Document:

exv10w1

 

Exhibit 10.1

	 	 	 
	J.P. MORGAN SECURITIES INC.

	 	CITIGROUP GLOBAL MARKETS INC.
	JPMORGAN CHASE BANK, N.A.

	 	390 Greenwich Street
	270 Park Avenue

	 	New York, New York 10013
	New York, New York 10017
	 	 

February 1, 2006

Nortel Networks

Interim Credit Facilities

Commitment Letter

Nortel Networks Corporation

Nortel Networks Inc.

8200 Dixie Road Suite 100

Brampton, Ontario L6T 5P6

Attention: Katharine Stevenson, Treasurer

          You (the “Company” or “NNC”) have requested that: (a) J.P. Morgan Securities
Inc. (“JPMorgan”) and Citigroup (as defined below) agree to structure, arrange and
syndicate credit facilities in an aggregate amount of up to US$1.3 billion consisting of (i) a
US$850 million Tranche A Term Loan (the “Tranche A Term Loan”) and (ii) a US$450 million
Tranche B Term Loan (the “Tranche B Term Loan”, and together with the Tranche A Term Loan,
collectively the “Facilities”) for the Company’s wholly-owned subsidiary, Nortel Networks
Inc. (“NNI” or the “Borrower”), (b) JPMorgan Chase Bank, N.A. (“JPMCB”)
commit to provide $500 million of, and to serve as administrative agent for, the Facilities and (c)
Citigroup commit to provide $400 million of the Facilities. For purposes of this Commitment Letter,
“Citigroup” shall mean Citigroup Global Markets Inc. (“CGMI”), Citibank, N.A.,
Citicorp USA, Inc., Citicorp North America, Inc. and/or any affiliate thereof as Citigroup shall
determine to be appropriate to provide the services contemplated herein.

          JPMorgan and CGMI are each pleased to advise you that they are willing to act as Joint
Bookrunners and Joint Arrangers for the Facilities (in such capacities, the “Arrangers”)
and CGMI is pleased to advise you that it is willing to act as Syndication Agent for the
Facilities. Furthermore, upon the terms and subject to the conditions set forth or referred to in
this commitment letter (the “Commitment Letter”) and in the Summary of Terms and Conditions
attached hereto as Exhibit A (the “Term Sheet”), (i) JPMCB is pleased to advise you of its
several commitment to provide $500,000,000 aggregate principal amount of the Facilities on a pro
rata basis to the Tranche A Term Loan and the Tranche B Term Loan (in accordance with their
respective principal amounts), and (ii) Citigroup is pleased to advise you of its several
commitment to provide $400,000,000 aggregate principal amount of the Facilities on a pro rata basis
to the Tranche A Term Loan and the Tranche B Term Loan (in accordance with their respective
principal amounts). Concurrently herewith, Royal Bank of Canada (“RBC”) and Export
Development Canada (“EDC”) have delivered commitments to the Company and JPMorgan, subject
to the terms and conditions set forth in their respective letters of even date herewith, to provide
the remaining $400,000,000 aggregate principal amount of the Facilities.

 

 

          It is agreed that JPMCB will act as the sole and exclusive Administrative Agent with respect
to the Facilities (in such capacity, the “Administrative Agent”) (it being understood that
the Administrative Agent shall have the right, at its election, to appoint a separate financial
institution to act on behalf of the lenders holding Tranche B Term Loans) and that JPMorgan and
CGMI will act as Arrangers, for the Facilities, and will, in such capacities, perform the duties
and exercise the authority customarily performed and exercised by them in such roles (it being
understood that JPMorgan will have “left” placement on any marketing materials relating to the
Facilities and shall serve as the physical bookrunner for the Facilities). You agree that no other
agents, co-agents or arrangers will be appointed, no other titles will be awarded and no
compensation (other than that expressly contemplated by this Commitment Letter, the Term Sheet and
the Fee Letter referred to below) will be paid in connection with the Facilities unless you and we
shall so agree.

          The Arrangers intend to syndicate the Facilities to a group of financial institutions (the
“Lenders”) identified by us and (except for the commitments of RBC and EDC contemplated
above) consented to by you (such consent not to be unreasonably withheld or delayed). The
Arrangers intend to commence syndication efforts, after consultation with you, promptly after the
execution of this Commitment Letter and the Fee Letter dated the date hereof and delivered herewith
(the “Fee Letter”), and you agree actively to assist the Arrangers in completing a
syndication satisfactory to us. Such assistance shall include (a) your using commercially
reasonable efforts to ensure that the syndication efforts benefit materially from your existing
relationships, (b) direct contact between senior management and advisors of NNC and the proposed
Lenders, (c) assistance in the preparation of Confidential Information Memoranda and other
marketing materials to be used in connection with the syndication (collectively with the Term
Sheet, the “Information Materials”) and (d) the hosting, with the Arrangers, of one or more
meetings and/or conference calls with prospective Lenders. You will assist us in preparing
Information Materials, including a Confidential Information Memorandum, for distribution to
prospective Lenders. You also will assist us in preparing an additional version of the Information
Materials (the “Public-Side Version”) to be used by prospective Lenders’ public-side
employees and representatives (“Public-Siders”) who do not wish to receive information
which may be considered to be material non-public information (within the meaning of United States
federal securities laws) with respect to you and your affiliates and any of your respective
securities (“MNPI”) and who may be engaged in investment and other market related
activities with respect to you or your affiliates’ securities or loans. Before distribution of any
Information Materials, you agree to execute and deliver to us (i) a letter in which you authorize
distribution of the Information Materials to a prospective Lender’s employees who wish to receive
MNPI in connection with their evaluation of the Facilities (“Private-Siders”);
provided that the applicable Lender shall have executed a non-disclosure agreement in
substantially the form of Exhibit B and (ii) a separate letter in which you authorize distribution
of the Public-Side Version to Public-Siders and represent that no MNPI is contained therein. Each
Arranger agrees not to distribute the Public Side Version to Public Siders or Information Materials
to Private-Siders until the Company has consented to their distribution (such consent not to be
unreasonably withheld or delayed). The Borrower hereby authorizes the Arrangers to distribute
drafts of definitive documentation with respect to the Facilities that have been approved by the
Borrower for such distribution to Private-Siders and Public-Siders as such drafts will not contain
MNPI at the time of their distribution.

          The Arrangers in consultation with you will manage all aspects of the syndication, including
decisions as to the selection of institutions to be approached with your consent (such consent not
to be unreasonably withheld or delayed) and when they will be approached, when their commitments
will be accepted, which institutions will participate, the allocations of the commitments among the
Lenders and the amount and distribution of fees among the Lenders. In acting as the Arrangers,
neither JPMorgan nor CGMI will have any responsibility other than to arrange the syndication of the
Facilities as set forth herein and in no event shall be subject to any fiduciary or other implied
duties. To assist the Arrangers in their arrangement and syndication efforts, you agree promptly
to prepare and provide to the Arrangers and

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JPMCB all information with respect to NNC and its subsidiaries and the transactions
contemplated hereby, including all financial information and projections (the
“Projections”), as the Arrangers may reasonably request in connection with the arrangement
and syndication of the Facilities. You hereby represent and covenant that (a) taken as a whole,
all information other than the Projections that has been or will be made available to (x) the
Arrangers, (y) Private Siders and (z) Public-Siders by you or any of your representatives in
connection with the transactions contemplated hereby (the “Information”) was or will be,
when furnished, complete and correct in all material respects and did not or will not, when
furnished, contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not materially misleading in light of
the circumstances under which such statements are made; provided, that the foregoing
representation and covenant shall not be deemed to have been breached solely as a result of a
failure to provide to Public-Siders Information which was made available to Private-Siders and (b)
the Projections that have been or will be made available to the Arrangers or the Lenders by you or
any of your representatives have been or will be prepared in good faith based upon assumptions that
are believed by you to be reasonable at the time made, it being understood that actual results may
materially vary from such projections and such forward-looking information must be read in the
context of cautionary language including, without limitation, the risk factors contained in your
filings made pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange
Act”). You understand that in arranging and syndicating the Facilities we may use and rely on
the Information and the Projections without independent verification thereof. You and we will
agree on appropriate procedures for the distribution of Information and Projections to prospective
Lenders, it being understood that the distribution of MNPI shall be conditioned upon the
affirmative agreement by a prospective Lender to be bound by the terms of a non-disclosure
agreement substantially in the form of Exhibit B.

          As consideration for the commitments hereunder and the Arrangers’ agreements to perform the
services described herein, you agree to pay or to cause to be paid the nonrefundable fees set forth
in the Term Sheet and in the Fee Letter.

          The commitments hereunder and the Arrangers’ agreements to perform the services described
herein are subject to (a) there not occurring after September 30, 2005 any material adverse
condition or material adverse change in or affecting the business, properties, senior management,
financial condition, stockholders’ equity or results of operations of the Company and its
subsidiaries, taken as a whole, except to the extent resulting from any contingency disclosed by
the Company’s periodic filings made pursuant to the Exchange Act prior to the date hereof, (b) our
not becoming aware after the date hereof of any material information or other matter affecting the
Company or the transactions contemplated hereby which is inconsistent in a material and adverse
manner with any such information or other matter disclosed to us prior to the date hereof, (c) the
negotiation, execution and delivery on or before February 15, 2006 of the definitive documentation
with respect to the Facilities (the “Credit Documentation”), in form and substance
satisfactory to the Arrangers and their counsel, RBC and EDC, and (d) the other conditions set
forth or referred to in the Term Sheet.

          You agree that until the date on which we reasonably determine that the Facilities have been
successfully syndicated or if earlier, the date on which the Facilities are repaid in full (the
“Syndication Termination Date”), there shall be no competing offering, placement or
arrangement of any debt securities or bank financing by or on behalf of the Borrower or any
affiliate thereof (other than any amendments to any existing financings, sales of receivables into
existing receivables financing facilities (and replacements and refinancings of existing
receivables financing facilities), sales and leasebacks of real estate, performance bond
facilities, letter of credit or letter of guarantee facilities relating to trade or performance
obligations or similar obligations, working capital facilities of subsidiaries organized outside of
the U.S. or Canada), unless the Arrangers have consented thereto.

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          You agree (a) to indemnify and hold harmless JPMorgan, JPMCB, Citigroup and their affiliates
and their respective officers, directors, employees, advisors, and agents (each, an
“indemnified person”) from and against any and all losses, claims, damages and liabilities
to which any such indemnified person may become subject arising out of or in connection with this
Commitment Letter, the Facilities, the use of the proceeds thereof or any related transaction or
any claim, litigation, investigation or proceeding relating to any of the foregoing, regardless of
whether any indemnified person is a party thereto, and to reimburse each indemnified person upon
demand for any legal or other expenses incurred in connection with investigating or defending any
of the foregoing, provided that the foregoing indemnity will not, as to any indemnified
person, apply to losses, claims, damages, liabilities or related expenses to the extent they are
found by a final, non-appealable judgment of a court to arise from the willful misconduct or gross
negligence of such indemnified person, and (b) to reimburse JPMorgan, JPMCB, Citigroup and their
affiliates on demand for all reasonable out-of-pocket expenses (including due diligence expenses,
syndication expenses, travel expenses, and reasonable fees, charges and disbursements of outside
counsel) incurred in connection with the Facilities and any related documentation (including this
Commitment Letter, the Term Sheet, the Fee Letter and the Credit Documentation) or the
administration, amendment, modification or waiver thereof. You shall indemnify each indemnified
person 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. Neither you nor any indemnified
person shall be liable for any indirect, consequential or punitive damages in connection with its
activities related to the Facilities. No indemnified person shall be liable for any damages
arising from the use by others of Information or other materials obtained through electronic,
telecommunications or other information transmission systems or for any special, indirect,
consequential or punitive damages in connection with the Facilities.

          This Commitment Letter shall not be assignable (x) by you without the prior written consent of
JPMorgan, JPMCB and CGMI or (y) by JPMorgan, JPMCB or CGMI except to their respective subsidiaries
or affiliates (and any purported assignment without such consent shall be null and void), is
intended to be solely for the benefit of the parties hereto and is not intended to confer any
benefits upon, or create any rights in favor of, any person other than the parties hereto. This
Commitment Letter may not be amended or waived except by an instrument in writing signed by you,
JPMorgan, JPMCB and CGMI. This Commitment Letter may be executed in any number of counterparts,
each of which shall be an original, and all of which, when taken together, shall constitute one
agreement. Delivery of an executed signature page of this Commitment Letter by facsimile
transmission shall be effective as delivery of manually executed counterpart hereof.

          This Commitment Letter is delivered to you on the understanding that neither this Commitment
Letter, the Term Sheet or the Fee Letter nor any of their terms or substance shall be disclosed,
directly or indirectly, to any other person except (a) to your and your subsidiaries’ officers,
directors, agents, auditors, employees and advisors who are directly involved in the consideration
of this matter or (b) as may be compelled in a judicial or administrative proceeding or as
otherwise required by law (in which case you agree to inform us promptly thereof),
provided, that the foregoing restrictions shall cease to apply (except in respect of the
Fee Letter and its terms and substance) after this Commitment Letter has been accepted by you.

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          This Commitment Letter shall be governed by, and construed and interpreted in accordance with,
the laws of the State of New York. EACH PARTY HERETO IRREVOCABLY AGREES TO WAIVE TRIAL BY JURY IN
ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY OR ON BEHALF OF ANY PARTY RELATED TO OR
ARISING OUT OF THIS COMMITMENT LETTER OR THE PERFORMANCE OF SERVICES HEREUNDER.

          Each of the parties hereto irrevocably agrees that, except as otherwise set forth in this
paragraph, any state or federal court sitting in the City of New York shall have exclusive
jurisdiction to hear and determine any suit, action or proceeding and to settle any dispute arising
out of or relating to this letter agreement and, for such purposes, irrevocably submits to the
jurisdiction of such courts. NNC hereby appoints the CT Corporation System at 111 Eighth Avenue,
New York, NY 10011, or if otherwise, its principal place of business in the City of New York from
time to time, as its agent for service of process, and agrees that service of any process, summons,
notice or documents by hand delivery or registered mail upon such agent shall be effective service
of process for any suit, action or proceeding brought in any such court, as its agent for service
of process, and agrees that service of any process, summons, notice or documents by hand delivery
or registered mail upon such agent shall be effective service of process for any suit, action or
proceeding brought in any such court. Each of NNC and NNI irrevocably and unconditionally waives
any objection to the laying of venue of any such suit, action or proceeding brought in any such
court and any claim that any such suit, action or proceeding has been brought in an inconvenient
forum. Each of NNC and NNI agrees that a final judgment in any such suit, action or proceeding
brought in any such court shall be conclusive and binding upon such person and may be enforced in
any other court to whose jurisdiction such person is or may in the future be subject, by suit upon
judgment. Each of NNC and NNI further agrees that nothing herein shall affect JPMCB’s, JPMorgan’s
or Citigroup’s right to effect service of process in any other manner permitted by law or to bring
a suit, action or proceeding (including a proceeding for enforcement of a judgment) in any other
court or jurisdiction in accordance with applicable law.

          You acknowledge that JPMorgan, JPMCB and Citigroup may be providing debt financing, equity
capital or other services (including financial advisory services) to other companies in respect of
which you may have conflicting interests regarding the transactions described herein and otherwise.
JPMorgan and JPMCB agree to be bound by the confidentiality provisions contained in the
nondisclosure letter agreement dated May 12, 2005 between JPMorgan and the Company with respect to
all confidential information received from the Company and its affiliates in connection with the
transactions contemplated by this letter. Citigroup agrees to be bound by the confidentiality
provisions contained in the nondisclosure letter agreement dated November 30, 2005 between Citibank
Canada and the Company with respect to all confidential information received from the Company and
its affiliates in connection with the transactions contemplated by this letter. None of JPMorgan,
JPMCB nor Citigroup will use confidential information obtained from you by virtue of the
transactions contemplated by this letter or their other relationships with you in connection with
their performance of services for other companies, and neither of them will furnish any such
information to other companies. You also acknowledge that they have no obligation to use in
connection with the transactions contemplated by this letter, or to furnish to you, confidential
information obtained from other companies.

          The reimbursement, indemnification and confidentiality provisions contained herein and the Fee
Letter shall remain in full force and effect regardless of whether definitive financing
documentation shall be executed and delivered and notwithstanding the termination of this
Commitment Letter or the commitments hereunder; provided, that your obligations under this
Commitment Letter, other than those arising under the fourth (but only until the Syndication
Termination Date), fifth, sixth, eighth (but only until the Syndication Termination Date), ninth
(but only with respect to losses, claims, damages, liabilities and expenses relating to the period
prior to the Syndication Termination Date), eleventh, twelfth and thirteenth paragraphs hereof,
shall automatically terminate and be superseded by the provisions of the

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Credit Documentation upon the effectiveness thereof, and you shall automatically be released
from all liability in connection therewith at such time.

          If the foregoing correctly sets forth our agreement, please indicate your acceptance of the
terms hereof and of the Term Sheet and the Fee Letter by returning to us executed counterparts
hereof and of the Fee Letter not later than 5:00 p.m., New York City time, on February 1, 2006.
The commitments and the Arrangers’ agreements herein will expire at such time in the event the
Arrangers have not received such executed counterparts in accordance with the immediately preceding
sentence.

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          JPMorgan, JPMCB and Citigroup are pleased to have been given the opportunity to assist you in
connection with this important financing.

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	J.P. MORGAN SECURITIES INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Bruce Borden
 

Name: Bruce Borden
	 	 
	 

	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	JPMORGAN CHASE BANK, N.A.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David M. Mallett	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: David M. Mallett	 	 
	 

	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	CITIGROUP GLOBAL MARKETS INC.
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Richard C. Zogheb	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Richard C. Zogheb	 	 
	 

	 	 	 	Title: Managing Director	 	 

	 	 	 	 	 
	Accepted and agreed to
as of the date first written above by:
		 	 
	 
	 	 	 	 
	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/ Lynn C. Egan	 	 
	 

	 	 	 	 
	 

	 	Name: Lynn C. Egan	 	 
	 

	 	Title: Assistant Secretary	 	 

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NORTEL NETWORKS CREDIT FACILITIES

Summary of Terms and Conditions

February 1, 2006

 

	 	 	 	 	 
	I.

	 	Parties	 	 
	 
	 	 	 	 
	 

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

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

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

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

	 	Syndication Agent and

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

	 	Managing Agent:
	 	EDC.
	 
	 	 	 	 
	 

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

	 	 Facilities	 	 
	 
	 	 	 	 
	 

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

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

 

 

	 	 	 	 	 
	 

	 	Maturity:
	 	February 15, 2007.
	 
	 	 	 	 
	 

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

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

	 	Certain Payment

Provisions	 	 
	 
	 	 	 	 
	 

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

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

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

	 	Certain Conditions	 	 
	 
	 	 	 	 
	 

	 	Initial Conditions:
	 	The availability of the Facilities shall be
conditioned upon satisfaction of, among other
things, the following conditions precedent (the date
upon which all such conditions precedent shall be
satisfied, the “Closing Date”) on or before February
14, 2006:

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

	 	 	 	 	 
	VI.

	 	Certain Documentation

Matters	 	 
	 
	 	 	 	 
	 

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

	 	Representations and
	 	1.      Corporate existence and power.
	 

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

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

	 	 	 	4.      Absence of undisclosed litigation.
	 

	 	 	 	5.      Compliance with laws and agreements.
	 

	 	 	 	6.      Investment and holding company status.
	 

	 	 	 	7.      Payment of taxes.
	 

	 	 	 	8.      Solvency.
	 

	 	 	 	9.      ERISA; Canadian plans.

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	 	 	 	10.      Disclosure.
	 

	 	 	 	11.      Accuracy of representations in security
documents.
	 

	 	 	 	12.      No unlawful payments.

	 	 	 	 	 
	 

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

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

	 	 	 	 
	Date
	 	Minimum LTM EBITDA

	 
	 
	March 31, 2006
	 	$	850,000,000
	 
	June 30, 2006
	 	$	750,000,000
	 
	September 30, 2006
	 	$	850,000,000
	 
	December 31, 2006
	 	$	900,000,000
	 

	 	 	 	 	 
	 

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

	 	Negative Covenants:
	 	The Credit Documentation shall contain restrictions,
subject to exceptions to be agreed, on (i) liens and
(ii) the payment of dividends on, or purchases,
redemptions or acquisitions of common or preferred
stock; provided that any payment or distribution to
holders or former holders of common stock of NNC in
connection with the settlement of, or satisfaction
of a judgment resulting from, any shareholder
litigation or regulatory or enforcement proceeding
shall not be restricted unless the making of such
payment would result in a violation of the minimum
cash and cash equivalents requirement set forth
above. Additionally, the Borrower and the
Guarantors shall be restricted from transferring any
Collateral to non-guarantor subsidiaries and joint
ventures (excluding ordinary course transfers and
transfers of cash) if after giving effect to any
such transfer, more than an amount of the Credit
Parties assets to be agreed would have been so
transferred.

-4-

 

	 	 	 	 	 
	 

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

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

	 	Assignments and
Participations:
	 	The Lenders shall be permitted to assign all or a
portion of their Loans and commitments with the
consent, not to be unreasonably withheld, of (a) the
Borrower, unless (i) the assignee is a Lender, an
affiliate of a Lender or an approved fund or (ii) an
Event of Default has occurred and is continuing and
(b) the Administrative Agent, unless the assignee is
a Lender, an affiliate of a Lender or an approved
fund. In the case of partial assignments (other than
to another Lender or to an affiliate of a Lender),
the minimum assignment amount shall be U.S.
$1,000,000, unless otherwise agreed by the Borrower
and the applicable Administrative Agent.
Participants shall have the same benefits as the
participating Lender with respect to yield
protection and increased cost provisions. Voting
rights of participants shall be limited to those
matters with respect to which the affirmative vote
of the Lender from which it purchased its
participation

-5-

 

	 	 	 	 	 
	 

	 	 	 	would be required as described under
“Voting” above. Pledges of Loans to a Federal
Reserve Bank in accordance with applicable law shall
be permitted without restriction. Promissory notes
shall be issued under the Facilities only upon
request.
	 
	 	 	 	 
	 

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

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

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

	 	Sharing of Payments:
	 	Customary sharing of setoff provisions.
	 
	 	 	 	 
	 

	 	Governing Law and Forum:
	 	 State of New York.
	 
	 	 	 	 
	 

	 	U.S. Counsel to the
Administrative Agent
and the Arrangers:
	 	Cahill Gordon & Reindel llp.
	 
	 	 	 	 
	 

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

-6-

 

Annex I-A

DRAFT

Annex I

Interest and Certain Fees

	 	 	 
	Interest:

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

	 	A. Base Rate Option
	 
	 	 
	 

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

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

	 	B. LIBOR Option
	 
	 	 
	 

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

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

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

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

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

 

 

EXHIBIT B

Form of Non-Disclosure Agreement

BY CLICKING ON THE “AGREE” BUTTON, YOU EXPRESSLY AGREE (I) TO COMPLY WITH THE FOLLOWING TERMS AND
CONDITIONS OF CONFIDENTIALITY OR (II) IF YOU OR YOUR INSTITUTION EXECUTE OR HAVE EXECUTED A
CONFIDENTIALITY AGREEMENT WITH RESPECT TO THESE FACILITIES, TO COMPLY WITH THE TERMS OF THAT
CONFIDENTIALITY AGREEMENT, WHICH SHALL SUPERSEDE PARAGRAPHS (1) TO (4) OF THESE REQUIREMENTS:

1. You, your institution, its affiliates and their respective partners, directors, officers,
employees, agents, advisors and other representatives (collectively, “Representatives”) shall treat
any information that is non-public, confidential and/or proprietary in nature (including but not
limited to financial, accounting and strategic information, specifications, procedures, processes,
business systems and like information, in addition to notes, analyses, compilations, studies,
interpretations or other documents or materials that contain, reflect or are based upon such
information) concerning Nortel Networks Corporation, Nortel Networks Limited and/or their
respective subsidiaries (collectively, “Nortel”), the credit facilities described herein (the
“Facilities”) and any transactions to which the Facilities pertain (the “Transactions”) (such
information collectively, “Confidential Information”) as confidential, whether furnished
electronically (by means of this website, e-mail or otherwise), verbally or in writing. For
greater certainty, the fact that Confidential Information has been made available to you, or that
discussions or negotiations are taking place concerning the Facilities, proposed Transactions or
any of the terms conditions or other facts with respect thereto (including the status thereof),
shall also constitute “Confidential Information” hereunder.

2. You, your institution, its affiliates and their respective Representatives shall use reasonable
precautions in accordance with your institution’s established procedures to keep the Confidential
Information confidential; provided however that any such information may be disclosed to your
institution, those of its affiliates and those Representatives which are specifically involved in
the proposed Transactions or need to know the Confidential Information in order to evaluate, and to
assist in the proposed Transactions, provided that such affiliates or Representatives shall be
informed by your institution of the confidential nature of the Confidential Information and shall
have agreed not to disclose the Confidential Information to any other person except as permitted
herein. You and your institution agree that you shall use the Confidential information solely in
connection with the proposed Transactions, that the Confidential Information will be kept
confidential and that neither you, nor your institution, its affiliates or their respective
Representatives will disclose any Confidential Information in any manner whatsoever except as
permitted herein. You and your institution assume responsibility for compliance with, and any
breach of, this agreement by your affiliates and their respective Representatives.

3. The foregoing confidentiality requirements do not apply to (i) information that is or becomes
generally available to the public other than as result of a disclosure by you, your institution,
its affiliates or their respective Representatives in breach of this agreement, (ii) information
that is or becomes available to you, your institution, its affiliates or their respective
Representatives from a source other than Nortel, provided that, to the knowledge of you, your
institution, such affiliates or such Representatives, such source is not bound by a confidentiality
agreement with Nortel or is otherwise prohibited from transmitting the information to you, your
institution or its Representatives by a contractual, legal or fiduciary obligation, (iii) any
disclosure to the extent required by law or regulation or administrative or other legal process or
to the extent requested by regulatory or governmental authorities (in which case you agree to
inform Nortel promptly thereof unless you are prohibited by law from doing so), (iv) any disclosure
with the prior written consent by Nortel or (v) any information that was or is independently
developed by you, your institution, its affiliates or their respective Representatives without use
of or reliance on the Evaluation Material.

4. This agreement shall terminate two (2) years from the date hereof.

UNLESS OTHERWISE INDICATED, THE DOCUMENTS POSTED ON THIS WEBSITE MAY CONTAIN MATERIAL NON-PUBLIC
INFORMATION CONCERNING NORTEL OR ITS SECURITIES. YOU AGREE TO USE SUCH INFORMATION ONLY IN
ACCORDANCE WITH YOUR INSTITUTION’S COMPLIANCE

-2-

 

POLICIES, CONTRACTUAL OBLIGATIONS (INCLUDING THIS AGREEMENT) AND APPLICABLE LAW, INCLUDING UNITED
STATES FEDERAL OR STATE SECURITIES LAWS.

IT IS UNDERSTOOD AND AGREED THAT NORTEL MAY RELY ON THIS EXPRESS AGREEMENT AND MAY ENFORCE THIS
EXPRESS AGREEMENT AS A BENEFICIARY THEREOF IN ACCORDANCE WITH ITS TERMS. YOU ACKNOWLEDGE THAT
NORTEL WILL BE PROVIDED WITH EVIDENCE OF YOUR ELECTRONIC SIGNATURE TO THIS AGREEMENT.

THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.

-3-exv10w2

 

Exhibit 10.2

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

Royal Bank of Canada

Royal Bank Plaza

5th Floor, South Tower

200 Bay Street

Toronto, Ontario M5J 2W7

Commitment Advice Letter Agreement

February 1, 2006

Nortel Networks Corporation

Nortel Networks Inc.

8200 Dixie Road Suite 100

Brampton, Ontario L6T 5P6

J.P. Morgan Securities Inc.

270 Park Avenue, 5th Floor

New York, NY 10017

Ladies and Gentlemen:

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

As used above, the term “Conditions” means:

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

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

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

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

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

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

 

 

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

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

 

 

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

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

	 	 	 	 	 
	Very truly yours,	 	 
	 
	 	 	 	 
	ROYAL BANK OF CANADA	 	 
	 
	 	 	 	 
	By:

	 	/s/ Noel Curran
 

Authorized Officer: Noel Curran
	 	 
	 

	 	Title: Vice President	 	 
	 

	 	Lender: Royal Bank of Canada	 	 
	 

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

	 	/s/ Katharine B. Stevenson
 

Authorized Officer: Katharine B. Stevenson
	 	 
	 

	 	Title: Treasurer	 	 
	 
	 	 	 	 
	By:

	 	/s/ Gordon A. Davies
 

Authorized Officer: Gordon A. Davies
	 	 
	 

	 	Title: General Counsel — Corporate and	 	 
	 

	 	Corporate Secretary
	 	 
	 
	 	 	 	 
	NORTEL NETWORKS INC.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Lynn C. Egan
 

Authorized Officer: Lynn C. Egan
	 	 
	 

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

	 	/s/ Bruce Borden
 

Authorized Officer: Bruce Borden
	 	 
	 

	 	Title: Vice President	 	 

 

 

NORTEL NETWORKS CREDIT FACILITIES

Summary of Terms and Conditions

February 1, 2006

 

	 	 	 	 	 
	I.

	 	Parties	 	 
	 
	 	 	 	 
	 

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

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

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

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

	 	Syndication Agent and

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

	 	Managing Agent:
	 	EDC.
	 
	 	 	 	 
	 

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

	 	Facilities	 	 
	 
	 	 	 	 
	 

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

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

 

 

	 	 	 	 	 
	 

	 	 	 	Term Loans is borrowed.
	 
	 	 	 	 
	 

	 	Maturity:
	 	February 15, 2007.
	 
	 	 	 	 
	 

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

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

	 	Certain Payment

Provisions	 	 
	 
	 	 	 	 
	 

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

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

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

	 	Certain Conditions	 	 
	 
	 	 	 	 
	 

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

-2-

 

	 	 	 	 	 
	 

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

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

	 	 	 	 	 
	VI.

	 	Certain Documentation

Matters	 	 
	 

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

	 	Representations and Warranties:
	 	1.      Corporate existence and power.
	 

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

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

	 	 	 	4.      Absence of undisclosed litigation.

-3-

 

	 	 	 	 	 
	 

	 	 	 	5.      Compliance with laws and agreements.
	 

	 	 	 	6.      Investment and holding company status.
	 

	 	 	 	7.      Payment of taxes.
	 

	 	 	 	8.      Solvency.
	 

	 	 	 	9.      ERISA; Canadian plans.
	 

	 	 	 	10.    Disclosure.
	 

	 	 	 	11.    Accuracy of representations in security
documents.
	 

	 	 	 	12.    No unlawful payments.
	 
	 	 	 	 
	 

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

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

	 	 	 	 	 	 	 
	Date
	 	 	 	Minimum LTM EBITDA

	 
	March 31, 2006
	 	 	 	$	850,000,000	 
	 
	 	 	 	 	 	 
	June 30, 2006
	 	 	 	$	750,000,000	 
	 
	 	 	 	 	 	 
	September 30, 2006
	 	 	 	$	850,000,000	 
	 
	 	 	 	 	 	 
	December 31,2006	 	 	 	$	900,000,000	 

	 	 	 	 	 
	 

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

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

-4-

 

	 	 	 	 	 
	 

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

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

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

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

-5-

 

	 	 	 	 	 
	 

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

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

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

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

	 	Sharing of Payments:
	 	Customary sharing of setoff provisions.
	 
	 	 	 	 
	 

	 	Governing Law and Forum:
	 	State of New York.
	 
	 	 	 	 
	 

	 	U.S. Counsel to the
Administrative Agent	 	 

-6-

 

	 	 	 	 	 
	 

	 	and the Arrangers:
	 	Cahill Gordon & Reindel llp.
	 
	 	 	 	 
	 

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

-7-

 

Annex I-A

DRAFT

Annex I

Interest and Certain Fees

	 	 	 
	Interest:

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

	 	A. Base Rate Option
	 
	 	 
	 

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

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

	 	B. LIBOR Option
	 
	 	 
	 

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

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

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

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

 

 

	 	 	 
	Default Rate:

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

-2-

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