NEWBRIDGE NETWORKS CORP
8-K, 2000-03-09
TELEPHONE & TELEGRAPH APPARATUS
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<PAGE>

                                 UNITED STATES
                      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):      February 23, 2000


                        Newbridge Networks Corporation
            (Exact name of registrant as specified in its charter)

<TABLE>
<S>                            <C>                      <C>
          Canada                      1-13316                     98-0077506
(State or other jurisdiction  (Commission File Number)  (IRS Employer Identification No.)
       of incorporation)
</TABLE>


600 March Road, Kanata, Ontario, Canada                     K2K 2E6
(Address of principal executive offices)                   (Zip Code)



Registrant's telephone number, including area code:      (613) 591-3600



                                      N/A
        (Former name or former address, if changed since last report.)
<PAGE>

Item 5.  Other Events.

     On February 23, 2000, Newbridge Networks Corporation and Alcatel issued a
joint press release announcing that they have entered into a Merger Agreement by
which Alcatel will acquire all of the currently issued and outstanding common
shares of Newbridge pursuant to a Plan of Arrangement under section 192 of the
Canada Business Corporations Act.

     Pursuant to the Plan of Arrangement, the authorized share capital of
Newbridge will be reorganized by creating a new class of shares to be designated
as Exchangeable Shares. Holders of common shares of Newbridge will receive 0.81
Exchangeable Shares (the "Exchange Ratio") for each common share of Newbridge
held. At the option of the shareholder, as part of the Plan of Arrangement each
Exchangeable Share resulting from the change of Newbridge common shares into
Exchangeable Shares may be retained by the holder or else each Exchangeable
Share will be simultaneously exchanged for one American Depositary Share (ADS)
of Alcatel. Thereafter, each Exchangeable Share will be exchangeable at any time
at the option of the holder, and, in certain circumstances, at the option of
Alcatel Holdings, for one Alcatel ADS. The Exchangeable Shares will entitle
holders to dividend and other rights that are economically equivalent in all
material respects to those of holders of Alcatel ADSs. The Exchangeable Shares
will not carry voting rights and the holders thereof will not be entitled to
receive notice of or attend any meeting of the shareholders of Newbridge (except
as required by applicable law) or of Alcatel.

     Newbridge shareholders who elect to receive Alcatel ADSs will be entitled
to vote and to receive notice of and to attend meetings of the shareholders of
Alcatel.

     Each Newbridge option granted under any of the Newbridge stock option plans
will be replaced with an option to acquire the number of Alcatel ADSs equal to
the Exchange Ratio multiplied by the number of common shares of Newbridge that
may be purchased as if such original Newbridge option were exercisable and
exercised immediately prior to the effective date of the Plan of Arrangement.
The exercise price for each Alcatel ADS will equal the exercise price of the
original Newbridge option, divided by the Exchange Ratio. The vesting period for
certain Newbridge options will be accelerated, as described in the Merger
Agreement. In addition, each Newbridge warrant outstanding on the effective date
of the Plan of Arrangement will be amended to provide for the right to purchase
the number of Exchangeable Shares equal to the product of the Exchange Ratio
multiplied by the number of common shares of Newbridge that may be purchased as
if such Newbridge warrants were exercisable and exercised immediately prior to
the effective date of the Plan of Arrangement. The exercise price for each
amended warrant will equal the exercise price of the original Newbridge warrant,
divided by the Exchange Ratio.

     As of the date of the Merger Agreement, an Alcatel ADS represents one-fifth
(1/5/th/) of an ordinary share of the capital stock of Alcatel. Alcatel arranges
for the issuance of American Depositary Receipts (ADRs) to evidence the Alcatel
ADSs.

     The Plan of Arrangement must be approved by at least two-thirds of the
votes cast at a special meeting of Newbridge's shareholders (which will include
holders of Newbridge common shares, options and warrants).  The completion of
the Plan of Arrangement is conditional upon, among other things, obtaining
Newbridge and Alcatel shareholder approval,

                                      -2-
<PAGE>

court approval, certain regulatory approvals, conditional listing approval from
The Toronto Stock Exchange of the Exchangeable Shares and New York Stock
Exchange approval of the listing of Alcatel ADSs to be issued on the effective
date of the Plan of Arrangement and the Alcatel ADSs to be provided upon the
exchange of the Exchangeable Shares. In addition, Alcatel is not obligated to
complete the Plan of Arrangement if, among other things, holders of more than 5%
of the common shares of Newbridge have exercised their dissent rights (as
described in the Merger Agreement) or if the transactions contemplated in the
Plan of Arrangement cannot be accounted for as a pooling-of-interests under
French generally accepted accounting principles. Also, unless otherwise agreed
in writing between the parties, the Merger Agreement will be terminated if the
effective date of the Plan of Arrangement does not occur on or prior to
September 30, 2000, subject to either party being entitled to unilaterally
extend such date to December 31, 2000 in certain circumstances relating to
obtaining regulatory approvals.

     Pursuant to an Option Agreement dated February 22, 2000, Newbridge also
granted to Alcatel an option to purchase up to 36,183,000 common shares of
Newbridge at the final reported price on the TSE on February 22, 2000, being
Cdn. $50.60. The option is exercisable in limited circumstances where the break
fee agreed to be paid to Alcatel by Newbridge under the Merger Agreement becomes
payable. The value of the option together with the break fee is capped at Cdn.
$375 million and Alcatel has the option to elect to receive the cash value of
the option rather than common shares of Newbridge.

     Pursuant to the terms of a Voting Agreement entered into among Dr. Terence
Matthews, certain holding companies of Dr. Matthews and Alcatel, dated February
22, 2000, Dr. Matthews has agreed, among other things, not to negotiate with,
solicit, initiate or encourage submission of proposals or offers from, or
provide information to, any other person, entity or group relating to an
Acquisition Proposal. Dr. Matthews has further agreed to vote or cause to be
voted all of the common shares of Newbridge owned directly or indirectly by him
or over which he holds voting or dispositive power in favor of the approval of
the transactions contemplated in the Plan of Arrangement and against any action
that would impede, interfere or discourage the completion of the Plan of
Arrangement. Dr. Matthews is Chairman of the Board of Directors and Chief
Executive Officer of Newbridge.

     A copy of the Merger Agreement, the Option Agreement, the Voting Agreement
and the joint press release issued by Newbridge and Alcatel on February 23, 2000
are attached and incorporated herein by reference in their entirety as Exhibits
2.1, 99.1, 99.2 and 99.3, respectively.

                                      -3-
<PAGE>

Item 7.  Financial Statements and Exhibits.


        (c)  Exhibits.

        2.1  Merger Agreement, dated as of February 22, 2000, between Alcatel
             and Newbridge Networks Corporation.

        99.1 Option Agreement, dated as of February 22, 2000, between Alcatel
             and Newbridge Networks Corporation.

        99.2 Voting Agreement, dated as of February 22, 2000, among Alcatel and
             certain Shareholders of Newbridge Networks Corporation.

        99.3 Joint Press Release issued by the Newbridge Networks Corporation
             and Alcatel on February 23, 2000.

                                      -4-
<PAGE>

                                   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
                                                  (Registrant)


Date: March 8, 2000                        By:    /s/ Peter Nadeau
                                                  ------------------------------
                                           Title: Corporate Vice President,
                                                  General Counsel and Secretary

                                      -5-
<PAGE>

                                 EXHIBIT INDEX


Exhibit   Description
- -------   -----------

2.1       Merger Agreement, dated as of February 22, 2000, between Alcatel and
          Newbridge Networks Corporation.

99.1      Option Agreement, dated as of February 22, 2000, between Alcatel and
          Newbridge Networks Corporation.

99.2      Voting Agreement, dated as of February 22, 2000, among Alcatel and
          certain Shareholders of Newbridge Networks Corporation.

99.3      Joint Press Release issued by the Newbridge Networks Corporation and
          Alcatel on February 23, 2000.

<PAGE>

                                                                     EXHIBIT 2.1


                                    ALCATEL

                                 as "ALCATEL"


                                      and



                        NEWBRIDGE NETWORKS CORPORATION

                                as "NEWBRIDGE"




________________________________________________________________________________


                                MERGER AGREEMENT

                                February 22, 2000


________________________________________________________________________________
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<S>                                                                                                     <C>
                                                ARTICLE 1
                                             INTERPRETATION

Section 1.1   Definitions............................................................................    1
Section 1.2   Interpretation Not Affected by Headings, etc...........................................    9
Section 1.3   Currency...............................................................................    9
Section 1.4   Number, etc............................................................................    9
Section 1.5   Date For Any Action....................................................................    9
Section 1.6   Entire Agreement.......................................................................    9
Section 1.7   Schedules..............................................................................    9
Section 1.8   Accounting Matters.....................................................................   10
Section 1.9   Knowledge..............................................................................   10

                                              ARTICLE 2
                                          THE ARRANGEMENT

Section 2.1   Implementation Steps by NEWBRIDGE......................................................   10
Section 2.2   Implementation Steps by ALCATEL........................................................   11
Section 2.3   Interim Order..........................................................................   12
Section 2.4   Articles of Arrangement................................................................   12
Section 2.5   NEWBRIDGE Circular.....................................................................   13
Section 2.6   ALCATEL Circular.......................................................................   13
Section 2.7   Securities Compliance..................................................................   13
Section 2.8   Preparation of Filings, etc............................................................   14

                                              ARTICLE 3
                                    REPRESENTATIONS AND WARRANTIES

Section 3.1   Representations and Warranties of NEWBRIDGE............................................   16
Section 3.2   Representations and Warranties of ALCATEL..............................................   31
Section 3.3   Survival...............................................................................   36

                                             ARTICLE 4
                                             COVENANTS

Section 4.1   Retention of Goodwill..................................................................   36
Section 4.2   Treatment of Options, Warrants, ESPP and KEEP..........................................   36
Section 4.3   Covenants of NEWBRIDGE.................................................................   36
Section 4.4   Covenants of ALCATEL...................................................................   41
Section 4.5   Covenants Regarding Non-Solicitation...................................................   44
Section 4.6   Notice by NEWBRIDGE of Superior Proposal Determination.................................   45
Section 4.7   Access to Information..................................................................   47
Section 4.8   Closing Matters........................................................................   47
</TABLE>

                                      (i)
<PAGE>

<TABLE>
<S>                                                                                                     <C>
Section 4.9   Indemnification........................................................................   48
Section 4.10  Pooling of Interests Accounting........................................................   48
Section 4.11  Safe Income............................................................................   48

                                             ARTICLE 5
                                            CONDITIONS

Section 5.1   Mutual Conditions Precedent............................................................   49
Section 5.2   Additional Conditions Precedent to the Obligations of ALCATEL..........................   51
Section 5.3   Additional Conditions Precedent to the Obligations of NEWBRIDGE........................   52
Section 5.4   Notice and Cure Provisions.............................................................   53
Section 5.5   Satisfaction of Conditions.............................................................   54

                                             ARTICLE 6
                                     AMENDMENT AND TERMINATION

Section 6.1   Amendment..............................................................................   54
Section 6.2   Mutual Understanding Regarding Amendments..............................................   55
Section 6.3   Termination............................................................................   55
Section 6.4   Break and Other Fees; Option...........................................................   57
Section 6.5   Remedies...............................................................................   58

                                             ARTICLE 7
                                              GENERAL

Section 7.1   Notices................................................................................   58
Section 7.2   Assignment.............................................................................   59
Section 7.3   Binding Effect.........................................................................   60
Section 7.4   Waiver and Modification................................................................   60
Section 7.5   Further Assurances.....................................................................   60
Section 7.6   Expenses...............................................................................   60
Section 7.7   Consultation...........................................................................   61
Section 7.8   Governing Laws.........................................................................   61
Section 7.9   Time of Essence........................................................................   61
Section 7.10  Counterparts...........................................................................   61
</TABLE>

                                     (ii)
<PAGE>

                               MERGER AGREEMENT

     MEMORANDUM OF AGREEMENT made as of the 22/nd/ day of February, 2000.

B E T W E E N :

     ALCATEL a corporation existing under the laws of France (hereinafter
                            referred to as "ALCATEL")
                                    - and -

                        NEWBRIDGE NETWORKS CORPORATION

                a corporation existing under the laws of Canada
                   (hereinafter referred to as "NEWBRIDGE")

     THIS AGREEMENT WITNESSES THAT in consideration of the respective covenants
and agreements herein contained, the parties hereto covenant and agree as
follows:

                                   ARTICLE 1
                                INTERPRETATION

Section 1.1  Definitions.

     In this Agreement, unless there is something in the subject matter or
context inconsistent therewith, the following terms shall have the following
meanings respectively:

     "1933 Act" means the United States Securities Act of 1933, as amended;

     "Acquisition Proposal" means any proposal or offer with respect to any
     merger, amalgamation, arrangement, business combination, liquidation,
     dissolution, recapitalization, take-over bid, purchase of all or any
     material assets of, or any purchase of more than 20% of the equity (or
     rights thereto) of, or similar transactions involving, NEWBRIDGE or any
     NEWBRIDGE Material Subsidiary, excluding the Arrangement;

     "affiliate" shall have the meaning ascribed thereto under the Securities
     Act;
<PAGE>

                                      -2-

     "ALCATEL Circular" means the circular to be sent to the ALCATEL
     Shareholders, including the notice of the ALCATEL Meeting and all
     appendices thereto, containing information relating to the transactions
     contemplated herein;

     "ALCATEL Material Subsidiary" means each subsidiary of ALCATEL the total
     assets of which constituted more than ten percent of the consolidated
     assets of ALCATEL or the total revenues of which constituted more than ten
     percent of the consolidated revenues of ALCATEL, in each case as set out in
     the financial statements of ALCATEL for the year ended December 31, 1999,
     and including each affiliate of ALCATEL that directly or indirectly holds
     an equity interest in each such subsidiary;

     "ALCATEL Meeting" means the ordinary general and extraordinary meeting of
     ALCATEL Shareholders, including any adjournment or postponement thereof, to
     be called and held in accordance with applicable laws to consider the
     ALCATEL Resolution as well as other matters to be considered at ALCATEL's
     2000 ordinary general meeting;

     "ALCATEL ADRs" means the American Depositary Receipts of ALCATEL;

     "ALCATEL ADSs" means the American Depositary Shares of ALCATEL;

     "ALCATEL Shares" means the shares in the capital of ALCATEL, nominal value
     Euro 10 each;

     "ALCATEL Resolution" means the resolution of the ALCATEL Shareholders to
     increase the ALCATEL share capital in order to implement the Arrangement;

     "ALCATEL Shareholders" means the holders of ALCATEL Shares;

     "Arrangement" means an arrangement under Section 192 of the CBCA on the
     terms and subject to the conditions set out in the Plan of Arrangement,
     subject to any amendments or variations thereto made in accordance with
     Section 6.1 or Article 6 of the Plan of Arrangement or made at the
     direction of the Court;

     "Arrangement Resolution" means the special resolution of the NEWBRIDGE
     shareholders, to be substantially in the form and content of Schedule A
     annexed hereto;

     "Articles of Arrangement" means the articles of arrangement of NEWBRIDGE in
     respect of the Arrangement that are required by the CBCA to be sent to the
     Director after the Final Order is made;
<PAGE>

                                      -3-

     "Business Day" means any day on which commercial banks are generally open
     for business in Toronto, Ontario, New York City, New York and Paris, France
     other than a Saturday, a Sunday or a day observed as a holiday in Toronto,
     Ontario, in New York City, New York or in Paris, France under applicable
     laws;

     "CBCA" means the Canada Business Corporations Act as now in effect and as
     it may be amended from time to time prior to the Effective Date;

     "Callco" or "ALCATEL Holdings" means an unlimited liability company to be
     incorporated under the laws of Nova Scotia and wholly-owned, as a first or
     second tier subsidiary, by ALCATEL;

     "COB" means the Commission des Operations de Bourse;

     "Confidentiality Agreement" means the confidentiality letter agreement
     dated December 7, 1999 between ALCATEL and NEWBRIDGE;

     "Court" means the Superior Court of Justice (Ontario);

     "Director" means the Director appointed pursuant to Section 260 of the
     CBCA;

     "Dissent Rights" means the rights of dissent in respect of the Arrangement
     described in Section 3.1 of the Plan of Arrangement;

     "Dissenting Shareholder" has the meaning ascribed thereto in the Plan of
     Arrangement;

     "Effective Date" means the date shown on the certificate of arrangement to
     be issued by the Director under the CBCA giving effect to the Arrangement;

     "Effective Time" has the meaning ascribed thereto in the Plan of
     Arrangement;

     "Environmental Laws" means all applicable Laws, including applicable common
     law, relating to the protection of the environment and public health and
     safety;

     "ERISA" has the meaning ascribed thereto in Section 3.1(l)(i);

     "Exchange Trust Agreement" means an agreement to be made between ALCATEL,
     NEWBRIDGE and the Trustee in connection with the Plan of Arrangement
     substantially in the form and content of Schedule E annexed hereto, with
     such changes thereto as the parties hereto, may agree.
<PAGE>

                                      -4-

     "Exchangeable Shares" means the non-voting exchangeable shares to be
     created in the capital of NEWBRIDGE, having substantially the rights,
     privileges, restrictions and conditions set out in Appendix I to the Plan
     of Arrangement;

     "Final Order" means the final order of the Court approving the Arrangement
     as such order may be amended by the Court at any time prior to the
     Effective Date or, if appealed, then, unless such appeal is withdrawn or
     denied, as affirmed or as amended on appeal;

     "Form F-3" has the meaning ascribed thereto in Section 2.7(4);

     "Form S-8" has the meaning ascribed thereto in Section 2.7(5);

     "Governmental Entity" means any (a) multinational, federal, provincial,
     state, regional, municipal, local or other government, governmental or
     public department, central bank, court, tribunal, arbitral body,
     commission, board, bureau or agency, domestic or foreign, (b) any
     subdivision, agent, commission, board, or authority of any of the
     foregoing, or (c) any quasi- governmental or private body exercising any
     regulatory, expropriation or taxing authority under or for the account of
     any of the foregoing;

     "holders" means, when used with reference to the NEWBRIDGE Common Shares,
     NEWBRIDGE Options or NEWBRIDGE Warrants, the holders thereof shown from
     time to time in the register maintained by or on behalf of NEWBRIDGE in
     respect of such securities and, when used with reference to the
     Exchangeable Shares, means the holders of Exchangeable Shares shown from
     time to time in the register maintained by or on behalf of NEWBRIDGE in
     respect of the Exchangeable Shares;

     "including" means including without limitation;

     "Information" has the meaning ascribed thereto in Section 4.7(2);

     "Interim Order" means the interim order of the Court, as the same may be
     amended, in respect of the Arrangement, as contemplated by Section 2.3;

     "Laws" means all statutes, regulations, statutory rules, orders, and terms
     and conditions of any grant of approval, permission, authority or license
     of any court, Governmental Entity, statutory body (including the OSC, The
     Toronto Stock Exchange, the PSE, the NYSE, the SEC and the COB) or self-
     regulatory authority, and the term "applicable" with respect to such Laws
     and in the context that refers to one or more Persons, means that such Laws
     apply to such Person or Persons or its or their business, undertaking,
     property or securities and emanate from a Governmental Entity having
     jurisdiction over
<PAGE>

                                      -5-

     the Person or Persons or its or their business, undertaking, property or
     securities;

     "Letter of Transmittal and Election Form" means the letter of transmittal
     and election form for use by holders of NEWBRIDGE Common Shares, in the
     form accompanying the NEWBRIDGE Circular;

     "Material Adverse Change", when used in connection with ALCATEL or
     NEWBRIDGE, means any change, effect, event or occurrence with respect to
     the condition (financial or otherwise), properties, assets, liabilities,
     obligations (whether absolute, accrued, conditional or otherwise),
     businesses, operations or results of operations of such party or those of
     its subsidiaries that is, or could reasonably be expected to be, material
     and adverse to such party and its subsidiaries taken as a whole, other than
     any change, effect, event or occurrence (i) relating to the Canadian,
     United States, United Kingdom or French economies, political conditions or
     securities markets in general, or (ii) affecting the worldwide
     telecommunications equipment industry in general and which does not have a
     materially disproportionate impact on such party, or (iii) relating to any
     change in the trading price of the ALCATEL Shares or ALCATEL ADRs or the
     NEWBRIDGE Common Shares, respectively, either (A) related to the
     Arrangement or the announcement thereof, or (B) unrelated to any change,
     circumstance, effect, event or occurrence that is, or could reasonably be
     expected to be, material and adverse to such party and its subsidiaries
     taken as a whole;

     "Material Adverse Effect" when used in connection with ALCATEL or
     NEWBRIDGE, means any effect that is, or could reasonably be expected to be,
     material and adverse to the condition (financial or otherwise), properties,
     assets, liabilities, obligations (whether absolute, accrued, conditional or
     otherwise), businesses, operations or results of operations of such party
     and its subsidiaries taken as a whole, other than any effect (i) relating
     to the Canadian, United States, United Kingdom or French economies,
     political conditions or securities markets in general, or (ii) affecting
     the worldwide telecommunications equipment industry in general and which
     does not have a materially disproportionate impact on such party, or (iii)
     relating to any change in the trading price of the ALCATEL Shares or
     ALCATEL ADRs or the NEWBRIDGE Common Shares, respectively, either (A)
     related to the Arrangement or the announcement thereof, or (B) unrelated to
     any change, circumstance, effect, event or occurrence that is, or could
     reasonably be expected to be, material and adverse to such party and its
     subsidiaries taken as a whole;

     "material fact" shall have the meaning ascribed thereto under the
     Securities Act;
<PAGE>

                                      -6-

     "NEWBRIDGE Circular" means the notice of the NEWBRIDGE Meeting and
     accompanying management information circular, including all appendices
     thereto, to be sent to NEWBRIDGE Shareholders in connection with the
     NEWBRIDGE Meeting;

     "NEWBRIDGE Common Shares" means the common shares in the capital of
     NEWBRIDGE;

     "NEWBRIDGE Documents" has the meaning ascribed thereto in Section 3.1(m);

     "NEWBRIDGE Employee Stock Purchase Plan" means the share purchase plan for
     NEWBRIDGE employees, as amended to the date hereof;

     "NEWBRIDGE Key Employee Executive Plan" means the deferred compensation
     plan for NEWBRIDGE key executive employees, as amended to the date hereof;

     "NEWBRIDGE Material Subsidiary" means NEWBRIDGE LIMITED of England,
     NEWBRIDGE INC. of the U.S., and NEWBRIDGE (ASIA) LIMITED of Hong Kong;

     "NEWBRIDGE Meeting" means the special meeting of NEWBRIDGE Shareholders,
     including any adjournment or postponement thereof, to be called and held in
     accordance with the Interim Order to consider the Arrangement;

     "NEWBRIDGE Options" means the NEWBRIDGE Common Share purchase options
     granted under the NEWBRIDGE Stock Option Plan;

     "NEWBRIDGE Plans" has the meaning ascribed thereto in Section 3.1(l)(i);

     "NEWBRIDGE Preferred Shares" means the preferred shares in the capital of
     NEWBRIDGE;

     "NEWBRIDGE Shareholders" means the holders of NEWBRIDGE Common Shares,
     NEWBRIDGE Options and NEWBRIDGE Warrants;

     "NEWBRIDGE Stock Option Plan" means NEWBRIDGE's 1999 Key Employee Stock
     Option Plan, NEWBRIDGE's Consolidated Key Employee Stock Option Plan and
     Stanford Telecommunications, Inc.'s 1991 Stock Option Plan, in each case as
     amended to the date hereof;

     "NEWBRIDGE Warrants" means the 285,000 share purchase warrants of NEWBRIDGE
     exercisable between May 21, 2000 and May 21, 2004;
<PAGE>

                                      -7-

     "NYSE" means the New York Stock Exchange;

     "Option Agreement" means the option agreement attached as Schedule F
     hereto;

     "OSC" means the Ontario Securities Commission;

     "Outside Date" means, subject to Section 6.3(4), September 30, 2000 or such
     later date as may be mutually agreed by the parties;

     "PSE" means the Paris Bourse;

     "Person" includes any individual, firm, partnership, limited partnership,
     joint venture, venture capital fund, limited liability company, unlimited
     liability company, association, trust, trustee, executor, administrator,
     legal personal representative, estate, group, body corporate, corporation,
     unincorporated association or organization, Governmental Entity, syndicate
     or other entity, whether or not having legal status;

     "Plan of Arrangement" means the plan of arrangement substantially in the
     form and content of Schedule B annexed hereto and any amendments or
     variations thereto made in accordance with Section 6.1 or Article 6 of the
     Plan of Arrangement or made at the direction of the Court;

     "Pre-Effective Date Period" shall mean the period from and including the
     date hereof to and including the Effective Time;

     "Publicly Disclosed by NEWBRIDGE" means disclosed by NEWBRIDGE in a public
     filing made by it with the OSC, The Toronto Stock Exchange, the NYSE or the
     SEC from January 1, 1998 to the date hereof;

     "Publicly Disclosed by ALCATEL" means disclosed by ALCATEL in a public
     filing made by it with the PSE, the COB, the NYSE or the SEC from January
     1, 1998 to the date hereof;

     "Regulatory Approvals" means those sanctions, rulings, consents, orders,
     exemptions, permits and other approvals (including the lapse, without
     objection, of a prescribed time under a statute or regulation that states
     that a transaction may be implemented if a prescribed time lapses following
     the giving of notice without an objection being made) of Governmental
     Entities, regulatory agencies or self-regulatory organizations, as set out
     in Schedule C hereto;

     "Revised Options" has the meaning ascribed thereto in the Plan of
     Arrangement;
<PAGE>

                                      -8-

     "Representatives" has the meaning ascribed thereto in Section 4.7(1);

     "SEC" means the United States Securities and Exchange Commission;

     "Securities Act" means the Securities Act (Ontario) and the rules,
     regulations and policies made thereunder, as now in effect and as they may
     be amended from time to time prior to the Effective Date;

     "subsidiary" means, with respect to a specified body corporate, any body
     corporate of which more than 50% of the outstanding shares ordinarily
     entitled to elect a majority of the board of directors thereof (whether or
     not shares of any other class or classes shall or might be entitled to vote
     upon the happening of any event or contingency) are at the time owned
     directly or indirectly by such specified body corporate, and shall include
     any body corporate, partnership, joint venture or other entity over which
     it exercises direction or control or which is in a like relation to a
     subsidiary;

     "Superior Proposal" means any bona fide written Acquisition Proposal that
     in the good faith determination of the Board of Directors of NEWBRIDGE,
     after consultation with its financial advisors and with outside counsel (a)
     is reasonably capable of being completed, taking into account all legal,
     financial, regulatory and other aspects of such proposal and the party
     making such proposal, and (b) would, if consummated in accordance with its
     terms, result in a transaction more favourable to the NEWBRIDGE
     shareholders from a financial point of view than the transaction
     contemplated by this Agreement;

     "Support Agreement" means an agreement to be made between ALCATEL, Callco
     and NEWBRIDGE substantially in the form and content of Schedule D annexed
     hereto, with such changes thereto as the parties hereto may agree;

     "Tax" and "Taxes" have the respective meanings ascribed thereto in Section
     3.1(k) (iii);

     "Tax Returns" means all returns, declarations, reports, information returns
     and statements required to be filed with any taxing authority relating to
     Taxes; and

     "Trustee" means the trustee to be chosen by ALCATEL and NEWBRIDGE, acting
     reasonably, to act as trustee under the Exchange Trust Agreement, being a
     corporation organized and existing under the laws of Canada and authorized
     to carry on the business of a trust company in all the provinces of Canada,
     and any successor trustee appointed under the Exchange Trust Agreement.
<PAGE>

                                      -9-

Section 1.2  Interpretation Not Affected by Headings, etc.

     The division of this Agreement into Articles, Sections and other portions
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
and/or a letter refer to the specified Article or Section of this Agreement. The
terms "this Agreement", "hereof", "herein" and "hereunder" and similar
expressions refer to this Agreement (including the Schedules hereto) and not to
any particular Article, Section or other portion hereof and include any
agreement or instrument supplementary or ancillary hereto.

Section 1.3  Currency.

     Unless otherwise specifically indicated, all sums of money referred to in
this Agreement are expressed in lawful money of Canada.

Section 1.4  Number, etc.

     Unless the context otherwise requires, words importing the singular shall
include the plural and vice versa and words importing any gender shall include
all genders.

Section 1.5  Date For Any Action.

     In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day which is a Business Day.

Section 1.6  Entire Agreement.

     This Agreement, the agreements and other documents herein referred to and
the Confidentiality Agreement constitute the entire agreement between the
parties hereto pertaining to the terms of the Arrangement and supersede all
other prior agreements, understandings, negotiations and discussions, whether
oral or written, between the parties hereto with respect to the terms of the
Arrangement.

Section 1.7  Schedules.

     The following Schedules are annexed to this Agreement and are hereby
incorporated by reference into this Agreement and form part hereof:

     Schedule A - Arrangement Resolution

     Schedule B - Plan of Arrangement
     Schedule C - Regulatory Approvals
     Schedule D - Support Agreement
     Schedule E - Exchange Trust Agreement
     Schedule F - Option Agreement
<PAGE>

                                      -10-

Section 1.8  Accounting Matters.

     Unless otherwise stated, all accounting terms used in this Agreement in
respect of NEWBRIDGE shall have the meanings attributable thereto under Canadian
generally accepted accounting principles and all determinations of an accounting
nature in respect of NEWBRIDGE required to be made shall be made in a manner
consistent with Canadian generally accepted accounting principles and past
practice. Unless otherwise stated, all accounting terms used in this Agreement
in respect of ALCATEL shall have the meanings attributable thereto under French
generally accepted accounting principles and all determinations of an accounting
nature required to be made in respect of ALCATEL shall be made in a manner
consistent with French generally accepted accounting principles and past
practice.

Section 1.9  Knowledge.

     Each reference herein to the knowledge of a party means, unless otherwise
specified, the knowledge of such party's senior officers following due inquiry.

                                   ARTICLE 2
                                THE ARRANGEMENT

Section 2.1  Implementation Steps by NEWBRIDGE.

          NEWBRIDGE covenants in favour of ALCATEL that NEWBRIDGE shall:

     (a)  subject to Section 2.5, as soon as reasonably practicable, apply in a
          manner acceptable to ALCATEL, acting reasonably, under Section 192 of
          the CBCA for an order approving the Arrangement and for the Interim
          Order, and thereafter proceed with and diligently seek the Interim
          Order;

     (b)  subject to Section 2.5, convene and hold the NEWBRIDGE Meeting for the
          purpose of considering the Arrangement Resolution (provided however
          that if there is another Acquisition Proposal to be considered at the
          NEWBRIDGE Meeting, the order of presentation, signage, proxy forms and
          other matters related thereto shall be acceptable to ALCATEL, acting
          reasonably);

     (c)  subject to Section 5.4(2), except as required for quorum purposes, not
          postpone or cancel (or propose for adjournment, postponement or
          cancellation) the NEWBRIDGE Meeting without ALCATEL's prior written
          consent except as required by Laws or required by the NEWBRIDGE
          Shareholders;
<PAGE>

                                      -11-

     (d)  at the request of ALCATEL, use commercially reasonable efforts to
          solicit from the NEWBRIDGE Shareholders proxies in favour of the
          approval of the Arrangement Resolution and to take all other action
          that is necessary or desirable to secure the approval of the
          Arrangement Resolution by the NEWBRIDGE Shareholders, except to the
          extent that the Board of Directors has changed its recommendation in
          accordance with the terms of this Agreement (and subject in all cases
          to Section 6.4 hereof);

     (e)  subject to obtaining the approvals as are required by the Interim
          Order, proceed with and diligently pursue the application to the Court
          for the Final Order;

     (f)  subject to obtaining the Final Order and the satisfaction or waiver of
          the other conditions herein contained in favour of each party, send to
          the Director, for endorsement and filing by the Director, the Articles
          of Arrangement and such other documents as may be required in
          connection therewith under the CBCA to give effect to the Arrangement;
          and

     (g)  subject to obtaining the Final Order and the satisfaction or waiver of
          the other conditions herein contained in its favour, execute the
          Support Agreement and the Exchange Trust Agreement.

Section 2.2  Implementation Steps by ALCATEL.

          ALCATEL covenants in favour of NEWBRIDGE that ALCATEL shall:

     (a)  subject to Section 2.6, convene and hold the ALCATEL Meeting at the
          same time as its 2000 ordinary general meeting would otherwise have
          been held for the purpose of considering the ALCATEL Resolution (and
          for any other proper purpose as may be set out in the notice for such
          meeting), and such meeting shall be held on or before May 31, 2000;

     (b)  subject to Section 5.4(2), except as required for quorum purposes, not
          adjourn, postpone or cancel (or propose for adjournment, postponement
          or cancellation) the ALCATEL Meeting without NEWBRIDGE's prior written
          consent except as required by Laws or required by the ALCATEL
          Shareholders;

     (c)  subject to their fiduciary duties, ALCATEL directors and officers
          shall not make a negative recommendation in the ALCATEL Circular with
          respect to the ALCATEL Resolution;
<PAGE>

                                      -12-

     (d)  incorporate and organize Callco;

     (e)  subject to obtaining the Final Order and the satisfaction or waiver of
          the other conditions herein contained in its favour, ALCATEL shall
          (and shall cause Callco to) execute and deliver the Support Agreement;
          and

     (f)  subject to obtaining the Final Order and the satisfaction or waiver of
          the other conditions herein contained in its favour, ALCATEL shall
          (and shall cause Callco to) execute and deliver the Exchange Trust
          Agreement.

Section 2.3  Interim Order.

     The notice of motion for the application referred to in Section 2.1(a)
shall request that the Interim Order provide:

     (a)  for the class of Persons to whom notice is to be provided in respect
          of the Arrangement and the NEWBRIDGE Meeting and for the manner in
          which such notice is to be provided;

     (b)  that the requisite approval for the Arrangement Resolution shall be
          66/2//\\3\\% of the votes cast on the Arrangement Resolution by
          NEWBRIDGE Shareholders present in person or by proxy at the NEWBRIDGE
          Meeting (such that each holder of NEWBRIDGE Common Shares is entitled
          to one vote for each NEWBRIDGE Common Share held and each holder of
          NEWBRIDGE Options and NEWBRIDGE Warrants is entitled to the number of
          votes represented by the number of NEWBRIDGE Common Shares into which
          such holder's NEWBRIDGE Option or NEWBRIDGE Warrants is convertible,
          rounded down to the nearest whole number of NEWBRIDGE Common Shares
          and without regard to vesting requirements, if any);

     (c)  that, in all other respects, the terms, restrictions and conditions of
          the by-laws and articles of NEWBRIDGE, including quorum requirements
          and all other matters, shall apply in respect of the NEWBRIDGE
          Meeting; and

     (d)  for the grant of the Dissent Rights.

Section 2.4  Articles of Arrangement.

     The Articles of Arrangement shall, with such other matters as are necessary
to effect the Arrangement, implement the Plan of Arrangement, as a result of
which, among other things, each holder of NEWBRIDGE Common Shares will be
entitled to
<PAGE>

                                     -13-

receive either 0.81 Exchangeable Shares or 0.81 ALCATEL ADSs (evidenced by
ALCATEL ADRs) at the option of the holder.

Section 2.5  NEWBRIDGE Circular.

     As promptly as reasonably practicable after the execution and delivery of
this Agreement, NEWBRIDGE shall complete the NEWBRIDGE Circular together with
any other documents required by the Securities Act or other applicable Laws in
connection with the Arrangement, and as promptly as practicable after the
execution and delivery of this Agreement, NEWBRIDGE shall, unless otherwise
agreed by the parties and subject to the contemporaneous mailing of the ALCATEL
Circular, cause the NEWBRIDGE Circular and other documentation required in
connection with the NEWBRIDGE Meeting to be sent to each NEWBRIDGE Shareholder
and filed as required by the Interim Order and applicable Laws.

Section 2.6  ALCATEL Circular.

     ALCATEL shall, subject to the obtaining of required Regulatory Approvals in
connection with sending the ALCATEL Circular, complete the ALCATEL Circular
together with any other documents required by the PSE or applicable Laws in
connection with the ALCATEL Meeting and shall, subject to the contemporaneous
mailing of the NEWBRIDGE Circular or as otherwise agreed by the parties, cause
the ALCATEL Circular and other documentation required in connection with the
ALCATEL Meeting to be sent to each ALCATEL Shareholder as required by applicable
Laws.

Section 2.7  Securities Compliance.

(1)  ALCATEL shall use its reasonable best efforts to obtain all orders required
     from the applicable Canadian securities regulatory authorities to permit
     the issuance and first resale of (a) the Exchangeable Shares issued
     pursuant to the Arrangement, and (b) the ALCATEL ADSs provided from time to
     time upon exchange of the Exchangeable Shares, in each case without
     qualification with or approval of or the filing of any prospectus, or the
     taking of any proceeding with, or the obtaining of any further order,
     ruling or consent from, any Governmental Entity or regulatory authority
     under any Canadian federal, provincial or territorial securities or other
     Laws or pursuant to the rules and regulations of any regulatory authority
     administering such Laws, or the fulfilment of any other legal requirement
     in any such jurisdiction (other than, with respect to such first resales,
     any restrictions on transfer by reason of, among other things, a holder
     being a "control person" of ALCATEL or NEWBRIDGE for purposes of Canadian
     federal, provincial or territorial securities Laws) (for greater certainty,
     in each case without affecting the need to comply with applicable United
     States, French or other Laws).
<PAGE>

                                     -14-

(2)  Each of ALCATEL and NEWBRIDGE shall use its reasonable best efforts to
     obtain the approval of The Toronto Stock Exchange for the listing of the
     Exchangeable Shares.

(3)  ALCATEL shall use its reasonable best efforts to obtain the approval of the
     COB and the PSE for the listing of the ALCATEL Shares to be issued in
     connection with the Arrangement.

(4)  ALCATEL shall use its reasonable best efforts to obtain the approval of the
     NYSE for the listing of the ALCATEL ADRs and the ALCATEL ADSs to be
     provided from time to time upon exchange of the Exchangeable Shares or the
     exercise of the NEWBRIDGE Options or the NEWBRIDGE Warrants.

(5)  As promptly as practicable after the date hereof but in no event later than
     March 24, 2000, ALCATEL shall file a registration statement on Form F-3 (or
     other applicable form) (the "Form F-3") in order to register under the 1933
     Act the ALCATEL ADSs to be provided from time to time after the Effective
     Time upon exchange of the Exchangeable Shares, and shall use its reasonable
     efforts to cause the Form F-3 to become effective and to maintain the
     effectiveness of such registration for the period that such Exchangeable
     Shares remain outstanding.

(6)  Within 10 days after or if necessary before the Effective Date, ALCATEL
     shall file a registration statement on Form S-8 (or other applicable form)
     (the "Form S-8") in order to register under the 1933 Act those ALCATEL ADSs
     to be distributed from time to time after the Effective Time upon the
     exercise of the Revised Options.

Section 2.8  Preparation of Filings, etc.

(1)  ALCATEL and NEWBRIDGE shall use their reasonable best efforts to cooperate
     in the preparation, seeking and obtaining of all circulars, filings,
     consents, Regulatory Approvals and other approvals and other matters in
     connection with this Agreement and the Arrangement, provided, however,
     that, with respect to Canadian or U.S. federal, provincial, state or
     territorial qualifications, ALCATEL shall not be required to register or
     qualify as a foreign corporation or to take any action that would subject
     it to service of process in any jurisdiction where it is not now so
     subject, except as to matters and transactions arising solely from the
     exchange of the Exchangeable Shares and the provision and listing of the
     ALCATEL ADSs and the ALCATEL ADRs.

(2)  Each of ALCATEL and NEWBRIDGE shall furnish to the other all such
     information concerning it and its shareholders as may be required (and, in
     the case of its shareholders, available to it) for the effectuation of the
     actions
<PAGE>

                                     -15-

     described in Sections 2.5, 2.6 and 2.7 and the foregoing provisions of this
     Section 2.8, and each covenants that no information furnished by it (to its
     knowledge in the case of information concerning its shareholders) in
     connection with such actions or otherwise in connection with the
     consummation of the Arrangement and the other transactions contemplated by
     this Agreement will contain any untrue statement of a material fact or omit
     to state a material fact required to be stated in any such document or
     necessary in order to make any information so furnished for use in any such
     document not misleading in the light of the circumstances in which it is
     furnished.

(3)  ALCATEL and NEWBRIDGE shall each promptly notify the other if at any time
     before the Effective Time it becomes aware that the NEWBRIDGE Circular or
     the ALCATEL Circular, an application for an order or any other document
     described in Section 2.7 contains any untrue statement of a material fact
     or omits to state a material fact required to be stated therein or
     necessary to make the statements contained therein not misleading in light
     of the circumstances in which they are made, or that otherwise requires an
     amendment or supplement to the NEWBRIDGE Circular or the ALCATEL Circular
     or such application or other document. In any such event, ALCATEL and
     NEWBRIDGE shall cooperate in the preparation of a supplement or amendment
     to the NEWBRIDGE Circular or the ALCATEL Circular or such application or
     other document, as required and as the case may be, and, if required, shall
     cause the same to be distributed to shareholders of ALCATEL or NEWBRIDGE
     and/or filed with the relevant securities regulatory authorities and/or
     stock exchanges.

(4)  NEWBRIDGE shall ensure that the NEWBRIDGE Circular complies with all
     applicable Laws and, without limiting the generality of the foregoing, that
     the NEWBRIDGE Circular does 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 contained therein not misleading in light
     of the circumstances in which they are made (other than with respect to any
     information relating to and provided by ALCATEL or any third party that is
     not an affiliate of NEWBRIDGE). Without limiting the generality of the
     foregoing, NEWBRIDGE shall ensure that the NEWBRIDGE Circular provides
     holders of NEWBRIDGE Common Shares with information in sufficient detail to
     permit them to form a reasoned judgement concerning the matters to be
     placed before them at the NEWBRIDGE Meeting, and ALCATEL shall provide all
     information regarding it necessary to do so.

(5)  ALCATEL shall ensure that the ALCATEL Circular and that the Form F-3 and
     Form S-8 comply with all applicable Laws and, without limiting the
     generality of the foregoing, that the ALCATEL Circular and such documents
<PAGE>

                                     -16-

     do 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 contained therein not misleading in light of the circumstances
     in which they are made (other than with respect to any information relating
     to and provided by NEWBRIDGE or any third party that is not an affiliate of
     ALCATEL). Without limiting the generality of the foregoing, ALCATEL shall
     ensure that the ALCATEL Circular provides ALCATEL Shareholders with
     information in sufficient detail to permit them to form a reasoned
     judgement concerning the matters to be placed before them at the ALCATEL
     Meeting, and NEWBRIDGE shall provide all information regarding it necessary
     to do so.

(6)  NEWBRIDGE shall, at least 45 days prior to the date of the NEWBRIDGE
     Meeting, deliver to ALCATEL a list reasonably satisfactory to ALCATEL
     setting forth the names and addresses of all Persons who are at the time
     "affiliates" of NEWBRIDGE for purposes of Rule 145 under the 1933 Act.
     NEWBRIDGE shall furnish such information and documents as ALCATEL may
     reasonably request for the purpose of reviewing such list, and NEWBRIDGE
     shall, without expending any moneys or other consideration, use its
     reasonable best efforts to cause each Person who is identified as an
     affiliate on such list to execute a written agreement at least 30 days
     prior to the date of the NEWBRIDGE Meeting in a form acceptable to ALCATEL
     and NEWBRIDGE, acting reasonably, related to the applicable resale
     restrictions of Rule 145.

                                   ARTICLE 3
                        REPRESENTATIONS AND WARRANTIES

Section 3.1  Representations and Warranties of NEWBRIDGE.

          NEWBRIDGE represents and warrants to and in favour of ALCATEL, as
     follows and acknowledges that ALCATEL is relying upon such representations
     and warranties in connection with the matters contemplated by this
     Agreement:

     (a)  Organization.

     Each of NEWBRIDGE and the NEWBRIDGE Material Subsidiaries has been duly
          incorporated or formed under all applicable Laws, is validly
          subsisting and has full corporate or legal power and authority to own
          its properties and conduct its businesses as currently owned and
          conducted.  The only material subsidiaries of NEWBRIDGE are the
          Material Subsidiaries.  All of the outstanding shares and other
          ownership interests of the NEWBRIDGE Material Subsidiaries which
<PAGE>

                                     -17-

          are held directly or indirectly by NEWBRIDGE are validly issued, fully
          paid and non-assessable and all such shares and other ownership
          interests are owned directly or indirectly by NEWBRIDGE, free and
          clear of all material liens, claims or encumbrances, except as has
          been set forth in writing by NEWBRIDGE to ALCATEL in a form acceptable
          to ALCATEL or pursuant to restrictions on transfers contained in
          articles or similar documents, and except as aforesaid there are no
          outstanding options, rights, entitlements, understandings or
          commitments (contingent or otherwise) regarding the right to acquire
          any such shares or other ownership interests in any of the NEWBRIDGE
          Material Subsidiaries. NEWBRIDGE has disclosed in writing to ALCATEL
          in a form acceptable to ALCATEL the names and jurisdictions of
          incorporation of each of the NEWBRIDGE Material Subsidiaries.

     (b)  Capitalization.  The authorized capital of NEWBRIDGE consists of an
          unlimited number of NEWBRIDGE Common Shares and an unlimited number of
          NEWBRIDGE Preferred Shares, issuable in Series, including the Series A
          NEWBRIDGE Preferred Shares. As of the date hereof, there are
          181,824,826 NEWBRIDGE Common Shares (and no more) and no NEWBRIDGE
          Preferred Shares issued and outstanding. In addition, as at the date
          hereof, options to acquire an aggregate of not more than 32,916,053
          NEWBRIDGE Common Shares are granted and outstanding under the
          NEWBRIDGE Stock Option Plan, rights to acquire not more than 7,500
          NEWBRIDGE Common Shares are granted and outstanding under the
          NEWBRIDGE Employee Stock Purchase Plan and rights to acquire 285,000
          NEWBRIDGE Common Shares are granted and outstanding under the
          NEWBRIDGE Warrants (and, in each case, no more).  No awards have been
          or will be made under the NEWBRIDGE Key Employee Executive Plan.
          Except as described in the preceding sentences of this Section 3.1(b)
          and in Section 3.1(a), there are no options, warrants, conversion
          privileges or other rights, agreements, arrangements or commitments
          (pre-emptive, contingent or otherwise) obligating NEWBRIDGE or any
          NEWBRIDGE Material Subsidiary to issue or sell any shares of NEWBRIDGE
          or any of the NEWBRIDGE Material Subsidiaries or securities or
          obligations of any kind convertible into or exchangeable for any
          shares of NEWBRIDGE or any NEWBRIDGE Material Subsidiary.  All
          outstanding NEWBRIDGE Common Shares have been duly authorized and are
          validly issued and outstanding as fully paid and non-assessable
          shares, free of pre-emptive rights. Except as described in the
          preceding sentences of this Section 3.1(b), there are no outstanding
          bonds, debentures or other evidences of indebtedness of
<PAGE>

                                     -18-

          NEWBRIDGE or any subsidiary having the right to vote (or that are
          convertible for or exercisable into securities having the right to
          vote) with the holders of the NEWBRIDGE Common Shares on any matter.
          Except as has been set forth in writing by NEWBRIDGE to ALCATEL in a
          form acceptable to ALCATEL, there are no outstanding contractual
          obligations of NEWBRIDGE or any of the NEWBRIDGE Material Subsidiaries
          to repurchase, redeem or otherwise acquire any of its outstanding
          securities or with respect to the voting or disposition of any
          outstanding securities of any of the NEWBRIDGE Material Subsidiaries.

     (c)  Authority and No Violation.

          (i)    NEWBRIDGE has the requisite corporate power and authority to
                 enter into this Agreement and to perform its obligations
                 hereunder. The execution and delivery of this Agreement by
                 NEWBRIDGE and the consummation by NEWBRIDGE of the transactions
                 contemplated by this Agreement have been duly authorized by its
                 Board of Directors and no other corporate proceedings on its
                 part are necessary to authorize this Agreement or the
                 transactions contemplated hereby, other than:

                 (A)  with respect to the NEWBRIDGE Meeting, the NEWBRIDGE
                      Circular and other matters relating solely thereto, the
                      approval of the Board of Directors of NEWBRIDGE; and

                 (B)  with respect to the completion of the Arrangement, the
                      requisite approval of the NEWBRIDGE Shareholders.

          (ii)   This Agreement has been duly executed and delivered by
                 NEWBRIDGE and constitutes its legal, valid and binding
                 obligation, enforceable against it in accordance with its
                 terms, subject to bankruptcy, insolvency and other applicable
                 Laws affecting creditors' rights generally, and to general
                 principles of equity.

          (iii)  The Board of Directors of NEWBRIDGE has (A) determined as of
                 the date hereof unanimously that the Arrangement is fair to the
                 holders of the NEWBRIDGE Common Shares and is in the best
                 interests of NEWBRIDGE, (B) received an opinion from Morgan
                 Stanley & Co. Incorporated to the effect that, as of the date
                 of this Agreement, the consideration offered to NEWBRIDGE
                 Shareholders pursuant to the Arrangement is fair
<PAGE>

                                     -19-

                 from a financial point of view to the NEWBRIDGE Shareholders,
                 and (C) determined as of the date hereof to unanimously
                 recommend that the NEWBRIDGE Shareholders vote in favour of the
                 Arrangement. NEWBRIDGE's directors have advised NEWBRIDGE that,
                 as of the date hereof, they intend to vote NEWBRIDGE Common
                 Shares and NEWBRIDGE Options held by them in favour of the
                 Arrangement and (except with respect to Mr. Matthews, unless
                 the Board of Directors of NEWBRIDGE shall have failed to
                 recommend or shall have withdrawn, modified or changed in a
                 manner adverse to ALCATEL its approval or recommendation of
                 this Agreement or the Arrangement or shall have approved or
                 recommended any unsolicited Superior Proposal in accordance
                 with Section 4.6) will so represent in the NEWBRIDGE Circular.
                 NEWBRIDGE is not subject to a shareholder rights plan or
                 "poison pill" or similar plan.

          (iv)   The approval of this Agreement, the execution and delivery by
                 NEWBRIDGE of this Agreement and the performance by it of its
                 obligations hereunder and the completion of the Arrangement and
                 the transactions contemplated thereby, will not, except as
                 disclosed in writing by NEWBRIDGE to ALCATEL in a form
                 acceptable to ALCATEL:

                 (A)  result (with or without notice or the passage of time) in
                      a violation or breach of, require any consent to be
                      obtained under or give rise to any termination, purchase
                      or sale rights or payment obligation under any provision
                      of:

                      (I)    its or any NEWBRIDGE Material Subsidiary's
                             certificate of incorporation, articles, by-laws or
                             other charter documents, including any unanimous
                             shareholder agreement;

                      (II)   any Laws, judgement or decree (subject to obtaining
                             the Regulatory Approvals relating to NEWBRIDGE),
                             except to the extent that the violation or breach
                             of, or failure to obtain any consent under, any
                             Laws, judgement or decree would not, individually
                             or in the aggregate, have a Material Adverse Effect
                             on NEWBRIDGE; or

                      (III)  except as would not, individually or in the
                             aggregate, have a Material Adverse Effect on
<PAGE>

                                     -20-

                             NEWBRIDGE, any contract, agreement, license,
                             franchise or permit to which NEWBRIDGE or any
                             subsidiary is party or by which it is bound or
                             subject or is the beneficiary;

                 (B)  give rise to any right of termination or acceleration of
                      indebtedness of NEWBRIDGE or any subsidiary, or cause any
                      such indebtedness to come due before its stated maturity,
                      or cause any available credit of NEWBRIDGE or any
                      subsidiary to cease to be available, other than as would
                      not, individually or in the aggregate, have a Material
                      Adverse Effect on NEWBRIDGE;

                 (C)  except as would not, individually or in the aggregate,
                      have a Material Adverse Effect on NEWBRIDGE, result in the
                      imposition of any encumbrance, charge or lien upon any of
                      its assets or the assets of any NEWBRIDGE Material
                      Subsidiary; or

                 (D)  except as would not, individually or in the aggregate,
                      have a Material Adverse Effect on NEWBRIDGE, restrict,
                      hinder, impair or limit the ability of NEWBRIDGE or any
                      NEWBRIDGE Material Subsidiary to carry on the business of
                      NEWBRIDGE or any NEWBRIDGE Material Subsidiary as and
                      where it is now being carried on.

                 No consent, approval, order or authorization of, or declaration
                 or filing with, any Governmental Entity is required to be
                 obtained by NEWBRIDGE and its subsidiaries in connection with
                 the execution and delivery of this Agreement or the
                 consummation by NEWBRIDGE of the transactions contemplated
                 hereby other than (A) any approvals required by the Interim
                 Order, (B) the Final Order, (C) filings with the Director under
                 the CBCA, (D) the Regulatory Approvals relating to NEWBRIDGE
                 and (E) any other consents, approvals, orders, authorizations,
                 declarations or filings of or with a Governmental Entity which
                 have been set forth in writing by NEWBRIDGE to ALCATEL in a
                 form acceptable to ALCATEL or which, if not obtained, would,
                 individually or in the aggregate, have a Material Adverse
                 Effect on NEWBRIDGE.

     (d)  No Defaults.  Subject to obtaining the Regulatory Approvals relating
          to NEWBRIDGE and except as has been disclosed in writing by NEWBRIDGE
          to ALCATEL in a form acceptable to ALCATEL, neither
<PAGE>

                                     -21-

          NEWBRIDGE nor any of its subsidiaries is in default under, and there
          exists no event, condition or occurrence which, after notice or lapse
          of time or both, would constitute such a default under, any contract,
          agreement, license or franchise to which it is a party which would
          have a Material Adverse Effect on NEWBRIDGE.

     (e)  Absence of Certain Changes or Events.  Except as has been disclosed in
          writing by NEWBRIDGE to ALCATEL in a form acceptable to ALCATEL or
          Publicly Disclosed by NEWBRIDGE, from April 30, 1999 through to the
          date hereof, each of NEWBRIDGE and the NEWBRIDGE Material Subsidiaries
          has conducted its business only in the ordinary and regular course of
          business consistent with past practice and there has not occurred:

          (i)    a Material Adverse Change with respect to NEWBRIDGE;

          (ii)   any damage, destruction or loss not fully covered by insurance
                 that could reasonably be expected to have a Material Adverse
                 Effect on NEWBRIDGE;

          (iii)  any redemption, repurchase or other acquisition of NEWBRIDGE
                 Common Shares by NEWBRIDGE or any declaration, setting aside or
                 payment of any dividend or other distribution (whether in cash,
                 stock or property) with respect to NEWBRIDGE Common Shares;

          (iv)   any material increase in or modification of the compensation
                 payable or to become payable by it to any of its directors or
                 officers, or any grant to any such director or officer of any
                 increase in severance or termination pay;

          (v)    any material increase in or modification of any bonus, pension,
                 insurance or benefit arrangement (including the granting of
                 stock options, restricted stock awards or stock appreciation
                 rights) made to, for or with any of its directors or officers;

          (vi)   any acquisition or sale of its property or assets aggregating
                 10% or more of NEWBRIDGE's total consolidated property and
                 assets as at April 30, 1999 other than in the ordinary and
                 regular course of business consistent with past practice;

          (vii)  any entering into, amendment of, relinquishment, termination or
                 non-renewal by it of any material contract, agreement, license,
                 franchise, lease transaction, commitment or other right
<PAGE>

                                     -22-

                 or obligation that could reasonably be expected to have a
                 Material Adverse Effect on NEWBRIDGE;

          (viii) any resolution to approve a split, consolidation or
                 reclassification of any of its outstanding shares;

          (ix)   any material change in its accounting methods, principles or
                 practices;

          (x)    any guarantee of the payment of material indebtedness or any
                 incurrence of material indebtedness for money borrowed or any
                 issue or sale of any debt securities except in the ordinary and
                 regular course of business consistent with past practice; or

          (xi)   except in the usual, ordinary and regular course of business
                 and consistent with past practice: (A) any satisfaction or
                 settlement of any claims or liabilities prior to the same being
                 due, which were, individually or in the aggregate, material; or
                 (B) any grant of any waiver, exercise of any option or
                 relinquishment of any contractual rights which were,
                 individually or in the aggregate, material.

     (f)  Employment Matters.

          (i)    Except as has been disclosed in writing by NEWBRIDGE to ALCATEL
                 in a form acceptable to ALCATEL, neither NEWBRIDGE nor any
                 NEWBRIDGE Material Subsidiary is a party to any agreement,
                 obligation or understanding providing for severance or
                 termination payments to, or any employment agreement with, any
                 director or officer, other than any common law obligations of
                 reasonable notice of termination or pay in lieu thereof and any
                 statutory obligations.

          (ii)   Except as has been set forth in writing by NEWBRIDGE to ALCATEL
                 in a form acceptable to ALCATEL, NEWBRIDGE or its subsidiaries
                 are not subject to any collective bargaining agreements, and
                 there are no current, pending or, to the knowledge of
                 NEWBRIDGE, threatened strikes or lockouts at NEWBRIDGE or any
                 NEWBRIDGE Material Subsidiary that would, individually or in
                 the aggregate, have a Material Adverse Effect on NEWBRIDGE.

          (iii)  Neither NEWBRIDGE nor any NEWBRIDGE Material Subsidiary is
                 subject to any litigation, actual or, to the knowledge of
                 NEWBRIDGE, threatened, relating to
<PAGE>

                                     -23-

                 employment or termination of employment of employees or
                 independent contractors, other than those claims or such
                 litigation as would, individually or in the aggregate, not have
                 a Material Adverse Effect on NEWBRIDGE.

          (iv)   NEWBRIDGE and all NEWBRIDGE Material Subsidiaries have operated
                 in accordance with all applicable Laws with respect to
                 employment and labour, including, but not limited to,
                 employment and labour standards, occupational health and
                 safety, employment equity, pay equity, workers' compensation,
                 human rights and labour relations and there are no current,
                 pending or, to the knowledge of NEWBRIDGE, threatened
                 proceedings before any board or tribunal with respect to any of
                 the above areas, other than as has been set forth in writing by
                 NEWBRIDGE to ALCATEL in a form acceptable to ALCATEL or where
                 the failure to so operate or such proceedings would,
                 individually or in the aggregate, not have a Material Adverse
                 Effect on NEWBRIDGE.

          (v)    Except as has been set forth in writing by NEWBRIDGE to ALCATEL
                 in a form acceptable to ALCATEL, there are no outstanding stock
                 appreciation rights, phantom equity or similar rights,
                 agreements, arrangements or commitments based upon the book
                 value, income or any other attribute of NEWBRIDGE or any
                 NEWBRIDGE Material Subsidiary.

     (g)  Financial Statements; Contingent Liabilities. The audited consolidated
          financial statements for NEWBRIDGE as at and for each of the 12-month
          periods ended on or about April 30, 1999, 1998 and 1997 and the
          unaudited consolidated financial statements for the 3-month and 6-
          month periods ended July 31 and October 31, 1999 have been prepared in
          accordance with Canadian generally accepted accounting principles
          (subject, in the case of such unaudited financial statements, to the
          absence of notes and to usual and non-material year-end adjustments),
          and such financial statements present fairly, in all material
          respects, the consolidated financial position and results of
          operations of NEWBRIDGE and its subsidiaries as of the respective
          dates thereof and for the respective periods covered thereby, subject,
          in the case of such unaudited financial statements, to usual and non-
          material year-end adjustments. Such financial statements have also
          been reconciled to U.S. generally accepted accounting principles in
          accordance with the applicable requirements of the SEC. The financial
          results for the 9-month period ended January 31, 2000 present fairly,
          in all material respects, the consolidated financial position and
          results of operations
<PAGE>

                                     -24-

          of NEWBRIDGE at the date thereof and for the period covered thereby.
          Except as set forth in the NEWBRIDGE Documents filed prior to the date
          hereof, and except for liabilities and obligations incurred in the
          ordinary course of business since the date of the most recent
          consolidated balance sheet included in the NEWBRIDGE Documents,
          neither NEWBRIDGE nor any of its subsidiaries has any liabilities or
          obligations of any nature (whether accrued, absolute, contingent or
          otherwise) except for those that would not, in the aggregate,
          reasonably be expected to have a Material Adverse Effect on NEWBRIDGE.

     (h)  Books and Records.  The financial books, records and accounts of
          NEWBRIDGE and its subsidiaries, in all material respects, (i) have
          been maintained in accordance with Canadian generally accepted
          accounting principles on a basis consistent with prior years, (ii) are
          stated in reasonable detail and accurately and fairly reflect the
          transactions and dispositions of the assets of NEWBRIDGE and its
          subsidiaries and (iii) accurately and fairly reflect the basis for the
          NEWBRIDGE consolidated financial statements. NEWBRIDGE's and the
          NEWBRIDGE Material Subsidiaries' corporate minute books contain
          minutes of all meetings and resolutions of the directors and
          shareholders held, and full access thereto has been provided to
          ALCATEL (except that only draft minutes have been made available in
          respect of the November 18, 1999 and February 21/22, 2000 board
          meetings).

     (i)  Litigation, Etc.  Except as has been set forth in writing by NEWBRIDGE
          to ALCATEL in a form acceptable to ALCATEL or Publicly Disclosed by
          NEWBRIDGE, there is no claim, action, proceeding or investigation
          pending or, to the knowledge of NEWBRIDGE, threatened against
          NEWBRIDGE or any NEWBRIDGE Material Subsidiary before any court or
          Governmental Entity that would reasonably be expected to have a
          Material Adverse Effect on NEWBRIDGE or to prevent or materially delay
          consummation of the transactions contemplated by this Agreement or the
          Arrangement. Neither NEWBRIDGE nor any NEWBRIDGE Material Subsidiary,
          nor any of their respective assets and properties, is subject to any
          outstanding judgement, order, writ, injunction or decree that has had
          or is reasonably likely to have a Material Adverse Effect on NEWBRIDGE
          or that would prevent or materially delay consummation of the
          transactions contemplated by this Agreement or the Arrangement. Except
          as has been set forth in writing previously by NEWBRIDGE to ALCATEL in
          a form acceptable to ALCATEL, to their knowledge, NEWBRIDGE and the
          NEWBRIDGE
<PAGE>

                                     -25-

          Material Subsidiaries are not subject to any warranty, negligence,
          performance or other claims or disputes or potential claims or
          disputes in respect of products or services currently being delivered
          or previously delivered, and to their knowledge there are no events or
          circumstances which could reasonably be expected to give rise to any
          such claims or disputes or potential claims or disputes, in each case
          which could reasonably be expected to have a Material Adverse Effect
          on NEWBRIDGE.

     (j)  Environmental. Except for any matters that, individually or in the
          aggregate, would not have a Material Adverse Effect on NEWBRIDGE or
          except as has been set forth in writing by NEWBRIDGE to ALCATEL in a
          form acceptable to ALCATEL:

          (i)  all operations of NEWBRIDGE and its subsidiaries have been
               conducted, and are now, in compliance with all Environmental
               Laws; and

          (ii) to its knowledge, neither NEWBRIDGE nor any Material Subsidiary
               is subject to:

               (A)  any Environmental Law which requires or may require any
                    material work, repairs, construction, change in business
                    practices or operations, or expenditures; or

               (B)  any written demand or written notice with respect to a
                    breach of or liability under any Environmental Laws
                    applicable to NEWBRIDGE or any NEWBRIDGE Material
                    Subsidiary.

     (k)  Tax Matters.  Except as has been set forth in writing by NEWBRIDGE to
          ALCATEL in a form acceptable to ALCATEL:

          (i)  NEWBRIDGE and each of the NEWBRIDGE Material Subsidiaries have
               filed, or caused to be filed, all Tax Returns required to be
               filed by them (all of which returns were correct and complete in
               all material respects), except those in respect of which the
               failure to file which would not have a Material Adverse Effect on
               NEWBRIDGE, and have paid, or caused to be paid, all material
               amounts of Taxes shown to be due and payable thereon, and
               NEWBRIDGE's most recently published financial statements contain
               an adequate provision in accordance with Canadian generally
               accepted accounting principles for all material amounts of Taxes
               payable in respect
<PAGE>

                                     -26-

                 of each period covered by such financial statements and all
                 prior periods to the extent such Taxes have not been paid,
                 whether or not due and whether or not shown as being due on any
                 Tax Returns. NEWBRIDGE and each of the NEWBRIDGE Material
                 Subsidiaries have made adequate provision in accordance with
                 Canadian generally accepted accounting principles in their
                 books and records for any material amounts of Taxes accruing in
                 respect of any accounting period which has ended subsequent to
                 the period covered by such financial statements.

          (ii)   Neither NEWBRIDGE nor any NEWBRIDGE Material Subsidiary has
                 received any written notification that any issues involving a
                 material amount of Taxes have been raised (and are currently
                 pending) by Canada Customs and Revenue Agency, the United
                 States Internal Revenue Service or any other taxing authority,
                 including, without limitation, any sales tax authority, in
                 connection with any of the Tax Returns filed or required to be
                 filed, and no waivers of statutes of limitations, or objections
                 to any assessments or reassessments, have been given or
                 requested or made with respect to NEWBRIDGE or any NEWBRIDGE
                 Material Subsidiary. All liability of NEWBRIDGE and the
                 NEWBRIDGE Material Subsidiaries for income taxes has been
                 assessed for all fiscal years up to and including the fiscal
                 year ended April 30, 1990. Neither NEWBRIDGE nor any NEWBRIDGE
                 Material Subsidiary has received any written notice from any
                 taxing authority to the effect that any Tax Return is being
                 examined. To the best of the knowledge of NEWBRIDGE, there are
                 no proposed in writing (but unassessed) additional Taxes
                 involving a material amount of Taxes and none has been asserted
                 in writing. No Tax liens have been filed for material amounts
                 of Taxes other than for Taxes not yet due and payable. Neither
                 NEWBRIDGE nor any of the NEWBRIDGE Material Subsidiaries is a
                 party to any Tax sharing or other similar agreement or
                 arrangement of any nature with any other person (other than
                 NEWBRIDGE or any of its subsidiaries) pursuant to which
                 NEWBRIDGE or any of the NEWBRIDGE Material Subsidiaries has or
                 could have any material liabilities in respect of Taxes, other
                 than any liability arising under an agreement providing for the
                 sale or other disposition of property by NEWBRIDGE or any of
                 the NEWBRIDGE Material Subsidiaries. Neither NEWBRIDGE nor
<PAGE>


                                     -27-

                 any NEWBRIDGE Material Subsidiary has received a refund of any
                 Taxes to which it was not entitled.

          (iii)  "Tax" and "Taxes" means, with respect to any entity, all income
                 taxes (including any tax on or based upon net income, gross
                 income, income as specially defined, earnings, profits or
                 selected items of income, earnings or profits) and all capital
                 taxes, gross receipts taxes, environmental taxes, sales taxes,
                 use taxes, ad valorem taxes, value added taxes, transfer taxes,
                 franchise taxes, license taxes, withholding taxes or other
                 withholding obligations, payroll taxes, employment taxes,
                 Canada or Quebec Pension Plan premiums, excise, severance,
                 social security premiums, workers' compensation premiums,
                 employment insurance or compensation premiums, stamp taxes,
                 occupation taxes, premium taxes, property taxes, windfall
                 profits taxes, alternative or add-on minimum taxes, goods and
                 services tax, customs duties or other taxes of any kind
                 whatsoever, together with any interest and any penalties or
                 additional amounts imposed by any taxing authority (domestic or
                 foreign) on such entity or for which such entity is
                 responsible, and any interest, penalties, additional taxes,
                 additions to tax or other amounts imposed with respect to the
                 foregoing.

          (iv)   For purposes of this Section 3.1(k), the term "material amount
                 of Taxes" shall mean an amount of Taxes that is material to
                 NEWBRIDGE and its subsidiaries taken as a whole.

     (l)  Pension and Employee Benefits.

          (i)    NEWBRIDGE has made available to ALCATEL a list of all employee
                 benefit, health, welfare, supplemental unemployment benefit,
                 bonus, pension, profit sharing, deferred compensation, stock
                 option, stock compensation, stock purchase, retirement,
                 hospitalization insurance, medical, dental, legal, disability
                 and similar plans or arrangements or practices, whether written
                 or oral, which are maintained by NEWBRIDGE and/or any NEWBRIDGE
                 Material Subsidiary (collectively referred to as the "NEWBRIDGE
                 Plans"). NEWBRIDGE has previously delivered to ALCATEL in a
                 form acceptable to ALCATEL a statement as to which of the
                 NEWBRIDGE Plans constitute "employee pension benefit plans" (as
                 defined in Section 3(2) of the United States Employee
                 Retirement Income Security Act of 1974,
<PAGE>



                                     -28-

                 as amended ("ERISA")) or "employee welfare benefit plans" (as
                 defined in Section 3(1) of ERISA).

          (ii)   To NEWBRIDGE's knowledge, no step has been taken, no event has
                 occurred and no condition or circumstance exists that has
                 resulted in or could reasonably be expected to result in any
                 NEWBRIDGE Plan being ordered or required to be terminated or
                 wound up in whole or in part or having its registration under
                 applicable Laws refused or revoked, or being placed under the
                 administration of any trustee or receiver or regulatory
                 authority or being required to pay any material Taxes,
                 penalties or levies under applicable Laws. To NEWBRIDGE's
                 knowledge, there are no actions, suits, claims (other than
                 routine claims for payment of benefits in the ordinary course),
                 trials, demands, investigations, arbitrations or other
                 proceedings which are pending or threatened in respect of any
                 of the NEWBRIDGE Plans or their assets which individually or in
                 the aggregate would have a Material Adverse Effect on
                 NEWBRIDGE.

          (iii)  NEWBRIDGE has made available to ALCATEL true, correct and
                 complete copies of all of the material NEWBRIDGE Plans (or, in
                 the case of any material unwritten NEWBRIDGE Plan, a
                 description thereof) together with funding agreements,
                 actuarial reports, funding and financial information returns
                 and statements with respect to each NEWBRIDGE Plan, and current
                 plan summaries, booklets and personnel manuals. NEWBRIDGE has
                 made available to ALCATEL a true and complete copy of the most
                 recent report filed with applicable Governmental Entities with
                 respect to each NEWBRIDGE Plan in respect of which such a
                 report was required.

          (iv)   Other than as has been disclosed in writing by NEWBRIDGE to
                 ALCATEL in a form acceptable to ALCATEL, all of the NEWBRIDGE
                 Plans are in compliance in all material respects with all
                 applicable Laws and their terms, and all of the NEWBRIDGE Plans
                 are fully insured or fully funded.

          (v)    None of the NEWBRIDGE Plans is a "multi-employer plan" within
                 the meaning of ERISA, nor has NEWBRIDGE or any NEWBRIDGE
                 Material Subsidiary been obligated to contribute to any such
                 multi-employer plan at any time within the past five years.
<PAGE>


                                     -29-

          (vi)   Except as has been set forth in writing by NEWBRIDGE to ALCATEL
                 in a form acceptable to ALCATEL, the entry into or performance
                 by NEWBRIDGE of this Agreement and the completion of the
                 Arrangement and the transactions contemplated thereby will not
                 result in any payment (including severance, unemployment
                 compensation, golden parachute, bonus or otherwise) becoming
                 due to any director, officer or employee of NEWBRIDGE or any
                 NEWBRIDGE Material Subsidiary, or increase any benefits
                 otherwise payable under any NEWBRIDGE Plan or result in the
                 acceleration of time of payment or vesting of any such
                 benefits.

     (m)  Reports.  NEWBRIDGE has filed with the OSC and/or with the SEC and/or
          with the NYSE true and complete copies of all forms, reports,
          schedules, statements and other documents required to be filed by it
          since January 1, 1998 (such forms, reports, schedules, statements and
          other documents, including any financial statements or other
          documents, including any schedules included therein, are referred to
          as the "NEWBRIDGE Documents"). The NEWBRIDGE Documents at the time
          filed (i) did not contain any misrepresentation of a material fact or
          omit to state a material fact required to be stated therein or
          necessary to make the statements therein, in the light of the
          circumstances under which they were made, not misleading, and (ii)
          complied in all material respects with the requirements of applicable
          securities Laws. NEWBRIDGE has not filed any confidential material
          change report with the OSC or any other securities authority or
          regulator or any stock exchange or other self-regulatory authority
          which at the date hereof remains confidential.

     (n)  Compliance with Laws.  Except as has been disclosed in writing by
          NEWBRIDGE to ALCATEL in a form acceptable to ALCATEL or Publicly
          Disclosed by NEWBRIDGE, NEWBRIDGE and the NEWBRIDGE Material
          Subsidiaries have complied with and are not in violation of any
          applicable Laws, orders, judgements and decrees other than non-
          compliance or violations which would not, individually or in the
          aggregate, have a Material Adverse Effect on NEWBRIDGE. Without
          limiting the generality of the foregoing, all securities of NEWBRIDGE
          (including, all options, rights or other convertible or exchangeable
          securities) have been issued in compliance with all applicable
          securities Laws and all securities to be issued upon exercise of any
          such options, rights and other convertible or exchangeable securities
          will be issued in compliance with all applicable securities Laws.
<PAGE>

                                     -30-

     (o)  Restrictions on Business Activities.  Except as has been set forth in
          writing by NEWBRIDGE to ALCATEL in a form acceptable to ALCATEL or
          Publicly Disclosed by NEWBRIDGE, there is no agreement, judgement,
          injunction, order or decree binding upon NEWBRIDGE or any subsidiary
          or affiliate that has or could reasonably be expected to have the
          effect of prohibiting, restricting or impairing any business practice
          of NEWBRIDGE or any subsidiary or affiliate, any acquisition of
          property by NEWBRIDGE or any subsidiary or affiliate or the conduct of
          business by NEWBRIDGE or any subsidiary or affiliate as currently
          conducted (including following the Arrangement) other than such
          agreements, judgements, injunctions, orders or decrees which would
          not, individually or in the aggregate, have a Material Adverse Effect
          on NEWBRIDGE.

     (p)  Property.  Except as has been disclosed in writing by NEWBRIDGE to
          ALCATEL in a form acceptable to ALCATEL, NEWBRIDGE and each NEWBRIDGE
          Material Subsidiary have good and sufficient title to the real
          property interests, including fee simple estate of and in real
          property, leases, easements, rights of way, permits or licences from
          land owners or authorities permitting the use of land by NEWBRIDGE or
          such NEWBRIDGE Material Subsidiary, necessary to permit the operation
          of its businesses as presently owned and conducted except for such
          failure of title that would individually or in the aggregate not have
          a Material Adverse Effect on NEWBRIDGE. NEWBRIDGE is not a party to,
          or under any agreement to become a party to, any lease with respect to
          real property which if terminated could reasonably be expected to have
          a Material Adverse Effect on NEWBRIDGE.

     (q)  Licences, Etc.  Except as has been disclosed in writing by NEWBRIDGE
          to ALCATEL in a form acceptable to ALCATEL, NEWBRIDGE and each
          NEWBRIDGE Material Subsidiary owns, possesses, or has obtained and is
          in compliance with, all licences, permits, certificates, orders,
          grants and other authorizations of or from any Governmental Entity
          necessary to conduct its businesses as now conducted except for such
          failure that would individually or in the aggregate not have a
          Material Adverse Effect on NEWBRIDGE.

     (r)  Registration Rights.  No holder of securities issued by NEWBRIDGE has
          any right to compel NEWBRIDGE to register or otherwise qualify such
          securities for public sale in Canada or the United States.

     (s)  Intellectual Property.  NEWBRIDGE has set forth in writing in a form
          acceptable to ALCATEL a complete and accurate list of all registered
          trade-marks, service marks, copyrights, industrial designs, patents,

<PAGE>

                                     -31-

          design patents and all applications therefor of NEWBRIDGE or its
          subsidiaries ("NEWBRIDGE IP"). Except as disclosed in writing in a
          form acceptable to ALCATEL, none of NEWBRIDGE nor its subsidiaries has
          received written notice or is aware that its use of NEWBRIDGE IP
          infringes upon or breaches the industrial or intellectual property
          rights of any other Person in any material respect. Except as
          disclosed in writing in a form acceptable to ALCATEL, NEWBRIDGE has
          not commenced legal proceedings relating to an infringement by any
          Person of the NEWBRIDGE IP. NEWBRIDGE, to its knowledge, has or has
          rights to use all of the intellectual property necessary to conduct
          the business of NEWBRIDGE as currently carried on except where the
          failure to do so would not, individually or in the aggregate, have a
          Material Adverse Effect on NEWBRIDGE.

     (t)  Non-Arm's Length Transactions.  Except as has been set forth in
          writing by NEWBRIDGE to ALCATEL in a form acceptable to ALCATEL, there
          are no material contracts, commitments, agreements, arrangements or
          other transactions between NEWBRIDGE or any of its subsidiaries, on
          the one hand, and any (i) officer or director of NEWBRIDGE or any of
          its subsidiaries, (ii) record or beneficial owner of five percent or
          more of the voting securities of NEWBRIDGE or (iii) affiliate of any
          such officer, director or beneficial owner, on the other hand.

     (u)  Insurance.  NEWBRIDGE has provided or made available to ALCATEL true,
          correct and complete copies of all material policies of insurance to
          which each of NEWBRIDGE and its subsidiaries are a party or are a
          beneficiary or named insured.  NEWBRIDGE and its subsidiaries maintain
          insurance coverage with reputable insurers in such amounts and
          covering such risks as are in accordance with normal industry practice
          for companies engaged in businesses similar to that of NEWBRIDGE and
          its subsidiaries (taking into account the cost and availability of
          such insurance).

Section 3.2  Representations and Warranties of ALCATEL.

          ALCATEL represents and warrants to and in favour of NEWBRIDGE as
     follows and acknowledges that NEWBRIDGE is relying upon such
     representations and warranties in connection with the matters contemplated
     by this Agreement:

     (a)  Organization.  ALCATEL has been duly incorporated or formed under
          applicable Laws, is validly subsisting and has full corporate or legal
          power and authority to own its properties and conduct its businesses
          as currently owned and conducted.  All of the outstanding shares and
<PAGE>


                                     -32-

          other ownership interests of the ALCATEL Material Subsidiaries which
          are held directly or indirectly by ALCATEL are owned directly or
          indirectly by ALCATEL, free and clear of all material liens, claims or
          encumbrances, except as has been set forth in writing by ALCATEL to
          NEWBRIDGE in a form acceptable to NEWBRIDGE or pursuant to
          restrictions on transfers contained in articles or similar documents.

     (b)  Capitalization.  The issued capital of ALCATEL consists of 206,648,635
          ALCATEL Shares, Euro 10 nominal value each, as at the date hereof.
          There are warrants, options or other rights to acquire from treasury
          not more than 3,000,000 ALCATEL Shares outstanding as at December 31,
          1999.

     (c)  Authority and No Violation.

          (i)  ALCATEL has the requisite corporate power and authority to enter
               into this Agreement, the Support Agreement and the Exchange Trust
               Agreement and to perform its obligations hereunder and
               thereunder. The consummation by ALCATEL of the transactions
               contemplated by this Agreement has been duly authorized by its
               Board of Directors and no other corporate proceedings on its part
               are necessary to authorize this Agreement, the Support Agreement
               and the Exchange Trust Agreement or the transactions contemplated
               hereby or thereby, other than:

               (A)  With respect to the ALCATEL Meeting, the ALCATEL Circular
                    and other matters relating solely thereto, the approval of
                    the Board of Directors of ALCATEL (and the COB); and

               (B)  The approval of the ALCATEL Shareholders.

          (ii) This Agreement has been duly executed and delivered by ALCATEL
               and constitutes its legal, valid and binding obligation,
               enforceable against it in accordance with its terms, subject to
               bankruptcy, insolvency and other applicable Laws affecting
               creditors' rights generally, and to general principles of equity.
               Each of the Support Agreement and the Exchange Trust Agreement
               will be duly executed and delivered by each of ALCATEL and its
               subsidiaries who will be party thereto and, when so executed and
               delivered, will constitute their respective legal, valid and
               binding obligations, enforceable against them in accordance with
               their respective terms, subject to bankruptcy,
<PAGE>


                                     -33-

                 insolvency and other applicable Laws affecting creditors'
                 rights generally, and to general principles of equity.

          (iii)  The approval of this Agreement, the Support Agreement and the
                 Exchange Trust Agreement, the execution and delivery by ALCATEL
                 and each of its subsidiaries who will be party thereto of this
                 Agreement, the Support Agreement and the Exchange Trust
                 Agreement and the performance by each of them of their
                 respective obligations hereunder and thereunder and the
                 completion of the Arrangement and the transactions contemplated
                 thereby, will not:

                 (A)  result (with or without notice or the passage of time) in
                      a violation or breach of, require any consent to be
                      obtained under or give rise to any termination, purchase
                      or sale rights or payment obligation under any provision
                      of:

                      (I)  its certificate of incorporation, articles, by-laws
                           or other charter documents;

                      (II) any Laws, judgement or decree (subject to obtaining
                           the Regulatory Approvals relating to ALCATEL), except
                           to the extent that the violation or breach of, or
                           failure to obtain any consent under, any Laws,
                           judgement or decree would not, individually or in the
                           aggregate, have a Material Adverse Effect on ALCATEL;

                 (B)  except as would not, individually or in the aggregate,
                      have a Material Adverse Effect on ALCATEL, result in the
                      imposition of any encumbrance, charge or lien upon any of
                      its assets or the assets of any ALCATEL Material
                      Subsidiary; or

                 (C)  except as would not, individually or in the aggregate,
                      have a Material Adverse Effect on ALCATEL, restrict,
                      hinder, impair or limit the ability of ALCATEL or any
                      ALCATEL Material Subsidiary to carry on business of
                      ALCATEL or any ALCATEL Material Subsidiary as and where it
                      is now being carried on.

                 No consent, approval, order or authorization of, or declaration
                 or filing with, any Governmental Entity is required to be
                 obtained by ALCATEL in connection with the execution and
<PAGE>

                                     -34-

               delivery of this Agreement, the Support Agreement and the
               Exchange Trust Agreement or the consummation by ALCATEL of the
               transactions contemplated hereby or thereby other than (A) the
               Regulatory Approvals relating to ALCATEL, (B) any filings
               required in connection with the creation and issue of the ALCATEL
               ADSs, and (C) any other consents, approvals, orders,
               authorizations, declarations or filings of or with a Governmental
               Entity which have been set forth in writing by ALCATEL to
               NEWBRIDGE in a form acceptable to NEWBRIDGE or which, if not
               obtained, would not, individually or in the aggregate, have a
               Material Adverse Effect on ALCATEL.

     (d)  Absence of Certain Changes or Events; No Defaults.  Except as Publicly
          Disclosed by ALCATEL, since December 31, 1999 through to the date
          hereof ALCATEL and each ALCATEL Material Subsidiary has conducted its
          business only in the ordinary and regular course of business
          consistent with past practice and there has not occurred:

          (i)    a Material Adverse Change with respect to ALCATEL; or

          (ii)   any material change in its accounting methods, principles or
                 practices.

          Subject to obtaining the Regulatory Approvals relating to ALCATEL and
          except as has been disclosed in writing by ALCATEL to NEWBRIDGE in a
          form acceptable to NEWBRIDGE, neither ALCATEL nor any of its
          subsidiaries is in default under, and there exists no event, condition
          or occurrence which, after notice or lapse of time or both, would
          constitute such a default under, any contract, agreement, license or
          franchise to which it is a party which would have a Material Adverse
          Effect on ALCATEL.

     (e)  Financial Statements.  The audited consolidated financial statements
          for ALCATEL as at and for each of the 12-month periods ended December
          31, 1999 and 1998 have been prepared in accordance with French
          generally accepted accounting principles, the requirements of
          applicable Governmental Entities and applicable securities Laws; such
          financial statements present fairly, in all material respects, the
          consolidated financial position and results of operations of ALCATEL
          and its subsidiaries as of the respective dates thereof and for the
          respective periods covered thereby.
<PAGE>

                                     -35-

     (f)  Reports.  ALCATEL has filed with the PSE and/or the COB and/or the
          NYSE and/or the SEC true and complete copies of all material forms,
          reports, schedules, statements and other documents required to be
          filed by it since January 1, 1998, and such documents, at the time
          filed, complied in all material respects with the requirements of
          applicable securities Laws and did not contain any misrepresentation
          of a material fact or omit to state a material fact required to be
          stated therein or necessary to make the statements therein, in the
          light of the circumstances under which they were made, not misleading.

     (g)  ALCATEL Shares.  The ALCATEL Shares to be issued in connection with
          the Arrangement and the ALCATEL ADSs to be provided upon the exchange
          from time to time of the Exchangeable Shares and upon the exercise of
          the NEWBRIDGE Options or the NEWBRIDGE Warrants will, in all cases, be
          duly and validly issued by ALCATEL on their respective dates of issue
          as fully paid and non-assessable securities.

     (h)  Litigation, Etc.  Except as has been set forth in writing by ALCATEL
          to NEWBRIDGE in a form acceptable to NEWBRIDGE or Publicly Disclosed
          by ALCATEL, there is no claim, action, proceeding or investigation
          pending or, to the knowledge of ALCATEL, threatened against ALCATEL or
          any ALCATEL Material Subsidiary before any court or Governmental
          Entity that would reasonably be expected to have a Material Adverse
          Effect on ALCATEL or to prevent or materially delay consummation of
          the transactions contemplated by this Agreement or the Arrangement.
          Neither ALCATEL nor any ALCATEL Material Subsidiary, nor any of their
          respective assets and properties, is subject to any outstanding
          judgement, order, writ, injunction or decree that has had or is
          reasonably likely to have a Material Adverse Effect on ALCATEL or that
          would prevent or materially delay consummation of the transactions
          contemplated by this Agreement or the Arrangement.

     (i)  Environmental.  Except as has been Publicly Disclosed by ALCATEL and
          except for any matters that, individually or in the aggregate, would
          not have a Material Adverse Effect on ALCATEL or except as has been
          set forth in writing by ALCATEL to NEWBRIDGE in a form acceptable to
          NEWBRIDGE:

          (i)    all operations of ALCATEL and its subsidiaries have been
                 conducted, and are now, in compliance with all Environmental
                 Laws; and
<PAGE>

                                     -36-

          (ii)   to its knowledge, neither ALCATEL nor any ALCATEL Material
                 Subsidiary is subject to:

                 (A)   any Environmental Law which requires or may require any
                       material work, repairs, construction, change in business
                       practices or operations, or expenditures; or

                 (B)   any written demand or written notice with respect to a
                       breach of or liability under any Environmental Laws
                       applicable to ALCATEL or any ALCATEL Material Subsidiary.

     (j)  Compliance with Laws.  Except as has been disclosed in writing by
          ALCATEL to NEWBRIDGE in a form acceptable to NEWBRIDGE or Publicly
          Disclosed by ALCATEL, ALCATEL and the ALCATEL Material Subsidiaries
          have complied with and are not in violation of any applicable Laws,
          orders, judgements and decrees other than non-compliance or violations
          which would not, individually or in the aggregate, have a Material
          Adverse Effect on ALCATEL.

Section 3.3  Survival.

     For greater certainty, the representations and warranties of NEWBRIDGE and
ALCATEL contained herein shall survive the execution and delivery of this
Agreement and shall terminate on the earlier of the termination of this
Agreement in accordance with its terms and the Effective Time. Any investigation
by a party hereto and its advisors shall not mitigate, diminish or affect the
representations and warranties of another party to this Agreement.

                                   ARTICLE 4
                                   COVENANTS

Section 4.1  Retention of Goodwill.

     During the Pre-Effective Date Period, NEWBRIDGE will, subject to the fact
that a transaction involving its businesses is contemplated hereby, continue to
carry on the business of NEWBRIDGE and its subsidiaries in a manner consistent
with prior practice, working to preserve the attendant goodwill of such entities
and to contribute to retention of that goodwill to and after the Effective Date,
but subject to the following provisions of this Article 4. The following
provisions of this Article 4 are intended to be in furtherance of this general
commitment.

Section 4.2  Treatment of Options, Warrants, ESPP and KEEP.

     (a)  The NEWBRIDGE Options and the NEWBRIDGE Warrants will be dealt with as
          provided in the Plan of Arrangement.
<PAGE>

                                     -37-

     (b)  NEWBRIDGE shall, as soon as reasonably practicable after the date
          hereof, and in any event prior to April 30, 2000, terminate the
          NEWBRIDGE Employee Stock Purchase Plan and the NEWBRIDGE Key Employee
          Executive Plan.

Section 4.3  Covenants of NEWBRIDGE.

     (a)  NEWBRIDGE covenants and agrees that, until the Effective Date or the
          earlier termination of this Agreement in accordance with Article 6,
          except (i) with the consent of ALCATEL to any deviation therefrom;
          (ii) as has been disclosed in writing by NEWBRIDGE to ALCATEL in a
          form acceptable to ALCATEL on the date hereof; or (iii) with respect
          to any matter expressly contemplated by this Agreement or the Plan of
          Arrangement, including the transactions involving the businesses of
          NEWBRIDGE and ALCATEL contemplated hereby, NEWBRIDGE will, and will
          cause the NEWBRIDGE Material Subsidiaries to:

          (i)    carry on its business in, and only in, the ordinary and regular
                 course in substantially the same manner as heretofore conducted
                 and, to the extent consistent with such business, use all
                 reasonable efforts to preserve intact its present business
                 organization and keep available the services of its present
                 officers and employees and others having business dealings with
                 it to the end that its goodwill and business shall be
                 maintained;

          (ii)   not split, consolidate or reclassify any of the outstanding
                 shares of NEWBRIDGE nor declare, set aside or pay any dividends
                 on or make any other distributions on or in respect of the
                 outstanding shares of NEWBRIDGE;

          (iii)  not amend the articles or by-laws of NEWBRIDGE or materially
                 amend the articles or by-laws of any subsidiary;

          (iv)   except for the grant of stock options in accordance with lists
                 of employees to be provided to ALCATEL in accordance with
                 applicable Laws and in the normal course of business consistent
                 with past practice, not to exceed 1,500,000 NEWBRIDGE Common
                 Shares per quarter and 3,000,000 NEWBRIDGE Common Shares in
                 aggregate, not sell, pledge, encumber, allot, reserve, set
                 aside or issue, authorize or propose the sale, pledge,
                 encumbrance, allotment, reservation, setting aside or issuance
                 of, or purchase or redeem or propose the purchase or redemption
                 of, any shares in its capital stock or of any NEWBRIDGE
                 Material Subsidiary thereof or any class of
<PAGE>

                                     -38-

                 securities convertible or exchangeable into, or rights,
                 warrants or options to acquire, any such shares or other
                 convertible or exchangeable securities, except for (a)
                 transactions between two or more wholly-owned NEWBRIDGE
                 subsidiaries or between a wholly-owned subsidiary of NEWBRIDGE
                 and NEWBRIDGE, and (b) the issuance of NEWBRIDGE Common Shares
                 pursuant to fully vested and duly exercised NEWBRIDGE Options
                 granted prior to the date hereof;

          (v)    not amend, vary or modify the NEWBRIDGE Employee Stock Purchase
                 Plan, the NEWBRIDGE Stock Option Plan or the NEWBRIDGE Key
                 Employee Executive Program or any NEWBRIDGE Options or other
                 benefits granted thereunder;

          (vi)   not reorganize, amalgamate or merge NEWBRIDGE or any of the
                 NEWBRIDGE Material Subsidiaries with any other Person, nor
                 acquire or agree to acquire by amalgamating, merging or
                 consolidating with, purchasing substantially all of the assets
                 or shares of or otherwise, any business of any corporation,
                 partnership, association or other business organization or
                 division thereof, which acquisition would be material to its
                 business or financial condition on a consolidated basis;

          (vii)  except with respect to the sale of inventory of NEWBRIDGE or
                 any subsidiary in the ordinary and regular course of business
                 consistent with past practice, not sell, lease, encumber or
                 otherwise dispose of any material assets (other than relating
                 to transactions between two or more wholly-owned NEWBRIDGE
                 subsidiaries or between a wholly-owned subsidiary of NEWBRIDGE
                 and NEWBRIDGE);

          (viii) carry out the terms of the Interim Order and the Final Order
                 applicable to it and use its reasonable efforts to comply
                 promptly with all requirements which applicable Laws may impose
                 on NEWBRIDGE or its subsidiaries with respect to the
                 transactions contemplated hereby and by the Arrangement;

          (ix)   not, and cause each of the NEWBRIDGE Material Subsidiaries not:

                 (A)  other than pursuant to existing employment, pension,
                      supplemental pension, termination, compensation
                      arrangements or policies, enter into or modify any
                      employment, severance, collective bargaining or similar
<PAGE>

                                     -39-

                      agreements, policies or arrangements with, or grant any
                      bonuses, salary increases, pension or supplemental pension
                      benefits, profit sharing, retirement allowances, deferred
                      compensation, incentive compensation, severance or
                      termination pay to or any other form of compensation or
                      with respect to any increase of benefits payable to, or
                      make any loan to, any officers or directors of NEWBRIDGE
                      or any NEWBRIDGE Material Subsidiary; or

                 (B)  other than in the usual, ordinary and regular course of
                      business and consistent with past practice or pursuant to
                      existing employment, pension, supplemental pension,
                      termination, compensation arrangements or policies, in the
                      case of employees who are not officers or directors of
                      NEWBRIDGE or any NEWBRIDGE Material Subsidiary, take any
                      action with respect to the entering into or modification
                      of any material employment, severance, collective
                      bargaining or similar agreements, policies or arrangements
                      or grant any material bonuses, salary increases, pension
                      or supplemental pension benefits, profit sharing,
                      retirement allowances, deferred compensation, incentive
                      compensation, severance or termination pay or any other
                      form of compensation or with respect to any material
                      increase of benefits payable, or make any material loans
                      to employees;

          (x)    not, and will cause its subsidiaries not to, settle or
                 compromise any claim brought by any present, former or
                 purported holder of any of its securities in connection with
                 the transactions contemplated by this Agreement or the
                 Arrangement prior to the Effective Date;

          (xi)   not guarantee the payment of material indebtedness or incur
                 material indebtedness for money borrowed or issue or sell any
                 debt securities except in the ordinary and regular course of
                 business consistent with past practice, other than as has been
                 set forth in writing on the date hereof by NEWBRIDGE to ALCATEL
                 in a form acceptable to ALCATEL;

          (xii)  not, except in the usual, ordinary and regular course of
                 business and consistent with past practice: (A) satisfy or
                 settle any claims or liabilities prior to the same being due,
                 except such as have been reserved against in the financial
                 statements of
<PAGE>

                 NEWBRIDGE and its subsidiaries or as has been disclosed in
                 writing to ALCATEL by NEWBRIDGE in a form acceptable to
                 ALCATEL, which are, individually or in the aggregate, material;
                 (B) grant any waiver, exercise any option or relinquish any
                 contractual rights which are, individually or in the aggregate,
                 material; or (C) enter into any interest rate, currency or
                 commodity swaps, hedges or other similar financial instruments;

          (xiii) use its reasonable commercial efforts (or cause each of its
                 subsidiaries to use reasonable commercial efforts) to cause its
                 current insurance (or re-insurance) policies not to be
                 cancelled or terminated or any of the coverage thereunder to
                 lapse, unless simultaneously with such termination,
                 cancellation or lapse, replacement policies underwritten by
                 insurance and re-insurance companies of nationally recognized
                 standing providing coverage equal to or greater than the
                 coverage under the cancelled, terminated or lapsed policies for
                 substantially similar premiums are in full force and effect;

          (xiv)  incur or commit to capital expenditures prior to the Effective
                 Date only in the ordinary course consistent with past practice
                 and not, in any event, exceeding $75 million, individually or
                 in the aggregate;

          (xv)   not make any changes to existing accounting practices relating
                 to NEWBRIDGE or any subsidiary, except as required by Canadian
                 or U.S. Law or required by Canadian or U.S. generally accepted
                 accounting principles, or make any material tax election
                 inconsistent with past practice; and

          (xvi)  promptly advise ALCATEL orally and in writing:

                 (A)  of any event occurring subsequent to the date of this
                      Agreement that would render any representation or warranty
                      of NEWBRIDGE contained in this Agreement (except any such
                      representation or warranty which speaks solely as of a
                      date prior to the occurrence of such event), if made on or
                      as of the date of such event or the Effective Date, untrue
                      or inaccurate in any material respect;

                 (B)  of any Material Adverse Change in respect of NEWBRIDGE;
                      and

                 (C)  of any material breach by NEWBRIDGE of any covenant or
                      agreement contained in this Agreement;
<PAGE>

                                      -41-


     (b)  NEWBRIDGE shall and shall cause its subsidiaries to perform all
          obligations required or desirable to be performed by NEWBRIDGE or any
          of its subsidiaries under this Agreement, co-operate with ALCATEL in
          connection therewith, and do all such other acts and things as may be
          necessary or desirable in order to consummate and make effective, as
          soon as reasonably practicable, the transactions contemplated in this
          Agreement and, without limiting the generality of the foregoing,
          NEWBRIDGE shall and where appropriate shall cause its subsidiaries to:

          (i)   use all reasonable efforts to obtain the requisite approvals of
                the NEWBRIDGE Shareholders to the Arrangement;

          (ii)  apply for and use all reasonable efforts to obtain all
                Regulatory Approvals relating to NEWBRIDGE or any of its
                subsidiaries and, in doing so, to keep ALCATEL reasonably
                informed as to the status of the proceedings related to
                obtaining the Regulatory Approvals, including, but not limited
                to, providing ALCATEL with copies of all related applications
                and notifications, in draft form, in order for ALCATEL to
                provide its reasonable comments;

          (iii) apply for and use all reasonable efforts to obtain the Interim
                Order and the Final Order;

          (iv)  defend all lawsuits or other legal, regulatory or other
                proceedings to which it is a party challenging or affecting this
                Agreement or the consummation of the transactions contemplated
                hereby;

          (v)   use its reasonable efforts to have lifted or rescinded any
                injunction or restraining order relating to NEWBRIDGE or other
                order which may adversely affect the ability of the parties to
                consummate the transactions contemplated hereby;

          (vi)  effect all necessary registrations, filings and submissions of
                information required by Governmental Entities from NEWBRIDGE or
                any of its subsidiaries relating to the Arrangement; and

          (vii) use its reasonable efforts to obtain all necessary waivers,
                consents and approvals required to be obtained by
<PAGE>

                                      -42-

                NEWBRIDGE or a subsidiary in connection with the Arrangement
                from other parties to any material loan agreements, leases or
                other material contracts;

     (c)  NEWBRIDGE shall carry out the terms of the Interim Order and Final
          Order applicable to it and use its reasonable efforts to comply
          promptly with all requirements which applicable Laws may impose on
          NEWBRIDGE or its subsidiaries with respect to the transactions
          contemplated hereby and by the Arrangement; and

     (d)  NEWBRIDGE shall use all reasonable efforts to cause the Exchangeable
          Shares to be listed and posted for trading on The Toronto Stock
          Exchange by the Effective Date.

Section 4.4  Covenants of ALCATEL.

          ALCATEL hereby covenants and agrees:

     (a)  to perform all obligations required or desirable to be performed by it
          under this Agreement, to co-operate with NEWBRIDGE in connection
          therewith, and to do all such other acts and things as may be
          necessary or desirable in order to consummate and make effective, as
          soon as reasonably practicable, the transactions contemplated by this
          Agreement and, without limiting the generality of the foregoing, to:

          (i)   use all reasonable efforts to obtain the requisite approvals of
                the ALCATEL Shareholders;

          (ii)  apply for and use all reasonable efforts to obtain all
                Regulatory Approvals relating to ALCATEL, and, in doing so, to
                keep NEWBRIDGE informed, subject to applicable Laws, as to the
                status of the proceedings related to obtaining the Regulatory
                Approvals, including, but not limited to, providing NEWBRIDGE
                with copies of all related applications and notifications, in
                draft form, in order for NEWBRIDGE to provide its reasonable
                comments, and providing NEWBRIDGE with copies of all material
                correspondence relating to the Regulatory Approvals;

          (iii) defend all lawsuits or other legal, regulatory or other
                proceedings to which it is a party challenging or affecting this
                Agreement or the consummation of the transactions contemplated
                hereby;
<PAGE>

                                      -43-

          (iv)  use all reasonable efforts to have lifted or rescinded any
                injunction or restraining order or other order relating to
                ALCATEL which may adversely affect the ability of the parties to
                consummate the transactions contemplated hereby;

          (v)   effect all necessary registrations, filings and submissions of
                information required by Governmental Entities from ALCATEL or
                their subsidiaries relating to the Arrangement; and

          (vi)  reserve for issuance, as required, ALCATEL Shares in connection
                with the transactions contemplated by this Agreement (including
                upon the exercise of ALCATEL Options and ALCATEL Warrants)
                consistent with the provisions of the Support Agreement; and

     (b)  to use all reasonable efforts to (i) cause the Exchangeable Shares to
          be listed and posted for trading on The Toronto Stock Exchange by the
          Effective Date and to maintain such listings for so long as there are
          Exchangeable Shares outstanding (other than those Exchangeable Shares
          held by ALCATEL or any of its affiliates), and (ii) to ensure that
          NEWBRIDGE remains a "public corporation" within the meaning of the
          Income Tax Act (Canada) for so long as there are Exchangeable Shares
          outstanding (other than those Exchangeable Shares held by ALCATEL or
          any of its affiliates);

     (c)  to carry out the terms of the Interim Order and Final Order applicable
          to it and use its reasonable efforts to comply promptly with all
          requirements which applicable Laws may impose on ALCATEL or its
          subsidiaries with respect to the transactions contemplated hereby and
          by the Arrangement;

     (d)  until the Effective Date or the earlier termination of this Agreement
          in accordance with Article 6, except (i) with the consent of NEWBRIDGE
          to any deviation therefrom, which shall not be unreasonably withheld;
          (ii) with respect to any matters which were disclosed by ALCATEL to
          NEWBRIDGE in writing; or (iii) with respect to any matter contemplated
          by this Agreement or the Plan of Arrangement, including the
          transactions involving the businesses of NEWBRIDGE and ALCATEL
          contemplated hereby, ALCATEL will:

          (i)   not split, consolidate or reclassify any of the outstanding
                ALCATEL Shares, ALCATEL ADRs or ALCATEL ADSs, nor declare, set
                aside or pay any dividends on or make any other distributions on
                or in respect of the outstanding ALCATEL
<PAGE>

                                      -44-

                Shares, other than the normal and customary dividends on ALCATEL
                Shares (except for a stock split contemplated to be put before
                the holders of ALCATEL Shares at the next ordinary general
                meeting for their approval);

          (ii)  not reorganize, amalgamate or merge ALCATEL with any other
                Person, nor acquire by amalgamating, merging or consolidating
                with, purchasing a majority of the voting securities or
                substantially all of the assets of or otherwise, any business or
                Person which acquisition or other transaction would reasonably
                be expected to prevent or materially delay the transactions
                contemplated hereby beyond the Outside Date; and

          (iii) promptly advise NEWBRIDGE orally and in writing:

                (A) of any event occurring subsequent to the date of this
                    Agreement that would render any representation or warranty
                    of ALCATEL contained in this Agreement (except any such
                    representation or warranty which speaks solely as of a date
                    prior to the occurrence of such event), if made on or as of
                    the date of such event or the Effective Date, untrue or
                    inaccurate in any material respect;

                (B) of any Material Adverse Change in respect of ALCATEL; and

                (C) of any material breach by ALCATEL of any covenant or
                    agreement contained in this Agreement.

Section 4.5  Covenants Regarding Non-Solicitation.

(1)  Subject to Section 4.6, NEWBRIDGE shall not, directly or indirectly,
     through any officer, director, employee, representative (including for
     greater certainty any investment banker, lawyer or accountant) or agent of
     NEWBRIDGE or any of its subsidiaries, (i) solicit, initiate, knowingly
     encourage or otherwise facilitate (including by way of furnishing
     information or entering into any form of agreement, arrangement or
     understanding) the initiation of any inquiries or proposals regarding an
     Acquisition Proposal, (ii) participate in any discussions or negotiations
     regarding any Acquisition Proposal, (iii) approve or recommend any
     Acquisition Proposal or (iv) accept or enter into any agreement,
     arrangement or understanding related to any Acquisition Proposal.
     Notwithstanding the preceding part of this Section 4.5(1) and any other
     provision of this Agreement, nothing shall prevent the Board of Directors
     of NEWBRIDGE from complying with NEWBRIDGE's disclosure
<PAGE>

                                      -45-

     obligations under applicable Laws with regard to an Acquisition Proposal or
     from considering, participating in any discussions or negotiations, or
     entering into a confidentiality agreement and providing information
     pursuant to Section 4.5(3) (but, subject to Section 4.6, not approve,
     recommend, accept or enter into any agreement, arrangement or
     understanding), regarding an unsolicited bona fide written Acquisition
     Proposal (a) in respect of which any required financing has been
     demonstrated to the satisfaction of the Board of Directors of NEWBRIDGE,
     acting in good faith, to be reasonably likely to be obtained, (b) that did
     not otherwise result from a breach of this Section 4.5, and (c) which the
     Board of Directors of NEWBRIDGE has determined in good faith, after
     consultation with financial advisors and with outside counsel, is a
     Superior Proposal. NEWBRIDGE shall, and shall cause the officers,
     directors, employees, representatives and agents of NEWBRIDGE and its
     subsidiaries to, cease immediately all current discussions and negotiations
     regarding any proposal that constitutes, or may reasonably be expected to
     lead to, an Acquisition Proposal, and request the return or destruction of
     all confidential information provided in connection therewith.

(2)  NEWBRIDGE shall forthwith notify ALCATEL, at first orally and then in
     writing, of any Acquisition Proposal and any inquiry that could lead to an
     Acquisition Proposal, or any amendments to the foregoing, or any request
     for non-public information relating to NEWBRIDGE or any NEWBRIDGE Material
     Subsidiary in connection with an Acquisition Proposal or for access to the
     properties, books or records of NEWBRIDGE or any NEWBRIDGE Material
     Subsidiary by any Person that informs NEWBRIDGE or such NEWBRIDGE Material
     Subsidiary that it is considering making, or has made, an Acquisition
     Proposal. Such notice shall include a description of the material terms and
     conditions of any proposal, the identity of the Person making such
     proposal, inquiry or contact and provide such other details of the
     proposal, inquiry, contact, discussions or negotiations as ALCATEL may
     reasonably request. NEWBRIDGE shall keep ALCATEL informed of the status
     including any change to the material terms of any such Acquisition Proposal
     or inquiry.

(3)  If NEWBRIDGE receives a request for material non-public information from a
     Person who has made an unsolicited bona fide written Acquisition Proposal
     and NEWBRIDGE is permitted, subject to and as contemplated under the second
     sentence of Section 4.5(1), to negotiate the terms of such Acquisition
     Proposal, then, and only in such case, the Board of Directors of NEWBRIDGE
     may, subject to the execution by such Person of a confidentiality agreement
     containing employee non-solicitation and standstill provisions
     substantially similar to those contained in the confidentiality agreement
     then in effect between NEWBRIDGE and ALCATEL, provide such Person with
     access to
<PAGE>

                                      -46-

     information regarding NEWBRIDGE; provided, however, that the Person making
     the Acquisition Proposal shall not be precluded under such confidentiality
     agreement from making the Acquisition Proposal (but not, except subject to
     Section 4.6(4), any material amendment thereto) and provided further that
     NEWBRIDGE sends a copy of any such confidentiality agreement to ALCATEL
     promptly upon its execution and ALCATEL is provided with a list of or
     copies of the information provided to such Person and immediately provided
     with access to similar information to which such Person was provided.

(4)  NEWBRIDGE shall ensure that its officers, directors and employees and its
     subsidiaries and their officers, directors and employees and any financial
     advisors or other advisors or representatives retained by it or its
     subsidiaries are aware of the provisions of this Section 4.5, and it shall
     be responsible for any breach of this Section 4.5 by its and its
     subsidiaries' officers, directors, employees, representatives or agents.

Section 4.6  Notice by NEWBRIDGE of Superior Proposal Determination.

(1)  Notwithstanding Sections 4.5(1), (2) and (3), but subject to ALCATEL's
     rights under Sections 6.3(3)(c) and 6.4, NEWBRIDGE may accept, approve or
     recommend or enter into any agreement, understanding or arrangement in
     respect of an unsolicited Superior Proposal if, and only if: (i) it has
     provided ALCATEL with a copy of the Superior Proposal document; and (ii)
     three Business Days shall have elapsed from the later of the date ALCATEL
     received written notice advising ALCATEL that NEWBRIDGE's Board of
     Directors has resolved, subject only to compliance with this Section 4.6,
     to accept, approve, recommend or enter into an agreement, understanding or
     arrangement in respect of such Superior Proposal and the date ALCATEL
     received a copy of such Superior Proposal. Any information provided by
     NEWBRIDGE to ALCATEL pursuant to this Section 4.6 or pursuant to Section
     4.5 shall constitute "Information" under Section 4.7(2).

(2)  During such three Business Day period, NEWBRIDGE agrees that ALCATEL shall
     have the right, but not the obligation, to offer to amend the terms of this
     Agreement. The Board of Directors of NEWBRIDGE will review any offer by
     ALCATEL to amend the terms of this Agreement in good faith in order to
     determine, in its discretion in the exercise of its fiduciary duties (but
     without regard to any requirement for approval or further approval by
     ALCATEL's Shareholders), whether ALCATEL's offer upon acceptance by
     NEWBRIDGE would result in such Superior Proposal ceasing to be a Superior
     Proposal. If the Board of Directors of NEWBRIDGE so determines, it will
     enter into an amended agreement with ALCATEL reflecting ALCATEL's amended
     proposal. If the Board of Directors of NEWBRIDGE continues to believe, in
<PAGE>

                                      -47-

     good faith, after consultation with its financial advisors and outside
     counsel, that such Superior Proposal remains a Superior Proposal (without
     regard to any requirement for approval or further approval by ALCATEL's
     Shareholders) and therefore rejects ALCATEL's amended proposal, NEWBRIDGE
     may approve, recommend, accept or enter into an agreement, understanding or
     arrangement with respect to the Superior Proposal provided that such
     acceptance or agreement does not obligate NEWBRIDGE or any other Person to
     seek to interfere with the completion of the Arrangement or impose any
     "break-up", "hello" or other fees or options or rights to acquire assets or
     securities, or any other obligations that would survive the Effective Date,
     on NEWBRIDGE or any subsidiary unless and until this Agreement is
     terminated in accordance with its terms. In addition, in such
     circumstances, NEWBRIDGE may proceed with such approvals, consents, filings
     of or required by Governmental Entities and such other Persons as NEWBRIDGE
     shall consider appropriate in order to consummate such Superior Proposal,
     provided that such activity does not interfere with the completion of the
     Arrangement.

(3)  Nothing contained in this Section 4.6 shall limit in any way the obligation
     of NEWBRIDGE to convene and hold the NEWBRIDGE Meeting in accordance with
     Section 2.1 of this Agreement.

(4)  NEWBRIDGE acknowledges and agrees that each successive material amendment
     to any Acquisition Proposal shall constitute a new Acquisition Proposal for
     purposes of the requirement under clause (ii) of Section 4.6(1) to initiate
     an additional three Business Day notice period.

Section 4.7  Access to Information.

(1)  Subject to Section 4.7(2) and applicable Laws, upon reasonable notice,
     NEWBRIDGE shall (and shall cause each of its subsidiaries to) afford
     ALCATEL's officers, employees, counsel, accountants and other authorized
     representatives and advisors ("Representatives") access, during normal
     business hours from the date hereof and until the earlier of the Effective
     Date or the termination of this Agreement, to its and its subsidiaries'
     properties, books, contracts and records as well as to its management
     personnel, and, during such period, NEWBRIDGE shall (and shall cause each
     of its subsidiaries to) furnish promptly to ALCATEL all information
     concerning NEWBRIDGE's and its subsidiaries' businesses, properties and
     personnel as ALCATEL may reasonably request.  Subject to Section 4.7(2) and
     applicable Laws, upon reasonable notice, ALCATEL shall afford NEWBRIDGE's
     Representatives the opportunity, upon reasonable notice and during normal
     business hours from the date hereof and until the earlier of the Effective
     Date or termination of this Agreement, to speak to appropriate management
<PAGE>

                                      -48-

     personnel as NEWBRIDGE may reasonably request, without materially
     interfering with their other responsibilities, provided that all such
     conversations shall impose upon NEWBRIDGE confidentiality obligations
     equivalent to those applicable to ALCATEL under the Confidentiality
     Agreement, mutatis mutandis.
                ----------------

(2)  Each of ALCATEL and NEWBRIDGE acknowledges that certain information
     provided to it under Section 4.7(1) above will be non-public and/or
     proprietary in nature (the "Information") and will be subject to the terms
     of the Confidentiality Agreement and Section 4.7(1). For greater certainty,
     the provisions of the Confidentiality Agreement shall survive the
     termination of this Agreement, provided that the Confidentiality Agreement
     and Section 4.7(1) shall terminate at the Effective Time notwithstanding
     anything to the contrary contained therein.

Section 4.8  Closing Matters.

     Each of ALCATEL and NEWBRIDGE shall deliver, at the closing of the
transactions contemplated hereby, such customary certificates, resolutions and
other closing documents as may be required by the other party hereto, acting
reasonably.

Section 4.9  Indemnification.

(1)  ALCATEL agrees that all rights to indemnification or exculpation now
     existing in favour of the directors or officers of NEWBRIDGE or any
     subsidiary as provided in the articles or by-laws thereof shall survive the
     Arrangement and shall continue in full force and effect for a period of not
     less than six years from the Effective Time.

(2)  There shall be maintained in effect, for not less than six years from the
     Effective Time, to the extent obtainable on reasonable commercial terms,
     coverage substantially equivalent to that in effect under the current
     policies of the directors' and officers' liability insurance maintained by
     NEWBRIDGE or any of its subsidiaries, as the case may be, which is no less
     advantageous, and with no gaps or lapses in coverages with respect to
     matters occurring prior to the Effective Time. Alternatively, at ALCATEL's
     option, it may cause NEWBRIDGE to purchase "run-off" directors' and
     officers' liability insurance to cover prior events during such six year
     period or the balance thereof.

Section 4.10  Pooling of Interests Accounting.

(1)  ALCATEL shall each use its reasonable best efforts to cause the business
     combination contemplated by the Arrangement to be effected in such a manner
     as to ensure that such business combination will be accounted for as of the
     Effective Date as a pooling of interests under French generally accepted
<PAGE>

                                      -49-

     accounting principles, and will use its reasonable best efforts to refrain
     from taking any actions which will prevent such accounting treatment.

(2)  ALCATEL represents and warrants to NEWBRIDGE that the COB has approved in
     principle such accounting treatment for the transactions contemplated
     hereby, and ALCATEL has caused to be delivered a letter in favour of
     NEWBRIDGE from its independent accountants confirming their view that the
     transactions contemplated herein may be so accounted.

Section 4.11  Safe Income.

     NEWBRIDGE shall arrange for a "safe income tuck-in" transaction  (the
"Tuck-in") or, if a Tuck-in does not achieve the objective of crystallizing the
"safe income" or results in other material adverse tax consequences to the
shareholder, another form of safe income crystallisation transaction, with any
shareholder having a significant "safe income" with respect to its shares of
NEWBRIDGE and requesting such a transaction, provided that:

     (a)  only one form of transaction will be required and at least one
     shareholder must request such a transaction within ten (10) days of the
     date hereof;

     (b)  such transaction is to be completed in accordance with applicable Laws
     prior to the Effective Date;

     (c)  such transaction (other than a Tuck-in) must be accomplished in a
     manner that does not entail any material cost, expense, obligation or
     liability (and for this purpose $2,500,000 in the aggregate shall be deemed
     not to be material), or any delay in completing the Arrangement, to
     NEWBRIDGE or their respective subsidiaries or shareholders (including to
     NEWBRIDGE's non-participating shareholders); and

     (d)  such transaction and its terms and conditions must be satisfactory to
     ALCATEL, acting reasonably (limited to, in the case of a Tuck-in, its
     effect on NEWBRIDGE or its shareholders).

In the event that such transaction or its terms and conditions are not
satisfactory to ALCATEL, acting reasonably, or the Ontario Securities Commission
refuses to grant any relief required in connection with any such transaction,
ALCATEL will use its reasonable best efforts, for a period not to exceed 15
Business Days to assist NEWBRIDGE in structuring such a transaction in a manner
satisfactory to ALCATEL, acting reasonably. The parties acknowledge that ALCATEL
will require, without limitation, that the Arrangement and related matters
(after taking into account any transaction described herein) be poolable under
French GAAP and not objectionable to the COB or the PSE, and that a Tuck-in does
not adversely affect these pooling and COB/PSE issues. In the event that no such
transaction is
<PAGE>

                                      -50-

satisfactory to ALCATEL, acting reasonably, where it used its reasonable best
efforts as aforesaid, this shall not affect the completion of the Arrangement.

                                   ARTICLE 5
                                  CONDITIONS

Section 5.1  Mutual Conditions Precedent.

     The respective obligations of the parties hereto to complete the
transactions contemplated by this Agreement shall be subject to the
satisfaction, on or before the Effective Date, of the following conditions
precedent, each of which may only be waived by the mutual consent of ALCATEL and
NEWBRIDGE:

     (a)  the Arrangement shall have been approved at the NEWBRIDGE Meeting by
          not less than two-thirds of the votes cast by the NEWBRIDGE
          Shareholders who are represented at the NEWBRIDGE Meeting;

     (b)  the Arrangement shall have been approved at the NEWBRIDGE Meeting in
          accordance with any conditions in addition to those set out in
          Section 5.1(a) which may be imposed by the Interim Order;

     (c)  the Interim Order and the Final Order shall each have been obtained in
          form and on terms satisfactory to each of NEWBRIDGE and ALCATEL,
          acting reasonably, and shall not have been set aside or modified in a
          manner unacceptable to such parties, acting reasonably, on appeal or
          otherwise;

     (d)  the ALCATEL Shareholders shall have approved the ALCATEL Resolution at
          the ALCATEL Meeting by the requisite levels required by applicable
          Laws;

     (e)  there shall not be in force any final and non-appealable injunction,
          order or decree restraining or enjoining the consummation of the
          transactions contemplated by this Agreement and there shall be no
          proceeding (other than an appeal made in connection with the
          Arrangement), of a judicial or administrative nature or otherwise,
          brought by a Governmental Entity in progress or threatened that
          relates to or results from the transactions contemplated by this
          Agreement that would, if successful, result in an order or ruling that
          would preclude completion of the transactions contemplated by this
          Agreement in accordance with the terms hereof or would otherwise be
          inconsistent with the Regulatory Approvals which have been obtained;

     (f)  this Agreement shall not have been terminated pursuant to Article 6;
<PAGE>

                                      -51-

     (g)  the Exchangeable Shares shall have been conditionally approved for
          listing on The Toronto Stock Exchange, the ALCATEL ADRs and the
          ALCATEL ADSs to be provided upon the exchange of Exchangeable Shares
          shall have been approved for listing on the NYSE, and the ALCATEL
          Shares to be issued in connection with the Arrangement shall have been
          approved for listing on the PSE, subject to the filing of required
          documentation, notice of issuance and/or other usual requirements;

     (h)  other than the Regulatory Approvals, all consents, waivers, permits,
          orders and approvals of any Governmental Entity, and the expiry of any
          waiting periods, in connection with, or required to permit, the
          consummation of the Arrangement, the failure of which to obtain or the
          non-expiry of which would constitute a criminal offense, or would have
          a Material Adverse Effect on ALCATEL or NEWBRIDGE, as the case may be,
          shall have been obtained or received on terms that will not have a
          Material Adverse Effect on ALCATEL and/or NEWBRIDGE; there shall not
          be pending or threatened any suit, action or proceeding by any
          Governmental Entity: (i) seeking to prohibit or restrict the
          acquisition by ALCATEL or any of its subsidiaries of any NEWBRIDGE
          Common Shares, seeking to restrain or prohibit the consummation of the
          Plan of Arrangement or seeking to obtain from NEWBRIDGE or ALCATEL any
          damages directly or indirectly in connection with the Arrangement,
          (ii) seeking to prohibit or materially limit the ownership or
          operation by ALCATEL or any of its subsidiaries of any material
          portion of the business or assets of NEWBRIDGE or any of its
          subsidiaries or to compel ALCATEL or any of its subsidiaries to
          dispose of or hold separate any material portion of the business or
          assets of NEWBRIDGE or any of its subsidiaries, (iii) seeking to
          impose limitations on the ability of ALCATEL or any of its
          subsidiaries to acquire or hold, or exercise full rights of ownership
          of, any NEWBRIDGE Common Shares, including the right to vote the
          NEWBRIDGE Common Shares purchased by them on all matters properly
          presented to the shareholders of NEWBRIDGE, (iv) seeking to prohibit
          ALCATEL or any of its subsidiaries from effectively controlling in any
          material respect the business or operations of NEWBRIDGE or any of its
          subsidiaries or (v) which otherwise is reasonably likely to have a
          Material Adverse Effect on NEWBRIDGE or ALCATEL; and

     (i)  the Regulatory Approvals shall have been obtained or satisfied on
          terms and conditions satisfactory to ALCATEL and NEWBRIDGE (but only
          insofar as it would directly affect NEWBRIDGE shareholders),
<PAGE>

                                      -52-


          acting reasonably, and in connection therewith ALCATEL shall have
          regard to the magnitude of the transaction.

Section 5.2  Additional Conditions Precedent to the Obligations of ALCATEL.

(1)  The obligations of ALCATEL to complete the transactions contemplated by
     this Agreement shall also be subject to the fulfilment of each of the
     following conditions precedent (each of which is for ALCATEL's exclusive
     benefit and may be waived by ALCATEL):

     (a)  all covenants of NEWBRIDGE under this Agreement to be performed on or
          before the Effective Date shall have been duly performed by NEWBRIDGE
          in all material respects;

     (b)  the representations and warranties of NEWBRIDGE shall have been true
          and correct on the date hereof;

     (c)  the representations and warranties of NEWBRIDGE shall be true and
          correct in all material respects (except where already qualified as to
          materiality or the absence of a Material Adverse Effect) as of the
          Effective Date as if made on and as of such date (except to the extent
          such representations and warranties speak solely as of an earlier
          date, in which event such representations and warranties shall be true
          and correct to such extent as of such earlier date, or except as
          affected by transactions contemplated or permitted by this Agreement),
          and ALCATEL shall have received a certificate of NEWBRIDGE addressed
          to ALCATEL and dated the Effective Date, signed on behalf of NEWBRIDGE
          by two senior executive officers of NEWBRIDGE (on NEWBRIDGE's behalf
          and without personal liability), confirming the same as at the
          Effective Date;

     (d)  at the request of ALCATEL, NEWBRIDGE shall have executed a waiver(s)
          or other agreement(s) by or with Kanata Research Park Corporation
          relating to the extension for up to two (2) five year terms of any
          leases to which it is a party with NEWBRIDGE on the same terms and at
          agreed or arbitrated fair market value rents, subject only to
          applicable Laws;

     (e)  the Board of Directors of NEWBRIDGE shall have adopted all necessary
          resolutions, and all other necessary corporate action shall have been
          taken by NEWBRIDGE and the subsidiaries to permit the consummation of
          the Arrangement;

     (f)  between the date hereof and the Effective Date, there shall not have
          occurred a Material Adverse Change to NEWBRIDGE;
<PAGE>

                                      -53-

     (g)  the transactions contemplated by the Arrangement shall be able to be
          accounted for as a pooling of interests under French generally
          accepted accounting principles; and

     (h)  the holders of NEWBRIDGE Common Shares representing in excess of 5% of
          the outstanding NEWBRIDGE Common Shares shall not have exercised
          dissent or similar rights in connection with the Arrangement.

(2)  ALCATEL may not rely on the failure to satisfy any of the above conditions
     precedent if the condition precedent would have been satisfied but for a
     material default by ALCATEL in complying with their obligations hereunder.

Section 5.3  Additional Conditions Precedent to the Obligations of NEWBRIDGE.

(1)  The obligations of NEWBRIDGE to complete the transactions contemplated by
     this Agreement shall also be subject to the following conditions precedent
     (each of which is for the exclusive benefit of NEWBRIDGE and may be waived
     by NEWBRIDGE):

     (a)  all covenants of ALCATEL under this Agreement to be performed on or
          before the Effective Date shall have been duly performed by ALCATEL in
          all material respects;

     (b)  all representations and warranties of ALCATEL under this Agreement
          shall have been true and correct on the date hereof;

     (c)  the representations and warranties of ALCATEL shall be true and
          correct in all material respects (except where already qualified as to
          materiality or the absence of a Material Adverse Effect) as of the
          Effective Date as if made on and as of such date (except to the extent
          such representations and warranties speak solely as of an earlier
          date, in which event such representations and warranties shall be true
          and correct to such extent as of such earlier date, or except as
          affected by transactions contemplated or permitted by this Agreement),
          and NEWBRIDGE shall have received a certificate of ALCATEL addressed
          to NEWBRIDGE and dated the Effective Date, signed on behalf of ALCATEL
          by two senior executive officers of ALCATEL (on ALCATEL's behalf and
          without personal liability), confirming the same as at the Effective
          Date;

     (d)  the Board of Directors of ALCATEL shall have adopted all necessary
          resolutions, and all other necessary corporate action shall have been
          taken by ALCATEL to permit the consummation of the Arrangement
<PAGE>

                                      -54-

          and the provision of ALCATEL ADSs upon the exchange from time to time
          of the Exchangeable Shares;

     (e)  between the date hereof and the Effective Date, there shall not have
          occurred a Material Adverse Change to ALCATEL; and

     (f)  the orders referred to in Section 2.7(1) shall have been obtained.

(2)  NEWBRIDGE may not rely on the failure to satisfy any of the above
     conditions precedent if the condition precedent would have been satisfied
     but for a material default by NEWBRIDGE in complying with its obligations
     hereunder.

Section 5.4  Notice and Cure Provisions.

(1)  ALCATEL and NEWBRIDGE will give prompt notice to the other of the
     occurrence, or failure to occur, at any time from the date hereof until the
     Effective Date, of any event or state of facts which occurrence or failure
     would, or would be likely to:

     (a)  cause any of the representations or warranties of the other party
          contained herein to be untrue or inaccurate on the date hereof or on
          the Effective Date; or

     (b)  result in the failure in any material respect to comply with or
          satisfy any covenant, condition or agreement to be complied with or
          satisfied by the other hereunder prior to the Effective Date.

(2)  Neither ALCATEL nor NEWBRIDGE may seek to rely upon any conditions
     precedent contained in Sections 5.1, 5.2 or 5.3, or exercise any
     termination right arising therefrom, unless forthwith and in any event
     prior to the filing of the Articles of Arrangement for acceptance by the
     Director, ALCATEL or NEWBRIDGE, as the case may be, has delivered a written
     notice to the other specifying in reasonable detail all breaches of
     covenants, representations and warranties or other matters which ALCATEL or
     NEWBRIDGE, as the case may be, are asserting as the basis for the non-
     fulfilment of the applicable condition precedent or the exercise of the
     termination right, as the case may be. If any such notice is delivered,
     provided that NEWBRIDGE or ALCATEL, as the case may be, is proceeding
     diligently to cure such matter, if such matter is susceptible to being
     cured (for greater certainty, except by way of disclosure in the case of
     representations and warranties), the other may not terminate this Agreement
     as a result thereof until the later of the 30 days prior to the Outside
     Date and the expiration of a period of 30 days from such notice. If such
     notice has been delivered prior to the date of the NEWBRIDGE Meeting, such
     meeting shall, unless the parties agree otherwise, be postponed
<PAGE>

                                      -55-

     or adjourned until the expiry of such period. If such notice has been
     delivered prior to the making of the application for the Final Order or the
     filing of the Articles of Arrangement with the Director, such application
     and such filing shall be postponed until the expiry of such period. For
     greater certainty, in the event that such matter is cured within the time
     period referred to herein without a Material Adverse Effect on the curing
     party, this Agreement may not be terminated as a result of the cured
     breach.

Section 5.5  Satisfaction of Conditions.

          The conditions precedent set out in Sections 5.1, 5.2 and 5.3 shall be
     conclusively deemed to have been satisfied, waived or released when, with
     the agreement of ALCATEL and NEWBRIDGE, a certificate of arrangement in
     respect of the Arrangement is issued by the Director.

                                   ARTICLE 6
                           AMENDMENT AND TERMINATION

Section 6.1  Amendment.

          This Agreement and the Plan of Arrangement may, at any time and from
     time to time before or after the holding of the NEWBRIDGE Meeting or the
     ALCATEL Meeting but not later than the Effective Date, be amended by mutual
     written agreement of the parties hereto, and any such amendment may,
     subject to applicable Laws and the Interim Order, without limitation:

     (a)  change the time for performance of any of the obligations or acts of
          the parties;

     (b)  waive any inaccuracies or modify any representation or warranty
          contained herein or in any document delivered pursuant hereto;

     (c)  waive compliance with or modify any of the covenants herein contained
          and waive or modify performance of any of the obligations of the
          parties; and/or

     (d)  waive compliance with or modify any conditions precedent herein
          contained.

Section 6.2  Mutual Understanding Regarding Amendments.

     The parties agree that if ALCATEL or NEWBRIDGE, as the case may be, propose
any amendment or amendments to this Agreement or to the Plan of Arrangement, the
other will act reasonably in considering such amendment and if the other and its
security holders are not prejudiced by reason of any such amendment the other
will co-operate in a reasonable fashion with ALCATEL or
<PAGE>

                                      -56-

NEWBRIDGE, as the case may be, so that such amendment can be effected subject to
applicable Laws and the rights of the security holders. Without limiting the
generality of the foregoing, ALCATEL shall, acting reasonably, consider in good
faith any proposal from NEWBRIDGE made within 7 Business Days hereof regarding
the attributes of the Exchangeable Shares and ancillary rights (including the
outside date of their redemption and whether the holders thereof can indirectly
possess any voting rights at the ALCATEL level or other features of the
Arrangement), but the decision to modify any of such attributes shall be in the
sole discretion of ALCATEL.

Section 6.3  Termination.

(1)  If any condition contained in Sections 5.1 or 5.2 is not satisfied at or
     before the Effective Date to the satisfaction of ALCATEL, then ALCATEL may,
     subject to Section 5.4 and to Section 5.2(2) in the case of Section 5.2, by
     notice to NEWBRIDGE terminate this Agreement and the obligations of the
     parties hereunder (except as otherwise herein provided, including under
     Section 6.4), but without detracting from the rights of ALCATEL arising
     from any breach by NEWBRIDGE but for which the condition would have been
     satisfied.

(2)  If any condition contained in Sections 5.1 or 5.3 is not satisfied at or
     before the Effective Date to the satisfaction of NEWBRIDGE, then NEWBRIDGE
     may, subject to Section 5.4 and to Section 5.3(2) in the case of Section
     5.3, by notice to ALCATEL terminate this Agreement and the obligations of
     the parties hereunder (except as otherwise herein provided, including under
     Section 6.4), but without detracting from the rights of NEWBRIDGE arising
     from any breach by ALCATEL but for which the condition would have been
     satisfied.

(3)  This Agreement may:

     (a)  be terminated by the mutual agreement of NEWBRIDGE and ALCATEL (for
          greater certainty, without further action on the part of the NEWBRIDGE
          Shareholders or the ALCATEL Shareholders if terminated after the
          holding of the NEWBRIDGE Meeting or the ALCATEL Meeting, as
          applicable);

     (b)  be terminated by either NEWBRIDGE or ALCATEL if there shall be passed
          any Law that makes consummation of the transactions contemplated by
          this Agreement illegal or otherwise prohibited; or

     (c)  be terminated by ALCATEL if (A) the Board of Directors of NEWBRIDGE
          shall have failed to recommend or shall have withdrawn, modified or
          changed in a manner adverse to ALCATEL its approval or recommendation
          of this Agreement or the Arrangement (unless ALCATEL has suffered a
          Material Adverse Change or
<PAGE>

                                      -57-

          ALCATEL shall have made a misrepresentation at the date hereof or
          breached a covenant under this Agreement in such a manner that, taking
          into account Sections 5.3(2) and 5.4, NEWBRIDGE would be entitled to
          rely on the failure of a condition set forth in Sections 5.3(1)(a),
          (b) or (e) as a reason not to complete the Arrangement), or (B) the
          Board of Directors of NEWBRIDGE shall have approved or recommended any
          Acquisition Proposal;

     in each case, prior to the Effective Date.

(4)  If the Effective Date does not occur on or prior to the Outside Date, then,
     unless otherwise agreed in writing by the parties, this Agreement shall
     terminate, provided that in the event that the conditions set forth in
     Sections 5.1(g), (h) or (i) above shall not have been satisfied by that
     date, either party may unilaterally extend the Outside Date until December
     31, 2000 upon written notice to the other party prior to September 30,
     2000, in which case the Outside Date shall be deemed for all purposes to be
     December 31, 2000.

(5)  If this Agreement is terminated in accordance with the foregoing provisions
     of this Section 6.3, no party shall have any further liability to perform
     its obligations hereunder except as provided in Section 6.4 and as
     otherwise contemplated hereby, and provided that neither the termination of
     this Agreement nor anything contained in this Section 6.3(5) shall relieve
     any party from any liability for any breach by it of this Agreement,
     including from any inaccuracy in its representations and warranties and any
     non-performance by it of its covenants made herein.

Section 6.4  Break and Other Fees; Option.

(1)  If:

     (a)  ALCATEL shall terminate this Agreement pursuant to Section 6.3(3)(c);
          or

     (b)  either NEWBRIDGE or ALCATEL shall terminate this Agreement pursuant to
          Section 6.3(1) or (2) as a result of the failure to satisfy the
          conditions specified in either Section 5.1(a) or Section 5.1(b) in
          circumstances where the requisite NEWBRIDGE Shareholder approval has
          not been obtained at the WENGRINDER Meeting, and an Acquisition
          Proposal has been made by any person other than ALCATEL prior to the
          NEWBRIDGE Meeting;

     then in any such case NEWBRIDGE shall pay to ALCATEL $375 million in
     immediately available funds to an account designated by ALCATEL. Such
<PAGE>

                                      -58-

     payment shall be due (A) in the case of a termination specified in clause
     (a), within one Business Day after written notice of termination by ALCATEL
     or (B) in the case of a termination specified in clause (b), within one
     Business Day after written notice of termination by either ALCATEL or prior
     to written notice of termination by NEWBRIDGE, respectively.  NEWBRIDGE
     shall not be obligated to make more than one payment pursuant to this
     Section 6.4(1).

(2)  If the holders of the NEWBRIDGE Common Shares shall fail to approve the
     Arrangement (unless ALCATEL shall have suffered a Material Adverse Change
     or ALCATEL shall have made a misrepresentation at the date hereof or
     breached a covenant under this Agreement in such a manner that, taking into
     account Sections 5.3(2) and 5.4, NEWBRIDGE would be entitled to rely on the
     failure of a condition set forth in Sections 5.3(1)(a), (b) or (e) as a
     reason not to complete the Arrangement) at the NEWBRIDGE Meeting, then,
     except in the circumstances contemplated in Section 6.4(1) above, on the
     first Business Day following the termination of this Agreement as a result
     thereof, NEWBRIDGE shall pay to ALCATEL $10,000,000 as payment in full of
     ALCATEL's out-of-pocket costs and expenses in connection with the
     transaction contemplated by this Agreement in immediately available funds
     to an account designated by ALCATEL.

(3)  If the ALCATEL Shareholders shall fail to approve the ALCATEL Resolution
     put forward for approval (unless NEWBRIDGE shall have suffered a Material
     Adverse Change or NEWBRIDGE shall have made a misrepresentation at the date
     hereof or breached a covenant under this Agreement in such a manner that,
     taking into account Section 5.4, ALCATEL would be entitled to rely on the
     failure of a condition set forth in Sections 5.2(1)(a), (b) or (f) as a
     reason not to complete the Arrangement) at the ALCATEL Meeting, then,
     except in the circumstances contemplated in Section 6.4(1) above, on the
     first Business Day following the termination of this Agreement as a result
     thereof, ALCATEL shall pay to NEWBRIDGE $10,000,000 as payment in full of
     NEWBRIDGE's out-of-pocket costs and expenses in connection with the
     transaction contemplated by this Agreement in immediately available funds
     to an account designated by NEWBRIDGE.

(4)  On the date hereof, NEWBRIDGE granted to ALCATEL the option to purchase
     NEWBRIDGE Common Shares upon the terms and subject to the conditions
     contained in the Option Agreement, a copy of which is attached as Schedule
     F.

Section 6.5  Remedies.

     The parties hereto acknowledge and agree that an award of money damages
would be inadequate for any breach of this Agreement by any party or its
<PAGE>

                                      -59-

representatives and any such breach would cause the non-breaching party
irreparable harm. Accordingly, the parties hereto agree that, in the event of
any breach or threatened breach of this Agreement by one of the parties, the
non-breaching party will also be entitled, without the requirement of posting a
bond or other security, to equitable relief, including injunctive relief and
specific performance. Such remedies will not be the exclusive remedies for any
breach of this Agreement but will be in addition to all other remedies available
at law or equity to each of the parties.


                                   ARTICLE 7
                                    GENERAL

Section 7.1  Notices.

          All notices and other communications which may or are required to be
     given pursuant to any provision of this Agreement shall be given or made in
     writing and shall be deemed to be validly given if served personally or by
     telecopy, in each case addressed to the particular party at:

     (a)  If to ALCATEL, at:

               c/o ALCATEL
               54 Rue de La Boetie
               75008 Paris France

               Attention:      General Counsel

               Telecopier No.: 011-331-4076-1435

          with a copy to:

               Stikeman, Elliott
               Box 85, Commerce Court West
               199 Bay Street, 53rd Floor
               Toronto, Ontario, Canada M5L 1B9

               Attention:      Mr. Simon Romano
               Telecopier No.: (416) 947-0866

     (b)  If to NEWBRIDGE at:

               600 March Road
               Kanata, Ontario, Canada K2K 2E6
<PAGE>

                                      -60-

               Attention:      General Counsel
               Telecopier No.: 613-599-3673

          with a copy to:

               Osler Hoskin & Harcourt
               1500 - 50 O'Connor Street
               Ottawa, Ontario, Canada
               K1P 6L2

               Attention:      Ms. Elizabeth Walker
               Telecopier No.: (613) 235-2867

or at such other address of which any party may, from time to time, advise the
other parties by notice in writing given in accordance with the foregoing. The
date of receipt of any such notice shall be deemed to be the date of delivery or
telecopying thereof.

Section 7.2  Assignment.

     No party hereto may assign its rights or obligations under this Agreement
or the Arrangement, except that ALCATEL may assign all or part of its rights or
obligations, without reducing its own obligations hereunder, to a wholly-owned
subsidiary.

Section 7.3  Binding Effect.

     This Agreement and the Arrangement shall be binding upon and shall enure to
the benefit of the parties hereto and their respective successors and permitted
assigns and no third party shall have any rights hereunder.

Section 7.4  Waiver and Modification.

     NEWBRIDGE and ALCATEL may waive or consent to the modification of, in whole
or in part, any inaccuracy of any representation or warranty made to them
hereunder or in any document to be delivered pursuant hereto and may waive or
consent to the modification of any of the covenants herein contained for their
respective benefit or waive or consent to the modification of any of the
obligations of the other parties hereto. Any waiver or consent to the
modification of any of the provisions of this Agreement, to be effective, must
be in writing executed by the party granting such waiver or consent.

Section 7.5  Further Assurances.

     Each party hereto shall, from time to time, and at all times hereafter, at
the request of the other parties hereto, but without further consideration, do
all such further acts and execute and deliver all such further documents and
instruments as
<PAGE>

                                      -61-

shall be reasonably required in order to fully perform and carry out the terms
and intent hereof.

Section 7.6  Expenses.

(1)  Subject to Section 6.4, the parties agree that all out-of-pocket expenses
     of the parties relating to the Arrangement and the transactions
     contemplated hereby, including legal fees, accounting fees, financial
     advisory fees, regulatory filing fees, stock exchange fees, all
     disbursements of advisors and printing and mailing costs, shall be paid by
     the party incurring such expenses.

(2)  NEWBRIDGE represents and warrants to ALCATEL that, except for any amounts
     owing to those financial advisers referred to in Section 3.1(c)(iii) by
     NEWBRIDGE pursuant to and in accordance with the terms of written and
     executed agreements existing as at the date hereof and disclosed to ALCATEL
     on or prior to the date hereof, no broker, finder or investment banker is
     or will be entitled to any brokerage, finder's or other fee or commission
     from NEWBRIDGE or any subsidiary of NEWBRIDGE in connection with the
     transactions contemplated hereby or by the Arrangement.

Section 7.7  Consultation.

     ALCATEL and NEWBRIDGE agree to consult with each other as to the general
nature of any news releases or public statements with respect to this Agreement
or the Arrangement, and to use their respective reasonable efforts not to issue
any news releases or public statements inconsistent with the results of such
consultations. Subject to applicable Laws, each party shall use its reasonable
efforts to enable the other parties to review and comment on all such news
releases prior to the release thereof. The parties agree to issue jointly the
news release in the agreed form with respect to this Arrangement as soon as
practicable following the execution of this Agreement. ALCATEL and NEWBRIDGE
also agree to consult with each other in preparing and making any filings and
communications in connection with any Regulatory Approvals or other regulatory
approvals and in seeking any third party consents under leases, joint ventures
or other agreements.

Section 7.8  Governing Laws.

     This Agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario and the laws of Canada applicable therein and
shall be treated in all respects as a Ontario contract. Each party hereby
irrevocably attorns to the jurisdiction of the courts of the Province of Ontario
in respect of all matters arising under or in relation to this Agreement.
<PAGE>

                                      -62-

Section 7.9   Time of Essence.

     Time shall be of the essence in this Agreement.

Section 7.10  Counterparts.

     This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original but all of which together shall constitute one
and the same instrument.
<PAGE>

                                      -63-

     IN WITNESS WHEREOF the parties hereto have executed this Merger Agreement
as of the date first written above.

                                            ALCATEL


                                            By: /s/ Serge Tchuruk
                                               ---------------------------------
                                                Authorized Signing Officer



                                            NEWBRIDGE NETWORKS CORPORATION


                                            By: /s/ Pearse Flynn
                                               ---------------------------------

                                            By: /s/ Kenneth B. Wigglesworth
                                               ---------------------------------
                                                Authorized Signing Officer
<PAGE>

                                   SCHEDULE A

                             ARRANGEMENT RESOLUTION

                SPECIAL RESOLUTION OF THE NEWBRIDGE SHAREHOLDERS


 .    BE IT RESOLVED THAT:

1.   The arrangement (the "Arrangement") under Section 192 of the Canada
     Business Corporations Act (the "CBCA") involving NEWBRIDGE Corporation
     ("NEWBRIDGE"), as more particularly described and set forth in the
     Management Information Circular (the "Circular") of NEWBRIDGE accompanying
     the notice of this meeting (as the Arrangement may be or may have been
     modified or amended) is hereby authorized, approved and adopted.

2.   The plan of arrangement (the "Plan of Arrangement") involving NEWBRIDGE,
     the full text of which is set out as Schedule B to the Merger Agreement
     (the "Merger Agreement") made between ALCATEL and NEWBRIDGE (as the Plan of
     Arrangement may be or may have been modified or amended) is hereby
     authorized, approved and adopted.

3.   Notwithstanding that this resolution has been passed (and the Arrangement
     adopted) by the shareholders of NEWBRIDGE or that the Arrangement has been
     approved by the Superior Court of Justice (Ontario), the directors of
     NEWBRIDGE are hereby authorized and empowered (i) to amend the Merger
     Agreement or the Plan of Arrangement to the extent permitted by the Merger
     Agreement, and (ii) subject to the terms of the Merger Agreement, not to
     proceed with the Arrangement without further approval of the shareholders
     of NEWBRIDGE.

4.   Any officer or director of NEWBRIDGE is hereby authorized and directed
     for and on behalf of NEWBRIDGE to execute, under the seal of NEWBRIDGE or
     otherwise, and to deliver articles of arrangement and such other documents
     as are necessary or desirable to the Director under the CBCA in accordance
     with the Merger Agreement for filing.

5.   Any officer or director of NEWBRIDGE is hereby authorized and directed
     for and on behalf of NEWBRIDGE to execute or cause to be executed, under
     the seal of NEWBRIDGE or otherwise, and to deliver or cause to be
     delivered, all such other documents and instruments and to perform or cause
     to be performed all such other acts and things as may be necessary or
     desirable to give full effect to the foregoing resolution and the matters
     authorized hereby.
<PAGE>

                                  SCHEDULE C
                             REGULATORY APPROVALS

Canada

 .    expiration or earlier termination of the waiting period under Part IX of
     the Competition Act (Canada) and receipt of an advance ruling certificate
     ("ARC") pursuant to the Competition Act (Canada) or, in the alternative to
     an ARC, a no action letter from the Commissioner of Competition

 .    determination by the Minister responsible for Investment Canada under the
     Investment Canada Act that the Arrangement is of "net benefit to Canada"
     for purposes of such Act on terms and conditions satisfactory to ALCATEL,
     acting reasonably

 .    exemption orders from the provincial securities regulators from the
     registration and prospectus requirements with respect to the Exchangeable
     Share structure

 .    conditional approval for the listing of the Exchangeable Shares on The
     Toronto Stock Exchange

United States

 .    expiration or earlier termination of the waiting period under the Hart-
     Scott-Rodino Antitrust Improvements Act of 1976

 .    approval of the NYSE to the listing of the ALCATEL ADRs and ALCATEL ADSs to
     be issued under the Arrangement, subject to notice of issuance

 .    effectiveness of the registration statement on Form F-3 regarding the
     ALCATEL ADRs and ALCATEL ADSs and on Form S-8 regarding the Revised Options

 .    compliance with the applicable requirements of U.S. state blue sky laws

 .    any other compliance with any applicable requirements of the U.S.
     Securities Act of 1933 and the U.S. Securities Exchange Act of 1934, each
     as amended

France/EU

 .    approval of the COB to the publication of the ALCATEL Circular and of the
     COB and PSE to the listing of the additional ALCATEL Shares and related
     matters
<PAGE>

                                      -2-

 .    the filing of a registration statement issued in connection with the
     transactions related to the Arrangement with the COB and the approval
     (visa) of such registration statement by the COB

 .    compliance with laws regulating competition, antitrust, investment or
     exchange controls (as appropriate) on terms and conditions satisfactory to
     ALCATEL, acting reasonably, or ALCATEL obtaining confirmation on terms
     satisfactory to it that the transactions referred to in this Agreement or
     any matter relating thereto will not be referred to such authorities

                            .     ----------------

<PAGE>

                                                                    Exhibit 99.1


                               OPTION AGREEMENT


     OPTION AGREEMENT dated as of February 22, 2000 (this "Agreement"),

BETWEEN:

               ALCATEL,
               a corporation existing under the laws of France

               (hereinafter referred to as "ALCATEL"),

AND:

               NEWBRIDGE NETWORKS CORPORATION,
               a corporation existing under the laws of Canada

               (hereinafter referred to as "NEWBRIDGE"),

     WHEREAS ALCATEL and NEWBRIDGE have entered into a Merger Agreement dated as
of the date hereof (the "Merger Agreement") which provides, upon the terms and
subject to the conditions set forth therein, for the completion of an
arrangement (the "Arrangement") involving NEWBRIDGE and its securityholders;

     AND WHEREAS, unless the context otherwise requires, words and phrases used
herein with initial capital letters shall have the meanings assigned to such
words and phrases in the Merger Agreement;

     AND WHEREAS as a condition to ALCATEL entering into the Merger Agreement,
ALCATEL has required that NEWBRIDGE agree, and in order to induce ALCATEL to
enter into the Merger Agreement, NEWBRIDGE has agreed, to grant ALCATEL an
option to purchase, in accordance with the terms and conditions of this
Agreement, up to 36,183,000 newly issued NEWBRIDGE Common Shares, representing
approximately 19.9 % of the issued and outstanding NEWBRIDGE Common Shares on
the date hereof;

     NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and in the Merger Agreement, the parties hereto agree as follows:
<PAGE>

                                      -2-

                                   ARTICLE 1
                                  THE OPTION

Section 1.1  Grant of Option.

     Subject to the terms and conditions set forth herein, NEWBRIDGE hereby
grants to ALCATEL an irrevocable option (the "Option") to purchase up to
36,183,000 NEWBRIDGE Common Shares (the "Option Shares") from the treasury of
NEWBRIDGE (being approximately 19.9% of the number of issued and outstanding
NEWBRIDGE Common Shares on the date hereof) in the manner set forth below at a
purchase price (the "Purchase Price") per Option Share equal to the final
reported price on The Toronto Stock Exchange on February 22, 2000 in cash per
Option Share.

Section 1.2  Exercise of Option.

(1)  The Option may be exercised by ALCATEL, in whole or in part, at any time or
     from time to time after the occurrence of an Exercise Event (as defined
     below) and prior to the Termination Date (as defined below).

(2)  An "Exercise Event" shall occur for purposes of this Agreement upon the
     occurrence of any event or circumstance which, pursuant to Section 6.4(1)
     of the Merger Agreement, entitles ALCATEL to a payment of the amount
     specified therein.

(3)  The "Termination Date" shall occur for purposes of this Agreement upon the
     first to occur of any of the following:

     (a)  the Effective Time;

     (b)  the date which is 2 years after the first occurrence of an Exercise
          Event;

     (c)  the date on which the Option shall have been exercised in full; or

     (d)  following the termination of the Merger Agreement in any manner in
          which ALCATEL would not be entitled, pursuant to Section 6.4(1) of the
          Merger Agreement, to a payment of the amount specified therein.

(4)  In the event ALCATEL wishes to exercise the Option, ALCATEL shall send a
     written notice (an "Exercise Notice") to NEWBRIDGE specifying the total
     number of Option Shares that ALCATEL wishes to purchase, the denominations
     of the certificate or certificates evidencing such Option Shares which
     ALCATEL wishes to receive, the date (subject to the earlier of the
     satisfaction or waiver of the conditions set forth in Section 1.3) (the
     "Closing Date") which shall be a Business Day not later than the fifth
     Business Day
<PAGE>

                                      -3-

     and not earlier than the second Business Day after delivery of such notice,
     and the place for the closing (the "Closing") of such purchase.

(5)  If at any time the Option is then exercisable pursuant to the terms of
     Section 1.2(1) hereof and notwithstanding whether the condition set forth
     in Section 1.3(1) shall have been fulfilled, ALCATEL may elect, in lieu of
     exercising the Option to purchase Option Shares as provided in Section
     1.2(4) hereof, to send a written notice to NEWBRIDGE (a "Cash Exercise
     Notice") specifying a date not later than the fifth Business Day and not
     earlier than the second Business Day following the date such notice is
     given, on which date NEWBRIDGE shall pay to ALCATEL an amount in cash equal
     to the Spread (as defined below) multiplied by such number of Option Shares
     as ALCATEL shall specify in the Cash Exercise Notice. As used herein,
     "Spread" shall mean the excess, if any, over the Purchase Price of the
     higher of (the "Applicable Price"): (x) if applicable, the highest price
     per share (the "Competing Purchase Price") for NEWBRIDGE Common Shares
     proposed in any Acquisition Proposal announced, proposed, offered or made
     prior to the date of the Cash Exercise Notice; or (y) the simple average of
     the closing prices (the "Closing Price"), if any of the NEWBRIDGE Common
     Shares on The Toronto Stock Exchange (the "TSE") during the 20 trading days
     immediately prior to the date of the Cash Exercise Notice. If the Competing
     Purchase Price includes any property other than cash, the Competing
     Purchase Price shall be the sum of: (i) the fixed cash amount, if any,
     included in the Competing Purchase Price; and (ii) the fair market value of
     such other property. If such other property includes securities listed on
     an existing public trading market, the fair market value of such securities
     shall be deemed to be equal to the average of the closing prices (or the
     average of the closing bid and asked prices if closing prices are
     unavailable) for such securities in their principal public trading market
     on the five trading days ending five days prior to the date of the Cash
     Exercise Notice. If such other property includes something other than cash
     or securities listed on an existing public trading market and, as of the
     payment date for the Spread, agreement on the value of such other property
     has not been reached, the Competing Purchase Price shall be deemed to be
     the amount of any cash included in the Competing Purchase Price plus the
     fair market value of such other property as determined by a nationally
     recognized investment banking firm jointly selected by ALCATEL and
     NEWBRIDGE. For this purpose, the parties shall use their reasonable best
     efforts to cause any determination of the fair market value of such other
     property to be made within two Business Days after the date of delivery of
     the Cash Exercise Notice. Upon exercise of its right to receive the Spread
     pursuant to this Section 1.2(5), the obligations of NEWBRIDGE to deliver
     Option Shares pursuant to Section 1.1 shall be terminated with respect to
     such number of Option Shares for which
<PAGE>

                                      -4-

     ALCATEL shall have elected to be paid the Spread pursuant to the Cash
     Exercise Notice.

Section 1.3  Conditions to Closing.

     The obligation of NEWBRIDGE to deliver Option Shares upon any exercise of
the Option is subject to the following conditions:

(1)  The Option Shares shall have been approved for listing on the NYSE and the
     TSE, provided however, that NEWBRIDGE and ALCATEL agree that NEWBRIDGE
     shall not be obligated to register the Option Shares under the U.S.
     Securities Act or otherwise qualify the Option Shares for resale in the
     United States or Canada other than on the terms and subject to the
     conditions set forth in Section 3.2; and

(2)  No preliminary or permanent injunction or other order by any court of
     competent jurisdiction prohibiting such issuance of Option Shares shall be
     in effect (provided that NEWBRIDGE has used its reasonable best efforts to
     resist or overturn same).

     The obligation of NEWBRIDGE to pay the Spread under Section 1.2(5) shall
only be subject to the condition that no preliminary or permanent injunction or
other order by any court of competent jurisdiction prohibiting payment of the
Spread shall be in effect (provided that NEWBRIDGE has used its reasonable best
efforts to resist or overturn same).

Section 1.4  Closings.

(1)  In the event of a Closing pursuant to Section 1.2(4), NEWBRIDGE shall
     deliver to ALCATEL a certificate or certificates evidencing the applicable
     number of Option Shares (in the denominations specified therein), and
     ALCATEL shall purchase each such Option Share from NEWBRIDGE at the
     Purchase Price.

(2)  In the event of a Closing pursuant to Section 1.2(5), NEWBRIDGE shall
     deliver to ALCATEL cash in the amount determined pursuant to Section
     1.2(5).

(3)  Payment of the Purchase Price and the Spread shall be made by wire transfer
     of immediately available funds.

Section 1.5  Adjustments upon Share Issuances, Changes in Capitalization, etc.

(1)  In the event of any change in NEWBRIDGE Common Shares or in the number of
     outstanding NEWBRIDGE Common Shares by reason of a stock dividend, split-
     up, recapitalization, combination, exchange of shares or similar
     transaction or any other extraordinary change in the corporate or capital
<PAGE>

                                      -5-

     structure of NEWBRIDGE (including, without limitation, the declaration or
     payment of an extraordinary dividend of cash, securities or other
     property), the type and number of shares or securities to be issued by
     NEWBRIDGE upon exercise of the Option and the Purchase Price shall be
     adjusted appropriately, and proper provision shall be made in the
     agreements governing such transaction, so that ALCATEL shall receive upon
     exercise of the Option the number and class of shares and/or other
     securities and/or cash and/or property that ALCATEL would have received in
     respect of NEWBRIDGE Common Shares if the Option had been exercised
     immediately prior to such event, or the record date therefor, as
     applicable, and elected, to the fullest extent it would have been permitted
     to elect, to receive such securities, cash or other property (as ALCATEL
     shall determine). For greater certainty, following any such transaction,
     ALCATEL shall continue to be entitled to give a Cash Exercise Notice and be
     paid the Spread, determined in light of the Purchase Price, adjusted as
     aforesaid.

(2)  In the event that NEWBRIDGE shall enter into an agreement (other than the
     Merger Agreement): (i) to consolidate with, amalgamate or merge into any
     person, other than ALCATEL or any subsidiary of ALCATEL, and shall not be
     the continuing or surviving corporation of such consolidation, amalgamation
     or merger; (ii) to permit any person, other than ALCATEL or any subsidiary
     of ALCATEL, to merge into NEWBRIDGE and NEWBRIDGE shall be the continuing
     or surviving corporation, but, in connection with such merger, the then
     outstanding NEWBRIDGE Common Shares shall be changed into or exchanged for
     shares or other securities of NEWBRIDGE or any other person or cash or any
     other property or the then outstanding NEWBRIDGE Common Shares shall after
     such merger represent less than 50% of the outstanding shares and share
     equivalents of the surviving corporation; or (iii) to sell or otherwise
     transfer all or substantially all of its assets to any person, other than
     ALCATEL or any subsidiary of ALCATEL; then, and in each such case, proper
     provision shall be made in the agreements governing such transaction so
     that ALCATEL shall receive upon exercise of the Option, the number and
     class of shares and/or other securities and/or cash and/or property that
     ALCATEL would have received in respect of NEWBRIDGE Common Shares if the
     Option had been exercised immediately prior to such transaction, or the
     record date therefor, as applicable, and elected, to the fullest extent it
     would have been permitted to elect, to receive such securities, cash or
     other property (as ALCATEL shall determine), and the Purchase Price shall
     be adjusted appropriately. For greater certainty, following any such
     transaction, ALCATEL shall continue to be entitled to give a Cash Exercise
     Notice and be paid the Spread, determined in light of the Purchase Price,
     adjusted as aforesaid.
<PAGE>

                                      -6-

(3)  The provisions of this Agreement, including, without limitation, Sections
     1.1, 1.2, 1.4 and 3.2, shall apply with appropriate adjustments to any
     securities for which the Option becomes exercisable pursuant to this
     Section 1.5.

                                   ARTICLE 2
                  REPRESENTATIONS AND WARRANTIES OF NEWBRIDGE

     NEWBRIDGE hereby represents and warrants to ALCATEL as follows:

Section 2.1  Authority Relative to This Agreement.

     NEWBRIDGE has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by NEWBRIDGE and the consummation by NEWBRIDGE of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action, and no other corporate proceedings on the part of NEWBRIDGE
are necessary to authorize this Agreement or to consummate such transactions.
This Agreement has been duly executed and delivered by NEWBRIDGE and, assuming
the due authorization, execution and delivery by ALCATEL, constitutes the legal,
valid and binding obligation of NEWBRIDGE, enforceable against NEWBRIDGE in
accordance with its terms.

Section 2.2  Authority to Issue Shares.

     NEWBRIDGE has taken all necessary corporate action to authorize and reserve
and permit it to issue, and at all times from the date hereof through the
Termination Date shall have reserved, all the Option Shares issuable pursuant to
this Agreement, and NEWBRIDGE shall take all necessary corporate action to
authorize and reserve and permit it to issue all additional NEWBRIDGE Common
Shares or other securities which may be issued pursuant to this Agreement, all
of which, upon their issuance and delivery in accordance with the terms of this
Agreement, shall be duly authorized, validly issued, fully paid and non-
assessable, shall be delivered free and clear of all security interests, liens,
claims, pledges, options, rights of first refusal, agreements, charges and other
encumbrances of any nature whatsoever (other than as provided in this Agreement)
and shall not be subject to any pre-emptive rights.

Section 2.3  No Conflicts.

     The execution and delivery of this Agreement does not, and the consummation
of the transactions contemplated hereby will not, conflict with, or result in
any breach pursuant to any provision of the constating documents of NEWBRIDGE or
any subsidiary of NEWBRIDGE or result in any breach of any loan or credit
agreement, note, mortgage, indenture, lease, pension plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
<PAGE>

                                      -7-

order, decree, statute, law, ordinance, rule or regulation applicable to
NEWBRIDGE or any subsidiary of NEWBRIDGE or their respective properties or
assets, except that the Option Shares may not be resold in (i) any province of
Canada except in accordance with Canadian securities laws; or (ii) the United
States unless the Option Shares are registered under the U.S. Securities Act or
are offered and sold pursuant to an exemption from registration under the U.S.
Securities Act.

                                   ARTICLE 3
                            COVENANTS OF NEWBRIDGE

Section 3.1  Listing; Other Action.

(1)  As promptly as practicable, NEWBRIDGE shall use all reasonable best efforts
     to cause the Option Shares to be approved for listing on the New York Stock
     Exchange (the "NYSE") and the TSE, subject to notice of issuance, and shall
     provide prompt notice to the TSE of the issuance of each Option Share.

(2)  NEWBRIDGE shall use all reasonable best efforts to take, or cause to be
     taken, all appropriate action, and to do, or cause to be done, all things
     necessary, proper or advisable under applicable law, regulation or policy
     to consummate and make effective the transactions contemplated hereunder,
     including, without limitation, using all reasonable best efforts to obtain
     all licenses, permits, consents, approvals, authorizations, qualifications
     and orders of any government or regulatory authority; provided however,
     that NEWBRIDGE shall not be obligated to register the Option Shares under
     the U.S. Securities Act or otherwise qualify the Option Shares for resale
     in the United States or Canada other than on the terms and subject to the
     conditions set forth in Section 3.2.

Section 3.2  Qualification

(1)  In the event that ALCATEL shall desire to sell any of the Option Shares and
     such sale in the manner proposed by ALCATEL requires, in the opinion of
     counsel to ALCATEL, which opinion shall be reasonably satisfactory to
     NEWBRIDGE and its counsel, registration of such Option Shares under the
     U.S. Securities Act of 1933, as amended or qualification of such Option
     Shares for resale under applicable Canadian securities laws, NEWBRIDGE
     shall cooperate with ALCATEL and any underwriters in registering or
     qualifying of such Option Shares for resale, including, without limitation,
     promptly filing a registration statement and/or prospectus which complies
     with the requirements of applicable U.S. federal and state securities laws
     and/or Canadian federal, provincial and territorial securities laws, as the
     case may be, and entering into and complying with an underwriting agreement
     with such underwriters upon such terms and conditions as are customarily
     contained in underwriting agreements with respect to secondary
<PAGE>

                                      -8-

     distributions; provided, however, that NEWBRIDGE shall not be required to
     file more than two registration statements which are declared effective
     and/or prospectuses hereunder and shall be entitled to delay the filing or
     effectiveness of any registration statement and/or prospectus for up to 120
     days (but not more than once in any 12 month period) if the offering would,
     in the judgment of the Board of Directors of NEWBRIDGE, require premature
     disclosure of any material corporate development or otherwise materially
     interfere with or materially adversely affect any pending or proposed
     offering of securities of NEWBRIDGE or any other material transaction
     involving NEWBRIDGE.

(2)  If Option Shares are registered or qualified pursuant to the provisions of
     this Section 3.2, NEWBRIDGE agrees (i) to furnish copies of the
     registration statement and/or prospectus relating to the Option Shares
     covered thereby in such numbers as ALCATEL may from time to time reasonably
     request and (ii) if any event shall occur as a result of which it becomes
     necessary to amend or supplement any registration statement or prospectus,
     to prepare and file under the applicable securities laws such amendments
     and supplements as may be necessary to keep available for at least 90 days
     a prospectus covering the Option Shares meeting the requirements of such
     securities laws, and to furnish ALCATEL with such numbers of copies of the
     registration statement and prospectus, as amended or supplemented, as may
     reasonably be requested. NEWBRIDGE shall bear the cost of the registration
     or qualification, including but not limited to, all registration and filing
     fees, printing expenses, and fees and disbursements of counsel and
     accountants for NEWBRIDGE, and ALCATEL shall pay the fees and disbursements
     of its counsel and the underwriting fees and commissions applicable to the
     Option Shares sold by ALCATEL. NEWBRIDGE shall indemnify and hold harmless
     ALCATEL, its affiliates and their respective officers and directors from
     and against any and all losses, claims, damages, liabilities and expenses
     arising out of or based upon any statements contained in or omissions or
     alleged omissions from, each registration statement or prospectus (or any
     amendment thereto) filed pursuant to this paragraph; provided, however,
     that this provision shall not apply to any loss, liability, claim, damage
     or expense to the extent it arises out of any untrue statement or omission
     made in reliance upon and in conformity with written information furnished
     to NEWBRIDGE by ALCATEL, its affiliates and its officers and other
     representatives expressly for use in any registration statement or
     prospectus (or any amendment thereto) filed pursuant to this paragraph.
     NEWBRIDGE shall also indemnify and hold harmless each underwriter and each
     person who controls any underwriter against any and all losses, claims,
     damages, liabilities and expenses arising out of or based upon any
     statements contained in or omissions or alleged omissions from, each
     registration statement or
<PAGE>

                                      -9-

     prospectus (or any amendment thereto) filed pursuant to this paragraph;
     provided, however, that this provision shall not apply to any loss,
     liability, claim, damage or expense to the extent it arises out of any
     untrue statement or omission made in reliance upon and in conformity with
     written information furnished to NEWBRIDGE by the underwriters expressly
     for use in any registration statement or prospectus (or any amendment
     thereto) filed pursuant to this Section 3.2.

                                   ARTICLE 4
                             COVENANTS OF ALCATEL

Section 4.1  Voting Limitations.

     ALCATEL hereby agrees with NEWBRIDGE that, unless the tax change provisions
of the voting agreement with Mr. Matthews have been triggered, it will not
exercise any voting rights attached to the Option Shares to either vote in
favour of the Arrangement or vote against any other Acquisition Proposal.

Section 4.2  Offering Restrictions.

     Until such time as ALCATEL has requested that NEWBRIDGE take such action as
may be required by Section 3.2 to register the Option Shares for resale under
the U.S. Securities Act, ALCATEL agrees to comply with the requirements of
Regulation S promulgated under the U.S. Securities Act, including, but not
limited to, the following:

(1)  ALCATEL shall not make any offer or sale of the Option Shares to a U.S.
     person or for the account or benefit of a U.S. person (within the meaning
     of Regulation S) during the 40 day period following issuance of the Option
     Shares.

(2)  All offering materials and documents used in connection with any offer or
     sale of the Option Shares during the 40 day period following issuance of
     the Option Shares shall include statements on the cover or inside cover
     page and in the underwriting or distribution section of any prospectus or
     offering circular and in any advertisement to the effect that the Option
     Shares have not been registered under the U.S. Securities Act and may not
     be offered or sold in the United States or to U.S. persons unless the
     Option Shares are so registered or an exemption from the registration
     requirements is available.

(3)  ALCATEL shall send written confirmation to any purchaser of the Option
     Shares during the 40 day period following the issuance of the Option Shares
     that the purchaser is subject to the foregoing restrictions on offers and
     sales of the Option Shares.
<PAGE>

                                      -10-

                                   ARTICLE 5
                              CERTAIN LIMITATIONS

Section 5.1  Maximum Total Proceeds.

     Notwithstanding any other provision of this Agreement or the Merger
Agreement, in no event shall ALCATEL's Total Proceeds (as hereinafter defined)
exceed $375 million and, if it otherwise would exceed such amount, ALCATEL, at
its sole election, shall either: (i) reduce the number of Option Shares subject
to this Option; (ii) deliver to NEWBRIDGE for cancellation Option Shares
previously purchased by ALCATEL hereunder; (iii) pay cash to NEWBRIDGE; or (iv)
any combination thereof, so that ALCATEL's Total Proceeds shall not exceed $375
million after taking into account the foregoing actions. As under herein, the
term "Total Proceeds" shall mean the aggregate amount (before taxes) of the
following: (i) the amount received by ALCATEL pursuant to a Cash Exercise Notice
pursuant to Section 1.2(5); (ii) (x) the net cash amounts, or fair value of any
securities or property, received by ALCATEL pursuant to the then agreed sale of
Option Shares purchased or acquired pursuant to this Agreement (or any other
securities into which such Option Shares are converted or exchanged in any
manner whatsoever) to any unaffiliated party or the net cash proceeds determined
as of the date of such proposed exercise assuming that such Option Shares were
sold for cash at the closing market price for the NEWBRIDGE Common Shares on the
TSE as of the close of business on the preceding trading day (less customary
brokerage commissions), whichever is greater, less (y) ALCATEL's Purchase Price
for such shares; and (iii) any amounts received by ALCATEL pursuant to Section
6.4(1) of the Merger Agreement.

                                   ARTICLE 6
                           TERMINATION OF AGREEMENT

Section 6.1  Termination.

     This Agreement, other than the rights and obligations of ALCATEL and
NEWBRIDGE under Sections 3.2 and 5.1, shall terminate on the Termination Date.

                                   ARTICLE 7
                                 MISCELLANEOUS

Section 7.1  Amendment.

     This Agreement may not be amended except by an instrument in writing signed
by each of the parties hereto.
<PAGE>

                                      -11-

Section 7.2  Waiver.

     Either party hereto may (a) extend the time for or waive compliance with
the performance of any obligation or other act of the other party hereto or (b)
waive any inaccuracy in the representations and warranties contained herein or
in any document delivered pursuant hereto. Any such extension or waiver shall be
valid if set forth in an instrument in writing signed by the party to be bound
thereby.

Section 7.3  Notices.

     All notices, requests, claims, demands and other communications hereunder
shall be in writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, by telecopy or facsimile, by
registered or certified mail (postage prepaid, return receipt requested) or by a
nationally recognized courier service to the respective parties at their
addresses as specified in the Merger Agreement.

Section 7.4  Severability.

     If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner to the fullest
extent permitted by applicable law in order that the transactions contemplated
hereby may be consummated as originally contemplated to the fullest extent
possible.

Section 7.5  Assignment; Binding Effect; Benefit.

     Except as expressly provided herein, neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned (by operation of
law or otherwise) without the prior written consent of any of the parties
hereto. Notwithstanding the foregoing, ALCATEL may assign this Agreement and any
of the rights, interests or obligations hereunder to any affiliate of ALCATEL
without the consent of NEWBRIDGE. Subject to the first and second sentence of
this section, this Agreement shall be binding upon and shall enure to the
benefit of the parties hereto and their respective successors and permitted
assigns.

Section 7.6  Specific Performance.

     The parties hereto agree that irreparable damage would occur in the event
any provision of this Agreement were not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or in equity.
<PAGE>

                                      -12-

Section 7.7  Governing Law.

     This Agreement shall be governed by, and construed in accordance, with the
laws of the Province of Ontario and the federal laws of Canada applicable
therein. All actions and proceedings arising out of or relating to this
Agreement shall be heard and determined exclusively in the courts of the
Province of Ontario.

Section 7.8  Headings.

     The descriptive headings contained in this Agreement are included for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

Section 7.9  Entire Agreement.

     This Agreement and the Merger Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior agreements and understandings between the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.
<PAGE>

                                      -13-

     IN WITNESS WHEREOF, the parties hereto have caused this Option Agreement to
be executed as of the date first written above by their respective officers
thereunto duly authorized.




                                     ALCATEL




                                     By: /s/ Serge Tchuruk
                                        -------------------------------
                                         Name: Serge Tchuruk

                                         Title: Chairman and Chief Executive
                                         Officer


                                     NEWBRIDGE NETWORKS CORPORATION

                                     By: /s/ Pearse Flynn
                                        -------------------------------
                                         Name: Pearse Flynn

                                         Title: President and Chief Operating
                                         Officer

                                     By: /s/ Kenneth B. Wigglesworth
                                        -------------------------------
                                         Name: Kenneth B. Wigglesworth

                                         Title: Executive Vice President,
                                         Finance and Chief Financial Officer

<PAGE>

                                                                    Exhibit 99.2



                               VOTING AGREEMENT
                                                               February 22, 2000

TO:  ALCATEL

Dear Sirs,

     Re:  Plan of Arrangement involving NEWBRIDGE CORPORATION

     In consideration of ALCATEL ("ALCATEL") entering into a merger agreement
dated the date hereof with, and agreeing to participate in the plan of
arrangement involving, NEWBRIDGE NETWORKS CORPORATION ("NEWBRIDGE") (the
"Transaction"), this letter agreement sets out the terms on which Terence
Matthews and his associated corporations referred to herein (each, a
"Shareholder" and collectively, the "Shareholders") undertake to take certain
actions and do certain things in respect of the Transaction.

     The terms of the Transaction are summarized in the Merger Agreement dated
February 22, 2000 between ALCATEL and NEWBRIDGE (the "Merger Agreement"), and
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Merger Agreement.

1.   Each of the Shareholders hereby represents and warrants to you (and
     acknowledges that you are relying upon such representations and
     warranties):

     (a)  that the common shares in the capital of NEWBRIDGE and the options to
          acquire the common shares in the capital of NEWBRIDGE (the "Shares"
          and the "Options", respectively) set forth on Annex I include all
                                                        -------
          Shares and Options held of record, owned by, or for which voting or
          dispositive power is granted to, any relative, trust or other
          affiliate of Shareholder of which Shareholder has or shares any voting
          power or power of disposition.  Except as described on Schedule 1(a),
                                                                 -------------
          Shareholder is the record and beneficial owner, has sole voting power,
          sole power of disposition and sole power to agree to all of the
          matters set forth in this Agreement, in each case with respect to the
          Shares and the Options set forth on Annex I attributable to such
                                              -------
          Shareholder.  Shareholder has good and marketable title to the Shares,
          free and clear of all liens, pledges, mortgages and encumbrances,
          except as set forth on Schedule 1(a) hereto.  As to any Shares that
                                 -------------
          Shareholder indicates he/it does not have such sole powers, the
          Shareholders shall use their reasonable best efforts to cause all of
          his/its obligations under this Agreement to be complied with by any
          person having such powers.  Other than the Shares and Options set
          forth on Annex I no common
                   -------
<PAGE>

                                      -2-


          shares or securities of NEWBRIDGE are beneficially owned or controlled
          directly or indirectly by any Shareholder;

     (b)  that Shareholder has the legal capacity to execute and deliver this
          Agreement and to consummate the transactions contemplated hereby.
          This Agreement has been duly executed and delivered by Shareholder,
          and, assuming the due authorization, execution and delivery by
          ALCATEL, this Agreement constitutes the legal, valid and binding
          obligation of Shareholder, enforceable in accordance with its terms;

     (c)  neither the execution and delivery of this Agreement by Shareholder,
          the consummation by Shareholder of the transactions contemplated
          hereby nor the compliance by Shareholder with any of the provisions
          hereof shall (i) 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) (or give rise to any third party right of termination,
          cancellation, material modification or acceleration) under any of the
          terms, conditions or provisions of any note, loan agreement, bond,
          mortgage, indenture, contract, license, agreement, lease, permit or
          other instrument or obligation to which Shareholder is a party or by
          which Shareholder or any of his/its properties or assets (including
          the Shares and the Options) may be bound, except as may be set forth
          in existing option agreements, (ii) require on the part of Shareholder
          any filing with, or permit, authorization, consent or approval of, any
          Governmental Entity, or (iii) violate any order, writ, injunction,
          decree, judgment, or Law applicable to Shareholder or any of his/its
          properties or assets, excluding from the foregoing such violations,
          breaches, defaults or failures to make any filing or to obtain any
          permit, authorization, consent or approval which would not,
          individually or in the aggregate, impair the ability of Shareholder to
          consummate the transactions contemplated hereby; and

     (d)  that there is no private or governmental action, suit, proceeding,
          claim, arbitration or investigation pending before any Governmental
          Entity, or, to the knowledge of any Shareholder, threatened against
          Shareholder or any of its respective properties or any of its
          respective officers or directors, in the case of a corporate entity
          (in their capacities as such) that, individually or in the aggregate,
          could reasonably be expected to have a material adverse effect on
          Shareholder's ability to consummate the transactions contemplated by
          this Agreement. There is no judgment, decree or order against
          Shareholder or, to the knowledge of any Shareholder, any of its
          respective directors or officers, in the case of a corporate entity
          (in their capacities as such) that could prevent, enjoin, alter or
          materially delay any of the
<PAGE>

                                      -3-

          transactions contemplated by this Agreement, or that could reasonably
          be expected to have a material adverse effect on Shareholder's ability
          to consummate the transactions contemplated by this Agreement.

2.   Each Shareholder hereby represents and warrants to you and covenants with
     you that between the date of this Agreement and the earlier of (i) the date
     of termination of the Merger Agreement in accordance with its terms, and
     (ii) the effective date of the Transaction (such earlier date being the
     "Expiry Date"), no Shareholder shall (A) sell, transfer, gift, assign,
     pledge, hypothecate, encumber or otherwise dispose of any of the Shares,
     Options or any common shares of Newbridge arising from the exercise of the
     Options (the "Additional Shares"), or enter into any agreement, arrangement
     or understanding in connection therewith, without having first obtained the
     prior written consent of ALCATEL, or (B) grant any proxies or powers of
     attorney, deposit any Shares, Options or Additional Shares (collectively,
     the "Owned Securities") into a voting trust or enter into a voting
     agreement, understanding or arrangement with respect to such Owned
     Securities; provided, however, that (I) up to a maximum of 1,000,000 Shares
     in the aggregate (less one half the number of any Shares pledged as
     described in (II)) may be sold by the Shareholders, (II) up to a maximum of
     2,000,000 Shares (less two times the number of Shares sold as described in
     (I)) may be pledged or hypocated to a bona fide lender to secure a loan (so
     long as such loan agreement provides that such Shareholder may vote such
     pledged Shares), and (III) the Owned Securities may be transferred to
     affiliates of the Shareholders to facilitate any transaction effected in
     accordance with Section 4.11 of the Merger Agreement, provided that any
                                                           -------- ----
     NEWBRIDGE shares obtained by the Shareholders in connection with such
     transaction shall be subject to the terms hereof.  None of the provisions
     of this Agreement shall apply to any of the secured parties described in
     Schedule 1(a) or who may become secured parties pursuant to this Section
     2(II) that realize on their security interest in such pledged or
     hypothecated Shares.

3.   The Shareholders hereby undertake, until the Expiry Date:

     (a)  to vote (or cause to be voted) all the Shares, the Additional Shares
          and the Options at any meeting of the shareholders of NEWBRIDGE, and
          in any action by written consent of the shareholders of NEWBRIDGE (i)
          in favour of the approval, consent, ratification and adoption of the
          Transaction (and any actions required in furtherance thereof); or (ii)
          against any action that would impede, interfere, or discourage the
          Transaction (excluding for greater certainty, a Superior Proposal),
          and against any action that would result in any breach of any
          representation, warranty or covenant in the Merger Agreement.
<PAGE>

                                      -4-

          Upon the request or direction of ALCATEL, the Shareholders shall
          execute a proxy in respect of any such resolution, and shall have the
          Owned Securities counted or not counted as part of a quorum in
          connection with any Newbridge shareholders meeting relating to matters
          set forth in Section 3(a)(ii).

     (b)  the Shareholders shall not without the prior written consent of
          ALCATEL requisition or join in the requisition of any meeting of the
          shareholders of NEWBRIDGE for the purpose of considering any
          resolution;

     (c)  for greater certainty, in connection with any matter referred to in
          Section 3(a)(ii), the Shareholders shall consult with ALCATEL prior to
          exercising any voting rights attached to the Shares, the Additional
          Shares or the Options and shall exercise or procure the exercise of
          such voting rights as ALCATEL shall instruct, including without
          limitation the delivery to ALCATEL, upon its request or direction, of
          a proxy in respect of any such resolution; and

     (d)  each Shareholder shall use its best efforts not to default, or take or
          omit to take any action which could reasonably be expected to cause a
          default, under those loans or other arrangements to which such
          Shareholder is subject that are described in Schedule 1(a) hereto or
          as permitted pursuant to Section 2 hereof.

4.   Each Shareholder (in the case of Terence Matthews in his capacity as a
     shareholder and not as a director of NEWBRIDGE) agrees that, until the
     Expiry Date, such Shareholder will not, directly or indirectly, negotiate
     with, solicit, initiate or encourage submission of proposals or offers
     from, or provide information to, any other person, entity or group relating
     to an Acquisition Proposal.

5.   The Shareholders hereby irrevocably agree:

     (a)  to details of this Agreement being set out in any information circular
          produced by NEWBRIDGE and/or ALCATEL in connection with the
          Transaction; and

     (b)  to this Agreement being available for inspection until the Expiry
          Date.

6.   Wesley Clover Corporation and Terence Matthews shall cause Kanata Research
     Park Corporation ("Kanata"), as soon as reasonably possible and in any
     event prior to the closing of the Transaction but conditional upon such
     closing, to have waived all of its rights to terminate any leases to which
     NEWBRIDGE or any subsidiary is a party as a result of the Transaction or
<PAGE>

                                      -5-

     any other pre-existing conditions or liabilities whatsoever prior to the
     date hereof, and to have entered into an agreement to enable NEWBRIDGE or
     its subsidiaries at their respective option to extend such leases for up to
     two periods of up to five years each on the same terms (except as to
     renewal) and at agreed or arbitrated fair market value rents, subject only
     to applicable laws and to require NEWBRIDGE or the relevant subsidiary to
     give Kanata at least nine months notice if it does not intend to extend any
     such lease.

7.   Notwithstanding Section 3(a), the Shareholders shall not be bound to vote
     in favour of, or grant ALCATEL a proxy on the Owned Securities to vote for,
     the Transaction in the event that, at the time of the NEWBRIDGE Meeting,
     the tax laws of Canada shall have been amended, or proposed for amendment
     by the Minister of Finance, in such a manner that tax deferral for the
     Transaction would not be available via the use of exchangeable shares as is
     proposed under the Merger Agreement.

8.   I, Terence Matthews, shall cause 3090-8081 Quebec Inc. to enter into this
     Agreement as soon as practicable.

9.   I, Terence Matthews, agree and confirm that I am bound by the terms of a
     Non-Competition Agreement with NEWBRIDGE dated October 14, 1987.

10.  Any date, time or period referred to in this Agreement shall be of the
     essence except to the extent to which ALCATEL and the Shareholders agree in
     writing to vary any date, time or period, in which event the varied date,
     time or period shall be of the essence.

11.  The Shareholders agree that monetary damages would not be an adequate
     remedy for any loss incurred by reason of a breach of this Agreement by any
     of them and hereby agrees to waive the defense in any action for specific
     performance that a remedy at law would be adequate.

12.  The Shareholders agree and confirm that:

     (a)  any provision of this Agreement may be amended or waived if, and only
          if, such amendment or waiver is in writing and signed, in the case of
          an amendment, by the Shareholders and ALCATEL or in the case of a
          waiver, by the party against whom the waiver is to be effective; and

     (b)  no failure or delay by any party in exercising any right, power or
          privilege hereunder shall operate as a waiver thereof nor shall any
          single or partial exercise thereof preclude any other or further
          exercise.

13.  In consideration of the Shareholders entering into this Agreement effective
     upon the closing of the Transaction, ALCATEL shall be obligated to
<PAGE>

                                      -6-

     reimburse the Shareholders for his/its reasonable out-of-pocket expenses,
     including legal, accounting and financial advisory fees, incurred in
     connection with the Transaction, but not in excess of CAN $200,000.

14.  The parties agree as follows:

     (a)  As soon as practicable, but in any event no later than the date upon
          which ALCATEL files with the SEC the Form F-3 pursuant to Section
          2.7(5) of the Merger Agreement, ALCATEL shall file a "shelf"
          registration statement pursuant to Rule 415 of the 1933 Act (the
          "Registration Statement"), with respect to the resale of all of the
          ALCATEL securities initially issuable upon exchange of the
          Exchangeable Shares, including, without limitation, the ALCATEL ADSs,
          to be issued to the Shareholders pursuant to the Merger Agreement
          (together with any securities of ALCATEL initially issued or issuable
          with respect to the Exchangeable Shares received by the undersigned in
          connection with the Transaction by way of a dividend or stock split or
          in connection with a combination of shares, recapitalization, merger,
          consolidation or other reorganization or otherwise, collectively, the
          "Registrable Securities"). ALCATEL shall use its reasonable efforts to
          (i) have the Registration Statement declared effective on or before
          the Effective Date, and (ii) to keep the Registration Statement
          continuously effective from the date such Registration Statement is
          declared effective until the Termination Date (as defined below).

     (b)  ALCATEL and the Shareholders shall each indemnify the other consistent
          with indemnification granted by issuers and selling shareholders for
          "shelf" registration statements.

     (c)  ALCATEL shall pay all costs, fees and expenses incident to ALCATEL's
          performance of or compliance with this Section 14, including, without
          limitation, all registration, filing, and NASD fees and all fees and
          expenses incurred in connection with compliance with state securities
          or blue sky laws (but excluding any underwriting commissions, fees or
          expenses) and with respect to any supplements or amendments to the
          Registration Statement, whether the Registration Statement becomes
          effective and whether all, none or some of the Registrable Securities
          are sold pursuant to the Registration Statement.

     (d)  The "Termination Date" means the earlier of the first date on which
          the Registrable Securities may be distributed to the public by the
          undersigned pursuant to Rule 144(k) or such date on which the
<PAGE>

                                      -7-

          Shareholders are no longer "affiliates" of ALCATEL under the
          Securities Act and subject to Rule 145.

15.  The Shareholders, in addition to being entitled to exercise all rights
     granted by law, including recovery of damages, shall be entitled to
     specific performance of its rights under Section 14.  ALCATEL agrees that
     monetary damages would not be adequate compensation for any loss incurred
     by reason of a breach by it of the provisions of Section 14 and hereby
     agrees to waive the defense in any action for specific performance that a
     remedy at law would be adequate.

16.  The provisions of this Agreement constitute legal, valid and binding
     obligations of ALCATEL, enforceable against it in accordance with its
     terms.

17.  All notices, requests, claims, demands and other communications hereunder
     shall be in writing and shall be given (and shall be deemed to have been
     duly given upon receipt) by delivery in person, by telecopy, facsimile,
     cable, telegram or telex, or by registered or certified mail (postage
     prepaid, return receipt requested) or by a nationally recognized courier
     service to the respective parties at their addresses as specified in Annex
     II hereto.

18.  If any term or other provision of this Agreement is invalid, illegal or
     incapable of being enforced by any rule of law or public policy, all other
     conditions and provisions of this Agreement shall nevertheless remain in
     full force and effect so long as the economic or legal substance of this
     Agreement is not affected in any manner materially adverse to any party.
     Upon such determination that any term or other provision is invalid,
     illegal or incapable of being enforced, the parties hereto shall negotiate
     in good faith to modify this Agreement so as to effect the original intent
     of the parties as closely as possible in a mutually acceptable manner in
     order that the terms of this Agreement remain as originally contemplated to
     the fullest extent possible.

19.  The provisions of this Agreement shall be binding upon and enure to the
     benefit of the parties hereto and their respective successors and permitted
     assigns, provided that no party may assign, delegate or otherwise transfer
     any of its rights, interests or obligations under this Agreement without
     the prior written consent of the other parties hereto, except that ALCATEL
     may assign, delegate or otherwise transfer any of its rights, interests or
     obligations under this Agreement to an affiliate without reducing its own
     obligations hereunder without the consent of the Shareholder.

20.  This Agreement is governed by the laws of the Province of Ontario and the
     federal laws of Canada applicable therein.  All actions and proceedings
     arising out of and relating to this Agreement shall be heard and determined
<PAGE>

                                      -8-

     exclusively in the courts of the Province of Ontario. Notwithstanding the
     foregoing, Section 15 of this Agreement shall be governed by the laws of
     the State of Delaware without regard to any applicable conflicts of law.

21.  ALCATEL shall permit NEWBRIDGE to arrange for a "safe income tuck-in"
     transaction  (the "Tuck-in") or, if a Tuck-in does not achieve the
     objective of crystallizing the "safe income" or results in other material
     adverse tax consequences to the Shareholders, another form of safe income
     crystallisation transaction, with one or more Shareholders, provided that:

     (a)  only one form of transaction will be required;

     (b)  such transaction is to be completed in accordance with applicable Laws
          prior to the Effective Date;

     (c)  such transaction (other than a Tuck-in) must be accomplished in a
          manner that does not entail any material cost, expense, obligation or
          liability (and for this purpose $2,500,000 in the aggregate shall be
          deemed not to be material), or any delay in completing the
          Arrangement, to NEWBRIDGE or their respective subsidiaries or
          shareholders (including to NEWBRIDGE's non-participating
          shareholders); and

     (d)  such transaction and its terms and conditions must be satisfactory to
          ALCATEL, acting reasonably (limited to, in the case of a Tuck-in, its
          effect on NEWBRIDGE or its shareholders).

     In the event that such transaction or its terms and conditions are not
     satisfactory to ALCATEL, acting reasonably, or the Ontario Securities
     Commission refuses to grant any relief required in connection with any such
     transaction, ALCATEL will use its reasonable best efforts, for a period not
     to exceed 15 Business Days to assist NEWBRIDGE and the Shareholders in
     structuring such a transaction in a manner satisfactory to ALCATEL, acting
     reasonably.  The parties acknowledge that ALCATEL will require, without
     limitation, that the Arrangement and related matters (after taking into
     account any transaction described herein) be poolable under French GAAP and
     not objectionable to the COB or the PSE, and that a Tuck-in does not
     adversely affect these pooling and COB/PSE issues.  In the event that no
     such transaction is satisfactory to ALCATEL, acting reasonably, where it
     used its reasonable best efforts as aforesaid, this shall not affect the
     completion of the Arrangement or this Agreement.
<PAGE>

                                      -9-

     This Voting Agreement has been agreed and accepted this 22/nd/ day of
February, 2000.



                                        ALCATEL

                                        Per: /s/ Serge Tchuruk
                                            ---------------------------
                                        Name: Serge Tchuruk
                                             --------------------------




                                        /s/ Terence Matthews
                                        -------------------------------
                                        Terence Matthews


                                        WESLEY CLOVER CORPORATION


                                        Per: /s/ Terence Matthews
                                            ---------------------------
                                        Name: Terence Matthews
                                             --------------------------


                                        3090-8081 QUEBEC INC.



                                        2874806 CANADA INC.


                                        Per: /s/ Terence Matthews
                                            ---------------------------
                                        Name: Terence Matthews
                                             --------------------------


                                        2985314 CANADA INC.


                                        Per: /s/ Terence Matthews
                                            ---------------------------
                                        Name: Terence Matthews
                                             --------------------------
<PAGE>

                                    ANNEX I


Shares
- ------

Terence Matthews                                   4,974,000

Wesley Clover Corporation                         32,379,153

3090-8081 Quebec Inc.                                595,000

2874806 Canada Inc.                                1,745,920

2985314 Canada Inc.                                   16,835



Options
- -------

None

<PAGE>

                                   ANNEX II


Address
- -------

Alcatel
54, Rue de La Boetie
75008 Paris France
Attention:  General Counsel
Telecopier No.:  011-331-4076-1435

Terence Matthews
[to be provided]

Wesley Clover Corporation
[to be provided]

3090-8081 Quebec Inc.
[to be provided]

2874806 Canada Inc.
[to be provided]

2985314 Canada Inc.
[to be provided]
<PAGE>

                                 Schedule 1(a)
                                 -------------


(i)   3,002,724 Shares owned by Terence Matthews are pledged to Barclays Bank as
      security;

(ii)  100,000 Shares owned by Terence Matthews are pledged to Royal Bank as
      security;

(iii) 13,686,773 Shares owned by Wesley Clover Corporation are pledged to Royal
      Bank as security.

      This security varies according to a formula based on the outstanding
      indebtedness to the Bank and market price of the shares;

(iv)  16,000 Shares owned by Wesley Clover Corporation are pledged to Bank of
      Wales as security;

(v)   2,245,602 Shares owned by Wesley Clover Corporation are pledged to Alex
      Brown & Sons as security; and

(vi)  50,000 Shares owned by 3090-8081 Quebec Inc. are pledged to National
      Trust.

<PAGE>

                                                                    EXHIBIT 99.3

                                    [LOGO]

                                 PRESS RELEASE

                     ALCATEL TO ACQUIRE NEWBRIDGE NETWORKS
           Move Makes Alcatel A World Leader In Broadband Networking

Paris, France & Kanata, Canada - 23 February 2000 - Alcatel (NYSE: ALA and
Paris: CGEP), a world leader in end-to-end voice and data communications
solutions systems, today announced that it has entered into a definitive
agreement to acquire Newbridge Networks Corporation (NYSE: NN and TSE: NNC), the
ATM WAN market leader. The integration of Newbridge will make Alcatel one of the
top players in the next-generation networking market.

Under the terms of the agreement, which has been approved by the boards of
directors of the two companies, Newbridge shareholders will be asked to approve
a Merger Agreement allowing for the ultimate conversion of each Newbridge share
into 0.81 Alcatel ADR.  Based on the Alcatel ADR closing price on 22 February,
2000 of US$48 1/8, the transaction has an implied value of US$7.1 billion.

Newbridge will merge with Alcatel's Carrier Data Division (CDD) to form the new
Carrier Internetworking Division (CID). Prior to this acquisition, CDD had a
revenue forecast of more than US$ 1 billion in ADSL, IP and other Internet-
related equipment in 2000. The new division will be headquartered in Kanata,
Canada, and is expected to have combined annual sales of more than US$ 2.5
billion (on a proforma basis).

"Alcatel is making a major move to become a world-wide leader in new generation
networks, which will handle the explosive growth of data with the appropriate
quality of service (QoS). This acquisition combines Alcatel's leading position
in fast Internet access with Newbridge's strong ATM multiservice capabilities.
Furthermore, the complementary position of both companies in network and service
management, as well as their common approach to IP networks, will allow Alcatel
to offer its customers and prospects a best in class product portfolio. This
deal is very attractive for our shareholders because it is expected to boost
both growth and income, thus enhancing shareholder value," said Alcatel's
Chairman and CEO, Serge Tchuruk.

The merger of Alcatel and Newbridge will produce immediate benefits. Alcatel
will leverage Newbridge's lead in the ATM/IP multiservice edge market and strong
network management, to provide a comprehensive solution for managed enhanced
services using DSL access technology.

The two companies have strong product synergies in LMDS radio access networks
and complementary customer bases, which position Alcatel as a world leader in
this fast growing market.

"During this past quarter, Newbridge achieved record revenue, streamlined its
cost structures, made substantial gains in the U.S. market, and increased its
WAN packet revenues. These have all served to put Newbridge on a dynamic growth
path in the broadband, next-generation market," said Pearse Flynn, Newbridge
President and Chief
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Operating Officer. "As part of the Alcatel family, we gain advantages from its
leading positions in broadband access and optics, its strong financing
capabilities, broader geographical presence and end-to-end network integration
know-how. The merger of Newbridge and Alcatel allows us to accelerate our growth
in the explosive broadband networking market."

"This deal confirms that broadband networks are the future of networking, and
that QoS remains the most important factor in delivering reliable, secure
networks. Newbridge understood this long before the competition, and has led in
developing these networks over the past decade. The union of Alcatel and
Newbridge is a true validation of our strategy," said Terence Matthews, Chairman
and CEO of Newbridge Networks.

Newbridge's newest product, the Newbridge 670 Routing Switch Platform, is a
prime example of Newbridge's leadership in the multiservice, ATM/IP/MPLS market.
The Newbridge 670 has been successfully tested by major world-wide carriers. The
product scales from 50 Gb/s to 450 Gb/s - and will scale even higher in the
future. No other product can match this scalability. The 670 perfectly serves
carrier requirements to cope with explosive traffic growth while providing
excellent QoS.

Alcatel expects the deal to be substantially accretive on a post-goodwill basis
as early as 2001, with a slight positive impact on EPS expected in 2000. These
forecasts do not include any potential revenue synergies, though this is a key
driver for the transaction. They do include US$ 150 million of expected cost
savings in 2001, representing the 2001 impact of anticipated savings of US$ 230
million on an annualized basis.

Pearse Flynn will head the expanded team as President of Alcatel's Carrier
Internetworking Division. He will also be appointed CEO of Newbridge. He will
report to Krish Prabhu, COO of Alcatel Telecom. Mr. Prabhu will oversee the
integration process.

Completion of the acquisition is subject to Newbridge shareholder approval of
the Merger Agreement, Alcatel shareholder authorization to complete the
transaction, the expiration or termination of waiting periods under applicable
antitrust laws, Canadian foreign investment review and other customary
conditions, including Canadian court approval. To facilitate a deferral of
Canadian income tax for Canadian shareholders of Newbridge, Newbridge shares
will be converted into securities that can be exchangeable into Alcatel ADRs for
a period not to exceed five years from the closing of the transaction.

Alcatel builds next-generation networks, delivering integrated end-to-end voice
and data communications solutions to established and new carriers, as well as
enterprises and consumers worldwide. With 120,000 employees and sales of EURO 23
billion in 1999, Alcatel operates in more than 130 countries.

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 a growing family of Newbridge Affiliate companies and strategic alliances
with numerous other networking
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companies to deliver complete, end-to-end solutions. Newbridge customers include
the world's 350 largest telecommunications service providers and more than
14,000 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.
                             -----------------

This document may include forward-looking statements within the meaning of Safe
Harbor provisions of the United States federal securities laws.  These
statements are based on current expectations, estimates and projections about
the general economy and Alcatel's and Newbridge's lines of business and are
generally identifiable by statements containing words such as "expects",
"believes", "estimates", or similar expressions.  Statements related to the
future performance involve certain assumptions, risks and uncertainties, many of
which are beyond the control of Alcatel or Newbridge, and include, amongst
others, applicable regulatory approvals, growth and customer spending patterns
in the telecommunications market, foreign and domestic product and price
competition, cost effectiveness, changes in governmental regulations, general
economic and market conditions in various geographic areas, interest rates and
the availability of capital.  Although Alcatel and Newbridge believe their
respective expectations reflected in any such forward-looking statements are
based on reasonable assumptions, they can give no assurance that those
expectations will be achieved; actual results could differ materially from the
above as a result of these or other factors.


                                    - 30 -

Newbridge Contact: Brian Keating
Cell #: 44 498 534 443
Newbridge Tel: 613 591 3600 x3421


Conference calls will be held for press and analysts at
     9:00 AM (CET), 3:00 AM (EST) in English:
                                                             + 44 (181) 896 4300

     11:00 AM (CET), 5:00 AM (EST) in French:
                       Press Conference, Alcatel, 54 rue la Boetie , 75008 Paris


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