<PAGE>
--------------------------------
|OMB APPROVAL |
|OMB Number: 3235-0145 |
|Expires: October 31, 1997 |
|Estimated average burden hours|
|per response.............14.90|
--------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. _____)*
ASCEND COMMUNICATIONS, INC.
- -------------------------------------------------------------------------------
(Name of Issuer)
Common Stock, $.001 Par Value Per Share
- -------------------------------------------------------------------------------
(Title of Class of Securities)
043491 10 9
--------------------------------------------------------
(CUSIP Number)
Debra A. Buxbaum, Testa, Hurwitz & Thibeault, LLP, High Street Tower, 125 High
Street, Boston, MA 02110 (617) 248-7000
- -------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices
and Communications)
March 30, 1997
- -------------------------------------------------------------------------------
(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 [_].
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 the
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).
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 2 OF 14 PAGES
- ----------------------- ---------------------
SCHEDULE 13D
- ------------------------------------------------------------------------------
NAME OF REPORTING PERSON
1
Cascade Communications Corp.
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON 04-3099677
- ------------------------------------------------------------------------------
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
2 (a) [_]
(b) [_]
- ------------------------------------------------------------------------------
SEC USE ONLY
3
- ------------------------------------------------------------------------------
SOURCE OF FUNDS*
4
WC, BK, OO
- ------------------------------------------------------------------------------
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED [_]
PURSUANT TO ITEMS 2(d) or 2(e)
5
- ------------------------------------------------------------------------------
CITIZENSHIP OR PLACE OF ORGANIZATION
6
State of Delaware
- ------------------------------------------------------------------------------
SOLE VOTING POWER
7
24,025,741 (acquisition of such shares is conditioned
upon the occurrence of certain events specified in
that certain Ascend Stock Option Agreement dated March
30, 1997 filed as Exhibit 2 to this Schedule 13D)
SHARES -----------------------------------------------------------
SHARED VOTING POWER
BENEFICIALLY 8
6,608,172
OWNED BY
-----------------------------------------------------------
EACH SOLE DISPOSITIVE POWER 24,025,741 (acquisition of such
shares is conditioned upon the occurrence of certain
REPORTING events specified in that certain Ascend Stock Option
9 Agreement dated March 30, 1997 filed as Exhibit 2 to
this Schedule 13D)
PERSON
-----------------------------------------------------------
SHARED DISPOSITIVE POWER
WITH 10
-0-
- ------------------------------------------------------------------------------
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
11
30,633,913
- ------------------------------------------------------------------------------
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
12
[_]
- ------------------------------------------------------------------------------
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
13
20.5%
- ------------------------------------------------------------------------------
TYPE OF REPORTING PERSON*
14
CO
- ------------------------------------------------------------------------------
*SEE INSTRUCTION BEFORE FILLING OUT!
INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7
(INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION.
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 3 OF 14 PAGES
- ----------------------- ---------------------
Neither the filing of this statement on Schedule 13D nor any of its
contents shall be deemed to constitute an admission by Cascade Communications
Corp. that it is the beneficial owner of any of the Common Stock referred to
herein for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended (the "Act"), or for any other purpose, and such beneficial ownership is
expressly disclaimed.
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D relates to the Common Stock, $.001 par
value per share (the "Common Stock"), of Ascend Communications, Inc., a Delaware
corporation (the "Issuer"). The principal executive offices of the Issuer are
located at One Ascend Plaza, 1701 Harbor Bay Parkway, Alameda, California 94502.
ITEM 2. IDENTITY AND BACKGROUND
(a) The name of the person filing this statement is Cascade
Communications Corp., a Delaware corporation ("Cascade").
(b) The address of the principal office and principal business of
Cascade is 5 Carlisle Street, Westford, Massachusetts 01886. Cascade develops,
manufactures, markets and supports a family of high performance, multi-service
wide area network switches that enable public service providers and private
network managers to provide cost-effective, high-speed data, video and voice
communications services to end users.
(c) Set forth in Schedule A is an appendix to Item 2 setting forth, to
Cascade's knowledge as of the date hereof, the name and present principal
occupation or employment and the name, principal business address of any
corporation or other organization in which such employment is conducted, of each
of Cascade's directors and executive officers as of the date hereof. The
information contained in Schedule A is incorporated herein by reference.
(d) During the past five years, neither Cascade nor, to Cascade's
knowledge, any person named in Schedule A to this Schedule 13D, has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
(e) During the past five years, neither Cascade nor, to Cascade's
knowledge, any person named in Schedule A to this Schedule 13D, was a party to a
civil proceeding of a judicial or administrative body of competent jurisdiction
as a result of which such person was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting or mandating activity
subject to, federal or state securities laws or finding any violation with
respect to such laws.
(f) All of the directors and executive officers of Cascade named in
Schedule A to this Schedule 13D are citizens of the United States.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
This statement on Schedule 13D relates to (i) an option granted to
Cascade by the Issuer to purchase shares of Common Stock from the Issuer as
described in Item 4 below (the "Ascend Stock Option") and (ii) to certain voting
arrangements between Ascend, Cascade and certain stockholders of the Issuer as
described in Item 4 below.
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 4 OF 14 PAGES
- ----------------------- ---------------------
The Stock Option Agreements. The Ascend Stock Option entitles Cascade
to purchase up to 24,025,741 shares of Issuer Common Stock under the
circumstances specified in the Ascend Stock Option, as described in Item 4, by
exchanging therefor shares of Cascade's Common Stock at the rate of 1.833
shares of Cascade Common Stock for each share of Issuer Common Stock subject
to such option and/or, at Cascade's election, by paying cash of $52.00 per
share. The number of shares of Common Stock subject to the Ascend Stock Option
will be equal to 19.9% of the total outstanding shares of Issuer Common Stock
as of March 30, 1997, subject to adjustment as provided in said Ascend Stock
Option. It is presently anticipated that any purchases of the Issuer's Common
Stock for which Cascade 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 Ascend Stock Option. If Cascade were to elect to pay the
exercise price by delivery of shares of Cascade Common Stock, such shares
would be newly-issued after approval of such issuance by Cascade's board of
directors. The foregoing summary of the Ascend Stock Option is qualified in
its entirety by reference to the copy of the Ascend Stock Option Agreement
included as Exhibit 2 to this Schedule 13D and incorporated herein in
---------
its entirety by reference. If the Merger is consummated pursuant to the
Agreement and Plan of Reorganization dated as of March 30, 1997, by and among
Issuer, Catskill Merger Corporation and Cascade (the "Merger Agreement"), the
Ascend Stock Option will not be exercised. No monetary consideration was paid
by Cascade to the Issuer for such option.
As an inducement to the Issuer to enter into the Merger Agreement,
Issuer and Cascade have also entered into a Cascade Stock Option Agreement,
which entitles the Issuer to purchase up to 18,765,939 shares of Cascade Common
Stock under the circumstances specified in the Cascade Stock Option Agreement
between Cascade and the Issuer by exchanging therefor shares of Issuer Common
Stock at the rate of 0.70 of a share of Issuer Common Stock for each share of
Cascade Common Stock subject to such option and/or, at Issuer's election, by
paying cash of $36.40 per share. The foregoing summary of the Cascade Stock
Option Agreement is qualified in its entirety by reference to the copy of the
Cascade Stock Option Agreement included as Exhibit 1 to this Schedule 13D and
---------
incorporated herein in its entirety by reference. If the Merger is consummated
pursuant to the Merger Agreement, the Cascade Stock Option will not be
exercised. No monetary consideration was paid by the Issuer to Cascade for such
option.
The Voting Agreements. Also as an inducement to Cascade to enter into
the Merger Agreement, the all of the directors and executive officers (the
"Voting Agreement Stockholders") of the Issuer have entered into an Ascend
Director and Officer Stock Voting Agreement (collectively the "Ascend Voting
Agreements") with Cascade. Pursuant to each Voting Agreement, the Voting
Agreement Stockholders have agreed to vote the shares of Issuer Common Stock
owned by them (i) in favor of the issuance of the shares of Issuer Common Stock
pursuant to the Merger Agreement and (ii) against approval of any proposal made
in opposition to or competition with consummation of the Merger. The Voting
Agreement Stockholders have also irrevocably appointed Cascade as their lawful
attorney and proxy to vote the shares of Issuer Common Stock owned by the Voting
Agreement Stockholders in the manner described in the previous sentence. The
Voting Agreements each terminates upon the earlier to occur of the Effective
Time or the termination of the Merger Agreement. The name of each Voting
Agreement Stockholder and the number of outstanding shares of Issuer Common
Stock beneficially held by such stockholder as of March 24, 1997 (including an
aggregate of 4,796,700 shares issuable upon exercise of stock options held by
the parties to the Ascend Voting Agreements) is set forth in Schedule B hereto
which is hereby incorporated by this reference. No monetary consideration was
paid by Cascade to the Issuer or to the parties to the Ascend Voting
Agreements for the Ascend Voting Agreements. The
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 5 OF 14 PAGES
- ----------------------- ---------------------
foregoing summary of each of the Ascend Voting Agreements is qualified in its
entirety by reference to the copy of the form of Ascend Voting Agreement
included as Exhibit 4 of this Schedule 13D and incorporated herein in its
---------
entirety by reference. Inasmuch as Cascade's voting rights under the Ascend
Voting Agreements are limited solely to certain matters related to the Merger,
and Cascade has no economic interest in or dispositive power over the shares of
the Issuer's Common Stock covered thereby, and such shares may be sold by the
holders thereof, Cascade expressly disclaims beneficial ownership of the shares
of Common Stock of the Issuer covered by the Voting Agreements. As an inducement
to Issuer to enter into the Merger Agreement, all of the directors and executive
officers of Cascade have entered into a Cascade Director and Officer Stock
Voting Agreement dated as of March 30, 1997 with the Issuer, the substance of
which is substantially similar to the substance of the Ascend Voting
Agreements. A copy of the form of Cascade Director and Officer Stock Voting
Agreement is included as Exhibit 3 of this Schedule 13D and incorporated herein
---------
in its entirety by reference.
Affiliate Agreements. Also in connection with the Merger Agreement,
the Voting Agreement Stockholders and the directors and executive officers of
Cascade have each entered into a Director, Officer and Stockholder Agreement
with Ascend (collectively, the "Agreements") pursuant to which each person has
agreed not to sell, exchange, transfer, pledge, dispose or otherwise reduce
its risk relative to any shares of Issuer Common Stock or other equity
securities of Issuer (and Cascade Common Stock with respect to its directors
and executive officers) owned by it during the period beginning on the date 30
days prior to the Closing Date (as defined in the Merger Agreement) and ending
on the day after Ascend has published financial results covering at least 30
days of combined operations of Ascend and Cascade in the form of a quarterly
earnings report, an effective registration statement filed with the Securities
and Exchange Commission ("Commission"), a report to the Commission on Form 10-
K, 10-Q or 8-K, or any other public filing or announcement which includes the
combined results of operations. The foregoing summary of the Agreements is
qualified in its entirety by reference to the forms of the Agreements included
as Exhibits 5 and 6 of this Schedule 13D and incorporated herein in its
----------------
entirety by reference.
ITEM 4. PURPOSE OF TRANSACTION
As stated above, the Stock Options 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, without limitation, approval of the
stockholders of Cascade and the Issuer, approvals of regulatory agencies, and
the satisfaction or waiver of various other terms and conditions, Catskill
Merger Corporation, a wholly-owned subsidiary of the Issuer, will be merged
with and into Cascade, which will be the surviving corporation. As a result,
Cascade will become a wholly-owned subsidiary of the Issuer, and each share of
the Cascade's Common Stock then outstanding will be converted into the right
to receive 0.7 (the "Exchange Ratio") share of Issuer 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 will be assumed by the
Issuer and will become options or rights to acquire shares of Issuer 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 Cascade, to the Issuer's Board of Directors effective upon the consummation
of the Merger. In addition, following the Merger, certain executive officers
of Cascade will become executive officers and key management employees of the
Issuer.
Subject to certain limitations, the Ascend Stock Option is exercisable,
in whole or in part, at any time or from time to time after the occurrence of an
event (a "Trigger Event") which causes a
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 6 OF 14 PAGES
- ----------------------- ---------------------
Termination Fee or Post-Termination Fee to become payable to Cascade by the
Issuer under the Merger Agreement. A Trigger Event will be deemed to have
occurred and the Ascend Stock Option will become exercisable under the following
circumstances:
(1) upon the termination of the Merger Agreement by Cascade 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
Cascade; (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 Cascade 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
Cascade 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 Cascade 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, 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 Cascade, and at the time of the event giving rise to the right of
Cascade 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 the approval of the
issuance of Issuer Common Stock in 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.
(4) after termination of the Merger Agreement by Cascade as a result of
the failure to receive the requisite vote for the issuance of shares of Issuer
Common Stock pursuant to the Merger Agreement by the stockholders of the Issuer,
if Cascade 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 Cascade 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 Cascade, or any affiliate thereof (a "Third Party"),
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 7 OF 14 PAGES
- ----------------------- ---------------------
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 Ascend Stock Option terminates upon the
occurrence of the earlier of the following: (i) the effective time of the
Merger, (ii) the termination of the Merger Agreement under circumstances which
do not constitute a Trigger Event, and (iii) 270 days after the Issuer receives
written notice of the occurrence of a Trigger Event. Notwithstanding the
foregoing, the Ascend Stock Option will remain exercisable for a period of 180
days after the date on which it becomes exercisable after a termination of the
Merger Agreement by Cascade as described in the paragraph (4) of this Item 4. In
addition, the Ascend Stock Option exercise period is automatically extended if
exercise of the Ascend Stock Option is prohibited or restrained for certain
legal reasons. The Ascend Stock Option may not be exercised if Cascade is in
material breach of its material representations, warranties, covenants or
agreements in the Ascend Stock Option Agreement or the Merger Agreement.
At any time when the Ascend Stock Option is exercisable, Cascade has the
right to "put" the Ascend Stock Option back to the Issuer. Under these "put"
provisions, Cascade has the right to require the Issuer to repurchase the Ascend
Stock Option, either in whole or in part. In addition, Cascade has certain
rights under the Ascend Stock Option Agreement to "put" any or all shares
purchased under the Ascend Stock Option back to the Issuer. Under these stock
"put" provisions, Cascade has the right to require the Issuer to repurchase any
or all shares purchased by Cascade under the Ascend Stock Option. At the
Issuer's discretion, or as specified by Cascade, all or part of the share
repurchase price will be paid by redelivery of the shares of Cascade previously
issued to the Issuer as payment of the purchase price under the Ascend Stock
Option.
After any exercise of the Ascend Stock Option by Cascade, the Issuer
would have certain "first refusal" rights with respect to the shares of Common
Stock acquired by Cascade under the Ascend Stock Option. Under these "first
refusal" rights, the Issuer has the right to repurchase all (but not less than
all) of Common Stock acquired by Cascade under the Ascend Stock Option.
The aggregate amount payable by Issuer under the Ascend Stock Option
Agreement is capped, as are the aggregate net proceeds receivable by Cascade
from sales of shares received upon exercise of the Ascend Stock Option. The
maximum amount payable by the Issuer to Cascade under the Merger Agreement and
the "put" provisions of the Ascend Stock Option Agreement may not exceed $85
million. In addition, if Cascade would receive net proceeds of more than $85
million (over and above the aggregate
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 8 OF 14 PAGES
- ----------------------- ---------------------
exercise price) from third party sales or dispositions of the shares of Common
Stock acquired under the Ascend Stock Option, all net proceeds in excess of such
amount will be remitted to the Issuer.
Under the Ascend Stock Option Agreement, Cascade's right to sell,
assign, pledge or otherwise dispose of or transfer shares of the Issuer is
subject to certain restrictions and first-refusal rights in favor of the Issuer.
In addition, the Ascend Stock Option Agreement gives Cascade certain rights to
have the shares acquired upon exercise of the Ascend Stock Option be 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
Ascend 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 sale price of the Common Stock for the
preceding ten trading days. The Ascend Stock Option Agreement allows Cascade to
demand two registrations, and allows the Issuer to defer the requested
registrations for certain periods in the following circumstances: (i) for up to
40 days when the Issuer is in possession of material non-public information
which it reasonably believes is 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.
The foregoing summary of the Ascend Stock Option is qualified in its
entirety by reference to the copy of the Ascend Stock Option Agreement included
as Exhibit 2 to this Schedule 13D and incorporated herein in its entirety by
---------
reference. If the Merger is consummated pursuant to the Merger Agreement, the
Ascend Stock Option will not be exercised.
As an inducement to the Issuer to enter into the Merger Agreement,
Issuer and Cascade have also entered into a Cascade Stock Option Agreement,
which entitles the Issuer to purchase up to 18,765,939 shares of Cascade Common
Stock under the circumstances specified in the Cascade Stock Option Agreement
between Cascade and the Issuer. The foregoing summary of the Cascade Stock
Option Agreement is qualified in its entirety by reference to the copy of the
Cascade Stock Option Agreement included as Exhibit 1 to this Schedule 13D and
---------
incorporated herein in its entirety by reference. If the Merger is consummated
pursuant to the Merger Agreement, the Cascade Stock Option will not be
exercised.
Also as an inducement to Issuer to enter into the Merger Agreement,
the directors and executive officers (the "Voting Agreement Stockholders") of
Cascade have entered into a Cascade Director and Officer Stock Voting
Agreement (collectively the "Cascade Voting Agreements") with Issuer. Pursuant
to each Voting Agreement, the Voting Agreement Stockholders have agreed to
vote the shares of Cascade Common Stock owned by them (i) in favor of approval
and adoption of the Merger Agreement and the Merger and (ii) against approval
of any proposal made in opposition to or competition with consummation of the
Merger. The Voting Agreement Stockholders have also irrevocably appointed the
Issuer as their lawful attorney and proxy to vote the shares of Cascade Common
Stock owned by the Voting Agreement Stockholders in the manner described in
the previous sentence. The Voting Agreements each terminates upon the earlier
to occur of the Effective Time or the termination of the Merger Agreement. The
foregoing summary of each of the Cascade Voting Agreements is qualified in its
entirety by reference to the copy of the form of Cascade Voting Agreement
included as Exhibit 3 of this Schedule 13D and incorporated herein in its
entirety by reference. Inasmuch as the Issuer's voting rights under the Voting
Agreements are limited solely to certain matters related to the Merger, and
the Issuer has no economic interest in or dispositive power over the shares of
the Issuer's Common Stock covered thereby, and such shares may be sold by the
holders thereof, the
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 9 OF 14 PAGES
- ----------------------- ---------------------
Issuer expressly disclaims beneficial ownership of the shares of Common Stock of
the Issuer covered by the Cascade Voting Agreements. As an inducement to Cascade
to enter into the Merger Agreement, all of the directors and executive officers
of the Issuer have entered into an Ascend Director and Officer Stock Voting
Agreement dated as of March 30, 1997 with the Issuer, the substance of which is
substantially similar to the substance of the Cascade Voting Agreements. A copy
of the form of Ascend Director and Officer Stock Voting Agreement is included as
Exhibit 4 of this Schedule 13D and incorporated herein in its entirety by
- ---------
reference.
Also in connection with the Merger Agreement, the Voting Agreement
Stockholders and the directors and executive officers of Cascade have each
entered into a Director, Officer and Stockholder Agreement with Ascend
(collectively, the "Agreements") pursuant to which each person has agreed not to
sell, exchange, transfer, pledge, dispose or otherwise reduce its risk relative
to any shares of Issuer Common Stock or other equity securities of Issuer (and
Cascade Common Stock with respect to its directors and executive officers) owned
by it during the period beginning on the date 30 days prior to the Closing Date
(as defined in the Merger Agreement) and ending on the day after Ascend has
published financial results covering at least 30 days of combined operations of
Ascend and Cascade in the form of a quarterly earnings report, an effective
registration statement filed with the Securities and Exchange Commission
("Commission"), a report to the Commission on Form 10-K, 10-Q or 8-K, or any
other public filing or announcement which includes the combined results of
operations. The foregoing summary of the Agreements is qualified in its entirety
by reference to the forms of the Agreements included as Exhibits 5 and 6 of this
----------------
Schedule 13D and incorporated herein in its entirety by reference.
Upon consummation of the Merger, the Certificate of Incorporation of the
Issuer, as in effect immediately prior to the Merger, shall be the Certificate
of Incorporation of the Issuer until thereafter amended.
Other than as described above, Cascade currently has no plan or
proposals which relate to, or may result in, any of the matters listed in Items
4(a) - (j) of Schedule 13D (although Cascade reserves the right to develop such
plans).
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
As a result of the Ascend Voting Agreements, Cascade has sole power to
vote an aggregate of 6,608,172 shares of Issuer Common Stock for the limited
purposes described in Item 4 above, and such shares constitute approximately
5.3% of the issued and outstanding shares of Issuer Common Stock as of March
24, 1997.
If the Ascend Stock Option is exercised, Cascade will have the right to
acquire 24,025,741 shares of Issuer Common Stock. If acquired, Cascade would
have sole voting and dispositive power over such shares, and such shares would
constitute approximately 16.6% of the issued and outstanding shares of the
Issuer Common Stock as of March 24, 1997.
To Cascade's knowledge, no shares of Issuer Common Stock are
beneficially owned by any of the persons named in Schedule A, except for
245,011 shares held by Matrix Partners III, L.P., of which Matrix III
Management Company is a general partner of which Paul J. Ferri, a current
director of Cascade, is a general partner.
Neither Cascade, nor, to Cascade's knowledge, any person named in
Schedule A, has affected any transaction in the Issuer Common Stock during the
past 60 days, except for 245,011 shares
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 10 OF 14 PAGES
- ----------------------- ---------------------
acquired by Matrix Partners III, L.P., of which Matrix III Management Company
is a general partner of which Paul J. Ferri, a current director of Cascade, is
a general partner, upon the consummation of a merger of a wholly-owned
subsidiary of Issuer with and into Whitetree, Inc.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS
WITH RESPECT TO SECURITIES OF THE ISSUER
Other than as described herein, to Cascade's knowledge, 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.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit No. Description
1 Cascade Stock Option Agreement dated March 30,
1997, by and between Ascend Communications, Inc., a
Delaware corporation, and Cascade Communications
Corp., a Delaware corporation
2 Form of Ascend Stock Option Agreement dated
March 30, 1997, by and among Ascend
Communications, Inc., a Delaware corporation,
and Cascade Communications Corp.,
a Delaware corporation
3 Form of Cascade Director and Officer Stock Voting
Agreement dated as of March 30, 1997, by and among
Ascend Communications, Inc., a Delaware
corporation and all directors and executive
officers of Cascade Communications Corp., a
Delaware corporation
4 Form of Ascend Director and Officer Stock Voting
Agreement dated as of March 30, 1997, by and among
Cascade Communications Corp.., a Delaware
corporation and all directors and executive
officers of Ascend Communications, Inc., a
Delaware corporation
5 Form of Cascade Director, Officer and Stockholder
Agreement dated as of March 30, 1997
6 Form of Ascend Director, Officer and Stockholder
Agreement dated as of March 30, 1997
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 11 OF 14 PAGES
- ----------------------- ---------------------
SIGNATURE
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: April 9, 1997 CASCADE COMMUNICATIONS CORP.
By: /s/ Paul E. Blondin
------------------------
Paul E. Blondin
Chief Financial Officer
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 12 OF 14 PAGES
- ----------------------- ---------------------
SCHEDULE A
<TABLE>
<CAPTION>
Name and Address of Corporation
Principal Occupation or Other Organization in
Name or Employment Which Employed
- ---- ------------- --------------
<S> <C> <C>
Victoria A. Brown President Communicore
PO Box 749
Stuart, FL 34995
Richard M. Burnes, Jr. General Partner The Charles River Partnerships
1000 Winter Street, Suite 3300
Waltham, MA 02154
Gururaj Deshpande Chairman of the Board of Directors, Cascade Communications Corp.
Executive Vice President of Business 5 Carlisle Road
Development Westford, MA 01886
Paul J. Ferri General Partner Matrix Partners
Bay Colony Corporate Center
1000 Winter Street, Suite 4500
Waltham, MA 02154
Bruns H. Grayson Managing General Partner Calvert Capital L.P.
One South Street, Suite 2150
Baltimore, MD 21202
Daniel E. Smith President, Chief Executive Officer Cascade Communications Corp.
5 Carlisle Road
Westford, MA 01886
Steven C. Walske Chief Executive Officer Parametric Technology Corporation
128 Technology Drive
Waltham, MA 02154
Hassan M. Ahmed Vice President of Engineering Cascade Communications Corp.
5 Carlisle Road
Westford, MA 01886
Paul E. Blondin Vice President of Finance and Cascade Communications Corp.
Administration, Chief Financial 5 Carlisle Road
Officer Westford, MA 01886
Michael A. Champa Vice President of Worldwide Sales Cascade Communications Corp.
and Customer Service 5 Carlisle Road
Westford, MA 01886
James A. Dolce, Jr. Vice President and General Manager of Cascade Communications Corp.
Remote Access 5 Carlisle Road
Westford, MA 01886
John E. Dowling Vice President of Operations Cascade Communications Corp.
5 Carlisle Road
Westford, MA 01886
Robert N. Machlin Vice President of Marketing Cascade Communications Corp.
5 Carlisle Road
Westford, MA 01886
Jonathan M. Reeves Vice President and General Manager Cascade Communications Corp.
of Broadband Access 5 Carlisle Road
Westford, MA 01886
</TABLE>
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 13 OF 14 PAGES
- ----------------------- ---------------------
SCHEDULE B
<TABLE>
<CAPTION>
Number of Shares of Issuer
Individual Common Stock Beneficially Owned
- ---------- -------------------------------
<S> <C>
Mory Ejabat 1,416,729
Curtis N. Sanford 633,501
Robert K. Dahl 859,920
Michael Hendren 475,841
Anthony Stagno 137,132
Michael J. Johnson 127,258
Jeanette Symons 1,073,765
Bernard Schneider 254,167
William H. Kind 206,250
Maureen Lawrence 0
Betsy S. Atkins 95,504
Roger L. Evans 1,018,279
C. Richard Kramlich 166,618
James P. Lally 141,608
Martin Schoffstall 1,600
</TABLE>
<PAGE>
- ----------------------- ---------------------
CUSIP NO. 043491 10 9 PAGE 14 OF 14 PAGES
- ----------------------- ---------------------
Exhibit No. Description
1 Cascade Stock Option Agreement dated March 30, 1997,
by and between Ascend Communications, Inc., a
Delaware corporation, and Cascade Communications
Corp., a Delaware corporation
2 Ascend Stock Option Agreement dated March 30, 1997,
by and among Ascend Communications, Inc., a Delaware
corporation, and Cascade Communications Corp., a
Delaware corporation
3 Form of Cascade Director and Officer Stock Voting
Agreement dated as of March 30, 1997, by and among
Ascend Communications, Inc., a Delaware corporation
and all directors and executive officers of Cascade
Communications Corp., a Delaware corporation
4 Form of Ascend Director and Officer Stock Voting
Agreement dated as of March 30, 1997, by and among
Cascade Communications Corp., a Delaware
corporation and all directors and executive
officers of Ascend Communications, Inc., a Delaware
corporation
5 Form of Cascade Director, Officer and Stockholder
Agreement dated as of March 30, 1997
6 Form of Ascend Director, Officer and Stockholder
Agreement dated as of March 30, 1997
<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
B-4
<PAGE>
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.
B-5
<PAGE>
(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
B-6
<PAGE>
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
B-7
<PAGE>
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
B-8
<PAGE>
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
B-9
<PAGE>
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
B-10
<PAGE>
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
B-12
<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]
B-13
<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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASCEND STOCK OPTION AGREEMENT
BY AND BETWEEN
ASCEND COMMUNICATIONS, INC.,
A DELAWARE CORPORATION,
AND
CASCADE COMMUNICATIONS CORP.,
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................................................... Recitals
Ascend Offer Notice................................................... 8(d)
Ascend Option......................................................... 1
Cash Exercise......................................................... 2(e)
Cash Exercise Price................................................... 2(e)
Cascade............................................................... Preamble
Cascade Charter....................................................... 2(b)
Cascade Common Stock.................................................. 2(e)
Cascade Offer Notice.................................................. 8(c)
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 Ascend Option............... B-1
(a) Exercise.................................................... B-1
(b) Exercise Procedure.......................................... B-1
(c) Termination of the Ascend 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 Ascend.................... B-3
(a) Organization and Standing................................... B-3
(b) Authority................................................... B-3
(c) Reservation of Shares....................................... B-3
(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 Cascade................... 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) Cascade "Put"............................................... B-5
(b) Certain Definitions......................................... B-5
(c) Redelivery of Shares of Cascade Common Stock................ B-6
(d) Payment and Redelivery of Ascend Options or Shares.......... B-6
(e) Repurchase Price Reduced at Cascade's Option................ B-6
Section 8. Restrictions on Transfer.................................... B-6
(a) Restrictions on Transfer.................................... B-6
(b) Permitted Sales............................................. B-7
(c) Ascend's Right of First Refusal............................. B-7
(d) Cascade'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-9
</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>
ASCEND STOCK OPTION AGREEMENT
THIS ASCEND STOCK OPTION AGREEMENT (the "Agreement") is made and entered
into as of March 30, 1997 by and between Ascend Communications, Inc., a
Delaware corporation ("Ascend"), and Cascade Communications Corp., a Delaware
corporation ("Cascade").
Recitals
Concurrently with the execution and delivery of this Agreement, Ascend,
Cascade, and Cascade 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 Cascade's willingness to enter
into the Merger Agreement, Cascade has requested that Ascend agree, and Ascend
has agreed, to grant to Cascade an option to acquire certain shares of
Ascend's authorized but unissued common stock, par value $.001 per share
(together with any associated rights, "Ascend Common Stock"), on the terms and
subject to the conditions set forth herein.
NOW, THEREFORE, to induce Cascade 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. Ascend hereby grants to Cascade an irrevocable
option (the "Ascend Option") to purchase a number of shares of Ascend 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 Ascend Option.
(a) Exercise. The Ascend Option may be exercised by Cascade, in whole or
in part, at any time or from time to time prior to the termination of
Cascade's right to exercise the Ascend Option by the terms of this Agreement
and upon and after the occurrence of the earliest event which causes (i) the
Ascend Termination Fee or (ii) the Ascend Post-Termination Fee (in each case
as defined in the Merger Agreement) to become payable (a "Trigger Event").
Notwithstanding the foregoing, the Ascend Option may not be exercised if
Cascade 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 Cascade wishes to exercise the
Ascend Option, Cascade shall deliver to Ascend written notice (an "Exercise
Notice") specifying the total number of shares of Ascend Common Stock that
Cascade wishes to purchase. To the extent permitted by law and the
Certificate of Incorporation, as amended, of Ascend (the "Ascend Charter"),
and provided that the conditions set forth in Section 3 to Ascend's
obligation to issue the shares of Ascend Common Stock to Cascade hereunder
have been satisfied or waived, Cascade 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 Ascend Common Stock
issuable upon such exercise, notwithstanding that the stock transfer books
of Ascend shall then be closed or that certificates representing such
shares of Ascend Common Stock shall not theretofore have been delivered to
Cascade. Each closing of a purchase of shares of Ascend Common Stock
hereunder (a "Closing") shall occur at a place, on a date, and at a time
designated by Cascade in an Exercise Notice delivered at least two (2)
business days prior to the date of such Closing.
C-1
<PAGE>
(c) Termination of the Ascend Option. Cascade's right to exercise the
Ascend 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 Ascend 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 Ascend 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 Ascend 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 Ascend Option cannot be exercised by reason of any
applicable judicial or governmental judgment, decree, order, law or
regulation, the Ascend 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 Ascend 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 Ascend, and such judgment, decree or order is vacated,
set aside, withdrawn, reversed or otherwise nullified, the time during which the
Ascend Option shall remain exercisable shall be extended for as long as such
judgment, decree, or order shall be in effect. The rights of Cascade set forth
in Sections 7 and 9 shall not terminate upon termination of Cascade's right to
exercise the Ascend Option with respect to shares acquired prior to termination,
but shall extend to the time provided in such sections. Notwithstanding the
termination of the Ascend Option, Cascade shall be entitled to purchase the
shares of Ascend Common Stock with respect to which Cascade had exercised the
Ascend Option prior to such termination.
(d) Option Number. The aggregate number of shares of Ascend Common Stock
issuable upon exercise of this Ascend 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 Ascend Common Stock issued and outstanding as of the date of this
Agreement, and shall be adjusted hereafter to reflect changes in Ascend'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 Ascend 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 Ascend Common Stock
pursuant to the Ascend Option (the "Exercise Price") shall be payable, at
Cascade's election, in cash (a "Cash Exercise") or in shares (a "Stock
Exercise") of Cascade common stock, $.001 par value per share ("Cascade Common
Stock"). The Exercise Price per share of Ascend Common Stock, (i) in the case
of a Cash Exercise, shall be a cash amount equal to $52.00 (the "Cash Exercise
Price"), and (ii) in the case of a Stock Exercise, shall be 1.833 shares of
Cascade Common Stock (the "Stock Exercise Price").
(f) Certain Limitations. In the event Cascade 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 Ascend Common Stock acquired pursuant to
the Ascend Option (other than a sale of such shares to Ascend pursuant to
Section 7, all Net Proceeds in excess of such amount shall be remitted to
Ascend 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 Ascend Common Stock
included in such sale or disposition. Notwithstanding anything in this
C-2
<PAGE>
Agreement or in the Merger Agreement to the contrary, the maximum aggregate
amount payable by Ascend to Cascade and its affiliates pursuant to Section
7 of this Agreement and the provisions of Section 8.3(c) 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 Ascend Common Stock repurchased by Ascend from Cascade pursuant to
Section 7 of this Agreement, it being understood that the limitation
contained in this sentence shall not limit the amounts receivable by
Cascade from persons other than Ascend, including without limitation
amounts receivable pursuant to a tender offer or other purchase and sale
transaction.
Section 3. Conditions to Closing. The obligation of Ascend to issue the
shares of Ascend Common Stock to Cascade 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 Ascend Common Stock by Ascend and the
acquisition of such shares by Cascade hereunder (and, in the case of a Stock
Exercise, the issuance of shares of Cascade Common Stock by Cascade and the
acquisition of such shares by Ascend) 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 Ascend Common Stock and the acquisition of such shares by
Cascade hereunder (and, in the case of a Stock Exercise, the issuance of
shares of Cascade Common Stock and the acquisition of such shares by Ascend)
shall have been obtained.
Section 4. Closing. At any Closing: (a) Ascend shall deliver to Cascade or
its designee a single certificate in definitive form representing the number
of shares of Ascend Common Stock designated by Cascade in its Exercise Notice,
such certificate to be registered in the name of Cascade and to bear the
legend set forth in Section 11; and (b) Cascade shall deliver to Ascend the
aggregate Exercise Price for the shares of Ascend Common Stock so designated
and being purchased by (i) wire transfer of immediately available funds to the
account or accounts specified in writing by Ascend (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
Cascade Common Stock being issued by Cascade in consideration thereof (in the
case of a Stock Exercise). Effective at or prior to the Closing, Ascend shall
cause the shares of Ascend Common Stock being delivered at the Closing to be
approved for quotation on The Nasdaq National Market, and Cascade shall cause
the shares of Cascade 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 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. 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 Ascend 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 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 therefor may be brought.
(c) Reservation of Shares. Ascend has taken all necessary corporate
action to authorize and reserve for issuance and to permit it to issue,
upon exercise of the Ascend Option, and at all times from the date
C-3
<PAGE>
hereof through the expiration of the Ascend Option will have reserved, a
number of authorized and unissued shares of Ascend 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 Ascend Common Stock issued to Cascade upon
the exercise of the Ascend Option 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, subject to compliance with applicable law, the consummation
by Ascend 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 Ascend
or any of its Subsidiaries of (i) any provision of the charter or the
Bylaws of Ascend 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 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 5(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 Purposes. Any shares of Cascade Common Stock acquired by
Ascend pursuant to this Agreement will be acquired for Ascend's own
account, for investment purposes only, and will not be acquired by Ascend
with a view to the public distribution thereof in violation of any
applicable provision of the Securities Act.
Section 6. 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. Except as set forth in Section 6(c), 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 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 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
C-4
<PAGE>
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 may
be brought.
(c) Reservation of Shares. Prior to any delivery of shares of Cascade
Common Stock in consideration of the purchase of shares of Ascend Common
Stock pursuant hereto, Cascade will have taken all necessary corporate
action to authorize for issuance and to permit it to issue such shares of
Cascade 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 Cascade Common Stock (if any) issued to
Ascend in consideration of the purchase of shares of Ascend Common Stock
pursuant hereto 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 the consummation by Cascade of the transactions contemplated
hereby will not, violate, conflict with, or result in a Violation by
Cascade or any of its Subsidiaries of (i) any provision of the Certificate
of Incorporation or Bylaws of Cascade, (ii) any material provision of any
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 6(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 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 Ascend Common Stock acquired by
Cascade upon exercise of the Ascend Option will be acquired for Cascade's
own account, for investment purposes only and will not be, and the Ascend
Option is not being, acquired by Cascade with a view to the public
distribution thereof in violation of any applicable provision of the
Securities Act.
Section 7. Certain Repurchases.
(a) Cascade "Put". At any time during which the Ascend Option is
exercisable pursuant to Section 2 (the "Purchase Period") upon written
notice to Ascend by Cascade (the "Repurchase Notice"):
(i) Ascend and its successors in interest shall repurchase from
Cascade all or any portion of the Ascend Option, as specified by
Cascade, 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) Ascend and its successors in interest shall repurchase from
Cascade all or any portion of the shares of Ascend Common Stock
purchased by Cascade pursuant to the Ascend Option, as specified by
Cascade, at the Share Repurchase Price set forth in Section 7(b)(ii)
subject to and as limited by Section 2(f) above.
(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 Ascend Common
C-5
<PAGE>
Stock as of the date of the applicable Repurchase Notice exceeds the
per share Exercise Price, multiplied by (B) the number of shares of
Ascend Common Stock purchasable pursuant to the Ascend 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 Cascade
per share of Ascend Common Stock acquired pursuant to the Ascend Option
and (II) the Fair Market Value (as defined in Section 7(b)(iii)) of a
single share of Ascend Common Stock as of the date of the applicable
Repurchase Notice, and (B) the number of shares of Ascend 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 Cascade Common Stock. In Ascend's discretion
or if specified by Cascade in the Repurchase Notice, all or a portion of
the Share Repurchase Price shall be paid by Ascend in shares of Cascade
Common Stock, by redelivery to Cascade of the shares of Cascade Common
Stock (and the certificate(s) representing such shares) previously
delivered by Cascade to Ascend pursuant to a Stock Exercise. For purposes
of this Section 7(c), each share of Cascade Common Stock redelivered to
Cascade shall be valued at and exchanged for .546 shares of Cascade Common
Stock. If fewer than all of the shares of Ascend Common Stock purchased by
Cascade pursuant to a Stock Exercise are to be repurchased by Ascend
pursuant to Section 7(a)(ii), Cascade shall issue to Ascend new
certificates representing those shares of Cascade Common Stock which are
not due to be redelivered to Cascade pursuant to this Section 7(c) to the
extent that excess shares of Cascade Common Stock are included in the
certificates redelivered to Cascade by Ascend. All shares of Cascade Common
Stock redelivered to Cascade hereunder shall be free and clear of all
claims, liens, charges, encumbrances and security interests of any nature
whatsoever.
(d) Payment and Redelivery of Ascend Options or Shares. In the event that
Cascade exercises its rights under Section 7(a), Ascend shall, within ten
(10) business days thereafter, pay the required amount to Cascade in
immediately available funds (or shares of Cascade Common Stock, if
applicable) and Cascade shall surrender to Ascend the Ascend Option or the
certificate or certificates evidencing the shares of Ascend Common Stock
purchased by Cascade pursuant hereto, and Cascade shall warrant that it has
sole beneficial ownership of the Ascend Option or such shares and that the
Ascend 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 Cascade's Option. In the event that
payment of the repurchase price specified in Section 7(a) would subject the
repurchase of the Ascend Option or the shares of Ascend Common Stock
purchased by Cascade pursuant to the Ascend Option to a vote of the
stockholders of Ascend pursuant to applicable law, regulations, or
requirements of a national securities exchange or national market system or
the Ascend Charter, then Cascade may, at its election, reduce the
repurchase price or the number of shares covered by the Cascade 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 Cascade Common Stock issued pursuant to a Stock Exercise
("Restricted 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.
C-6
<PAGE>
(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) 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 the Ascend Option, 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 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(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 Ascend, (ii) any disposition of Ascend Common Stock or
other securities by a person to whom Cascade has assigned its rights under
the Ascend Option with the consent of Ascend, (iii) any sale by means of a
public offering registered under the Securities Act, or (iv) any transfer
to a wholly-owned subsidiary of Cascade which agrees in writing to be bound
by the terms hereof.
(d) 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 a Stock Exercise of the Ascend Option by Cascade, it shall give
Cascade written notice of the proposed transaction (a "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
C-7
<PAGE>
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(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 Cascade, (ii) any sale by means of a public offering
registered under the Securities Act, or (iii) any transfer to a wholly-
owned subsidiary of Ascend which agrees in writing to be bound by the terms
hereof.
(e) Additional Restrictions. Prior to any permitted sales of any
Restricted Shares under 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 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 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-8
<PAGE>
(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 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 10 only if
C-9
<PAGE>
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 Ascend contained in this
Agreement or in the Merger Agreement, in the event of any change in Ascend
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 Ascend 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 Cascade shall receive, upon
exercise of the Ascend Option, the number and class of securities or
property that Cascade would have received in respect of the shares of
Ascend Common Stock issuable to Cascade if the Ascend 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 any 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 Ascend shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Cascade 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 Cascade
or one of its Subsidiaries, to merge into Ascend and Ascend shall be the
continuing or surviving corporation, but, in connection with such merger,
the then-outstanding shares of Ascend Common Stock shall be changed into or
exchanged for stock or other securities of Ascend 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 Cascade 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 Ascend Option,
Cascade shall be entitled to receive, for each share of Ascend Common Stock
with respect to which the Ascend 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
Ascend 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 Ascend Common Stock, subject to the foregoing, proper provision
shall be made so that the holder of the Ascend Option would have the same
election or similar rights as would the holder of the number of shares of
Ascend Common Stock for which the Ascend Option is then exercisable).
Section 11. Restrictive Legends. Each certificate representing shares of
Ascend Common Stock issued to Cascade hereunder, and shares of Cascade Common
Stock, if any, delivered to Ascend 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 ASCEND
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 reference if Cascade or Ascend, 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
C-10
<PAGE>
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 Cascade is not permitted to acquire, or Ascend is
not permitted to repurchase pursuant to Section 7, the full number of
shares of Ascend Common Stock provided in this Agreement (as the same may
be adjusted), it is the express intention of Ascend to allow Cascade to
acquire or to require Ascend 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
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.
C-11
<PAGE>
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 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
Facsimile No.: (415) 327-3699
Attention: Gregory M. Gallo, Esq. &
Rod J. Howard, Esq.
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.
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 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.
C-12
<PAGE>
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. 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 under Section 4 and any stock listing or stock quotation
application required to be filed by Ascend with respect to such shares, and
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 in connection with a Stock
Exercise and any stock listing or stock quotation application required to be
filed by Ascend 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.
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.
Ascend Communications, Inc.
By: /s/ ROBERT K. DAHL
-----------------------------------
Name: Robert K. Dahl
Title: Vice President, Finance and
Chief Financial Officer
Cascade Communications Corp.
By: /s/ DANIEL E. SMITH
-----------------------------------
Name: Daniel E. Smith
Title: President and Chief Executive
Officer
C-13
<PAGE>
EXHIBIT 3
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, Catskill 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
1
<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
3
<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: __________________
<PAGE>
EXHIBIT 4
ASCEND DIRECTOR AND OFFICER
STOCK VOTING AGREEMENT
THIS ASCEND DIRECTOR AND OFFICER STOCK VOTING AGREEMENT ("Agreement" or
"Ascend Stock Voting Agreement") is made and entered into as of March , 1997
by and between Cascade Communications Corp., a Delaware corporation
("Cascade"), and the undersigned officer or director (the "Holder") of Ascend
Communications, Inc., a Delaware corporation ("Ascend").
Recitals
Cascade, Catskill Merger Corporation, a Delaware corporation and a wholly-
owned subsidiary of Ascend ("Sub"), and Ascend have entered into an Agreement
and Plan of Reorganization, dated as of March , 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 Ascend indicated on the signature page of this Ascend Stock
Voting Agreement (the "Shares"). As a condition to its execution and delivery
of the Merger Agreement, Cascade has requested that Holder agree, and in
consideration, and to induce the execution and delivery, of the Merger
Agreement by Cascade, Holder is willing to agree to vote all shares of Ascend
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 Ascend
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 Ascend stockholders solicited with respect to any of the following,
Holder shall vote the Shares and any shares of Ascend capital stock that
Holder purchases or otherwise acquires beneficial ownership of after the date
of this Ascend Stock Voting Agreement and prior to the expiration or
termination of this Ascend Stock Voting Agreement ("New Shares"):
(a) in favor of approval of the issuance of shares of Ascend common stock
pursuant to the Merger Agreement, as the same may be amended from time to
time, and any proposal or action which would, or could reasonably be
expected to, facilitate the Merger and the other transactions contemplated
by the Merger Agreement;
(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
Ascend with, sale of assets or stock of Ascend to, or reorganization or
recapitalization involving Ascend with, any party other than Cascade or an
affiliate of Cascade as contemplated by the Merger Agreement (any event
described in clause (b) or (c) hereafter referred to as an "Opposing
Proposal").
Holder, as the holder of voting stock of Ascend, shall be present, in person
or by proxy, at all meetings of stockholders of Ascend so that all Shares and
New Shares are counted for the purposes of determining the
1
<PAGE>
presence of a quorum at such meetings. This Ascend Stock Voting Agreement is
intended to bind Holder only 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 Ascend or exercising or observing
Holder's fiduciary duties and responsibilities as an officer or director of
Ascend.
Section 2 Irrevocable Proxy. Concurrently with the execution of this Ascend
Stock Voting Agreement, Holder agrees to deliver to Cascade 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 Ascend Stock Voting Agreement
in accordance with its terms.
Section 3 Representations, Warranties and Covenants of Holder. Holder hereby
represents, warrants and covenants to Cascade 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 Ascend 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
Ascend 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
Ascend capital stock held by Holder or such entity in a voting trust or
subject any shares of Ascend 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 Cascade.
(c) Validity; No Conflict. This Ascend Stock Voting Agreement constitutes
the legal, valid and binding obligation of Holder. Neither the execution of
this Ascend 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 Ascend, and as otherwise contemplated by the last sentence of
Section 1, 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 (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 Ascend
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 Ascend with
respect to an Opposing Proposal.
Section 4 Representations, Warranties and Covenants of Cascade. Cascade
represents, warrants and covenants to Holder as follows:
(a) Due Authorization. This Ascend Stock Voting Agreement has been
authorized by all necessary corporate action on the part of Cascade and has
been duly executed by a duly authorized officer of Cascade.
(b) Validity; No Conflict. This Ascend Stock Voting Agreement constitutes
the legal, valid and binding obligation of Cascade. Neither the execution
of this Ascend Stock Voting Agreement by Cascade
2
<PAGE>
nor the consummation of the transactions contemplated herein will violate
or result in a breach of (i) any agreement to which Cascade is a party or
by which Cascade is bound, (ii) any decree, judgment or order to which
Cascade is subject, or (iii) any law or regulation now in effect applicable
to Cascade.
Section 5 Additional Documents. Holder and Cascade hereby covenant and agree
to execute and deliver any additional documents necessary or desirable, in the
reasonable opinion of Cascade's legal counsel or Holder, as the case may be,
to carry out the intent of this Ascend 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 Ascend 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
Ascend 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 Cascade or Ascend 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 Ascend 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 Ascend 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 Ascend 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 Ascend 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 Cascade 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 Cascade
upon such breach, Cascade 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 Cascade: Cascade Communications Corp.
5 Carlisle Road
Westford, MA 01886
Fax Number: 508-692-9214
Attention: Chief Financial Officer
3
<PAGE>
If to Holder: To the address for notice set forth on the last page
hereof.
With a copy to: Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Fax Number: 510-747-94502
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. and 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 Ascend 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 Ascend 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 Ascend 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 Ascend Stock Voting Agreement.
[REST OF PAGE INTENTIONALLY LEFT BLANK.]
4
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Ascend Stock Voting
Agreement to be duly executed on the day and year first above written.
Cascade Communications Corp.
By: _________________________________
Its: ________________________________
Holder
By: _________________________________
Holder's Address for Notice:
_____________________________________
_____________________________________
_____________________________________
Number of Shares owned beneficially:
_____________________________________
Number of Shares owned of record
(if different from above):
_____________________________________
5
<PAGE>
ANNEX A
IRREVOCABLE PROXY
The undersigned stockholder of Ascend Communications, Inc., a Delaware
corporation ("Ascend"), hereby irrevocably appoints and constitutes the
members of the Board of Directors of Cascade Communications Corp., a Delaware
corporation ("Cascade"), 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 Ascend 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 Ascend stockholders, and in every written consent in
lieu of such a meeting, or otherwise,
(a) in favor of approval of (i) the issuance of shares of Ascend common
stock pursuant to 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) any proposal or action which would, or could
reasonably be expected to, facilitate the merger of Sub with and into
Cascade pursuant to the Merger Agreement (the "Merger") and the other
transactions contemplated by the Merger Agreement;
(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
Ascend with, sale of assets or stock of Ascend to, or reorganization or
recapitalization involving Ascend with, any party other than Cascade or an
affiliate of Cascade, 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.
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 Ascend Director and Officer Stock
Voting Agreement between the undersigned and Cascade, and is irrevocable and
coupled with an interest in such obligations. This proxy will terminate upon the
expiration or termination of such Ascend 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.
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 Ascend and with any Inspector of Elections
at any meeting of the stockholders of Ascend.
[REST 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: __________________
<PAGE>
EXHIBIT 5
CASCADE DIRECTOR, OFFICER AND STOCKHOLDER AGREEMENT
THIS CASCADE DIRECTOR, OFFICER AND STOCKHOLDER AGREEMENT ("Agreement") is
made and entered into as of March , 1997 by and among Ascend Communications,
Inc., a Delaware corporation ("Ascend"), and the undersigned director, officer
and/or stockholder ("Signatory") of Cascade Communications Corp., a Delaware
corporation ("Cascade") . Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Merger Agreement (as defined below).
Recitals
Ascend and Cascade have entered into an Agreement and Plan of
Reorganization, dated as of March 30, 1997 (the "Merger Agreement"), pursuant
to which Cascade will become a wholly-owned subsidiary of Ascend and the
stockholders of Cascade will become stockholders of Ascend. It will be a
condition to the effectiveness of the Merger that (i) legal counsel to Cascade
and Ascend will have delivered their respective opinions to the effect that
the Merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and (ii)
the independent auditing firms that audit the annual financial statements of
Cascade and Ascend will have delivered letters confirming the appropriateness
of pooling of interests accounting for the Merger under Accounting Principles
Board Opinion No. 16 and the applicable regulations of the Securities and
Exchange Commission (the "Commission"). The execution and delivery of this
Agreement by Signatory is a material inducement to Ascend to enter into the
Merger Agreement. Signatory has been advised that Signatory may be deemed to
be an "affiliate" of Cascade, as such term is used (i) for purposes of
paragraphs (c) and (d) of Rule 145 of the Commission under the Securities Act
of 1933, as amended (the "Act"), and/or (ii) in the Commission's Accounting
Series Releases 130 and 135, as amended, it being understood that nothing
contained herein shall be construed as an admission by Signatory that
Signatory is in fact an affiliate of Cascade.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
Agreement
1. Acknowledgments by Signatory. Signatory acknowledges and understands that
the covenants made by Signatory set forth herein will be relied upon by
Ascend, Cascade, and their respective affiliates, legal counsel and auditing
firms, and that substantial losses and damages may be incurred by such persons
if Signatory's representations and warranties are inaccurate or if Signatory's
covenants and agreements are breached. Signatory has carefully read this
Agreement and the Merger Agreement and has consulted with such legal counsel
and financial advisers as Signatory has deemed appropriate in connection with,
and prior to, the execution and delivery of this Agreement.
2. Compliance with Rule 145 and the Act.
(a) Signatory has been advised that (i) the issuance of shares of Ascend
Common Stock in connection with the Merger is expected to be effected pursuant
to a Registration Statement filed by Ascend on Form S-4, and the resale of
such shares will be subject to the restrictions set forth in Rule 145 under
the Act unless such shares are otherwise transferred pursuant to an effective
registration statement under the Act or an appropriate exemption from
registration, and (ii) Signatory may be deemed to be an affiliate of Cascade.
Signatory accordingly agrees not to sell, pledge, transfer or otherwise
dispose of any shares of Ascend Common Stock issued to Signatory in the
Merger, unless (i) such sale, pledge, transfer or other disposition is made in
conformity with the requirements of Rule 145 under the Act, (ii) such sale,
pledge, transfer or other disposition is made pursuant to an effective
registration statement under the Act, or (iii) Signatory delivers to Ascend a
written opinion of counsel, in form and substance reasonably acceptable to
Ascend, to the effect that such sale, pledge, transfer or other disposition is
otherwise exempt from registration under the Act.
(b) Ascend will give stop transfer instructions to its transfer agent with
respect to any Ascend Common Stock received by Signatory pursuant to the
Merger, and there will be placed on the certificates representing such Ascend
Common Stock, or any substitutions therefor, a legend stating in substance as
follows:
1
<PAGE>
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED PURSUANT TO A
BUSINESS COMBINATION WHICH IS BEING ACCOUNTED FOR AS A POOLING OF
INTERESTS, IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE
SECURITIES ACT OF 1933 APPLIES, AND MAY ONLY BE TRANSFERRED IN CONFORMITY
WITH RULE 145, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, OR IN
ACCORDANCE WITH A WRITTEN OPINION OF COUNSEL, REASONABLY ACCEPTABLE TO THE
ISSUER IN FORM AND SUBSTANCE TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT
FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE
TRANSFERRED UNTIL SUCH TIME AS ASCEND SHALL HAVE PUBLISHED FINANCIAL
RESULTS COVERING AT LEAST 30 DAYS OF COMBINED OPERATIONS WITH CASCADE. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE TERMS OF
A CERTAIN DIRECTOR, OFFICER AND STOCKHOLDER AGREEMENT DATED AS OF MARCH ,
1997 BETWEEN THE HOLDER OF THIS CERTIFICATE AND ASCEND, A COPY OF WHICH
AGREEMENT MAY BE INSPECTED BY THE HOLDER OF THIS CERTIFICATE AT THE
PRINCIPAL OFFICES OF ASCEND OR FURNISHED BY ASCEND TO THE HOLDER OF THIS
CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend), and Ascend shall so instruct its transfer
agent, if a registration statement respecting the sale of the shares has been
declared effective under the Act or if Signatory delivers to Ascend (i)
satisfactory written evidence that the shares have been sold in compliance
with Rule 145 (in which case, the substitute certificate will be issued in the
name of the transferee), or (ii) an opinion of counsel, in form and substance
reasonably acceptable to Ascend, to the effect that sale of the shares by the
holder thereof is no longer subject to Rule 145.
3. Covenants Related to Pooling of Interests.
(a) During the period beginning on the date thirty (30) days prior to the
Closing Date (as defined in the Merger Agreement) and ending on the day after
Ascend has published (within the meaning of Accounting Series Release No. 135)
financial results covering at least thirty (30) days of post-Merger combined
operations of Ascend and Cascade (the "Restricted Period") in the form of a
quarterly earnings report, an effective registration statement filed with the
Commission, a report to the Commission on Form 10-K, 10-Q or 8-K or any other
public filing or announcement which includes the combined results of
operations, Signatory will not sell, exchange, transfer, pledge, distribute,
or otherwise dispose of or grant any option, establish any "short" or put-
equivalent position with respect to or enter into any similar transaction
(through derivatives or otherwise) intended to have or having the effect,
directly or indirectly, of reducing Signatory's risk relative to (i) any
shares of Cascade Common Stock or Ascend Common Stock owned by Signatory or
(ii) any shares of Ascend Common Stock received by Signatory in connection
with the Merger.
(b) Notwithstanding anything to the contrary contained in Section 3(a),
Signatory will be permitted, during the Restricted Period, to sell, exchange,
transfer, pledge, distribute or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter into
any similar transaction (through derivatives or otherwise) intended to have or
having the effect, directly or indirectly, of reducing Signatory's risk
relative to any shares of Cascade Common Stock or Ascend Common Stock received
by Signatory in connection with the Merger an amount of such shares not more
than the de minimis amount permitted by the Commission in its rules and
releases relating to pooling-of-interests accounting treatment, subject to the
advance concurrence of Ascend and Cascade and each of their independent
auditors.
4. Miscellaneous.
(a) This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original, but all of which together shall
constitute one and the same document.
(b) This Agreement shall be enforceable by, and shall inure to the benefit
of and be binding upon, the parties hereto and their respective successors and
assigns.
2
<PAGE>
(c) This Agreement shall be governed by and construed, interpreted and
enforced in accordance with the internal laws of the State of Delaware,
applicable to agreements made and performed wholly within such state. 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.
(d) If any provision of this Agreement is held to be unenforceable for any
reason, it shall be modified rather than voided, if possible, in order to
achieve the intent of the parties to the extent possible. In any event, all
other provisions of this Agreement shall be deemed valid and enforceable to
the extent possible.
(e) Legal counsel to and auditors for the parties to the Merger Agreement
shall be entitled to rely upon this Agreement to the extent they deem
necessary.
(f) This Agreement shall not be modified or amended, or any right hereunder
waived or any obligation excused, except by a written agreement signed by both
parties.
(g) Notwithstanding any other provision contained herein, this Agreement and
all obligations hereunder shall terminate upon the termination of the Merger
Agreement in accordance with its terms.
(h) From and after the Effective Time of the Merger and as long as is
necessary in order to permit Signatory to sell Ascend Common Stock held by
Signatory pursuant to Rule 145 and, to the extent applicable, Rule 144 under
the Securities Act, Ascend shall use all reasonable efforts to file on a
timely basis all reports required to be filed by it pursuant to the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder, as
the same shall be in effect at the time, and shall otherwise use all
reasonable efforts to make available adequate public information regarding
Ascend in such manner as may be required to satisfy the requirements of
paragraph (c) of Rule 144 under the Securities Act.
IN WITNESS WHEREOF, this Agreement is executed as of the date first shown
above.
Ascend Communications, Inc. a
Delaware corporation
By:__________________________________
Signatory
By:__________________________________
Name of Signatory:___________________
Title of Signatory (if applicable):__
Number of Shares Owned:______________
Number of Shares Issuable
uponExercise of Stock Options:_______
3
<PAGE>
EXHIBIT 6
ASCEND DIRECTOR, OFFICER AND STOCKHOLDER AGREEMENT
THIS ASCEND DIRECTOR, OFFICER AND STOCKHOLDER AGREEMENT ("Agreement") is
made and entered into as of March , 1997 by and among Ascend Communications,
Inc., a Delaware corporation ("Ascend"), Cascade Communications Corp., a
Delaware corporation ("Cascade") and the undersigned director, officer and/or
stockholder ("Signatory") of Ascend. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to them in the Merger Agreement (as
defined below).
Recitals
Ascend and Cascade have entered into an Agreement and Plan of Reorganization
dated as of March 30, 1997 (the "Merger Agreement") pursuant to which Cascade
will become a wholly-owned subsidiary of Ascend, and stockholders of Cascade
will become stockholders of Ascend. It will be a condition to the effectiveness
of the Merger that the independent auditing firms that audit the annual
financial statements of Ascend and Cascade will have delivered letters
confirming their concurrence with Ascend's management as to the appropriateness
of pooling of interests accounting for the Merger under Accounting Principles
Board Opinion No. 16 and the applicable regulations of the Securities and
Exchange Commission (the "Commission"). The execution and delivery of this
Agreement by Signatory is a material inducement to Ascend to enter into the
Merger Agreement. Signatory has been advised that Signatory may be deemed to be
an "affiliate" of Ascend, as such term is used in Accounting Series Releases 130
and 135, as amended, of the Commission, it being understood that nothing
contained herein shall be construed as an admission by Signatory that Signatory
is in fact an affiliate of Ascend.
NOW, THEREFORE, intending to be legally bound, the parties hereby agree as
follows:
Agreement
1. Acknowledgment. Signatory acknowledges and understands that the
representations, warranties and covenants by Signatory set forth herein will
be relied upon by Ascend, Cascade and their respective affiliates, legal counsel
and auditing firms, and that substantial losses and damages may be incurred by
these persons if Signatory's representations and warranties are inaccurate or if
Signatory's covenants and agreements are breached. Signatory has carefully read
this Agreement and the Merger Agreement and has consulted with such legal
counsel and financial advisers as Signatory has deemed necessary in connection
with, and prior to, the execution and delivery of this Agreement.
2. Covenants Related to Pooling of Interests. During the period beginning on
the earlier of the date thirty (30) days prior to the anticipated Closing Date
(as defined in the Merger Agreement or such date as set forth in a notice to
be delivered by Ascend to Signatory) and ending on the day two days after the
day that Ascend has published (within the meaning of Accounting Series Release
No. 135) financial results covering at least thirty (30) days of post-Merger
combined operations of Ascend and Cascade (the "Restricted Period"), in the
form of a quarterly earnings report, an effective registration statement filed
with the Commission, a report to the Commission on Form 10-K, 10-Q or 8-K or
any other public filing or announcement which includes the combined results of
operations, Signatory will not sell, exchange, transfer, pledge, distribute,
make any gift or otherwise dispose of or grant any option, establish any
"short" or put-equivalent position with respect to or enter into any similar
transaction (through derivatives or otherwise) intended to have or having the
effect, directly or indirectly, of reducing Signatory's risk relative to any
shares of Ascend Common Stock. Ascend may, at its discretion, place a stock
transfer notice consistent with the foregoing with its transfer agent with
respect to Signatory's shares. Notwithstanding the foregoing, Signatory will
be permitted, during the Restricted Period, to sell, exchange, transfer,
pledge, distribute, make any gift or otherwise dispose of or grant any option,
establish any "short" or put-equivalent position with respect to or enter into
any similar transaction (through derivatives or otherwise) intended to have or
having the effect, directly or indirectly, of reducing Signatory's risk
relative to an amount of shares of Ascend Common Stock not more than the de
minimis amount permitted by the Commission in its rules and releases relating
to pooling-of-interests accounting treatment, subject to the advance
concurrence of Ascend and Cascade and each of their independent auditors.
1
<PAGE>
3. Beneficial Ownership of Stock. Except for the Ascend Common Stock and
options to purchase Ascend Common Stock set forth in Appendix A hereto,
Signatory does not beneficially own any shares of Ascend Common Stock or any
other equity securities of Ascend or any options, warrants or other rights to
acquire any equity securities of Ascend.
4. Reliance by Third Parties. Legal counsel to and auditors for the parties
to the Merger Agreement shall be entitled to rely upon this Agreement to the
extent they deem necessary.
5. Miscellaneous. For the convenience of the parties hereto, this Agreement
may be executed in one or more counterparts, each of which shall be deemed to
be an original, but all of which together shall constitute one and the same
document. This Agreement shall be enforceable by, and shall inure to the
benefit of and be binding upon, the parties hereto and their respective
successors and assigns. This Agreement shall be governed by and construed,
interpreted and enforced in accordance with the internal laws of the State of
Delaware applicable to agreements made and performed wholly within such state.
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. If any provision of this Agreement is held to be
unenforceable for any reason, it shall be modified rather than voided, if
possible, in order to achieve the intent of the parties to the extent
possible. In any event, all other provisions of this Agreement shall be deemed
valid and enforceable to the extent possible. This Agreement shall not be
modified and amended, or any right hereunder waived or any obligation excused,
except by a written agreement signed by both parties.
Executed as of the date shown on the first page of this Agreement.
Ascend Communications, Inc. a Signatory
Delaware corporation
By:__________________________________
By:__________________________________
Print Name of Signatory:_____________
Name:________________________________
Title (if applicable):_______________
Title:_______________________________
Cascade Communications Corp. a
Delaware corporation
By:__________________________________
Name:________________________________
Title:_______________________________
2
<PAGE>
APPENDIX A
3
