-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OmfV6tWHIYIE6e3ThoQQe0gXreEk+rE58IEclv6zOPPGQ3HJYvsff9+PuJzzE5Xi 7rBcJvoisnGGr/MYWUumPQ== 0000929624-99-001158.txt : 19990628 0000929624-99-001158.hdr.sgml : 19990628 ACCESSION NUMBER: 0000929624-99-001158 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19990622 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990625 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STANFORD TELECOMMUNICATIONS INC CENTRAL INDEX KEY: 0000725727 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 942207636 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11473 FILM NUMBER: 99652475 BUSINESS ADDRESS: STREET 1: 1221 CROSSMAN AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94089 BUSINESS PHONE: 4087450818 MAIL ADDRESS: STREET 1: 221 CROSSMAN AVENUE CITY: SUNNYVALE STATE: CA ZIP: 94088-3733 8-K 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 22, 1999 Stanford Telecommunications, Inc. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) Delaware 000-12734 94-2207636 - --------------------------------------------------------------------------------------------------- (State or Other Jurisdiction (Commission File Number) (IRS Employer Identification No.) of Incorporation)
1221 Crossman Avenue, Sunnyvale, California 94089 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: 408-745-0818 --------------------------- N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 5. Other Events. On June 22, 1999, Stanford Telecommunications, Inc., a Delaware corporation ("STel"), entered into an Agreement and Plan of Merger (the "Merger Agreement") with Newbridge Networks Corporation, a Canadian corporation ("Newbridge"), and Saturn Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Newbridge ("Merger Sub"), which provides for the acquisition of STel by Newbridge in a tax-free, stock-for-stock exchange. Pursuant to the Merger Agreement, Merger Sub will be merged with and into STel (the "Merger"), and STel will become a wholly owned subsidiary of Newbridge. Consummation of the Merger is subject to certain conditions, including the following: . approval by STel's stockholders at a special meeting of stockholders, to be called for the purpose of voting on the Merger (the "Special Meeting"); . STel having entered into a definitive agreement or agreements to sell certain business units (the "Non-Core Assets") to one or more third party buyers for an aggregate purchase price which will result in after-tax net cash proceeds to STel of not less than $102 million; . regulatory approvals; and . other customary conditions. The Non-Core Assets to be sold to one or more third party buyers consist of STel's operations in Satcom Ground Systems, Communications Systems Integration, Applied Technology Operation, Advanced Communications Systems and Manufacturing & Quality Assurance. In the Merger, for each share of STel common stock, the STel stockholders will receive Newbridge common shares with a value equal to (a) $30, subject to adjustment if the value of the Newbridge common shares is less than $24, and (b) an amount based upon a formula which includes the proceeds from the sale of the Non-Core Assets (the "Contingent Value"). The number of Newbridge shares to be received by the STel stockholders will be determined based on the average price of the Newbridge common shares during the 10 trading day period ending on the fifth trading day preceding the Special Meeting. The Contingent Value may be as high as $5; however, it is possible that the after-tax net cash proceeds from the sale of the Non-Core Assets may result in the Contingent Value being minimal. In no event will the Contingent Value be less than $0. If the Non-Core Assets have not been sold by the closing of the Merger, then the Contingent Value will become payable following completion of the sale of the Non-Core Assets. In such event, at the time of the Merger, Newbridge and a rights agent will enter into a Contingent Value Rights Agreement and the STel stockholders will receive a certificate to evidence their right to the Contingent Value, which right will not be transferable. Pursuant to the Merger Agreement, STel has granted Newbridge an option to acquire a non-exclusive license to STel's wireless broadband technology (the "Technology Option Agreement"), which option would be exercisable at $69 million if a third party acquired control of STel. Also pursuant to the Merger Agreement, STel has granted Newbridge an option to purchase unissued shares of STel common stock equal to 19.9% of the issued and outstanding STel common stock (the "Stock Option Agreement"), at $35 per share, upon the occurrence of certain events which could give rise to a termination of the Merger Agreement. -2- Certain officers and directors of STel have entered into voting agreements with Newbridge providing that they will vote, in their capacity as stockholders, in favor of the adoption of the Merger Agreement and approval of the Merger. The foregoing summaries of certain principal terms of the Merger Agreement, Technology Option Agreement, Stock Option Agreement and voting agreements are not complete and are qualified in their entirety by reference to the agreements. Copies of the Merger Agreement, Technology Option Agreement and Stock Option Agreement and the form of the voting agreements are filed as Exhibits to this Form 8-K and are incorporated herein by this reference. The form of the Contingent Value Rights Agreement that may be entered into between Newbridge and a rights agent, under the circumstances described above, also is filed as an Exhibit to this Form 8-K. A registration statement relating to the Newbridge common shares to be issued in the Merger will be filed with the Securities and Exchange Commission, as will a proxy statement relating to the Special Meeting. Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. (c) Exhibits 2.1 Agreement and Plan of Merger, dated as of June 22, 1999, by and among STel, Newbridge and Merger Sub 10.1 Wireless Broadband Products Technology License Option Agreement, dated as of June 22, 1999, between STel and Newbridge 10.2 Stock Option Agreement, dated as of June 22, 1999, between Newbridge and STel 99.1 Form of Contingent Value Rights Agreement 99.2 Form of Voting Agreement 99.3 Joint Press Release issued by Newbridge and STel on June 22, 1999 -3- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Stanford Telecommunications, Inc. Dated: June 24, 1999 By: /s/ Jerome F. Klajbor ---------------------- Name: Jerome F. Klajbor ---------------------- Title: Vice President, Chief Financial Officer ------------------------------------------- -4- EXHIBIT INDEX Exhibit Description ------- ----------- 2.1 Agreement and Plan of Merger, dated as of June 22, 1999, by and among STel, Newbridge and Merger Sub 10.1 Wireless Broadband Products Technology License Option Agreement, dated as of June 22, 1999, between STel and Newbridge 10.2 Stock Option Agreement, dated as of June 22, 1999, between Newbridge and STel 99.1 Form of Contingent Value Rights Agreement 99.2 Form of Voting Agreement 99.3 Joint Press Release issued by Newbridge and STel on June 22, 1999 EX-2.1 2 AGREEMENT AND PLAN OF MERGER EXHIBIT 2.1 AGREEMENT AND PLAN OF MERGER BY AND AMONG NEWBRIDGE NETWORKS CORPORATION SATURN ACQUISITION CORP. AND STANFORD TELECOMMUNICATIONS, INC. Dated as of June 22, 1999 TABLE OF CONTENTS
Page ---- ARTICLE I -- THE MERGER........................................... 2 1.1 The Merger.................................................. 2 1.2 Closing; Effective Time..................................... 2 1.3 Effects of the Merger....................................... 2 1.4 Certificate of Incorporation; Bylaws........................ 2 1.5 Directors and Officers of the Surviving Corporation......... 3 ARTICLE II -- CONVERSION OF SHARES................................ 3 2.1 Conversion of Stock......................................... 3 2.2 Stel Options; Stock Purchase Plan........................... 5 2.3 Exchange of Stel Stock Certificates......................... 7 2.4 Lost, Stolen or Destroyed Certificates...................... 8 2.5 Tax Consequences............................................ 9 ARTICLE III -- REPRESENTATIONS AND WARRANTIES OF STEL............. 9 3.1 Organization, Etc........................................... 9 3.2 Authority Relative to This Agreement........................ 10 3.3 No Violations, Etc.......................................... 10 3.4 Board Recommendation........................................ 11 3.5 Fairness Opinion............................................ 11 3.6 Capitalization.............................................. 12 3.7 SEC Filings................................................. 12 3.8 Financial Statements........................................ 13 3.9 Absence of Undisclosed Liabilities.......................... 13 3.10 Absence of Changes or Events................................ 13 3.11 Capital Stock of Subsidiaries............................... 15 3.12 Litigation.................................................. 15 3.13 Insurance................................................... 16 3.14 Contracts and Commitments................................... 16 3.15 Labor Matters; Employment and Labor Contracts............... 18 3.16 Compliance with Laws........................................ 18 3.17 Government Contracts........................................ 19 3.18 Intellectual Property Rights................................ 22 3.19 Accounts Receivable; Inventories............................ 24 3.20 Order Backlog............................................... 24 3.21 Product and Service Warranties.............................. 25 3.22 Taxes....................................................... 25 3.23 Employee Benefit Plans; ERISA............................... 25 3.24 Environmental Matters....................................... 27 3.25 Officer's Certificate as to Tax Matters..................... 30 3.26 Affiliates.................................................. 34 3.27 Finders or Brokers.......................................... 34 3.28 Registration Statement; Proxy Statement/Prospectus.......... 34 3.29 Title to Property........................................... 34
1 TABLE OF CONTENTS
Page ---- 3.30 Year 2000 Compliance..................................................... 35 ARTICLE IV -- REPRESENTATIONS AND WARRANTIES OF NEWBRIDGE AND MERGER SUB....... 35 4.1 Organization, Etc........................................................ 36 4.2 Authority Relative to This Agreement..................................... 36 4.3 No Violations, Etc....................................................... 37 4.4 Capitalization........................................................... 37 4.5 Registration Statement; Proxy Statement/Prospectus....................... 37 4.6 SEC Filings.............................................................. 38 4.7 Compliance with Laws..................................................... 38 4.8 Financial Statements..................................................... 38 4.9 Absence of Undisclosed Liabilities....................................... 39 4.10 Absence of Changes or Events............................................. 39 4.11 Litigation............................................................... 39 ARTICLE V -- COVENANTS......................................................... 39 5.1 Conduct of Business During Interim Period................................ 39 5.2 No Solicitation.......................................................... 41 5.3 Access to Information.................................................... 43 5.4 Special Meeting; Registration Statement; Board Recommendation........................................................... 44 5.5 Commercially Reasonable Efforts.......................................... 46 5.6 Public Announcements..................................................... 46 5.7 Notification of Certain Matters.......................................... 47 5.8 Indemnification.......................................................... 47 5.9 Affiliate Agreements..................................................... 48 5.10 NYSE Listing............................................................. 49 5.11 Resignation of Directors and Officers.................................... 49 5.12 Form S-8................................................................. 49 5.13 SEC Filings.............................................................. 49 5.14 Employee Matters......................................................... 50 5.15 Termination of Stel Purchase Plan........................................ 50 5.16 Stock Option Agreement................................................... 51 5.17 Technology Option Agreement.............................................. 51 5.18 Non-core Asset Sale...................................................... 51 5.19 Assumption of Options.................................................... 51 5.20 Transitional Contract-Manufacturing Arrangement.......................... 51 5.21 Stel IP Rights........................................................... 51 ARTICLE VI --CONDITIONS TO THE OBLIGATIONS OF EACH PARTY....................... 52 6.1 Registration Statement................................................... 52 6.2 Stockholder Approval..................................................... 52 6.3 Listing of Additional Shares............................................. 52 6.4 Government Clearances.................................................... 52 6.5 Statute or Decree........................................................ 52
2 TABLE OF CONTENTS
Page ---- ARTICLE VII -- CONDITIONS TO THE OBLIGATIONS OF STEL AND NEWBRIDGE................. 53 7.1 Additional Conditions To The Obligations Of Stel............................. 53 7.2 Additional Conditions To The Obligations Of Newbridge And Merger Sub......... 53 ARTICLE VIII -- TERMINATION........................................................ 55 8.1 Termination.................................................................. 55 8.2 Notice of Termination; Effect of Termination................................. 57 8.3 Fees and Expenses............................................................ 58 ARTICLE IX -- MISCELLANEOUS........................................................ 59 9.1 Amendment and Modification................................................... 59 9.2 Waiver of Compliance; Consents............................................... 59 9.3 Survival; Investigations..................................................... 59 9.4 Notices...................................................................... 59 9.5 Assignment; Third Party Beneficiaries........................................ 60 9.6 Governing Law................................................................ 61 9.7 Counterparts................................................................. 61 9.8 Severability................................................................. 61 9.9 Interpretation............................................................... 61 9.10 Entire Agreement............................................................. 61 9.11 Definition of "law".......................................................... 61 9.12 Rules of Construction........................................................ 61
3 Exhibits - -------- Exhibit A Stock Option Agreement Exhibit B Technology Option Agreement Exhibit C Form of Voting Agreement Exhibit D Certificate of Merger Exhibit E Form of CVR Agreement Exhibit F Form of Stel Affiliates Agreement Schedule 5.8(b) Other Indemnified Parties Schedule 5.14 Employee Severance Schedule 7.1(h) Employment Agreements "Accounts Receivable" Section 3.19(a) "Acquisition Proposal".............................. Section 5.2(c) "Acquisition Transaction"........................... Section 5.2(c) "Action"............................................ Section 3.12(a) "Affiliates"........................................ Section 3.26 "Antitrust Division"................................ Section 5.5 "CERCLA"............................................ Section 3.24(a)(iii) "CFIUS"............................................. Section 5.5 "Certificate of Merger"............................. Section 1.2 "Closing"........................................... Section 1.2 "Closing Date"...................................... Section 1.2 "COBRA"............................................. Section 3.15(b) "Code".............................................. Recitals "Confidentiality Agreement"......................... Section 5.3 "Contingent Value Ratio"............................ Section 2.1(a)(ii) "Contractor"........................................ Section 3.24(a)(i) "CVR Agreement"..................................... Section 2(a)(iii) "CVR Certificates................................... Section 2(b) "Delaware Law"...................................... Section 1.1 "Effective Time".................................... Section 1.2 "End Date".......................................... Section 8.1(b) "Employee Benefit Plans"............................ Section 3.23(a) "Environment"....................................... Section 3.24(a)(ii) "Environmental Law"................................. Section 3.24(a)(iii) "Environmental Permit".............................. Section 3.24(a)(iv) "ERISA"............................................. Section 3.23(a) "ERISA Affiliate"................................... Section 3.23(a) "Exchange Act"...................................... Section 3.3 "Exchange Agent".................................... Section 2.3(a) "Exchange Fund"..................................... Section 2.3(c) "Exchange Ratio".................................... Section 2.1(a)(i) "Exon-Florio Amendment"............................. Section 3.3 "Foreign Plan"...................................... Section 3.23(n) "FTC"............................................... Section 5.5 "GAAP".............................................. Section 3.8 "Government Bid".................................... Section 3.17(a)(ii) "Government Contract"............................... Section 3.17(a)(iii) "Government Entity"................................. Section 3.3 "Government Body"................................... Section 3.17(a)(i) "Group Health Plan"................................. Section 3.23(k) "Hazardous Material"................................ Section 3.24(a)(v) "Holder"............................................ Section 2.3(c) "HSR Act"........................................... Section 3.3
"Indemnified Parties"............................... Section 5.8(b) "IRS"............................................... Section 3.22(b)(iii) "law"............................................... Section 9.11 "Legal Requirement"................................. Section 3.17(a)(iv) "Maturity Date"..................................... Section 2.1(a)(ii) "Merger"............................................ Recitals "Merger Sub"........................................ Preamble "Merger Sub Common Stock"........................... Section 2.1(d) "Newbridge"......................................... Preamble "Newbridge Adjustment Option"....................... Section 2.1(a)(i) "Newbridge Balance Sheet"........................... Section 4.8 "Newbridge Certificates"............................ Section 2.1(b) "Newbridge Closing Value"........................... Section 2.1(a)(i) "Newbridge Common Stock"............................ Recitals "Newbridge Disclosure Statement".................... Article IV "Newbridge Exchange Options"........................ Section 2.2(a)(iii) "Newbridge Financial Statements".................... Section 4.8 "Newbridge Fractional Share Value".................. Section 2.1(f) "Newbridge Material Adverse Effect"................. Section 4.1(a) "Newbridge Material Subsidiaries.................... Section 4.1(a) "Newbridge SEC Reports"............................. Section 4.6 "Newbridge Stock Certificate"....................... Section 2.1(b) "Non-core Assets"................................... Section 5.18 "Non-core Asset Sale"............................... Section 5.18 "Non-core Asset Sale Proceeds"...................... Section 2.1(a)(ii) "Notice of Superior Proposal"....................... Section 5.4(c) "Pension Benefit Plans"............................. Section 3.23(a) "Person"............................................ Section 2.1(g) "Potential Acquiror"................................ Section 5.2(a) "Proxy Statement/Prospectus"........................ Section 3.28 "Real Property"..................................... Section 3.24(b)(iv) "Reference Date".................................... Section 3.8 "Registration Statement"............................ Section 3.3 "Returns"........................................... Section 3.22(b)(i) "Stel".............................................. Preamble "Stel Affiliates"................................... Section 5.9 "Stel Affiliates Agreement"......................... Section 5.9 "Stel Balance Sheet"................................ Section 3.8 "Stel Certificate".................................. Section 2.3(c) "Stel Common Stock"................................. Recitals "Stel Contract"..................................... Section 3.14(b) "Stel Disclosure Statement"......................... Article III "Stel Financial Statements"......................... Section 3.8
"Stel IP Rights".................................... Section 3.18(a) "Stel Material Adverse Effect"...................... Section 3.1(a) "Stel Options"...................................... Section 2.2(a) "Stel Purchase Plan"................................ Section 2.2(b) "Stel Rights"....................................... Section 3.4 "Stel Rights Plan".................................. Section 3.4 "Stel SEC Reports".................................. Section 3.7(a) "Stel Special Meeting".............................. Section 5.4(a) "Stel Stock Plans".................................. Section 2.2(a) "Stel Triggering Event"............................. Section 8.1(i) "SEC"............................................... Section 3.7(a) "Securities Act".................................... Section 3.7(a) "Stock Option Agreement"............................ Recitals "Subsidiary"........................................ Section 2.1(g) "Superior Proposal"................................. Section 5.2(d) "Surviving Corporation"............................. Section 1.1 "Tax" or "Taxes".................................... Section 3.22(a) "Technology Option Agreement"....................... Recitals "Termination Fee"................................... Section 8.3(b)(i) "Third Party"....................................... Section 5.2(c) "Voting Agreements"................................. Recitals "Welfare Benefit Plans"............................. Section 3.23(a) "Year 2000 Compliant"............................... Section 3.30
AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered into as of June 22, 1999 by and among Newbridge Networks Corporation, a Canadian corporation ("Newbridge"), Saturn Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Newbridge ("Merger Sub"), and Stanford Telecommunications, Inc., a Delaware corporation ("Stel"), with respect to the following facts: A. The respective boards of directors of Newbridge, Merger Sub and Stel have approved and declared advisable the merger of Merger Sub with and into Stel (the "Merger"), upon the terms and subject to the conditions set forth herein, and have determined that the Merger and the other transactions are fair to, and in the best interests of, their respective stockholders. B. Pursuant to the Merger, among other things, the outstanding shares of Stel Common Stock, $.01 par value ("Stel Common Stock"), will be converted into Common Shares of Newbridge ("Newbridge Common Stock"), at the rate set forth herein. C. For United States federal income tax purposes, it is intended that the Merger will qualify as a reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). D. Simultaneously with the execution and delivery of this Agreement and as a condition and inducement to Newbridge's and the Merger Sub's willingness to enter into this Agreement, Newbridge is entering into a Stock Option Agreement dated the date hereof in the form of Exhibit A (the "Stock --------- Option Agreement") with Stel, pursuant to which Stel is granting to Newbridge the right and option to purchase shares of Stel Common Stock from Stel equal to up to 19.9% of issued and outstanding Stel Common Stock. E. Simultaneously with the execution and delivery of this Agreement and as a condition and inducement to Newbridge's and the Merger Sub's willingness to enter into this Agreement, Newbridge is entering into the Wireless Broadband Products Technology License Option Agreement in the form of Exhibit B (the "Technology Option Agreement") with Stel. - --------- F. Simultaneously with the execution and delivery of this Agreement and as a condition and inducement to Newbridge's and the Merger Sub's willingness to enter into this Agreement, Newbridge is entering into Voting Agreements in the form of Exhibit C with certain directors and officers of Stel --------- in their respective capacities as stockholders of Stel (the "Voting Agreements"). The parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. At the Effective Time (as defined in Section 1.2) and subject to and upon the terms and conditions of this Agreement and the applicable provisions of Delaware General Corporation Law (the "Delaware Law"), (i) Merger Sub shall be merged with and into Stel, (ii) the separate corporate existence of Merger Sub shall cease, and (iii) Stel shall be the surviving corporation. Stel as the surviving corporation after the Merger is hereinafter sometimes referred to as the "Surviving Corporation." 1.2 Closing; Effective Time. The closing of the Merger and the other transactions contemplated hereby (the "Closing") will take place at 10:00 a.m., local time, on a date to be specified by the parties (the "Closing Date"), which shall be no later than the first business day after satisfaction or waiver of the conditions set forth in Articles VI and VII, unless another time or date is agreed to by the parties hereto. The Closing shall take place at the offices of Heller Ehrman White & McAuliffe, 525 University Avenue, Palo Alto, California, or at such other location as the parties hereto shall mutually agree. At the Closing, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger substantially in the form of Exhibit D (the "Certificate --------- of Merger") with the Secretary of State of the State of Delaware, in accordance with the relevant provisions of the Delaware Law (the time of such filing, or such later time as may be agreed in writing by the parties and specified in the Certificate of Merger, being the "Effective Time"). 1.3 Effects of the Merger. The effects of the Merger shall be as provided in this Agreement, the Certificate of Merger and the applicable provisions of the Delaware Law. Without limiting the foregoing, at the Effective Time all the property, rights, privileges, powers and franchises of Stel and Merger Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of Stel and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. 1.4 Certificate of Incorporation; Bylaws. (a) Subject to Section 5.8, from and after the Effective Time, the certificate of incorporation of Stel, as in effect immediately prior to the Effective Time, shall be the certificate of incorporation of the Surviving Corporation, until changed or amended as provided by law. (b) Subject to Section 5.8, from and after the Effective Time, the bylaws of Merger Sub, as in effect immediately prior to the Effective Time, shall be the bylaws of the Surviving Corporation. 2 1.5 Directors and Officers of the Surviving Corporation. The directors and officers of Merger Sub immediately prior to the Effective Time shall serve as the initial directors and officers of the Surviving Corporation, until their respective successors are duly elected or appointed and qualified. ARTICLE II CONVERSION OF SHARES 2.1 Conversion of Stock. Pursuant to the Merger, and without any action on the part of the holders of any outstanding shares of capital stock or other securities of Stel or Merger Sub: (a) As of the Effective Time: (i) each share of Stel Common Stock issued and outstanding immediately prior to the Effective Time (other than shares of Stel Common Stock to be canceled pursuant to Section 2.1(c)) shall be automatically converted into the right to receive that number of shares (the "Exchange Ratio") of fully paid and nonassessable Newbridge Common Stock that equals U.S. $30.00 divided by the average closing price per share of Newbridge Common Stock as reported on the New York Stock Exchange ("NYSE") Composite Tape on the ten trading days ending on the fifth trading day immediately preceding the Stel Special Meeting (the "Newbridge Closing Value"). Notwithstanding the foregoing, if the Newbridge Closing Value is less than U.S. $24.00, the Exchange Ratio shall be 1.25; provided, however, that, in such event, Newbridge shall have the option (the "Newbridge Adjustment Option"), exercisable by notice to Stel prior to the close of business on the third trading day prior to the Stel Special Meeting, to adjust the Exchange Ratio, to an amount that exceeds 1.25; (ii) if the "Non-core Asset Sale" (as defined in Section 5.18) has closed on or prior to the Effective Time, the holder of each share of Stel Common Stock shall have the right to receive for each share of Stel Common Stock, an additional fraction of a share (the "Contingent Value Ratio") of fully paid and nonassessable Newbridge Common Stock as is determined using the following formula: [B+C-D+E] --------- divided by v SS where, "B" equals the lesser of (A) the gross proceeds from the Non-core Asset Sale before deduction of any state and federal income taxes payable on such proceeds (the "Non-core Asset Sale Proceeds") and (B) $173,000,000, minus $102,000,000; 3 "C" equals 50% of the greater of (A) the Non-core Asset Sale Proceeds minus $173,000,000 and (B) 0; "D" equals 50% of any state and federal income taxes payable on the Non- core Asset Sale Proceeds, based on the applicable rates as determined in good faith by Newbridge; "E" equals $625,000; "SS" equals the number of shares of Stel Common Stock and Stel Options issued and outstanding immediately prior to the Effective Time (other than shares of Stel Common Stock to be canceled pursuant to Section 2.1(c)); and "V" equals the greater of (a) the Newbridge Closing Value and (b) $24.00, unless the Newbridge Adjustment Option is exercised, in which case "V" equals $30.00 divided by the Exchange Ratio; in the event that any consideration received from the Non-core Asset Sale is not cash or is affected by some contingency, the parties shall appoint an independent expert in business valuation to calculate the net present value of such consideration, and such amount shall be included in the calculation of the Non-core Asset Sale Proceeds;. (iii) if the Non-core Asset Sale has not closed on or prior to the Effective Time, the holder of each share of Stel Common Stock, shall have the right to receive, for each share of Stel Common Stock, one contingent value right ("CVR"), with substantially the terms set forth in the form of Contingent Value Rights Agreement attached hereto as Exhibit E (the "CVR Agreement"). --------- (b) As of the Effective Time, each holder of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Stel Common Stock shall cease to have any rights with respect thereto, except the right to receive (i) a certificate (or direct registration) representing the number of whole shares of Newbridge Common Stock into which such shares have been converted (the "Newbridge Stock Certificates"), (ii) cash in lieu of fractional shares of Newbridge Common Stock in accordance with Section 2.1(f), without interest, and (iii) in the event the Non-core Asset Sale has not closed prior to the Effective Time, a certificate (or direct registration) representing the CVRs (the "CVR Certificates" and, together with the Newbridge Stock Certificates, the "Newbridge Certificates"). (c) As of the Effective Time, each share of Stel Common Stock held of record immediately prior to the Effective Time by Stel, Merger Sub, Newbridge or any wholly-owned subsidiary of Stel or of Newbridge shall be canceled and extinguished without any conversion thereof. 4 (d) As of the Effective Time, each share of Common Stock, $0.01 par value, of Merger Sub (the "Merger Sub Common Stock") issued and outstanding immediately prior to the Effective Time shall be canceled, extinguished and automatically converted into one validly issued, fully paid and nonassessable share of Common Stock, $0.01 par value, of the Surviving Corporation. Each certificate evidencing ownership of a number of shares of Merger Sub Common Stock shall be deemed to evidence ownership of the same number of shares of Common Stock, $0.01 par value, of the Surviving Corporation. (e) The Exchange Ratio shall be adjusted, or Newbridge shall make appropriate provision, to reflect appropriately the effect of any stock split, reverse stock split, stock dividend (including any dividend or distribution of securities convertible into Newbridge Common Stock or Stel Common Stock), reorganization, recapitalization or other like change with respect to Newbridge Common Stock or (subject to Section 5.1) Stel Common Stock occurring or having a record date or an effective date on or after the date hereof and prior to the Effective Time. (f) No fraction of a share of Newbridge Common Stock will be issued by virtue of the Merger. Instead, each holder of shares of Stel Common Stock who would otherwise be entitled to a fraction of a share of Newbridge Common Stock (after aggregating all fractional shares of Newbridge Common Stock to be received by such holder) shall receive from Newbridge an amount of cash (rounded down to the nearest whole cent) equal to the product of (i) such fraction, multiplied by (ii) the Newbridge Fractional Share Value. For the purposes of this Agreement, "Newbridge Fractional Share Value" shall mean the closing price per share of Newbridge Common Stock as reported on the NYSE Composite Tape on the trading day immediately preceding the Effective Time. (g) For purposes of this Agreement, (i) the term "Subsidiary", when used with respect to any Person, means any corporation or other organization, whether incorporated or unincorporated, of which (A) at least a majority of the securities or other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person (through ownership of securities, by contract or otherwise) or (B) such Person or any Subsidiary of such Person is a general partner of any general partnership or a manager of any limited liability company. For the purposes of this Agreement, the term "Person" means any individual, group, organization, corporation, partnership, joint venture, limited liability company, trust or entity of any kind. 2.2 Stel Options; Stock Purchase Plan. (a) As of the Effective Time, Newbridge shall, to the full extent permitted by applicable law, assume all of the stock options of Stel outstanding 5 immediately prior to the Effective Time under the Stel Stock Plans (as defined below) (the "Stel Options"). For purposes of this Agreement, "Stel Stock Plans" means Stel's 1982 Stock Option Plan, and 1991 Stock Option Plan. Each Stel Option, whether or not exercisable at the Effective Time, shall, to the full extent permitted by applicable law, be assumed by Newbridge in such a manner that it shall be exercisable upon the same terms and conditions as under the Stel Stock Plan pursuant to which it was granted and the applicable option agreement issued thereunder; provided that: (i) if the Non-core Asset Sale has closed on or prior to the Effective Time, (A) each such option shall thereafter be exercisable for the number of shares of Newbridge Common Stock (rounded down to the nearest whole share) equal to the product obtained from multiplying the number of shares of Stel Common Stock covered by such option immediately prior to the Effective Time by the sum of the Exchange Ratio and the Contingent Value Ratio and (B) the option price per share of Newbridge Common Stock thereafter shall be equal to the quotient (rounded up to the nearest whole cent) obtained from dividing the option price per share of Stel Common Stock subject to such option in effect immediately prior to the Effective Time by the sum of the Exchange Ratio and the Contingent Value Ratio; (ii) if the Non-core Asset Sale does not close on or prior to the Effective Time and a Stel Option is exercised on or prior to the Maturity Date of the CVRs, (A) each option shall be exercisable for (1) the number of shares of Newbridge Common Stock (rounded down to the nearest whole share) equal to the product obtained from multiplying the number of shares of Stel Common Stock covered by such option immediately prior to the Effective Time by the Exchange Ratio and (2) the number of CVRs equal to the number of shares of Stel Common Stock covered by such option immediately prior to the Effective Time and (B) the option price thereafter shall be equal to the quotient (rounded up the nearest whole cent) obtained from dividing the option price per share of Stel Common Stock subject to such option in effect immediately prior to the Effective Time by the Exchange Ratio; and (iii) if the Non-core Asset Sale does not close on or prior to the Effective Time, and a Stel Option is exercised after the Maturity Date of the CVRs, such option shall thereafter be exercisable as described in Section 2.2(a)(i). Stel Options assumed in the manner described in this Section are referred to in this Agreement as the "Newbridge Exchange Options". Prior to the Effective Time, Stel shall make all adjustments provided for in the Stel Stock plan with respect to the Stel Options to facilitate the implementation of the provisions of this Section 2.2(a). (b) All the purchase rights under Stel's 1992 Employee Stock Purchase Plan ("Stel Purchase Plan") shall terminate following the purchase of shares in respect of the Participation Period (as defined in the Stel Purchase Plan) beginning on or about June 30, 1999 and no Participation Period shall be commended thereafter. All funds 6 contributed to the Stel Purchase Plan that have not been used to purchase shares of Stel Common Stock by the termination date of the Stel Purchase Plan shall be returned after such termination date in accordance with Section 8 of the Stel Purchase Plan. 2.3 Exchange of Stel Stock Certificates. (a) At or prior to the Effective Time, Newbridge shall enter into an agreement with a bank or trust company selected by Newbridge to act as the exchange agent for the Merger (the "Exchange Agent"). (b) At or prior to the Effective Time, Newbridge shall supply or cause to be supplied to or for the account of the Exchange Agent in trust for the benefit of the holders of Stel Common Stock, for exchange pursuant to this Section 2.3 (i) the Newbridge Stock Certificates issuable pursuant to Section 2.1 to be exchanged for outstanding shares of Stel Common Stock, (ii) cash in an aggregate amount sufficient to make the payments in lieu of fractional shares provided for in Section 2.1(f), and (iii) in the event the Non-core Asset Sale has not closed prior to the Effective Time, the CVR Certificates. (c) Promptly after the Effective Time, Newbridge shall mail or shall cause to be mailed to each Holder a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Stel Certificates shall pass, only upon proper delivery of the Stel Certificates to the Exchange Agent) and instructions for surrender of the Stel Certificates. Upon surrender to the Exchange Agent of a Stel Certificate, together with such letter of transmittal duly executed, the Holder shall be entitled to receive in exchange therefor (i) Newbridge Stock Certificates evidencing that number of shares of Newbridge Common Stock issuable to such Holder in accordance with this Article II; (ii) any dividends or other distributions that such Holder has the right to receive pursuant to Section 2.3(d); (iii) cash in respect of fractional shares as provided in Section 2.1(f); and (iv) in the event the Non-core Asset Sale has not closed prior to the Effective Time, CVR Certificates evidencing that number of CVRs issuable to such Holder in accordance with this Article II, and such Stel Certificate so surrendered shall forthwith be canceled. Such Newbridge Certificates, dividends and other distributions and cash are referred to collectively as the "Exchange Fund." No Newbridge Certificates will be issued to a Person who is not the registered owner of a surrendered Stel Certificate, unless (i) the Stel Certificate so surrendered has been properly endorsed or otherwise is in proper form for transfer, and (ii) such Person shall either (A) pay any transfer or other tax required by reason of such issuance or (B) establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 2.3, from and after the Effective Time, each Stel Certificate shall be deemed to represent, for all purposes other than payment of dividends, the right to receive a certificate representing the number of full shares of Newbridge Common Stock as determined in accordance with this Article II, 7 cash in lieu of fractional shares as provided in Section 2.1(f) and a certificate representing the number of CVRs as determined in accordance with this Article II. For purposes of this Agreement, "Stel Certificate" means a certificate which immediately prior to the Effective Time represented shares of Stel Common Stock, and "Holder" means a person who holds one or more Stel Certificates as of the Effective Time. (d) No dividend or other distribution declared with respect to Newbridge Common Stock with a record date after the Effective Time will be paid to Holders of unsurrendered Stel Certificates until such Holders surrender their Stel Certificates. Upon the surrender of such Stel Certificates, there shall be paid to such Holders, promptly after such surrender, the amount of dividends or other distributions, excluding interest, declared with a record date after the Effective Time and not paid because of the failure to surrender Stel Certificates for exchange. (e) Any portion of the Exchange Fund which remains undistributed to the former stockholders of Stel for twelve (12) months after the Effective Time shall be delivered to Newbridge, upon demand of Newbridge, and any such former stockholders who have not theretofore complied with this Section 2.3 shall thereafter look only to Newbridge for payment of their claims for Newbridge Common Stock, any cash in lieu of fractional shares of Newbridge Common Stock, any dividends or distributions with respect to Newbridge Common Stock and any CVRs. (f) Notwithstanding anything to the contrary in this Agreement, none of the Exchange Agent, Newbridge, the Surviving Corporation nor any party hereto shall be liable to any holder of shares of Stel Common Stock for shares of Newbridge Common Stock or cash in lieu of fractional shares delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. 2.4 Lost, Stolen or Destroyed Certificates. In the event that any Stel Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall issue and pay in respect of such lost, stolen or destroyed Stel Certificates, upon the making of an affidavit of that fact by the holder thereof, Newbridge Stock Certificates evidencing the shares of Newbridge Common Stock and CVR Certificates evidencing the CVRs, each as may be required pursuant to Section 2.1, cash in respect of fractional shares, if any, as may be required by Section 2.1(f) and any dividends or distributions payable pursuant to Section 2.3(d); provided, however, that Newbridge may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed Stel Certificate to deliver a bond in such sum as it may reasonably direct as indemnity against any claim that may be made against Newbridge or the Exchange Agent with respect to the Stel Certificates alleged to have been lost, stolen or destroyed. 8 2.5 Tax Consequences. For United States federal income tax purposes, it is intended by the parties hereto that the Merger qualify as a reorganization within the meaning of Section 368(a) of the Code. ARTICLE III REPRESENTATIONS AND WARRANTIES OF STEL Stel makes to Newbridge and Merger Sub the representations and warranties contained in this Article III, in each case subject to the exceptions set forth in the disclosure statement, dated as of the date hereof (the "Stel Disclosure Statement"). The Stel Disclosure Statement shall be arranged in schedules corresponding to the numbered and lettered Sections of this Article III, and the disclosure in any Schedule of the Stel Disclosure Statement shall qualify only the corresponding Section of this Article III. 3.1 Organization, Etc. (a) Each of Stel and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Stel and its Subsidiaries is duly qualified as a foreign Person to do business, and is in good standing, in each jurisdiction where the character of its owned or leased properties or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have a Stel Material Adverse Effect. For the purposes of this Agreement, "Stel Material Adverse Effect" means any change, event or effect that is materially adverse to either (i) the business, operations or assets of Stel's wireless broadband products division or its telecom products components division, or (ii) the general affairs, business, operations, assets, condition (financial or otherwise) or results of operations of Stel and its Subsidiaries taken as a whole. (b) Stel is not in violation of any provision of its certificate of incorporation or bylaws. None of Stel's Subsidiaries is in violation of its certificate of incorporation or other charter document or in material violation of its bylaws. Schedule 3.1(b) of the Stel Disclosure Statement sets forth (i) the full name of each Subsidiary of Stel, its capitalization and the ownership interest of Stel and each other Person (if any) therein, (ii) the jurisdiction in which each such Subsidiary is organized, (iii) each jurisdiction in which Stel and each Subsidiary of Stel is qualified to do business as a foreign Person, (iv) a brief summary of the business and material operations of each Subsidiary of Stel, and (v) the names of the current directors and officers of Stel and of each Subsidiary of Stel. Stel has made available to Newbridge accurate and complete copies of the certificate of incorporation, bylaws and any other charter documents, as currently in effect, of Stel and each of its Subsidiaries. 9 3.2 Authority Relative to This Agreement. Stel has full corporate power and authority to (i) execute and deliver this Agreement, (ii) execute and deliver the Stock Option Agreement, (iii) execute and deliver the Technology Option Agreement, (iv) consummate the transactions contemplated by the Stock Option Agreement and Technology Option Agreement, and (v) assuming the approval of the Merger by a majority of the outstanding shares of Stel Common Stock at the Stel Special Meeting or any adjournment or postponement thereof in accordance with Delaware Law, consummate the Merger and the other transactions contemplated hereby. The execution and delivery of this Agreement, the Stock Option Agreement and the Technology Option Agreement, and the consummation of the Merger and the other transactions contemplated hereby and thereby, have been duly and validly authorized by the unanimous vote of the board of directors of Stel, and no other corporate proceedings on the part of Stel are necessary to authorize this Agreement, the Stock Option Agreement and the Technology Option Agreement or to consummate the Merger and the other transactions contemplated hereby and thereby (other than, with respect to the Merger, the approval of the Merger by a majority of the outstanding shares of Stel Common Stock at the Stel Special Meeting or any adjournment or postponement thereof in accordance with the Delaware Law). Each of this Agreement, the Stock Option Agreement and the Technology Option Agreement has been duly and validly executed and delivered by Stel and, assuming due authorization, execution and delivery by Newbridge and, in the case of this Agreement, by Merger Sub, constitutes a valid and binding agreement of Stel, enforceable against Stel in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 3.3 No Violations, Etc. No filing with or notification to, and no permit, authorization, consent or approval of, any court, administrative agency, commission, or other governmental or regulatory body, authority or instrumentality ("Government Entity") is necessary on the part of Stel for the consummation by Stel of the Merger and the other transactions contemplated hereby and by the Stock Option Agreement and the Technology Option Agreement, or for the exercise by Newbridge and the Surviving Corporation of full rights to own and operate the business of Stel and its Subsidiaries as presently being conducted, except for (i) the filing of the Certificate of Merger as required by Delaware Law, (ii) compliance with the applicable requirements of the Securities Exchange Act of 1934, as amended (together with the Rules and Regulations promulgated thereunder, the "Exchange Act") including the filing of a proxy statement on Schedule 14A which is expected to be incorporated into a Registration Statement on Form S-4 to be filed by Newbridge registering the Newbridge Common Stock to be issued hereunder (the "Registration Statement"), state securities or "blue sky" laws and state takeover laws, (iii) any filing required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and (iv) the voluntary notice to be filed under Section 721 of the Defense Production Act of 1950, as amended by Section 5021 of the Omnibus Trade and Competitiveness Act of 1988 (the "Exon-Florio Amendment"). Neither the execution 10 and delivery of this Agreement, the Stock Option Agreement, and the Technology Option Agreement nor the consummation of the Merger and the other transactions contemplated hereby and thereby nor compliance by Stel with all of the provisions hereof and thereof, nor the exercise by Newbridge and the Surviving Corporation of full rights to own and operate the business of Stel and its Subsidiaries as presently being conducted will, subject to obtaining the approval of this Agreement by the holders of a majority of the outstanding shares of Stel Common Stock at the Stel Special Meeting or any adjournment thereof in accordance with Delaware Law, (i) conflict with or result in any breach of any provision of the certificate of incorporation, bylaws or other charter document of Stel or any of its Subsidiaries, (ii) violate any material order, writ, injunction, decree, statute, rule or regulation applicable to Stel, or any of its Subsidiaries, or by which any of their properties or assets may be bound, or (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under, or result in any material change in, or give rise to any right of termination, cancellation, acceleration, redemption or repurchase under, any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, deed of trust, license, lease, contract, agreement or other instrument or obligation to which Stel or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound. Schedule 3.3 of the Stel Disclosure Statement lists all consents, waivers and approvals required to be obtained in connection with the consummation of the transactions contemplated hereby or by the Stock Option Agreement or Technology Option Agreement under any of Stel's or any of its Subsidiaries' notes, bonds, mortgages, indentures, deeds of trust, licenses or leases, contracts, agreements or other instruments or obligations the failure to obtain which would have a Stel Material Adverse Effect. 3.4 Board Recommendation. The board of directors of Stel has, at a meeting of such board duly held on June 21, 1999, unanimously (i) approved and adopted this Agreement, the Stock Option Agreement and the Technology Option Agreement (ii) determined that this Agreement is fair to and in the best interests of the stockholders of Stel, (iii) resolved to recommend approval of this Agreement to the stockholders of Stel, (iv) resolved that Stel take all action necessary to exempt the execution and delivery of this Agreement, the Stock Option Agreement and the Technology Option Agreement and the consummation of the transactions contemplated hereby and thereby from the provisions of all applicable state antitakeover statutes and regulations, including, but not limited to, Section 203 of the Delaware Law, and (v) amended the Stel Rights Agreement (the "Stel Rights Plan") dated as of May 9, 1995 between Stel and the First National Bank of Boston to render the rights issued thereunder (the "Stel Rights") inapplicable to the Merger, this Agreement, the Stock Option Agreement and the Technology Option Agreement and the other transactions contemplated hereby, and to terminate the Stel Rights Plan as of the Effective Time. 3.5 Fairness Opinion. Stel has received the opinion of Ferris, Baker, Watts dated the date of the approval of this Agreement by the board of directors of Stel to the 11 effect that the Exchange Ratio is fair to Stel's stockholders from a financial point of view, and has provided a copy of such opinion to Newbridge. 3.6 Capitalization. (a) The authorized capital stock of Stel consists of 25,000,000 shares of Stel Common Stock. As of June 16, 1999, there were (i) 13,152,959 shares of Stel Common Stock outstanding, and (ii) no treasury shares. (b) Other than the Stel Common Stock, there are no equity securities of any class of Stel, or any securities convertible into or exercisable for any such equity securities, issued, reserved for issuance or outstanding. Except for the Stel Options, Stel Rights, and purchase rights under the Stel Purchase Plan there are no warrants, options, convertible securities, calls, rights, stock appreciation rights, preemptive rights, rights of first refusal, or agreements or commitments of any nature obligating Stel to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests of Stel, or obligating Stel to grant, issue, extend, accelerate the vesting of, or enter into, any such warrant, option, convertible security, call, right, stock appreciation right, preemptive right, right of first refusal, agreement or commitment. To the knowledge of Stel, except for the Voting Agreements, there are no voting trusts, proxies or other agreements or understandings with respect to the capital stock of Stel. (c) True and complete copies of each Stel Stock Plan and the Stel Purchase Plan, and of the forms of all agreements and instruments relating to or issued under each thereof, have been made available to Newbridge. Such agreements, instruments, and forms have not been amended, modified or supplemented, and there are no agreements to amend, modify or supplement any such agreements, instruments or forms. (d) Schedule 3.6(d) of the Stel Disclosure Statement sets forth the following information with respect to Stel Options outstanding as of June 16, 1999: the aggregate number of shares issuable thereunder, the type of option, the grant date, the expiration date, the exercise price and the vesting schedule. Each Stel Option was granted in accordance with the terms of the Stel Stock Plan applicable thereto. The terms of each of the Stel Stock Plans do not prohibit the assumption of the Stel Options as provided in Section 2.2(a). Consummation of the Merger will accelerate vesting of all Stel Options, except those which have been outstanding for less than one year as of the Effective Time. 3.7 SEC Filings. (a) Stel has filed with the Securities and Exchange Commission (the "SEC") all required forms, reports, registration statements and documents required to be filed by it with the SEC (collectively, all such forms, reports, registration statements and 12 documents filed since April 1, 1996 are referred to herein as the "Stel SEC Reports"). All of the Stel SEC Reports complied as to form, when filed, in all material respects with the applicable provisions of the Securities Act of 1933, as amended (together with the rules and regulations promulgated thereunder, the "Securities Act") and the Exchange Act. Accurate and complete copies of the Stel SEC Reports have been made available to Newbridge. As of their respective dates, the Stel SEC Reports (including all exhibits and schedules thereto and documents incorporated by reference therein) did not contain any 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, in light of the circumstances under which they were made, not misleading. Stel has been advised by each of its officers and directors that each such person and such persons' affiliates have complied with all filing requirements under Section 13 and Section 16(a) of the Exchange Act. 3.8 Financial Statements. Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Stel SEC Reports (the "Stel Financial Statements"), (a) was prepared in accordance with generally accepted accounting principles ("GAAP") applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (b) fairly presented the consolidated financial position of Stel and its Subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, consistent with the books and records of Stel, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount. The balance sheet of Stel contained in Stel's Annual Report to Stockholders for the year ended March 31, 1999 (the "Reference Date") is hereinafter referred to as the "Stel Balance Sheet." 3.9 Absence of Undisclosed Liabilities. Neither Stel nor any of its Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) other than (i) liabilities included in the Stel Balance Sheet and the related notes to the financial statements, (ii) normal or recurring liabilities incurred since the Reference Date in the ordinary course of business consistent with past practice which, individually or in the aggregate, would not be reasonably likely to have a Stel Material Adverse Effect, and (iii) liabilities under this Agreement, the Stock Option Agreement and the Technology Option Agreement. 3.10 Absence of Changes or Events. Except as contemplated by this Agreement, since the Reference Date no Stel Material Adverse Effect has occurred and, in addition, Stel and its Subsidiaries have not, directly or indirectly: (a) purchased, otherwise acquired, or agreed to purchase or otherwise acquire, any shares of capital stock of Stel or any of its Subsidiaries, or declared, set aside or paid any dividend or otherwise made a distribution (whether in cash, stock or property 13 or any combination thereof) in respect of their capital stock (other than dividends or other distributions payable solely to Stel or a wholly owned Subsidiary of Stel); (b) authorized for issuance, issued, sold, delivered, granted or issued any options, warrants, calls, subscriptions or other rights for, or otherwise agreed or committed to issue, sell or deliver any shares of any class of capital stock of Stel or its Subsidiaries or any securities convertible into or exchangeable or exercisable for shares of any class of capital stock of Stel or its Subsidiaries, other than pursuant to and in accordance with the Stel Stock Plans; (c) (i) created or incurred any indebtedness for borrowed money exceeding U.S. $100,000 in the aggregate, (ii) assumed, guaranteed, endorsed or otherwise as an accommodation become responsible for the obligations of any other individual, firm or corporation, made any loans or advances to any other individual, firm or corporation exceeding U.S. $100,000 in the aggregate, (iii) entered into any oral or written material agreement or any commitment or transaction or incurred any liabilities material to Stel and its Subsidiaries taken as a whole, or involving in excess of U.S. $100,000; (d) instituted any change in accounting methods, principles or practices other than as required by GAAP or the rules and regulations promulgated by the SEC and disclosed in the notes to the Stel Financial Statements; (e) revalued any assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivable in excess of amounts previously reserved as reflected in the Stel Balance Sheet; (f) suffered any damage, destruction or loss, whether covered by insurance or not, except for such as would not, individually and in the aggregate exceed $250,000; (g) (i) increased in any manner the compensation of any of its directors, officers or, other than in the ordinary course of business and consistent with past practice, non-officer employees, (ii) granted any severance or termination pay to any Person; (iii) entered into any oral or written employment, consulting, indemnification or severance agreement with any Person; (iv) adopted, become obligated under, or amended any employee benefit plan, program or arrangement; or (v) repriced any Stel Options; (h) sold, transferred, leased, licensed, pledged, mortgaged, encumbered, or otherwise disposed of, or agreed to sell, transfer, lease, license, pledge, mortgage, encumber, or otherwise dispose of, any material properties, (including intangibles, real, personal or mixed); 14 (i) amended its certificate of incorporation, bylaws, or any other charter document, or effected or been a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction; (j) made any capital expenditure in any calendar month which, when added to all other capital expenditures made by or on behalf of Stel and its Subsidiaries in such calendar month resulted in such capital expenditures exceeding U.S. $250,000 in the aggregate; (k) paid, discharged or satisfied any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities (including accounts payable) in the ordinary course of business and consistent with past practice, or collected, or accelerated the collection of, any amounts owed (including accounts receivable) other than their collection in the ordinary course of business; (l) waived, released, assigned, settled or compromised any material claim or litigation, or commenced a lawsuit other than for the routine collection of bills; (m) agreed or proposed to do any of the things described in the preceding clauses (a) through (l) other than as expressly contemplated or provided for in this Agreement. 3.11 Capital Stock of Subsidiaries. Stel is directly or indirectly the record and beneficial owner of all of the outstanding shares of capital stock or other equity interests of each of its Subsidiaries (other than qualifying shares, the ownership of which is set forth in Schedule 3.11 of the Stel Disclosure Statement). All of such shares have been duly authorized and are validly issued, fully paid, nonassessable and free of preemptive rights with respect thereto and are owned by Stel free and clear of any claim, lien or encumbrance of any kind with respect thereto. There are no proxies or voting agreements with respect to such shares, and there are not any existing options, warrants, calls, subscriptions, or other rights or other agreements or commitments obligating Stel or any Subsidiaries to issue, transfer or sell any shares of capital stock of any Subsidiary or any other securities convertible into, exercisable for, or evidencing the right to subscribe for any such shares. Stel does not directly or indirectly own any interest in any Person except the Subsidiaries. 3.12 Litigation. (a) There is no private or governmental claim, action, suit (whether in law or in equity), investigation or proceeding of any nature ("Action") pending or, to the knowledge of Stel, threatened against Stel or any of its Subsidiaries, or any of their respective officers and directors (in their capacities as such), or involving any of their 15 assets, before any court, governmental or regulatory authority or body, or arbitration tribunal, except for those Actions which, individually and in the aggregate, would not have a Stel Material Adverse Effect. There is no Action pending or, to the knowledge of Stel, threatened which in any manner challenges, seeks to, or is reasonably likely to prevent, enjoin, alter or delay the transactions contemplated by this Agreement, the Stock Option Agreement or the Technology Option Agreement. (b) There is no outstanding judgment, order, writ, injunction or decree of any court, governmental or regulatory authority or body, or arbitration tribunal in a proceeding to which Stel, any Subsidiary of Stel, or any of their assets is or was a party or by which Stel, any Subsidiary of Stel, or any of their assets is bound. 3.13 Insurance. Schedule 3.13 of the Stel Disclosure Statement lists all insurance policies (including without limitation workers' compensation insurance policies) covering the business, properties or assets of Stel and its Subsidiaries, the premiums and coverages of such policies, and all claims in excess of U.S. $50,000 made against any such policies since April 1, 1996. All such policies are in effect, and true and complete copies of all such policies have been made available to Newbridge. Stel has not received notice of the cancellation or threat of cancellation of any of such policy. 3.14 Contracts and Commitments. (a) Except as filed as an exhibit to Stel's SEC Reports, neither Stel nor its Subsidiaries is a party to or bound by any oral or written contract, obligation or commitment of any type in any of the following categories: (i) agreements or arrangements that contain severance pay, understandings with respect to tax arrangements, understandings with respect to expatriate benefits, or post-employment liabilities or obligations; (ii) agreements or plans under which benefits will be increased or accelerated by the occurrence of any of the transactions contemplated by this Agreement, or the Stock Option Agreement or under which the value of the benefits will be calculated on the basis of any of the transactions contemplated by this Agreement or the Stock Option Agreement; (iii) agreements, contracts or commitments currently in force relating to the disposition or acquisition of material assets other than in the ordinary course of business, or relating to an ownership interest in any corporation, partnership, joint venture or other business enterprise; (iv) agreements, contracts or commitments (A) relating to the acquisition, transfer, development, sharing, license (to or by Stel), or use of any Stel IP Right (except for any contract pursuant to which any Stel IP Right is licensed to Stel 16 under any third party software license generally available to the public), or (B) with respect to the manufacturing, distribution or marketing of any products of Stel; (v) agreements, contracts or commitments for the purchase of materials, supplies or equipment which provide for purchase prices substantially greater than those presently prevailing for such materials, supplies or equipment, or which are with sole or single source suppliers, other than those which if terminated would not constitute a Material Adverse Effect; (vi) guarantees or other agreements, contracts or commitments under which Stel or any of its Subsidiaries is absolutely or contingently liable for (A) the performance of any other person, firm or corporation (other than Stel or its Subsidiaries), or (B) the whole or any part of the indebtedness or liabilities of any other person, firm or corporation (other than Stel or its Subsidiaries); (vii) powers of attorney authorizing the incurrence of a material obligation on the part of Stel or its Subsidiaries; (viii) agreements, contracts or commitments which limit or restrict (A) where Stel or any of its Subsidiaries may conduct business, (B) the type or lines of business (current or future) in which they may engage, or (C) any acquisition of assets or stock (tangible or intangible) by Stel or any of its Subsidiaries; (ix) agreements, contracts or commitments containing any agreement with respect to a change of control of Stel or any of its Subsidiaries; (x) agreements, contracts or commitments for the borrowing or lending of money, or the availability of credit (except credit extended by Stel or any of its Subsidiaries to customers in the ordinary course of business and consistent with past practice); and (xi) any hedging, option, derivative or other similar transaction and any foreign exchange position or contract for the exchange of currency; (b) Neither Stel nor any of its Subsidiaries, nor to Stel's knowledge any other party to a Stel Contract (as defined below), has breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, (nor does there exist any condition under which, with the passage of time or the giving of notice or both, could reasonably be expected to cause such a breach, violation or default under), any material agreement, contract or commitment to which Stel or any of its Subsidiaries is a party or by which any of them or any of their properties or assets may be bound (any such agreement, contract or commitment, a "Stel Contract"), other than any breaches, violations or defaults which individually or in the aggregate would not have a Stel Material Adverse Effect. 17 (c) Each Stel Contract is a valid, binding and enforceable obligation of Stel and to Stel's knowledge, of the other party or parties thereto, in accordance with its terms, and in full force and effect, except where the failure to be valid, binding, enforceable and in full force and effect would not have a Stel Material Adverse Effect and to the extent enforcement may be limited by applicable bankruptcy, insolvency, moratorium or other laws affecting the enforcement of creditors' rights governing or by general principles of equity. (d) An accurate and complete copy of each Stel Contract has been made available to Newbridge. 3.15 Labor Matters; Employment and Labor Contracts. (a) None of Stel or any of its Subsidiaries is a party to any union contract or other collective bargaining agreement, nor to the knowledge of Stel or any of its Subsidiaries are there any activities or proceedings of any labor union to organize any of its employees. Each of Stel and its Subsidiaries is in compliance with all applicable (i) laws, regulations and agreements respecting employment and employment practices, (ii) terms and conditions of employment, and (iii) occupational health and safety requirements, except for those failures to comply which, individually or in the aggregate, would not have a Stel Material Adverse Effect. (b) There is no labor strike, slowdown or stoppage pending (or any labor strike or stoppage threatened) against Stel or any of its Subsidiaries. No petition for certification has been filed and is pending before the National Labor Relations Board with respect to any employees of Stel or any of its Subsidiaries who are not currently organized. Neither Stel nor any of its Subsidiaries has any obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), with respect to any former employees or qualifying beneficiaries thereunder, except for obligations that would not have, individually or in the aggregate, a Stel Material Adverse Effect. There are no controversies pending or, to the knowledge of Stel or any of its Subsidiaries, threatened, between Stel or any of its Subsidiaries and any of their respective employees, which controversies would have, individually or in the aggregate, a Stel Material Adverse Effect. (c) Neither Stel nor any of its Subsidiaries is a party to or bound by any employment agreements or arrangements that are not terminable at will by Stel or its Subsidiaries. 3.16 Compliance with Laws. Neither Stel nor any of its Subsidiaries has violated or failed to comply with any statute, law, ordinance, rule or regulation (including without limitation relating to the export or import of goods or technology) of any foreign, federal, state or local government or any other governmental department or agency, except where any such violations or failures to comply would not, individually or in the 18 aggregate, have a Stel Material Adverse Effect. Stel and its Subsidiaries have all permits, licenses and franchises from governmental agencies required to conduct their businesses as now bei ng conducted and as proposed to be conducted, except for those, the absence of which, would not, individually or in the aggregate, have a Stel Material Adverse Effect. 3.17 Government Contracts. (a) For purposes of this Agreement: (i) "Government Body" shall mean any: (A) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (B) federal, state, local, municipal, foreign or other government; or (C) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal). (ii) "Government Bid" shall mean any quotation, bid or proposal submitted to any Government Body or any proposed prime contractor or higher-tier subcontractor of any Government Body. (iii) "Government Contract" shall mean any prime contract, subcontract, letter contract, purchase order or delivery order executed or submitted to or on behalf of any Government Body or any prime contractor or higher-tier subcontractor, or under which any Government Body or any such prime contractor or subcontractor otherwise has or may acquire any right or interest. (iv) "Legal Requirement" shall mean any federal, state, local, municipal, foreign or other law, statute, constitution, resolution, ordinance, code, edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted, promulgated, implemented or otherwise put into effect by or under the authority of any Government Body. (b) Since April 1, 1996, except as set forth in Schedule 3.17 of the Stel Disclosure Statement: (i) neither Stel nor any Subsidiary has had any determination of noncompliance, entered into any consent order or undertaken any internal investigation relating directly or indirectly to any Government Contract or Government Bid; (ii) neither Stel nor any Subsidiary has failed to comply in all material respects with all Legal Requirements with respect to all Government Contracts and Government Bids; 19 (iii) neither Stel nor any Subsidiary has, in obtaining or performing any Government Contract, violated any applicable procurement law or regulation or other material Legal Requirement; (iv) all facts set forth in or acknowledged by Stel or any Subsidiary in any certification, representation or disclosure statement submitted by Stel or any Subsidiary with respect to any Government Contract or Government Bid were current, accurate and complete as of the date of submission; (v) neither Stel nor any Subsidiary has, nor to the best of Stel's knowledge, have any of their respective employees been debarred or suspended from doing business with any Government Body, nor have any proceedings been initiated against Stel, any Subsidiary or, to the best of Stel's knowledge, any employee of Stel or any Subsidiary that might result in such debarment or suspension; (vi) no negative determination of responsibility has been issued against Stel or any Subsidiary in connection with any Government Contract or Government Bid; (vii) no direct or indirect costs incurred by Stel or any Subsidiary have been questioned or disallowed as a result of a finding or determination of any kind by any Government Body; (viii) no Government Body, or prime contractor or higher-tier subcontractor of any Government Body, has withheld or set off, or threatened to withhold or set off, any amount due to Stel or any Subsidiary under any Government Contract; (ix) there have been no material irregularities, misstatements or omissions relating to any Government Contract or Government Bid that have led to or have a reasonable prospect of leading to (A) any administrative, civil, criminal or other investigation, legal proceeding or indictment involving Stel, any Subsidiary or any of their employees, (B) the questioning or disallowance of any costs submitted for payment by Stel or any Subsidiary, (C) the recoupment of any payments previously made to Stel or any Subsidiary, (D) a finding or claim of fraud, defective pricing, mischarging or improper payments on the part of Stel or any Subsidiary, or (E) the assessment of any penalties or damages of any kind against Stel or any Subsidiary; (x) there are not nor have there been any (A) outstanding claims against Stel or any Subsidiary by, or dispute involving Stel or any Subsidiary with, any prime contractor, subcontractor, vendor or other Person arising under or relating to the award or performance of any Government Contract, (B) facts known by Stel upon which any such claim may be based or which may give rise to any such dispute, (C) final decisions of any Government Body against Stel or any Subsidiary; 20 (xi) neither Stel nor any Subsidiary is undergoing, or has undergone an audit, and Stel has no knowledge of any impending audit, arising under or relating to any Government Contract (other than normal routine audits conducted in the ordinary course of business); (xii) neither Stel nor any Subsidiary has entered into any financing arrangement or assignment of proceeds with respect to the performance of any Government Contract; (xiii) no payment has been made by Stel or any Subsidiary or by any Person acting on Stel's or any Subsidiary's behalf to any Person (other than to any bona fide employee or agent of Stel or any Subsidiary) which is or was contingent upon the award of any Government Contract or which would otherwise be in violation of any applicable procurement law or regulation or any other Legal Requirement; (xiv) Stel's and each of its Subsidiaries cost accounting system is in material compliance with applicable regulations and other applicable Legal Requirements, and has not has been determined by any Government Body not to be in material compliance with any Legal Requirement; (xv) to the best of Stel's knowledge, Stel and its Subsidiaries have complied with all applicable regulations and other Legal Requirements and with all applicable contractual requirements relating to the placement of legends or restrictive markings on technical data, computer software and other intellectual property; (xvi) neither Stel nor any Subsidiary has made any disclosure to any Government Body pursuant to any formal agency disclosure program; (xvii) Stel and its Subsidiaries have reached agreement with the cognizant government representatives approving and "closing" all indirect costs charged to Government Contracts; (xviii)the responsible government representatives have agreed with Stel and each Subsidiary on the "forward pricing rates" that Stel or such Subsidiary is charging on cost-type Government Contracts and including in Government Bids; and (xix) with the exception of potential novation or change-of-name agreement that may be required by a Government Body under applicable Legal Requirements, neither Stel nor any Subsidiary is or will be required to make any filing with or give any notice to, or to obtain any consent from, any Government Body under or in connection with any Government Contract or Government Bid as a result of or by virtue of (A) the execution, delivery or performance of this Agreement or any of the other agreements referred to in this Agreement, or (B) the consummation of the transactions 21 contemplated by this Agreement, the Stock Option Agreement and the Technology Option Agreement. 3.18 Intellectual Property Rights. (a) Stel and its Subsidiaries own or have the right to use all intellectual property used in or necessary to conduct their respective businesses (such intellectual property and the rights thereto are collectively referred to herein as the "Stel IP Rights"). (b) Schedule 3.18 of Stel Disclosure Statement sets forth, with respect to all Stel IP Rights registered with any Government Body or for which an application has been filed with any Government Body, (i) a brief description of such Stel IP Rights, and (ii) the names of the jurisdictions covered by the applicable registration or application. Schedule 3.18 of Stel Disclosure Statement identifies and provides a brief description of, and identifies any ongoing royalty or payment obligations with respect to, each Stel IP Right that is licensed or otherwise made available to Stel by any Person (except for any Stel IP Right that is licensed to Stel under any third party software license generally available to the public), and identifies the agreement under which such Stel IP Right is being licensed or otherwise made available to Stel. Stel has good, valid and marketable title to all of Stel IP Rights (except for licensed rights), free and clear of all encumbrances, except (i) as set forth in Schedule 3.18 of the Stel Disclosure Statement, (ii) for any lien for current taxes not yet due and payable, and (iii) for minor liens that have arisen in the ordinary course of business and that do not (individually or in the aggregate) materially detract from the value of the rights subject thereto or materially impair the operations of Stel. To Stel's knowledge, Stel has a valid right to use, license and otherwise exploit all Stel IP Rights. Except as set forth in Schedule 3.18 of Stel Disclosure Statement, Stel has not developed jointly or does not jointly own or have joint rights with any other Person any Stel IP Right that is material to the business of Stel. Except as set forth in Schedule 3.18 of the Stel Disclosure Statement, there is no agreement or arrangement pursuant to which any Person has any right (whether or not currently exercisable) to use, license or otherwise exploit any Stel IP Rights (c) Stel has taken all commercially reasonable measures and precautions to protect and maintain the confidentiality and secrecy of all Stel IP Rights (except Stel IP Rights whose value would be unimpaired by public disclosure) and otherwise to maintain and protect the value of all Stel IP Rights. (d) To the knowledge of Stel, Stel is not misappropriating or making any unlawful use of, and Stel has not at any time misappropriated or made any unlawful use, of, or received any notice or other communication (in writing or otherwise) of any actual, alleged, possible or potential infringement, misappropriation or unlawful use of, any intellectual property rights owned or used by any other Person. Stel is not aware that any Person is misappropriating, or making unlawful use of any of the Stel IP Rights. 22 (e) Stel has not licensed any of the Stel IP Rights to any Person on an exclusive basis. (f) The execution, delivery and performance of this Agreement, the Stock Option Agreement or the Technology Option Agreement and the consummation of the transactions contemplated hereby will not constitute a material breach of any instrument or agreement governing any Stel IP Rights, and will not (i) cause the modification of any terms of any licenses or agreements relating to any Stel IP Rights, (ii) cause the forfeiture or termination of any Stel IP Rights, (iii) give rise to a right of forfeiture or termination of any Stel IP Rights or (iv) materially impair the right of Stel, the Surviving Corporation or Newbridge to use, sell or license any Stel IP Rights or portion thereof. (g) Neither the manufacture, marketing, license, sale nor intended use of any product or technology currently licensed or sold or under development by Stel or any of its Subsidiaries (i) violates in any material respect any license or agreement between Stel or any of its Subsidiaries and any third party or (ii) infringes in any material respect any patents or other intellectual property rights of any other party; and there is no pending or threatened claim or litigation contesting the validity, ownership or right to use, sell, license or dispose of any Stel IP Rights, or asserting that any Stel IP Rights or the proposed use, sale, license or disposition thereof, or the manufacture, use or sale of any Stel products, conflicts or will conflict with the rights of any other party. (h) Stel has provided to Newbridge a true and complete copy of its standard form of employee confidentiality agreement and taken all commercially reasonably necessary steps to ensure that all employees have executed such an agreement. All consultants or third parties with access to proprietary information of Stel have executed appropriate non-disclosure agreements which adequately protect the Stel IP Rights. (i) Neither Stel nor any of its Subsidiaries is aware or has reason to believe that any of its employees or consultants is obligated under any contract, covenant or other agreement or commitment of any nature, or subject to any judgment, decree or order of any court or administrative agency, that would interfere with the use of such employee's or consultant's best efforts to promote the interests of Stel and its Subsidiaries or that would conflict with the business of Stel as presently conducted or proposed to be conducted. Neither Stel nor any of its Subsidiaries has entered into any agreement to indemnify any other person, including but not limited to any employee or consultant of Stel or any of its Subsidiaries, against any charge of infringement, misappropriation or misuse of any intellectual property, other than indemnification provisions contained in purchase orders or customer agreements arising in the ordinary course of business. All current and former employees of Stel or any of its Subsidiaries, and all current and former consultants of Stel or any of its Subsidiaries who have provided services related to Stel IP 23 Rights, have signed valid and enforceable written assignments to Stel or its Subsidiaries of any and all rights or claims in any intellectual property that any such employee or consultant has or may have by reason of any contribution, participation or other role in the development, conception, creation, reduction to practice or authorship of any invention, innovation, development or work of authorship or any other intellectual property that is used in the business of Stel, and Stel and its Subsidiaries possess signed copies of all such written assignments by such employees and consultants. 3.19 Accounts Receivable; Inventories. (a) Except as set forth in the Stel Balance Sheet, (i) each account receivable of Stel and its Subsidiaries (the "Accounts Receivable") represents a sale made in the ordinary course of business and which arose pursuant to an enforceable contract for a bona fide sale of goods or for services performed, and Stel and its Subsidiaries have performed all of their obligations to produce the goods or perform the services to which such Accounts Receivable relate, other than amounts recorded as deferred revenue, and (ii) no Account Receivable is subject to any claim for reduction, counterclaim, set-off, recoupment or other claim for credit, allowances or adjustment by the obligor thereof. (b) Subject to amounts reserved therefor on the Stel Balance Sheet, the values at which all inventories are carried on the Stel Balance Sheet reflect the historical inventory valuation policy of Stel and its Subsidiaries set forth in the Stel SEC Reports. Stel and its Subsidiaries have good and marketable title to the inventories free and clear of all liens and encumbrances. The inventories do not consist of, in any material amount, items that are obsolete, damaged or slow-moving beyond amounts reserved on the Stel Balance Sheet. The inventories do not consist of any items held on consignment. Neither Stel nor any of its Subsidiaries is under any obligation or liability with respect to accepting returns of items of inventory or merchandise in the possession of their customers other than in the ordinary course of business and consistent with past practice. No clearance or extraordinary sale of the inventories has been conducted since the Stel Reference Date. Subject to the amounts reserved therefor on the Stel Balance Sheet, the inventories are in good and merchantable condition in all material respects, are suitable and usable for the purposes for which they are intended and are in a condition such that they can be sold in the ordinary course of business consistent with past practice. 3.20 Order Backlog. Schedule 3.20 of the Stel Disclosure Statement contains a list of the aggregate orders for the products of Stel and its Subsidiaries as of the Stel Reference Date and as of April 30, 1999, and identifies each customer included in the backlog and the range of products and prices by customer constituting the backlog. Except as set forth on Schedule 3.20, all such orders have been included in backlog on a basis consistent with Stel's historical practices and Stel is not aware of any customer who has placed an order included in such backlog having refused or who intends to refuse delivery of any ordered products in accordance with the terms of such orders. 24 3.21 Product and Service Warranties. The standard written forms of product and service warranties and guarantees utilized by Stel and its Subsidiaries as of the date of this Agreement have been provided to Newbridge. Except as set forth on Schedule 3.21 of the Stel Disclosure Statement, during a period of three years prior to the date of this Agreement, neither Stel nor any Subsidiary or any of their affiliates have made any other written material warranties (which remain in effect) with regard to products and/or services supplied by Stel or its Subsidiaries. 3.22 Taxes. (a) For the purposes of this Agreement, a "Tax" or, collectively, "Taxes," means (i) any and all federal, state, local, foreign and other taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, gains, franchise, capital stock, severance, withholding, payroll, recapture, employment, excise, unemployment insurance, social security, business license, occupation, business organization, stamp, environmental and property taxes, together with all interest, penalties and additions imposed with respect to such amounts; (ii) any liability for the payment of any amounts described in clause (i) as a result of being a successor to or transferee of any individual or entity or a member of an affiliated, consolidated or unitary group for any period (including pursuant to Treas. Reg. (S) 1.1502-6 or comparable provisions of state, local or foreign tax law); and (iii) any liability for the payment of amounts described in clause (i) or clause (ii) as a result of any express or implied obligation to indemnify any Person or as a result of any obligations under agreements or arrangements with any Person. (b) (i) Stel and each of its Subsidiaries have filed all material returns, estimates, information statements and reports relating to Taxes ("Returns") required to be filed by them prior to Closing, and such Returns are true and correct and completed in accordance with applicable law. Schedule 3.22 of the Stel Disclosure Statement lists all jurisdictions in which Returns are required to be filed by Stel and its Subsidiaries (or have been required since April 1, 1996 of the Stel) and the types of Returns required to be filed in each such jurisdiction. (ii) Stel and each of its Subsidiaries have (A) timely paid all Taxes due and payable by them as shown on the Returns, (B) timely paid all Taxes for which a notice of assessment or collection has been received (other than amounts properly accrued on the Stel Financial Statements, described in paragraph (iii), below, and being contested in good faith by appropriate proceedings), (C) accrued on the Stel Financial Statements all Taxes attributable to periods covered by such statements that are not yet due and payable, and (D) properly reserved, in accordance with GAAP, for all Taxes not yet due but which are expected to become due and payable in the future. 25 (iii) Neither the Internal Revenue Service (the "IRS") nor any other taxing authority has asserted any claim for Taxes in writing, or to the actual knowledge of the executive officers of Stel, is threatening to assert any claims for Taxes. No Tax deficiency notice or notice of assessment of collection has been received in writing by Stel except as described on Schedule 3.22 of the Stel Disclosure Statement. No audit or, to Stel's knowledge, other examination of any Return of Stel or any of its Subsidiaries is presently in progress, nor have Stel or any of its Subsidiaries been notified in writing of any request for such an audit or other examination. No power of attorney to deal with Tax matters or waiver of any statute of limitations with respect to Taxes has been granted by Stel or its Subsidiaries. Except as described on Schedule 3.22 of the Stel Disclosure Statement the relevant statute of limitations for the assessment or proposal of a deficiency for Taxes has expired for all years before fiscal year 1995. None of Stel or its Subsidiaries has availed itself of any Tax Amnesty, tax holiday or similar relief in any jurisdiction. (iv) Stel and its Subsidiaries have withheld or collected and paid over to the appropriate governmental authorities (or are properly holding for such payment) all Taxes required by law to be withheld or collected with respect to their operations, including withholdings on payments to Stel or its Subsidiaries for sales and use taxes or payments by Stel or its Subsidiaries to employees or independent contractors on account of federal, state, and foreign income Taxes, the Federal Insurance Contribution Act, and the Federal Unemployment Tax Act. (v) There are no liens for Taxes upon the assets of Stel or any of its Subsidiaries (other than liens for property Taxes that are not yet due or delinquent). (vi) There is no contract, agreement, plan or arrangement, including but not limited to the provisions of this Agreement, covering any employee or former employee of Stel or any of its Subsidiaries that, individually or collectively, could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G, 404 or 162 of the Code. (vii) None of Stel nor any of its Subsidiaries has filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by Stel. (viii) Neither Stel nor any of its Subsidiaries is or has been a member of an affiliated group of corporations filing a consolidated federal income tax return (or a group of corporations filing a consolidated, combined or unitary income tax return under comparable provisions of state, local or foreign tax law) other than a group the common parent of which is or was Stel. 26 (ix) Neither Stel nor any of its Subsidiaries has any obligation under any agreement or arrangement with any other Person with respect to Taxes of such other Person (including pursuant to Treas. Reg. (S) 1.1502-6 or comparable provisions of state, local or foreign tax law) and including any liability for Taxes of any predecessor entity. (x) Stel has made available to Newbridge true copies of all Returns that Stel or its Subsidiaries have filed since April 1, 1996 and true copies of all correspondence and other written submissions to or communications with any Tax authorities. (xi) None of the assets of Stel is "tax-exempt use property" within the meaning of Section 168(h) of the Code. (xii) Stel has not agreed to make, nor is it required to make, any adjustment under Section 481 of the Code by reason of a change in accounting method or otherwise. (xiii) Except as set forth in Schedule 3.22 of the Disclosure Statement, Stel is not and has not been a party to any joint venture, partnership, or other arrangement or contract that could be treated as a partnership for federal income tax purposes. (xiv) None of Stel nor any of its Subsidiaries has indemnified any person against Tax in connection with any arrangement for the leasing of real or personal property, except for indemnity with respect to acts of Stel or its Subsidiaries. (xv) None of Stel and its Subsidiaries has or has had operations or assets outside of the United States taxable as a "branch" by the United States or as a "permanent establishment" by any foreign country. (xvi) None of Stel and its Subsidiaries is aware of any reason why the Merger will fail to qualify as a reorganization under the provisions of Section 368(a) of the Code. 3.23 Employee Benefit Plans; ERISA. (a) Except as set forth on Schedule 3.23 of the Stel Disclosure Statement, there are no "employee pension benefit plans" as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") ("Pension Plans"), "welfare benefit plans" as defined in Section 3(1) of ERISA ("Welfare Plans"), or stock bonus, stock option, restricted stock, stock appreciation right, stock purchase, bonus, incentive, deferred compensation, severance, holiday, or vacation plans, or any other employee benefit plan, program, policy or arrangement covering employees (or 27 former employees) employed in the United States that either is maintained or contributed to by Stel or any of its Subsidiaries or any of their ERISA Affiliates (as hereinafter defined) or to which Stel or any of its Subsidiaries or any of their ERISA Affiliates is obligated to make payments or otherwise may have any liability (collectively, the "Employee Benefit Plans") with respect to employees or former employees of Stel, its Subsidiaries, or any of their ERISA Affiliates. For purposes of this Agreement, "ERISA Affiliate" shall mean any person (as defined in Section 3(9) of ERISA) that is or has been a member of any group of persons described in Section 414(b), (c), (m) or (o) of the Code, including without limitation Stel or a Subsidiary. (b) Stel and each of its Subsidiaries, and each of the Pension Plans and Welfare Plans, are in compliance with the applicable provisions of ERISA, the Code and other applicable laws, except where the failure to comply would not, individually or in the aggregate, have a Stel Material Adverse Effect. (c) All contributions to, and payments from, the Pension Plans which are required to have been made in accordance with the Pension Plans have been timely made, except where the failure to make such contributions or payments on a timely basis would not, individually or in the aggregate, have a Stel Material Adverse Effect. (d) All of Stel's Pension Plans intended to qualify under Section 401 of the Code have been determined by the Internal Revenue Service ("IRS") to be so qualified, and no event has occurred and no condition exists with respect to the form or operation of such Pension Plans which would cause the loss of such qualification or exemption or the imposition of any material liability, penalty or tax under ERISA or the Code. (e) To the best of Stel's knowledge, there are no (i) investigations pending by any Government Entity involving the Pension Plans or Welfare Plans, nor (ii) pending or threatened claims (other than routine claims for benefits), suits or proceedings against any Pension or Welfare Plan, against the assets of any of the trusts under any Pension or Welfare Plan or against any fiduciary of any Pension or Welfare Plan with respect to the operation of such plan or asserting any rights or claims to benefits under any Pension Plan or against the assets of any trust under such plan, except for those which would not, individually or in the aggregate, give rise to any liability which would have a Stel Material Adverse Effect. To the best of Stel's knowledge, there are no facts which would give rise to any liability under this Section 3.24(e) except for those which would not, individually or in the aggregate, have a Stel Material Adverse Effect in the event of any such investigation, claim, suit or proceeding. (f) None of Stel, any of its Subsidiaries or any employee of the foregoing, nor any trustee, administrator, other fiduciary or any other "party in interest" or "disqualified person" with respect to the Pension Plans or Welfare Plans, has engaged in a "prohibited transaction" (as such term is defined in Section 4975 of the Code or 28 Section 406 of ERISA), other than such transactions that would not, individually or in the aggregate, have a Stel Material Adverse Effect. (g) None of Stel, any of its Subsidiaries, or any of their ERISA Affiliates maintain or contribute to, nor have they ever maintained or contributed to, any pension plan subject to Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA. (h) Neither Stel nor any Subsidiary of Stel nor any ERISA Affiliate has incurred any material liability under Title IV of ERISA that has not been satisfied in full. (i) Neither Stel, any of its Subsidiaries nor any of their ERISA Affiliates has any material liability (including any contingent liability under Section 4204 of ERISA) with respect to any multiemployer plan, within the meaning of Section 3(37) of ERISA, covering employees (or former employees) employed in the United States. (j) With respect to each of the Employee Benefit Plans, true, correct and complete copies of the following documents have been made available to Newbridge: (i) the plan document and any related trust agreement, including amendments thereto, (ii) any current summary plan descriptions and other material communications to participants relating to the Employee Benefit Plans, (iii) the three most recent Forms 5500, if applicable, and (iv) the most recent IRS determination letter, if applicable. (k) None of the Welfare Plans maintained by Stel or any of its Subsidiaries provides for continuing benefits or coverage for any participant or any beneficiary of a participant following termination of employment, except as may be required under COBRA, or except at the expense of the participant or the participant's beneficiary. Stel and each of its Subsidiaries which maintain a "group health plan" within the meaning of Section 5000(b)(1) of the Code have complied with the notice and continuation requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title I of ERISA and the regulations thereunder, except where the failure to comply would not, individually or in the aggregate, have a Stel Material Adverse Effect. (l) No liability under any Pension Plan or Welfare Plan has been funded nor has any such obligation been satisfied with the purchase of a contract from an insurance company as to which Stel or any of its Subsidiaries has received notice that such insurance company is in rehabilitation or a comparable proceeding. (m) The consummation of the transactions contemplated by this Agreement will not result in an increase in the amount of compensation or benefits or accelerate the vesting or timing of payment of any benefits or compensation payable to or in respect of any employee of Stel or any of its Subsidiaries under any Employee Benefit Plan. 29 (n) Schedule 3.23(n) of the Stel Disclosure Statement lists each Foreign Plan (as hereinafter defined). Stel and each of its Subsidiaries and each of the Foreign Plans are in compliance with applicable laws, and all required contributions have been made to the Foreign Plans, except where the failure to comply or make contributions would not, individually or in the aggregate, have a Stel Material Adverse Effect. Each of the Foreign Plans that is a funded defined benefit plan has a fair market value of plan assets that is greater than the plan's liabilities, as determined in accordance with applicable laws. For purposes hereof, the term "Foreign Plan" shall mean any plan, program, policy, arrangement or agreement maintained or contributed to by, or entered into with, Stel or any Subsidiary with respect to employees (or former employees) employed outside the United States to the extent the benefits provided thereunder are not mandated by the laws of the applicable foreign jurisdiction. (o) To the best of Stel's knowledge, there are no claims, suits or facts concerning the operation or benefits of any Employee Benefit Plan other than a Pension or Welfare Plan except for those which would not, individually or in the aggregate, give rise to any liability which would have a Stel Material Adverse Effect. (p) Each of the Employee Benefit Plans and the Foreign Plans can be terminated by Stel within a period of 30 days following the Effective Time in accordance with the terms of such Plan (and the provisions of ERISA and the Code), without any additional contribution to such Employee Benefit Plan or Foreign Plan or the payment of any additional compensation or amount or the additional vesting or acceleration of any vesting provided under the Employee Benefit Plan or Foreign Plan. 3.24 Environmental Matters. (a) For purposes of this Agreement: (i) "Contractor" shall mean any person or entity, including but not limited to partners, licensors, and licensees, with which Stel formerly or presently has any agreement or arrangement (whether oral or written) under which such person or entity has or had physical possession of, and was or is obligated to develop, test, process, manufacture or produce any product or substance on behalf of Stel. (ii) "Environment" shall mean any land including, without limitation, surface land and sub-surface strata, seabed or river bed and any water (including, without limitation, coastal and inland waters, surface waters and ground waters and water in drains and sewers) and air (including, without limitation, air within buildings) and other natural or manmade structures above or below ground. (iii) "Environmental Law" means any law or regulation, now or hereafter in effect and as amended, and any judicial or administrative interpretation thereof, in each case relating to the Environment or harm to or the protection of human 30 health or animals or plants, including, without limitation, laws relating to public and workers health and safety, emissions, discharges or releases of chemicals or any other pollutants or contaminants or industrial, radioactive, dangerous, toxic or hazardous substances or wastes (whether in solid or liquid form or in the form of a gas or vapor and including noise and genetically modified organisms) into the Environment or otherwise relating to the manufacture, processing, use, treatment, storage, distribution, disposal transport or handling of substances or wastes. Environmental Laws include, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act, as amended 42 USC 9601 et seq. ("CERCLA"), the Resource Conservation and Recovery Act 42 USC, 6901 et seq., the Hazardous Materials Transportation Act 49 USC, 6901 et seq., the Clean Water Act 33, 1251 et seq., the Toxic Substances Control Act 15 USC, 2601 et seq., the Clean Air Act 42 USC, 7401 et seq., the Safe Drinking Water Act 42 USC, 300f et seq., the Atomic Energy Act 42 USC, 2201 et seq., the Federal Food Drug and Cosmetic Act 21 USC, 136 et seq., and the Federal Food Drug and Cosmetic Act 21 USC, 301 et seq., and equivalent state and local ordinances and statutes, and statutes and ordinances in countries other than the United States of America. (iv) "Environmental Permit" shall mean any permit, license, consent, approval, certificate, qualification, specification, registration and other authorization, and the filing of all notifications, reports and assessments, required by any federal, state, local or foreign government or regulatory entity pursuant to any Environmental Law. (v) "Hazardous Material" shall mean any pollutant, contaminant, or hazardous, toxic, medical, biohazardous, infectious or dangerous waste, substance, gas, constituent or material, defined or regulated as such in, or for purposes of, any Environmental Law, including, without limitation, any asbestos, any petroleum, oil (including crude oil or any fraction thereof), any radioactive substance, any polychlorinated biphenyls, any toxin, chemical, virus, infectious disease or disease causing agent, and any other substance that can give rise to liability under any Environmental Law. (b) Except for such cases that, individually or in the aggregate, have not and would not reasonably be expected to have a Stel Material Adverse Effect: (i) Each of Stel and its Subsidiaries possesses all Environmental Permits required under applicable Environmental Laws to conduct its current business and to use and occupy the Real Property for its current business. All Environmental Permits are in full force and effect and Stel and each of its Subsidiaries are, and to Stel's knowledge have, at all times been in compliance with the terms and conditions of such Environmental Permits. (ii) There are no facts or circumstances indicating that any Environmental Permits possessed by Stel or any of its Subsidiaries would or might be 31 revoked, suspended, canceled or not renewed, and all appropriate necessary action in connection with the renewal or extension of any Environmental Permits possessed by Stel or any of its Subsidiaries relating to their current business and the Real Property has been taken. (iii) The execution and delivery of this Agreement and the Stock Option Agreement and the consummation by Stel of the Merger and other transactions contemplated hereby (and thereby) and the exercise by Newbridge and the Surviving Corporation of rights to own and operate the business of Stel and its Subsidiaries and use and occupy the Real Property and carry on its business substantially as presently conducted will not affect the validity or require the transfer of any Environmental Permits held by Stel or any of its Subsidiaries and will not require any notification, disclosure, registration, reporting, filing, investigation or remediation under any Environmental Law. (iv) Stel and each of its Subsidiaries and, to the knowledge of Stel, all previous owners, lessees and occupants of the real property now or previously owned, leased or occupied by Stel and its Subsidiaries (the "Real Property"), are in compliance with, and within the period of all applicable statutes of limitation, have complied with all applicable Environmental Laws and have not received notice of any liability under any Environmental Law; and neither Stel or any of its Subsidiaries nor any portion of the Real Property is in violation of any Environmental Law. (v) There is no civil, criminal or administrative action, suit, demand, claim, complaint, hearing, notice of violation, notice or demand letter, proceeding or request for information pending or any liability (whether actual or contingent) to make good, repair, reinstate, sample, investigate or clean up any of the Real Property, including but not limited to ground water beneath such Real Property. There is no act, omission, event or circumstance giving rise or likely to give rise in the future to any such action, suit, demand, claim, complaint, hearing, notice of violation, notice or demand letter, proceeding, or request or any such liability or other liabilities (A) against Stel or any of its Subsidiaries, or (B) against any person or entity, including but not limited to any Contractor, in connection with which liability could reasonably be imputed or attributed by law or contract to Stel or any of its Subsidiaries. (vi) No property or facility presently or formerly owned operated or leased by Stel or any of its present or former Subsidiaries or by any respective predecessor in interest is listed or proposed for listing, nor are there are any facts or circumstances which would or might give rise to such an entry on the National Priorities List or the CERCLA Information System ("CERCLIS"), both under the CERCLA or on any comparable list established under any state or local Environmental Law of a country other than the United States of America, nor has Stel or any of its Subsidiaries received any notification of potential or actual liability or any request for information under CERCLA or any comparable foreign, state or local law. 32 (vii) There has not been any disposal, spill, discharge, or release of any Hazardous Material generated, used, owned, stored, or controlled by Stel, any of its Subsidiaries, or respective predecessors in interest, on, at, or under any property presently or formerly owned, leased, or operated by Stel, its Subsidiaries, any predecessor in interest, or any Contractor, and there are no Hazardous Materials located in, at, on, or under, or in the vicinity of, any such facility or property, or at any other location, in either case that could reasonably be expected to require investigation, removal, remedial, or corrective action by Stel or any of its Subsidiaries or that would reasonably likely result in liability of, or costs in excess of, U.S. $250,000, individually or in the aggregate, to Stel or any of its Subsidiaries under any Environmental Law. (viii) (A) Other than cleaning and office supplies normally used in the operation of an office, Hazardous Materials have not been generated, used, treated, handled or stored on, or transported to or from, or released on any Real Property or, any property adjoining any Real Property; (B) Stel and its Subsidiaries have disposed of all wastes, including those wastes containing Hazardous Materials, in compliance with all applicable Environmental Law and Environmental Permits; and (C) neither Stel nor any of its Subsidiaries has transported or arranged for the transportation of any Hazardous materials to any location that is listed or proposed for listing on the National Priorities List under CERCLA or on the CERCLIS or any analogous state or country list or which is the subject of any environmental claim. (ix) There has not been any underground or aboveground storage tank or other underground storage receptacle or related piping, or any impoundment or other disposal area containing Hazardous Materials located on any Real Property owned, leased or operated by Stel, any of its Subsidiaries, or respective predecessors in interest during the period of such ownership, lease or operation, and no asbestos or polychlorinated biphenyls have been used or disposed of, or have been located at, on, or under any such facility or property during the period of such ownership lease or operation; (x) Stel and its Subsidiaries have taken all actions necessary under applicable requirements of Environmental Law to register any products or materials required to be registered by Stel or any of its Subsidiaries (or any of their respective agents) thereunder. (c) After a reasonable investigation made by Stel, Stel has made available to Newbridge all records and files, including, but not limited to, all assessments, reports, studies, audits, analyses, tests and data in possession of Stel and its Subsidiaries concerning the existence of Hazardous Materials at facilities or properties currently or formerly owned, operated, or leased by Stel or any present or former Subsidiary or predecessor in interest, or concerning compliance by Stel and its Subsidiaries with, or liability under, any Environmental Law. 33 3.25 Officer's Certificate as to Tax Matters. Stel knows of no reason why it will be unable to deliver to Heller Ehrman White & McAuliffe and Thelen Reid & Priest LLP at the Closing an Officer's Certificate in form sufficient to enable each such counsel to render the opinions required by Section 7.2(d). 3.26 Affiliates. Stel has delivered to Newbridge in accordance with Section 5.9 a list identifying all persons who to Stel's knowledge may be deemed to be "affiliates" of Stel for purposes of Rule 145 under the Securities Act ("Affiliates"). 3.27 Finders or Brokers. Except for Ferris, Baker Watts, Incorporated, whose fees have been disclosed to Newbridge, neither Stel nor any of its Subsidiaries has employed any investment banker, broker, finder or intermediary in connection with the transactions contemplated hereby who might be entitled to a fee or any commission the receipt of which is conditioned upon consummation of the Merger. 3.28 Registration Statement; Proxy Statement/Prospectus. The information supplied by Stel for inclusion or incorporation by reference in the Registration Statement (as defined herein) as it relates to Stel, at the time the Registration Statement is declared effective by the SEC shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. The information supplied by Stel for inclusion in the proxy statement/prospectus to be sent to the stockholders of Stel in connection with the Stel Special Meeting (such proxy statement/prospectus, as amended and supplemented is referred to herein as the "Proxy Statement/Prospectus"), at the date the Proxy Statement/Prospectus is first mailed to stockholders, at the time of the Stel Special Meeting and at the Effective Time shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If at any time prior to the Effective Time any event with respect to Stel or any of its Subsidiaries shall occur which is required to be described in the Proxy Statement/Prospectus, such event shall be so described, and an amendment or supplement shall be promptly filed with the SEC and, as required by law, disseminated to the stockholders of Stel. 3.29 Title to Property. Stel and its Subsidiaries have good and valid title to all of their respective properties, interests in properties and assets, real and personal, reflected in the Stel Balance Sheet or acquired after the Reference Date, and have valid leasehold interests in all leased properties and assets, in each case free and clear of all mortgages, liens, pledges, charges or encumbrances of any kind or character, except (i) liens for current taxes not yet due and payable, (ii) such imperfections of title, liens and easements as do not and will not materially detract from or interfere with the use of the properties subject thereto or affected thereby, or otherwise materially impair business operations involving such properties, (iii) liens securing debt reflected on the Stel Balance Sheet, (iv) 34 liens recorded pursuant to any Environmental Law or (v) liens which would not, individually or in the aggregate, have a Stel Material Adverse Effect. Schedule 3.29 of the Stel Disclosure Statement identifies each parcel of real property owned or leased by Stel or any of its Subsidiaries. 3.30 Year 2000 Compliance. All of Stel's products (including products sold to date, products currently being sold or products under development), both individually and when operating in conjunction with all other systems or products with which they are designed to interface, and all computer software and hardware (including microcode, firmware, system and application programs, files, databases, computer services, and microcontrollers, including those embedded in computer and noncomputer equipment) contained in Stel's products (including products sold to date, products currently being sold or products under development) are Year 2000 Compliant. "Year 2000 Compliant" means that such hardware or software will: (a) process date data from at least the years 1900 through 2101 without error or interruption; (b) maintain functionality with respect to the introduction, processing, or output of records containing dates falling on or after January 1, 2000; and (c) be interoperable with other software or hardware which may deliver records to, receive records from, or interact with such hardware or software in the course of conducting the business of Stel, including processing data and manufacturing the products of Stel. All of Stel's internal computer systems are, both individually and in conjunction with all other systems with which they interface, Year 2000 Compliant. Stel has made inquiries of its manufacturers, suppliers and customers and, to its knowledge, Stel is not relying on any third party whose systems are not Year 2000 Compliant. Stel does not have any material expenses or other material liabilities associated with securing Year 2000 Compliance, or making contingency arrangements to address Year 2000 Compliance issues, with respect to Stel's products (including products sold to date, products currently being sold or products under development), internal computer systems or the computer systems or products or services of Stel's manufacturers, suppliers or customers. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF NEWBRIDGE AND MERGER SUB Newbridge and Merger Sub make to Stel the representations and warranties contained in this Article IV, in each case subject to the exceptions set forth in the disclosure statement, dated as of the date hereof, delivered by Newbridge to Stel in connection with the execution of this Agreement (the "Newbridge Disclosure Statement"). The Newbridge Disclosure Statement shall be arranged in schedules corresponding to the numbered and lettered Sections of this Article IV, and the disclosure in any schedule of the Newbridge Disclosure Statement shall qualify only the corresponding Section of this Article IV. 35 4.1 Organization, Etc. (a) Each of Newbridge, its material subsidiaries listed on Section 4.1(a) of the Newbridge Disclosure Statement (the "Newbridge Material Subsidiaries") and Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Newbridge and the Newbridge Material Subsidiary are each duly qualified as a foreign Person to do business, and are each in good standing, in each jurisdiction where the character of its owned or leased properties or the nature of its activities makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually and in the aggregate, have an Newbridge Material Adverse Effect. None of Newbridge or any Newbridge Material Subsidiary is in violation of any provision of its certificate of incorporation, bylaws or any other charter document. For the purposes of this Agreement, "Newbridge Material Adverse Effect" means any change, event or effect that is materially adverse to the general affairs, business, operations, assets, condition (financial or otherwise) or results of operations of Newbridge and the Newbridge Material Subsidiaries taken as a whole. (b) Neither Newbridge, the Newbridge Material Subsidiaries nor Merger Sub is in violation of any provision of its certificate of incorporation, bylaws or other charter documents. 4.2 Authority Relative to This Agreement. Each of Newbridge and Merger Sub has full corporate power and authority to execute and deliver this Agreement, the Stock Option Agreement and the Technology Option Agreement, as applicable, and to consummate the Merger and the other transactions contemplated hereby and thereby. The execution and delivery of this Agreement, the Stock Option Agreement and the Technology Option Agreement, and the consummation of the Merger and the other transactions contemplated hereby and thereby, have been duly and validly authorized by the board of directors of each of Newbridge and Merger Sub, as applicable, and no other corporate proceedings on the part of either Newbridge or Merger Sub are necessary to authorize this Agreement, the Stock Option Agreement or the Technology Option Agreement or to consummate the Merger and the other transactions contemplated hereby and thereby. Each of this Agreement, the Stock Option Agreement and the Technology Option Agreement has been duly and validly executed and delivered by Newbridge and Merger Sub, as applicable, and, assuming due authorization, execution and delivery by Stel, constitutes a valid and binding agreement of each of Newbridge and Merger Sub as applicable, enforceable against each of them in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. 36 4.3 No Violations, Etc. No filing with or notification to, and no permit, authorization, consent or approval of, any Government Entity is necessary on the part of either Newbridge or Merger Sub for the consummation by Newbridge or Merger Sub of the Merger or the other transactions contemplated hereby, and by the Stock Option Agreement and the Technology Option Agreement, except for (i) the filing of the Certificate of Merger as required by Delaware Law, (ii) the filing with the SEC and the effectiveness of the Registration Statement, (iii) the applicable requirements of the Exchange Act, state or Canadian provincial securities or "blue sky" laws, state takeover laws and the listing requirements of the NYSE and the Toronto Stock Exchange, (iv) any filings required under and in compliance with the HSR Act, and (v) the voluntary notice under the Exon- Florio Amendment. Neither the execution and delivery of this Agreement, the Stock Option Agreement and the Technology Option Agreement, nor the consummation of the Merger or the other transactions contemplated hereby or thereby, nor compliance by Newbridge and Merger Sub with all of the provisions hereof and thereof will (i) conflict with or result in any breach of any provision of the certificate of incorporation, bylaws or other charter documents of Newbridge or any Newbridge Material Subsidiary, (ii) violate any material order, writ, injunction, decree, statute, rule or regulation applicable to Newbridge, any Newbridge Material Subsidiary or by which any of their properties or assets may be bound, or (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default, or give rise to any right of termination, cancellation, acceleration, redemption or repurchase under, any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Newbridge or any Newbridge Material Subsidiary is a party or by which any of them or any of their properties or assets may be bound. 4.4 Capitalization. The authorized capital stock of Newbridge consists of an unlimited number of Common Shares, of which there were 180,427,602 shares issued and outstanding as of June 17, 1999, and an unlimited number of participating Preferred Shares, of which no shares are issued or outstanding. The authorized capital stock of Merger Sub consists of 1,000 shares of Common Stock, $.01 par value, 1,000 of which, as of the date hereof, are issued and outstanding and are held by Newbridge. Merger Sub was formed for the purpose of consummating the Merger and has no material assets or liabilities except as necessary for such purpose. All outstanding shares of Newbridge Common Stock are duly authorized, validly issued, fully paid and nonassessable and are not subject to preemptive rights created by statute, the certificate of incorporation or bylaws of Newbridge or any agreement to which Newbridge is a party or by which it is bound. 4.5 Registration Statement; Proxy Statement/Prospectus. The information supplied by Newbridge for inclusion or incorporation by reference in the Registration Statement as it relates to Newbridge or Merger Sub, at the time the Registration Statement is declared effective, shall not contain any untrue statement of a material fact 37 or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading. If at any time prior to the Effective Time any event with respect to Newbridge or any Newbridge Material Subsidiary shall occur which is required to be described in the Registration Statement, such event shall be so described, and an amendment or supplement shall be promptly filed with the SEC and, as required by law, disseminated to the shareholders of Stel. 4.6 SEC Filings. Newbridge has filed with the SEC all required forms, reports, registration statements and documents required to be filed by it with the SEC (collectively, all such forms, reports, registration statements and documents filed after May 1, 1996 are referred to herein as the "Newbridge SEC Reports"), all of which complied as to form when filed in all material respects with the applicable provisions of the Securities Act and the Exchange Act, as the case may be. Accurate and complete copies of the Newbridge SEC reports have been made available to Stel. As of their respective dates the Newbridge SEC Reports (including all exhibits and schedules thereto and documents incorporated by reference therein) did not contain any 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, in light of the circumstances under which they were made, not misleading. 4.7 Compliance with Laws. Neither Newbridge nor any Newbridge Material Subsidiary has violated or failed to comply with any statute, law, ordinance, rule or regulation (including, without limitation, relating to the export or import of goods or technology) of any foreign, federal, state or local government or any other governmental department or agency, except where any such violations or failures to comply would not, individually or in the aggregate, have a Newbridge Material Adverse Effect. Newbridge and the Newbridge Material Subsidiaries have all permits, licenses and franchises from governmental agencies required to conduct their businesses as now being conducted and as proposed to be conducted, except for those the absence of which would not, individually or in the aggregate, have an Newbridge Material Adverse Effect. 4.8 Financial Statements. Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in the Newbridge SEC Reports (the "Newbridge Financial Statements"), (a) was prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (b) fairly presented the consolidated financial position of Newbridge and its Subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, consistent with the books and records of Newbridge, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount. The 38 balance sheet of Newbridge contained in Newbridge's Form 10-K for the fiscal year ended May 2, 1999 is hereinafter referred to as the "Newbridge Balance Sheet." 4.9 Absence of Undisclosed Liabilities. Neither Newbridge nor any of its Subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) other than (i) liabilities included in the Newbridge Balance Sheet and the related notes to the financial statements, (ii) normal or recurring liabilities incurred since May 2, 1999 in the ordinary course of business consistent with past practice, which, individually or in the aggregate, are not or would not be reasonably likely to have, an Newbridge Material Adverse Effect and (iii) liabilities under this Agreement, the Stock Option Agreement and the Technology Option Agreement. 4.10 Absence of Changes or Events. Except as contemplated by this Agreement, between May 2, 1999, and the date of this Agreement, no Newbridge Material Adverse Effect has occurred. 4.11 Litigation. (a) Except as set forth in the Newbridge SEC Reports, there is no Action pending or, to the knowledge of Newbridge, threatened against Newbridge or any of its Subsidiaries, or any of their respective officers and directors (in their capacities as such), or involving any of their assets, before any court, or governmental or regulatory authority or body, or arbitration tribunal, except for those Actions which, individually or in the aggregate, would not have an Newbridge Material Adverse Effect. There is no Action pending or, to the knowledge of Newbridge, threatened which in any manner challenges, seeks to, or is reasonably likely to prevent, enjoin, alter or delay the transactions anticipated by this Agreement. (b) There is no outstanding judgment, order, writ, injunction or decree of any court, governmental agency or arbitration tribunal in a proceeding to which Newbridge, any Newbridge Material Subsidiary or any of their assets is a party, or by which Newbridge, any Newbridge Material Subsidiary or any of their assets is bound. ARTICLE V COVENANTS 5.1 Conduct of Business During Interim Period. Except as contemplated or required by this Agreement or as expressly consented to in writing by Newbridge, during the period from the date of this Agreement to the earlier of the termination of this Agreement or the Effective Time, each of Stel and its Subsidiaries will (i) conduct its operations according to its ordinary and usual course of business consistent with past practice, (ii) use all commercially reasonable efforts to preserve intact its business organization, to keep available the services of its officers and employees in each business 39 function and to maintain satisfactory relationships with suppliers, distributors, customers and others having business relationships with it, and (iii) not take any action which would adversely affect its ability to consummate the Merger or the other transactions contemplated by this Agreement, the Stock Option Agreement or the Technology Option Agreement. Without limiting the generality of the foregoing, and except as otherwise expressly provided in this Agreement, prior to the earlier of the termination of this Agreement or Effective Time neither Stel nor any of its Subsidiaries will, without the prior written consent of Newbridge, directly or indirectly, do any of the following: (a) enter into, violate, amend or otherwise modify or waive any of the terms of, (i) any license or partnership, joint venture, or other agreement relating to the joint development or transfer of technology or Stel IP Rights; or (ii) any other agreements, commitments or contracts, except in the ordinary course of business and consistent with past practice; (b) (i) with respect to Stel's wireless broadband and satellite personal communications products, accept any new or incremental work orders from current customers or enter into any new contractual obligations with customers other than Newbridge and, (ii) with respect to Stel's telcom component products, agree to undertake research and development work for any third party with a term extending beyond May 31, 2000; (c) authorize, solicit, propose or announce an intention to authorize, recommend or propose, or enter into any agreement in principle or an agreement with any other person with respect to, any plan of liquidation or dissolution, any acquisition of a material amount of assets or securities, any disposition of a material amount of assets or securities, any material change in capitalization, or any partnership, association, joint venture, joint development, technology transfer, or other material business alliance; (d) fail to renew any insurance policy naming it as a beneficiary or a loss payee, or take any steps or fail to take any steps that would permit any insurance policy naming it as a beneficiary or a loss payee to be canceled, terminated or materially altered, except in the ordinary course of business and consistent with past practice and following written notice to Newbridge; (e) maintain its books and records in a manner other than in the ordinary course of business and consistent with past practice; (f) enter into any hedging, option, derivative or other similar transaction or any foreign exchange position or contract for the exchange of currency other than in the ordinary course of business and consistent with past practice; (g) institute any change in its accounting methods, principles or practices other than as required by GAAP, or the rules and regulations promulgated by 40 the SEC, or revalue any of its respective assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivables; (h) pay, discharge or satisfy any material claims, liabilities or obligations (absolute, accrued, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities (including accounts payable) in the ordinary course of business and consistent with past practice, or collect, or accelerate the collection of, any amounts owed (including accounts receivable) other than the collection in the ordinary course of business; (i) split, combine or reclassify any shares of its capital stock; (j) issue any capital stock or other options, warrants or rights to purchase or acquire capital stock or change the terms of any such outstanding securities, except that Stel may (i) issue capital stock upon the exercise of options, warrants or rights outstanding as of the date of this Agreement and (ii) accelerate those Stel Options that are not to be assumed or substituted with equivalent options or other economic benefits by Newbridge or by the purchasers of Stel's Non-core Assets; (k) waive, release, assign, settle or compromise any material claim or litigation, or commence a lawsuit other than (i) for the routine collection of bills, (ii) the settlement of the litigation with Cabletron Systems, Inc., (iii) in such cases where Stel determines in good faith that failure to commence suit would result in the material impairment of a valuable aspect of its business, provided that Stel consults with Newbridge prior to the filing of such a suit, or (iv) for a breach of this Agreement; (l) in respect of any Taxes, make or change any material election change any accounting method, enter into any closing agreement, settle any material claim or assessment, or consent to any extension or waiver of the limitation period applicable to any material claim or assessment except as required by applicable law; (m) take or agree to take, any of the actions described in Section 3.10, or any action which would make any of its representations or warranties contained in this Agreement untrue or incorrect or prevent it from performing or cause it not to perform its covenants hereunder. 5.2 No Solicitation. (a) From and after the date of this Agreement until the Effective Time or termination of this Agreement pursuant to Article VIII, Stel and its Subsidiaries will not, nor will they authorize or permit any of their respective officers, directors, affiliates, agents or employees or any investment banker, attorney or other advisor or representative retained by any of them to, directly or indirectly, (i) solicit, initiate, encourage or induce the making, submission or announcement of any Acquisition Proposal (as defined in 41 Section 5.2(c)), (ii) participate in any discussions or negotiations regarding, or furnish to any person any non-public information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any Acquisition Proposal, (iii) engage in discussions with any person with respect to any Acquisition Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v) enter into any letter of intent or similar document or any agreement or commitment contemplating or otherwise relating to any Acquisition Transaction (as defined in Section 5.2(c)). Notwithstanding anything to the contrary contained in this Section 5.2 or in any other provision of this Agreement, Stel and its board of directors (i) may participate in discussions or negotiations with or furnish non-public information to any third party that has made an unsolicited Acquisition Proposal (a "Potential Acquiror") and/or (ii) subject to the provisions of Section 5.4(c), may approve or accept an unsolicited Acquisition Proposal, in each case only if the board of directors of Stel determines in good faith (A) after receiving written advice from its financial advisor, that such Acquisition Proposal is a Superior Proposal (as defined in Section 5.2(d) hereof), and (B) following consultation with outside legal counsel, that the failure to participate in such discussions or negotiations or to furnish such information or approve or accept an Acquisition Proposal would violate the board's fiduciary duties under applicable law. Stel may not furnish any non-public information to a Potential Acquiror unless it is furnished pursuant to a confidentiality agreement containing provisions at least as favorable to Stel as the confidentiality provisions of the Confidentiality Agreement (as defined in Section 5.3) and is simultaneously provided to Newbridge. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in this Section 5.2(a) by any officer, director or employee of Stel or any of its Subsidiaries or any investment banker, attorney or other advisor or representative of Stel or any of its Subsidiaries shall be deemed to be a breach of this Section 5.2(a) by Stel. (b) In addition to the obligations of Stel set forth in Section 5.2(a), Stel as promptly as practicable, and in any event within 24 hours, shall advise Newbridge orally and in writing of any Acquisition Proposal or any request for non-public information or inquiry which Stel reasonably believes would lead to an Acquisition Proposal or to any Acquisition Transaction, the material terms and conditions of such Acquisition Proposal, request or inquiry, and the identity of the person or group making any such Acquisition Proposal, request or inquiry. Stel will keep Newbridge informed as promptly as practicable in all material respects of the status and details (including material amendments or proposed material amendments) of any such Acquisition Proposal, request or inquiry. (c) For purposes of this Agreement, "Acquisition Proposal" shall mean any offer or proposal made by a Third Party (as defined below) relating to any Acquisition Transaction. For purposes of this Agreement, "Acquisition Transaction" shall mean any transaction or series of related transactions involving: (i) any purchase 42 from Stel or acquisition by any Person (or any group of Persons acting in concert for the specific purpose of allowing Stel to evade the provisions of this Section 5.2) other than Newbridge, Stel or Merger Sub or any affiliate thereof (a "Third Party") of 15% or more of the total interest in the total outstanding voting securities of Stel or any of its Subsidiaries or any tender offer or exchange offer that if consummated would result in any Third Person (or its shareholder) beneficially owning 15% or more of the total outstanding voting securities of Stel or any of its Subsidiaries; (ii) any merger, consolidation, business combination or similar transaction involving Stel or any of its Subsidiaries; (iii) any sale, lease (other than in the ordinary course of business), exchange, transfer, license (other than in the ordinary course of business), acquisition or disposition of a material portion of the assets of Stel (excluding the Non-core Assets); (iv) any liquidation or dissolution of Stel; or (v) the acquisition by a Third Party (or potential acquisition upon the completion of a transaction or series of related transactions) of control of the board of directors of Stel or the election or appointment of nominees of a Third Party (or the ability of a Third Party to elect or appoint its nominees) to a majority of the seats on the board of directors of Stel. (d) The term "Superior Proposal" means any bona fide Acquisition Proposal, made in writing and not initiated, solicited or encouraged in violation of Section 5.2(a) of this Agreement, on terms which the board of directors of Stel determines in good faith to be more favorable to Stel and its stockholders or to its stockholders than the Merger (after receiving the written advice from Stel's financial advisor that the value of the consideration provided for in such proposal is superior to the value of the consideration provided for in the Merger), for which financing, to the extent required, is then committed or which, in the good faith judgment of the board of directors of Stel, after receiving written advice from its financial advisor, is reasonably capable of being financed by the Potential Acquiror. 5.3 Access to Information. From the date of this Agreement until the Effective Time, Stel will afford Newbridge and its authorized representatives (including counsel, environmental and other consultants, accountants, auditors and agents) full access during normal business hours and upon reasonable notice to all of its facilities, personnel and operations and to all books and records of it and its Subsidiaries, will permit Newbridge and its authorized representatives to conduct inspections as they may reasonably request and will instruct its officers and those of its Subsidiaries to furnish such persons with such financial and operating data and other information with respect to its business and properties as they may from time to time request, subject to the restrictions set forth in the Confidentiality Agreement (as defined below). Newbridge and Merger Sub agree that each of them will treat any such information in accordance with the Confidentiality Agreement, effective as of March 1, 1999, between Newbridge and Stel (the "Confidentiality Agreement"), which Confidentiality Agreement, except for the standstill provisions, shall remain in full force and effect in accordance with its terms. 43 5.4 Special Meeting; Registration Statement; Board Recommendation. (a) Promptly after the date hereof, Stel will take all action necessary in accordance with Delaware Law and its certificate of incorporation and bylaws to convene a meeting of Stel's stockholders to consider adoption and approval of this Agreement and approval of the Merger (the "Stel Special Meeting") to be held as promptly as practicable, and in any event (to the extent permissible under applicable law) within 45 days after the declaration of effectiveness of the Registration Statement. Subject to Section 5.4(c), Stel will use its commercially reasonable efforts to solicit from its stockholders proxies in favor of the adoption and approval of this Agreement and the approval of the Merger and will take all other action necessary or advisable to secure the vote or consent of its stockholders required by the rules of Nasdaq or Delaware Law to obtain such approvals. Notwithstanding anything to the contrary contained in this Agreement, Stel may adjourn or postpone the Stel Special Meeting to the extent necessary to ensure that any necessary supplement or amendment to the Prospectus/Proxy Statement is provided to Stel's stockholders in advance of a vote on the Merger and this Agreement or, if as of the time for which the Stel Special Meeting is originally scheduled (as set forth in the Prospectus/Proxy Statement) there are insufficient shares of Stel Common Stock represented (either in person or by proxy) to constitute a quorum necessary to conduct the business of the Stel Special Meeting. Stel shall ensure that the Stel Special Meeting is called, noticed, convened, held and conducted, and that all proxies solicited by Stel in connection with the Stel Special Meeting are solicited, in compliance with the Delaware Law, Stel's certificate of incorporation and bylaws, the rules of Nasdaq and all other applicable legal requirements. Stel's obligation to call, give notice of, convene and hold the Stel Special Meeting in accordance with this Section 5.4(a) shall not be limited to or otherwise affected by the commencement, disclosure, announcement or submission to Stel of any Acquisition Proposal, or by any withdrawal, amendment or modification of the recommendation of the board of directors of Stel with respect to the Merger and/or this Agreement. (b) Subject to Section 5.4(c), (i) the board of directors of Stel shall unanimously recommend that Stel's stockholders vote in favor of and adopt and approve this Agreement and approve the Merger at the Stel Special Meeting; (ii) Stel shall cause the Prospectus/Proxy Statement to include a statement to the effect that the board of directors of Stel has unanimously recommended that Stel's stockholders vote in favor of and adopt and approve this Agreement and the Merger at the Stel Special Meeting; and (iii) neither the board of directors of Stel nor any committee thereof shall withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in a manner adverse to Newbridge, the unanimous recommendation of the board of directors of Stel that Stel's stockholders vote in favor of and adopt and approve this Agreement and the Merger. For purposes of this Agreement, said recommendation of the board of directors shall be deemed to have been modified in a manner adverse to Newbridge if said recommendation shall no longer be unanimous, provided that, for all purposes of this 44 Agreement, an action by any board of directors or committee thereof shall be unanimous if each member of such board of directors or committee has approved such action other than (i) any such member who has appropriately abstained from voting on such matter because of an actual or potential conflict of interest and (ii) any such member who is unable to vote in connection with such action as a result of death or disability. (c) Nothing in Section 5.4(b) shall prevent the board of directors of Stel from withholding, withdrawing, amending or modifying its unanimous recommendation that Stel stockholders vote in favor of and adopt and approve this Agreement and approve the Merger if (i) a Superior Proposal is made to Stel and is not withdrawn, (ii) Stel shall have provided written notice to Newbridge (a "Notice of Superior Proposal") advising Newbridge that Stel has received a Superior Proposal, specifying the material terms and conditions of such Superior Proposal and identifying the person or entity making such Superior Proposal, (iii) Newbridge shall not have, within five business days of Newbridge's receipt of the Notice of Superior Proposal, made an offer that the board of directors of Stel by a majority vote determines in its good faith judgment (based on the written advice of its financial advisor) to be at least as favorable to Stel's stockholders as such Superior Proposal (it being agreed that the board of directors of Stel shall convene a meeting to consider any such offer by Newbridge promptly following the receipt thereof), (iv) after such board meeting, the board of directors of Stel shall have concluded in good faith, after consultation with its outside counsel, that, in light of such Superior Proposal, the withholding, withdrawal, amendment or modification of such recommendation is required in order for the board of directors of Stel to comply with its fiduciary obligations to Stel's stockholders under applicable law and (v) Stel shall not have violated any of the restrictions set forth in Section 5.2 or this Section 5.4(c). Subject to applicable laws, nothing contained in this Section 5.4(c) shall limit Stel's obligation to hold and convene the Stel Special Meeting (regardless of whether the unanimous recommendation of the board of directors of Stel shall have been withheld, withdrawn, amended or modified). If the Stel board has withheld, withdrawn, amended or modified its recommendation as provided in this Section 5.4(c), Stel shall not be required to solicit proxies from its stockholders to vote in favor of and approve and adopt this Agreement and the Merger; provided that Stel shall use its commercially reasonable efforts to solicit a sufficient number of proxies (without regard to the manner in which votes are cast by those proxies) to ensure the presence of a quorum of stockholders at the Stel Special Meeting. (d) Nothing contained in this Agreement shall prohibit Stel or its board of directors from complying with the requirements of Rules 14d-9 and 14e- 2(a) promulgated under the Exchange Act. (e) As promptly as practicable after the execution of this Agreement, Stel and Newbridge shall mutually prepare, and Stel shall file with the SEC, a preliminary form of the Proxy Statement/Prospectus. As promptly as practicable following receipt of SEC comments on such preliminary Proxy Statement/Prospectus, Newbridge and Stel 45 shall mutually prepare a response to such comments. Upon resolution of all comments, Newbridge shall file the Registration Statement with the SEC. Newbridge and Stel shall use all commercially reasonable efforts to have the preliminary Proxy Statement/Prospectus cleared by the SEC and the Registration Statement declared effective by the SEC as promptly as practicable. Newbridge shall also take any action required to be taken under applicable state blue sky or securities laws in connection with Newbridge Common Stock to be issued in exchange for the shares of Stel Common Stock. Newbridge and Stel shall promptly furnish to each other all information, and take such other actions (including without limitation using all commercially reasonable efforts to provide any required consents of their respective independent auditors), as may reasonably be requested in connection with any action by any of them in connection with the preceding sentences of this Section 5.4(e). Whenever any party learns of the occurrence of any event which is required to be set forth in an amendment or supplement to the Proxy Statement/Prospectus, the Registration Statement or any other filing made pursuant to this Section 5.4(e), Newbridge or Stel, as the case may be, shall promptly inform the other of such occurrence and cooperate in filing with the SEC or its staff and/or mailing to stockholders of Stel such amendment or supplement. 5.5 Commercially Reasonable Efforts. Subject to the terms and conditions herein provided, Newbridge, Merger Sub and Stel shall use all commercially reasonable efforts to take, or cause to be taken, all other actions and do, or cause to be done, all other things necessary, proper or appropriate under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement, including, without limitation, (a) promptly filing Notification and Report Forms under the HSR Act with the Federal Trade Commission (the "FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") and responding as promptly as practicable to any inquiries received from the FTC or the Antitrust Division for additional information or documentation, (b) promptly filing a notification with the Committee on Foreign Investment in the United States ("CFIUS") under the Exon- Florio Amendment and responding as promptly as practicable to any inquiries received from CFIUS for additional information or documentation, including, without limitation, taking such actions as may be required by the U.S. Department of Defense to mitigate foreign ownership, control or influence with respect to the performance of classified Government Contracts; (c) obtaining all necessary governmental and private party consents, approvals or waivers, and (d) lifting any legal bar to the Merger and the exercise of the option granted in the Stock Option Agreement. Newbridge shall cause Merger Sub to perform all of its obligations under this Agreement and shall not take any action which would cause Stel to fail to perform its obligations hereunder. Stel shall not take any action which would cause Newbridge or Merger Sub to fail to perform their obligations hereunder. 5.6 Public Announcements. Before issuing any press release or otherwise making any public statement with respect to the Merger or any of the other transactions contemplated hereby, Newbridge, Merger Sub and Stel agree to consult with each other 46 as to its form and substance, and agree not to issue any such press release or general communication to employees or make any public statement prior to obtaining the consent of the other (which shall not be unreasonably withheld or delayed), except as may be required by applicable law or by the rules and regulations of or listing agreement with the NYSE, the Nasdaq, The Toronto Stock Exchange or as may otherwise be required by of the NYSE, Nasdaq, the SEC or Canadian securities authorities. 5.7 Notification of Certain Matters. Each of Stel and Newbridge shall promptly notify the other party of the occurrence or non-occurrence of any event the respective occurrence or non-occurrence of which would be likely to cause any condition to the obligations of the notifying party to effect the Merger not to be fulfilled. Each of Stel and Newbridge shall also give prompt notice to the other of any communication from any Person alleging that the consent of such Person is or may be required in connection with the Merger or other transactions contemplated hereby. 5.8 Indemnification. (a) The certificate of incorporation and bylaws of the Surviving Corporation shall contain, and Newbridge shall cause the Surviving Corporation to fulfill and honor, the provisions with respect to indemnification set forth in the certificate of incorporation and bylaws of Stel as of the date of this Agreement, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of individuals who, immediately prior to the Effective Time, were directors and officers of Stel, unless such modification is required by law. (b) After the Effective Time the Surviving Corporation, to the fullest extent permitted under applicable law or under the Surviving Corporation's certificate of incorporation or bylaws, shall hold harmless, (i) each present director or officer of Stel and each of its Subsidiaries, and (ii) each person identified on Schedule 5.8(b) as presently serving at the request of Stel or any Subsidiary of Stel as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise (collectively, the "Indemnified Parties") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, to the extent arising out of or pertaining to any action or omission in his or her capacity as a director or officer of Stel arising out of or pertaining to the transactions contemplated by this Agreement for a period of six years after the date hereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) any counsel retained by the Indemnified Parties for any period after the Effective Time must be reasonably satisfactory to Newbridge, (ii) after the Effective Time, Newbridge shall cause the 47 Surviving Corporation to pay the reasonable fees and expenses of such counsel, promptly after statements therefor are received and (iii) Newbridge shall cause the Surviving Corporation to cooperate in the defense of any such matter; provided, however, that neither Newbridge nor the Surviving Corporation shall be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld); and provided, further, that, in the event that any claim or claims for indemnification are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until the disposition of any and all such claims; and provided, further, that nothing in this Section 5.8 shall impair any rights or obligations of any present or former directors or officers of Stel. The Indemnified Parties as a group may retain only one law firm (in addition to local counsel) to represent them with respect to any single action unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties. In the event Newbridge or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, to the extent necessary to effectuate the purposes of this Section 5.8, proper provision shall be made so that the successors and assigns of Newbridge and the Surviving Corporation assume the obligations of such party set forth in this Section 5.8 and none of the actions described in clause (i) or (ii) shall be taken until such provision is made. (c) For a period of six years after the Effective Time, Newbridge shall or shall cause the Surviving Corporation to maintain in effect, if available, directors' and officers' liability insurance covering those persons who are currently covered by Stel's directors' and officers' liability insurance policy on terms comparable to those applicable under the policy of directors' and officers' liability insurance currently maintained by Stel; provided, however, that in no event shall Newbridge or the Surviving Corporation be required to expend in excess of 150% of the annual premium currently paid by Stel for such coverage, and that if the annual premiums of such insurance coverage exceed such amount, the Surviving Corporation shall be obligated instead to obtain a policy with the greatest coverage available for a cost not exceeding such amount. (d) Newbridge shall cause the Surviving Corporation to perform its obligations under this Section 5.8 and shall, in addition, guarantee, as co- obligor with the Surviving Corporation, the performance of such obligations by the Surviving Corporation. 5.9 Affiliate Agreements. Concurrently with the execution and delivery hereof, Stel shall deliver to Newbridge a list (reasonably satisfactory to counsel for Newbridge), setting forth the names of all Persons who are expected to be, at the Effective Time, in Stel's reasonable judgment, "affiliates" of Stel as that term is used in paragraphs (c) and 48 (d) of Rule 145 under the Securities Act (the "Stel Affiliates"). Stel shall furnish such information and documents as Newbridge may reasonably request for the purpose of reviewing such list. Stel shall use commercially reasonable efforts to deliver a written agreement in substantially the form of Exhibit F hereto (a "Stel Affiliate Agreement") executed by each Person identified as a Stel Affiliate in the list furnished pursuant to this Section 5.9 within ten days of the execution of this Agreement. Stel shall deliver to Newbridge an updated list reflecting any change in the identity of the Stel Affiliates within five days of Stel's having knowledge of such change. In the event additional Persons become Stel Affiliates after the date hereof, Stel shall use commercially reasonable efforts to cause each such Person to deliver to Newbridge a written agreement in substantially the form of Exhibit F hereto with each such Person within ten days after Stel has knowledge that such Person has become a Stel Affiliate. 5.10 Listings. Newbridge shall use commercially reasonable efforts to list on the NYSE, upon official notice of issuance, the shares of Newbridge Common Stock to be issued in connection with the Merger. Newbridge shall use commercially reasonable efforts to list on the Toronto Stock Exchange, subject to the satisfaction of customary conditions, the shares of Newbridge Common Stock to be issued in connection with the Merger. 5.11 Resignation of Directors and Officers. Prior to the Effective Time, Stel shall deliver to Newbridge the resignations of such directors and officers of Stel and its Subsidiaries as Newbridge shall specify at least ten business days prior to the Closing, effective at the Effective Time. 5.12 Form S-8. No later than ten business days after the Effective Time, Newbridge shall file with the SEC a Registration Statement, on Form S-8 or other appropriate form under the Securities Act to register Newbridge Common Stock issuable upon exercise of the Newbridge Exchange Options. Newbridge shall use commercially reasonable efforts to cause such Registration Statement to remain effective until the exercise or expiration of such options. 5.13 SEC Filings. (a) Stel will deliver promptly to Newbridge true and complete copies of each report, registration statement or statement mailed by it to its security holders generally or filed by it with the SEC, in each case subsequent to the date hereof and prior to the Effective Time. As of their respective dates, such reports, including the consolidated financial statements included therein, and statements (excluding any information therein provided by Newbridge or Merger Sub, as to which Stel makes no representation) will not contain any 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, in light of the circumstances under which they are made, not misleading and will comply in all material respects with all applicable requirements of law. Each of the consolidated 49 financial statements (including, in each case, any related notes thereto) contained in such reports, (i) shall comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, (ii) shall be prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) shall fairly present the consolidated financial position of Stel and its Subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount. (b) Newbridge will deliver promptly to Stel true and complete copies of each report filed by it with the SEC subsequent to the date hereof and prior to the Effective Time. As of their respective dates, such reports, including the consolidated financial statements included therein, and statements (excluding any information therein provided by Stel, as to which Newbridge makes no representation) will not contain any 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, in light of the circumstances under which they are made, not misleading and will comply in all material respects with all applicable requirements of law. Each of the consolidated financial statements (including, in each case, any related notes thereto) contained in such reports (i) shall comply as to form in all material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, (ii) shall be prepared in accordance with GAAP applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto or, in the case of unaudited interim financial statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) shall fairly present the consolidated financial position of Newbridge and its Subsidiaries as at the respective dates thereof and the consolidated results of its operations and cash flows for the periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not, or are not expected to be, material in amount. 5.14 Employee Matters. Newbridge agrees to make severance payments to persons who are Stel employees immediately prior to the Effective Time and who are terminated on or within 90 days of the Effective Time and to pay to employees of Stel as of the Effective Time the other benefits as set forth in Schedule 5.14. 5.15 Termination of Stel Purchase Plan. Stel, acting through its board of directors, shall take all action necessary to discontinue the Stel Purchase Plan effective upon purchase of Stel Common Stock for the Participation Period ending September 30, 1999. 50 5.16 Stock Option Agreement. Stel agrees not to take any action that would impede, bar, restrict or otherwise interfere in any manner with Newbridge's rights under the Stock Option Agreement. 5.17 Technology Option Agreement. Stel agrees not to take any action that would impede, bar, restrict or otherwise interfere in any manner with Newbridge's rights under the Technology Option Agreement. 5.18 Non-core Asset Sale. Stel shall use its best efforts to cause the sale or sales (the "Non-core Asset Sale") of all assets (or the shares of the legal entity or entities to which they belong) of all Stel's current operating divisions other than its wireless broadband products division, its telecom component products division and its satellite personal communications division (the "Non-core Assets") for an aggregate purchase price which will result in after-tax net cash proceeds of not less than U.S. $102,000,000. Newbridge agrees that the Non-core Asset Sale may include net cash generated by the Non-core Assets subsequent to March 31, 1999. Stel agrees that it will inform Newbridge of any proposals, discussions or negotiations concerning the sale of such divisions and that it will include Newbridge and Newbridge's advisors, including CIBC World Markets, in all such discussions and negotiations regarding the Non- core Asset Sale. Newbridge and Stel agree to use commercially reasonable efforts to maximize the Non-core Asset Sale Proceeds. 5.19 Assumption of Options. The parties will use all commercially reasonable efforts to obtain the agreement of purchasers of the Non-core Assets to assume or substitute equivalent options or other economic benefits for the unvested Stel Options that would not qualify for accelerated vesting pursuant to Stel's Stock Option Plan as of the Effective Time held by Stel employees to be hired by such purchasers. 5.20 Transitional Contract-Manufacturing Arrangement. Stel and Newbridge will use all commercially reasonable efforts to enter into a transitional contract manufacturing arrangement with the contract manufacturing facility that will be sold as part of the Non-core Asset Sale. 5.21 Stel IP Rights. Stel will use all commercially reasonable efforts to amend any agreements giving any Third Party rights to Stel IP Rights as a result of the execution and delivery of this Agreement, the Stock Option Agreement, the Technology Option Agreement or the consummation of the Merger and the other transactions contemplated hereby or thereby. 5.22 Appraisal Rights. Stel and Newbridge will take all necessary and appropriate action to enable the holders of Stel Common Stock to exercise appraisal rights, if available, under Section 262 of the Delaware Law and otherwise to comply with the terms of such statute. 51 ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF EACH PARTY The respective obligations of each party to this Agreement to effect the Merger shall be subject to the fulfillment on or before the Effective Time of each of the following conditions, any one or more of which may be waived in writing by all the parties hereto: 6.1 Registration Statement. The Registration Statement shall have become effective in accordance with the provisions of the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the SEC and remain in effect and no proceedings for such purpose shall be pending before or threatened by the SEC. 6.2 Stockholder Approval. The approval of the holders representing a majority of the outstanding shares of Stel Common Stock for adoption of the Merger Agreement and approval of the Merger shall have been obtained at the Stel Special Meeting or any adjournment or postponement thereof. 6.3 Listing of Additional Shares. The Newbridge Common Stock issuable in connection with the Merger shall have been approved for listing subject to official notice of issuance on the NYSE and shall have been approved for listing subject to the satisfaction of customary conditions on the Toronto Stock Exchange. 6.4 Government Clearances. The waiting periods applicable to consummation of the Merger under the HSR Act and Exon-Florio Amendment shall have expired or been terminated. Other than the filing of the Certificate of Merger which shall be accomplished as provided in Section 1.2, all authorizations, consents, orders or approvals of, or declarations or filings with, or expirations of waiting periods imposed by, any Government Entity the failure of which to obtain or comply with prior to the Effective Time would be reasonably likely to have a Stel Material Adverse Effect or a Newbridge Material Adverse Effect shall have been obtained or filed. 6.5 Statute or Decree. No writ, order, temporary restraining order, preliminary injunction or injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental body or authority, which remains in effect, and prohibits the consummation of the Merger or otherwise makes it illegal, nor shall any governmental agency have instituted any action, suit or proceeding which remains pending and which seeks, and which is reasonably likely, to enjoin, restrain or prohibit the consummation of the Merger in accordance with the terms of this Agreement. 52 ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF STEL AND NEWBRIDGE 7.1 Additional Conditions To The Obligations Of Stel. The obligations of Stel to effect the Merger shall be subject to the fulfillment of each of the following additional conditions, any one or more of which may be waived in writing by Stel: (a) The representations and warranties of Newbridge and Merger Sub contained in this Agreement (without regard to any materiality exceptions or provisions therein) shall be true and correct, in all material respects, as of the Effective Time, with the same force and effect as if made at the Effective Time, except (i) for changes specifically permitted by the terms of this Agreement, (ii) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date, and (iii) for such inaccuracies as, in the aggregate, would not reasonably be expected to have a Newbridge Material Adverse Effect. (b) Newbridge and Merger Sub shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by them on or prior to the Closing Date. (c) Newbridge and Merger Sub shall have furnished certificates of their respective officers to evidence compliance with the conditions set forth in Sections 7.1(a) and (b) of this Agreement. (d) Stel shall have received an opinion of Thelen Reid & Priest LLP, counsel to Stel, dated as of the Closing Date, substantially to the effect that on the basis of the facts, representations and assumptions set forth in such opinions, (i) the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code; (ii) each of Newbridge, Merger Sub and Stel will be a party to such reorganization within the meaning of Section 368(b) of the Code; and (iii) except with respect to cash received in lieu of fractional share interests in Newbridge Common Stock, no gain or loss will be recognized, for United States federal income tax purposes, by a stockholder of Stel as a result of the Merger with respect to the shares of Stel Common Stock converted into Newbridge Common Stock. (e) If the Non-core Asset Sale has not closed on or prior to the Effective Time, Newbridge and the Rights Agent (as defined in the CVR Agreement) shall have executed the CVR Agreement substantially in the form attached hereto as Exhibit E. --------- 7.2 Additional Conditions To The Obligations Of Newbridge And Merger Sub. The obligations of Newbridge and Merger Sub to effect the Merger shall be subject a 53 to the fulfillment of each of the following additional conditions, any one or more of which may be waived in writing by Newbridge: (a) The representations and warranties of Stel contained in this Agreement (without regard to any materiality exceptions or provisions therein) shall be true and correct, in all material respects, as of the Effective Time, with the same force and effect as if made at the Effective Time, except, (i) for changes related to the balance sheets or assets of the Non-core Assets, (ii) for changes in the prospects of Stel's constellation project, (iii) for other changes specifically permitted by the terms of this Agreement, (iv) that the accuracy of the representations and warranties that by their terms speak as of the date of this Agreement or some other date will be determined as of such date, and (v) for such inaccuracies as, in the aggregate, would not have a Stel Material Adverse Effect. (b) Stel shall have performed and complied in all material respects with all agreements, obligations and conditions required by this Agreement to be performed or complied with by it on or prior to the Closing Date. (c) Stel shall have furnished certificates of its officers to evidence compliance with the conditions set forth in Sections 7.2(a) and (b) of this Agreement. (d) Newbridge and Merger Sub shall have received an opinion of Heller Ehrman White & McAuliffe, counsel to Newbridge and Merger Sub, dated as of the Closing Date, substantially to the effect that on the basis of the facts, representations and assumptions set forth in such opinions, (i) the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code; (ii) each of Newbridge, Merger Sub and Stel will be a party to such reorganization within the meaning of Section 368(b) of the Code; and (iii) except with respect to cash received in lieu of fractional share interests in Newbridge Common Stock, no gain or loss will be recognized, for United States federal income tax purposes, by a stockholder of Stel as a result of the Merger with respect to the shares of Stel Common Stock converted into Newbridge Common Stock. (e) Any consents, approvals, notifications, disclosures, and filings and registrations listed in Schedule 3.3 of the Stel Disclosure Statement shall have been obtained or made. (f) Stel shall have entered into binding agreements reasonably acceptable to Newbridge with respect to the Non-core Asset Sale for an aggregate purchase price which will result in after-tax net cash proceeds to Stel of not less than U.S. $102,000,000. (g) Stel shall have delivered to Newbridge a statement that the interest in Stel is not a United States real property interest as contemplated by Section 1.1445-2(c)(3) of the regulations promulgated under the Code. 54 (h) Stel shall have entered into employment agreements or achieved retention arrangements which are satisfactory to Newbridge with Stel employees listed on Schedule 7.1(h). (i) Stel shall have delivered to Newbridge the resignations of such directors and officers of Stel and its Subsidiaries as Newbridge shall specify at least ten days prior to the Closing, effective at the Effective Time. (j) The aggregate number of shares of Stel Common Stock demanding or purporting to demand appraisal rights under Section 262 of the Delaware Law shall not exceed 10% of the outstanding shares of Stel Common Stock immediately prior to the Effective Time. (k) There shall not have occurred, since the date hereof, any Stel Material Adverse Effect, except for the occurrence of conditions specifically excepted in clauses (i) and (ii) of Section 7.2(a) hereof. ARTICLE VIII TERMINATION 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after the requisite approval of the stockholders of Stel: (a) by mutual written consent duly authorized by the boards of directors of Newbridge, Stel and Merger Sub; (b) by either Stel or Newbridge if the Merger shall not have been consummated by January 31, 2000 (the "End Date"), which date may be extended by mutual consent of the parties hereto; provided, however, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any party whose action or failure to act has proximately contributed to the failure of the Merger to occur on or before such date and such action or failure to act constitutes a material breach of this Agreement; (c) by either Stel or Newbridge if (i) a statute, rule, regulation or executive order shall have been enacted, entered or promulgated prohibiting the consummation of the Merger substantially on the terms contemplated hereby or (ii) a court of competent jurisdiction or other Government Entity shall have issued an order, decree, ruling or injunction, or taken any other action, having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger substantially on the terms contemplated hereby, and such order, decree, ruling, injunction or other action shall have become final and non-appealable; provided, that a party shall not be permitted to - -------- 55 terminate this Agreement pursuant to this Section 8.1(c) unless such party shall have used its reasonable efforts to remove such order, decree, ruling or injunction; (d) by either Stel or Newbridge if the required approval of the stockholders of Stel contemplated by this Agreement shall not have been obtained by reason of the failure to obtain the required vote at a meeting of Stel stockholders duly convened therefore or at any adjournment thereof; provided, however, that the right to terminate this Agreement under this Section 8.1(d) shall not be available to Stel where (i) Stel shall have breached in any material respect its obligations under this Agreement in any manner that shall have proximately contributed to the failure to obtain such stockholder approval (it being specifically understood that a withholding, withdrawal, amendment or modification of the board of directors recommendation to Stel stockholders to vote in favor of and approve and adopt this Agreement and approve the Merger in accordance with the conditions of Section 5.4(c) is not a breach of this Agreement) or (ii) such failure was caused by a breach of any Voting Agreement by a party thereto other than Newbridge; (e) by Newbridge if a Stel Triggering Event (as defined below) shall have occurred; (f) by Stel if (i) the Newbridge Closing Value is less than $24.00 per share, (ii) Newbridge does not exercise the Newbridge Adjustment Option or, if after Newbridge exercises such option, the Exchange Ratio is still less than the quotient obtained by dividing U.S. $30.00 by the Newbridge Closing Value, and (iii) Stel delivers a written termination notice prior to the close of business on the trading day immediately prior to the Stel Special Meeting. (g) by Stel, if there exists a breach or breaches of any representation or warranty of Newbridge or Merger Sub contained in this Agreement such that the Closing condition set forth in Section 7.1(a) or Section 7.1(b) would not be satisfied; provided, however, that if such breach or -------- ------- breaches are capable of being cured prior to the Effective Time such that such condition would be satisfied, then Stel shall not be permitted to terminate this Agreement pursuant to this Section 8.3(g) unless Stel shall have delivered to Newbridge written notice of such breach or breaches and such breach or breaches shall not have been so cured within 30 days after delivery to Newbridge of such written notice; provided, further, that Stel shall not be permitted to terminate ----------------- this Agreement pursuant to this Section 8.3(g) if Stel shall have breached in any material respect its obligations under this Agreement in any manner that shall have proximately caused such breach or breaches of Newbridge; or (h) by Newbridge, if there exists a breach or breaches of any representation or warranty of Stel contained in this Agreement such that the Closing condition set forth in Section 7.2(a) or 7.2(b) would not be satisfied; provided, however, that if such breach or breaches are capable of being cured - -------- ------- prior to the Effective Time such 56 that such condition would be satisfied, then Newbridge shall not be permitted to terminate this Agreement pursuant to this Section 8.1(h) unless Newbridge shall have delivered to Stel written notice of such breach or breaches and such breach or breaches shall not have been so cured within 30 days after delivery to Stel of such written notice; provided, further that Newbridge shall not be permitted -------- ------- to terminate this Agreement pursuant to this Section 8.2(h) if Newbridge shall have breached in any material respect its obligations under this Agreement in any manner that shall have proximately caused such breach or breaches of Stel. (i) For the purposes of this Agreement, a "Stel Triggering Event" shall be deemed to have occurred if: (i) the board of directors of Stel or any committee thereof shall for any reason have withdrawn or shall have amended or modified in a manner adverse to Newbridge its unanimous recommendation in favor of, the adoption and approval of the Agreement or the approval of the Merger; (ii) Stel shall have failed to include or maintain in the Prospectus/Proxy Statement the unanimous recommendation of the board of directors of Stel in favor of the adoption and approval of the Agreement and the approval of the Merger; (iii) the board of directors of Stel shall have failed to reaffirm its unanimous recommendation in favor of the adoption and approval of the Agreement and the approval of the Merger within five days after Newbridge requests in writing that such recommendation be reaffirmed; (iv) the board of directors of Stel or any committee thereof shall have failed to reject any Acquisition Proposal; (v) Stel shall have entered into any letter or intent or similar document or any agreement or commitment contemplating or otherwise relating to an Acquisition Proposal; (vi) subject to Stel's ability to adjourn or postpone a meeting pursuant to the third sentence of Section 5.4(a), Stel shall have failed to hold the Stel Special Meeting as promptly as practicable and in any event (to the extent permissible under applicable law) within 45 days after the declaration of the effectiveness of the Registration Statement; (vii) a tender or exchange offer relating to securities of Stel shall have been commenced by a Person unaffiliated with Newbridge and Stel shall not have sent to its security holders pursuant to Rule 14e-2 promulgated under the Securities Act, within ten business days after such tender or exchange offer is first published, sent or given, a statement disclosing that the board of directors of Stel recommends rejection of such tender or exchange offer; or (viii) Stel shall have breached any of its obligations under Section 5.2 of this Agreement. 8.2 Notice of Termination; Effect of Termination. Any termination of this Agreement under Section 8.1 will be effective immediately upon the delivery of a valid written notice of the terminating party to the other parties hereto. In the event of the termination of this Agreement as provided in Section 8.1, this Agreement shall be of no further force or effect, except (i) as set forth in the last sentence of Section 5.3, this Section 8.2, Section 8.3, Sections 9.4, 9.5, 9.6, 9.10, 9.11 and 9.12, each of which shall survive the termination of this Agreement, and (ii) nothing herein shall relieve any party from liability for any willful breach of this Agreement. No termination of this Agreement shall affect the obligations of the parties contained in the Confidentiality Agreement, the 57 Stock Option Agreement or the Technology Option Agreement, all of which obligations shall survive termination of this Agreement in accordance with their terms. 8.3 Fees and Expenses. (a) General. Except as set forth in this Section 8.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses whether or not the Merger is consummated; provided, however, that Newbridge and Stel shall share equally all fees and expenses, other than attorneys' and accountants' fees and expenses, incurred in relation to the printing and filing (with the SEC) of the Prospectus/Proxy Statement (including any preliminary materials related thereto) and the Registration Statement (including financial statements and exhibits) and any amendments or supplements thereto. (b) Stel Payments. (i) In the event that this Agreement is terminated by Newbridge pursuant to Section 8.1(e), Stel shall promptly, but in no event later than ten business days after the date of such termination, pay Newbridge a nonrefundable fee equal to U.S. $25 million in immediately available funds (the "Termination Fee"). (ii) In the event that this Agreement is terminated by Newbridge or Stel, as applicable, pursuant to Section 8.1 (b) or (d), (A) Stel shall pay Newbridge the Termination Fee only if following the date hereof and prior to the termination of this Agreement, a Third Party has publicly announced an Acquisition Proposal and within 12 months following the termination of this Agreement, Stel executes with a Third Party an agreement providing for an Acquisition Transaction or an Acquisition Transaction has been consummated and (B) such payment shall be made promptly, but in no event later than ten business days after the execution of such agreement. (iii) In the event that this Agreement is terminated by Newbridge or Stel pursuant to Section 8.1(d) and Stel is not required to pay Newbridge the Termination Fee, Stel shall reimburse Newbridge for all documented expenses incurred by Newbridge in connection with this Agreement, the Stock Option Agreement, the Technology Option Agreement and the transactions contemplated hereby (the "Newbridge Expenses") in immediately available funds not later than ten business days after the first anniversary of the execution of this Agreement. (iv) In the event that this Agreement is terminated by Newbridge pursuant to Section 8.1(h) because the Closing condition set forth in Section 7.2(b) is not satisfied, Stel shall promptly, but in no event later than ten business days after the date of such termination, reimburse Newbridge for the Newbridge Expenses in immediately available funds. 58 (v) Stel acknowledges that the agreements contained in this Section 8.3(b) are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, Newbridge would not enter into this Agreement; accordingly, if Stel fails to pay in a timely manner the amounts due pursuant to this Section 8.3(b), and, in order to obtain such payment, Newbridge makes a claim that results in a judgment against Stel for the amounts set forth in this Section 8.3(b), Stel shall pay to Newbridge its reasonable costs and expenses (including reasonable attorneys' fees and expenses) in connection with such suit, together with interest on the amounts set forth in this Section 8.3(b) at the prime rate of The Chase Manhattan Bank in effect on the date such payment was required to be made. Payment of the fees described in this Section 8.3(b) shall not be in lieu of damages incurred in the event of breach of this Agreement. ARTICLE IX MISCELLANEOUS 9.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Newbridge, Merger Sub and Stel at any time prior to the Effective Time; provided, however, that after approval of this Agreement by the stockholders of Stel, no such amendment or modification shall change the amount or form of the consideration to be received by Stel's stockholders in the Merger. 9.2 Waiver of Compliance; Consents. Any failure of Newbridge or Merger Sub, on the one hand, or Stel, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Stel or Newbridge or Merger Sub, respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 9.2. 9.3 Survival; Investigations. The respective representations and warranties of Newbridge, Merger Sub and Stel contained herein or in any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party hereto and shall not survive the Effective Time. 9.4 Notices. All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified 59 below (or at such other address for a party as shall be specified by like notice. Any such notice shall be effective upon receipt, if personally delivered or on the next business day following transmittal if sent by confirmed facsimile. Notices, including oral notices, shall be delivered as follows: if to Stel, to: Stanford Telecommunications, Inc. 1221 Crossman Avenue P.O. Box 3733 Sunnyvale, California 94089 Telephone: (408) 735-0818 Facsimile: (408) 745-2410 Attention: Gary Wolf with a copy to: Thelen Reid & Priest LLP 333 West San Carlos Street, 17th Floor San Jose, California 95110-2701 Telephone: (408) 292-5800 Facsimile: (408) 287-8040 Attention: Jay L. Margulies to Newbridge, or Merger Sub, to: Newbridge Networks Corporation 600 March Road, P.O. Box 13600 Kanata, Ontario, Canada K2K 2E6 Telephone: (613) 591-3600 Facsimile: (613) 599-3672 Attention: Peter Nadeau with a copy to: Heller Ehrman White & McAuliffe 525 University Avenue Palo Alto, California 94301 Telephone: (650) 324-7000 Facsimile: (650) 324-0638 Attention: Stephen C. Ferruolo (Matter #21969-0009) 9.5 Assignment; Third Party Beneficiaries. Neither this Agreement nor any right, interest or obligation hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or remedies upon any Person other than the parties hereto, with respect only to Section 5.8, the officers and directors of Stel, or as otherwise expressly provided herein. 60 9.6 Governing Law. This Agreement shall be governed by the laws of the State of Delaware without reference to principles of conflicts of laws. 9.7 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.8 Severability. In case any one or more of the provisions contained in this Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against a party hereto, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. 9.9 Interpretation. The Article and Section headings contained in this Agreement are solely for the purpose of reference and shall not in any way affect the meaning or interpretation of this Agreement. 9.10 Entire Agreement. This Agreement, including the exhibits hereto and the documents and instruments referred to herein, embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to herein and therein. 9.11 Definition of "law". When used in this Agreement "law" refers to any applicable law (whether civil, criminal or administrative) including, without limitation, common law, statute, statutory instrument, treaty, regulation, directive, decision, code, order, decree, injunction, resolution or judgment of any government, quasi-government, supranational, federal, state or local government, statutory or regulatory body, court, or agency. 9.12 Rules of Construction. Each party to this Agreement has been represented by counsel during the preparation and execution of this Agreement, and therefore waives any rule of construction that would construe ambiguities against the party drafting the agreement. 61 IN WITNESS WHEREOF, Newbridge Networks Corporation, Saturn Acquisition Corp. and Stanford Telecommunications, Inc. have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. NEWBRIDGE NETWORKS CORPORATION By: /s/ Alan G. Lutz ---------------- Title: President and Chief Operating Officer ------------------------------------- By: /s/ Peter Nadeau ---------------- Title: Vice President and General Counsel ---------------------------------- SATURN ACQUISITION CORP. By:/s/ Peter Nadeau ---------------- Title: President, Treasurer and Secretary ---------------------------------- STANFORD TELECOMMUNICATIONS, INC. By: /s/ Val P. Peline ----------------- Title: President and Chief Executive Officer ------------------------------------- By: /s/ James J. Spilker, Jr. -------------------------- Title: Chairman -------- 62 EX-10.1 3 LICENSE OPTION AGREEMENT EXHIBIT 10.1 WIRELESS BROADBAND PRODUCTS TECHNOLOGY LICENSE OPTION AGREEMENT BETWEEN STANFORD TELECOMMUNICATIONS INC. a Delaware Corporation having its principal place of business at 1221 Crossman Avenue, P.O. Box 3733, Sunnyvale, California 94089 ("Stel") AND NEWBRIDGE NETWORKS CORPORATION a Canadian Corporation having its principal place of business at 600 March Road, P.O. Box 13600, Kanata, Ontario, Canada K2K 2E6 ("Newbridge") This Agreement is made effective as of the 22nd day of June 1999 (the "Effective Date"). BACKGROUND A. Stel designs, manufactures and markets advanced digital communications products and systems to establish or enhance communications via satellites, terrestrial wireless and cable. B. Newbridge designs, manufactures, markets and services a comprehensive family of networking products and systems. C. Pursuant to that certain Agreement and Plan of Merger (the "Merger Agreement") executed concurrently herewith by Stel and Newbridge (each a "Party" and collectively "Parties") and Saturn Acquisition Corp., a Delaware corporation and wholly owned subsidiary of Newbridge ("Merger Sub"), as a condition and as a inducement to Newbridge and the Merger Sub to enter the Merger Agreement, Stel is providing an option to license Stel's wireless broadband products technology upon the terms and subject to the conditions set forth in this Agreement. THEREFORE THE PARTIES AGREE: 1. Definitions. The following capitalized terms shall have these meanings ascribed to them: 1.1 "Affiliate" means any person that controls, is controlled by or is under common control with a Party 1.2 "Agreement" means this Wireless Broadband Products Technology License Option Agreement. 1.3 "Change of Control" means an "Acquisition Transaction", as such term is defined in the Merger Agreement; provided, however, that the spin-off of the -------- ------- WBP business of Stel by distribution to Stel's stockholders shall not constitute a Change of Control, unless subsequent to such spin-off and during the Option Period an Acquisition Transaction occurs involving the new company conducting the WBP business. 1.4 "Escrow Agreement" means an escrow agreement to be entered into by the parties and an escrow agent (the "Escrow Agent") selected by the parties within 30 days of the Effective Date, which provides under the circumstances described in Section 3.2 the release to Newbridge of the Stel Designs and related information for the Stel Intellectual Property. 1.5 "Intellectual Property" means patents, copyrights, mask work rights, trade secrets and any other intellectual or industrial properties as may be recognized around the world, including without limitation, applications and registrations for any of the foregoing. 1.6 "License" has the meaning set forth in Section 2.3 1.7 "Licensed Patents" means: (i) the patent and patent applications specified in Exhibit A attached hereto; (ii) the resulting patents, reissues, --------- reexaminations, and continuations, continuations-in-part and divisionals of any of the foregoing; and (iii) corresponding foreign patent applications and resulting patents of any of the foregoing. 1.8 "Licensed Products" are products that incorporate or are produced by the practice of subject matter of Stel Intellectual Property or whose manufacture, use, sale, export, or offer for sale would constitute an infringement of Stel Intellectual Property but for the License granted under this Agreement. 1.9 "Option" has the meaning set forth in Section 2.1 1.10 "Option Period" means the period beginning on the Effective Date and ending on the earlier of: (i) May 24, 2001; (ii) nine months after the termination by 2 Newbridge of the Merger Agreement pursuant to Section 8.1(h) thereof; (iii) twelve months after the termination by either Party of the Merger Agreement pursuant to Section 8.1(b) or 8.1(c) thereof; and (iv) the date of termination if the Merger Agreement is terminated by Stel pursuant to Section 8.1(f) or Section 8.1(g) thereof. 1.11 "Stel Designs" means the designs for Stel's WBP specified in Exhibit ------- B attached hereto, including without limitation, the schematics, net lists, mask - - works, test data, simulations and specifications therefore. 1.12 "Stel Intellectual Property" means all Intellectual Property owned or sublicensable by Stel at any time during the Term relating to, or otherwise used by its WBP business, including without limitation, the Licensed Patents and the Stel Designs, and Stel's written technical information and know-how therefor. 1.13 "Term" means the period beginning on the Effective Date and ending upon: (i) the end of the Option Period, if Newbridge does not exercise the Option by such time; or (ii) the expiration of the last of Licensed Patents, otherwise. 1.14 "WBP" means wireless broadband products. 2. License Option and Grant; Technology Transfer 2.1 Option Grant. Stel hereby grants to Newbridge an option (the "Option") to acquire the license specified in Section 2.3. 2.2 Exercise of Option. The Option shall be exercisable by Newbridge upon a Change of Control. In order to exercise the Option, Newbridge shall: (i) provide Stel notice of its exercise of the Option; and (ii) pay Stel the option fee specified in Section 4.1. 2.3 License. Effective upon Newbridge's exercise of the Option, Stel hereby grants to Newbridge a perpetual, nonexclusive, nontransferable, worldwide, irrevocable, fully paid-up and royalty-free license (the "License") without the right to sublicense except as set forth below to make, have made, import, use, sell and have sold Licensed Products covered by Stel Intellectual Property. Newbridge shall have the right to sublicense the rights set forth in this Section 2.3 to its Affiliates, third party OEMs and end-users of the Licensed Products. 2.4 License of "Intellectual Property". All rights and licenses granted under or pursuant to this Agreement by Stel to Newbridge with respect to the Stel Intellectual Property are, and shall otherwise be deemed to be, for purposes of Section 365(n) of Title 11 of the United States Code (the "Bankruptcy Code"), licenses of rights to "intellectual property" as defined under Section 101(56) of the Bankruptcy Code. The Parties agree that Newbridge, as a licensee of such rights and licenses, shall retain and may fully exercise, provided it abides by the terms of this Agreement, all of its rights and 3 elections under the Bankruptcy Code. The Parties further agree that, in the event that any proceeding shall be instituted by or against Stel seeking to adjudicate it bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking an entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, or Stel shall take any action to authorize any of the foregoing actions (each a "Proceeding"), Newbridge shall have the right to retain and enforce its rights under this Agreement including, but not limited to, the right obtain the License for the Stel Intellectual Property in accordance with the terms of this Agreement. 2.5 Technology Transfer. Upon the effectiveness of the License in accordance with Section 2.3, (i) Stel shall provide Newbridge all reasonably applicable information pertinent to the manufacture of Stel Designs or otherwise to exploit the Stel Intellectual Property; and (ii) for a period of one year after the exercise of the Option, Stel shall make available to Newbridge at least three engineers that are thoroughly familiar with the Stel Intellectual Property for the purposes of facilitating the technology transfer required to fully exploit the License, including without limitation, applying the Stel Designs to Licensed Products. 3. Escrow 3.1 Deposit. Stel shall deposit in a timely manner into escrow with the Escrow Agent all reasonably applicable information pertinent to the manufacture of Stel Designs or otherwise to exploit the Stel Intellectual Property (the "Escrow Materials"), in accordance with the Escrow Agreement. Stel shall periodically update the Escrow Materials based on any improvements to the Stel Intellectual Property made during the Term. The Escrow Agent fees shall be borne by Stel. 3.2 Release Events. The Escrow Materials shall be released only under the following circumstances: (a) To Newbridge, due to the failure of Stel or Stel's successor-in- interest after a Change of Control to carry out the technology transfer under Section 2.5; (b) To Newbridge, at its option, due to Stel's bankruptcy, liquidation or winding up of its business; or (c) To Stel, due to the expiration of the Option Period, without the Option being exercised in accordance with Section 2.2. 3.3 Post-Release Use. Provided the Escrow Materials have been rightfully released by the Escrow Agent to Newbridge in accordance with Section 3.2, the Escrow Materials shall be subject to the License. 4 4. Payments 4.1 Option Fee. Upon exercising the Option, Newbridge shall pay Stel the sum of $69 million in consideration of the License and the technology transfer specified in Section 2.5, including without limitation, the salaries, travel, lodging and other expenses of the Stel personnel involved. 4.2 Payment Terms. Newbridge shall pay Stel by check or wire transfer in immediately available funds within ten business days of notice of Newbridge's exercise of the Option. 5. Confidentiality Newbridge and Stel agree that each of them shall treat any confidential information disclosed hereunder in accordance with the Confidentiality Agreement effective as of March 1, 1999 between the Parties, which Confidentiality Agreement, except with respect to the standstill provisions thereof, shall remain in full force and effect in accordance with its terms. 6. Ownership 6.1 Newbridge. As between Newbridge and Stel, Newbridge shall retain ownership of all right, title and interest in and to any and all Intellectual Property: (i) held by Newbridge as of the Effective Date; or (ii) solely developed by Newbridge following exercise of the Option using the Stel Intellectual Property. Any and all Intellectual Property jointly developed by the Parties pursuant to Section 2.5 shall be jointly owned. 6.2 Stel. Subject to the License granted hereunder, Stel shall retain ownership of all right, title and interest in and to the Stel Intellectual Property. 7. Representations, Warranties and Indemnification 7.1 Representations and Warranties. Stel represents, warrants and covenants that: (a) Other than the Licensed Patents and Stel Designs scheduled on Exhibit A and Exhibit B, respectively, there are no other Intellectual Property - --------- --------- rights: (i) used in the WBP business or (ii) required to exploit the License; (b) Stel owns and shall continue to own the Stel Intellectual Property free and clear of any liens or encumbrances; and (c) Stel is able and shall remain able to grant the License specified in Section 2.3 for the Term and shall not commit any acts, or through inaction allow any events to occur, which would impair such ability. 5 7.2 Indemnification. Stel shall indemnify, hold harmless, and defend Newbridge, its officers, employees, and agents against any claims, suits, losses, damages, costs, fees, and expenses resulting from or arising out of exercise of the License granted under this Agreement or any breach of any representation or warranty hereunder. Stel shall pay all costs incurred by Newbridge to enforce this indemnification, including reasonable attorneys' fees. 8. Term and Survival 8.1 Term. This Agreement shall be in effect for the Term. 8.2 Survival. Upon the expiration of this Agreement, the provisions of Articles 1, 5 and 6, Section 7.2, this Section 8.2, Section 9.4, Section 9.13 and Section 9.14 shall survive and continue into perpetuity. 9. Miscellaneous 9.1 Waiver. No provision of this Agreement is deemed waived and no breach excused unless such waiver or consent is made in writing and signed by the Party to have waived or consented. Failure on the part of either Party to exercise or enforce any right of such Party under this Agreement shall not be a waiver by such Party of any right, or operate to bar the enforcement or exercise of the right at any time thereafter. 9.2 Assignability. This Agreement is binding on and inures to the benefit of the Parties and their respective successors and assigns. Newbridge's rights and obligations hereunder shall survive any change in the status of Stel, including without limitation, Change of Control, bankruptcy or receivership. 9.3 Notices. Any report, payment, notice, or other communication that either party receives must be in writing and shall be properly given and effective on the date of delivery if delivered in person, or the fifth day after mailing if mailed by first-class certified mail, postage paid, to the addresses given below (or to an address designated by written notice to the other party): In the case of Newbridge: Newbridge Networks Corporation 600 March Road, P.O. Box 13600 Kanata, Ontario, Canada K2K 2E6 Phone: (613) 591-3600 Fax: (613) 599-3672 Attention: Peter Nadeau In the case of Stel: Stanford Telecommunications, Inc. 1221 Crossman Avenue, P.O. Box 3733 6 Sunnyvale, California 94089 Telephone:(408) 735-0818 Facsimile:(408) 745-2410 Attention: Gary Wolf 9.4 Governing Law. This Agreement and performance hereunder shall be governed by the laws of the State of California, without regard to its conflict of laws provisions. The Parties hereby acknowledge and agree that the United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement. 9.5 Export Control. Newbridge shall observe all applicable United States and foreign laws and regulations concerning the transfer of Licensed Products and related technical data, including International Traffic in Arms Regulations (ITAR) and Export Administration Regulations. The foregoing notwithstanding, Stel shall be responsible for obtaining any export permits hereunder for the License that may be exercised hereunder. 9.6 Force Majeure. This Agreement is not breached and no liability is created when a Party fails to perform an obligation under this Agreement if the failure or omission arises from a cause beyond the reasonable control of such Party. These causes include, but are not limited to, the following: acts of God; acts or omissions of any government or governmental agency; compliance with requirements, rules, regulations, or order of any governmental authority or any office, department, agency, or instrumentality thereof; fire, storm, flood, earthquake; accident; acts of the public enemy, war, rebellion, insurrection, riot, sabotage, invasion; quarantine, restriction; transportation embargoes; or failures or delays in transportation. 9.7 Interpretation. The Section headings contained in this Agreement are solely for purpose of reference and shall not in any way affect the meaning or interpretation of this Agreement. 9.8 Amendments. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Newbridge and Stel. 9.9 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 9.10 Severability. In case any one or more of the provisions contained in this Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against a Party hereto, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalidity, 7 illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. 9.11 No Agency. Neither Party is an agent of the other and neither shall have any power to contract for the other Party for any purpose. 9.12 Entire Agreement. This Agreement, including the exhibits hereto and the documents and instruments referred to herein, and the Merger Agreement, including the exhibits thereto and the documents and instruments referred to therein, embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. 9.13 Rules of Construction. Each party to this Agreement has been represented by counsel during the preparation and execution of this Agreement, and therefore waives any rule of construction that would construe ambiguities against the party drafting the Agreement. 9.14 Jury Waiver. The Parties irrevocably waive trial by jury. 8 IN WITNESS WHEREOF, the Parties have executed this Agreement, on the date first above written. NEWBRIDGE NETWORKS CORPORATION By: /s/ Alan G. Lutz -------------------------------------------- Name: Alan G. Lutz ------------------------------------------ Title: President and Chief Operating Officer ----------------------------------------- By:/s/ Peter Nadeau --------------------------------------------- Name: Peter Nadeau ------------------------------------------ Title: Vice President and General Counsel ----------------------------------------- STANFORD TELECOMMUNICATIONS, INC. By: /s/ Val P. Peline -------------------------------------------- Name: Val P. Peline ------------------------------------------ Title: President and Chief Executive Officer ----------------------------------------- 9 EX-10.2 4 STOCK OPTION AGREEMENT EXHIBIT 10.2 STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT is made and entered into as of June 22, 1999 (the "Agreement") by and between Newbridge Networks Corporation, a Canadian corporation ("Newbridge"), and Stanford Telecommunications, Inc., a Delaware corporation ("Stel"), with respect to the following facts: A. Concurrently with the execution and delivery of this Agreement, Newbridge, Stel and Stel Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of Newbridge ("Merger Sub"), are entering into an Agreement and Plan of Merger (the "Merger Agreement"), which provides that, among other things, upon the terms and subject to the conditions thereof, Newbridge and Stel will to enter into a business combination transaction (the "Merger"). B. As a condition and inducement to Newbridge's willingness to enter into the Merger Agreement, Newbridge has requested that Stel agree, and Stel has so agreed, to grant to Newbridge an option to acquire shares of Stel's Common Stock, par value $.01 per share ("Stel Shares"), upon the terms and subject to the conditions set forth herein. C. Capitalized terms used and not otherwise defined herein that are defined in the Merger Agreement shall have the respective meanings ascribed thereto in the Merger Agreement. The parties agree as follows: 1. Grant of Option. Stel hereby grants to Newbridge an irrevocable option (the "Option") to acquire up to the number of Stel Shares which equals 19.9% of the issued and outstanding Stel Shares (the "Option Shares") as of the first date, if any, upon which an Exercise Event (as defined in Section 2(a) below) shall occur (provided that the Option Shares shall not upon timely issuance constitute more than 19.9% of the then issued and outstanding Stel Shares) at a purchase price of U.S. $35.00 per share (the "Exercise Price"), payable in cash. All references in this Agreement to Option Shares issued to Newbridge shall be deemed to include the associated Stel Rights. 2. Exercise of Option; Maximum Proceeds. (a) The Option may be exercised by Newbridge, in whole or in part, at any time or from time to time only: (i) upon the occurrence of a Triggering Event, as defined in the Merger Agreement, or (ii) upon the public announcement of an Acquisition Proposal, as defined in the Merger Agreement (any of the events specified in clauses (i) or (ii) of this sentence being referred to herein as an "Exercise Event"). (b) In the event Newbridge wishes to exercise the Option, Newbridge shall deliver to Stel a written notice (each an "Exercise Notice") specifying the total number of Option Shares it wishes to acquire and a closing date and time prior to the expiration of the Option for the purchase of such Option Shares (a "Closing"). The Exercise Notice may be withdrawn by Newbridge at any time prior to a Closing. Unless an Exercise Notice is withdrawn, the Closing shall occur on the specified date at the principal offices of Stel. (c) The Option shall expire upon the earliest of (i) the Effective Time, (ii) the termination of the Merger Agreement pursuant to any of Section 8.1(a), 8.1(c), 8.1(f), 8.1(g) or 8.1(h) thereof, (iii) the termination of the Merger Agreement pursuant to either Section 8.1(b) or 8.1(d) thereof, if prior thereto no Exercise Event shall have occurred, or (iv) 18 months following the termination of the Merger Agreement under any other circumstances; provided, however, that if the Option cannot be exercised by reason of any applicable statute, rule, regulation or government order, or because any applicable waiting period related to issuance of the Option Shares under the HSR Act shall not have expired or been terminated, then the Option shall not expire until the tenth business day after such impediment to exercise shall have been removed or shall have become final and not subject to appeal. (d) If Newbridge receives an amount pursuant to Section 8.3(b)(i) or (ii) of the Merger Agreement which, when aggregated with proceeds received by Newbridge in connection with any sales or other dispositions of Option Shares and any dividends received by Newbridge declared on Option Shares, is equal to more than the sum of (i) $25,000,000 plus (ii) the Exercise Price multiplied by the number of Stel Shares purchased by Newbridge pursuant to the Option, then all proceeds to Newbridge in excess of such sum shall be remitted by Newbridge to Stel. 3. Conditions to Closing. The obligation of Stel to issue Option Shares to Newbridge hereunder is subject to the conditions that (a) all filings and declarations required to be made, all authorizations, consents, orders and approvals required to be obtained, and all waiting periods required to expire or be terminated, pursuant to a requirement of any Government Entity or applicable law (including, without limitation the HSR Act) shall have been made or obtained or shall have expired or been terminated, in each case in connection with the exercise of the Option hereunder; and (b) no preliminary or permanent injunction or other order by any court of competent jurisdiction prohibiting or otherwise restraining such issuance shall be in effect. It is understood and agreed that at any time during which the Option is exercisable, the parties will use their respective reasonable efforts to satisfy all conditions to Closing, so that a Closing may take place as promptly as practicable, and in any event, prior to consummation of a tender or exchange offer for shares of Stel capital stock. 4. Closing. At each Closing, (a) Stel shall deliver to Newbridge a single certificate in definitive form representing the number of Stel Shares designated by Newbridge in its Exercise Notice, such certificate to be registered in the name of Newbridge and to bear the legend set forth in Section 10 hereof, against delivery of (b) payment by Newbridge to Stel of the aggregate purchase price for the Stel Shares so designated and being purchased by wire transfer or delivery of a certified check or bank check. 5. Representations and Warranties of Stel. Stel represents and warrants to Newbridge that: 2 (a) Stel is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full corporate power and authority to execute and deliver this Agreement and to carry out its obligations hereunder; (b) the execution and delivery of this Agreement by Stel and consummation by Stel of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action on the part of Stel, and no other corporate proceedings on the part of Stel are necessary to authorize this Agreement or any of the transactions contemplated hereby; (c) this Agreement has been duly and validly executed and delivered by Stel, constitutes a legal, valid and binding obligation of Stel and, assuming this Agreement constitutes a legal, valid and binding obligation of Newbridge, is enforceable against Stel in accordance with its terms, except as enforceability may be limited by bankruptcy and other laws affecting the rights and remedies of creditors generally and general principles of equity; (d) except for any filings required under the HSR Act, Stel has taken all necessary corporate and other action to authorize and reserve for issuance and to permit it to issue upon exercise of the Option, and at all times from the date hereof until the termination of the Option will have reserved for issuance, a sufficient number of unissued Stel Shares for Newbridge to exercise the Option in full and will take all necessary corporate or other action to authorize and reserve for issuance all additional Stel Shares or other securities which may be issuable pursuant to Section 9 upon exercise of the Option, all of which, upon their issuance and delivery in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable; (e) upon delivery of the Stel Shares and any other securities to Newbridge upon exercise of the Option, Newbridge will acquire such Stel Shares or other securities free and clear of all material claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever, excluding those imposed by Newbridge; (f) the execution and delivery of this Agreement by Stel do not, and the performance of this Agreement by Stel will not, (i) conflict with the certificate of incorporation or bylaws of Stel, (ii) violate any order applicable to Stel or any of its Subsidiaries or by which they or any of their property is bound or affected, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give rise to any right of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of Stel or any of its Subsidiaries pursuant to, any contract or agreement to which Stel or any of its Subsidiaries is a party or by which Stel or any of its Subsidiaries or any of their property is bound or affected; (g) the execution and delivery of this Agreement by Stel does not, and the performance of this Agreement by Stel will not, require any consent, approval, authorization or permit of, or filing with, or notification to, any Government Entity, except pursuant to the HSR Act; and 3 (h) the board of directors of Stel has resolved to render the rights issued under the Stel Rights Plan inapplicable to this Agreement and the transactions contemplated hereby. 6. Certain Rights. (a) At the request of and upon notice by Newbridge (the "Put Notice"), if at any time during the period during which the Option is exercisable pursuant to Section 2, Stel executes with a Third Party an agreement providing for an Acquisition Transaction or an Acquisition Transaction has been consummated (the "Purchase Period"): (i) Stel (or any successor entity thereof) shall purchase from Newbridge the Option, to the extent not previously exercised, at a price equal to the difference between the "Market/Tender Offer Price" for Stel Shares as of the date Newbridge gives notice of its intent to exercise its rights under this Section 6(a) and the Exercise Price, multiplied by the number of Stel Shares purchasable pursuant to the Option. For purposes of this Agreement, "Market/Tender Offer Price" means the higher of (A) the highest price per share offered as of such date pursuant to any Acquisition Proposal which was made prior to such date and not terminated or withdrawn as of such date and (B) the highest closing sale price of Stel Shares on the Nasdaq National Market ("Nasdaq") during the twenty (20) trading days ending on the trading day immediately preceding such date. For purposes of determining the highest price offered pursuant to any Acquisition Proposal which involves consideration other than cash, the value of such consideration shall be equal to the higher of (x) if securities of the proponent of the same class as such consideration are traded on any national securities exchange or by any registered securities association, a value based on the closing sale price for such securities on their principal trading market on such date and (y) the value ascribed to such consideration by the proponent of such Acquisition Proposal, or if no such value is ascribed, a value determined in good faith by the board of directors of Stel. (ii) Stel (or any successor entity thereof) shall purchase the Option Shares, if any, acquired by Newbridge at a price equal to (A) the Exercise Price paid by Newbridge for such Stel Shares plus (B) (1) the difference between the Market/Tender Offer Price and such Exercise Price multiplied by (2) the number of Stel Shares so purchased. (iii) Notwithstanding subparagraphs (i) and (ii) above, pursuant to this Section 6(a), Stel shall not be required to pay Newbridge in excess of an aggregate of (A) $25,000,000 plus (B) the Exercise Price paid by Newbridge for Stel Shares acquired pursuant to the exercise of the Option minus (C) any amounts paid or to be paid to Newbridge by Stel pursuant to Section 8.3(b)(i) or (ii) of the Merger Agreement. (b) In the event Newbridge exercises its rights under Section 6(a), Stel shall, within ten business days after Newbridge delivers notice pursuant to Section 6(a), pay the required amount to Newbridge in immediately available funds. Newbridge shall thereupon surrender to Stel the Option and the certificates evidencing the Stel Shares purchased by Newbridge pursuant thereto, and shall represent and warrant that such shares are then free and clear of all claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever, other than those imposed by Stel. 4 (c) If Newbridge shall have acquired Option Shares pursuant to exercise of the Option and neither (i) any Acquisition Transaction with respect to Stel shall have been consummated at any time after the date of this Agreement and prior to 18 months after the termination of the Merger Agreement nor (ii) shall Stel have entered into an agreement with respect to such an Acquisition Transaction, which agreement remains in effect at the end of such 18 months, then, at any time after the earlier of (A) 18 months after the termination of ----- the Merger Agreement and (B) the day prior to the effectiveness of a registration statement filed by Stel pursuant to Section 7 below, and prior to --------- the date 24 months following the termination of Merger Agreement, Stel may require Newbridge, upon delivery to Newbridge of written notice, to sell to Stel any Stel Shares held by Newbridge as of the day that is ten business days after the date of such notice ("Call Shares"), up to a number of Call Shares equal to the number of Option Shares acquired by Newbridge in connection with such Exercise Date. The per share purchase price for such sale (the "Stel Call Price") shall be equal to the Exercise Price less any dividends paid on the Call Shares to be purchased. The closing of any sale of Call Shares shall take place at the principal offices of Stel at a time and on a date designated by Stel in the aforementioned notice to Newbridge, which date shall be no more than 20 and no less than 12 business days from the date of such notice. The Stel Call Price shall be paid in immediately available funds. 7. Registration Rights. (a) Following the termination of the Merger Agreement, Newbridge and its permitted assigns or successors (a "Holder") may by written notice (a "Registration Notice") to Stel (the "Registrant") request the Registrant to register under the Securities Act all or any part of the shares of Registrant acquired by such Holder pursuant to this Agreement (the "Registrable Securities"), in order to permit the sale or other disposition of such shares pursuant to a Permitted Offering (as defined below); provided, however that any such Registration Notice must relate to a number of shares equal to at least 1% of the outstanding shares of Common Stock of the Registrant on a fully diluted basis and that any rights to require registration hereunder shall terminate with respect to any shares that may be sold pursuant to Rule 144(k) under the Securities Act. For purposes of this Agreement, a "Permitted Offering" means a bona fide firm commitment underwritten public offering in which the Holder and the underwriters shall effect as wide a distribution of such Registrable Securities as is reasonably practicable and shall use all reasonable efforts to prevent any person or group from purchasing through such offering shares representing more than 1% of the outstanding shares of Common Stock of the Registrant on a fully diluted basis. The Registration Notice shall include a certificate executed by the Holder and its proposed managing underwriter, which underwriter shall be an investment banking firm of nationally recognized standing (the "Manager"), stating that (i) the Holder and the Manager have a good faith intention to commence a Permitted Offering, and (ii) the Manager in good faith believes that, based on the then prevailing market conditions, it will be able to sell the Registrable Securities at a per share price equal to at least 80% of the per share average of the closing sale prices of the Registrant's Common Stock on Nasdaq for the 20 trading days immediately preceding the date of the Registration Notice. The Registrant shall thereupon have the option, exercisable by written notice delivered to the Holder within 10 business days after the receipt of the Registration Notice, irrevocably to agree to purchase all or any part of the Registrable Securities for cash at a price (the "Option Price") equal to the product of (i) the number of Registrable Securities so purchased and (ii) the per share average of the closing sale prices of the Registrant's Common Stock on Nasdaq for the 20 trading days immediately 5 preceding the date of the Registration Notice. Any such purchase of Registrable Securities by the Registrant hereunder shall take place at a closing to be held at the principal executive offices of the Registrant or its counsel at any reasonable date and time designated by the Registrant in such notice within 10 business days after delivery of such notice. The payment for the shares to be purchased shall be made by delivery at the time of such closing of the Option Price in immediately available funds. (b) If the Registrant does not elect to exercise its option to purchase pursuant to Section 7(a) with respect to all Registrable Securities, the Registrant shall use all reasonable efforts to effect, as promptly as practicable, the registration under the Securities Act of the unpurchased Registrable Securities requested to be registered in the Registration Notice; provided, however, that (i) the Holder shall not be entitled to more than an - -------- ------- aggregate of two effective registration statements hereunder and (ii) the Registrant will not be required to file any such registration statement during any period of time (not to exceed 40 days after a Registration Notice in the case of clause (A) below or 90 days after a Registration Notice in the case of clauses (B) and (C) below) when: (A) the Registrant is in possession of material non-public information which it reasonably believes would be detrimental to be disclosed at such time and, in the written opinion of counsel to the Registrant, such information would have to be disclosed if a registration statement were filed at that time; (B) the Registrant is required under the Securities Act to include audited financial statements for any period in such registration statement and such financial statements are not yet available for inclusion in such registration statement; or (C) the Registrant determines, in its reasonable judgment, that such registration would interfere with any financing, acquisition or other material transaction involving such Registrant. If consummation of the sale of any Registrable Securities pursuant to a registration hereunder does not occur within 180 days after the filing with the SEC of the initial registration statement therefor, the provisions of this Section 7 shall again be applicable to any proposed registration, it being understood that the Holder shall not be entitled to more than an aggregate of two effective registration statements hereunder. The Registrant shall use all reasonable efforts to cause any Registrable Securities registered pursuant to this Section 7 to be qualified for sale under the securities or blue sky laws of such jurisdictions as the Holder may reasonably request, and shall continue such registration or qualification in effect in such jurisdictions; provided, however, that the Registrant shall not -------- ------- be required to qualify to do business in, or consent to general service of process in, any jurisdiction by reason of this provision. (c) The registration rights set forth in this Section 7 are subject to the condition that the Holder shall provide the Registrant with such information with respect to such Holder's Registrable Securities, the plan for distribution thereof, and such other information with respect to the Holder as, in the reasonable judgment of counsel for the Registrant, is necessary to enable the Registrant to include in a registration statement all material facts required to be disclosed with respect to a registration thereunder. (d) A registration effected under this Section 7 shall be effected at the Registrant's expense, except for underwriting discounts and commissions and the fees and expenses of counsel to the Holder, and the Registrant shall provide to the underwriters such documentation (including certificates, opinions of counsel and "comfort" letters from auditors) as are customary in connection with underwritten public offerings and as such underwriters may reasonably require. In connection with any registration, the Holder and the Registrant agree to 6 enter into an underwriting agreement reasonably acceptable to each such party, in form and substance customary for transactions of this type with the underwriters participating in such offering. 8. Indemnification. (a) The Registrant will indemnify the Holder, each of its directors and officers and each person who controls the Holder within the meaning of Section 15 of the Securities Act, and each underwriter of the Registrant's securities, with respect to any registration, qualification or compliance which has been effected pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Registrant of any rule or regulation promulgated under the Securities Act applicable to the Registrant in connection with any such registration, qualification or compliance. The Registrant will reimburse the Holder and each of its directors and officers and each person who controls the Holder within the meaning of Section 15 of the Securities Act, and each underwriter for any legal or any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, provided that the Registrant will not be liable in any such case only to the extent that any such claim, loss, damage, liability or expense arises out of or is based on any untrue statement or omission or alleged untrue statement or omission, made in reliance upon and in conformity with written information furnished to the Registrant by such Holder or director or officer or controlling person or underwriter seeking indemnification. (b) The Holder will indemnify the Registrant, each of its directors and officers and each underwriter of the Registrant's securities covered by such registration statement and each person who controls the Registrant within the meaning of Section 15 of the Securities Act, against all expenses, claims, losses, damages and liabilities (or actions in respect thereof), including any of the foregoing incurred in settlement of any litigation, commenced or threatened, arising out of or based on any untrue statement (or alleged untrue statement) of a material fact contained in any such registration statement, prospectus, offering circular or other document, or any amendment or supplement thereto, incident to any such registration, qualification or compliance, or based on any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading, or any violation by the Holder of any rule or regulation promulgated under the Securities Act applicable to the Holder in connection with any such registration, qualification or compliance. The Holder will reimburse the Registrant and each of its directors and officers and each person who controls the Registrant within the meaning of Section 15 of the Securities Act, and each underwriter for any legal or any other expenses reasonably incurred in connection with investigating, preparing or defending any such claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that any such claim, loss, damage, liability or expense arises out of or is based on any untrue 7 statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with written information furnished to the Registrant by such Holder or director or officer or controlling person or underwriter for use therein, provided that in no event shall any indemnity under this Section 8(b) exceed the gross proceeds of the offering received by the Holder. (c) Each party entitled to indemnification under this Section 8 (an "Indemnified Party") shall give notice to the party required to provide indemnification (the "Indemnifying Party") promptly after such Indemnified Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of any such claim or any litigation resulting therefrom. Counsel for the Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party's expense; provided, however, that the Indemnifying Party shall pay such expense if - -------- ------- representation of the Indemnified Party by counsel retained by the Indemnifying Party would be inappropriate due to actual or potential differing interests between the Indemnified Party and any other party represented by such counsel in such proceeding. The failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Section 8(c) unless the failure to give such notice is materially prejudicial to an Indemnifying Party's ability to defend such action. No Indemnifying Party, in the defense of any such claim or litigation shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any settlement which does not include the claimant's or plaintiff's unconditional release of Indemnified Party from all liability in respect to such claim or litigation. No Indemnifying Party shall be required to indemnify any Indemnified Party with respect to any settlement entered into without such Indemnifying Party's prior consent (which shall not be unreasonably withheld). (d) If the indemnification provided for in this Section 8 is held by a court of competent jurisdiction to be unavailable to an Indemnified Party with respect to any expenses, claims, losses, damages and liabilities referred to therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such any expenses, claims, losses, damages and liabilities in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that resulted in such any expenses, claims, losses, damages and liabilities as well as any other relevant equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the untrue (or alleged untrue statement) of a material fact or the omission (or alleged omission) to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified Party and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. 9. Adjustment Upon Changes in Capitalization: Rights Plans. (a) If any change shall occur in the Stel Shares by reason of stock dividends, stock splits, reverse stock splits, mergers (other than the Merger), recapitalizations, combinations, exchanges of shares and the like, then (i) the type and number of shares or 8 securities subject to the Option, and (ii) the Exercise Price shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction so that Newbridge shall receive, upon exercise of the Option, the number and class of shares or other securities or property that Newbridge would have received in respect of the Stel Shares if the Option had been exercised immediately prior to such change or the record date therefor, as applicable. (b) Prior to such time as the Option is terminated, and at any time after the Option is exercised (in whole or in part), (i) Stel shall not take any action to reverse or amend the resolution referred to in Section 5(h) of this Agreement and (ii) Stel shall not amend, (nor permit the amendment of) its Rights Agreement nor adopt (nor permit the adoption of) a new stockholders rights plan that contains provisions for the distribution or exercise of rights thereunder as a result of Newbridge, or any affiliate or transferee, being the beneficial owner of Stel Shares by virtue of the Option being exercisable or having been exercised or as a result of beneficially owning shares issuable in respect of the Option Shares. 10. Restrictive Legend. Each certificate representing Option Shares issued to Newbridge hereunder shall include a legend in substantially the following form: THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. Certificates representing shares sold in a registered public offering pursuant to Section 7 shall not be required to bear the legend set forth in Section 10. 11. Listing and HSR Filing. Stel, upon the request of Newbridge, shall promptly file an application to list the Stel Shares to be acquired upon exercise of the Option on Nasdaq and shall use all reasonable efforts to obtain approval of such listing as soon as practicable. Promptly after a request by Newbridge, Stel shall file Notification and Report Forms under the HSR Act with the FTC and the Antitrust Division. Stel shall use all reasonable efforts to respond as promptly as practicable to any inquiries received from the FTC or the Antitrust Division for additional information or documentation. 12. Assignment; Binding Effect. Neither this Agreement nor the Option created hereunder nor any right, interest or obligation hereunder shall be assigned by either party without the prior written consent of the other. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or remedies upon any Person other than the parties hereto. Any shares sold by a party in compliance with the provisions of Section 7 hereof shall, upon consummation of such sale, be 9 free of the restrictions imposed with respect to such shares by this Agreement and any transferee of such shares shall not be entitled the rights of the transferor under this Agreement. 13. Specific Performance. Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money, damages. Therefore, in the event of any such breach, the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. 14. Entire Agreement. This Agreement and the Merger Agreement, including the exhibits thereto and the documents and instruments referred to therein, embody the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to herein and therein. 15. Further Assurances. Each party will execute and deliver all such further documents and instruments and take all such further action as may be necessary in order to consummate the transactions contemplated hereby. 16. Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction or a federal or state regulatory agency to be invalid, void, or unenforceable, the other terms, provisions, covenants, and restrictions of this Agreement shall remain in full force and effect and shall not be affected, impaired, or invalidated. If for any reason such court or regulatory agency determines that the Option does not permit Newbridge to acquire, or does not require Stel to repurchase, the full number of Option Shares provided herein (as adjusted pursuant to Section 9), it is the express intention of Stel to allow Newbridge to acquire, or to require Stel to repurchase, such lesser number of shares as may be permissible without any amendment or modification hereof. 17. Notices. All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice). Any such notice shall be effective upon receipt, if personally delivered or on the next business day following transmittal if sent by confirmed facsimile. Notices, including oral notices, shall be delivered as follows: 10 if to Stel, to: Stanford Telecommunications, Inc. 1221 Crossman Avenue, P.O. Box 3733 Sunnyvale, California Telephone: (408) 735-0818 Facsimile: (408) 745-2410 Attention: Gary Wolf with a copy to: Thelen Reid & Priest LLP 333 West San Carlos, 17th Floor San Jose, CA 95110-2701 Telephone:(408) 292-5800 Facsimile:(408) 287-8040 Attention: Jay L. Margulies if to Newbridge, to: Newbridge Networks Corporation 600 March Road, P.O. Box 136000 Kanata, Ontario, Canada K2K 2E6 Telephone:(613) 591-3600 Facsimile:(613) 599-3672 Attention: Peter Nadeau with a copy to: Heller Ehrman White & McAuliffe 525 University Avenue Palo Alto, California 94301 Telephone: (650) 324-7000 Facsimile: (650) 324-0638 Attention: Stephen C. Ferruolo (Matter #21969-0009) 18. Governing Law. This Agreement shall be governed by the laws of the State of Delaware without reference to principles of conflicts of laws. 19. Counterparts. This Agreement may be executed in two counterparts, each of which shall be deemed to be an original, but both of which together shall constitute one and the same instrument. 20. Expenses. Except as otherwise expressly provided herein or in the Merger Agreement, all costs, and expenses incurred in connection with the transactions contemplated by this Agreement shall be paid by the party incurring such expenses. 11 21. Amendments; Waiver. Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of the parties. The terms and conditions hereof may be waived only by an instrument in writing signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with a term or condition shall not operate as a waiver or estoppel with respect to, any subsequent or other failure. 22. Rules of Construction. Each party to this Agreement has been represented by counsel during the preparation and execution of this Agreement, and therefore waives any rule of construction that would construe ambiguities against the party drafting the agreement. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed by their respective duly authorized officers as of the date first above written. NEWBRIDGE NETWORKS CORPORATION By: /s/ Alan G. Lutz ---------------------------------------- Name: Alan G. Lutz -------------------------------------- Title: President and Chief Operating Officer ------------------------------------- By: /s/ Peter Nadeau ---------------------------------------- Name: Peter Nadeau -------------------------------------- Title: Vice President and General Counsel ------------------------------------- STANFORD TELECOMMUNICATIONS, INC. By: /s/ Val P. Peline ---------------------------------------- Name: P. Peline -------------------------------------- Title: President and Chief Executive Officer ------------------------------------- 12 EX-99.1 5 FORM OF CONTINGENT VALUE RIGHTS AGREEMENT EXHIBIT 99.1 CONTINGENT VALUE RIGHTS AGREEMENT THIS CONTINGENT VALUE RIGHTS AGREEMENT, dated as of ______________, 1999, between Newbridge Networks Corporation, a Canadian corporation ("Newbridge"), and ___________________, as Rights Agent (the "Rights Agent"), in favor of each person who acquires from time to time Contingent Value Rights (the "CVRs") to receive, in accordance with the terms hereof, shares (the "CVR Shares") of Newbridge's common stock ("Newbridge Common Stock"). The CVR Shares are issuable pursuant to a registration statement on Form S-4 (No. 333-_________) (the "Registration Statement") filed by Newbridge with the Securities and Exchange Commission (the "Commission"). 1. Appointment of Rights Agent. Newbridge hereby appoints the Rights Agent to act as agent for Newbridge in accordance with the instructions set forth herein, and the Rights Agent hereby accepts such appointment, upon the terms and conditions hereinafter set forth. 2. Certain Definitions. Capitalized terms used herein without definition shall have the meanings given them in the Agreement and Plan of Merger, dated June 22, 1999, by and among Newbridge, Saturn Acquisition Corp. and Saturn Corporation (the "Merger Agreement"). For purposes of this Agreement, and in addition to the terms defined elsewhere in this Agreement, the following terms shall have the following meanings: 2.1 "Common Stock" means (i) the Newbridge Common Stock or (ii) any other class of stock resulting from successive changes of reclassification of such shares consisting solely of changes in par value, or from par value to no par value, or from no par value to par value. Unless the context requires otherwise, all references to Common Stock and CVR Shares in this Agreement and in the CVR Certificates (as defined herein) shall, in the event of an adjustment pursuant to Section 13 hereof, be deemed to refer also to any other securities or property then issuable upon maturity of the CVRs as a result of such adjustment. 2.2 "Fair Market Value" with respect to any security shall mean the closing sales price of such security on the day in question on the principal national securities exchange on which such security is listed or admitted to trading or, if not listed or traded on any such exchange, the closing price of such security on the Nasdaq National Market or, if not listed or traded on any exchange or the Nasdaq National Market, the average of the closing bid and ask prices per share on the National Association of Securities Dealers, Inc. Automated Quotation System ("Nasdaq") on the day in question or, if such quotations are not available, the fair market value on the day in question as reasonably determined by the Board of Directors of Newbridge or any duly authorized committee of such Board after consultation with its legal and financial advisors. 2.3 "Issuance Date" means the Effective Time as defined in the Merger Agreement. 3. Form of CVR Certificate. 3.1 The CVRs shall be evidenced by certificates (the "CVR Certificates") substantially in the form attached hereto as Exhibit A. The CVR --------- Certificates may have such letters, numbers or other marks of identification or designation and such legends, summaries or endorsements printed, lithographed or engraved thereon as Newbridge may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any law or with any rule or regulation made pursuant thereto. Newbridge will use its reasonable efforts to advise the Rights Agent of any material change in any such rule or regulation of which it becomes aware. 3.2 The CVR Certificates shall be executed on behalf of Newbridge by the manual or facsimile signature of the present or any future President or Vice President of Newbridge, under its corporate seal, affixed or in facsimile, attested by the manual or facsimile signature of the present or any future Secretary or Assistant Secretary of Newbridge. CVR Certificates shall be dated as of the date of the initial issuance thereof. 4. Registration and Countersignature. 4.1 The Rights Agent shall maintain books for the registration of the CVR Certificates. The CVR Certificates shall be countersigned by the Rights Agent and shall not be valid for any purpose unless so countersigned. The CVR Certificates shall be so countersigned, however, by the Rights Agent and shall be delivered by the Rights Agent, notwithstanding that the persons whose manual or facsimile signatures appear thereon as proper officers of Newbridge shall have ceased to be such officers at the time of such countersigned or delivery. 4.2 Prior to due presentment for registration of the CVR Certificates, Newbridge and the Rights Agent may deem and treat the registered holder thereof as the absolute owner of the CVR Certificates (notwithstanding any notation of ownership or other writing thereof made by anyone other than Newbridge or the Rights Agent) for the purpose of payment of CVR Shares upon maturity of the CVRs and for all other purposes, and neither Newbridge nor the Rights Agent shall be affected by any notice to the contrary. 5. Maturity and Payment of CVRs. 5.1 The CVRs will mature at the close of business on the Maturity Date (as defined herein) without any further action by the holders of CVRs. For purposes of this Agreement, "Maturity Date" means the earlier to occur of (a) the date on which -2- Saturn completes the Non-core Asset Sale; and (b) May 31, 2000. On or as soon as practicable after the Maturity Date, but in no event later than (i) ten business days after the Maturity Date or (ii) if an independent expert in business valuation is appointed under Section 6.1 or 6.2 hereof, ten business days after receipt of the appraisal from such expert, Newbridge shall deliver a notice to the Rights Agent setting forth the number of shares of Common Stock, if any, or other consideration issuable per CVR pursuant to this Agreement. 5.2 As soon as practicable after receipt of the notice referred to in Section 5.2 hereof, the Rights Agent shall cause to be delivered to each record holder of CVRs stock certificates representing that number of CVR Shares due to each such holder as determined pursuant to Section 6 hereof and/or such other consideration (including payment of cash in lieu of fractional shares) as such holder may be entitled under this Agreement. Any CVR Shares or other securities issued upon payment in respect of CVRs shall be deemed to have been issued as of the close of business on the Maturity Date, and the CVRs shall be deemed to have been canceled at such time; provided, however, that if the Maturity Date is a date on which the stock transfer books of Newbridge are closed, any such CVR Shares shall be deemed to have been issued to the holders of CVRs on the next business day on which the stock transfer books of Newbridge are open. 6. CVR Shares Issuable Upon Maturity of CVRs. 6.1 The number of CVR Shares issuable per CVR upon maturity of the CVRs shall be a fraction of a share of Common Stock (the "Contingent Value Ratio") as is determined by using the following formula: [B+C-D+E] --------- divided by v N where, "B" equals [the lesser of (A) the gross proceeds from the Non-core Asset Sale before deduction of any state and federal taxes payable on such proceeds (the "Non-core Asset Sale Proceeds") and (B) $173,000,000], minus $102,000,000; "C" equals 50% of the greater of (A) the Non-core Asset Sale Proceeds minus $173,000,000 and (B) 0; "D" equals 50% of any state or federal income taxes payable on the Non-core Asset Sale Proceeds, based on the applicable rates, determined in good faith by Newbridge; "E" equals $625,000; -3- "N" equals the number of CVRs issued and outstanding on the Maturity Date plus the number of CVRs issuable upon exercise of Saturn Options assumed by Newbridge pursuant to Section 2.2(a) of the Merger Agreement; and "V" equals the greater of (a) the average closing price per share of Newbridge Common Stock as reported on the New York Stock Exchange Composite Tape on the ten trading days ending on the fifth trading day immediately preceding the Saturn Special Meeting and (b) $24.00, unless the Newbridge Adjustment Option is exercised pursuant to Section 2.1(a) of the Merger Agreement, in which case "V" equals $30.00 divided by the Exchange Ratio. 6.2 In the event that consideration received from the Non-core Asset Sale is not cash or is affected by some contingency, Newbridge shall appoint an independent expert in business valuation to calculate the net present value of such consideration, and such amount shall be included in the calculation of the Non-core Asset Sale Proceeds. 6.3 In the event that the Maturity Date is the date set forth in clause (b) of Section 5.1, Newbridge shall be required to include in the calculation of the Non-core Asset Sale Proceeds an amount equal to (a) the sales price for such assets specified in a binding contract to sell such assets in effect on the Maturity Date or (b) the fair cash value of the most recent bona fide offer to purchase such assets as determined by an independent expert in business valuation familiar with Saturn's Non-Core Asset business. If clauses (a) or (b) do not apply, then the amount included in the Non-core Asset Sale Proceeds shall be equal to those amounts received from the Non-core Asset Sale on or prior to the Maturity Date. The number of CVR Shares issuable per CVR pursuant to this Section 6 is subject to adjustment as hereinafter set forth in this Agreement. 7. Fractional Shares. No fractional shares of Common Stock shall be issued to any holder of CVRs in respect of the CVRs. Instead of any fractional shares of Common Stock that would otherwise be issuable to any such holder, Newbridge will pay to such holder a cash adjustment in respect of such fractional interest in an amount equal to the product of (a) such fractional interest multiplied by (b) the Newbridge Fractional Share Value. 8. Payment of Taxes. Newbridge will pay all documentary stamp taxes attributable to the original issuance of the CVRs and the CVR Shares; provided, however, that Newbridge shall not be required to (a) pay any tax which may be payable in respect of the issuance or delivery of certificates for CVR Shares in a name other than that of the registered holder of the CVR Certificates as of the Maturity Date or (b) issue or deliver any certificate for CVR Shares upon the Maturity Date until any such tax required to be paid under clause (a) shall have been paid, all such tax being payable by the holder of such CVR at the time of surrender. -4- 9. Mutilated or Missing Certificates. In case any CVR Certificate shall be mutilated, lost, stolen or destroyed, Newbridge may in its discretion issue, and the Rights Agent may countersign and deliver in exchange and substitution for an upon cancellation of the mutilated CVR Certificate, or in lieu of a substitution for the lost, stolen or destroyed CVR Certificate, a new CVR Certificate of like tenor and evidencing the number of CVRs evidenced by the CVR Certificate so mutilated, lost, stolen or destroyed, but only upon receipt of evidence satisfactory to the Rights Agent of such mutilation, loss, theft or destruction of such CVR Certificate and indemnity, if requested, also satisfactory to it. Applicants for such substitute CVR Certificate shall also comply with such other reasonable regulations and pay such other reasonable charges as Newbridge or the Rights Agent may prescribe. Any such new CVR Certificate shall constitute an original contractual obligation of Newbridge, whether or not the allegedly mutilated, lost, stolen or destroyed CVR Certificate shall be at any time enforceable by anyone. 10. Reservation of CVR Shares; Stock Certificates. Newbridge shall at all times reserve for issuance and delivery upon maturity of the CVRs such number of CVR Shares or other shares of capital stock of Newbridge from time to time issuable upon maturity of the CVRs. All such shares shall be duly authorized and, when issued, shall be validly issued, fully paid and nonassessable, free and clear of all liens, security interests, charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights. The Rights Agent is hereby irrevocably authorized to requisition a reasonable time prior to the Maturity Date, as applicable, from Newbridge's transfer agent stock certificates issuable upon maturity of the CVRs. Newbridge will supply such transfer agent with duly executed stock certificates for such purpose. Newbridge shall keep a copy of this Agreement on file with its transfer agent and with every transfer agent for any shares of Common Stock. 11. Transfer and Registration of CVRs and CVR Shares. 11.1 The CVRs, and any interest therein, shall in no circumstances be sold, assigned or otherwise transferred other than by will or pursuant to the laws of descent and distribution. 11.2 The CVRs and CVR Shares have been registered pursuant to the Registration Statement under the Securities Act of 1933, as amended (the "Act"). Newbridge covenants and agrees: (a) to prepare and file with the Commission such amendments and supplements to such Registration Statement and the prospectus used in connection therewith as may be necessary to keep such Registration Statement effective through the Maturity Date and to use its commercially reasonable efforts to keep such Registration Statement effective during such period; -5- (b) as expeditiously as possible, to use its commercially reasonable efforts to register or qualify the CVRs and the CVR Shares to be delivered upon the Maturity Date under the securities or Blue Sky laws of each jurisdiction in which such registration or qualification is necessary; and (c) to pay all expenses incurred by Newbridge in complying with this Section 11.2, including, without limitation, (i) all registration and filing fees, (ii) all printing expenses, (iii) all fees and disbursements of counsel and independent public accountants for Newbridge, (iv) all Blue Sky fees and expenses (including fees and expenses of counsel in connection with any Blue Sky surveys), and (v) the entire expense of any special audits incident to or required by any such registration. 12. Rights of CVR Certificate Holder. The holder of any CVR Certificate or CVR shall not, by virtue thereof, be entitled to any rights of a stockholder of Newbridge, either at law or in equity, and the rights of the holder are limited to those expressed in this Agreement. 13. Antidilution Provisions. The number of CVR Shares issuable upon the maturity of the CVRs pursuant to Section 5 hereof is subject to change or adjustment as follows: 13.1 Stock Dividends, Stock Splits and Combinations of Stock. If at any time after the Issuance Date and before 5:00 p.m., [______ time], on the Maturity Date, (a) Newbridge shall fix a record date for the issuance of any stock dividend payable in shares of Common Stock, (b) the number of shares of Common Stock shall have been increased by a subdivision or split-up of shares of Common Stock or (c) the number of shares of Common Stock shall have been decreased by a combination of the outstanding shares of Common Stock, then the number of CVR Shares issuable pursuant to Section 6 hereof shall be multiplied by a fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such dividend, subdivision, split-up or combination and the denominator of which is the number of shares of Common Stock outstanding immediately prior to such dividend, subdivision, split-up or combination. The time of occurrence of an event giving rise to an adjustment made pursuant to this Section 13.1 shall, in the case of a subdivision, split-up or combination, be the effective date thereof and shall, in the case of dividend, be the record date thereof. 13.2 Consolidation, Merger, etc. If at any time after the Issuance Date and before 5:00 p.m., [______ time], on the Maturity Date any capital reorganization of Newbridge, or any reclassification of the Common Stock, or any consolidation of Newbridge with or merger of Newbridge with or into any other corporation or person or any sale, lease or other transfer of all or substantially all of the assets of Newbridge to any other person, including any individual, corporation, partnership, joint venture, trust or group thereof (a "Transaction"), shall be effected in such a way that the holders of the Common Stock shall be entitled to receive solely voting stock of Newbridge with respect -6- to or in exchange for Common Stock, then each holder of a CVR shall have the right to receive on or after the Maturity Date (as provided in Section 5 hereof) the Equivalent Payment (as defined below). For purposes of this Agreement, "Equivalent Payment" means the number of shares of voting stock of Newbridge that would have been payable in the Transaction in respect of the number of shares of Common Stock that would have been payable upon maturity of the CVRs held by such holder had the Transaction not occurred, calculated by equating the Fair Market Value of the Common Stock with the Fair Market Value of the consideration payable in the Transaction in respect of the Common Stock. If, instead of or in addition to voting stock of Newbridge, the consideration in such transaction would consist of cash, securities or other assets, then prior to such transaction Newbridge shall appoint in independent expert in valuation to determine the number of shares of Common Stock represented, in such expert's best judgment, by the CVRs, and each holder of a CVR shall be issued that number of shares of Common Stock represented by such holder's CVR. 13.3 Readjustments, etc. If an adjustment is made under Section 13.1 or 13.2 above, and the event to which the adjustment relates does not occur, then any adjustments in the number of CVR Shares issuable upon maturity of the CVRs that were made in accordance with such Section shall be adjusted back to the number of CVR Shares that were issuable immediately prior to the effective date or the record date of such event, as the case may be. 13.4 Preservation of Purchase Rights upon Merger, Consolidation, etc. Newbridge shall not effect any reorganization, reclassification, consolidation, merger, or sale under Section 13.2 hereof unless prior to or simultaneously with the consummation thereof the successor corporation or person (if other than Newbridge) resulting from such reorganization, reclassification, consolidation or merger or the person (if other than Newbridge) purchasing such assets shall assume by written instrument, executed and mailed or delivered to the Rights Agent, the obligation to deliver to such holder such shares of stock, cash, securities or assets as, in accordance with Section 13.2 hereof, such holder may be entitled to receive, and containing the express assumption of such person or the due and punctual performance and observance by Newbridge and of all liabilities and obligations of Newbridge hereunder. Such written agreement shall provide for adjustments, which shall be as nearly equivalent as may be practicable to the adjustments provided for in this Section 13 and shall provide that such adjustments that similarly apply the successive reorganizations, reclassifications, consolidations, mergers, sales, transfers or leases. 14. Officer's Certificate. Whenever the number of CVR Shares that may be issued upon the Maturity Date is adjusted as required by the provisions of this Agreement, Newbridge will forthwith file in the custody of its Secretary or an Assistant Secretary at its principal office and with the Rights Agent an officer's certificate showing the adjusted number of CVR Shares that may be issued upon maturity of the CVRs, -7- determined as herein provided, setting forth in reasonable detail the facts requiring such adjustment and the manner of computing such adjustment. Each such officer's certificate shall be made available at all reasonable times for inspection by each holder of CVRs. Newbridge shall, forthwith after each such adjustment, cause a copy of such certificate to be mailed to the holder. The Rights Agent shall be entitled to rely conclusively on the contents of certificates furnished pursuant to this Section 14 and shall not be required to make any independent inquiry as to facts not established through such certificates. 15. Listing on NYSE. Newbridge will use its commercially reasonable efforts to list on the NYSE the shares of the Common Stock issuable in respect of the CVRs, and will use its commercially reasonable efforts to maintain such listing or approval so long as any other shares of Common Stock are so listed or approved; and Newbridge shall use its commercially reasonable efforts to so list on each national securities exchange or obtain approval for quotation on the Nasdaq National Market, or such other over-the-counter quotation system, and shall use its commercially reasonable efforts to maintain such listing or approval of, any other shares of capital stock of Newbridge issuable in respect of the CVRs if and so long as the shares of capital stock of the same class are listed on such national securities exchange or are traded on the Nasdaq National Market or such over-the-counter quotation system. Any such listing or quotation will be at Newbridge's expense. 16. Availability of Information. Newbridge will comply with all applicable periodic public information reporting requirements of the Commission to which it may from time to time be subject. 17. Merger, Consolidation or Change of Name of Rights Agent. Any corporation into which the Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent shall be a party, or any corporation succeeding to the corporate trust business of the Rights Agent, shall be the successor to the Rights Agent hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a successor Rights Agent under the provisions of Section 19 hereof. In case at the time such successor to the Rights Agent shall succeed to the agency created by this Agreement, and in case at that time any of the CVRs shall have been countersigned but not delivered, any such successor to the Rights Agent may adopt the countersignature of the predecessor Rights Agent and deliver such CVRs so countersigned; and in case at that time any of the CVRs shall not have been countersigned, any successor to the Rights Agent may countersign such CVRs either in the name of the predecessor Rights Agent or in the name of the successor Rights Agent; and in all such cases such CVRs shall have the full force and effect provided in the CVRs and in this Agreement. In the case at any time the name of the Rights Agent shall be changed and at such time any of the CVRs shall have been countersigned but not delivered, the Rights Agent -8- may adopt the countersignature under its prior name and deliver CVRs so countersigned; and in case at that time any of the CVRs shall not have been countersigned, the Rights Agent may countersign such CVRs either in its prior name or in its changed name; and in all such cases such CVRs shall have the full force and effect provided in the CVRs and in this Agreement. 18. Duties of Rights Agent. The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the following terms and conditions, by all of which Newbridge and the holders of the CVRs, by their acceptance thereof, shall be bound: 18.1 The statements contained herein and in the CVR Certificate shall be taken as statements of Newbridge, and the Rights Agent assumes no responsibility for the correctness of any of the same except such as describe the Rights Agent or actions taken or to be taken by it. The Rights Agent assumes no responsibility with respect to the delivery of CVRs except as herein otherwise provided. 18.2 The Rights Agent shall not be responsible for any failure of Newbridge to comply with any of the covenants contained in this Agreement or in the CVRs to be complied with by Newbridge. 18.3 The Rights Agent may consult at any time with counsel satisfactory to it (who may be counsel for Newbridge), and the Rights Agent shall incur no liability or responsibility to Newbridge or to any holder of any CVR in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel, provided the Rights Agent shall have exercised reasonable care in the selection and continued employment of such counsel. 18.4 The Rights Agent shall incur no liability or responsibility to Newbridge or to any holder of any CVR for any action taken in reliance on any notice, resolution, waiver, consent, order, certificate or other paper, document or instrument believed by it to be genuine and to have been signed, sent or presented by the party or parties. 18.5 Newbridge agrees (a) to pay to the Rights Agent reasonable compensation for all services rendered by the Rights Agent in the execution of this Agreement, (b) to reimburse the Rights Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Rights Agent in the execution of this Agreement (other than taxes measured by the Rights Agent's net income), and (c) upon request, to advance to the Rights Agent funds to pay cash in lieu of fractional shares of Common Stock issuable upon maturity of the CVRs. 18.6 The Rights Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless -9- Newbridge shall furnish the Rights Agent with reasonable security and indemnity for any costs and expenses which may be incurred. All rights of action under this Agreement or under any of the CVRs may be enforced by the Rights Agent without the possession of any of the CVRs or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Rights Agent shall be brought in its name as Rights Agent, and any recovery of judgment shall be for the ratable benefit of the registered holders of the CVRs, as their respective rights or interests may appear. 18.7 The Rights Agent and any stockholder, director, officer or employee of the Rights Agent may buy, sell or deal in any of the CVRs or other securities of Newbridge or become pecuniarily interested in any transaction in which Newbridge may be interested, or contract with or lend money to or otherwise act as fully and freely as though it were not the Rights Agent under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for Newbridge or for any other legal entity. 18.8 The Rights Agent shall act hereunder solely as agent, and its duties shall be determined solely by the provisions hereof. The Rights Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own gross negligence or bad faith. 19. Change of Rights Agent. The Rights Agent may resign and be discharged from its duties under this Agreement by giving to Newbridge notice in writing, and to the holders of the CVRs notice in writing and sent by first-class mail, postage prepaid, to each registered holder of a CVR at such holder's address appearing in the register maintained by the Rights Agent with respect to the CVRs, specifying a date when such resignation shall take effect, which notice shall be sent at least two weeks prior to the date so specified. If the Rights Agent shall resign or otherwise become incapable of acting, Newbridge shall appoint a successor to the Rights Agent. If Newbridge shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the registered holder of a CVR (who shall, with such notice, submit his CVR for inspection by Newbridge), then the registered holder of any CVR may apply to any court of competent jurisdiction for the appointment of a successor of the Rights Agent. After appointment the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the former Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 19, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be. -10- 20. Identity of Transfer Agent. Forthwith upon the appointment after the date hereof of any transfer agent for the Common Stock, or of any subsequent transfer agent for shares of the Common Stock, Newbridge will file with the Rights Agent a statement setting forth the name and address of such transfer agent, unless the Rights Agent is such transfer agent. 21. Successors. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or remedies upon any Person other than the parties hereto. 22. Termination. This Agreement shall terminate at 5:00 p.m., [______ time], on the Maturity Date or on such later date on which all of the obligations of the Rights Agent have been fulfilled hereunder. 23. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 24. Interpretation. The Section headings contained in this Agreement are solely for the purpose of reference and shall not in any way affect the meaning or interpretation of this Agreement. 25. Amendments. This Agreement may be amended by the written consent of Newbridge and the affirmative vote or the written consent of holders holding not less than one-half in interest of the CVRs. Notwithstanding the foregoing, Newbridge and the Rights Agent may from time to time supplement or amend this Agreement, without the approval of any holder of CVRs, in order to cure any ambiguity or to correct or supplement any provision contained in this Agreement which may be defective or inconsistent with any other provision in this Agreement, or to make any other provisions in regard to matters or questions arising under this Agreement which Newbridge and the Rights Agent may deem necessary or desirable and which shall not be inconsistent with the provisions of the CVRs and which shall not materially adversely affect the interests of the holders of CVRs. 26. Notices. All notices and other communications hereunder shall be in writing and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice. Any such notice shall be effective upon receipt, if personally delivered or on the next business day following transmittal if sent by confirmed facsimile. Notices shall be delivered as follows: -11- if to Rights Agent, to: ____________________________________ ____________________________________ Telephone:__________________________ Facsimile:__________________________ if to Newbridge, to: Newbridge Networks Corporation 600 March Road, P.O. Box 13600 Kanata, Ontario, Canada K2K 2E6 Telephone: (613) 591-7300 Facsimile: (613) 599-3672 Attention: Peter Nadeau with a copy to: Heller Ehrman White & McAuliffe 525 University Avenue Palo Alto, California 94301 Telephone: (650) 324-7000 Facsimile: (650) 324-0638 Attention: Stephen C. Ferruolo (Matter #21969-0009) 27. Benefits of This Agreement. Nothing in this Agreement shall be construed to give to any person or corporation, other than Newbridge, the Rights Agent and the registered holders of the CVRs, any legal or equitable right, remedy or claim under this Agreement; and this Agreement shall be for the sole and exclusive benefit of Newbridge, the Rights Agent and the registered holders of CVRs. 28. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflicts laws. -12- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the first date written above. NEWBRIDGE NETWORKS CORPORATION By __________________________________ Title _______________________________ By __________________________________ Title _______________________________ [RIGHTS AGENT] By __________________________________ Title _______________________________ -13- Exhibit A to Contingent Value Rights Agreement [FORM OF CVR CERTIFICATE] VOID AFTER 5:00 P.M., [________ TIME], ON MAY 31, 2000 CVR No.________ ______CVRs NEWBRIDGE NETWORKS CORPORATION CONTINGENT VALUE RIGHTS TO RECEIVE SHARES OF COMMON STOCK THIS CERTIFIES THAT, FOR VALUE RECEIVED, _______________, or its permitted assigns, is the registered holder of the number of Contingent Value Rights ("CVRs") set forth above. Each CVR entitles the holder thereof to receive from Newbridge Networks Corporation, a Canadian corporation ("Newbridge"), subject to the terms and conditions set forth hereinafter and in the Continent Value Rights Agreement, dated __________, 1999, between Newbridge and [Rights Agent] ("CVR Agreement"), to shares (the "CVR Shares") of Newbridge's common stock (the "Common Stock"). The number of CVR shares issuable per CVR on the Maturity Date (as defined in the CVR Agreement) shall be equal to the Contingent Value Ratio (as defined in the CVR Agreement). The number of CVR Shares are subject to change or adjustment upon the occurrence of certain events set forth in the CVR Agreement, including the issuance of any stock dividend payable in shares of Common Stock, any increase in the number of shares of Common Stock by a subdivision or split-up of shares of Common Stock or any decrease in the number of shares of Common Stock by a combination of the outstanding shares of Common Stock. The time of occurrence of an event giving rise to such an adjustment shall, in the case of a subdivision, split-up or combination, be the effective date thereof and shall, in the case of a dividend, be the record date thereof. Furthermore, unless otherwise earlier terminated pursuant to the terms of the CVR Agreement, the type and amount of consideration payable upon maturity of the CVRs is subject to adjustment upon the occurrence of any capital reorganization, reclassification of the Common Stock, any consolidation of Newbridge with or merger of Newbridge with or into any other corporation or person or any sale, lease or other transfer of all or substantially all of the assets of Newbridge to any other corporation or person. REFERENCE IS MADE TO THE PROVISIONS OF THIS CVR CERTIFICATE SET FORTH ON THE REVERSE SIDE HEREOF, AND SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH ON THE FRONT OF THIS CERTIFICATE. This CVR Certificate shall be governed by and construed in accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, Newbridge has caused this CVR Certificate to be executed by its duly authorized officer. Dated: _____________________ NEWBRIDGE NETWORKS CORPORATION By ______________________________ Title ___________________________ Countersigned: [RIGHTS AGENT] By ______________________________ Title ___________________________ as Rights Agent By ___________________________ Title _______________________ -2- [REVERSE SIDE] The CVR Certificate is subject to all of the terms, provisions and conditions of the Contingent Value Rights Agreement, dated as of ______________, 1999 (the "CVR Agreement"), between Newbridge Networks Corporation and the Rights Agent, to all of which terms, provisions and conditions the registered holder of the CVR consents by acceptance hereof. The CVR Agreement and certain definitions included in the Agreement and Plan of Merger, dated June 22, 1999 (the "Merger Agreement"), by and among Newbridge, Saturn Acquisition Corp. and Saturn Corporation are incorporated herein by reference and made part hereof and reference is made to the CVR Agreement and the Merger Agreement for a full description of the rights, limitations of rights, obligations, duties and immunities of the Rights Agent, Newbridge and the holders of the CVR Certificates. Copies of the CVR Agreement and the Merger Agreement are available for inspection at the principal office of the Rights Agent or may be obtained upon written request addressed to the Rights Agent at its principal office at [__________________________]. Newbridge shall not be required upon maturity of the CVRs evidenced by this CVR Certificate to issue fractional shares, but shall make adjustment therefor in cash as provided in the CVR Agreement. Newbridge has filed and caused to become effective a registration statement under the Securities Act of 1933, as amended, covering the CVRs and CVR Shares and has agreed to use commercially reasonable efforts to maintain the effectiveness of such registration statement through the Maturity Date and to register or qualify the CVRs and the CVR Shares to be delivered upon maturity of the CVRs under the laws of each jurisdiction in which such registration or qualification is necessary. This CVR Certificate is not transferable or assignable other than by will or pursuant to the laws of descent and distribution. The holder of this CVR Certificate shall not, by virtue hereof, be entitled to any of the rights of a stockholder in Newbridge, either at law or in equity, and the rights of the holder are limited to those expressed in the CVR Agreement. Every holder of this CVR Certificate, by accepting the same, consents and agrees with Newbridge, the Rights Agent and with every other holder of a CVR Certificate that Newbridge and the Rights Agent may deem and treat the person in whose name this CVR Certificate is registered as the absolute owner hereof (notwithstanding any notation of ownership or other writing hereon made by anyone other than Newbridge or the Rights Agent) for all purposes whatsoever and neither Newbridge nor the Rights Agent shall be affected by any notice to the contrary. This CVR Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by the Rights Agent. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM as tenants in common TEN ENT as tenants by the entireties JT TEN as joint tenants with right of survivorship and not as tenants in common COM PROP as community property UNIF GIFT MIN _____________ Custodian ___________ ACT (Cust) (Minor) under Uniform Gifts to Minors Act __________________________________ (State) Additional abbreviations may also be used though not in the above list. -2- EX-99.2 6 FORM OF VOTING AGREEMENT EXHIBIT 99.2 VOTING AGREEMENT THIS VOTING AGREEMENT ("Agreement") is made and entered into as of June 22, 1999 by and among Newbridge Networks Corporation, a Canadian corporation ("Newbridge"), Saturn Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Newbridge ("Merger Sub"), and the person whose name appears on the signature page hereto as a stockholder of Stanford Telecommunications, Inc., a Delaware corporation ("Stel"), acting in his capacity as a stockholder of Stel and not in any other capacity ("Stockholder"). A. Concurrently with the execution of this Agreement, Newbridge, Merger Sub and Stel are entering into an Agreement and Plan of Merger of even date herewith (the "Merger Agreement"), pursuant to which the parties thereto have agreed, upon the terms and subject to the conditions set forth therein, to merge Merger Sub with and into Stel (the "Merger"). Capitalized terms used and not otherwise defined herein, and defined in the Merger Agreement, shall have the respective meanings ascribed to them in the Merger Agreement. B. As of the date hereof, Stockholder is a recordholder and a Beneficial Owner (as defined hereinafter) of the number of Existing Shares (as defined hereinafter) of the Common Stock, par value $.01 per share, of Stel (the "Stel Common Stock") set forth on the signature page hereto, with plenary authority to enter into and perform this Agreement. C. As an inducement and a condition to entering into the Merger Agreement, Newbridge has required Stockholder to agree, and Stockholder has agreed, to enter into this Agreement. The parties agree as follows: 1. Certain Definitions. For purposes of this Agreement: (a) "Beneficially Own" or "Beneficial Ownership" with respect to any securities means having "beneficial ownership" of such securities as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Without duplicative counting of the same securities by the same holder, securities Beneficially Owned by a person include securities Beneficially Owned by all other persons with whom such person would constitute a "group" within the meaning of Section 13(d) of the Exchange Act with respect to the securities of the same issuer. (b) "Existing Shares" means (subject to Section 7 hereof) shares of Stel Common Stock Beneficially Owned by Stockholder as of the date hereof. (c) "Securities" means the Existing Shares together with any shares of Stel Common Stock or other securities of Stel acquired by Stockholder in any capacity after the date hereof and prior to the termination of this Agreement, whether upon the exercise of options, warrants or rights, the conversion or exchange of convertible or exchangeable securities, or by means of purchase, dividend, distribution, split-up, recapitalization, combination, exchange of shares or the like, gift, bequest, inheritance or as a successor in interest in any capacity or otherwise. 2. Representations and Warranties of Stockholder. Stockholder represents and warrants to Newbridge and Merger Sub as follows: (a) On the date hereof, Stockholder is a recordholder and a Beneficial Owner of the Existing Shares consisting of the number of shares of Stel Common Stock set forth on the signature page hereto. On the date hereof, the Existing Shares constitute all of the shares of Stel Common Stock owned of record or Beneficially Owned by Stockholder. There are no outstanding options or other rights to acquire from Stockholder, or obligations of Stockholder to sell or to acquire, any shares of Stel Common Stock. Stockholder shares voting power and power to issue instructions with respect to the matters set forth in Sections 5 and 8 hereof, power of disposition, power of conversion, power to demand appraisal rights and power to agree to all of the matters set forth in this Agreement with Stockholder's spouse, in each case with respect to all of the Existing Shares with no limitations, qualifications or restrictions on such rights, subject to applicable securities laws and the terms of this Agreement and no other person is a recordholder or Beneficial Owner of, or has any of such powers with respect to, the Existing Shares. (b) Stockholder holds a proxy from Stockholder's spouse with respect to all of the Existing Shares and has the sole legal capacity, power and authority to enter into and perform all of Stockholder's obligations under this Agreement. This Agreement has been duly and validly executed and delivered by Stockholder and constitutes a valid and binding agreement of Stockholder, enforceable against Stockholder in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. (c) Except for any applicable filings under federal and state securities laws, no filing with, and no permit, authorization, consent or approval of, any Government Entity is necessary for the execution of this Agreement by Stockholder and the consummation by Stockholder of the transactions contemplated hereby. None of the execution and delivery of this Agreement by Stockholder, the consummation by Stockholder of the transactions contemplated hereby or compliance by Stockholder with any of the provisions hereof will (i) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, acceleration, redemption or purchase) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, or other instrument or obligation to which Stockholder is a party or by which Stockholder or any of Stockholder's properties or assets may be bound, or (ii) violate any order, writ, injunction, decree, judgment, statute, rule or regulation applicable to Stockholder or any of Stockholder's properties or assets. 2 (d) Except as permitted by this Agreement, the Existing Shares and the Securities are now and, at all times during the term hereof, will be, held by Stockholder, or by a nominee or custodian for the benefit of Stockholder, free and clear of all mortgages, claims, charges, liens, security interests, pledges or options, proxies, voting trusts or agreements, understandings or arrangements or any other rights whatsoever ("Encumbrances"), except for any such Encumbrances arising hereunder. (e) No broker, investment banker, financial advisor or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of Stockholder. (f) Stockholder understands and acknowledges that Newbridge is entering into, and causing Merger Sub to enter into, the Merger Agreement in reliance upon Stockholder's concurrent execution and delivery of this Agreement. 3. Representations and Warranties of Newbridge and Merger Sub. Each of Newbridge and Merger Sub hereby, jointly and severally, represents and warrants to Stockholder as follows: (a) Each of Newbridge and Merger Sub has the corporate power and authority to enter into and perform all of its obligations under this Agreement. This Agreement has been duly and validly executed and delivered by each of Newbridge and Merger Sub and constitutes a valid and binding agreement of Newbridge and Merger Sub, enforceable against each of Newbridge and Merger Sub in accordance with its terms, except to the extent that its enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting the enforcement of creditors' rights generally or by general equitable principles. (b) Except for filings under the Exchange Act, no filing with, and no permit, authorization, consent or approval of, any Government Entity is necessary for the execution of this Agreement by Newbridge and Merger Sub and the consummation by Newbridge and Merger Sub of the transactions contemplated hereby, and none of the execution and delivery of this Agreement by each of Newbridge and Merger Sub, the consummation by each of Newbridge and Merger Sub of the transactions contemplated hereby or compliance by each of Newbridge and Merger Sub with any of the provisions hereof shall (i) conflict with or result in any breach of any organizational documents applicable to either Newbridge or Merger Sub, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any third party right of termination, cancellation, acceleration, redemption or purchase) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement, or other instrument or obligation of any kind to which either Newbridge or Merger Sub is a party or by which either Newbridge or Merger Sub or any of their respective properties or assets may be bound, or (iii) violate any order, writ, injunction, decree, 3 judgment, statute, rule or regulation applicable to either Newbridge or Merger Sub or any of their respective properties or assets. 4. Disclosure. Stockholder hereby agrees to permit Newbridge to publish and disclose in the Registration Statement and the Proxy Statement/Prospectus (including all documents and schedules filed with the SEC), and in any press release or other disclosure document which Newbridge, in its sole discretion, determines to be necessary or desirable in connection with the Merger and any transactions related thereto, Stockholder's identity and ownership of Stel Common Stock and the nature of Stockholder's commitments, arrangements and understandings under this Agreement. 5. Certain Restrictions. (a) Stockholder will not directly or indirectly (i) solicit, facilitate or encourage submission of (including by way of furnishing or disclosing information) any proposal, bid, offer, inquiry or other expression of interest which constitutes or is reasonably likely to lead to any Acquisition Proposal or (ii) in the event of any unsolicited Acquisition Proposal for Stel or its subsidiaries, engage in negotiations or discussions with, or provide any information to, any Person (other than Newbridge and its Representatives) relating to any Acquisition Proposal. Stockholder will immediately (and in no event more than 24 hours after receipt thereof) notify Newbridge of any Acquisition Proposal, or any request for information, access, discussion or negotiation, received by Stockholder relating to an Acquisition Proposal. Such notice to Newbridge shall be made orally and in writing and shall include a copy of any writing submitted by any such Person making an Acquisition Proposal or request, and shall indicate the identity of such Person and the substance, terms and conditions of such Acquisition Proposal or request. Stockholder will immediately cease and cause to be terminated any existing activities, negotiations or discussions of Stockholder with any Person conducted heretofore with respect to any Acquisition Proposal relating to Stel, other than discussions or negotiations with Newbridge and its Representatives. For purposes of this Agreement, Stel is not deemed to be an affiliate of Stockholder. (b) Prior to the termination of this Agreement, Stockholder agrees not to, directly or indirectly, take any other action that would make any representation or warranty of Stockholder contained herein untrue or incorrect. 6. Voting of Stel Common Stock. Stockholder hereby irrevocably and unconditionally agrees that during the period commencing on the date hereof and continuing until the first to occur of (a) the Effective Time or (b) termination of this Agreement in accordance with its terms, Stockholder will appear at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of the holders of Stel Common Stock, however called, or in connection with any written consent of the holders of Stel Common Stock presented to Stockholder, or otherwise cause the Securities to be counted as present thereat for purposes of establishing a quorum and vote or consent (or cause to be voted or consented) the Securities in favor of the adoption of the Merger Agreement and the approval of other actions 4 contemplated by the Merger Agreement and this Agreement and any actions required in furtherance thereof and hereof. 7. Distributions. In the event of a stock dividend or distribution, or any change in the Stel Common Stock by reason of any stock dividend, split-up, recapitalization, combination, exchange of share or the like other than pursuant to the Merger, the terms "Existing Shares" and "Securities" will be deemed to refer to and include the shares of Stel Common Stock as well as all such stock dividends and distributions and any shares into which or for which any or all of the Securities may be changed or exchanged, and appropriate adjustments shall be made to the terms and provisions of this Agreement. 8. Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of the parties hereto agrees to use its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement and the Merger Agreement. Each party shall promptly consult with the other and provide any necessary information and material with respect to all filings made by such party with any Government Entity in connection with this Agreement and the Merger Agreement and the transactions contemplated hereby and there by. 9. Termination. This Agreement shall terminate on the earlier to occur of: (a) the termination of the Merger Agreement; (b) the agreement of the parties hereto to terminate this Agreement; or (c) the Effective Time of the Merger. 10. Miscellaneous. (a) Subject to applicable law, this Agreement may be amended, modified or supplemented only by written agreement of Newbridge, Merger Sub and Stockholder at any time prior to the Effective Time. (b) Any failure of Stockholder, on one hand, or Newbridge or Merger Sub, on the other hand, to comply with any obligation, covenant, agreement or condition herein may be waived by Newbridge or Merger Sub, or Stockholder, respectively, only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent shall be given in writing in a manner consistent with the requirements for a waiver of compliance as set forth in this Section 10(b). (c) All notices and other communications hereunder shall be in writing (except the notice required in the case of Section 5(a), which notice shall be delivered both orally and in writing) and shall be delivered personally by overnight courier or similar means or sent by facsimile with written confirmation of receipt, to the parties at the addresses specified below (or at such other address for a party as shall be specified by like notice). Any such notice shall be 5 effective upon receipt, if personally delivered or on the next business day following transmittal if sent by confirmed facsimile. Notices, including oral notices, shall be delivered as follows: if to Stel, to: 1221 Crossman Avenue P.O. Box 3733 Sunnyvale, California Telephone:(408) 745-0818 Facsimile: (408) 745-2410 Attention:Gary Wolf with a copy to: Thelen Reid & Priest LLP 333 West San Carlos Street, 17th Floor San Jose, California 95110-2701 Telephone: (408) 292-5800 Facsimile: (408) 287-8040 Attention: Jay L. Margulies if to Newbridge, or Merger Sub,to: 600 March Road P.O. Box 13600 Kanata, Ontario, Canada K2K 2E6 Telephone: (613) 591-3600 Facsimile: (613) 599-3672 Attention: Peter Nadeau with a copy to: Heller Ehrman White & McAuliffe 525 University Avenue Palo Alto, California 94301 Telephone: (650) 324-7000 Facsimile: (650) 324-0638 Attention: Stephen C. Ferruolo (Matter #21969-0009) if to Stockholder, to: the address set forth on the signature page (d) Neither this Agreement nor any right, interest or obligation hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not intended to confer any rights or remedies hereunder upon any other person except the parties hereto. (e) This Agreement shall be governed by the laws of the State of without reference to principles of conflicts of law. 6 (f) This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (g) In case any one or more of the provisions contained in this Agreement should be finally determined to be invalid, illegal or unenforceable in any respect against a party hereto, it shall be adjusted if possible to effect the intent of the parties. In any event, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby, and such invalidity, illegality or unenforceability shall only apply as to such party in the specific jurisdiction where such final determination shall have been made. (h) The article and section headings contained in this Agreement are solely for the purpose of reference and shall not in any way affect the meaning or interpretation of this Agreement. (i) This Agreement embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no representations, promises, warranties, covenants, or undertakings, other than those expressly set forth or referred to herein and therein. (j) Each of the parties hereto recognizes and acknowledges that a breach by it of any covenants or agreements contained in this Agreement will cause the other party to sustain damages for which it would not have an adequate remedy at law for money damages. Therefore, in the event of any such breach, the aggrieved party shall be entitled to the remedy of specific performance of such covenants and agreements and injunctive and other equitable relief in addition to any other remedy to which it may be entitled, at law or in equity. (k) All costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses. (l) From time to time, at any other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further lawful action as may be necessary or desirable to consummate and make effective, in the most expeditious manner practicable, the transactions contemplated by this Agreement. (m) Notwithstanding any other provision of this Agreement (including, without limitation, Section 5 hereof), nothing contained in this Agreement shall bind or obligate Stockholder to act or refrain from acting in any capacity other than as a stockholder of Stel, it being expressly understood and agreed that this Agreement shall not bind or obligate Stockholder in his capacity as a director or officer of Stel [Rest of page intentionally blank] 7 IN WITNESS WHEREOF, the parties hereto have signed this Voting Agreement, in the case of corporate parties, by their respective duly authorized officers, as of the date first above written. NEWBRIDGE NETWORKS CORPORATION ________________________________________ Stockholder Name By:_______________________________ Print Name:_______________________ Signature:______________________________ Print Title:______________________ NUMBER OF EXISTING SHARES SATURN ACQUISITION CORP. BENEFICIALLY OWNED BY STOCKHOLDER:____________________________ By:_______________________________ ADDRESS OF STOCKHOLDER: Print Name:_______________________ ________________________________________ Print Title:______________________ ________________________________________ 8 EX-99.3 7 JOINT PRESS RELEASE DATED JUNE 22, 1999 EXHIBIT 99.3 Newbridge Networks to Acquire Stanford Telecommunications Further Strengthens Industry Leadership in Broadband Wireless Market KANATA, Ontario and SUNNYVALE, California, June, 22, 1999 -- Newbridge Networks (NYSE: NN; TSE: NNC) today announced it has signed a definitive agreement to acquire Stanford Telecommunications, Inc. (STII: Nasdaq), a leading supplier of key broadband wireless technology and products. The boards of directors of Newbridge Networks and Stanford Telecommunications have approved an agreement and plan of merger, subject to conditions including approval by Stanford Telecom's stockholders, whereby Newbridge will acquire all of the outstanding shares of common stock of Stanford Telecom in a tax-free, stock-for-stock exchange. After proceeds from the divestiture of unrelated businesses, the Stanford Telecom acquisition is expected to have a net cost to Newbridge of approximately US$280 million. The parties expect to close the transaction by November of this year. In addition to being subject to the approval of Stanford Telecom's stockholders, the transaction is conditional on the execution of a definitive agreement for the sale of the other operations, receipt of regulatory approvals and other customary closing conditions. The transaction will be accounted for under the purchase method of accounting. Under the agreement Stanford Telecom stockholders will receive for each share of common stock US$30 in Newbridge stock plus a contingent value right (CVR) which will give them a participation in the proceeds on the sale of other operations above a minimum amount. This participation will also be payable in the form of Newbridge common shares. The CVR may have a value of up to US$5 per share. For the purpose of this transaction, the value of a Newbridge common share shall equal the ten-day average closing price on the NYSE, ending on the fifth trading day immediately preceding Stanford Telecom's stockholder vote, expected in October. If the Newbridge stock price, pursuant to this calculation, is below US$24 and Newbridge does not exercise its right to adjust the exchange ratio, Stanford Telecom's board will be permitted to terminate the Agreement. Upon closing, Newbridge intends to retain the Wireless Broadband Products group, which currently forms part of Stanford Telecom's wholly-owned subsidiary Stanford Telecom Wireless Broadband, Inc., and other associated groups, which are presently held in Stanford Telecom's Base Business Operations. Stanford Telecom and Newbridge have agreed that Stanford Telecom's other operations, including SATCOM Ground Systems, Communications Systems Integration, Applied Technology Operation, Advanced Communications Systems and Manufacturing and Quality Assurance, will be sold to third parties. Pursuant to the merger agreement, Stanford Telecom has also granted Newbridge an option to acquire a non-exclusive license to its broadband wireless technology which would be exercisable under a change of control of Stanford Telecom. "Newbridge moved into the broadband wireless market space last year and at that time we expressed a conservative view of the potential revenue from this business," said Alan Lutz, president and chief operating officer, Newbridge Networks. "Since then we have won 15 new customer contracts, we have been selected for 13 additional field trials, and we are in discussions with 30 potential new customers. By acquiring Stanford Telecom, we have acquired access to the source of the time division multiple access (TDMA) technology which contributes to differentiating our product offering from the competition. "Under the acquisition, which we expect will be break-even in the first year and accretive to Newbridge earnings thereafter, on an operating basis, excluding goodwill. Newbridge will retain Stanford Telecom's Wireless Broadband Products group, Telecommunications Components Products group and the Satellite Personal Communications group. The Newbridge wireless development team in Sunnyvale will become a center of excellence for broadband wireless technologies, including development of multiple access wireless modems, highly integrated subscriber units and custom ASICs. "Newbridge and Stanford Telecom have enjoyed a long-standing, successful relationship. Stanford Telecom's unique technology has been integrated into the comprehensive Newbridge LMDS solution," continued Mr. Lutz. "By acquiring Stanford Telecom, Newbridge further extends its leadership position in the broadband wireless market. We deliver the industry's most powerful solution, extending from the broadband network core to the customer premise. This enables service providers to reduce capital outlay and enhance network performance, while capitalizing on the steep demand for broadband wireless services through a solution with quality and reliability equal to or better than that available over wireline facilities, such as fiber." "Newbridge knows the Stanford Telecom team -- the people, the culture and the technology -- and Stanford Telecom knows the Newbridge team," said Dr. Val P. Peline, president and chief executive officer, Stanford Telecommunications. "Marrying the strengths of the two companies delivers the industry leading solution from a single vendor that immediately addresses a substantial global market opportunity." This news release may include certain forward-looking statements that involve risks and uncertainties. Actual results may differ materially from results indicated in any forward-looking statements. Newbridge cautions that, among other things, in view of the rapid technological changes in the networking industry, if technologies or standards supported by Newbridge products or common carrier service offerings based on Newbridge products become obsolete or fail to gain widespread commercial acceptance, the Company's business may be adversely affected. Additional information identifying risks and uncertainties is contained in most recent Newbridge Form 10-Q quarterly report and Form 10-K annual report filed with the SEC. Stanford Telecom designs, manufactures and markets advanced digital communications products and systems to establish or enhance communications via terrestrial wireless, satellites 2 and cable. Stanford Telecom's technical strengths include: system design, communication waveforms, modulation and demodulation techniques, ASIC design, radio frequency (RF) antennas and converters, software and firmware, asynchronous transfer mode design and advanced manufacturing techniques and processes. Stanford Telecom was founded in 1973, maintains headquarters in Sunnyvale, California and employs over 1,000 people at its various locations throughout the United States. News and information are available at www.stelhq.com. Newbridge Networks designs, manufactures, markets and services wide area networking solutions for Internet service providers; local, long-distance, and wireless communications companies; cable television carriers; and enterprise customers in more than 100 countries. The Company leverages its relationship with more than 20 Newbridge Affiliate companies and strategic alliances with numerous other networking companies to deliver complete, end-to-end solutions. Newbridge customers include the world's 350 largest telecommunications service providers and more than 10,000 corporations, government organizations and other institutions. Founded in 1986, the Company employs more than 6,000 people on six continents. News and information are available at www.newbridge.com. Newbridge Networks and Stanford management will be hosting a conference call on Tuesday, June 22nd at 5:30 p.m. Eastern Daylight time. Telephone Conference Call Please call in 10 minutes prior to the start of the call North America: 1-800-553-3709 International: 1-303-267-1007 Audio Web Cast (listen only mode) Newbridge web site: www.newbridge.com For more information, contact Corporate Communications. Newbridge and logo are registered trademarks of Newbridge Networks Corporation. Stanford Telecom and Stanford Wireless Broadband are registered trademarks of Stanford Telecommunications Inc. 3 -----END PRIVACY-ENHANCED MESSAGE-----