EXHIBIT 10.14
FOREIGN PLEDGE AGREEMENT
dated as of
April 4, 2002
Between
NORTEL NETWORKS INTERNATIONAL FINANCE & HOLDING B.V
and
JPMORGAN CHASE BANK, as Collateral Agent
TABLE OF CONTENTS
PAGE
----
SECTION 1. Definitions ............................................................................2
SECTION 2. Pledge of Equity Interests.............................................................13
SECTION 3. General Representations, Warranties and Covenants......................................14
SECTION 4. Additional Covenants...................................................................17
SECTION 5. Equity Interests.......................................................................17
SECTION 6. Cash Collateral Accounts...............................................................18
SECTION 7. Operation of Cash Collateral Accounts..................................................18
SECTION 8. Transfer of Record Ownership...........................................................19
SECTION 9. Right to Vote Securities...............................................................20
SECTION 10. Certain Cash Distributions............................................................20
SECTION 11. Remedies Upon Event of Default or Specified Event of
Default...........................................................................................20
SECTION 12. Application of Proceeds...............................................................21
SECTION 13. Fees and Expenses.....................................................................24
SECTION 14. Authority to Administer Collateral....................................................25
SECTION 15. [INTENTIONALLY LEFT BLANK]............................................................26
SECTION 16. [INTENTIONALLY LEFT BLANK]............................................................26
SECTION 17. Termination of Pledges; Release of Collateral.........................................26
SECTION 18. Additional Lien Grantors..............................................................27
SECTION 19. Additional Secured Obligations........................................................27
SECTION 20. Notices...............................................................................28
SECTION 21. No Implied Waivers; Remedies Not Exclusive............................................29
SECTION 22. Successors and Assigns................................................................29
SECTION 23. Amendments and Waivers................................................................29
SECTION 24. Choice of Law.........................................................................30
SECTION 25. Judgement Currency....................................................................30
SECTION 26. Appointment of Agent for Service of Process...........................................31
SECTION 27. WAIVER OF JURY DUTY...................................................................32
SECTION 28. Severability..........................................................................32
SCHEDULES:
SCHEDULE 1 Equity Interests in Material Subsidiaries Owned by Lien Grantors
EXHIBITS:
EXHIBIT A Pledge Agreement Supplement
FOREIGN PLEDGE AGREEMENT
AGREEMENT dated as of April 4, 2002 Between Nortel Networks International
Finance & Holding, B.V, 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 the ▇▇▇▇▇▇ 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-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 certain Material Subsidiaries (as defined below) of NNL
are required to enter into a Foreign Pledge Agreement in the form hereof;
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) Definitions. The following terms, as used herein, have the following
meanings:
"ADDITIONAL COLLATERAL DATE" means the first date on which the failure to
satisfy the Additional Collateral Requirement with respect to any Additional
Subsidiary would constitute an Event of Default under any Credit Agreement.
"ADDITIONAL COLLATERAL REQUIREMENT" means, with respect to any Additional
Subsidiary, the requirement set forth in any Credit Agreement that either (x)
any Equity Interest in such Additional Subsidiary owned by NNL or any Subsidiary
of 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 LIEN GRANTOR" means each Subsidiary of NNL that shall, at any
time after the date hereof, become a "Lien Grantor" pursuant to Section 18.
"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 NNL, (3) which is not a Subsidiary of NNI, (4) 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
2
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 New York and excludes Saturdays, Sundays and 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.
" CANADIAN 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 Canada or one of the Provinces or
Territories of Canada.
3
"CAPITAL MARKETS EVENT" has the meaning set forth in any Credit Agreement.
" CASH COLLATERAL ACCOUNT" has the meaning specified in Section 6.
"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 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.
"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.
4
"DESIGNATED HEDGING AGREEMENT" means any Hedging Agreement designated
pursuant to (and in accordance with the terms of) (i) Section 21(a) of the
Canadian Security Agreement or (ii) Section 22(a) of the U.S. 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 NNL guarantees, among other things, the obligations of NNL 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 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.
5
"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 the parties listed on the signature pages hereto and
the Additional 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.
"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.
6
"NNC" means Nortel Networks Corporation, a Canadian corporation, and its
successors.
"NNFI HEDGING OBLIGATIONS" means (i) all obligations of NNFI under any
Designated Hedging Agreement and (ii) any renewals or 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 extensions as renewals thereof.
"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.
"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 GUARANTEED OBLIGATIONS" means (i) the NNI Hedging Obligations, (ii)
the NNFI Hedging Obligations, (iii) the NNI Bank Obligations, (iv) any
Designated Bank Debt and (v) any Designated Capital Markets Debt (other than
Designated Capital Markets Debt of NNL).
7
"NNL HEDGING OBLIGATIONS" means (i) all obligations of NNL under any
Designated Hedging Agreement and (ii) any renewals or extensions thereof.
"NNL SUBSIDIARY" means any Subsidiary of NNL other than NNI or any
Subsidiary of NNI.
"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.
"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;
(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
8
(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.
"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,
9
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 Replacement Agreement). Prior to
the first Refinancing Effective Date, the Included Banks will be the Banks party
to either 2001 364-Day Agreement and the "applicable Credit Agreements" for the
purpose 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.
10
"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 (1) the NNL Bank Obligations, (2) the NNL
Hedging Obligations, (3) the NNL Bond Obligations, (4) the NNL Guaranteed
Obligations, (5) any Designated Capital Markets Debt and (6) 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 purposes of this Agreement.
"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 NNL.
"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 the time
of determination).
"TRANSACTION LIENS" means the Liens granted by the "Lien Grantors" under,
and as defined in, any of the Security Documents.
11
"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.
"2026 NOTES" means the 7.875% Notes due 2026 issued by Northern Telecom
Capital Corporation and guaranteed by NTL pursuant to the 1996 Indenture.
"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,
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.
(b) 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
12
5-Year Agreement" or the "2001 NNL 364-Day Agreement") shall be deemed to be a
reference to the Replacement Agreement with respect thereto.
(c) Terms Generally. The definitions of terms herein 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 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 Subsidiary of NNI, (B) any Equity Interests held by a Lien
Grantor in any
13
Subsidiary that is a U.S. Subsidiary or a Canadian Subsidiary, (C) any Equity
Interests held by a Lien Grantor in any Subsidiary that is not a Material
Subsidiary, (D) any Equity Interest held in any Additional Subsidiary prior to
the applicable Additional Collateral Date and (E) any Equity Interest held in
any Subsidiary that is party to a Foreign Subsidiary Guarantee which is in full
force and effect (x) on the first day of the Collateral Period or (y) solely
with respect to any Additional Subsidiary, on the applicable Additional
Collateral Date. 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.
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 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
14
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, financing change statements, mortgages or other
similar or equivalent documents with respect to 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 (and 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(c) with
respect to such Equity
15
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 of unlimited 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 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 any
NNL Company 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 or,
if necessary or desirable under applicable law, the 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 and
incorporation of Collateral is subject to applicable securities laws and other
mandatory 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.
16
(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 is (1) a Material Subsidiary, (2) not a
Subsidiary of NNI, (3) not a Canadian Subsidiary, (4) not a U.S. Subsidiary and
(5) not party to a Foreign Subsidiary Guarantee which is in full force and
effect on such date, is directly held by any NNL Company other than a Lien
Grantor or a "Lien Grantor" as defined 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 Documents and subject to
any mandatory laws) on all of the Equity Interests it holds in such Subsidiary.
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.
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(c) 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 Equity
Interest ("PLEDGED CERTIFICATED SECURITIES") 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) 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 and in compliance
with mandatory provisions of applicable law.
(c) Further Assurances. Each Lien Grantor authorizes the Collateral Agent
to execute and file financing statements, financing change statements or
continuation statements under the Uniform Commercial Code applicable in any
relevant U.S. jurisdiction or under the Personal Property Security Act as
applicable in any relevant Canadian jurisdiction, 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,
17
deliver, file and record any financing statement, instrument of assignment or
other paper and take all other action and enter into such other agreements that
may be necessary or desirable or that the Collateral Agent may reasonably
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 the 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 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 (ii) and 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.
18
(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
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) Subject to mandatory
provisions of applicable law, 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). It is understood that
under the laws of Portugal no Pledged Equity Interest may be transferred of
record into the name of the Collateral Agent except through enforcement in a
foreclosure with respect thereto conducted in accordance with the laws of
Portugal.
(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.
19
SECTION 9. Right to Vote Securities. (a) Unless an Event of Default shall
have occurred and be continuing, the Collateral Agent agrees that,
notwithstanding Section 2, 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. 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 payment and other distributions to the extent provided herein.
(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 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 "Pledged Deposit Account" (as defined in
the Canadian Security Agreement) of the relevant Lien Grantor if such account
exists at such time and if not 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
Agreements.
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
20
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 Uniform Commercial Code (whether or not in
effect in the jurisdiction where such rights are exercised, but subject to
mandatory provisions of applicable law in such jurisdiction) and 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, if
a Specified Event of Default shall have occurred and be continuing, without
being required to give any notice, except as herein provided or as may be
required by mandatory provisions of law, the Collateral Agent may 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, take possession of,
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 a 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 (which shall be
conducted in accordance with mandatory provisions of applicable Portuguese law)
shall be given to the relevant Lien Grantor as required by Section 14 (unless
the Lien Grantor shall already have received notice of a foreclosure or sale
conducted in accordance with the applicable laws of Portugal).
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
permitted under applicable Portuguese law (as set forth in the last sentence of
Section 8(a)) 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;
21
(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,
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 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 Lien Grantor only up to an
aggregate amount equal to the largest amount that would not render such
application of Collateral or proceeds thereof invalid or unenforceable under any
laws applicable to such Lien Grantor. 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
22
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 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)(1), 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
23
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).
(d) In making the payments and allocations required by this Section 12, the
Collateral Agent may rely upon 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) NNL or NNI, to the
extent that the Collateral Agent has not obtained information from the foregoing
sources. 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
24
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. 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, withholding 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 such
Lien Grantor'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 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
25
such notice (if any) as is required to be given by mandatory provision of
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 shall be 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 comply
with the provisions of applicable law. The parties acknowledge that, in
accordance with mandatory provisions of applicable laws of Portugal, foreclosure
on or enforcement of a pledge must be made by sale to a third party conducted in
accordance with the laws of Portugal.
SECTION 15. [INTENTIONALLY LEFT BLANK].
SECTION 16. [INTENTIONALLY LEFT BLANK].
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 of the Collateral permitted by the Credit Agreements and not
expressly prohibited by this Agreement, the Pledge of the assets sold or
disposed of (but not in any Proceeds arising from such sale or disposition) will
cease 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 securities
subject to a put/call arrangement permitted by the terms of the Credit
Agreements
26
being transferred to any person other than another Lien Grantor 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
exclusions 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.
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" as defined herein. Any
Subsidiary which is (1) a Subsidiary of NNL, (2) not a Subsidiary of NNI, (3)
not a U.S. Subsidiary and (4) not a Canadian Subsidiary shall become a "Lien
Grantor" hereunder if required to do so by the provisions of any of the Credit
Agreement.
SECTION 19. Additional Secured Obligations. (a) Any Lien Grantor may from
time to time designate any indebtedness constituting a Capital Markets Event 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
27
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 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 NNL or
NNI to any Bank or any wholly-owned subsidiary of 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 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 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 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 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 Canada or 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 listed on the signature pages
hereof:
28
C/O Nortel Networks Limited
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇
▇▇▇ 5P6Attention: Corporate Secretary
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
MS: 036/NO/230
(ii) in the case of any other Lien Grantor, its address, facsimile
number or e-mail 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 20 by giving notice of such change to the
Collateral Agent and the Lien Grantors in the manner specified above.
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
29
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(f). 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 Portugal, except as otherwise required by
mandatory provisions of law.
SECTION 25. Judgement Currency. If for the purpose of obtaining judgment in
any court it is necessary to convert a sum due from any Lien Grantor hereunder
or under any of the Secured Agreements in the currency expressed to be payable
herein or therein (the "SPECIFIED CURRENCY") into another currency, the parties
hereto 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 the Collateral Agent could purchase the Specified Currency with such
other currency at the Collateral Agent's New York office on the Domestic
Business Day, as hereinafter defined, preceding that on which final judgment is
given. The obligations of each Lien Grantor in respect of any sum due to any
Bank or the Collateral Agent hereunder or under any of the Secured Agreements
shall, notwithstanding any judgment in a currency other than the Specified
Currency, be discharged only to the extent that on the Domestic Business Day
following receipt by such Bank or the Collateral Agent (as the case may be) of
any sum adjudged to be so due in such other currency such Bank or the Collateral
Agent (as the case may be) may in accordance with normal banking procedures
purchase such Specified Currency with such other currency; if the amount of
Specified Currency so purchased is less than the sum originally due to such Bank
or the Collateral Agent, as the case may be, in the Specified Currency, each
Lien Grantor agrees, to the fullest extent that it may effectively do so, as a
separate obligation and notwithstanding any such judgment, to indemnify such
Bank or the Collateral Agent, as the case may be, against such loss and if the
amount of Specified Currency so purchased by the Collateral Agent exceeds the
sum due to the Collateral Agent, as the case may be, the Collateral Agent shall
remit such excess to the Lien Grantor. For the purposes of this section,
"DOMESTIC BUSINESS
30
DAY" means any day except a Saturday, Sunday, or other day on which commercial
banks in New York City are required or authorized by law to close.
SECTION 26. Appointment of Agent for Service of Process. (a) Each Lien
Grantor hereby irrevocably designates, appoints, authorizes and empowers as its
agent for service of process, CT Corporation System at its offices currently
located at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ to accept and acknowledge
for and on behalf of such Lien Grantor service of any and all process, notices
or other documents that may be served in any suit, action or proceeding relating
hereto in any New York State or Federal court sitting in The State of New York.
(b) In lieu of service upon its agent, each Lien Grantor consents to
process being served in any suit, action or proceeding relating hereto by
mailing a copy thereof by registered or certified air mail, postage prepaid,
return receipt requested, to its address designated pursuant to Section 20. Each
Lien Grantor agrees that such service (1) shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding and
(2) shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon and personal delivery to it.
(c) Nothing in this Section shall affect the right of any party hereto to
serve process in any manner permitted by law, or limit any right that any party
hereto may have to bring proceedings against any other party hereto in the
courts of any jurisdiction or to enforce in any lawful manner a judgment
obtained in one jurisdiction in any other jurisdiction.
SECTION 27. WAIVER OF JURY DUTY. 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 ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 28. Severability. If any provision of any Security Document is
invalid or unenforceable in any jurisdiction, then, to the fullest extent
permitted by
31
law, (a) the other provisions of the Security 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.
32
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 INTERNATIONAL
FINANCE & HOLDING B.V.
By:/s/ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Title: Managing Director
JPMORGAN CHASE BANK,
as Collateral Agent
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CFA
-----------------------------------------
Title: Vice President
SCHEDULE 1
PLEDGED EQUITY INTERESTS IN MATERIAL SUBSIDIARIES
OWNED BY LIEN GRANTORS
(AS OF THE DATE HEREOF)
ISSUER JURISDICTION OWNER OF PERCENTAGE NUMBER OF
OF EQUITY INTEREST OWNED SHARES OR
ORGANIZATION UNITS
Nortel Telecom (Portugal) Portugal Nortel Networks International 99.9% 34,996
S.A. Finance & Holding B.V.
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, [________] and JPMorgan Chase Bank, as Collateral Agent, are
parties to a 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. Pledge of Equity Interest. (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
A-1
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 Pledged Equity Interests, 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.(1) (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 of applicable law or regulation or of
its organizational documents, or of any
---------------------
(1) Modify as needed if the Lien Grantor is not a corporation.
A-2
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.
A-3
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:
JPMORGAN CHASE BANK,
as Collateral Agent
By:
------------------------------------------
Name:
Title:
A-4
A-5
CONFORMED COPY
PLEDGE AGREEMENT SUPPLEMENT
PLEDGE AGREEMENT SUPPLEMENT dated as of April 4, 2002 between Nortel
Networks Optical Components Limited. (the "LIEN GRANTOR") and JPMORGAN CHASE
BANK, as Collateral Agent.
WHEREAS, Nortel Networks International Finance and Holding B.V. and
JPMorgan Chase Bank, as Collateral Agent, are parties to a Foreign Pledge
Agreement dated as of the first day of the Collateral Period (as heretofore
amended and/or supplemented, the "PLEDGE AGREEMENT");
WHEREAS, Nortel Networks Optical Components Limited desires to become 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. Pledge of Equity Interest. (a) The 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 Equity Interests in the Subsidiary
identified in Schedule I hereto held directly by the 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, whether now owned or existing or hereafter acquired or arising and
regardless of where located (the "ADDITIONAL COLLATERAL"). The security
interests granted by the Lien Grantor pursuant to this Section 1(a) shall
terminate in accordance with Section 17 of the Pledge Agreement.
(b) The foregoing Pledge is 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 the Lien Grantor with respect
to any of the Additional Collateral or any transaction in connection therewith.
2. 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 it
were one of the original parties thereto; provided that the parties hereto agree
that nothing in the Pledge Agreement shall require the Lien Grantor to transfer
legal title to the Collateral Agent or any Secured Party at any time prior to an
Event of Default.
3. Representations and Warranties. Each of the representations and
warranties set forth in the Pledge Agreement are true as applied to the Lien
Grantor and the Additional Collateral on the date specified therein, other than
the representations and warranties set forth in Section 3(e) and (f). For
purposes of the foregoing sentence, references in said Sections to "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 Additional Collateral.
4. Governing Law. This Pledge Agreement Supplement shall be construed in
accordance with and governed by the laws of Portugal.
2
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.
NORTEL NETWORKS OPTICAL COMPONENTS LIMITED
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Title:
Director
JPMORGAN CHASE BANK,
as Collateral Agent
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CFA
-----------------------------------------
Title:
Vice President
3
SCHEDULE I
PLEDGED EQUITY INTERESTS IN MATERIAL SUBSIDIARIES
OWNED BY THE LIEN GRANTOR
(AS OF THE DATE HEREOF)
ISSUER JURISDICTION OWNER OF PERCENTAGE NUMBER OF
OF EQUITY INTEREST OWNED SHARES OR
ORGANIZATION UNITS
Nortel Telecom (Portugal) Portugal Nortel Networks less than 1
S.A. Optical Components 0.01%
Limited
S-1
CONFORMED COPY
PLEDGE AGREEMENT SUPPLEMENT
PLEDGE AGREEMENT SUPPLEMENT dated as of April 4, 2002 between NORTEL
NETWORKS INTERNATIONAL FINANCE & HOLDING B.V., NORTEL NETWORKS OPTICAL
COMPONENTS LIMITED and JPMORGAN CHASE BANK, as Collateral Agent.
WHEREAS, Nortel Networks International Finance & Holding B.V, ("NNIFH")
Nortel Networks Optical Components Limited and JPMorgan Chase Bank, as
Collateral Agent (the "COLLATERAL AGENT") are parties to a Portugese law
governed Foreign Pledge Agreement dated as of the first day of the Collateral
Period (the "PLEDGE AGREEMENT"); 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. 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.
2. 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.
3. 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.
4. 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
other agreement, instrument or document or (v) the satisfaction of any condition
set forth in any Security Document.
5. 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
2
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.
6. 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 set forth in this Agreement shall apply to any such
subagent and to the Related Parties of the Collateral Agent and any such
sub-agent.
7. 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 (a)
its own records for information as to the Banks, their Secured Obligations and
actions taken by them, (b) the relevant Indenture Trustee for information as to
the Secured Obligations outstanding under any Indenture and actions taken by the
holders thereof, (c) 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 (d) NNL or NNI, to
the extent that the Collateral Agent has not obtained information from the
foregoing sources.
8. Refusal to Act. 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 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.
9. Resignation; Successor Collateral Agent. Subject to the appointment and
acceptance of a successor Collateral Agent as provided herein, 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
3
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 this Pledge
Agreement Supplement 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.
2. Governing Law. This Pledge Agreement Supplement shall be construed in
accordance with and governed by the laws of the State of New York.
4
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.
NORTEL NETWORKS INTERNATIONAL
FINANCE & HOLDING B.V.
By:/s/ ▇▇▇▇ ▇. Mage
-----------------------------------------
Title:
NORTEL NETWORKS OPTICAL
COMPONENTS LIMITED
By:/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
Title:
Director
NORTEL NETWORKS INTERNATIONAL
FINANCE & HOLDING B.V.
By:/s/ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
Title: Managing Director
JPMORGAN CHASE BANK,
as Collateral Agent
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, CFA
-----------------------------------------
Title: Vice President
5