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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
Newbridge Networks Corporation
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(Exact Name of Registrant as Specified in Charter)
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Canada 001-13316 98-0077506
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(State or Other Jurisdiction (Commission File Number) (IRS Employer Identification No.)
of Incorporation
600 March Road, Kanata, Ontario, Canada K2K 2E6
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (613) 591-3600
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
On June 22, 1999, Newbridge Networks Corporation, a Canadian corporation
("Newbridge") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Stanford Telecommunications, Inc., a Delaware corporation
("STel"), 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
closing 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.
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.
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Certain officers and directors of STel have entered into voting agreements
(the "Voting Agreements") with Newbridge providing that such officers and
directors 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 Agreement 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 Newbridge, STel and Merger Sub
99.1 Wireless Broadband Products Technology License Option
Agreement, dated as of June 22, 1999, between Newbridge and
STel
99.2 Stock Option Agreement, dated as of June 22, 1999, between
Newbridge and STel
99.3 Form of Voting Agreement
99.4 Form of Contingent Value Rights Agreement
99.5 Joint Press Release issued by Newbridge and STel on June 22,
1999
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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.
Newbridge Networks Corporation
Dated: June 29, 1999 By: /s/ Peter Nadeau
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Name: Peter Nadeau
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Title: Vice President and General Counsel
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EXHIBIT INDEX
Exhibit Description
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2.1 Agreement and Plan of Merger, dated as of June 22, 1999, by and among
Newbridge, STel and Merger Sub
99.1 Wireless Broadband Products Technology License Option Agreement, dated
as of June 22, 1999, between Newbridge and STel
99.2 Stock Option Agreement, dated as of June 22, 1999, between Newbridge
and STel
99.3 Form of Voting Agreement
99.4 Form of Contingent Value Rights Agreement
99.5 Joint Press Release issued by Newbridge and STel on June 22, 1999
<PAGE>
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
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TABLE OF CONTENTS
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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................................................ 27
3.24 Environmental Matters........................................................ 30
3.25 Officer's Certificate as to Tax Matters...................................... 34
3.26 Affiliates................................................................... 34
3.27 Finders or Brokers........................................................... 34
3.28 Registration Statement; Proxy Statement/Prospectus........................... 34
3.29 Title to Property............................................................ 34
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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
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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
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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").
<PAGE>
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.
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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;
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"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.
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(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
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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
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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,
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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.
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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.
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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
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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
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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
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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
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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);
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(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 claim, liabilities
or obl(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
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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
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under any third party software license generally available to the public), or
(B) with respect to the manufacturing, distribution or 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.
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(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
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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 being 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;
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(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;
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(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 acontractual 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
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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.
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(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
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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.
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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.
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(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.
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(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
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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
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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.
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(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
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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
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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.
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(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.
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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)
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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.
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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.
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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
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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
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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
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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
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
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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 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
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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
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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.
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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
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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
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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
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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
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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
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(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 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
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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 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.
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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.
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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.
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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 Dat e.
(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
53
<PAGE>
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
<PAGE>
(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
<PAGE>
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
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<PAGE>
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
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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
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(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
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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
if 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.
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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
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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
-------------------------------------
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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
<PAGE>
<TABLE>
<S> <C>
"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
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"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
</TABLE>
<PAGE>
<TABLE>
<S> <C>
"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
</TABLE>
<PAGE>
EXHIBIT 99.1
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
EXHIBIT 99.2
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.
<PAGE>
(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
<PAGE>
(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
<PAGE>
(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.
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(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
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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
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<PAGE>
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
<PAGE>
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
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<PAGE>
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
<PAGE>
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:
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<PAGE>
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.
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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: Val P. Peline
--------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
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EXHIBIT 99.3
VOTING AGREEMENT
THIS VOTING AGREEMENT ("Agreement") is made and entered into as of June 22,
1999 by and among Newbridge Networks Corporation, a Delaware 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
<PAGE>
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.
(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
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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,
judgment, statute, rule or regulation applicable to either Newbridge or Merger
Sub or any of their respective properties or assets.
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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 contemplated by the Merger Agreement and this
Agreement and any actions required in furtherance thereof and hereof.
4
<PAGE>
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 thereby.
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 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:
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<PAGE>
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.
(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.
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<PAGE>
(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]
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<PAGE>
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
BENEFICIALLY OWNED BY SATURN ACQUISITION CORP.
STOCKHOLDER:
----------------------------
By:
---------------------------
Print Name:
-------------------
ADDRESS OF STOCKHOLDER: Print Title:
--------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
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<PAGE>
EXHIBIT 99.4
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.
<PAGE>
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
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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;
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<PAGE>
"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.
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<PAGE>
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;
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<PAGE>
(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
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<PAGE>
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,
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<PAGE>
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
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<PAGE>
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
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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.
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<PAGE>
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:
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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.
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<PAGE>
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 ______________________________
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<PAGE>
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
<PAGE>
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 _________________________
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<PAGE>
[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.
<PAGE>
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 ACT _____________ Custodian ___________
(Cust) (Minor)
under Uniform Gifts to Minors Act
___________________________________
(State)
Additional abbreviations may also be used though not in the above list.
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<PAGE>
EXHIBIT 99.5
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
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Newbridge Networks to Acquire Stanford Telecommunications page 2
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.
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Newbridge Networks to Acquire Stanford Telecommunications page 3
"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
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Newbridge Networks to Acquire Stanford Telecommunications page 4
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 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.
-----------------
- end -
Newbridge and logo are registered trademarks of Newbridge Networks Corporation.
Stanford Telecom and Stanford Wireless Broadband are registered trademarks of
Stanford Telecommunications Inc.
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
