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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. ________)*
Cascade Communications Corp.
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(Name of Issuer)
Common Stock, $.001 par value
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(Title of Class of Securities)
147184 10 5
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(CUSIP Number)
Robert K. Dahl
Chief Financial Officer
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
(510) 769-6001
with a copy to:
Gregory M. Gallo & Rod J. Howard
Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, CA 94301
(415) 833-2000
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(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
March 30, 1997
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
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Note: Six copies of this statement, including all exhibits, should be filed
with the Commission. See Rule 13d-1(a) for other parties to whom copies are to
be sent.
* The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
SEC 1746 (12-91)
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CUSIP NO. 147184 10 5 SCHEDULE 13D Page 3 of 15 Pages
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1 NAME OF REPORTING PERSON
S. S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Ascend Communications, Inc. IRS Identification No. 94-3092033
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (See Instructions)
(a) [_]
(b) [_]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
WC, BK, OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) or 2(e)
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
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NUMBER OF 7 SOLE VOTING POWER
SHARES
BENEFICIALLY
OWNED BY 18,765,939(1)
BY EACH -----------------------------------------------------------------
REPORTING 8 SHARED VOTING POWER
PERSON
WITH 4,425,742(2)
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9 SOLE DISPOSITIVE POWER
18,765,939(1)
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10 SHARED DISPOSITIVE POWER
0
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
23,191,681(1) (2)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
(See Instructions)
[_]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
20.1(3)
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14 TYPE OF REPORTING PERSON (See Instructions)
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION
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CUSIP NO. 147184 10 5 SCHEDULE 13D Page 4 of 15 Pages
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(1) Of the shares of common stock, par value $.001, of Cascade Communications
Corp. (the "Issuer") covered by this report, 18,765,939 are purchasable by
Ascend Communications, Inc. ("Ascend") upon exercise of an option (the
"Option") granted to Ascend pursuant to the Cascade Stock Option Agreement
dated as of March 30, 1997 between the Issuer and Ascend (the "Stock Option
Agreement") and described in Item 4 of this Schedule 13D. The number of
shares indicated represents 19.9% of the total outstanding shares of common
stock of the Issuer as of March 19, 1997, excluding shares issuable upon
exercise of the Option, as represented by the Issuer in the Agreement and
Plan of Reorganization dated as of March 30, 1997 by and among Ascend,
Catskill Merger Corporation and the Issuer (the "Merger Agreement"). The
exact number of shares of common stock of the Issuer purchasable by Ascend
upon exercise of the Option is equal to 19.9% of the total number of shares
of common stock of the Issuer outstanding as of March 30, 1997 (subject to
adjustment in the event of certain changes in the capitalization of the
Issuer). The Option may only be exercised upon the happening of certain
events, none of which has occurred as of the date hereof. Prior to the
exercise of the Option, Ascend is not entitled to any rights as a
stockholder of the Issuer as to the shares covered by the Option, and
Ascend expressly disclaims beneficial ownership of the shares of common
stock of the Issuer which are purchasable by Ascend upon exercise of the
Option.
(2) As an inducement to Ascend to enter into the Merger Agreement, the Issuer
has caused all of the directors and executive officers of the Issuer to
enter into Cascade Director and Officer Stock Voting Agreements (the
"Voting Agreements") with Ascend pursuant to which such directors and
officers have irrevocably appointed Ascend as their lawful attorney and
proxy. Such proxy gives Ascend the limited right to vote all shares of the
Issuer's common stock held by the parties to the Voting Agreements in favor
of adoption of the Merger Agreement and approval of the Merger and any
proposal or action which would, or could reasonably be expected to,
facilitate the Merger, and against competing proposals. The number of
shares indicated includes an aggregate of 2,516,549 shares issuable upon
exercise of stock options held by the parties to the Voting Agreements. The
names of the parties to the Voting Agreements and the number of shares
beneficially owned by each of them are set forth in Schedule B hereto which
is incorporated herein by reference. Inasmuch as Ascend's voting rights
under the Voting Agreements are limited solely to certain matters related
to the Merger, and Ascend has no economic interest in or affirmative
dispositive power over the shares of the Issuer's common stock covered
thereby, Ascend expressly disclaims beneficial ownership of the shares of
common stock of the Issuer covered by the Voting Agreements.
(3) The percentage reflects the total number of shares of Common Stock of the
Issuer that would be outstanding giving effect to the issuance by the
Issuer of 18,765,939 shares of common stock upon exercise of the Option and
2,516,549 shares of common stock upon exercise of stock options held by the
parties to the Voting Agreements.
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CUSIP NO. 147184 10 5 SCHEDULE 13D Page 5 of 15 Pages
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Item 1. Security and Issuer.
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This Schedule 13D relates to the common stock, par value $.001 per share
("Common Stock") of Cascade Communications Corp., a Delaware corporation (the
"Issuer"). The principal executive offices of the Issuer are at 5 Carlisle Road,
Westford, Massachusetts 01886.
Item 2. Identity and Background.
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This Schedule 13D is filed by Ascend Communications, Inc., a Delaware
corporation ("Ascend"). Ascend develops, manufactures, markets, sells and
supports a broad range of high-speed integrated remote networking products.
During the last five years, to the best of Ascend's knowledge, neither Ascend
nor any person named in Schedule A to this 13D has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) or has been a
party to a civil proceeding or a judicial or administrative body of competent
jurisdiction resulting in a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws, or finding any violation with respect to such laws.
Attached hereto as Schedule A is an appendix to Item 2 setting forth, to the
best of Ascend's knowledge as of the date hereof, certain additional information
concerning the directors and executive officers of Ascend. The information
contained in Schedule A is incorporated herein by reference.
Item 3. Source and Amount of Funds or Other Consideration.
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This Schedule 13D relates to (i) the Option granted by the Issuer to purchase
shares of Common Stock from the Issuer and (ii) the Voting Agreements between
Ascend and the individual executive officers and directors of the Issuer, both
as described in Item 4 below.
The Option entitles Ascend to purchase up to approximately 18,765,939 shares of
Common Stock under the circumstances specified in the Stock Option Agreement as
described in Item 4. The exact number of shares of Common Stock subject to the
Option is equal to 19.9% of the total number of shares of Common Stock
outstanding as of March 30, 1997 (subject to adjustment in the event of certain
changes in the capitalization of the Issuer). The purchase price under the
Option is payable either in cash or in shares of Ascend's common stock. The
exercise price for a cash exercise is equal to $36.40 per share of the Issuer's
Common Stock, and the exercise price for a stock exercise is equal to 0.7 of a
share of Ascend common stock for each share of the Issuer's Common Stock subject
to the Option. It is presently anticipated that any purchases of the Issuer's
Common Stock for which Ascend elects to pay cash would be made with funds
generated by a combination of available working capital, bank or other
borrowings and/or the sale, in whole or in part, of shares of Common Stock
acquired upon exercise of the Option. In addition, Ascend could elect to pay the
exercise price by delivery of shares of Ascend common stock. Such shares would
be newly-issued after approval of such issuance by Ascend's board of directors.
Reference is hereby made to the Stock Option Agreement, which is included as
Exhibit 1 to this Schedule 13D, for the full text of its terms, including the
conditions upon which it may be exercised. The Stock Option Agreement is
incorporated herein by reference in its entirety. If the Merger is consummated
pursuant to the Merger Agreement, the Option will not be exercised. No monetary
consideration was paid by Ascend to the Issuer for the Option.
As an inducement to the Issuer to enter into the Merger Agreement, Issuer and
Ascend have also entered into an Ascend Stock Option Agreement (the "Ascend
Option"), which entitles the Issuer to purchase up to 19.9% of the total number
of shares of Ascend common stock outstanding as of March 30, 1997, subject to
adjustment in the event of certain changes in Ascend's capitalization. Based on
the number of shares of Ascend common stock outstanding as of March 24, 1997,
the Issuer would be entitled under the Ascend Option to acquire up to
24,025,741, shares of Ascend common stock. The rights of the Issuer under the
Ascend Option are substantially parallel to those of Ascend under the Stock
Option Agreement. No monetary consideration was paid by the Issuer to Ascend for
the Ascend Option.
As a further inducement to Ascend to enter into the Merger Agreement, the Issuer
has caused all of the directors and executive officers of the Issuer to enter
into the Voting Agreements with Ascend pursuant to which such directors and
officers have irrevocably appointed Ascend as their lawful attorney and proxy
for certain matters relating to the Merger. Such proxy gives Ascend the limited
right to vote all shares of the Issuer's Common Stock held by the parties to the
Voting Agreements in favor of adoption of the Merger Agreement and approval of
the Merger and any proposal or action which would, or could reasonably be
expected to, facilitate the Merger, and against
Page 5 of 15 pages
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CUSIP NO. 147184 10 5 SCHEDULE 13D Page 6 of 15 Pages
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competing proposals. Reference is hereby made to the form of Voting Agreement,
which is included as Exhibit 2 to this Schedule 13D, for the full text of its
terms and of the irrevocable proxy granted pursuant thereto. The Voting
Agreements terminate upon the earlier to occur of the Effective Time of the
Merger, as defined in the Merger Agreement, and the termination of the Merger
Agreement. The form of Voting Agreement is incorporated herein by reference in
its entirety. The shares of Common Stock covered by this Schedule 13D include an
aggregate of 4,425,742 shares subject or potentially subject to the Voting
Agreements, including 2,516,549 shares issuable upon exercise of stock options
held by the parties to the Voting Agreements. The names of the parties to the
Voting Agreements and the number of shares beneficially owned by each of them is
set forth in Schedule B hereto which is hereby incorporated by this reference.
As a further inducement to Ascend to enter into the Merger Agreement, the Issuer
has also caused the directors and executive officers of the Issuer named on
Schedule B to enter into agreements (the "Director, Officer and Stockholder
Agreements"), pursuant to which such directors and officers have agreed to
certain restrictions on their ability to sell their shares of the Issuer's
Common Stock and any shares of Ascend common stock which they receive as a
result of the Merger, except to the extent permitted by Rule 145 under the
Securities Act of 1933, as amended, and except as permitted by accounting rules
relating to pooling of interests. No monetary consideration was paid by Ascend
to the Issuer or to the parties named in Schedule B for the Voting Agreements or
the Director, Officer and Stockholder Agreements. Inasmuch as Ascend's voting
rights under the Voting Agreements are limited solely to certain matters related
to the Merger, and Ascend has no economic interest in or affirmative dispositive
power over the shares of the Issuer's Common Stock covered by the Voting
Agreements or the Director, Officer and Stockholder Agreements, Ascend expressly
disclaims beneficial ownership of such shares of Common Stock of the Issuer.
Item 4. Purpose of Transaction.
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As stated above, the Option was granted to Ascend, and the Voting Agreements
were entered into, in connection with the execution of the Merger Agreement.
Upon consummation of the Merger pursuant to the Merger Agreement, which is
subject to customary conditions, including the approval of the stockholders of
Ascend and the Issuer, expiration or early termination of applicable waiting
periods, and the satisfaction or waiver of various other conditions,
Catskill Merger Corporation, a wholly-owned subsidiary of Ascend, will be merged
with and into the Issuer, which will be the surviving corporation. As a result,
the Issuer will become a wholly-owned subsidiary of Ascend, and each share of
the Issuer's Common Stock then outstanding will be converted into the right to
receive 0.7 (the "Exchange Ratio") of a share of Ascend common stock (and a
proportionate cash payment in lieu of any fractional shares). At the effective
time of the Merger pursuant to the Merger Agreement, any outstanding, but
unexercised options or rights to purchase Common Stock of the Issuer will be
assumed by Ascend and will become options or rights to acquire shares of Ascend
common stock, as adjusted to reflect the Exchange Ratio. The Merger Agreement
provides that the Ascend Board of Directors will elect Messrs. Daniel E. Smith,
Paul J. Ferri and Gururaj Deshpande, each of whom is a current director of the
Issuer, to the Ascend Board of Directors effective upon the consummation of the
Merger. In addition, following the Merger, certain executive officers of the
Issuer will become executive officers and key management employees of Ascend.
Subject to certain limitations, the Option is exercisable, in whole or in part,
at any time or from time to time after the occurrence of the earliest event (a
"Trigger Event") which causes a Cascade Termination Fee or Cascade Post-
Termination Fee to become payable to Ascend by the Issuer under the Merger
Agreement. A Trigger Event will be deemed to have occurred and the Option will
become exercisable under the following circumstances:
(1) upon the termination of the Merger Agreement by Ascend if (A)(i) the Board
of Directors of the Issuer shall have withdrawn or modified its recommendation
of the Merger Agreement or the Merger in a manner adverse to Ascend; (ii) an
Alternative Transaction (as defined below) involving the Issuer shall have taken
place or the Board of Directors of the Issuer shall have recommended such an
Alternative Transaction (or a proposal or offer therefor) to the stockholders of
the Issuer or shall have publicly announced its intention to recommend such an
Alternative Transaction (or a proposal or offer therefor) or to engage in an
Alternative Transaction; or (iii) a tender offer or exchange offer for twenty
percent (20%) or more of the outstanding shares of the Common Stock shall have
been commenced or a registration statement with respect thereto shall have been
filed (other than by Ascend or an affiliate thereof) and the Board of Directors
of the Issuer shall have (x) recommended that the stockholders of the Issuer
tender their shares in such tender or exchange offer or (y) publicly announced
its intention to take no position with respect to such tender offer, and, (B) at
the time of the event giving rise to the right of Ascend to terminate, an
Alternative Transaction involving the Issuer shall have been announced or
proposed which shall not have been absolutely and unconditionally withdrawn and
abandoned; or
(2) upon the termination of the Merger Agreement by Ascend if the Issuer shall
have willfully or intentionally breached any representation, warranty, covenant
or agreement on the part of the Issuer set forth in the Merger Agreement, which
breach, if uncured, would cause any of the conditions to the closing of the
Merger not to be satisfied,
Page 6 of 15 pages
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CUSIP NO. 147184 10 5 SCHEDULE 13D Page 7 of 15 Pages
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and such breach is incapable of being cured or, if capable of being cured, shall
not have been cured within ten (10) business days following receipt by the
Issuer of written notice of such breach from Ascend, and, at the time of the
event giving rise to the right of Ascend to terminate, an Alternative
Transaction involving the Issuer shall have been announced or proposed which
shall not have been absolutely and unconditionally withdrawn and abandoned; or
(3) upon the termination of the Merger Agreement by the Issuer as a result of
the failure to receive the requisite vote for adoption of the Merger Agreement
and approval of the Merger by the stockholders of the Issuer, and, at the time
of the event giving rise to the right of the Issuer to terminate, an Alternative
Transaction involving the Issuer shall have been announced or proposed which
shall not have been absolutely and unconditionally withdrawn and abandoned; or
(4) after termination of the Merger Agreement by Ascend as a result of the
failure to receive the requisite vote for adoption of the Merger Agreement and
approval of the Merger by the stockholders of the Issuer, if Ascend delivers
written notice of such termination to the Issuer within twenty (20) days after
the applicable meeting of stockholders of the Issuer, and, at the time of the
event giving rise to the right of Ascend to terminate the Merger Agreement, an
Alternative Transaction involving the Issuer shall have been announced or
proposed which shall not have been absolutely and unconditionally withdrawn and
abandoned, and the Issuer within one hundred eighty (180) days after such
termination enters into a definitive written merger or other business
combination agreement with the offeror in such Alternative Transaction (or any
affiliate thereof) or recommends that the stockholders of the Issuer tender
their shares of the Issuer's capital stock in response to a tender or exchange
offer providing for an Alternative Transaction by such offeror (or any affiliate
thereof).
An "Alternative Transaction" involving the Issuer means (i) a transaction or
series of transactions pursuant to which any person or group (as such term is
defined under the Securities Exchange Act of 1934, as amended), other than
Ascend, or any affiliate thereof (a "Third Party"), acquires (or would acquire
upon completion of such transaction or series of transactions) more than twenty
percent (20%) of the equity securities or voting power of the Issuer or any of
its material subsidiaries, pursuant to a tender offer or exchange offer or
otherwise, (ii) a merger, consolidation, share exchange or other business
combination involving the Issuer or any of its material subsidiaries pursuant to
which any Third Party acquires ownership (or would acquire ownership upon
consummation of such merger, consolidation, share exchange or other business
combination) of more than twenty percent (20%) of the outstanding equity
securities or voting power of the Issuer or any of its material subsidiaries or
of the entity surviving such merger or business combination or resulting from
such consolidation, (iii) any other transaction or series of transactions
pursuant to which any Third Party acquires (or would acquire upon completion of
such transaction or series of transactions) control of assets of the Issuer or
any of its material subsidiaries (including, for this purpose, outstanding
equity securities of subsidiaries of such party) having a fair market value
equal to more than twenty percent (20%) of the fair market value of all the
consolidated assets of the Issuer immediately prior to such transaction or
series of transactions, or (iv) any transaction or series of transactions
pursuant to which any Third Party acquires (or would acquire upon completion of
such transaction or series of transactions) control of the Board of Directors of
the Issuer or by which nominees of any Third Party are (or would be) elected or
appointed to a majority of the seats on the Board of Directors of the Issuer.
With certain exceptions, the Option terminates upon the occurrence of the
earliest of the following:
(i) the Effective Time of the Merger;
(ii) the date on which the Merger Agreement is terminated pursuant to Article
VIII thereof other than under circumstances which also constitute a Trigger
Event under the Stock Option Agreement, and
(iii) (A) in the event the Option becomes exercisable pursuant to clause (i)
of Section 2(a) of the Stock Option Agreement, the date two hundred seventy
(270) days after the date on which the Merger Agreement is terminated pursuant
to Article VIII thereof under circumstances which also constitute a Trigger
Event under clause (i) of Section 2(a) of the Stock Option Agreement, or
(B) in the event the Option becomes exercisable pursuant to clause (ii) of
Section 2(a) of the Stock Option Agreement, the later of (I) the date two
hundred seventy (270) days after the date on which the Merger Agreement is
terminated pursuant to Article VIII thereof under circumstances which also
constitute a Trigger Event under clause (ii) of Section 2(a) of the Stock Option
Agreement and (II) the date one hundred eighty (180) days after the date on
which the Option becomes exercisable pursuant to clause (ii) of Section 2(a) of
the Stock Option Agreement.
In addition, the Option exercise period is automatically extended if exercise
of the Option is prohibited or restrained for certain legal reasons. The
Option may not be exercised if Ascend is in material breach of its material
representations, warranties, covenants or agreements in the Stock Option
Agreement or the Merger Agreement.
At any time when the Option is exercisable, Ascend has the right to "put" the
Option, or the shares of the Issuer's Common Stock theretofore acquired by
Ascend under the Option, back to the Issuer. Under these "put" provisions,
Ascend has the right to require the Issuer to repurchase the Option, or the
shares of the Issuer's Common Stock theretofore acquired by Ascend under the
Option, either in whole or in part. At the Issuer's discretion, or if specified
by Ascend, all or
Page 7 of 15 pages
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CUSIP NO. 147184 10 5 SCHEDULE 13D Page 8 of 15 Pages
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part of the share repurchase price will be paid by redelivery of shares of
Ascend previously issued to the Issuer as payment of the purchase price under
the Option. In such event, each share of Ascend common stock redelivered to
Ascend will be valued at and exchanged for 1.428 shares of the Issuer's Common
Stock.
The aggregate amount payable by the Issuer under the Stock Option Agreement is
capped, as are the aggregate net proceeds receivable by Ascend from sales of
shares received upon exercise of the Option. The maximum amount payable by the
Issuer to Ascend under the Termination Fee and Post-Termination Fee provisions
of the Merger Agreement and the "put" provisions of the Stock Option Agreement
may not exceed $85 million. In addition, if Ascend would receive net proceeds of
more than $85 million (over and above the aggregate exercise price) from third
party sales or dispositions of the shares of Common Stock acquired under the
Option, all net proceeds in excess of such amount will be remitted to the
Issuer.
Under the Stock Option Agreement, each party's right to sell, assign,
transfer or otherwise dispose of shares of the other party is subject to
certain restrictions and first-refusal rights in favor of such other party. In
addition, the Stock Option Agreement gives Ascend certain rights to have the
shares acquired upon exercise of the Option registered under the Securities
Act of 1933, as amended, for sale in a public offering. The registration
rights take effect after the termination of the Merger Agreement and are
subject to conditions and limitations. In lieu of registration, the Stock
Option Agreement gives the Issuer the option to agree to purchase, for cash,
all or part of the securities covered by the registration request, at a price
equal to the average last reported sale price of the Issuer's Common Stock on
The Nasdaq National Market for the preceding ten trading days. The Stock Option
Agreement allows Ascend to demand two registrations, and allows the Issuer to
defer the requested registrations for certain periods in the following
circumstances: (i) for up to 60 days when the Issuer is in possession of
material non-public information which it reasonably believes would be
detrimental to be disclosed at such time and which, in the opinion of counsel to
the Issuer, would be required to be disclosed in the registration statement, and
(ii) for up to 90 days when required audited financial statements are not yet
available or the Issuer reasonably determines that registration would interfere
with a material financing, acquisition or other transaction.
Reference is hereby made to the Stock Option Agreement, which is included as
Exhibit 1 to this Schedule 13D, for the full text of its terms, including the
conditions upon which it may be exercised. The Stock Option Agreement is
incorporated herein by reference in its entirety. If the Merger is consummated
pursuant to the Merger Agreement, the Option will not be exercised.
As a further inducement to Ascend to enter into the Merger Agreement, the Issuer
has caused all of the directors and executive officers of the Issuer to enter
into the Voting Agreements with Ascend pursuant to which such directors and
officers irrevocably appoint Ascend as their lawful attorney and proxy. Such
proxy gives Ascend the limited right to vote all shares of the Issuer's Common
Stock held by the parties to the Voting Agreements for adoption of the Merger
Agreement and approval of the Merger pursuant thereto and any proposal or action
which would, or could reasonably be expected to, facilitate the Merger, and
against any competing proposal or any merger or combination with any party other
than Ascend. The Voting Agreements, and the irrevocable proxies granted pursuant
thereto, terminate upon the earlier of the effective time of the Merger and the
termination of the Merger Agreement.
Reference is hereby made to the form of Voting Agreement, which is included as
Exhibit 2 to this Schedule 13D, for the full text of its terms and of the
irrevocable proxy granted pursuant thereto. The form of Voting Agreement is
incorporated herein by reference in its entirety. The names of the parties to
the Voting Agreements and the number of shares beneficially owned by each of
them are set forth in Schedule B hereto which is hereby incorporated by this
reference.
As a further inducement to Ascend to enter into the Merger Agreement, the Issuer
has also caused the directors and executive officers of the Issuer named on
Schedule B to enter into Director, Officer and Stockholder Agreements, pursuant
to which such directors and officers have agreed to certain restrictions on
their ability to sell their shares of the Issuer's Common Stock and any shares
of Ascend common stock which they receive as a result of the Merger, except to
the extent permitted by Rule 145 under the Securities Act of 1933, as amended,
and except as permitted by accounting rules relating to pooling of interests.
Inasmuch as Ascend's voting rights under the Voting Agreements are limited
solely to certain matters related to the Merger, and Ascend has no economic
interest in or affirmative dispositive power over the shares of the Issuer's
Common Stock covered by the Voting Agreements or the Director, Officer and
Stockholder Agreements, Ascend expressly disclaims beneficial ownership of such
shares of Common Stock of the Issuer.
As an inducement to the Issuer to enter into the Merger Agreement, Issuer and
Ascend have also entered into the Ascend Option, which entitles the Issuer to
purchase a number of shares of Ascend common stock equal to up to 19.9% of the
total number of shares of Ascend common stock outstanding as of March 30, 1997
(subject to adjustment in the event of certain changes in Ascend's
capitalization) or approximately 24,025,741 shares of Ascend Common Stock. The
rights of the Issuer under the Ascend Option are substantially parallel to those
of Ascend under the Stock Option Agreement. As a further inducement to the
Issuer to enter into the Merger Agreement, Ascend has caused all of its
directors and executive officers to enter into voting agreements (the "Ascend
Voting Agreements"), the terms of which are substantially parallel to the Voting
Agreements entered into by the officers and directors of the Issuer, and to sign
director, officer and stockholder agreements (the "Ascend Director, Officer and
Stockholder Agreements") restricting their ability to sell or otherwise dispose
of Ascend stock except to the extent permitted by accounting rules relating to
pooling of interests.
Upon consummation of the Merger, the Certificate of Incorporation of the Issuer,
as in effect immediately prior to the Merger, shall be amended and restated in
the form attached to the Merger Agreement.
Other than as described above, Ascend currently has no plans or proposals which
relate to, or may result in, any of the matters listed in Items 4(a) - (j) of
Schedule 13D (although Ascend reserves the right to develop such plans).
Page 8 of 15 pages
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CUSIP NO. 147184 10 5 SCHEDULE 13D Page 9 of 15 Pages
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Item 5. Interest in Securities of the Issuer.
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As a result of the Option and the Voting Agreements, Ascend may be deemed to
beneficially own 23,191,681 shares of the Common Stock of the Issuer, which
would represent approximately 20.1% of the shares of Common Stock that would be
outstanding after the exercise in full of the Option and all stock options held
by parties to the Voting Agreements (based on the number of shares of Common
Stock outstanding of the Issuer on March 19, 1997, as set forth in the Merger
Agreement). Upon exercise of the Option in accordance with its terms, Ascend
would have sole voting and dispositive power, subject to the rights of the
Issuer under the Stock Option Agreement, over shares acquired upon such
exercise.
18,865,514 of the shares of Common Stock described herein are subject to the
Option, which is not currently exercisable. 4,425,742 of the shares of Common
Stock described herein are subject to the Voting Agreements, which grant Ascend
only limited voting rights and no dispositive power over such shares. Nothing
herein shall be deemed to be an admission by Ascend as to the beneficial
ownership of any shares of Common Stock, and Ascend disclaims beneficial
ownership of all shares of Common Stock of the Issuer issuable upon exercise of
the Option and subject to the Voting Agreements.
As an inducement to the Issuer to enter into the Merger Agreement, Ascend has
granted the Issuer the Ascend Option which entitles the Issuer to acquire a
number of shares of Ascend common stock equal to up to 19.9% of the total shares
of Ascend's common stock outstanding as of March 30, 1997 (subject to adjustment
in the event of certain changes in the capitalization of Ascend). The rights of
the Issuer under the Ascend Option are substantially parallel to those of Ascend
under the Stock Option Agreement. If the Ascend Option became exercisable and if
the Issuer paid the exercise price of the Ascend Option with shares of the
Issuer's Common Stock, Ascend would become the beneficial owner of the number of
shares tendered by the Issuer upon exercise of the Ascend Option.
The following persons referred to in Schedule A may be deemed to beneficially
own shares of Common Stock of the Issuer: Betsy S. Atkins, 214 shares,
(excluding 500 shares acquired by Ms. Atkins on March 17, 1997 for $27.25 per
share and sold by Ms. Atkins for $24.00 per share on March 19, 1997) over which
Ms. Atkins has the sole power to vote and sole power to dispose or to direct
such disposition; Martin Schoffstall, 1,000 shares (excluding 461 shares for
which Mr. Schoffstall disclaims beneficial ownership except to the extent of
his pecuniary interest therein), over which Mr. Schoffstall has the sole power
to vote and sole power to dispose or to direct such disposition; and, Roger L.
Evans, 955,209 shares, over which Mr. Evans has shared power, with Greylock
Equity Limited Partnership (in which Mr. Evans is a general partner), to vote
and to dispose or to direct such vote or disposition.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
- ------- ---------------------------------------------------------------------
to the Securities of the Issuer.
- --------------------------------
Roger L. Evans, a director of Ascend and a general partner of Greylock Equity
Limited Partnership, shares both the power to vote and the power to dispose or
to direct such vote or disposition of 955,209 shares of Common Stock of the
Issuer. Except as described in this Schedule 13D, and other than the Merger
Agreement and the other agreements contemplated thereby, including the Stock
Option Agreement, the Ascend Option, the Voting Agreements and the Director,
Officer and Stockholder Agreements, to the best knowledge of Ascend, there are
no contracts, arrangements, understandings or relationships (legal or otherwise)
among the persons named in Item 2 and between such persons and any person with
respect to any securities of the Issuer, including but not limited to transfer
or voting of any of the securities, finder's fees, joint ventures, loan or
option arrangements, puts or calls, guarantees of profits, division of profits
or loss, or the giving or withholding of proxies.
Page 9 of 15 pages
<PAGE>
- ------------------------- ----------------------
CUSIP NO. 147184 10 5 SCHEDULE 13D Page 10 of 15 Pages
- ------------------------- ----------------------
Item 7. Material to be filed as Exhibits.
- ------- ---------------------------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1. Cascade Stock Option Agreement, dated March 30, 1997
2. Form of Voting Agreement
After reasonable inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date:
By: /s/ Michael J. Johnson
------------------------------
Michael J. Johnson, Controller and Chief Accounting Officer
Page 10 of 15 pages
<PAGE>
- ---------------------------- ---------------------
CUSIP NO. 147184 10 5 SCHEDULE 13D Page 11 of 15 Pages
- ---------------------------- ---------------------
SCHEDULE A
----------
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION
---------------- --------------------
<S> <C>
Mory Ejabat President, Chief Executive Officer and Director of
c/o Ascend Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Curtis N. Sanford Senior Vice President, International Sales and
c/o Ascend General Manager of International Operations of
Communications, Inc. Ascend
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Robert K. Dahl Vice President, Finance, Chief Financial Officer,
c/o Ascend Secretary and Director of Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Michael Hendren Senior Vice President, North American Sales of
c/o Ascend Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Anthony Stagno Vice President, Manufacturing of Ascend
c/o Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Michael J. Johnson Controller and Chief Accounting Officer of Ascend
c/o Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Jeanette Symons Executive Vice President, Advanced Products and
c/o Ascend Technology Group and Chief Technical Officer of
Communications, Inc. Ascend
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
</TABLE>
Page 11 of 15 pages
<PAGE>
- ---------------------------- ---------------------
CUSIP NO. 147184 10 5 SCHEDULE 13D Page 12 of 15 Pages
- ---------------------------- ---------------------
<TABLE>
<S> <C>
Bernard Schneider Vice President, Strategic Business Development of
c/o Ascend Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
William H. Kind Vice President, Engineering of Ascend
c/o Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Maureen Lawrence Vice President, Marketing of Ascend
c/o Ascend (effective April 4, 1997)
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Betsy S. Atkins Director of Ascend
c/o Ascend
Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Roger L. Evans Venture Capitalist with Greylock Management
c/o Greylock Capital Corporation and Director of Ascend
Limited Partnership
One Federal Street
Boston, MA 02110
C. Richard Kramlich General Partner of New Enterprise Associates and
c/o New Enterprise Director of Ascend
Associates
235 Montgomery Street,
Suite 1025
San Francisco, CA 94104
James P. Lally General Partner of Kleiner Perkins Caufield &
c/o Kleiner Perkins Byers and Director of Ascend
Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
Martin Schoffstall President and Chairman of the Board of Epicenter,
Epicenter, Inc. Inc. and Director of Ascend
5790 Devonshire Road
Harrisburgh, PA 17112
</TABLE>
Page 12 of 15 pages
<PAGE>
- ---------------------------- ---------------------
CUSIP NO. 147184 10 5 SCHEDULE 13D Page 13 of 15 Pages
- ---------------------------- ---------------------
SCHEDULE B
----------
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION BENEFICIAL
- ---------------- -------------------- ----------
OWNERSHIP
---------
<S> <C> <C>
Victoria A. Brown President of Communicore and 240,000
c/o Cascade Communications Corp. Director of Cascade
5 Carlisle Road
Westford, MA 01886
Richard M. Burnes, Jr. General Partner of The Charles River 173,278
c/o Cascade Communications Corp. Partnerships and Director of Cascade
5 Carlisle Road
Westford, MA 01886
Gururaj Deshpande Executive Vice President of Business 826,174
c/o Cascade Communications Corp. Development and Chairman of the
5 Carlisle Road Board of Directors of Cascade
Westford, MA 01886
Paul J. Ferri General Partner of Matrix Partners 137,877
c/o Cascade Communications Corp. and Director of Cascade
5 Carlisle Road
Westford, MA 01886
Bruns H. Grayson Managing General Partner of Calvert 266,425
c/o Cascade Communications Corp. Capital L.P. and Director of Cascade
5 Carlisle Road
Westford, MA 01886
Daniel E. Smith President, Chief Executive Officer 1,661,034
c/o Cascade Communications Corp. and Director of Cascade
5 Carlisle Road
Westford, MA 01886
</TABLE>
Page 13 of 15 pages
<PAGE>
- ---------------------------- ---------------------
CUSIP NO. 147184 10 5 SCHEDULE 13D Page 14 of 15 Pages
- ---------------------------- ---------------------
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION BENEFICIAL
- ---------------- -------------------- ----------
OWNERSHIP
---------
<S> <C> <C>
Steven C. Walske Chairman of the Board of Directors 32,068
c/o Cascade Communications Corp. of Parametric Technology
5 Carlisle Road Corporation and Director of Cascade
Westford, MA 01886
Hassan M. Ahmed Vice President of Engineering of 51,440
c/o Cascade Communications Corp. Cascade
5 Carlisle Road
Westford, MA 01886
Paul E. Blondin Vice President of Finance and 154,204
c/o Cascade Communications Corp. Administration, Chief Financial
5 Carlisle Road Officer, Treasurer and Secretary of
Westford, MA 01886 Cascade
Michael A. Champa Vice President of Worldwide Sales 146,574
c/o Cascade Communications Corp. and Customer Service of Cascade
5 Carlisle Road
Westford, MA 01886
James A. Dolce, Jr. Vice President and General Manager 173,380
c/o Cascade Communications Corp. of Remote Access of Cascade
5 Carlisle Road
Westford, MA 01886
John E. Dowling Vice President of Operations of 111,678
c/o Cascade Communications Corp. Cascade
5 Carlisle Road
Westford, MA 01886
Robert N. Machlin Vice President of Marketing of 62,426
c/o Cascade Communications Corp. Cascade
5 Carlisle Road
Westford, MA 01886
</TABLE>
Page 14 of 15 pages
<PAGE>
- ---------------------------- ---------------------
CUSIP NO. 147184 10 5 SCHEDULE 13D Page 15 of 15 Pages
- ---------------------------- ---------------------
<TABLE>
<CAPTION>
NAME AND ADDRESS PRINCIPAL OCCUPATION BENEFICIAL
- ---------------- -------------------- ----------
OWNERSHIP
---------
<S> <C> <C>
Jonathan M. Reeves Vice President and General Manager 389,184
c/o Cascade Communications Corp. of Broadband Access of Cascade
5 Carlisle Road
Westford, MA 01886
</TABLE>
Page 15 of 15 pages
<PAGE>
EXHIBIT 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CASCADE STOCK OPTION AGREEMENT
BY AND BETWEEN
CASCADE COMMUNICATIONS CORP.,
A DELAWARE CORPORATION,
AND
ASCEND COMMUNICATIONS, INC.,
A DELAWARE CORPORATION,
DATED AS OF MARCH 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
Agreement............................................................. Preamble
Ascend................................................................ Preamble
Ascend Common Stock................................................... 2(e)
Ascend Offer Notice................................................... 8(c)
Cash Exercise......................................................... 2(e)
Cash Exercise Price................................................... 2(e)
Cascade............................................................... Preamble
Cascade Charter....................................................... 2(b)
Cascade Common Stock.................................................. Recitals
Cascade Offer Notice.................................................. 8(d)
Cascade Option........................................................ 1
Closing............................................................... 2(b)
Exercise Notice....................................................... 2(b)
Exercise Price........................................................ 2(e)
Expiration Date....................................................... 8(a)
Fair Market Value..................................................... 7(b)(iii)
Holder................................................................ 9(a)
Holder's Designation Notice........................................... 9(b)
HSR Act............................................................... 3
Manager............................................................... 9(b)
Material Contract..................................................... 5(e)
Merger................................................................ Recitals
Merger Agreement...................................................... Recitals
Net Proceeds.......................................................... 2(f)
Option Number......................................................... 2(d)
Option Repurchase Price............................................... 7(b)(i)
Permitted Offering.................................................... 9(a)
Purchase Period....................................................... 7(a)
Registrable Securities................................................ 9(a)
Registrant............................................................ 9(a)
Registrant's Designation Notice....................................... 9(b)
Registration Notice................................................... 9(a)
Repurchase Notice..................................................... 7(a)
Restricted Shares..................................................... 8(a)
Share Repurchase Price................................................ 7(b)(ii)
Stock Exercise........................................................ 2(e)
Stock Exercise Price.................................................. 2(e)
Sub................................................................... Recitals
Trigger Event......................................................... 2(a)
Violation............................................................. 5(e)
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
Section 1. Grant of Option............................................. B-1
Section 2. Exercise and Termination of the Cascade Option.............. B-1
(a) Exercise.................................................... B-1
(b) Exercise Procedure.......................................... B-1
(c) Termination of the Cascade Option........................... B-2
(d) Option Number............................................... B-2
(e) Exercise Price.............................................. B-2
(f) Certain Limitations......................................... B-2
Section 3. Conditions to Closing....................................... B-3
Section 4. Closing..................................................... B-3
Section 5. Representations and Warranties of Cascade................... B-3
(a) Organization and Standing................................... B-3
(b) Authority................................................... B-3
(c) Reservation of Shares....................................... B-4
(d) No Liens.................................................... B-4
(e) No Conflicts................................................ B-4
(f) Consents and Approvals...................................... B-4
(g) Investment Purposes......................................... B-4
Section 6. Representations and Warranties of Ascend.................... B-4
(a) Organization and Standing................................... B-4
(b) Authority................................................... B-4
(c) Reservation of Shares....................................... B-5
(d) No Liens.................................................... B-5
(e) No Conflicts................................................ B-5
(f) Consents and Approvals...................................... B-5
(g) Investment Purpose.......................................... B-5
Section 7. Certain Repurchases......................................... B-5
(a) Ascend "Put"................................................ B-5
(b) Certain Definitions......................................... B-6
(c) Redelivery of Shares of Ascend Common Stock................. B-6
(d) Payment and Redelivery of Cascade Options or Shares......... B-6
(e) Repurchase Price Reduced at Ascend's Option................. B-6
Section 8. Restrictions on Transfer.................................... B-6
(a) Restrictions on Transfer.................................... B-6
(b) Permitted Sales............................................. B-7
(c) Cascade's Right of First Refusal............................ B-7
(d) Ascend's Right of First Refusal............................. B-7
(e) Additional Restrictions..................................... B-8
Section 9. Registration Rights......................................... B-8
(a) Procedure................................................... B-8
(b) Manager's Certificate....................................... B-8
(c) First Refusal Right......................................... B-9
(d) Closing..................................................... B-9
(e) Certain Limitations......................................... B-9
(f) State Securities Laws....................................... B-9
(g) Obligations of Registrant................................... B-9
(h) Indemnification............................................. B-9
(i) Inclusion of Additional Shares of Registrant................ B-10
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <C> <S> <C>
Section 10. Adjustment Upon Changes in Capitalization.................. B-10
Section 11. Restrictive Legends........................................ B-10
Binding Effect; No Assignment; No Third-Party
Section 12. Beneficiaries............................................. B-11
Section 13. Specific Performance....................................... B-11
Section 14. Validity................................................... B-11
Section 15. Notices.................................................... B-12
Section 16. Governing Law.............................................. B-12
Section 17. Interpretation............................................. B-12
Section 18. Counterparts; Effect....................................... B-13
Section 19. Expenses................................................... B-13
Section 20. Amendments; Waiver......................................... B-13
Section 21. Extension of Time Periods.................................. B-13
Section 22. Further Assurances......................................... B-13
</TABLE>
iii
<PAGE>
CASCADE STOCK OPTION AGREEMENT
THIS CASCADE STOCK OPTION AGREEMENT (the "Agreement") is made and entered
into as of March 30, 1997 by and between Cascade Communications Corp., a
Delaware corporation ("Cascade"), and Ascend Communications, Inc., a Delaware
corporation ("Ascend").
Recitals
Concurrently with the execution and delivery of this Agreement, Cascade,
Ascend, and Catskill Merger Corporation, a Delaware corporation and a wholly-
owned subsidiary of Ascend ("Sub"), are entering into an Agreement and Plan of
Reorganization, dated as of March 30, 1997 (the "Merger Agreement"), which
provides for the merger of Sub with and into Cascade in accordance with the
terms of the Merger Agreement and the laws of the State of Delaware (the
"Merger"). As a condition and inducement to Ascend's willingness to enter into
the Merger Agreement, Ascend has requested that Cascade agree, and Cascade has
agreed, to grant to Ascend an option to acquire certain shares of Cascade's
authorized but unissued common stock, par value $.001 per share (together with
any associated rights, "Cascade Common Stock"), on the terms and subject to
the conditions set forth herein.
NOW, THEREFORE, to induce Ascend to enter into the Merger Agreement and in
consideration of the representations, warranties, covenants and agreements
contained herein and in the Merger Agreement, the parties hereto, intending to
be legally bound, hereby agree as follows. Capitalized terms used herein but
not defined herein shall have the meanings ascribed to them in the Merger
Agreement.
Agreement
Section 1. Grant of Option. Cascade hereby grants to Ascend an irrevocable
option (the "Cascade Option") to purchase a number of shares of Cascade Common
Stock equal to the Option Number (as defined in Section 2(d)), on the terms
and subject to the conditions set forth below.
Section 2. Exercise and Termination of the Cascade Option.
(a) Exercise. The Cascade Option may be exercised by Ascend, in whole or in
part, at any time or from time to time prior to the termination of Ascend's
right to exercise the Cascade Option by the terms of this Agreement and upon and
after the occurrence of the earliest event which causes (i) the Cascade
Termination Fee or (ii) the Cascade Post-Termination Fee (in each case as
defined in the Merger Agreement) to become payable (a "Trigger Event").
Notwithstanding the foregoing, the Cascade Option may not be exercised if Ascend
is in breach in any material respect of any of its material representations,
warranties, covenants or agreements contained in this Agreement or the Merger
Agreement.
(b) Exercise Procedure. In the event that Ascend wishes to exercise the
Cascade Option, Ascend shall deliver to Cascade written notice (an "Exercise
Notice") specifying the total number of shares of Cascade Common Stock that
Ascend wishes to purchase. To the extent permitted by law and the Certificate
of Incorporation, as amended, of Cascade (the "Cascade Charter"), and provided
that the conditions set forth in Section 3 to Cascade's obligation to issue
the shares of Cascade Common Stock to Ascend hereunder have been satisfied or
waived, Ascend shall, upon delivery of the Exercise Notice and tender of the
applicable aggregate Exercise Price, immediately be deemed to be the holder of
record of the shares of Cascade Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Cascade shall then be closed
or that certificates representing such shares of Cascade Common Stock shall
not theretofore have been delivered to Ascend. Each closing of a purchase of
shares of Cascade Common Stock hereunder (a "Closing") shall occur at a place,
on a date, and at a time designated by Ascend in an Exercise Notice delivered
at least two (2) business days prior to the date of such Closing.
B-1
<PAGE>
(c) Termination of the Cascade Option. Ascend's right to exercise the
Cascade Option shall terminate upon the earliest to occur of:
(i) the Effective Time of the Merger;
(ii) the date on which the Merger Agreement is terminated pursuant to
Article VIII thereof other than under circumstances which also constitute a
Trigger Event under this Agreement; and
(iii) (A) in the event the Cascade Option becomes exercisable pursuant to
clause (i) of Section 2(a), the date two hundred seventy (270) days after the
date on which the Merger Agreement is terminated pursuant to Article VIII
thereof under circumstances which also constitute a Trigger Event under clause
(i) of Section 2(a), or
(B) in the event the Cascade Option becomes exercisable pursuant to clause
(ii) of Section 2(a), the later of (I) the date two hundred seventy (270) days
after the date on which the Merger Agreement is terminated pursuant to Article
VIII thereof under circumstances which also constitute a Trigger Event under
clause (ii) of Section 2(a) and (II) the date one hundred eighty (180) days
after the date on which the Cascade Option becomes exercisable pursuant to
clause (ii) of Section 2(a).
Notwithstanding the foregoing, with respect to clause (iii) in the immediately
preceding sentence, if the Cascade Option cannot be exercised by reason of any
applicable judicial or governmental judgment, decree, order, law or regulation,
the Cascade Option shall remain exercisable and shall not terminate until the
earlier of (x) the date on which such impediment shall become final and not
subject to appeal and (y) 5:00 p.m., Pacific Standard Time, on the tenth (10th)
business day after such impediment shall have been removed; provided, however,
that if such judgment, decree, or order shall have been obtained at the request
of Cascade or any of its Affiliates or a party that has made or is proposing to
make a Competing Offer (as such term is defined in the Merger Agreement) for
Cascade, and such judgment, decree or order is vacated, set aside, withdrawn,
reversed or otherwise nullified, the time during which the Cascade Option shall
remain exercisable shall be extended for as long as such judgment, decree, or
order shall be in effect. The rights of Ascend set forth in Sections 7 and 9
shall not terminate upon termination of Ascend's right to exercise the Cascade
Option with respect to shares acquired prior to such termination, but shall
extend to the time provided in such sections. Notwithstanding the termination of
the Cascade Option, Ascend shall be entitled to purchase the shares of Cascade
Common Stock with respect to which Ascend had exercised the Cascade Option prior
to such termination.
(d) Option Number. The aggregate number of shares of Cascade Common Stock
issuable upon exercise of this Cascade Option (the "Option Number") shall
initially be the number of shares, rounded down to the nearest whole share,
equal to nineteen and nine-tenths percent (19.9%) of the total number of
shares of Cascade Common Stock issued and outstanding as of the date of this
Agreement, and shall be adjusted hereafter to reflect changes in Cascade's
capitalization occurring after the date hereof in accordance with Section 10.
Notwithstanding any other provision of this Agreement, in no event shall the
Option Number exceed nineteen and nine-tenths percent (19.9%) of the total
number of shares of Cascade Common Stock issued and outstanding as of the date
of this Agreement, adjusted in accordance with Section 10.
(e) Exercise Price. The purchase price per share of Cascade Common Stock
pursuant to the Cascade Option (the "Exercise Price") shall be payable, at
Ascend's election, in cash (a "Cash Exercise") or in shares (a "Stock
Exercise") of Ascend common stock, $.001 par value per share ("Ascend Common
Stock"). The Exercise Price per share of Cascade Common Stock, (i) in the case
of a Cash Exercise, shall be a cash amount equal to $36.40 (the "Cash Exercise
Price"), and (ii) in the case of a Stock Exercise, shall be seven tenths (.7) of
a share of Ascend Common Stock (the "Stock Exercise Price").
(f) Certain Limitations. In the event Ascend would receive aggregate,
cumulative Net Proceeds (as defined below) of more than eighty-five million
dollars ($85,000,000) in connection with the sale (or other disposition) to
any third party of the shares of Cascade Common Stock acquired pursuant to the
Cascade Option (other than a sale of such shares pursuant to Section 7), all
Net Proceeds in excess of such amount shall be remitted to Cascade promptly
upon receipt. "Net Proceeds" shall mean the aggregate proceeds of such sale or
disposition in excess of the product of the Exercise Price multiplied by the
number of shares of Cascade Common
B-2
<PAGE>
Stock included in such sale or disposition. Notwithstanding anything in this
Agreement or in the Merger Agreement to the contrary, the maximum aggregate
amount payable by Cascade to Ascend and its affiliates pursuant to Section 7
of this Agreement and the provisions of Section 8.3(b) of the Merger Agreement
shall not exceed the sum of eighty-five million dollars ($85,000,000) plus, in
the case of payments pursuant to Sections 7(a)(ii) and 7(b)(ii) of this
Agreement, the aggregate Exercise Price for the shares of Cascade Common Stock
repurchased by Cascade from Ascend pursuant to Section 7 of this Agreement, it
being understood that the limitation contained in this sentence shall not
limit the amounts receivable by Ascend from persons other than Cascade,
including without limitation amounts receivable pursuant to a tender offer or
other purchase and sale transaction.
Section 3. Conditions to Closing. The obligation of Cascade to issue the
shares of Cascade Common Stock to Ascend hereunder is subject to the
conditions that (a) all waiting periods, if any, under the Hart Scott Rodino
Antitrust Improvements Act of 1975, as amended (the "HSR Act"), applicable to
the issuance of the shares of Cascade Common Stock by Cascade and the
acquisition of such shares by Ascend hereunder (and, in the case of a Stock
Exercise, the issuance of shares of Ascend Common Stock by Ascend and the
acquisition of such shares by Cascade) shall have expired or have been
terminated; (b) no preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect; and (c) all consents, approvals, orders,
authorizations and permits of any federal, state, local or foreign
governmental authority, if any, required in connection with the issuance of
the shares of Cascade Common Stock and the acquisition of such shares by
Ascend hereunder (and, in the case of a Stock Exercise, the issuance of shares
of Ascend Common Stock and the acquisition of such shares by Cascade) shall
have been obtained.
Section 4. Closing. At any Closing: (a) Cascade shall deliver to Ascend or
its designee a single certificate in definitive form representing the number
of shares of Cascade Common Stock designated by Ascend in its Exercise Notice,
such certificate to be registered in the name of Ascend and to bear the legend
set forth in Section 11; and (b) Ascend shall deliver to Cascade the aggregate
Exercise Price for the shares of Cascade Common Stock so designated and being
purchased by (i) wire transfer of immediately available funds to the account
or accounts specified in writing by Cascade (in the case of a Cash Exercise),
or (ii) subject to the satisfaction of applicable conditions, delivery of a
certificate or certificates representing the number of shares of Ascend Common
Stock being issued by Ascend in consideration thereof (in the case of a Stock
Exercise). Effective at or prior to the Closing, Cascade shall cause the
shares of Cascade Common Stock being delivered at the Closing to be approved
for quotation on The Nasdaq National Market, and Ascend shall cause the shares
of Ascend Common Stock being delivered at the Closing pursuant to a Stock
Exercise to be approved for quotation on The Nasdaq National Market.
Section 5. Representations and Warranties of Cascade. Cascade represents and
warrants to Ascend as follows:
(a) Organization and Standing. Cascade is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all corporate power and authority required to enter into
this Agreement and to carry out its obligations hereunder.
(b) Authority. The execution and delivery of this Agreement by Cascade
and the consummation by Cascade of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Cascade and no other corporate proceedings on the part of Cascade and no
action of Cascade shareholders are necessary to authorize this Agreement or
any of the transactions contemplated hereby; this Agreement has been duly
and validly executed and delivered by Cascade and, assuming the due
authorization, execution and delivery hereof by Ascend and the receipt of
all required governmental approvals, constitutes the valid and binding
obligation of Cascade, enforceable against Cascade in accordance with its
terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting the enforcement of
creditors' rights generally, and except that the availability of equitable
remedies, including specific performance, may be subject to the discretion
of any court before which any proceeding therefor may be brought.
B-3
<PAGE>
(c) Reservation of Shares. Cascade has taken all necessary corporate
action to authorize and reserve for issuance and to permit it to issue,
upon exercise of the Cascade Option, and at all times from the date hereof
through the expiration of the Cascade Option will have reserved, a number
of authorized and unissued shares of Cascade Common Stock not less than the
Option Number, such amount being subject to adjustment as provided in
Section 10, all of which, upon their issuance and delivery in accordance
with the terms of this Agreement, will be duly authorized, validly issued,
fully paid and nonassessable.
(d) No Liens. The shares of Cascade Common Stock issued to Ascend upon
the exercise of the Cascade Option will be, upon delivery thereof to
Ascend, free and clear of all claims, liens, charges, encumbrances and
security interests of any nature whatsoever.
(e) No Conflicts. The execution and delivery of this Agreement by Cascade
does not, and, subject to compliance with applicable law, the consummation
by Cascade of the transactions contemplated hereby will not, violate,
conflict with, or result in a breach of any provision of, or constitute a
default (with or without notice or lapse of time, or both) under, or result
in the termination of, or accelerate the performance required by, or result
in a right of termination, cancellation, or acceleration of any obligation
or the loss of a material benefit under, or the creation of a lien, pledge,
security interest or other encumbrance on assets (any such violation,
conflict, breach, default, termination, acceleration, right of termination,
cancellation or acceleration, loss, or creation, a "Violation") by Cascade
or any of its Subsidiaries of (i) any provision of the charter or the
Bylaws of Cascade or any of its Subsidiaries, each as amended to date, (ii)
any material provision of any material loan or credit agreement, note,
mortgage, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise or license (a "Material
Contract") of Cascade or any of its Subsidiaries or to which any of them is
a party or by which any of them or their properties or assets are bound, or
(iii) except as contemplated by Section 3.4(c) of the Merger Agreement or
Section 5(f) below, any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Cascade or any of its subsidiaries or any
of their properties or assets.
(f) Consents and Approvals. The execution and delivery of this Agreement
by Cascade does not, and (except for the notifications required under the
HSR Act and applicable foreign laws, the expiration or early termination of
waiting periods under the HSR Act and applicable foreign laws, and the
receipt of approvals under applicable securities laws, and except as
contemplated by Section 9) the performance of this Agreement by Cascade and
the consummation of the transactions contemplated hereby will not, require
any consent, approval, order, authorization or permit of, filing with, or
notification to any governmental or regulatory authority, other than such
consents, approvals, orders, authorizations, permits, filings and
notifications which, in the aggregate, if not obtained or made, could not
reasonably be expected to have a Cascade Material Adverse Effect or an
Ascend Material Adverse Effect (as such terms are defined in the Merger
Agreement) or a material adverse effect on the ability of the parties to
consummate the transactions contemplated by this Agreement.
(g) Investment Purposes. Any shares of Ascend Common Stock acquired by
Cascade pursuant to this Agreement will be acquired for Cascade's own
account, for investment purposes only, and will not be acquired by Cascade
with a view to the public distribution thereof in violation of any
applicable provision of the Securities Act.
Section 6. Representations and Warranties of Ascend. Ascend represents and
warrants to Cascade as follows:
(a) Organization and Standing. Ascend is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware and has all corporate power and authority required to enter into
this Agreement and to carry out its obligations hereunder.
(b) Authority. Except as set forth in Section 6(c), the execution and
delivery of this Agreement by Ascend and the consummation by Ascend of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Ascend, and no other corporate proceedings
on the part of Ascend and no action of its stockholders are necessary to
authorize this Agreement or any of the transactions contemplated hereby;
this Agreement has been duly and validly executed and delivered by
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Ascend and, assuming the due authorization, execution and delivery hereof
by Cascade and the receipt of all required governmental approvals,
constitutes the valid and binding obligation of Ascend, enforceable against
Ascend in accordance with its terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, or other similar laws affecting the
enforcement of creditors' rights generally, and except that the
availability of equitable remedies, including specific performance, may be
subject to the discretion of any court before which any proceeding may be
brought.
(c) Reservation of Shares. Prior to any delivery of shares of Ascend
Common Stock in consideration of the purchase of shares of Cascade Common
Stock pursuant hereto, Ascend will have taken all necessary corporate
action to authorize for issuance and to permit it to issue such shares of
Ascend Common Stock, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be duly authorized,
validly issued, fully paid and nonassessable.
(d) No Liens. The shares of Ascend Common Stock (if any) issued to
Cascade in consideration of the purchase of shares of Cascade Common Stock
pursuant hereto will be, upon delivery thereof to Cascade, free and clear
of all claims, liens, charges, encumbrances and security interests of any
nature whatsoever.
(e) No Conflicts. The execution and delivery of this Agreement by Ascend
does not, and the consummation by Ascend of the transactions contemplated
hereby will not, violate, conflict with, or result in a Violation by Ascend
or any of its Subsidiaries, of (i) any provision of the Certificate of
Incorporation or Bylaws of Ascend, (ii) any material provision of any
Material Contract of Ascend or any of its Subsidiaries or to which any of
them is a party or by which any of them or their properties or assets are
bound, or (iii) except as contemplated by Section 4.4(c) of the Merger
Agreement or Section 6(f) below, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Ascend or any of its
subsidiaries or any of their properties or assets.
(f) Consents and Approvals. The execution and delivery of this Agreement
by Ascend does not, and (except for the notifications required under the
HSR Act and applicable foreign laws, the expiration or early termination of
any waiting periods under the HSR Act and applicable foreign laws, and the
receipt of approvals under applicable securities laws, and except as
contemplated by Section 9) the performance of this Agreement by Ascend and
the consummation of the transactions contemplated hereby will not, require
any consent, approval, order, authorization or permit of, filing with, or
notification to any governmental or regulatory authority, other than such
consents, approvals, orders, authorizations, permits, filings and
notifications which, in the aggregate, if not obtained or made, could not
reasonably be expected to have a Cascade Material Adverse Effect or an
Ascend Material Adverse Effect (as such terms are defined in the Merger
Agreement) or a material adverse effect on the ability of the parties to
consummate the transactions contemplated by this Agreement.
(g) Investment Purpose. Any shares of Cascade Common Stock acquired by
Ascend upon exercise of the Cascade Option will be acquired for Ascend's
own account, for investment purposes only and will not be, and the Cascade
Option is not being, acquired by Ascend with a view to the public
distribution thereof in violation of any applicable provision of the
Securities Act.
Section 7. Certain Repurchases.
(a) Ascend "Put". At any time during which the Cascade Option is exercisable
pursuant to Section 2 (the "Purchase Period"), upon written notice to Cascade
by Ascend (the "Repurchase Notice"):
(i) Cascade and its successors in interest shall repurchase from Ascend
all or any portion of the Cascade Option, as specified by Ascend, to the
extent not previously exercised, at the Option Repurchase Price set forth
in Section 7(b)(i), subject to and as limited by Section 2(f) above; and
(ii) Cascade and its successors in interest shall repurchase from Ascend
all or any portion of the shares of Cascade Common Stock purchased by
Ascend pursuant to the Cascade Option, as specified by Ascend, at the Share
Repurchase Price set forth in Section 7(b)(ii) subject to and as limited by
Section 2(f) above.
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(b) Certain Definitions. For purposes of this Section 7, the following
definitions shall apply:
(i) Option Repurchase Price. "Option Repurchase Price" shall mean (A) the
amount (if any) by which the Fair Market Value (as defined in Section
7(b)(iii)) of a single share of Cascade Common Stock as of the date of the
applicable Repurchase Notice exceeds the per share Exercise Price,
multiplied by (B) the number of shares of Cascade Common Stock purchasable
pursuant to the Cascade Option or the portion thereof covered by the
applicable Repurchase Notice.
(ii) Share Repurchase Price. "Share Repurchase Price" shall mean the
product of (A) the greater of (I) the Exercise Price paid by Ascend per
share of Cascade Common Stock acquired pursuant to the Cascade Option and
(II) the Fair Market Value (as defined in Section 7(b)(iii)) of a single
share of Cascade Common Stock as of the date of the applicable Repurchase
Notice, and (B) the number of shares of Cascade Common Stock to be
repurchased pursuant to this Section 7 as covered by the applicable
Repurchase Notice.
(iii) Fair Market Value. As used in this Agreement, "Fair Market Value"
shall mean, with respect to any security, the per share average of the last
reported sale prices on The Nasdaq National Market (or such other national
stock exchange or national market system as shall then be the primary
trading market for such security) for the ten (10) trading days immediately
preceding the applicable date.
(c) Redelivery of Shares of Ascend Common Stock. In Cascade's discretion or
if specified by Ascend in the Repurchase Notice, all or a portion of the Share
Repurchase Price shall be paid by Cascade in shares of Ascend Common Stock, by
redelivery to Ascend of the shares of Ascend Common Stock (and the
certificate(s) representing such shares) previously delivered by Ascend to
Cascade pursuant to a Stock Exercise. For purposes of this Section 7(c), each
share of Ascend Common Stock redelivered to Ascend shall be valued at and
exchanged for 1.428 shares of Cascade Common Stock. If fewer than all of the
shares of Cascade Common Stock purchased by Ascend pursuant to a Stock
Exercise are to be repurchased by Cascade pursuant to Section 7(a)(ii), Ascend
shall issue to Cascade new certificates representing those shares of Ascend
Common Stock which are not due to be redelivered to Ascend pursuant to this
Section 7(c) to the extent that excess shares of Ascend Common Stock are
included in the certificates redelivered to Ascend by Cascade. All shares of
Ascend Common Stock redelivered to Ascend hereunder shall be free and clear of
all claims, liens, charges, encumbrances and security interests of any nature
whatsoever.
(d) Payment and Redelivery of Cascade Options or Shares. In the event that
Ascend exercises its rights under Section 7(a), Cascade shall, within ten (10)
business days thereafter, pay the required amount to Ascend in immediately
available funds (or shares of Ascend Common Stock, if applicable) and Ascend
shall surrender to Cascade the Cascade Option or the certificate or
certificates evidencing the shares of Cascade Common Stock purchased by Ascend
pursuant hereto, and Ascend shall warrant that it has sole beneficial
ownership of the Cascade Option or such shares and that the Cascade Option or
such shares are then free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever.
(e) Repurchase Price Reduced at Ascend's Option. In the event that payment
of the repurchase price specified in Section 7(a) would subject the repurchase
of the Cascade Option or the shares of Cascade Common Stock purchased by
Ascend pursuant to the Cascade Option to a vote of the stockholders of Cascade
pursuant to applicable law, regulations, or requirements of a national
securities exchange or national market system or the Cascade Charter, then
Ascend may, at its election, reduce the repurchase price or the number of
shares covered by the Ascend repurchase request to an amount which would
permit such repurchase without the necessity for such a vote.
Section 8. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the fifth anniversary of the date
hereof (the "Expiration Date"), neither party shall, directly or indirectly,
by operation of law or otherwise, sell, assign, pledge, or otherwise dispose
of or transfer any shares of capital stock of the other party acquired by such
party pursuant to this Agreement, including any shares of Ascend Common Stock
issued pursuant to a Stock Exercise ("Restricted
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Shares"), or otherwise beneficially owned (within the meaning of Rule 13d-3
promulgated under the Exchange Act) by such other party, other than (i)
pursuant to Section 7 or (ii) in accordance with Sections 8(b) or 9.
(b) Permitted Sales. Following the termination of the Merger Agreement, a
party shall be permitted to sell any Restricted Shares beneficially owned by
it if such sale is made (i) pursuant to a tender or exchange offer or other
business combination transaction that has been approved or recommended, or
otherwise determined to be fair to and in the best interests of the holders of
common stock of the other party, by a majority of the members of the Board of
Directors of such other party, or (ii) subject to Section 8(c) or (d) as the
case may be, to a person who, immediately following such sale, would
beneficially own (within the meaning of Rule 13d-3 promulgated under the
Exchange Act), either alone or as part of a "group" (as used in Rule 13d-5
under the Exchange Act), not more than ten percent (10%) of such party's
outstanding voting securities, which person is a passive institutional
investor who would be eligible under Rule 13d-1(b)(1) under the Exchange Act
to report such holdings of Restricted Shares on Schedule 13G under the
Exchange Act.
(c) Cascade's Right of First Refusal. At any time after the first occurrence
of a Trigger Event and prior to the Expiration Date if Ascend shall desire to
sell, assign, transfer or otherwise dispose of all or any of the shares of
Cascade Common Stock or other securities acquired by it pursuant to the
Cascade Option, it shall give Cascade written notice of the proposed
transaction (an "Ascend Offer Notice"), identifying the proposed transferee,
accompanied by a copy of a binding offer to purchase such shares or other
securities signed by such transferee and setting forth the terms of the
proposed transaction. An Ascend Offer Notice shall be deemed an offer by
Ascend to Cascade, which may be accepted within five (5) business days of the
receipt of such Ascend Offer Notice, on the same terms and conditions and at
the same price at which Ascend is proposing to transfer such shares or other
securities to such transferee. The purchase of any such shares or other
securities by Cascade shall be settled within five (5) business days of the
date of the acceptance of the offer and the purchase price shall be paid to
Ascend in immediately available funds. In the event of the failure or refusal
of Cascade to purchase all the shares or other securities covered by a Ascend
Offer Notice, Ascend may sell all, but not less than all, of such shares or
other securities to the proposed transferee at no less than the price
specified and on terms no more favorable to the transferee than those set
forth in the Ascend Offer Notice as long as such sale is completed within
ninety (90) days of the receipt by Cascade of the applicable Ascend Offer
Notice; provided that the provisions of this sentence shall not limit the
rights Ascend may otherwise have in the event Cascade has accepted the offer
contained in the Ascend Offer Notice and wrongfully refuses to purchase the
shares or other securities subject thereto. The requirements of this Section
8(c) shall not apply to (i) any disposition as a result of which the proposed
transferee would own beneficially not more than three percent (3%) of the
outstanding voting power of Cascade, (ii) any disposition of Cascade Common
Stock or other securities by a person to whom Ascend has assigned its rights
under the Cascade Option with the consent of Cascade, (iii) any sale by means
of a public offering registered under the Securities Act, or (iv) any transfer
to a wholly-owned subsidiary of Ascend which agrees in writing to be bound by
the terms hereof.
(d) Ascend's Right of First Refusal. At any time after the first occurrence
of a Trigger Event and prior to the Expiration Date, if Cascade shall desire
to sell, assign, transfer or otherwise dispose of all or any of the shares of
Ascend Common Stock or other securities acquired by it pursuant to a Stock
Exercise of the Cascade Option by Ascend, it shall give Ascend written notice
of the proposed transaction (a "Cascade Offer Notice"), identifying the
proposed transferee, accompanied by a copy of a binding offer to purchase such
shares or other securities signed by such transferee and setting forth the
terms of the proposed transaction. A Cascade Offer Notice shall be deemed an
offer by Cascade to Ascend, which may be accepted within five (5) business
days of the receipt of such Cascade Offer Notice, on the same terms and
conditions and at the same price at which Cascade is proposing to transfer
such shares or other securities to such transferee. The purchase of any such
shares or other securities by Ascend shall be settled within five (5) business
days of the date of the acceptance of the offer and the purchase price shall
be paid to Cascade in immediately available funds. In the event of the failure
or refusal of Ascend to purchase all the shares or other securities covered by
a Cascade Offer Notice, Cascade may sell all, but not less than all, of such
shares or other securities to the proposed transferee at no less than the
price specified and on terms no more favorable to the transferee than those
set forth in the Cascade
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Offer Notice as long as such sale is completed within ninety (90) days of the
receipt by Ascend of the applicable Cascade Offer Notice; provided that the
provisions of this sentence shall not limit the rights Cascade may otherwise
have in the event Ascend has accepted the offer contained in the Cascade Offer
Notice and wrongfully refuses to purchase the shares or other securities
subject thereto. The requirements of this Section 8(d) shall not apply to (i)
any disposition as a result of which the proposed transferee would own
beneficially not more than three percent (3%) of the outstanding voting power
of Ascend, (ii) any sale by means of a public offering registered under the
Securities Act, or (iii) any transfer to a wholly-owned subsidiary of Cascade
which agrees in writing to be bound by the terms hereof.
(e) Additional Restrictions. Prior to any permitted sales of any Restricted
Shares under of Section 8(b)(ii), the holder thereof shall give written notice
to the issuer of such Restricted Shares of its intention to effect such
transfer. Each such notice shall describe the manner of the proposed transfer
and, if requested by the issuer of such Restricted Shares, shall be
accompanied by an opinion of counsel satisfactory to such issuer (it being
agreed that each of Gray Cary Ware & Freidenrich, A Professional Corporation,
and Testa, Hurwitz & Thibeault, LLP shall be satisfactory) to the effect that
such sale may be effected without registration under the Securities Act and
any applicable state securities laws. Each certificate for Restricted Shares
transferred as above provided shall bear the legend set forth in Section 11,
except that such certificate shall not bear such legend if (i) such transfer
is in accordance with the provisions of Rule 144 (or any other rule permitting
public sale without registration under the Securities Act) or (ii) the opinion
of counsel referred to above is to the further effect that the transferee and
any subsequent transferee would be entitled to transfer such securities in a
public sale without registration under the Securities Act and any applicable
state securities laws. The restrictions provided for in this Section 8(e)
shall not apply to securities which are not required to bear the legend
prescribed by Section 11 in accordance with the provisions of this Agreement.
The foregoing restrictions on transferability shall terminate as to any
particular shares when such shares shall have been effectively registered
under the Securities Act and any applicable state securities laws and sold or
otherwise disposed of in accordance with the registration statement covering
such shares.
Section 9. Registration Rights.
(a) Procedure. Following the termination of the Merger Agreement, either
party hereto that owns Restricted Shares (a "Holder") may by written notice
(the "Registration Notice") to the other party (the "Registrant") request the
Registrant to register under the Securities Act all or any part of the
Restricted Shares acquired by such Holder pursuant to this Agreement (the
"Registrable Securities") in order to permit the sale or other disposition of
such shares pursuant to a bona fide firm commitment underwritten public
offering, in which the Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any person (including any "group" as
used in Rule 13d-5 under the Exchange Act)) and its affiliates from purchasing
through such offering Restricted Shares representing more than three percent
(3%) of the outstanding shares of common stock of the Registrant on a fully
diluted basis (a "Permitted Offering"). Any rights to require registration
hereunder shall terminate with respect to any shares that may be sold pursuant
to Rule 144(k) under the Securities Act.
(b) Manager's Certificate. The managing underwriter shall be an investment
banking firm of nationally recognized standing, and shall be selected by (i)
the Registrant within ten (10) business days after receipt of a Registration
Notice, subject to approval of the Holder (which approval shall not be
unreasonably withheld, delayed or conditioned), or (ii) if Registrant fails to
deliver notice (the "Registrant's Designation Notice") to Holder of such
selection within ten (10) business days after receipt of a Registration
Notice, then by Holder subject to the reasonable approval of Registrant (which
approval shall not be unreasonably withheld, delayed or conditioned) (the
"Manager"), and Holder shall deliver written notice (the "Holder's Designation
Notice") of such selection within ten (10) business days after expiration of
the ten (10) day period in which Registrant is entitled to give notice. The
Registrant's Designation Notice or the Holder's Designation Notice, as the
case may be, shall state that (i) the party delivering such notice and its
proposed Manager have a good faith intention to commence promptly a Permitted
Offering, and (ii) such proposed Manager in good faith believes that, based on
the then-prevailing market conditions, it will be able to sell the Registrable
Securities to the public in a Permitted
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Offering within one hundred twenty (120) days at a per share price equal to at
least eighty percent (80%) of the then Fair Market Value of such shares.
(c) First Refusal Right. The Registrant (and/or any person designated by the
Registrant) shall thereupon have the option exercisable by written notice
delivered to the Holder within five (5) business days after the receipt of the
Registration Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities proposed to be so sold for cash at a price equal to the
product of (i) the number of Registrable Securities to be so purchased by the
Registrant and (ii) the then Fair Market Value of such shares.
(d) Closing. Any purchase of Registrable Securities by the Registrant (or
its designee) under Section 9(c) shall take place at a closing to be held at
the principal executive offices of the Registrant or at the offices of its
counsel at any reasonable date and time designated by the Registrant and/or
such designee in such notice within twenty (20) business days after delivery
of such notice, and any payment for the shares to be so purchased shall be
made by delivery at the time of such closing in immediately available funds.
(e) Certain Limitations. If the Registrant does not elect to exercise its
option pursuant to Section 9(c) with respect to all Registrable Securities, it
shall use its best efforts to effect, as promptly as practicable, the
registration under the Securities Act of the unpurchased Registrable
Securities proposed to be so sold; provided, however, that (i) neither party
shall be entitled to demand more than an aggregate of two (2) effective
registration statements hereunder, and (ii) the Registrant will not be
required to file any such registration statement during any period of time
(not to exceed sixty (60) days after such request in the case of clause (A)
below or ninety (90) days after such request in the case of clauses (B) and
(C) below) when (A) the Registrant is in possession of material non-public
information which it reasonably believes would be detrimental to be disclosed
at such time and, in the opinion of counsel to the Registrant, such
information would be required to be disclosed if a registration statement were
filed at that time; (B) the Registrant is required under the Securities Act to
include audited financial statements for any period in such registration
statement and such financial statements are not yet available for inclusion in
such registration statement; or (C) the Registrant determines, in its
reasonable judgment, that such registration would interfere with any
financing, acquisition or other transaction involving the Registrant or any of
its material subsidiaries and that such transaction is material to the
Registrant and its subsidiaries taken as a whole. If consummation of the sale
of any Registrable Securities pursuant to a registration hereunder does not
occur within one hundred twenty (120) days after the effectiveness of the
initial registration statement, the provisions of this Section 9 shall again
be applicable to any proposed registration.
(f) State Securities Laws. The Registrant shall use its reasonable best
efforts to cause any Registrable Securities registered pursuant to this
Section 9 to be qualified for sale under the securities laws of such states as
the Holder may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Registrant shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
(g) Obligations of Registrant. The Registrant shall provide to the
underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as is customary in connection with
underwritten public offerings as such underwriters may reasonably require. The
registration rights set forth in this Section 9 are subject to the condition
that the Holder shall provide the Registrant with such information with
respect to its Registrable Securities, the plans for the distribution thereof,
and such other information with respect to the Holder as, in the reasonable
judgment of counsel for the Registrant, is necessary to enable the Registrant
to include in such registration statement all material facts required to be
disclosed with respect to a registration thereunder.
(h) Indemnification. In connection with any registration effected under this
Section 9, the parties agree (i) to indemnify each other and the underwriters
in the customary manner, (ii) to enter into an underwriting agreement in form
and substance customary for transactions of such type with the Manager and the
other underwriters participating in such offering, and (iii) to take all
further actions which shall be reasonably
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necessary to effect such registration and sale (including, if the Manager
deems it necessary, participating in road-show presentations).
(i) Inclusion of Additional Shares of Registrant. The Registrant shall be
entitled to include (at its expense) additional shares of its common stock in
a registration effected pursuant to this Section 9 only if and to the extent
the Manager determines that such inclusion will not adversely affect the
prospects for success of such offering.
Section 10. Adjustment Upon Changes in Capitalization.
(a) Without limiting any restriction on Cascade contained in this Agreement
or in the Merger Agreement, in the event of any change in Cascade Common Stock
by reason of any stock dividend, stock split, merger (other than the Merger),
recapitalization, combination, exchange of shares or any similar transaction,
the type and number of shares or securities subject to the Cascade Option, and
the Exercise Price per share provided herein, shall be adjusted appropriately
and proper provision shall be made in the agreements governing such
transaction so that Ascend shall receive, upon exercise of the Cascade Option,
the number and class of securities or property that Ascend would have received
in respect of the shares of Cascade Common Stock issuable to Ascend if the
Cascade Option had been exercised immediately prior to such event or the
record date therefor, as applicable. In addition, without limiting any
restriction on Ascend or Cascade contained in this Agreement or the Merger
Agreement, in the event of any change in Ascend Common Stock or Cascade Common
Stock by reason of any stock dividend, stock split, merger (other than the
Merger), recapitalization, combination, exchange of shares or similar
transaction, equitable adjustment shall be made to the other provisions hereof
to carry out the original intent of this Agreement.
(b) In the event that Cascade shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Ascend or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger; (ii) to permit any person, other than Ascend or one
of its Subsidiaries, to merge into Cascade and Cascade shall be the continuing
or surviving corporation, but, in connection with such merger, the then-
outstanding shares of Cascade Common Stock shall be changed into or exchanged
for stock or other securities of Cascade or any other person or cash or any
other property; or (iii) to sell or otherwise transfer all or substantially
all of its assets to any person, other than Ascend or one of its Subsidiaries,
then, and in each such case, the agreement governing such transaction shall
make proper provision so that upon the consummation of such transaction and
upon the subsequent exercise of the Cascade Option, Ascend shall be entitled
to receive, for each share of Cascade Common Stock with respect to which the
Cascade Option has not theretofore been exercised, an amount of consideration
in the form of and equal to the per share amount of consideration that would
be received by the holder of one share of Cascade Common Stock (and, in the
event of an election or similar arrangement with respect to the type of
consideration to be received by the holders of Cascade Common Stock, subject
to the foregoing, proper provision shall be made so that the holder of the
Cascade Option would have the same election or similar rights as would the
holder of the number of shares of Cascade Common Stock for which the Cascade
Option is then exercisable).
Section 11. Restrictive Legends. Each certificate representing shares of
Cascade Common Stock issued to Ascend hereunder, and shares of Ascend Common
Stock, if any, delivered to Cascade pursuant to a Stock Exercise, shall
include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES OR
BLUE SKY LAWS, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO
SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE CASCADE
STOCK OPTION AGREEMENT DATED AS OF MARCH 30, 1997, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that (i) the reference to the resale restrictions
of the Securities Act and state securities or Blue Sky laws in the foregoing
legend shall be removed by delivery of substitute certificate(s) without such
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reference if Ascend or Cascade, as the case may be, shall have delivered to
the other party a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel, in form and substance
reasonably satisfactory to the other party, to the effect that such legend is
not required for purposes of the Securities Act or such laws; (ii) the
reference to the provisions of this Agreement in the foregoing legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law. Certificates representing shares sold in a registered public offering
pursuant to Section 9 shall not be required to bear the legend set forth in
this Section 11.
Section 12. Binding Effect; No Assignment; No Third-Party
Beneficiaries. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and permitted assigns.
Except as expressly provided for in this Agreement, neither this Agreement nor
the rights or obligations of either party hereto are assignable, except by
operation of law, or with the written consent of the other party, and any such
attempted assignment in violation of this Agreement shall be void and of no
force or effect. Nothing contained in this Agreement, express or implied, is
intended to confer upon any person other than the parties hereto and their
respective permitted assigns any rights or remedies of any nature whatsoever.
Any Restricted Shares sold by a party in compliance with the provisions of
Section 9 shall, upon consummation of such sale, be free of the restrictions
imposed and the benefits provided with respect to such shares by this
Agreement.
Section 13. Specific Performance. The parties hereto recognize and agree
that if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise breached,
immediate and irreparable harm or injury would be caused for which money
damages would not be an adequate remedy. Accordingly, each party agrees that,
in addition to other remedies, whether at law or in equity, the other party
shall be entitled to an injunction to prevent or restrain any violation or
threatened violation of the provisions of this Agreement, and to enforce
specifically the terms and provisions hereof, in any court of the State of
Delaware or of the United States of America located in the State of Delaware.
In the event that any action should be brought in equity to enforce the
provisions of this Agreement, neither party will allege, and each party hereby
waives the defense, that there is an adequate remedy at law. Each party hereto
irrevocably and unconditionally consents and submits to the jurisdiction of
the courts of the State of Delaware and of the United States of America
located in the City of Wilmington in the State of Delaware for any actions,
suits or proceedings arising out of or relating to this Agreement and the
transactions contemplated hereby, and waives any objection to venue in any
such court therein.
Section 14. Validity.
(a) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of
this Agreement, which shall remain in full force and effect.
(b) In the event any court or other governmental or regulatory authority
holds any provisions of this Agreement to be null, void or unenforceable, the
parties hereto shall negotiate in good faith the execution and delivery of an
amendment to this Agreement in order, as nearly as possible, to effectuate, to
the extent permitted by law, the intent of the parties hereto with respect to
such provision and the economic effects thereof.
(c) If for any reason any such court or other governmental or regulatory
authority determines that Ascend is not permitted to acquire, or Cascade is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Cascade Common Stock provided in this Agreement (as the same may be
adjusted), it is the express intention of Cascade to allow Ascend to acquire
or to require Cascade to repurchase such lesser number of shares as may be
permissible without any other amendment or modification hereof.
(d) Each party agrees that, should any court or other governmental or
regulatory authority hold any provision of this Agreement or part hereof to be
null, void or unenforceable, or order any party to take any action
B-11
<PAGE>
inconsistent herewith, or not take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including but not limited to money damages, for breach
hereof or of any other provision of this Agreement or part hereof as the
result of such holding or order.
Section 15. Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if (a) delivered personally, or (b) if
sent by overnight courier service (receipt confirmed in writing), or (c) if
delivered by facsimile transmission (with receipt confirmed), or (d) five (5)
days after being mailed by registered or certified mail (return receipt
requested) to the parties in each case to the following addresses (or at such
other address for a party as shall be specified by like notice):
If to Cascade, to:
Cascade Communications Corp.
5 Carlisle Road
Westford, MA 01886
Facsimile No.: (508) 692-1221
Attention: President and Corporate Counsel
with a copy to:
Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Fax Number: (617) 248-7100
Attention: John A. Meltaus, Esq.
If to Ascend, to:
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Facsimile No.: (510) 769-6001
Attention: President
with a copy to:
Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, CA 94301
Fax Number: (415) 327-3699
Attention: Gregory M. Gallo, Esq. &
Rod J. Howard, Esq.
Section 16. Governing Law. This Agreement shall be governed by and
construed, and any controversy arising out of or otherwise relating to this
Agreement shall be determined, in accordance with the laws of the State of
Delaware applicable to agreements made and to be performed entirely within
such State and without regard to its choice of law principles. Each party
hereto consents and submits to the exclusive jurisdiction of the courts of the
State of Delaware and the courts of the United States located in such state
for the adjudication of any action, suit, proceeding, claim or dispute arising
out of or otherwise relating to this Agreement.
Section 17. Interpretation. The headings contained in this Agreement are for
reference purposes and shall not affect in any way the meaning or
interpretation of the Agreement. When reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement, unless
otherwise indicated. Whenever the words "include," "includes," or "including"
are used in this Agreement, they shall be deemed
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<PAGE>
to be followed by the words "without limitation." Whenever "or" is used in
this Agreement it shall be construed in the nonexclusive sense. The words
"herein," "hereby," "hereof," "hereto," "hereunder" and words of similar
import refer to this Agreement.
Section 18. Counterparts; Effect. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 19. Expenses. Cascade shall pay all expenses, and any and all
federal, state and local taxes and other charges, that may be payable in
connection with the preparation, issuance and delivery of Cascade stock
certificates under Section 4 and any stock listing or stock quotation
application required to be filed by Cascade with respect to such shares, and
Ascend shall pay all expenses, and any and all federal, state and local taxes
and other charges, that may be payable in connection with the preparation,
issuance and delivery of Ascend stock certificates in connection with a Stock
Exercise and any stock listing or stock quotation application required to be
filed by Cascade with respect to such shares. A registration effected under
Section 9 shall be effected at the Registrant's expense, except for
underwriting discounts and commissions and the fees and the expenses of
counsel to the Holder. Subject to the foregoing, and except as otherwise
expressly provided herein or in the Merger Agreement, all other costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses.
Section 20. Amendments; Waiver. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of
a waiver, by an instrument signed on behalf of the party waiving compliance.
Section 21. Extension of Time Periods. The time periods for exercises of
certain rights hereunder shall be extended (but in no event by more than six
(6) months): (a) to the extent necessary to obtain all governmental approvals
for the exercise of such rights, and for the expiration of all statutory
waiting periods; and (b) to the extent necessary to avoid any liability or
disgorgement of profits under Section 16(b) of the Exchange Act by reason of
such exercise.
Section 22. Further Assurances. Each party agrees to execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to consummate the transactions contemplated hereby.
[Remainder of Page Intentionally Left Blank]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first
above written.
Cascade Communications Corp.
By: /s/ DANIEL E. SMITH
_________________________________
Name: Daniel E. Smith
Title: President and Chief
Executive Officer
Ascend Communications, Inc.
By: /s/ ROBERT K. DAHL
_________________________________
Name: Robert K. Dahl
Title: Vice President, Finance,
and Chief Financial Officer
B-14
<PAGE>
EXHIBIT 2
CASCADE DIRECTOR AND OFFICER
STOCK VOTING AGREEMENT
THIS CASCADE DIRECTOR AND OFFICER STOCK VOTING AGREEMENT ("Agreement" or
"Cascade Stock Voting Agreement") is made and entered into as of March , 1997
by and between Ascend Communications, Inc., a Delaware corporation ("Ascend"),
and the undersigned director or officer (the "Holder") of Cascade
Communications Corp., a Delaware corporation ("Cascade").
Recitals
Ascend, Cascade Merger Corporation, a Delaware corporation and a wholly-
owned subsidiary of Ascend ("Sub"), and Cascade have entered into an Agreement
and Plan of Reorganization, dated as of March 30, 1997 (the "Merger
Agreement") providing for the merger of Sub with and into Cascade (the
"Merger"). As a result of the Merger, which is intended to qualify as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended, and to be accounted for as a pooling of interests,
Cascade will become a wholly-owned subsidiary of Ascend and stockholders of
Cascade will become stockholders of Ascend. Holder is the holder of record and
the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) of the number of shares of the
capital stock of Cascade indicated on the signature page of this Cascade Stock
Voting Agreement (the "Shares"). As a condition to its execution and delivery
of the Merger Agreement, Ascend has requested that Holder agree, and in
consideration, and to induce the execution and delivery, of the Merger
Agreement by Ascend, Holder is willing to agree to vote all shares of Cascade
capital stock owned by Holder so as to facilitate consummation of the Merger,
as more fully described below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties agree as
follows:
Agreement
Section 1 Agreement to Vote Shares. At every meeting of the Cascade
stockholders called with respect to any of the following, and at any
adjournment thereof, and with respect to every action or approval by written
consent of Cascade stockholders solicited with respect to any of the
following, Holder shall vote the Shares and any shares of Cascade capital
stock that Holder purchases or otherwise acquires beneficial ownership of
after the date of this Cascade Stock Voting Agreement and prior to the
expiration or termination of this Cascade Stock Voting Agreement ("New
Shares"):
(a) in favor of adoption of the Merger Agreement, as the same may be
amended from time to time, and approval of the Merger and any proposal or
action which would, or could reasonably be expected to, facilitate the
Merger;
(b) against approval of any proposal made in opposition to or competition
with consummation of the Merger and the Merger Agreement; and
(c) against any merger, consolidation or other business combination of
Cascade with, sale of assets or stock of Cascade to, or reorganization or
recapitalization involving Cascade with, any party other than Ascend or an
affiliate of Ascend as contemplated by the Merger Agreement (any event
described in clauses (b) or (c) hereinafter referred to as an "Opposing
Proposal").
Holder, as the holder of voting stock of Cascade, shall be present, in
person or by proxy, at all meetings of stockholders of Cascade so that all
Shares and New Shares are counted for the purposes of determining the presence
of a quorum at such meetings. This Cascade Stock Voting Agreement is intended
to bind Holder only
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<PAGE>
with respect to the specific matters set forth herein and solely in his or her
capacity as a stockholder, and shall not prohibit, limit or restrict in any
manner Holder from acting in Holder's capacity as an officer or director of
Cascade or exercising or observing Holder's fiduciary duties and
responsibilities as an officer or director of Cascade.
Section 2 Irrevocable Proxy. Concurrently with the execution of this Cascade
Stock Voting Agreement, Holder agrees to deliver to Ascend a proxy in the form
attached hereto as Annex A (the "Proxy"), which shall be irrevocable to the
extent provided therein; provided, however, that the Proxy shall be revoked
upon expiration or termination of this Cascade Stock Voting Agreement in
accordance with its terms.
Section 3 Representations, Warranties and Covenants of Holder. Holder hereby
represents, warrants and covenants to Ascend as follows:
(a) Ownership of Shares. Holder (i) as of the date of this Agreement, is
the holder of record and beneficial owner of the Shares free and clear of
any liens, claims, options, charges or other encumbrances that would
interfere with the voting of the Shares or the granting of any proxy with
respect thereto, (ii) as of the date of this Agreement, does not
beneficially own any shares of capital stock of Cascade other than the
Shares (except to the extent that Holder currently disclaims beneficial
ownership in accordance with applicable law) and (iii) has full power and
authority to make, enter into, deliver and carry out the terms of this
Cascade Stock Voting Agreement and the Proxy.
(b) No Voting Trusts and Agreements. Between the date of this Agreement
and the expiration or termination of this Agreement, Holder will not, and
will not permit any entity under Holder's control to, deposit any shares of
Cascade capital stock held by Holder or such entity in a voting trust or
subject any shares of Cascade capital stock held by such Holder or such
entity to any arrangement or agreement with respect to the voting of such
shares of capital stock, other than agreements entered into with Ascend.
(c) Validity; No Conflict. This Cascade Stock Voting Agreement
constitutes the legal, valid and binding obligation of Holder. Neither the
execution of this Cascade Stock Voting Agreement by Holder nor the
consummation of the transactions contemplated herein will violate or result
in a breach of (i) any provision of any trust, charter, partnership
agreement or other charter document applicable to Holder, (ii) any
agreement to which Holder is a party or by which Holder is bound, (iii) any
decree, judgment or order to which Holder is subject, or (iv) any law or
regulation now in effect applicable to Holder.
(d) No Proxy Solicitations. Except as required by law, including without
limitation actions which the Holder determines in reasonable good faith are
required pursuant to Holder's fiduciary duties as an officer or director of
Cascade and as otherwise contemplated by the last sentence of Section 1,
between the date of this Agreement and the expiration or termination of
this Cascade Stock Voting Agreement, Holder will not, and will not permit
any entity under Holder's control, to (i) solicit proxies or become a
"participant" in a "solicitation" (as such terms are defined in Rule 14A
under the Exchange Act) with respect to an Opposing Proposal or assist any
party in taking or planning any action which would compete with, restrain
or otherwise serve to interfere with or inhibit the timely consummation of
the Merger in accordance with the terms of the Merger Agreement, (ii)
initiate a stockholders' vote or action by written consent of Cascade
stockholders without a meeting with respect to an Opposing Proposal or
(iii) become a member of a "group" (as such term is used in Section 13(d)
of the Exchange Act) with respect to any voting securities of Cascade with
respect to an Opposing Proposal.
Section 4 Representations, Warranties and Covenants of Ascend. Ascend
represents, warrants and covenants to Holder as follows:
(a) Due Authorization. This Cascade Stock Voting Agreement has been
authorized by all necessary corporate action on the part of Ascend and has
been duly executed by a duly authorized officer of Ascend.
(b) Validity; No Conflict. This Cascade Stock Voting Agreement
constitutes the legal, valid and binding obligation of Ascend. Neither the
execution of this Cascade Stock Voting Agreement by Ascend nor the
consummation of the transactions contemplated herein will violate or result
in a breach of (i) any
2
<PAGE>
agreement to which Ascend is a party or by which Ascend is bound, (ii) any
decree, judgment or order to which Ascend is subject, or (iii) any law or
regulation now in effect applicable to Ascend.
Section 5 Additional Documents. Holder and Ascend hereby covenant and agree
to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Ascend's legal counsel or Holder, as the case may be, to
carry out the intent of this Cascade Stock Voting Agreement.
Section 6 Consent and Waiver. Holder hereby gives any consent or waiver
reasonably required for the performance of Holder's obligations hereunder
solely in such Holder's capacity as a stockholder of Cascade.
Section 7 Termination. Notwithstanding any other provision contained herein,
this Cascade Stock Voting Agreement and the Proxy, and all obligations of
Holder hereunder and thereunder, shall terminate upon the earlier of the
Effective Time (as defined in the Merger Agreement) or the expiration or
termination of the Merger Agreement.
Section 8 Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of this
Cascade Stock Voting Agreement or the Proxy (i) is held by a court of
competent jurisdiction to be invalid, void or unenforceable for any reason,
or (ii) would preclude the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986,
as amended, or prevent Ascend or Cascade from accounting for the business
combination contemplated by the Merger Agreement as a pooling of interests,
such term, provision, covenant or restriction shall be modified or voided,
as may be necessary to achieve the intent of the parties to the extent
possible, and the remainder of the terms, provisions, covenants and
restrictions of this Cascade Stock Voting Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
(b) Binding Effect and Assignment. This Cascade Stock Voting Agreement
and all of the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, but, except as otherwise specifically provided herein, neither
this Cascade Stock Voting Agreement nor any of the rights, interests or
obligations of the parties hereto may be assigned by either of the parties
hereto without the prior written consent of the other, and any attempted
assignment thereof without such consent shall be null and void.
(c) Amendments and Modifications. This Cascade Stock Voting Agreement may
not be modified, amended, altered or supplemented except upon the execution
and delivery of a written agreement executed by the parties hereto.
(d) Specific Performance; Injunctive Relief. The parties hereto
acknowledge that Ascend will be irreparably harmed by a breach of any of
the covenants or agreements of Holder set forth herein and that there will
be no adequate remedy at law for such a breach. Therefore, it is agreed
that, in addition to any other remedies which may be available to Ascend
upon such breach, Ascend shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to it at law or in equity.
(e) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and sufficient if delivered in
person, by commercial overnight courier service, by confirmed telecopy, or
sent by mail (registered or certified mail, postage prepaid, return receipt
requested), to the respective parties as follows:
If to Ascend: Ascend
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
(510) 747-2616
Attention: Chief Financial Officer
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<PAGE>
If to Holder:To the address for notice set forth on the last page
hereof.
With a copy to: Cascade
5 Carlisle Road
Westford, MA 01886
(508) 692-9214
Attention: Chief Financial Officer
and to: Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, CA 94301
Fax Number: 415-327-3699
Attention: Gregory M. Gallo, Esq.
& Rod J. Howard, Esq.
and to: Testa, Hurwitz & Thibeault, LLP
High Street Tower
125 High Street
Boston, MA 02110
Fax Number: 617-248-7100
Attention: John A. Meltaus, Esq. &
Debra A. Buxbaum, Esq.
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
(f) Governing Law. This Cascade Stock Voting Agreement shall be governed
by, construed and enforced in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law. Each
party hereto irrevocably and unconditionally consents and submits to the
jurisdiction of the courts of the State of Delaware and of the United
States of America located in the State of Delaware for any actions, suits
or proceedings arising out of or relating to this agreement and the
transactions contemplated hereby.
(g) Entire Agreement. This Cascade Stock Voting Agreement contains the
entire understanding of the parties with respect to the subject matter
hereof, and supersedes all prior negotiations and understandings between
the parties with respect to such subject matter.
(h) Counterparts. This Cascade Stock Voting Agreement may be executed in
one or more counterparts, each of which shall be an original, but all of
which together shall constitute one and the same instrument.
(i) Effect of Headings. The section headings contained herein are for
convenience only and shall not affect the construction or interpretation of
this Cascade Stock Voting Agreement.
[Remainder of Page Intentionally Left Blank]
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Cascade Stock Voting
Agreement to be duly executed on the day and year first above written.
Ascend Communications, Inc.
By: _________________________________
Its: ________________________________
Holder
By: _________________________________
Holder's Address for Notice:
_____________________________________
_____________________________________
_____________________________________
Number of Shares owned beneficially:
_____________________________________
Number of Shares owned of record
(ifdifferent from above):
_____________________________________
5
<PAGE>
ANNEX A
IRREVOCABLE PROXY
The undersigned stockholder of Cascade Corp., a Delaware corporation
("Cascade"), hereby irrevocably appoints and constitutes the members of the
Board of Directors of Ascend, Inc., a Delaware corporation ("Ascend"), and
each of them (the "Proxyholders"), the agents and proxies of the undersigned,
with full power of substitution and resubstitution, to the full extent of the
undersigned's rights with respect to the shares of capital stock of Cascade
beneficially owned by the undersigned, and any and all other shares or
securities issued or issuable in respect thereof, or which the undersigned
otherwise acquires, on or after the date hereof and prior to the date this
proxy terminates (collectively, the "Shares"), to vote the Shares as follows:
The agents and proxies named above are empowered at any time prior to the
expiration or termination of this proxy to exercise all voting rights
(including, without limitation, the power to execute and deliver written
consents with respect to the Shares) of the undersigned at every special or
adjourned meeting of Cascade stockholders (but not at any annual meeting of
Cascade stockholders), and in every written consent in lieu of such a
meeting, or otherwise,
(a) in favor of (i) adoption of the Agreement and Plan of Reorganization
by and among Ascend, Catskill Merger Corporation ("Sub"), and Cascade, dated
as of March 30, 1997, as the same may be amended from time to time (the
"Merger Agreement"), and (ii) approval of the merger of Sub with and into
Cascade as contemplated by the Merger Agreement (the "Merger") and any
proposal or action which would, or could reasonably be expected to,
facilitate the Merger;
(b) against approval of any proposal made in opposition to or competition
with consummation of the Merger and the Merger Agreement;
(c) against any merger, consolidation or other business combination of
Cascade with, sale of assets or stock of Cascade to, or reorganization or
recapitalization involving Cascade with, any party other than Ascend or an
affiliate of Ascend as contemplated by the Merger Agreement.
The Proxyholders may not exercise this proxy with respect to any other
matter. The undersigned may vote the Shares on all such other matters in
person or by proxy.
The proxy granted by the undersigned to the Proxyholders hereby is granted
as of the date of this Irrevocable Proxy in order to secure the obligations of
the undersigned set forth in Section 1 of the Cascade Director and Officer
Stock Voting Agreement between the undersigned and Ascend, and is irrevocable
and coupled with an interest in such obligations and in the shares of capital
stock of Cascade to be exchanged pursuant the Merger Agreement. This proxy will
expire or terminate upon the expiration or termination of such Cascade Director
and Officer Stock Voting Agreement in accordance with its terms.
Upon the execution hereof, all prior proxies given by the undersigned with
respect to the Shares are hereby revoked, and no subsequent proxies will be
given with respect to the Shares until such time as this proxy shall be
terminated in accordance with its terms, other than any proxy given or to be
given by the undersigned with respect to the 1997 Annual Meeting of Cascade
stockholders.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned. The undersigned authorizes the
Proxyholders to file this proxy and any substitution or revocation of
substitution with the Secretary of Cascade and with any Inspector of Elections
at any special meeting of the stockholders of Cascade.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
This proxy is irrevocable and shall survive the insolvency, incapacity, death
or liquidation of the undersigned.
Dated: March , 1997.
Name of Holder: ____________________________________
Signature of Holder: _______________________________
Shares beneficially owned by Holder: _______________
Shares owned of record by Holder: __________________
