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In accordance with these agreements Nortel Networks S.A. recorded related party revenues of approximately
35,903, 3,000, and
28,963 in the years 2003, 2002, and 2001 respectively. No cost of revenues to related parties are directly linked to these transactions.
R
e
p
resentative activit
y
Nortel Networks France is acting as the representative of certain of its affiliates in certain transactions with a French based customer. The
benefit of these transactions is not retained by Nortel Networks France and is transferred back to the affiliates having actually performed
the transaction. No revenue is recognized by Nortel Networks France on these transactions. The amounts billed to Nortel Networks
France under these agreements were
15,365, 33,755 and 21,905 for 2003, 2002 and 2001, respectively.
R
o
y
alties
Nortel Networks France pays royalties amounting to seven percent of its revenue to certain of its affiliates in remuneration for the right to
market Nortel Networks products in the French market. The amounts billed to Nortel Networks France under these agreements were
6,527, 9,997 and 21,694 for 2003, 2002 and 2001, respectively.
Sale o
f
investment
Through a series of complex transactions taking place from July 2003 to September 2003, Nortel Networks S.A. sold the interest it was
holding in EADS Telecom to NNIF&H B.V. and EADS. As these transactions were part of a greater transaction between Nortel
Networks S.A.’s affiliates and EADS the resulting gain of
43,070 has been recorded as paid in capital (see note 9).
F
inancin
g
transactions
On December 31, 2002, Nortel Networks provided Nortel Networks S.A. with a subordinated loan in the aggregate amount of
200,000.
This loan is classified as a long-term note payable to a related party. The repayment of the loan, in case of bankruptcy, insolvency or
liquidation, is subordinated to the prior repayment of any of Nortel Networks S.A. existing or future secured and unsecured creditors.
Nortel Networks S.A. may repay the whole or any part of the outstanding amount of the loan subject to notifying Nortel Networks in
advance of its irrevocable decision to make the repayment. The loan bears interest at a rate per annum equal to Euribor rate plus one
percent (3.1 percent at December 31, 2003). Interest is payable at the end of each interest period, subject to Nortel Networks S.A. having
positive net earnings and the interest payments not exceeding 40 percent of the positive net earnings. The amount outstanding under that
loan as of December 31, 2003 and 2002 was
50,000 and 200.000, respectively. The loan is payable upon the discretion of Nortel
Networks S.A. and has been classified as long-term in the accompanying balance sheet as management does not intend on repayment
prior to January 1, 2005.
On December 19, 2002, Nortel Networks S.A. provided Nortel Networks with a revolving loan in the amount of
200,000. This loan is
classified as a long-term note receivable to a related party. The loan bears interest at a rate per annum equal to Euribor plus one percent.
Interest is accrued and due unless an amount larger than the outstanding amount of advances is outstanding under the subordinated loan.
The term of the loan is two year and can be accelerated at the request of Nortel Networks S.A. The amount outstanding under that loan as
of December 31, 2003 and 2002 was
48,573 and 140,010 respectively.
At December 31, 2001, Nortel Networks S.A. had a revolving note payable with an affiliated company in the amount of
106,048. This
payable was settled in full in 2002.
On December 31, 2002, Nortel Networks provided Nortel Networks France with a subordinated loan in the aggregate amount of
20,000.
This loan is classified as a long-term note payable to a related party. This loan is included in the balance due to related parties for Nortel
Networks S.A. as of December 31, 2003, as a result of the acquisition of Nortel Networks France (see note 9). The repayment of the loan,
in case of bankruptcy, insolvency or liquidation, is subordinated to the prior repayment of any of Nortel Networks France’s existing or
future secured and unsecured creditors. Nortel Networks France may repay the whole or any part of the outstanding amount of the loan
subject to notifying Nortel Networks in advance of its irrevocable decision to make the repayment. The loan bears interest at a rate per
annum equal to Euribor plus one percent (3.1 percent at December 31, 2003). Interest is payable at the end of each interest period, subject
to Nortel Networks France having positive net earnings and the interest payments not exceeding 40 percent of the positive net earnings.