Item 10. Additional Information

A.     Share Capital.

Not applicable.

B.     Memorandum and Articles of Incorporation

Mitel Networks is incorporated under the CBCA under company number 385460-4. The date of incorporation is January 12, 2001.

In June 2004, the board of directors of Mitel Networks approved the repeal of the Company’s former general operating by-laws and adopted By-law No. 1A, a new by-law relating generally to the transactions of the business and affairs of the Company.

On July 15, 2004, at a meeting of the shareholders, the shareholders of Mitel Networks ratified the repeal of the previous general operating by-laws and the adoption of By-law No. 1A.

Mitel Networks’ certificate and articles of incorporation do not contain any limitations on Mitel Networks’ objects or purposes. The following is a summary of certain provisions of Mitel Networks’ certificate and articles of incorporation:

Meetings of Shareholders

Subject to the CBCA, the annual meeting of shareholders of Mitel Networks is to held on such day and at such time in each year as the board, or the chairperson of the board, or the vice-chairperson of the board, or the president in the absence of the chairperson or vice-chairperson of the board, may from time to time determine, for the purpose of considering the financial statements and reports required by the CBCA to be placed before the annual meeting, electing directors, appointing auditors and for the transaction of such other business as may properly be brought before the meeting. Pursuant to subsections 133(b) and 155(1) of the CBCA, Mitel Networks must hold the annual meeting of its shareholders at least once every calendar year and not later than fifteen months after the preceding ordinary general meeting. Mitel Networks must place before the shareholders at every annual meeting comparative financial statements for the immediately preceding financial year along with the report of the auditor.

In accordance with subsection 143 of the CBCA the holders of not less than five percent of the issued and outstanding shares of Mitel Networks that carry the rights to vote may requisition the directors (by sending the requisition to each director and to the registered office) of Mitel Networks to call a meeting of shareholders for the purposes stated in the requisition. Upon the requisition of shareholders, the directors shall proceed to convene the meeting or meetings to be held in the manner set forth in the by-laws of Mitel Networks or the CBCA, as applicable. The requisition shall state the business to be transacted at the meeting.

Subject to the CBCA, notice of the time and place of each meeting of shareholders shall be sent not less than 21 days nor more than 60 days before the meeting to each shareholder entitled to

 

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vote at the meeting, to each director and to the auditor of Mitel Networks. If a meeting of shareholders is adjourned for less than 30 days it is not necessary to give notice of the adjourned meeting other than by announcement at the earliest meeting that is adjourned.

A quorum of shareholders is present at a meeting of shareholders of Mitel Networks if the holders of 20% of the shares entitled to vote at the meeting are present in person or represented by proxy, provided that a quorum shall not be less than two persons.

Section 137 of the CBCA proscribes the method under which proposals may be made by shareholders entitled to vote. The shareholder must submit to the Company a notice of any matter that the person proposes to raise at the meeting. The Company shall set out the proposal in the management proxy circular and the proposing shareholder may request to include a supporting statement. If the Company does not include the proposal in the management proxy circular, it must send a notice of refusal to the proposing shareholder including the reasons why the proposal will not be included. Either the shareholder and/or the Company may apply to the courts claiming aggrievance.

Directors

At least twenty-five per cent of the directors of Mitel Networks must be resident Canadians. However, if the Company has less than four directors, at least one director must be a resident Canadian. Subject to the terms of the Shareholders Agreement, the board shall manage or supervise the management of the business and affairs of Mitel Networks. Section 122 of the CBCA states that every director and officer of the Company shall act honestly and in good faith with a view to the best interests of the Company and to exercise care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Subject to its by-laws and articles, the directors of Mitel Networks may fix the remuneration of the directors of Mitel Networks.

No director or officer shall be liable for: (a) the acts, receipts, neglects or defaults of any other director, officer, employee or agent of Mitel Networks or any other person; (b) any loss, damage or expense happening to Mitel Networks through the insufficiency or deficiency of title to any property acquired by, for, or on behalf of Mitel Networks, or for the insufficiency or deficiency of any security in or upon which any of the moneys of Mitel Networks shall be loaned out or invested; (c) any loss or damage arising from the bankruptcy, insolvency or tortious act of any person, firm or Company, including any person, firm or Company with whom any moneys, securities or other assets belonging to Mitel Networks shall be lodged or deposited; (d) any loss, conversion, misapplication or misappropriation of or any damage resulting from any dealings with any moneys, securities or other assets belonging to Mitel Networks; (e) any other loss, damage or misfortune whatever which may happen in the execution of the duties of the director’s or officer’s respective office or in relation thereto, relieve a director or officer from the duty to act in accordance with the CBCA or relieve such director or officer from liability for a breach of the CBCA.

Mitel Networks shall indemnify a director or officer of the Company, a former director or officer of the Company or another individual who acts or acted at the Company’s request as a director or officer, or an individual acting in a similar capacity, of another entity against all costs, charges

 

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and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by such individual in respect of any civil, criminal or administrative, investigative or other proceeding (a “proceeding”) in which the individual is involved because of that association with the Company or other entity. The Company may not indemnify an individual in connection with the previous sentence unless the individual: (a) acted honestly and in good faith with a view to the best interests of the Company or other entity for which the individual acted as a director or officer or in a similar capacity at the Company’s request, as the case may be; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, had reasonable grounds for believing that his conduct was lawful.

A director or officer of Mitel Networks who is a party to a material transaction or material contract, or proposed material transaction or material contract with the Company, is a director or an officer of, or acts in a capacity similar to a director or officer of, or has a material interest in any person who is a party to a material transaction or material contract or proposed material transaction or material contract with the Company shall disclose the nature and extent of his/her interest at the time and in the manner provided in the CBCA. Except as provided in the CBCA, no such director of the Company shall vote on any resolution to approve any transaction. If a material transaction or material contract is made between the Company and one or more of its directors or officers, or between the Company and another person of which a director or officer of the Company is a director or officer or in which he has a material interest, the transaction is neither void nor voidable by reason only of that relationship, or by reason only that a director with an interest in the transaction or contract is present at or is counted to determine the presence of a quorum at a meeting of directors or committee of directors that authorized the transaction, if the director or officer disclosed his interest in accordance with the provisions of the CBCA and the transaction or contract was approved by the directors or the shareholders and it was reasonable and fair to the Company at the time it was approved.

Capital Stock

Pursuant to its articles of incorporation, as amended, Mitel Networks’ authorized capital consists of an unlimited number of common shares without par value, and, as described below, an unlimited number of Class A Convertible Preferred Shares, issuable in series, and an unlimited number of Class B Convertible Preferred Shares, issuable in series. Each common share ranks equally as to dividends, voting rights and as to the distribution of assets on winding-up for liquidation. Holders of common shares are entitled to one vote for each share held of record on all matters to be acted upon by the shareholders.

The articles also provide that no shares of Mitel Networks may be transferred without the consent of the directors of Mitel Networks evidenced by a resolution passed by them and recorded in the books of Mitel Networks. However, Mitel Networks may be prohibited from having this restriction if, under the CBCA regulations, it is deemed to be a “distributing corporation”. A “distributing corporation” includes a corporation that has filed a prospectus or registration statement under provincial legislation or under the laws of a jurisdiction outside Canada. Mitel Networks has filed a registration statement with the United States Securities and Exchange Commission under the United States Securities Exchange Act of 1934 . If such registration statement is also considered to be a “registration statement” for purposes of the

 

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CBCA regulations, Mitel Networks would be deemed to be a distributing corporation for purposes of the CBCA. Given that Mitel Networks’ securities are not listed on any stock exchange and no market exists for such securities, Mitel Networks proposes to make an application under the CBCA for a determination that it is not a distributing corporation for purposes of the CBCA. In the absence of such determination, Mitel Networks expects it would file articles of amendment to delete the share transfer restriction from its articles, in accordance with previously obtained shareholder approval.

By-law No. 1A provides that, subject to the CBCA and the Company’s articles, shares may be issued at such times and to such persons and for such consideration as the directors may determine.

On April 22, 2004 Mitel Networks filed Articles of Amendment amending its authorized capital to create two classes of preferred shares, the Class A Convertible Preferred Shares and the Class B Convertible Preferred Shares, each issuable in series. On April 23, 2004 Mitel Networks filed Articles of Amendment to designate the first series of Class A Convertible Preferred Shares as the Class A Convertible Preferred Shares, Series 1 (or “Series A Shares”, as they are referred to in this annual report) and to designate the first series of Class B Convertible Preferred Shares as the Class B Convertible Preferred Shares, Series 1 (or “Series B Shares”, as they are referred to in this annual report).

The rights, privileges, restrictions and conditions attaching to the Class A Convertible Preferred Shares and the Class B Convertible Preferred Shares are set out in the Articles of Amendment dated April 22, 2004 and attached as Exhibit 1.2 to this annual report.

The rights, privileges, restrictions and conditions attached to the Series A Shares and the Series B Shares are set out in the Articles of Amendment dated April 23, 2004 and attached as Exhibit 1.3 to this annual report.

The following summarizes the key rights, privileges, restrictions and conditions attached to the Series A Shares and Series B Shares:

Series A Shares:

(a)     Liquidation Preference — Upon the occurrence of a liquidation, dissolution or winding-up of the Company, or a “change of control” of the Company (as defined in the Series A Share provisions), holders of Series A Shares will be entitled to receive from the Company, in preference to any distribution to holders of Series B Shares (or any other series of Class B Convertible Preferred Shares) or common shares, an amount, in respect of each Series A Share, equal to the original issue price of CDN$1.00 per share plus any declared but unpaid dividends on such share (the “Series A Liquidation Preference”), subject to customary adjustments. After payment (whether in cash or other consideration) of the Series A Liquidation Preference, and payment (whether in cash or other consideration) of the Series B Liquidation Preference as described below, the holders of the Series A Shares are entitled to receive the amount (the “Series A Participation Amount”) resulting from the remaining assets of the Company available

 

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for distribution being distributed to the shareholders of the Company rateably on an as-if-converted to common shares basis.

Notwithstanding the above, if the liquidation, dissolution, winding-up or change of control occurs within the first two years from the date the Series A Shares were originally issued:

(b)     Voting — The Series A Shares have voting rights on an as-if-converted to common shares basis, and shall vote together with the holders of common shares and Series B Shares.

(c)     Conversion — The Series A Shares are convertible, at the option of the holder, and automatically in certain circumstances, into common shares of the Company, on the basis of one common share for each Series A Share so converted, subject to customary adjustments for events such as stock splits and the anti-dilution protection described below. Events that will trigger the automatic conversion of Series A Shares into common shares include: (i) the completion of an initial public offering meeting certain pre-conditions; and (ii) the vote of the holders of a certain percentage of the outstanding Series A Shares to require conversion.

In addition, if the conversion occurs after two years from the original issuance date of the Series A Shares, holders of Series A Shares will also receive, in respect of each Series A Share, an additional number of common shares (the “Additional Common Shares”) equal to the original issue price (as adjusted) of the Series A Shares, divided by the fair market value of a Common Share at the time of such conversion. Further, in the event of a conversion in connection with an initial public offering that does not meet certain pre-conditions within the first two years from the original issuance date, holders of Series A Shares shall also be entitled to receive certain additional common shares, determined, with respect to each Series A Share so converted by a fraction, where the numerator is the difference between two times the issue price less the greater of (i) the issue price and (ii) the IPO offering price; and the denominator is the IPO offering price.

(d)     Anti-Dilution Protection — The Series A Shares have “full ratchet” anti-dilution protection, such that if the Company issues common shares (or securities exercisable for, convertible into or exchangeable for common shares) at a price per common share which is less than the issue price (as adjusted) of the Series A Shares, then the number of common shares into which the Series A Shares will then be convertible will thereafter be calculated on the basis of the lowest price at which the common shares (or securities exercisable for, convertible into or exchangeable for common shares) were issued.

 

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(e)     Redemption — The Series A Shares have redemption rights, which entitle the holders of a certain percentage of the outstanding Series A Shares, at any time following five years and one day from the last date that shares are issued in connection with the Financing, to require the Company to redeem the Series A Shares. Subject to the availability of sufficient funds for redemption, upon any such redemption, holders of Series A Shares will be entitled to receive from the Company an amount equal to the sum of (i) the number of Series A Shares outstanding multiplied by the sum of the issue price and the per share amount of any declared but unpaid dividends; and (ii) the then fair market value of the common shares into which such Series A Shares are then convertible.

Series B Shares:

The Series B Shares are substantially the same as the Series A Shares, except that the Series B Shares rank junior to the Series A Shares (but senior to the common shares) with respect to entitlements on a liquidation, dissolution or winding up of the Company or a change of control of the Company and, where there are insufficient assets available to fully redeem the Series A Shares and Series B Shares, with respect to priorities to certain redemption payments.

C.     Material Contracts

The following summary of Mitel Networks’ material agreements, which agreements are filed as exhibits to this annual report, does not purport to be complete and is subject to, and qualified in its entirety by reference to, all the provisions of those agreements.

a) Subscription Agreement between Mitel Networks and EdgeStone

On April 23, 2004, Mitel Networks entered into a Subscription Agreement with EdgeStone, setting out the terms and conditions pursuant to which EdgeStone subscribed for Series A Shares, a Series 1 Warrant and the Series 2 Warrant. See Item 4.A to this annual report for further details in respect of the Subscription Agreement.

b) Shareholders Agreement between Mitel Networks, Mitel Systems Corporation (now Wesley Clover), Zarlink , PTIC, Dr. Matthews, Mitel Knowledge, WCC (now Wesley Clover) and EdgeStone:

Mitel Networks, Wesley Clover, Zarlink and PTIC were parties to an amended and restated shareholder agreement dated August 31, 2001. Each of the parties subsequently entered into a Waiver and Termination Agreement dated April 23, 2004 thereby terminating such amended and restated shareholders agreement. On April 23, 2004, in connection with the Financing, Mitel Networks, Wesley Clover, Zarlink, PTIC, Dr. Matthews, Mitel Knowledge and EdgeStone entered into a new shareholders agreement (the “Shareholders Agreement”). The Shareholders Agreement contains provisions relating to the entitlement of EdgeStone to appoint two directors to the board of directors of the Company, and various other provisions respecting the management of Mitel Networks and dealings with the securities of Mitel Networks held by the shareholders which are parties to the Shareholders Agreement. Certain parties to the

 

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Shareholders Agreement, namely, Wesley Clover and Mitel Knowledge, are corporations controlled directly or indirectly by Dr. Matthews.

The Shareholders Agreement also contains put rights in favour of certain of the shareholders, as follows:

Where EdgeStone and one or more of the other shareholders exercises their put rights, EdgeStone shall have priority, such that the Company will be required to repurchase all of EdgeStone’s securities which are the subject of the exercise of its put right, before any payments are made to Zarlink and/or PTIC. Thereafter, where both Zarlink and PTIC have exercised their put rights, their put rights shall rank pari passu.

 

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c) Registration Rights Agreement between Mitel Systems (now Wesley Clover), Zarlink, PTIC, Mitel Knowledge, WCC (now Wesley Clover) and EdgeStone

In connection with the Financing, Mitel Networks also entered into a registration rights agreement (the “Registration Rights Agreement”) with Wesley Clover, Zarlink, PTIC, Mitel Knowledge and EdgeStone dated April 23, 2004. Pursuant to the Registration Rights Agreement, Mitel Networks covenanted to make certain arrangements with respect to the registration and/or the qualification for distribution of the shares held by such shareholders under the applicable securities laws of the United Shares and/or Canada.

d) Receivables Purchase Agreement between the Mitel Group and The Canada Trust Company

The Mitel Group have entered into a Receivable Purchase Agreement with The Canada Trust Company (the “Purchaser”) with an effective date of April 16, 2004, whereby certain qualifying non-interest bearing trade receivables in Canada and the United States may be purchased from the Mitel Group by the Purchaser and transferred to a securitization trust.

e) Amended and Restated Loan Agreement between Mitel Networks, the Lenders from time to time and the Bank of Montreal as Administrative Agent

Mitel Networks, as borrower, has entered into an Amended and Restated Credit Agreement with the Bank of Montreal as administrative agent and lead arranger (the “Bank”), effective as of April 21, 2004, and amended on July 24, 2004, whereby a revolving credit facility of $22 million (CDN$30 million) has been made available to Mitel Networks upon and subject to the terms and conditions therein set forth (the “2004 Bank Facility”). See Item 5.B Liquidity and Capital Resources for additional discussion of this loan facility. The 2004 Bank Facility amends and restates an Amended and Restated Credit Agreement made as of February 27, 2003, as amended by amending agreements made as of June 12, 2003 and February 24, 2004.

f) Loan Agreement with Export Development Canada (“EDC”)

MNL, a wholly-owned subsidiary of Mitel Networks, entered into a loan agreement dated March 4, 2003 with EDC in the amount of £4.1 million that was subject to a borrowing base. The facility bore interest at LIBOR plus 3.5%. The facility was secured by a general assignment of Mitel Networks’ accounts receivable and a general security interest in the remaining assets of Mitel Networks and its two U.S. wholly-owned subsidiaries, each of which was a guarantor. EDC also held £683,470 in cash collateral to support the loan. The loan facility contained certain restrictions and financial covenants. The remaining balance outstanding on the loan £4,117,590.23 (including accrued interest) was repaid to EDC in full on April 19, 2004, and on April 19, 2004 £703,229.77, being cash collateral (including accrued interest) held by EDC was repaid to Mitel Networks, in full, and certain underlying security and guarantees in connection with the credit facility were discharged.

g) Chattel Mortgage Loan Facility with Barclays Bank PLC

On October 22, 2001, MNL entered into a loan with Barclays Bank PLC in the amount of £5.0 million, secured by certain United Kingdom equipment. The mortgage bears interest at 7.7%, is

 

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payable in monthly installments and is due in October 2004. See Item 5.B Liquidity and Capital Resources for additional discussion of this loan facility.

h) Chattel Mortgage Loan Facility with Barclays Bank PLC

On April 25, 2003, MNL entered into a loan with Barclays Bank PLC in the amount of £0.8 million, secured by certain United Kingdom equipment. The mortgage bears interest at 6.3%, is payable in monthly installments and is due in April 2006. See Item 5.B Liquidity and Capital Resources for additional discussion of this loan facility.

i) Real Property Loan Facility with Barclays Bank PLC

Pursuant to a facility letter dated December 13, 2001 and a legal charge dated January 24, 2002, MNL entered into a real property loan facility with Barclays Bank PLC in the amount of £7.5 million, which is secured by the real property located in the Mitel Business Park, Portskewett, Monmouthshire. See Item 5.B Liquidity and Capital Resources for additional discussion of this loan facility.

j) Business Overdraft and Ancillary Facilities with Barclays Bank PLC

On June 24, 2002, MNL and Barclays Bank PLC entered into an overdraft facility of £1 million and ancillary facilities totaling £3.0 million. See Item 5.B Liquidity and Capital Resources for additional discussion of this loan facility.

Agreements with BreconRidge:

a) Supply Agreement with BreconRidge

On August 31, 2001 Mitel Networks and two of its wholly-owned subsidiaries entered into a supply agreement with BreconRidge, under which BreconRidge supplies certain products and services to Mitel Networks. Pursuant to an amendment dated February 27, 2003, the initial term of the agreement was extended to December 31, 2007, and will be automatically renewed thereafter for additional one-year periods unless terminated. Either party has the right to terminate the agreement by giving prior written notice of one hundred and eighty (180) days at any time during a renewal term, or to give notice of its intent not to renew no less than one hundred and eighty (180) days prior to the expiration of a renewal term. Subject to certain exceptions, the supply agreement is exclusive during the initial term with respect to current products and new product introductions. Under the terms of the supply agreement, BreconRidge manufactures the majority of Mitel Networks’ products and provides repair and other related services.

The supply agreement with BreconRidge does not contain any minimum purchase requirements. Under the terms of the supply agreement, Mitel Networks is not obligated to purchase products from BreconRidge in any specific quantity, unless and until a binding purchase order has been issued. Mitel Networks may be obligated to purchase certain excess inventory levels from BreconRidge that could result from Mitel Networks’ actual sales varying from forecast. Furthermore, BreconRidge is required to purchase Mitel Networks’ raw material inventory, before turning to third party suppliers for raw material procurement. BreconRidge has

 

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committed to certain cost reductions through August 1, 2004 on purchases of traditional communications platform products.

BreconRidge is prohibited from discontinuing its manufacture of any products or from refusing for any reason other than an event of force majeure or in the event of an uncured default to manufacture and supply the products to Mitel Networks. The agreement may be terminated by either party at any time following the expiration of the initial term on not less than 180 days prior notice or in the event of an uncured material breach by or change in control of the other party.

b) Sublease Agreement between Mitel Networks and BreconRidge

On August 31, 2001 Mitel Networks entered into a sublease agreement to lease to BreconRidge certain of its Ottawa manufacturing and office facility totaling 158,780 square feet. The term of the agreement is five years expiring on August 31, 2006. BreconRidge has the option to extend the sublease for an additional five years. The annual base rent is CDN$1,573,020.

The sublease agreement was amended on May 31, 2002 to include additional space of 4,026 square feet thereby increasing the annual base rent to CDN$1,625,358.

c) Lease Agreement between MNL and the U.K. subsidiary of BreconRidge

On September 14, 2001, MNL entered into a lease agreement with the U.K. subsidiary of BreconRidge for 94,161 square feet (8,751 square meters) of office and manufacturing space located in the Portskewett Business Park located in Portskewett, Monmouthshire, U.K. The term of the lease is fifteen years expiring on August 30, 2016 with cancellation options on the fifth and tenth years available to Mitel Networks and BreconRidge. The annual base rent is £517,884.

Agreements with Mitel Knowledge:

a) Transfer of Mitel Knowledge intellectual property to Mitel Networks, and termination of certain related Licensing and Research and Development Cost Sharing Agreements

On November 1, 2002, Mitel Networks exercised its Call Right under the MNC R&D Agreement (defined below). In connection with the Call Right, Mitel Networks and Mitel Knowledge entered into an (Intellectual Property) Purchase and Sale Agreement, also dated November 1, 2004, whereby all of Mitel Knowledge’s right, title and interest in and to the IP (as defined below) was transferred to Mitel Networks. The purchase price for the IP was CDN$12.5 million payable to Mitel Knowledge in 4,555,169 common shares of Mitel Networks.

In connection with the exercise of the Call Right and IP Purchase and Sale Agreement, on November 1, 2002, the following agreements were terminated by mutual consent of the parties thereto:

 

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(excluding trademarks) utilized by Mitel Networks in its products (the “IP”)): (A) Mitel Knowledge retained Mitel Networks’ services to perform R&D in consideration for which Mitel Knowledge funded certain of Mitel Networks’ R&D activities; (B) Mitel Knowledge granted to Mitel Networks a license to exploit the intellectual property in Canada, South and Central America, Mexico and the Caribbean in exchange for a license fee; (C) Mitel Networks agreed to transfer to Mitel Knowledge any investment tax credits, but in no event less than CDN$10 million, earned on the R&D activities to the extent that such investment tax credits were not required to reduce Mitel Networks’ Canadian federal tax payable; (D) Mitel Networks was granted a call right (the “Call Right”) pursuant to which it had the right to require Mitel Knowledge to sell all of its rights, title, interest in, and benefits from, the IP, including improvements and new technology, to Mitel Networks upon the occurrence of the earliest of the following events: (1) the third anniversary of the agreement; (2) Mitel Networks passing a resolution to proceed with an initial public offering of its shares in Ontario or any other jurisdiction which results in the listing of its shares on a recognized stock exchange; or (3) the termination of the agreement on its terms. The MNC R&D Agreement provided that the purchase price for the IP would be paid by the issuance of common shares from Mitel Networks’ treasury with the number of shares to be determined in accordance with a formula described in the MNC R&D Agreement.

(ii)

Research and Development Agreement between Mitel Networks and Mitel Overseas, a wholly-owned subsidiary of Mitel Networks dated March 27, 2001 (the “MNOC R&D Agreement”);

Under  the MNOC R&D Agreement, the parties agreed to undertake joint R&D and to share in the costs associated therewith. The agreement provided that Mitel Knowledge would own all intellectual property developed by either party. In exchange for Mitel Overseas bearing certain of the jointly incurred R&D costs, Mitel Knowledge granted to Mitel Networks Overseas Limited a royalty-free, exclusive license to exploit the intellectual property in the United States, Europe, Middle East, Africa and Asia Pacific regions.

(iii)

Intellectual Property License Agreement between Mitel Knowledge and Mitel Overseas dated March 27, 2001 (the “MNOC License Agreement”);

Under the MNOC License Agreement, Mitel Knowledge granted Mitel Overseas an exclusive, fully paid-up license to exploit the IP in the United States for total consideration of CDN$26.6 million in the form of a promissory note. The promissory note bore interest at the rate of 7.4%, compounded semi-annually, payable to Mitel Knowledge on demand.

 

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In October 2003 the entire loan outstanding at that date of $31.0 million (CDN$ 40.9 million) was converted (and the debt discharged) into 20,448,875 common shares of the Company at their then fair value of CDN$2 per common share. On April 23, 2004, pursuant to an Exchange and Release Agreement entered into between the Company and Wesley Clover in connection with the Financing, all of the common shares issued on conversion of the loan were exchanged for 40,897,750 Series B Shares of the Company at their then fair value of CDN$1 per preferred share.

b) Lease Agreement between Mitel Networks and MRPC

On March 27, 2001, Mitel Networks and MRPC entered into a lease agreement pursuant to which Mitel Networks leases its headquarters facilities located in Ottawa, Ontario totaling 512,391 square feet. The initial term of the lease is ten years expiring on February 15, 2011. The terms of the lease reflect current market conditions. Annual base rent is CDN$13.00 per square foot for office space and CDN$9.00 per square foot for non-office space. Mitel Networks is responsible for the payment of operating costs in addition to the base rent.

c) Alliance Agreement between Mitel Networks, March Networks, MNL and Mitel Networks International Limited, subsidiaries of Mitel Networks

The agreement is effective September 21, 2001 with an initial term of two years which may be extended for additional subsequent one-year periods upon mutual consent of the parties. The Alliance Agreement was extended for one (1) year, expiring on September 21, 2004, unless extended for additional one-year periods upon mutual consent of the parties. Each party may terminate the agreement for its convenience on 60 days prior written notice.

The agreement provides for joint development of new projects to be determined by the parties, and marketing of each of Mitel Networks’ and March Networks’ IP-based products and services.

 

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The parties are to establish an Alliance Management Committee comprised of three representatives from each of Mitel Networks and March Networks. The Alliance Management Committee is responsible for the overall management of the alliance to determine joint activities in the areas of product development, product marketing, and product and system integration to ensure where appropriate interoperability between the product portfolios of Mitel Networks and March Networks. With regard to any of these activities the Alliance Management Committee is also responsible for monitoring joint activities, reviewing promotional activities, approving specifications and pricing for any jointly developed products, and to allocate each parties’ liability for shared expenses.

Either party has the ability to propose joint product development to the Alliance Management Committee which will then evaluate and approve or reject the proposal. If the committee approves a proposal, then the parties will negotiate a binding Joint Development Agreement setting out, among other matters, the technology to be developed, each party’s responsibilities, ownership of intellectual property to be developed under the project if such arising intellectual property is not to be jointly owned.

Mitel Networks and March Networks will jointly brand, promote, market and distribute each other’s IP-based products and services. The terms and conditions under which each party will distribute the other party’s products are set out in a separate Global Marketing and Distribution Agreement.

Agreements with Zarlink:

a) Amended Supply Agreement between Mitel Networks and Zarlink

Mitel Networks entered into a non-exclusive supply agreement dated February 16, 2001 with Zarlink pursuant to which Zarlink supplies semiconductor components to Mitel Networks. The initial term of the agreement is ten years with subsequent automatic annual renewals

Zarlink is obligated to place all of its know how, improvements and new technology with respect to the manufacture of hybrid devices and VoIP products in escrow. The escrowed materials are to be released in the event of: bankruptcy; receivership; issuance of a last-time buy notification; discontinuance of manufacture; transfer of the hybrid or VoIP business in whole or in part to another party, if the party fails to assume the obligations of Zarlink with respect to the hybrid or VoIP products; a material breach of the agreement by Zarlink that adversely affects the continuing supply of products, which remains uncured 30 days after written notification of the breach.

Under the terms of the supply agreement, Zarlink granted to Mitel Networks a license in the Zarlink intellectual property, Zarlink improvements, and Zarlink developed new technology relating to the supplied components. Mitel Networks has the right to grant sublicenses only to semiconductor second source suppliers for hybrid and semiconductor components to be used in specified Mitel Networks products and VoIP products, to the extent that Zarlink intellectual property has been incorporated into the components and used by Mitel Networks. The supply agreement was amended by letter agreement dated October 24, 2001. The amending agreement provides for an expansion of the foregoing license grant in that it allows Mitel Networks, in the

 

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case of licensed intellectual property existing as of February 16, 2001 or created thereafter, to: (a) complete the development of the MT92102 VoIP device, (b) sublicense such intellectual property to a third party foundry to permit the manufacture of the MT92102 VoIP device (i) for sale by the foundry to Mitel Networks, and (ii) for sales by the foundry to its customers but restricted to applications based on Mitel Networks’ converged access products.

The amending agreement further provided for payment of non-recurring engineering expenses to Zarlink for the completion of the MT92102 device.

The supply agreement was further amended by Amending Agreement dated April 23, 2004, whereby clause 21(A)(ii) of the supply agreement, which had required prior approval from Zarlink in connection with amendments to Mitel Networks’ constating documents, was deleted in its entirety.

b) Lease Between MNL and Zarlink Semiconductor Limited, a subsidiary of Zarlink

MNL, a wholly-owned subsidiary of Mitel Networks, entered into a lease agreement dated February 2, 2001 with a wholly-owned subsidiary of Zarlink, pursuant to which the subsidiary leases 49,500 square feet at MNL’s premises at Portskewett Business Park, Portskewett Monmouthshire, on terms reflecting prevailing market conditions. The term of the lease is five years. Both parties have the right to terminate the lease on February 2, 2004, or at any time thereafter upon at least twelve months prior written notice. The base rent is £272,250 per annum.

c) Intellectual Property License Agreement between Zarlink and Mitel Networks

On February 16, 2001, Mitel Networks and Zarlink entered into an Intellectual Property License Agreement dated February 16, 2001 pursuant to which Zarlink licensed to Mitel Networks the intellectual property retained by Zarlink. Under the agreement, Zarlink granted to Mitel Networks a non personal, limited, assignable, royalty free, perpetual, non exclusive worldwide license for the licensed intellectual property to make, use, develop, offer for sale, or otherwise exploit for the licensed products. Zarlink is precluded from assigning any of the licensed intellectual property in whole or in part, or from granting a security interest therein, to any party engaged in the sale of products or services that are competitive with Mitel Networks. Mitel Networks is authorized to grant sublicenses of the intellectual property to permit it to carry on its business, except that it cannot sublicense the licensed intellectual property to allow the manufacturing of semiconductors other than for use in its business.

The term of the license is for the entire term of the property rights under which the licenses are granted. If Zarlink is wound up or otherwise ceases its operations, ceases to carry on business, or takes any material steps with regard to bankruptcy proceedings, then all right, title and interest in and to the licensed intellectual property shall be deemed to be transferred over to Mitel Networks.

The Intellectual Property License between Zarlink and Mitel Networks dated February 16, 2001 was amended on October 24, 2001. The amendment provides for an expansion of the license granted to Mitel Networks with respect to licensed intellectual property existing as of February 16, 2001 or created thereafter to complete the development of the MT92102 VoIP device in that

 

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it allows Mitel Networks to sublicense such intellectual property to a third party foundry to permit the manufacture of the MT92102 VoIP device for sale by such foundry to Mitel Networks for its business, as well as to the foundry’s other customers for their business requirements, but restricted to applications based on Mitel Networks’ converged access products.

d) Non Competition and Non Solicitation Agreement between Zarlink and its subsidiaries, Mitel Systems (now Wesley Clover), Mitel Networks and its subsidiaries, MRPC, Mitel Knowledge and Dr. Matthews dated February 16, 2001

The Non Competition and Non Solicitation Agreement provides that (a) Zarlink, on behalf of itself and its subsidiaries, will not, for a period of five years carry on or be associated with any undertaking which is competitive with Mitel Networks, except that Zarlink (and its subsidiaries) may hold securities in a competitive business provided such securities do not exceed 5% of the outstanding equity securities of such company; and (b) Mitel Networks will not, for a period of five years, grant or permit in any manner any firm to compete with the semiconductor business of Zarlink , or permit any party to use any of Zarlink’s licensed intellectual property except as permitted under the Intellectual Property License Agreement between Zarlink and Mitel Networks dated February 16, 2001. The foregoing restriction does not preclude Mitel Networks from investing in a corporation, firm or entity which competes with Zarlink or any entity within Zarlink’s semiconductor group provided that such interest does not exceed 33% of the outstanding voting equity and provided that no use of licensed intellectual property is granted other than as is permitted pursuant to the Intellectual Property License Agreement.

Agreements with Key Employees:

a) Amended and Restated Employment Agreement between Mitel Networks and Paul Butcher

Effective as of February 16, 2001, Mitel Networks executed an Amended and Restated Employment Agreement with Paul Butcher pursuant to which Mr. Butcher was employed as President and Chief Operating Officer of Mitel Networks, reporting to the CEO. The agreement is for an indefinite term, subject to termination in accordance with its terms. In addition to a base salary, car allowance, stock options and senior management benefits and perquisites, Mr. Butcher is entitled to receive a bonus payment on each anniversary of his February 16th start date provided that specific objectives, to be defined by Mitel Networks, are met. The agreement details the compensation that Mr. Butcher would receive were his employment to terminate under various circumstances, and contains provisions addressing confidentiality, non-disclosure, non-competition and ownership of intellectual property.

By way of a private letter agreement between Mr. Butcher and Dr. Matthews dated March 1, 2002, Dr. Matthews granted to Mr. Butcher options to purchase common shares in Mitel Networks from the holdings of Wesley Clover. Such options vest in 25% increments on the first, second, third and fourth anniversaries of Mr. Butcher’s February 16, 2001 start date.

b) Amended and Restated Employment Agreement between Mitel Networks and Donald Smith

Effective as of April 17, 2001, Mitel Networks executed an Amended and Restated Employment Agreement with Donald Smith pursuant to which Mr. Smith was employed as CEO of Mitel Networks, reporting to the Chairman of the board of directors of Mitel Networks. The

 

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agreement is for an indefinite term, subject to termination in accordance with its terms. In addition to a base salary, car allowance, stock options and senior management benefits and perquisites, Mr. Smith is entitled to receive an annual bonus payment in an amount determined by the Compensation Committee of Mitel Networks’ board of directors. The agreement details the compensation that Mr. Smith would receive were his employment to terminate under various circumstances, and contains provisions addressing confidentiality, non-disclosure, non-competition and ownership of intellectual property.

By way of a private letter agreement between Mr. Smith and Dr. Matthews dated March 1, 2002, Dr. Matthews granted to Mr. Smith options to purchase common shares in Mitel Networks from the holdings of Wesley Clover. Such options vest in 25% increments on the first, second, third and fourth anniversaries of Mr. Smith’s April 2, 2001 start date.

Agreements with Others:

a) Union Agreement between Mitel Networks Solutions, Inc. (“MNSI”) and the IBEW

Mitel Networks’ indirect wholly-owned U.S. subsidiary, MNSI, has negotiated a national union contract with the IBEW which assures Mitel Networks of obtaining the services of its unionized field technician employees in the U.S. and includes a provision which precludes the employees from going on strike. The terms and conditions of the contract are typical in the industry. The current contract expires in the Fall of 2004 and Mitel Networks’ US subsidiary, MNSI, and the IBEW will enter into good faith collective bargaining in Summer 2004 with the intent of consummating a new multi-year agreement.

b) Integrated Communications Solutions R&D Project Agreement between Mitel Networks, Mitel Knowledge, March Networks and Her Majesty the Queen in Right of Canada.

On October 10, 2002, Mitel Networks, March Networks and Mitel Knowledge signed an agreement with the Government of Canada (the “TPC Agreement”) that provides for financing, through the Technology Partnerships Canada program, of up to CDN$60 million for certain March Networks’ and Mitel Networks’ R&D activities over a three year period. Each party is severally liable for its portion of the R&D work described in the TPC Agreement. The TPC Agreement contains certain restrictions on the exploitation outside of Canada of the intellectual property developed through the project. In exchange for the financing received by Mitel Networks under the TPC Agreement, Mitel Networks is required, as of September 30th in each of 2002, 2003 and 2004, to issue warrants to Her Majesty the Queen in Right of Canada. The warrants are exercisable on a one-for-one basis for common shares for no additional consideration. The number of warrants to be issued is equal to the amount of contributions paid to Mitel Networks under the TPC Agreement in the immediately preceding 12-month period, divided by the fair market value of Mitel Networks’ common shares as of the applicable date.

The original expiry date of the TPC Agreement was extended by the parties, from September 30, 2004 to March 31, 2005, by an Amendment Agreement entered into between the parties dated April 27, 2004.

 

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c) Agreement between Mr. Peter Charbonneau and Dr. Matthews

By way of an oral agreement between Mr. Peter Charbonneau and Dr. Matthews on February 16, 2001, Dr. Matthews granted to Mr. Charbonneau options to purchase common shares in Mitel Networks from the holdings of Wesley Clover. Such options vest in 25% increments on the first, second, third and fourth anniversaries of the grant date.

D. Exchange Controls

There are no government laws, decrees or regulations in Canada which restrict the export or import of capital or, subject to the following sentence, which affect the remittance of dividends or other payments to nonresident holders of Mitel Networks’ common shares. However, any such remittance to a resident of the United States is generally subject to non-resident tax pursuant to Article X of the 1980 Canada-United States Income Tax Convention. See “Item 10.E Taxation” for additional discussion on tax matters.

There are currently no limitations of general application imposed by Canadian federal or provincial laws on the rights of non-residents of Canada to hold or vote Mitel Networks’ common shares. There are also no such limitations imposed by the articles of incorporation with respect to Mitel Networks’ common shares. There are, however, certain requirements on the acquisition of control of Mitel Networks’ securities by non-residents of Canada. The Investment Canada Act requires notification to and, in certain cases, advance review and approval by, the Government of Canada, of the acquisition by a “non-Canadian” of “control” of a “Canadian business”, all as defined in the Investment Canada Act . Generally speaking, in order for an acquisition to be subject to advance review and approval, the asset value of the Canadian business being acquired must meet or exceed certain monetary thresholds.

E. Taxation

The following discussion is not intended to be, nor should it be construed to be, legal or tax advice to any holder or prospective holder of common shares of Mitel Networks and no opinion or representation with respect to the Canadian or United States federal, state, provincial, local or other income tax consequences to any such holder or prospective holder is made. Accordingly, holders and prospective holders of common shares of Mitel Networks should consult their own tax advisors about the federal, state, provincial, local and foreign tax consequences of purchasing, owning and disposing of common shares of Mitel Networks.

CANADIAN FEDERAL INCOME TAX CONSEQUENCES

This summary is based upon the current provisions of the Income Tax Act (Canada), the regulations thereunder, the current publicly announced administrative and assessing policies of the Canada Revenue Agency, and all specific proposals (the “Tax Proposals”) to amend the Income Tax Act and regulations announced by the Minister of Finance (Canada) prior to the date hereof. This discussion is not exhaustive of all possible Canadian federal income tax consequences and, except for the Tax Proposals, does not take into account or anticipate any changes in law, whether by legislative, governmental or judicial action, nor does it take into account provincial or foreign tax considerations which may differ significantly from those discussed herein.

 

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The summary applies to beneficial owners of common shares who, for the purposes of the Income Tax Act, are residents of the United States and are not resident in Canada, and who hold common shares of Mitel Networks as capital property.

Dividends

The Income Tax Act provides that dividends and other distributions deemed to be dividends paid or deemed to be paid by a Canadian resident corporation (such as Mitel Networks) to a non-resident of Canada shall be subject to a non-resident withholding tax equal to 25% of the gross amount of the dividend or deemed dividend.

Provisions in the Income Tax Act relating to dividend and deemed dividend payments to and capital gains realized by non-residents of Canada who are residents of the United States are subject to the 1980 Canada-United States Income Tax Convention.

Article X of the 1980 Canada-United States Income Tax Convention provides that the rate of Canadian non-resident withholding tax on dividends or deemed dividends paid to a United States corporation that beneficially owns at least 10% of the voting shares of the corporation paying the dividend shall not exceed 5% of the dividend or deemed dividend, and in any other case, the rate of non-resident withholding tax shall not exceed 15% of the dividend or deemed dividend.

Disposition of Shares

The Income Tax Act provides that a non-resident person is subject to tax in Canada on the disposition of “taxable Canadian property.” Common shares of Mitel Networks are considered to be “taxable Canadian property” as defined in the Income Tax Act. Therefore, under the Income Tax Act, a non-resident would be subject to tax in Canada on the disposition of common shares of Mitel Networks. Article XIII of the 1980 Canada-United States Income Tax Convention provides that gains realized by a United States resident on the disposition of shares of a Canadian corporation may not generally be taxed in Canada unless the value of the Canadian corporation is derived principally from real property situated in Canada.

Generally, certain filing and reporting obligations exist where a non-resident of Canada disposes of taxable Canadian property. In particular, the non-resident must make an application to the Canada Revenue Agency in advance of the disposition for the purpose of obtaining a certificate issued by the Canada Revenue Agency pursuant to section 116 of the Income Tax Act. If the non-resident fails to secure such certificate from the Canada Revenue Agency in advance of the disposition, the purchaser is required to withhold and remit to the Canada Revenue Agency 25% of the amount otherwise payable to the non-resident.

UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following discussion is based on the U.S. Internal Revenue Code of 1986, as amended (the “Code”), existing and proposed Treasury Regulations, published Internal Revenue Service rulings, published administrative positions of the Internal Revenue Service and court decisions that are currently applicable, any or all of which could be materially and adversely changed, possibly on a retroactive basis, at any time. In addition, this discussion does not consider the potential effects, both adverse and beneficial, of any recently proposed legislation that, if

 

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enacted, could be applied, possibly on a retroactive basis, at any time. In addition, this discussion does not cover any state, local or foreign tax consequences. The following is a discussion of United States federal income tax consequences, under current law, generally applicable to a U.S. Holder (as defined below) of common shares of Mitel Networks who holds such shares as capital assets. This discussion does not address all potentially relevant federal income tax matters and it does not address consequences peculiar to persons subject to special provisions of federal income tax law, such as those described below that are excluded from the definition of a U.S. Holder.

U.S. Holder

As used herein, a “U.S. Holder” includes a holder of common shares of Mitel Networks 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 of any political subdivision thereof, any United States entity which is taxable as a corporation for United States tax purposes and any other person or entity whose ownership of common shares of Mitel Networks is effectively connected with the conduct of a trade or business in the United States. A U.S. Holder does not include persons subject to special provisions of federal income tax law, such as tax-exempt organizations, qualified retirement plans, financial institutions, insurance companies, real estate investment trusts, regulated investment companies, broker-dealers, nonresident alien individuals or foreign corporations whose ownership of common shares is not effectively connected with the conduct of a trade or business in the United States and shareholders who acquired their shares through the exercise of employee stock options or otherwise as compensation.

Dividends

Except as otherwise discussed below under “Passive Foreign Investment Company Considerations,” U.S. Holders receiving dividend distributions (including constructive dividends) with respect to common shares of Mitel Networks are required to include in gross income for United States federal income tax purposes the gross amount of such distributions to the extent that Mitel Networks has current or accumulated earnings and profits, without reduction for any Canadian income tax withheld from such distributions. Such Canadian tax withheld may be credited, subject to certain limitations, against the U.S. Holder’s United States federal tax liability or, alternatively, may be deducted in computing the U.S. Holder’s federal taxable income (but in the case of individuals, only if they itemize deductions). See “Foreign Tax Credit.” To the extent that distributions exceed current or accumulated earnings and profits of Mitel Networks, they will be treated first as a return of capital up to the U.S. Holder’s adjusted basis in the common shares (which adjusted basis must therefore be reduced) and thereafter as a gain from the sale or exchange of the common shares. Preferential tax rates for long-term capital gains are applicable to a U.S. Holder that is an individual, estate or trust. Moreover, “qualified dividends” received by U.S. Holders who are individuals, during tax years beginning before January 1, 2009, from any “qualified foreign corporation” are subject to a preferential tax rate, provided such individual U.S. Holder meets a certain holding period requirement. A “qualified foreign corporation” is generally any corporation formed in a foreign jurisdiction which has a comprehensive income tax treaty with the United States or, if not, the dividend is paid with respect to stock that is readily tradable on an established United States market. However, a “qualified foreign corporation” excludes a foreign corporation that is a foreign personal holding

 

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company, a foreign investment company, or a passive foreign investment company for the year the dividend is paid or the previous year. Mitel Networks believes that it qualifies as a “qualified foreign corporation”. There are currently no preferential tax rates for a U.S. Holder that is a corporation.

In general, dividends paid on common shares of Mitel Networks will not be eligible for the same dividends received deduction provided to corporations receiving dividends from certain United States corporations. A U.S. Holder which is a corporation may, under certain circumstances, be entitled to a 70% deduction of the United States source portion of dividends received from Mitel Networks (unless Mitel Networks is a “foreign personal holding company” as defined in Section 552 of the Code, or a “passive foreign investment company” as defined below) if such U.S. Holder owns shares representing at least 10% of the voting power and value of Mitel Networks. The availability of this deduction is subject to several complex limitations that are beyond the scope of this discussion.

Foreign Tax Credit

A U.S. Holder who pays (or has withheld from distributions) Canadian or other foreign income tax with respect to the ownership of common shares of Mitel Networks may be entitled, at the election of the U.S. Holder, to either a tax credit or a deduction for such foreign tax paid or withheld. This election is made on a year-by-year basis and generally applies to all foreign income taxes paid by (or withheld from) the U.S. Holder during that year. There are significant and complex limitations that apply to the credit, among which is the general limitation that the credit cannot exceed the proportionate share of the U.S. Holder’s United States income tax liability that the U.S. Holder’s foreign source income bears to his or its worldwide taxable income. In the determination of the application of this limitation, the various items of income and deduction must be classified into foreign and domestic sources. Complex rules govern income such as “passive income”, “high withholding tax interest”, “financial services income”, “shipping income” and certain other classifications of income. In addition, U.S. Holders that are corporations and that own 10% or more of the voting stock of Mitel Networks may be entitled to an “indirect” foreign tax credit under Section 902 of the Code with respect to the payment of dividends by Mitel Networks under certain circumstances and subject to complex rules and limitations. The availability of the foreign tax credit and the application of the limitations on the foreign tax credit are fact specific and holders and prospective holders of common shares should consult their own tax advisors regarding their individual circumstances.

Disposition of Shares

Except as otherwise discussed below under “Passive Foreign Investment Company Considerations,” a gain or loss realized on a sale of common shares will generally be a capital gain or loss, and will be long-term if the shareholder has a holding period of more than one year. The amount of gain or loss recognized by a selling U.S. Holder will be measured by the difference between (i) the amount realized on the sale and (ii) his or its tax basis in the common shares. Gains and losses are netted and combined according to special rules in arriving at the overall capital gain or loss for a particular tax year. Deductions for net capital losses are subject to significant limitations. Individual U.S. Holders may carryover unused capital losses to offset capital gains realized in subsequent years. For U.S. Holders that are corporations (other than

 

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corporations subject to Subchapter S of the Code), any unused capital losses may only be carried back three and forward five years from the loss year to offset capital gains until such net capital losses are exhausted.

Foreign Personal Holding Company Considerations

Special rules apply to a U.S. Holder of a “foreign personal holding company” or “FPHC” as defined in Section 552 of the Code. Mitel Networks will not be classified as a FPHC for U.S. federal income tax purposes unless (i) five or fewer individuals who are U.S. citizens or residents own or are deemed to own more than 50% of the total voting power of all classes of stock entitled to vote or the total value of Mitel Networks stock; and (ii) at least 60% (or 50% in certain cases) of Mitel Networks’ gross income consists of “foreign personal holding company income,” which generally includes passive income such as dividends, interest, gains from the sale or exchange of stock or securities, certain rents, and royalties. Mitel Networks believes that it is not a FPHC; however, no assurance can be provided that Mitel Networks will not be classified as a FPHC in the future.

Passive Foreign Investment Company Considerations

If Mitel Networks is a “passive foreign investment company” or “PFIC” as defined in Section 1297 of the Code, U.S. Holders will be subject to U.S. federal income taxation under one of two alternative tax regimes at the election of each such U.S. Holder. Section 1297 of the Code defines a PFIC as a corporation that is not formed in the United States and either (i) 75% or more of its gross income for the taxable year is “passive income”, which generally includes interest, dividends and certain rents and royalties or (ii) the average percentage, by fair market value (or, if Mitel Networks elects, adjusted tax basis), of its assets that produce or are held for the production of “passive income” is 50% or more. The rules applicable to a FPHC take priority over the rules applicable to a PFIC, so that amounts includable in gross income under the FPHC rules will not be taxable again under the PFIC rules. Mitel Networks does not believe that it will be a PFIC for the current fiscal year or for future years. Whether Mitel Networks is a PFIC in any year and the tax consequences relating to PFIC status will depend on the composition of Mitel Networks’ income and assets, including cash. U.S. Holders should be aware, however, that if Mitel Networks becomes a PFIC, it may not be able or willing to satisfy record-keeping requirements that would enable U.S. Holders to make an election to treat Mitel Networks as a “qualified electing fund” for purposes of one of the two alternative tax regimes applicable to a PFIC. U.S. Holders or potential shareholders should consult their own tax advisor concerning the impact of these rules on their investment in Mitel Networks.

F. Dividends and Paying Agents

Not applicable.

G. Statement by Experts

Not applicable.

 

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H. Documents on Display

Mitel Networks is subject to the informational requirements of the United States Securities Exchange Act of 1934, as amended, such as to file reports and other information with the SEC. Shareholders may read and copy any of Mitel Networks’ reports and other information at, and obtain copies upon payment of prescribed fees from, the Public Reference Room maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

Mitel Networks is not required to file reports and other information with any securities commissions in Canada.

As a foreign private issuer, Mitel Networks is exempt from the rules under the United States Securities Exchange Act of 1934, as amended, prescribing the furnishing and content of proxy statements to shareholders. Mitel Networks has included in this annual report certain information disclosed in its proxy statement prepared under applicable Canadian law.

Mitel Networks will provide without charge to each person, including any beneficial owner, on the written or oral request of such person, a copy of any or all documents referred to above which have been or may be incorporated by reference in this annual report (not including exhibits to such incorporated information that are not specifically incorporated by reference into such information). Requests for such copies should be directed to Mitel Networks at the following address: Mitel Networks Corporation, 350 Legget Drive, Ottawa, Ontario, Canada, K2K 2W7 Attention: Corporate Secretary, telephone number: 613-592-2122.

I. Subsidiary Information

Not applicable.