EXHIBIT 10.11
NNI FOREIGN PLEDGE AGREEMENT
dated as of
April 4, 2002
Between
NORTEL NETWORKS INC.
and
JPMORGAN CHASE BANK, as Collateral Agent
TABLE OF CONTENTS
PAGE
SECTION 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2. Pledge of Equity Interests . . . . . . . . . . . . . . . . . . . 14
SECTION 3. General Representations, Warranties and Covenants . . . . . . . . 15
SECTION 4. Additional Covenants . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 5. Equity Interests . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6. Cash Collateral Accounts . . . . . . . . . . . . . . . . . . . . 19
SECTION 7. Operation of Cash Collateral Accounts . . . . . . . . . . . . . . 19
SECTION 8. Transfer of Record Ownership . . . . . . . . . . . . . . . . . . 20
SECTION 9. Right to Vote Securities . . . . . . . . . . . . . . . . . . . . 20
SECTION 10. Certain Cash Distributions . . . . . . . . . . . . . . . . . . . 21
SECTION 11. Remedies upon Event of Default or Specified Event of Default . . 21
SECTION 12. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . 22
SECTION 13. Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 14. Authority to Administer Collateral . . . . . . . . . . . . . . . 26
SECTION 15. Limitation on Duty in Respect of Collateral . . . . . . . . . . . 26
SECTION 16. General Provisions Concerning the Collateral Agent . . . . . . . 27
SECTION 17. Termination of Pledges; Release of Collateral . . . . . . . . . . 30
SECTION 18. Additional Lien Grantors . . . . . . . . . . . . . . . . . . . . 31
SECTION 19. Additional Secured Obligations . . . . . . . . . . . . . . . . . 31
SECTION 20. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 21. No Implied Waivers; Remedies Not Exclusive . . . . . . . . . . . 33
SECTION 22. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . 33
SECTION 23. Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . 33
SECTION 24. Choice of Law . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 25. Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 26. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SCHEDULES:
SCHEDULE 1 Equity Interests in Material Subsidiaries Owned by Lien
Grantors
EXHIBITS:
EXHIBIT A Pledge Agreement Supplement
ii
NNI FOREIGN PLEDGE AGREEMENT(1)
AGREEMENT dated as of April 4, 2002 among NORTEL NETWORKS INC. (with its
successors, "NNI") and JPMORGAN CHASE BANK, as Collateral Agent (with its
successors, the "COLLATERAL AGENT").
WHEREAS, Nortel Networks Limited (with its successors, "NNL"), as borrower,
certain financial institutions and ▇.▇.▇▇▇▇▇▇ Bank Canada, formerly known as The
Chase Manhattan Bank successor by merger to ▇▇▇▇▇▇ Guaranty Trust Company of New
York, Toronto Branch, as Administrative Agent, are parties to a 364-Day Credit
Agreement dated as of April 12, 2000 (as amended from time to time, the "2000
NNL 364-DAY AGREEMENT"); and
WHEREAS, NNL, as borrower, certain financial institutions, Credit Suisse
First Boston ("CSFB"), as Syndication Agent, and JPMorgan Chase Bank, formerly
known as The Chase Manhattan Bank successor by merger to ▇▇▇▇▇▇ Guaranty Trust
Company of New York, Toronto Branch, as Administrative Agent, are parties to a
5-Year Credit Agreement dated as of April 12, 2000 (as amended from time to
time, the "2000 NNL 5-YEAR AGREEMENT"); and
WHEREAS, NNI, as borrower, NNL, as guarantor, certain financial
institutions and JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank
successor by merger to ▇▇▇▇▇▇ Guaranty Trust Company of New York, as
Administrative Agent, are parties to a 364-Day Credit Agreement dated as of
April 12, 2000 (as amended from time to time, the "2000 NNI 364-DAY AGREEMENT");
and
WHEREAS, NNI, as borrower, NNL, as guarantor, certain financial
institutions, and JPMorgan Chase Bank, formerly known as The Chase Manhattan
Bank successor by merger to ▇▇▇▇▇▇ Guaranty Trust Company of New York, as
Administrative Agent, are parties to a 5-Year Credit Agreement dated as of April
12, 2000 (as amended from time to time, the "2000 NNI 5-YEAR AGREEMENT"); and
WHEREAS, NNL, as borrower, certain financial institutions, CSFB, as
Syndication Agent, and JPMorgan Chase Bank formerly known as The Chase Manhattan
Bank, Toronto Branch, as Administrative Agent, are parties to a 364-
-------------
(1) This Agreement assumes no Pledged Equity Interest in Material, Non-U.S.
Subsidiaries are held through a Securities Intermediary. This document will need
to be amended if NNTC is also to have its stock pledged.
Day Credit Agreement dated as of June 14, 2001 (as amended from time to time,
the "2001 NNL 364-DAY AGREEMENT"); and
WHEREAS, NNI, as borrower, NNL, as guarantor, certain financial
institutions, CSFB, as Syndication Agent, and JPMorgan Chase Bank formerly known
as The Chase Manhattan Bank, as Administrative Agent, are parties to a 364-Day
Credit Agreement dated as of June 14, 2001 (as amended from time to time, the
"2001 NNI 364-DAY AGREEMENT"); and
WHEREAS, the parties hereto have agreed that this Agreement shall be in
effect only during any Collateral Period (as defined below); and
WHEREAS, pursuant to the ▇▇▇▇ ▇▇▇ 364-Day Agreement and the 2001 NNI
364-Day Agreement (together, the "2001 364-DAY AGREEMENTS"), on the first day of
any Collateral Period NNI and any U.S. Subsidiary of NNI or NNL which directly
owns any Equity Interest in a Material Subsidiary which is not a U.S. Subsidiary
is required to enter into a Foreign Pledge Agreement;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
(a) Terms Defined in UCC. As used herein, each of the following terms has
the meaning specified in the UCC:
Term UCC
---- ---
Authenticate 9-102
Certificated Security 8-102
Control 8-106
Investment Property 9-102
Security 8-102 & 103
Securities Intermediary 8-102
Uncertificated Security 8-102
(b) Additional Definitions. The following additional terms, as used herein,
have the following meanings:
"ADDITIONAL COLLATERAL DATE" means the first date on which the failure of
to satisfy the Additional Collateral Requirement with respect to any Additional
Subsidiary would constitute an Event of Default under any Credit Agreement.
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"ADDITIONAL COLLATERAL REQUIREMENT" means, with respect to any Additional
Subsidiary, the requirement set forth in any Credit Agreement that either (x)
the Equity Interest in such Additional Subsidiary owned by NNI or any U.S.
Subsidiary of NNI or NNL be added to the collateral subject to a pledge
agreement in form and substance reasonably satisfactory to the Collateral Agent
or (y) such Additional Subsidiary deliver a Foreign Subsidiary Guarantee.
"ADDITIONAL SUBSIDIARY" means any Subsidiary formed or acquired on or after
February 28, 2002 (1) which is a Material Subsidiary, (2) which is a Subsidiary
of NNI or NNL, (3) which is not a U.S. Subsidiary and (5) with respect to which
the Additional Collateral Requirement is required to be satisfied; provided that
on and after the Refinancing Effective Date with respect to any Credit
Agreement, "Additional Subsidiary" for the purpose of this Agreement will also
include any Subsidiary formed or acquired on or after the Refinancing Effective
Date with respect to which the Additional Collateral Requirement is required to
be satisfied (for the avoidance of doubt, if with respect to any Subsidiary the
Additional Collateral Requirement shall have been met pursuant to any Security
Document other than the Pledge Documents, then such Subsidiary shall not be an
Additional Subsidiary for the purpose hereof).
"ASSET SALE" means any "Asset Sale" referred to in Section 5.13(g) of the
2001 364-Day Agreements; provided that, on and after the Refinancing Effective
Date with respect to any Credit Agreement, "Asset Sale" for purposes of this
Agreement will also include any "asset sale" (or similar term) as defined in any
Replacement Agreement with respect to such Credit Agreement which is stated to
constitute an Asset Sale for the purpose of this Agreement.
"BANK TERMINATION DATE" means the first date on which all of the following
conditions are satisfied: (i) all commitments to extend credit under any Credit
Agreement shall have expired or been terminated, (ii) all Non-Contingent Secured
Obligations arising under any of the Credit Agreements shall have been paid in
full, and (iii) no Contingent Secured Obligation shall remain outstanding under
any of the Credit Agreements, other than any indemnity claims that have not been
asserted on or prior to such date.
"BANKS" means the "Banks" under each of the Credit Agreements.
"BONDS" means, collectively, the 2002 Notes, the 2003 Notes, the 2006
Notes, the 2006 NNCC Notes, the 2008 Notes, the 2023 Notes and the 2026 Notes.
"BUSINESS DAY" means a day on which chartered banks are open for
over-the-counter business in New York and excludes Saturdays, Sundays and
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statutory holidays therein; provided that for the purpose of Section 3(f),
"Business Day" shall mean a day on which chartered banks are open for
over-the-counter business in New York, Ontario and the principal place of
business of the applicable Lien Grantor and the applicable issuer of the Equity
Interest being Pledged and excludes Saturdays, Sundays and statutory holidays
therein.
"CANADIAN SECURITY AGREEMENT" means the Canadian guarantee and security
agreement dated the date hereof among NNL, NNI, the Subsidiaries party thereto
and JPMorgan Chase Bank, as Collateral Agent.
"CAPITAL MARKETS EVENT" has the meaning set forth in any Credit Agreement.
"CASH COLLATERAL ACCOUNT" has the meaning specified in Section 6(a).
"CASH DISTRIBUTIONS" means dividends, interest and other distributions and
payments (including proceeds of liquidation, sale or other disposition) made or
received in cash upon or with respect to any Collateral.
"COLLATERAL" means all property, whether now owned or hereafter acquired,
on which a Lien is granted or purports to be granted to the Collateral Agent
pursuant to the Pledge Documents. When used with respect to a specific Lien
Grantor, the term "Collateral" means any of the foregoing Collateral in which
such a Lien is granted or is purported to be granted by such Lien Grantor.
"COLLATERAL PERIOD" means any period from and including the first day when
the Debt Rating is lower than BBB- by S&P or Baa3 by Moody's to but excluding
the first day when the Debt Rating is BBB (stable outlook) or higher by S&P and
Baa2 (stable outlook) or higher by Moody's.
"CONTINGENT SECURED OBLIGATION" means, at any time, any Secured Obligation
(or portion thereof) that is contingent in nature at such time, including any
Secured Obligation that is: (i) an obligation under a Designated Hedging
Agreement to make payments that cannot be quantified at such time, (ii) any
other obligation (including any guarantee) that is contingent in nature at such
time or (iii) an obligation to provide collateral to secure any of the foregoing
types of obligations.
"CREDIT AGREEMENTS" means the NNI Credit Agreements and the NNL Credit
Agreements.
"DEBT RATING" means any rating by Moody's or S&P with respect to the senior
unsecured non-credit enhanced long-term debt of NNL.
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"DESIGNATED BANK DEBT" means any indebtedness for borrowed money designated
pursuant to (and in accordance with the terms of) (i) Section 19(b), (ii)
Section 22(c) of the U.S. Security Agreement or (iii) Section 21(c) of the
Canadian Security Agreement.
"DESIGNATED CAPITAL MARKETS DEBT" means any indebtedness constituting a
Capital Markets Event designated pursuant to (and in accordance with the terms
of) (i) Section 19(a), (ii) Section 22(b) of the U.S. Security Agreement or
(iii) Section 21(b) of the Canadian Security Agreement.
"DESIGNATED HEDGING AGREEMENT" means any Hedging Agreement designated
pursuant to (and in accordance with the terms of) (i) Section 22(a) of the U.S.
Security Agreement or (ii) Section 21(a) of the Canadian Security Agreement.
"DRAWDOWN DATE" means any date during any Collateral Period on which an
extension of credit is made under either 2001 364-Day Agreement; provided that,
on and after the Refinancing Effective Date with respect to any Credit
Agreement, "Drawdown Date" for purposes of this Agreement will also include any
date during any Collateral Period on which an extension of credit is made under
the Replacement Agreement with respect to such Credit Agreement.
"EQUITY INTEREST" means (i) in the case of a corporation, any shares of its
capital stock, (ii) in the case of a limited liability company, any membership
interest therein, (iii) in the case of a partnership, any partnership interest
(whether general or limited) therein, (iv) in the case of any other business
entity, any participation or other interest in the equity or profits thereof or
(v) any warrant, option or other right to acquire any Equity Interest described
in this definition.
"EVENT OF DEFAULT" means an "Event of Default" under any Credit Agreement.
"FOREIGN SUBSIDIARY GUARANTEE" means a guarantee in form and substance
reasonably satisfactory to the Collateral Agent pursuant to which a Material
Subsidiary of NNI or NNL guarantees, among other things, the obligations of NNI
or NNL, respectively, under the Loan Documents.
"HEDGING AGREEMENT" means (i) any interest rate protection agreement,
foreign currency exchange agreement, commodity price protection agreement or
other interest rate, currency exchange rate or commodity price hedging
arrangement and (ii) any hedging agreement in respect of common stock entered
into in order to hedge exposure under stock option plans or other benefit plans
for employees, directors or consultants of NNL and its Subsidiaries, but in each
case
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only if such agreement or arrangement is entered into with a Bank or an
affiliate thereof.
"ILLIQUID COLLATERAL" means all Collateral other than the Liquid
Collateral.
"INDENTURE TRUSTEES" means (i) The Toronto-Dominion Bank Trust Company, as
trustee under the 1988 Indenture, (ii) The Bank of New York, as trustee under
the 1996 Indenture, (iii) Citibank, N.A., as trustee under the 2000 Indenture
and (iv) Bankers Trust Company, as trustee under the 2001 Indenture and their
respective successors in such capacity.
"INDENTURES" means, collectively, the 1988 Indenture, the 1996 Indenture,
the 2000 Indenture and the 2001 Indenture.
"INVESTMENT GRADE DATE" means the first day when the Debt Rating is BBB
(stable outlook) or higher by S&P and Baa2 (stable outlook) or higher by
Moody's.
"LIEN" means, with respect to any asset, (i) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (ii) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (iii) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
"LIEN GRANTORS" means NNI and the Subsidiary Lien Grantors.
"LIQUID COLLATERAL" means the (i) Cash Collateral Accounts and (ii) all
Cash Distributions on the Pledged Equity Interests.
"LIQUID INVESTMENT" means a Permitted Investment (other than commercial
paper) that matures within 30 days after it is first included in the Collateral.
"LOAN DOCUMENTS" means the Credit Agreements (including notes issued
thereunder) and the Security Documents.
"LLC INTEREST" means a membership interest or similar interest in a limited
liability company.
"MATERIAL SUBSIDIARY" has the meaning set forth in the ▇▇▇▇ ▇▇▇ 364-Day
Agreement.
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"MOODY'S" means ▇▇▇▇▇'▇ Investors Service, Inc.
"1988 INDENTURE" means the Indenture dated as of November 30, 1988 among
NTL, the subsidiary guarantors party thereto and The Toronto-Dominion Bank Trust
Company as trustee, as amended from time to time.
"1996 INDENTURE" means the Indenture dated as of February 15, 1996 among
NTL, the subsidiary guarantors party thereto and The Bank of New York as
trustee, as amended from time to time.
"NNC" means Nortel Networks Corporation, a Canadian corporation, and its
successors.
"NNFI" means Nortel Networks U.S. Finance Inc.
"NNFI HEDGING OBLIGATIONS" means (i) all obligations of NNFI under any
Designated Hedging Agreement and (ii) any renewals and extensions thereof.
"NNI BANK OBLIGATIONS" means (i) all principal of and interest (including,
without limitation, any Post-Petition Interest) on any loan under, or any note
issued pursuant to, any NNI Credit Agreement, (ii) all other amounts payable by
NNI under any NNI Credit Agreement, (iii) all obligations of NNI under Section 2
of the U.S. Security Agreement and (iv) any renewals or extensions of any of the
foregoing.
"NNI CREDIT AGREEMENTS" means the ▇▇▇▇ ▇▇▇ 364-Day Agreement, the 2000 NNI
5-Year Agreement and the 2001 NNI 364-Day Agreement.
"NNI HEDGING OBLIGATIONS" means (i) all obligations of NNI under any
Designated Hedging Agreement and (ii) any renewals or extensions thereof.
"NNI SECURED OBLIGATIONS" means (i) the NNI Bank Obligations, (ii) the NNI
Hedging Obligations, (iii) any Designated Bank Debt and (iv) any Designated
Capital Markets Debt of NNI.
"NNL BANK OBLIGATIONS" means (i) all principal of and interest (including,
without limitation, any Post-Petition Interest) on any loan under, or any note
issued pursuant to, any NNL Credit Agreement, (ii) all other amounts payable by
NNL under any NNL Credit Agreement, (iii) all obligations of NNL under Article 9
of each NNI Credit Agreement and (iv) any renewals or extensions of any of the
foregoing.
7
"NNL BOND OBLIGATIONS" means all principal of and interest (including,
without limitation, any Post-Petition Interest) on and other amounts payable
under the 2002 Notes, the 2003 Notes, the 2006 Notes, the 2006 NNCC Notes, the
2008 Notes, the 2023 Notes and the 2026 Notes.
"NNL COMPANIES" means, collectively, NNL, any of its Subsidiaries
(including without limitation NNI and any NNI Subsidiaries) and their respective
affiliates.
"NNL CREDIT AGREEMENTS" means the ▇▇▇▇ ▇▇▇ 364-Day Agreement, the ▇▇▇▇ ▇▇▇
5-Year Agreement and the ▇▇▇▇ ▇▇▇ 364-Day Agreement.
"NNL HEDGING OBLIGATIONS" means (i) all obligations of NNL under any
Designated Hedging Agreement and (ii) any renewals or extensions thereof.
"NON-CONTINGENT SECURED OBLIGATION" means at any time any Secured
Obligation (or portion thereof) that is not a Contingent Secured Obligation at
such time.
"NTL" means Northern Telecom Limited, a Canadian corporation, and its
successors.
"OWN" refers to the possession of sufficient rights in property to grant a
security interest therein as contemplated by UCC Section 9-203, and "ACQUIRE"
refers to the acquisition of any such rights.
"PARTNERSHIP INTEREST" means a partnership interest, whether general or
limited.
"PERMITTED INVESTMENTS" means investments in:
(i) direct obligations of, or obligations the principal of and interest on
which are unconditionally guaranteed by, the United States or Canada (or by any
agency thereof to the extent such obligations are backed by the full faith and
credit of the United States or Canada, as the case may be), in each case
maturing within one year from the date of acquisition thereof;
(ii) commercial paper maturing within one year from the date of acquisition
thereof and having, at such date of acquisition, the highest credit rating
obtainable from S&P, Moody's or Dominion Bond Rating Services Limited;
8
(iii) certificates of deposit, banker's acceptances and time deposits
maturing within 180 days from the date of acquisition thereof issued or
guaranteed by or placed with, and money market deposit accounts issued or
offered by, any domestic office of any commercial bank organized under the laws
of the United States or any State thereof or Canada which has a combined capital
and surplus and undivided profits of at least $500,000,000;
(iv) fully collateralized repurchase agreements with a term of not more
than 30 days for securities described in clause (i) above and entered into with
a financial institution satisfying the criteria described in clause (iii) above;
and
(v) any other investments made in compliance with Corporate Procedure No.
303.30 of NNC with respect to cash investments and safe custody arrangements,
substantially as in effect on the Amendment No. 2 Effective Date (as defined in
the ▇▇▇▇ ▇▇▇ 364-Day Agreement).
"PERMITTED LIENS" means (i) the Transaction Liens and (ii) any other Liens
on the Collateral permitted to be created or assumed or to exist pursuant to
each Credit Agreement.
"PERSON" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
"PLEDGE" means the Liens granted by the Lien Grantors under the Pledge
Documents.
"PLEDGE AGREEMENT SUPPLEMENT" means a Pledge Agreement Supplement,
substantially in the form of Exhibit A, signed and delivered to the Collateral
Agent for the purpose of adding a Subsidiary as a party hereto pursuant to
Section 18 and/or adding additional property to the Collateral.
"PLEDGE DOCUMENTS" means this Agreement, the Pledge Agreement Supplement,
and all other supplemental or additional security agreements, control agreements
or similar instruments required to be delivered hereunder.
"PLEDGED", when used in conjunction with any type of asset, means at any
time an asset of such type that is included (or that creates rights that are
included) in the Collateral at such time pursuant to the terms of this
Agreement. For example, "Pledged Equity Interest" means an Equity Interest that
is included in the Collateral at such time.
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"POST-PETITION INTEREST" means, with respect to any obligation of any
Person, any interest that accrues after the commencement of any case, proceeding
or other action relating to the bankruptcy, insolvency or reorganization of such
Person (or would accrue but for the operation of applicable bankruptcy or
insolvency laws), whether or not such interest is allowed or allowable as a
claim in any such proceeding.
"PROCEEDS" means all proceeds of, and all other profits, products, rents or
receipts, in whatever form, arising from the collection, sale, exchange,
assignment, or other disposition of, or other realization upon, any Collateral,
including all claims of the relevant Lien Grantor against third parties for loss
of, damage to or destruction of, or for proceeds payable under, or unearned
premiums with respect to, policies of insurance in respect of, any Collateral,
and any condemnation or requisition payments with respect to any Collateral.
"RATIO" means, with respect to any Secured Bond Obligation, at any time,
the ratio of (i) the principal amount of such Secured Bond Obligation to (ii)
the principal amount outstanding under the Credit Agreements at such time.
"REFINANCING" means, with respect to any Credit Agreement, any renewal or
extension thereof (including pursuant to an amendment and restatement or a
replacement thereof).
"REFINANCING EFFECTIVE DATE" means, with respect to any Credit Agreement,
the first date on which a Refinancing thereof becomes effective.
"REPLACEMENT AGREEMENT" means, with respect to any Credit Agreement, one or
more credit agreements evidencing the Refinancing of such Credit Agreement, but
only if each such credit agreement is designated as a "Replacement Agreement"
for purposes of this Agreement by NNI or NNL, as the case may be.
"REQUIRED SECURED BANKS" means, at any date, Included Banks at such date
having at least 51% of the aggregate amount, without duplication, of (i) the
"Commitments" under the applicable Credit Agreements and (ii) the aggregate
unpaid principal amount of the "Loans" under the applicable Credit Agreements.
"INCLUDED BANKS" means, at any date, the Banks party to either of the 2001
364-Day Agreements and, solely if such date occurs on or after the Refinancing
Effective Date with respect to any Credit Agreement, the Banks party to the
Replacement Agreement with respect to any Credit Agreement (subject to any
exclusion set forth in such Credit Agreement or a Replacement Agreement). Prior
to the first Refinancing Effective Date, the Included Banks will be the Banks
party to either 2001 364-Day Credit Agreement and the "applicable Credit
Agreements"
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for the purposes of clauses (i) and (ii) will be each of the 2001 364-Day
Agreements.
"S&P" means Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc.
"SECURED AGREEMENT", when used with respect to any Secured Obligation of
any Lien Grantor, refers to each instrument, agreement or other document that
sets forth obligations of each Lien Grantor and/or rights of the holder with
respect to such Secured Obligation.
"SECURED BOND OBLIGATIONS" means, at any date, the NNL Bond Obligations and
any Designated Capital Markets Debt containing provisions requiring that such
Designated Capital Markets Debt be equally and ratably secured at such date with
the debt under the Credit Agreements.
"SECURED OBLIGATIONS" means (i) with respect to NNI, the NNI Secured
Obligations and (ii) with respect to each Subsidiary Lien Grantor, (1) the NNI
Bank Obligations, (2) the NNI Hedging Obligations, (3) the NNL Bond Obligations,
(4) the NNL Bank Obligations, (5) the NNL Hedging Obligations, (6) the NNFI
Hedging Obligations, (7) any Designated Capital Markets Debt and (8) any
Designated Bank Debt.
"SECURED PARTIES" means the holders from time to time of the Secured
Obligations.
"SECURITY DOCUMENTS" means this Agreement, the U.S. Security Agreement, the
Canadian Security Agreement and all supplemental or additional security
agreements, control agreements or similar instruments delivered pursuant thereto
or pursuant to any NNL Credit Agreement or NNI Credit Agreement (other than any
such agreement or instrument with respect to real property).
"SPECIFIED EVENT OF DEFAULT" means an event described in Section 6.01(a),
(f) or (g) of the Credit Agreements (or any corresponding provision of any
Replacement Agreement), or any Event of Default caused by a breach of any
financial or debt covenant contained in either 2001 364-Day Agreement; provided
that, on and after the Refinancing Effective Date with respect to any Credit
Agreement, "Specified Event of Default" for purposes of this Agreement will also
include any event of default caused by a breach of any financial or debt
covenant contained in any Replacement Agreement with respect to such Credit
Agreement or any other event of default that is designated in such Replacement
Agreement as a "Specified Event of Default" for the purpose of this Agreement.
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"SUBSIDIARY" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of NNI.
"SUBSIDIARY LIEN GRANTORS" means each Subsidiary of NNI or NNL that shall,
at any time after the date hereof, become a "Subsidiary Lien Grantor" pursuant
to Section 18.
"TOTAL COLLATERAL" means the "Collateral" as defined in any Credit
Agreement (assuming, for this purpose, that Collateral includes all "Foreign
Subsidiary Guarantees" as defined in any Credit Agreement, in effect at any time
of determination).
"TRANSACTION LIENS" means the Liens granted by the "Lien Grantors" under,
and as defined in, any of the Security Documents.
"2000 INDENTURE" means the Indenture dated as of December 15, 2000 among
NNL, Nortel Networks Capital Corporation and Citibank, N.A. as trustee, as
amended from time to time.
"2001 INDENTURE" means the Indenture dated as of August 15, 2001 among NNC,
NNL as guarantor and The Bankers Trust Company, as trustee, as amended from time
to time.
"2002 NOTES" means the 6 7/8% Notes due 2002 issued by NTL pursuant to the
1988 Indenture.
"2003 NOTES" means the 6% Notes due 2003 issued by NTL pursuant to the 1988
Indenture.
"2006 NOTES" means the 6.125% Notes due 2006 issued by NNL pursuant to the
2000 Indenture.
"2006 NNCC NOTES" means the 7.40% Notes due 2006 issued by NTL pursuant to
the 1996 Indenture.
"2008 NOTES" means the 4.25% Convertible Senior Notes due 2008 issued by
NNC and guaranteed by NNL pursuant to the 2001 Indenture.
"2023 NOTES" means the 6 7/8% Notes due 2023 issued by NTL pursuant to the
1988 Indenture.
12
"2026 NOTES" means the 7.875% Notes due 2026 issued by Northern Telecom
Capital Corporation and guaranteed by NTL pursuant to the 1996 Indenture.
"UCC" means the Uniform Commercial Code as in effect from time to time in
the State of New York; provided that, if perfection or the effect of perfection
or non-perfection or the priority of any Transaction Lien on any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than New York, "UCC" means the Uniform Commercial Code as in effect from time to
time in such other jurisdiction for purposes of the provisions hereof relating
to such perfection, effect of perfection or non-perfection or priority.
"U.S. SECURITY AGREEMENT" means the U.S. Guarantee and Security Agreement
dated as of the date hereof among NNL, NNI, the Subsidiaries party thereto and
JPMorgan Chase Bank, as Collateral Agent.
"U.S. SUBSIDIARY" means, with respect to any Person, any Subsidiary (which
may be a corporation, limited liability company, partnership or other legal
entity) organized under the laws of the United States or any state thereof.
(c) Special provision with respect to Refinancings. On and after the
Refinancing Effective Date with respect to any Credit Agreement, any reference
herein to such Credit Agreement (including for the avoidance of doubt any
reference to "2000 NNI 364-Day Agreement", "2000 NNI 5-Year Agreement", "2001
NNI 364-Day Agreement", "2000 NNL 364-Day Agreement", "2000 NNL 5-Year
Agreement" or the "2001 NNL 364-Day Agreement") shall be deemed to be a
reference to the Replacement Agreement with respect thereto.
(d) Terms Generally. The definitions of terms herein (including those
incorporated by reference to the UCC or to another document) apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun includes the corresponding masculine, feminine and neuter
forms. The words "INCLUDE", "INCLUDES" and "INCLUDING" shall be deemed to be
followed by the phrase "WITHOUT LIMITATION". The word "WILL" shall be construed
to have the same meaning and effect as the word "SHALL". Unless the context
requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (ii) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (iii) the words "HEREIN", "HEREOF" and "HEREUNDER", and words of
similar import, shall be
13
construed to refer to this Agreement in its entirety and not to any particular
provision hereof, (iv) all references herein to Sections, Exhibits and Schedules
shall be construed to refer to Sections of, and Exhibits and Schedules to, this
Agreement and (v) the word "PROPERTY" shall be construed to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
SECTION 2. Pledge of Equity Interests. (a) Each Lien Grantor, in order to
secure its Secured Obligations, grants to the Collateral Agent for the benefit
of the Secured Parties, effective on the first day of any Collateral Period, a
continuing security interest in all the following property of such Lien Grantor,
whether now owned or existing or hereafter acquired or arising and regardless of
where located:
(i) all Equity Interests in any Subsidiary held directly by such Lien
Grantor and all of its rights and privileges with respect thereto, and all
income and profits thereon, all interest, dividends and other payments and
distributions with respect thereto;
(ii) such Lien Grantor's ownership interest in its Cash Collateral
Account and all cash held therein from time to time; and
(iii) all Proceeds of the Collateral described in the foregoing
clauses (i) and (ii);
provided that the following property shall be excluded from the foregoing
security interests: (A) any Equity Interests held by a Lien Grantor in any
Subsidiary that is a U.S. Subsidiary, (B) Equity Interests held by a Lien
Grantor in any Subsidiary that is not a Material Subsidiary, (C) any Equity
Interest held in any Additional Subsidiary prior to the applicable Additional
Collateral Date, (D) any Equity Interest held in any Subsidiary that is party to
a Foreign Subsidiary Guarantee which is in full force and effect on (x) the
first day of the Collateral Period or (y) solely with respect to any Additional
Subsidiary, on the applicable Additional Collateral Date and (E) voting Equity
Interest in any Subsidiary that is not a U.S. Subsidiary to the extent (but only
to the extent) required to prevent the Collateral from including more than 66%
of all voting power of all Equity Interests in such Subsidiary. The security
interests granted by each Lien Grantor pursuant to this Section 2(a) shall
terminate in accordance with Section 17.
(b) The Pledges are granted as security only and shall not subject the
Collateral Agent or any other Secured Party to, or transfer or in any way affect
or modify, any obligation or liability of any Lien Grantor with respect to any
of the Collateral or any transaction in connection therewith.
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SECTION 3. General Representations, Warranties and Covenants. Each Lien
Grantor represents and warrants, at the times set forth below, and covenants,
where indicated below, as follows.
(a) Each Lien Grantor represents and warrants, on the first day of the
first Collateral Period and on each Drawdown Date, that, at such time, such Lien
Grantor is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization of which such Lien Grantor
shall on or prior to such time have given written notice to the Collateral
Agent.
(b) Each Lien Grantor represents and warrants, on the first day of the
first Collateral Period, that Schedule 1 lists all Pledged Equity Interests
owned by such Lien Grantor on the date of delivery of such Schedule 1 and held
directly by such Lien Grantor (i.e., not through a Subsidiary, a Securities
Intermediary or any other Person).
(c) Each Lien Grantor represents and warrants, on the first day of the
first Collateral Period, that all Pledged Equity Interests owned by such Lien
Grantor at such time are owned by it free and clear of any Lien other than (i)
the Transaction Liens and (ii) any tax liens, judgment liens, put/call
arrangements and Liens existing on the date of this Agreement that are Permitted
Liens. Each Lien Grantor covenants that it will cause all Pledged Equity
Interests owned by such Lien Grantor from time to time to be owned by it free
and clear of any Lien other than (i) the Transaction Liens and (ii) any tax
liens, judgment liens, put/call arrangements and Liens existing on the date of
this Agreement that are Permitted Liens. Such Lien Grantor represents and
warrants, on the first day of the first Collateral Period and on each Drawdown
Date, that all shares of capital stock included in such Pledged Equity Interests
owned by such Lien Grantor have been duly authorized and validly issued and are
fully paid and non-assessable. Such Lien Grantor covenants that it will ensure
that none of the Pledged Equity Interests owned by such Lien Grantor are subject
to any option to purchase or similar right of any Person. Such Lien Grantor
covenants that it will not become a party to or otherwise bound by any agreement
(except the Credit Agreements, the Security Documents and the Indentures) which
restricts in any manner the rights of any present or future holder of any
Pledged Equity Interest owned by such Lien Grantor.
(d) Each Lien Grantor represents and warrants, on the first day of the
first Collateral Period and on each Drawdown Date, that, at each such time, (i)
no financing statement, security agreement, mortgage or similar or equivalent
document or instrument covering all or part of the Collateral owned by such Lien
Grantor is on file or of record in any jurisdiction in which such filing or
recording would be effective to perfect or record a Lien on such Collateral,
except financing statements, mortgages or other similar or equivalent documents
with respect to
15
Permitted Liens and (ii) no Collateral owned by such Lien Grantor is in the
possession or under the Control of any other Person having a claim thereto or
security interest therein, other than a Permitted Lien.
(e) Each Lien Grantor represents and warrants, on the first day of the
first Collateral Period, that, when the actions which are required to be taken
in order to create and perfect a Pledge (make the Pledge enforceable against the
Lien Grantor and third parties) with respect to any Collateral, as disclosed in
writing to the Collateral Agent or its counsel on or prior to such date by any
NNL Company or its counsel, have been taken, then at such time such Pledge (i)
will have been validly created, (ii) attaches to each item of such Collateral on
such date (or, if such Lien Grantor first obtains rights thereto on a later
date, on such later date), (iii) when so attached, will secure all the Secured
Obligations of such Lien Grantor and (iv) will constitute a perfected security
interest in such Collateral owned by such Lien Grantor prior to all Liens and
rights of others therein, except Permitted Liens.
(f) Each Lien Grantor represents and warrants, on each Drawdown Date, that
on such date the Pledges (i) have been validly created, (ii) attached to each
item of such Collateral on such date (or, if such Lien Grantor first obtains
rights thereto on a later date, on such later date), (iii) when so attached,
secure all the Secured Obligations of such Lien Grantor and (iv) will constitute
a perfected security interests in the Collateral owned by such Lien Grantor
prior to all Liens and rights of others therein, except Permitted Liens;
provided that (i) if this representation and warranty shall not be true on any
Drawdown Date with respect to any Equity Interests as a result of the Collateral
Agent not performing in a timely manner its obligations under Section 5(d) with
respect to such Equity Interests prior to such Drawdown Date, the representation
with respect to such Equity Interests shall be deemed required to be made not on
such Drawdown Date but on the fifteenth Business Day following compliance by the
Collateral Agent with such Section with respect to such Equity Interests and
(ii) if the Collateral Agent shall have determined in its good faith discretion
that creating or perfecting a security interest in any Collateral (making such
security interest enforceable against the Lien Grantor and third parties) by the
date this representation and warranty would otherwise be required to be made is
impossible, impracticable or unreasonably burdensome, the Collateral Agent may,
in its good faith discretion, consent to a waiver of compliance with this
representation and warranty on the date this representation and warranty would
otherwise be required to be made (which waiver (x) may at the option of the
Collateral Agent be limited in duration, (y) shall in any event be granted and
shall be unlimited in duration if such Collateral is De Minimus Collateral). "DE
MINIMUS COLLATERAL" means, at any Drawdown Date, any Equity Interests so long as
such Equity Interests, together with all other Equity Interests that are
proposed to constitute "De Minimus
16
Collateral" on such Drawdown Date, constitute the Equity Interests of Persons
that (together with their consolidated subsidiaries, without duplication) in the
aggregate have consolidated revenues that are less than 5% of the consolidated
revenues of NNL and its Subsidiaries, as set forth in the most recent audited
consolidated financial statements of NNL and its consolidated subsidiaries
delivered to the Banks or made publicly available. Without limiting any other
obligations of any Lien Grantor set forth in this Agreement, each Lien Grantor
agrees that it will use its commercially reasonable efforts to ensure that the
Pledges with respect to any Equity Interests that constitute De Minimus
Collateral are validly created and perfected (made enforceable against the Lien
Grantor and third parties).
(g) Each Lien Grantor represents and warrants, on the first day of the
first Collateral Period and on each Drawdown Date, that, except as disclosed in
writing to the Collateral Agent or its counsel on or prior to such date by NNL
or its counsel, no registration, recordation or filing with or consent or
approval of any governmental body, agency or official is required in connection
with the execution or delivery of the Pledge Documents or is necessary for the
validity or enforceability thereof or for the perfection (including, if
applicable, under the UCC) or due recordation of the Pledges granted by such
Lien Grantor or for the enforcement of the Pledges granted by such Lien Grantor
(it being understood that any disposition of Collateral constituting Securities
is subject to applicable securities laws).
(h) Each Lien Grantor represents and warrants, on the first day of the
first Collateral Period and on each Drawdown Date, that, at such time, no
Pledged Equity Interest is held through a Securities Intermediary.
(i) Each Lien Grantor represents and warrants that, on the first day of the
first Collateral Period and on each Drawdown Date, no Equity Interest in any
Subsidiary of such Lien Grantor which (i) is a Material Subsidiary and (ii) is
not a U.S. Subsidiary and (iii) is not party to a Foreign Subsidiary Guarantee
which is in full force and effect on such date is directly held by any U.S.
Subsidiary of NNI or NNL which is not a Subsidiary Lien Grantor or a "Lien
Grantor" as defined in any Security Document pursuant to which such "Lien
Grantor" has granted a lien (subject to the exceptions, if any, set forth in and
to the extent required by such Security Document) on all Equity Interest it
holds in such Subsidiary; provided that this representation and warranty shall
be deemed not to have been made with respect to U.S. Subsidiaries of NNI which
directly held such Equity Interest on February 28, 2002.
SECTION 4. Additional Covenants. Each Lien Grantor covenants that such Lien
Grantor will not effect any Asset Sale with respect to any Collateral if at any
such time a Specified Event of Default has occurred and is continuing.
17
SECTION 5. Equity Interests. Each Lien Grantor represents and warrants, at
the times set forth below, and each Lien Grantor and, with respect to Section
5(d) only, the Collateral Agent, covenants, where indicated below, as follows:
(a) Certificated Securities. On the first day of the first Collateral
Period and on each Drawdown Date, such Lien Grantor represents and warrants
that, as of such date, such Lien Grantor has delivered to the Collateral Agent
as Collateral hereunder all certificates representing any Pledged Certificated
Security owned as of such date by such Lien Grantor. Such Lien Grantor covenants
that whenever such Lien Grantor acquires any certificate representing a Pledged
Certificated Security described in the immediately preceding sentence, such Lien
Grantor will as promptly as practicable deliver such certificate to the
Collateral Agent as Collateral hereunder.
(b) Perfection as to Certificated Securities. Such Lien Grantor represents
and warrants at the time that such Lien Grantor delivers the certificate
representing any Pledged Certificated Security owned by such Lien Grantor to the
Collateral Agent and complies with Section 5(c) in connection with such
delivery, and assuming the Collateral Agent has no notice of any adverse claim,
that to the extent that perfection is governed by the laws of a jurisdiction in
the United States, (i) the Pledge of such Pledged Certificated Security will be
perfected, subject to no prior Liens or rights of others other than tax liens,
judgment liens, put/call arrangements and Liens existing on the date of this
Agreement that are Permitted Liens, and (ii) the Collateral Agent will have
Control of such Pledged Certificated Security.
(c) Delivery of Pledged Certificates. Each Lien Grantor covenants that all
Pledged Certificates, when delivered to the Collateral Agent, will be in form
and substance reasonably satisfactory to the Collateral Agent.
(d) Further Assurances. Each Lien Grantor authorizes the Collateral Agent
to execute and file financing statements and continuation statements under the
Uniform Commercial Code applicable in any relevant U.S. jurisdiction (the
"UCC"), and agrees that it shall pay the reasonable costs thereof or incidental
thereto. The Lien Grantor covenants that it will, and authorizes the Collateral
Agent to, at the Lien Grantor's expense and in such manner and form as the
Collateral Agent may reasonably require, execute, deliver, file and record any
financing statement, specific assignment or other paper and take all other
action and enter into such other agreements as may be necessary or desirable or
that the Collateral Agent reasonably may request, in order to create, preserve,
perfect or validate any Pledge or to enable the Collateral Agent to exercise and
enforce its rights hereunder with respect to any of the Collateral. Upon request
of any Lien Grantor and receipt by the Collateral Agent of evidence reasonably
satisfactory to it of the need for such action, the Collateral Agent shall
deliver to such Lien
18
Grantor any stock certificates evidencing any Pledged Equity Interests for the
sole purpose of creating or perfecting the Pledge with respect thereto.
SECTION 6. Cash Collateral Accounts. (a) If and when required for purposes
hereof, the Collateral Agent will establish with respect to each Lien Grantor an
account (its "CASH COLLATERAL ACCOUNT"), in the name and under the exclusive
control of the Collateral Agent, subject to Section 6(d).
(b) The Collateral Agent shall deposit the following amounts, as and when
received by it, in each Lien Grantor's Cash Collateral Account: (i) each Cash
Distribution required by Section 10 to be deposited therein and (ii) each amount
realized or otherwise received by the Collateral Agent with respect to assets of
such Lien Grantor upon any exercise of remedies pursuant to any Pledge Document
upon the occurrence and during the continuance of (x) with respect to Illiquid
Collateral, an Event of Default and (y) with respect to Liquid Collateral, a
Specified Event of Default.
(c) The Collateral Agent shall maintain such records and/or establish such
sub-accounts as shall be required to enable it to identify the amounts held in
each Cash Collateral Account from time to time pursuant to Section 6(b).
(d) Unless (x) an Event of Default shall have occurred and be continuing
and the Required Secured Banks shall have instructed the Collateral Agent to
stop withdrawing amounts from the Cash Collateral Accounts pursuant to this
subsection 6(d) or (y) the maturity of any of the Bonds or the indebtedness
outstanding under the Credit Agreements shall have been accelerated, any Cash
Distributions or other amounts deposited in the Cash Collateral Account shall,
at the relevant Lien Grantor's request, (A) be withdrawn and applied to pay
Secured Obligations that are then due and payable or (B) if no Event of Default
has occurred and is continuing, be withdrawn and returned to such Lien Grantor.
SECTION 7. Operation of Cash Collateral Accounts. (a) All Cash
Distributions received with respect to Permitted Investments held in a Cash
Collateral Account shall be deposited therein promptly upon receipt thereof.
(b) So long as no Specified Event of Default shall have occurred and be
continuing, funds held in any Cash Collateral Account may, until withdrawn, be
invested and reinvested in Permitted Investments; provided that if a Specified
Event of Default shall have occurred and be continuing, the Collateral Agent may
select such Permitted Investments.
(c) If a Specified Event of Default shall have occurred and be continuing,
the Collateral Agent may (i) retain all cash and investments then held in any
Cash Collateral Account, (ii) liquidate any or all investments held therein
19
and/or (iii) withdraw any amounts held therein and apply such amounts as
provided in Section 12.
(d) If a Specified Event of Default shall have occurred and be continuing,
and immediately available cash on deposit in any Cash Collateral Account is not
sufficient to make any distribution or withdrawal to be made pursuant hereto,
the Collateral Agent will cause to be liquidated, as promptly as practicable,
such investments held in or credited to such Cash Collateral Account as shall be
required to obtain sufficient cash to make such distribution or withdrawal and,
notwithstanding any other provision hereof, such distribution or withdrawal
shall not be made until such liquidation has taken place.
SECTION 8. Transfer of Record Ownership. (a) To the maximum extent
permitted by applicable law, at any time when an Event of Default shall have
occurred and be continuing, the Collateral Agent may (and to the extent that
action by it is required, the relevant Lien Grantor, if directed to do so by the
Collateral Agent, will as promptly as practicable) cause each of the Pledged
Certificated Securities (or any portion thereof specified in such direction) to
be transferred of record into the name of the Collateral Agent or its nominee.
Promptly upon sending any such direction, the Collateral Agent will notify each
relevant Lien Grantor thereof, and from time to time thereafter such Lien
Grantor will take any and all actions reasonably requested by the Collateral
Agent to facilitate compliance with this subsection 8(a).
(b) Communications after Transfer of Record Ownership. The Collateral Agent
will promptly give to the relevant Lien Grantor copies of any notices and other
communications received by the Collateral Agent with respect to Pledged
Certificated Securities registered in the name of the Collateral Agent or its
nominee.
SECTION 9. Right to Vote Securities. (a) Unless an Event of Default shall
have occurred and be continuing, each Lien Grantor will have the right, from
time to time, to vote and to give consents, ratifications and waivers with
respect to any Pledged Equity Interest owned by it and the Collateral Agent
will, upon receiving a written request from such Lien Grantor, promptly deliver
to such Lien Grantor or as specified in such request such proxies, powers of
attorney, consents, ratifications and waivers in respect of any such Pledged
Equity Interest that is registered in the name of the Collateral Agent or its
nominee, in each case as shall be specified in such request and be in form and
substance reasonably satisfactory to the Collateral Agent. Unless an Event of
Default shall have occurred and be continuing, the Collateral Agent will have no
right to take any action which the owner of a Pledged Security, Pledged
Partnership Interest or Pledged LLC Interest is entitled to take with respect
thereto, except the right to receive payments and other distributions to the
extent provided herein.
20
(b) If an Event of Default shall have occurred and be continuing, the
Collateral Agent will have the right to the extent permitted by law (and, in the
case of a Pledged Security, Pledged Partnership Interest or Pledged LLC
Interest, by the relevant partnership agreement, limited liability company
agreement, operating agreement or other governing document) to vote, to give
consents, ratifications and waivers and to take any other action with respect to
Pledged Equity Interests, with the same force and effect as if the Collateral
Agent were the absolute and sole owner thereof, and each Lien Grantor will take
all such action as the Collateral Agent may reasonably request from time to time
to give effect to such right.
SECTION 10. Certain Cash Distributions. Cash Distributions with respect to
Permitted Investments held in a Cash Collateral Account shall be deposited and
held therein, or withdrawn therefrom, as provided in Section 6 and Section 7. If
a Specified Event of Default shall have occurred and be continuing, Cash
Distributions (other than in amounts less than $3,000,000) with respect to any
Pledged Equity Interest (whether held in the name of a Lien Grantor or in the
name of the Collateral Agent or its nominee) shall be deposited, as soon as
practicable upon receipt thereof, in a "Controlled Deposit Account" (as defined
in the U.S. Security Agreement) of the relevant Lien Grantor if such account
exists at such time and otherwise, in a Cash Collateral Account (provided that
if the Collateral Agent has not established at such time a Cash Collateral
Account with respect to such Lien Grantor, such Lien Grantor shall be required
to deposit such Cash Distributions as soon as practicable after such an account
is established) and, if applicable, applied in accordance with the prepayment
provisions of the 2001 364-Day Agreements and any other applicable Credit
Agreement.
SECTION 11. Remedies upon Event of Default or Specified Event of Default.
If (x) with respect to Illiquid Collateral, an Event of Default shall have
occurred and be continuing, or (y) with respect to Liquid Collateral, a
Specified Event of Default shall have occurred and be continuing, the Collateral
Agent may exercise (or cause its sub-agents to exercise) any or all of the
remedies available to it (or to such sub-agents) under the Pledge Documents with
respect to Illiquid Collateral and Liquid Collateral, respectively. Without
limiting the generality of the foregoing, if (x) with respect to Illiquid
Collateral, an Event of Default shall have occurred and be continuing or (y)
with respect to Liquid Collateral, a Specified Event of Default shall have
occurred and be continuing, the Collateral Agent may exercise on behalf of the
Secured Parties all the rights of a secured party under the UCC (whether or not
in effect in the jurisdiction where such rights are exercised but subject to
mandatory provisions of applicable law in such jurisdiction) or under the laws
of the jurisdiction of enforcement with respect to any Illiquid Collateral and
Liquid Collateral, as applicable, and, in addition, the Collateral Agent may, to
the maximum extent permitted by applicable law, if a Specified Event of Default
shall have occurred and be continuing, without being
21
required to give any notice, except as herein provided or as may be required by
mandatory provisions of law, withdraw all cash held in the Cash Collateral
Accounts and apply such cash as provided in Section 12 and, if there shall be no
such cash or if such cash shall be insufficient to pay all the Secured
Obligations in full, sell, or otherwise dispose of (x) if an Event of Default
has occurred and is continuing, the Illiquid Collateral or any part thereof and
(y) if Specified Event of Default shall have occurred and be continuing, the
Liquid Collateral or any part thereof. Notice of any such sale or other
disposition shall be given to the relevant Lien Grantor as required by Section
14.
SECTION 12. Application of Proceeds. (a) The Collateral Agent may (i) if a
Specified Event of Default shall have occurred and be continuing, apply any cash
held in the Cash Collateral Accounts and (ii) if (x) with respect to Illiquid
Collateral, an Event of Default shall have occurred and be continuing or (y)
with respect to Liquid Collateral, a Specified Event of Default shall have
occurred and be continuing, apply the proceeds of any sale or other disposition
of all or any part of the Illiquid Collateral or Liquid Collateral, as
applicable, in the following order of priorities:
(1) to pay the expenses of such sale or other disposition, including
reasonable compensation to agents of and counsel for the Collateral Agent,
and all reasonable expenses, liabilities and advances incurred or made by
the Collateral Agent in connection with the Security Documents, and any
other amounts then due and payable to the Collateral Agent pursuant to
Section 13 or any amounts owing to any Indenture Trustee under (x) Section
5.05 of each of the 1988 Indenture, the 1996 Indenture and the ▇▇▇▇
▇▇▇▇▇▇▇▇▇ and (y) Section 6.10 of the 2001 Indenture;
(2) to pay the due and unpaid principal, face amount or termination
amount of the Secured Obligations ratably, on the basis of the principal or
face amount of such Secured Obligations (or, with respect to Contingent
Secured Obligations, provide for the payment thereof pursuant to Section
12(b)), until payment in full of the principal of all Secured Obligations
shall have been made (or, with respect to Contingent Secured Obligations,
so provided for);
(3) to pay ratably the due and unpaid interest accrued on the Secured
Obligations in accordance with the provisions of the applicable Secured
Agreement, as applicable;
(4) to pay all other due and unpaid Secured Obligations and all due
and unpaid commitment fees and participation fees under each Credit
Agreement ratably (or, with respect to Contingent Secured Obligations,
22
provide for the payment thereof pursuant to Section 12(b)), until payment
in full of all such other Secured Obligations and fees shall have been made
(or, with respect to Contingent Secured Obligations, so provided for); and
(5) to pay to the relevant Lien Grantor, or as a court of competent
jurisdiction may direct, any surplus then remaining from the proceeds of
the Collateral owned by it;
provided that Collateral owned by any Subsidiary Lien Grantor and any proceeds
thereof shall be applied pursuant to the foregoing clauses (1), (2), (3) and (4)
of this Section 12(a) to the Secured Obligations of such Subsidiary Lien Grantor
only up to an aggregate amount equal to the largest amount that would not render
the application of such Collateral or proceeds thereof subject to avoidance
under Section 548 of the United States Bankruptcy Code or any comparable
provision of applicable law. The Collateral Agent may make such distributions
hereunder in cash or in kind or, on a ratable basis, in any combination thereof.
(b) If at any time any portion of any monies collected or received by the
Collateral Agent would, but for the provisions of this Section 12(b), be payable
pursuant to Section 12(a) in respect of a Contingent Secured Obligation, the
Collateral Agent shall not apply any monies to pay such Contingent Secured
Obligation but instead (x) notify the holder of such Contingent Secured
Obligation and (y) with respect to the holder of such Contingent Secured
Obligations excluding the holder of any Secured Bond Obligation, request the
holder thereof, at least 10 days before each proposed distribution hereunder, to
notify the Collateral Agent as to the maximum amount of such Contingent Secured
Obligation if then ascertainable (e.g., in the case of a letter of credit, the
maximum amount available for subsequent drawings thereunder). If the holder of
such Contingent Secured Obligation (excluding the holder of any Secured Bond
Obligation) does not notify the Collateral Agent of the maximum ascertainable
amount thereof at least two Business Days before such distribution, such holder
will not be entitled to share in such distribution. If such holder does so
notify the Collateral Agent as to the maximum ascertainable amount thereof, or
if such holder is the holder of any Secured Bond Obligation (regardless of
whether such holder has provided any notice to the Collateral Agent), the
Collateral Agent will allocate to such holder a portion of the monies to be
distributed in such distribution, calculated as if such Contingent Secured
Obligation were outstanding in such maximum ascertainable amount. However, the
Collateral Agent will not apply such portion of such monies to pay such
Contingent Secured Obligation, but instead will hold such monies and invest such
monies in Liquid Investments. All such monies and Liquid Investments and all
proceeds thereof will constitute Collateral hereunder, but will be subject to
distribution in accordance with this Section 12(b) rather than Section 12(a).
The Collateral Agent will hold all such monies and Liquid Investments and the
net proceeds thereof in trust until all or
23
part of such Contingent Secured Obligation becomes a Non-Contingent Secured
Obligation, whereupon the Collateral Agent at the request of the relevant
Secured Party will apply the amount so held in trust to pay such Non-Contingent
Secured Obligation; provided that, if the other Secured Obligations theretofore
paid pursuant to the same clause of Section 12(a) (i.e. clause (2) or (4)) were
not paid in full, the Collateral Agent will apply the amount so held in trust to
pay the same percentage of such Non-Contingent Secured Obligation as the
percentage of such other Secured Obligations theretofore paid pursuant to the
same clause of Section 12(a). If (i) the holder of such Contingent Secured
Obligation shall advise the Collateral Agent that no portion thereof remains in
the category of a Contingent Secured Obligation and (ii) the Collateral Agent
still holds any amount held in trust pursuant to this Section 12(b) in respect
of such Contingent Secured Obligation (after paying all amounts payable pursuant
to the preceding sentence with respect to any portions thereof that became
Non-Contingent Secured Obligations), such remaining amount will be applied by
the Collateral Agent in the order of priorities set forth in Section 12(a).
(c) With respect to any Secured Bond Obligation, whether or not a
Contingent Secured Obligation, including, without limitation, the principal
outstanding of and interest on such Secured Bond Obligation, an amount (the
"DETERMINED AMOUNT") with respect to such Secured Bond Obligation shall be
required to be paid or held by the Collateral Agent with respect to each of
Sections 12(a)(2), 12(a)(3) and 12(a)(4) (each, a "Level") equal to (x) the
Ratio multiplied by (y) the sum of (A) the proceeds of any sale or other
disposition of Collateral that are, in fact, being applied by the Collateral
Agent to amounts owed under the Credit Agreements at the applicable Level, plus
(B) the proceeds of such Collateral proposed to be held by the Collateral Agent
pursuant to Section 12(b) to cover the Contingent Secured Obligations relating
to the Credit Agreements at such Level in accordance with Section 12(b).
Notwithstanding the foregoing, if the amount to be applied to the Secured Bond
Obligations at any Level would be greater if the Ratio were calculated by
reference to a Secured Obligation (other than the principal under the Credit
Agreements) that constitutes "Funded Debt" under any Indenture, such Secured
Obligation shall be used in order to determine the amount to be applied to the
Secured Bond Obligations at such Level. Section 12 of this Agreement (including
this Section 12(c)) is intended to comply with the equal and ratable negative
pledge provisions of the Indentures and shall be construed to give effect to
such intention. The Collateral Agent shall be obligated to offer to pay to the
relevant Indenture Trustee any portion of the Determined Amounts that are, in
fact, due and payable at such time as such Determined Amounts are calculated,
and the Collateral Agent shall deposit any remaining portion of such Determined
Amounts and any amounts not accepted by the relevant Indenture Trustee in a
segregated account solely for the benefit of the holders of the relevant Secured
Bond Obligation (and all amounts on deposit in such account shall be invested in
Liquid Investments).
24
(d) In making the payments and allocations required by this Section 12, the
Collateral Agent may rely upon information supplied to it pursuant to Section
16(f). All distributions made by the Collateral Agent pursuant to this Section
12 shall be final (except in the event of manifest error) and the Collateral
Agent shall have no duty to inquire as to the application by any Secured Party
of any amount distributed to it.
SECTION 13. Fees and Expenses. Each Lien Grantor will forthwith upon demand
pay to the Collateral Agent: (a) the amount of any taxes that the Collateral
Agent may have been required to pay by reason of the Transaction Liens or to
free any Collateral from any other Lien thereon; (b) the amount of any and all
reasonable out-of-pocket expenses, including transfer taxes and reasonable fees
and expenses of counsel and other experts, that the Collateral Agent may incur
in connection with (i) the administration or enforcement of the Security
Documents, including such reasonable out-of-pocket expenses as are incurred to
preserve the value of the Collateral or the validity, perfection, rank or value
of any Transaction Lien, (ii) the collection, sale or other disposition of any
Collateral or (iii) the exercise by the Collateral Agent of any of its rights or
powers under the Security Documents; (c) the amount of any fees that any Lien
Grantor shall have agreed in writing to pay to the Collateral Agent and that
shall have become due and payable in accordance with such written agreement and
(d) the amount required to indemnify the Collateral Agent for, or hold it
harmless and defend it against, any loss, liability or expense (including the
reasonable fees and out-of-pocket expenses of its counsel and any experts or
sub-agents appointed by it hereunder) incurred or suffered by the Collateral
Agent in connection with the Security Documents, except to the extent that such
loss, liability or expense arises from the Collateral Agent's gross negligence
or willful misconduct or a breach of any duty that the Collateral Agent has
under this Agreement (after giving effect to Section 15 and Section 16). Any
such amount not paid to the Collateral Agent as soon as practicable will bear
interest for each day thereafter until paid at a rate per annum equal to the sum
of 2% plus the highest rate applicable to the base rate loans under the Credit
Agreements. If any transfer tax, documentary stamp tax or other tax is payable
in connection with any transfer or other transaction provided for in the
Security Documents, the Lien Grantors will pay such tax and provide any required
tax stamps to the Collateral Agent or as otherwise required by law.
SECTION 14. Authority to Administer Collateral. Each Lien Grantor
irrevocably appoints the Collateral Agent its true and lawful attorney, with
full power of substitution, in the name of such Lien Grantor, any Secured Party
or otherwise, for the sole use and benefit of the Secured Parties, but at NNI's
expense, to the extent permitted by law to exercise, at any time and from time
to time while (x) an Event of Default with respect to Illiquid Collateral and
(y) a Specified Event of Default with respect to Liquid Collateral shall have
occurred
25
and be continuing, all or any of the following powers with respect to all or any
of such Lien Grantor's Collateral:
(a) to demand, ▇▇▇ for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof;
(b) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto;
(c) to sell or otherwise dispose of the same or the proceeds or avails
thereof, as fully and effectually as if the Collateral Agent were the
absolute owner thereof; and
(d) to extend the time of payment of any or all thereof and to make
any allowance or other adjustment with reference thereto,
provided that, except in the case of Collateral that threatens to decline
speedily in value or is of a type customarily sold on a recognized market (as to
which only such notice (if any) as is required to be given by mandatory
provision fo applicable law shall be given), the Collateral Agent will give the
relevant Lien Grantor at least ten days' prior written notice (or such longer
period of notice as is required by mandatory provision of applicable law) of the
time and place of any public sale thereof or the time after which any private
sale or other intended disposition thereof will be made. Any such notice shall
(i) contain the information specified in UCC Section 9-613, (ii) be
Authenticated and (iii) be sent to the parties required to be notified pursuant
to UCC Section 9-611(c); provided that, if the Collateral Agent fails to comply
with this sentence in any respect, its liability for such failure shall be
limited to the liability (if any) imposed on it as a matter of law under the
UCC.
SECTION 15. Limitation on Duty in Respect of Collateral. Beyond the
exercise of reasonable care in the custody and preservation thereof, the
Collateral Agent will have no duty as to any Collateral in its possession or
control or in the possession or control of any sub-agent or bailee selected by
it in good faith or any income therefrom or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Collateral
Agent will be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession or control if such Collateral
is accorded treatment substantially equal to that which it accords its own
property, and will not be liable or responsible for any loss or damage to any
Collateral, or for any diminution in the value thereof, by reason of any act or
omission of any sub-agent or bailee selected by the Collateral Agent in good
faith, except to the extent that such liability arises from the Collateral
Agent's gross negligence or willful misconduct.
26
SECTION 16. General Provisions Concerning the Collateral Agent. (a)
Authority. The Collateral Agent is authorized to take such actions and to
exercise such powers as are delegated to the Collateral Agent by the terms of
the Security Documents, together with such actions and powers as are reasonably
incidental thereto.
(b) Rights and Powers as a Secured Party. The bank serving as the
Collateral Agent shall, in its capacity as a Secured Party, have the same rights
and powers as any other Secured Party and may exercise the same as though it
were not the Collateral Agent. Such bank and its affiliates may accept deposits
from, lend money to and generally engage in any kind of business with any NNL
Company as if it were not the Collateral Agent hereunder.
(c) Limited Duties and Responsibilities. The Collateral Agent shall not
have any duties or obligations under the Security Documents except those
expressly set forth therein. Without limiting the generality of the foregoing,
(i) the Collateral Agent shall not be subject to any fiduciary or other implied
duties, regardless of whether an Event of Default has occurred and is
continuing, (ii) the Collateral Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Security Documents that the
Collateral Agent is required in writing to exercise by the Required Secured
Banks (or such other number or percentage of the Banks as shall be necessary
under the relevant circumstances), and (iii) except as expressly set forth in
the Loan Documents, the Collateral Agent shall not have any duty to disclose,
and shall not be liable for any failure to disclose, any information relating to
any NNL Company that is communicated to or obtained by the bank serving as
Collateral Agent or any of its affiliates in any capacity. The Collateral Agent
shall not be liable for any action taken or not taken by it with the consent or
at the request of the Required Secured Banks or in the absence of its own gross
negligence or wilful misconduct. The Collateral Agent shall not be responsible
for the existence, genuineness or value of any Collateral or for the validity,
perfection, priority or enforceability of any Transaction Lien, whether impaired
by operation of law or by reason of any action or omission to act on its part
under the Security Documents, in either case absent its own gross negligence or
willful misconduct. The Collateral Agent shall be deemed not to have knowledge
of any Event of Default unless and until written notice thereof is given to the
Collateral Agent by any Lien Grantor or a Secured Party, and the Collateral
Agent shall not be responsible for or have any duty to ascertain or inquire into
(i) any statement, warranty or representation made in or in connection with any
Security Document, (ii) the contents of any certificate, report or other
document delivered thereunder or in connection therewith other than by it, (iii)
the performance or observance of any of the covenants, agreements or other terms
or conditions set forth in any Security Document, (iv) the validity,
enforceability, effectiveness or genuineness of any Security Document or any
27
other agreement, instrument or document or (v) the satisfaction of any condition
set forth in any Security Document.
(d) Authority to Rely on Certain Writings, Statements and Advice. The
Collateral Agent shall be entitled to rely on, and shall not incur any liability
for relying on, any notice, request, certificate, consent, statement,
instrument, document or other writing believed by it to be genuine and to have
been signed or sent by the proper Person. The Collateral Agent also may rely on
any statement made to it orally or by telephone and believed by it to be made by
the proper Person, and shall not incur any liability for relying thereon. The
Collateral Agent may consult with legal counsel (who may be counsel for any NNL
Company), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountant or expert. The Collateral Agent may rely
conclusively on advice from the applicable Indenture Trustee as to whether at
any time the maturity of any Bonds has been accelerated.
(e) Sub-Agents and Related Parties. The Collateral Agent may perform any of
its duties and exercise any of its rights and powers through one or more
sub-agents appointed by it in good faith. The Collateral Agent and any such
subagent may perform any of its duties and exercise any of its rights and powers
through its directors, officers, employees and agents (the "RELATED PARTIES").
The exculpatory provisions of Section 15 and this Section 16 shall apply to any
such sub-agent and to the Related Parties of the Collateral Agent and any such
subagent.
(f) Information as to Secured Obligations and Actions by Secured Parties.
For all purposes of the Security Documents, including determining the amounts of
the Secured Obligations and whether a Secured Obligation is a Contingent Secured
Obligation or not, or whether any action has been taken under any Secured
Agreement, the Collateral Agent will be entitled to rely on information from (i)
its own records for information as to the Banks, their Secured Obligations and
actions taken by them, (ii) the relevant Indenture Trustee for information as to
the Secured Obligations outstanding under any Indenture and actions taken by the
holders thereof, (iii) any Secured Party for information as to its Secured
Obligations and actions taken by it, to the extent that the Collateral Agent has
not obtained such information from the foregoing sources and (iv) NNI, to the
extent that the Collateral Agent has not obtained information from the foregoing
sources.
(g) The Collateral Agent may refuse to act on any notice, consent,
direction or instruction from any Secured Parties or any agent, trustee or
similar representative thereof that, in the Collateral Agent's opinion, (i) is
contrary to law or the provisions of any Security Document, (ii) may expose the
Collateral Agent
28
to liability (unless the Collateral Agent shall have been indemnified, to its
reasonable satisfaction, for such liability by the Secured Parties that gave
such notice, consent, direction or instruction) or (iii) is unduly prejudicial
to Secured Parties not joining in such notice, consent, direction or
instruction.
(h) Resignation; Successor Collateral Agent. Subject to the appointment and
acceptance of a successor Collateral Agent as provided in this subsection 16(h),
the Collateral Agent may resign at any time by notifying the Banks and NNI. Upon
any such resignation, the Required Secured Banks shall have the right to appoint
a successor Collateral Agent reasonably acceptable to NNI. If no successor shall
have been so appointed by the Required Secured Banks and shall have accepted
such appointment within 30 days after the retiring Collateral Agent gives notice
of its resignation, then the retiring Collateral Agent may, on behalf of the
Secured Parties, appoint a successor Collateral Agent reasonably acceptable to
NNI which shall be a bank with an office in New York, New York, or an affiliate
of any such bank. Upon acceptance of its appointment as Collateral Agent
hereunder by a successor, such successor shall succeed to and become vested with
all the rights, powers, privileges and duties of the retiring Collateral Agent
hereunder, and the retiring Collateral Agent shall be discharged from its duties
and obligations hereunder. The fees payable by NNI to a successor Collateral
Agent shall be the same as those payable to its predecessor unless otherwise
agreed by NNI and such successor. After the Collateral Agent's resignation
hereunder, the provisions of Section 15 and this Section 16 shall continue in
effect for the benefit of such retiring Collateral Agent, its sub-agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while the retiring Collateral Agent was acting as
Collateral Agent.
SECTION 17. Termination of Pledges; Release of Collateral. (a) The Pledges
granted by each Lien Grantor shall terminate on the earlier of (i) any
Investment Grade Date and (ii) the Bank Termination Date.
(b) On the first day on which a Foreign Subsidiary Guarantee is in full
force and effect with respect to a Material Subsidiary, any Pledge with respect
to any Equity Interest held in such Material Subsidiary will cease immediately
without any action by the Collateral Agent or any other Secured Party.
(c) Concurrently with any sale, exchange, assignment or other disposition
by any Lien Grantor (except a sale, exchange, assignment or other disposition to
another Lien Grantor whose "Secured Obligations" hereunder include "Secured
Obligations" of the Lien Grantor effecting such sale or other disposition) of
the Collateral permitted by the Credit Agreements and not expressly prohibited
by this Agreement, the Pledge on the assets sold or disposed of (but not in any
Proceeds arising from such sale or disposition) will cease
29
immediately without any action by the Collateral Agent or any other Secured
Party.
(d) Upon any Collateral of any Lien Grantor consisting of cash, cash
equivalents or Permitted Investments becoming the subject of a hedging
transaction permitted under the terms of the Credit Agreements, the Pledge
thereof (but not in any Proceeds of such Lien Grantor's rights under such
hedging transaction) will cease immediately without any action by the Collateral
Agent or any other Secured Party; provided that, if the transaction pursuant to
which such Collateral becoming the subject of a hedging transaction is an Asset
Sale no Specified Event of Default shall have occurred and be continuing.
(e) Upon any Collateral of any Lien Grantor consisting of Investment
Property subject to a put/call arrangement permitted by the terms of the Credit
Agreements being transferred to any person as a result of the exercise of such
put/call arrangement, the Pledge thereof (but not in any Proceeds of such
transfer) will cease immediately without any action by the Collateral Agent or
any other Secured Party; provided that, if the transaction pursuant to which
such Collateral being so transferred is an Asset Sale, no Specified Event of
Default shall have occurred and be continuing.
(f) In addition to the foregoing, at any time before the Pledges terminate,
the Collateral Agent may (i) release any Collateral (but not all or any
substantial part of the Total Collateral) with the prior written consent of the
Required Secured Banks, (ii) release all or any substantial part of the Total
Collateral with the prior written consent of all the Banks under the 2001
364-Day Agreements and, if such release is to occur on or after the Refinancing
Effective Date with respect to any Credit Agreement, all the Banks under the
Replacement Agreement with respect to such Credit Agreement (subject to any
exclusion set forth in such Credit Agreement) or (iii) amend this Agreement so
that the Secured Obligations of any Lien Grantor excludes the obligations under
any Credit Agreement with the prior written consent of all Banks party to such
Credit Agreement.
(g) Upon any termination of a Pledge or release of Collateral, or change in
the Secured Obligations of any Lien Grantor, the Collateral Agent will promptly,
at the expense of the relevant Lien Grantor, execute and deliver to such Lien
Grantor such documents as such Lien Grantor shall reasonably request to evidence
the termination of such Pledge or the release of such Collateral, or change in
the Secured Obligations, as the case may be, and shall deliver to such Lien
Grantor any documents or instruments, including without limitation stock
certificates, evidencing any Collateral no longer subject to any Pledge.
30
SECTION 18. Additional Lien Grantors. Any person may become a party hereto
by signing and delivering to the Collateral Agent a Pledge Agreement Supplement,
whereupon such person shall become a "Lien Grantor" and a "Subsidiary Lien
Grantor" as defined herein. Any Subsidiary which is (1) a Subsidiary of NNI or
NNL and (2) a U.S. Subsidiary shall be required to become a "Lien Grantor" and
"Subsidiary Lien Grantor: if required to do so by the provisions of the Credit
Agreements.
SECTION 19. Additional Secured Obligations. (a) Any Lien Grantor may from
time to time designate any indebtedness constituting a Capital Markets Event
("Designated Capital Markets Debt") as an additional Secured Obligation by
delivering to the Collateral Agent a certificate signed by a financial officer
that (i) identifies such indebtedness and the material terms thereof and (ii)
states that the obligations thereunder are designated as Secured Obligations;
provided that no such designation shall be effective unless and until, and
solely to the extent that, the commitments under the Credit Agreements shall
have been reduced and the loans outstanding thereunder shall have been repaid,
in each case to the extent required by the terms of the Credit Agreements as a
result of such Capital Markets Event; provided further that if a designation of
indebtedness constituting a Capital Markets Event shall have been made pursuant
to (and in accordance with the terms of) (x) Section 22(b) of the U.S. Security
Agreement or (y) Section 21(b) of the Canadian Security Agreement, then such
designated indebtedness shall constitute a Secured Obligation of each Lien
Grantor without any further action on the part of any Lien Grantor.
(b) Any Lien Grantor that is a Material Subsidiary of NNI or NNL may from
time to time designate any indebtedness for borrowed money (other than
indebtedness constituting a Capital Markets Event) owed by any Material
Subsidiary of NNI or NNL in either case to any Bank or any other financial
institution and outstanding on December 20, 2001 or incurred pursuant to a
commitment to extend credit in effect on such date or any extensions, renewals,
replacements and refinancings thereof ("Designated Bank Debt") as an additional
Secured Obligation by delivering to the Collateral Agent a certificate signed by
a financial officer that (i) identifies such indebtedness and the material terms
thereof and (ii) states the obligations thereunder are designated as Secured
Obligations; provided that the aggregate amount of indebtedness (without
duplication) designated as "Designated Bank Debt" under this Agreement and any
other security or guarantee document entered into by NNL, NNI and their
respective Material Subsidiaries for the benefit of the Secured Parties will not
exceed $300,000,000 in aggregate principal amount; provided further that if a
designation of indebtedness for borrowed money shall have been made pursuant to
(and in accordance with the terms of) (x) Section 22(c) of the U.S. Security
Agreement or (y) Section 21(c) of the Canadian Security Agreement, then such
31
designated indebtedness shall constitute a Secured Obligation of each Lien
Grantor without any further action on the part of any Lien Grantor.
SECTION 20. Notices. Each notice, request or other communication given to
any party hereunder shall be in writing (which term includes facsimile or other
electronic transmission) and shall be effective (a) when hand delivered or sent
by courier to such party at its address specified below, (b) when sent to such
party by facsimile or other electronic transmission, addressed to it at its
facsimile number or electronic address specified below, and such party sends
back an electronic confirmation of receipt or (c) ten days after being sent to
such party by certified or registered United States mail, addressed to it at its
address specified below, with first class or airmail postage prepaid:
(i) in the case of any Lien Grantor:
C/O Nortel Networks Limited
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇ ▇▇▇
Attention: Corporate Secretary Facsimile:
▇▇▇-▇▇▇-▇▇▇▇ MS: 036/NO/230
(ii) in the case of any other Lien Grantor, its address, facsimile
number or email address set forth in its first Pledge Agreement Supplement
(iii) in the case of the Collateral Agent:
JPMorgan Chase Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
E-mail: ▇▇▇▇▇▇.▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
(iv) in the case of any other Secured Party, to the Collateral Agent
to be forwarded to such Secured Party at its address or facsimile number or
e-mail address, if any, specified in or pursuant to the relevant Secured
Agreement.
Any party may change its address, facsimile number and/or e-mail address for
purposes of this Section by giving notice of such change to the Collateral Agent
and the Lien Grantors in the manner specified above.
32
SECTION 21. No Implied Waivers; Remedies Not Exclusive. No failure by the
Collateral Agent or any Secured Party to exercise, and no delay in exercising
and no course of dealing with respect to, any right or remedy under any Pledge
Document shall operate as a waiver thereof; nor shall any single or partial
exercise by the Collateral Agent or any Secured Party of any right or remedy
under any Loan Document preclude any other or further exercise thereof or the
exercise of any other right or remedy. The rights and remedies specified in the
Loan Documents are cumulative and are not exclusive of any other rights or
remedies provided by law.
SECTION 22. Successors and Assigns. This Agreement is for the benefit of
the Collateral Agent and the Secured Parties. If all or any part of any Secured
Party's interest in any Secured Obligation is assigned or otherwise transferred
in accordance with the transfer provisions applicable thereto, the transferor's
rights hereunder, to the extent applicable to the obligation so transferred,
shall be automatically transferred with such obligation. This Agreement shall be
binding on the Lien Grantors and their respective successors and assigns.
SECTION 23. Amendments and Waivers. Neither this Agreement nor any
provision hereof may be waived, amended, modified or terminated except pursuant
to an agreement or agreements in writing entered into by the parties hereto,
with the consent of the Required Secured Banks; provided that any such agreement
that effects a release of any Collateral or amends the definition of Secured
Obligations shall be made in accordance with Section 17(e). No such waiver,
amendment or modification shall affect the rights of a Secured Party (other than
a Bank) hereunder more adversely than it affects the comparable rights of the
Bank hereunder, without the consent of such Secured Party.
SECTION 24. Choice of Law. This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, except as otherwise
required by mandatory provisions of law.
SECTION 25. Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO ANY
PLEDGE DOCUMENT OR ANY TRANSACTION CONTEMPLATED THEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER
PARTIES HERETO HAVE BEEN INDUCED TO
33
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
SECTION 26. Severability. If any provision of any Pledge Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (a) the other provisions of the Pledge Documents shall remain
in full force and effect in such jurisdiction and shall be liberally construed
in favor of the Collateral Agent and the Secured Parties in order to carry out
the intentions of the parties thereto as nearly as may be possible and (b) the
invalidity or unenforceability of such provision in such jurisdiction shall not
affect the validity or enforceability thereof in any other jurisdiction.
34
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
NORTEL NETWORKS INC.
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
35
JPMORGAN CHASE BANK,
as Collateral Agent
By: ____________________________________
Name:
Title:
36
SCHEDULE 1
PLEDGED EQUITY INTERESTS IN MATERIAL SUBSIDIARIES
OWNED BY LIEN GRANTORS
(AS OF THE DATE HEREOF)
JURISDICTION NUMBER OF
OF OWNER OF PERCENTAGE SHARES OR
ISSUER ORGANIZATION EQUITY INTEREST OWNED UNITS
--------------------- ------------ -------------------- ---------- ---------
Nortel Networks Japan Japan Nortel Networks Inc. 100% 200
S-1-1
EXHIBIT A
TO PLEDGE AGREEMENT
PLEDGE AGREEMENT SUPPLEMENT
PLEDGE AGREEMENT SUPPLEMENT dated as of [the date of execution if such date
occurs during a Collateral Period and otherwise on the first day of the first
Collateral Period following execution] between [NAME OF LIEN GRANTOR] (the "LIEN
GRANTOR") and JPMORGAN CHASE BANK, as Collateral Agent.
WHEREAS, Nortel Networks Inc., the Subsidiaries party thereto and JPMorgan
Chase Bank, as Collateral Agent, are parties to a NNI Foreign Pledge Agreement
dated as of [the first day of the Collateral Period] (as heretofore amended
and/or supplemented, the "PLEDGE AGREEMENT");
WHEREAS, [name of Lien Grantor] desires to become [is] a party to the
Pledge Agreement as a Lien Grantor thereunder; and
WHEREAS, terms defined in the Pledge Agreement and not otherwise defined
herein have, as used herein, the respective meanings provided for therein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Grant of Transaction Liens. (a) In order to secure the Secured
Obligations, the Lien Grantor grants to the Collateral Agent for the benefit of
the Secured Parties, effective on the date hereof (if such date occurs during a
Collateral Period) and otherwise on the first day of any Collateral Period
following execution hereof a continuing security interest in all the following
property of the Lien Grantor, whether now owned or existing or hereafter
acquired or arising and regardless of where located (the "NEW COLLATERAL"):
[describe property being added to the Collateral]
The security interests granted by the Lien Grantor pursuant hereto shall
terminate in accordance with Section 17 of the Pledge Agreement.
(b) The foregoing Pledges are granted as security only and shall not
subject the Collateral Agent or any other Secured Party to, or transfer or in
any
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way affect or modify, any obligation or liability of the Lien Grantor with
respect to any of the New Collateral or any transaction in connection therewith.
2. Delivery of Collateral. On [the date of execution hereof if such date
occurs during a Collateral Period and otherwise on the first day of the first
Collateral Period following execution hereof] and on each Drawdown Date, the
Lien Grantor has complied with the provisions of either Section 5 or Section
8(a) (as applicable) of the Pledge Agreement with respect to Investment
Property, in each case if and to the extent included in the New Collateral at
such time.
3. Party to Pledge Agreement. Upon delivering this Pledge Agreement
Supplement to the Collateral Agent, the Lien Grantor will become a party to the
Pledge Agreement and will thereafter have all the rights and obligations of a
Lien Grantor thereunder and be bound by all the provisions thereof as fully as
if the Lien Grantor were one of the original parties thereto.
4. Address of Lien Grantor. The address, facsimile number and e-mail
address of the Lien Grantor for purposes of Section 20(ii) of the Pledge
Agreement are:
[address, facsimile number and e-mail address of Lien Grantor]
5. Representations and Warranties.(2) (a) The Lien Grantor represents and
warrants, on [the date of execution hereof if such date occurs during a
Collateral Period and otherwise on the first day of the first Collateral Period
following execution hereof] and on each Drawdown Date, that on such date it is a
corporation duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, of which the Lien Grantor has on or prior
to such time given prior written notice to the Collateral Agent.
(b) The Lien Grantor represents and warrants, on [the date of execution
hereof if such date occurs during a Collateral Period and otherwise on the first
day of the first Collateral Period following the execution hereof] that
execution and delivery of this Pledge Agreement Supplement by the Lien Grantor
and the performance by it of its obligations under the Pledge Agreement as
supplemented hereby (i) are within its corporate or other powers, have been duly
authorized by all necessary corporate or other action, (ii) except as disclosed
in writing to the Collateral Agent or its counsel on or prior to such date by
any NNL Company or its counsel, require no action by or in respect of, or filing
with, any governmental body, agency or official other than filings for
perfection of Pledges on the New Collateral and (iii) do not contravene, or
constitute a default under, any provision
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(2) Modify as needed if the Lien Grantor is not a corporation.
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of applicable law or regulation or of its organizational documents, or of any
agreement, judgment, injunction, order, decree or other instrument binding upon
it except, with respect to (ii) and (iii) above, any such action, filing or
contravention which would not have a material adverse affect on the ability of
the Lien Grantor to perform its obligations under this Pledge Agreement
Supplement or the Pledge Agreement.
(c) The Lien Grantor represents and warrants on [the date of execution
hereof if such date occurs during a Collateral Period and otherwise on the first
day of the first Collateral Period following the execution hereof] that on such
date the Pledge Agreement as supplemented hereby constitutes a valid and binding
agreement of the Lien Grantor, enforceable in accordance with its terms, except
as limited by applicable bankruptcy, insolvency, fraudulent conveyance or other
similar laws affecting creditors' rights generally and general principles of
equity.
(d) Each of the representations and warranties set forth in Sections 3 and
5 of the Pledge Agreement is true as applied to the Lien Grantor and the New
Collateral on the date specified therein. For purposes of the foregoing
sentence, references in said Sections to a "Lien Grantor" shall be deemed to
refer to the Lien Grantor, references to "Schedules" to the Pledge Agreement
shall be deemed to refer to the corresponding Schedules to this Pledge Agreement
Supplement, references to "Collateral" shall be deemed to refer to the New
Collateral, and the Collateral Period shall be deemed to have commenced on the
date of execution hereof if such date occurs during a Collateral Period and
otherwise on the first day of the first Collateral Period following execution
hereof.
6. Governing Law. This Pledge Agreement Supplement shall be construed in
accordance with and governed by the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge Agreement
Supplement to be duly executed by their respective authorized officers as of the
day and year first above written.
[NAME OF LIEN GRANTOR]
By: ___________________________________
Name:
Title:
By: ___________________________________
Name:
Title:
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JPMORGAN CHASE BANK,
as Collateral Agent
By: ____________________________________
Name:
Title:
SCHEDULE 1
TO PLEDGE AGREEMENT
SUPPLEMENT
PLEDGED EQUITY INTERESTS IN MATERIAL SUBSIDIARIES
OWNED BY LIEN GRANTOR(3)
JURISDICTION
OF PERCENTAGE NUMBER OF
ISSUER ORGANIZATION OWNED SHARES OR UNITS
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(3) To be used only for a new Lien Grantor
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