EXHIBIT 10.4
NORTEL NETWORKS LIMITED
as Borrower
-and-
NORTEL NETWORKS CORPORATION
as Lender
----------------------------------------------------------
LOAN AGREEMENT
AUGUST 15, 2001
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TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.............................................................................................1
Section 1.1 Defined Terms......................................................................................1
ARTICLE 2 THE LOAN................................................................................................3
Section 2.1 Principal Amount...................................................................................3
ARTICLE 3 INTEREST................................................................................................3
Section 3.1 Interest...........................................................................................3
Section 3.2 Additional Interest................................................................................3
Section 3.3 Computation of Interest............................................................................4
ARTICLE 4 REPAYMENT...............................................................................................4
Section 4.1 Repayment..........................................................................................4
Section 4.2 Prepayment.........................................................................................4
ARTICLE 5 CALL ON LOAN............................................................................................4
Section 5.1 Change of Control or Change in Law.................................................................4
Section 5.2 Other..............................................................................................5
Section 5.3 Application of Repayment...........................................................................5
ARTICLE 6 CONVERSION..............................................................................................5
Section 6.1 Right to Convert...................................................................................5
Section 6.2 Conversion Procedure...............................................................................5
Section 6.3 Adjustment of Conversion Price.....................................................................6
ARTICLE 7 COVENANTS...............................................................................................7
Section 7.1 Registration.......................................................................................7
ARTICLE 8 DEFAULT.................................................................................................8
Section 8.1 Events of Default..................................................................................8
ARTICLE 9 LENDER'S RECORDS........................................................................................9
Section 9.1 Conversions and Prepayments........................................................................9
Section 9.2 Outstanding Balance................................................................................9
Section 9.3 Provision of Records...............................................................................9
ARTICLE 10 GENERAL PROVISIONS.....................................................................................9
Section 10.1 Payments..........................................................................................9
Section 10.2 Successors and Assigns............................................................................9
Section 10.3 Waiver............................................................................................9
Section 10.4 Notices..........................................................................................10
Section 10.5 Further Assurances...............................................................................10
Section 10.6 Headings.........................................................................................11
Section 10.7 Governing Law....................................................................................11
Section 10.8 Severability.....................................................................................11
Section 10.9 Judgment Currency................................................................................11
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SCHEDULES
Calculation of Conversion Price Schedule A
Prepayment Premium Schedule B
Prepayments and Conversions of Principal Schedule C
LOAN AGREEMENT
Loan Agreement dated as of August 15, 2001 made between Nortel Networks
Limited, as borrower and Nortel Networks Corporation, as lender.
ARTICLE 1
DEFINITIONS
SECTION 1.1 DEFINED TERMS. As used in this Agreement, the following terms have
the following meanings:
"ADDITIONAL AMOUNTS" has the meaning specified in the Indenture;
"ADDITIONAL INTEREST" has the meaning specified in Section 3.2;
"ADDITIONAL INTEREST PAYMENT DATE" means: (i) March 1st and September 1st of
each year during the Term (commencing on March 1, 2002); (ii) the date of any
prepayment by the Borrower on account of the Principal Amount outstanding prior
to the Maturity Date (including repayments at the request of the Lender); and
(iii) the Maturity Date;
"AGREEMENT" means this loan agreement between the parties hereto, including the
schedules referred to herein and attached hereto, as the same may be amended or
supplemented in writing from time to time;
"BANKING DAY" means any day other than a Saturday or a Sunday on which banks in
Canada are open for business;
"BORROWER" means Nortel Networks Limited, a Canadian corporation;
"CHANGE IN LAW" means a change or amendment in the laws or treaties (including
any regulations or rulings promulgated thereunder) of Canada (or any political
subdivision or taxing authority thereof or therein) or any change in or new or
different position regarding the application, interpretation and administration
of such laws, treaties, regulations or rulings (including a holding, judgment or
order by a court of competent jurisdiction), which change is announced or
becomes effective on or after August 9, 2001;
"CHANGE OF CONTROL" has the meaning specified in the Indenture;
"CLOSING DATE" means August 15, 2001;
"COMMON SHARES" means fully paid and non-assessable common shares in the capital
of the Borrower;
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"CONVERSION DATE" has the meaning specified in Section 6.2;
"CONVERSION PRICE" means US$21.66 as per the calculation set out in Schedule A,
subject only to adjustment in accordance with Section 6.3;
"GUARANTEE" means the full and unconditional guarantee of the payment
obligations of the Lender in respect of the Notes given by the Borrower under
the Indenture;
"INDENTURE" means the indenture relating to the Notes, the Guarantee and the
common shares of the Lender issuable on conversion of the Notes, dated August
15, 2001 among the Borrower, as guarantor, the Lender, as issuer, and Bankers
Trust Company, as trustee, as the same may be amended or supplemented in writing
from time to time;
"INTEREST RATE" means 5.15 per cent per annum;
"LENDER" means Nortel Networks Corporation, a Canadian corporation;
"MATURITY DATE" means September 1, 2008;
"NOTES" means the US$1,800,000,000 aggregate principal amount of 4.25%
Convertible Senior Notes due 2008 issued by the Lender under the Indenture;
"NOTICE OF CONVERSION" has the meaning specified in Section 6.2;
"PREPAYMENT AND CONVERSION GRID" has the meaning specified in Section 9.1;
"PRINCIPAL AMOUNT" means one billion and eight hundred million United States
dollars (US$1,800,000,000);
"REGISTRATION AGREEMENT" means the registration agreement relating to the Notes,
the Guarantee and the common shares of the Lender issuable on the conversion of
the Notes, dated August 15, 2001, among the Lender, the Borrower and Credit
Suisse First Boston Corporation and ▇.▇. ▇▇▇▇▇▇ Securities Inc., as
representatives of the initial purchasers of the Notes, as the same may be
amended or supplemented in writing from time to time;
"REGISTRATION DEFAULT" has the meaning specified in the Registration Agreement;
"TERM" means the period commencing on the Closing Date and terminating on the
Maturity Date; and
"UNITED STATES DOLLARS", "US$" or "$" means lawful currency of the United
States.
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ARTICLE 2
THE LOAN
SECTION 2.1 PRINCIPAL AMOUNT. The Lender agrees to lend to the Borrower and the
Borrower agrees to borrow from the Lender the Principal Amount in accordance
with this Agreement.
ARTICLE 3
INTEREST
SECTION 3.1 INTEREST. The Borrower agrees to pay to the Lender interest on the
outstanding balance of the Principal Amount at a rate equal to the Interest
Rate. Interest shall be calculated daily and paid semi-annually in arrears on
March 1st and September 1st of each year during the Term (commencing on March 1,
2002) and on the Maturity Date. Interest shall be calculated on the basis of a
360-day year comprised of twelve 30-day months. If the Borrower at any time
shall fail to pay the interest or any other amounts owing under this Agreement
when due, the Borrower shall pay interest on the amount in default at the
Interest Rate, both before and after maturity, as well as before and after
judgment (to the extent permitted by law) until payment in full.
SECTION 3.2 ADDITIONAL INTEREST. In the event of a Registration Default, the
Borrower agrees to pay to the Lender additional interest (the "ADDITIONAL
INTEREST") on the outstanding balance of the Principal Amount at a rate per
annum equal to :
(a) 0.25 percent for the first 90 days during which a Registration
Default has occurred and is continuing; and
(b) 0.50 percent for any additional days during which such
Registration Default has occurred and is continuing.
Additional Interest shall be calculated daily, on the basis of a 360-day year
comprised of twelve 30-day months, and paid on each Additional Interest Payment
Date. Following the cure of a Registration Default, Additional Interest will
cease to accrue with respect to such Registration Default. Notwithstanding any
other provision of this Section 3.2, the Borrower shall not be required to pay
Additional Interest to the Lender in respect of a Registration Default if such
Registration Default resulted from the Borrower acting in bad faith or engaging
in wilful misconduct in connection with its obligations under the Registration
Agreement.
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SECTION 3.3 COMPUTATION OF INTEREST. For purposes of the Interest Act (Canada):
(a) when interest under this Agreement is calculated using a rate based on a
year of 360 days, such rate when expressed as an annual rate, is equivalent to
(i) the applicable rate based on a year of 360 days, (ii) multiplied by the
actual number of days in the calendar year in which the period for which such
interest is payable ends, and (iii) divided by 360; (b) the principle of deemed
reinvestment of interest does not apply to any interest calculation under this
Agreement; and (c) the rates of interest stipulated in this Agreement are
intended to be nominal rates and not effective rates or yields.
ARTICLE 4
REPAYMENT
SECTION 4.1 REPAYMENT. The Principal Amount outstanding and accrued and unpaid
interest are due and payable by the Borrower to the Lender on the Maturity Date.
SECTION 4.2 PREPAYMENT. The Borrower may, in its sole and absolute discretion,
make prepayments, from time to time and in any amount which is $1,000.00 or an
integral multiple thereof, on account of the Principal Amount outstanding
provided that the Borrower shall provide two Banking Days notice of the
prepayment to the Lender and shall pay to the Lender at such time a prepayment
premium calculated in the manner specified in Schedule B hereto (the "PREPAYMENT
PREMIUM") and accrued and unpaid interest (including Additional Interest, if
any) to the date fixed for prepayment on that portion of the Principal Amount to
which prepayment applies. All prepayments will be applied first on account of
interest (including Additional Interest, if any), then on account of the
Prepayment Premium and then on account of the Principal Amount.
ARTICLE 5
CALL ON LOAN
SECTION 5.1 CHANGE OF CONTROL OR CHANGE IN LAW. In the event of:
(a) a Change of Control; or
(b) a Change in Law such that the Lender becomes or would become
obligated to pay Additional Amounts on the next date on which any
amount would be payable with respect to the Notes,
the Lender may, upon no less than 15 days notice to the Borrower, require that
the Borrower repay, without bonus or penalty, all, or any part which is
$1,000.00 or an integral multiple thereof, of the Principal Amount outstanding
together with accrued and unpaid interest (including Additional Interest, if
any) to the date fixed
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for repayment on that portion of the Principal Amount to which repayment
applies. The Lender agrees that any repayment by the Borrower under this Section
5.1 on account of the Principal Amount outstanding shall be used by the Lender
to redeem a substantially similar principal amount of the Notes issued and
outstanding.
SECTION 5.2 OTHER. The Lender may, from time to time, make a request to the
Borrower for an optional repayment, without bonus or penalty, of all, or any
part which is $1,000.00 or an integral multiple thereof, of the Principal Amount
outstanding together with accrued and unpaid interest (including Additional
Interest, if any) to the date fixed for repayment on that portion of the
Principal Amount to which repayment applies. The Borrower may exercise its sole
and absolute discretion in determining whether to comply with such request and
is under no obligation to make such repayment.
SECTION 5.3 APPLICATION OF REPAYMENT. All repayments made under this Article 5
will be applied first on account of accrued and unpaid interest (including
Additional Interest, if any), and then on account of the Principal Amount
outstanding.
ARTICLE 6
CONVERSION
SECTION 6.1 RIGHT TO CONVERT. The Lender shall have the right at any time and
from time to time, up to the Maturity Date to convert the whole, or any part
which is $1,000.00 or an integral multiple thereof, of the Principal Amount
outstanding into that whole number of Common Shares determined by dividing such
amount by the Conversion Price.
SECTION 6.2 CONVERSION PROCEDURE. Subject to Section 6.1 above, the Lender may
convert all or part of the Principal Amount outstanding by delivering to the
Borrower a notice of conversion, in writing, specifying that portion of the
Principal Amount outstanding that the Lender elects to convert (the "NOTICE OF
CONVERSION"). The Borrower shall, within two Banking Days following the receipt
of the Notice of Conversion (the "CONVERSION DATE") deliver to the Lender that
number of Common Shares determined in the manner set out in Section 6.1 above,
provided, however, that: (i) the Borrower shall round-down to the nearest whole
number of Common Shares and not issue or make payment or adjustment on account
of any fractional Common Shares, and (ii) there shall be no payment or
adjustment by the Borrower on account of any interest accrued or accruing
(including Additional Interest, if any) from the date of the last preceding
interest payment date on the Principal Amount so converted. Subject to the
foregoing provisions of this Section 6.2, at the close of business on the
Conversion Date: (i) such conversion shall be deemed to have been made, and (ii)
the Lender shall be treated for all purposes as having become the holder of
record of such Common Shares. The Common Shares issued upon such conversion
shall rank only in
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respect of dividends declared in favour of shareholders of record on or after
the Conversion Date.
SECTION 6.3 ADJUSTMENT OF CONVERSION PRICE. The Conversion Price in effect at
any date shall be subject to adjustment from time to time as follows:
(a) if and whenever at any time prior to the Conversion Date the
Borrower shall:
(i) subdivide or redivide the outstanding Common Shares into a
greater number of Common Shares;
(ii) reduce, combine or consolidate the outstanding Common
Shares into a smaller number of Common Shares; or
(iii) issue Common Shares to the holders of all or substantially
all of the outstanding Common Shares by way of a stock
dividend (other than the issue of Common Shares to holders
of Common Shares pursuant to their exercise of options to
receive dividends in the form of Common Shares in lieu of
dividends paid in the ordinary course on the Common
Shares),
the Conversion Price in effect on the effective date of such
subdivision, redivision, reduction, combination or consolidation
or on the record date for such issue of Common Shares by way of a
stock dividend, as the case may be, shall, in the case of the
events referred to in clauses (i) and (iii) above, be decreased in
proportion to the number of outstanding Common Shares resulting
from such subdivision, redivision or dividend, or shall, in the
case of the events referred to in clause (ii) above, be increased
in proportion to the number of outstanding Common Shares resulting
from such reduction, combination or consolidation;
(b) in the case of any reclassification of, or other change in, the
outstanding Common Shares other than a subdivision, redivision,
reduction, combination or consolidation, or in the case of an
amalgamation, merger or combination involving the Borrower or the
sale of all or substantially all of the assets of the Borrower or
the occurrence of such other event that would materially affect
the Common Shares, the Conversion Rate shall be adjusted in such
manner, if any, and at such time, as the directors of the Borrower
(or its successor corporation, if applicable), in their
discretion, may determine to be equitable in the circumstances and
whose determination shall be conclusive unless the Lender, within
10 days after receiving written notice of such determination
objects to such
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determination, in which event the Borrower (or its successor
corporation, if applicable) and the Lender shall make their best
good faith efforts to reach a mutually agreeable determination. In
the event that agreement cannot be reached by the parties within
30 days after notice of objection as to the adjustment to the
Conversion Price which is equitable in the circumstances is
delivered, such question shall be submitted to arbitration by a
single arbitrator pursuant to the Arbitration Act (Ontario). The
determination of the arbitrator shall be final, conclusive and
binding and upon the arbitrator's determination being made the
Conversion Price shall, without further action on the part of the
Borrower (and its successor corporation, if applicable), be
conclusively deemed to be adjusted in accordance with such
determination. If within 10 days after the end of the 30-day
period the parties have not agreed upon the identity of the
arbitrator, either party may, on notice to the other, apply to a
judge of the Ontario Court of Justice (General Division) to
appoint the arbitrator;
(c) the adjustments provided for in paragraphs (a) and (b) are
cumulative and shall apply to successive subdivisions,
redivisions, reductions, combinations, consolidations,
distribution, issues or other events resulting in any adjustment
under the provisions of this Section 6.3, provided that,
notwithstanding any other provision of this Section 6.3, no
adjustment of the Conversion Price shall be required unless such
adjustment would require an increase or decreased of at least 1%
in the Conversion Price then in effect; provided, however, that
any adjustments which by reason of this paragraph (c) are not
required to be made and shall be carried forward and taken into
account in any subsequent adjustment; and
(d) immediately upon the occurrence of any event which requires an
adjustment in the Conversion Price, the Borrower shall promptly
give written notice to the Lender of the particulars of such event
and of the required adjustment in the Conversion Price.
ARTICLE 7
COVENANTS
SECTION 7.1 REGISTRATION. Each of the Lender and the Borrower agrees to use its
reasonable best efforts:
(a) to file a shelf registration statement with the United States
Securities and Exchange Commission ("SEC") with respect to the
resale of the Notes, the Guarantee and the common shares of the
Lender issuable upon conversion of the Notes;
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(b) to cause such shelf registration statement to be declared
effective by the SEC; and
(c) to keep the shelf registration statement continuously effective
under the United States Securities Act of 1933,
within and for the time periods specified in the Registration Agreement so as to
avoid a Registration Default.
ARTICLE 8
DEFAULT
SECTION 8.1 EVENTS OF DEFAULT. If any of the following events shall occur and be
continuing, the Lender may, at its option and upon written notice to the
Borrower, require the outstanding balance of the Principal Amount together with
all accrued and unpaid interest (including Additional Interest, if any) to
become immediately due and payable:
(a) the Borrower fails to make any payment on account of the Principal
Amount when due;
(b) the Borrower fails to make any payment in the amounts and at the
times specified in this Agreement, other than a payment described
in paragraph (a), and such non-payment continues for a period of
30 days;
(c) the Borrower fails to perform or observe any material covenant,
agreement or other obligation of the Borrower under this Agreement
for 90 days after written notice from the Lender requiring the
same to be remedied;
(d) the Borrower becomes bankrupt or subject to the commencement of
insolvency proceedings under the Bankruptcy and Insolvency Act
(Canada) or the Companies' Creditors Arrangement Act (Canada); or
(e) the occurrence of an event of default as defined in any evidence
of indebtedness for borrowed money of the Borrower exceeding on
its face $100,000,000 in principal amount, whether such
indebtedness now exists or shall hereafter be created which
results in such indebtedness becoming or being declared due and
payable prior to the date on which it would otherwise become due
and payable and such acceleration shall not be rescinded or
annulled within 10 days after written notice (i) specifying such
default, (ii) requiring the Borrower to cause such acceleration to
be rescinded or annulled, and (iii) stating that such notice is a
"Notice of Default" thereunder, shall have been given to the
Borrower by the Lender or by the trustee under any lien, indenture
or
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instrument governing such indebtedness, by the holder or holders
of any such indebtedness or by the agent of any such holder or
holders.
ARTICLE 9
LENDER'S RECORDS
SECTION 9.1 CONVERSIONS AND PREPAYMENTS. All conversions of the Principal Amount
outstanding into Common Shares and all prepayments (including, repayments at the
request of the Lender) on account of the Principal Amount outstanding shall be
evidenced by a notation in the records to be maintained by the Lender,
substantially in the form of Schedule C hereto (the "PREPAYMENT AND CONVERSION
GRID"). The failure to make any such notation, however, shall not affect the
liability of the Borrower to the Lender.
SECTION 9.2 OUTSTANDING BALANCE. The Borrower acknowledges, confirms and agrees
with the Lender that all amounts recorded by the Lender in the Prepayment and
Conversion Grid will constitute prima facie evidence of the outstanding balance
of the Principal Amount under this Agreement and, in the absence of evidence to
the contrary, will be conclusive evidence of any outstanding balance.
SECTION 9.3 PROVISION OF RECORDS. As may be requested by the Borrower from time
to time, but no less often than on a quarterly basis, the Lender shall provide a
copy of the Prepayment and Conversion Grid to the Borrower.
ARTICLE 10
GENERAL PROVISIONS
SECTION 10.1 PAYMENTS. All payments required will be made in United States
dollars in immediately available funds at the office of the Lender at the
address listed under Section 10.4 or to any other place that the Lender directs.
SECTION 10.2 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
enure to the benefit of and shall be binding upon the Borrower, the Lender and
their respective successors and permitted assigns. This Agreement shall not be
assignable by either of the parties to the Agreement without the written consent
of the other party.
SECTION 10.3 WAIVER. The Lender may in writing waive any breach by the Borrower
of any of the provisions contained in this Agreement or any default by the
Borrower in the observance or performance of any covenant or condition required
to be observed or performed under this Agreement; provided that no act or
omission by the Lender will be taken in any manner whatsoever to affect any
subsequent breach of default or the rights resulting therefrom.
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SECTION 10.4 NOTICES. Any request, notice or demand made or give in connection
with this Agreement may be given by delivery to the relevant party at its
address or facsimile number set forth below, or any other address or facsimile
number that a party may direct:
If to the Borrower: Nortel Networks Limited
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Assistant Treasurer
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Attention: Corporate Secretary
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
if to the Lender: Nortel Networks Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Assistant Treasurer
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Attention: Corporate Secretary
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
Every such notice so given shall be deemed to be received on the date of
delivery if served personally, on the date of transmission if transmitted by
facsimile, provided in either care that if such day is not a Banking Day then
the notice shall be deemed to have been received on the next following Banking
Day, or on the fourth Banking Day following the day of mailing, if sent by mail;
provided that in the event of an interruption of postal service at any time
prior to the deemed receipt of any notice sent by mail, then such notice, unless
earlier delivered or actually received, shall be deemed to be received on the
fourth Banking Day following the date of resumption of normal postal service.
SECTION 10.5 FURTHER ASSURANCES. The Borrower agrees that it will, from time to
time, at the request of the Lender, execute and deliver or obtain and deliver
any agreements, instruments and documents and take all further action as may be
reasonably required by the Lender to accomplish the purposes of this Agreement.
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SECTION 10.6 HEADINGS. The headings of this Agreement are included for
convenience of reference only and do not constitute a part of this Agreement for
any other purpose.
SECTION 10.7 GOVERNING LAW. This Agreement and all other documents and
instruments referred to will be construed in accordance with and governed by the
laws of the Province of Ontario and the Courts of that Province will have
jurisdiction over all disputes that may arise under it.
SECTION 10.8 SEVERABILITY. Any provision of this Agreement which is or becomes
prohibited or unenforceable in any jurisdiction, does not invalidate, affect or
impair the remaining provisions thereof and any such prohibition or
unenforceability in any jurisdiction does not invalidate or render unenforceable
such provision in any other jurisdiction.
SECTION 10.9 JUDGMENT CURRENCY.
(a) If, for the purposes of obtaining a judgment in any court, it is
necessary to convert a sum due to the Lender in any currency (the
"ORIGINAL CURRENCY") into another currency (the "OTHER CURRENCY"),
the parties agree, to the fullest extent that they may effectively
do so, that the rate of exchange used shall be that at which, in
accordance with normal banking procedures, such Lender could
purchase the Original Currency with the Other Currency on the
Banking Day preceding the day on which final judgment is given or,
if permitted by applicable law, on the day on which the judgment
is paid or satisfied.
(b) The obligations of the Borrower in respect of any sum due in the
Original Currency from it to any Lender under this Agreement
shall, notwithstanding any judgment in any Other Currency, be
discharged only to the extent that on the Banking Day following
receipt by the Lender of any sum adjudged to be so due in the
Other Currency, the Lender may, in accordance with normal banking
procedures, purchase the Original Currency with such Other
Currency. If the amount of the Original Currency so purchased is
less than the sum originally due to the Lender in the Original
Currency, the Borrower agrees, as a separate obligation and
notwithstanding the judgment, to indemnify the Lender, against any
loss, and, if the amount of the Original Currency so purchased
exceeds the sum originally due to the Lender in the Original
Currency, the Lender shall remit such excess to the Borrower.
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IN WITNESS WHEREOF THIS AGREEMENT HAS BEEN EXECUTED AS OF THE 15TH DAY OF
AUGUST, 2001.
NORTEL NETWORKS LIMITED
Per: "▇▇▇▇▇ ▇. ▇▇▇▇"
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Chief Financial Officer
Per: "▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇"
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Assistant Treasurer
NORTEL NETWORKS CORPORATION
Per: "▇▇▇▇▇ ▇. ▇▇▇▇"
--------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇
Chief Financial Officer
Per: "▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇"
--------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Assistant Treasurer
SCHEDULE A
CALCULATION OF CONVERSION PRICE
The Conversion Price is a fixed amount (subject only to adjustment in accordance
with Section 6.3) calculated as the product of the following:
(a) the price per common share at which holders may convert their
Notes into Common Shares of the Lender under the Indenture
(without any adjustments);
(b) a fraction of which the numerator is the total number of common
shares of the Lender outstanding on July 31, 2001 and the
denominator is the total number of Common Shares outstanding on
the same date; and
(c) a fraction of which the numerator is the total revenues of the
Borrower for the six-month period ending June 30, 2001 and the
denominator is the total revenues of the Lender for the same
period.
SCHEDULE B
PREPAYMENT PREMIUM
The following sets out the prepayment premium (expressed as a percentage of the
principal amount) for an amount prepaid during the period indicated:
Prepayment
Period Premium
------ -------
Beginning on August 15, 2001 and ending on August 31, 2005 2.125%
Beginning on September 1, 2005 and ending on August 31, 2006 1.417%
Beginning on September 1, 2006 and ending on August 31, 2007 0.708%
Beginning on September 1, 2007 and thereafter nil
SCHEDULE C
PREPAYMENTS AND CONVERSIONS OF PRINCIPAL
Principal Amount Principal Amount Outstanding Balance Notation
Date Converted Prepaid of Principal Amount Made By
---- ---------------- ---------------- -------------------- --------
AMENDMENT NO. 1 TO LOAN AGREEMENT
AMENDMENT NO. 1 TO LOAN AGREEMENT (this "AMENDMENT") dated as of
September 30, 2001 among NORTEL NETWORKS CORPORATION, as Lender and NORTEL
NETWORKS LIMITED, as Borrower
W I T N E S S E T H:
WHEREAS Nortel Networks Corporation borrowed US$1.8 billion pursuant to
the terms and conditions of certain convertible senior notes issued by Nortel
Networks Corporation on August 15, 2001 for the purpose of earning income from
Nortel Networks Corporation's business or property and has used, continues to
use and will continue to use, including in the circumstances contemplated by and
as recited in this Amendment, such borrowing for the purpose of earning income
from Nortel Networks Corporation's business or property;
AND WHEREAS, in connection with such borrowing, Nortel Networks
Corporation and Nortel Networks Limited have entered into a Loan Agreement dated
as of August 15, 2001 (the "Agreement") whereby Nortel Networks Limited has
used, continues to use and will continue to use the amount borrowed from Nortel
Networks Corporation for the purpose of earning income from Nortel Networks
Limited's business or property;
AND WHEREAS the conversion by Nortel Networks Corporation of its loan to
Nortel Networks Limited into common shares of Nortel Networks Limited, as
contemplated in the Agreement and this Amendment, is not intended by Nortel
Networks Corporation and Nortel Networks Limited directly or indirectly in any
way to derogate from or otherwise change or compromise Nortel Networks
Corporation's income earning purpose or income earning use of the amount
borrowed by Nortel Networks Corporation and loaned by Nortel Networks
Corporation to Nortel Networks Limited, and upon and by any such conversion of
the loan into common shares, or as contemplated in this Amendment conversion
into 1 common share, of Nortel Networks Limited as provided for under the
Agreement and this Amendment, it was and is Nortel Networks Corporation's
continuing intention to maintain and enhance its ability to earn income from its
business or property including in particular Nortel Networks Corporation's
investment in Nortel Networks Limited;
AND WHEREAS, Nortel Networks Corporation and Nortel Networks Limited
desire to amend Sections 6.1 and 10.4 of the Agreement, as more fully set forth
below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement shall have the
meaning assigned to such term in the Agreement. Each reference to "hereof",
"hereunder", "herein" and "hereby" and each other similar reference and each
reference to "this Agreement" and each other similar reference contained in the
Agreement shall from and after the date hereof refer to the Agreement as amended
by this Amendment.
SECTION 2. Amendment of Section 6.1 of the Agreement. Section 6.1 of the
Agreement is hereby amended to read as follows:
"SECTION 6.1 RIGHT TO CONVERT.
The Lender shall have the right at any time and from time to time, up to
the Maturity Date to convert the whole, or any part which is $1,000 or an
integral multiple thereof, of the Principal Amount outstanding into that
whole number of Common Shares determined by dividing such amount by the
Conversion Price; provided that in the event that the whole Principal
Amount outstanding at any time is to be converted into Common Shares and
at such time the Lender beneficially owns all the outstanding Common
Shares, such amount shall be converted into one (1) Common Share only.
Notwithstanding any other provision of this Agreement, including in
particular this Section 6.1 as it otherwise applies, should it be
determined by any relevant taxing authority subsequently to the
conversion of the Principal Amount into Common Shares that an
insufficient number of Common Shares were issued by Borrower upon such
conversion to be consistent with and satisfy the income earning purposes
and uses of and by Lender and Borrower, Borrower shall issue and Lender
shall cause Borrower to issue such additional Common Shares as shall be
sufficient to be consistent with and to satisfy the income earning
purposes and uses of and by Lender and Borrower."
SECTION 3. Amendment of Section 10.4 of the Agreement. Section 10.4 of
the Agreement is hereby amended to read as follows:
"SECTION 10.4 NOTICES.
Any request, notice or demand made or given in connection with this
Agreement may be given by delivery to the relevant party at its address
or facsimile number set forth below, or any other address or facsimile
number that a party may direct:
If to the Borrower: Nortel Networks Limited
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Assistant Treasurer
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Attention: Corporate Secretary
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
If to the Lender: Nortel Networks Corporation
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇
Attention: Assistant Treasurer
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to: Attention: Corporate Secretary
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
Every such notice so given shall be deemed to be received on the date of
delivery if served personally and on the date of transmission if
transmitted by facsimile, regardless of whether such date is a Banking
Date."
SECTION 4. Governing Law. This Amendment shall be governed by and
construed in accordance with the laws of the Province of Ontario.
SECTION 5. Counterparts. This Amendment may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1
to Loan Agreement to be duly executed as of the date first above written.
NORTEL NETWORKS CORPORATION,
as Lender
By: "▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇"
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▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Treasurer
By: "▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇"
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Assistant Treasurer
NORTEL NETWORKS LIMITED,
as Borrower
By: "▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇"
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▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Treasurer
By: "▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇"
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▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Assistant Treasurer