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December 31, 2006.
The EDC Support Facility does not materially restrict NNL’s ability to sell any of its assets (subject to certain maximum amounts) or to
purchase or pre-pay any of its currently outstanding debt. The EDC Support Facility can be suspended or terminated if NNL’s senior long-term
debt rating by Moody’s has been downgraded to less than B3 or if its debt rating by S&P has been downgraded to less than B–.
As of December 31, 2003, NNL’s obligations under the EDC Support Facility were secured on an equal and ratable basis under the security
agreements entered into by NNL and various of our subsidiaries that pledged substantially all of NNL’s and its subsidiaries’ assets in favor of
the holders of NNL’s public debt securities and the holders of our 4.25% Convertible Senior Notes. As of December 31, 2003, the security
provided under the security agreements was comprised of:
If NNL’s senior long-term debt rating by Moody’s returns to Baa2 (with a stable outlook) and its rating by S&P returns to BBB (with a stable
outlook), the security and guarantees will be released in full. If the EDC Support Facility is terminated, or expires, the security and guarantees
will also be released in full. NNL may provide EDC with cash collateral in an amount equal to the total amount of its outstanding obligations
and undrawn commitments and expenses under this facility (or any other alternative collateral or arrangements acceptable to EDC) in lieu of
the security provided under the security agreements. Accordingly, if the EDC Support Facility is secured by cash or other alternate collateral or
arrangements acceptable to EDC, the security and guarantees will also be released in full.
For information related to our outstanding public debt, see “Long-term debt, credit and support facilities” in note 11 of the accompanying
consolidated financial statements. For additional financial information related to those subsidiaries providing guarantees as of December 31,
2003, see “Supplemental consolidating financial information” in note 24 of the accompanying consolidated financial statements. For
information related to the security pledged, those subsidiaries providing guarantees and the impact of the termination of the Five Year Facilities
on the related security agreements, subsequent to December 31, 2003, see “Developments in 2003 and 2004 — Nortel Networks Audit
Committee Independent Review; restatements; related matters — Credit facilities and security agreements”. For information related to our debt
ratings, see “Credit ratings” below. See “Risk factors/forward looking statements” for factors that may affect our ability to comply with
covenants and conditions in our EDC Support Facility in the future.
In 2002, we filed a shelf registration statement with the SEC and a base shelf prospectus with the applicable securities regulatory authorities in
Canada, to qualify for the potential sale of up to $2,500 of various types of securities in the U.S. and/or Canada. The qualifying securities
include common shares, preferred shares, debt securities, warrants to purchase equity or debt securities, share purchase contracts and share
purchase or equity units (subject to certain approvals). As of December 31, 2003, approximately $1,700 under the shelf registration statement
and base shelf prospectus has been utilized. As of June 6, 2004, the Canadian shelf registration expired. Owing to matters described above in
“Developments in 2003 and 2004 — Nortel Networks Audit Committee Independent Review; restatements; related matters” with respect to the
delayed filing of the Reports, we are currently unable to utilize the remaining capacity under the SEC shelf registration statement in its current
form. For the same reasons, we are also unable to permit holders of our prepaid forward purchase contracts to exercise certain “early
settlement” rights and receive Nortel Networks Corporation common shares in advance of the otherwise applicable August 15, 2005 settlement
date. These rights will again become exercisable upon the effectiveness of a registration statement (or a post-effective amendment to the shelf
registration statement) filed with the SEC (with respect to the common shares to be delivered) that contains a related current prospectus. Under
the terms of the Purchase Contract and Unit Agreement which governs the purchase contracts, we have agreed to use commercially reasonable
efforts to have, in effect, a registration statement covering the common shares to be delivered and to provide a prospectus in connection
therewith.
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• pledges of substantially all of the assets of NNL and those of most of its U.S. and Canadian subsidiaries;
• share pledges in certain of NNL’s other subsidiaries; and
• guarantees by certain of NNL’s wholly owned subsidiaries organized in Canada, England, Ireland and Hong Kong.
Shelf re
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istration statement and base shelf
p
ros
p
ectus