<PAGE> 1
EXHIBIT 1.2
NORTEL NETWORKS CAPITAL CORPORATION
[Title of Security or Securities]
TERMS AND UNDERWRITING AGREEMENT
Nortel Networks Capital Corporation
Nortel Networks Plaza
200 Athens Way
Nashville, Tennessee
37228-1397
U.S.A.
Nortel Networks Limited
8200 Dixie Road, Suite 100
Brampton, Ontario
L6T 5P6
Canada
Ladies and Gentlemen:
We (the "Representative") understand that Nortel Networks Capital
Corporation, a Delaware corporation (the "Corporation"), proposes to issue and
sell to the underwriters named in Schedule II hereto (the "Underwriters") (i)
the principal amount of its guaranteed debt securities (the "Debt Securities"),
if any, identified in Schedule I hereto (the "Underwritten Debt Securities")
and/or (ii) the warrants (the "Warrants"), if any, identified in Schedule I
hereto (the "Underwritten Warrants") to purchase the aggregate principal amount
of the Debt Securities identified in Schedule I hereto (the "Warrant
Securities"). The Debt Securities will be unconditionally and irrevocably
guaranteed (the "Guarantees") by Nortel Networks Limited, a Canadian corporation
(the "Guarantor"), as to all amounts of principal and premium, if any, and
interest, if any, thereof and therein due. If such Debt Securities and Warrants
are being issued together in units, such units are referred to herein as the
"Underwritten Units". The Underwritten Debt Securities, if any, the Underwritten
Warrants, if any, and the Underwritten Units, if any, are hereinafter referred
to as the "Underwritten Securities".
All the provisions contained in the document constituting Annex A
entitled "Nortel Networks Capital Corporation-Underwriting Agreement Basic
Provisions" are incorporated herein in their entirety and shall be deemed to be
a part of this Terms Agreement to the same extent as if such provisions had been
set forth in full herein. Terms defined in such document are used herein as
therein defined.
Subject to the terms and conditions set forth herein or incorporated by
reference herein, the Underwriters offer to purchase, severally and not jointly,
at the respective purchase price set forth in Schedule I hereto, the principal
amount of the Underwritten Debt Securities and/or
<PAGE> 2
the number of Underwritten Warrants and/or the number of Underwritten Units set
forth opposite their respective names in Schedule II hereto.
The Corporation acknowledges that the statements set forth in the last
paragraph on the cover page, the information with respect to stabilization and
over-allotment on the inside front cover page and under the heading
"Underwriting" in the Prospectus Supplement constitute the only information
furnished in writing by or on behalf of the Underwriters for inclusion in the
Prospectus Supplement, and we, as the Representative, confirm that such
statements are correct.
If the firm or firms identified as Underwriters include only the firm
or firms identified as the Representative, then the terms Underwriters and
Representative shall each be deemed to refer to such firm or firms.
Please accept this offer no later than 4:00 P.M. on , by signing
a copy of this Terms Agreement in the space set forth below and returning the
signed copy to us or by sending us a written acceptance in the following form:
"We hereby accept your offer, set forth in the Terms Agreement, dated ,
to purchase the Underwritten Securities on the terms set forth therein."
Very truly yours,
[Name(s) of Representative
and addresses for purposes of
notices]
By [Name of Representative]
By
-----------------------------------------
Acting severally and on
behalf of itself and the
several Underwriters
Accepted:
NORTEL NETWORKS LIMITED,
solely in its capacity as Guarantor
By:
---------------------------------------------
Title:
By:
---------------------------------------------
Title:
NORTEL NETWORKS CAPITAL CORPORATION
By:
---------------------------------------------
Title:
2
<PAGE> 3
SCHEDULE I TO TERMS AGREEMENT
[Description of Debt Securities:
Title:
Principal amount (including currency or composite currency):
If Debt Securities are not to be purchased with Warrants as units,
purchase price (include accrued interest or amortization, if any),
currency, public offering price, if any, and underwriting discount:
Sinking fund provisions:
Redemption provisions:
Closing Location:
Other provisions:]
[Description of Warrants:
Title of Warrants:
Number:
If Warrants are not to be purchased with Debt Securities as units,
purchase price, currency, public offering price, if any, and
underwriting discount:
Warrant Agent:
Warrant Agreement:
Warrant exercise price and currency:
Principal amount (including currency or composite currency) of Warrant
Securities issuable upon exercise of one Warrant:
Date after which Warrants may be exercised:
Expiration date:
Closing Location:
Other provisions:]
Schedule I-1
<PAGE> 4
[Description of Underwritten Units:
Purchase price and currency:
Public offering price, if any, and commissions:
Detachable date (if applicable):
Closing Location:
Other provisions:]
[Description of Warrant Securities:
Title Principal amount (including currency or composite currency):
Sinking fund provisions:
Redemption provisions:
Other provisions:]
Schedule I-2
<PAGE> 5
SCHEDULE II TO TERMS AGREEMENT
<TABLE>
<CAPTION>
Principal Amount Number of Number of
of Underwritten Underwritten Underwritten
Debt Securities Warrants to Units to be
to be Purchased be Purchased Purchased
Underwriter (if any) (if any) (if any)
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Total
</TABLE>
Schedule II-1
<PAGE> 6
ANNEX A TO TERMS AGREEMENT
NORTEL NETWORKS CAPITAL CORPORATION
UNDERWRITING AGREEMENT BASIC PROVISIONS
1. INTRODUCTION
(a) The Corporation proposes to issue and sell certain of its debt
securities, issuable under an indenture dated as of December 15, 2000,
(the "Indenture") among the Corporation, the Guarantor and Citibank,
N.A., as trustee (the "Trustee"), and/or certain of its warrants to
purchase debt securities issuable pursuant to the warrant agreement
(the "Warrant Agreement") identified in the Terms Agreement (as
hereinafter defined) (such debt securities and warrants being sometimes
collectively referred to herein as the "Securities"), in one or more
offerings on terms determined at the time of sale. Such debt securities
and warrants may be issued separately or together in units.
(b) The terms with respect to the purchase of the Securities from the
Corporation by the several underwriters (the "Underwriters") listed in
the applicable terms agreement entered into between the Representative
(defined below), on behalf of such Underwriters, the Corporation and
the Guarantor (the "Terms Agreement"), to which these Underwriting
Agreement Basic Provisions constitute Annex A, are set forth in the
Terms Agreement, which together with the provisions hereof incorporated
therein by reference, is sometimes herein referred to as the
"Agreement". The Securities to be purchased in any such offering are
hereinafter referred to as the "Underwritten Securities", and any firm
or firms acting as representatives of such Underwriters are herein
referred to as the "Representatives". Terms defined in the Terms
Agreement are used herein as therein defined.
2. REGISTRATION STATEMENT AND COMPLIANCE WITH APPLICABLE LAW
Each of the Corporation and the Guarantor represents and warrants to
and agrees with each Underwriter that:
(a) A registration statement on Form S-3 with respect to the Securities has
been prepared by the Corporation and the Guarantor in conformity with
the requirements of the Securities Act of 1933 (the "Act"), and the
rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") thereunder, has been filed
with the Commission and has become effective. As used in this
Agreement: (i) "Registration Statement" means such registration
statement (including all documents incorporated therein by reference),
as amended at the date of the Terms Agreement; (ii) "Basic Prospectus"
means the prospectus (including all documents incorporated therein by
reference) included in the Registration Statement; and (iii)
"Prospectus" means the Basic Prospectus, together with any amendments
or supplements thereto (including in each case all documents
incorporated therein by reference) specifically related to the
Underwritten Securities, as filed with the Commission pursuant to Rule
424(b) of the Rules and Regulations. The Commission has not issued any
order preventing or suspending the use of the Prospectus
Annex A-1
<PAGE> 7
and, to the Corporation's knowledge, no proceedings for such purpose
are pending before or threatened by the Commission.
(b) The Registration Statement, as amended, as of the time it became
effective and as of the date of the Terms Agreement and the Prospectus
complied and (in the case of any amendment or supplement to any such
document, or any material incorporated by reference in any such
document filed with the Commission after the date as of which this
representation is being made) will comply, in all material respects, at
all times during the period specified in Section 7(c) hereof and on the
Delivery Date, with the provisions of the Act, the Rules and
Regulations, the Securities Exchange Act of 1934 (the "Exchange Act")
and the rules and regulations of the Commission thereunder; and the
Indenture, including any amendments and supplements thereto pursuant to
which the Underwritten Debt Securities will be issued, as of the time
the Registration Statement became effective and as of the date of the
Terms Agreement complies, and will comply during the period specified
in Section 7(c) and on the Delivery Date (as hereinafter defined), with
the requirements of the Trust Indenture Act of 1939 (the "Trust
Indenture Act") and the rules and regulations of the Commission
thereunder. The Registration Statement, as of the time it became
effective and as of the date of the Terms Agreement, did not and will
not at any time during the period specified in Section 7(c) hereof and
on the Delivery Date, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and the
Prospectus, as amended or supplemented as of the date of the Terms
Agreement and at the time the Registration Statement became effective,
did not and will not, at any time during the period specified in
Section 7(c) and on the Delivery Date, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. The Corporation and the Guarantor
make no representation or warranty as to: (i) that part of the
Registration Statement that constitutes the Statement of Eligibility
and Qualification under the Trust Indenture Act (Form T-1) of the
Trustee; or (ii) information contained in or omitted from the
Registration Statement or the Prospectus in reliance upon and in
conformity with written information furnished to the Corporation or the
Guarantor through the Representative by or on behalf of any Underwriter
specifically for use in connection with the preparation thereof.
3. PURCHASE OF THE UNDERWRITTEN SECURITIES
(a) The obligation of the Underwriters to purchase, and the Corporation to
sell, the Underwritten Securities is evidenced by a Terms Agreement
delivered at the time the Corporation determines to sell the
Underwritten Securities. The Terms Agreement specifies the firm or
firms that will be the Underwriters, the principal amount or number of
the Underwritten Securities to be purchased by each Underwriter, the
purchase price or prices to be paid by the Underwriters for the
Underwritten Securities, the public offering price or prices, if any,
of the Underwritten Securities, and the Underwriters' compensation
therefor and any terms of the Underwritten Securities not already
specified in the Indenture or the Warrant Agreement, as the case may
be. The Terms Agreement specifies any details of the terms of the
offering which should be reflected in the supplement to the Basic
Prospectus related to the offering of the Underwritten Securities.
Annex A-2
<PAGE> 8
(b) It is understood that, in making this Agreement, the Underwriters are
contracting severally and not jointly, and that their several
agreements to purchase the Underwritten Securities on the basis of the
agreements and representations herein contained shall be several and
not joint and shall apply only to the respective principal amounts or
number of the Underwritten Securities to be purchased by them as
provided herein.
(c) Each of the Underwriters shall not offer or sell, directly or
indirectly, any Underwritten Securities in Canada or any province or
territory thereof in contravention of the securities laws of Canada or
any province or territory thereof or (ii) any jurisdiction in the
United States other than to institutional investors or as otherwise
permitted by state securities or blue sky laws.
(d) Each Underwriter shall send to any dealer who purchases from it any of
the Underwritten Securities a notice stating in substance that, by
purchasing such Underwritten Securities, such dealer represents that it
has not offered or sold and shall not offer or sell, directly or
indirectly, any of such Underwritten Securities in Canada or to, or for
the benefit of, any resident of Canada in contravention of the
securities laws of Canada or any province or territory thereof and that
it shall deliver to any other dealer to whom it sells any of such
Underwritten Securities a notice containing substantially the same
statement as is contained in this sentence. It also undertakes not to
distribute any offering material related to the Underwritten Securities
in Canada. Each Underwriter and any dealer who purchases from it any of
the Underwritten Securities may be required to furnish a certificate
stating that it, or any such dealer, has complied with the restrictions
set forth in this paragraph.
4. DELIVERY OF THE UNDERWRITTEN SECURITIES
The Corporation shall not be obligated to deliver any Underwritten
Securities except upon payment for all Underwritten Securities to be
purchased pursuant to this Agreement as hereinafter provided.
5. DEFAULT IN PERFORMANCE BY UNDERWRITER
(a) If any Underwriter defaults in the performance of its obligations under
this Agreement, the remaining non-defaulting Underwriters shall be
obligated severally to purchase the Underwritten Securities which the
defaulting Underwriter agreed but failed to purchase in the respective
proportions which the principal amount or number, as the case may be,
of Underwritten Securities set forth in the applicable column in
Schedule II to the Terms Agreement to be purchased by each remaining
non-defaulting Underwriter set forth in such column bears to the
aggregate principal amount or number, as the case may be, of
Underwritten Securities set forth in such column to be purchased by all
the remaining non-defaulting Underwriters; provided that the remaining
non-defaulting Underwriters shall not be obligated to purchase,
respectively, any Underwritten Debt Securities, Underwritten Warrants
or Underwritten Units that constitute Underwritten Securities if the
aggregate principal amount or number, as the case may be, of,
respectively, such Underwritten Debt Securities, Underwritten Warrants
or Underwritten Units which the defaulting Underwriter or Underwriters
agreed but failed to purchase exceeds 10% of the total principal amount
or number, as the case may be, of, respectively, such Underwritten Debt
Securities,
Annex A-3
<PAGE> 9
Underwritten Warrants or Underwritten Units. If the foregoing maximum
is exceeded, the remaining non-defaulting Underwriters, or other
underwriters satisfactory to the Representative, shall have the right,
but shall not be obligated, to purchase, in such proportion as may be
agreed upon among them, all the Underwritten Securities.
(b) If the remaining non-defaulting Underwriters or other underwriters
satisfactory to the Representative do not elect pursuant to the last
sentence of the above paragraph to purchase the aggregate principal
amount or number of Underwritten Securities which the defaulting
Underwriter or Underwriters agreed but failed to purchase that exceeds
10% of the total principal amount or number, as the case may be, of
such Underwritten Debt Securities, Underwritten Warrants or
Underwritten Units, this Agreement with respect to such Underwritten
Debt Securities, Underwritten Warrants or Underwritten Units, as the
case may be, shall terminate without liability on the part of any
non-defaulting Underwriter, the Corporation or the Guarantor.
(c) Nothing contained in this Section 5 shall relieve a defaulting
Underwriter of any liability it may have to the Corporation or the
Guarantor and any non-defaulting Underwriter for damages caused by its
default. If other underwriters are obligated or agree to purchase the
Underwritten Securities of a defaulting Underwriter, either the
Representative, the Corporation or the Guarantor may postpone the
Delivery Date for up to seven full business days in order to effect any
changes that in the opinion of counsel for the Corporation or the
Guarantor or counsel for the Underwriters may be necessary in the
Registration Statement, the Prospectus or in any other document or
arrangement.
6. UNDERWRITTEN SECURITIES
(a) Unless otherwise agreed, delivery of and payment for the Underwritten
Securities shall be made at such location as may be agreed upon by the
Representative and the Corporation (as set forth in Schedule I to the
Terms Agreement) at 9:30 A.M., local time New York City, on the third
business day following the date of the Terms Agreement, or at such
other time and date as shall be agreed upon. This date and time are
sometimes referred to as the "Delivery Date".
(b) On the Delivery Date, the Corporation shall deliver the Underwritten
Securities to the Representative for the account of each Underwriter
against payment to or upon the order of the Corporation of the purchase
price by wire transfer to an account specified by the Corporation or
other financial instrument payable in same day funds upon terms and
conditions agreed to between the Corporation and the Representative.
(c) When delivered, the Underwritten Securities shall be in such form and
in such permitted denominations as the Representative shall request in
writing not less than two full business days prior to the Delivery
Date. For the purpose of expediting the checking and packaging of the
Underwritten Securities, the Corporation shall make the Underwritten
Securities available for inspection by the Representative in New York
City not later than 2:00 P.M., local time New York City, on the
business day prior to the Delivery Date, or at such other place and
time as the parties may agree.
Annex A-4
<PAGE> 10
7. OBLIGATIONS OF THE CORPORATION
(a) The Corporation shall furnish promptly to the Representative and to
counsel for the Underwriters a signed copy of the Registration
Statement as originally filed and a copy of each amendment thereto (in
each case together with all exhibits filed therewith) filed prior to or
on the date of the Terms Agreement or related to or covering the
Underwritten Securities, and a copy of the Prospectus filed with the
Commission.
(b) The Corporation shall deliver promptly to the Representative, without
charge, such number of the following documents as the Representative
may reasonably request: (i) conformed copies of the Registration
Statement (excluding exhibits other than the Indenture, the Warrant
Agreement and this Agreement); (ii) the Prospectus; and (iii) any
documents incorporated by reference in the Prospectus; and the
Corporation authorizes the Underwriters and all dealers to whom any
Underwritten Securities may be offered or sold by the Underwriters to
use such documents during the period referred to in Section 7(c) in
connection with the sale of the Underwritten Securities in accordance
with the applicable provisions of the Act and the Rules and
Regulations; provided that the Corporation shall be deemed to have
complied with the requirements of clause (iii) of this paragraph with
respect to any document filed electronically with the Commission.
(c) During such period following the date of the Terms Agreement, as in the
opinion of counsel for the Underwriters, a prospectus is required by
law to be delivered, but not in any event longer than 40 days from and
including the date of the Terms Agreement, the Corporation shall
furnish copies of: (i) any amendment to the Registration Statement;
(ii) the Prospectus or any amendment or supplement thereto; or (iii)
any document incorporated by reference in any of the foregoing or any
amendment or supplement to any such incorporated document to the
Representative and to counsel for the Underwriters prior to filing any
of such items with the Commission and shall not file any such item to
which the Representative shall reasonably object; provided that despite
any such objection but after consultation with the Representative,
including the furnishing to the Representative of drafts thereof, the
Corporation and the Guarantor may file any report or statement which in
the opinion of its counsel it is required to file pursuant to the
Exchange Act.
(d) The Corporation shall advise the Representative promptly: (i) when any
post-effective amendment to the Registration Statement related to or
covering the Underwritten Securities becomes effective; (ii) of any
request by the Commission for an amendment or supplement (insofar as
the amendment or supplement relates to or covers the Underwritten
Securities) to the Registration Statement, to the Prospectus, to any
document incorporated by reference in any of the foregoing or for any
additional information related to the Registration Statement (insofar
as such information relates to or covers the Underwritten Securities);
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or any order directed
to the Prospectus or any document incorporated therein by reference or
the initiation of any stop order proceeding or of any challenge to the
accuracy or adequacy of any document incorporated by reference in the
Prospectus; and (iv) of receipt by the Corporation of any notification
with respect to the suspension of the qualification of the Underwritten
Securities for sale in any jurisdiction or the initiation of any
proceeding for that purpose. If at any time during the period referred
to
Annex A-5
<PAGE> 11
in Section 7(c) when the Prospectus related to the Underwritten
Securities is required to be delivered under the Act, any event occurs
as a result of which the Prospectus as then amended or supplemented
would include an untrue statement of material fact or omit to state a
material fact necessary in order to make the statements therein in the
light of the circumstances under which they were made not misleading,
or if it shall be necessary to amend or supplement the Prospectus to
comply with the Act, the Rules and Regulations, the Exchange Act or the
rules and regulations of the Commission thereunder, the Corporation
and/or the Guarantor shall promptly prepare and file with the
Commission, subject to Section 7(c), an amendment or supplement that
will correct such statement or omission or an amendment or supplement
which will effect such compliance.
(e) If, during the period referred to Section 7(c), the Commission shall
issue a stop order suspending the effectiveness of the Registration
Statement, the Corporation and/or the Guarantor shall make every
reasonable effort to obtain the lifting of that order at the earliest
possible time.
(f) As soon as practicable, or in accordance with Rule 158 of the Rules and
Regulations, the Guarantor shall make generally available to its
security holders and to the Representative an earnings statement (which
need not be audited) of the Guarantor and its consolidated subsidiaries
that will satisfy the provisions of Section 11 (a) of the Act and Rule
158 thereunder.
(g) The Corporation shall make every reasonable effort to arrange for the
qualification of the Underwritten Securities for sale under the laws of
such jurisdictions (other than jurisdictions outside the United States)
as the Representative may reasonably designate and the Corporation
shall pay all expenses (including reasonable fees and disbursements of
counsel) in connection with such qualifications, to maintain such
qualifications in effect during the period referred to in Section 7(c)
and to arrange for the determination of the legality of the
Underwritten Securities for purchase by institutional investors;
provided, however, that the Corporation shall not be required to
qualify to do business in any jurisdiction where it is not so qualified
at the date of the Terms Agreement or to take any action that would
subject it to general or unlimited service of process or to the
imposition of any taxes based on, or measured by, all or any part of
the income of the Corporation in any jurisdiction where it is not at
such date so subject.
(h) If the sale of the Underwritten Securities provided for herein is not
consummated because any condition to the obligations of the
Underwriters set forth in Section 10 hereof is not satisfied or because
of any refusal, inability or failure on the part of the Corporation or
the Guarantor to comply with any provision hereof other than by reason
of a default by any of the Underwriters, the Corporation or the
Guarantor shall reimburse the Underwriters severally upon demand for
all reasonable out-of-pocket expenses (including the reasonable fees
and disbursements of counsel for the Underwriters) that shall have been
incurred by them in connection with the proposed purchase and sale of
the Underwritten Securities.
Annex A-6
<PAGE> 12
8. INDEMNIFICATION
(a) The Corporation and the Guarantor (together, the "Indemnifying
Parties") shall jointly and severally indemnify and hold harmless each
Underwriter and each person who controls any Underwriter within the
meaning of either the Act or the Exchange Act from and against any
loss, claim, damage or liability, joint or several, and any action in
respect thereof, to which they or any of them may become subject, under
the Act, the Exchange Act or other federal or state statutory law or
regulation, at common law or otherwise, insofar as such loss, claim,
damage, liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement, any preliminary prospectus consisting of
the Basic Prospectus together with the preliminary prospectus
supplement thereto related to the offering of the Underwritten
Securities that is used prior to the filing of the Prospectus (the
"Preliminary Prospectus") or the Prospectus or arises out of, or is
based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading. The Indemnifying Parties shall
reimburse each indemnified party for any reasonable legal and other
expenses reasonably incurred by such indemnified party in investigating
or defending against any such loss, claim, damage, liability or action;
provided that the Indemnifying Parties shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged
untrue statement or omission or alleged omission: (i) made in the
Registration Statement, the Preliminary Prospectus or the Prospectus in
reliance upon and in conformity with written information furnished to
either of the Indemnifying Parties through the Representative by or on
behalf of any Underwriter for use in connection with the preparation
thereof; or (ii) contained in that part of the Registration Statement
constituting the Statement of Eligibility and Qualification under the
Trust Indenture Act (Form T-1) of the Trustee; provided further, that
the Indemnifying Parties shall not be liable for the amount of any
settlement of any claim made without their consent, which consent will
not be unreasonably withheld; and provided further, that as to any
Preliminary Prospectus, this indemnity shall not inure to the benefit
of any Underwriter (or any person controlling such Underwriter) on
account of any loss, claim, damage, liability or action arising from
the sale of Underwritten Securities to any person by that Underwriter
if that Underwriter failed to send or give a copy of the Prospectus, as
the same may be amended or supplemented (for purposes of this
paragraph, the "Final Prospectus"), to that person within the time
required by the Act, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in such Preliminary Prospectus was corrected in the Final
Prospectus, unless such failure resulted from non-compliance by either
of the Indemnifying Parties with Section 7(b). For purposes of the
final proviso to the immediately preceding sentence, the term Final
Prospectus shall not be deemed to include the documents incorporated
therein by reference, and no Underwriter shall be obligated to send or
give any supplement or amendment to any document incorporated by
reference in any Preliminary Prospectus or the Final Prospectus to any
person other than a person to whom such Underwriter has delivered such
incorporated documents in response to a written or oral request
therefor. The foregoing indemnity is in addition to and not in
limitation or duplication of any liability or right that the
Indemnifying Parties may otherwise have to an Underwriter or any person
who controls an Underwriter.
Annex A-7
<PAGE> 13
(b) Each Underwriter shall indemnify and hold harmless each of the
Indemnifying Parties, each of their respective directors, each of their
respective officers who signed the Registration Statement and any
person who controls either of the Indemnifying Parties within the
meaning of the Act or the Exchange Act, to the same extent (including,
without limitation, the reimbursement of expenses) as the foregoing
indemnity from the Indemnifying Parties to each Underwriter as set
forth in the above paragraph, but only with reference to written
information furnished to the Indemnifying Parties through the
Representative by or on behalf of that Underwriter for use in
connection with the preparation of the documents referred to in the
foregoing indemnity. The foregoing indemnity is in addition to and not
in limitation or duplication of any liability that any Underwriter may
otherwise have to the Indemnifying Parties or any of their respective
directors, officers or controlling persons.
(c) Promptly after receipt by an indemnified party under Sections 8(a) or
(b) above of notice of any claim or the commencement of any action, the
indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under either such paragraph, notify the
indemnifying party in writing of the claim or the commencement of that
action, provided that the failure to notify the indemnifying party
shall not relieve it from any liability that it may have to an
indemnified party otherwise than under this Section 8. If any action
shall be brought against an indemnified party, and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party
shall be entitled to participate therein, and, to the extent that it
may elect by written notice delivered to the indemnified party promptly
after receiving the aforesaid notice from such indemnified party, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any
such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that
there are likely to be substantial legal defenses available to it and
the other indemnified parties which are different from and additional
to those available to the indemnifying party, the indemnified party or
parties shall have the right to select separate counsel to assert such
legal defenses and otherwise to participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of its
election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party shall not be
liable to such indemnified party under this Section 8 for any legal or
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless: (i) the indemnified party
shall have employed separate counsel in connection with the assertion
of legal defenses in accordance with the proviso to the immediately
preceding sentence (it being understood, however, that the indemnifying
party shall bear only the reasonable fees and disbursements of separate
counsel and shall not be liable for the expenses of more than one
separate counsel, approved by the Representative in the case of Section
8(a), representing the indemnified parties under such paragraph who are
parties to such action); (ii) the indemnifying party shall not have
employed counsel reasonably satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after notice
of commencement of the action; or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party; and except that, if clause (i) or
(iii) is applicable, such liability shall be only in respect of the
counsel referred to in such clause (i) or (iii).
Annex A-8
<PAGE> 14
(d) To provide for just and equitable contribution in circumstances in
which the indemnification provided for in Sections 8(a) or (b) is due
in accordance with its terms but is for any reason other than as
specified in Section 8(a) held by a court to be unavailable on the
grounds of policy or otherwise, the Indemnifying Parties and the
Underwriters shall contribute to the aggregate losses, claims, damages
and liabilities (including reasonable legal or other expenses
reasonably incurred in connection with investigating or defending same)
to which the Indemnifying Parties and one or more of the Underwriters
may be subject in such proportion so that the Underwriters are
responsible for that portion represented by the percentage that the
underwriting discount related to the relevant Underwritten Securities
bears to the sum of such discount and the purchase price of the
relevant Underwritten Securities specified in Schedule I to the Terms
Agreement and the Indemnifying Parties are responsible for the balance;
provided, however, that: (i) in no case shall any Underwriter (except
as may be provided in any applicable agreement among underwriters) be
responsible for any amount in excess of the underwriting discount
applicable to the Underwritten Securities purchased by such Underwriter
hereunder; and (ii) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant
to this paragraph are several in proportion to their respective
underwriting percentages and not joint. For purposes of this Section 8,
each person who controls an Underwriter within the meaning of the Act
or the Exchange Act shall without duplication have the same rights to
contribution as such Underwriter, and each person who controls either
of the Indemnifying Parties within the meaning of the Act or the
Exchange Act, each officer of either of the Indemnifying Parties who
shall have signed the Registration Statement and each director of
either of the Indemnifying Parties shall have the same rights to
contribution as the Indemnifying Parties, subject in each case to
clauses (i) and (ii) of this paragraph. Any party entitled to
contribution shall, promptly after receipt of notice of commencement of
any action, suit or proceeding against such party in respect of which a
claim for contribution may be made against another party or parties
under this paragraph, notify such party or parties from whom
contribution may be sought, but the omission to so notify such party or
parties shall not relieve the party or parties from whom contribution
may be sought from any other obligation it or they may have otherwise
than under this paragraph.
9. TERMINATION OF UNDERWRITERS' OBLIGATIONS
The obligations of the Underwriters under this Agreement may be
terminated by the Representative, in its absolute discretion, by notice
given to and received by the Corporation and the Guarantor prior to the
delivery of and payment for the Underwritten Securities, if, during the
period beginning on the date of the Terms Agreement to and including
the Delivery Date: (i) trading in securities generally on the New York
Stock Exchange, Inc. shall have been suspended or limited or minimum
prices shall have been established on such Exchange by order of the
Commission or any other governmental authority; (ii) a banking
moratorium is declared by either United States federal or New York
State authorities; or (iii) there shall have occurred any outbreak or
material escalation of hostilities the effect of which on the financial
markets of the United States is such as to make it, in the reasonable
judgment of the Representative, impracticable to market the
Underwritten Securities.
Annex A-9
<PAGE> 15
10. ADDITIONAL CONDITIONS TO THE RESPECTIVE OBLIGATIONS OF THE UNDERWRITERS
(a) The respective obligations of the Underwriters under this Agreement
with respect to the Underwritten Securities are subject to the accuracy
in all material respects on the date of the Terms Agreement and on the
Delivery Date of the representations and warranties of the Corporation
and the Guarantor contained herein, to performance by the Corporation
and the Guarantor in all material respects of each of their obligations
hereunder, and to each of the following additional terms and conditions
applicable to the Underwritten Securities.
(b) At or before the Delivery Date, no stop order suspending the
effectiveness of the Registration Statement or any order directed to
any document incorporated by reference in the Prospectus shall have
been issued and remain in effect and no proceeding for that purpose
shall be pending or, to the knowledge of the Corporation, the Guarantor
or the Representative, threatened by the Commission.
(c) The Corporation shall have furnished to the Representative, on the
Delivery Date, the opinion of Roger A. Schecter, Secretary of the
Corporation ("Counsel"), dated the Delivery Date, to the effect that:
(i) the Corporation has been duly incorporated and is a validly
existing corporation under the laws of Delaware, with
corporate power and authority to conduct its business as
currently conducted and described in the Prospectus;
(ii) the execution and delivery of the Indenture have been duly
authorized, the Indenture has been executed and delivered by
the Corporation and is qualified under the Trust Indenture Act
and, assuming the requisite corporate capacity and powers of,
and the due authorization, execution and delivery by the
Guarantor and the Trustee, constitutes a valid and binding
agreement of the Corporation enforceable in accordance with
its terms;
(iii) the issue, execution and delivery of the Underwritten
Securities have been duly authorized in accordance with the
Indenture and the Underwritten Securities have been duly
executed and delivered by the Corporation and, assuming
authentication by the Trustee, constitute valid and binding
obligations of the Corporation enforceable in accordance with
their terms;
(iv) the execution and delivery of the Warrant Agreement have been
duly authorized, the Warrant Agreement has been executed and
delivered by the Corporation and, assuming the requisite
corporate capacity and powers of, and the due authorization,
execution and delivery by the warrant agent named in the
Warrant Agreement, constitutes a valid and binding agreement
of the Corporation enforceable in accordance with its terms;
(v) the execution and delivery of this Agreement have been duly
authorized and the Agreement has been duly executed and
delivered by the Corporation;
(vi) the issue and sale of the Underwritten Securities to the
Underwriters pursuant to this Agreement, and the consummation
of the other transactions, herein contemplated (a)
Annex A-10
<PAGE> 16
do not require any consent, approval, authorization,
registration or qualification of or with any governmental
authority of the United States or the State of New York
(except such as have been obtained or effected under the Act
and such as may be required under state securities or blue sky
laws), and (b) do not result in a breach or violation of any
of the terms and provisions of, or constitute a default under,
the certificate of incorporation or bylaws of the Corporation;
(vii) the Registration Statement is effective under the Act and, to
the best of Counsel's knowledge, no stop order with respect
thereto has been issued, or proceeding for that purpose has
been instituted or threatened, by the Commission; and
(viii) to the best of Counsel's knowledge, no order directed to any
document incorporated by reference in the Prospectus has been
issued and remains in effect, or is threatened to be issued,
by the Commission.
The opinions expressed above will be subject to those
assumptions and qualifications reasonably satisfactory to such Counsel
including without limitation, with respect to the opinions expressed in
Sections 10(c)(ii), (iii) and (iv) above that:
(x) enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other laws
affecting the enforcement of creditors' rights generally;
(y) equitable remedies, including the remedies of specific
performance and injunction, may only be granted at the
discretion of a court of competent jurisdiction; and
(z) no opinion is expressed with respect to the enforceability of
any provisions relating to indemnity and contribution.
(d) Counsel, in rendering his opinion, may rely as to matters of fact, to
the extent he deems proper, on certificates of responsible officers of
the Corporation and its subsidiaries or public officials. He may also
rely upon legal opinions provided to him. In addition, he may rely upon
determinations of responsible officers of the Corporation with respect
to the verification, characterization and quantification of various
assets and liabilities. Furthermore, he may assume without independent
investigation: (i) the authenticity of any document or instrument
submitted to him as an original, the conformity to the authentic
original of any document or instrument submitted to him as a certified,
conformed or photographic copy and the genuineness of all signatures on
such originals or copies; and (ii) with respect to parties to an
agreement other than the Corporation, the due execution and delivery,
pursuant to due authorization, of such agreement and that such
agreement constitutes a legal, valid and binding agreement of all such
parties.
(e) The Guarantor shall have furnished to the Representative, on the
Delivery Date, the opinion of Nicholas J. DeRoma, Chief Legal Officer
of the Guarantor ("Guarantor's Counsel"), dated the Delivery Date, to
the effect that:
Annex A-11
<PAGE> 17
(i) the Guarantor has been duly incorporated and is a validly
existing corporation under the laws of Canada, with corporate
power and authority to conduct its business as currently
conducted and described in the Prospectus;
(ii) the execution and delivery of the Indenture have been duly
authorized, the Indenture has been executed and delivered by
the Guarantor and is qualified under the Trust Indenture Act
and, assuming the requisite corporate capacity and powers of,
and the due authorization, execution and delivery by the
Corporation and the Trustee, constitutes a valid and binding
agreement of the Guarantor enforceable in accordance with its
terms;
(iii) the issue, execution and delivery of the Guarantees have been
duly authorized in accordance with the Indenture and the
Guarantees have been duly executed and delivered by the
Guarantor and, assuming authentication of the Underwritten
Securities by the Trustee, constitute valid and binding
obligations of the Guarantor enforceable in accordance with
their terms;
(iv) the execution and delivery of this Agreement have been duly
authorized and the Agreement has been duly executed and
delivered by the Guarantor,
(v) the issue of the Guarantees to the Underwriters pursuant to
this Agreement and the consummation of the other transactions
therein contemplated (x) do not require (except for the
exemption orders of the Director under the Canada Business
Corporations Act pursuant to Section 82(3) of such Act and of
the Commission des valeurs mobilieres du Quebec pursuant to
Section 12 of the Securities Act (Quebec), which orders were
granted, and the sending of the Prospectus to the Director
under the Canada Business Corporations Act pursuant to Section
193 thereunder, which was effected) the consent, approval or
authorization of or filing or registration with, any
governmental body or regulatory authority in Canada, and (y)
do not conflict with or constitute a breach of or default
under the constating documents or bylaws of the Guarantor;
(vi) the Registration Statement is effective under the Act and, to
the best of Guarantor's Counsel's knowledge, no stop order
with respect thereto has been issued, or proceeding for that
purpose has been instituted or threatened, by the Commission;
(vii) to the best of Guarantor's Counsel's knowledge, no order
directed to any document incorporated by reference in the
Prospectus has been issued and remains in effect, or is
threatened to be issued, by the Commission; and
(viii) to the best of Guarantor's Counsel's knowledge, other than as
disclosed in the Prospectus, neither the Guarantor nor any of
its subsidiaries is involved in any litigation, arbitration or
legal proceedings which are material to the Guarantor and its
subsidiaries taken as a whole nor is there any such
litigation, arbitration or legal proceedings pending or
threatened.
Annex A-12
<PAGE> 18
The opinions expressed above will be subject to those
assumptions and qualifications reasonably satisfactory to such
Guarantor's Counsel including without limitation, with respect to the
opinions expressed in Sections 10(e)(ii) and (iii) above that:
(v) enforceability may be limited by bankruptcy, insolvency,
reorganization, arrangement, moratorium or other laws
affecting the enforcement of creditors' rights generally;
(w) equitable remedies, including the remedies of specific
performance and injunction, may only be granted at the
discretion of a court of competent jurisdiction;
(x) the Currency Act (Canada) precludes the courts in Canada from
awarding a judgment for an amount expressed in a currency
other than Canadian dollars;
(y) any requirement that "interest", as defined in Section 347 of
the Criminal Code (Canada), be paid by the Guarantor at an
effective annual rate in excess of 60% is not enforceable, and
such requirement may not be severable from the remainder of
the document in which it is contained; and
(z) no opinion is expressed with respect to the enforceability of
any provisions relating to indemnity and contribution.
(f) Guarantor's Counsel, in rendering his opinion, may rely as to matters
of fact, to the extent he deems proper, on certificates of responsible
officers of the Guarantor and its subsidiaries or public officials. He
may also rely upon legal opinions provided to him. In addition, he may
rely upon determinations of responsible officers of the Guarantor with
respect to the verification, characterization and quantification of
various assets and liabilities. Furthermore, he may assume without
independent investigation: (i) the authenticity of any document or
instrument submitted to him as an original, the conformity to the
authentic original of any document or instrument submitted to him as a
certified, conformed or photographic copy and the genuineness of all
signatures on such originals or copies; and (ii) with respect to
parties to an agreement, other than the Guarantor, the due execution
and delivery, pursuant to due authorization, of such agreement and that
such agreement constitutes a legal, valid and binding agreement of all
such parties.
(g) In addition, Guarantor's Counsel shall advise by letter, based on his
participation in the preparation of the Registration Statement and
Prospectus (but without independent check or verification of the
contents thereof except as specified therein), that:
(i) the Registration Statement, as of its effective date, and the
Prospectus, as of its date and the date of the supplement to
the Basic Prospectus (in each case, except for the documents
incorporated by reference therein, the financial statements
and other financial and statistical data included or
incorporated by reference therein and the information included
therein under the caption "Plan of Distribution" or
"Underwriting", as to which Guarantor's Counsel need express
no view), appeared on their face to be appropriately
responsive in all material respects to the requirements of the
Act and the Rules and Regulations; and
Annex A-13
<PAGE> 19
(ii) no information has come to Guarantor's Counsel's attention
that causes him to believe that the Registration Statement
(except the financial statements and other financial and
statistical data included or incorporated by reference therein
and the information included therein under the caption "Plan
of Distribution" or "Underwriting", as to which Guarantor's
Counsel need express no view), at the time it became
effective, or on the date of such opinion contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus
(except as aforesaid) contains any untrue statement of a
material fact or omits to state a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(h) The Corporation and the Guarantor shall have furnished to the
Representative, as of the date of the Terms Agreement and on the
Delivery Date, a letter of Deloitte & Touche LLP or another
internationally recognized firm of chartered accountants or certified
public accountants, addressed to the Underwriters and dated the
Delivery Date, of the type described in the Canadian Institute of
Chartered Accountants Handbook, Section 7100, or in the American
Institute of Certified Public Accountants' Statement on Auditing
Standards No. 72 and covering such specified financial statement items
as may be agreed among the Corporation, the Guarantor and the
Representative.
(i) The Representative shall have received, on the Delivery Date, from
Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the Underwriters,
such opinion or opinions, dated the Delivery Date, with respect to the
issuance and sale of the Underwritten Securities, the Guarantees, the
Indenture, the Warrant Agreement, the Registration Statement, the
Prospectus and other related matters as the Representative may
reasonably require, and the Corporation and the Guarantor shall have
furnished to such counsel such documents as they reasonably request for
the purpose of enabling them to pass upon such matters.
(j) The Corporation shall have furnished to the Representative, on the
Delivery Date, a certificate of the Corporation, signed by any two of
the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, or any one of the aforesaid
officers together with any one of the Secretary, the Controller, the
Treasurer, any Assistant Controller, any Assistant Secretary or any
Assistant Treasurer, dated the Delivery Date, to the effect that the
signers of such certificate have examined the Registration Statement,
the Prospectus and this Agreement and that:
(i) the representations and warranties of the Corporation in this
Agreement are true and correct in all material respects on and
as of the Delivery Date with the same effect as if made on the
Delivery Date and the Corporation has complied in all material
respects with all the agreements and satisfied in all material
respects all the conditions on its part to be performed or
satisfied at or prior to the Delivery Date; and
(ii) no stop order suspending the effectiveness of the registration
Statement has been issued and remains in effect and no
proceedings for that purpose are pending or, to the knowledge
of each such person, threatened by the Commission, and no
order
Annex A-14
<PAGE> 20
directed to any document incorporated by reference in the
Prospectus has been issued and remains in effect or, to the
knowledge of each such person, is threatened to be issued by
the Commission.
(k) The Guarantor shall have furnished to the Representative, on the
Delivery Date, a certificate of the Guarantor, signed by any two of the
President and Chief Executive Officer, the Chief Operating Officer, the
Chief Financial Officer, or any one of the aforesaid officers together
with any one of the Corporate Secretary, the Controller, the Treasurer,
any Assistant Controller, any Assistant Secretary or any Assistant
Treasurer, dated the Delivery Date, to the effect that the signers of
such certificate have examined the Registration Statement, the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Guarantor in this
Agreement are true and correct in all material respects on and
as of the Delivery Date with the same effect as if made on the
Delivery Date and the Guarantor has complied in all material
respects with all the agreements and satisfied in all material
respects all the conditions on its part to be performed or
satisfied at or prior to the Delivery Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and remains in effect and no
proceedings for that purpose are pending or, to the knowledge
of each such person, threatened by the Commission, and no
order directed to any document incorporated by reference in
the Prospectus has been issued and remains in effect or, to
the knowledge of each such person, is threatened to be issued
by the Commission; and
(iii) since the date of the most recent financial statements
included in the Prospectus, there has been no material adverse
change in the condition (financial or other), earnings,
business or properties of the Guarantor and its subsidiaries,
taken as a whole, except as set forth in or contemplated in
the Prospectus.
(l) During the period commencing the date of the Terms Agreement and
terminating the Delivery Date, no downgrading shall have occurred in
the rating of the Guarantor's debt securities by any "nationally
recognized statistical rating organization", as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the Act and no such
organization shall have publicly announced that it has under
surveillance or review, with possible negative implications, its rating
of any of the Guarantor's debt securities.
11. SURVIVAL OF REPRESENTATIONS AND INDEMNIFICATION
The respective agreements, representations, warranties, indemnities and
other statements of the Corporation and the Guarantor or their respective
officers and of the Underwriters set forth in or made pursuant to this Agreement
will remain in full force and effect, regardless of any investigation made by or
on behalf of any Underwriter or the Corporation or the Guarantor or any of the
officers, directors or controlling persons referred to in Section 8 hereof, and
will survive delivery of and payment for the Underwritten Securities for a
period of two years after such delivery.
Annex A-15
<PAGE> 21
12. NOTICES
All communications hereunder will be in writing and effective only on
receipt, and, if sent to the Underwriters, will be mailed, delivered or sent by
electronic transfer including telex or facsimile and confirmed to the
Representative first named in the Terms Agreement, or, if sent to the
Corporation or the Guarantor, will be mailed, delivered or sent by electronic
transfer including telex or facsimile and confirmed to it at, in the case of the
Corporation, Nortel Networks Capital Corporation, Nortel Networks Plaza, 200
Athens Way, Nashville, Tennessee 37228-1397, Attention: Secretary (facsimile
number (615) 432-4067) and, in the case of the Guarantor, Nortel Networks
Limited, 8200 Dixie Road, Suite 100, Brampton, Ontario, L6T 5P6, Canada,
Attention: Corporate Secretary (facsimile number (905) 863-8423).
13. SUCCESSORS
This Agreement will inure to the benefit of and be binding upon the
parties hereto and their respective successors and the officers and directors
and controlling persons referred to in Section 8 hereof, and no other person
shall have any right or obligation hereunder.
14. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.
15. APPLICABLE LAW
This Agreement will be governed by and construed in accordance with the
laws of the Province of Ontario, Canada, except that Sections 2, 7 and 8 will be
governed by and construed in accordance with the laws of the State of New York,
United States.
Annex A-16
