As filed with the Securities and Exchange Commission on
September 10, 2007
Registration
No. 333-
333- -01
333- -02
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
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NORTEL NETWORKS LIMITED
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NORTEL NETWORKS CORPORATION
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NORTEL NETWORKS INC.
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(Exact name of registrant
as specified in its charter)
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(Exact name of registrant
as specified in its charter)
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(Exact name of registrant
as specified in its charter)
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Canada
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Canada
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Delaware
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(State or other jurisdiction
of
incorporation or organization)
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(State or other jurisdiction
of
incorporation or organization)
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(State or other jurisdiction
of
incorporation or organization)
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62-12-62580
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Not Applicable
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04-2486332
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(I.R.S. Employer
Identification Number)
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(I.R.S. Employer
Identification Number)
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(I.R.S. Employer
Identification Number)
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195 The West Mall
Toronto, Ontario, Canada M9C 5K1
(905) 863-7000
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195 The West Mall
Toronto, Ontario, Canada M9C 5K1
(905) 863-7000
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2221 Lakeside Boulevard
Richardson, Texas 75082
(615) 432-4000
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(Address, including zip code,
and telephone number, including area code, of
registrants principal executive offices)
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(Address, including zip code,
and telephone number, including area code, of
registrants principal executive offices)
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(Address, including zip code,
and telephone number, including area code, of
registrants principal executive offices)
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CT Corporation
3500 North St. Paul Street,
Suite 2900
Dallas, Texas 75201
(214) 979-1172
(Name, address, including zip
code, and telephone number, including area code, of agent for
service)
Copies of all communications, including communications
sent to agent for service, should be sent to:
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Gordon A. Davies, Esq.
Chief Legal Officer and Corporate Secretary
Nortel Networks Corporation
195 The West Mall
Toronto, Ontario, Canada M9C 5K1
(905) 863-7000
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Craig B. Brod, Esq.
Sandra L. Flow, Esq.
Cleary Gottlieb Steen & Hamilton LLP
One Liberty Plaza
New York, New York 10006
(212) 225-2000
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Approximate date of commencement of proposed sale to the
public:
As soon as practicable after the
Registration Statement becomes effective.
If the securities being registered on this form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check the
following box.
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If this form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act
of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective
registration statement for the same
offering.
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If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to
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Offering Price
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Aggregate
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Amount of
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Securities to be Registered
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be Registered
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per Unit
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Offering Price(1)
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Registration Fee
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10.75% Senior Notes due 2016
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$450,000,000
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100%
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$450,000,000
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$13,815
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Guarantees of 10.750% Senior
Notes due 2016(2)
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$450,000,000
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(3)
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10.125% Senior Notes due 2013
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$550,000,000
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100%
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$550,000,000
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$16,885
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Guarantees of 10.125% Senior
Notes due 2013(2)
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$550,000,000
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(3)
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Floating Rate Senior Notes due 2011
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$1,000,000,000
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100%
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$1,000,000,000
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$30,700
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Guarantees of Floating Rate Senior
Notes due 2011(2)
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$1,000,000,000
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(3)
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(1)
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Estimated solely for purposes of
calculating the registration fee pursuant to Rule 457 under
the Securities Act.
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(2)
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The 10.75% Senior Notes due
2016, the 10.125% Senior Notes due 2013 and the Floating
Rate Senior Notes due 2011 are fully and unconditionally
guaranteed by Nortel Networks Corporation and initially
guaranteed by Nortel Networks Inc.
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(3)
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Pursuant to Rule 457(n) under
the Securities Act, no separate fee is payable for the
registration of the Guarantees.
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The Registrants hereby amend this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrants shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until the Registration
Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.
The
information in this prospectus is not complete and may be
changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell nor does it
seek an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
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SUBJECT TO COMPLETION,
DATED ,
2007
PROSPECTUS
Nortel
Networks Limited
Offers to
Exchange
U.S.$450,000,000
principal amount of our 10.75% Senior Notes due 2016
U.S.$550,000,000 principal amount of our 10.125% Senior
Notes due 2013
U.S.$1,000,000,000 principal amount of our Floating Rate Senior
Notes due 2011
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We are offering to exchange (1) any and all of our
outstanding 10.75% Senior Notes due 2016, or the Old 2016
Fixed Rate Notes, for an equal amount of new 10.75% Senior
Notes due 2016, or the New 2016 Fixed Rate Notes, (2) any
and all of our outstanding 10.125% Senior Notes due 2013,
or the Old 2013 Fixed Rate Notes, for an equal amount of new
10.125% Senior Notes due 2013, or the New 2013 Fixed Rate
Notes, and (3) any and all of our outstanding Floating Rate
Senior Notes due 2011, or the Old Floating Rate Notes, for an
equal amount of new Floating Rate Senior Notes due 2011, or the
New Floating Rate Notes. We refer to (a) the Old 2016 Fixed
Rate Notes and the Old 2013 Fixed Rate Notes collectively as the
Old Fixed Rate Notes, (b) the Old Fixed Rate Notes and the
Old Floating Rate Notes collectively as the Old Notes,
(c) the New 2016 Fixed Rate Notes and the New 2013 Fixed
Rate Notes collectively as the New Fixed Rate Notes,
(d) the New Fixed Rate Notes and the New Floating Rate
Notes collectively as the New Notes, (e) the New Notes and
the Old Notes collectively as the Notes, (e) the Old 2016
Fixed Rate Notes and the New 2016 Fixed Rate Notes collectively
as the 2016 Fixed Rate Notes, (f) the Old 2013 Fixed Rate
Notes and the New 2013 Fixed Rate Notes collectively as the 2013
Fixed Rate Notes, and (g) the Old Floating Rate Notes and
the New Floating Rate Notes collectively as the Floating Rate
Notes.
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The exchange offers expires at 5:00 p.m., New York City
time,
on ,
2007, unless extended.
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Tenders of Old Notes may be withdrawn at any time prior to the
expiration of the exchange offers.
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All Old Notes that are validly tendered and not validly
withdrawn will be exchanged.
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The exchange of Old Notes for New Notes generally will not be a
taxable exchange for U.S. federal income tax purposes.
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We will not receive any proceeds from the exchange offers.
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The terms of the New Notes to be issued in the exchange offers
are substantially the same as the terms of the Old Notes, except
that the New Notes will be registered under the
U.S. Securities Act of 1933, as amended, or the Securities
Act, and the New Notes have no transfer restrictions, rights to
additional interest or registration rights, except for certain
restrictions on transfers of New Notes in Canada under
applicable Canadian securities laws.
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The New Notes will not be listed on any securities exchange. A
public market for the New Notes may not develop, which could
make selling the New Notes difficult.
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Each broker-dealer that receives New Notes for its own account
pursuant to the exchange offers must acknowledge that it will
deliver a prospectus in connection with any resale of such New
Notes. The letter of transmittal accompanying this prospectus
states that by so acknowledging and by delivering a prospectus,
a broker-dealer will not be deemed to admit that it is an
underwriter within the meaning of the Securities
Act. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with
resales of New Notes received in exchange for Old Notes where
such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. We have
agreed that, for a period of 180 days after the expiration
date (as defined herein), we will make this prospectus available
to any broker-dealer for use in connection with any such resale
upon the request of any such broker-dealer. See Plan of
Distribution.
See Risk Factors beginning on page 17 and
the risk factors in the documents incorporated by reference
herein for a discussion of certain risks that you should
consider in connection with an investment in the New Notes.
Neither the Securities and Exchange Commission, which we
refer to as the SEC, nor any state securities commission has
approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to
the contrary is a criminal offense.
The date of this prospectus
is ,
2007.
In making your investment decision, you should rely only on
the information contained or incorporated by reference in this
prospectus. We have not authorized any other person to provide
you with any other information. If anyone provides you with
different or inconsistent information, you should not rely on
it.
We are offering to exchange the Old Notes for New Notes only
in places where the exchange offers are permitted.
You should not assume that the information contained or
incorporated by reference in this prospectus is accurate as of
any date other than the date on the front cover of this
prospectus or the date of any document incorporated by reference
herein.
TABLE OF
CONTENTS
Each of Nortel Networks Corporations and Nortel Networks
Limiteds principal executive offices are located at 195
The West Mall, Toronto, Ontario, Canada M9C 5K1, telephone
number
(905) 863-7000.
Nortel Networks Inc.s principal executive offices are
located at 2221 Lakeside Boulevard, Richardson, Texas 75082,
telephone number
(615) 432-4000.
Nortels website is located at www.nortel.com. The
information on the website is not part of this prospectus.
References to NNC refer to Nortel Networks
Corporation without its subsidiaries. References to
NNL or the Company refer to Nortel
Networks Limited without its subsidiaries. References to
NNI refer to Nortel Networks Inc. without its
subsidiaries. Unless the context otherwise requires, where we
say we, us, our or
Nortel, we mean NNC or NNC and its subsidiaries, as
applicable. References to the Guarantors refer to
NNC and NNI (or, during a suspension period (as defined herein),
to NNC). References to the Issuers refer to the
Company and the Guarantors. Where we refer to the
industry, we mean the telecommunications industry.
Reference to the 2006 Annual Report refer to
NNCs and NNLs Annual Reports on
Form 10-K
for the year ended December 31, 2006. References to the
2006 Financial Statements refer to the audited
consolidated financial statements included in NNCs and
NNLs Current Reports on
Form 8-K
dated September 10, 2007 (which replaced the audited
consolidated financial statements included in the 2006 Annual
Reports), and references to the 2006 MD&A refer
to the Managements Discussion and Analysis of Financial
Condition and Results of Operations, or MD&A, sections
included in NNCs and NNLs Current Reports on
Form 8-K
dated September 10, 2007 (which replaced the MD&A
sections included in the 2006 Annual Reports).
NNL is the principal direct operating subsidiary of NNC. NNC
holds all of NNLs outstanding common shares but none of
NNLs outstanding preferred shares. NNCs and
NNLs most recent Annual Reports on
Form 10-K
and Quarterly Reports on
Form 10-Q,
as well as certain of NNCs and NNLs other filings
with the SEC are incorporated by reference herein. See
Incorporation of Certain Documents by Reference.
i
Presentation
of Financial and Other Information; Material Weaknesses; SEC
Review
Unless otherwise indicated, all financial information included
in this prospectus is derived from NNCs historical
consolidated audited balance sheet as of December 31, 2006
and consolidated audited statements of operations, changes in
equity and comprehensive income (loss) and cash flows for the
years ended December 31, 2006, 2005 and 2004 and NNCs
historical unaudited condensed consolidated financial statements
as of June 30, 2007 and for the six month periods ended
June 30, 2007 and 2006, which have been prepared on the
basis of accounting principles generally accepted in the United
States, or U.S. GAAP. Unless otherwise indicated, all
references to dollars and $ shall mean United States
dollars.
We and our independent registered chartered accountants have
identified a material weakness related to our internal control
over financial reporting and concluded that our internal control
over financial reporting was ineffective as of December 31,
2006. This material weakness, if not fully addressed, could
result in accounting errors such as those underlying the
restatements of our consolidated financial statements more fully
discussed in the Controls and Procedures sections of
NNCs Annual Reports on
Form 10-K
or
10-K/A,
as the case may be, for the years ended December 31, 2006,
2005 and 2003. After considering this material weakness, among
other matters, our chief executive officer, or CEO, and chief
financial officer, or CFO, have concluded, most recently as of
June 30, 2007, that our disclosure controls and procedures
are not effective to provide reasonable assurance that
information required to be disclosed in the reports we file and
submit under the U.S. Securities Exchange Act of 1934, as
amended, or the Exchange Act, is recorded, processed, summarized
and reported as and when required.
In addition, in part as a result of the compensating procedures
and processes that we are applying to our financial reporting
process, during the preparation of our financial statements for
recent periods (including 2006, 2005 and 2004), we identified a
number of adjustments to correct accounting errors related to
prior periods, including the errors corrected in the most recent
restatement, as more fully discussed in note 4 to the 2006
Financial Statements. In the past, we also recorded adjustments
that were immaterial to the then-current period and to the prior
periods in the financial statements for the then-current period.
As long as we continue to have a material weakness in our
internal control over financial reporting, we may in the future
identify similar adjustments to prior period financial
information. Adjustments that may be identified in the future
could require further restatement of our financial statements.
Furthermore, the threshold for our being required to restate
financial information in the future is potentially very low in
the current regulatory environment due in part to the fact that
we currently, and in the near future expect to, operate at close
to break-even levels of earnings or loss. We have received
comments on our periodic filings from the staff of the
SECs Division of Corporation Finance, or the Staff, and
may receive further comments.
For more detailed information on the risks related to these
matters, see the Risk Factors sections of the 2006
Annual Report and NNCs Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2007, or the 2007
Second Quarter Report, which are incorporated by reference
herein.
The consolidated financial statements and related information of
NNL are incorporated by reference herein and readers are
cautioned that there are material differences between the
financial information presented for NNC under
Summary Selected Historical Consolidated
Financial Information of NNC and the Company. For example,
NNCs audited consolidated balance sheet as of
December 31, 2006 and audited consolidated statements of
operations, changes in equity and comprehensive income (loss)
and cash flows for the year ended December 31, 2006 are
materially different from the corresponding consolidated audited
financial statements of NNL, relating primarily to (i) the
shareholder litigation expense which was recognized in the
consolidated audited financial statements of NNC but was not
recognized in the consolidated audited financial statements of
NNL; (ii) the reporting of the Companys Existing
Preferred Stock (as defined under Description of the New
Notes Certain Definitions) in the item
minority interests in subsidiary companies in the audited
consolidated balance sheets of NNC and the reporting of
dividends and the related taxes in minority
interests net of tax in the audited consolidated
statements of operations of NNC; and (iii) the reporting of
NNCs 4.25% Convertible Senior Notes due
September 1, 2008, or the 2008 Convertible Notes, in the
audited consolidated balance sheets of NNC and related interest
expense in the audited consolidated statements of operations of
NNC which are not reported in the audited consolidated financial
statements of the
ii
Company. This prospectus includes certain financial information
for NNC because the Company is the principal direct operating
subsidiary of NNC and its results are consolidated into
NNCs results. In addition, the Notes are fully and
unconditionally guaranteed by NNC and certain financial
covenants in the indenture for the Notes are calculated based on
the consolidated financial information of NNC.
Enforcement
of Civil Liabilities
Each of NNC and NNL is a Canadian corporation. A substantial
portion of their assets are located in Canada or elsewhere
outside of the United States and many of their directors and
executive officers, and some of the experts named in this
document, are residents of Canada. As a result, it may be
difficult for investors to effect service within the United
States upon NNC or NNL or those directors, officers and experts.
Execution by United States courts of any judgment obtained
against NNC or NNL or any of their directors, officers and
experts in United States courts would be limited to their assets
or those of that person in the United States. Gordon A.
Davies, Esq., Chief Legal Officer and Corporate Secretary
of NNC and NNL, has advised the Issuers that there is doubt as
to the enforceability in Canada of United States judgments or
liabilities in original actions in Canadian courts predicated
solely upon the civil liability provisions of the federal
securities laws of the United States.
Forward-Looking
Statements
Certain statements in this prospectus or in the documents
incorporated by reference herein may contain words such as
could, expects, may,
anticipates, believes,
intends, estimates, targets,
envisions, seeks and other similar
language and are considered forward-looking statements or
information under applicable securities legislation. These
statements are based on our current expectations, estimates,
forecasts and projections about the operating environment,
economies and markets in which we operate. These statements are
subject to important assumptions, risks and uncertainties, which
are difficult to predict and the actual outcome may be
materially different.
Further, actual results or events could differ materially from
those contemplated in forward-looking statements as a result of
the following:
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Risks and uncertainties relating to our business
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including: significant competition, competitive pricing
practice, cautious capital spending by customers, industry
consolidation, rapidly changing technologies, evolving industry
standards, frequent new product introductions and short product
life cycles, and other trends and industry characteristics
affecting the telecommunications industry; any material adverse
effects on our performance if our expectations regarding market
demand for particular products prove to be wrong; the
sufficiency of recently announced restructuring actions; any
negative developments associated with our suppliers and contract
manufacturing agreements including our reliance on certain
suppliers for key optical networking solutions components;
potential penalties, damages or cancelled customer contracts
from failure to meet delivery and installation deadlines and any
defects or errors in our current or planned products;
fluctuations in foreign currency exchange rates; potential
higher operational and financial risks associated with our
efforts to expand internationally; potential additional
valuation allowances for all or a portion of our deferred tax
assets if market conditions deteriorate or future results of
operations are less than expected; a failure to protect our
intellectual property rights, or any adverse judgments or
settlements arising out of disputes regarding intellectual
property; any negative effect of a failure to maintain the
integrity of our information systems; changes in regulation of
the telecommunications industry or other aspects of the
industry; any failure to successfully operate or integrate
strategic acquisitions, or failure to consummate or succeed with
strategic alliances; our potential inability to attract or
retain the personnel necessary to achieve our business
objectives or to maintain an effective risk management strategy;
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Risks and uncertainties relating to our liquidity, financing
arrangements and capital
, including: any inability of us to
manage cash flow fluctuations to fund working capital
requirements or achieve our business objectives in a timely
manner or obtain additional sources of funding; high levels of
debt, limitations on us capitalizing on business opportunities
because of senior notes covenants, or on obtaining additional
secured debt pursuant to the provisions of indentures governing
certain of our
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iii
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public debt issues; our below investment grade credit rating;
any increase of restricted cash requirements for us if we are
unable to secure alternative support for obligations arising
from certain normal course business activities, or any inability
of our subsidiaries to provide us with sufficient funding; any
negative effect to us of the need to make larger defined benefit
plans contributions in the future; exposure to customer credit
risks or inability of customers to fulfill payment obligations
under customer financing arrangements; or any negative impact on
our ability to make future acquisitions, raise capital, issue
debt and retain employees arising from stock price volatility
and any declines in the market price of our publicly traded
securities; and
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Risks and uncertainties relating to our prior restatements
and related matters
, including: any negative impact on us of
such restatements, legal judgments, fines, penalties or
settlements, or any substantial regulatory fines or other
penalties or sanctions, related to the ongoing regulatory and
criminal investigations of us in the U.S. and Canada; the
significant dilution of our existing equity positions resulting
from the approval of our class action settlement; any
significant pending or future civil litigation actions not
encompassed by our class action settlement; any unsuccessful
remediation of our material weakness in internal control over
financial reporting resulting in an inability to report our
results of operations and financial condition accurately and in
a timely manner; our inability to access, in its current form,
our shelf registration statement filed with the SEC; or any
breach by us of the continued listing requirements of the New
York Stock Exchange, which we refer to as NYSE, or the Toronto
Stock Exchange, which we refer to as TSX, causing the NYSE
and/or
the
TSX to commence suspension or delisting procedures. For
additional information with respect to certain of these and
other factors, see the 2006 Annual Report and the 2007 Second
Quarter Report, which are incorporated by reference herein, and
our other filings with the SEC.
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Any forward-looking statements included or incorporated by
reference in this prospectus speak only as of the date of this
prospectus or the date of such incorporated document. Unless
otherwise required by applicable securities laws, we disclaim
any intention or obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise.
Registered
Trademarks
NORTEL, NORTEL (Logo), NORTEL NETWORKS, The GLOBEMARK (Logo),
NT, and NORTEL GOVERNMENT SOLUTIONS are trademarks of Nortel.
MOODYS is a trademark of Moodys Investor Services,
Inc. NYSE is a trademark of the New York Stock Exchange, Inc.
TSX is a trademark of TSX Inc. SAP is a trademark of SAP AG.
S&P and STANDARD & POORS are trademarks of
The McGraw-Hill Companies, Inc. All other trademarks are the
property of their respective owners.
iv
The following summary should be read in conjunction with, and is
qualified in its entirety by, the more detailed information and
financial statements (and notes thereto) contained elsewhere or
incorporated by reference in this prospectus. For a discussion
of certain factors to be considered in connection with an
investment in the New Notes, see Risk Factors.
Company
Overview
We are a global supplier of networking solutions serving both
service provider and enterprise customers. Our networking
solutions include hardware and software products and services
designed to reduce complexity, improve efficiency, increase
productivity and drive customer value. Our technologies span
access and core networks, support multimedia and
business-critical applications, and help eliminate todays
barriers to efficiency, speed and performance by simplifying
networks and connecting people with information. Our business
activities include the design, development, engineering,
marketing, sale, supply, licensing, installation, servicing and
support of these networking solutions.
Global
Class Action Settlement
In February 2006, we announced an agreement to settle two
significant class action lawsuits pending in the
U.S. District Court for the Southern District of New York,
or the Global Class Action Settlement. Subsequently, we
entered into agreements to settle all related Canadian actions.
The Global Class Action Settlement became effective on
March 20, 2007. Under the terms of the Global
Class Action Settlement, we agreed to pay $575 million
in cash and issue approximately 62,866,775 of NNC common shares,
or the Settlement Shares, and we will contribute to the
plaintiffs one-half of any recovery resulting from our ongoing
litigation against certain former officers of Nortel.
The cash portion of the settlement is under the direction of the
settlement escrow agents and our obligation has been satisfied,
and as a result, the balances have been released. Approximately
4% of the Settlement Shares have been issued, and we currently
expect the balance of the Settlement Shares to be issued
commencing in the second half of 2007 and continuing into 2008.
See Capitalization of NNC and Risk
Factors.
Restatements;
Material Weakness and Related Matters
We have effected successive restatements of prior period
financial results. In December 2003, we restated our
consolidated financial statements for the years ended
December 31, 2002, 2001 and 2000 and for the quarters ended
March 31, 2003 and June 30, 2003, referred to herein
as the First Restatement. Following an independent review of the
facts and circumstances leading to the First Restatement, or the
Independent Review, we restated our financial statements for the
years ended December 31, 2002 and 2001 and the quarters
ended March 31, 2003 and 2002, June 30, 2003 and 2002
and September 30, 2003 and 2002, referred to herein as the
Second Restatement. Over the course of the Second Restatement
process, we, together with our independent registered chartered
accountants, identified a number of material weaknesses in our
internal control over financial reporting as of
December 31, 2003. In addition, in January 2005, our and
NNLs boards of directors adopted in their entirety the
governing principles for remedial measures identified through
the Independent Review. As part of these remedial efforts and to
compensate for the unremedied material weaknesses in our
internal control over financial reporting, we undertook
intensive efforts in 2005 to validate and enhance our controls
and procedures relating to the recognition of revenue. As a
result of these efforts, it became apparent that certain of our
customer contracts for revenue recognized in 2005 and earlier
periods had not been accounted for properly under
U.S. GAAP. In addition, based on our review of our revenue
recognition policies and discussions with our independent
registered chartered accountants as part of the 2005 audit, we
determined that in our previous application of these policies,
we misinterpreted certain of these policies. Managements
determination that these errors required correction led to the
restatement of our consolidated financial statements for the
years ended December 31, 2004 and 2003 and the quarters
ended March 31, 2005 and 2004, June 30, 2005 and 2004,
and September 30, 2005 and 2004, or the Third Restatement.
For more
1
information on these restatements, see our Annual Reports on
Form 10-K
or
10-K/A
for the fiscal years 2003 and 2005, respectively.
In the course of the preparation of our 2006 Financial
Statements, we identified certain errors primarily through
discussions with our North American pension and post-retirement
actuaries and through our on-going remediation efforts described
above. As a result, we restated our consolidated balance sheet
as of December 31, 2005 and consolidated statements of
operations, changes in equity and comprehensive income (loss)
and cash flows for each of the years ended December 31,
2005 and 2004 and for each of the first three quarters in 2006
and 2005. See note 4 to the 2006 Financial Statements and
the Quarterly Financial Data included in the 2006 Annual Report,
which are incorporated by reference herein.
During 2006 and into 2007, we continued to improve our internal
controls over financial reporting to compensate for our
previously identified and reported five material weaknesses, and
to implement the recommendations for remedial measures
identified through the Independent Review. We believe that our
remedial measures and other actions taken to significantly
improve internal control over financial reporting, individually
and in the aggregate, addressed the internal control issues in
the five material weaknesses. As at December 31, 2006, we
concluded that these measures resulted in the elimination of the
five material weaknesses, with the exception of certain
deficiencies that comprise the revenue related material
weakness, as further described in the Controls and
Procedures section of our 2006 Annual Report, which is
incorporated by reference herein.
We are subject to additional significant pending civil
litigation actions, which are not encompassed by the Global
Class Action Settlement and which, if decided against us or
as a result of settlement, could require us to pay substantial
judgments, settlements, fines or other penalties and could
result in the dilution of existing equity positions, and we
cannot predict the timing of developments in these matters.
In May 2007, we and NNL entered into a settlement agreement with
the staff of the Ontario Securities Commission, or OSC, in
connection with its investigation into prior accounting
practices that led to certain restatements of our and NNLs
financial results. On May 22, 2007, the OSC issued an order
approving the settlement agreement, which fully resolves all
issues with the OSC with respect to Nortel. Under the terms of
the OSC order, we and NNL are required to deliver to the OSC
staff quarterly and annual written reports detailing, among
other matters, our progress in implementing our remediation
plan. This reporting requirement began following the filing of
the 2007 Second Quarter Report and will end upon the earlier of
the elimination of our remaining material weakness relating to
revenue recognition and the completion of our remediation plan.
The OSC order does not impose any administrative penalty or
fine. However, we have made a payment to the OSC in the amount
of CDN$1 million as a contribution towards the costs of its
investigation.
We have been under investigation by the SEC since April 2004 in
connection with previous restatements of our consolidated
financial statements. As a result of discussions with the
enforcement staff of the SEC for purposes of resolving the
investigation, we concluded that a reserve should be provided.
Accordingly, an accrual was recorded in the second quarter of
2007 in the amount of $35 million, which we believe
represents our current best estimate for the liability
associated with this matter. However, this matter is ongoing and
the ultimate outcome is still uncertain.
In addition, we received U.S. federal grand jury subpoenas
for the production of certain documents sought in connection
with an ongoing criminal investigation being conducted by the
U.S. Attorneys Office for the Northern District of
Texas, Dallas Division. Further, a criminal investigation into
our financial accounting situation by the Integrated Market
Enforcement Team of the Royal Canadian Mounted Police is
ongoing. Regulatory sanctions may potentially require us to
agree to remedial undertakings that may involve the appointment
of an independent adviser to review, assess and monitor our
accounting practices, financial reporting and disclosure
processes and internal control systems. See Risk
Factors and Legal Proceedings in the 2006
Annual Report and the 2007 Second Quarter Report.
2
Appointment
of KPMG LLP
On May 2, 2007, the appointment of KPMG LLP as our
principal independent public accountants beginning with fiscal
2007 was approved by our shareholders at our annual and special
meeting of shareholders. KPMG LLP was also appointed as the
principal independent public accountants for NNL on the same
date.
Business
Transformation Initiatives
On February 7, 2007, we outlined the next steps of our
Business Transformation plan with the announcement of a work
plan to implement a net reduction in our global workforce of
approximately 2,900 positions, or the 2007 Restructuring Plan.
As part of this plan, we will also shift approximately 1,000
positions from higher-cost to lower-cost locations. The 2007
Restructuring Plan also includes initiatives to more efficiently
manage our various business locations and reduce our global real
estate portfolio. For more information, see the
Managements Discussion and Analysis of Financial Condition
and Results of Operations, or MD&A, section of the 2007
Second Quarter Report.
Partial
Redemption of 2008 Convertible Notes
We will use the net proceeds of the issuance of NNCs 1.75%
convertible notes due 2012, or the 2012 Convertible Notes, and
2.125% convertible notes due 2014, or the 2014 Convertibles
Notes, in March 2007 to redeem on September 28, 2007 at par
value $1,125 million of the $1.8 billion outstanding
principal amount of the 2008 Convertible Notes pursuant to a
redemption notice given to holders of the 2008 Convertible Notes
on September 4, 2007.
3
The
Exchange Offers
On July 5, 2006, we completed a private placement of the
Old Notes and entered into a registration rights agreement in
which we agreed, among other things, to conduct these exchange
offers. Under the terms of the exchange offers, you are entitled
to exchange Old Notes for New Notes evidencing the same
indebtedness and with substantially similar terms. The following
is a summary of the exchange offers. You should read the
discussion under the heading Description of the New
Notes for further information regarding the New Notes.
|
|
|
Old Notes
|
|
On July 5, 2006, we issued:
|
|
|
|
$450,000,000 aggregate principal amount of Old 2016
Fixed Rate Notes;
|
|
|
|
$550,000,000 aggregate principal amount of Old 2013
Fixed Rate Notes; and
|
|
|
|
$1,000,000,000 aggregate principal amount of Old
Floating Rate Notes.
|
|
|
|
As of the date of this prospectus, $450,000,000 aggregate
principal amount of Old 2016 Fixed Rate Notes, $550,000,000
aggregate principal amount of Old 2013 Fixed Rate Notes and
$1,000,000,000 aggregate principal amount of Old Floating Rate
Notes are outstanding.
|
|
Exchange Offers
|
|
We are offering to exchange:
|
|
|
|
for each $1,000 aggregate principal amount of Old
2016 Fixed Rate Notes validly tendered and accepted, $1,000
aggregate principal amount of New 2016 Fixed Rate Notes;
|
|
|
|
for each $1,000 aggregate principal amount of Old
2013 Fixed Rate Notes validly tendered and accepted, $1,000
aggregate principal amount of New 2013 Fixed Rate Notes; and
|
|
|
|
for each $1,000 aggregate principal amount of Old
Floating Rate Notes validly tendered and accepted, $1,000
aggregate principal amount of New Floating Rate Notes;
|
|
|
|
The terms of the New Notes are substantially identical to the
terms of the Old Notes, except that the transfer restrictions,
registration rights and provisions for additional interest
relating to the Old Notes do not apply to the New Notes (other
than the transfer restrictions applicable to the transfer of New
Notes in Canada under applicable Canadian securities laws).
|
|
Expiration Date
|
|
The exchange offers will expire at 5:00 p.m., New York City
time,
on ,
2007, unless we decide to extend it.
|
|
Settlement Date
|
|
The settlement date of the exchange offers will be as soon as
practicable after the expiration date of the exchange offers.
|
|
Withdrawal of Tenders
|
|
Tenders of Old Notes may be withdrawn at any time prior to the
expiration of the exchange offers. See Description of the
Exchange Offers Withdrawal of Tenders.
|
|
Conditions to the Exchange Offers
|
|
Our obligation to consummate the exchange offers is subject to
certain customary conditions, which we may assert or waive. See
|
4
|
|
|
|
|
Description of the Exchange Offers Conditions
to the Exchange Offers.
|
|
Procedures for Tendering
|
|
To participate in the exchange offers, you must follow the
automatic tender offer program, or ATOP, procedures established
by The Depository Trust Company, or DTC, for tendering Old
Notes held in book-entry form.
|
|
|
|
In addition to effecting the tender of Old Notes through the
ATOP procedures, Canadian holders of Old Notes must also
complete the Canadian Representation Letter sent to holders of
Old Notes in Canada.
|
|
|
|
The ATOP procedures require that the exchange agent receive,
prior to the expiration date of the exchange offers, a
computer-generated message known as an agents
message that is transmitted through ATOP and that confirms:
|
|
|
|
that DTC has received instructions to exchange your
Old Notes;
|
|
|
|
that you agree to be bound by the terms of the
letter of transmittal; and
|
|
|
|
whether you are resident in Canada and, if you are
resident in Canada, that you acknowledge that you have received
the Canadian Private Placement Memorandum and have delivered the
Canadian Representation Letter to the exchange agent.
|
|
|
|
For more details, please read Description of the Exchange
Offers Terms of the Exchange Offers and
Description of the Exchange Offers Procedures
for Tendering. Any holder electing to have Old Notes
exchanged pursuant to the exchange offers must properly tender
its Old Notes prior to the close of business on the expiration
date. All Old Notes validly tendered and not properly withdrawn
will be accepted for exchange. Old Notes may be exchanged only
in minimum denominations of $2,000 and integral multiples of
$1,000 in excess thereof.
|
|
Consequences of Failure to Exchange
|
|
If we complete the exchange offers and you do not participate in
it, then:
|
|
|
|
your Old Notes will continue to be subject to the
existing restrictions upon their transfer;
|
|
|
|
we will have no further obligation to provide for
the registration under the Securities Act of those Old Notes
except under certain limited circumstances; and
|
|
|
|
the liquidity of the market for your Old Notes could
be adversely affected.
|
|
Taxation
|
|
The exchange pursuant to the exchange offers generally will not
be a taxable event for U.S. federal income tax purposes. See
Certain U.S. Federal Income Tax Considerations in
this prospectus.
|
|
Use of Proceeds
|
|
We will not receive any cash proceeds from the issuance of the
New Notes in the exchange offers.
|
5
|
|
|
Exchange Agent
|
|
The Bank of New York is the exchange agent for the exchange
offers. All correspondence in connection with the exchange
offers should be sent or delivered by each holder of Old Notes,
or a beneficial owners commercial bank, broker, dealer,
trust company or other nominee, to the exchange agent at:
|
|
|
|
|
|
The Bank of New York
Corporate Trust Operations
Reorganization Unit
101 Barclay Street, 7 East
New York, New York 10286
Telephone:
(212) 815-3687
Facsimile:
(212) 815-1915
|
|
|
|
Information Agent
|
|
D.F. King & Co., Inc. is serving as information agent
for the exchange offers. You should direct questions and
requests for assistance and requests for additional copies of
this prospectus (including the letter of transmittal and the
Canadian Representation Letter) to the information agent at the
following address:
|
|
|
|
|
|
D.F. King & Co., Inc.
48 Wall Street
New York, New York 10005
Banks and brokers call:
(212) 269-5550
(collect)
All others call toll-free:
(800) 659-6590
|
6
The New
Notes
|
|
|
Issuer
|
|
Nortel Networks Limited, a Canadian corporation.
|
|
Guarantors
|
|
Nortel Networks Corporation, a Canadian corporation, and Nortel
Networks Inc., a Delaware corporation.
|
|
Securities Being Exchanged
|
|
Up to $1,000,000,000 aggregate principal amount of New Floating
Rate Notes.
|
|
|
|
Up to $550,000,000 aggregate principal amount of New 2013 Fixed
Rate Notes.
|
|
|
|
Up to $450,000,000 aggregate principal amount of New 2016 Fixed
Rate Notes.
|
|
Maturity
|
|
July 15, 2016, in the case of the New 2016 Fixed Rate Notes.
|
|
|
|
July 15, 2013, in the case of the New 2013 Fixed Rate Notes.
|
|
|
|
July 15, 2011, in the case of the New Floating Rate Notes.
|
|
Interest Rate
|
|
The New 2016 Fixed Rate Notes will bear interest at an annual
rate of 10.750%. Interest on the New 2016 Fixed Rate Notes is
payable on January 15 and July 15 of each year,
commencing .
Interest on the New 2016 Fixed Rate Notes will begin to accrue
on ,
the date on which we made the most recent interest payment on
the Old 2016 Fixed Rate Notes.
|
|
|
|
The New 2013 Fixed Rate Notes will bear interest at an annual
rate of 10.125%. Interest on the New 2013 Fixed Rate Notes is
payable on January 15 and July 15 of each year,
commencing .
Interest on the New 2013 Fixed Rate Notes will begin to accrue
on ,
the date on which we made the most recent interest payment on
the Old 2013 Fixed Rate Notes.
|
|
|
|
The New Floating Rate Notes will bear interest at an annual
rate, reset quarterly, equal to three-month LIBOR plus 4.250%.
Interest on the New Floating Rate Notes is payable on
January 15, April 15, July 15 and October 15 of each
year,
commencing .
Interest on the New Floating Rate Notes will begin to accrue
on ,
the date on which we made the most recent interest payment on
the Old Floating Rate Notes.
|
|
|
|
See Description of the New Notes Principal,
Maturity and Interest for additional information.
|
|
Optional Redemption
|
|
The New 2016 Fixed Rate Notes will be redeemable at the
Companys option, in whole at any time or in part from time
to time on or after July 15, 2011, at the redemption prices
set forth in this prospectus, together with accrued and unpaid
interest, if any, to the date of redemption. In addition, at any
time prior to July 15, 2011, the Company may redeem all or
a portion of the New 2016 Fixed Rate Notes at a price equal to
100% of the principal amount thereof plus a make-
whole premium set forth in this prospectus, together with
accrued and unpaid interest.
|
|
|
|
The New 2013 Fixed Rate Notes will be redeemable at the
Companys option, in whole at any time or in part from time
to time, at a price equal to 100% of the principal amount
thereof plus a make-
|
7
|
|
|
|
|
whole premium set forth in this prospectus, together with
accrued and unpaid interest.
|
|
|
|
The Company may also, at its option at any time or from time to
time on or prior to July 15, 2009, use the proceeds of
certain equity offerings to redeem up to 35% of each series of
Notes at the prices set forth in this prospectus. Any Old Notes
of any series that remain outstanding after the completion of
the exchange offers, together with the New Notes of such series
issued in the exchange offers, will be treated as a single class
of securities under the Indenture.
|
|
|
|
In addition, in the event of certain changes in applicable
withholding taxes, the Company may, at its option, redeem the
New Notes of each series in whole, but not in part, at the
prices described in this prospectus.
|
|
|
|
The New Floating Rate Notes are not redeemable at the
Companys option, except as described in the two preceding
paragraphs.
|
|
|
|
See Description of the New Notes Optional
Redemption for additional information.
|
|
Offer to Purchase Upon a Change of Control
|
|
Upon a Change of Control (as defined under Description of
the New Notes Certain Definitions), the
Company will be required to make an offer to purchase all or a
portion of each holders New Notes at a purchase price in
cash equal to 101% of the principal amount thereof, together
with accrued and unpaid interest, if any, to the date of
purchase. See Description of the New Notes
Change of Control and Risk Factors Risks
Relating to the New Notes The Company may be unable
to purchase the Notes upon a Change of Control.
|
|
Certain Covenants
|
|
The indenture governing the New Notes contains certain
limitations on the ability of NNC and its subsidiaries (other
than Nortel Government Solutions Holding Corporation, or NGSH,
Nortel LearnIT and their respective subsidiaries) to:
|
|
|
|
incur or guarantee indebtedness;
|
|
|
|
grant liens;
|
|
|
|
pay dividends on or repurchase certain capital stock
of NNC and the Company; and
|
|
|
|
enter into certain mergers, amalgamations or
consolidations.
|
|
|
|
These covenants are subject to a number of important exceptions
and limitations and certain of these covenants will either be
inapplicable or more limited at any time that the New Notes have
an investment grade rating. See Description of the New
Notes Certain Covenants that Will Cease to Apply
During Suspension Period and Description of the New
Notes Certain Covenants Applicable at All
Times.
|
|
Ranking
|
|
The New Notes will be senior unsecured obligations of the
Company and will rank
pari passu
with all other senior
obligations of the Company, including the Old Notes, and
effectively junior to all
|
8
|
|
|
|
|
secured obligations of the Company to the extent of the value of
the property securing such obligations. The New Notes will be
effectively subordinated to all liabilities of the subsidiaries
of NNC that are not Guarantors (other than the Company) to the
extent of the value of such subsidiaries.
|
|
Guarantees
|
|
The New Notes will at all times be guaranteed by NNC and will
also initially be guaranteed by NNI. If, for any reason, the
Company does not make any required payment in respect of any
guaranteed New Notes when due, whether on the normal due date,
on acceleration, redemption or otherwise, the Guarantors with
respect to the guarantees that are then in effect will cause the
payment to be made to or to the order of the Trustee. Each
Guarantee will be the direct, unconditional, unsecured and
unsubordinated obligation of the respective Guarantor and will
rank equally and ratably with other senior unsecured obligations
of the respective Guarantor, including the guarantees of the Old
Notes, except to the extent prescribed by law.
|
|
|
|
The guarantee of NNI will be released under certain
circumstances set forth under Description of the New
Notes Guarantees; Release of Guarantees.
|
|
Absence of a Public Market for the New Notes;
Transfer
Restrictions
|
|
The New Notes are a new issue of securities and there is
currently no established market for the New Notes. We do not
intend to apply for a listing of the New Notes on any securities
exchange or automated dealer quotation system.
|
|
|
|
Any New Notes issued in the exchange offers will be distributed
in Canada on a private placement basis. The New Notes have not
been and will not be qualified for sale under the securities
laws of any province or territory in Canada and any resale of
the New Notes in Canada must be made in accordance with the
transfer restrictions described under Transfer
Restrictions in Canada and applicable securities laws of a
province or territory in Canada.
|
Risk
Factors
Investing in the New Notes involves substantial risks. You
should carefully consider all the information in this prospectus
prior to investing in the New Notes. In particular, we urge you
to consider carefully the factors set forth under Risk
Factors beginning on page 17 of this prospectus and
in the Risk Factors sections of the 2006 Annual
Report and the 2007 Second Quarter Report, which are
incorporated by reference herein.
9
Corporate
Structure of Company and Guarantors
The following chart illustrates the simplified vertical
corporate structure of the Company and the Guarantors. For
information about the indebtedness of NNC and its subsidiaries,
see Capitalization of NNC and Description of
Other Indebtedness of NNC.
|
|
(1)
|
The NNI guarantee will be released under certain circumstances,
see Description of the New Notes Guarantees;
Release of Guarantees.
|
10
Selected
Historical Consolidated Financial Information of NNC
The following table sets forth summary selected historical
consolidated financial data for NNC as of June 30, 2007 and
December 31, 2006, for the six months ended June 30,
2007 and 2006 and for the three years ended December 31,
2006, 2005 and 2004. This data has been derived from, and should
be read in conjunction with, NNCs unaudited condensed
consolidated interim financial statements and NNCs audited
consolidated financial statements, respectively, and the
accompanying related notes, all of which are incorporated by
reference herein. The financial results for the six-month
periods are not necessarily indicative of financial results for
the full year. We believe that the unaudited condensed
consolidated financial statements include all adjustments
necessary for a fair presentation of the results for the periods
presented.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
2006
|
|
|
2005(1)
|
|
|
2004(1)
|
|
|
|
(Millions of U.S. dollars, except gross margin)
|
|
|
Revenues
|
|
$
|
5,045
|
|
|
$
|
5,170
|
|
|
$
|
11,418
|
|
|
$
|
10,509
|
|
|
$
|
9,478
|
|
Gross profit
|
|
|
2,054
|
|
|
|
1,993
|
|
|
|
4,439
|
|
|
|
4,278
|
|
|
|
3,922
|
|
Gross margin
|
|
|
40.7
|
%
|
|
|
38.5
|
%
|
|
|
38.9
|
%
|
|
|
40.7
|
%
|
|
|
41.4
|
%
|
Selling, general and
administrative expense
|
|
|
1,199
|
|
|
|
1,224
|
|
|
|
2,503
|
|
|
|
2,429
|
|
|
|
2,146
|
|
Research and development expense
|
|
|
832
|
|
|
|
977
|
|
|
|
1,939
|
|
|
|
1,874
|
|
|
|
1,975
|
|
Amortization of intangibles
|
|
|
25
|
|
|
|
11
|
|
|
|
26
|
|
|
|
17
|
|
|
|
9
|
|
In-process research and
development expense
|
|
|
|
|
|
|
16
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
Special charges
|
|
|
116
|
|
|
|
54
|
|
|
|
105
|
|
|
|
169
|
|
|
|
181
|
|
Loss (gain) on sale of business
and assets(2)
|
|
|
(11
|
)
|
|
|
(27
|
)
|
|
|
(206
|
)
|
|
|
47
|
|
|
|
(91
|
)
|
Shareholder litigation settlement
expense (recovery)
|
|
|
(54
|
)
|
|
|
(491
|
)
|
|
|
(219
|
)
|
|
|
2,474
|
|
|
|
|
|
Regulatory investigation expense
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating earnings (loss)
|
|
|
(88
|
)
|
|
|
229
|
|
|
|
269
|
|
|
|
(2,732
|
)
|
|
|
(298
|
)
|
Other income net
|
|
|
198
|
|
|
|
120
|
|
|
|
212
|
|
|
|
295
|
|
|
|
217
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
(176
|
)
|
|
|
(103
|
)
|
|
|
(272
|
)
|
|
|
(209
|
)
|
|
|
(192
|
)
|
Other
|
|
|
(18
|
)
|
|
|
(35
|
)
|
|
|
(68
|
)
|
|
|
(10
|
)
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) from continuing
operations before income taxes, minority interests and equity in
net earnings (loss) of associated companies
|
|
|
(84
|
)
|
|
|
211
|
|
|
|
141
|
|
|
|
(2,656
|
)
|
|
|
(283
|
)
|
Income tax benefit (expense)
|
|
|
(24
|
)
|
|
|
(54
|
)
|
|
|
(60
|
)
|
|
|
81
|
|
|
|
20
|
|
Minority interests net
of tax
|
|
|
(33
|
)
|
|
|
10
|
|
|
|
(59
|
)
|
|
|
(39
|
)
|
|
|
(33
|
)
|
Equity in net earnings (loss) of
associated companies net of tax
|
|
|
1
|
|
|
|
(5
|
)
|
|
|
(3
|
)
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) from
continuing operations
|
|
|
(140
|
)
|
|
|
162
|
|
|
|
19
|
|
|
|
(2,611
|
)
|
|
|
(296
|
)
|
Net earnings (loss) from
discontinued operations net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
|
49
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss) before
cumulative effect of accounting change
|
|
|
(140
|
)
|
|
|
162
|
|
|
|
19
|
|
|
|
(2,610
|
)
|
|
|
(247
|
)
|
Cumulative effect of accounting
change net of tax
|
|
|
|
|
|
|
9
|
|
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings (loss)
|
|
$
|
(140
|
)
|
|
$
|
171
|
|
|
$
|
28
|
|
|
$
|
(2,610
|
)
|
|
$
|
(247
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
NNCs consolidated financial results include the operating
results of Nortel Government Solutions Incorporated, or NGS,
from June 3, 2005, the date we acquired NGS.
|
11
|
|
|
(2)
|
|
Represents net gains or losses classified in NNCs
consolidated statement of operations as gains or losses on the
sale of businesses and assets and includes related costs.
Consists primarily of: for the six months ended June 30,
2007, a gain of $12 million related to the sale of
LG-Nortels wireless business in the second quarter of
2007; for the six months ended June 30, 2006, charges
related to the divestiture of our manufacturing operations to
Flextronics, a gain of $23 million related to the sale of
our blade server business and a gain of $18 million related
to the sale of our Brampton facility; for 2006, gains of
$166 million on the sale of certain assets and liabilities
related to our Universal Mobile Telecommunications Systems
access business, $40 million related to the sale of real
estate assets in Canada and the Europe, Middle East and Africa
region and $23 million on the sale of certain assets
related to our blade server business; for 2005, charges related
to the divestiture of our manufacturing operations to
Flextronics; and for 2004, a gain of $78 million related to
the sale of certain assets in the Caribbean and Latin America
region and a gain of approximately $30 million related to
the sale of our directory operator service business to VoltDelta
Resources LLC.
|
Balance
Sheet Data
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
As of December 31,
|
|
|
2007
|
|
2006
|
|
|
(Millions of U.S. dollars)
|
|
Total assets
|
|
$
|
18,949
|
|
|
$
|
18,979
|
|
Unrestricted cash and cash
equivalents
|
|
|
4,473
|
(3)
|
|
|
3,492
|
|
Accounts receivable net
|
|
|
2,393
|
|
|
|
2,785
|
|
Inventories net
|
|
|
2,119
|
|
|
|
1,989
|
|
Trade and other accounts payable
|
|
|
1,025
|
|
|
|
1,125
|
|
Plant and equipment net
|
|
|
1,511
|
|
|
|
1,530
|
|
Total debt(4)
|
|
|
5,635
|
(3)
|
|
|
4,500
|
|
Total shareholders equity
|
|
|
2,806
|
(5)
|
|
|
1,121
|
|
|
|
|
(3)
|
|
Does not reflect the use of the net proceeds of the issuance of
the 2012 Convertible Notes and 2014 Convertibles Notes in March
2007 to redeem on September 28, 2007 at par value
$1,125 million of the $1.8 billion outstanding
principal amount of the 2008 Convertible Notes.
|
|
(4)
|
|
Total debt includes long-term debt, long-term debt due within
one year, loan payable and notes payable. Notes payable as of
June 30, 2007 was $33 million and as of
December 31, 2006 was $36 million.
|
|
(5)
|
|
As of March 20, 2007, the date the Global Class Action
Settlement became effective, the litigation settlement provision
related to the equity component of the Global Class Action
Settlement was reclassified to additional
paid-in-capital
within shareholders equity as the number of shares was
fixed at such date.
|
12
Other
Financial Data and Credit Statistics
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
|
June 30,
|
|
Year Ended December 31,
|
|
|
2007
|
|
2006
|
|
2006
|
|
2005
|
|
2004
|
|
|
(Millions of U.S. dollars, except ratios)
|
|
Net cash from (used in) operating
activities of continuing operations
|
|
$
|
(681
|
)
|
|
$
|
(282
|
)
|
|
$
|
237
|
|
|
$
|
(179
|
)
|
|
$
|
(185
|
)
|
Net cash from (used in) investing
activities of continuing operations
|
|
|
523
|
|
|
|
(669
|
)
|
|
|
(273
|
)
|
|
|
(426
|
)
|
|
|
(132
|
)
|
Net cash from (used in) financing
activities of continuing operations
|
|
|
1,097
|
|
|
|
(149
|
)
|
|
|
483
|
|
|
|
(60
|
)
|
|
|
(110
|
)
|
Adjusted EBITDA(6)
|
|
|
|
|
|
|
|
|
|
|
748
|
|
|
|
852
|
|
|
|
551
|
|
Capital expenditures
|
|
|
109
|
|
|
|
177
|
|
|
|
316
|
|
|
|
258
|
|
|
|
276
|
|
Cash interest paid
|
|
|
184
|
|
|
|
162
|
|
|
|
241
|
|
|
|
203
|
|
|
|
189
|
|
Ratio of earnings to fixed charges
|
|
|
|
(7)
|
|
|
2.3
|
|
|
|
1.2
|
|
|
|
|
(7)
|
|
|
|
(7)
|
Consolidated Fixed Charges(8)
|
|
|
|
|
|
|
|
|
|
|
402
|
|
|
|
256
|
|
|
|
235
|
|
Consolidated Fixed Charge Coverage
Ratio(9)
|
|
|
|
|
|
|
|
|
|
|
1.86
|
|
|
|
3.33
|
|
|
|
2.34
|
|
Ratio of net debt to Adjusted
EBITDA(10)
|
|
|
|
|
|
|
|
|
|
|
1.35
|
|
|
|
1.11
|
|
|
|
|
|
|
|
|
(6)
|
|
We have presented Adjusted EBITDA because it is a financial
measure that is used as a factor in testing whether the Company,
the Guarantors and their subsidiaries may incur additional
funded debt under the terms of the Notes and the related
indenture (see Description of the New Notes
Certain Definitions and Certain
Covenants that will Cease to Apply During Suspension
Period). Adjusted EBITDA is derived from EBITDA, which is
defined as net earnings (loss) from continuing operations before
interest expense (excluding interest income and certain interest
expense related to the Global Class Action Settlement),
income tax expense (benefit), depreciation and amortization and
cash dividends paid by NNL on outstanding preferred shares
(excluding taxes paid in respect of such dividends, which are
included in income tax expense (benefit).
|
Adjusted EBITDA and EBITDA, as presented, may not be comparable
to similarly titled measures of other companies. Adjusted EBITDA
and EBITDA, which are non-GAAP financial measures, have
important limitations as analytical tools and you should not
consider them in isolation or as substitutes for analysis of
NNCs consolidated results as reported under
U.S. GAAP. For example, Adjusted EBITDA:
|
|
|
|
|
does not reflect NNCs consolidated cash expenditures, or
future requirements for capital expenditures, or contractual
commitments including pension and other post-retirement
obligations;
|
|
|
|
does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal
payments, on NNCs consolidated indebtedness and other
obligations;
|
|
|
|
does not reflect tax payments that represent a reduction in cash
available to NNC and its subsidiaries;
|
|
|
|
does not reflect expenses resulting from payments or
distributions in connection with certain shareholder litigation
or regulatory or law enforcement investigations;
|
|
|
|
does not necessarily reflect changes in, or cash requirements
for, NNCs consolidated working capital needs including the
timing of the receipt of cash from our customers for the sales
of our solutions or the timing of our payments of costs relating
to these sales; and
|
|
|
|
does not reflect any cash requirements for the assets being
depreciated and amortized that may have to be replaced in the
future.
|
Because of these limitations, we rely primarily on our results
under U.S. GAAP. Adjusted EBITDA and EBITDA also differ in
important respects from Management EBT discussed in the
MD&A section of our 2007 Second Quarter Report. Adjusted
EBITDA and EBITDA should not be viewed as substitute measures of
our cash flow or reliable predictors of our cash flow or our
ability to generate earnings or cash to service our indebtedness.
13
The following table reconciles Adjusted EBITDA for NNC on a
consolidated basis to EBITDA and to the most directly comparable
U.S. GAAP measure, net earnings (loss) from continuing
operations. We have presented a reconciliation to EBITDA because
it is a measure that is commonly used by investors in evaluating
high yield debt instruments and Adjusted EBITDA is derived from
EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
(Millions of U.S. dollars)
|
Net earnings (loss) from
continuing operations
|
|
$
|
19
|
|
|
$
|
(2,611
|
)
|
|
$
|
(296
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense(a)
|
|
|
318
|
|
|
|
219
|
|
|
|
202
|
|
Income tax expense (benefit)
|
|
|
60
|
|
|
|
(81
|
)
|
|
|
(20
|
)
|
Amortization and depreciation
|
|
|
290
|
|
|
|
302
|
|
|
|
341
|
|
Dividends on preferred shares(b)
|
|
|
38
|
|
|
|
26
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA
|
|
|
725
|
|
|
|
(2,145
|
)
|
|
|
249
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (income) loss of equity
investments except cash distributions(c)
|
|
|
3
|
|
|
|
(3
|
)
|
|
|
|
|
Restructuring charges(d)
|
|
|
105
|
|
|
|
169
|
|
|
|
181
|
|
(Gain) loss on sale of businesses
and assets(e)
|
|
|
(206
|
)
|
|
|
47
|
|
|
|
(91
|
)
|
Loss on BSNL contract(f)
|
|
|
13
|
|
|
|
148
|
|
|
|
160
|
|
Customer financing receivable
restructuring gains(g)
|
|
|
|
|
|
|
(10
|
)
|
|
|
(97
|
)
|
Non-cash compensation expense(h)
|
|
|
103
|
|
|
|
89
|
|
|
|
117
|
|
Restatement costs(i)
|
|
|
48
|
|
|
|
102
|
|
|
|
97
|
|
Finance transformation costs(j)
|
|
|
51
|
|
|
|
40
|
|
|
|
|
|
Shareholder litigation settlement
expense (recovery)(k)
|
|
|
(219
|
)
|
|
|
2,474
|
|
|
|
|
|
Regulatory investigation expense(l)
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange gains
|
|
|
12
|
|
|
|
(59
|
)
|
|
|
(65
|
)
|
Adjustment for asset sale(m)
|
|
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
748
|
|
|
|
852
|
|
|
$
|
551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
Excludes interest expense incurred related to the cash held in
escrow related to the Global Class Action Settlement, which
was paid over to the plaintiffs. Does not give effect to
interest income.
|
|
|
(b)
|
Represents cash dividends paid by NNL on outstanding preferred
shares (excluding taxes paid in respect of such dividends, which
are included in income tax expense (benefit) above), which are
included as part of minority interests in NNCs
consolidated financial statements. The amounts included in the
calculation of Consolidated Fixed Charges described below in
footnote 8 include these taxes.
|
|
|
(c)
|
Represents the net income or loss of joint ventures in which NNC
or a subsidiary of NNC is a party and the net income or loss of
entities that are not subsidiaries of NNC, in each case except
to the extent of cash dividends or distributions paid to NNC or
to a subsidiary of NNC by such joint venture or other entity.
|
|
|
(d)
|
Represents charges (including amounts to be settled in cash)
related to exit and disposal activities approved by the board of
directors of NNC as part of a restructuring plan. Restructuring
charges in 2007, 2006, 2005 and 2004 consist of charges relating
to four restructuring plans. During 2001 and 2004, we
implemented work plans to streamline operations through
workforce reductions and real estate optimization strategies.
During the second quarter of 2006, in an effort to increase
competitiveness by improving operating margins and overall
business performance, we announced a restructuring plan that
included workforce reductions. In the first quarter of 2007, we
outlined the 2007 Restructuring Plan. See
Summary Company Overview Business
Transformation Initiatives. For more information on these
restructuring plans, see the 2006 MD&A and the MD&A
section included in the 2007 Second Quarter Report, which are
incorporated by reference herein. We may incur restructuring
charges of this nature in the future as our business and the
telecommunications industry continue to evolve.
|
|
|
(e)
|
Represents net gains or losses classified in NNCs
consolidated statement of operations as gains or losses on the
sale of businesses and assets. See footnote 2 for more
information.
|
|
|
(f)
|
Represents losses, charges and costs attributed to the contracts
with Bharat Sanchar Nigam Limited, or BSNL. The definition of
Adjusted EBITDA excludes these losses, charges and costs
attributed to
|
14
|
|
|
|
|
BSNL contracts existing on the issue date of the Old Notes, but
not any expansion option, extension, renewal or replacement of
those contracts. For more information on the BSNL contracts, see
the MD&A section of our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005, or the 2005
Annual Report.
|
|
|
|
|
(g)
|
Represents favorable settlements of nil in 2006, nil in 2005 and
$45 million in 2004 related to the sale or restructuring of
customer financing receivables due to subsequent collections for
amounts exceeding NNCs original estimates of net recovery,
which are included in selling, general and administrative, or
SG&A, expense; and gains of $10 million in 2005 (all
of which was recorded in the first quarter of 2005) and
$52 million in 2004 (all of which was recorded in the
fourth quarter of 2004) resulting from restructured
customer financing arrangements, which are included in other
income (expense). The definition of Adjusted EBITDA excludes
these items, but if there are any similar items that occur after
March 31, 2006, they will not be excluded.
|
|
|
(h)
|
Represents non-cash compensation expense related to stock-based
compensation plans included as applicable in cost of revenues,
SG&A expense and research and development, or R&D,
expense.
|
|
|
(i)
|
Represents costs attributable to the First, Second and Third
Restatements and related internal control remedial measures. We
continue to identify, develop and implement remedial measures
and compensating procedures to address the material weakness in
our internal control over financial reporting. The definition of
Adjusted EBITDA excludes only those costs attributable to
restatements disclosed in, incorporated by reference in or
contemplated by the offering memorandum related to the original
offering of the Old Notes, or the 2006 Offering Memorandum, or
any related internal control remedial measures and, for example,
does not represent any costs attributable to our further
restatement in 2007. For more information about our
restatements, see Summary Company
Overview Restatements; Material Weakness and Related
Matters and the Controls and Procedures
sections in the 2006 Annual Report and 2007 Second Quarter
Report.
|
|
|
(j)
|
Represents costs attributable to our ongoing finance
transformation project, which includes, among other things, the
implementation of a new information technology platform (SAP) to
provide an integrated global financial system. For more
information, see the Controls and Procedures section
in the 2006 Annual Report and 2007 Second Quarter Report.
|
|
|
(k)
|
Represents costs attributable to our Global Class Action
Settlement. See Company Overview
Global Class Action Settlement for more information.
As a result of the Global Class Action Settlement, we
established a litigation settlement provision and recorded a
charge to our full-year 2005 financial results of
$2,474 million (net of insurance proceeds of
$229 million, which were placed in escrow in April 2006).
Of this amount, $575 million related to the cash portion,
which we placed in escrow on June 1, 2006, along with
$5 million in accrued interest, and $1,899 million
related to the equity component. We adjusted the equity
component in each quarter since February 2006 to reflect the
fair value of the equity component. The final adjustment to the
fair value of the equity component occurred on March 20,
2007, the date the settlement became effective. As of
March 20, 2007, the fair value of the equity component had
decreased to $1,626 million, including a recovery of
$54 million in the first quarter of 2007. We may incur
additional costs in the future in connection with the settlement
of, or satisfaction of any judgment resulting from, any
shareholder litigation. The definition of Adjusted EBITDA
excludes costs relating to these matters as disclosed or
incorporated by reference in the 2006 Offering Memorandum.
|
|
|
(l)
|
Represents costs attributable to our May 2007 settlement
agreement with the staff of the OSC and charges taken in the
second quarter of 2007 as a result of our discussions with the
enforcement staff of the SEC for purposes of resolving the
investigation into prior accounting practices that led to
certain restatements of our and NNLs financial results.
See Company Overview Restatements;
Material Weakness and Related Matters for more
information. We may incur additional costs in the future in
connection with the settlement of, or satisfaction of any
judgment resulting from, any regulatory or law enforcement
investigation. The definition of Adjusted EBITDA excludes costs
relating to these matters as disclosed or incorporated by
reference in the 2006 Offering Memorandum.
|
|
|
(m)
|
Represents an adjustment for the sale of substantially all of
the assets and liabilities related to our UMTS access business
in 2006. In addition to the adjustments included in the
definition of Adjusted EBITDA as described above,
Adjusted EBITDA as used in the Consolidated Fixed Charge
Coverage
|
15
Ratio is calculated after giving pro forma effect to certain
asset sales and asset acquisitions by adjusting for our good
faith estimate of the Adjusted EBITDA (including pro forma
expense and cost reductions) attributable to the asset sold or
acquired. Fore more information, see Description of the
New Notes Certain Definitions.
|
|
|
(7)
|
|
The earnings of NNC calculated in accordance with U.S. GAAP were
inadequate to cover fixed charges for the six months ended
June 30, 2007 by $117 million and for the years ended
December 31, 2005 and 2004 by $2,695 million and
$316 million, respectively.
|
|
(8)
|
|
We have presented Consolidated Fixed Charges because it is a
financial measure that is used as a factor in testing whether
the Company, the Guarantors and their subsidiaries may incur
additional funded debt under the terms of the Notes and the
related indenture (see Description of the New
Notes Certain Definitions and
Description of the New Notes Certain Covenants
that will Cease to Apply During Suspension Period).
|
Consolidated Fixed Charges, as presented, may not be comparable
to similarly titled measures of other companies. Consolidated
Fixed Charges is a non-GAAP financial measure, and you should
not consider it in isolation or as substitutes for analysis of
NNCs consolidated results as reported under
U.S. GAAP. Consolidated Fixed Charges also differs in
important respects from fixed charges as calculated for purposes
of the ratio of earnings to fixed charges under SEC rules, which
is presented under Ratio of Earnings to Fixed Charges of
NNC.
The following table sets out the composition of Consolidated
Fixed Charges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
December 31,
|
|
|
2006
|
|
2005
|
|
2004
|
|
|
(Millions of U.S. dollars)
|
|
Interest expense(a)
|
|
$
|
318
|
|
|
$
|
219
|
|
|
$
|
202
|
|
Dividends on preferred shares(b)
|
|
|
53
|
|
|
|
37
|
|
|
|
33
|
|
Adjustments for changes in
indebtedness(c)
|
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Fixed
Charges
|
|
$
|
402
|
|
|
$
|
256
|
|
|
$
|
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(a)
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Excludes interest expense incurred related to the cash held in
escrow related to the Global Class Action Settlement, which
was paid over to the plaintiffs. Does not give effect to
interest income.
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(b)
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Represents cash dividends paid by NNL on outstanding preferred
shares, which are reflected in NNCs consolidated financial
statements as minority interests (including taxes paid in
respect of such dividends, which are included in the income tax
expense (benefit) line).
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(c)
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Represents adjustments for the issuance in July 2006 of the Old
Notes and the use of the proceeds from the issuance of the Old
Notes to prepay the $1,300 million credit facility NNI
entered into in February 2006. Consolidated Fixed Charges as
used in the Consolidated Fixed Charge Coverage Ratio is
calculated after giving pro forma effect to the incurrence or
repayment of certain indebtedness as if such incurrence or
repayment had occurred on the first day of the applicable
period. For more information, see Description of the New
Notes Certain Definitions.
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(9)
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Represents the ratio of Adjusted EBITDA to Consolidated Fixed
Charges. See footnote 6 for a description of Adjusted EBITDA and
footnote 8 for a description of Consolidated Fixed Charges.
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(10)
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We have presented the ratio of net debt to Adjusted EBITDA
because we believe it provides information that is useful to
understand our past financial performance and prospects for the
future and because it is a measure that is commonly used by
investors in evaluating high yield debt instruments. Net debt is
defined as total debt less unrestricted cash and cash
equivalents and, as presented, may not be comparable to
similarly titled measures of other companies. Net debt as of
June 30, 2007, December 31, 2006 and December 31,
2005 comprises total debt of $5,635 million,
$4,500 million and $3,896 million, respectively, less
unrestricted cash and cash equivalents of $4,473 million,
$3,492 million and $2,951 million, respectively. Total
debt, net debt and unrestricted cash and cash equivalents as of
June 30, 2007 do not reflect the use of the proceeds from
the sale of the 2012 Convertible Notes and 2014 Convertibles
Notes in March 2007 to redeem on September 28, 2007 at par
value $1,125 million of the $1.8 billion outstanding
principal amount of 2008 Convertible Notes. See footnote 4 for a
description of total debt and footnote 6 for a description of
Adjusted EBITDA.
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16
Investing in the New Notes involves substantial risks.
A description of the risks relating to our restatements and
related matters, risks relating to the Company, including risks
relating to our business, and risks relating to our liquidity,
financing arrangements and capital is included elsewhere herein
and in the Risk Factors sections of the 2006 Annual
Report and the 2007 Second Quarter Report, which are
incorporated by reference herein. You should carefully consider
these risks and the risks described below along with other
information contained or incorporated by reference in this
prospectus before making an investment decision with regard to
the New Notes. The risks and uncertainties described below and
in the documents incorporated by reference herein are not the
only ones relevant to us or to an investment in the New Notes.
Additional risks and uncertainties not currently known to us or
that we currently believe are immaterial may also impair our
business, results of operations, financial condition and
liquidity.
The above categories and the order in which we have listed our
risk factors is not intended to limit your consideration of the
possible effects of these risks on our business or to categorize
or rank our risks by likelihood of occurrence or severity to our
business. Any adverse effects related to the risks discussed
may, and likely would, have an adverse impact on many aspects of
our business.
Risks
Relating to the New Notes
The
Issuers may not be able to generate sufficient cash flow to meet
their obligations, including payments on the New Notes and the
Guarantees. NNC and the Company depend on their subsidiaries for
a substantial portion of their cash flow.
NNCs principal asset is the common shares of the Company,
and the capital stock of the Companys subsidiaries
represents a significant portion of the Companys assets.
Consequently NNC is dependent, and the Company is partially
dependent, on distributions from their subsidiaries to service
their debt, including any payments on the Guarantees. The
Issuers subsidiaries are separate and distinct legal
entities and any subsidiary that is not a Guarantor will have no
obligation, contingent or otherwise, to pay amounts due under
the New Notes or the Guarantees or to make any funds available
to pay those amounts, whether by dividend, distribution, loan or
other payment. In addition, the Issuers subsidiaries
ability to pay dividends and make other distributions to the
Issuers may also be subject to their having net income and the
requisite amounts of
paid-in-capital,
and other restrictions under applicable laws, including with
respect to exchange and capital controls, as well as the absence
of any financial or other agreement that may restrict their
ability to provide funds to the Issuers. Furthermore, the
ability of the Issuers to fund their obligations, including
payments on the New Notes and the Guarantees, depends on their
and their subsidiaries ability to generate sufficient cash
flows from operations, which is subject in part to general
economic, financial, business, competitive, legislative,
regulatory and other factors, many of which may be beyond their
control. If the Issuers and their subsidiaries are unable to
maintain a sufficient level of cash flows from operations, and
other sources of liquidity are not available to them, or the
Issuers subsidiaries are otherwise unable to pay dividends
to the Issuers or provide and make payments on loans or other
forms of financing to the Issuers, the Issuers may not be able
to make payments of principal, interest or other payments on the
New Notes and the Guarantees. In these circumstances, the
Issuers also may not be able to pay the principal, interest or
other amounts due on their other obligations, including
outstanding public debt and corporate expenses.
If any Issuer is unable to service its debt or pay its other
obligations, it will be forced to take actions such as reducing
or delaying capital expenditures, selling assets, restructuring
or refinancing its debt, or seeking additional equity capital.
It may be unable to effect any of these actions on satisfactory
terms, or at all. In addition, if any Issuer cannot make
scheduled payments on any of its debt obligations, it will be in
default under that obligation and, as a result, among other
things, (i) the holders of that obligation could declare
all outstanding principal and interest to be due and payable,
which could result in additional debt becoming due and
outstanding as a result of cross-default or cross-acceleration
provisions; and (ii) it could be forced into bankruptcy or
liquidation, which could result in you losing your entire
investment in the New Notes
and/or
the
benefit of the applicable Guarantee. In addition, if either NNC
or the Company cannot make
17
scheduled payments on its material debt, Export Development
Canada, or EDC, could terminate its commitments under the
$750 million support facility, or the EDC Support Facility,
and require cash collateralization of any outstanding support
under the EDC Support Facility.
Material
adverse legal judgments, fines, penalties or settlements could
have a material adverse effect on our business, results of
operations, financial condition and liquidity, which could be
very significant and could prevent the Issuers from fulfilling,
among other things, their obligations under the New Notes and
the Guarantees.
We are subject to significant pending civil litigation and
regulatory and criminal investigations, the outcome and timing
of which are uncertain and difficult to predict and could
require us to pay substantial judgments, settlements, fines or
other penalties. We believe our cash will be sufficient to fund
the changes to our business model in accordance with our
strategic plan (see Executive Overview Our
Business and Strategy in the MD&A section of the 2007
Second Quarter Report), fund our investments and meet our
customer commitments for at least the twelve month period
commencing July 1, 2007, including the cash expenditures
outlined under Liquidity and Capital Resources
Future Uses of Liquidity in the MD&A section of the
2007 Second Quarter Report. In making this estimate, we have not
assumed the need to make any payments in respect of fines, other
penalties, judgments or settlements in connection with our
pending civil litigation (other than those encompassed by the
Global Class Action Settlement and for anticipated
professional fees and expenses) or regulatory or criminal
investigations related to the restatements (other than those
discussed above under Summary Company
Overview Restatements; Material Weakness and Related
Matters), which could have a material adverse effect on
our business, results of operations, financial condition and
liquidity. Any such payments (in addition to those mentioned
above) could materially and adversely affect our cash position,
our available cash and cash flow from operations may not be
sufficient to pay them, and additional sources of funding may
not be available to us on commercially reasonable terms or at
all.
The covenants in the indenture do not restrict us from making
any payments to satisfy judgments, settlements, penalties, fines
or other penalties in connection with the existing civil
litigation or regulatory and criminal investigations or any
litigation or investigation brought against us in the future.
These payments could materially and adversely affect our cash
position and prevent the Issuers from being able to make
payments of principal, interest or other payments on the New
Notes and the Guarantees. These payments could also adversely
affect the credit ratings assigned to the New Notes and the
Guarantees by the nationally recognized rating agencies. In
these circumstances, the Issuers also may not be able to satisfy
their obligations under other indebtedness, which could result
in an event of default under the New Notes and the Guarantees as
a result of the cross-acceleration provisions contained in the
indenture.
In addition, these circumstances could have a material adverse
effect on our business, results of operations, financial
condition and liquidity, including by:
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requiring us to dedicate a substantial portion of our cash
and/or
cash
flow from operations to these payments, thereby reducing the
availability of our cash
and/or
cash
flow to fund working capital, capital expenditures, R&D
efforts and other general corporate purposes, including debt
reduction;
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increasing the difficulty
and/or
cost
to us of refinancing our indebtedness;
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increasing our vulnerability to general adverse economic and
industry conditions;
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limiting our flexibility in planning for, or reacting to,
changes in our businesses and the industries in which we operate;
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making it more difficult or more costly for us to make
acquisitions and investments;
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limiting our ability to obtain,
and/or
increasing the cost of obtaining, directors and
officers liability insurance
and/or
other
types of insurance; and
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restricting our ability to introduce new technologies and
products
and/or
exploit business opportunities.
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18
Our
high level of debt could materially and adversely affect our
business, results of operations, financial condition and
liquidity and prevent the Issuers from fulfilling, among other
things, their obligations under the New Notes and the
Guarantees.
In order to finance our business, we have incurred significant
levels of debt. Following the exchange offers, we will continue
to have a substantial amount of indebtedness and other
obligations. As of June 30, 2007, we had approximately
$5.6 billion of debt. See Capitalization of NNC
for additional information.
Our high degree of leverage could have important consequences to
you. For example, a high level of debt, arduous or restrictive
terms and conditions related to accessing certain sources of
funding, or any significant reduction in, or access to, the EDC
Support Facility, could place us at a competitive disadvantage
compared to competitors that have less debt and could materially
and adversely affect our ability to: fund the operations of our
business; borrow money in the future or access other sources of
funding; refinance our existing debt, should we decide to do so;
pay interest, or judgments, settlements, fines or other
penalties; and maintain our flexibility in planning for or
reacting to economic downturns, adverse industry conditions and
adverse developments in our business, and our ability to
withstand such events.
Despite their current debt level, the Issuers may still be able
to incur substantially more debt under the covenants in the
indenture, which could further exacerbate these risks.
If any Issuer incurs any additional debt that ranks equally with
the New Notes and the Guarantees, the holders of that debt will
be entitled to share ratably with you in any proceeds
distributed in connection with any insolvency, liquidation,
reorganization, dissolution or other
winding-up
of that Issuer, as will the holders of the Old Notes. This may
have the effect of reducing the amount of proceeds paid to you.
The
New Notes and Guarantees will be effectively subordinated to all
indebtedness and other obligations of NNCs direct and
indirect non-guarantor subsidiaries (other than the Company),
which may include obligations under the EDC Support Facility.
None of NNCs direct and indirect subsidiaries other than
NNI will guarantee the New Notes.
The New Notes will be guaranteed by NNC and also initially
guaranteed by NNI but not by any of their other subsidiaries.
The Guarantee of NNI will be released under certain
circumstances set forth under Description of the New
Notes Guarantees; Release of Guarantees.
NNCs direct and indirect non-guarantor subsidiaries (other
than the Company) will have no obligation to make payments in
respect of the obligations under the New Notes or the
Guarantees. The terms of the indenture permit NNCs
non-guarantor subsidiaries to incur or guarantee any additional
indebtedness that could be incurred by any Issuer without
concurrently providing a guarantee of the New Notes. In
addition, the indenture does not contain any restrictions on the
amount of indebtedness that NGSH, a direct subsidiary of NNI,
and its subsidiaries may incur.
In the event of a bankruptcy, liquidation or reorganization of
any direct or indirect non-guarantor subsidiary of NNC, all of
the creditors of that subsidiary (including trade creditors and
creditors holding secured or unsecured indebtedness or
guarantees issued by that subsidiary) and third parties having
the benefit of liens (including statutory liens) against that
subsidiarys assets will generally be entitled to payment
of their claims from the assets of such non-guarantor subsidiary
before any of those assets are made available for distribution
to any Issuer that is a shareholder of such subsidiary. As a
result, the New Notes and the Guarantees are effectively junior
to the obligations of non-guarantor subsidiaries.
Furthermore, the terms of the EDC Support Facility may require
NNCs direct and indirect non-guarantor subsidiaries to
guarantee the Companys obligations under the EDC Support
Facility. If this occurs, EDC will be entitled to payment of its
claims under the EDC Support Facility from the assets of such
subsidiary before any assets are made available for distribution
to any Issuer that is a shareholder of any such subsidiary. As a
result, the New Notes and the Guarantees would be effectively
junior to the EDC Support Facility to the extent of the value of
such subsidiarys assets.
For the six months ended June 30, 2007 and the year ended
December 31, 2006, the Issuers, on an unconsolidated basis,
accounted for 64% and 58%, respectively, of our total revenues
and 66% and 56%,
19
respectively, of our total assets (in each case on an
unconsolidated basis, not taking into account eliminations). As
of June 30, 2007, we had $5.6 billion in total debt
(including the current portion) of which $365 million was
the debt of NNCs direct and indirect non-guarantor
subsidiaries (which includes $150 million of senior notes
issued by Nortel Networks Capital Corporation and guaranteed by
NNC). The revenue and asset compositions described above may not
be representative of the revenue and asset compositions in
future periods. For more information, see the supplemental
condensed consolidating financial information included in the
2006 Financial Statements and the supplemental unaudited
condensed consolidating quarterly financial information included
in NNCs and NNLs Current Reports on
Form 8-K
dated September 10, 2007, which are incorporated by
reference herein.
The
New Notes and Guarantees will be effectively subordinated to any
secured indebtedness or other secured obligations of the Issuers
and NNCs direct and indirect non-guarantor subsidiaries,
which may include obligations under the EDC Support
Facility.
The terms of the indenture permit the Issuers and NNCs
direct and indirect non-guarantor subsidiaries to incur
significant amounts of secured debt without equally and ratably
securing the New Notes. If the Issuers or NNCs direct and
indirect non-guarantor subsidiaries were unable to repay such
secured indebtedness, the holders of such debt could proceed
against the collateral securing that debt and those assets would
not be available to holders of the New Notes and Guarantees.
Because the New Notes and Guarantees are unsecured, the New
Notes and Guarantees will be effectively subordinated to any
secured debt incurred by the Issuers and NNCs direct and
indirect non-guarantor subsidiaries to the extent of the value
of the collateral pledged to secure any secured debt.
The indenture restricts NNC, the Company and certain of their
other direct and indirect subsidiaries from creating liens on
their assets to secure funded debt in excess of specified
amounts unless these liens also equally and ratably secure the
New Notes. Because funded debt is defined in the indenture to
exclude obligations in respect of bid and performance related
bonds and receivables securitizations, the indenture does not
restrict NNC, the Company and their subsidiaries from pledging
their assets to secure the Companys obligations under the
EDC Support Facility. The terms of the EDC Support Facility may
require the Company and its subsidiaries to equally and ratably
secure the Companys obligations under the EDC Support
Facility if the Company or its subsidiaries incur secured funded
debt in amounts that are not sufficient to require that the
Notes also be secured under the terms of the indenture.
The
covenants in the indenture contain significant exceptions and
carve-outs which may provide less protection to
holders of New Notes than indentures governing securities of
comparably rated companies, and many of these covenants will
cease to be in effect should the ratings on the New Notes
increase to investment grade.
The covenants in the indenture governing the Notes and
Guarantees contain significant exceptions and
carve-outs in order to provide significant operating
flexibility for NNC and its subsidiaries. These exceptions may
provide less protection to holders of New Notes than indentures
governing securities of non-investment grade rated companies. In
particular, you should be aware that the indenture governing the
Notes and the Guarantees:
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does not restrict the ability of NNC or its subsidiaries to lend
cash to or make investments in non-guarantor subsidiaries, joint
ventures, customers or other third parties other than in
connection with a transfer of all or substantially all of the
assets of NNC, the Company or NNI;
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permits NNC or its subsidiaries to incur substantial amounts of
additional indebtedness, including indebtedness to finance the
acquisition of additional assets;
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permits any indebtedness allowed under the indenture to be
incurred by any of NNCs non-guarantor subsidiaries without
requiring such subsidiaries to guarantee the New Notes;
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permits payments to current or former NNC shareholders in the
form of settlements (and any related fines or penalties)
relating to certain regulatory and criminal investigations and
certain civil litigation
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proceedings in the U.S. and Canada, and such payments will
not otherwise reduce the amount NNC is permitted under the
indenture to pay as dividends or for the repurchase of its
shares;
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allows NNC to calculate Adjusted EBITDA (which is used, among
other things, to determine the amount of indebtedness that NNC
and its subsidiaries are permitted to incur under the terms of
the indenture) in the manner presented in
Summary Selected Historical Consolidated
Financial Information of NNC of this prospectus, which,
among other things, (i) excludes the payments to
shareholders and regulatory agencies referred to above and
(ii) does not necessarily reflect changes in, or cash
requirements for, NNCs consolidated working capital needs
including the timing of the receipt of cash from our customers
for the sales of our solutions or the timing of our payments of
costs relating to these sales (Adjusted EBITDA should therefore
not be viewed as a substitute measure of our cash flow or a
reliable predictor of our cash flow or our ability to generate
earnings or cash to service our indebtedness);
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does not restrict the ability of NNCs subsidiaries to
incur contractual restrictions on their ability to make
transfers and pay dividends to NNC and its other subsidiaries;
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does not restrict the activities of NGSH or any of its
subsidiaries and Nortel LearnIT;
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does not restrict the ability of NNC or its subsidiaries to
engage in transactions with affiliates, including NGSH and its
subsidiaries; and
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contains additional exceptions and carve-outs that you should
consider carefully before acquiring the New Notes.
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In addition, the events of default contained in the indenture
relating to bankruptcy, judgments and cross-acceleration of
other material indebtedness will be limited to the Issuers and
will not apply to any other subsidiary of NNC.
During the time, if any, that the New Notes are rated investment
grade by both Standard & Poors, or S&P, and
Moodys Investors Service, or Moodys, and certain
other conditions are met (a time we refer to as a
suspension period), most of the restrictive
covenants (including those restricting the incurrence of
indebtedness and the payment of dividends and stock repurchases)
contained in the indenture governing the Notes will cease to be
in effect. In addition, the Negative Pledge covenant
will not restrict the creation of liens on the assets of any of
NNCs subsidiaries (other than the Company, NNI and Nortel
Networks Capital Corporation, or NNCC) during a suspension
period, but instead will only restrict the creation of liens on
the assets owned by the Issuers and NNCC. Any action taken
during a suspension period that would have been restricted under
the covenants in the indenture if they had been taken when the
New Notes were not rated investment grade will continue to be
permitted even if the New Notes cease to be rated investment
grade. NNIs Guarantee will also be released during a
suspension period.
See Description of the New Notes Certain
Covenants that will Cease to Apply During Suspension
Period and Certain Covenants Applicable
at All Times for additional information.
Should
the ratings on the New Notes increase to investment grade,
NNIs Guarantee will be released.
NNIs Guarantee will be released during a suspension
period. Therefore, during a suspension period, there will be no
U.S. obligor with respect to the New Notes. If NNIs
Guarantee is released, you will not be entitled to receive any
payments from NNI. See Description of the New
Notes Guarantees; Release of Guarantees for
additional information.
Indebtedness
under the New Notes will be subject to floating interest rates,
which will result in Nortels interest expense increasing
if interest rates rise.
Indebtedness under the New Floating Rate Notes will be subject
to floating interest rates, as are the Old Floating Rate Notes.
In addition, we have entered into interest rate swaps to convert
the fixed interest rate exposure under the Old Fixed Rate Notes
to a floating rate, which will also apply to the New Fixed Rate
Notes. Changes in economic conditions could result in higher
interest rates, thereby increasing the Companys
21
interest expense. An increase in the Companys interest
expense could reduce funds available for operations or other
purposes, and we may accordingly experience economic losses and
negative impact on results due to interest rate fluctuations.
Canadian
bankruptcy and insolvency laws may impair the enforcement of
remedies under the New Notes and the Guarantees of Canadian
domiciled entities.
The rights of the trustee who represents the holders of the New
Notes to enforce remedies could be significantly impaired by the
restructuring provisions of applicable Canadian federal
bankruptcy, insolvency and other restructuring legislation if
the benefit of such legislation is sought with respect to NNC or
the Company. For example, both the Bankruptcy and Insolvency Act
(Canada) and the Companies Creditors Arrangement Act
(Canada) contain provisions enabling an insolvent person to
obtain a stay of proceedings against its creditors and others
and to prepare and file a proposal to be voted on by the various
classes of its affected creditors. A restructuring proposal, if
accepted by the requisite majorities of each affected class of
creditors, and if approved by the relevant Canadian court, would
be binding on all creditors within each affected class that may
not otherwise be willing to accept it. Moreover, this
legislation permits the insolvent debtor to retain possession
and administration of its property, subject to court oversight,
even though it may be in default under the applicable debt
instrument during the period the stay against proceedings
remains in place.
The powers of the court under the Bankruptcy and Insolvency Act
and particularly under the Companies Creditors Arrangement
Act (Canada) have been exercised broadly to protect a
restructuring entity from actions taken by creditors and other
parties. Accordingly, the Company cannot predict whether
payments of principal, interest or other payments on the New
Notes by the Company or payments by NNC under its Guarantee
would be made during any proceedings in bankruptcy, insolvency
or other restructuring, whether or when the trustee could
exercise its rights under the indenture or whether, and to what
extent, holders of the New Notes would be compensated for any
delays in payment, if any, of principal, interest or other
payments on the New Notes and costs, including the fees and
disbursements of the trustee.
If NNC or the Company were to become bankrupt under the
Bankruptcy and Insolvency Act (Canada), its assets would be
vested in a trustee in bankruptcy, subject to the rights of
secured creditors. In such a bankruptcy, the rights of the
trustee under the indenture would be stayed, and that trustee
would receive, on behalf of the holders of the New Notes, the
pro rata share of the proceeds of the distribution, if any,
available to creditors of equal rank.
The
Guarantees are subject to certain defenses that may limit your
right to receive payment.
Although the Guarantees provide the holders of the New Notes
with a direct claim against the assets of the Guarantors,
enforcement of the Guarantees against any Guarantor would be
subject to certain suretyship defenses available to
Guarantors generally. Enforcement could also be subject to other
defenses available to the Guarantors in certain circumstances.
To the extent that the Guarantees are not enforceable, the
holders of New Notes would have no claims against the Guarantors.
NNCs
Guarantee may be unenforceable, subordinated or limited in scope
under the insolvency and creditor protection laws of
Canada.
NNC is incorporated under the laws of Canada. Therefore, any
insolvency proceedings by or against NNC would likely be based
on Canadian insolvency laws. Under the Bankruptcy and Insolvency
Act (Canada), NNCs Guarantee could be set aside as a
fraudulent preference which prefers the holders of the New Notes
over other creditors of NNC if:
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the Guarantee was given within twelve months of the bankruptcy
of NNC;
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NNC was insolvent at the time the Guarantee was given; and
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the Guarantee was given with a view to preferring the holders of
the Guarantees over other creditors of NNC.
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The Guarantee could also be challenged under applicable Canadian
provincial creditor protection laws.
We cannot be certain as to the standards that a court would use
to determine whether NNC was solvent at the time it incurred the
indebtedness evidenced by its Guarantee. For example, a court
could take into account the significant pending civil litigation
and regulatory investigations, which if decided against us or as
a result of settlement, could require us to pay substantial
judgments, settlements, fines or other penalties, in determining
the solvency of NNC. In addition, there can be no assurance as
to how the insolvency laws of the various jurisdictions in which
we operate will be applied in relation to one another.
NNIs
Guarantee may be unenforceable under U.S. federal and state
fraudulent conveyance statutes.
NNIs Guarantee may be subject to review under
U.S. federal bankruptcy law and comparable provisions of
state fraudulent conveyance laws if a bankruptcy or
reorganization case or lawsuit is commenced by or on behalf of
NNIs unpaid creditors. Under these laws, a U.S. court
could void the obligations under the Guarantee, subordinate the
Guarantee to NNIs other debt or take other action
detrimental to the holders of the New Notes, if, among other
things, NNI, at the time it incurred the indebtedness evidenced
by its Guarantee:
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issued the Guarantee to delay, hinder or defraud present or
future creditors; or
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received less than reasonably equivalent value or fair
consideration for issuing the Guarantee at the time it issued
the Guarantee; and was insolvent or rendered insolvent by reason
of issuing the Guarantee; or was engaged, or about to engage, in
a business or transaction for which its remaining unencumbered
assets constituted unreasonably small capital to carry on its
business; or intended to incur, or believed that it would incur,
debts beyond its ability to pay such debts as they mature.
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The measures of insolvency for purposes of the foregoing
considerations will depend upon the law applied in any
proceeding with respect to the foregoing. Generally, however,
NNI would be considered insolvent in the U.S. if:
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the sum of its debts, including contingent liabilities, was
greater than the fair saleable value of all of its assets;
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the present fair saleable value of its assets was less than the
amount that would be required to pay its probable liabilities on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its debts as they become due.
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We cannot be certain as to the standards that a U.S. court
would use to determine whether or not NNI was solvent at the
relevant time. For example, a court could take into account the
significant pending civil litigation and regulatory
investigations, which if decided against us or as a result of
settlement, could require us to pay substantial judgments,
settlements, fines or other penalties and could result in the
significant dilution of existing equity positions, in
determining the solvency of NNI. A court could also consider
whether the Guarantee was incurred principally for the benefit
of the Company and only indirectly for the benefit of NNI in
determining whether the obligations of NNI were incurred for
less than fair consideration. Regardless of the standard that
the U.S. court uses, we cannot be certain that the issuance
of NNIs Guarantee would not be voided or NNIs
Guarantee would not be subordinated to NNIs other debt.
Covenants
in the indenture impose operating and financial restrictions on
us, which may prevent us from capitalizing on business
opportunities.
The indenture governing the Notes and Guarantees contains
various covenants that limit our ability to:
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incur, assume or guarantee additional funded debt, disqualified
stock and certain types of preferred stock, in excess of certain
baskets and permitted amounts;
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create liens on assets of NNC and its restricted subsidiaries to
secure funded debt in excess of certain baskets and permitted
amounts without equally and ratably securing the Notes; or
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23
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merge, consolidate and sell or otherwise dispose of
substantially all of the assets of any Issuer unless the
surviving entity or purchaser of such transaction assumes the
obligations of such Issuer under the Notes and no default exists
under the indenture after giving effect to such merger,
consolidation or sale.
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In addition, we may in the future incur and guarantee debt with
more restrictive covenants (including maintenance financial
tests) that impose significant operating and financial
restrictions, including restrictions on our ability to engage in
other business activities that may be in our best long-term
interests.
Failure to comply with the covenants contained in the indenture,
the EDC Support Facility or any future debt instruments or
credit agreements, which could be more restrictive than those
applicable to the Notes, could materially and adversely affect
our business, results of operations, financial condition and
liquidity.
The
Company may be unable to purchase the Notes upon a Change of
Control.
Upon a Change of Control (as defined in Description of the
New Notes), the Company will be required to offer to
purchase all of the New Notes and Old Notes then outstanding for
cash at 101% of the principal amount thereof together with
accrued and unpaid interest. If a Change of Control were to
occur, the Company may not have sufficient funds to pay the
change of control purchase price and the Issuers may be required
to obtain third party financing in order to do so. However, the
Issuers may not be able to obtain such financing on commercially
reasonable terms, or at all. The Companys failure
following a Change of Control to make or consummate an offer to
purchase the Notes would constitute an event of default under
the indenture. In such an event, the trustee or the holders of
at least 25% in aggregate principal amount of the outstanding
New Notes and Old Notes of a series, which act together as a
single class of securities under the Indenture, may accelerate
the maturity of all of the Notes of that series.
In addition, the occurrence of a Change of Control of either NNC
or the Company would require NNC to offer to purchase the 2008
Convertibles Notes, the 2012 Convertible Notes and the 2014
Convertible Notes, of which an aggregate amount of
$2,950 million were outstanding as of June 30, 2007
and which are fully and unconditionally guaranteed by the
Company (and, in the case of the 2012 Convertible Notes and the
2014 Convertible Notes, also initially guaranteed by NNI).
Failure to make or consummate such purchases would similarly
constitute an event of default under the respective indentures
governing those notes. The occurrence of a change of control of
either NNC or the Company would also constitute an event of
default under the EDC Support Facility and would permit EDC to
terminate or suspend its commitments thereunder.
The Change of Control provision in the indenture governing the
Notes does not cover all corporate reorganizations, mergers or
similar transactions and may not protect you in the event we
consummate a highly leveraged transaction. In addition, a
consolidation, amalgamation or merger of NNC and the Company
with or into each other would not constitute a Change of Control
under the definition.
Your
ability to transfer any New Notes may be limited by the absence
of an active trading market for such New Notes, and there is no
assurance that any active trading market will develop for such
New Notes.
The New Notes are a new issue of securities for which there is
currently no established trading market. The Issuers do not
intend to have the New Notes or the Guarantees listed on a
national securities exchange or to arrange for quotation on any
automated dealer quotation systems. The Issuers cannot assure
you that a trading market for the New Notes will develop, that
you will be able to sell your New Notes at a particular time or
that the price that you receive when you sell your New Notes
will be favorable. The liquidity of any market for any New Notes
will depend on a number of factors, including:
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the number of holders of such New Notes;
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our operating performance and financial condition;
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the market for similar securities;
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the interest of securities dealers in making a market in the New
Notes; and
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prevailing interest rates.
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24
For example, if a large number of Old Notes of a particular
series are not exchanged in the exchange offers, the trading
market for the New Notes of such series could be adversely
affected due to the limited amount, or float, of the
New Notes that would be issued.
Historically, the market for non-investment grade debt has been
subject to disruptions that have caused substantial volatility
in the prices of securities similar to the New Notes. The
Company cannot assure you that the market, if any, for the New
Notes will be free from similar disruptions or that any such
disruptions may not adversely affect the prices at which you may
sell your New Notes. Any such disruptions could have an adverse
effect on the holders of the New Notes.
You
may only transfer the New Notes in Canada in accordance with, or
in a transaction exempt from, the registration and prospectus
requirements of the applicable securities laws of the provinces
or territories of Canada.
Any New Notes issued in the exchange offers will be distributed
in Canada on a private placement basis. The New Notes have not
been and will not be qualified for sale under the securities
laws of any province or territory in Canada and any resale of
the New Notes in Canada must be made in accordance with the
transfer restrictions described under Transfer
Restrictions in Canada and applicable securities laws of a
province or territory in Canada.
Your
failure to tender Old Notes in the exchange offers may affect
their marketability.
The trading market for any Old Notes not exchanged in the
exchange offers could be adversely affected and could cease to
exist entirely due to a limited float of the Old Notes that
remain outstanding following the exchange offers. Generally,
decreased float of a security could result in less demand to
purchase that security and could, therefore, result in lower
prices for that security, as well as increased volatility. There
can be no assurance that an active market in the Old Notes will
exist, develop or continue, or as to the prices at which the Old
Notes may trade, after the exchange offers are completed.
In addition, if you do not exchange your Old Notes for New Notes
in the exchange offers, you will continue to be subject to the
restrictions on transfers of the Old Notes, as described in the
2006 Offering Memorandum. If the exchange offers are completed,
we will have no further obligation to provide for registration
of the Old Notes except under the limited circumstances
described under Description of the Exchange
Offers Registration Rights, and the Old Notes
will generally bear interest at the same rate as the Exchange
Notes.
Holders of Old Notes in Canada who do not exchange their Old
Notes for New Notes under the exchange offers will remain
subject to the restrictions on transfer applicable to the Old
Notes as set forth in the Canadian Offering Memorandum related
to the offering of the Old Notes, or the 2006 Canadian Offering
Memorandum.
The
exchange offers may not be completed.
We are not obligated to complete the exchange offers under
certain circumstances. See Description of the Exchange
Offers Conditions to the Exchange Offers. Even
if the exchange offers are completed, it may not be completed on
the schedule described in this prospectus. Accordingly, holders
participating in the exchange offers may have to wait longer
than expected to receive their New Notes, during which time,
those holders of Old Notes will not be able to effect transfers
of their Old Notes tendered in the exchange offers.
U.S.
investors in the New Notes may face difficulties in the
enforcement of certain civil liabilities.
Each of NNC and the Company is a Canadian corporation. A
substantial portion of their assets are located in Canada or
elsewhere outside of the United States and many of their
directors and executive officers, and some of the experts named
in this document, are residents of Canada. As a result, it may
be difficult for investors to effect service within the United
States upon NNC or the Company or those directors, officers and
experts. Execution by United States courts of any judgment
obtained against NNC or the Company or any of
25
their directors, officers and experts in United States courts
would be limited to their assets or those of that person in the
United States. Gordon A. Davies, Esq., Chief Legal Officer
and Corporate Secretary of NNC and the Company, has advised the
Issuers that there is doubt as to the enforceability in Canada
of United States judgments or liabilities in original actions in
Canadian courts predicated solely upon the civil liability
provisions of the federal securities laws of the United States.
We will not receive any proceeds from the issuance of New Notes
in the exchange offers. In consideration for issuing the New
Notes, we will receive Old Notes in like principal amount. The
Old Notes surrendered in exchange for the New Notes will be
retired and cancelled.
RATIO
OF EARNINGS TO FIXED CHARGES OF NNC
The following table sets forth the consolidated ratios of
earnings from continuing operations to fixed charges for NNC
computed under SEC rules for the periods indicated below.
Earnings for purposes of the ratios consist of consolidated
pre-tax earnings or losses from continuing operations before
adjustments for minority interests in consolidated subsidiaries
or income or loss from equity investees,
plus:
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fixed charges;
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amortization of capitalized interest;
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distributed income of equity investees; and
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pre-tax losses of equity investees for which charges arising
from guarantees are included in fixed charges;
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less:
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interest capitalized; and
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the minority interest in pre-tax income of subsidiaries that
have not incurred fixed charges.
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Fixed charges for this purpose consist of:
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interest expensed and capitalized;
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amortized premiums, discounts and capitalized expenses related
to indebtedness;
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one-third of rental expenses on operating leases, deemed to be
representative of interest expenses; and
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preference security dividend requirements of consolidated
subsidiaries.
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Six Months
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Ended
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June 30,
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Year Ended December 31,
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2007(a)
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2006
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2005
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2004
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2003(a)
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2002(a)
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NNC
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(b)
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1.2
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(b)
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(b)
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1.2
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(b)
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(a)
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Derived from unaudited financial information.
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(b)
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The earnings of NNC calculated in accordance with U.S. GAAP were
inadequate to cover fixed charges for the six months ended
June 30, 2007 by $117 million and for the years ended
December 31, 2005, 2004 and 2002 by $2,695 million,
$316 million and $3,411 million, respectively.
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26
The following table sets forth the unrestricted cash and cash
equivalents and capitalization of NNC as of June 30, 2007.
The completion of the exchange offers will not change the amount
of debt outstanding or otherwise affect capitalization.
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As of June 30, 2007
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(Millions of U.S. dollars)
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Unrestricted cash and cash
equivalents(a)
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$
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4,473
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Debt (including current
maturities):
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4.25% Convertible Senior
Notes due 2008(a)(b)
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1,800
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Floating Rate Senior Notes due
2011(c)
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1,000
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1.75% Convertible Senior
Notes due 2012(d)
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575
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10.125% Senior Notes due
2013(c)
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550
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2.125% Convertible Senior
Notes due 2014(d)
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575
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10.750% Senior Notes due
2016(c)
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450
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6.875% Notes due 2023(e)
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200
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7.875% Notes due 2026(f)
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150
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Other
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335
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Total debt(a)(g)
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$
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5,635
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Other liabilities
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3,988
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Minority interests in subsidiary
companies
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788
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Shareholders equity:
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Common shares, without par
value authorized shares: unlimited; issued and
outstanding shares: 437,197,970 as of June 30, 2007(h)
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34,023
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Additional paid-in capital(i)
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4,980
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Accumulated deficit
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(35,715
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)
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Accumulated other comprehensive
income (loss)
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(482
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)
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Total shareholders equity(i)
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$
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2,806
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Total capitalization
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$
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13,217
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(a)
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Does not reflect the use of the net proceeds of the issuance of
NNCs 2012 Convertible Notes and 2014 Convertibles
Notes in March 2007 to redeem on September 28, 2007 at par
value $1,125 million of the $1.8 billion outstanding
principal amount of NNCs 2008 Convertible Notes.
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(b)
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Issued by NNC and fully and unconditionally guaranteed by NNL.
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(c)
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Issued by NNL, fully and unconditionally guaranteed by NNC and
initially guaranteed by NNI.
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(d)
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Issued by NNC, fully and unconditionally guaranteed by NNL and
initially guaranteed by NNI.
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(e)
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Issued by NNL.
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(f)
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Issued by NNCC and fully and unconditionally guaranteed by NNL.
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(g)
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Total debt includes long-term debt, long-term debt due within
one year, loan payable and notes payable.
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(h)
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The Global Class Action Settlement was deemed effective on
March 20, 2007. Approximately 4% of the total 62,866,775
Settlement Shares have been issued, and we currently expect the
balance of the Settlement Shares to be issued commencing in the
second half of 2007 and continuing into 2008. See
Summary Company Overview Global
Class Action Settlement.
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(i)
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As of March 20, 2007, the date the Global Class Action
Settlement became effective, the litigation settlement provision
related to the equity component of the Global Class Action
Settlement was reclassified to additional
paid-in-capital
within shareholders equity as the number of shares was
fixed at such date.
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27
DESCRIPTION
OF OTHER INDEBTEDNESS OF NNC
The consolidated total debt of NNC consisted of the following as
of the dates set forth below:
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As of
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As of
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June 30,
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December 31,
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2007
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2006
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(In millions)
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Debt (including current
maturities):
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4.25% Convertible Senior
Notes due 2008(a)(b)
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$
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1,800
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$
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1,800
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Floating Rate Senior Notes due
2011(c)
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1,000
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1,000
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1.75% Convertible Senior
Notes due 2012(d)
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575
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10.125% Senior Notes due
2013(c)
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550
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550
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2.125% Convertible Senior
Notes due 2014(d)
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575
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10.750% Senior Notes due
2016(c)
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450
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450
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6.875% Notes due 2023(e)
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200
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200
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7.875% Notes due 2026(f)
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150
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150
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Other
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335
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350
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Total debt(a)
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5,635
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4,500
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Less:
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Long-term debt due within one
year(a)
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22
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18
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Notes payable
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33
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36
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Long-term debt(a)
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$
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5,580
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$
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4,446
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(a)
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We will use the net proceeds of the sale of the 2012 Convertible
Notes and 2014 Convertible Notes in March 2007 to redeem on
September 28, 2007 at par value $1,125 million of the
$1.8 billion outstanding principal amount of 2008
Convertible Notes.
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(b)
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Issued by NNC and fully and unconditionally guaranteed by NNL.
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(c)
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Issued by NNL and fully and unconditionally guaranteed by NNC
and initially guaranteed by NNI.
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(d)
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Issued by NNC and fully and unconditionally guaranteed by NNL
and initially guaranteed by NNI.
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(e)
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Issued by NNL.
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(f)
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Issued by NNCC and fully and unconditionally guaranteed by NNL.
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As of December 31, 2006, the amounts of consolidated
long-term debt of NNC payable for each of the years ending
December 31 consisted of:
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2007
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$
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18
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2008
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1,821
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(a)
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2009
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18
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2010
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20
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2011
|
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1,022
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Thereafter
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1,565
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(a)
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Total long term debt payable
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$
|
4,464
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(a)
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(a)
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Does not reflect the issuance of $1,150 million aggregate
principal amount of 2012 Convertible Notes and 2014 Convertible
Notes in March 2007 and the use of the net proceeds thereof to
redeem on September 28, 2007 at par value
$1,125 million of the $1.8 billion outstanding
principal amount of NNCs 2008 Convertible Notes.
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28
Support
Facility
On February 14, 2003, NNL entered into the EDC Support
Facility. As of June 30, 2007, the facility provided for up
to $750 million in support including:
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$300 million of committed revolving support for performance
bonds or similar instruments with individual amounts of up to
$10 million, of which $114 million was
outstanding; and
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$450 million of uncommitted support for performance bonds
or similar instruments
and/or
receivables sales
and/or
securitizations, of which $40 million was outstanding.
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The EDC Support Facility has a maturity date of
December 31, 2008. The EDC Support Facility provides that
EDC may suspend its obligation to issue NNL any additional
support if events occur that would have a material adverse
effect on NNLs business, financial position or results of
operation. The EDC Support Facility does not materially restrict
NNLs ability to sell any of its assets (subject to certain
maximum amounts) or to purchase or prepay any of its currently
outstanding debt. In addition, the EDC Support Facility can be
suspended or terminated by EDC if NNLs senior long-term
debt rating by Moodys has been downgraded to less than B3
or if its debt rating by S&P has been downgraded to less
than B-.
EDC has also agreed to provide future support under the EDC
Support Facility on an unsecured basis and without the
guarantees of NNLs subsidiaries provided that should NNL
or its subsidiaries incur or guarantee certain indebtedness in
the future above agreed thresholds of $25 million in North
America and $100 million outside of North America, equal
and ratable security
and/or
guarantees of NNLs obligations under the EDC Support
Facility would be required at that time. In connection with the
2006 offering of the Old Notes, NNL, NNI and EDC entered into a
new guarantee agreement dated July 4, 2006 by which NNI
agreed to guarantee NNLs obligations under the EDC Support
Facility during the time in which the Notes are guaranteed by
NNI.
As a result of NNLs most recent restatement of its
financial results, it breached certain provisions of the EDC
Support Facility. Absent a waiver, EDC would have had the right
to refuse to issue additional support and to terminate its
commitments under the EDC Support Facility, subject to a
30 day cure period with respect to certain provisions. On
March 9, 2007, NNL received a waiver from EDC in respect of
these breaches.
For information related to our outstanding public debt, see
note 11, Long-term debt and support facilities,
to our 2006 Financial Statements and note 10,
Long-term debt, to the unaudited condensed
consolidated financial statements included in the 2007 Second
Quarter Report. For information related to our debt ratings, see
Liquidity and Capital Resources Credit
Ratings in the MD&A section of the 2007 Second
Quarter Report.
DESCRIPTION
OF THE EXCHANGE OFFERS
Purpose
of the Exchange Offers
On July 5, 2006, we completed a private placement of the
Old Notes and entered into a registration rights agreement.
Pursuant to the registration rights agreement, we agreed that we
would use our reasonable best efforts to:
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file with the SEC an exchange offer registration statement
covering offers to the holders of Old Notes to exchange all Old
Notes for New Notes on or prior to October 5, 2007;
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cause the exchange offer registration statement to become
effective on or prior to January 5, 2008;
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complete the exchange offers not later than 45 days after
the date the exchange offer registration statement becomes
effective; and
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have such exchange offer registration statement remain effective
until 180 days after the closing of the exchange offers.
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29
Upon the effectiveness of the registration statement of which
this prospectus is a part, we will offer the New Notes in
exchange for Old Notes. The registration rights agreement is
incorporated by reference as an exhibit to the registration
statement of which this prospectus is a part.
The registration rights agreement also provides that if we do
not complete the exchange offers within a certain period of time
or under certain other circumstances, we will be obligated to
pay certain additional interest to holders of the Old Notes.
Except as discussed below under Registration
Rights, upon the completion of the exchange offers, we
will have no further obligation to provide for registration of
the Old Notes or to pay such additional interest.
Resale of
the New Notes
We are making the exchange offers in reliance on the position of
the Staff of the SEC as set forth in interpretive letters
addressed to third parties in other transactions. For further
information on the SECs position, see
Exxon Capital
Holdings Corporation
, available May 13, 1988,
Morgan
Stanley & Co. Incorporated
, available June 5,
1991, and
Shearman & Sterling
, available
July 2, 1993, and other interpretive letters to similar
effect. We have not sought our own interpretive letter, however,
and we cannot assure you that the Staff would make a similar
determination with respect to the exchange offers as it has in
interpretive letters to third parties. Based on these
interpretations by the Staff, we believe that the New Notes
issued in the exchange offers may be offered for resale, resold
or otherwise transferred by you, without further compliance with
the registration and prospectus delivery provisions of the
Securities Act, so long as you:
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are acquiring the New Notes in the ordinary course of your
business;
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are not participating in, and do not intend to participate in, a
distribution of the New Notes within the meaning of the
Securities Act and have no arrangement or understanding with any
person to participate in a distribution of the New Notes within
the meaning of the Securities Act;
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are not a broker-dealer who acquired the Old Notes directly from
us; and
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are not an affiliate of ours, within the meaning of
Rule 405 of the Securities Act.
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By tendering the Old Notes in exchange for New Notes, you will
be required to represent to us that each of the above statements
applies to you. If you are participating or intend to
participate in a distribution of the New Notes or have any
arrangement or understanding with any person to participate in a
distribution of the New Notes to be acquired in the exchange
offers, you may be deemed to have received restricted securities
and may not rely on the applicable interpretations of the Staff
of the SEC. If you are so deemed, you will have to comply with
the registration and prospectus delivery requirements of the
Securities Act in connection with any secondary resale
transaction.
Only broker-dealers that acquired Old Notes as a result of
market-making activities or other trading activities may
participate in the exchange offers. Each broker-dealer that
receives New Notes for its own account in exchange for Old Notes
that the broker-dealer acquired as a result of market-making
activities or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of those
New Notes. The letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an
underwriter within the meaning of the Securities
Act. A broker-dealer may use this prospectus, as it may be
amended or supplemented from time to time, in connection with
resales of New Notes received in exchange for Old Notes which
the broker-dealer acquired as a result of market-making or other
trading activities for a period of 180 days after the
expiration date of the exchange offers. See Plan of
Distribution.
Any New Notes issued in the exchange offers will be distributed
in Canada on a private placement basis. The New Notes have not
been and will not be qualified for sale under the securities
laws of any province or territory in Canada and any resale of
the New Notes in Canada must be made in accordance with the
transfer restrictions described under Transfer
Restrictions in Canada and applicable securities laws of a
province or territory in Canada.
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The exchange offers are not being made to, nor will we accept
tenders for exchange from, holders of Old Notes in any
jurisdiction in which the exchange offers or the acceptance of
it would not be in compliance with the securities or blue sky
laws of such jurisdiction.
Terms of
the Exchange Offers
Upon the terms and subject to the conditions set forth in this
prospectus and the letter of transmittal, we will accept any and
all Old Notes validly tendered and not withdrawn prior to
5:00 p.m., New York City time, on the expiration date. We
will issue $1,000 principal amount of New Notes in authorized
denominations in exchange for each $1,000 principal amount of
Old Notes validly tendered and accepted pursuant to the exchange
offers.
We will not pay any accrued and unpaid interest on the Old Notes
that we acquire in the exchange offers. Instead, interest on the
New Floating Rate Notes will accrue
from ,
2007, the date on which we made the most recent interest payment
on the Old Floating Rate Notes, and interest on the New 2013
Fixed Rate Notes and 2016 Fixed Rate Notes will accrue
from ,
2007, the date on which we made the most recent interest payment
on the Old 2013 Fixed Rate Notes and Old 2016 Fixed Rate Notes.
Holders may tender some or all of their Old Notes pursuant to
the exchange offers. However, tendering holders of Old Notes
must tender Old Notes in minimum denominations of $2,000 and
integral multiples of $1,000 in excess thereof. New Notes will
be issued in minimum denominations of $2,000 and integral
multiples of $1,000 in excess thereof.
The terms of the New Notes are identical in all material
respects to the terms of the Old Notes, except that:
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we have registered the New Notes under the Securities Act and
therefore the New Notes will not bear legends restricting their
transfer (except with respect to transfers in Canada as
described under Transfer Restrictions in
Canada), and
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specified rights under the registration rights agreement,
including the provisions providing for registration rights and
for payment of additional interest in specified circumstances
relating to the exchange offers, will be eliminated.
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The New Notes will evidence the same indebtedness as the Old
Notes. The New Notes will be issued under the same indenture as
the Old Notes and will be entitled to the same benefits under
that indenture as the Old Notes. As of the date of this
prospectus, $450,000,000 aggregate principal amount of Old 2016
Fixed Rate Notes, $550,000,000 of Old 2013 Fixed Rate Notes and
$1,000,000,000 of Old Floating Rate Notes are outstanding. Old
Notes accepted for exchange will be retired and cancelled and
not reissued.
Except as described below under Book-Entry Settlement and
Clearance, we will issue New Notes in the form of one or
more global notes registered in the name of DTC or its nominee,
and each beneficial owners interest in it will be
transferable in book-entry form through DTC.
We will conduct the exchange offers in accordance with the
applicable requirements of the Securities Act and the Exchange
Act, and the rules and regulations of the SEC thereunder.
We will be considered to have accepted validly tendered Old
Notes if and when we have given written notice to that effect to
the exchange agent. The exchange agent will act as agent for the
tendering holders for the purposes of receiving the New Notes
from us.
If we do not accept tendered Old Notes for exchange because of
an invalid tender, the occurrence of the other events described
in this prospectus or otherwise, we will return these Old Notes,
without expense, to the tendering holder as soon as practicable
after the expiration date of the exchange offers.
Holders who tender Old Notes will not be required to pay
brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes on exchange of Old
Notes in connection with the exchange offers. We will pay all
charges and expenses, other than certain applicable taxes in
certain circumstances, in connection with the exchange offers.
See Fees and Expenses and
Transfer Taxes.
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If we successfully complete the exchange offers, any Old Notes
that holders do not tender or that we do not accept in the
exchange offers will remain outstanding and continue to accrue
interest. The holders of Old Notes after the exchange offers in
general will not have further rights under the registration
rights agreement, including registration rights and any rights
to additional interest. Holders wishing to transfer the Old
Notes will be required to rely on exemptions from the
registration requirements of the Securities Act.
Expiration
Date; Extensions; Amendments; Termination
For purposes of the exchange offers, the term expiration
date means 5:00 p.m., New York City time,
on ,
2007, subject to our right to extend that time and date in our
sole discretion, in which case the expiration date means the
latest time and date to which the exchange offers are extended.
We reserve the right, in our sole discretion, by giving written
notice to the exchange agent, to:
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extend the exchange offers;
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delay acceptance of any Old Notes;
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terminate the exchange offers and refuse to accept any Old Notes
if a condition to our obligation to exchange Old Notes for New
Notes is not satisfied or waived on or prior to the expiration
date; or
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amend the exchange offers.
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If the exchange offers are amended in a manner that we determine
constitutes a material change, we will extend the exchange
offers for a period of two to ten business days, depending upon
the significance of the amendment and the manner of disclosure
to the holders, if the exchange offers would otherwise have
expired during that two to ten business day period.
We will notify holders of the Old Notes of any extension,
amendment or termination of the exchange offers by press release
or other public announcement. We will announce any extension of
the expiration date no later than 9:00 a.m., New York City
time, on the first business day after the previously scheduled
expiration date. We have no other obligation to publish,
advertise or otherwise communicate any information about any
extension, amendment or termination.
Conditions
to the Exchange Offers
None of the exchange offers is conditioned upon the completion
of the other exchange offers. Notwithstanding any other
provision of the exchange offers, we will not be required to
accept for exchange, or to issue New Notes in exchange for, any
Old Notes and may terminate or amend the exchange offers if at
any time before the expiration of the exchange offers, we
determine that the exchange offers would violate any applicable
law, regulation or rule or any applicable interpretation of the
Staff of the SEC.
The foregoing condition is for our sole benefit and may be
asserted by us regardless of the circumstances giving rise to
any such condition or may be waived by us in whole or in part at
any time and from time to time.
The failure by us at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any of those rights and
each of those rights shall be deemed an ongoing right which may
be asserted at any time and from time to time. Any determination
we make concerning an event, development or circumstance
described or referred to above will be conclusive and binding.
If the foregoing condition is not satisfied, we may, at any time
on or prior to the expiration date:
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terminate the exchange offers and return all tendered Old Notes
to the respective tendering holders;
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modify, extend or otherwise amend the exchange offers and retain
all tendered Old Notes until the expiration date, as extended,
subject to the withdrawal rights of holders; or
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waive the unsatisfied conditions with respect to the exchange
offers and accept all Old Notes tendered and not previously
validly withdrawn.
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In addition, we will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for those
Old Notes, if at such time any stop order shall be threatened or
in effect with respect to the registration statement of which
this prospectus is a part or with respect to the qualification
of the indenture governing the New Notes under the
U.S. Trust Indenture Act of 1939, as amended, or the
TIA. In the case of any of those events, we are required to use
our reasonable best efforts to obtain the withdrawal of such a
stop order at the earliest possible moment.
Effect of
Tender
Any tender of Old Notes by a holder, and our subsequent
acceptance of that tender, will constitute a binding agreement
between that holder and us upon the terms and subject to the
conditions of the exchange offers described in this prospectus
and in the letter of transmittal. The participation in the
exchange offers by a tendering holder of Old Notes will
constitute the agreement by that holder to deliver good and
marketable title to the tendered Old Notes, free and clear of
any and all liens, restrictions, charges, pledges, security
interests, encumbrances or rights of any kind of third parties.
Letter of
Transmittal; Representations, Warranties and Covenants of
Holders of Old Notes
Upon agreement to the terms of the letter of transmittal
pursuant to an agents message (as described below under
Procedures for Tendering), a holder, or
the beneficial holder of Old Notes on behalf of which the holder
has tendered, will, subject to that holders ability to
withdraw its tender and to the terms and conditions of the
exchange offers generally, thereby:
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irrevocably sell, assign and transfer to or upon our order or
the order of our nominee all right, title and interest in and
to, and any and all claims in respect of or arising or having
arisen as a result of the holders status as a holder of,
all Old Notes tendered thereby, such that thereafter the holder
shall have no contractual or other rights or claims in law or
equity against us or any fiduciary, trustee, fiscal agent or
other person connected with the Old Notes arising under, from or
in connection with those Old Notes;
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waive any and all rights with respect to the Old Notes tendered
thereby, including, without limitation, any existing or past
defaults and their consequences in respect of those Old
Notes; and
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release and discharge us and the trustee for the Old Notes from
any and all claims the holder may have, now or in the future,
arising out of or related to the Old Notes tendered thereby,
including, without limitation, any claims that the holder is
entitled to receive additional principal or interest payments
with respect to the Old Notes tendered thereby, other than as
expressly provided in this prospectus and in the letter of
transmittal, or to participate in any redemption or defeasance
of the Old Notes tendered thereby.
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In addition, by tendering Old Notes in the exchange offers, each
holder of Old Notes will be deemed to represent, warrant and
agree that:
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it has received and reviewed this prospectus;
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it is the beneficial owner (as defined below) of, or a duly
authorized representative of one or more beneficial owners of,
the Old Notes tendered thereby, and it has full power and
authority to tender the Old Notes in accordance with the terms
of the exchange offers and the letter of transmittal;
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the Old Notes being tendered thereby were owned as of the date
of tender, free and clear of any liens, charges, claims,
encumbrances, interests and restrictions of any kind, and we
will acquire good, indefeasible and unencumbered title to those
Old Notes, free and clear of all liens, charges, claims,
encumbrances, interests and restrictions of any kind, when we
accept the same;
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it will not sell, pledge, hypothecate or otherwise encumber or
transfer any Old Notes tendered thereby from the date of the
letter of transmittal, and any purported sale, pledge,
hypothecation or other encumbrance or transfer will be void and
of no effect;
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in evaluating the exchange offers and in making its decision
whether to participate in the exchange offers by tendering its
Old Notes, it has made its own independent appraisal of the
matters referred to in this prospectus and the letter of
transmittal and in any related communications and it is not
relying on any statement, representation or warranty, express or
implied, made to it by us (other than those contained in this
prospectus, as amended or supplemented through the expiration
date), the information agent or the exchange agent;
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the tender of the Old Notes in accordance with the terms of the
exchange offers and the letter of transmittal shall constitute
an undertaking to execute any further documents and give any
further assurances that may be required in connection with any
of the foregoing, in each case on and subject to the terms and
conditions described or referred to in this prospectus;
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the agreement to the terms of the letter of transmittal pursuant
to an agents message shall, subject to the terms and
conditions of the exchange offers, constitute the irrevocable
appointment of the exchange agent as its attorney and agent and
an irrevocable instruction to that attorney and agent to
complete and execute all or any forms of transfer and other
documents at the discretion of that attorney and agent in
relation to the Old Notes tendered thereby in favor of us or any
other person or persons as we may direct and to deliver those
forms of transfer and other documents in the attorneys and
agents discretion and the certificates and other documents
of title relating to the registration of Old Notes and to
execute all other documents and to do all other acts and things
as may be in the opinion of that attorney or agent necessary or
expedient for the purpose of, or in connection with, the
acceptance of the exchange offers, and to vest in us or our
nominees those Old Notes;
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the terms and conditions of the exchange offers shall be deemed
to be incorporated in, and form a part of, the letter of
transmittal, which shall be read and construed accordingly;
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it is acquiring the New Notes in the ordinary course of its
business;
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it is not participating in, and does not intend to participate
in, a distribution of the New Notes within the meaning of the
Securities Act and has no arrangement or understanding with any
person to participate in a distribution of the New Notes within
the meaning of the Securities Act;
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it is not a broker-dealer who acquired the Old Notes directly
from us;
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it is not an affiliate of ours, within the meaning
of Rule 405 of the Securities Act;
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If a holder of Old Notes is resident in Canada, by tendering Old
Notes in the exchange offers, that holder of Old Notes will also
be deemed to represent, warrant and agree that:
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it has received a copy of the Canadian Private Placement
Memorandum and understands that this prospectus forms a part of
the Canadian Private Placement Memorandum;
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it is tendering its Old Notes for exchange on the terms and
conditions set forth in the Canadian Private Placement
Memorandum in addition to the terms set forth in the letter of
transmittal;
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it is entitled under applicable Canadian securities laws to
participate in the exchange offers and to receive the New Notes
without the benefit of a prospectus qualified under such
securities laws and without the services of a dealer registered
under those securities laws;
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it has completed and delivered to the exchange agent the
Canadian Representation Letter; and
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it understands that the tender of Old Notes will not be
considered a valid tender unless the holder has completed and
delivered to the Exchange Agent a Canadian Representation Letter.
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The representations, warranties and agreements of a holder
tendering Old Notes will be deemed to be repeated and
reconfirmed on and as of the expiration date and the settlement
date. For purposes of this prospectus, the beneficial
owner of any Old Notes means any holder that exercises
investment discretion with respect to those Old Notes.
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Absence
of Dissenters Rights
Holders of the Old Notes do not have any appraisal or
dissenters rights in connection with the exchange offers.
Acceptance
of Old Notes for Exchange; Settlement Date and Delivery of New
Notes
We will be deemed to accept validly tendered Old Notes that have
not been validly withdrawn as provided in this prospectus when,
and if, we give written notice of acceptance to the exchange
agent.
Subject to the terms and conditions of the exchange offers, we
will deliver the New Notes in book-entry form on the settlement
date, which will be as soon as practicable after the expiration
date of the exchange offers. We will not be obligated to deliver
New Notes unless the exchange offers are consummated.
The exchange agent will act as agent for tendering holders of
Old Notes for the purpose of receiving Old Notes and
transmitting New Notes as of the settlement date. If any
tendered Old Notes are not accepted for any reason described in
the terms and conditions of the exchange offers, those Old Notes
will be returned without expense to the tendering holders as
promptly as practicable after the expiration or termination of
the exchange offers.
Procedures
for Tendering
To participate in the exchange offers, you must properly tender
your Old Notes to the exchange agent as described below. We will
only issue New Notes in exchange for Old Notes that you timely
and properly tender. Therefore, you should allow sufficient time
to ensure timely delivery of the Old Notes, and you should
follow carefully the instructions on how to tender your Old
Notes. It is your responsibility to properly tender your Old
Notes. Although we have the right to waive any defects, we are
not required to do so, and neither we, nor the exchange agent is
required to notify you of defects in your tender.
If you have any questions or need help in exchanging your Old
Notes, please contact the exchange agent at the address or
telephone numbers listed below.
All of the Old Notes were issued in book-entry form, and all of
the Old Notes are currently represented by global certificates
registered in the name of Cede & Co., the nominee of
DTC. We have confirmed with DTC that the Old Notes may be
tendered using DTCs automatic tender offer program, or
ATOP. The exchange agent will establish an account with DTC for
purposes of the exchange offers promptly after the commencement
of the exchange offers.
In addition to effecting the tender of Old Notes through the
ATOP procedures, a holder of Old Notes in Canada must also
complete, sign and date a Canadian Representation Letter and
send the completed Canadian Representation Letter to the
exchange agent. In order for Old Notes held by a resident of
Canada to be validly tendered, the exchange agent must receive
the completed Canadian Representation Letter prior to
5:00 p.m., New York City time, on the expiration date.
Under the ATOP procedures, holders of Old Notes that are
accepting the exchange offers transmit their acceptance through
a DTC participant to DTC. DTC will verify the acceptance,
transfer the tendered Old Notes to the exchange agents DTC
account and send an agents message to the
exchange agent. The agents message will state
(a) that DTC has received instructions from the participant
to tender Old Notes, (b) that the tendering holder agrees
to be bound by the terms of the letter of transmittal,
(c) whether the tendering holder is resident in Canada, and
(d) if the tendering holder is resident in Canada, that the
holder confirms that it has received the Canadian Private
Placement Memorandum and has delivered the Canadian
Representation Letter to the exchange agent.
By using the ATOP procedures to exchange Old Notes, you will not
be required to deliver a letter of transmittal to the exchange
agent. However, you will be bound by its terms just as if you
had signed it.
Determinations Under the Exchange Offers.
We
will determine in our sole discretion all questions as to the
validity, form, eligibility, time of receipt, acceptance of
tendered Old Notes and withdrawal of tendered
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Old Notes. Our determination will be final and binding. We
reserve the absolute right to reject any Old Notes not properly
tendered or any Old Notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right
to waive any defect, irregularities or conditions of tender as
to particular Old Notes. Our interpretation of the terms and
conditions of the exchange offers, including the instructions in
the letter of transmittal, will be final and binding on all
parties. Unless waived, all defects or irregularities in
connection with tenders of Old Notes must be cured within such
time as we shall determine. Although we intend to notify holders
of defects or irregularities with respect to tenders of Old
Notes, we are not required to do so, and neither we, the
information agent, the exchange agent nor any other person will
incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed made until such defects
or irregularities have been cured or waived. Any Old Notes
received by the exchange agent that are not properly tendered
and as to which the defects or irregularities have not been
cured or waived will be returned to the tendering holder as soon
as practicable after the expiration date of the exchange.
When We Will Issue New Notes.
In all cases, we
will issue New Notes for Old Notes that we have accepted for
exchange under the exchange offers only after the exchange agent
receives, prior to 5:00 p.m., New York City time, on the
expiration date:
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a book-entry confirmation of such Old Notes into the exchange
agents account at DTC; and
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a properly transmitted agents message.
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Return of Old Notes Not Accepted or
Exchanged.
If we do not accept any tendered Old
Notes for exchange or if Old Notes are submitted for a greater
principal amount than the holder desires to exchange, the
unaccepted or non-exchanged Old Notes will be returned without
expense to their tendering holder. Such non-exchanged Old Notes
will be credited to an account maintained with DTC. These
actions will occur as promptly as practicable after the
expiration or termination of the exchange offers.
Participating Broker-Dealers.
Each
broker-dealer that receives New Notes for its own account in
exchange for Old Notes that the broker-dealer acquired as a
result of market-making activities or other trading activities
must acknowledge that it will deliver a prospectus in connection
with any resale of those New Notes. See Plan of
Distribution.
Withdrawal
of Tenders
Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, you must comply with the
appropriate ATOP procedures. Any notice of withdrawal must
specify the name and number of the account at DTC to be credited
with withdrawn Old Notes and otherwise comply with the ATOP
procedures.
We will determine all questions as to the validity, form,
eligibility and time of receipt of a notice of withdrawal. Our
determination shall be final and binding on all parties. We will
deem any Old Notes so withdrawn not to have been validly
tendered for exchange for purposes of the exchange offers.
You may retender properly withdrawn Old Notes by following the
procedures described under Procedures for
Tendering above at any time on or prior to the expiration
date of the exchange offers.
Any Old Notes that have been tendered for exchange but that are
not exchanged for any reason will be credited to an account
maintained with DTC for the Old Notes. This return or crediting
will take place as soon as practicable after withdrawal,
rejection of tender, expiration or termination of the exchange
offers.
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Exchange
Agent
The Bank of New York has been appointed as the exchange agent
for the exchange offers. All correspondence in connection with
the exchange offers should be sent or delivered by each holder
of Old Notes, or a beneficial owners commercial bank,
broker, dealer, trust company or other nominee, to the exchange
agent at:
The Bank of
New York
Corporate Trust Operations
Reorganization Unit
101 Barclay Street, 7 East
New York, New York 10286
Telephone:
(212) 815-3687
Facsimile:
(212) 815-1915
Information
Agent
D.F. King & Co., Inc. has been appointed as the
information agent for the exchange offers. Questions concerning
tender procedures and requests for additional copies of this
prospectus, the letter of transmittal or the Canadian
Representation Letter should be directed to the information
agent at the address or telephone numbers listed below. Holders
of Old Notes may also contact their commercial bank, broker,
dealer, trust company or other nominee for assistance concerning
the exchange offers.
D.F.
King & Co., Inc.
48 Wall Street
New York, New York 10005
Banks and brokers call:
(212) 269-5550
(collect)
All others call toll-free:
(800) 659-6590
Announcements
We may make any announcement required pursuant to the terms of
this prospectus or required by the Exchange Act or the rules
promulgated thereunder through a reasonable press release or
other public announcement in our sole discretion; provided,
that, if any such announcement is made by issuing a press
release to the Dow Jones News Service, such announcement shall
be reasonable and sufficient.
Fees and
Expenses
We will bear the expenses of soliciting tenders of the Old
Notes. The principal solicitation is being made by mail.
Additional solicitations may, however, be made by
e-mail,
facsimile transmission, telephone or in person by the
information agent as well as our officers and other employees
and those of our affiliates.
We have not retained any dealer-manager in connection with this
exchange offers and will not make any payments to broker-dealers
or others soliciting acceptances of the exchange offers.
However, we will pay the exchange agent and information agent
reasonable and customary fees for their services and will
reimburse them for their reasonable out-of-pocket expenses.
Tendering holders of Old Notes will not be required to pay any
fee or commission to the exchange agent. If, however, a
tendering holder handles the transaction through its commercial
bank, broker, dealer, trust company or other institution, that
holder may be required to pay brokerage fees or commissions.
Transfer
Taxes
Holders who tender their Old Notes for exchange will not be
obligated to pay any transfer taxes in connection with that
tender or exchange, except that holders who instruct us to
register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the exchange offers be returned to,
a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax on
those Old Notes.
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Consequences
of Failure to Exchange
Holders of Old Notes who do not exchange their Old Notes for New
Notes under the exchange offers will remain subject to the
restrictions on transfer applicable to the Old Notes (i) as
set forth in the legend printed on the Old Notes as a
consequence of the issuance of the Old Notes pursuant to
exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable
state securities laws and (ii) otherwise as set forth in
the 2006 Offering Memorandum, and in the 2006 Canadian Offering
Memorandum, where applicable.
Any Old Notes not tendered by their holders in exchange for New
Notes in the exchange offers will not retain any rights under
the registration rights agreement (except in certain limited
circumstances as described below under
Registration Rights).
In general, you may not offer or sell the Old Notes unless they
are registered under the Securities Act or the offer or sale is
exempt from the registration requirements of the Securities Act
and applicable state securities laws or applicable securities
laws of a province or territory in Canada. We do not intend to
register resales of the Old Notes under the Securities Act.
Registration
Rights
Under the registration rights agreement, if we determine that
the exchange offers are not available or may not be completed
because it would violate any applicable law, regulation or rule
or applicable interpretations of the Staff of the SEC, we will,
in lieu of completing the exchange offers, use our reasonable
best efforts to cause a shelf registration statement relating to
resales of the Old Notes by holders to become effective and to
keep that shelf registration statement effective until the
expiration of the time period referred to in Rule 144(k)
under the Securities Act or such shorter period ending when all
Old Notes covered by the shelf registration statement have been
sold. We will also be required to file a resale shelf
registration statement if the exchange offers are not for any
other reason completed by February 19, 2008 and in certain
other limited circumstances.
The registration rights agreement further provides that if
(i) the exchange offers are not completed within
45 days after the date of effectiveness of the registration
statement of which this prospectus is a part, (ii) if
required, the resale shelf registration statement does not
become effective on or prior to February 19, 2008, or
(iii) if required, the resale shelf registration statement
becomes effective but ceases to remain effective or otherwise
available for more than 45 days in any
12-month
period prior to the time the Old Notes are freely transferable
under the Securities Act, subject to limited exceptions, the
annual interest rate borne by the Old Notes will be increased by
0.25% per annum, in each case, until the exchange offers are
completed, the resale shelf registration statement becomes
effective (or again becomes available, as applicable) or the Old
Notes otherwise become freely tradable under the Securities Act.
Except as described above, upon the completion of the exchange
offers, we will have no further obligation to provide for
registration of the Old Notes or to pay additional interest as
described above. These registration rights and provisions for
additional interest relating to the Old Notes do not apply to
the New Notes.
Other
Participation in the exchange offers is voluntary, and you
should carefully consider whether to participate. You are urged
to consult your financial and tax advisors in making your own
decision as to what action to take.
DESCRIPTION
OF THE NEW NOTES
The Company will issue the New Notes under an indenture dated as
of July 5, 2006 (as supplemented by the first supplemental
indenture dated as of July 5, 2006 and the second
supplemental indenture dated as of May 1, 2007), or the
Indenture, among itself, the Guarantors and The Bank of New
York, as trustee, or the Trustee. Upon issuance of the New
Notes, the Indenture will be subject to, and governed by, the
TIA. The
38
following is a summary of the material provisions of the
Indenture. It does not include all of the provisions of the
Indenture. We urge you to read the Indenture because it defines
your rights. The Indenture is filed as an exhibit to the
registration statement of which this prospectus forms a part and
you may request a copy of the Indenture at our address shown
under the caption Incorporation of Certain Documents by
Reference. You can find definitions of certain capitalized
terms used in this description under Certain
Definitions. See Risk Factors in this
prospectus and in the documents incorporated by reference herein
for a discussion of certain factors that you should consider
before investing in the New Notes.
The New Notes will evidence the continuation of the indebtedness
originally evidenced by the Old Notes. Any Old Notes of any
series that remain outstanding after the completion of the
exchange offers, together with the New Notes of the same series
issued in the exchange offers, will be treated as a single class
of securities under the Indenture. Accordingly, portions of this
section describe provisions of the Indenture relating to the
Notes, which refers to both the Old Notes and the
New Notes.
Principal,
Maturity and Interest
In the exchange offers, the Company will issue:
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|
|
|
|
for each $1,000 aggregate principal amount of Old 2016 Fixed
Rate Notes validly tendered and accepted, $1,000 aggregate
principal amount of New 2016 Fixed Rate Notes;
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for each $1,000 aggregate principal amount of Old 2013 Fixed
Rate Notes validly tendered and accepted, $1,000 aggregate
principal amount of New 2013 Fixed Rate Notes; and
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|
|
for each $1,000 aggregate principal amount of Old Floating Rate
Notes validly tendered and accepted, $1,000 aggregate principal
amount of New Floating Rate Notes.
|
As of the date of this prospectus, $450,000,000 aggregate
principal amount of Old 2016 Fixed Rate Notes, $550,000,000
aggregate principal amount of Old 2013 Fixed Rate Notes and
$1,000,000,000 aggregate principal amount of Old Floating Rate
Notes are outstanding.
The Company may issue additional Notes, or the Additional Notes,
of any series (in addition to other securities under the
Indenture having terms different from any series of New Notes
issued in the exchange offers) from time to time in an unlimited
principal amount, subject to the limitations set forth under
Limitation on Incurrence of Additional Funded
Debt. Holders of Additional Notes of any series will have
the right to vote together with Holders of Old Notes and New
Notes of the same series as one class. Any Old Notes of any
series that remain outstanding after the completion of the
exchange offers, together with the New Notes of the same series
issued in the exchange offers, will be treated as a single class
of securities under the Indenture.
New Fixed Rate Notes.
The New 2016 Fixed Rate
Notes will mature on July 15, 2016 and the New 2013 Fixed
Rate Notes will mature on July 15, 2013. Interest on the
New 2016 Fixed Rate Notes will accrue at the rate of 10.750% per
annum and interest on the New 2013 Fixed Rate Notes will accrue
at the rate of 10.125% per annum. All interest on the New Fixed
Rate Notes will be payable in cash semiannually in arrears on
each January 15 and July 15, commencing
on (or,
if any such day is not a Business Day, the next succeeding
Business Day), to the Persons who are registered Holders at the
close of business on the January 1 and July 1 immediately
preceding the applicable interest payment date. Interest on the
New Fixed Rate Notes will accrue from the most recent date to
which interest has been paid on the New Fixed Rate Notes or, if
no interest has been paid on the New Fixed Rate Notes, from and
including the most recent date to which interest has been paid
on the Old Fixed Rate Notes. Interest will be computed on the
basis of a
360-day
year
consisting of twelve
30-day
months.
New Floating Rate Notes.
The New Floating Rate
Notes will mature on July 15, 2011 and will bear interest
at a rate per annum, reset quarterly, equal to Three-Month LIBOR
plus 4.250%, in each case, as determined by an agent appointed
by the Company to calculate Three-Month LIBOR for purposes of
the Indenture, or the Calculation Agent, which is initially the
Trustee. Interest will be payable in cash quarterly in arrears
on each January 15, April 15, July 15 and
October 15, commencing
on (or,
if any such day is
39
not a Business Day, the next succeeding Business Day). The
Company will make each interest payment to the Persons who are
Holders of record of the New Floating Rate Notes on the
January 1, April 1, July 1 and October 1 immediately
preceding the applicable interest payment date. The New Floating
Rate Notes will accrue interest from the most recent date to
which interest has been paid on the New Floating Rate Notes or,
if no interest has been paid on the New Floating Rate Notes,
from and including the most recent date to which interest has
been paid on the Old Floating Rate Notes.
Set forth below is a summary of certain of the defined terms
used in the Indenture relating solely to the New Floating Rate
Notes.
Determination Date,
with respect to an
Interest Period, will be the second London Banking Day preceding
the first day of the Interest Period.
Interest Period
means the period commencing
on and including an interest payment date and ending on and
including the day immediately preceding the next succeeding
interest payment date, with the exception that the first
Interest Period shall commence on and include the most recent
date to which interest has been paid on the Old Floating Rate
Notes and end on and include .
London Banking Day
means any day in which
dealings in United States dollars are transacted or, with
respect to any future date, are expected to be transacted in the
London interbank market.
Representative Amount
means a principal
amount of not less than $1,000,000 for a single transaction in
the relevant market at the relevant time.
Reuters Screen LIBO Page
means the display
designated as page LIBO on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBO page
on that service or a successor service for the purpose of
displaying London interbank offered rates of major banks).
Three-Month LIBOR,
with respect to an
Interest Period, will be the offered rate (or, if more than one
such rate appears, the arithmetic mean of the rates), expressed
as a percentage per annum, for deposits in United States dollars
for a three-month period that appears on the Reuters Screen LIBO
Page as of 11:00 a.m., London time, on the Determination
Date for such Interest Period. If fewer than two rates appear on
the Reuters Screen LIBO Page or the Reuters Screen LIBO Page is
unavailable on such Determination Date, the Calculation Agent
will request the principal London office of each of four major
banks in the London interbank market, as selected by the
Calculation Agent, to provide such banks offered quotation
(expressed as a percentage per annum), as of approximately
11:00 a.m., London time, on such Determination Date, to
prime banks in the London interbank market for deposits in a
Representative Amount in United States dollars for a three-month
period beginning on the first day of such Interest Period. If at
least two such offered quotations are so provided, Three-Month
LIBOR for the Interest Period will be the arithmetic mean of
such quotations. If fewer than two such quotations are so
provided, the Calculation Agent will request each of four major
banks in New York City, as selected by the Calculation Agent, to
provide such banks rate (expressed as a percentage per
annum), as of approximately 11:00 a.m., New York City time,
on such Determination Date, for loans in a Representative Amount
in United States dollars to leading European banks for a
three-month period beginning on such Determination Date. If at
least two such rates are so provided, Three-Month LIBOR for the
Interest Period will be the arithmetic mean of such rates. If
fewer than two such rates are so provided, then
Three-Month
LIBOR for the Interest Period will be Three-Month LIBOR in
effect with respect to the immediately preceding Interest Period.
The amount of interest to be paid on the New Floating Rate Notes
for each Interest Period will be calculated by multiplying the
principal amount of the New Floating Rate Notes by a fraction,
the numerator of which is the product of the interest rate and
the number of days in such Interest Period and the denominator
of which is 360.
All percentages resulting from any of the above calculations
will be rounded, if necessary, to the nearest one
hundred-thousandth of a percentage point, with five
one-millionths of a percentage point being rounded upwards
(e.g., 9.876545% (or 0.09876545) being rounded to 9.87655% (or
0.0987655)) and all dollar amounts
40
used in or resulting from such calculations will be rounded to
the nearest cent (with one-half cent being rounded upwards).
The interest rate on the New Floating Rate Notes will in no
event be higher than the lesser of (i) the maximum rate
permitted by New York law as the same may be modified by United
States law of general application and (ii) the maximum rate
or amount that could be received by a Holder of New Floating
Rate Notes without such Holder receiving interest at a criminal
rate (within the meaning of the
Criminal Code
(Canada),
which is currently an effective annual rate in excess of 60%).
Form and
Denominations; Book Entry
The Company will issue the New Notes in fully registered form in
denominations of $2,000 and integral multiples of $1,000 in
excess thereof. The Trustee will initially act as paying agent
and registrar for the New Notes. The New Notes may be presented
for registration of transfer and exchange at the offices of the
registrar. The Company may change the paying agent and registrar
and, so long as the New Notes remain in the form of global
securities, may do so without notice to Holders of the New
Notes. It is expected that the Company will pay principal (and
premium, if any) on the New Notes at the Trustees
corporate office in New York, New York. At the Companys
option, interest may be paid at the Trustees corporate
trust office or by check mailed to the registered address of
Holders. For so long as the New Notes remain in the form of
global securities, the Company will pay all principal and
interest (and premium, if any) on the New Notes to the
applicable depositary or its nominee as the registered holder of
the global security representing the New Notes.
Ranking
of the New Notes
The New Notes will be senior unsecured obligations of the
Company and will rank
pari passu
with all other senior
obligations of the Company, including the Old Notes, and
effectively junior to all secured obligations of the Company to
the extent of the value of the property securing such
obligations. The New Notes will be effectively subordinated
to all liabilities of the Subsidiaries of NNC that are not
Guarantors (other than the Company) to the extent of the value
of such Subsidiaries.
Guarantees;
Release of Guarantees
The New Notes will be guaranteed, jointly and severally, by NNC
and, initially, by NNI. If, for any reason, the Company does not
make any required payment in respect of any guaranteed New Notes
when due, whether on the normal due date, on acceleration,
redemption or otherwise, the Guarantors with respect to the
Guarantees that are then in effect will cause the payment to be
made to or to the order of the Trustee. Each Guarantee will be
the direct, unconditional, unsecured and unsubordinated
obligation of the respective Guarantor and will rank equally and
ratably without preference among themselves and at least equally
with other senior unsecured obligations of the respective
Guarantor, including the guarantees of the Old Notes, except to
the extent prescribed by law.
The Guarantee of a Guarantor will be released automatically with
respect to any series of Notes upon defeasance of such series of
Notes as provided below under the caption
Defeasance or satisfaction and discharge
of such series of Notes as provided in the Indenture.
In addition, the Guarantee of NNI will be released with respect
to any series of Notes upon the occurrence of a Suspension
Period. However, upon the occurrence of a Reversion Date (as
defined below), NNI will enter into a supplemental indenture
guaranteeing such series of Notes on terms substantially similar
to those under NNIs Guarantee.
At such time as NNIs Guarantee is released with respect to
any series of Notes, NNI will no longer be considered a
Guarantor of such series of Notes.
41
Additional
Amounts
All payments made by the Company or the Guarantors under or in
respect of the New Notes or Guarantees will be made without
withholding or deduction for or on account of any present or
future taxes, duties, assessments or governmental charges
imposed or levied by or on behalf of the government of any
jurisdiction, including Canada or any province or territory
thereof, or by any authority or agency therein or thereof having
power to tax, all of which are herein referred to as
Taxes, unless the Company or such Guarantor is
required to withhold or deduct Taxes by law or by the
interpretation or administration thereof by the relevant
governmental authority. If the Company or any Guarantor is
required to withhold or deduct any amount for or on account of
Taxes from any payment made under or in respect of the New Notes
or the Guarantees, the Company or such Guarantor will pay such
additional amounts, which we refer to as Additional Amounts, as
may be necessary so that the net amount received by each Holder
of a New Note (including Additional Amounts) after such
withholding or deduction will not be less than the amount the
Holder would have received if such Taxes had not been withheld
or deducted. However, no Additional Amounts will be payable with
respect to a payment made to a Holder of a New Note, which we
refer to as an Excluded Holder, in respect of a beneficial
owner, (i) with which the Company or such Guarantor does
not deal at arms length (within the meaning of the Income
Tax Act (Canada)) at the time of making such payment,
(ii) which is subject to such Taxes by reason of its being
connected presently or formerly with any jurisdiction, including
Canada or any province or territory thereof, otherwise than by
reason of the Holders purchase of the New Notes, the
holding of New Notes or the receipt of payments in respect of
the New Notes, (iii) which presents such New Note for
payment (where presentation is required) more than 30 days
after the relevant date (except to the extent that the Holder
thereof would have been entitled to such Additional Amounts on
presenting a New Note for payment on the last day of such
30-day
period); for this purpose, the relevant date in
relation to any payments on any New Note means: (a) the due
date for payment thereof, or (b) if the full amount of the
monies payable on such date has not been received by the Trustee
on or prior to such due date, the date on which the full amount
of such monies has been so received and notice to that effect
has been duly given to Holders of New Notes in accordance with
the Indenture or (iv) who could lawfully avoid or reduce
(but has not so avoided or reduced) such withholding or
deduction by complying, or procuring that any third party
comply, with any statutory requirements or by making, or
procuring that any third party make, a declaration of
non-residence, eligibility for treaty benefits or other similar
claim for exemption or reduction to any relevant tax authority,
the Company and such Guarantor as appropriate;
provided
that in the case of a reduction the Holder shall be entitled
to receive Additional Amounts up to the reduced amount that
would have applied had it made the appropriate claim. The
Company and the applicable Guarantor will also make such
withholding or deduction and remit the full amount deducted or
withheld to the relevant authority in accordance with applicable
law. The Company will furnish to the Trustee, within
30 days after the date the payment of any Taxes is due
pursuant to applicable law, certified copies of tax receipts
evidencing that such payment has been made by the Company or the
applicable Guarantor or other evidence of such payment
satisfactory to the Trustee. If any Holder pays any Taxes or
other amounts in respect of payments that the Company or
Guarantors pay to such Holder, the Company and each Guarantor
shall indemnify and hold harmless each Holder of New Notes
(other than an Excluded Holder) and upon written request
reimburse each such Holder for the amount of (x) any Taxes
so levied or imposed and paid by such Holder as a result of
payments made under or with respect to the New Notes or the
Guarantees, and (y) any Taxes levied or imposed and paid by
such Holder with respect to any reimbursement under
(x) above, but excluding any such Taxes on such
Holders net income or capital. A certificate of the Holder
(or the Trustee on behalf of the Holder) accompanying the
written request and containing reasonable detail as to the
amount of Taxes to be reimbursed shall be determinative, absent
manifest error, of the amount due from the Company and
Guarantors to the Holder under this indemnification.
At least 30 days prior to each date on which any payment
under or with respect to the New Notes or the Guarantees is due
and payable, if the Company or any Guarantor is obligated to pay
Additional Amounts with respect to such payment, the Company
will deliver to the Trustee an officers certificate
stating the fact that such Additional Amounts will be payable,
the amounts so payable and that the Company or such Guarantor,
as the case may be, will remit such deduction or withholding to
the appropriate tax authority, and will set forth such other
information necessary to enable the Trustee to pay such
Additional Amounts to Holders of the
42
New Notes on the relevant date. All references in this
prospectus to the payment of principal of, premium or any other
amount, if any, and interest on, any New Note or Guarantee shall
be deemed to include the payment of Additional Amounts to the
extent that, in such context, Additional Amounts are, were or
would be payable.
For a discussion of the exemption from Canadian withholding
taxes that should be applicable to payments under or with
respect to the New Notes, see Certain Canadian Federal
Income Tax Considerations.
Sinking
Fund
The New Notes will not be entitled to the benefit of any
mandatory sinking fund.
Optional
Redemption
Except as described below, the New Notes are not redeemable at
the option of the Company.
New 2016 Fixed Rate Notes.
At any time on or
after July 15, 2011, the Company may redeem the New 2016
Fixed Rate Notes at its option, in whole at any time or in part
from time to time, upon not less than 30 nor more than
60 days notice, at the following redemption prices
(expressed as percentages of the principal amount thereof) if
redeemed during the twelve-month period commencing on July 15 of
the years set forth below:
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Redemption
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Year
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Price
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2011
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105.375
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%
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2012
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103.583
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%
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2013
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101.792
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%
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2014 and each year thereafter
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100.000
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%
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In addition, the Company must pay accrued and unpaid interest on
the New 2016 Fixed Rate Notes redeemed to the applicable date of
redemption.
At any time prior to July 15, 2011, the Company may redeem
the New 2016 Fixed Rate Notes at its option, in whole at any
time or in part from time to time, upon not less than 30 nor
more than 60 days notice, at a price equal to 100% of
the principal amount thereof plus the 2016 Applicable Premium
(as defined below) as of, and accrued but unpaid interest, if
any, to, the date of redemption (subject to the right of Holders
of record on the relevant record date to receive interest due on
the relevant interest payment date).
2016 Applicable Premium
means with respect to
any New 2016 Fixed Rate Note at any redemption date, the greater
of (1) 1.0% of the principal amount of such New 2016 Fixed
Rate Note; and (2) the excess of (a) the present value
at such redemption date of (i) the redemption price of such
New 2016 Fixed Rate Note on July 15, 2011 (such redemption
price being set forth in the table above under the heading
New 2016 Fixed Rate Notes) plus (ii) all
required remaining scheduled interest payments due on the New
2016 Fixed Rate Note through July 15, 2011 (other than
interest accrued to the redemption date), computed using a
discount rate equal to the Treasury Rate (as defined below) plus
50 basis points; over (b) the principal amount of such
New 2016 Fixed Rate Note on such redemption date. Calculation of
the 2016 Applicable Premium will be made by the Company or on
behalf of the Company by such Person as the Company shall
designate;
provided
that such calculation shall not be a
duty or obligation of the Trustee or the Calculation Agent.
New 2013 Fixed Rate Notes.
The Company may
redeem the New 2013 Fixed Rate Notes at its option, in whole at
any time or in part from time to time, upon not less than 30 nor
more than 60 days notice, at a price equal to 100% of
the principal amount thereof plus the 2013 Applicable Premium
(as defined below) as of, and accrued but unpaid interest, if
any, to, the date of redemption (subject to the right of Holders
of record on the relevant record date to receive interest due on
the relevant interest payment date).
2013 Applicable Premium
means with respect to
any New 2013 Fixed Rate Note at any redemption date, the greater
of (1) 1.0% of the principal amount of such New 2013 Fixed
Rate Note; and (2) the excess of (a) the present value
at such redemption date of (i) the principal amount of such
New 2013 Fixed Rate Note on July 15, 2013 plus
(ii) all required remaining scheduled interest payments due
on the New 2013 Fixed Rate
43
Note through July 15, 2013 (other than interest accrued to
the redemption date), computed using a discount rate equal to
the Treasury Rate (as defined below) plus 50 basis points;
over (b) the principal amount of such New 2013 Fixed Rate
Note on such redemption date. Calculation of the 2013 Applicable
Premium will be made by the Company or on behalf of the Company
by such Person as the Company shall designate;
provided
that such calculation shall not be a duty or obligation of the
Trustee or the Calculation Agent.
Treasury Rate
means, with respect to any
redemption date, the yield to maturity at the time of
computation (which shall be at approximately 11:00 a.m. on
the second business day preceding the redemption date) of United
States Treasury securities with a constant maturity (as compiled
and published in the most recent Federal Reserve Statistical
Release H.15(519) that has become publicly available at least
two business days prior to such redemption date (or, if such
Statistical Release is no longer published, any publicly
available source of similar market data)) most nearly equal to
the period from such redemption date to July 15, 2011 with
respect to the New 2016 Fixed Rate Notes, or the 2016 Fixed Rate
Notes Applicable Period, and to July 15, 2013 with respect
to the New 2013 Fixed Rate Notes, or the 2013 Fixed Rate Notes
Applicable Period;
provided
that if the 2016 Fixed Rate
Notes Applicable Period or the 2013 Fixed Rate Notes Applicable
Period, as the case may be, is not equal to the constant
maturity of the United States Treasury security for which a
weekly average yield is given, the Treasury Rate shall be
obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given,
except that if the 2016 Fixed Rate Notes Applicable Period or
the 2013 Fixed Rate Notes Applicable Period, as the case may be,
is less than one year, the weekly average yield on actually
traded United States Treasury securities adjusted to a constant
maturity of one year shall be used.
Optional
Redemption with Qualified Equity Proceeds
On or prior to July 15, 2009, the Company may, at its
option, use Qualified Equity Proceeds (as defined below) to
redeem up to 35% of the original aggregate principal amount of
any series of Notes (including any Additional Notes of such
series), in whole at any time or in part from time to time, at a
redemption price equal to (i) in the case of the 2016 Fixed
Rate Notes, 110.750% of the principal amount thereof,
(ii) in the case of the 2013 Fixed Rate Notes, 110.125% of
the principal amount thereof and (iii) in the case of the
Floating Rate Notes, 100% of the principal amount so redeemed
plus a premium equal to the interest rate per annum of such
Floating Rate Notes applicable on the date of redemption, in
each case, plus accrued and unpaid interest thereon, if any, to
the applicable date of redemption;
provided
that, in each
case, the Company makes such redemption not more than
90 days after the receipt by NNC or the Company of such
Qualified Equity Proceeds.
Qualified Equity Proceeds
means the net cash
proceeds from any issuance or sale of Qualified Capital Stock of
NNC or the Company, other than issuances or sales to NNC or any
Subsidiary of NNC.
Optional
Redemption for Changes in Applicable Withholding Taxes
The Notes of each series are also subject to redemption in
whole, but not in part, at the Companys option at any time
in cash, on not less than 30 nor more than 60 days
notice to the Holders, at a price equal to 100% of the aggregate
principal amount, together with accrued and unpaid interest to
the date fixed for redemption and all Additional Amounts then
due or becoming due on the redemption date, in the event the
Company or a Guarantor is, has become or would become obligated
to pay, on the next date on which any amount would be payable by
the Company or the Guarantor, as the case may be, with respect
to the Notes of such series, any Additional Amount as a result
of an actual or proposed change or amendment in the laws
(including any regulations promulgated thereunder) or treaties
of any jurisdiction (including Canada or any province or
territory thereof) or any change in or new or different position
regarding the application, interpretation or administration of
such laws, treaties or regulations (including a holding,
judgment or order by a court of competent jurisdiction), which
change is announced or becomes effective on or after the Issue
Date;
provided
that the Company delivers to the Trustee
an opinion of counsel attesting to such change or amendment.
44
Selection
and Notice of Redemption
In the event that the Company chooses to redeem less than all of
the Notes of any series, selection of the Notes of such series
for redemption will be made by the Trustee either:
(1) in compliance with the requirements of the principal
national securities exchange, if any, on which the Notes of such
series are listed; or
(2) if such series is not listed on a national securities
exchange, on a
pro rata
basis, by lot or by such method
as the Trustee shall deem fair and appropriate.
No Notes of a principal amount of $1,000 or less shall be
redeemed in part. If a partial redemption is made with Qualified
Equity Proceeds, the Trustee will select the Notes of such
series only on a
pro rata
basis or on as nearly a
pro
rata
basis as is practicable (subject to procedures of the
depositary).
Notice of redemption will be mailed by first-class mail at least
30 but not more than 60 days before the applicable
redemption date to each Holder of Notes to be redeemed at its
registered address. If the Notes are to be redeemed in part
only, then the notice of redemption must state the portion of
the principal amount thereof to be redeemed. A new Note in a
principal amount equal to the unredeemed portion thereof will be
issued in the name of the Holder thereof upon cancellation of
the original Note (or appropriate adjustments to the amount and
beneficial interests in a global Note will be made). On and
after the applicable redemption date, interest will cease to
accrue on Notes or portions thereof called for redemption as
long as the Company has deposited with the paying agent funds in
satisfaction of the applicable redemption price.
Change of
Control
Upon the occurrence of a Change of Control, the Company will be
required to make an offer to purchase each Holders Notes
pursuant to the offer described below (the
Change of
Control Offer
), at a purchase price in cash equal to
101% of the principal amount thereof, together with accrued and
unpaid interest to the date of purchase.
Within 30 days following the date upon which the Change of
Control occurs, the Company must send, or cause the Trustee to
send, by first-class mail, a notice to each Holder, with a copy
to the Trustee, which notice shall govern the terms of the
Change of Control Offer. Such notice shall state, among other
things, the purchase date (the
Change of Control
Payment Date
), which must be no earlier than
30 days nor later than 60 days after the date such
notice is mailed, other than as may be required to comply with
any applicable laws. Each Holder who accepts the Change of
Control Offer will be required to deliver the form entitled
Option of Holder to Elect Purchase on the reverse of
the Note completed and specifying the portion (in integral
multiples of $1,000) of such Holders Notes that it agrees
to sell to the Company pursuant to the Change of Control Offer,
to the paying agent at the address specified in the notice prior
to the close of business on the third business day prior to the
Change of Control Payment Date.
If a Change of Control Offer is made, there can be no assurance
that the Company will have available funds sufficient to pay the
purchase price for all the Notes that might be delivered by
Holders seeking to accept the Change of Control Offer. In the
event the Company is required to purchase outstanding Notes
pursuant to a Change of Control Offer, the Company expects that
it would seek third-party financing to the extent it does not
have available funds to meet its purchase obligations. However,
there can be no assurance that the Company would be able to
obtain such financing. In addition, there can be no assurance
that the Company would be able to obtain the consents necessary
to consummate a Change of Control Offer from the lenders under
agreements governing outstanding Funded Debt that may in the
future prohibit the Change of Control Offer. The failure to
consummate a Change of Control Offer would constitute an Event
of Default under the Indenture. See Risk
Factors The Company may be unable to purchase the
Notes upon a Change of Control for more information.
One of the events that constitutes a Change of Control under the
Indenture is the disposition of all or substantially
all of NNCs or the Companys assets. This term
has not been interpreted under New York law, which is the
governing law of the Indenture, to represent a specific
quantitative test. As a consequence, if
45
Holders of the Notes assert that the Company is required to make
a Change of Control Offer and the Company elects to contest such
assertion, there is uncertainty as to how a court interpreting
New York law would interpret the term.
Neither the Boards of Directors of NNC or the Company nor the
Trustee may waive the covenant of the Company to make a Change
of Control Offer following a Change of Control. Restrictions in
the Indenture described herein on the ability of NNC, the
Company and its Subsidiaries to incur additional Funded Debt, to
grant Liens on the property of NNC, the Company and the
Restricted Subsidiaries and to make Restricted Payments may also
make more difficult or discourage a takeover of NNC or the
Company, whether favored or opposed by the management or
shareholders of NNC or the Company. There can be no assurance
that the Company or the acquiring party will have sufficient
financial resources to effect a Change of Control Offer. Such
restrictions may, in certain circumstances, make more difficult
or discourage any leveraged buyout of NNC or the Company or any
of their Subsidiaries by their respective management. However,
the Indenture may not afford the Holders protection in all
circumstances from the adverse aspects of a highly leveraged
transaction, reorganization, amalgamation, restructuring, merger
or similar transaction.
The Company will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations
are applicable in connection with the purchase of Notes pursuant
to a Change of Control Offer. To the extent that the provisions
of any securities laws or regulations conflict with the
Change of Control provisions of the Indenture, the
Company shall comply with the applicable securities laws and
regulations and shall not be deemed to have breached its
obligations under the Change of Control provisions
of the Indenture by virtue thereof.
The Change of Control provisions described above
will apply during any Suspension Period.
Suspension
Period
During each Suspension Period, the provisions of the Indenture
described under Certain Covenants that will Cease to Apply
During Suspension Period will not apply. The provisions of
the Indenture described under Certain Covenants Applicable
at All Times will apply at all times during any Suspension
Period so long as any securities remain outstanding thereunder.
Suspension Period
means, for any series of
Notes, any period (a) beginning on the date that:
(1) the Notes of such series have Investment Grade Status;
provided
that prior to the assignment of the ratings
contemplated by the definition of Investment Grade Status, the
Company has advised Moodys and S&P that the covenants
under Certain Covenants that will Cease to Apply During
Suspension Period will not apply during such Suspension
Period;
(2) no Default or Event of Default has occurred and is
continuing; and
(3) the Company has delivered an officers certificate
to the Trustee certifying that the conditions set forth in
clauses (1) and (2) above are satisfied; and
(b) ending on the date (the
Reversion
Date
) that the Notes of such series cease to have the
applicable rating from either Moodys or S&P specified
in the definition of Investment Grade Status;
provided
that solely for the purpose of determining whether and when
the Reversion Date shall have occurred, a series of Notes shall
be deemed to have Investment Grade Status if clauses (i)
and (ii) of the definition of Investment Grade Status are
otherwise satisfied, notwithstanding that either Moodys
and/or
S&P shall have announced a negative outlook with respect to
such series of Notes.
On each Reversion Date, (i) all Funded Debt of NNC or any
Subsidiary of NNC incurred during the Suspension Period prior to
such Reversion Date will be deemed to have been outstanding on
the Issue Date and classified as permitted under clause (3)
of the definition of Permitted Funded Debt, and (ii) all
Liens granted or created by any Subsidiary of NNC (other than
the Company or any Subsidiary that was a Restricted Subsidiary
during such Suspension Period) during the Suspension Period
prior to such Reversion Date (other than any Lien granted or
created in connection with a transaction that directly results
in a downgrade in the rating of the Notes of any series from
S&P or Moodys to below the applicable rating
specified in the
46
definition of Investment Grade Status) will be deemed to have
been outstanding on the Issue Date and classified as permitted
under clause (10) of the definition of Permitted Liens.
For purposes of calculating the amount available to be made as
Restricted Payments under clause (iii) of the first
paragraph of the Limitation on Restricted Payments
covenant, calculations under that clause will be made with
reference to the Measurement Date as set forth in that clause.
Accordingly, Restricted Payments made during the Suspension
Period not otherwise permitted pursuant to any of
clauses (1) through (11) under the second paragraph
under the Limitation on Restricted Payments covenant
will reduce the amount available to be made as Restricted
Payments under clause (iii) of the first paragraph of such
covenant;
provided
that the amount available to be made
as Restricted Payments on the Reversion Date shall not be
reduced to below zero solely as a result of such Restricted
Payments, but may be reduced to below zero as a result of
cumulative Consolidated Net Income for the purpose of
sub-clause (w) of clause (iii) of the first paragraph
of such covenant being a loss, and the items specified in
sub-clauses (w) through (z) of clause (iii) of
the first paragraph of such covenant that occur during the
Suspension Period will increase the amount available to be made
as Restricted Payments under clause (iii) of the first
paragraph of such covenant. Any Restricted Payments made during
the Suspension Period that would have been made pursuant to
clause (11) of the second paragraph under the
Limitation on Restricted Payments covenant if such
covenant were then applicable, shall reduce the amounts
permitted to be incurred under such clause (11) on the
Reversion Date.
Certain
Covenants that Will Cease to Apply During Suspension
Period
Set forth below are summaries of certain covenants contained in
the Indenture that will apply at all times so long as any
securities remain outstanding thereunder, except during any
Suspension Period.
Limitation on Incurrence of Additional Funded
Debt.
(a) The Company and the Guarantors
will not, and will not permit any of their Subsidiaries to,
directly or indirectly, create, incur, assume, guarantee,
acquire, become liable, contingently or otherwise, with respect
to, or otherwise become responsible for the payment of
(collectively,
incur
) any Funded Debt (other
than Permitted Funded Debt);
provided
that the Company,
any Guarantor and any other Subsidiary of NNC may incur Funded
Debt (including, without limitation, Acquired Funded Debt), if
on the date of the incurrence of such Funded Debt, after giving
effect to the incurrence thereof, the Consolidated Fixed Charge
Coverage Ratio is greater than 2.0 to 1.0.
(b) The Company and the Guarantors will not, directly or
indirectly, incur any Funded Debt which by its terms (or by the
terms of any agreement governing such Funded Debt) is
subordinated in right of payment to any other Funded Debt of the
Company or such Guarantors, unless such Funded Debt is also by
its terms (or by the terms of any agreement governing such
Funded Debt) made expressly subordinate to the Notes and the
Guarantees, as applicable, to the same extent and in the same
manner as such Funded Debt is subordinated to other Funded Debt
of the Company and the Guarantors, as applicable.
Limitation on Restricted Payments.
The Company
and the Guarantors will not, and will not cause or permit any of
their Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any distribution
(other than dividends or distributions payable in Qualified
Capital Stock of NNC) on or in respect of shares of NNCs
Capital Stock or the Companys Preferred Stock to holders
of such Capital Stock or Preferred Stock, as the case may be, in
their capacity as such; or
(2) purchase, redeem or otherwise acquire or retire for
value any Capital Stock of NNC or any Preferred Stock of the
Company or any warrants, rights or options to purchase or
acquire shares of any class of such Capital Stock or Preferred
Stock or make any payments with respect to Synthetic Purchase
Agreements,
(each of the foregoing actions set forth in clauses (1) and
(2) being referred to as a
Restricted
Payment
), if at the time of such Restricted Payment or
immediately after giving effect thereto,
(i) a Default or an Event of Default shall have occurred
and be continuing;
47
(ii) the Company would not be able to incur at least $1.00
of additional Funded Debt (other than Permitted Funded Debt) in
compliance with the Limitation on Incurrence of Additional
Funded Debt covenant; or
(iii) the aggregate amount of Restricted Payments
(including such proposed Restricted Payment) made subsequent to
the Measurement Date shall exceed the sum, without duplication
(the
Restricted Payments Basket
), of:
(w) 50% of the cumulative Consolidated Net Income of NNC
(or if cumulative Consolidated Net Income shall be a loss, minus
100% of such loss) earned subsequent to the Measurement Date and
on or prior to the last day of the most recent fiscal quarter
for which consolidated financial information for NNC is publicly
available (the
Reference Date
) (treating such
period as a single accounting period); plus
(x) 100% of the aggregate net cash proceeds received by NNC
from any Person (other than a Subsidiary of NNC) or the Company
from any Person (other than NNC or any other Subsidiary of NNC)
from the issuance and sale subsequent to the Measurement Date
and on or prior to the Reference Date of Qualified Capital Stock
of NNC or Preferred Stock (other than Disqualified Capital
Stock) of the Company or warrants, options or other rights to
acquire Qualified Capital Stock of NNC (but excluding any debt
security that is convertible into, or exchangeable for,
Qualified Capital Stock); plus
(y) 100% of the aggregate net cash proceeds of any equity
contribution received by NNC or the Company from a holder of
NNCs or the Companys Capital Stock (other than an
equity contribution received by the Company from NNC) following
the Measurement Date; plus
(z) the amount by which Funded Debt of NNC, the Company or
another Subsidiary of NNC is reduced on NNCs consolidated
balance sheet subsequent to the Measurement Date upon the
conversion or exchange (other than by a Subsidiary of the
Company) of such Funded Debt for Qualified Capital Stock of NNC
or Preferred Stock (other than Disqualified Capital Stock) of
the Company (less the amount of any cash, or the fair value of
any other property, distributed by NNC, the Company or another
Subsidiary of NNC upon such conversion or exchange).
Notwithstanding the foregoing, the provisions set forth in the
preceding paragraphs shall not prohibit:
(1) the payment of any dividend within 60 days after
the date of declaration of such dividend if the dividend would
have been permitted on the date of declaration;
(2) the purchase, defeasance, repurchase, prepayment,
redemption or other acquisition or retirement for value of
Capital Stock of NNC or Preferred Stock (other than Disqualified
Capital Stock) of the Company or any warrants, rights or options
to purchase or acquire shares of any class of such Capital Stock
or Preferred Stock in exchange for, or out of the proceeds of
the substantially concurrent sale of, Qualified Capital Stock of
NNC or Preferred Stock (other than Disqualified Capital Stock)
of the Company (other than Capital Stock issued or sold to NNC
or a Subsidiary of NNC);
provided
that the net cash
proceeds from such exchange or sale shall be excluded from the
calculations pursuant to clause (iii)(x) of the preceding
paragraph;
(3) the repurchase or other acquisition of Capital Stock of
NNC or any warrants, rights or options to purchase or acquire
shares of any such Capital Stock or securities convertible into
Capital Stock of NNC, from or on behalf of current or former
employees, directors, consultants, or contractors of NNC or any
of its Subsidiaries (or permitted transferees of such current or
former employees, directors, consultants or contractors),
pursuant to the terms of the agreements (including employment,
consulting or severance agreements) or plans (or amendments
thereto) under which such individuals purchase or sell, or are
granted the option to purchase or sell, shares of such Capital
Stock;
(4) the redemption by NNC of any rights to purchase shares
of Common Stock of NNC outstanding from time to time under the
amended and restated shareholder rights plan agreement between
NNC and Computershare Trust Company of Canada, as rights
agent, dated as of February 14, 2003, as the same
48
may be further amended, restated or replaced from time to time,
in accordance with the terms thereof;
provided
that such
rights are redeemed for nominal consideration;
(5) payments to holders or former holders of Capital Stock
of NNC, the Company or any other Subsidiary of NNC pursuant to a
statutory dissent right or appraisal remedy;
(6) payments to holders of Capital Stock (or to the holders
of Funded Debt or Disqualified Capital Stock that is convertible
into or exchangeable for Capital Stock upon such conversion or
exchange) in lieu of the issuance of fractional shares;
(7) payments to holders of Capital Stock of NNC under any
stock purchase plan or similar employee or director benefit plan
in settlement of fractional shares issued under such plan;
(8) the declaration and payment by NNC or the Company of
regularly scheduled cash dividends with respect to, and the
redemption by NNC or the Company on a scheduled mandatory
redemption date of, any Disqualified Capital Stock (including
Existing Preferred Stock) or Designated Qualified Preferred
Stock;
(9) the declaration and payment by NNC or the Company of
regularly scheduled cash dividends with respect to, and the
redemption by NNC or the Company on a scheduled mandatory
redemption date of, any Qualified Capital Stock (other than
Designated Qualified Preferred Stock) issued after the Issue
Date in an amount not in excess of the aggregate net cash
proceeds received by NNC or the Company from any Person (other
than NNC or a Subsidiary of NNC) from such issuance;
provided
that the amount of Restricted Payments made pursuant to this
clause (9) shall be excluded from the calculation pursuant
to clause (iii)(x) of the preceding paragraph;
(10) any payment or distribution to holders or former
holders of Capital Stock of NNC in connection with the
settlement of, or satisfaction of a judgment resulting from, any
shareholder litigation or regulatory or enforcement
proceeding; and
(11) any other Restricted Payments in an aggregate amount
which, when taken together with all other Restricted Payments
pursuant to this clause (11), does not exceed $25,000,000.
Notwithstanding the foregoing, none of NNC, the Company or any
other Subsidiary of NNC may make any Restricted Payment in
reliance on clause (11) if, after giving effect to such
Restricted Payment, a Default or Event of Default shall have
occurred and be continuing. In calculating the aggregate amount
of Restricted Payments made subsequent to the Issue Date for
purposes of clause (iii) of the second preceding paragraph
of this covenant, amounts expended pursuant to clause (1)
of the immediately preceding paragraph shall be included in such
calculation and amounts expended pursuant to clauses (2)
through (11) of the immediately preceding paragraph shall
be excluded in such calculation.
Certain
Covenants Applicable at All Times
Set forth below are summaries of certain covenants contained in
the Indenture that, except as expressly indicated, will apply at
all times so long as any securities remain outstanding
thereunder.
Negative Pledge.
NNC and the Company will not
and will not permit any Restricted Subsidiary to:
(1) issue, assume or guarantee any Funded Debt that is
secured by a Lien upon any property of NNC, the Company or any
Restricted Subsidiary, whether now owned or hereafter
acquired; or
(2) secure any Funded Debt by a Lien upon any property of
NNC, the Company or any Restricted Subsidiary, whether now owned
or hereafter acquired;
unless any outstanding securities under the Indenture, including
the Notes, are concurrently secured equally and ratably with
such Funded Debt;
provided
that the foregoing
restrictions shall not apply to Funded Debt secured by Permitted
Liens.
49
Permitted Lien
means:
(1) any Lien existing on property at the time of the
acquisition of that property by NNC, the Company or the relevant
Restricted Subsidiary;
(2) any Lien on property that is incurred after the Issue
Date to secure or provide for the payment of the purchase price
of the property or the cost of construction or improvement
thereon;
(3) any Lien on property of a Person existing at the time
that Person is liquidated, dissolved or merged into, or
amalgamated or consolidated with, NNC, the Company or any
Restricted Subsidiary, or at the time the properties of or
equity interests in the Person are sold, leased or otherwise
transferred to NNC, the Company or any Restricted Subsidiary;
(4) any Lien securing intercompany Funded Debt among or
between NNC, the Company
and/or
the
Restricted Subsidiaries;
(5) deposits of cash, cash equivalents or investment
securities against which the lender of any Credit Enhanced
Foreign Subsidiary Debt has a Lien or right of set off;
(6) any Lien on property of a Foreign Subsidiary securing
any Funded Debt incurred pursuant to clause (9) of the
definition of Permitted Funded Debt;
(7) Liens in favor of the United States of America or any
State thereof, Canada or any Province or territory thereof, or
any department, agency or instrumentality or political
subdivision thereof, or in favor of any other country or
political subdivision, to secure partial, progress, advance or
other payments pursuant to any contract or statute or to secure
any Funded Debt incurred or guaranteed for the purpose of
financing or refinancing all or any part of the purchase price
of the property, shares of capital stock or indebtedness subject
to such Liens, or the cost of constructing or improving the
property subject to such Liens (including, without limitation,
Liens incurred in connection with pollution control, industrial
revenue or similar financings or relating to the development,
restoration, demolition or remediation of property);
(8) any Lien created by or resulting from litigation or
other proceedings against, or upon property of, NNC, the Company
or any Restricted Subsidiary, or any Lien securing appeal bonds
(or letters of credit or other similar instruments issued in
support of or in lieu of appeal bonds) in respect of judgments,
in each case, or any Lien for workmens compensation awards
or similar awards, so long as the finality of such judgment or
award is being contested and execution thereon is stayed or such
Lien relates to a final unappealable judgment which is satisfied
within 30 days of such judgment or any Lien incurred by
NNC, the Company or any Restricted Subsidiary for the purpose of
obtaining a stay or discharge in the course of any litigation or
other proceeding;
(9) any other Liens securing Funded Debt of any Foreign
Subsidiary;
provided
that the aggregate outstanding
principal amount of Funded Debt secured pursuant to this
clause (9) by any individual Foreign Subsidiary would not,
after giving effect to the relevant transaction, exceed
$5,000,000;
(10) Liens existing on the Issue Date and any extension,
renewal or replacement in whole or in part of any Lien existing
on the Issue Date or referred to in the above exceptions, so
long as the total amount of secured Funded Debt does not
increase, and the property securing the Funded Debt is not
expanded, as a result of the extension, renewal or
replacement; and
(11) Managed Service Contract Liens.
Notwithstanding the foregoing, NNC, the Company and any
Restricted Subsidiary may issue, assume or guarantee Funded Debt
secured by a Lien upon any of their property that would
otherwise be subject to the foregoing restrictions, and may
carry out any other transactions that would otherwise be subject
to the foregoing restrictions, so long as the aggregate amount
of all such secured Funded Debt incurred pursuant to this
sentence would not, after giving effect to the relevant
transaction, exceed 10% of NNCs Consolidated Net Tangible
Assets on or prior to the earlier of (a) September 2,
2008 or (b) the refinancing or repayment (including by
redemption) in full of the 2008 Convertible Notes and 15%
thereafter.
50
Amalgamation, Merger, Conveyance, Transfer or
Lease.
Each of NNC, the Company and, during any
period in which NNI is a Guarantor, NNI, under the terms of the
Indenture, has covenanted in the Indenture that it will not
amalgamate or merge with any other corporation or enter into any
reorganization or arrangement or effect any conveyance, transfer
or lease of all or substantially all of its and its
Subsidiaries assets, taken as a whole, unless specified
conditions are satisfied. These conditions are as follows:
(1) either (a) it is the surviving Person or one of
the continuing Persons or (b) the successor corporation (or
the Person that leases or that acquires by conveyance or
transfer all or substantially all of its and its
Subsidiaries assets, taken as a whole) expressly assumes,
by supplemental Indenture, its obligations under the
Indenture; and
(2) NNC, the Company, NNI or any successor Person, as the
case may be, are not immediately after the transaction in
Default under the Indenture or any outstanding securities under
the Indenture, including the Notes.
Events of
Default
The following events are defined in the Indenture as
Events of Default
with respect to any series
of Notes:
(1) the failure to pay the principal of the Notes of that
series when such principal becomes due and payable, whether at
maturity, upon redemption or otherwise;
(2) the failure to pay interest on the Notes of that series
when the same becomes due and payable and the Default continues
for a continuous period of 30 days;
(3) a Default by NNC, the Company, or during any period in
which NNI is a Guarantor, NNI, in the performance or observance
of any of their respective covenants, agreements or other
obligations set forth in the Indenture for a continuous period
of 90 days after the Company or such Guarantor receives
written notice specifying the Default (and demanding that such
Default be remedied) from the Holders of at least 25% of the
then-outstanding principal amount of the Notes of such series;
(4) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any Guarantor;
(5) a Default by NNC, the Company, or during any period in
which NNI is a Guarantor, NNI, under a single obligation in
respect of Funded Debt that exceeds on its face $100,000,000 in
principal amount which results in the acceleration of the due
date of that Funded Debt, and this acceleration is not rescinded
or annulled within 10 days after notice from Holders of at
least 25% of the then-outstanding principal amount of the Notes
of such series has been given;
(6) any Guarantee shall cease to be in full force and
effect (other than in accordance with the terms of the
Indenture) or any Guarantor denies or disaffirms its obligations
under its Guarantee;
(7) one or more judgments in an aggregate amount in excess
of $100,000,000 shall have been rendered against NNC, the
Company or, during any period in which NNI is a Guarantor, NNI,
and such judgments remain undischarged, unpaid in accordance
with its or their respective terms or unstayed for a period of
90 days after such judgment or judgments become final and
non-appealable; and
(8) a failure by the Company to make a Change of Control
Offer.
An Event of Default with respect to a particular series of Notes
may, but will not necessarily, constitute an Event of Default
with respect to any other series of Notes. The Company is
required to file with the Trustee annual officers
certificates as to the absence of specified Defaults under the
Indenture.
If an Event of Default with respect to a series of Notes occurs
and is continuing, either the Trustee or the Holders of not less
than 25% in principal amount of the then-outstanding Notes of
the affected series may declare the principal of, and premium,
if any, on, all Notes of the series to be due and payable,
together with accrued interest. The Indenture provides that, in
certain cases, the Holders of a majority in principal amount of
51
the then-outstanding Notes of a series may on behalf of the
Holders of all Notes of that series waive any past Default or
Event of Default and rescind and annul any such declaration and
its consequences.
The Trustee may require indemnification from the Holders of
Notes of a series before proceeding to exercise any right or
power under the Indenture at the request of those Holders. The
Holders of a majority in principal amount of the
then-outstanding Notes of any series may:
(1) direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on it with respect to the Notes of
that series, and
(2) take any other action authorized to be taken under the
Indenture or under applicable law. However, the Trustee may
refuse to follow any direction that conflicts with law or the
Indenture or is unduly prejudicial to the rights of other
Holders.
No Holder will be entitled to pursue any remedy with respect to
the Indenture unless the Trustee fails to act for 60 days
after it is given:
(1) a notice of Default by that Holder,
(2) a request to enforce the Indenture by the holders of
not less than 25% in aggregate principal amount of all of the
then-outstanding securities issued under the Indenture,
including the Notes (treated as a single class), and
(3) an indemnity in favor of the Trustee, satisfactory to
the Trustee,
and during this
60-day
period the holders of a majority in principal amount of all of
the then-outstanding securities issued under the Indenture
(treated as a single class) do not give a direction to the
Trustee that is inconsistent with the enforcement request. These
provisions will not prevent any Holder of Notes from enforcing
payment of the principal of (and premium, if any) and interest
on the Notes at the relevant due dates.
If an Event of Default with respect to a series of Notes occurs
and is continuing, the Trustee will mail to the Holders of those
Notes a notice of the Event of Default within 90 days after
it occurs. However, except in the case of a Default in any
payment in respect of a series of Notes, the Trustee shall be
protected in withholding notice of an Event of Default if it
determines in good faith that this is in the interests of the
Holders of the relevant Notes.
Modification
of the Indenture
The Company and the Trustee may modify the Indenture without the
consent of Holders to make certain changes, including:
(1) to reflect the succession of another corporation to the
Company or any Guarantor and the assumption of the Notes or the
Guarantees of the Notes, as applicable, by the successor;
(2) to add covenants to any or all Notes or surrender any
right or power of the Company or any Guarantor;
(3) to add additional Events of Default to any or all Notes;
(4) to change or eliminate any restrictions on the payment
of principal of (or premium, if any, on) Notes;
(5) to change or eliminate any provision of the Indenture;
provided
that any such modification shall only become
effective when there are no Notes outstanding that were issued
prior to such modification;
(6) to establish the form or terms of Notes of any series;
(7) to reflect the acceptance of a successor Trustee or to
facilitate the administration of the trust under more than one
Trustee;
(8) to secure the Notes;
52
(9) to add an additional Guarantor in respect of the Notes;
(10) to permit or facilitate defeasance or discharge of any
or all Notes;
provided
that such modification shall not
adversely affect the interests of Holders of any Notes in any
material respect; or
(11) to cure any ambiguity or correct or supplement any
defective or inconsistent provisions;
provided
that any
changes will not adversely affect the interests of Holders of
Notes in any material respect.
The Indenture provides that, in general, the Company and the
Trustee may modify the Indenture or the rights of the Holders of
any series of Notes so long as the Company obtains the consent
of the Holders of not less than a majority in principal amount
of the then-outstanding Notes of such series affected by the
modification. The Indenture also provides, however, that the
Company may not effect any modification without the consent of
each affected Holder if that modification would:
(1) change the maturity of any Note, or reduce the
principal amount or any premium payable on redemption thereof,
or reduce the rate or change the time of payment of interest
thereon, or change any place of payment or change the currency
in which a Note is payable or affect the right of any Holder to
institute suit for the enforcement of payment in accordance with
the foregoing;
(2) reduce the percentage in principal amount of the
outstanding Notes the consent of whose Holders is required for
approval of any proposed modification to the Indenture or for
waivers of certain covenants or Defaults under the Indenture, or
reduce the requirements for quorum or voting; or
(3) in the case of guaranteed Notes, change the terms and
conditions of the obligations of the Guarantors in respect of
payments under the Guarantee.
The Indenture contains provisions for convening meetings of the
Holders of Notes of a series. A meeting may be called at any
time by the Trustee, or upon the request of the Company or any
Guarantor, as the case may be, or the Holders of at least 10% in
principal amount of the then-outstanding Notes of the series.
Except as described in the preceding paragraph and as otherwise
provided in the Indenture, any resolution presented at a meeting
or adjourned meeting at which a quorum is present may be adopted
by the affirmative vote of the Holders of a majority in
principal amount of the then-outstanding Notes of that series.
Any resolution passed or decision taken at any meeting of
Holders of Notes of any series duly held in accordance with the
Indenture will be binding on all Holders of Notes of that series
whether or not present or represented at the meeting. The quorum
at any meeting of the Holders of Notes of a series called to
adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount
of the then-outstanding Notes of that series.
Defeasance
The Indenture contains provisions that permit the Company or a
Guarantor to cease compliance with the covenants described above
in this Description of the New Notes with respect to
Notes of any series. This is known as covenant
defeasance. If the Company or a Guarantor satisfies the
conditions for covenant defeasance, then any failure on its part
to comply with the terms of the covenants described above will
not be an Event of Default under the Indenture with respect to
the relevant Notes. The conditions the Company or a Guarantor
must satisfy are as follows:
(1) the Company or such Guarantor must irrevocably deposit
with the Trustee as specific security pledged for the due
payment and ultimate satisfaction of the Companys
obligations in respect of the Notes of the series affected,
funds in U.S. dollars and/or, subject to specified
conditions, U.S. government obligations in an amount
sufficient to pay the principal of, and premium, if any, and
interest on the outstanding Notes of the particular series on
their stated maturity;
(2) the Company or such Guarantor must receive opinions of
counsel to the effect that Holders of the Notes affected will
not recognize income, gain or loss for United States or Canadian
federal income tax purposes as a result of the deposit of funds
and defeasance of the Companys and the Guarantors
53
obligations and will be subject to United States and Canadian
federal income tax as if the deposit and defeasance had not
occurred;
(3) the deposit of funds must not result in a breach or
violation of, or constitute a Default under, the Indenture or
any other material agreement or instrument to which the Company
or any Guarantor is a party or by which it is bound;
(4) no Default with respect to the Notes of such series
shall have occurred and be continuing on the date of the deposit
of funds;
(5) the Company or such Guarantor must deliver to the
Trustee an officers certificate or an opinion of counsel
stating that all conditions precedent to the defeasance under
the Indenture have been complied with; and
(6) the deposit of funds must not cause the Trustee to have
a conflicting interest, within the meaning of the Indenture and
the TIA.
Concerning
the Trustee
The Bank of New York is the trustee, registrar and paying agent,
or the Trustee. The Trustee maintains an office in New York, New
York. The Trustee will also initially serve as the Calculation
Agent.
If an Event of Default occurs and is continuing, the Trustee
will be required to use the degree of care and skill of a
prudent person in the conduct of his own affairs. The Trustee
will become obligated to exercise any of its powers under the
Indenture at the request of any of the Holders of any Notes only
after those Holders have offered the Trustee an indemnity
reasonably satisfactory to it.
If the Trustee becomes one of our creditors, it will be subject
to limitations in the indenture on its rights to obtain payment
of claims or to realize on some property received for any such
claim, as security or otherwise. The Trustee is permitted to
engage in other transactions with us.
Certain
Definitions
Set forth below is a summary of certain of the defined terms
used in the Indenture. Reference is made to the Indenture for
the full definition of all such terms, as well as any other
terms used herein for which no definition is provided.
Acquired Funded Debt
means Funded Debt of a
Person or any of its Subsidiaries existing at the time such
Person becomes a Subsidiary of NNC or at the time it merges,
amalgamates or consolidates with or into NNC or any of its
Subsidiaries or assumed in connection with the acquisition of
property or assets from such Person and in each case not
incurred by such Person in connection with, or in anticipation
or contemplation of, such Person becoming a Subsidiary of NNC or
such acquisition, merger or consolidation or acquisition of such
property or assets.
Adjusted EBITDA
means, with respect to NNC,
for any period, the sum, all as determined on a consolidated
basis for NNC and its Subsidiaries in accordance with GAAP
(without duplication), of:
(1) Consolidated Net Income;
plus
(2) to the extent Consolidated Net Income has been reduced
thereby (without duplication):
(a) all income taxes and related interest and penalties of
NNC and its Subsidiaries paid or accrued (net of any income tax
credits or gains) in accordance with GAAP for such period;
(b) Consolidated Fixed Charges;
(c) any non-cash expenses, charges or losses that decreased
Consolidated Net Income during such period;
(d) any loss, charge or cost attributable to exit or
disposal activities approved by the board of directors of NNC as
part of a restructuring plan;
54
(e) any loss, charge or cost attributable to any
restatements of financial information of NNC or any of its
subsidiaries disclosed in, incorporated by reference in or
contemplated by the 2006 Offering Memorandum or any related
internal control remedial measures;
(f) any loss, charge or cost attributable to the actual and
contemplated transactions with Flextronics disclosed in,
incorporated by reference in or contemplated by the 2006
Offering Memorandum;
(g) any loss, charge or cost attributable to the finance
transformation project of NNC and its Subsidiaries, including,
without limitation, the implementation of a new information
technology platform (SAP) to provide an integrated global
financial system;
(h) any loss, charge or cost attributable to any payment of
fines, penalties or other amounts paid to any government
authority or stock exchange in connection with any regulatory or
enforcement proceeding relating to events disclosed in,
incorporated by reference in or contemplated by the 2006
Offering Memorandum; and
(i) any loss, charge or cost attributable to the contracts
existing on the Issue Date with Bharat Sanchar Nigam Limited
disclosed in, incorporated by reference in or contemplated by
the 2006 Offering Memorandum but not any expansion option,
extension, renewal or replacement thereof;
minus
(3) any non-cash credits and gains that increased
Consolidated Net Income during such period, including any
reversal of a charge referred to in clauses (2)(c) or
(i) above;
minus
(4) to the extent Consolidated Net Income has been
increased thereby:
(a) any gains attributable to reversals prior to the Issue
Date of provisions relating to a certain customer bankruptcy
settlement during the year ended December 31, 2003 as
disclosed in Note 5 Consolidated financial statement
details Cost of revenue to NNCs
consolidated financial statements contained in NNCs 2005
Annual Report;
(b) any credits and gains attributable to the restructuring
of customer financing receivables prior to the Issue
Date; and
(c) any reversals of any reserves for any losses, charges
or costs with respect to the matters covered by clauses (d),
(e), (f), (g), (h) or (i) of clause (2) above.
Affiliate
means, with respect to any
specified Person, any other Person who directly or indirectly
through one or more intermediaries controls, or is controlled
by, or is under common control with, such specified Person. The
term
control
means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise; and
the terms
controlling
and
controlled
have meanings correlative of the
foregoing.
Asset Acquisition
means (1) an
investment by NNC or any Subsidiary of NNC in any other Person
pursuant to which such Person shall become a Subsidiary of NNC
or shall be merged, consolidated or amalgamated with or into NNC
or any Subsidiary of NNC, or (2) the acquisition by NNC or
any Subsidiary of NNC of the assets of any Person (other than a
Subsidiary of NNC) which constitute all or substantially all of
the assets of such Person or comprise any division or line of
business of such Person or any other properties or assets of
such Person other than in the ordinary course of business.
Capital Stock
means:
(1) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents
(however designated and whether or not voting) of corporate
stock, including each class of Common Stock and Preferred Stock
of such Person; and
(2) with respect to any Person that is not a corporation,
any and all partnership, membership or other equity interests of
such Person.
55
Capitalized Lease Obligation
means, as to any
Person, the obligations of such Person under a lease that are
required to be classified and accounted for as capital lease
obligations under GAAP and, for purposes of this definition, the
amount of such obligations at any date shall be the capitalized
amount of such obligations at such date, determined in
accordance with GAAP.
Change of Control
means the occurrence of one
or more of the following events:
(1) any person, including its affiliates and
associates, or any group, in each case, other than
NNC, any one or more Subsidiaries of NNC or NNCs or such
Subsidiaries employee benefit plans, files a
Schedule 13D or Schedule TO (or any successor
schedule, form or report under the Exchange Act) disclosing that
such person or group has become the beneficial owner
of 50% or more of the combined voting power of NNCs
Capital Stock having ordinary power to elect directors, or has
the power to, directly or indirectly, elect a majority of the
members of the NNCs Board of Directors;
provided
that the foregoing shall not apply if as a result of, and
immediately following, the transaction giving a person such
beneficial ownership (including an exchange offer or a
transaction referred to in clause (3) below), the holders
of the Companys or NNCs Common Stock immediately
prior to such transaction are, directly or indirectly, the
beneficial owners of at least a majority of the total voting
power in the aggregate of all classes of Capital Stock of such
person;
(2) NNC ceases to be the beneficial owner of
100% of the voting power of the Common Stock of the Company;
(3) there shall be consummated any share exchange,
amalgamation, consolidation, or merger of NNC pursuant to which
NNCs Common Stock would be converted into cash, securities
or other property, or the Company or NNC sells, assigns,
conveys, transfers, leases or otherwise disposes of all or
substantially all of its assets, in each case other than
pursuant to a share exchange, amalgamation, consolidation or
merger of the Company or NNC in which the holders of the
Companys or NNCs Common Stock immediately prior to
the share exchange, amalgamation, consolidation, or merger have,
directly or indirectly, at least a majority of the total voting
power in the aggregate of all classes of Capital Stock of the
continuing or surviving corporation (or of the parent of such
continuing or surviving corporation) immediately after the share
exchange, amalgamation, consolidation or merger; or
(4) the Company or NNC is dissolved or liquidated.
For purposes of this Change of Control definition:
(1)
person
or
group
has the meaning given to it for purposes of Sections 13(d)
and 14(d) of the Exchange Act or any successor provisions, and
the term group includes any group acting for the
purpose of acquiring, holding or disposing of securities within
the meaning of Rule
13d-5(b)(1)
under the Exchange Act or any successor provision;
(2) a beneficial owner will be determined in
accordance with Rule
13d-3
under
the Exchange Act, as in effect on the date of the
Indenture; and
(3) the number of shares of the Companys voting stock
outstanding will be deemed to include, in addition to all
outstanding shares of the Companys voting stock and
unissued shares deemed to be held by the person or
group or other person with respect to which the
Change of Control determination is being made, all unissued
shares deemed to be held by all other persons.
Notwithstanding the foregoing, any (i) amalgamation,
consolidation or merger of NNC with or into the Company (whether
directly or indirectly by merger with or into an entity with
only nominal assets created in anticipation or contemplation of
such amalgamation, consolidation or merger), (ii) transfer
of assets solely between or among NNC, the Company and any
successor entity to NNC or the Company or (iii) liquidation
or dissolution of NNC or the Company resulting in the transfer
of all of the assets of NNC or the Company to NNC, the Company
or any successor entity to NNC or the Company shall, in each
case, not constitute a Change of Control;
provided
that
such transaction does not contravene the terms of the
Amalgamation, Merger, Conveyance, Transfer or Lease
covenant.
56
Commission
means the Securities and Exchange
Commission.
Common Stock
of any Person means any and all
shares, interests or other participations in, and other
equivalents (however designated and whether voting or
non-voting) of, such Persons common equity interests,
whether outstanding on the Issue Date or issued after the Issue
Date, and includes, without limitation, all series and classes
of such equity interests.
Consolidated Fixed Charge Coverage Ratio
means the ratio of (i) Adjusted EBITDA of NNC during
the four full fiscal quarters (the
Four Quarter
Period
) ending prior to the date of the transaction
(the
Transaction Date
) giving rise to the
need to calculate the Consolidated Fixed Charge Coverage Ratio
for which financial statements are publicly available to
(ii) Consolidated Fixed Charges for such Four Quarter
Period. In addition to and without limitation of the foregoing,
for purposes of this definition, Adjusted EBITDA and
Consolidated Fixed Charges shall be calculated after
giving effect on a
pro forma
basis (as reasonably
estimated by NNC) for the period of such calculation to:
(1) the incurrence of any Funded Debt of NNC or any of its
Subsidiaries giving rise to the need to make such calculation
and any incurrence or repayment of other Funded Debt (and the
application of the proceeds thereof), other than the incurrence
or repayment of Funded Debt in the ordinary course of business
for working capital purposes pursuant to working capital
facilities, occurring during the Four Quarter Period or at any
time subsequent to the last day of the Four Quarter Period and
on or prior to the Transaction Date, as if such incurrence or
repayment, as the case may be (and the application of the
proceeds thereof), occurred on the first day of the Four Quarter
Period; and
(2) (A) any asset sale during the Four Quarter Period
or at any time subsequent to the last day of the Fourth Quarter
Period and on or prior to the Transaction Date involving the
sale of a Subsidiary or line of business by NNC or any of its
Subsidiaries, in each case, that accounted for at least
$150,000,000 of NNCs consolidated revenues for the Four
Quarter Period and (B) any Asset Acquisition by NNC or any
of its Subsidiaries during the Four Quarter Period or at any
time subsequent to the last day of the Fourth Quarter Period and
on or prior to the Transaction Date which would have accounted
for at least $150,000,000 of NNCs consolidated revenue for
the Four Quarter Period, in each case, so as to exclude or
include, as the case may be, NNCs good faith estimate of
any Adjusted EBITDA (including any
pro forma
expense and
cost reductions calculated on a basis consistent with
Regulation S-X
under the Exchange Act) attributable to the assets which are the
subject of such asset sale or Asset Acquisition, as if such
asset sale or Asset Acquisition occurred on the first day of the
Four Quarter Period.
If NNC or any of its Subsidiaries directly or indirectly
guarantees Funded Debt of a third Person, the preceding sentence
shall give effect to the incurrence of such guaranteed Funded
Debt, without duplication, as if NNC or any Subsidiary of NNC
had directly incurred or otherwise assumed such guaranteed
Funded Debt.
Furthermore, in calculating the Consolidated Fixed Charge
Coverage Ratio:
(1) for purposes of determining the numerator (but not the
denominator) of this Consolidated Fixed Charge Coverage
Ratio, interest income determined on a fluctuating basis
as of the Transaction Date and which will continue to be so
determined thereafter, shall be deemed to have accrued at a
fixed rate per annum equal to the applicable rate of interest in
effect on the Transaction Date;
(2) for purposes of determining the denominator (but not
the numerator) of this Consolidated Fixed Charge Coverage
Ratio, interest on outstanding Funded Debt, determined on
a fluctuating basis as of the Transaction Date and which will
continue to be so determined thereafter, shall be deemed to have
accrued at a fixed rate per annum equal to the applicable rate
of interest in effect on the Transaction Date; and
(3) notwithstanding clause (1) or (2) above,
interest on Funded Debt determined on a fluctuating basis, to
the extent such interest is covered by agreements relating to
Interest Swap Obligations, shall be deemed to accrue at the rate
per annum resulting after giving effect to the operation of such
agreements.
Consolidated Fixed Charges
means, for any
period, the sum, without duplication, of:
(1) Consolidated Interest Expense for such period; plus
57
(2) the amount of all dividends on any series of
Disqualified Capital Stock (including the Existing Preferred
Stock) or Designated Qualified Preferred Stock of NNC or its
Subsidiaries paid, declared or accrued during such period
multiplied, to the extent such dividend payments are not a
deduction to the federal income tax liabilities of NNC or its
applicable Subsidiary, by a fraction, the numerator of which is
one and the denominator of which is one minus the then current
effective consolidated federal, state and local tax rate of NNC
or such Subsidiary, expressed as a decimal.
Consolidated Interest Expense
means, for any
period, total interest expense (including that portion
attributable to Capital Lease Obligations in accordance with
GAAP) of NNC and its Subsidiaries for such period, on a
consolidated basis, determined in accordance with GAAP (without
duplication).
Consolidated Net Income
means, with respect
to NNC, for any period, the aggregate net income (or loss) of
NNC and its Subsidiaries for such period on a consolidated
basis, determined in accordance with GAAP;
provided
that
there shall be excluded therefrom (without duplication):
(1) net after-tax gains or losses classified in NNCs
consolidated statement of operations as gains or losses on the
sale of businesses or assets;
(2) net after-tax items classified as extraordinary gains
or losses;
(3) the net after-tax expense (or gain) resulting from any
payment, distribution or accrual in connection with the
settlement of, or satisfaction of any judgment resulting from,
any shareholder litigation or regulatory or law enforcement
investigation, in each case, relating to circumstances disclosed
in, incorporated by reference in or contemplated by the 2006
Offering Memorandum;
(4) the net income (but not loss) of any Subsidiary of NNC
(other than the Company or any Guarantor) to the extent that
(a) the declaration of dividends by such Subsidiary of that
income is prohibited by a contract, operation of law (other than
as a result of any solvency or minimum capital requirement) or
applicable judgment and (b) such net income cannot
otherwise be distributed or transferred to NNC;
(5) the net income or loss of any Person that is not a
Subsidiary of NNC, and any joint ventures in which NNC or any
Subsidiary is a party, except to the extent of cash dividends or
distributions paid to NNC or to a Subsidiary of NNC by such
Person;
(6) after-tax income or loss attributable to discontinued
operations;
(7) the cumulative effect of changes in accounting
principles; and
(8) for purposes of calculating Consolidated Net Income
pursuant to clause (iii) of the first paragraph of the
Limitation on Restricted Payments covenant only, in
the case of a successor to NNC by consolidation, amalgamation or
merger or as a transferee of assets of NNC or the Company, as
applicable, the net income (but not loss) of the successor
corporation prior to such consolidation, amalgamation, merger or
transfer of assets (other than the successor of a merger,
amalgamation or consolidation of the Company with or into NNC or
any Subsidiary of NNC or of NNC into any Subsidiary of NNC).
Consolidated Net Tangible Assets
means
NNCs consolidated total assets after deducting therefrom
(i) all current liabilities and (ii) all goodwill,
trade names, trademarks, patents, unamortized debt discount and
expense and other like intangible assets, as shown in NNCs
then most recent consolidated balance sheet prepared in
accordance with GAAP contained in (x) NNCs most
recent annual or quarterly report on
Form 10-K
or
Form 10-Q,
as applicable, as filed with the Commission or (y) if NNC
is no longer subject to reporting requirements under the
Exchange Act, NNCs most recent annual or quarterly
financial statements certified by NNCs chief financial
officer.
Credit Enhanced Foreign Subsidiary Debt
means
any Funded Debt of a Foreign Subsidiary payable to a financial
institution that has (i) sold a participation for cash
consideration in the full principal amount of such Funded Debt
to NNC, the Company or any other Subsidiary of NNC or
(ii) a Lien on or right of set-off against deposits of
cash, cash equivalents or investment securities of NNC, the
Company or any other
58
Subsidiary of NNC;
provided
that, in the case of
clause (ii) above, the principal amount of such Funded Debt
does not exceed the amount of cash, cash equivalents or
investment securities so deposited.
Default
means an event or condition the
occurrence of which is, or with the lapse of time or the giving
of notice or both would be, an Event of Default.
Designated Qualified Preferred Stock
means
any Preferred Stock consisting of Qualified Capital Stock issued
by NNC or any of its Subsidiaries that is designated as such by
NNC by an officers certificate delivered to the Trustee;
provided
that, immediately after giving effect to the
issuance thereof, the Consolidated Fixed Charge Coverage Ratio
is greater than 2.0 to 1.0.
Disqualified Capital Stock
means, with
respect to the Notes of any series, that portion of any Capital
Stock which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the
option of the holder thereof), or upon the happening of any
event (other than an event which would constitute an asset sale
or Change of Control), matures or is mandatorily redeemable
(other than such Capital Stock that will be redeemed with
Qualified Capital Stock), pursuant to a sinking fund obligation
or otherwise, or is redeemable at the sole option of the holder
thereof (except, in each case, upon the occurrence of an asset
sale or Change of Control) on or prior to the final maturity
date of the Notes of such series.
dollar
or
$
, unless
otherwise indicated, means lawful currency of the United States
of America.
Exchange Act
means the Securities Exchange
Act of 1934, as amended, or any successor statute or statutes
thereto.
Existing Preferred Stock
means the
Companys Redeemable Class A Preferred Shares
Series 5, of which 16,000,000 shares were outstanding
as of the date of this prospectus (and the Companys
Redeemable Class A Preferred Shares Series 6 into
which such shares are convertible), and Non-cumulative
Redeemable Class A Preferred Shares Series 7, of which
14,000,000 shares were outstanding as of the date of this
prospectus (and the Companys Redeemable Class A
Preferred Shares Series 8 into which such shares are
convertible), in each case as the same may be amended from time
to time.
Foreign Subsidiary
means a Subsidiary of NNC
organized under the laws of a jurisdiction outside the United
States of America and Canada.
Funded Debt
means with respect to any Person,
without duplication:
(1) all indebtedness of such Person for borrowed money;
(2) all indebtedness of such Person evidenced by bonds,
debentures, notes or other similar instruments;
(3) all Capitalized Lease Obligations of such Person;
(4) guarantees of indebtedness of another Person of the
type referred to in clauses (1) through (3) above and
clause (5) below (each such guarantee to constitute Funded
Debt in an amount equal to the maximum amount of such other
Persons Funded Debt guaranteed thereby);
(5) all indebtedness of any other Person of the type
referred to in clauses (1) through (4) which is
secured by any Lien on any property or asset of such Person, the
amount of such indebtedness being deemed to be the lesser of the
fair market value of such property or asset and the amount of
the indebtedness so secured; and
(6) all Disqualified Capital Stock (including the Existing
Preferred Stock) and Designated Qualified Preferred Stock issued
by such Person with the amount of Funded Debt represented
thereby being equal to the greater of its voluntary or
involuntary liquidation preference and its maximum fixed
repurchase price, if any, but excluding accrued dividends, if
any.
For greater certainty, (i) proceeds received in respect of
any factoring, securitization, sale of receivables or similar
transaction, (ii) obligations in respect of the performance
of bids, trade contracts, leases, statutory
59
obligations, surety and appeal bonds, performance bonds and
obligations of a like nature, (iii) guarantees of, and
indemnity arrangements with respect to, obligations described in
clauses (i) and (ii) of this paragraph, or (iv)
obligations under letters of credit and letters of guarantee
issued to support (A) trade or performance obligations,
(B) obligations under operating leases or
(C) contingent obligations arising in connection with the
settlement of any shareholder litigation or regulatory or
criminal investigation, or satisfaction of any judgment
resulting therefrom, will not be considered Funded Debt.
For purposes hereof, the maximum fixed repurchase
price of any Disqualified Capital Stock that does not have
a fixed repurchase price shall be calculated in accordance with
the terms of such Disqualified Capital Stock as if such
Disqualified Capital Stock were purchased on any date on which
Funded Debt shall be required to be determined pursuant to the
Indenture, and if such price is based upon, or measured by, the
fair market value of such Disqualified Capital Stock shall be
determined in accordance with the definition thereof.
Accrual of interest, accrual of dividends, the accretion of
accreted value, the payment of interest in the form of
additional Funded Debt and the payment of dividends in the form
of additional shares of Preferred Stock will not be deemed to be
an incurrence of Funded Debt. The amount of any Funded Debt
outstanding as of any date shall be (i) the accreted value
of the Funded Debt, in the case of any Funded Debt issued with
original issue discount or (ii) the principal amount or
liquidation preference of such Funded Debt, in any other case.
For purposes of determining compliance with any
U.S. dollar-denominated restriction on the incurrence of
Funded Debt, the U.S. dollar-equivalent principal amount of
Funded Debt denominated in a foreign currency shall be
calculated based on the relevant currency exchange rate in
effect on the date such Funded Debt was incurred, in the case of
term Funded Debt, or first committed, in the case of revolving
credit Funded Debt. Notwithstanding any other provision of the
Limitation on Incurrence of Additional Funded Debt
covenant, the maximum amount of Funded Debt that NNC, the
Company or the Guarantors may incur pursuant to the
Limitation on Incurrence of Additional Funded Debt
covenant shall not be deemed to be exceeded solely as a result
of fluctuations in the exchange rate of currencies. The
principal amount of any Funded Debt incurred to Refinance other
Funded Debt, if incurred in a different currency from the Funded
Debt being Refinanced, shall be calculated based on the currency
exchange rate applicable to the currencies in which such
Refinancing Funded Debt is denominated that is in effect on the
date of such Refinancing.
GAAP
means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession of the United
States, which are in effect from time to time.
Holders
means the holders of the Notes.
Interest Swap Obligations
means the
obligations of any Person pursuant to any arrangement with any
other Person, whereby, directly or indirectly, such Person is
entitled to receive from time to time periodic payments
calculated by applying either a floating or a fixed rate of
interest on a stated notional amount in exchange for periodic
payments made by such other Person calculated by applying a
fixed or a floating rate of interest on the same notional amount
and shall include, without limitation, interest rate swaps,
caps, floors, collars and similar agreements.
Investment Grade Status,
with respect to the
Notes of any series, shall occur when the Notes of such series
have both (i) a rating of BBB or
higher from S&P and (ii) a rating of Baa3
or higher from Moodys, and each such rating shall have
been published by the applicable agency, in each case with no
negative outlook.
Issue Date
means the date of original issue
of the Old Notes.
Lien
means any mortgage, hypothec, pledge,
lien, security interest, privilege, floating charge, conditional
sale or other title retention agreement or other similar
encumbrance securing indebtedness for borrowed money. For
greater certainty, Lien does not include any such
encumbrance covering receivables or
60
other assets an interest in which has been transferred to a
third party in a factoring, securitization or similar
transaction that is accounted for as a sale under GAAP.
Managed Service Contract Liens
means any Lien
in favor of a customer of NNC or any of its Subsidiaries
and/or
a
third party financing company relating to equipment owned by NNC
or any of its Subsidiaries that is (i) used by such
customer in the conduct of its business and (ii) managed by
NNC or any of its Subsidiaries under a managed services or
hosting services contract between NNC or any of its
Subsidiaries, such customer
and/or
such
third party financing company.
Measurement Date
means March 31, 2006.
Moodys
means Moodys Investors
Service, Inc. and its successors.
NGSH
means Nortel Government Solutions
Holding Corporation, a Delaware corporation.
NNC
means Nortel Networks Corporation, a
Canadian corporation.
NNCC
means Nortel Networks Capital
Corporation, a Delaware corporation.
NNI
means Nortel Networks Inc., a Delaware
corporation.
Permitted Funded Debt
means, without
duplication, each of the following:
(1) Funded Debt under the Old Notes (other than Additional
Notes) and the New Notes and the Guarantees;
(2) Funded Debt incurred to finance the acquisition,
improvement or construction of assets that is secured by
Purchase Money Liens on the assets so acquired, improved or
constructed;
(3) Funded Debt of NNC, the Company
and/or
any
Subsidiary of NNC outstanding on the Issue Date;
(4) Funded Debt of NNC, the Company
and/or
any
Subsidiary of NNC to NNC, the Company
and/or
any
Subsidiary of NNC;
(5) Funded Debt of NNC, the Company
and/or
any
Subsidiary of NNC owing to any joint-venture in which NNC, the
Company or such Subsidiary has a minority holding;
(6) any guarantee of Funded Debt by NNC, the Company or any
Subsidiary of NNC so long as the incurrence of such Funded Debt
would otherwise be permitted or is otherwise not restricted
under the Indenture;
(7) Refinancing Funded Debt;
(8) any Credit Enhanced Foreign Subsidiary Debt and any
Funded Debt arising out of the deposit of cash or cash
equivalents to secure any Credit Enhanced Foreign Subsidiary
Debt;
(9) additional Funded Debt of NNC, the Company and any
Subsidiary of NNC in an aggregate outstanding principal amount
not to exceed, after giving effect to the relevant transaction,
$250,000,000;
(10) any other Funded Debt of any Foreign Subsidiary;
provided
that the aggregate outstanding principal amount
of Funded Debt issued or assumed pursuant to this
clause (10) by any individual Foreign Subsidiary would not,
after giving effect to the relevant transaction, exceed
$5,000,000; and
(11) Funded Debt in an aggregate outstanding principal
amount not to exceed 15% of Consolidated Net Tangible Assets
after giving effect to any such incurrence of Funded Debt under
this clause (11).
For purposes of determining compliance with the Limitation
on Incurrence of Additional Funded Debt covenant, in the
event that an item of Funded Debt meets the criteria of more
than one of the categories of Permitted Funded Debt other than
clause (3) above or is entitled to be incurred pursuant to
the Consolidated Fixed Charge Coverage Ratio provisions of such
covenant, the Company or the applicable Guarantor shall, in its
sole discretion, classify such item of Funded Debt in any manner
that complies with such covenant. In addition, the Company or
the applicable Guarantor may, at any time, change the
classification of an item of
61
Funded Debt (or any portion thereof) to any other clause, and
may classify an item in part under any one or more of the
clauses listed above, or in whole or in part to the first
paragraph of the Limitation on Incurrence of Additional
Funded Debt covenant;
provided
that NNC, the
Company or any other Subsidiary of NNC would be permitted to
incur such item of Funded Debt (or portion thereof) pursuant to
such other clause or clauses, as the case may be, or of the
first paragraph of the Limitation on Incurrence of
Additional Funded Debt covenant, as the case may be, at
such time of reclassification. Accrual of interest, accretion or
amortization of original issue discount or other discounts or
premiums, the payment of interest on any Funded Debt in the form
of additional Funded Debt with the same terms, and the payment
of dividends on Disqualified Capital Stock or Designated
Qualified Preferred Stock in the form of additional shares of
the same class of Disqualified Capital Stock or Designated
Qualified Preferred Stock and any other changes in reported
Funded Debt required by GAAP and other non-cash changes in
Funded Debt due to fluctuations in currency exchange rates, will
not be deemed to be an incurrence of Funded Debt or an issuance
of Disqualified Capital Stock or Designated Qualified Preferred
Stock for purposes of the Limitation on Incurrence of
Additional Funded Debt covenant.
Person
means an individual, partnership,
corporation, limited liability company, unincorporated
organization, trust or joint venture, or a governmental agency
or political subdivision thereof.
Preferred Stock
of any Person means any
Capital Stock of such Person that has preferential rights to any
other Capital Stock of such Person with respect to dividends or
redemptions or upon liquidation.
Purchase Money Lien
means any Lien on
property existing at the time of acquisition thereof by NNC or
any Subsidiary of NNC; any Lien on any property acquired,
constructed or improved by NNC or any Subsidiary of NNC incurred
subsequent to the Issue Date, which is created or assumed
contemporaneously with, or within 180 days after, such
acquisition or the completion of such construction or
improvement, to secure or provide for the payment of the
purchase price thereof or the cost of construction or
improvement thereon incurred subsequent to the Issue Date
(including the cost of any underlying real property);
provided
that in the case of any such acquisition,
construction or improvement, the Lien shall not apply to any
property previously owned by NNC or any Subsidiary of NNC, other
than, in the case of any such construction or improvement, any
real property, theretofore substantially unimproved for the
purposes of NNC or any Subsidiary of NNC, on which the property
so constructed, or the improvement, is located and other than
any machinery or equipment installed at any time so as to
constitute immovable property or a fixture on the real property
on which the property so constructed, or the improvement, is
located.
Qualified Capital Stock
means any Capital
Stock that is not Disqualified Capital Stock.
Refinance
means, with respect to any security
or Funded Debt, to refinance, extend, renew, refund, repay,
prepay, redeem, defease or retire, or to issue a security or any
Funded Debt in exchange or replacement for, such security or
Funded Debt in whole or in part.
Refinanced
and
Refinancing
have correlative meanings.
Refinancing Funded Debt
means any Refinancing
by NNC, the Company or any other Subsidiary of NNC of Funded
Debt permitted by the Limitation on Incurrence of
Additional Funded Debt covenant (other than pursuant to
clauses (4), (5), (6), (8), (9), (10) or (11) of the
definition of Permitted Funded Debt), in each case that does not:
(1) result in an increase in the aggregate principal amount
of Funded Debt of such Person as of the date of such proposed
Refinancing (plus the amount of any premium required to be paid
under the terms of the instrument governing such Funded Debt and
plus the amount of reasonable expenses incurred by NNC, the
Company or any other Subsidiary of NNC in connection with such
Refinancing); or
(2) create Funded Debt with either (a) a Weighted
Average Life to Maturity that is less than the Weighted Average
Life to Maturity of the Funded Debt being Refinanced or
(b) a final maturity earlier than the final maturity of any
of the Notes.
Restricted Subsidiary
means (i) during a
Suspension Period, NNI and NNCC and (ii) at all other
times, any Subsidiary of NNC (other than the Company).
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S&P
means Standard &
Poors Rating Service, a division of The McGraw-Hill
Companies, Inc., and its successors.
Securities Act
means the Securities Act of
1933, as amended, or any successor statute or statutes thereto.
Subsidiary,
with respect to any Person, means:
(1) any corporation of which the outstanding Capital Stock
having at least a majority of the votes entitled to be cast in
the election of directors under ordinary circumstances shall at
the time be owned, directly or indirectly, by such
Person; or
(2) any other Person of which at least a majority of the
voting interest under ordinary circumstances is at the time,
directly or indirectly, owned by such Person;
provided
that none of (a) NGSH, (b) any direct
or indirect Subsidiary of NGSH or (c) for long as it is a
tax exempt organization under Section 501(c)(3) of the
Internal Revenue Code, Nortel LearnIT, a Delaware corporation,
shall constitute a Subsidiary of NNC or any of its Subsidiaries
for purposes of the Limitation on Incurrence of Additional
Funded Debt, Limitation on Restricted Payments
and Negative Pledge covenants (or the defined terms
used therein other than Consolidated Net Income and Adjusted
EBITDA) or any Event of Default.
Suspension Period
has the meaning set forth
under Suspension Period.
Synthetic Purchase Agreement
shall mean any
derivative or similar agreement pursuant to which NNC or any of
its Subsidiaries is or may become obligated to make any payment
the amount of which is determined by reference to the price or
value at any time of any Capital Stock of NNC;
provided
that no phantom stock or similar plan providing for payments
only to current or former directors, officers, employees,
consultants or contractors of NNC or any Subsidiary of NNC (or
to their heirs or estates or successors or assigns) shall be
deemed to be a Synthetic Purchase Agreement.
Weighted Average Life to Maturity
means, when
applied to any Funded Debt at any date, the number of years
obtained by dividing (a) the then outstanding aggregate
principal amount of such Funded Debt into (b) the sum of
the products obtained by multiplying (i) the amount of each
then-remaining installment, sinking fund, serial maturity or
other required payment of principal, including payment at final
maturity, in respect thereof, by (ii) the number of years
(calculated to the nearest one-twelfth) which will elapse
between such date and the making of such payment.
BOOK-ENTRY
SETTLEMENT AND CLEARANCE
The
Global Notes
The New Notes will be issued in the form of several registered
New Notes in global form, without interest coupons, or the
Global Notes. Upon issuance, each of the Global Notes will be
deposited with the Trustee as custodian for DTC and registered
in the name of Cede & Co., as nominee of DTC.
Ownership of beneficial interests in each Global Note will be
limited to persons who have accounts with DTC, or DTC
Participants, or persons who hold interests through DTC
Participants. We expect that under procedures established by DTC
(these procedures are subject to change):
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upon deposit of each Global Note with DTCs custodian, DTC
will credit portions of the principal amount of that Global Note
to the accounts of the relevant DTC Participants for credit to
the respective accounts of the acquirers of New Notes or to such
other accounts as they may direct at DTC.
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ownership of beneficial interests in each Global Note will be
shown on, and transfer of ownership of those interests will be
effected only through, records maintained by DTC (with respect
to interests of DTC Participants) and the records of DTC
Participants (with respect to other owners of beneficial
interests in that Global Note).
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Beneficial interests in the Global Notes may not be exchanged
for New Notes in physical, certificated form except in the
limited circumstances described below.
Book-Entry
Procedures for the Global Notes
All interests in the Global Notes will be subject to the
operations and procedures of DTC. We provide the following
summaries of those operations and procedures solely for the
convenience of investors. The operations and procedures of each
settlement system are controlled by that settlement system and
may be changed at any time. We are not responsible for those
operations or procedures.
DTC has advised us that it is:
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limited purpose trust company organized under the laws of the
State of New York;
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a banking organization within the meaning of the New
York State Banking Law;
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a member of the Federal Reserve System;
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a clearing corporation within the meaning of the
Uniform Commercial Code; and
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a clearing agency registered under Section 17A
of the Exchange Act.
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DTC was created to hold securities for its participants and to
facilitate the clearance and settlement of securities
transactions between its participants through electronic
book-entry changes to the accounts of its participants. DTC
Participants include securities brokers and dealers, banks and
trust companies, clearing corporations and other organizations.
Indirect access to DTCs system is also available to others
such as banks, brokers, dealers and trust companies; these
indirect participants clear through or maintain a custodial
relationship with a DTC Participant, either directly or
indirectly. Investors who are not DTC Participants may
beneficially own securities held by or on behalf of DTC only
through DTC Participants or indirect participants in DTC.
So long as DTCs nominee is the registered owner of a
Global Note, that nominee will be considered the sole owner or
holder of the Notes represented by that Global Note for all
purposes under the Indenture. Except as provided below, owners
of beneficial interests in a Global Note:
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will not be entitled to have New Notes represented by the Global
Note registered in their names;
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will not receive or be entitled to receive physical,
certificated New Notes; and
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will not be considered the owners or holders of the New Notes
under the Indenture for any purpose, including with respect to
the giving of any direction, instruction or approval to the
Trustee under the Indenture.
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As a result, each investor who owns a beneficial interest in a
Global Note must rely on the procedures of DTC to exercise any
rights of a holder of Notes under the Indenture (and, if the
investor is not a DTC Participant or an indirect participant in
DTC, on the procedures of the DTC Participant through which the
investor owns its interest).
Payments of principal, premium (if any) and interest with
respect to the Notes represented by a Global Note will be made
by the Trustee to DTCs nominee as the registered holder of
the Global Note. Neither the Company nor the Trustee will have
any responsibility or liability for the payment of amounts to
owners of beneficial interests in a Global Note, for any aspect
of the records relating to or payments made on account of those
interests by DTC, or for maintaining, supervising or reviewing
any records of DTC relating to those interests.
Payments by DTC Participants and indirect participants in DTC to
the owners of beneficial interests in a Global Note will be
governed by standing instructions and customary industry
practice and will be the responsibility of those participants or
indirect participants and DTC.
Transfers between participants in DTC will be effected under
DTCs procedures and will be settled in
same-day
funds.
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DTC has agreed to the above procedures to facilitate transfers
of interests in the Global Notes among participants in its
settlement system. However, DTC is not obligated to perform
these procedures and may discontinue or change these procedures
at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its participants or
indirect participants of their obligations under the rules and
procedures governing their operations.
Certificated
Notes
New Notes in physical, certificated form will be issued and
delivered to each person that DTC identifies as a beneficial
owner of the related Notes only if:
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DTC notifies us at any time that it is unwilling or unable to
continue as depositary for the Global Notes and a successor
depositary is not appointed within 90 days;
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DTC ceases to be registered as a clearing agency under the
Exchange Act and a successor depositary is not appointed within
90 days;
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an event of default has occurred and is continuing and DTC
requests the issuance of certificated Notes;
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the Company, at its option, notifies the Trustee that it elects
to cause the issuance of certificated Notes; or
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certain other events provided in the Indenture should occur.
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CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain U.S. federal
income tax considerations with respect to the exchange offers
and the ownership and disposition of the New Notes to be issued
pursuant to the exchange offers. The summary does not purport to
be a comprehensive description of all of the tax considerations
that may be relevant to any particular investor, including tax
considerations that arise from rules of general application to
all taxpayers or to certain classes of investors or that are
generally assumed to be known by investors. The discussion set
forth below deals only with New Notes held as capital assets and
does not deal with special situations, such as those of dealers
in securities or currencies, financial institutions, tax-exempt
entities, insurance companies, persons liable for alternative
minimum tax, persons holding the New Notes as a part of a
hedging, integrated, conversion or constructive sale transaction
or a straddle, traders in securities that elect to use a
mark-to-market method of accounting for their securities
holdings, U.S. Holders (as defined below) of the New Notes
whose functional currency is not the
U.S. dollar or U.S. expatriates. Furthermore, the
discussion below is based upon the provisions of the Internal
Revenue Code of 1986, as amended, or the Code, and regulations,
rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as
to result in U.S. federal income tax consequences different
from those discussed below. This discussion does not describe
any tax consequences arising out of the laws of any state or
local or foreign jurisdiction. Accordingly, each holder should
consult its own tax advisor with regard to the offers and the
application of U.S. federal income tax laws, as well as the
laws of any state, local or foreign taxing jurisdictions, to its
particular situation.
If an entity classified as a partnership for U.S. federal
income tax purposes holds the New Notes, the tax treatment of a
partner will generally depend upon the status of the partner and
the activities of the partnership. Any partner of a partnership
holding the New Notes should consult its own tax advisors.
U.S.
Federal Income Tax Consequences to U.S. Holders
The following discussion is a summary of certain
U.S. federal income tax consequences that will apply to you
if you are a beneficial owner that is, for U.S. federal
income tax purposes, an individual who is a citizen or resident
of the United States, a corporation created or organized in or
under the laws of the United States or any political subdivision
thereof, or any other person that is subject to
U.S. federal income tax on a net income basis in respect of
its investment in the Notes, or a U.S. Holder.
65
Exchange
Offers and Registration Rights Agreement
A U.S. Holders exchange of the Old Notes for the New
Notes pursuant to the terms of the exchange offers and
registration rights agreement will not be considered an actual
exchange of debt instruments for U.S. federal income tax
purposes, and accordingly will give rise to no taxable gain or
loss, and will have no effect on the U.S. Holders
basis in the Old Notes or holding period. Instead, the New Notes
will be treated as a continuation of the Old Notes exchanged
therefor. The exchanging U.S. Holder will retain the tax
basis in, and bond premium or market discount, if any, on, the
New Notes that such U.S. Holder had in the Old Notes.
Payments
of Interest
Interest on a New Note will generally be taxable to a
U.S. Holder as foreign source ordinary income at the time
it is paid or accrued in accordance with the
U.S. Holders method of accounting for
U.S. federal income tax purposes.
Sale,
Exchange and Retirement of New Notes
Subject to the discussion of market discount below, a
U.S. Holder generally will recognize capital gain or loss
on the sale, exchange, retirement or other taxable disposition
of the New Notes in an amount equal to the difference between
the amount realized upon the sale, exchange, retirement or other
disposition (less an amount equal to any accrued interest not
previously included in income, which will be taxable as such)
and the U.S. Holders adjusted tax basis in the New
Notes. An exchanging U.S. Holders adjusted tax basis
in the New Notes generally will be such U.S. Holders
adjusted tax basis in the Old Notes surrendered for the New
Notes, as described above, increased by any market discount
previously taken into account by the U.S. Holder, and
reduced by the amount of any amortizable bond premium previously
amortized by the U.S. Holder, with respect to the New
Notes. Gain or loss recognized by a U.S. Holder on the
sale, exchange, retirement or other disposition of the New Notes
will generally be treated as U.S. source gain or loss. Such
gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange,
retirement or other disposition, the New Notes have been held
for more than one year. Capital gains of individuals derived
with respect to capital assets held for more than one year are
eligible for reduced rates of taxation. The deductibility of
capital losses is subject to limitations.
Any gain realized by a U.S. Holder on the sale, exchange,
retirement or other disposition of the New Notes will be treated
as ordinary income to the extent of the market discount that has
accrued on the New Notes and not previously been taken into
account by the U.S. Holder. An exchanging
U.S. Holders accrued market discount (if any) on the
New Notes will include the amount of market discount accrued on
the Old Notes surrendered in exchange for such New Notes during
the period such Old Notes were held by the U.S. Holder.
Premium
and Market Discount
If a U.S. Holders purchase price of a New Note is
greater than the New Notes face amount, such holder will
be considered to have acquired the New Note at a premium. A
U.S. Holder may elect to amortize such premium (as an
offset to interest income), using a constant-yield method, over
the remaining term of the New Note. Such election, once made,
generally applies to all bonds held or subsequently acquired by
the U.S. Holder on or after the first taxable year to which
the election applies and may not be revoked without the consent
of the Internal Revenue Code. A U.S. Holder that elects to
amortize such premium must reduce its tax basis in a New Note by
the amount of the premium amortized during its holding period.
With respect to a U.S. Holder that does not elect to
amortize bond premium, the amount of bond premium will be
included in the U.S. Holders tax basis when the New
Note matures or is disposed of by the U.S. Holder.
Therefore, a U.S. Holder that does not elect to amortize
such premium and that holds the New Note to maturity generally
will be required to treat the premium as capital loss when the
New Note matures.
If a U.S. Holder purchases a New Note at a price that is
lower than its face value by at least 0.25% of its face value
multiplied by the number of remaining whole years to maturity,
the New Note will be considered to have market
discount in the hands of such U.S. Holder. In such
case, gain realized by the U.S. Holder on
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the disposition of the New Note generally will be treated as
ordinary income to the extent of the market discount that
accrued on the New Note while held by such U.S. Holder and
was not previously taken into account pursuant to the election
discussed below. Furthermore, the U.S. Holder could be
required to defer the deduction of a portion of the interest
paid on any indebtedness incurred or maintained to purchase or
carry the New Note. In general terms, market discount on a New
Note will be treated as accruing ratably over the term of such
New Note, or, at the election of the holder, under a constant
yield method. A U.S. Holder may elect to include market
discount in income on a current basis as it accrues (on either a
ratable or constant-yield basis), in lieu of treating a portion
of any gain realized on a sale of a New Note as ordinary income.
If a U.S. Holder elects to include market discount on a
current basis, the interest deduction deferral rule described
above will not apply. Any such election, if made, applies to all
market discount bonds acquired by the taxpayer on or after the
first day of the first taxable year to which such election
applies and is revocable only with the consent of the IRS.
Information
Reporting and Backup Withholding
In general, information reporting requirements will apply to
certain payments of principal and interest on a New Note and to
the proceeds of the sale of a New Note made to U.S. Holders
other than certain exempt recipients (such as corporations).
Backup withholding will apply to such payments if the
U.S. Holder fails to provide its taxpayer identification
number or, in the case of interest payments, fails either to
report in full dividend and interest income or to make certain
certifications. Any amounts withheld under the backup
withholding rules will be allowed as a refund or a credit
against the U.S. Holders U.S. federal income tax
liability provided the required information is furnished to the
IRS.
U.S.
Federal Income Tax Consequences to
Non-U.S.
Holders
The following is a summary of certain U.S. federal tax
consequences that will apply to you if you are a
Non-U.S. Holder
of the New Notes. The term
Non-U.S. Holder
means a beneficial owner that is not a U.S. Person and not
a partnership. As used herein, the term
U.S. Person means a citizen or resident of the
United States, a corporation, partnership or other entity
created or organized in or under the laws of the
United States or any political subdivision thereof, an
estate the income of which is subject to U.S. federal
income taxation regardless of its source or a trust if
(i) a U.S. court is able to exercise primary
supervision over the trusts administration and
(ii) one or more U.S. persons have the authority to
control all of the trusts substantial decisions.
As discussed above with respect to U.S. Holders, the
exchange of the Old Notes for the New Notes pursuant to the
terms of the exchange offers and registration rights agreement
will not be considered an actual exchange of debt instruments
for U.S. federal income tax purposes for a beneficial owner
of the Old Notes. Accordingly,
Non-U.S. Holders
will recognize no gain or loss on the exchange of the Old Notes
for the New Notes.
U.S.
Federal Income and Withholding Tax
Under United States federal income tax law as currently in
effect, holders of the New Notes that are
Non-U.S. Holders
will not be subject to U.S. federal income tax, or
U.S. federal withholding tax, on payments of interest on
the New Notes so long as the requirements described in the
second succeeding paragraph are satisfied, unless:
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the holder is an insurance company carrying on a
U.S. insurance business, within the meaning of the Code, to
which the interest is attributable; or
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the holder has an office or other fixed place of business in the
United States to which the interest is attributable and the
interest either (a) is derived in the active conduct of a
banking, financing or similar business within the United States
or (b) is received by a corporation the principal business
of which is trading in stock or securities for its own account,
and certain other conditions exist.
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The gain realized (including on redemption) on any sale or
exchange of the New Notes by a
Non-U.S. Holder
will not be subject to U.S. federal income tax, or
U.S. federal withholding tax, unless (i) such gain is
effectively connected with the conduct by the
Non-U.S. Holder
of a trade or business in the United States or (ii) in
the case of gain realized by an individual holder, the
Non-U.S. Holder
is present in the United States for 183 days or more in the
taxable year of the sale and either (a) such gain or income
is attributable to an office or other fixed place of business
maintained in the United States by such
Non-U.S. Holder
or (b) such
Non-U.S. Holder
has a tax home in the United States.
Non-U.S. Holders
may be required to comply with applicable certification
procedures to establish that they are not U.S. Persons in
order to avoid the application of information reporting
requirements and backup withholding tax.
CERTAIN
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain Canadian federal
income tax considerations applicable to a Non-Resident Holder
(as defined below) of the New Notes who acquires New Notes
pursuant to this prospectus.
This summary is based on the current provisions of the Tax Act
and the regulations thereunder, the current administrative
policies and assessing practices of the Canada Revenue Agency
made publicly available prior to the date of this prospectus,
and all specific proposals to amend the Tax Act and the
regulations publicly announced by the Minister of Finance
(Canada) prior to the date of this prospectus. This summary does
not otherwise take into account or anticipate changes in the law
or in administrative policies or assessing practices of the
Canada Revenue Agency, whether by judicial, governmental or
legislative decision or action, nor does it take into account
tax legislation or considerations of any province or territory
of Canada or any jurisdiction other than Canada. This summary is
of a general nature only and is not intended to be, and should
not be interpreted as, legal or tax advice to any particular
holder of New Notes. Prospective holders should consult their
own tax advisors with respect to the income tax considerations
applicable to them.
As used herein, a Non-Resident Holder of a New Note
means a beneficial owner who, at all relevant times, (i) is
not, has not been and is not deemed to be a resident of Canada
for purposes of the Tax Act, or any applicable income tax
convention, (ii) deals at arms length with the
Company and the Guarantors and is not affiliated with the
Company or the Guarantors for purposes of the Tax Act,
(iii) does not use or hold and is not deemed to use or hold
the New Notes in connection with any business carried on in
Canada, and (iv) is not an insurer for purposes of the Tax
Act.
Amounts paid or credited, or deemed to be paid or credited, as,
on account or in lieu of payment of, or in satisfaction of the
principal amount of the New Notes or premium, discount or
interest on the New Notes by us to a Non-Resident Holder,
including in respect of an offer to purchase the New Notes
required to be made under the terms of the New Notes, will be
exempt from Canadian withholding tax.
No other taxes on income (including taxable capital gains) will
be payable under the Tax Act by a Non-Resident Holder of the New
Notes by reason only of the acquisition, ownership or
disposition of the New Notes by such Non-Resident Holder.
Each broker-dealer that receives New Notes for its own account
pursuant to the exchange offers must acknowledge that it will
deliver a prospectus in connection with any resale of such New
Notes. This prospectus, as it may be amended or supplemented
from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes
where such Old Notes were acquired as a result of market-making
activities or other trading activities. Starting on the
expiration date of the exchange offers and ending on the close
of business 180 days after the expiration date, we will
make this prospectus, as amended or supplemented, available to
any broker-dealer for use in connection with any such resale
upon the request of any such broker-dealer.
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We will not receive any proceeds from any sale of New Notes by
broker-dealers.
New Notes received by broker-dealers for their own account
pursuant to the exchange offers may be sold from time to time in
one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the
New Notes or a combination of such methods of resale, at market
prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer
and/or
the
purchasers of any such New Notes. Any broker-dealer that resells
New Notes that were received by it for its own account pursuant
to the exchange offers and any broker or dealer that
participates in a distribution of such New Notes may be deemed
to be an underwriter within the meaning of the
Securities Act and any profit of any such resale of New Notes
and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by
acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the
Securities Act.
For a period of 180 days after the expiration date, we
shall promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer
that requests such documents in the letter of transmittal. We
have agreed to pay all expenses incident to the exchange offers
(including the expenses of one counsel for the holders of the
Old Notes) other than commissions or concessions of any brokers
or dealers and will indemnify the holders of the Old Notes
(including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
Any distribution of New Notes in Canada pursuant to the exchange
offers will be made on a private placement basis and exempt from
the requirement that we prepare and file a prospectus with the
relevant Canadian securities regulatory authorities.
TRANSFER
RESTRICTIONS IN CANADA
The New Notes are subject to restrictions on transfer in Canada
as summarized below. By tendering your Old Notes in exchange for
New Notes, you will be deemed to acknowledge, represent and
agree with the Company and the Guarantors that:
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no prospectus has been or will be filed with the securities
commission or similar regulatory authority of any province or
territory of Canada in connection with the distribution of the
New Notes pursuant to the exchange offers, or in connection with
the Old Notes;
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you will not sell New Notes, directly or indirectly, in Canada
for a period of four months following the settlement date except
pursuant to an available exemption from the prospectus
requirements of the applicable provincial or territorial
securities laws; and
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each New Note will contain a legend substantially to the
following effect:
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UNLESS PERMITTED UNDER CANADIAN SECURITIES LEGISLATION, THE
HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY IN CANADA
BEFORE [the date that is four months and one day following the
settlement date].
69
INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus incorporates by reference important business and
financial information about NNC and NNL that is not included in
or delivered with this document. The information incorporated by
reference is considered to be part of this prospectus, and later
information that we and NNL file with the SEC will automatically
update and supersede this information. Any statement contained
in this prospectus or in any document incorporated or deemed to
be incorporated by reference into this prospectus that is
modified or superseded by subsequently filed materials shall not
be deemed, except as so modified or superseded, to constitute a
part of this prospectus. We incorporate by reference the
documents listed below, including all exhibits thereto, and any
future filings we and NNL make with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the termination or completion of the exchange offers,
including any period during which we have agreed to make this
prospectus available to broker-dealers for resales as described
herein:
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Filings of NNC (SEC File No. 001-07260)
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Period/Date
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Annual Report on
Form 10-K
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Fiscal year ended December 31,
2006 (with the exception of the audited consolidated financial
statements and related notes in item 8, the MD&A in item 7
and the business description in item 1 thereof, which have been
replaced by the audited consolidated financial statements,
MD&A and business description included in NNCs
Current Report on Form 8-K dated September 10, 2007, which is
incorporated by reference herein).
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Proxy Statement on
Schedule 14A
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March 16, 2007.
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Quarterly Reports on
Form 10-Q
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March 31, 2007, June 30, 2007.
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Current Reports on
Form 8-K
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January 2, 2007, February 6, 2007,
February 7, 2007 (except Item 2.02 thereof), March 1, 2007
(except Item 2.02 thereof), March 9, 2007, March 15, 2007, March
16, 2007 (except Item 2.02 thereof), March 22, 2007, May 1, 2007
(except Item 2.02 thereof), May 2, 2007, May 3, 2007 (except
Item 2.02 thereof), May 16, 2007, May 22, 2007, June 4, 2007,
August 1, 2007, August 2, 2007 (except Item 2.02 thereof),
September 10, 2007.
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Filings of NNL (SEC File No. 000-30758)
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Period/Date
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Annual Report on
Form 10-K
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Fiscal year ended December 31,
2006 (with the exception of the audited consolidated financial
statements and related notes in item 8, the MD&A in item 7
and the business description in item 1 thereof, which have been
replaced by the audited consolidated financial statements,
MD&A and business description included in NNLs
Current Report on Form 8-K dated September 10, 2007, which is
incorporated by reference herein).
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Quarterly Reports on
Form 10-Q
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March 31, 2007, June 30, 2007.
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Current Reports on
Form 8-K
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January 2, 2007, February 6, 2007,
February 7, 2007 (except Item 2.02 thereof), March 1, 2007
(except Item 2.02 thereof), March 9, 2007, March 15, 2007, March
16, 2007 (except Item 2.02 thereof), March 22, 2007, May 1, 2007
(except Item 2.02 thereof), May 2, 2007, May 3, 2007 (except
Item 2.02 thereof), May 16, 2007, May 22, 2007, June 4, 2007,
August 1, 2007, August 2, 2007 (except Item 2.02 thereof),
September 10, 2007.
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We will provide to each person, including any beneficial owner,
to whom an prospectus is delivered, upon written or oral request
at no cost to the requester a copy of any or all of the reports
or documents that have been incorporated by reference in this
prospectus but not delivered with the prospectus. Requests for
these reports or documents must be made to the Corporate
Secretary at Nortel Networks Corporation and Nortel Networks
Limited, 195 The West Mall, Toronto, Ontario, Canada M9C 5K1,
telephone number
(905) 863-7000.
The incorporated reports and other documents may be accessed at
our website at www.nortel.com. The information on the website is
not part of this prospectus.
WHERE
YOU CAN FIND MORE INFORMATION
NNC and NNL file annual, quarterly and current reports, proxy
statements and other information with the SEC. We have also
filed with the SEC a registration statement on
Form S-4
to register the New Notes and related guarantees. This
prospectus, which forms part of the registration statement, does
not contain all of the information included in that registration
statement. For further information about us, the New Notes and
related Guarantees described in this prospectus, you should
refer to the registration statement and its exhibits. You may
read and copy any of the information on file with the SEC at the
SECs Public Reference Room at 100 F Street,
N.E., Washington, DC 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
In addition, the SEC maintains an Internet site at
http://www.sec.gov
that contains reports, proxy and information statements, and
other information regarding issuers that file electronically
with the SEC. NNCs and NNLs filings with the SEC are
also available to the public from commercial document retrieval
services.
NNCs common shares are listed on the NYSE and TSX.
NNCs 2008 Convertible Notes and NNLs related
guarantee are also listed on the NYSE. Reports and other
information concerning NNC or NNL may be inspected at the
offices of the New York Stock Exchange, 20 Broad Street,
New York, New York 10005.
The validity of the New Notes will be passed upon for us by
Cleary Gottlieb Steen & Hamilton LLP, New York, New
York. Certain matters under Canadian law will be passed upon for
us by Gordon A. Davies, Chief Legal Officer and Corporate
Secretary of NNC and NNL.
The consolidated financial statements and financial statement
schedules of NNC and NNL as of December 31, 2006 and 2005
and for each of the years in the three-year period ended
December 31, 2006 included in NNCs and NNLs
Current Reports on Form 8-K dated September 10, 2007
and incorporated by reference herein, and managements
report on the effectiveness of internal control over financial
reporting as of December 31, 2006, included in NNCs
and NNLs 2006 Annual Report and incorporated by reference
herein, have been audited by Deloitte & Touche LLP,
independent registered chartered accountants, as stated in their
reports, which are incorporated by reference in this prospectus
in reliance upon such firm as experts in accounting and
auditing, which reports (1) express an unqualified opinion
on the consolidated financial statements and consolidated
financial statement schedule and include an explanatory
paragraph referring to the restatement of the consolidated
financial statements as of December 31, 2005 and for the
years ended December 31, 2005 and 2004, and includes a
separate report titled Comments by Independent Registered
Chartered Accountants on Canada United States of
America Reporting Differences referring to changes in accounting
principles that have a material effect on the comparability of
the financial statements, (2) express an unqualified
opinion on managements assessment of the effectiveness of
NNC and NNLs internal control over financial reporting,
and (3) express an adverse opinion on the effectiveness of
NNC and NNLs internal control over financial reporting
because of a material weakness.
71
ANNEX A
LETTER OF TRANSMITTAL
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE
ATTENTION. If you are in any doubt as to the action to be taken,
you should immediately consult your broker, bank manager,
lawyer, accountant, investment advisor or other professional
adviser.
LETTER OF
TRANSMITTAL
Relating to
NORTEL
NETWORKS LIMITED
Offers to
Exchange
This document relates to the exchange offers (the Exchange
Offers) made by Nortel Networks Limited (the
Company) to exchange:
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any and all of the $450,000,000 aggregate principal amount of
its unregistered 10.75% Senior Notes due 2016 (CUSIP Nos.
656569AB6 and C65614AA4) (the Old 2016 Fixed Rate
Notes) for an equal amount of new 10.75% Senior Notes
due 2016 (the New 2016 Fixed Rate Notes), which have
been registered under the Securities Act of 1933, as amended
(the Securities Act);
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any and all of the $550,000,000 aggregate principal amount of
its unregistered 10.125% Senior Notes due 2013 (CUSIP Nos.
656569AE0 and C65614AB2) (the Old 2013 Fixed Rate
Notes) for an equal amount of new 10.125% Senior
Notes due 2013 (the New 2013 Fixed Rate Notes),
which have been registered under the Securities Act; and
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any and all of the $1,000,000,000 aggregate principal amount of
its unregistered Floating Rate Senior Notes due 2011 (CUSIP Nos.
656569AH3 and C65614AC0) (the Old Floating Rate
Notes) for an equal amount of new Floating Rate Senior
Notes due 2011 (the New Floating Rate Notes), which
have been registered under the Securities Act.
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The Old 2016 Fixed Rate Notes, the Old 2013 Fixed Rate Notes and
the Old Floating Rate Notes are referred to collectively as the
Old Notes, and the New 2016 Fixed Rate Notes, the
New 2013 Fixed Rate Notes and the New Floating Rate Notes are
referred to collectively as the New Notes. The New
Notes will be fully and unconditionally guaranteed by Nortel
Networks Corporation and initially guaranteed by Nortel Networks
Inc.
The Exchange Offers are described in the Prospectus
dated ,
2007 (the Prospectus) and in this letter of
transmittal (the Letter of Transmittal). All terms
and conditions contained in, or otherwise referred to in, the
Prospectus are deemed to be incorporated in, and form a part of,
this Letter of Transmittal. Therefore, you are urged to read
carefully the Prospectus and the items referred to therein. The
terms and conditions contained in the Prospectus, together with
the terms and conditions governing this Letter of Transmittal
and the instructions herein, are collectively referred to herein
as the terms and conditions.
The Exchange Offers will expire at 5:00 p.m., New York
City time,
on ,
2007, unless extended by the Company (such date and time, as
they may be extended, the Expiration Date). Tendered
Old Notes may be withdrawn at any time prior to the Expiration
Date.
A-1
Upon the satisfaction or waiver of the conditions to the
acceptance of Old Notes set forth in the Prospectus under
Description of the Exchange Offers Conditions
to the Exchange Offers, the Company will accept for
settlement Old Notes that have been validly tendered (and not
subsequently validly withdrawn). This acceptance date is
referred to as the Acceptance Date. The Company will
deliver the New Notes on a date (the Settlement
Date) as soon as practicable after the Expiration Date.
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The Information Agent for the
Exchange Offers is:
D.F. King &
Co., Inc.
48 Wall Street
New York, New York 10005
Banks and brokers call:
(212) 269-5550
(collect)
All others call toll-free:
(800) 659-6590
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The Exchange Agent for the
Exchange Offers is:
The Bank of New
York
Corporate Trust Operations
Reorganization Unit
101 Barclay Street, 7 East
New York, New York 10286
Telephone: (212) 815-3687
Facsimile: (212) 815-1915
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,
2007
This Letter of Transmittal is to be used by holders of the Old
Notes. Tender of Old Notes is to be made using the Automated
Tender Offer Program (ATOP) of The Depository
Trust Company (DTC) pursuant to the procedures
set forth in the Prospectus under the caption Description
of the Exchange Offers Procedures for
Tendering. Holders of Old Notes that are accepting the
Exchange Offers must transmit their acceptance through a DTC
participant to DTC using ATOP procedures. DTC will verify the
acceptance, execute a book-entry delivery to the Exchange
Agents DTC account and send a computer-generated message
known as an agents message to the Exchange
Agent. For you to validly tender your Old Notes in the Exchange
Offers, the Exchange Agent must receive, prior to the Expiration
Date, an agents message under the ATOP procedures that
confirms:
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that DTC has received your instructions to tender your Old Notes;
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that you agree to be bound by the terms of this Letter of
Transmittal; and
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whether you are resident in Canada and, if you are resident in
Canada, that you acknowledge that you have received the Canadian
Private Placement Memorandum and have delivered the Canadian
Representation Letter to the exchange agent.
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By using the ATOP procedures to tender Old Notes, you will not
be required to deliver this Letter of Transmittal to the
Exchange Agent. However, you will be bound by its terms, and you
will be deemed to have made the acknowledgments and the
representations and warranties it contains, just as if you had
signed it.
In addition to effecting the tender of Old Notes through the
ATOP procedures, a holder of Old Notes that is resident in
Canada must also complete, sign and date the Canadian
Representation Letter that is included with the Canadian Private
Placement Memorandum and send the completed Canadian
Representation Letter to the exchange agent. In order for Old
Notes held by holder that is resident in Canada to be validly
tendered, the exchange agent must receive the completed Canadian
Representation Letter prior to 5:00 p.m., New York City
time, on the Expiration Date.
The New Notes will be issued in full exchange for Old Notes in
the Exchange Offers, if consummated, on the Settlement Date and
will be delivered in book-entry form.
A-2
Please
read the accompanying instructions carefully.
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange
Offers, the tendering holder hereby tenders to the Company the
aggregate principal amount of Old Notes credited by the
tendering holder to the Exchange Agents account at DTC
using ATOP.
The tendering holder understands that validly tendered Old Notes
(or defectively tendered Old Notes with respect to which the
Company has waived or caused to be waived such defect will be
deemed to have been accepted by the Company if, as and when the
Company gives written notice thereof to the Exchange Agent. The
tendering holder understands that, subject to the terms and
conditions, Old Notes properly tendered and accepted (and not
validly withdrawn) in accordance with the terms and conditions
will be exchanged for New Notes. The tendering holder
understands that, under certain circumstances, the Company may
not be required to accept any of the Old Notes tendered
(including any Old Notes tendered after the Expiration Date). If
any Old Notes are not accepted for exchange for any reason (or
if Old Notes are validly withdrawn), such Old Notes will be
returned, without expense, to the tendering holders
account at DTC or such other account as designated herein,
pursuant to the book-entry transfer procedures described in the
Prospectus, as promptly as practicable after the expiration or
termination of the Exchange Offers.
By tendering Old Notes in the Exchange Offers, the tendering
holder acknowledges that the Exchange Offers are being made
based upon the Companys understanding of an interpretation
by the staff of the Securities and Exchange Commission (the
SEC) as set forth in no-action letters issued to
third parties, including
Exxon Capital Holdings
Corporation
, SEC No-Action Letter (available May 13,
1988),
Morgan Stanley & Co. Incorporated
, SEC
No-Action Letter (available June 5, 1991) and
Shearman & Sterling
, SEC No-Action Letter
(available July 2, 1993), that the New Notes issued in
exchange for the Old Notes pursuant to the Exchange Offers may
be offered for resale, resold and otherwise transferred by each
holder thereof (other than a broker-dealer who acquired the Old
Notes directly from the Company or any holder that is an
affiliate of the Company within the meaning of
Rule 405 under the Securities Act), without compliance with
the registration and prospectus delivery provisions of the
Securities Act, provided that such New Notes are acquired in the
ordinary course of such holders business and such holder
is not engaged in, and does not intend to engage in, a
distribution of such New Notes and has no arrangement with any
person to participate in the distribution of such New Notes. The
tendering holder represents that it acquires the New Notes in
the ordinary course of its business, it is not engaged in, and
does not intend to engage in, a distribution of New Notes and it
has no arrangements or understandings with any person to
participate in a distribution of the New Notes. If the tendering
holder is a broker-dealer that will receive New Notes for its
own account in exchange for Old Notes, it represents that the
Old Notes to be exchanged for New Notes were acquired by it as a
result of market-making activities or other trading activities
and acknowledges that it will deliver a prospectus in connection
with any resale of such New Notes; however, by so acknowledging
and by delivering a prospectus, the tendering holder will not be
deemed to admit that it is an underwriter within the
meaning of the Securities Act.
Upon agreement to the terms of this Letter of Transmittal
pursuant to an agents message, the tendering holder will,
subject to that holders ability to withdraw its tender,
and subject to the terms and conditions of the Exchange Offers
generally, hereby:
(1) irrevocably sell, assign and transfer to or upon the
order of the Company or its nominee all right, title and
interest in and to, and any and all claims in respect of or
arising or having arisen as a result of the tendering
holders status as a holder of, all Old Notes tendered
hereby, such that thereafter it shall have no contractual or
other rights or claims in law or equity against the Company or
any fiduciary, trustee, fiscal agent or other person connected
with the Old Notes arising under, from or in connection with
such Old Notes;
(2) waive any and all rights with respect to the Old Notes
tendered hereby, including, without limitation, any existing or
past defaults and their consequences in respect of such Old
Notes; and
(3) release and discharge the Company and The Bank of New
York, as the trustee for the Old Notes, from any and all claims
the tendering holder may have, now or in the future, arising out
of or related to the Old Notes tendered hereby, including,
without limitation, any claims that the tendering holder is
entitled to receive additional principal or interest payments
with respect to the Old Notes tendered hereby,
A-3
other than as expressly provided in the Prospectus and in this
Letter of Transmittal, or to participate in any redemption or
defeasance of the Old Notes tendered hereby.
The tendering holder understands that tenders of Old Notes
pursuant to the procedures described in the Prospectus and in
this Letter of Transmittal and acceptance of such Old Notes by
the Company will, following such acceptance, constitute a
binding agreement between the tendering holder and the Company
upon the terms and conditions.
By tendering Old Notes in the Exchange Offers, the tendering
holder represents, warrants and agrees that:
(1) it has received and reviewed the Prospectus;
(2) it is the beneficial owner (as defined below) of, or a
duly authorized representative of one or more beneficial owners
of, the Old Notes tendered hereby, and it has full power and
authority to execute this Letter of Transmittal;
(3) the Old Notes being tendered hereby were owned as of
the date of tender, free and clear of any liens, charges,
claims, encumbrances, interests and restrictions of any kind,
and the Company will acquire good, indefeasible and unencumbered
title to such Old Notes, free and clear of all liens, charges,
claims, encumbrances, interests and restrictions of any kind,
when the Company accepts the same;
(4) it will not sell, pledge, hypothecate or otherwise
encumber or transfer any Old Notes tendered hereby from the date
of this Letter of Transmittal, and any purported sale, pledge,
hypothecation or other encumbrance or transfer will be void and
of no effect;
(5) in evaluating the Exchange Offers and in making its
decision whether to participate in the Exchange Offers by
tendering its Old Notes, the tendering holder has made its own
independent appraisal of the matters referred to in the
Prospectus and this Letter of Transmittal and in any related
communications and it is not relying on any statement,
representation or warranty, express or implied, made to such
holder by the Company (other than those contained in this
prospectus, as amended or supplemented through the expiration
date), the Information Agent or the Exchange Agent;
(6) the execution and delivery of this Letter of
Transmittal shall constitute an undertaking to execute any
further documents and give any further assurances that may be
required in connection with any of the foregoing, in each case
on and subject to the terms and conditions described or referred
to in the Prospectus;
(7) the agreement to the terms of this Letter of
Transmittal pursuant to an agents message shall, subject
to the terms and conditions of the Exchange Offers, constitute
the irrevocable appointment of the Exchange Agent as its
attorney and agent and an irrevocable instruction to such
attorney and agent to complete and execute all or any forms of
transfer and other documents at the discretion of that attorney
and agent in relation to the Old Notes tendered in favor of the
Company or any other person or persons as the Company may direct
and to deliver such forms of transfer and other documents in the
attorneys and agents discretion and the certificates
and other documents of title relating to the registration of
such Old Notes and to execute all other documents and to do all
other acts and things as may be in the opinion of that attorney
or agent necessary or expedient for the purpose of, or in
connection with, the acceptance of the Exchange Offers, and to
vest in the Company or its nominees such Old Notes;
(8) the terms and conditions of the Exchange Offers shall
be deemed to be incorporated in, and form a part of, this Letter
of Transmittal, which shall be read and construed accordingly;
(9) it is acquiring the New Notes in the ordinary course of
its business;
(10) it is not participating in, and does not intend to
participate in, a distribution of the New Notes within the
meaning of the Securities Act and has no arrangement or
understanding with any person to participate in a distribution
of the New Notes within the meaning of the Securities Act;
(11) it is not a broker-dealer who acquired the Old Notes
directly from the Company; and
(12) it is not an affiliate of the Company,
within the meaning of Rule 405 of the Securities Act.
A-4
If the tendering holder is a resident of Canada, by tendering
Old Notes in the Exchange Offers, the tendering holder also
represents, warrants and agrees that:
(1) it has received a copy of the Canadian Private
Placement Memorandum and understands that the Prospectus forms a
part of the Canadian Private Placement Memorandum;
(2) it is tendering its Old Notes for exchange on the terms
and conditions set forth in the Canadian Private Placement
Memorandum in addition to the terms set forth in this Letter of
Transmittal;
(3) it is entitled under applicable Canadian securities
laws to participate in the Exchange Offers and receive the New
Notes without the benefit of a prospectus qualified under such
securities laws and without the services of a dealer registered
under those securities laws;
(4) it has completed and delivered to the Exchange Agent
the Canadian Representation Letter; and
(5) the tender of Old Notes will not be considered a valid
tender unless the holder has completed and delivered to the
Exchange Agent a Canadian Representation Letter.
The representations, warranties and agreements of a holder
tendering Old Notes shall be deemed to be repeated and
reconfirmed on and as of the Expiration Date and the Settlement
Date. For purposes of this Letter of Transmittal, the
beneficial owner of any Old Notes means any holder
that exercises investment discretion with respect to such Old
Notes.
The tendering holder understands that tenders may not be
withdrawn at any time after the Expiration Date, except as set
forth in the Prospectus, unless the Exchange Offer is amended
with changes to the terms and conditions that are, in the
reasonable judgment of the Company, materially adverse to the
tendering holders, in which case tenders may be withdrawn under
the conditions described in the extension.
If the Exchange Offers are amended in a manner determined by the
Company to constitute a material change, the Company will extend
the Exchange Offers for a period of two to ten business days,
depending on the significance of the amendment and the manner of
disclosure to such holders, if the Exchange Offers would
otherwise have expired during such two to ten business day
period.
All authority conferred or agreed to be conferred in this Letter
of Transmittal and every obligation of the tendering holder
hereunder shall be binding upon the tendering holders
successors, assigns, heirs, executors, administrators, trustees
in bankruptcy and legal representatives of the tendering holder
and shall not be affected by, and shall survive, the death or
incapacity of the tendering holder.
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CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10
ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY
AMENDMENTS OR SUPPLEMENTS THERETO.
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Name:
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Address:
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Name of Tendering Institution:
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Account Number:
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Transaction Code Number:
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By crediting the Old Notes to the Exchange Agents account
at DTC using ATOP and by complying with applicable ATOP
procedures with respect to the Exchange Offers, the participant
in DTC confirms on behalf of itself and the beneficial owners of
such Old Notes all provisions of this Letter of Transmittal
(including all representations and warranties) applicable to it
and such beneficial owner as fully as if it had completed the
information required herein and executed and transmitted this
Letter of Transmittal to the Exchange Agent.
A-5
INSTRUCTIONS FORMING
PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFERS
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Book-Entry
Confirmations
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Any confirmation of a book-entry transfer to the Exchange
Agents account at DTC of Old Notes tendered by book-entry
transfer, as well as an agents message, and any other
documents required by this Letter of Transmittal, must be
received by the Exchange Agent at its address set forth on the
cover page of this Letter of Transmittal prior to
5:00 p.m., New York City time, on the Expiration Date.
The Company will determine in its sole discretion all questions
as to the validity, form, eligibility, time of receipt,
acceptance of tendered Old Notes and withdrawal of tendered Old
Notes. The Companys determination will be final and
binding. The Company reserves the absolute right to reject any
Old Notes not properly tendered or any acceptance of Old Notes
that would, in the opinion of its counsel, be unlawful. The
Company also reserves the right to waive any defect,
irregularities or conditions of tender as to particular Old
Notes. The Companys interpretation of the terms and
conditions of the Exchange Offers, including the instructions in
this Letter of Transmittal, will be final and binding on all
parties. Unless waived, all defects or irregularities in
connection with tenders of Old Notes must be cured within such
time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with
respect to tenders of Old Notes, none of the Company, the
Information Agent, the Exchange Agent and any other person will
incur any liability for failure to give such notification.
Tenders of Old Notes will not be deemed made until such defects
or irregularities have been cured or waived. Any Old Notes
received by the Exchange Agent that are not properly tendered
and as to which the defects or irregularities have not been
cured or waived will be returned to the tendering holder through
the facilities of DTC as soon as practicable after the
Expiration Date.
The Company reserves the absolute right to waive, in whole or
part, at any time or from time to time, any of the conditions to
the Exchange Offers set forth in the Prospectus or in this
Letter of Transmittal.
No alternative, conditional, irregular or contingent tender of
Old Notes will be accepted.
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5.
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Request
for Assistance or Additional Copies
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Requests for assistance or for additional copies of the
Prospectus or this Letter of Transmittal may be directed to the
Information Agent at the address or telephone numbers set forth
on the cover page of this Letter of Transmittal. Holders may
also contact their commercial bank, broker, dealer, trust
company or other nominee for assistance concerning the Exchange
Offers.
Tenders of Old Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date. For
a withdrawal to be effective you must comply with the
appropriate ATOP procedures. Any notice of withdrawal must
specify the name and number of the account at DTC to be credited
with withdrawn Old Notes and otherwise comply with the ATOP
procedures. For more information, see the section of the
Prospectus entitled Description of the Exchange
Offers Withdrawal of Tenders.
Holders who tender their Old Notes for exchange will not be
obligated to pay any transfer taxes in connection with that
tender or exchange, except that holders who instruct the Company
to register New Notes in the name of, or request that Old Notes
not tendered or not accepted in the exchange offers be returned
to, a person other than the registered tendering holder will be
responsible for the payment of any applicable transfer tax on
those Old Notes.
A-6
IMPORTANT: BY USING THE ATOP PROCEDURES TO TENDER
OLD NOTES, YOU WILL NOT BE REQUIRED TO DELIVER THIS LETTER OF
TRANSMITTAL TO THE EXCHANGE AGENT. HOWEVER, YOU WILL BE BOUND BY
ITS TERMS, AND YOU WILL BE DEEMED TO HAVE MADE THE
ACKNOWLEDGMENTS AND THE REPRESENTATIONS AND WARRANTIES IT
CONTAINS, JUST AS IF YOU HAD SIGNED IT.
A-7
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS
|
|
Item 20.
|
Indemnification
of Directors and Officers.
|
Nortel
Networks Corporation and Nortel Networks Limited
Each of NNC and NNL is a Canadian corporation. The Canada
Business Corporations Act (the Act) provides
generally that a corporation may indemnify a director or officer
of the corporation, a former director or officer of the
corporation or another individual who acts or acted at the
corporations request as a director or officer, or an
individual acting in a similar capacity, of another entity,
against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably
incurred by the individual in respect of any civil, criminal,
administrative, investigative or other proceeding in which he or
she is involved because of that association with the corporation
or other entity, where the director or officer acted honestly
and in good faith with a view to the best interests of the
corporation or, as the case may be, to the best interests of the
other entity for which the individual acted as director or
officer or in a similar capacity at the corporations
request and, in the case of a criminal or administrative action
enforced by monetary penalty, the director or officer had
reasonable grounds for believing that the conduct was lawful.
Where an officer or director was not judged by the court or
other competent authority to have committed any fault or omitted
to do anything that the individual ought to have done and
provided that such director or officer acted honestly and in
good faith with a view to the best interests of the corporation,
or, as the case may be, to the best interests of the other
entity for which the individual acted as director or officer or
in a similar capacity at the corporations request and in
the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, the individual had
reasonable grounds for believing that the individuals
conduct was lawful, such officer or director is entitled to
indemnification from the corporation for such costs, charges and
expenses which were reasonably incurred.
By-law No. 1 of NNC, approved by the Board of Directors of
NNC on February 22, 2001 and confirmed by the shareholders
of NNC on April 26, 2001, and By-law No. 1 of NNL,
approved by the Board of Directors of NNL on February 22,
2001, and by its sole shareholder on April 26, 2001,
implements the indemnification provisions of the Act and each
reads as follows:
Section
9.2
INDEMNITY
Subject to the limitations contained in the Act, the
corporation shall indemnify a director or officer, a former
director or officer, or a person who acts or acted at the
corporations request as a director or officer of a body
corporate of which the corporation is or was a shareholder or
creditor, or a person who undertakes or has undertaken any
liability on behalf of the corporation or any such body
corporate, and his or her heirs and legal representatives,
against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably
incurred by that person in respect of any civil, criminal or
administrative action or proceeding to which such person is made
a party by reason of being or having been a director or officer
of the corporation or such body corporate, if:
(a) such person acted honestly and in good faith with a
view to the best interests of the corporation; and
(b) in the case of a criminal or administrative action
or proceeding that is enforced by a monetary penalty, such
person had reasonable grounds for believing that his or her
conduct was lawful.
The corporation shall indemnify any person referred to above
who fulfills the conditions contained in (a) and
(b) above and who has been substantially successful on the
merits in the defense of any civil, criminal or administrative
action or proceeding to which such person is made a party by
reason of his or her being or having been a director or officer
of the corporation or body corporate, against all costs, charges
and expenses reasonably incurred by such person in connection
with the defense of such action or proceeding.
II-1
The corporation may also indemnify such persons in such other
circumstances as the Act or other applicable law permits or
requires. Nothing in this by-law shall limit the right of any
person entitled to indemnity to claim indemnity apart from the
provisions of this by-law. The corporation is hereby authorized
to execute agreements evidencing its indemnity in favor of
the foregoing persons to the full extent permitted
by law.
Section
9.3
INSURANCE
To the extent permitted by the Act and other applicable law,
the corporation may purchase and maintain insurance for the
benefit of any person referred to in Section 9.2 against
such liability as the board of directors may determine.
Additionally, NNC has entered into agreements with certain of
our directors pursuant to which NNC has agreed to indemnify such
directors to the extent permitted under the Act, NNCs
by-laws and our by-laws.
The Act also provides specifically for the purchase of insurance
by a corporation for the benefit of its directors and officers
against liability incurred as such. The directors and officers
of NNC and NNL are covered by a group liability insurance policy.
Nortel
Networks Inc.
NNI is a Delaware corporation. Subsection (a) of
Section 145 of the General Corporation Law of the State of
Delaware (the DGCL) empowers a corporation to
indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the
corporation) by reason of the fact that the person is or was a
director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses
(including attorneys fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by the
person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the persons
conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith
and in a manner which the person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had reasonable
cause to believe that the persons conduct was unlawful.
Subsection (b) of Section 145 of the DGCL empowers a
corporation to indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation
to procure a judgment in its favor by reason of the fact that
the person is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other
enterprise against expenses (including attorneys fees)
actually and reasonably incurred by the person in connection
with the defense or settlement of such action or suit if the
person acted in good faith and in a manner the person reasonably
believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable to the corporation unless
and only to the extent that the Court of Chancery or the court
in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly
and reasonably entitled to indemnity for such expenses which the
Court of Chancery or such other court shall deem proper.
Subsection (d) of Section 145 of the DGCL provides
that any indemnification under subsections (a) and
(b) of Section 145 (unless ordered by a court) shall
be made by the corporation only as authorized in the specific
case upon a determination that indemnification of the present or
former director, officer, employee or agent is proper in the
circumstances because the person has met the applicable standard
of conduct set forth in
II-2
subsections (a) and (b) of Section 145. Such
determination shall be made, with respect to a person who is a
director or officer at the time of such determination,
(1) by a majority vote of the directors who are not parties
to such action, suit or proceeding, even though less than a
quorum, or (2) by a committee of such directors designated
by majority vote of such directors, even though less than a
quorum, or (3) if there are no such directors, or if such
directors so direct, by independent legal counsel in a written
opinion, or (4) by the stockholders.
Section 145 of the DGCL further provides that to the extent
a present or former director or officer of a corporation has
been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in subsections (a)
and (b) of Section 145, or in defense of any claim,
issue or matter therein, such person shall be indemnified
against expenses (including attorneys fees) actually and
reasonably incurred by such person in connection therewith and
that such expenses may be paid by the corporation in advance of
the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be
determined that such person is not entitled to be indemnified by
the corporation as authorized in Section 145 of the DGCL;
that any indemnification and advancement of expenses provided
by, or granted pursuant to, Section 145 shall not be deemed
exclusive of any other rights to which the indemnified party may
be entitled; that any indemnification and advancement of
expenses provided by, or granted pursuant to, Section 145
shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of
such persons heirs, executors and administrators; and
empowers the corporation to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee
or agent of the corporation or is or was serving at the request
of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person
and incurred by such person in any such capacity, or arising out
of such persons status as such, whether or not the
corporation would have the power to indemnify such person
against such liabilities under Section 145.
NNIs by-laws implement the provisions of Section 145
of the DGCL as follows:
4. Indemnification.
The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of
Delaware, as the same may be amended and supplemented from time
to time, indemnify any and all directors and officers which it
shall have power to indemnify under said Section 145 from
and against any and all of the expenses, liabilities, or other
matters referred to, in, or covered by said Section, and the
indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be
entitled under the Certificate of Incorporation or any
agreement, vote of stockholders or disinterested directors or
otherwise, both as to actions in their official capacities and
as to action in another capacity while holding such office, and
shall continue as to a person who has ceased to be a director or
officer, and shall inure to the benefit of the heirs, executors,
and administrators of such person.
Section 102(b)(7) of the DGCL provides that a certificate
of incorporation may contain a provision eliminating or limiting
the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty
as a director, provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of
the directors duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL, or
(iv) for any transaction from which the director derived an
improper personal benefit.
Article 12 of our Restated Certificate of Incorporation, as
amended, limits the personal liability of our directors to the
fullest extent permitted by Section 102(b)(7) of the DGCL.
Additionally, we have entered into agreements with certain of
our directors and executive officers pursuant to which we have
agreed to indemnify such directors and executive officers to the
maximum extent permitted under the DGCL and in accordance with
our by-laws and directors and officers insurance
policy.
II-3
The following is a list of all exhibits filed as a part of this
registration statement on
Form S-4,
including those incorporated in this registration statement by
reference. These exhibits may contain representations and
warranties by the parties. These representations and warranties
have been made solely for the benefit of the other party or
parties to such agreements and (i) may have been qualified
by disclosures made to such other party or parties,
(ii) were made only as of the date of such agreements or
such other date(s) as may be specified in such agreements and
are subject to more recent developments, which may not be fully
reflected in the registrants public disclosure,
(iii) may reflect the allocation of risk among the parties
to such agreements and (iv) may apply materiality standards
different from what may be viewed as material to investors.
Accordingly, these representations and warranties may not
describe the registrants actual state of affairs at the
date hereof and should not be relied upon.
|
|
|
|
|
Exhibit
|
|
|
No
|
|
Description
|
|
|
|
|
|
|
|
*2
|
.1
|
|
Amended and Restated Arrangement
Agreement involving BCE Inc., Nortel Networks Corporation,
formerly known as New Nortel Inc., and Nortel Networks Limited,
formerly known as Nortel Networks Corporation, made as of
January 26, 2000, as amended and restated March 13,
2000 (including Plan of Arrangement under Section 192 of
the Canada Business Corporations Act) (filed as Exhibit 2.1
to Nortel Networks Limiteds Current Report on
Form 8-K
dated May 1, 2000).
|
|
*4
|
.1
|
|
Indenture dated as of July 5,
2006 among Nortel Networks Limited, Nortel Networks Corporation,
Nortel Networks Inc. and The Bank of New York, as trustee (filed
as Exhibit 4.1 to Nortel Networks Limiteds Current
Report on
Form 8-K
dated July 6, 2006).
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|
*4
|
.2
|
|
First Supplemental Indenture dated
as of July 5, 2006 among Nortel Networks Limited, Nortel
Networks Corporation, Nortel Networks Inc. and The Bank of New
York, as trustee (filed as Exhibit 4.2 to Nortel Networks
Limiteds Current Report on
Form 8-K
dated July 6, 2006).
|
|
*4
|
.3
|
|
Second Supplemental Indenture
dated May 1, 2007 to Indenture dated as of July 5,
2006 among Nortel Networks Limited, Nortel Networks Corporation,
Nortel Networks Inc. and The Bank of New York, as trustee
(filed as Exhibit 4.2 to Nortel Networks Limiteds
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007).
|
|
*4
|
.4
|
|
Form of New Note and related
Guarantee (included in the supplemental indenture listed above
as Exhibit 4.2).
|
|
*4
|
.5
|
|
Registration Rights Agreement
dated July 5, 2006 among Nortel Networks Limited, Nortel
Networks Corporation, Nortel Networks Inc. and the
representative of the initial purchasers with regards to U.S.
$1,000,000,000 Floating Rate Senior Notes due 2011, U.S.
$550,000,000 10.125% Senior Notes due 2013, U.S.
$450,000,000 10.750% Senior Notes due 2016 (filed as
Exhibit 10.2 to Nortel Networks Limiteds Current
Report on
Form 8-K
dated July 6, 2006).
|
|
**5
|
.1
|
|
Opinion of Cleary Gottlieb
Steen & Hamilton LLP.
|
|
**5
|
.2
|
|
Opinion of Gordon A. Davies, Chief
Legal Officer and Corporate Secretary of Nortel Networks Limited
and Nortel Networks Corporation.
|
|
*12
|
.1
|
|
Statement of Computation of Ratios
of Earnings to Fixed Charges of Nortel Networks Limited for the
three and six months ended June 30, 2007 and for the fiscal
years ended 2006, 2005, 2004, 2003 and 2002 (filed as
Exhibit 12 to Nortel Networks Limiteds Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2007).
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|
*12
|
.2
|
|
Statement of Computation of Ratio
of Earnings to Fixed Charges of Nortel Networks Corporation for
the three and six months ended June 30, 2007 and for the
fiscal years ended 2006, 2005, 2004, 2003 and 2002 (filed as
Exhibit 12 to Nortel Networks Corporations Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2007).
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|
12
|
.3
|
|
Statement of Computation of Ratio
of Earnings to Fixed Charges of Nortel Networks Corporation for
the six months ended June 30, 2006.
|
|
12
|
.4
|
|
Statement of Computation of Other
Ratios.
|
|
**23
|
.1
|
|
Consent of Cleary Gottlieb
Steen & Hamilton LLP (included in Exhibit 5.1).
|
|
**23
|
.2
|
|
Consent of Gordon A. Davies, Chief
Legal Officer and Corporate Secretary of Nortel Networks Limited
and Nortel Networks Corporation (included in Exhibit 5.2).
|
II-4
|
|
|
|
|
Exhibit
|
|
|
No
|
|
Description
|
|
|
23
|
.3
|
|
Consent of Deloitte &
Touche LLP with respect to report relating to consolidated
financial statements and financial statement schedule of Nortel
Networks Corporation and Nortel Networks Limited.
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|
24
|
.1
|
|
Power of Attorney of certain
directors and officers of Nortel Networks Limited.
|
|
24
|
.2
|
|
Power of Attorney of certain
directors and officers of Nortel Networks Corporation.
|
|
24
|
.3
|
|
Power of Attorney of certain
directors and officers of Nortel Networks Inc.
|
|
25
|
|
|
Form T-1
Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as trustee under
the Indenture.
|
|
|
|
*
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|
Incorporated by reference.
|
|
**
|
|
To be filed by amendment.
|
(a) The undersigned registrants hereby undertake:
(1) to file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events
arising after the effective date of this registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in this registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if,
in the aggregate, the changes in volume and price represent no
more than a 20% change in the maximum aggregate offering price
set forth in the Calculation of Registration Fee
table in the effective registration statement; and
(iii) to include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
(2) that, for the purpose of determining any liability
under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(3) to remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) that, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser, if the registrants
are subject to Rule 430C, each prospectus filed pursuant to
Rule 424(b) as part of a registration statement relating to
an offering, other than registration statements relying on
Rule 430B or other than prospectuses filed in reliance on
Rule 430A (§ 230.430A of this chapter), shall be
deemed to be part of and included in the registration statement
as of the date it is first used after effectiveness. Provided,
however, that no statement made in a registration statement or
prospectus that is part of the registration statement or made in
a document incorporated or deemed incorporated by reference into
the registration statement or prospectus that is part of the
registration statement will, as to a purchaser with a time of
contract of sale prior to such first use, supersede or modify
any statement that was made in the registration statement or
prospectus that was part of the registration statement or made
in any such document immediately prior to such date of first use.
II-5
(5) that, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, the undersigned
registrants undertake that in a primary offering of securities
of the undersigned registrants pursuant to this registration
statement, regardless of the underwriting method used to sell
the securities to the purchaser, if the securities are offered
or sold to such purchaser by means of any of the following
communications, the undersigned registrants will be a seller to
the purchaser and will be considered to offer or sell such
securities to such purchaser:
(i) any preliminary prospectus or prospectus of the
undersigned registrants relating to the offering required to be
filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrants or used
or referred to by the undersigned registrants;
(iii) the portion of any other free writing prospectus
relating to the offering containing material information about
the undersigned registrants or its securities provided by or on
behalf of the undersigned registrants; and
(iv) any other communication that is an offer in the
offering made by the undersigned registrants to the purchaser.
(b) The undersigned registrants hereby undertake that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of a registrants annual report
pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plans annual report pursuant to
Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrants have been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in
the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrants of expenses incurred
or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrants hereby undertake to respond
to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of
this Form, within one business day of such request, and to send
the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents
filed subsequent to the effective date of this registration
statement through the date of responding to the request.
(e) The undersigned registrants hereby undertake to supply
by means of a post-effective amendment all information
concerning a transaction and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada,
on the 10th day of September, 2007.
NORTEL NETWORKS LIMITED
Gordon A Davies
Chief Legal Officer and Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on behalf of Nortel
Networks Limited by the following persons in the capacities
indicated on the 10th day of September, 2007.
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Signature
|
|
Title
|
|
|
|
|
Principal Executive Officer
|
|
|
|
|
|
/s/ Mike
S. Zafirovski
(Mike
S. Zafirovski)
|
|
President and Chief Executive
Officer, and a Director
|
|
|
|
Principal Financial Officer
|
|
|
|
|
|
/s/ David
W. Drinkwater
(David
W. Drinkwater)
|
|
Chief Financial Officer
|
|
|
|
Principal Accounting Officer
|
|
|
|
|
|
/s/ Paul
W. Karr
(Paul
W. Karr)
|
|
Controller
|
|
Authorized Representative in the
United States
|
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|
|
NORTEL NETWORKS INC.
|
|
|
|
|
|
/s/ Lynn
C. Egan
(Lynn
C. Egan)
|
|
Assistant Secretary
|
II-7
Directors
|
|
|
|
|
J.H. Bennett*
(J.H.
Bennett)
|
|
R.D. McCormick*
(R.D.
McCormick)
|
|
|
|
M. Bischoff*
(M.
Bischoff)
|
|
C. Mongeau*
(C.
Mongeau)
|
|
|
|
J.B. Hunt, Jr.*
(J.B.
Hunt, Jr.)
|
|
H.J. Pearce*
(H.J.
Pearce)
|
|
|
|
K.M. Johnson*
(K.M.
Johnson)
|
|
J.D. Watson*
(J.D.
Watson)
|
|
|
|
J.A. MacNaughton*
(J.A.
MacNaughton)
|
|
M.S. Zafirovski*
(M.S.
Zafirovski)
|
|
|
|
J.P. Manley*
(J.P.
Manley)
|
|
|
|
|
|
|
|
/s/ Gordon
A. Davies
By:*
(Gordon A. Davies, as attorney-in-fact September 10, 2007.)
|
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada,
on the 10th day of September, 2007.
NORTEL NETWORKS CORPORATION
Gordon A Davies
Chief Legal Officer and Corporate Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on behalf of Nortel
Networks Corporation by the following persons in the capacities
indicated on the 10th day of September, 2007.
|
|
|
|
|
Signature
|
|
Title
|
|
|
|
|
Principal Executive Officer
|
|
|
|
|
|
/s/ Mike
S. Zafirovski
(Mike
S. Zafirovski)
|
|
President and Chief Executive
Officer, and a Director
|
|
|
|
Principal Financial Officer
|
|
|
|
|
|
/s/ David
W. Drinkwater
(David
W. Drinkwater)
|
|
Chief Financial Officer
|
|
|
|
Principal Accounting Officer
|
|
|
|
|
|
/s/ Paul
W. Karr
(Paul
W. Karr)
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Controller
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Authorized Representative in the
United States
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NORTEL NETWORKS INC.
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/s/ Lynn
C. Egan
(Lynn
C. Egan)
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Assistant Secretary
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II-9
Directors
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J.H. Bennett*
(J.H.
Bennett)
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R.D. McCormick*
(R.D.
McCormick)
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M. Bischoff*
(M.
Bischoff)
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C. Mongeau*
(C.
Mongeau)
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J.B. Hunt, Jr.*
(J.B.
Hunt, Jr.)
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H.J. Pearce*
(H.J.
Pearce)
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K.M. Johnson*
(K.M.
Johnson)
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J.D. Watson*
(J.D.
Watson)
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J.A. MacNaughton*
(J.A.
MacNaughton)
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M.S. Zafirovski*
(M.S.
Zafirovski)
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J.P. Manley*
(J.P.
Manley)
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/s/ Gordon
A. Davies
By:*
(Gordon A. Davies, as attorney-in-fact September 10, 2007.)
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II-10
SIGNATURES
Pursuant to the requirements of the Securities Act, the
registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Toronto, Province of Ontario, Canada,
on the 10th day of September, 2007.
NORTEL NETWORKS INC.
President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on behalf of Nortel
Networks Inc. by the following persons in the capacities
indicated on the 10th day of September, 2007.
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Signature
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Title
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Principal Executive Officer
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/s/ Karen
E. Sledge
(Karen
E. Sledge)
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President and a Director
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Principal Financial Officer
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/s/ Karen
E. Sledge
(Karen
E. Sledge)
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President and a Director
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Principal Accounting Officer
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/s/ Kimberly
P. Poe
(Kimberly
P. Poe)
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Treasurer
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Directors
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/s/ Karen
E. Sledge
(Karen
E. Sledge)
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II-11
EXHIBIT INDEX
The following is a list of all exhibits filed as a part of this
registration statement on
Form S-4,
including those incorporated in this registration statement by
reference. These exhibits may contain representations and
warranties by the parties. These representations and warranties
have been made solely for the benefit of the other party or
parties to such agreements and (i) may have been qualified
by disclosures made to such other party or parties,
(ii) were made only as of the date of such agreements or
such other date(s) as may be specified in such agreements and
are subject to more recent developments, which may not be fully
reflected in the registrants public disclosure,
(iii) may reflect the allocation of risk among the parties
to such agreements and (iv) may apply materiality standards
different from what may be viewed as material to investors.
Accordingly, these representations and warranties may not
describe the registrants actual state of affairs at the
date hereof and should not be relied upon.
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Exhibit
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No
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Description
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*2
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.1
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Amended and Restated Arrangement
Agreement involving BCE Inc., Nortel Networks Corporation,
formerly known as New Nortel Inc., and Nortel Networks Limited,
formerly known as Nortel Networks Corporation, made as of
January 26, 2000, as amended and restated March 13,
2000 (including Plan of Arrangement under Section 192 of
the Canada Business Corporations Act) (filed as Exhibit 2.1
to Nortel Networks Limiteds Current Report on
Form 8-K
dated May 1, 2000).
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*4
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.1
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Indenture dated as of July 5,
2006 among Nortel Networks Limited, Nortel Networks Corporation,
Nortel Networks Inc. and The Bank of New York, as trustee (filed
as Exhibit 4.1 to Nortel Networks Limiteds Current
Report on
Form 8-K
dated July 6, 2006).
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*4
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.2
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First Supplemental Indenture dated
as of July 5, 2006 among Nortel Networks Limited, Nortel
Networks Corporation, Nortel Networks Inc. and The Bank of New
York, as trustee (filed as Exhibit 4.2 to Nortel Networks
Limiteds Current Report on
Form 8-K
dated July 6, 2006).
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*4
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.3
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Second Supplemental Indenture
dated May 1, 2007 to Indenture dated as of July 5,
2006 among Nortel Networks Limited, Nortel Networks Corporation,
Nortel Networks Inc. and The Bank of New York, as trustee
(filed as Exhibit 4.2 to Nortel Networks Limiteds
Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2007).
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*4
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.4
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Form of New Note and related
Guarantee (included in the supplemental indenture listed above
as Exhibit 4.2).
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*4
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.5
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Registration Rights Agreement
dated July 5, 2006 among Nortel Networks Limited, Nortel
Networks Corporation, Nortel Networks Inc. and the
representative of the initial purchasers with regards to
U.S. $1,000,000,000 Floating Rate Senior Notes due 2011,
U.S. $550,000,000 10.125% Senior Notes due 2013, U.S.
$450,000,000 10.750% Senior Notes due 2016 (filed as
Exhibit 10.2 to Nortel Networks Limiteds Current
Report on
Form 8-K
dated July 6, 2006).
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**5
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.1
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Opinion of Cleary Gottlieb
Steen & Hamilton LLP.
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**5
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.2
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Opinion of Gordon A. Davies, Chief
Legal Officer and Corporate Secretary of Nortel Networks Limited
and Nortel Networks Corporation.
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*12
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.1
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Statement of Computation of Ratios
of Earnings to Fixed Charges of Nortel Networks Limited for the
three and six months ended June 30, 2007 and for the fiscal
years ended 2006, 2005, 2004, 2003 and 2002 (filed as
Exhibit 12 to Nortel Networks Limiteds Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2007).
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*12
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.2
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Statement of Computation of Ratio
of Earnings to Fixed Charges of Nortel Networks Corporation for
the three and six months ended June 30, 2007 and for the
fiscal years ended 2006, 2005, 2004, 2003 and 2002 (filed as
Exhibit 12 to Nortel Networks Corporations Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2007).
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12
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.3
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Statement of Computation of Ratio
of Earnings to Fixed Charges of Nortel Networks Corporation for
the six months ended June 30, 2006.
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12
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.4
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Statement of Computation of Other
Ratios.
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**23
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.1
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Consent of Cleary Gottlieb
Steen & Hamilton LLP (included in Exhibit 5.1).
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**23
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.2
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Consent of Gordon A. Davies, Chief
Legal Officer and Corporate Secretary of Nortel Networks Limited
and Nortel Networks Corporation (included in Exhibit 5.2).
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II-12
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Exhibit
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No
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Description
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23
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.3
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Consent of Deloitte &
Touche LLP with respect to report relating to consolidated
financial statements and financial statement schedule of Nortel
Networks Corporation and Nortel Networks Limited.
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24
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.1
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Power of Attorney of certain
directors and officers of Nortel Networks Limited.
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24
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.2
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Power of Attorney of certain
directors and officers of Nortel Networks Corporation.
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24
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.3
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Power of Attorney of certain
directors and officers of Nortel Networks Inc.
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25
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Form T-1
Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The Bank of New York, as trustee under the
Indenture.
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*
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Incorporated by reference.
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**
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To be filed by amendment.
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II-13