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F-82
As a result of the termination of the Five Year Facilities, certain foreign security agreements entered into by NNL and various of its
subsidiaries under which shares of certain subsidiaries of NNL incorporated outside of the U.S. and Canada were pledged in favor of the
banks under the Five Year Facilities, EDC and the holders of Nortel Networks and NNL’s outstanding public debt securities also
terminated in accordance with their terms (see note 24). In addition, guarantees by certain subsidiaries of NNL incorporated outside of
the U.S. and Canada terminated in accordance with their terms. Security agreements remain in place under which substantially all of the
assets of NNL located in the U.S. and Canada and those of most of its U.S. and Canadian subsidiaries, including the shares of certain of
NNL’s U.S. and Canadian subsidiaries, are pledged in favor of EDC and the holders of Nortel Networks and NNL’s outstanding public
debt securities. In addition, the guarantees by certain of NNL’s wholly owned subsidiaries, including NNI, most of NNL’s Canadian
subsidiaries, Nortel Networks (Asia) Limited, Nortel Networks (Ireland) Limited and Nortel Networks U.K. Limited, of NNL’s
obligations under the EDC Support Facility and Nortel Networks and NNL’s outstanding public debt securities remain in place.
Debt securities
As a result of the delay in filing the Reports, Nortel Networks and NNL have not been in compliance with their obligations to deliver
their respective SEC filings to relevant parties under Nortel Networks and NNL’s public debt indentures. As of December 31, 2004,
approximately $1,800 of notes of NNL (or its subsidiaries) and $1,800 of convertible debt securities of Nortel Networks were
outstanding.
These delays have not resulted in an automatic event of default and acceleration of the outstanding long-term debt and such default and
acceleration cannot occur unless notice of such non-compliance from holders of 25% of the outstanding principal amount of any relevant
debt securities is provided to Nortel Networks or NNL, as applicable, and Nortel Networks or NNL, as applicable, fail to file and deliver
the relevant report within 90 days after such notice is provided, all in accordance with the terms of the indentures. While such notice
could have been given at any time after March 30, 2004, neither Nortel Networks nor NNL has received a notice to the date of this report.
As a result of the delay in filing certain of the Reports, Nortel Networks and NNL continue not to be in compliance with their obligations
under Nortel Networks and NNL’s public debt indentures as described above. If notice were given and acceleration of Nortel Networks
and NNL’s debt securities were to occur, Nortel Networks may be unable to meet its payment obligations.
Stock-based com
p
ensation
p
lans
As a result of Nortel Networks March 10, 2004 announcement, as described above under “Nortel Networks Audit Committee
Independent Review; restatements; related matters”, Nortel Networks suspended as of March 10, 2004: the purchase of Nortel Networks
Corporation common shares under the ESPPs; the exercise of outstanding options granted under the 2000 Plan or 1986 Plan, or the grant
of any additional options under those plans, or the exercise of outstanding options granted under employee stock option plans previously
assumed by Nortel Networks in connection with mergers and acquisitions; and the purchase of units in a Nortel Networks stock fund or
purchase of Nortel Networks Corporation common shares under Nortel Networks defined contribution and investments plans, until such
time, at the earliest, that Nortel Networks is in compliance with U.S. and Canadian regulatory securities filing requirements.
Stock exchan
g
es
As a result of the continued delay in filing the Quarterly Reports, Nortel Networks is in breach of the continued listing requirements of
the NYSE and the TSX. The NYSE has granted Nortel Networks and NNL an extension up to March 31, 2005 by which to file the 2003
Annual Reports. To date, neither the NYSE nor the TSX has commenced any suspension or delisting procedures in respect of Nortel
Networks Corporation common shares and other of Nortel Networks and NNL’s listed securities. The commencement of any suspension
or delisting procedures by either exchange remains, at all times, at the discretion of such exchange.
Director
y
and o
p
erator services business
On August 2, 2004, Nortel Networks completed the contribution of certain assets and liabilities of its directory and operator services
(“DOS”) business to VoltDelta Resources LLC (“VoltDelta”), a wholly owned subsidiary of Volt Information Sciences, Inc. (“VIS”), in
return for a 24 percent interest in VoltDelta. After a period of two years, Nortel Networks and VIS each have an option to cause Nortel
Networks to sell its VoltDelta shares to VIS for proceeds ranging from $25 to $70. As a result of this transaction, approximately 160
Nortel Networks DOS employees in North Americ
a