Representations and Warranties. The representations and warranties of each Issuer
contained herein shall be true and correct on the date hereof and on and as of the Closing
Date; and the statements of each Issuer and their respective officers made in any
certificates delivered pursuant to this Agreement shall be true and correct on and as of the
Closing Date.

     (b)   No Downgrade. Subsequent to the execution and delivery of this Agreement, (i) no
downgrading shall have occurred in the rating accorded the Securities or any other debt
securities or preferred stock issued or guaranteed by any Issuer by any “nationally
recognized statistical rating organization”, as such term is defined by the Commission for
purposes of Rule 436(g)(2) under the Securities Act; and (ii) no such organization shall
have publicly announced that it has under surveillance or review, or has changed its outlook
with respect to, its rating of the Securities or of any other debt securities or preferred
stock issued or guaranteed by any Issuer (other than an announcement with positive
implications of a possible upgrading).

     (c)   No Material Adverse Change. Subsequent to the execution and delivery of this
Agreement, no event or condition of a type described in Section 3(e) hereof shall have
occurred or shall exist, which event or condition is not described in or contemplated by the
Time of Sale Information (excluding any amendment or supplement thereto or any document
filed with the Commission after the Time of Sale and incorporated by reference therein) and
the Offering Memorandum (excluding any amendment or supplement thereto or any document filed
with the Commission after the date hereof and incorporated by reference therein) and the
effect of which in the reasonable judgment of the Representative, makes it impracticable or
inadvisable to proceed with the offering, sale or delivery of the Securities on the terms
and in the manner contemplated by this Agreement and the Offering Memorandum.

     (d)   Officers’ Certificate. The Representative shall have received on and as of the
Closing Date a certificate, on behalf of NNC, of either (A) the chief executive officer and
the chief financial officer of NNC or (B) one of the aforesaid officers and any one of the
Corporate Secretary, the Controller or the Treasurer of NNC (i) confirming that such
officers have reviewed the Offering Memorandum and, to the best knowledge of such officers
after reasonable investigation, the representation set forth in Section 3(a) hereof is true
and correct, (ii) confirming that the other representations and warranties of the Issuers in
this Agreement are true and correct (in each case, if not qualified as to materiality or
Material Adverse Effect, in all material respects) and that the Issuers have complied with
all agreements and satisfied all conditions on their part to be performed or satisfied
hereunder at or prior to the Closing Date in all material respects and (iii) to the effect
set forth in paragraphs (b) and (c) above.

17

 

     (e)   Comfort Letters. On the date of this Agreement and on the Closing Date, Deloitte &
Touche LLP shall have furnished to the Representative, at the request of the Company,
letters, dated the respective dates of delivery thereof and addressed to the Initial
Purchasers and the Board of Directors of each of the Issuers, in form and substance
reasonably satisfactory to the Representative, containing statements and information of the
type customarily included in accountants’ “comfort letters” to initial purchasers with
respect to the financial statements and certain financial information contained or
incorporated by reference in the Time of Sale Information and the Offering Memorandum.

     (f)   Opinion of Counsel for the Company. Gordon A. Davies, Esq., General
Counsel-Corporate and Corporate Secretary of NNC and the Company, Cleary Gottlieb Steen &
Hamilton LLP, special U.S. counsel for the Issuers, and Ogilvy Renault LLP, Canadian counsel
for the Issuers, shall have furnished to the Representative, at the request of the Company,
their written opinion or letter, as the case may be, dated the Closing Date and addressed to
the Initial Purchasers, in form and substance reasonably satisfactory to the Representative,
to the effect set forth in Annexes D-1, D-2 and D-3, respectively, hereto.

     (g)   Opinion and 10b-5 Statement of Counsel for the Initial Purchasers. The
Representative shall have received on and as of the Closing Date an opinion and 10b-5
statement from Cahill Gordon & Reindel llp, counsel for the Initial Purchasers, and
an opinion from Blake, Cassels & Graydon LLP, Canadian counsel for the Initial Purchasers,
with respect to such matters as the Representative may reasonably request, and such counsel
shall have received such documents and information as they may reasonably request to enable
them to pass upon such matters.

     (h)   No Legal Impediment to Issuance. No action shall have been taken and no statute,
rule, regulation or order shall have been enacted, adopted or issued by any United States
federal or Canadian federal, state, provincial, territorial or foreign governmental or
regulatory authority that would, as of the Closing Date, prevent the issuance or sale of the
Notes or the issuance of the Guarantees; and no injunction or order of any United States
federal or Canadian federal, state, provincial, territorial or foreign court shall have been
issued that would, as of the Closing Date, prevent the issuance or sale of the Notes or the
issuance of the Guarantees.

     (i)   Good Standing. The Representative shall have received on and as of the Closing
Date evidence reasonably satisfactory to the Representative of the good standing of the
Issuers in their respective jurisdictions of organization and the jurisdictions of their
principal executive offices, in each case in writing or any standard form of
telecommunication, from the appropriate governmental authorities of such jurisdictions.

     (j)   Registration Rights Agreement. The Initial Purchasers shall have received a
counterpart of the Registration Rights Agreement that shall have been executed and delivered
by a duly authorized officer of each Issuer.

     (k)   PORTAL and DTC. The Securities shall have been approved by the NASD for trading in
the PORTAL Market and shall be eligible for clearance and settlement through DTC.

18

 

     (l)   Additional Documents. On or prior to the Closing Date, the Issuers shall have
furnished to the Representative such further certificates and documents as the
Representative may reasonably request.

     All opinions, letters, certificates and evidence mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form
and substance reasonably satisfactory to counsel for the Initial Purchasers.

     7.     Indemnification and Contribution.

     (a)   Indemnification of the Initial Purchasers. The Issuers, jointly and severally, agree to
indemnify and hold harmless each Initial Purchaser, its affiliates, directors and officers and each
person, if any, who controls such Initial Purchaser within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, legal fees and other expenses incurred in
connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are
incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary Offering Memorandum, any of the
other Time of Sale Information, the Electronic Roadshow, any Issuer Written Communication or the
Offering Memorandum (or any amendment or supplement thereto) or any omission or alleged omission to
state therein a material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except insofar as such losses,
claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity with any information
relating to any Initial Purchaser furnished to the Company in writing by such Initial Purchaser
through the Representative expressly for use therein, it being understood and agreed that the only
such information furnished by any Initial Purchaser consists of the information described as such
in subsection (b) below.

     (b)   Indemnification of the Issuers. Each Initial Purchaser agrees, severally and not jointly,
to indemnify and hold harmless each Issuer, each of the Issuer’s officers and directors and each
person, if any, who controls any Issuer within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a)
above, but only with respect to any losses, claims, damages or liabilities that arise out of, or
are based upon, any untrue statement or omission or alleged untrue statement or omission made in
reliance upon and in conformity with any information relating to such Initial Purchaser furnished
to the Company in writing by such Initial Purchaser through the Representative expressly for use in
any of the Time of Sale Information and the Offering Memorandum (or any amendment or supplement
thereto), it being understood and agreed that the only such information consists of the following:
the information contained in (a) the Preliminary Offering Memorandum and the Offering Memorandum in
the third paragraph, the fifth and sixth sentences of the eleventh paragraph and the thirteenth
paragraph under the caption “Plan of distribution” and (b) the Canadian Preliminary Offering
Memorandum and the Canadian Offering Memorandum in the fourth and sixth paragraphs under the
heading “Relationships between the Company and certain Initial Purchasers”; provided,
however, that the Initial Purchasers shall not be liable for any losses, claims, damages or
liabilities arising out of or based upon the Company’s failure to amend or supplement any of the
Time of Sale Information or the Offering Memorandum pursuant to Section 4(b).

19

 

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

20

 

     (d)   Contribution. If the indemnification provided for in paragraphs (a) and (b) above is
unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of
indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such
proportion as is appropriate to reflect the relative benefits received by the Issuers on the one
hand and the Initial Purchasers on the other from the offering of the Securities or (ii) if the
allocation provided by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i) but also the
relative fault of the Issuers on the one hand and the Initial Purchasers on the other in connection
with the statements or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative benefits received by the Issuers
on the one hand and the Initial Purchasers on the other shall be deemed to be in the same
respective proportions as the net proceeds (before deducting expenses) received by the Company from
the sale of the Securities and the total discounts and commissions received by the Initial
Purchasers in connection therewith, as provided in this Agreement, bear to the aggregate offering
price of the Securities. The relative fault of the Issuers on the one hand and the Initial
Purchasers on the other shall be determined by reference to, among other things, whether the untrue
or alleged untrue statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by any Issuer or by the Initial Purchasers and the
parties’ relative intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission.

     (e)   Limitation on Liability. The Issuers and the Initial Purchasers agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified
Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d)
above shall be deemed to include, subject to the limitations set forth above, any legal or other
expenses incurred by such Indemnified Person in connection with any such action or claim.
Notwithstanding the provisions of this Section 7, in no event shall an Initial Purchaser be
required to contribute any amount in excess of the amount by which the total discounts and
commissions received by such Initial Purchaser with respect to the offering of the Securities
exceeds the amount of any damages that such Initial Purchaser has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers’ obligations to contribute pursuant to this Section 7
are several in proportion to their respective purchase obligations hereunder and not joint.

21

 

     (f)   Non-Exclusive Remedies. The remedies provided for in this Section 7 are not exclusive and
shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at
law or in equity.

     8.     Termination. This Agreement may be terminated in the absolute discretion of the
Representative, by notice to the Company, if after the execution and delivery of this Agreement and
prior to the Closing Date (i) trading generally shall have been suspended or materially limited on
the New York Stock Exchange, the Nasdaq National Market, the Toronto Stock Exchange or the
over-the-counter market; (ii) trading of any securities issued or guaranteed by any Issuer shall
have been suspended on any exchange or in any over-the-counter market; (iii) a general moratorium
on commercial banking activities shall have been declared by New York, Ontario, United States
federal or Canadian federal authorities; or (iv) there shall have occurred any outbreak or
escalation of hostilities or any change in financial markets or any calamity or crisis, either
within or outside the United States or Canada, that, in the reasonable judgment of the
Representative, is material and adverse and makes it impracticable or inadvisable to proceed with
the offering, sale or delivery of the Securities on the terms and in the manner contemplated by
this Agreement, the Time of Sale Information and the Offering Memorandum.

     9.     Defaulting Initial Purchaser.

     (a)   If, on the Closing Date, any Initial Purchaser defaults on its obligation to purchase the
Securities that it has agreed to purchase hereunder, the non-defaulting Initial Purchasers may in
their discretion arrange for the purchase of such Securities by other persons satisfactory to the
Company on the terms contained in this Agreement. If, within 36 hours after any such default by
any Initial Purchaser, the non-defaulting Initial Purchasers do not arrange for the purchase of
such Securities, then the Company shall be entitled to a further period of 36 hours within which to
procure other persons satisfactory to the non-defaulting Initial Purchasers to purchase such
Securities on such terms. If other persons become obligated or agree to purchase the Securities of
a defaulting Initial Purchaser, either the non-defaulting Initial Purchasers or the Company may
postpone the Closing Date for up to five full business days in order to effect any changes that in
the opinion of counsel for the Company or counsel for the Initial Purchasers may be necessary in
the Time of Sale Information, the Offering Memorandum or in any other document or arrangement, and
the Company agrees to promptly prepare any amendment or supplement to the Time of Sale Information
or the Offering Memorandum that effects any such changes. As used in this Agreement, the term
“Initial Purchaser” includes, for all purposes of this Agreement unless the context otherwise
requires, any person not listed in Schedule 1 hereto that, pursuant to this Section 9, purchases
Securities that a defaulting Initial Purchaser agreed but failed to purchase.

     (b)   If, after giving effect to any arrangements for the purchase of the Securities of a
defaulting Initial Purchaser or Initial Purchasers by the non-defaulting Initial Purchasers and the
Company as provided in paragraph (a) above, the aggregate principal amount of such Securities that
remains unpurchased does not exceed one-eleventh of the aggregate principal amount of all the
Securities, then the Company shall have the right to require each non-defaulting Initial Purchaser
to purchase the principal amount of Securities that such Initial Purchaser agreed to purchase
hereunder plus such Initial Purchaser’s pro rata share (based on the principal
amount of Securities that such Initial Purchaser agreed to purchase hereunder) of the Securities of
such defaulting Initial Purchaser or Initial Purchasers for which such arrangements have not been
made.

22

 

     (c)   If, after giving effect to any arrangements for the purchase of the Securities of a
defaulting Initial Purchaser or Initial Purchasers by the non-defaulting Initial Purchasers and the
Company as provided in paragraph (a) above, the aggregate principal amount of such Securities that
remains unpurchased exceeds one-eleventh of the aggregate principal amount of all the Securities,
or if the Company shall not exercise the right described in paragraph (b) above, then this
Agreement shall terminate without liability on the part of the non-defaulting Initial Purchasers.
Any termination of this Agreement pursuant to this Section 9 shall be without liability on the part
of the Issuers, except that the Issuers will continue to be liable for the payment of expenses as
set forth in Section 10(a) hereof and except that the provisions of Section 7 hereof shall not
terminate and shall remain in effect.

     (d)   Nothing contained herein shall relieve a defaulting Initial Purchaser of any liability it
may have to the Company, the Guarantor or any non-defaulting Initial Purchaser for damages caused
by its default.

10.     Payment of Expenses.

     (a)   Whether or not the transactions contemplated by this Agreement are consummated or this
Agreement is terminated, the Issuers, jointly and severally, agree to pay or cause to be paid all
costs and expenses incident to the performance of their respective obligations hereunder, including
without limitation, (i) the costs incident to the authorization, issuance, sale, preparation and
delivery of the Securities; (ii) the costs incident to the preparation and printing of the
Preliminary Offering Memorandum, any other Time of Sale Information and the Offering Memorandum
(including any amendment or supplement thereto) and the distribution thereof; (iii) the costs of
reproducing and distributing each of the Transaction Documents; (iv) the fees and expenses of the
Issuers’ counsel and independent accountants; (v) the reasonable fees and expenses incurred in
connection with the registration or qualification and determination of eligibility for investment
of the Securities under the laws of such jurisdictions as the Representative may reasonably
designate and the preparation, printing and distribution of a Blue Sky Memorandum (including the
reasonable related fees and expenses of counsel for the Initial Purchasers); (vi) any fees charged
by rating agencies for rating the Securities; (vii) the fees and expenses of the Trustee and any
paying agent (including related fees and expenses of any counsel to such parties); (viii) all
expenses and application fees incurred in connection with the application for the inclusion of the
Securities on the PORTAL Market and the approval of the Securities for book-entry transfer by DTC;
and (ix) all expenses incurred by the Company in connection with any “road show” presentation to
potential investors, including all air travel expenses relating thereto (but excluding any expenses
associated with accommodations of any employees of the Initial Purchasers in connection with any
such “road show” presentation and any expenses associated with any meals in connection with any
such “road show” presentation).

     (b)   If (i) this Agreement is terminated pursuant to Section 8(ii), (ii) the Company for any
reason fails to tender the Securities for delivery to the Initial Purchasers or (iii) the Initial
Purchasers decline to purchase the Securities for any reason permitted under this Agreement, the

23

 

Issuers, jointly and severally, agree to reimburse the Initial Purchasers for all out-of-pocket
costs and expenses (including the reasonable fees and expenses of their counsel) reasonably
incurred by the Initial Purchasers in connection with this Agreement and the offering contemplated
hereby.

     11.     Persons Entitled to Benefit of Agreement. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective successors and any
controlling persons referred to herein, and the affiliates, officers and directors of each Initial
Purchaser and the respective officers and directors of the Issuers referred to in Section 7 hereof.
Nothing in this Agreement is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement or any provision contained
herein. No purchaser of Securities from any Initial Purchaser shall be deemed to be a successor
merely by reason of such purchase.

     12.     Survival. The respective indemnities, rights of contribution, representations,
warranties and agreements of the Issuers, and the Initial Purchasers contained in this Agreement or
made by or on behalf of the Issuers, or the Initial Purchasers pursuant to this Agreement or any
certificate delivered pursuant hereto shall survive the delivery of and payment for the Securities
and shall remain in full force and effect, regardless of any termination of this Agreement or any
investigation made by or on behalf of the Issuers or the Initial Purchasers.

     13.     Certain Defined Terms. For purposes of this Agreement, (a) except where otherwise
expressly provided, the term “affiliate” has the meaning set forth in Rule 405 under the Securities
Act; (b) the term “business day” means any day other than a day on which banks are permitted or
required to be closed in New York City; (c) the term “subsidiary” has the meaning set forth in Rule
405 under the Securities Act; and (d) the term “written communication” has the meaning set forth in
Rule 405 under the Securities Act.

     14.     Miscellaneous.

     (a)   Authority of the Representative. Any action by the Initial Purchasers hereunder may be
taken by [                      ] on behalf of the Initial Purchasers, and any
such action taken by [                      ] shall be binding upon the
Initial Purchasers.

     (b)   Notices. All notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted and confirmed by any standard form of
telecommunication. Notices to the Initial Purchasers shall be given to the Representative c/o [                    ]
(fax: [                      ]; Attention: [                      ], with a copy to Michael A.
Becker, Esq., Cahill Gordon & Reindel llp, 80 Pine Street, New York, New York 10005 (fax:
(212) 269-5420). Notices to the Company shall be given to it at 8200 Dixie Road, Brampton,
Ontario, Canada L6T 5P6 (fax: (905) 863-8386) (or such other address and fax number as shall be
furnished to the Representative); Attention: Gordon A. Davies, with a copy to Craig B. Brod, Esq.
and Sandra L. Flow, Esq., Cleary Gottlieb Steen & Hamilton LLP, One Liberty Plaza, New York, New
York 10006 (fax: (212) 225-3999).

24

 

     (c)   Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the State of New York.

     (d)   Judgment Currency. The Issuers shall, jointly and severally, indemnify each Initial
Purchaser, their respective affiliates, each person, if any, who controls any of such parties
within the meaning of the Securities Act or the Exchange Act and each of their respective officers,
directors, employees and agents against any loss incurred by such party as a result of any judgment
or order being given or made in favor of such party for any amount due under this Agreement and
such judgment or order being expressed and paid in a currency (the “Judgment Currency”) other than
United States dollars and as a result of any negative variance between (i) the rate of exchange at
which the United States dollar amount is converted into the Judgment Currency for the purpose of
such judgment or order and (ii) the spot rate of exchange in The City of New York at which such
party on the date of payment of such judgment or order is able to purchase United States dollars
with the amount of the Judgment Currency actually received by such party. The foregoing indemnity
shall continue in full force and effect notwithstanding any such judgment or order as aforesaid.
The term “spot rate of exchange” shall include any premiums and costs of exchange payable in
connection with the purchase of, or conversion into, United States dollars.

     (e)   Consent to Jurisdiction. Any suit, action or proceeding seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this Agreement, the Transactions
Document or the transactions contemplated hereby or thereby may be brought in any federal or New
York State court located in New York City, New York County, and the Issuers hereby consent to the
jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection
that it may now or hereafter have to the laying of the venues of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding brought in any such court
has been brought in an inconvenient form. Process in any such suit, action or proceeding may be
served on any of the Issuers anywhere in the world, whether within or without the jurisdiction of
any such court. Without limiting the foregoing, each Issuer agrees that service of process on any
such Issuer as provided in clause (b) above shall be deemed effective service of process on such
Issuer.

     (f)   Counterparts. This Agreement may be signed in counterparts (which may include
counterparts delivered by any standard form of telecommunication), each of which shall be an
original and all of which together shall constitute one and the same instrument.

     (g)   Amendments or Waivers. No amendment or waiver of any provision of this Agreement, nor any
consent or approval to any departure therefrom, shall in any event be effective unless the same
shall be in writing and signed by the parties hereto.

     (h)   Headings. The headings herein are included for convenience of reference only and are not
intended to be part of, or to affect the meaning or interpretation of, this Agreement.

25

 

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

Very truly yours,

	 	 	 	 	 
	 	 
NORTEL NETWORKS LIMITED

 

 	 
	 	By:  	/s/  Katharine B. Stevenson
 	 
	 	 	Name:  	Katharine B. Stevenson 	 
	 	 	Title:  	Treasurer 	 
	 
	 	 	 
	 	By:  	/s/  Gordon A. Davies
 	 
	 	 	Name:  	Gordon A. Davies 	 
	 	 	Title:  	General Counsel – Corporate
and
Corporate Secretary 	 
	 
	 
	 
	 	NORTEL NETWORKS CORPORATION

 

 	 
	 	By:  	
/s/  Katharine B. Stevenson
 	 
	 	 	Name:  	Katharine B. Stevenson 	 
	 	 	Title:  	Treasurer 	 
	 
	 	 	 
	 	By:  	/s/  Gordon A. Davies
 	 
	 	 	Name:  	Gordon A. Davies 	 
	 	 	Title:  	General Counsel – Corporate
and
Corporate Secretary 	 
	 
	 
	 
	 	NORTEL NETWORKS INC.

 

 	 
	 	By:  	/s/  Allen K. Stout
 	 
	 	 	Name:  	Allen K. Stout 	 
	 	 	Title:  	Vice President, Finance 	 

26

 

	 	 	 	 	 

Accepted: June 29, 2006

[                              ]

For itself and on behalf of the

several Initial Purchasers listed

in Schedule 1 hereto.

	 	 	 	 	 
	 	 	 
	By:  	/s/  Authorized Signatory
 	 	 
	 	Authorized Signatory 	 	 
	 	 	 	 
	 

27

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