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Networks and NNL’s prior financial results (the “Related Breaches”). The waiver was to remain in effect until the earliest of certain
events or May 29, 2004. On March 29, 2004, NNL and EDC also amended the EDC Support Facility to provide that EDC may also
suspend its obligation to issue NNL any additional support if events occur that have a material adverse effect on NNL’s business,
financial position or results of operations and that such amendment would survive the waiver period.
On May 28, 2004, NNL obtained a new waiver from EDC of certain defaults under the EDC Support Facility related to the delay in filing
the 2003 Annual Reports and Nortel Networks and NNL’s quarterly reports on Form 10-Q for the three months ended March 31, 2004
(the “First Quarter Reports”) and the Related Breaches, which waiver was to remain in effect until the earliest of certain events or
August 30, 2004. This waiver reclassified the previously committed $300 revolving small bond sub-facility of the EDC Support Facility
as uncommitted support.
A further waiver was obtained from EDC effective August 20, 2004 (the “August Waiver”) related to the delay in filing the 2003 Annual
Reports, the First Quarter Reports and Nortel Networks and NNL’s quarterly reports on Form 10-Q for the three months ended June 30,
2004 (the “Second Quarter Reports”) and the Related Breaches, which waiver was to remain in effect until the earliest of certain events
or September 30, 2004.
On September 29, 2004, NNL obtained a new waiver from EDC (the “September Waiver”) which replaced the August Waiver on
substantially the same terms as provided in the August Waiver except that the September Waiver was to remain in effect until the earliest
of certain events or October 31, 2004.
On October 29, 2004, NNL obtained a new waiver from EDC (the “October Waiver”) which replaced the September Waiver on
substantially the same terms as the September Waiver except that the October Waiver remained in effect until the earliest of certain
events or November 19, 2004.
A further waiver was obtained from EDC effective November 19, 2004 (the “November Waiver”) related to the delay in filing the 2003
Annual Reports, the First Quarter Reports, the Second Quarter Reports and Nortel Networks and NNL’s quarterly reports on Form 10-Q
for the three months ended September 30, 2004 (the “Third Quarter Reports”, and together with the 2003 Annual Reports, the First
Quarter Reports and the Second Quarter Reports, the “Reports”, and the Third Quarter Reports together with the First Quarter Reports
and Second Quarter Reports, the “Quarterly Reports”) and the Related Breaches, which waiver was to remain in effect until the earliest of
certain events or December 10, 2004.
On December 10, 2004, NNL obtained a new waiver from EDC (the “December Waiver”) which replaced the November Waiver on
substantially the same terms as the November Waiver except that: (i) the December Waiver included an amendment to the EDC Support
Facility to extend the termination date of the EDC Support Facility to December 31, 2006 from December 31, 2005; and (ii) the
December Waiver remains in effect until the earliest of certain events including the date on which Nortel Networks and NNL have filed
all of the Reports or January 15, 2005.
As Nortel Networks and NNL will not have filed all of the Reports by January 15, 2005, EDC will have the right on such date (absent a
further waiver in relation to the delayed filings and the Related Breaches) to: (i) terminate the EDC Support Facility; (ii) exercise certain
rights against collateral; or (iii) require NNL to cash collateralize all existing support.
In addition, the Related Breaches will continue beyond the filing of the Reports. Accordingly, EDC will have the right beginning on
January 15, 2005 (absent a further waiver of the Related Breaches) to terminate or suspend the EDC Support Facility and exercise certain
other rights against collateral notwithstanding the filing of the Reports. While NNL is seeking a permanent waiver from EDC in
connection with the Related Breaches, there can be no assurance that NNL will receive any waiver or as to the terms of any such waiver.
The $300 revolving small bond sub-facility will not become committed support until all of the Reports have been filed with the SEC, the
trustees under Nortel Networks and NNL’s public trust indentures and EDC and NNL obtains a permanent waiver of the Related
Breaches.
Credit facilities and securit
y
a
g
reements
On April 28, 2004, NNL notified the banks under the Five Year Facilities that it was terminating these facilities. Absent such termination,
the banks would have been permitted, upon 30 days’ notice, to terminate their commitments under the Five Year Facilities as a result of
NNL’s inability to file its annual report on Form 10-K for the year ended December 31, 2003 by April 29, 2004. Upon termination, the
Five Year Facilities were undrawn.