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firm. Nortel Networks had remaining commitments, if requested, of $24 and $30 as of December 31, 2003 and 2002, respectively. These
commitments expire at various dates through 2012.
Purchase commitments
Nortel Networks has entered into purchase commitments with certain suppliers under which it commits to buy a minimum amount or
percentage of designated products in exchange for price guarantees or similar concessions. In certain of these agreements, Nortel
Networks may be required to acquire and pay for such products up to the prescribed minimum or forecasted purchases.
During the third quarter of 2003, Nortel Networks renegotiated a key supply arrangement with a supplier. The renegotiated agreement
requires that $2,800 in aggregate purchases with the supplier be made between June 2003 and June 2009. As of December 31, 2003, the
remaining purchase commitment under the agreement was $2,300. The renegotiated agreement includes a graduated liquidated damages
remedy for the benefit of the supplier if the minimum purchase commitment is not met by the end of the agreement in 2009, however,
Nortel Networks expects to meet the minimum purchase commitment.
Nortel Networks entered into an arrangement with a minimum purchase commitment of $120 with Bookham. The terms of the
commitment require Nortel Networks to purchase $120 of product from Bookham between November 8, 2002 and May 31, 2004. The
purchase commitment was fully met by December 31, 2004.
Nortel Networks entered into an arrangement with BreconRidge with purchase commitments of approximately $11 and $33 of products
during 2003 and 2004, respectively. The 2003 and 2004 commitments have both been met.
Nortel Networks has agreed with JDS that if Nortel Networks purchased a minimum amount of designated products determined as a
percentage of Nortel Networks total purchases for such products during the period from January 1, 2001 to December 31, 2003, Nortel
Networks would be entitled to a reduction, in whole or in part, of the additional consideration otherwise payable in Nortel Networks
Corporation common shares to JDS in connection with the acquisition of the 980 NPLC business from JDS (see note 10). On
November 13, 2003, Nortel Networks and JDS agreed upon a modification to the measurement metrics for the period from November 8,
2002 through the remainder of the purchase arrangement to reflect, in accordance with the terms of the underlying agreement, the
disposition by Nortel Networks of certain of its operations. Nortel Networks believes that its purchases over the term of the purchase
arrangement were sufficient to meet the required measurement metrics of Nortel Networks total purchases to December 31, 2003, and as
such does not expect that any additional common shares will be issued.
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leases and other commitments
As of December 31, 2003, the future minimum payments under operating leases, outsourcing contracts, special charges related to lease
commitments accrued for as part of restructuring contract settlement and lease costs and related sublease recoveries (see note 7),
consisted of:
Operating Outsourcing Special Sublease
leases contracts charges income
2004 $ 163 $ 161 $ 145 $ (23)
2005 159 104 95 (29)
2006 145 104 72 (41)
2007 131 104 59 (38)
2008 113 104 49 (33)
Thereafter 649 104 248 (153)
Total future minimum payments $ 1,360 $ 681 $ 668 $ (317)
Rental expense on operating leases for the years ended December 31, 2003, 2002 and 2001, net of applicable sublease income, amounted
to $260, $469 and $756, respectively.
During the years ended December 31, 2003 and 2002, Nortel Networks entered into sale leaseback transactions for certain of its
properties with carrying values of approximately $17 and $250, respectively, which resulted in a loss on disposal of $6 and $7,
respectively.