ASCEND COMMUNICATIONS INC, S-4, 1996-07-11

ASCEND COMMUNICATIONS INC
S-4, 1996-07-11
COMPUTER INTEGRATED SYSTEMS DESIGN

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<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 11, 1996
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ASCEND COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 7373 91-092033
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NO.) IDENTIFICATION NUMBER)
</TABLE>

1275 HARBOR BAY PARKWAY,
ALAMEDA, CALIFORNIA 94502
(510) 769-6001
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MORY EJABAT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ASCEND COMMUNICATIONS, INC.
1275 HARBOR BAY PARKWAY
ALAMEDA, CALIFORNIA 94502
(510) 769-6001
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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Copies to:
<TABLE>
<S> <C> <C>
DENNIS C. SULLIVAN, ESQ. MICHELE D. VAILLANCOURT, ESQ. PETER B. TARR, ESQ.
WILLIAM R. SCHREIBER, ESQ. WINTHROP & WEINSTINE, P.A. HALE AND DORR
GRAY CARY WARE & FREIDENRICH 3000 DAIN BOSWORTH PLAZA 60 STATE STREET
A PROFESSIONAL CORPORATION 60 SOUTH SIXTH STREET BOSTON, MASSACHUSETTS 02109
400 HAMILTON AVENUE MINNEAPOLIS, MINNESOTA 55402 (617) 526-6000
PALO ALTO, CALIFORNIA 94301 (612) 347-0700
(415) 328-6561
</TABLE>
----------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and certain
other conditions under the Merger Agreement are met or waived.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE OFFERING REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(3)
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<S> <C> <C> <C> <C>
Common Stock, $.001 par
value per share....... 4,160,930 $55.875 $232,491,964 $80,170
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</TABLE>
(1) Based upon an estimate of the maximum number of shares of the Common Stock
of the Registrant issuable in the merger described herein.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the
"Securities Act"), and based upon prices on The Nasdaq National Market on
July 8, 1996.
(3) A fee of $50,868 was previously paid by NetStar, Inc. pursuant to Rule
14a-6 under the Securities Exchange Act of 1934, as amended, in connection
with the filing of the preliminary Proxy Statement/Prospectus on June 14,
1996. Pursuant to Rule 457(b) under the Securities Act, such fee is being
credited against the registration fee, and accordingly, an additional
$29,302 is being paid in connection with this Registration Statement.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
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<PAGE>

ASCEND COMMUNICATIONS, INC.

CROSS-REFERENCE SHEET SHOWING LOCATIONS IN THE PROXY STATEMENT/PROSPECTUS OF
THE RESPONSES TO THE ITEMS OF FORM S-4

(PURSUANT TO ITEM 501 OF REGULATION S-K)

<TABLE>
<CAPTION>
FORM S-4 LOCATION IN PROXY
ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
----------------------- --------------------
<C> <S>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus... Facing Page; Cross Reference
Sheet; Outside Front Cover
Page of Proxy Statement/
Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................ Inside Front Cover Page of
Proxy Statement/Prospectus;
Available Information;
Incorporation of Certain
Ascend Documents by
Reference; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed
Charges and Other Information............ Summary; Risk Factors;
Selected Historical and
Unaudited Pro Forma Financial
Data; Comparative Historical
and Unaudited Per Share Data;
Market Price Information

4. Terms of the Transaction................. Summary; The Merger; The
Merger Agreement; Comparative
Rights of Ascend Stockholders
and NetStar Stockholders;
Description of Ascend Capital
Stock

5. Pro Forma Financial Information.......... Unaudited Pro Forma Condensed
Combining Financial
Statements

6. Material Contacts with the Company Being
Acquired................................. The Merger; The Merger
Agreement

7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters....................... *

8. Interests of Named Experts and Counsel... The Merger; Legal Matters

9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities.............................. *

B. INFORMATION ABOUT THE REGISTRANT

10. Information with Respect to S-3 Regis-
trants................................... Available Information;
Incorporation of Certain
Ascend Documents by
Reference; Summary; Selected
Historical and Unaudited Pro
Forma Financial Data; Market
Price Information;
Information Concerning Ascend

11. Incorporation of Certain Information by
Reference................................ Incorporation of Certain
Ascend Documents by Reference

12. Information with Respect to S-2 or S-3
Registrants.............................. *

13. Incorporation of Certain Information by
Reference................................ *

14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants........ *
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
FORM S-4 LOCATION IN PROXY
ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
----------------------- --------------------
<C> <S>
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3
Companies................................ *

16. Information with Respect to S-2 or S-3
Companies................................ *

17. Information with Respect to Companies
Other Than S-3 or S-2 Companies.......... Available Information;
Summary; Market Price
Information; Selected
Historical and Unaudited
Pro Forma Financial Data;
Information Concerning
NetStar
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Au-
thorizations are to be Solicited......... Outside Front Cover Page of
Proxy Statement/Prospectus;
Incorporation of Certain
Ascend Documents by
Reference; Summary; The
Special Meeting; The
Merger; Information
Concerning Ascend;
Information Concerning
NetStar
19. Information if Proxies, Consents or Au-
thorizations are not to be Solicited or
in an Exchange Offer..................... *
</TABLE>
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* Not Applicable
<PAGE>

[LETTERHEAD OF NETSTAR, INC.]

July 15, 1996

Dear Stockholder:

As most of you are aware, NetStar, Inc. ("NetStar") has entered into an
agreement (the "Merger Agreement") to combine with Ascend Communications,
Inc., a Delaware corporation ("Ascend"). At a special meeting of stockholders
(the "Special Meeting") to be held at the Minneapolis/St. Paul Airport Hilton,
3800 East 80th Street, Minneapolis, Minnesota on August 15, 1996, at 10:00
a.m., Central Time, you will be asked to consider and approve the Merger
Agreement.

Approval of this important matter will require the affirmative vote of the
holders of a majority of the common stock, $.01 per share par value, of
NetStar ("NetStar Common Stock") outstanding on July 5, 1996, the record date
for the Special Meeting. The NetStar Board of Directors has unanimously
approved the Merger Agreement and recommends that you vote FOR the approval
and adoption of the Merger Agreement.

If the proposed merger is consummated, each share of NetStar Common Stock
will be converted into 0.35398 of a share of common stock, $.001 per share par
value, of Ascend.

The NetStar Board of Directors believes that the Merger will offer a number
of potential benefits to NetStar and its stockholders, including the potential
for increased sales of NetStar products through Ascend's larger sales force
and geographically more extensive distribution channel, the ability to reduce
dependence on third party technology by accessing Ascend's technology base,
the ability to realize cost savings through the leverage of research and
development spending by Ascend, the ability to leverage Ascend's expertise in
low cost of design and manufacturing efficiencies and volume procurement, and
the ability of NetStar stockholders to share in the enhanced prospects of the
combined company.

Details of the proposed merger and other important information concerning
NetStar and Ascend appear in the accompanying Proxy Statement/Prospectus. I
urge you to give this material your careful consideration.

All stockholders are cordially invited to attend the Special Meeting in
person. However, whether or not you plan to attend the Special Meeting, please
complete, sign and date the accompanying proxy card and return it promptly in
the enclosed postage-prepaid envelope. If you attend the Special Meeting, you
may vote in person if you wish, even though you have previously returned your
proxy. It is very important that your shares be represented and voted at the
Special Meeting. Your prompt cooperation will be greatly appreciated.

Sincerely,

Douglas M. Pihl
President and Chief Executive Officer
<PAGE>

NETSTAR, INC.
10250 VALLEY VIEW ROAD, SUITE 113
EDEN PRAIRIE, MINNESOTA 55344

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON AUGUST 15, 1996

To the Stockholders of
NetStar, Inc.:

NOTICE IS HEREBY GIVEN that a special meeting of stockholders (the "Special
Meeting") of NetStar, Inc., a Minnesota corporation ("NetStar"), will be held
on August 15, 1996, at the Minneapolis/St. Paul Airport Hilton, 3800 East 80th
Street, Minneapolis, Minnesota, commencing at 10:00 a.m., Central Time, for
the following purposes:

1. To consider and vote upon a proposal to approve and adopt an Agreement
and Plan of Merger (the "Merger Agreement"), dated as of May 30, 1996,
by and among Ascend Communications, Inc., a Delaware corporation
("Ascend"), Nebula Acquisition Corporation, a Minnesota corporation and
a wholly-owned subsidiary of Ascend ("Sub"), and NetStar, pursuant to
which, among other things, (a) Sub will be merged with and into NetStar,
which will be the surviving corporation, and NetStar will become a
wholly-owned subsidiary of Ascend (the "Merger") and (b) each
outstanding share of Common Stock, par value $0.01 per share, of NetStar
will be converted into the right to receive 0.35398 of a share of Common
Stock, par value $0.001 per share, of Ascend; and

2. To transact such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.

The stock transfer books of NetStar will not be closed. In lieu thereof, and
in accordance with NetStar's Bylaws, the Board of Directors has set the close
of business on July 5, 1996 as the record date for the determination of the
stockholders entitled to notice of and to vote at the Special Meeting and any
adjournments or postponements thereof.

Under the Minnesota Business Corporation Act, NetStar stockholders have
certain dissenters' rights in connection with the Merger. See "The Special
Meeting--Dissenters' Rights" in the accompanying Proxy Statement/Prospectus
and Annex C thereto.

All stockholders are cordially invited to attend the Special Meeting in
person. However, to ensure your representation at the Special Meeting, you are
urged to complete and sign the enclosed proxy card and return it as promptly
as possible in the enclosed postage-prepaid envelope.

By Order of the Board of Directors

Duane S. Carlson
Secretary

July 15, 1996

WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
DATE YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE-PREPAID
ENVELOPE. DO NOT SEND ANY STOCK CERTIFICATES WITH THE ENCLOSED PROXY CARD.
<PAGE>

NETSTAR, INC. PROXY STATEMENT

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ASCEND COMMUNICATIONS, INC. PROSPECTUS

This Proxy Statement/Prospectus is being furnished to holders of Common
Stock, par value $0.01 per share ("NetStar Common Stock"), of NetStar, Inc., a
Minnesota corporation ("NetStar"), in connection with the solicitation of
proxies by the Board of Directors of NetStar (the "NetStar Board") for use at
a special meeting of NetStar stockholders (the "Special Meeting") to be held
on August 15, 1996, at the Minneapolis/St. Paul Airport Hilton, 3800 East 80th
Street, Minneapolis, Minnesota, commencing at 10:00 a.m., Central Time, and at
any adjournments or postponements thereof.

This Proxy Statement/Prospectus also constitutes a prospectus of Ascend
Communications, Inc., a Delaware corporation ("Ascend"), with respect to up to
4,160,930 shares of Common Stock, par value $0.001 per share ("Ascend Common
Stock"), to be issued in the merger of Nebula Acquisition Corporation, a
Minnesota corporation and a wholly-owned subsidiary of Ascend ("Sub"), with
and into NetStar (the "Merger") pursuant to the Agreement and Plan of Merger,
dated as of May 30, 1996, among Ascend, Sub and NetStar (the "Merger
Agreement") in exchange for outstanding shares of NetStar Common Stock. All
information contained in this Proxy Statement/Prospectus relating to Ascend
has been supplied by Ascend, and all information relating to NetStar has been
supplied by NetStar.

----------------

SEE "RISK FACTORS" BEGINNING ON PAGE 16 FOR CERTAIN INFORMATION THAT SHOULD
BE CONSIDERED BY NETSTAR STOCKHOLDERS IN EVALUATING THE PROPOSAL TO BE VOTED
ON AT THE SPECIAL MEETING AND THE ACQUISITION OF THE SECURITIES OFFERED
HEREBY.

----------------

THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE
NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

----------------

This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of NetStar on or about July 15, 1996.

The date of this Proxy Statement/Prospectus is July 11, 1996.
<PAGE>

AVAILABLE INFORMATION

Ascend and NetStar are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The reports, proxy
statements and other information filed by Ascend and NetStar with the
Commission can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, and should be available for inspection at the Commission's
Regional Offices located at 7 World Trade Center, New York, New York 10048 and
500 West Madison Street, Suite 1400, Chicago, Illinois 60611. Copies of such
material also can be obtained from the Public Reference Section of the
Commission, Washington, D.C. 20549 at prescribed rates. Ascend Common Stock
and NetStar Common Stock are traded on The Nasdaq National Market. Reports and
other information concerning Ascend and NetStar can also be inspected at the
offices of the National Association of Securities Dealers, Inc., Market
Listing Section, 1735 K Street, N.W., Washington, D.C. 20006.

Ascend has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
shares of Ascend Common Stock to be issued pursuant to the Merger Agreement.
This Proxy Statement/Prospectus does not contain all the information set forth
in the Registration Statement. Such additional information may be obtained
from the Commission's principal office in Washington, D.C. Statements
contained in this Proxy Statement/Prospectus or in any document incorporated
by reference in this Proxy Statement/ Prospectus as to the contents of any
contract or other document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the copy of such contract
or other document filed as an exhibit to the Registration Statement or such
other document, each such statement being qualified in all respects by such
reference.

INCORPORATION OF CERTAIN ASCEND DOCUMENTS BY REFERENCE

The following Ascend documents filed with the Commission are incorporated by
reference in this Proxy Statement/Prospectus:

1. Ascend's Annual Report on Form 10-K for the year ended December
31, 1995;

2. Ascend's Quarterly Report on Form 10-Q for the three month period
ended March 31, 1996;

3. Ascend's Current Report on Form 8-K filed on June 7, 1996; and

4. The description of Ascend's capital stock contained in Ascend's
Registration Statement on Form 8-A filed on March 31, 1994.

All documents and reports subsequently filed by Ascend pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the termination of the offering under this
Proxy Statement/Prospectus shall be deemed to be incorporated by reference in
this Proxy Statement/Prospectus and to be part hereof from the date of filing
of such documents or reports. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Proxy Statement/Prospectus
to the extent that a statement contained herein or in any other subsequently
filed document which also is or is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.

THIS PROXY STATEMENT/PROSPECTUS INCORPORATES ASCEND DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED, ON
WRITTEN OR ORAL REQUEST,

2
<PAGE>

WITHOUT CHARGE, DIRECTED TO ASCEND COMMUNICATIONS, INC., 1275 HARBOR BAY
PARKWAY, ALAMEDA, CALIFORNIA 94502 (TELEPHONE NUMBER (510) 769-6001),
ATTENTION: ROBERT K. DAHL, CHIEF FINANCIAL OFFICER. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY AUGUST 9, 1996.

NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ASCEND, NETSTAR OR ANY OTHER
PERSON. THIS PROXY STATEMENT/ PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A
PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF ASCEND OR NETSTAR SINCE THE DATE HEREOF OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.

Ascend, Multiband, Multiband RPM, Pipeline and RubberBandwidth are
registered trademarks of Ascend, and Multiband Bandwidth on Demand, Multiband
Plus, Multiband VSX, MAX, Pipeline Remote LAN Access Router, Pipeline 25,
Pipeline 50 and Pipeline 400 are trademarks of Ascend. GigaRouter and
ClusterSwitch are registered trademarks of NetStar. This Proxy
Statement/Prospectus also includes trademarks of companies other than Ascend
and NetStar which are the property of their respective owners.

NOTICE TO NEW HAMPSHIRE RESIDENTS: Neither the fact that a registration
statement or an application for a license has been filed with the State of New
Hampshire nor the fact that a security is effectively registered or a person
is licensed in the State of New Hampshire constitutes a finding by the
Secretary of State of New Hampshire that any document filed under RSA 421-B of
the New Hampshire Uniform Securities Act is true, complete and not misleading.
Neither any such fact nor the fact that an exemption or exception is available
for a security or a transaction means that the Secretary of State has passed
in any way upon the merits or qualifications of, or recommended or given
approval to, any person, security or transaction. It is unlawful to make, or
cause to be made, to any prospective purchaser, customer or client any
representation inconsistent with the provisions of this paragraph.

UNDER THE MINNESOTA BUSINESS CORPORATION ACT, NETSTAR STOCKHOLDERS HAVE
CERTAIN DISSENTERS' RIGHTS IN CONNECTION WITH THE MERGER. SEE "THE SPECIAL
MEETING--DISSENTERS' RIGHTS" AND ANNEX C HERETO.

3
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TABLE OF CONTENTS

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PAGE
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<S> <C>
AVAILABLE INFORMATION.................................................... 2
INCORPORATION OF CERTAIN ASCEND DOCUMENTS BY REFERENCE................... 2
SUMMARY.................................................................. 6
The Companies.......................................................... 6
Date and Place of the Special Meeting.................................. 7
Stockholders Entitled to Vote.......................................... 7
Purpose of the Special Meeting......................................... 7
Vote Required.......................................................... 7
Effects of the Merger.................................................. 7
Recommendation of the NetStar Board of Directors....................... 8
Opinion of Financial Advisor to NetStar................................ 8
Interests of Certain Persons in the Merger............................. 8
Voting Agreements...................................................... 9
Effective Time of the Merger........................................... 9
Conditions to the Merger............................................... 9
Regulatory Requirements................................................ 9
Termination............................................................ 9
Surrender of NetStar Stock Certificates................................ 10
Certain Federal Income Tax Consequences................................ 10
Accounting Treatment................................................... 10
Comparison of Stockholder Rights....................................... 10
Dissenters' Rights..................................................... 10
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA............... 11
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA............ 14
MARKET PRICE INFORMATION................................................. 15
RISK FACTORS............................................................. 16
Risks Relating to the Merger........................................... 16
Risks Relating to Ascend and the Combined Company...................... 17
Risks Relating to NetStar.............................................. 21
THE SPECIAL MEETING...................................................... 25
General................................................................ 25
Matters to be Considered at the Meeting................................ 25
Voting at the Meeting; Record Date..................................... 25
Proxies................................................................ 26
Dissenters' Rights..................................................... 26
THE MERGER............................................................... 30
Background of the Merger............................................... 30
Reasons for the Merger; Recommendation of the NetStar Board of
Directors................................................................ 32
Opinion of Financial Advisor to NetStar................................ 34
Interests of Certain Persons in the Merger............................. 38
Voting Agreements...................................................... 38
Accounting Treatment................................................... 38
Certain Federal Income Tax Consequences................................ 39
Regulatory Requirements................................................ 41
Federal Securities Law Consequences.................................... 41
Nasdaq National Market Quotation....................................... 41
</TABLE>

4
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<TABLE>
<S> <C>
THE MERGER AGREEMENT...................................................... 42
The Merger.............................................................. 42
Conversion of Securities................................................ 42
Dissenters' Rights...................................................... 43
Representations and Warranties.......................................... 43
Certain Covenants and Agreements........................................ 43
No Solicitation......................................................... 44
Related Matters After the Merger........................................ 45
Indemnification......................................................... 45
Conditions.............................................................. 46
Stock Plans and Options................................................. 47
Warrants................................................................ 47
Termination; Termination Fees and Expenses.............................. 48
Amendment and Waiver.................................................... 49
INFORMATION CONCERNING ASCEND............................................. 50
Business................................................................ 50
Selected Consolidated Financial Data.................................... 62
Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................. 63
Management.............................................................. 68
Security Ownership of Certain Beneficial Owners and Management.......... 70
INFORMATION CONCERNING NETSTAR............................................ 72
Business................................................................ 72
Selected Consolidated Financial Data.................................... 81
Management's Discussion and Analysis of Financial Condition and Results
of Operations............................................................. 82
Security Ownership of Certain Beneficial Owners and Management.......... 86
UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS.............. 87
COMPARISON OF RIGHTS OF ASCEND STOCKHOLDERS AND NETSTAR STOCKHOLDERS...... 95
DESCRIPTION OF ASCEND CAPITAL STOCK....................................... 100
LEGAL MATTERS............................................................. 100
EXPERTS................................................................... 100
GLOSSARY.................................................................. 101
INDEX TO NETSTAR, INC. CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
ANNEX A--AGREEMENT AND PLAN OF MERGER..................................... A-1
ANNEX B--OPINION OF WESSELS, ARNOLD & HENDERSON, L.L.C.................... B-1
ANNEX C--SECTIONS 302A.471 AND 302A.473 OF THE MINNESOTA BUSINESS
CORPORATION ACT.......................................................... C-1
</TABLE>

5
<PAGE>

SUMMARY

The following is a summary of certain information contained elsewhere in this
Proxy Statement/Prospectus. Reference is made to, and this summary is qualified
in its entirety by, the more detailed information contained, or incorporated by
reference, in this Proxy Statement/Prospectus and the Annexes hereto. Certain
terms used in this Proxy Statement/Prospectus are defined in the Glossary
beginning on page 101 hereof and elsewhere herein. NetStar stockholders are
urged to read this Proxy Statement/Prospectus and the Annexes hereto in their
entirety.

This Proxy Statement/Prospectus contains a number of forward-looking
statements which reflect the current views of Ascend and/or NetStar with
respect to future events that will have an effect on their future financial
performance. These forward-looking statements are subject to various risks and
uncertainties, including those set forth under "Risk Factors" and elsewhere
herein, that could cause actual results to differ materially from historical
results or those currently anticipated. Readers are cautioned not to place
undue reliance on these forward-looking statements.

All share and per share data of Ascend and NetStar in this Proxy
Statement/Prospectus reflects all stock splits of Ascend Common Stock and
NetStar Common Stock effected prior to the date hereof.

THE COMPANIES

Ascend. Ascend develops, manufactures, markets, sells and supports a broad
range of high-speed digital remote networking access products that enable its
customers to build: (i) Internet access systems consisting of point-of-presence
("POP") termination equipment for Internet service providers ("ISPs") and
remote site Internet access equipment for Internet subscribers; (ii) extensions
and enhancements to corporate backbone networks that facilitate access to these
networks by remote offices, telecommuters and mobile computer users; and (iii)
videoconferencing and multimedia access facilities. These products are termed
bandwidth on demand systems because they establish high-speed switched digital
connections whose bandwidth, duration and destination can be adjusted to suit
user application needs. These products support existing digital and analog
networks.

Ascend has three bandwidth on demand remote networking access product
families, each of which is focused on major application segments: MAX products
for wide area networking ("WAN") access to corporate backbone networks,
Internet access in POPs and multimedia access facilities; Pipeline products for
telecommuting, remote office access and Internet access by individual sites or
users; and Multiband products for videoconferencing and multimedia networks.
These products support a wide variety of application interfaces, switched
digital services, digital modem services and digital and analog access line
types. This wide range of connectivity and interoperability options
significantly increases the number of POP, corporate and individual sites that
can benefit from bandwidth on demand networking. Ascend's products are
distributed and serviced globally and Ascend maintains marketing and sales
relationships with ISPs, including UUNET, PSI, BBN, MCI, EUNET, Demon, Pipex
and NTT-PC, with major telecommunications carriers, including AT&T, Sprint,
MCI, GTE, Pacific Bell, Southwestern Bell, British Telecom, France Telecom,
Deutsche Telekom and NTT in Japan, with video equipment providers, including
Compression Labs, GPT, PictureTel and VTEL and with value-added resellers
("VARs") and distributors, including relationships, as of March 31, 1996, with
approximately 124 VARs and distributors in North America and approximately 112
outside of North America.

Ascend was incorporated in California in 1989 and reincorporated in Delaware
in 1994. Ascend's principal offices are located at 1275 Harbor Bay Parkway,
Alameda, California 94502, and its telephone number at that location is (510)
769-6001.

NetStar. NetStar designs, manufactures, markets and services high-performance
computer networking equipment for organizations whose high-speed, high-volume
information transfer needs cannot be effectively met by their existing
networks. NetStar's principal product, the GigaRouter, is an Internet protocol
("IP") router that connects multiple high-speed networks. The networking
industry has standardized a number of network technologies that communicate at
speeds from 50 million bits per second up to 800 million bits per second. The

6
<PAGE>

GigaRouter can simultaneously route information among more high-speed networks
than any other router known to NetStar. NetStar's strategy, as exemplified by
the GigaRouter, is to provide IP routers with industry leading speed and
capacity and to design products that merge routers and switching technologies,
including ATM.

NetStar was incorporated in Minnesota in December 1990. NetStar is located at
10250 Valley View Road, Suite 113, Eden Prairie, Minnesota 55344, and its
telephone number is (612) 943-8990. NetStar has one subsidiary, NetStar
International, Ltd., which was formed under the laws of the State of Minnesota
for use in managing NetStar's foreign distributors.

DATE AND PLACE OF THE SPECIAL MEETING

The Special Meeting of NetStar stockholders will be held on August 15, 1996,
at the Minneapolis/St. Paul Airport Hilton, 3800 East 80th Street, Minneapolis,
Minnesota, commencing at 10:00 a.m., Central Time.

STOCKHOLDERS ENTITLED TO VOTE

Holders of record of shares of NetStar Common Stock at the close of business
on July 5, 1996 are entitled to notice of and to vote at the Special Meeting.
At such date there were 10,749,830 shares of NetStar Common Stock outstanding,
each of which will be entitled to one vote on each matter to be acted upon or
which may properly come before the Special Meeting.

PURPOSE OF THE SPECIAL MEETING

The purpose of the Special Meeting is to consider and vote upon (i) a
proposal to approve and adopt the Merger Agreement and (ii) such other matters
as may properly be brought before the Special Meeting, or any adjournments or
postponements thereof.

VOTE REQUIRED

The approval of the Merger Agreement by NetStar stockholders will require the
affirmative vote of the holders of a majority of the outstanding shares of
NetStar Common Stock.

EFFECTS OF THE MERGER

Upon consummation of the Merger pursuant to the Merger Agreement (i) Sub will
be merged with and into NetStar, which will be the surviving corporation (the
"Surviving Corporation"), and NetStar will become a wholly-owned subsidiary of
Ascend, and (ii) each issued and outstanding share of NetStar Common Stock
(other than shares held by NetStar stockholders who perfect their dissenters'
rights) will be converted into the right to receive 0.35398 of a share of
Ascend Common Stock (the "Conversion Number" or "Exchange Ratio"). Fractional
shares of Ascend Common Stock will not be issued in connection with the Merger.
NetStar stockholders otherwise entitled to a fractional share will be paid the
value of such fractional share in cash determined as described below under "The
Merger Agreement--Conversion of Securities."

Based upon the outstanding shares of Common Stock of NetStar and Ascend as of
May 31, 1996 (and assuming no exercise by NetStar stockholders of their
dissenters' rights), the stockholders of NetStar immediately prior to the
consummation of the Merger will own approximately 3.2% of the outstanding
shares of Ascend Common Stock immediately following the consummation of the
Merger.

Upon consummation of the Merger, each then-outstanding option to purchase
NetStar Common Stock under NetStar's Stock Option Incentive Plan--1992 (the
"NetStar Employee Option Plan"), whether vested or unvested (a "NetStar
Option"), will be assumed by Ascend and will be deemed to constitute an option
to acquire, on the same terms and conditions as were applicable under such
NetStar Option, the same number of

7
<PAGE>

shares of Ascend Common Stock (rounded down to the nearest whole share) as the
holder of such NetStar Option would have been entitled to receive pursuant to
the Merger had such holder exercised such NetStar Option in full immediately
prior to the consummation of the Merger, at a price per share (rounded up to
the nearest whole cent) equal to the aggregate exercise price for the shares of
NetStar Common Stock otherwise purchasable pursuant to such NetStar Option
divided by the number of full shares of Ascend Common Stock (rounded down to
the nearest whole share) deemed purchasable pursuant to such NetStar Option in
accordance with the foregoing. The purpose and effect of this option assumption
formula is to give holders of NetStar Options the economic benefit of the
Merger. See "The Merger Agreement--Stock Plans and Options."

Upon consummation of the Merger, each then-outstanding warrant to purchase
NetStar Common Stock (a "NetStar Warrant") will be assumed by Ascend and will
be deemed to constitute a warrant to acquire, on the same terms and conditions
as were applicable under such NetStar Warrant, the same number of shares of
Ascend Common Stock (rounded down to the nearest whole share) as the holder of
such NetStar Warrant would have been entitled to receive pursuant to the Merger
had such holder exercised such NetStar Warrant in full immediately prior to the
consummation of the Merger, at a price per share (rounded up to the nearest
whole cent) equal to the aggregate exercise price for the shares of NetStar
Common Stock otherwise purchasable pursuant to such NetStar Warrant divided by
the number of full shares of Ascend Common Stock deemed purchasable pursuant to
such NetStar Warrant in accordance with the foregoing. See "The Merger
Agreement--Warrants."

The assumption of the NetStar Warrants by Ascend may be a taxable event for
the warrantholders. See "The Merger--Certain Federal Income Tax Consequences--
Holders of NetStar Warrants."

RECOMMENDATION OF THE NETSTAR BOARD OF DIRECTORS

The Board of Directors of NetStar (the "NetStar Board") has unanimously
approved the Merger Agreement and unanimously recommends that holders of
NetStar Common Stock approve the Merger Agreement. See "The Merger--Reasons for
the Merger; Recommendation of the NetStar Board of Directors."

OPINION OF FINANCIAL ADVISOR TO NETSTAR

NetStar retained Wessels, Arnold & Henderson, L.L.C. ("Wessels") to act as
its financial advisor in connection with the Merger. On May 30, 1996, Wessels
delivered its oral opinion to the NetStar Board to the effect that, as of the
date of such opinion, the Conversion Number is fair, from a financial point of
view, to the holders of NetStar Common Stock. Wessels subsequently confirmed
its oral opinion by delivery of a written opinion dated May 30, 1996. The full
text of Wessels's opinion, which sets forth the assumptions made, procedures
followed, matters considered and limits of its review, is attached hereto as
Annex B and is incorporated herein by reference. HOLDERS OF NETSTAR COMMON
STOCK ARE URGED TO, AND SHOULD, READ SUCH OPINION IN ITS ENTIRETY. See "The
Merger--Opinion of Financial Advisor to NetStar."

INTERESTS OF CERTAIN PERSONS IN THE MERGER

As of May 31, 1996, directors and executive officers of Ascend and their
affiliates may be deemed to be beneficial owners of approximately 5.6% of the
outstanding shares of Ascend Common Stock. See "Information Concerning Ascend--
Security Ownership of Certain Beneficial Owners and Management." In addition,
Martin Shoffstall, as director of Ascend, owns 500 shares of NetStar Common
Stock, which represents less than 1% of the outstanding shares of Common Stock
of NetStar.

Certain directors, executive officers and stockholders of NetStar are
obligated to vote or direct the vote of all of the outstanding shares of
NetStar Common Stock over which they have voting control in favor of the
approval and adoption of the Merger Agreement. See "The Merger--Voting
Agreements."

8
<PAGE>

Ascend has agreed to retain the services of Thomas S. Bednarik, James D.
Edwards and Gary A. Stoltz, the three current non-employee directors of
NetStar, as members of the Board of Directors of the Surviving Corporation for
a period of not less than 90 days following consummation of the Merger to
assist with post-Merger transition matters. Each of these individuals will
serve in such capacity without compensation. However, stock options held by
such persons will continue to vest during their continued service, and, as a
result, options to purchase 12,500 shares of NetStar Common Stock held by each
of these individuals (which will be assumed by Ascend in the Merger and
converted into options to purchase 4,424 shares of Ascend Common Stock) will
vest during the period of such service. See "The Merger Agreement--Related
Matters after the Merger."

Under the Merger Agreement, Ascend is required to provide indemnification to,
and maintain liability insurance covering, the directors and officers of
NetStar. See "The Merger Agreement--Indemnification."

VOTING AGREEMENTS

In connection with the execution of the Merger Agreement, each of the
directors of NetStar, certain executive officers of NetStar and certain NetStar
stockholders affiliated with a director who, as of May 31, 1996, together held
approximately 3.5% of the outstanding shares of NetStar Common Stock, entered
into Voting Agreements pursuant to which such persons agreed, among other
things, (i) to vote their shares of NetStar Common Stock in favor of approval
of the Merger Agreement and against any proposal made in opposition to or
competition with the consummation of the Merger or which would, or could
reasonably be expected to, prohibit or discourage the Merger and (ii) not to
transfer, pledge, sell, exchange or offer to transfer or sell or otherwise
dispose of or encumber any shares of NetStar Common Stock prior to the earliest
of the consummation of the Merger or the termination of the Merger Agreement.
See "The Merger--Voting Agreements."

EFFECTIVE TIME OF THE MERGER

It is anticipated that the Merger will become effective as promptly as
practicable after the requisite approval by the stockholders of NetStar has
been obtained and all other conditions to the Merger have been satisfied or
waived (the "Effective Time"). It is anticipated that, assuming all conditions
are met, the Merger will occur on August 15, 1996.

CONDITIONS TO THE MERGER

The obligations of Ascend and NetStar to consummate the Merger are subject to
the satisfaction of certain conditions, including, but not limited to,
obtaining requisite NetStar stockholder and regulatory approvals, approval for
quotation on The Nasdaq National Market of the Ascend Common Stock to be issued
pursuant to the Merger Agreement, the absence of any injunction prohibiting
consummation of the Merger, the continuing accuracy of the representations and
warranties made in the Merger Agreement on and as of the Effective Time, the
receipt of certain legal opinions with respect to tax matters and the
confirmation of certain accountants' letters with respect to qualification of
the Merger as a pooling of interests transaction. In addition, the parties'
obligations to consummate the Merger are subject to NetStar having not
received, prior to the Special Meeting, notices from NetStar stockholders who
desire to seek dissenters' rights where such holders own an aggregate number of
shares of NetStar Common Stock which would, if such rights were perfected,
prevent Ascend from accounting for the Merger as a pooling of interests. See
"The Merger--Accounting Treatment," "--Certain Federal Income Tax Consequences"
and "The Merger Agreement--Conditions."

REGULATORY REQUIREMENTS

The consummation of the Merger is subject to certain regulatory requirements,
including expiration of the applicable waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). On June
17, 1996, Ascend and NetStar each filed a notification and report form under
the HSR Act, together with a request for early termination of the applicable
30-day waiting period. See "The Merger--Regulatory Requirements."

TERMINATION

The Merger Agreement is subject to termination by mutual written consent of
Ascend and NetStar, at the option of either Ascend or NetStar, if the Merger is
not consummated before December 31, 1996, and prior to

9
<PAGE>

such time upon the occurrence of certain events. If the Merger Agreement is
terminated under certain circumstances, NetStar may be required to reimburse
Ascend for its expenses up to $750,000, or NetStar or Ascend may be required to
pay the other party a termination fee of $10,000,000. See "The Merger
Agreement--Termination; Termination Fees and Expenses."

SURRENDER OF NETSTAR STOCK CERTIFICATES

If the Merger is consummated, The First National Bank of Boston (the
"Exchange Agent") will mail a letter of transmittal with instructions to all
holders of record of NetStar Common Stock immediately prior to the Merger for
use in surrendering their stock certificates in exchange for certificates
representing shares of Ascend Common Stock and a cash payment in lieu of
fractional shares, if any. CERTIFICATES SHOULD NOT BE SURRENDERED UNTIL THE
LETTER OF TRANSMITTAL IS RECEIVED. See "The Merger Agreement--Conversion of
Securities."

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The Merger is intended to be a tax-free reorganization so that no gain or
loss would be recognized by Ascend or NetStar and no gain or loss would be
recognized by NetStar stockholders, except in respect of cash received in lieu
of fractional shares or pursuant to the exercise of dissenters' rights. Holders
of NetStar Warrants may be subject to federal income tax upon the assumption of
the NetStar Warrants by Ascend. It is a condition to the Merger that Ascend and
NetStar shall have each received an opinion of their respective counsel 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").
For a further discussion of federal income tax consequences of the Merger, see
"The Merger--Certain Federal Income Tax Consequences." See also "The Merger
Agreement--Conditions."

ACCOUNTING TREATMENT

The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. It is a condition to the Merger that Ascend
shall have received a letter from Ernst & Young LLP, Ascend's independent
auditors, as to the appropriateness of pooling of interests accounting for the
Merger under Accounting Principles Board Opinion No. 16, and that NetStar shall
have received a letter from Deloitte & Touche LLP, NetStar's independent
auditors, stating that it knows of nothing with respect to NetStar that would
prohibit Ascend from accounting for the Merger as a pooling of interests. See
"The Merger--Accounting Treatment" and "The Merger Agreement--Conditions."

COMPARISON OF STOCKHOLDER RIGHTS

See "Comparison of Rights of Ascend Stockholders and NetStar Stockholders"
for a summary of the material differences between the rights of holders of
Ascend Common Stock and NetStar Common Stock.

DISSENTERS' RIGHTS

NetStar stockholders are entitled to exercise dissenters' rights pursuant to
the provisions of the Minnesota Business Corporation Act (the "MBCA"). In
accordance with these provisions, NetStar stockholders have the right to
dissent to the Merger and to be paid the "fair value" of their shares of
NetStar Common Stock. The failure of a dissenting stockholder of NetStar to
timely and properly comply with the appropriate procedures will result in the
termination or waiver of such rights. In the event that a NetStar stockholder
who attempts to exercise dissenters' rights should fail to make an effective
demand for payment or otherwise lose his or her status as a dissenting
stockholder, such NetStar stockholder shall be entitled to receive from Ascend
the same number of shares of Ascend Common Stock, and cash payment in lieu of
any fractional share, that such NetStar stockholder would have received in the
Merger if he or she had not attempted to exercise dissenters' rights. See "The
Special Meeting--Dissenters' Rights," "The Merger Agreement--Dissenters'
Rights" and "The Merger Agreement--Conditions."

10
<PAGE>

SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA

Ascend's historical balance sheet data at March 31, 1996 and historical
statement of income data for the three month periods ended March 31, 1996 and
1995 are derived from Ascend's unaudited consolidated financial statements
incorporated by reference herein. Ascend's historical balance sheet data at
March 31, 1995 are derived from Ascend's unaudited consolidated financial
statements not included or incorporated by reference herein. Ascend's
historical balance sheet data at December 31, 1995 and 1994 and historical
statement of income data for each of the three years in the period ended
December 31, 1995 are derived from Ascend's audited consolidated financial
statements incorporated by reference herein. Ascend's historical balance sheet
data as of December 31, 1993, 1992 and 1991 and historical statement of income
data for each of the two years in the period ended December 31, 1992 are
derived from Ascend's audited consolidated financial statements not
incorporated by reference or included herein. All consolidated financial
statement information is qualified by and should be read in conjunction with
such financial statements and the notes thereto. NetStar's historical statement
of operations data for the three months ended March 31, 1996 and 1995 are
derived from NetStar's unaudited financial statements which are not included
herein. NetStar's historical balance sheet data as of March 31, 1996 are
derived from unaudited consolidated financial statements included elsewhere in
this Proxy Statement/Prospectus. NetStar's historical balance sheet data as of
September 30, 1995 and 1994 and the statement of operations data for the years
ended September 30, 1995, 1994 and 1993 are derived from NetStar's audited
consolidated financial statements included elsewhere in this Proxy
Statement/Prospectus. NetStar's historical balance sheet data as of September
30, 1993 and 1992 and the statement of operations data for the period from
March 1, 1992 (inception) to September 30, 1992 are derived from NetStar's
audited consolidated financial statements which are not included herein.
NetStar's consolidated financial information is qualified by and should be read
in conjunction with NetStar's consolidated financial statements and notes
thereto included elsewhere in this Proxy Statement/Prospectus. In the opinion
of the managements of Ascend and NetStar, the above mentioned unaudited interim
financial data of the respective companies include all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results for unaudited interim periods. The unaudited selected pro forma
combined financial data is qualified in its entirety by reference to, and
should be read in conjunction with, the unaudited pro forma condensed combining
financial statements and notes thereto included elsewhere in this Proxy
Statement/Prospectus. The unaudited selected pro forma combined statement of
income data combines Ascend's consolidated results of operations data for each
of the three years in the period ended December 31, 1995 and for the three
month period ended March 31, 1996 with NetStar's consolidated results of
operations data for each of the three years in the period ended September 30,
1995 and for the three month period ended March 31, 1996, giving effect to the
Merger as if it had occurred at the beginning of each period presented. The
unaudited selected pro forma combined balance sheet data combines Ascend's
consolidated balance sheet data as of March 31, 1996 with NetStar's
consolidated balance sheet data as of that date, giving effect to the Merger as
if it had occurred as of March 31, 1996. The selected pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the consolidated operating results or financial position that would have
occurred had the Merger been consummated at the beginning of the periods
presented, nor is it necessarily indicative of future operating results or
financial position. See "Unaudited Pro Forma Condensed Combining Financial
Statements."

11
<PAGE>

ASCEND SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -----------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------- --------- -------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF
INCOME DATA:
Net sales.............. $ 91,078 $ 20,363 $149,590 $39,343 $16,215 $ 7,236 $ 3,156
Gross profit........... 59,230 13,364 98,420 26,138 10,628 3,797 1,694
Operating income 31,230 5,182 43,825 9,013 1,297 (3,891) (2,572)
(loss)..................
Net income (loss)...... 20,948 3,465 30,573 8,699 1,349 (3,766) (2,393)
Net income (loss) per $0.17 $0.04 $0.28 $0.09 $0.02 $(0.33) $(0.21)
share...................
Number of shares used
in per share
calculation.......... 121,675 101,176 108,976 92,800 82,152 11,488 11,472
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------------------
1996 1995 1994 1993 1992 1991
----------- -------- ------- ------- ------- ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET
DATA:
Working capital.......... $254,406 $235,221 $41,249 $ 8,486 $ 7,192 $3,615
Total assets............. 388,482 335,450 53,272 12,392 10,032 5,767
Total stockholders' 327,951 296,130 43,655 9,560 8,140 4,313
equity....................
</TABLE>

NETSTAR SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 1, 1992
MARCH 31, YEAR ENDED SEPTEMBER 30, (INCEPTION) TO
-------------------- ---------------------------- SEPTEMBER 30,
1996 1995 1995 1994 1993 1992
--------- --------- -------- -------- -------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL STATEMENT OF
OPERATIONS DATA:
Revenues............... $ 951 $ 1,010 $ 3,014 $ 312 $ -- $ --
Gross profit........... 232 321 888 130 -- --
Operating loss......... (2,822) (879) (4,525) (3,862) (1,759) (311)
Net loss............... (2,520) (858) (4,898) (3,785) (1,714) (298)
Net loss per share..... $(0.26) $(0.16) $(0.90) $(0.85) $(0.63) $(0.19)
Number of shares used
in per share
calculation.......... 9,817 5,424 5,448 4,433 2,725 1,590
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ----------------------------
1996 1995 1994 1993 1992
----------- ------- ------ ------ ------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
HISTORICAL BALANCE SHEET DATA:
Working capital...................... $25,656 $24,138 $4,858 $2,092 $ 845
Total assets......................... 29,921 31,069 5,949 2,970 1,009
Total stockholders' equity........... 27,720 25,362 5,384 2,562 960
</TABLE>

12
<PAGE>

ASCEND AND NETSTAR UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA(1)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME DATA:

<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ------------------------
1996 1995 1994 1993
------------------ -------- ------- -------
<S> <C> <C> <C> <C>
Net sales........................ $ 92,029 $152,604 $39,655 $16,215
Gross profit..................... 59,463 99,308 26,268 10,628
Net income (loss)................ 19,386 27,535 7,118 (365)
Net income (loss) per share...... $0.15 $0.25 $0.08 $(0.00)
Shares used in per share 125,947 111,264 94,583 83,117
computations.....................
</TABLE>

<TABLE>
<CAPTION>
MARCH 31,
1996
---------
<S> <C>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET DATA:
Working capital....................................................... $272,504
Total assets.......................................................... 423,830
Total stockholders' equity............................................ 353,598
</TABLE>
- --------
(1)See "Unaudited Pro Forma Condensed Combining Financial Statements"

13
<PAGE>

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

The following table sets forth (1) historical net income per share and
historical book value per share data of Ascend; (2) historical net loss per
share and historical book value per share data of NetStar; (3) unaudited pro
forma combined net income (loss) per share and unaudited pro forma book value
per share data of Ascend after giving effect to the Merger on a pooling of
interests basis; and (4) unaudited equivalent pro forma combined net income
(loss) per share and unaudited equivalent pro forma combined book value per
share data of NetStar based on the exchange of 0.35398 of a share of Ascend
Common Stock for each share of NetStar Common Stock. See "The Merger
Agreement--Conversion of Securities." The information in the table should be
read in conjunction with the audited consolidated financial statements and the
unaudited interim condensed consolidated financial statements of Ascend and
NetStar and the notes thereto incorporated by reference and included herein.
The unaudited pro forma combined financial data are not necessarily indicative
of the net income (loss) per share or book value per share that would have been
achieved had the Merger been consummated as of the beginning of the periods
presented and should not be construed as representative of such amounts for any
future dates or periods.

<TABLE>
<CAPTION>
HISTORICAL ASCEND NETSTAR EQUIVALENT
-------------- PRO FORMA PRO FORMA
ASCEND NETSTAR COMBINED (1)(2) COMBINED (1)(2)(3)
------ ------- --------------- ------------------
<S> <C> <C> <C> <C>
Net income (loss) per share:
Three months ended March 31:
1996..................... $0.17 $(0.26) $ 0.15 $ 0.05
1995..................... 0.04 (0.16) 0.03 0.01
For the year ended December 31
for Ascend and September 30 for NetStar:
1995..................... 0.28 (0.90) 0.25 0.09
1994..................... 0.09 (0.85) 0.08 0.03
1993..................... 0.02 (0.63) (0.00) (0.00)
Book value per share at (4):
March 31, 1996............ $2.95 $ 2.79 $ 2.87 $ 1.02
December 31, 1995 for Ascend and
September 30, 1995 for NetStar........ 2.69 2.87 2.64 0.93
</TABLE>
- --------
(1) NetStar has a September 30 fiscal year end and, accordingly, the NetStar
statements of operations for the years ended September 30, 1995, 1994 and
1993 have been combined with Ascend statements of income for the calendar
years ended December 31, 1995, 1994 and 1993. In order to conform NetStar's
fiscal year end to Ascend's calendar fiscal year end, NetStar's first
quarter ended December 31, 1995 has not been presented. Instead, NetStar's
second quarter ended March 31, 1996 has been presented for comparative
purposes. The results of operations for NetStar's first quarter ended
December 31, 1995 included net sales of approximately $1.7 million, gross
profit of approximately $585,000, net loss of approximately $1.1 million
and net loss per share of $(0.11).

(2) Ascend and NetStar anticipate that the combined company will incur Merger-
related expenses totaling approximately $7.5 million. Such expenses include
investment advisory fees, legal and accounting expenses and other
transaction costs. These costs are expected to be charged to the operations
of Ascend in the twelve-month period following the Merger. The effects of
these costs have not been reflected in the historical or pro forma net
income (loss) per share data but are reflected in the pro forma book value
per share data as of March 31, 1996 and December 31, 1995.

(3) The Netstar equivalent pro forma combined per share amounts are calculated
by multiplying the Ascend pro forma combined per share amounts by the
Exchange Ratio of 0.35398 of a share of Ascend Common Stock for each share
of NetStar Common Stock.

(4) Historical book value per share is computed by dividing stockholders'
equity by the number of shares of Common Stock outstanding at the end of
each period. Ascend pro forma book value per share is computed by dividing
pro forma stockholders' equity, including the effect of pro forma
adjustments, by the pro forma number of shares of Ascend Common Stock which
would have been outstanding had the Merger been consummated as of each
balance sheet date.

14
<PAGE>

MARKET PRICE INFORMATION

Both Ascend Common Stock and NetStar Common Stock are quoted on The Nasdaq
National Market under the symbols "ASND" and "NTSR," respectively.

The table below sets forth, for the calendar quarters indicated, the reported
high and low closing sale prices of Ascend Common Stock and NetStar Common
Stock as reported on The Nasdaq National Market. Ascend Common Stock began
trading on The Nasdaq National Market on May 13, 1994, and NetStar Common Stock
began trading on The Nasdaq National Market on September 19, 1995. Prices of
Ascend Common Stock and NetStar Common Stock reflect all stock splits effected
prior to the date hereof.

<TABLE>
<CAPTION>
ASCEND COMMON NETSTAR COMMON
STOCK STOCK
------------- ---------------
HIGH LOW HIGH LOW
------------- ------- -------
<S> <C> <C> <C> <C>
1994
Second Quarter (commencing May 13).......... $ 2.03 $ 1.41 $ -- $ --
Third Quarter............................... 3.47 1.61 -- --
Fourth Quarter.............................. 5.56 2.72 -- --
1995
First Quarter............................... 8.22 4.94 -- --
Second Quarter.............................. 13.00 7.84 -- --
Third Quarter (commencing September 19 for
NetStar).................................. 21.56 12.25 11.25 9.62
Fourth Quarter.............................. 40.63 16.50 27.00 8.38
1996
First Quarter............................... 57.00 32.25 22.75 15.00
Second Quarter.............................. 70.63 51.75 26.68 16.25
Third Quarter (through July 10)............. 60.88 53.38 21.13 18.75
</TABLE>

On May 30, 1996, the last full trading day prior to the public announcement
of the Merger Agreement, the closing sale price on The Nasdaq National Market
was $66.13 per share of Ascend Common Stock and $25.25 per share of NetStar
Common Stock.

On July 10, 1996, the most recent practicable date prior to the printing of
this Proxy Statement/Prospectus, the closing sale price on The Nasdaq National
Market was $60.88 per share of Ascend Common Stock and $21.13 per share of
NetStar Common Stock.

Because the market price of Ascend Common Stock is subject to fluctuation,
the market value of the shares of Ascend Common Stock that holders of NetStar
Common Stock will receive in the Merger may increase or decrease prior to the
Merger.

NETSTAR STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
ASCEND COMMON STOCK AND THE NETSTAR COMMON STOCK.

Neither Ascend nor NetStar has paid any cash dividends on its Common Stock
since their respective inceptions. Following the Merger, Ascend intends to
retain any future earnings for use in its business and does not anticipate
paying cash dividends in the foreseeable future.

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<PAGE>

RISK FACTORS

The following risk factors should be considered by holders of NetStar Common
Stock in evaluating whether to approve the Merger Agreement and thereby become
holders of Ascend Common Stock. These factors should be considered in
conjunction with the other information included and incorporated by reference
in this Proxy Statement/Prospectus. In evaluating Ascend's and NetStar's
business, prospective investors should carefully consider the following
factors in addition to the other information presented in this Proxy
Statement/Prospectus.

RISKS RELATING TO THE MERGER

Integration of Certain Operations. The managements of Ascend and NetStar
have entered into the Merger Agreement with the expectation that the Merger
will result in beneficial synergies for Ascend and NetStar. See "The Merger--
Reasons for the Merger; Recommendation of the NetStar Board of Directors."
Achieving the anticipated benefits of the Merger will depend in part upon
whether the integration of the two companies' businesses is accomplished in an
efficient and effective manner, and there can be no assurance that this will
occur. The combination of the two companies will require, among other things,
integration of the companies' respective product offerings and technology and
coordination of their research and development, sales and marketing and
financial reporting efforts. There can be no assurance that such integration
will be accomplished smoothly or successfully. If significant difficulties are
encountered in the integration of the existing product lines and technology,
resources could be diverted from new product development, resulting in delays
in new product introductions. The integration of the product lines could also
cause confusion or dissatisfaction among existing customers of Ascend and
NetStar. The difficulties of such integration may be increased by the
necessity of coordinating geographically separated organizations with distinct
cultures. The integration of certain operations following the Merger will
require the dedication of management and other personnel resources which may
temporarily distract attention from the day-to-day business of the combined
company. Failure to successfully accomplish the integration of the two
companies' operations could have a material adverse effect on the combined
company's business, financial condition or results of operations.

Distributors, Resellers and Customers. There can be no assurance that
distributors, resellers and customers of Ascend or NetStar will continue their
current buying patterns without regard to the announced Merger. In particular,
certain present and potential distributors and customers may defer purchasing
decisions as they evaluate the combined company's future product strategy. Any
such deferrals could have a material adverse effect on the combined company's
business, financial condition or results of operations.

Fixed Exchange Ratio. Under the terms of the Merger Agreement, each share of
NetStar Common Stock issued and outstanding at the Effective Time will be
converted into the right to receive 0.35398 of a share of Ascend Common Stock.
The Merger Agreement does not contain any provisions for adjustment of the
Conversion Number based on fluctuations in the price of Ascend Common Stock.
Accordingly, the value of the consideration to be received by the stockholders
of NetStar upon the Merger will depend on the market price of Ascend Common
Stock at the Effective Time. On May 30, 1996, the date on which the Merger
Agreement was executed, the closing per share sale price of Ascend Common
Stock was $66.13. On July 10, 1996, the most recent practicable date prior to
the printing of this Proxy Statement/Prospectus, the closing per share sale
price of Ascend Common Stock was $60.88. There can be no assurance that the
market price of Ascend Common Stock on and after the Effective Time will not
be lower than such prices. See "--Risks Relating to Ascend and the Combined
Company--Volatility of Stock Price" and "--Risks Relating to NetStar--
Volatility of Stock Price" and "Market Price Information."

Transaction Charges. Ascend and NetStar anticipate that the combined company
will incur Merger-related expenses totaling approximately $7.5 million. Such
expenses include investment advisory fees, legal and accounting expenses and
other transaction costs. These costs are expected to be charged to the
operations of Ascend in the twelve-month period following the Merger. This
amount is a preliminary estimate only and therefore subject to change. There
can be no assurance that the combined company will not incur additional
charges to reflect costs associated with the Merger. See "--Integration of
Certain Operations" and "Selected Historical and Unaudited Pro Forma Financial
Data."

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<PAGE>

RISKS RELATING TO ASCEND AND THE COMBINED COMPANY

Fluctuations in Quarterly Operating Results. Ascend has experienced rapid
quarterly growth in net sales principally due to the emergence of several
markets for bandwidth on demand network access products, increased market
acceptance of Ascend's products and the expansion of Ascend's product line and
distribution channels. Due to the evolving nature of the markets for Ascend's
products, as well as the likelihood of increased competition, there can be no
assurance that Ascend's rate of growth in net sales will continue or that
Ascend will be able to sustain profitability in the future. Ascend's quarterly
operating results are affected by a wide variety of factors, including
competition, the mix of products sold, the mix of distribution channels
employed, Ascend's success in developing, introducing and shipping new
products, price reductions for Ascend's products, changes in the levels of
inventory held by third party resellers, the timing of orders from and
shipments to customers, seasonality and general economic conditions. Ascend
expects that its gross margins could be affected in future periods by price
adjustments as a result of increased competition. Ascend also expects that its
gross margins could be adversely affected in future periods by increased sales
of its Pipeline products as a percentage of net sales. These products have
lower gross margins than Ascend's other products. In addition, Ascend's use of
third parties to distribute its products to certain VARs may adversely affect
Ascend's gross margins. Ascend typically operates with a relatively small
backlog. As a result, quarterly sales and operating results generally depend
on the volume and timing of and ability to fulfill orders received within the
quarter, which are difficult to forecast. A significant portion of Ascend's
expense levels is relatively fixed in advance based in large part on Ascend's
forecasts of future sales. If sales are below expectations in any given
quarter, the adverse impact of the shortfall on Ascend's operating results may
be magnified by Ascend's inability to adjust spending to compensate for the
shortfall. Ascend may also increase spending in response to competition or to
pursue new market opportunities. Accordingly, there can be no assurance that
Ascend will be able to sustain profitability in the future, particularly on a
quarter-to-quarter basis. See "Information Concerning Ascend--Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Dependence on the Internet Access Market; Developing Markets; Market
Acceptance of Ascend's Products. The recent growth in Ascend's net sales has
been largely attributable to the use of its products for Internet access.
Sales of Ascend's MAX products, which are used principally as POP termination
devices by ISPs, accounted for approximately 26%, 63% and 72% of Ascend's net
sales in 1994, 1995 and the first three months of 1996, respectively.
Similarly, sales of Ascend's Pipeline products, which are used for Internet
access by Internet subscribers, were approximately 10%, 20% and 19% of net
sales in 1994, 1995 and the first three months of 1996, respectively. The
market for Internet access products is new and evolving, and it is difficult
to predict its size or future growth rate. Ascend believes that sales of its
MAX and Pipeline products will depend in large part upon a robust industry and
infrastructure for providing Internet access and carrying Internet traffic and
upon sustained adoption by end-user customers of the Internet for commerce and
communication. There can be no assurance that this industry and infrastructure
will develop or that this adoption will occur. Ascend believes competition in
these markets will increase significantly in the future and could adversely
affect Ascend's business, results of operations and financial condition.

In addition, market acceptance of Ascend's products for applications other
than Internet access is important to Ascend's future success. Specifically,
Ascend's products are targeted at access to corporate backbone networks and
local area networks ("LANs") by remote offices, telecommuters and mobile
users, videoconferencing and multimedia access facilities. Ascend's success in
generating significant sales in these emerging markets will depend in part on
its ability to educate users about the benefits of Ascend's technology and to
develop effective distribution channels to address these markets. These
markets are diverse and rapidly evolving, and it is difficult to predict their
potential size or future growth rate. Moreover, Ascend's limited resources
relative to certain of its competitors may restrict its ability to remain
current with respect to developments in these markets and to effectively
pursue marketing activities in multiple markets simultaneously. Accordingly,
there can be no assurance that Ascend's products will be widely accepted in
these new markets or that Ascend will be able to identify additional markets.
The inability of Ascend to continue to penetrate the various markets for its
products or to successfully expand the markets for its products would have a
material adverse effect on its business, results of operations and financial
condition. See "Information Concerning Ascend--Management's Discussion and

17
<PAGE>

Analysis of Financial Condition and Results of Operations" and "--Business--
Industry Background and Market," "--Business--Products" and "--Business--
Competition."

Reliance on Sales to Internet Service Providers. Ascend sells a substantial
percentage of its products, particularly its MAX products, to ISPs. Sales to
ISPs accounted for approximately 21% and 25% of Ascend's net sales in 1995 and
the three months ended March 31, 1996, respectively. Sales to one of these
ISPs, UUNET, accounted for approximately 11% and 13% of net sales in 1995 and
the three months ended March 31, 1996, respectively. Because Ascend's products
are being used to enhance or extend the Internet access infrastructure of the
ISPs, Ascend expects that sales to any particular ISP may vary considerably
from period to period. Accordingly, there can be no assurance that sales to
these entities, individually or as a group, will equal or exceed historical
levels in any future period. Any development that would result in a
substantial decrease or delay in sales to one or more of these entities,
including actions by competitors or technological changes, could have a
material adverse effect on Ascend's business, results of operations and
financial condition. See "Information Concerning Ascend--Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"--Business--Marketing and Sales."

New Product Development and Timely Introduction of New and Enhanced
Products. The markets for Ascend's products (including the product lines of
NetStar to be acquired in the Merger) are characterized by rapidly changing
technologies, evolving industry standards, frequent new product introductions
and short product life cycles. Inherent in the product development process are
a number of risks. The development of new, technologically advanced products
is a complex and uncertain process requiring high levels of innovation, as
well as the accurate anticipation of technological and market trends. The
introduction of new or enhanced products also may require Ascend to manage the
transition from older products in order to minimize disruption in customer
ordering patterns, avoid excessive levels of older product inventories and
ensure that adequate supplies of new products can be delivered to meet
customer demand. There can be no assurance that the combined company will
successfully develop, introduce or manage the transition of new products.
Products may contain undetected or unresolved software errors when they are
first introduced or as new versions are released. There can be no assurance
that, despite extensive testing, software errors will not be found in new
products or upgrades after commencement of commercial shipments of new or
enhanced products. The inability of such products to gain market acceptance or
problems associated with new product transitions could adversely affect the
combined company's operating results, particularly on a quarterly basis. See
"Information Concerning Ascend--Business--Research and Development."

Competition. The markets for Ascend's and NetStar's products are highly
competitive and subject to rapid technological change. Ascend expects
competition to increase in the future as current competitors enhance their
product offerings and additional companies enter the market. Ascend's current
competitors can be classified into three groups: manufacturers of WAN and
Internet access equipment, manufacturers of remote LAN access and Internet
subscriber access equipment, and manufacturers of bandwidth on demand products
addressing the needs of the videoconferencing market. In the WAN and Internet
access equipment market, Ascend primarily competes with Cisco Systems, Inc.
("Cisco") U.S. Robotics Corporation ("U.S. Robotics") and 3Com Corporation
("3Com"), each of which has substantially greater financial, marketing and
technical resources than Ascend. In the remote LAN access and Internet
subscriber access market, competition is widespread, although few companies
have positioned their products specifically as digital bandwidth on demand
network access systems. Ascend's primary competitors in this market are
Gandalf, Cisco, Shiva and 3Com. In the videoconferencing access market,
competitors include Madge Networks, Adtran and Promptus Communications (a
subsidiary of GTI).

Competitive factors in the combined company's markets include core
technology, breadth of product features, product quality and functionality,
pricing, marketing and distribution resources, international certifications
and customer service and support. Some of the combined company's current and
potential competitors have substantially greater financial, marketing and
technical resources than the combined company. Many also have established
relationships with current and potential customers for the combined company's
products. Increased competition could result in price reductions, reduced
profit margins or loss of market share, each of which would adversely affect
the combined company's operating results. There can be no assurance that

18
<PAGE>

the combined company will be able to continue to compete successfully against
current and future competitors as bandwidth on demand markets evolve and
competition increases. See "Information Concerning Ascend--Business--
Competition."

Management of Growth. Ascend is currently experiencing rapid growth and
expansion, which has placed, and will continue to place, a significant strain
on its administrative, operational and financial resources and increased
demands on its systems and controls. This growth has resulted in a continuing
increase in the level of responsibility for both existing and new management
personnel. Ascend anticipates that its continued growth will require it to
recruit and hire a substantial number of new engineering, sales and marketing
and managerial personnel. There can be no assurance that Ascend will be
successful at hiring or retaining these personnel. Ascend's ability to manage
its growth successfully will also require Ascend to continue to expand and
improve its operational, management and financial systems and controls and to
expand its manufacturing capacity. If Ascend's management is unable to manage
growth effectively, Ascend's business, results of operations and financial
condition may be materially and adversely affected. See "Information
Concerning Ascend--Business--Manufacturing and Quality" and "--Management."

Reliance on Third Party Value-Added Resellers and Distributors. Ascend's
sales, to a significant degree, are made through VARs and distributors.
Accordingly, Ascend is dependent upon the continued viability and financial
stability of these VARs and distributors. While Ascend has contractual
relationships with many of its VARs and distributors, these agreements do not
require the VAR or distributor to purchase Ascend's products and can be
terminated by the VAR or distributor at any time. There can be no assurance
that any of Ascend's VARs and distributors will continue to market Ascend's
products. Ascend's VARs and distributors generally offer products of several
different companies, including products that are competitive with Ascend's
products. Accordingly, there is a risk that these VARs and distributors may
give higher priority to products of other suppliers, thus reducing their
efforts to sell Ascend's products. Any special distribution arrangements and
product pricing arrangements that Ascend may implement in one or more
distribution channels for strategic purposes could adversely affect gross
profit margins for its products. See "Information Concerning Ascend--
Business--Marketing and Sales."

Dependence on Key Personnel. Ascend's success depends to a significant
degree upon the continuing contributions of its key management, sales,
marketing and product development personnel. Ascend does not have employment
contracts with its key personnel and does not maintain any key person life
insurance policies. The loss of key management or technical personnel could
adversely affect Ascend. Ascend believes that its future success will depend
in large part upon its ability to attract and retain highly-skilled
engineering, managerial, sales and marketing personnel. Competition for such
personnel is intense, and there can be no assurance that Ascend will be
successful in attracting and retaining such personnel. Failure to attract and
retain key personnel could have a material adverse effect on Ascend's
business, results of operations and financial condition. See "Information
Concerning Ascend--Business--Employees" and "--Management."

Tariff and Regulatory Matters. Rates for telecommunications services are
governed by tariffs of licensed carriers that are subject to regulatory
approval. Future changes in these tariffs could have a material effect on
Ascend's business. For example, should tariffs for public switched digital
services increase in the future relative to tariffs for private leased
services, the cost-effectiveness of Ascend's products would be reduced, and
its business and results of operations could be adversely affected. In
addition, Ascend's products must meet standards and receive certification for
connection to the public telecommunications network prior to their sale. In
the United States, Ascend's products must comply with Part 15(a) (industrial
equipment), Part 15(b) (residential equipment) and Part 68 (analog lines) of
the Federal Communications Commission regulations. Ascend's products also must
be certified by domestic telecommunications carriers. In foreign countries,
Ascend's products are subject to a wide variety of governmental review and
certification requirements. Although only France currently regulates
importation of Ascend's products, foreign customers typically require that
Ascend's products receive certification from the country's primary
telecommunications carriers. Any future inability to obtain on a timely basis
or retain domestic certification or foreign regulatory approvals could have a
material adverse effect

19
<PAGE>

on Ascend's business and results of operations. See "Information Concerning
Ascend--Business--Industry Background and Market."

Dependence on Contract Manufacturers and Single-Source Suppliers. Ascend's
production operations consist primarily of materials planning and procurement,
quality control and final assembly, burn-in and testing of certain products.
Ascend relies on independent contractors to manufacture certain of Ascend's
products or components and subassemblies used in Ascend's products to its
specifications. Ascend is also dependent upon single or limited source
suppliers for a number of components and parts used in its products, including
certain key microprocessors and integrated circuits. There can be no assurance
that these independent contractors and suppliers will be able to meet Ascend's
future requirements for manufactured products, components and subassemblies.
Ascend generally purchases single or limited source components pursuant to
purchase orders and has no guaranteed supply arrangements with these
suppliers. In addition, the availability of many of these components to Ascend
is dependent in part on Ascend's ability to provide its suppliers with
accurate forecasts of its future requirements. Ascend has generally been able
to obtain adequate supplies of parts and components in a timely manner from
existing sources and endeavors to maintain inventory levels adequate to guard
against interruptions in supplies. Ascend believes that there are alternative
suppliers or alternative components for all of the components contained in its
products. However, any extended interruption in the supply of any of the key
components currently obtained from a single or limited source or the time
necessary to transition a replacement supplier's product or a replacement
component into Ascend's products could disrupt its operations and have a
material adverse effect on Ascend's operating results in any given period.
Ascend purchases certain components from foreign suppliers; however, all such
purchases are denominated in U.S. dollars and Ascend believes all such
components or alternate components are available from domestic suppliers.
Ascend may also be subject to increases in component costs, which could also
have a material adverse effect on its operating results. See "Information
Concerning Ascend--Business--Manufacturing and Quality."

Dependence on Proprietary Technology. Ascend's success and ability to
compete is dependent in part upon its proprietary technology. Ascend relies on
a combination of patent, copyright and trade secret laws and non-disclosure
agreements to protect its proprietary technology. Ascend currently holds two
United States patents and one Canadian patent and has three patent
applications pending. There can be no assurance that patents will be issued
with respect to pending or future patent applications or that Ascend's patents
will be upheld as valid or will prevent the development of competitive
products. In addition, Ascend has generally entered into confidentiality or
license agreements with its employees, VARs, distributors, customers and
potential customers and limits access to the distribution of its software,
documentation and other proprietary information. There can be no assurance
that the steps taken by Ascend to protect its proprietary rights will be
adequate to prevent misappropriation of its technology or that Ascend's
competitors will not independently develop technologies that are substantially
equivalent or superior to Ascend's technology. In addition, the laws of some
foreign countries do not protect proprietary rights to the same extent as do
the laws of the United States. Ascend is also subject to the risk of adverse
claims and litigation alleging infringement of the intellectual property
rights of others. From time to time, Ascend has received claims of
infringement of other parties' proprietary rights. Although Ascend believes
that all such claims received to date are immaterial, there can be no
assurance that third parties will not assert infringement claims in the future
with respect to current or future products or that any such claims will not
require the combined company to enter into license arrangements or result in
protracted and costly litigation, regardless of the merits of such claims. No
assurance can be given that any necessary licenses will be available or that,
if available, such licenses can be obtained on commercially reasonable terms.
See "Information Concerning Ascend--Business--Products," "--Research and
Development" and "--Proprietary Rights."

International Sales. Ascend's international sales accounted for
approximately 15%, 20%, 29% and 42% of Ascend's net sales in 1993, 1994, 1995
and the three months ended March 31, 1996, respectively, and NetStar's
international sales accounted for approximately 35% and 81% of its net sales
in 1995 and the six months ended March 31, 1996, respectively. International
sales are expected to continue to account for a significant portion of the
combined company's net sales in future periods. International sales are
subject to certain

20
<PAGE>

inherent risks, including unexpected changes in regulatory requirements and
tariffs, difficulties in staffing and managing foreign operations, longer
payment cycles, problems in collecting accounts receivable and potentially
adverse tax consequences. Each company depends on third party resellers for
substantially all of its international sales. Certain of these third party
resellers also act as resellers for competitors of Ascend and NetStar and
could devote greater effort and resources to marketing competitive products.
The loss of certain of these third party resellers could have a material
adverse effect on the combined company's business and results of operations.
Although the combined company's sales will be denominated in U.S. dollars,
fluctuations in currency exchange rates could cause the combined company's
products to become relatively more expensive to customers in a particular
country, leading to a reduction in sales or profitability in that country.
Furthermore, future international activity may result in foreign currency
denominated sales, and, in such event, gains and losses on the conversion to
U.S. dollars of accounts receivable and accounts payable arising from
international operations may contribute to fluctuations in the combined
company's results of operations. In addition, sales in Europe and certain
other parts of the world typically are adversely affected in the third quarter
of each calendar year as many customers and end-users reduce their business
activities during the summer months. These seasonal factors may have an effect
on the combined company's business, results of operations and financial
condition.

Potential Issuance of Preferred Stock; Anti-Takeover Provisions. The Board
of Directors of Ascend has the authority to issue up to 2,000,000 shares of
Preferred Stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further
vote or action by the stockholders. The rights of the holders of the Ascend
Common Stock will be subject to, and may be adversely affected by, the rights
of the holders of any Preferred Stock that may be issued in the future. The
issuance of the Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding voting stock of Ascend, thereby delaying, deferring or
preventing a change in control of Ascend. Furthermore, such Preferred Stock
may have other rights, including economic rights, senior to the Ascend Common
Stock, and as a result, the issuance of such stock could have a material
adverse effect on the market value of the Ascend Common Stock. Ascend has no
present plans to issue shares of Preferred Stock. Ascend may in the future
adopt other measures that may have the effect of delaying, deferring or
preventing a change of control of Ascend. Certain of such measures may be
adopted without any further vote or action by Ascend's stockholders. Ascend is
also afforded the protections of Section 203 of the Delaware General
Corporation Law, which could delay or prevent a change in control of Ascend,
impede a merger, consolidation or other business combination involving Ascend
or discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of Ascend.

Volatility of Stock Price. Ascend's Common Stock has experienced significant
price volatility and such volatility may occur in the future, particularly as
a result of quarter-to-quarter variations in the actual or anticipated
financial results of Ascend or of other companies in the network access
industry or announcements by Ascend or its competitors regarding new product
introductions or other developments affecting Ascend. In addition, the market
has experienced extreme price and volume fluctuations that have affected the
market price of many technology companies' stocks and that have been unrelated
or disproportionate to the operating performance of these companies. See
"Market Price Information."

RISKS RELATING TO NETSTAR

Operating Losses; Lack of Revenues; Additional Capital Requirements. While
NetStar has sold 75 GigaRouters and 25 ClusterSwitches through March 31, 1996,
revenue is not adequate to meet expenses, and NetStar continues to incur
significant operating losses and has significant negative cash flow from
operations. From inception through March 31, 1996, NetStar incurred cumulative
losses of $14,281,557. While NetStar's revenues have increased during the last
twelve months, there can be no assurance that revenues will continue to grow
or that NetStar will achieve profitability. To become profitable, NetStar must
significantly increase revenues from the GigaRouter and ClusterSwitch by
developing new media cards to broaden the market potential of NetStar's
products and by expanding its marketing and sales capabilities. This will
entail hiring a significant

21
<PAGE>

number of additional sales, marketing and development personnel, as well as
investing in additional capital assets. NetStar's current cash balances are
currently believed to be adequate to meet NetStar's cash needs for its planned
operations and expansion at least through fiscal 1997. However, if NetStar's
planned operations and expansion require more capital than anticipated, sales
do not increase, and operating losses continue, NetStar may need additional
equity capital in the future in order to maintain its expected level of
operations. NetStar's actual cash needs may vary significantly from its
anticipated cash needs, and no assurance can be given that NetStar's
predictions regarding its cash needs will prove accurate, that NetStar will be
able to secure any required additional financing when needed, or that such
financing, if obtained, will be on terms favorable or acceptable to NetStar.
If NetStar is unable to obtain additional financing when needed or in the
amount needed, it would be required to significantly scale back expansion
plans and, depending upon cash flow from its existing business, reduce the
scope of its operations. See "Information Concerning NetStar--Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"--Business."

Customer Concentration. For the year ended September 30, 1995, NetStar
recognized revenues from products shipped to Net One Systems Co., Ltd.
(NetStar's distributor in Japan) ("Net One"), and MCI Communications Corp.
("MCI"), of $958,769 and $753,010, respectively, representing 32% and 25% of
NetStar's net sales, and 17 other customers accounted for the remaining sales.
For the six months ended March 31, 1996, NetStar had net sales to Net One of
$1,792,759, representing 69% of NetStar's net sales, and nine other customers
accounted for the remaining sales. NetStar has not established a broad
customer base and does not have long-term contracts with its customers. Except
for sales to Net One, NetStar historically has not relied on repeat business
with its customers. Further, NetStar does not expect that it will receive
additional orders from its end-user customers once their initial needs are
satisfied unless such customers expand or modify their communication networks.
NetStar has relied on a limited number of customers for a significant portion
of its revenues and expects this to continue for the foreseeable future. As a
result, NetStar's sales are expected to continue to depend upon the receipt of
orders from new customers. See "Information Concerning NetStar--Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"--Business--Customers."

Product Concentration. From inception through March 31, 1996, revenues from
sales of the GigaRouter have accounted for approximately 89% of NetStar's
total revenues. NetStar's results of operations are materially dependent on
the success of this one product. A significant reduction in sales of the
GigaRouter resulting from changes in the industry, including the introduction
of new competing technology or the evolving needs of NetStar's customers,
would have a material adverse effect on NetStar.

Fluctuations of Financial Results. The timing of orders from customers, the
length of trial periods, changes in price or product mix, changes in
manufacturing costs, or the introduction of new products by NetStar or
competitors could cause fluctuations in NetStar's quarterly financial results.
Moreover, given the relatively large unit selling price associated with an
order from any one customer, a limited number of customers may account for a
large percentage of sales during any one quarter. Accordingly, NetStar may
experience significant fluctuations in its financial results, and there can be
no assurance that NetStar's revenues or results of operations will improve on
a quarterly basis or that any improvement from quarter to quarter will be
indicative of future performance. In addition, NetStar's expenses are based in
part on expectations of future sales. As a result, changes in expenses may not
match changes in revenues on a quarterly basis, and a delay in expected sales
would adversely affect NetStar's operating results. To date, many of NetStar's
potential customers have requested that they be allowed to evaluate equipment
on a trial basis before committing to purchase. Revenues from trial
installations of equipment are generally recognized immediately upon receipt
of orders from customers at the conclusion of a successful trial period. For
non-trial installations, NetStar typically ships equipment shortly after the
receipt of an order. Therefore, NetStar does not believe that order backlog is
a significant indicator of future business. At March 31, 1996, NetStar's
backlog of customer orders was not material. NetStar historically has not
maintained such a backlog. See "Information Concerning NetStar--Management's
Discussion and Analysis of Financial Condition and Result of Operations" and
"--Business--Customers."

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<PAGE>

Product Development Risks. NetStar's future revenues will depend on its
ability to timely develop and introduce to the market new features and
products that meet the then-existing demands of the marketplace. There can be
no assurance of NetStar's ability to develop such features or products or to
introduce such features or products to the market when it would be
advantageous to do so. In addition, NetStar's products are technologically
complex and are used in extensive networks with many different configurations.
In the future, NetStar may experience some problems with products installed at
customers' sites because it is not always possible to test the functions of a
product in all customers' configurations. This may cause delays in bringing
future products and features fully to market. Any such delays could adversely
affect NetStar due to loss of customer confidence, higher operating losses due
to delayed or lost sales and the expense of correcting problems, and the
possibility of other networking products gaining competitive advantage and
market share. See "Information Concerning NetStar--Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "--Business--
Research and Development."

Dependence on Outside Sources; Availability of Components. NetStar uses
integrated circuits and other components from outside sources in its products.
While many of these components are available from multiple sources, some can
be obtained from only one source. An interruption in the availability of any
component may force NetStar to redesign its products and could have a material
adverse effect on NetStar. NetStar has no long-term contracts with its
suppliers and orders components pursuant to purchaser orders. NetStar operates
a materials requirements planning ("MRP") system for production planning. This
system is periodically updated with current component availability information
and used to forecast the need for components and generate purchase orders with
appropriate lead times to assure proper availability. See "Information
Concerning NetStar--Business--Manufacturing."

Market Acceptance of Products. There are many networking products currently
being offered for sale in the market segments in which NetStar competes. There
can be no assurance that NetStar's intended customers will purchase NetStar's
products instead of competing products. Failure to obtain significant customer
satisfaction or market share would have a material adverse effect on NetStar.
Customers evaluate competing products on the basis of the availability of the
required network interfaces in a particular installation, the performance of
the router and its price. In addition, after installation, customers evaluate
the supplier's ability to serve the equipment, if required, and its
reliability when deciding on future orders for additional equipment. See
"Information Concerning NetStar--Business."

Competition. The industry in which NetStar operates is highly competitive.
Most NetStar competitors are established companies with significantly greater
financial resources, more extensive business experience, and greater marketing
and service capabilities than NetStar's. There can be no assurance that
NetStar will be able to compete successfully. The same evaluation criteria
described in the risk factor entitled "Market Acceptance of Products" are used
by customers to determine the relative strength of competitors. Other
competitive factors are the supplier's relative financial strength and
operating history. See "Information Concerning NetStar--Business--
Competition."

Changes in Computer and Software Technology; Possible Obsolescence. The
computer industry has been characterized by rapid technological change which
could result in obsolescence of NetStar's products. NetStar will be required
to respond to those changes by enhancing its then existing products and
developing and/or marketing new products. The testing of NetStar's products
discussed in the risk factor entitled "Product Development Risks" is not
expected to affect NetStar's ability to be responsive to rapid industry
changes. However, delays in NetStar's development or marketing activities, or
a lack of the financial resources required to pursue new opportunities, may
adversely affect NetStar's ability to be responsive to rapid industry changes.
In addition, new developments currently unknown to Netstar could render
NetStar's products less competitive than products from others using such newer
technologies. See "Information Concerning NetStar--Business."

Dependence on Key Personnel; Lack of Employment and Non-Compete Agreements.
Because of the requirements of its product development, production, and
marketing and sales activities, NetStar is dependent

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upon the efforts of its current officers and other employees and upon its
ability to attract and retain other technically qualified personnel. NetStar
has only recently obtained confidentiality agreements with many of its
management and other personnel, including those involved in product
development. NetStar has no non-compete agreements or key person insurance
covering any of its employees. There is generally intense competition in the
computer hardware and software industry for qualified personnel, including
competition from companies with substantially greater resources than those of
NetStar. There can be no assurance that NetStar can attract or retain
qualified personnel. See "Information Concerning NetStar--Management."

Intellectual Property Rights. NetStar has not applied for and does not hold
any patents. Management believes that NetStar's business will be more
dependent on the timing of the introduction of its products to the market
rather than on available patent protection or other protection of its
intellectual property rights. Management believes that the only technology
that might be available for patent protection would be certain engineering
details embedded in NetStar's products. While NetStar intends, over time, to
maximize the product and business protection reasonably available to NetStar
through the patent process and by otherwise protecting its intellectual
property rights, there can be no assurance that any patents will be applied
for, that any such patent applications will result in patent grants, or that
any patents granted or the measures taken by NetStar to protect its
intellectual property rights will adequately protect NetStar's technology from
use by competitors. In addition, there can be no assurance that the technology
used in NetStar's products will not infringe on others' patents even if
NetStar obtains patents for such technology. If NetStar applies for and
obtains a patent which is subsequently infringed upon, NetStar may not have
sufficient resources to prosecute a patent suit to defend its patent. While
NetStar has not sought patent protection, it has registered the trademarks
GigaRouter and ClusterSwitch. See "Information Concerning NetStar--Business--
Patents and Proprietary Rights."

Volatility of Stock Price. NetStar's Common Stock has experienced
significant price volatility, and such volatility may occur in the future,
particularly as a result of quarter-to-quarter variations in the actual or
anticipated financial results of NetStar or of other companies in NetStar's
industry or announcements by NetStar or its competitors regarding new product
introductions or other developments affecting NetStar. In addition, the market
has experienced extreme price and volume fluctuations that have affected the
market price of many technology companies' stocks and that have been unrelated
or disproportionate to the operating performance of these companies. See
"Market Price Information."

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THE SPECIAL MEETING

GENERAL

This Proxy Statement/Prospectus is being furnished to holders of NetStar
Common Stock in connection with the solicitation of proxies by the NetStar
Board for use at the Special Meeting to be held at the Minneapolis/St. Paul
Airport Hilton, 3800 East 80th Street., Minneapolis, Minnesota on August 15,
1996, commencing at 10:00 a.m., Central Time, and at any adjournments or
postponements thereof.

This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to stockholders of NetStar on or about July 15, 1996.

MATTERS TO BE CONSIDERED AT THE MEETING

At the Special Meeting, holders of NetStar Common Stock will consider and
vote upon a proposal to approve and adopt the Merger Agreement and such other
matters as may properly be brought before the Special Meeting, or any
adjournments or postponements thereof.

The NetStar Board has unanimously approved the Merger Agreement and
recommends a vote FOR approval and adoption of the Merger Agreement.

VOTING AT THE MEETING; RECORD DATE

The NetStar Board has fixed July 5, 1996 as the record date (the "Record
Date") for the determination of the NetStar stockholders entitled to notice of
and to vote at the Special Meeting and any adjournments or postponements
thereof. Accordingly, only holders of record of shares of NetStar Common Stock
at the close of business on the Record Date will be entitled to notice of and
to vote at the Special Meeting. As of July 5, 1996, there were 10,749,830
shares of NetStar Common Stock outstanding and entitled to vote, which shares
were held by approximately 541 holders of record. Each holder of record of
shares of NetStar Common Stock on the Record Date is entitled to cast one vote
per share on each proposal properly submitted for the vote of the NetStar
stockholders, either in person or by properly executed proxy, at the Special
Meeting. The presence, in person or by properly executed proxy, of the holders
of a majority of the outstanding shares of NetStar Common Stock entitled to
vote is necessary to constitute a quorum at the Special Meeting.

The affirmative vote of the holders of over 50% of the outstanding shares of
NetStar Common Stock is required to approve the Merger Agreement.

As of May 31, 1996, directors and executive officers of NetStar and their
affiliates may be deemed to be beneficial owners of approximately 7.4% of the
outstanding shares of NetStar Common Stock. Each of the directors of NetStar,
certain executive officers of NetStar and certain NetStar stockholders
affiliated with a director, who, as of May 31, 1996, together held
approximately 3.5% of the outstanding shares of NetStar Common Stock, have
entered into Voting Agreements pursuant to which such persons have agreed to
vote their shares of NetStar Common Stock for approval and adoption of the
Merger Agreement. See "The Merger--Voting Agreements."

Ascend owns no shares of NetStar Common Stock.

At the Special Meeting, in determining whether the proposal to approve and
adopt the Merger Agreement has received the requisite number of affirmative
votes, abstentions and broker non-votes will have the same effect as a vote
against such proposal. Abstentions and broker non-votes will be counted for
purposes of determining the presence or absence of a quorum. A "broker non-
vote" occurs when a nominee holding shares for a

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beneficial owner does not vote on a proposal because, for such proposal, the
nominee does not have discretionary voting power and has not received
instructions from the beneficial owner.

PROXIES

This Proxy Statement/Prospectus is being furnished to NetStar stockholders
in connection with the solicitation of proxies by and on behalf of the NetStar
Board for use at the Special Meeting.

All shares of NetStar Common Stock which are entitled to vote and are
represented at the Special Meeting by properly executed proxies received prior
to or at the Special Meeting, if not revoked, will be voted at the Special
Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated (other than in the case of broker non-votes), such
proxies will be voted FOR approval and adoption of the Merger Agreement.

If any other matters are properly presented at the Special Meeting for
consideration including, among other things, consideration of a motion to
adjourn the Special Meeting to another time and/or place (including, without
limitation, for the purpose of soliciting additional proxies), the persons
named in the enclosed form of proxy and acting thereunder will have discretion
to vote on such matters in accordance with their best judgment.

Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by (i) filing
with the Secretary of NetStar, at or before the taking of the vote at the
Special Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of NetStar, before the taking of the vote at
the Special Meeting or (iii) attending the Special Meeting and voting in
person (although attendance at the Special Meeting will not in and of itself
constitute a revocation of a proxy). Any written notice of revocation or
subsequent proxy should be sent so as to be delivered to NetStar, Inc., 10250
Valley View Road, Suite 113, Eden Prairie, Minnesota, 55344, Attention: Duane
S. Carlson, Secretary, or hand delivered to the Secretary of NetStar at or
before the taking of the vote at the Special Meeting.

The costs of preparing and mailing this Proxy Statement/Prospectus will be
borne equally by NetStar and Ascend. All other costs of this solicitation will
be borne by NetStar. In addition to solicitation by use of the mails, proxies
may be solicited by directors, officers and employees of NetStar in person or
by telephone, telegram or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. NetStar has retained MacKenzie Partners, Inc., a proxy
solicitation firm, for assistance in connection with the solicitation of
proxies for the Special Meeting at a cost of approximately $10,000 plus
reasonable out-of-pocket expenses. Arrangements will also be made with
custodians, nominees and fiduciaries for forwarding of proxy solicitation
materials to beneficial owners of shares held of record by such custodians,
nominees and fiduciaries, and NetStar will reimburse such custodians, nominees
and fiduciaries for their reasonable expenses incurred in connection
therewith.

NETSTAR STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.

DISSENTERS' RIGHTS

Stockholders of NetStar are entitled to exercise dissenters' rights pursuant
to the provisions of Sections 302A.471 and 302A.473 of the MBCA. In accordance
with these sections, NetStar stockholders have the right to dissent to the
Merger and to be paid the "fair value" of their shares of NetStar Common Stock
in lieu of receiving the consideration provided under the Merger Agreement. In
this context, the term "fair value" means the value of the NetStar shares
immediately before the Effective Time. Under Section 302A.473, where a merger
is to be submitted for approval at a meeting of stockholders, the corporation
must notify each of its stockholders of the right to dissent, include in such
notice a copy of Sections 302A.471 and 302A.473 and provide a brief

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description of the procedures to be followed under these sections. This Proxy
Statement/Prospectus is intended to constitute such notice to the stockholders
of NetStar, and the following discussion describes the procedures to be
followed by a dissenting stockholder. The applicable statutory provisions are
attached hereto as Annex C.

The following discussion is not a complete statement of the law pertaining
to a dissenting stockholder's rights under Minnesota law and is qualified in
its entirety by the full text of Sections 302A.471 and 302A.473 of the MBCA
attached hereto as Annex C. Any NetStar stockholder who wishes to exercise the
right to dissent and demand the fair value of his or her shares, or who wishes
to preserve the right to do so, should carefully review the following
discussion and Annex C, because failure to timely and properly comply with the
procedures will result in the loss of a stockholder's right to dissent under
Minnesota law.

If a stockholder of NetStar wishes to exercise the right to demand the fair
value of his or her shares, such stockholder must take the following actions:

. BEFORE THE VOTE OF STOCKHOLDERS IS TAKEN AT THE SPECIAL MEETING, THE
STOCKHOLDER MUST FILE A WRITTEN NOTICE OF INTENT TO DEMAND THE FAIR
VALUE OF HIS OR HER SHARES AND, IN ADDITION, HE OR SHE MUST NOT VOTE IN
FAVOR OF APPROVAL OF THE MERGER AGREEMENT. Because a proxy that does not
contain voting instructions will, unless revoked, be voted FOR approval
of the Merger Agreement, a NetStar stockholder who votes by proxy and
who wishes to exercise dissenters' rights must (i) vote AGAINST the
approval of the Merger Agreement or (ii) ABSTAIN from voting on the
approval of the Merger Agreement. A vote against the Merger Agreement,
in person or by proxy, will not in and of itself constitute a written
notice of intent to demand the fair value of a stockholder's NetStar
shares satisfying the requirements of the MBCA.

. A DEMAND FOR FAIR VALUE MUST BE EXECUTED BY OR FOR THE STOCKHOLDER OF
RECORD, FULLY AND CORRECTLY, AS SUCH STOCKHOLDER'S NAME APPEARS ON HIS
OR HER NETSTAR STOCK CERTIFICATE OR CERTIFICATES. If NetStar stock is
owned of record in a fiduciary capacity such as by a trustee, guardian
or custodian, such demand must be executed by the fiduciary. If the
stock is owned of record by more than one person, as in a joint tenancy
or tenancy in common, such demand must be executed by all joint owners.
An authorized agent, including an agent for two or more joint owners,
may execute the demand for a stockholder of record; however, the agent
must identify the record owner and expressly disclose the fact that, in
exercising the demand, he or she is acting as agent for the record
owner.

. A record owner who holds shares of NetStar Common Stock as a nominee for
others, such as a broker, may demand fair value of the shares held for
all, or fewer than all, of the beneficial owners of such shares. In such
a case, the written demand should set forth the number of shares to
which it relates. When no number of shares is expressly mentioned, the
demand will be presumed to cover all shares standing in the name of the
record owner. BENEFICIAL OWNERS OF NETSTAR SHARES WHO ARE NOT RECORD
OWNERS AND WHO INTEND TO EXERCISE DISSENTERS' RIGHTS SHOULD INSTRUCT THE
RECORD OWNER TO COMPLY WITH THE STATUTORY REQUIREMENTS WITH RESPECT TO
THE EXERCISE OF DISSENTERS' RIGHTS BEFORE THE DATE OF THE SPECIAL
MEETING.

. NetStar stockholders who elect to exercise dissenters' rights and demand
fair value, in order to properly assert their dissenters' rights, must
mail or deliver their written demand to: Duane S. Carlson, Chief
Financial Officer and Secretary, NetStar, Inc., 10250 Valley View Road,
Suite 113, Eden Prairie, Minnesota 55344. The written demand must
specify the stockholder's name and mailing address, the number of shares
owned, and that the stockholder is thereby demanding the fair value of
his or her shares.

. After the Effective Time, NetStar, as the Surviving Corporation, will
cause to be mailed to each stockholder of NetStar who has properly
asserted dissenters' rights, a notice that contains (i) the address to
which a demand for payment and stock certificates must be sent in order
to receive payment and the date by which they must be received; (ii) a
form to be used to certify the date on which the

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<PAGE>

stockholder, or the beneficial owner on whose behalf the stockholder
dissents, acquired his or her NetStar shares or an interest in them and
to demand payment; and (iii) another copy of Sections 302A.471 and
302A.473 of the MBCA, together with a brief description of these
sections. TO RECEIVE THE FAIR VALUE OF HIS OR HER NETSTAR SHARES, A
DISSENTING STOCKHOLDER MUST DEMAND PAYMENT AND DEPOSIT HIS OR HER
CERTIFICATES WITHIN 30 DAYS AFTER THE NOTICE IS GIVEN.

. After the Effective Time, or after NetStar receives a valid demand for
payment, whichever is later, NetStar must remit to each dissenting
stockholder who has complied with the dissenters' rights provisions the
amount NetStar estimates to be the fair value of the shares, plus
interest, along with (i) NetStar's closing balance sheet and statement
of income for a fiscal year ending not more than 16 months before the
Effective Time, together with the latest available interim financial
statement; (ii) an estimate by NetStar of the fair value of the shares
and a brief description of the method used to reach the estimate; and
(iii) another copy of Sections 302A.471 and 302A.473 of the MBCA and a
brief description of the procedure to be followed in demanding
supplemental payment. If NetStar fails to remit payment within 60 days
of the deposit of certificates, NetStar must return all deposited
certificates. However, NetStar may again give notice and require deposit
at a later time.

. IF A DISSENTING NETSTAR STOCKHOLDER BELIEVES THAT THE AMOUNT REMITTED BY
NETSTAR IS LESS THAN THE FAIR VALUE OF HIS OR HER SHARES PLUS INTEREST,
SUCH DISSENTING SHAREHOLDER MAY GIVE WRITTEN NOTICE TO NETSTAR OF HIS OR
HER OWN ESTIMATE OF THE FAIR VALUE FOR THE SHARES PLUS INTEREST AND
DEMAND A SUPPLEMENTAL PAYMENT FOR THE DIFFERENCE. Any written demand for
supplemental payment must be made within 30 days after NetStar mailed
its original remittance. Otherwise, a dissenter is entitled only to the
amount remitted by NetStar.

. Within 60 days after receiving a demand for supplemental payment,
NetStar, as the Surviving Corporation, must either pay the amount of the
supplemental payment demanded (or agreed to between the dissenting
stockholder and NetStar) or file a petition in the state courts of
Minnesota requesting that the court determine the fair value of the
shares plus interest. Any petition so filed must name as parties all
dissenting stockholders who have demanded supplemental payments and who
have been unable to reach an agreement with NetStar concerning the fair
value of their shares. The court may appoint appraisers, with such power
and authority as the court deems proper, to receive evidence on and
recommend the amount of fair value of the shares. The jurisdiction of
the court is plenary and exclusive, and the fair value as determined by
the court is binding on all stockholders, wherever located. A dissenting
stockholder, if successful, is entitled to a judgment for the amount by
which the fair value of his or her shares as determined by the court
exceeds the amount originally remitted by NetStar.

Generally, the costs and expenses associated with a court proceeding to
determine the fair value of the NetStar shares will be borne by NetStar, as
the Surviving Corporation, unless the court finds that a dissenting
stockholder has demanded supplemental payment in a manner that is arbitrary,
vexatious or not in good faith. Similar costs and expenses may also be
assessed in instances where NetStar has failed to comply with the procedures
specified in Section 302A.473 of the MBCA discussed above. The court may, in
its discretion, award attorneys' fees to an attorney representing dissenting
stockholders out of any amount awarded to such dissenters.

FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 302A.473 FOR ASSERTING
DISSENTERS' RIGHTS WILL RESULT IN THE LOSS OF A STOCKHOLDER'S RIGHTS TO DEMAND
THE FAIR VALUE OF HIS OR HER NETSTAR SHARES. Stockholders considering seeking
appraisal should realize that the fair value of their shares, as determined
under Section 302A.473 of the MBCA in the manner outlined above, could be more
than, the same as or less than the amount of value of the shares of Ascend
Common Stock they would be entitled to receive as a result of the Merger if
they did not seek appraisal of their shares.

Under Subdivision 4 of Section 3024A.471 of the MBCA, a NetStar stockholder
has no right, at law or in equity, to set aside the approval of the Merger
Agreement or the consummation of the Merger except if such adoption or
consummation was fraudulent with respect to such stockholder or NetStar.

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<PAGE>

THE RESPECTIVE OBLIGATIONS OF ASCEND AND NETSTAR TO EFFECT THE MERGER IS
SUBJECT TO THE CONDITION THAT NETSTAR SHALL NOT HAVE RECEIVED, PRIOR TO THE
SPECIAL MEETING, NOTICES OF INTENT TO DEMAND FAIR VALUE OF SHARES FROM NETSTAR
STOCKHOLDERS WITH RESPECT TO AN AGGREGATE NUMBER OF SHARES OF NETSTAR COMMON
STOCK WHICH (ASSUMING PERFECTION OF THE DISSENTERS' RIGHTS BY SUCH
STOCKHOLDERS) WOULD PREVENT ASCEND FROM ACCOUNTING FOR THE MERGER AS A POOLING
OF INTERESTS. NETSTAR EXPECTS THAT IF HOLDERS OF APPROXIMATELY 9.5% OF THE
OUTSTANDING NETSTAR COMMON STOCK WERE TO EXERCISE DISSENTERS' RIGHTS, POOLING
OF INTERESTS ACCOUNTING TREATMENT WOULD NOT BE AVAILABLE, AND EITHER PARTY
WOULD HAVE THE RIGHT TO NOT EFFECT THE MERGER. SEE "THE MERGER--ACCOUNTING
TREATMENT" AND "THE MERGER AGREEMENT--CONDITIONS."

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<PAGE>

THE MERGER

BACKGROUND OF THE MERGER

The acquisition of complementary businesses and product lines is an
important part of Ascend's overall business strategy. Ascend continually
evaluates potential acquisition opportunities and considers potential
alliances, combinations and other strategic transactions with other
participants in the networking industry.

Since June 1995, senior management of NetStar has from time to time
considered strategic relationships and combinations of various forms,
including potential OEM arrangements, joint marketing relationships, product
development, distribution or marketing alliances, and business combinations
and similar transactions.

In July and August 1995, NetStar had discussions with a potential business
partner regarding various potential strategic alliances with that corporation.
These discussions were terminated in September 1995 by mutual agreement of
NetStar and that corporation.

On September 20, 1995, at a regularly-scheduled meeting of the NetStar
Board, management was directed by the NetStar Board to identify possible
strategic alternatives and to report the results of its efforts at the
regularly-scheduled November 1, 1995 NetStar Board meeting.

At regularly-scheduled meetings held on November 1, 1995, December 6, 1995,
January 11, 1996 and February 15, 1996, the NetStar Board generally discussed
the merits of NetStar being acquired or entering into a business combination
or similar transaction.

On February 12, 1996, Douglas M. Pihl, President and Chief Executive Officer
of NetStar, and Duane S. Carlson, Executive Vice President and Chief Financial
Officer of NetStar, met with Bryson D. Hollimon, Managing Director of Wessels,
to discuss a variety of issues, including potential strategic initiatives
pertaining to NetStar.

At a regularly-scheduled meeting held on March 14, 1996, the NetStar Board
established a committee (the "NetStar Committee") consisting of Messrs. Pihl
and Carlson and James D. Edwards, a non-employee director of NetStar, to
continue NetStar's pursuit of strategic relationships.

On March 22, 1996, Mr. Carlson met with Mr. Hollimon of Wessels to discuss
strategic initiatives pertaining to NetStar.

Between March 22, 1996 and April 2, 1996, the NetStar Committee, as well as
Wayne A. Zuehlke, NetStar's Vice President of Finance, and Mark E. Garver,
NetStar's Vice President of Sales and Marketing, met with certain investment
banking firms to discuss various strategic options.

On March 25, 1996, Mr. Garver of NetStar met with Samuel Mathan, Ascend's
Assistant Vice President, Carrier Marketing, to discuss possible joint
marketing relationships between the two companies.

On April 1, 1996, the NetStar Committee met with Mr. Hollimon of Wessels to
discuss a potential merger and acquisition strategy, timing of the potential
engagement and the retention of Wessels as NetStar's exclusive financial
advisor.

On April 2, 1996, Mr. Hollimon was informed by the NetStar Committee that
NetStar had decided to retain Wessels in connection with the potential sale or
merger of the Company.

On April 3, 1996, Mr. Hollimon met with Mory Ejabat, President and Chief
Executive Officer of Ascend, and discussed the potential merits of Ascend
acquiring NetStar through merger or acquisition.

On April 4, 1996, Messrs. Pihl and Garver of NetStar met with Mr. Ejabat of
Ascend and a representative of each company's sales and marketing
organizations to discuss possible joint marketing relationships. Thereafter,
Messrs. Pihl and Ejabat met to discuss possible strategic alliances between
the two companies.

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<PAGE>

On April 10, 1996, Messrs. Pihl, Carlson and Zuehlke of NetStar met with Mr.
Hollimon and other representatives of Wessels to discuss strategy, various
timetables and certain potential strategic partners that would find NetStar
attractive as a merger or acquisition candidate.

Between April 10, 1996 and April 15, 1996, representatives of Wessels met
with certain management representatives of NetStar, including Messrs. Pihl and
Carlson, to prepare a confidential memorandum concerning NetStar to be used in
discussions with certain strategic candidate companies.

On April 18, 1996, the NetStar Board ratified the selection of Wessels as
the Company's exclusive financial advisor (as evidenced by an engagement
letter between NetStar and Wessels). Representatives of Wessels met with the
NetStar Board and reviewed potential strategic partners who it believed would
find NetStar an attractive acquisition candidate, discussed the potential
timetable of the engagement and discussed potential valuation parameters
pertaining to NetStar as an acquisition candidate.

On April 18, 1996, the NetStar Board retained the law firm of Hale and Dorr
as special counsel to represent NetStar in connection with a potential
business combination.

During April and May 1996, at the direction of the NetStar Committee,
representatives of Wessels contacted certain companies in the networking and
communications industry to discuss their potential interest in a strategic
relationship with NetStar. As a result of these efforts, Ascend expressed
interest in entering into a strategic relationship with NetStar and became
involved in substantive discussions with NetStar concerning the possibility of
acquiring NetStar.

On May 7, 1996, Ascend and NetStar executed and delivered a Mutual and
Reciprocal Non-Disclosure Agreement.

On May 7, 1996, Mr. Ejabat, Robert K. Dahl, Ascend's Vice President, Finance
and Chief Financial Officer and Jeanette Symons, Ascend's Vice President,
Engineering and Chief Technical Officer, met with Messrs. Pihl, and Carlson of
NetStar, and certain other representatives of NetStar management, to discuss
NetStar's current organization and product strategy and the potential fit and
complement of NetStar's products and sales channels with the current product
offerings of Ascend.

On May 17, 1996, Messrs. Pihl, Carlson and Garver of NetStar met with Mr.
Ejabat of Ascend to discuss the potential integration of the product lines of
NetStar and Ascend and certain product synergies.

On May 19, 1996, representatives of Robertson, Stephens & Company LLC
("Robertson"), Ascend's financial advisor, contacted Wessels regarding the
possible strategic combination of Ascend and NetStar.

On May 19, 1996, at a special meeting of the NetStar Board, representatives
of Wessels reported on discussions with Robertson regarding a potential
business combination with Ascend. The directors, representatives of Wessels
and counsel to NetStar discussed terms of a potential business combination
with Ascend and the NetStar Board authorized management to proceed with
negotiations with representatives of Ascend.

On May 20, 1996, Mr. Dahl of Ascend and Messrs. Pihl and Carlson of NetStar
spoke by telephone, confirmed their companies' mutual interest in proceeding
with more substantive discussions regarding a possible business combination
and agreed on the basis upon which Ascend would conduct its due diligence
review of NetStar.

During the week of May 20, 1996, representatives of Ascend, its counsel,
accountants and financial advisor met with representatives of NetStar, its
counsel, accountants and financial advisor to complete various aspects of
Ascend's due diligence review of NetStar's business, financial and legal
affairs.

On May 22, 1996, Ascend delivered a draft of a proposed Merger Agreement to
NetStar and its counsel.

On May 23, 1996, at a regularly-scheduled meeting of the NetStar Board,
representatives of Wessels and counsel to NetStar reviewed the principal terms
of the proposed Merger Agreement and identified terms to be negotiated.

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On May 23, 1996, counsel to Ascend met with counsel to NetStar to discuss
the structure of the potential Merger and the terms of the proposed Merger
Agreement.

On May 24, 1996, at a special meeting of the NetStar Board, the directors
reviewed with NetStar's counsel the draft of the proposed Merger Agreement
which had been delivered on May 22, 1996. NetStar's counsel reported to the
NetStar Board on the results of negotiations with Ascend's counsel on May 23,
1996, and the directors discussed various issues which remained to be
resolved.

On May 24, 1996, representatives of Ascend and its counsel met with
representatives of NetStar and its counsel to further discuss the structure of
the potential Merger and the terms of the proposed Merger Agreement.

On May 25, 1996, Ascend delivered a revised draft of the proposed Merger
Agreement to NetStar and its counsel.

On May 28, 1996, at a special meeting of the NetStar Board, the directors
reviewed with NetStar's counsel the revised draft of the proposed Merger
Agreement which had been circulated to all directors. The directors discussed
various terms of the revised Merger Agreement.

On May 28, 1996 and May 29, 1996, Ascend and NetStar, and their respective
counsel, had further discussions regarding the terms of the proposed Merger
Agreement and related documents.

On May 29, 1996, at a regularly-scheduled meeting of the Board of Directors
of Ascend (the "Ascend Board"), the Ascend Board received presentations from
(i) Ascend's management, counsel and financial advisor as to the status of
discussions with NetStar, the results of the due diligence evaluation of
NetStar, the principal terms of the proposed Merger and the benefits and
potential risks of the proposed business combination; and (ii) Mr. Pihl
regarding NetStar, its technology and strategy.

On May 30, 1996, at a special meeting of the Ascend Board, the Ascend Board
reviewed further information from Ascend's management, counsel and financial
advisor as to the results of its due diligence evaluation of NetStar and the
benefits and potential risks of the proposed business combination. At the
meeting, the Ascend Board unanimously approved the Merger Agreement and
related matters and authorized Ascend's management to proceed with the Merger.

On May 30, 1996, at a special meeting of the NetStar Board, (i)
representatives of Wessels and the management of NetStar reported on the
financial terms proposed by Ascend and other business terms of the proposed
Merger, (ii) NetStar's counsel reviewed the proposed terms of the Merger
Agreement, and (iii) representatives of Wessels provided financial analyses
relating to the proposed Merger and delivered Wessels' oral opinion to the
effect that, as of such date, the financial terms were fair from a financial
point of view to NetStar's stockholders. See "--Opinion of Financial Advisor
to NetStar." At the meeting, the NetStar Board unanimously approved the Merger
Agreement and related matters and authorized NetStar's management to proceed
with the Merger.

On May 30, 1996, following the meetings of their respective Boards of
Directors, the parties executed the Merger Agreement.

On May 31, 1996, prior to the opening of trading on The Nasdaq National
Market, Ascend and NetStar issued a joint news release announcing the Merger.

REASONS FOR THE MERGER; RECOMMENDATION OF THE NETSTAR BOARD OF DIRECTORS

THE BOARD OF DIRECTORS OF NETSTAR UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF NETSTAR VOTE FOR APPROVAL OF THE MERGER AGREEMENT FOR THE
REASONS SET FORTH BELOW.

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The following discussion of the parties' reasons for the Merger contains
forward-looking statements which involve risks and uncertainties. The actual
results of Ascend, NetStar and the combined company could differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including those set forth under "Risk Factors" and elsewhere
in this Proxy Statement/Prospectus.

JOINT REASONS FOR THE MERGER

Ascend and NetStar have identified several potential benefits that they
believe will contribute to the success of the combined company. These
potential benefits include:

. The integration of NetStar's technology, including its high-speed data
interfaces, distributed routing and non-blocking switching capabilities,
with Ascend's WAN and bandwidth on demand technologies is expected to
position the combined company to offer the next generation of IP
switching products, capable of switching IP traffic over any available
medium.

. The integration of the two companies' technologies is also expected to
enable the combined company to provide the first single-platform IP
switching product suitable for medium-to-large ISPs or carrier POPs, as
well as the backbone of the Internet.

. The combination will broaden Ascend's product line and result in the
distribution of NetStar's products through Ascend's more extensive
marketing and distribution channels, potentially resulting in increased
sales for the combined company.

. The combination of the two companies' engineering teams is expected to
produce synergies which will improve and accelerate product development.

. By taking advantage of Ascend's manufacturing expertise and volume
procurement, the combined company may be able to reduce costs and
increase the value of products based on NetStar's technology.

. The combined company is expected to achieve other operational
efficiencies and synergies which could allow it to reduce costs.

ASCEND'S REASONS FOR THE MERGER

The Board of Directors of Ascend unanimously approved the Merger Agreement
at its meeting held on May 30, 1996. The Ascend Board believes that
consummation of the Merger is in the best interests of Ascend.

In arriving at its unanimous decision to approve the Merger Agreement, the
Ascend Board reviewed with Ascend management a number of factors that
supported the consideration to be paid by Ascend in the Merger. Among the
factors that the Board considered were (i) information concerning Ascend's and
NetStar's respective businesses, historical financial performance, operations
and products, including possible future product releases; (ii) NetStar's
technology and the anticipated leverage between NetStar's router products and
Ascend's products; (iii) an analysis of the relative value that NetStar's
technology and products might contribute to the future business of the
combined company; (iv) a comparison of the financial terms of comparable
merger and acquisition transactions; (v) the compatibility of the management
and businesses of Ascend and NetStar; (vi) reports from Ascend's management
and legal advisors on specific terms of the relevant agreements, including the
Merger Agreement and other matters; (vii) the Ascend Board's judgment that
Ascend was unlikely to identify an alternative business opportunity that would
provide superior benefits to Ascend and its stockholders in the high end
router market; (viii) Ascend's and NetStar's historical financial condition
and results of operations; and (ix) the technical, sales and marketing, and
distribution capabilities of the NetStar employee team. In the course of its
evaluation, Ascend reviewed certain projected NetStar financial information
compiled from published estimates of financial analysts; however, no material
reliance was placed on such information by Ascend's management or Board of
Directors in their evaluation of the Merger.

NETSTAR'S REASONS FOR THE MERGER

The Board of Directors of NetStar unanimously approved the Merger Agreement
at its meeting held on May 30, 1996. The NetStar Board believes that
consummation of the Merger is in the best interests of NetStar and its
stockholders and unanimously recommends that the stockholders of NetStar vote
FOR approval of the Merger Agreement.

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In arriving at its unanimous decision to approve the Merger Agreement, the
NetStar Board considered a number of potentially positive factors, including
(i) the potential for increased sales of NetStar products through Ascend's
larger sales force and geographically more extensive distribution channel;
(ii) the ability to reduce dependence on third party technology by accessing
Ascend's technology base; (iii) the ability to realize cost savings through
the leverage of research and development spending by Ascend, thus enabling
NetStar to focus its engineering resources on its core technologies; (iv) the
ability to leverage Ascend's expertise in low cost of design and manufacturing
efficiencies and volume procurement; and (v) the ability of NetStar
stockholders to share in the enhanced prospects of the combined company.

The NetStar Board also considered certain potentially negative factors
related to the Merger, including (i) the risk that the benefits sought in the
Merger would not be fully achieved; (ii) the risk that the Merger would not be
consummated; (iii) the possible adverse effect of the public announcement of
the Merger on NetStar's sales and operating results, together with the
significant costs which NetStar would incur in the event that, after having
been announced, the Merger was not consummated; and (iv) the substantial
management time and effort required to consummate the Merger and integrate
NetStar's business with that of Ascend and the impact on personnel as a result
of the consolidation of certain functions. In the view of the NetStar Board,
the potentially negative factors were not sufficient, either individually or
collectively, to outweigh the potential benefits of the Merger.

In the course of its deliberations, the NetStar Board reviewed with NetStar
management a number of additional factors relevant to the Merger. Such review
included consideration of the long-term prospects for NetStar as an
independent company as well as other potential strategic relationships. The
NetStar Board also considered, among other matters, (i) information concerning
Ascend's and NetStar's respective businesses, prospects, financial performance
and condition, operations, technology and competitive position; (ii) the
historical financial performance of Ascend and other publicly-available
information concerning Ascend; and (iii) current financial market conditions
and historical market prices, volatility and trading information with respect
to Ascend Common Stock and NetStar Common Stock. In addition, the NetStar
Board reviewed the consideration to be issued to the NetStar stockholders in
the Merger, the relationship between the market value of Ascend Common Stock
to be issued in exchange for NetStar Common Stock and the market value of
NetStar Common Stock, and the principal terms of the Merger Agreement. The
NetStar Board considered the financial analyses prepared by Wessels, including
the oral opinion of Wessels, delivered at the May 30, 1996 meeting of the
NetStar Board, to the effect that, as of that date, the consideration to be
received by the holders of NetStar Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to the holders of NetStar
Common Stock. See "--Opinion of Financial Advisor to NetStar."

In view of the wide variety of factors, both positive and negative, which
were considered, the NetStar Board did not find it practicable to quantify or
otherwise assign relative weights to the specific factors considered.

OPINION OF FINANCIAL ADVISOR TO NETSTAR

Wessels has acted as financial advisor to NetStar in connection with the
Merger. Pursuant to an engagement letter (the "Engagement Letter") that was
ratified by the NetStar Board on April 18, 1996, NetStar retained Wessels to
furnish financial advisory and investment banking services with respect to a
possible sale or merger of NetStar and to render an opinion as to the
fairness, from a financial point of view, to the NetStar stockholders of the
consideration offered in any proposed sale or merger. The amount of
consideration to be received by NetStar stockholders in the Merger was
determined through negotiations between NetStar management and Ascend and not
by Wessels, although Wessels did assist NetStar management in these
negotiations. Wessels rendered its oral opinion (subsequently confirmed in
writing) on May 30, 1996 to the NetStar Board that, as of such date and based
on the procedures followed, factors considered and assumptions made by Wessels
as set forth therein, the consideration to be received by the holders of
NetStar Common Stock pursuant to the Merger Agreement is fair from a financial
point of view to the holders of NetStar Common Stock. A copy of Wessels'
opinion dated May 30, 1996 (the "Wessels Opinion"), which sets forth the
assumptions made, matters considered, the scope and limitations of the review
undertaken and the procedures followed by Wessels, is

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attached as Annex B to this Proxy Statement/Prospectus. NetStar stockholders
are urged to read the Wessels Opinion in its entirety. The summary of the
Wessels Opinion set forth herein is qualified in its entirety by reference to
the Wessels Opinion. The Wessels Opinion applies only to the fairness from a
financial point of view of the consideration to be received by the NetStar
stockholders as provided by the terms of the Merger Agreement and should not
be deemed to constitute a recommendation by Wessels to NetStar stockholders to
vote in favor of any matter presented in this Proxy Statement/Prospectus. The
Wessels Opinion does not constitute an opinion as to the price at which Ascend
Common Stock may trade at any time. The Wessels Opinion was provided for the
use of the NetStar Board in its evaluation of the Merger. The NetStar Board
did not impose any limitations on the scope of the investigation of Wessels
with respect to rendering its opinion.

In connection with its review of the Merger, and in arriving at its opinion,
Wessels has: (i) reviewed and analyzed the financial terms of the Merger
Agreement; (ii) reviewed and analyzed certain publicly available financial
statements and other information of NetStar and Ascend; (iii) reviewed and
analyzed certain internal financial statements and other historical financial
and operating data concerning NetStar prepared by the management of NetStar;
(iv) reviewed and analyzed certain internal financial statements and other
historical financial and operating data concerning Ascend prepared by the
management of Ascend; (v) reviewed and analyzed certain financial projections
prepared by the management of NetStar; (vi) reviewed and analyzed certain
financial projections prepared by the management of Ascend; (vii) conducted
discussions with members of the senior management of NetStar with respect to
the business and prospects of NetStar; (viii) conducted discussions with
members of the senior management of Ascend with respect to the business and
prospects of Ascend; (ix) analyzed the pro forma impact of the Merger on
Ascend's results of operations; (x) reviewed the reported prices and trading
activity for the NetStar Common Stock and the Ascend Common Stock; (xi)
compared the financial performance of NetStar and Ascend and the prices of the
NetStar Common Stock and the Ascend Common Stock with that of certain other
comparable publicly traded companies and their securities; (xii) reviewed the
financial terms, to the extent publicly available, of certain comparable
merger transactions; and (xiii) participated in discussions and negotiations
among representatives of NetStar and Ascend and their respective financial and
legal advisors. Although materials provided to Wessels included financial
projections of Ascend prepared by management of Ascend, and although Wessels
reviewed and analyzed such information, Wessels did not materially rely upon
projections in preparing or delivering the Wessels Opinion to the NetStar
Board.

Based on this information, Wessels performed a variety of analyses and
examinations of the Merger and considered such financial, economic and market
criteria as it deemed necessary in arriving at the Wessels Opinion. The
following is a summary of the financial analyses performed by Wessels in
connection with the delivery of the Wessels Opinion.

Comparable Company Analysis. Wessels used a comparable company analysis to
analyze NetStar's operating performance relative to a group of publicly traded
companies which Wessels deemed for purposes of its analysis to be comparable
to NetStar. In such analysis, Wessels compared the value to be achieved by the
NetStar stockholders in the Merger, expressed as a multiple of certain
operating results, to the market trading values achieved by the stockholders
of the comparable companies, expressed as a multiple of the same operating
results. Wessels compared multiples of selected financial data for NetStar
with those of the following publicly traded companies in the networking
industry: 3Com Corporation, Bay Networks, Inc., Cabletron Systems, Inc. and
Cisco Systems, Inc. (collectively referred to as the "Comparable Companies").
Although such companies were considered comparable to NetStar for the purpose
of this analysis based on certain characteristics of their respective
businesses, none of such companies possessed characteristics identical to
those of NetStar. Wessels calculated the following valuation multiples based
on, as to NetStar, a market price of $23.41 per share for the Ascend Common
Stock to be offered as consideration in the Merger, and, as to the Comparable
Companies, on market prices and other information available as of the date of
the Wessels Opinion. The mean and median for market capitalization as a
multiple of each of the indicated statistics for NetStar and the Comparable
Companies is as follows: (i) projected calendar year 1996 revenues, 27.4x for
NetStar, as compared to a mean of 3.9x and a median of 3.3x for the Comparable
Companies and (ii) projected calendar year 1997 revenues, 11.5x for NetStar,
as compared to a mean of 3.0x and a median of 2.6x for the Comparable
Companies. In each of the comparisons

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of the value to be achieved by the NetStar stockholders in the Merger as
compared with the mean and median of the market values realized by the
stockholders of the Comparable Companies, the multiples of operating results
achieved by the NetStar stockholders was greater than that realized by the
stockholders of the Comparable Companies.

Comparable Transactions. Wessels compared multiples of selected financial
data and other financial data relating to the proposed Merger with multiples
paid in, and other financial data from, 42 acquisitions since January 1, 1993
of public high-technology companies (i.e., companies in the markets for
computer equipment, electronics, communications (including networking) and
other advanced technologies) with aggregate equity values between $50 million
and $9 billion. These transactions were selected based primarily on the
aggregate transaction value of the business acquired, the public company
status of the target and the target company's involvement in a high-technology
industry. Wessels also compared the premium of the equity value per share over
the target stock price one day and four weeks prior to the announcement of the
transaction. This analysis produced multiples of transaction value to latest
12-month revenues for the comparable acquisitions ranging from 0.4x to 19.6x
with a mean and median of 3.7x and 1.8x, respectively, as compared to 71.5x
for NetStar. The multiple of transaction value to latest 12-month operating
income for comparable acquisitions ranged from 8.0x to 225.2x with a mean and
a median of 38.7x and 24.2x, respectively, as compared to a multiple that is
negative for NetStar, as NetStar was not profitable in the prior twelve
months. The multiple of transaction value of the acquisition to latest 12-
month net income ranged from 9.5x to 200.8x, with a mean and median of 52.7x
and 37.6x, respectively, as compared to a multiple that is negative for
NetStar, as NetStar was not profitable in the prior twelve months. The premium
of the equity value per share over the stock price of the target one day prior
to the announcement of the transaction ranged from (5)% to 189% with a mean
and a median of 40% and 32%, respectively, as compared to (7)% for NetStar.
The premium of the equity value per share over the stock price of the target
four weeks prior to the announcement of the transaction ranged from (7)% to
210% with a mean and median of 57% and 49%, respectively, as compared to 25%
for NetStar. In addition, the premium of the equity value per share over the
average closing price of NetStar Common Stock 30 days and 60 days prior to the
announcement of the Merger was 10% and 23%, respectively.

Discounted Cash Flow Analysis. Wessels estimated present values of NetStar
using a discounted cash flow analysis based on projections of future
operations prepared by NetStar's management. Wessels calculated present values
of projected operating cash flows after net changes to working capital over
the period between May 30, 1996 and December 31, 1996 and the four years 1997
to 2000 using a discount rate of 21%. Wessels calculated approximate terminal
values of NetStar as of December 31, 2000 of 18.6x NetStar's calendar year
2000 operating income. Wessels determined this multiple based on the latest
12-month market capitalization to operating income multiples of the Comparable
Companies. The terminal value was discounted to present value using the same
discount rate as the cash flows. Wessels calculated the present value of
NetStar's net operating loss carryforward which would be applied to reduce
NetStar's taxable income using the same discount rate as the cash flows.
Wessels calculated an implied valuation of NetStar by adding the present value
of the cash flows and the terminal value and the present value of NetStar's
net operating loss carryforwards to NetStar's cash balances as of March 31,
1996. The implied value of shares of NetStar Common Stock based on this
analysis was $16.72 per share. Wessels determined that, at the time of the
Wessels Opinion, the value of the consideration to be received by the NetStar
stockholders in the Merger of $23.41 per share based on the market price of
Ascend Common Stock was greater than the present value of NetStar's cash flows
under the range of discounted cash flow valuations discussed above.

The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Wessels
believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all factors and analyses, could create an incomplete or misleading
view of the processes underlying its opinion. In arriving at its fairness
determination, Wessels considered the results of all such analyses. In view of
the wide variety of factors considered in connection with its evaluation of
the fairness of the Merger consideration, Wessels did not find it practicable
to assign relative weights to the factors considered in reaching its opinion.
No company or transaction used in the above analysis as a comparison is
identical to NetStar or Ascend, or the proposed Merger. Accordingly, an
analysis of the results of the foregoing was not simply mathematical nor
necessarily precise;

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rather, it involved complex considerations and judgments concerning
differences in financial and operating characteristics of companies and other
factors that could affect public trading values. The analyses were prepared
solely for purposes of Wessels providing its opinion as to the fairness of the
Merger consideration pursuant to the Merger Agreement to the NetStar Board and
do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon forecasts
of future results are not necessarily indicative of actual future results,
which may be significantly more or less favorable than suggested by such
analyses. See "Risk Factors--Risks Relating to Ascend and the Combined
Company--Volatility of Stock Price." As described above, the Wessels Opinion
and presentation to the NetStar Board was one of many factors taken into
consideration by the NetStar Board in making its determination to approve the
Merger Agreement. The Wessels Opinion does not constitute a recommendation to
any member of the NetStar Board or to any NetStar stockholder as to how any
such Board member or stockholder should vote on the proposed Merger or
otherwise address NetStar's decision to effect the Merger.

Wessels assumed and relied upon the accuracy and completeness of the
financial, legal, tax, operating and other information provided to Wessels by
NetStar and Ascend and did not independently verify such information. Further,
Wessels assumed that the Merger will qualify as a tax-free reorganization and
will be accounted for as a pooling of interests. Wessels did not perform an
independent evaluation or appraisal of any of the respective assets or
liabilities of NetStar or Ascend, nor was Wessels furnished with any such
evaluations or appraisals. With respect to financial forecasts, Wessels
assumed that these forecasts were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of NetStar
and Ascend, as the case may be, as to the respective future financial
performance of NetStar or Ascend. The Wessels Opinion was based on the
economic, market, financial and other conditions as they existed and the
information available to Wessels on the date of the opinion. Events occurring
after the date of the Wessels Opinion may materially affect the assumptions
used in preparing the Wessels Opinion. Further, the Wessels Opinion speaks
only as of the date thereof and is based on the conditions as they existed and
information with which Wessels was supplied as of the date thereof. It should
be understood that, although subsequent developments may have affected or may
hereafter affect the Wessels Opinion, Wessels has not been requested to and
does not have any obligation to update, revise or reaffirm the Wessels
Opinion.

Wessels is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for
corporations. NetStar selected Wessels as its financial advisor based on
Wessels' experience in mergers and acquisitions and in securities valuation
generally.

In the ordinary course of business, Wessels acts as a market maker and
broker in the publicly traded securities of Ascend and receives customary
compensation in connection therewith, and also provides research coverage for
Ascend. In the ordinary course of business, Wessels actively trades in the
publicly traded securities of Ascend for its own account and for the accounts
of its customers and, accordingly, may at any time hold a long or short
position in such securities.

Pursuant to the Engagement Letter, NetStar paid Wessels a non-refundable
retainer fee (the "Retainer Fee") of $25,000 upon execution of the Engagement
Letter and agreed to pay to Wessels a non-refundable opinion fee (the "Opinion
Fee") of $500,000 for the rendering of the Wessels Opinion. In addition,
NetStar has agreed to pay Wessels, upon consummation of the Merger, a
transaction fee (the "Transaction Fee") in the amount of 1.25% of the total
Aggregate Transaction Value (as defined in the Engagement Letter). The
Retainer Fee and the Opinion Fee will be credited against the Transaction Fee.
Payment of the Transaction Fee is contingent upon consummation of the Merger.
NetStar has also agreed to reimburse Wessels for its reasonable out-of-pocket
expenses, up to $50,000 (subject to increase with the concurrence of NetStar),
and to indemnify Wessels against certain liabilities relating to or arising
out of services performed by Wessels as financial advisor to NetStar. The
terms of the Engagement Letter, which are customary in transactions of this
nature, were negotiated at arm's length between NetStar and Wessels, and the
NetStar Board was aware of such fee arrangement at the time of its

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approval of the Merger Agreement, including the fact that a significant
portion of the aggregate fee payable to Wessels is contingent upon
consummation of the Merger.

INTERESTS OF CERTAIN PERSONS IN THE MERGER

As of May 31, 1996, directors and executive officers of Ascend and their
affiliates may be deemed to be beneficial owners of approximately 6.0% of the
outstanding shares of Ascend Common Stock. See "Information Concerning
Ascend--Security Ownership of Certain Beneficial Owners and Management." In
addition, Martin Shoffstall, as director of Ascend, owns 500 shares of NetStar
Common Stock, which represents less than 1% of the outstanding shares of
Common Stock of NetStar.

Ascend has agreed to retain the services of Thomas S. Bednarik, James D.
Edwards and Gary A. Stoltz, the three current non-employee directors of
NetStar, as members of the Board of Directors of the Surviving Corporation for
a period of not less than 90 days following the Effective Time to assist with
post-Merger transition matters. Each of these individuals will serve in such
capacity without compensation. However, stock options held by such persons
will continue to vest during their continued service, and, as a result,
options to purchase 12,500 shares of NetStar Common Stock held by each of
these individuals (which will be assumed by Ascend in the Merger and converted
into options to purchase 4,424 shares of Ascend Common Stock) will vest during
the period of such service. See "The Merger Agreement--Related Matters After
the Merger."

Under the Merger Agreement, Ascend is required to provide indemnification
to, and maintain liability insurance covering, the directors and officers of
NetStar. See "The Merger Agreement--Indemnification."

VOTING AGREEMENTS

In connection with the execution of the Merger Agreement, each of the
directors of NetStar, certain executive officers of NetStar and certain
NetStar stockholders affiliated with a director who, as of May 31, 1996,
together held approximately 3.5% of the outstanding shares of NetStar Common
Stock, entered into Voting Agreements pursuant to which such persons agreed,
among other things, (i) to vote their shares of NetStar Common Stock in favor
of approval of the Merger Agreement and against any proposal made in
opposition to or competition with the Merger or which would, or could
reasonably be expected to, prohibit or discourage the Merger and (ii) not to
transfer, pledge, sell, exchange or offer to transfer or sell or otherwise
dispose of or encumber any shares of NetStar Common Stock prior to the
earliest of the Effective Time or the termination of the Merger Agreement.

Concurrently with the execution of each Voting Agreement, each such
stockholder delivered to Ascend an irrevocable proxy pursuant to which such
stockholder has appointed the Ascend Board of Directors as such stockholder's
proxy to vote all shares of NetStar Common Stock owned by such stockholder in
a manner consistent with the Voting Agreement.

ACCOUNTING TREATMENT

The Merger is intended to qualify as a pooling of interests for accounting
and financial reporting purposes. Ascend has received a letter from Ernst &
Young LLP, Ascend's independent auditors, as to their concurrence with
Ascend's management regarding the appropriateness of pooling of interests
accounting for the Merger under Accounting Principles Board Opinion No. 16, if
the Merger is consummated in accordance with the Merger Agreement, and NetStar
has received a letter from Deloitte & Touche LLP, Netstar's independent
auditors, stating that it knows of nothing with respect to NetStar that would
prohibit Ascend from accounting for the Merger as a pooling of interests.
Under pooling of interests accounting, the recorded assets and liabilities of
Ascend and NetStar will be carried forward to the combined company at their
recorded amounts, income of the

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combined company will include income of Ascend and loss of NetStar for the
entire fiscal year in which the combination occurs and the reported income of
the separate companies for prior periods will be combined and restated as
income of the combined company. Consummation of the Merger is conditioned upon
the written confirmation of such letters at the Effective Time. See "The
Merger Agreement--Conditions" and "Unaudited Pro Forma Condensed Combining
Financial Statements."

Each of the respective affiliates of Ascend and NetStar will be requested to
execute a written agreement to the effect that such person will not transfer
shares of Common Stock of either Ascend or NetStar during the period beginning
30 days preceding the Effective Time and ending on the date that Ascend
publishes financial statements which reflect 30 days of combined operations of
Ascend and Netstar, subject to certain de minimis exceptions (which agreements
relate to the ability of Ascend to account for the Merger as a pooling of
interests).

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

NetStar Stockholders

The following discussion addresses certain federal income tax considerations
of the Merger that are applicable to holders of NetStar Common Stock. This
discussion reflects the opinions of Gray Cary Ware & Freidenrich, a
Professional Corporation, and Hale and Dorr, counsel to Ascend and NetStar,
respectively, which are attached as Exhibits 8.1 and 8.2 to the Registration
Statement of which this Proxy Statement/Prospectus is a part (the "Exhibit
Opinions"). The Exhibit Opinions each include an opinion to the effect that
the Merger will constitute a "reorganization" within the meaning of Section
368(a) of the Code (a "Reorganization"). The Exhibit Opinions are based on
certain assumptions and representations and are subject to certain limitations
and qualifications as noted therein.

NetStar stockholders should be aware that the following discussion does not
deal with all federal tax consequences that may result from the Merger,
including the survival or availability of any tax attributes or elections of
NetStar as a result of the Merger, and does not deal with all federal income
tax considerations that may be relevant to particular NetStar stockholders in
light of their particular circumstances, such as stockholders who are dealers
in securities, who are foreign persons or who acquired their NetStar Common
Stock through stock option or stock purchase programs or in other compensatory
transactions. In addition, the following discussion does not address the tax
consequences of transactions effectuated prior to or after the Merger (whether
or not such transactions are in connection with the Merger), including,
without limitation, the exercise of NetStar Options or NetStar Warrants to
purchase NetStar Common Stock in anticipation of the Merger, except for the
exercise of NetStar Warrants (not received in a compensatory transaction) for
the purchase of NetStar Common Stock in anticipation of the Merger. Finally,
no foreign, state or local tax considerations are addressed herein.
ACCORDINGLY, NETSTAR STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS
AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE MERGER AND RELATED
TRANSACTIONS, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES TO THEM OF THE MERGER AND SUCH RELATED TRANSACTIONS.

The following discussion is based on the interpretation of the Code by the
companies' respective counsel, applicable Treasury Regulations, judicial
authority and administrative rulings and practice, all as of the date hereof.
The Internal Revenue Service (the "IRS") is not precluded from adopting a
contrary position. In addition, there can be no assurance that future
legislative, judicial or administrative changes or interpretations will not
adversely affect the accuracy of the statements and conclusions set forth
herein. Any such changes or interpretations could be applied retroactively and
could affect the tax consequences of the Merger to Ascend, NetStar and/or
their respective stockholders.

Subject to the limitations and qualifications referred to herein, and as a
result of the Merger qualifying as a Reorganization, the companies' respective
counsel are of the opinion that:

(a) No gain or loss will be recognized by the holders of NetStar Common
Stock upon the receipt of Ascend Common Stock solely in exchange for
NetStar Common Stock in the Merger (except to the extent of cash received
in lieu of fractional shares);

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(b) The aggregate tax basis of the Ascend Common Stock to be received by
the NetStar stockholders in the Merger (including any fractional share of
Ascend Common Stock not actually received) will be the same as the basis of
the NetStar Common Stock surrendered in exchange therefor;

(c) The holding period of the Ascend Common Stock received by each
NetStar stockholder in the Merger will include the period during which the
NetStar Common Stock surrendered in exchange therefor was held, provided
that the NetStar Common Stock so surrendered is held as a capital asset at
the Effective Time;

(d) Cash payments received by NetStar stockholders in lieu of receipt of
fractional shares of Ascend Common Stock will be treated as received in
redemption of such fractional shares, subject to the provisions of Code
Section 302, as if such fractional share had been issued in the Merger and
then redeemed by Ascend for cash;

(e) A NetStar stockholder who exercises dissenters' rights with respect
to such stockholder's NetStar Common Stock and receives payment for such
shares in cash will generally recognize gain or loss measured by the
difference between the stockholder's basis in such shares and the amount of
cash received if, as a result of such exercise, the stockholder exercising
dissenters' rights owns no shares of Ascend Common Stock (either actually
or constructively within the meaning of Section 318 of the Code); and

(f) No gain or loss will be recognized by Ascend, Sub or NetStar as a
result of the Merger.

Neither Ascend nor NetStar has requested a ruling from the IRS in connection
with the Merger. However, it is a condition of the respective obligations of
Ascend and NetStar to consummate the Merger that Ascend and NetStar receive
confirming tax opinions from their respective counsel to the effect that for
federal income tax purposes, the Merger will constitute a Reorganization. The
Exhibit Opinions are not intended to satisfy this closing condition. These
closing opinions, which are collectively referred to herein as the "Tax
Opinions," neither bind the IRS nor preclude the IRS from adopting a contrary
position. As with the Exhibit Opinions, the Tax Opinions will be subject to
certain assumptions, exceptions and qualifications and will be based on the
truth and accuracy of certain representations of Ascend, NetStar, Sub and
certain NetStar stockholders, including representations contained in certain
certificates of the respective managements of Ascend, NetStar and Sub dated on
or prior to the date of this Proxy Statement/Prospectus.

A successful IRS challenge to the Reorganization status of the Merger would
result in a NetStar stockholder recognizing gain or loss with respect to each
share of NetStar Common Stock surrendered equal to the difference between the
stockholder's basis in such share and the fair market value, as of the
Effective Time, of the Ascend Common Stock received in exchange therefor. In
such event, a stockholder's aggregate basis in the Ascend Common Stock so
received would equal its fair market value, and the stockholder's holding
period for such stock would begin the day after the Merger.

Even if the Merger qualifies as a Reorganization, a recipient of shares of
Ascend Common Stock would recognize gain to the extent that such shares were
considered to be received in exchange for services or property (other than
solely for NetStar Common Stock). All or a portion of such gain may be taxable
as ordinary income. Gain would also be recognized to the extent that a NetStar
stockholder was treated as receiving (directly or indirectly) consideration
other than Ascend Common Stock in exchange for the stockholder's NetStar
Common Stock.

Holders of NetStar Warrants

Generally, the exchange of warrants not received in a compensatory
transaction for warrants or stock of an acquiring corporation in a
Reorganization is a taxable transaction to the warrantholders with the
warrantholders recognizing gain or loss in an amount equal to the difference
between the value of the warrants or stock received and their basis in the
warrants exchanged. Consequently, holders of NetStar Warrants may be subject
to federal income tax upon the assumption of the NetStar Warrants by Ascend
pursuant to the Merger Agreement to the extent such assumption constitutes a
taxable exchange. However, warrantholders who have not received their

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NetStar Warrants in a compensatory transaction and who, prior to the Effective
Time, exercise their NetStar Warrants pursuant to the terms thereof for the
purchase of NetStar Common Stock and subsequently exchange such NetStar Common
Stock for Ascend Common Stock pursuant to the Merger Agreement may not be
subject to federal income tax on the exercise or exchange. Neither Ascend nor
NetStar has requested a ruling from the IRS or an opinion of counsel with
respect to the tax consequences to NetStar warrantholders of an assumption of
their NetStar Warrants by Ascend or exercise of their NetStar Warrants prior
to the Merger. NETSTAR WARRANTHOLDERS ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS CONCERNING THE TAX CONSEQUENCES TO THEM OF THE ASSUMPTION OF THEIR
NETSTAR WARRANTS BY ASCEND AND THE TAX CONSEQUENCES OF EXERCISING THEIR
NETSTAR WARRANTS PRIOR TO THE EFFECTIVE TIME.

REGULATORY REQUIREMENTS

Under the HSR Act and the rules promulgated thereunder by the Federal Trade
Commission (the "FTC"), the Merger may not be consummated until notifications
have been given and certain information has been furnished to the FTC and the
Antitrust Division of the Department of Justice (the "Antitrust Division") and
specified waiting period requirements have been satisfied. Ascend and NetStar
filed notification and report forms under the HSR Act with the FTC and the
Antitrust Division on June 17, 1996, together with a request for early
termination of the applicable 30-day waiting period. At any time before or
after the Effective Time, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the consummation of the Merger or
seeking divestiture of substantial assets of Ascend or NetStar. At any time
before or after the Effective Time, and notwithstanding that the HSR Act
waiting period has expired, any state could take such action under the
antitrust laws as it deems necessary or desirable in the public interest. Such
action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of NetStar or businesses of Ascend or NetStar. Private
parties may also seek to take legal action under the antitrust laws under
certain circumstances.

Based on information available to them, Ascend and NetStar believe that the
Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Merger on antitrust grounds will not be made or that, if such a challenge were
made, Ascend and NetStar would prevail or would not be required to accept
certain conditions, including certain divestitures, in order to consummate the
Merger.

FEDERAL SECURITIES LAW CONSEQUENCES

All shares of Ascend Common Stock received by NetStar stockholders in the
Merger will be freely transferable, except that shares of Ascend Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of NetStar prior to the Merger may be resold by them
only in transactions permitted by the resale provisions of Rule 145
promulgated under the Securities Act (or Rule 144 in the case of any such
persons who become affiliates of Ascend) or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of NetStar or
Ascend generally include individuals or entities that control, are controlled
by, or are under common control with, such party and may include certain
officers and directors of such party as well as principal stockholders of such
party. The Merger Agreement requires NetStar to use its best efforts to cause
each of its affiliates to execute a written agreement (an "Affiliate's
Agreement") to the effect that such person will not offer or sell or otherwise
dispose of any of the shares of Ascend Common Stock issued to such person in
or pursuant to the Merger in violation of the Securities Act or the rules and
regulations promulgated by the Commission thereunder.

NASDAQ NATIONAL MARKET QUOTATION

It is a condition to the Merger that the shares of Ascend Common Stock to be
issued pursuant to the Merger Agreement and required to be reserved for
issuance in connection with the Merger be approved for quotation on The Nasdaq
National Market. An application has been filed for listing the shares of
Ascend Common Stock on The Nasdaq National Market.

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THE MERGER AGREEMENT

The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Annex A to this Proxy
Statement/Prospectus and incorporated herein by reference. Such summary is
qualified in its entirety by reference to the Merger Agreement. Stockholders
of NetStar are urged to read the Merger Agreement in its entirety for a more
complete description of the Merger.

THE MERGER

The Merger Agreement provides that, following the approval and adoption of
the Merger Agreement by the stockholders of NetStar and the satisfaction or
waiver of the other conditions to the Merger, Sub will be merged with and into
NetStar, with NetStar continuing as the Surviving Corporation, which shall be
a wholly-owned subsidiary of Ascend.

If all such conditions to the Merger are satisfied or waived, the Merger
will become effective upon the filing by the Surviving Corporation of duly
executed Articles of Merger with the Secretary of State of the State of
Minnesota or at such time thereafter as is provided in the Articles of Merger.

CONVERSION OF SECURITIES

Upon consummation of the Merger, pursuant to the Merger Agreement, each
issued and outstanding share of NetStar Common Stock (other than shares owned
by Ascend, Sub or any other wholly-owned subsidiary of Ascend, all of which
will be canceled, and shares owned by stockholders of NetStar who properly
exercise and perfect dissenters' rights) will be converted into the right to
receive 0.35398 of a share of Ascend Common Stock. Based upon the outstanding
shares of Common Stock of NetStar and Ascend as of May 31, 1996 (and assuming
no exercise by NetStar stockholders of their dissenters' rights), the
stockholders of NetStar immediately prior to the consummation of the Merger
will own approximately 3.2% of the outstanding shares of Ascend Common Stock
immediately following the consummation of the Merger. If any holder of shares
of NetStar Common Stock would be entitled to receive a number of shares of
Ascend Common Stock that includes a fraction, then, in lieu of a fractional
share, such holder will be entitled to receive cash in an amount equal to such
fractional part of a share of Ascend Common Stock multiplied by the average of
the last reported sale price of Ascend Common Stock, as reported on The Nasdaq
National Market, on each of the ten trading days immediately preceding the
date of the Effective Time. Each share of Sub common stock issued and
outstanding immediately prior to the Effective Time will be converted into one
share of common stock of the Surviving Corporation.

Promptly after the Effective Time, The First National Bank of Boston (the
"Exchange Agent") will mail transmittal forms and exchange instructions to
each holder of record of NetStar Common Stock to be used to surrender and
exchange certificates evidencing shares of NetStar Common Stock for
certificates evidencing the shares of Ascend Common Stock to which such holder
has become entitled. After receipt of such transmittal forms, each holder of
certificates formerly representing NetStar Common Stock will be able to
surrender such certificates to the Exchange Agent, and each such holder will
receive in exchange therefor certificates evidencing the number of whole
shares of Ascend Common Stock to which such holder is entitled and any cash
which may be payable in lieu of a fractional share of Ascend Common Stock.
Such transmittal forms will be accompanied by instructions specifying other
details of the exchange. NETSTAR STOCKHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.

After the Effective Time, each certificate evidencing NetStar Common Stock,
until so surrendered and exchanged, will be deemed, for all purposes, to
evidence only the right to receive the number of whole shares of Ascend Common
Stock which the holder of such certificate is entitled to receive and the
right to receive any cash payment in lieu of a fractional share of Ascend
Common Stock. The holder of such unexchanged certificate will not be entitled
to receive any dividends or other distributions payable by Ascend until the
certificate has been exchanged. Subject to applicable laws, such dividends and
distributions, together with any cash payment in lieu of a fractional share of
Ascend Common Stock, will be paid without interest.

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DISSENTERS' RIGHTS

Any shares of NetStar Common Stock held by stockholders of NetStar who
properly exercise and perfect the dissenters' rights set forth in the MBCA
("Dissenting Shares") shall not be converted into the right to receive Ascend
Common Stock but shall instead be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the provisions of the MBCA. In the event that a NetStar
stockholder who attempts to exercise dissenters' rights should fail to make an
effective demand for payment or otherwise loses his or her status as a
dissenting stockholder, Ascend shall, as of the later of the Effective Time or
the occurrence of such event, issue and deliver, upon surrender by such
stockholder of his or her certificate or certificates representing NetStar
Common Stock, the shares of Ascend Common Stock and any cash payment in lieu
of fractional shares, in each case without interest thereon, to which such
stockholder would have been entitled under the Merger Agreement. It is a
condition to closing the Merger that NetStar shall not have received, prior to
the Special Meeting, notices from NetStar stockholders who desire to exercise
dissenters' appraisal rights with respect to an aggregate number of shares of
NetStar Common Stock which (assuming perfection of the dissenters' appraisal
rights of such stockholders) would prevent Ascend from accounting for the
Merger as a pooling of interests.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various customary representations and
warranties relating to, among other things, (a) the due organization, valid
existence and good standing of each of Ascend, NetStar and each of their
respective subsidiaries and certain similar corporate matters; (b) the capital
structure of each of Ascend and NetStar; (c) the authorization, execution,
delivery and enforceability of the Merger Agreement, the consummation of the
transactions contemplated by the Merger Agreement and related matters; (d) the
absence of conflicts under charters or by-laws, required consents or approvals
and violations of any instruments or law; (e) documents and financial
statements filed by each of Ascend and NetStar with the Commission and the
accuracy of information contained therein; (f) the absence of undisclosed
liabilities; (g) the absence of certain material adverse changes or events;
(h) taxes, tax returns and audits; (i) properties; (j) intellectual property;
(k) agreements, contracts and commitments; (l) litigation; (m) environmental
matters, hazardous materials and hazardous materials activities; (n) employee
benefit plans; (o) compliance with laws; (p) matters affecting the
availability of pooling of interests accounting; (q) interested party
transactions; (r) the accuracy of information supplied by each of Ascend and
NetStar in connection with the Registration Statement and this Proxy
Statement/Prospectus; (s) opinions of financial advisors; (t) the absence of
pending discussions with other parties; and (u) the interim operations of Sub.

CERTAIN COVENANTS AND AGREEMENTS

Pursuant to the Merger Agreement, NetStar has agreed that, during the period
from the date of the Merger Agreement until the Effective Time, except as
otherwise consented to in writing by Ascend or as contemplated by the Merger
Agreement, NetStar and its subsidiaries will: (a) carry on its business in the
ordinary course in substantially the same manner as previously conducted; (b)
pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, and pay or perform other obligations when due; (c) preserve
intact its present business organization; (d) not accelerate, amend or change
the period of exercisability of options granted under any employee stock plan,
except as required pursuant to the plan or any related agreement; (e) not
transfer or license or otherwise extend, amend or modify any rights to its
intellectual property rights, other than in the ordinary course of business
consistent with past practices; (f) not declare or pay any dividends on or
make other distributions in respect of any of its capital stock, not effect
certain other changes in its capitalization, and not purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except from
former employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with the termination of
service; (g) not issue, or authorize or propose the issuance of, any shares of
its capital stock or securities convertible into shares of its capital stock,
or any subscriptions, rights, warrants, or options to acquire, or other
agreements obligating it to issue any such shares or other convertible
securities, subject to certain exceptions; (h) not engage in material
acquisitions; (i) subject to certain exceptions, not sell,

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lease, license or otherwise dispose of material properties or assets; (j) not
increase the compensation payable to its officers or employees (except for
increases consistent with past practices), grant additional severance or
termination pay or enter into employment agreements with officers or any non-
officer employee or enter into any collective bargaining agreement or
establish, adopt, enter into or amend any plan for the benefit of its
directors, officers or employees, subject to certain exceptions; (k) not
revalue any of its assets, including writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course of
business; (l) not incur indebtedness for money borrowed (or guarantees
thereof) other than indebtedness incurred under existing lines of credit
consistent with prior practice; (m) not amend its Restated Articles of
Incorporation or Bylaws, except as contemplated by the Merger Agreement; (n)
not incur, with certain exceptions, material capital expenditures; (o) not
enter into or amend any agreements pursuant to which any third party is
granted exclusive marketing or manufacturing rights with respect to any
NetStar product; (p) not amend or terminate any material contract, agreement
or license to which it is a party except in the ordinary course of business;
(q) not waive or release any material right or claim, except in the ordinary
course of business; (r) not initiate any litigation or arbitration proceeding;
(s) not take any action that would or is reasonably likely to result in any of
its representations and warranties becoming untrue; (t) promptly notify Ascend
of any event or occurrence not in the ordinary course of business where such
event or occurrence would result in a breach of any covenant of NetStar or
cause any representation or warranty of NetStar to be untrue; and (u) confer
on a regular basis with Ascend on operational matters of materiality.

Pursuant to the Merger Agreement, Ascend has agreed that, during the period
from the date of the Merger Agreement until the Effective Time, except as
otherwise consented to in writing by NetStar or as contemplated by the Merger
Agreement, Ascend and its subsidiaries will: (a) carry on its business in the
ordinary course in substantially the same manner as previously conducted; (b)
pay its debts and taxes when due subject to good faith disputes over such
debts or taxes, and pay or perform other obligations when due; (c) preserve
intact its present business organization; (d) not declare or pay any dividends
on or make other distributions in respect of any of its capital stock (other
than stock splits of its Common Stock or stock dividends payable in shares of
Common Stock), not effect certain other changes in its capitalization, and not
purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock except from former employees, directors and consultants in
accordance with agreements providing for the repurchase of shares in
connection with the termination of service; (e) subject to certain exceptions,
not sell, lease, or otherwise dispose of material properties or assets; (f)
not amend its Certificate of Incorporation or Bylaws, except as contemplated
by the Merger Agreement; (g) not take any action that would or is reasonably
likely to result in any of its representations and warranties becoming untrue;
and (h) confer on a regular basis with NetStar on operational matters of
materiality.

NO SOLICITATION

The Merger Agreement provides that NetStar will not, directly or indirectly,
through any officer, director, employee, representative or agent of NetStar,
(i) solicit, initiate or encourage any inquiries or proposals that constitute,
or could reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of
shares of capital stock (including without limitation by way of a tender
offer) or similar transactions involving NetStar or any of its subsidiaries,
other than the transactions contemplated by the Merger Agreement (any of the
foregoing inquiries or proposals being referred to in the Merger Agreement as
an "Acquisition Proposal"), (ii) engage in negotiations or discussions
concerning, or provide any nonpublic information to any person or entity
relating to, any Acquisition Proposal, or (iii) agree to, approve or recommend
any Acquisition Proposal; provided, however, that nothing contained in the
Merger Agreement shall prevent NetStar or the NetStar Board from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity (including a new
and unsolicited Acquisition Proposal received by NetStar after the execution
of the Merger Agreement from a person or entity whose initial contact with
NetStar may have been solicited by NetStar prior to the execution of the
Merger Agreement) or recommending such an unsolicited bona fide written
Acquisition Proposal to the stockholders of NetStar, if and only to the extent
that (1) the NetStar Board believes in good faith (after consultation with and
based upon the advice of its financial

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advisor) that such Acquisition Proposal would, if consummated, result in a
transaction more favorable to NetStar's stockholders from a financial point of
view than the transaction contemplated by the Merger Agreement (any such more
favorable Acquisition Proposal being referred to as a "Superior Proposal") and
that the party making such Superior Proposal has the financial means, or the
ability to obtain the necessary financing, to conclude such transaction, (2)
the NetStar Board determines in good faith (after consultation with and based
upon the advice of outside legal counsel) that such action is necessary for
the NetStar Board to comply with its fiduciary duties to the NetStar
stockholders under applicable law and (3) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such person
or entity, the NetStar Board receives from such person or entity an executed
confidentiality agreement with terms no more favorable to such party than
those contained in the reciprocal non-disclosure agreement between Ascend and
NetStar; or (B) complying with Rule 14e-2 promulgated under the Exchange Act
with regard to an Acquisition Proposal.

NetStar is required to notify Ascend (orally and in writing) within 24 hours
after receipt of any Acquisition Proposal or request for non-public
information or access to its properties, books or records in connection with
an Acquisition Proposal.

RELATED MATTERS AFTER THE MERGER

At the Effective Time, Sub will be merged with and into NetStar, and NetStar
will be the Surviving Corporation and a wholly-owned subsidiary of Ascend.
Each share of Sub Common Stock issued and outstanding immediately prior to the
Effective Time will be converted into and exchanged for one validly issued,
fully paid and nonassessable share of NetStar Common Stock. Each stock
certificate of Sub evidencing ownership of any such shares shall continue to
evidence ownership of such shares of NetStar Common Stock.

Unless otherwise determined by Ascend prior to the Effective Time, at the
Effective Time, the Articles of Incorporation of NetStar, as in effect
immediately prior to the Effective Time and as amended in accordance with the
provisions of the Merger Agreement, will be the Articles of Incorporation of
the Surviving Corporation. The Bylaws of Sub, as in effect immediately prior
to the Effective Time, will be the Bylaws of the Surviving Corporation.

The initial directors of the Surviving Corporation shall be four persons to
be designated by Ascend prior to the Closing and Thomas S. Bednarik, James D.
Edwards and Gary A. Stoltz, the three non-employee directors of NetStar as of
the date of the Merger Agreement. Ascend will retain the services of Messrs.
Bednarik, Edwards and Stoltz as members of the Board of Directors of the
Surviving Corporation for a period of not less than 90 days following the
Effective Time to assist with post-Merger transition matters. Such current
non-employee directors of NetStar will serve in such capacity without
compensation.

After the Effective Time, it is expected that the current officers of
NetStar will continue as members of management of NetStar, which will operate
as a wholly-owned subsidiary of Ascend.

After the Effective Time, all shares of NetStar Common Stock will cease to
be quoted on The Nasdaq National Market, and the Surviving Corporation will
undertake to terminate registration of NetStar Common Stock under the Exchange
Act.

INDEMNIFICATION

The Merger Agreement provides that NetStar shall, and that from and after
the Effective Time, Ascend and the Surviving Corporation shall, indemnify,
defend and hold harmless each person who was as of the date of the Merger
Agreement or had been at any time prior to the date thereof, or who becomes
prior to the Effective Time, an officer, director or employee of NetStar or
any of its subsidiaries, against all losses, claims, damages, costs, expenses,
liabilities or judgment or amounts that are paid in settlement with the
approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part out of, or arising in whole or in part
out of, the fact that

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such person is or was a director, officer or employee of NetStar or any
subsidiary, whether pertaining to any matter existing or occurring at or prior
to the Effective Time and whether asserted or claimed prior to, or at or
after, the Effective Time ("Indemnified Liabilities"), and all Indemnified
Liabilities based in whole or in part out of, or pertaining to the Merger
Agreement or the transactions contemplated thereby, in each case to the full
extent that a corporation is permitted under the MBCA to indemnify its own
directors, officers or employees, as the case may be. After the Effective
Time, Ascend and the Surviving Corporation will fulfill and honor in all
respects the obligations of NetStar pursuant to the Bylaws of NetStar and any
indemnification agreements with NetStar directors and officers existing as of
the date of the Merger Agreement.

In addition, Ascend has agreed to maintain, or cause the Surviving
Corporation to maintain, in effect a policy or policies of directors' and
officers' liability insurance with coverage substantially comparable to
policies in force as of May 30, 1996 covering the directors and officers of
NetStar as of the date of the Merger Agreement for a period of not less than
four years following the Effective Time; provided, however, that should such
comparable coverage at any time be unavailable for aggregate premiums of less
than $300,000, Ascend and/or the Surviving Corporation shall only be required
to obtain such lesser coverage as may be obtained for such amount.

CONDITIONS

The respective obligations of Ascend and NetStar to effect the Merger are
subject to the following conditions, among others: (a) the Merger Agreement
shall have been approved and adopted by the stockholders of NetStar; (b) the
waiting period applicable to the consummation of the Merger under the HSR Act
shall have expired or been terminated; (c) all material governmental
authorizations, consents, orders or approvals shall have been obtained; (d)
the Registration Statement shall have become effective and shall not be the
subject of a stop order or proceedings seeking a stop order; (e) no temporary
restraining order, preliminary or permanent injunction or other order shall be
in effect nor shall there be any proceeding seeking any of the foregoing that
prevents, or seeks to prevent, the consummation of the Merger; (f) no action
shall be taken, nor any statute, rule, regulation, or order enacted, entered,
enforced or deemed applicable to the Merger which makes the consummation of
the Merger illegal; (g) receipt by Ascend of a letter from Ernst & Young LLP,
Ascend's independent auditors, as to their concurrence with Ascend's
management regarding the appropriateness of pooling of interests accounting
for the Merger under Accounting Principles Board Opinion No. 16 if the Merger
is consummated in accordance with the Merger Agreement and receipt by NetStar
of a letter from Deloitte & Touche LLP, NetStar's independent auditors,
stating that it knows of nothing with respect to NetStar that would prohibit
Ascend from accounting for the Merger as a pooling of interests (see "The
Merger--Accounting Treatment"); (h) the approval of the shares of Ascend
Common Stock to be issued in the Merger for quotation on The Nasdaq National
Market; (i) NetStar shall not have received, prior to the Special Meeting,
notices from NetStar stockholders who desire to exercise dissenters' appraisal
rights with respect to an aggregate number of shares of NetStar Common Stock
which (assuming perfection of the dissenters' appraisal rights of such
stockholders) would prevent Ascend from accounting for the Merger as a pooling
of interests (see "The Special Meeting--Dissenters' Rights"); (j) receipt by
Ascend of a written opinion from Gray Cary Ware & Freidenrich, a Professional
Corporation, counsel to Ascend, and receipt by NetStar of an opinion of Hale
and Dorr, counsel to NetStar, both to the effect that the Merger will be
treated for Federal income tax purposes as a tax-free reorganization within
the meaning of Section 368(a) of the Code (see "The Merger--Certain Federal
Income Tax Consequences"); (k) receipt by Ascend of all state securities or
"Blue Sky" permits and other authorizations necessary to issue shares of
Ascend Common stock pursuant to the Merger; (l) the accuracy in all material
respects of the representations and warranties of the other party set forth in
the Merger Agreement, subject to the specific provisions described below; and
(k) the performance in all material respects of all obligations of the other
party required to be performed under the Merger Agreement.

For purposes of determining the accuracy of the representations and
warranties of NetStar relating to the absence of certain material adverse
changes, as of the Closing Date, continuing operating losses (excluding
expenses related to the Merger and the other transactions contemplated by the
Merger Agreement) incurred by NetStar in amounts not exceeding $4,500,000 for
the period from June 1, 1996 through August 31, 1996, $1,500,000 for September
1996 and $1,000,000 for any calendar month thereafter (all as reflected in
NetStar's

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consolidated financial statements prepared in accordance with generally
accepted accounting principles consistently applied) shall not, in and of
themselves, be deemed to constitute a material adverse change.

STOCK PLANS AND OPTIONS

At the Effective Time, each outstanding NetStar Option under the NetStar
Employee Option Plan shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such NetStar Option,
the number of shares of Ascend Common Stock (rounded down to the nearest whole
number) as the holder of such NetStar Option would have been entitled to
receive pursuant to the Merger had such holder exercised such NetStar Option
in full immediately prior to the Effective Time, at a price per share (rounded
up to the nearest whole cent) equal to (i) the aggregate exercise price for
the shares of NetStar Common Stock otherwise purchasable pursuant to such
NetStar Option divided by (ii) the number of full shares of Ascend Common
Stock deemed purchasable pursuant to such NetStar Option as determined above
as of Effective Time. As of May 31, 1996, NetStar Options to acquire an
aggregate of 1,524,150 shares of NetStar Common Stock were outstanding under
the NetStar Employee Option Plan.

Ascend has agreed to reserve for issuance a sufficient number of shares of
Ascend Common Stock for delivery under the NetStar Employee Option Plan
assumed as described above. As soon as practicable after the Effective Time,
and not more than 10 business days thereafter, Ascend shall file a
Registration Statement on Form S-8 with respect to the shares of Ascend Common
Stock subject to such options and shall use its best efforts to maintain the
effectiveness of such registration statement(s) and the current status of the
prospectus(es) contained therein for so long as such options remain
outstanding. With respect to individuals, if any, who will be subject to the
reporting requirements under Section 16(a) of the Exchange Act after the
Merger, Ascend has agreed to administer the NetStar Employee Option Plan
assumed in the Merger in a manner that complies with Rule 16b-3 promulgated
under the Exchange Act.

NetStar has agreed to take such action as is necessary to cause the ending
date of the then current "Phase" of NetStar's Fiscal 1996 Employee Stock
Purchase Plan (the "NetStar Purchase Plan") (as such term is defined therein)
to be the last trading day on which the NetStar Common Stock is traded on The
Nasdaq National Market immediately prior to the Effective Time (the "Final
NetStar Purchase Date"); provided that, such change in the Phase shall be
conditioned upon the consummation of the Merger. On the Final NetStar Purchase
Date, NetStar shall apply the funds credited as of such date under the NetStar
Purchase Plan within each participant's payroll withholding account to the
purchase of whole shares of NetStar Common Stock in accordance with the terms
of the NetStar Purchase Plan.

Employees of NetStar as of the Effective Time shall be permitted to
participate in the Ascend Employee Stock Purchase Plan commencing on the first
enrollment date following the Effective Time, subject to compliance with the
eligibility provisions of the plan. Employees of NetStar will each receive
credit, for purposes of such eligibility provisions, for prior service with
NetStar.

WARRANTS

At the Effective Time, each outstanding NetStar Warrant shall be deemed to
constitute a warrant to acquire, on the same terms and conditions as were
applicable under such NetStar Warrant, the same number of shares of Ascend
Common Stock (rounded down to the nearest whole number) as the holder of such
NetStar Warrant would have been entitled to receive pursuant to the Merger had
such holder exercised such NetStar Warrant in full immediately prior to the
Effective Time, at a price per share (rounded up to the nearest whole cent)
equal to (i) the aggregate exercise price for the shares of NetStar Common
Stock otherwise purchasable pursuant to such NetStar Warrant divided by (ii)
the number of full shares of Ascend Common Stock deemed purchasable pursuant
to such NetStar Warrant in accordance with the foregoing. As soon as
practicable after the Effective Time, Ascend shall deliver to the holders of
the NetStar Warrants appropriate notice setting forth such holders' rights and
shall deliver to such holders, upon surrender of their NetStar Warrants, new
warrants (the "Ascend

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Warrants") evidencing such holders' rights. As of May 31, 1996, NetStar
Warrants to acquire an aggregate of 1,195,674 shares of NetStar Common Stock
were outstanding.

Ascend has agreed to reserve for issuance a sufficient number of shares of
Ascend Common Stock for delivery upon the exercise of the Ascend Warrants. As
soon as practicable after the Effective Time, and not more than 10 business
days thereafter, Ascend shall file a Registration Statement on Form S-3 (or
any successor or other appropriate form) with respect to the shares of Ascend
Common Stock subject to the Ascend Warrants and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as the Ascend Warrants remain outstanding.

The assumption of the NetStar Warrants by Ascend may be a taxable event for
the warrantholders. See "The Merger--Certain Federal Income Tax Consequences--
Holders of NetStar Warrants."

TERMINATION; TERMINATION FEES AND EXPENSES

The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the stockholders of NetStar:

(a) by the mutual written consent of Ascend and NetStar;

(b) by either Ascend or NetStar if the Merger shall not have been
consummated by December 31, 1996 (provided that the right to terminate
the Merger Agreement under this clause shall not be available to any
party whose failure to fulfill any obligation under the Merger
Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date);

(c) by either Ascend or NetStar if a court of competent jurisdiction or
other Governmental Entity (as defined in the Merger Agreement) shall
have issued a nonappealable final order, decree or ruling or taken any
other action, in each case having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, except if
the party relying on such order, decree or ruling or other action has
not complied with its obligations under Section 6.7 (Legal Conditions
to Merger) of the Merger Agreement;

(d) by Ascend, if, at the NetStar Special Meeting (including any
adjournment or postponement), the requisite vote of the stockholders of
NetStar in favor of the Merger Agreement and the Merger shall not have
been obtained;

(e) by Ascend, if (i) the Board of Directors of NetStar shall have
withdrawn or modified its recommendation of the Merger Agreement or the
Merger or shall have publicly announced or disclosed to any third party
its intention to do any of the foregoing; (ii) an Alternative
Transaction (as defined in the Merger Agreement) shall have taken place
or the Board of Directors of NetStar shall have recommended to the
stockholders of NetStar an Alternative Transaction; or (iii) a tender
offer or exchange offer for 20% or more of the outstanding shares of
NetStar Common Stock is commenced (other than by Ascend or an affiliate
of Ascend) and the Board of Directors of NetStar recommends that the
stockholders of NetStar tender their shares in such tender or exchange
offer;

(f) by Ascend or NetStar, if there has been a breach of any representation,
warranty, covenant or agreement on the part of the other party set
forth in the Merger Agreement, which breach (i) causes the conditions
set forth in Sections 7.2(a) or (b) (in the case of termination by
Ascend) or 7.3(a) or (b) (in the case of termination by NetStar) of the
Merger Agreement (relating to the accuracy of representations and
warranties of the other party and performance by the other party of
certain obligations) not to be satisfied and (ii) shall not have been
cured within 10 business days following receipt by the breaching party
of written notice of such breach from the other party; or

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(g) by Ascend or NetStar, if NetStar shall have received, prior to the
Special Meeting, notices from NetStar stockholders who desire to
exercise dissenters' appraisal rights with respect to an aggregate
number of shares of NetStar Common Stock which (assuming perfection of
the dissenters' appraisal rights of such stockholders) would prevent
Ascend from accounting for the Merger as a pooling of interests.

In the event of any termination of the Merger Agreement by either Ascend or
NetStar as provided above, there will be no liability or obligation on the
part of Ascend, NetStar, Sub or their respective officers, directors,
stockholders or affiliates, except to the extent that such termination results
from the wilful breach by a party of any of its representations, warranties,
covenants or agreements set forth in the Merger Agreement, provided that the
provisions described below relating to the payment of fees and expenses shall
survive any such termination.

Except as described below, whether or not the Merger is consummated, all
fees, costs and expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby shall be paid by the party incurring
such expenses, except that all fees and expenses, other than attorneys' fees,
incurred in connection with the printing and filing of this Proxy
Statement/Prospectus shall be shared equally by Ascend and NetStar.

NetStar is required to pay Ascend up to $750,000 as reimbursement for
expenses of Ascend actually incurred relating to the transactions contemplated
by the Merger Agreement prior to termination (including fees and expenses of
Ascend's counsel, accountants and financial advisor, but excluding any
discretionary fees paid to such financial advisor), upon the earliest to occur
of the following events: (i) the termination of the Merger Agreement by Ascend
under the circumstances described in paragraph (d) above as a result of the
failure to receive the requisite vote for approval of the Merger Agreement and
the Merger by the stockholders of NetStar at the NetStar Special Meeting; or
(ii) the termination of the Merger Agreement by Ascend under the circumstances
described in paragraph (e) above.

NetStar is required to pay Ascend a termination fee of $10,000,000 upon the
earliest to occur of the following events: (i) the termination of the Merger
Agreement by Ascend under the circumstances described in paragraph (e) above;
or (ii) the termination of the Merger Agreement by Ascend under the
circumstances described in paragraph (d) above as a result of the failure to
receive the requisite vote for approval of the Merger Agreement by the
stockholders of NetStar at the Special Meeting if, at the time of such
failure, there shall have been announced an Alternative Transaction which
shall not have been absolutely and unconditionally withdrawn and abandoned; or
(iii) the termination of the Merger Agreement by Ascend under the
circumstances described in paragraph (f) above after a willful and material
breach of the Merger Agreement by NetStar.

Ascend is required to pay NetStar a termination fee of $10,000,000 upon the
termination of the Merger Agreement by NetStar under the circumstances
described in paragraph (f) above after a willful and material breach of the
Merger Agreement by Ascend.

Any expenses and fees payable as described above are required to be paid
within one business day after the first to occur of the relevant termination
events. In no event shall NetStar or Ascend be required to pay such expenses
or fees as provided for above, if, immediately prior to the termination of the
Merger Agreement, the party to receive such expenses or fees was in breach of
any of its material obligations under the Merger Agreement.

AMENDMENT AND WAIVER

The Merger Agreement may be amended at any time by action taken or
authorized by the respective Boards of Directors of Ascend and NetStar, but
after approval by the stockholders of NetStar of the matters presented in
connection with the Merger to them, no amendment shall be made which by law
requires further approval by such stockholders, without such further approval.
Ascend and NetStar, by action taken or authorized by their respective Boards
of Directors, may extend the time for performance of the obligations or other
acts of the other parties to the Merger Agreement, may waive inaccuracies in
the representations or warranties contained in the Merger Agreement and may
waive compliance with any agreements or conditions contained in the Merger
Agreement.

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INFORMATION CONCERNING ASCEND

The following Business section contains forward-looking statements which
involve risks and uncertainties. Ascend's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of a variety of factors, including those factors set forth under "Risk
Factors" and elsewhere in this Proxy Statement/Prospectus.

BUSINESS

Ascend develops, manufactures, markets, sells and supports a broad range of
high-speed digital remote networking access products that enable its customers
to build: (i) Internet access systems consisting of POP termination equipment
for ISPs and remote site Internet access equipment for Internet subscribers;
(ii) extensions and enhancements to corporate backbone networks that
facilitate access to these networks by remote offices, telecommuters and
mobile computer users; and (iii) videoconferencing and multimedia access
facilities. These products are termed bandwidth on demand systems because they
establish high-speed switched digital connections whose bandwidth, duration
and destination can be adjusted to suit user application needs. These products
support existing digital and analog networks.

Ascend has three bandwidth on demand remote networking access product
families, each of which is focused on major application segments: MAX products
for WAN access to corporate backbone networks, Internet access in POPs and
multimedia access facilities; Pipeline products for telecommuting, remote
office access and Internet access by individual sites or users; and Multiband
products for videoconferencing and multimedia networks. These products support
a wide variety of application interfaces, switched digital services, digital
modem services and digital and analog access line types. This wide range of
connectivity and interoperability options significantly increases the number
of POP, corporate and individual sites that can benefit from bandwidth on
demand networking. Ascend's products are distributed and serviced globally and
Ascend maintains marketing and sales relationships with ISPs, including UUNET,
PSI, BBN, MCI, EUNET, Demon, Pipex and NTT-PC, with major telecommunications
carriers, including AT&T, Sprint, MCI, GTE, Pacific Bell, Southwestern Bell,
British Telecom, France Telecom, Deutsche Telekom and NTT in Japan, with video
equipment providers, including Compression Labs, GPT, PictureTel and VTEL, and
with VARs and distributors, including relationships, as of March 31, 1996,
with approximately 124 VARs and distributors in North America and
approximately 112 outside of North America.

INDUSTRY BACKGROUND AND MARKET

Switched Digital Services

Historically, organizations have created private digital networks using
dedicated leased digital circuits that provide fixed amounts of bandwidth
between fixed network sites. The bandwidth requirements of emerging
applications such as Internet access, remote LAN access, telecommuting and
small office/house office ("SOHO") access and videoconferencing and multimedia
access, coupled with the inflexibility of dedicated digital circuits, have
created an opportunity for network carriers to offer alternatives to dedicated
digital circuits. Over the past five years, local telephone companies and
network carriers such as AT&T, MCI, Sprint and numerous international carriers
have introduced switched digital network services that were previously
unavailable. These switched digital services allow users to establish end-to-
end digital connections on an as-needed basis, similar in concept to making a
standard telephone call. The typical data rate for these connections is 56
kilobits per second (kbit/s) or 64 kbit/s, although there is a limited
availability of 384 kbit/s and 1536 kbit/s service as well.

These new services are characterized by tariff structures that encourage
acceptance. In 1985, the cost of a coast-to-coast dialed 56 kbit/s connection
was over $60 per hour. Today, a coast-to-coast dialed 64 kbit/s connection
costs as little as $7 per hour, similar to the cost of a voice telephone call.
Therefore, there is strong cost incentive for users to implement these
services.

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Along with the introduction of these switched digital services is a growing
availability of cost effective digital access lines that provide access to
these services from a customer's location. Digital access lines are offered by
the local telephone companies and network carriers, and take the form of Tl
access lines (1.5 megabits per second (Mbit/s)), El access lines (2 Mbit/s),
switched 56 access lines (56 kbit/s), ISDN Basic Rate Interface (BRI) access
lines (2 to 64 kbit/s channels) and ISDN Primary Rate Interface (PRI) access
lines (23 to 64 kbit/s channels).

Applications

Coincident with the availability of attractively priced switched digital
services and digital access lines has been the emergence of a new class of
applications that have specific bandwidth requirements. These requirements
include the ability to establish a connection, transfer data and then
terminate the connection when the data transfer is complete, to establish
connections to different geographical sites on a call-by-call basis, and to
provide variable amounts of bandwidth during a call, or on a call-by-call
basis. The nature of these applications is such that switched digital and
digital modem services provide a highly effective transmission mechanism for
such data transfer needs. Three such applications include WAN and Internet
access; remote LAN and Internet subscriber access; and videoconferencing and
multimedia access.

WAN and Internet Access. The WAN and Internet access markets are driven by
the growth of switched digital services offered by telecommunications carriers
and by the growth of dial-up internetworking offered through Internet service
providers, public information network providers, private network service
providers and large corporate telecommunications centers. WAN and Internet
access requires managed, high capacity, high density termination of digital
and analog switched connections and flexible communications to the appropriate
backbone network or the Internet through LAN or WAN circuit or frame relay
connections.

Remote LAN and Internet Subscriber Access. The remote office and
telecommuting/SOHO market is driven primarily by the need for organizations to
increase the productivity of network users by extending their corporate
backbone network beyond its dedicated leased digital circuit boundaries to
remote offices, telecommuters, mobile computer users, vendors and customers.
The Internet access market is driven by the need for organizations and
individuals to have switched digital connections to Internet services such as
inter-company electronic mail, file transfers and the World Wide Web. Remote
LAN and Internet subscriber access requires managed, cost-effective
connections that can be established and terminated as needed, at sufficient
bandwidth.

Videoconferencing and Multimedia Access. Today's videoconferencing market is
driven by corporate demands for better and more efficient communications,
thereby enhancing video room system access and worker productivity. With the
emergence of the desktop video market, the demand for high performance
switched connectivity allowing intra-company as well as inter-company video
access equipment has grown. The multimedia market is driven by an array of
emerging multimedia access applications which include multimedia banking,
telemedicine and distance learning.

The emergence of attractively priced switched digital services and digital
access lines and the digital network LAN access equipment opportunities
presented by applications such as WAN and Internet access, remote and Internet
subscriber access and videoconferencing and multimedia access have led
customers to demand a new class of access equipment. This bandwidth on demand
access equipment must provide applications with variable bandwidth having the
reliability and performance capability of dedicated leased digital circuits
and the flexibility of switched digital services and digital modem services.

In addition, this equipment must contain sophisticated bandwidth management
technology to address the significant connectivity challenges posed by the
large variety of switched services and digital access lines, each with their
own set of protocols, and the different applications and application
interfaces. Furthermore, this equipment must frequently be able to establish
connections with bandwidth capacity exceeding the bandwidth capacity offered
by individual switched digital circuits.

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THE ASCEND SOLUTION

Ascend provides customer premise bandwidth on demand access systems for POP,
corporate and individual user sites that enable users to design remote
networking solutions that are unique to their specific needs using switched
digital services as well as dedicated leased digital services and which
satisfy user needs for secure connections and network management. Ascend's
bandwidth on demand access systems establish high-speed, transparent digital
connections whose bandwidth, duration and destination can be adjusted to suit
user application needs.

Ascend's remote LAN and Internet subscriber access products and WAN and
Internet access products integrate digital modem technology in addition to
switched digital technology allowing dynamic selection of analog or digital
dial-up services and a seamless transition and integration of digital and
analog services within a corporation or an ISP's communications center.

These products utilize inverse multiplexing, a fundamental enabling
technology that aggregates multiple independent switched digital connections
to create a single, high-bandwidth end-to-end connection, providing higher
bandwidth for an application than is available from individual switched
digital circuits. In addition, inverse multiplexing expands or contracts the
bandwidth of a connection by adding or removing individual switched digital
circuits from the connection without terminating the entire connection. This
allows dynamic bandwidth allocation, or Rubber Bandwidth, which adjusts a
connection's bandwidth to match varying application requirements. Ascend
pioneered and is a leader in inverse multiplexing.

Ascend's bandwidth on demand product families incorporate scalable, modular
software and hardware architectures that facilitate rapid, flexible customer
deployments. This scalability and modularity also allow Ascend to rapidly
develop new products and additional features. Hardware platforms range from
lower cost systems using general purpose microprocessors to high-performance
scalable systems with state-of-the-art RISC-based processors. All products
share common core technology software that can be configured into a wide
variety of bandwidth on demand systems to suit customers' specific needs for
capacity, functionality and cost effectiveness.

ASCEND STRATEGY

Ascend's objective is to maintain a leadership position in the market for
bandwidth on demand digital remote networking access systems using the
following strategies:

Focus on Targeted Applications Markets

Ascend's first product family, the Multiband family, was introduced in
February 1991. By focusing on videoconferencing and working closely with
telecommunications carriers such as AT&T, MCI and Sprint, Ascend became a
market leader in bandwidth on demand videoconferencing access. Building on
this success and on the existing Multiband technology, Ascend introduced the
MAX product family in late 1992. The MAX family of products supports WAN,
Internet and multimedia access applications, and has been widely deployed by
ISPs, particularly in recent periods. In 1994, 1995 and the three months ended
March 31, 1996, the MAX product family accounted for approximately 26%, 63%
and 72% of Ascend's net sales, respectively. In late 1993, to address the
expanding remote LAN and Internet access market, Ascend leveraged the
technology incorporated in its MAX and Multiband product families and
introduced a third product family, the Pipeline family of products. In 1994,
1995 and the three months ended March 31, 1996, the Pipeline product family
accounted for approximately 10%, 20% and 19% of Ascend's net sales,
respectively.

Ascend will continue to monitor future trends and evolving applications, and
intends to enhance and expand its range of product offerings to suit the
particular digital network access requirements of significant new applications
markets.

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Leverage Switched Digital Services

Ascend's products take advantage of the flexible destination and duration
attributes of switched digital services and the favorable tariffs for those
services. Ascend intends to continue to enhance and expand its family of
products to exploit the range of circuit, packet and cell-based services
offered by telecommunications carriers. Ascend, as a bandwidth on demand
access equipment provider, currently provides circuit-based services through
switched digital and digital modem support, cellular telephony services,
packet-based services through frame relay and X.25 support and, in the future,
intends to develop cell-based support through Asynchronous Transmission Mode
(ATM) switching technology.

Provide "Any to Any" Connectivity

Ascend believes that its products must support and enable interoperability
of available application cabling interfaces (such as high-speed serial ports,
10 Base-T using unshielded twisted pair wiring, Ethernet and ISDN), digital
access lines (such as T1, E1, Switched 56, ISDN BRI and ISDN PRI), digital
services (such as Switched 56, Switched 64, Switched 384, Switched 1536,
Switched Multirate and GloBanD) and modem services (V.32, V.32bis, and V.34
modem standards) required for its targeted applications markets. Also, Ascend
believes its products must support these requirements both domestically and
internationally to accommodate the needs of multinational end-user customers.
Ascend intends to support additional application cabling interfaces, digital
access lines and digital service offerings as and when such offerings become
significant in terms of satisfying the needs of end-user customers in the
targeted applications markets.

Leverage Strategic Distribution and Marketing Relationships

Since its inception in 1989, Ascend has developed close relationships with
important VARs, distributors, ISPs, telecommunications carriers and
applications equipment manufacturers around the world to support marketing and
sales activities in each of its targeted applications markets. Ascend
leverages the capabilities, resources, expertise and market presence of these
strategic partners to bring Ascend's products to market rapidly and to respond
to developments in these markets. Ascend intends to develop similar strategic
relationships with additional partners in the future to obtain comparable
benefits.

Focus on Global Markets and Applications

Organizations around the world utilize the applications targeted by Ascend's
products, often across national borders. The high cost of international
dedicated digital circuits has motivated organizations to explore the use of
international switched digital services. Ascend's products must support
digital services available in the major industrial countries throughout the
world and enable interoperability of these services. Ascend's products allow
end-users to realize flexibility in terms of connectivity and potential
economic benefit in terms of reduced carrier service fees. Ascend currently
markets and sells its products outside of North America in Europe and Asia and
the Pacific basin. Ascend intends to support digital services in additional
countries as those services become available.

Exploit Flexible Product Architecture For Rapid Time to Market

All of Ascend's products share the same bandwidth on demand software. This
core software is designed to be extensible to accommodate new applications,
cabling interfaces, digital access lines and carrier digital services. The
software currently operates on three different families of microprocessors,
from relatively low-cost processors, such as the Intel 80C18 and Motorola's
68xxx, to state-of-the-art RISC-based processors, such as the Intel i960, and
is designed to be ported to other microprocessors in the future. In addition,
Ascend has designed its hardware architecture in a modular fashion so that it
can use elements of this architecture in future products. This flexibility,
portability and modularity are intended to facilitate a relatively short
product design and development cycle and to enable Ascend to address new
applications markets and support new network services offered by
telecommunications carriers in a relatively short period of time.

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PRODUCTS

Ascend has developed three product families based on a common software-based
architecture intended to permit its products to: (i) connect to the major
types of digital access lines; (ii) connect to widely available dedicated line
services, switched digital services and modem services; (iii) connect to
access lines and telecommunications services worldwide; (iv) provide support
for different types of applications and application interfaces; and (v)
accommodate network growth and application expansion in a scalable fashion. In
addition, in June 1996, Ascend introduced a line of dynamic firewall
protection software products.

Ascend's products also support local and remote management of the access
equipment, the digital access line interface and the application interface.
Ascend products can be managed from a central location using either Ascend's
proprietary remote management protocols or standards-based Simple Network
Management Protocol (SNMP).

MAX

Ascend introduced its first MAX products in late 1992. Sales of MAX products
accounted for approximately 26%, 63% and 72% of Ascend's net sales in 1994,
1995 and the three months ended March 31, 1996, respectively. The MAX family
of integrated access servers provides bandwidth on demand for WAN, Internet
and multimedia access over a common set of digital access lines. The MAX is a
modular card and backplane system that allows users to configure each unit
according to application and bandwidth requirements. It supports up to 8
Mbit/s of bandwidth to the WAN. The MAX can be configured with Ethernet cards
and digital modem cards to act as a central site remote LAN access server,
allowing up to 96 simultaneous remote users to dial into the corporate
backbone network or ISP network. The MAX can also be configured with inverse
multiplexing cards, providing up to 38 high-speed inverse multiplexing ports
for central site videoconferencing, dedicated circuit backup and disaster
recovery, dedicated circuit overflow and load balancing, high speed bulk file
transfer, high quality audio transmission and other applications.

The MAX product family is capable of combining all of the features of the
Multiband and Pipeline product families as well as the following features that
facilitate integrated access:

. High density digital modem support (72 digital modems in a single MAX).
Digital modems allow remote analog modem users to dial into digital
access lines (ISDN PRI or T1) connected to the MAX.

. Frame relay connectivity via either a high speed (up to 8Mbps)
synchronous serial connection to a local frame relay switch or
integrated Tl CSU/DSU access to a remote switch.

. Rubber Bandwidth dynamic bandwidth allocation algorithms and patented
hardware to support automatic dedicated circuit overflow.

. Translation of traditional Tl signaling to out-of-band ISDN signaling
for support of voice services offered through a PBX.

. Support of network access from multiple diverse network carriers to
support automatic backup of network access lines and services.

. Heterogeneous network access providing T1, ISDN PRI, ISDN BRI and Frame
Relay concurrently in the same device to optimize bandwidth utilization
and cost (low-bandwidth, low-cost ISDN BRI access lines may be used as
backup for a T1 access line).

. ISDN BRI interfaces to provide ISDN to the desktop for desktop
videoconferencing.

. Security protocols such as Challenge Handshake Authentication Protocol
(CHAP), Password Authentication Protocol (PAP), TACACS+, Radius and UNIX
syslog. The security protocols are crucial to ensure the integrity of
the backbone network.

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. Support of additional security capabilities, including call-back, packet
filtering, caller line ID, token-based security and dynamic firewall
technology.

Ascend has obtained certification for MAX products in approximately 24
countries and has applied for certification in several other countries. MAX
units generally range in list price from $2,400 to $20,000, with units fully
configured with digital modems ranging up to approximately $56,000.

Pipeline

Ascend introduced its first Pipeline products in late 1993. Sales of
Pipeline products accounted for approximately 10%, 20% and 19% of Ascend's net
sales in 1994, 1995 and the three months ended March 31, 1996, respectively.
The Pipeline product family provides access equipment for remote office,
telecommuting and SOHO, and Internet access. Pipeline products incorporate
standards-based LAN routing and bridging protocols transmitted over switched
digital services and include inverse multiplexing functionality to allow users
to obtain higher data rates than are available from individual digital access
lines and switched digital circuits.

Pipeline products support the major types of digital access lines and
provide interoperability between different access line types. Certain of the
key Pipeline features enabling remote LAN access include:

. Security protocols such as CHAP, PAP, TACACS+, Radius and UNIX syslog.
The security protocols are crucial to ensure the integrity of the
backbone network.

. Support of additional security capabilities including call-back, packet
filtering, caller line ID, token-based security and dynamic firewall
technology.

. Packet-level inverse multiplexing for greater performance than can be
obtained over single channel connections.

. Support for key encapsulation protocols including PPP, MP (Multilink
PPP) and Ascend's and other companies' proprietary encapsulation
protocols.

. Support for data compression over wide area networks for improved
performance.

. Support of protocol spoofing to minimize connect-time costs over the
wide area network and to maximize remote site performance.

. Call Detail Recording (CDR) for billing and monitoring purposes.

. Filter-based call establishment and termination to ensure that
connections are active only for the duration required for the
application.

. Telnet, SNMP and syslog network management capabilities.

Members of the Pipeline product family include the low-end Pipeline 25, the
mid-range Pipeline 50 and Pipeline 75, and the Pipeline 130, which may be used
for high-end remote LAN access or as a small central site WAN access device.
In 1996, Ascend began volume shipments of the Pipeline 130 and the Pipeline
75. The Pipeline 75 is targeted at the remote access market and has analog and
digital capabilities. The Pipeline products yield lower gross margins than
Ascend's other products. Ascend has obtained certification for Pipeline
products in approximately 24 countries and has applied for certification in
several other countries. Pipeline units generally range in list price from
$600 to $2,000.

Multiband

Ascend introduced its first Multiband products in February 1991 and
introduced a cost-reduced product, the Multiband Plus, in May 1992. In 1995,
Ascend introduced the Multiband VSX, a less expensive, reduced

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<PAGE>

functionality version of its Multiband Plus product. Sales of Multiband
products accounted for approximately 58%, 15% and 8% of Ascend's net sales in
1994, 1995 and the three months ended March 31, 1996, respectively. The
Multiband family is focused primarily on videoconferencing and multimedia
applications. This family of bandwidth on demand controllers provides global
bandwidth on demand at speeds from 56 kbit/s to 4 Mbit/s using switched
digital services.

The Multiband Plus product supports four simultaneous high-speed digital
connections, connecting to applications using serial ports. The product
incorporates inverse multiplexing, dynamic bandwidth allocation, global
connectivity and comprehensive management capabilities to allow users to
create bandwidth on demand network solutions primarily for videoconferencing
and multimedia applications. Multiband Remote Port Modules (RPM) facilitate
bandwidth distribution within a facility by extending serial data ports from
Multiband products over unshielded twisted pair wiring to applications
throughout a facility for distances up to 3,400 feet.

Certain of the key Multiband features enabling videoconferencing access
include:

. Inverse multiplexing.

. Support for all major inverse multiplexing standards, including BONDING.

. Remote management capability on all models.

. Integrated SNMP management with direct Ethernet access.

. Support for all major videoconferencing dialing protocols, such as RS-
366, extended Switched Digital Services Applications Forum (SDSAF), V.25
bis and X.21 for international compatibility.

. Support for dual paired ports to interoperate with the installed base of
videoconferencing systems that do not support inverse multiplexing.

. Compatibility with the major brands of videoconferencing equipment.

. Billing caps to ensure that user-set limits are not exceeded for
individual or total monthly call costs.

Ascend has obtained country certifications for Multiband Plus products in
approximately 24 countries and has applied for certification in several other
countries. Multiband VSX units generally range in list price from $1,500 to
$9,000. Multiband Plus units generally range in list price from $7,000 to
$10,000.

Secure Access

Ascend introduced its first Secure Access products in June 1996. The first
products made available in the Secure Access family, Secure Access Firewall
and Secure Access Manager, provide dynamic firewall protection for remote
networks and can be integrated into Ascend's MAX and Pipeline products. Secure
Access firewall technology is designed to safeguard a company's information
resources from unauthorized intrusion through the Internet or other forms of
open remote access. Security administrators can manage remote firewall agents
from a central site, eliminating the need for separate management
workstations. Ascend customers can add firewall technology security to their
MAX central site and Pipeline remote access products through a software
upgrade.

Certain of the key Secure Access features include:

. Flexible logging access and simple configuration features.

. Ability to support user-defined applications and protocols.

. Ability to detect and shut down probing attacks (e.g. SATAN).

. Ability to precisely adjust the duration and breadth of access on an
application-by-application basis.

. Advanced router-based security.

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<PAGE>

Secure Access Manager is included with Secure Access Firewall software at no
additional cost to customers. Secure Access products range in list price from
$500 to $4,000 and are available for the Pipeline 50, Pipeline 75, Pipeline
130 and all members of the MAX family of products.

TECHNOLOGY

Ascend has developed a core software architecture that is modular and
portable. This software is used in over 60 product models and runs on three
different hardware microprocessors: Intel 80C188, Intel RISC i960 and Motorola
68xxx. The key capabilities of Ascend's technology are:

Wide Area Network Protocol Software. Ascend products connect to and manage
wide area communications for a variety of digital and analog access lines and
switched and leased digital services worldwide. Each digital or analog access
line and digital service has specific connect and disconnect protocols.
Ascend's products support 36 wide area network protocols and five wide area
digital access interfaces. These protocols include 20 different ISDN call
signaling protocols worldwide.

Bandwidth Management Software. Ascend's products manage wide area network
bandwidth over a variety of digital services, digital access lines and user
applications. Ascend's products support several bandwidth on demand
technologies which allow dynamic changes in bandwidth during a communications
session, including Ascend inverse multiplexing and Rubber Bandwidth, industry
standard inverse multiplexing, such as BONDING, as well as software data
compression.

Remote LAN Access Software. Ascend's products incorporate standards used in
remote LAN access including PPP and MP. Ascend has also developed proprietary
extensions to the standard protocols by optimizing them for remote LAN access.
Included in these is MP+, Ascend's Multipoint Point-to-Point Protocol.

Standards-Based Security. Ascend's products support many standard and
extended methods for providing security and access control for WAN access,
including CHAP, PAP, TACACS+, Radius and UNIX syslog.

Application Specific Software. Ascend's products support a wide variety of
application equipment, such as videoconferencing equipment, routers, T1
multiplexers and PBXs, and a wide variety of application cabling, such as
serial ports and unshielded twisted pair wiring. Ascend's Multiband product
family implements the videoconferencing protocol RS-366 and is compatible with
videoconferencing equipment manufactured by Compression Labs, PictureTel,
VTEL, British Telecom, GPT and others. In addition, Ascend's products support
network management, remote diagnostics and a wide variety of advanced security
protocols.

MARKETING AND SALES

Ascend's marketing and sales objective is to ensure that subscribers to
digital network services, including ISDN, and users of applications equipment
requiring such services are aware of the capabilities and benefits of Ascend's
products. To accomplish this objective, Ascend has developed and maintains
marketing and sales relationships with VARs, distributors, ISPs, major
telecommunications carriers and applications equipment manufacturers who, in
turn, market and sell Ascend's products to end-user customers. Ascend's sales
force also sells products directly to certain end-user customers.

The primary role of Ascend's sales force is to: (i) provide support to the
VARs, distributors, ISPs, telecommunications carriers and applications
equipment manufacturers; (ii) assist ISPs and end-user customers in addressing
complex network and Internet access problems; (iii) differentiate the features
and capabilities of Ascend's products from competitive offerings; and (iv)
continually monitor and understand ISPs' and end-user customers' evolving
needs for network access services.

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Ascend also has several marketing programs to support the sale and
distribution of its products. The objective of these programs is to inform
VARs, distributors, ISPs, telecommunications carriers, applications equipment
manufacturers and end-user customers about the capabilities and benefits
available with the use of Ascend's bandwidth on demand network access
equipment. The programs include participation in industry trade shows and
technical conferences, design and presentation of technology seminars,
publication of customer newsletters and technical and educational articles for
the trade press and other industry journals and frequent communications with
the installed base of end-user customers regarding evolving applications for
Ascend's products.

Internet Service Providers

Ascend's MAX and Pipeline products are sold through its direct, VAR and
distributor channels to ISPs. Ascend has relationships with many major ISPs
worldwide, including UUNET, PSI, BBN, MCI, EUNET, Demon, Pipex and NTT-PC.
Also, UUNET, which first commenced volume purchases of Ascend's products in
1995, accounted for 11% and 13% of Ascend's net sales in 1995 and the three
months ended March 31, 1996, respectively.

Value-Added Resellers and Distributors

As of March 31, 1996, Ascend had entered into non-exclusive agreements with
124 VARs and distributors in North America whereby these parties have been
granted non-exclusive rights to sell and service Ascend's products. The terms
of the agreements generally are for periods not in excess of twelve months,
subject to annual renewals and earlier termination by either party with prior
notice. VARs and distributors are entitled to periodically return unsold
inventory to Ascend. Returns are subject to a maximum limit and may be subject
to a minimum restocking requirement. To date, such inventory returns have not
been material. Of the 124 VARs and distributors, 10 are authorized to market
Ascend's products for video applications only, 95 are authorized to market
Ascend's products for data applications only and 19 are authorized to market
Ascend's products for video and data applications. In addition, Ascend has
entered into agreements with certain distributors who sell its products to
VARs of Ascend.

Telecommunications Carriers

Ascend's products are sold and serviced by major telecommunications carriers
around the world, including AT&T, Sprint, MCI, GTE, Pacific Bell, Southwestern
Bell, British Telecom, France Telecom, Deutsche Telekom and NTT in Japan.
Except for sales to AT&T, sales to telecommunications carriers are made on
open account and are subject to Ascend's standard terms and conditions of
sale. Under its agreement with AT&T, Ascend provides its Multiband, MAX and
Pipeline products for resale by AT&T under the AT&T label. AT&T may, at any
time, cancel orders for product delivery which it has placed with Ascend,
subject to the payment of specified minimum amounts. AT&T, which became a VAR
in 1992, accounted for approximately 18%, 15%, 5% and 1% of net sales in 1993,
1994, 1995 and the three months ended March 31, 1996, respectively. Certain of
the telecommunications carriers are entitled to periodically exchange unsold
inventory for other products offered by Ascend, subject to a maximum exchange
limit and subject to a minimum restocking requirement for returned inventory.
To date, such inventory exchanges have not been material.

Applications Equipment Manufacturers

Ascend's products are also sold and serviced by applications equipment
manufacturers, and integrators of videoconferencing equipment, including
Compression Labs, PictureTel, GPT and VTEL, under agreements which authorize
these companies to resell Ascend's products using Ascend's identification
label. The applications equipment manufacturers are not obligated to purchase
minimum volumes of product and they may cancel orders placed with Ascend at
any time prior to scheduled payment.

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<PAGE>

North American Sales, Customer Service and Marketing Organization

As of March 31, 1996, Ascend's North America sales, customer service and
marketing organization included 185 individuals, including managers, sales
representatives, and technical and administrative support personnel. Ascend
has 22 sales offices located in the following metropolitan areas: Atlanta,
Boston, Chicago, Cleveland, Dallas, Denver, Durham, Kansas City, Los Angeles,
New York, Palo Alto, San Francisco, Seattle, St. Louis, Tampa, Toronto and
Washington D.C. Ascend intends to continue to recruit highly trained
individuals for its North America sales organization.

International Sales

Ascend's international sales have been principally export sales and
currently are made through approximately 140 telecommunications carriers,
Internet service providers, VARs and distributors servicing approximately 30
countries, including the United Kingdom, Germany, France, Belgium, Japan, Hong
Kong, Singapore and Australia. The carriers, VARs and distributors generally
provide system installation, technical assistance and support to end-user
customers within their area of responsibility. Generally, international
telecommunications carriers, VARs and distributors have non-exclusive rights
to sell and market Ascend's products within their respective countries.

As of March 31, 1996, Ascend's international sales organization included 44
individuals, including managers, sales representatives and technical and
administrative support personnel. Ascend has sales offices in the United
Kingdom, Germany, France, Belgium, Japan, Hong Kong, Singapore and Australia.

International sales accounted for approximately 15%, 20%, 29%, and 42% of
net sales in 1993, 1994 and 1995 and the three months ended March 31, 1996,
respectively. See Note 1 of Notes to Consolidated Financial Statements.
International sales are made in United States dollars and are subject to
government controls and other risks associated with international business
activities. To date, Ascend has not experienced any material difficulties or
interruptions with respect to its international business activities.

TECHNICAL ASSISTANCE AND SUPPORT

A high level of continuing technical assistance and support is important to
Ascend's objective of developing long-term relationships with customers. The
majority of these technical assistance and support activities are related to
installations and network configuration issues and are primarily provided by
third parties distributing Ascend's products. Ascend supports its customers
and sales personnel by providing telephone support and remote access to
customer installations through Ascend's Technical Assistance Center in
Alameda, California. Remote access is accomplished either through a digital
dial-up network connection directly to a customer's installation or through a
modem connection to the control port of the customer's system. The connection
allows Company representatives to remotely analyze and correct software,
installation and configuration problems. Ascend also offers on-site
installation and technical assistance for fixed fees, which to date have not
been material.

Ascend's products have warranties of up to 12 months from the date of
shipment, although in certain cases products sold in foreign countries are
warranted for up to 15 months from the date of shipment. Ascend has a variety
of comprehensive and flexible hardware and software maintenance and support
programs available for products no longer under warranty, with services
ranging from time and materials and remote service support to 24-hour on-site
support, depending on the end-user customer's preference. Ascend also offers
various training courses for its third party resellers and end-user customers.
To date, revenues attributable to customer service, support and training
services have not been material.

RESEARCH AND DEVELOPMENT

Ascend believes that its future success depends in part on its ability to
continue to enhance its existing products and to develop new products that
maintain technological competitiveness. Ascend also believes its

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<PAGE>

product development activities should be directed to solving the practical
needs of its customers. Ascend monitors changing customer needs and works
closely with users of bandwidth on demand network access products, including
ISPs, telecommunications carriers, applications equipment manufacturers, VARs
and distributors, end-user customers and market research organizations to
monitor changes in the marketplace. Ascend intends to remain dedicated to
industry standards and to continue to support emerging wide area networking
protocol standards and carrier services.

Ascend's software and hardware architecture is modular in design,
facilitating a relatively short product design and development cycle and
reducing the time to market for new products and features. Ascend has utilized
this architectural design to develop and introduce more than 60 different
product models and enhancements since the introduction of its first products
in 1991. Ascend intends to continue to utilize this architectural design to
develop and introduce additional products and enhancements in the future.

Ascend and its major customers test new products prior to their general
commercial availability. Ascend conducts both internal testing and beta
testing with select customers. To date, Ascend has not experienced any
material product returns or software or hardware errors.

Ascend is currently undertaking development efforts for each of its product
families. MAX development efforts include improving network access and network
management capabilities as well as improving price/performance. Pipeline
development efforts include digital and analog integration, support of
additional WAN protocols and cost reduction engineering. Multiband development
efforts include integration of emerging multimedia access applications which
may include multimedia banking, telemedicine and distance learning as well as
improving price/performance.

Schedules for high technology products are inherently difficult to predict,
and there can be no assurance that Ascend will achieve its scheduled first
customer shipment dates. Also, there can be no assurance that Ascend's product
development efforts will result in commercially successful products, or that
Ascend's products will not be rendered obsolete by changing technology or new
product announcements by other companies.

Ascend's research and development expenditures were $2.0 million, $3.6
million, $9.6 million and $5.5 million in 1993, 1994, 1995 and the three
months ended March 31, 1996, respectively. Research and development
expenditures are expensed as incurred. As of March 31, 1996, 72 full-time
employees were engaged in research and development. During 1995, Ascend opened
development facilities in Calabasas, California and Salt Lake City, Utah.

On September 1, 1995, Ascend completed a $3.0 million purchase of technology
and related assets associated with the DaynaLINK product family from Dayna
Communications, Inc. Costs associated with the purchase were expensed as
purchased research and development. The acquisition provides technology and
expertise that Ascend is using to enhance and expand the functionality of its
MAX family of products.

In March 1996, Ascend acquired Morning Star Technologies, Inc. ("Morning
Star"), a manufacturer of standards-based, high performance networking
products, including network routing software and advanced network security
products. The transaction was accounted for as a pooling of interests. Ascend
will operate Morning Star's former headquarters facility in Columbus, Ohio as
a development and product marketing facility.

COMPETITION

The market for bandwidth on demand network access systems is highly
competitive and subject to rapid technological change. Ascend expects
competition to persist and increase in the future. Ascend's current
competitors can be divided into three groups: manufacturers of WAN and
Internet access equipment, manufacturers of remote LAN access and Internet
subscriber access equipment, and manufacturers of bandwidth on demand products
addressing the needs of the videoconferencing and multimedia access market.

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<PAGE>

In the WAN and Internet access market, Ascend's primary competitors are
Cisco, U.S. Robotics and 3Com, each of which has substantially greater
financial, marketing and technical resources than Ascend. In the remote LAN
access and Internet subscriber access market, competition is widespread,
although few companies have positioned their products specifically as digital
bandwidth on demand network access systems. Ascend's primary competitors in
this market are Gandalf, Cisco, Shiva and 3Com. In the videoconferencing and
multimedia access market, competitors include Madge Networks, Adtran and
Promptus Communications (a subsidiary of GTI).

Competitive factors in the bandwidth on demand network access market include
core technology, breadth of product features, scalability of products, product
quality and functionality, pricing, marketing and distribution resources,
international certifications and technical service and support. Ascend
believes it presently competes favorably with respect to each of these factors
and is positioned to respond to anticipated competitive actions.

Ascend expects additional competition from existing competitors and from a
number of companies that may enter Ascend's existing and future markets. The
additional competition could adversely affect Ascend's business, results of
operations and financial condition. Some of Ascend's current and potential
competitors have substantially greater financial, marketing and technical
resources than Ascend.

MANUFACTURING AND QUALITY

Ascend has received the International Standard Organization (ISO) 9001
certification for quality. Ascend's manufacturing operations consist primarily
of materials planning and procurement, final assembly, burn-in, final system
testing and quality control. Ascend designs all of the hardware subassemblies
for its products and uses the services of contract manufacturers to build
these subassemblies and certain of its products to Ascend's specifications.
Ascend presently uses a variety of independent third party contract assembly
companies to perform printed circuit board assembly and in-circuit testing.
Ascend installs its proprietary software into the electronically erasable
programmable read only memory (EEPROM) of its systems in order to configure
products to meet customer needs and to maintain quality control and system
security. The manufacturing process enables Ascend to configure the hardware
and software in combinations to meet a wide variety of individual customer
requirements. Ascend uses automated testing equipment and burn-in procedures,
as well as comprehensive inspection, testing and statistical process control
testing by technicians, to assure the quality and reliability of its products.
To date, Ascend has not experienced significant product defects or customer
returns of products.

Although Ascend generally uses standard parts and components for its
products, certain components, including certain key microprocessors and
integrated circuits, are presently available only from a single source or from
limited sources. Ascend has no supply commitments from its vendors and
generally purchases components on a purchase order basis as opposed to
entering into long term procurement agreements with vendors. Ascend has
generally been able to obtain adequate supplies of components in a timely
manner from current vendors or, when necessary to meet production needs, from
alternate vendors. Ascend believes that, in most cases, alternate vendors can
be identified if current vendors are unable to fulfill needs. However, delays
or failure to identify alternate vendors, if required, or a reduction or
interruption in supply or a significant increase in the price of components
could adversely affect Ascend's financial results and could impact customer
relations.

Ascend increased its manufacturing capacity in 1993, 1994, 1995 and the
first three months of 1996 by adding additional facilities and personnel and
will continue to increase its manufacturing capacity as needed. As of March
31, 1996, 62 full-time employees were engaged in manufacturing operations.
Ascend's financial results could be adversely affected if it encounters delays
or for any other reason does not expand manufacturing capacity as required.

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PROPRIETARY RIGHTS

Ascend's success and ability to compete is dependent in part upon its
proprietary technology, although Ascend believes that its success is more
dependent upon its technical expertise than its proprietary rights. Ascend
relies on a combination of patent, copyright and trade secret laws and non-
disclosure agreements to protect its proprietary technology. Ascend generally
enters into confidentiality or license agreements with its employees,
distributors, customers and potential customers and limits access to the
distribution of its software, documentation and other proprietary information.
There can be no assurance that the steps taken by Ascend in this regard will
be adequate to prevent misappropriation of its technology or that Ascend's
competitors will not independently develop technologies that are substantially
equivalent or superior to Ascend's technology. In addition, the laws of some
foreign countries do not protect Ascend's proprietary rights to the same
extent as do the laws of the United States. Ascend is also subject to the risk
of adverse claims and litigation alleging infringement of the intellectual
property rights of others. From time to time Ascend has received claims of
infringement of other parties' proprietary rights. There can be no assurance
that third parties will not assert infringement claims in the future with
respect to Ascend's current or future products or that any such claims will
not require Ascend to enter into license arrangements or result in protracted
and costly litigation, regardless of the merits of such claims. No assurance
can be given that any necessary licenses will be available or that, if
available, such licenses can be obtained on commercially reasonable terms.

EMPLOYEES

As of March 31, 1996, Ascend employed 416 persons, including 229 in sales
and marketing, 62 in manufacturing, 72 in engineering and 53 in finance and
administration. Of these, 38 were employed outside of North America. None of
Ascend's employees is represented by a labor union. Ascend has experienced no
work stoppages and believes its relationship with its employees is good.

Competition for qualified personnel in Ascend's industry is intense. Ascend
believes that its future success will depend in part on its continued ability
to hire, assimilate and retain qualified personnel.

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and the notes thereto
incorporated by reference herein. The consolidated statement of operations
data set forth below with respect to the years ended December 31, 1995, 1994
and 1993 and the consolidated balance sheet data as of December 31, 1995 and
1994 are derived from, and are qualified by reference to, the audited
consolidated financial statements of Ascend incorporated herein by reference
and should be read in conjunction with those financial statements and the
notes thereto. The consolidated balance sheet data as of December 31, 1993 and
March 31, 1995 are derived from Ascend's audited and unaudited consolidated
financial statements, respectively, not incorporated by reference or included
herein. The consolidated statement of operations data set forth below with
respect to each of the three month periods ended March 31, 1996 and 1995 and
the consolidated balance sheet as of March 31, 1996 are derived from, and are
qualified by reference to, the unaudited consolidated financial statements of
Ascend incorporated by reference herein and should be read in conjunction with
those financial statements and notes thereto. The unaudited financial
statements include all normal recurring adjustments that Ascend considers
necessary for a fair presentation of its financial position and results of
operations. The results of operations for the three months ended March 31,
1996 are not necessarily indicative of results to be expected for any future
period.

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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1995 1994 1993
--------- ----------------- ------- -------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net sales......................... $91,078 $ 20,363 $149,590 $39,343 $16,215
Cost of sales..................... 31,848 6,999 51,170 13,205 5,587
--------- -------- -------- ------- -------
Gross profit..................... 59,230 13,364 98,420 26,138 10,628
Operating expenses:
Research and development......... 5,495 1,890 9,609 3,595 1,983
Sales and marketing.............. 19,549 4,609 33,910 10,477 5,492
General and administrative....... 2,956 1,683 8,044 3,053 1,856
Purchased research and
development...................... -- -- 3,032 -- --
--------- -------- -------- ------- -------
Total operating expenses........ 28,000 8,182 54,595 17,125 9,331
--------- -------- -------- ------- -------
Operating income.................. 31,230 5,182 43,825 9,013 1,297
Interest income, net.............. 2,557 403 5,493 892 52
--------- -------- -------- ------- -------
Income before income taxes........ 33,787 5,585 49,318 9,905 1,349
Provision for income taxes........ 12,839 2,120 18,745 1,206 --
--------- -------- -------- ------- -------
Net income........................ $20,948 $ 3,465 $ 30,573 $ 8,699 $ 1,349
========= ======== ======== ======= =======
Net income per share.............. $0.17 $0.04 $0.28 $0.09 $0.02
========= ======== ======== ======= =======
Number of shares used in per share
calculation....................... 121,675 101,176 108,976 92,800 82,152
========= ======== ======== ======= =======
<CAPTION>
MARCH 31, DECEMBER 31,
-------------------------------------------
1996 1995 1995 1994 1993
--------- ----------------- ------- -------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................... $ 254,406 $ 45,238 $235,221 $41,249 $ 8,486
Total assets...................... 388,482 64,293 335,450 53,272 12,392
Total stockholders' equity........ 327,951 48,683 296,130 43,655 9,560
</TABLE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. Ascend's actual results could differ materially from
those anticipated in these forward-looking statements as a result of a variety
of factors, including the factors described below under the subheading
"Factors that may Affect Future Results" and the additional factors set forth
under "Risk Factors" and elsewhere in this Proxy Statement/Prospectus.

OVERVIEW

Ascend develops, manufactures, markets, sells and supports a broad range of
high-speed digital remote networking access products that enable its customers
to build: (i) Internet access systems consisting of POP termination equipment
for ISPs and remote site Internet access equipment for Internet subscribers;
(ii) extensions and enhancements to corporate backbone networks that
facilitate access to these networks by remote offices, telecommuters and
mobile computer users; and (iii) videoconferencing and multimedia access
facilities. These products are termed bandwidth on demand products because
they establish high-speed switched digital connections whose bandwidth,
duration and destination can be adjusted to suit user application needs. These
products support existing digital and analog networks. Net sales have
increased due to the market acceptance of

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MAX and Pipeline products and continuing acceptance of the Multiband product
family, and due to the expansion of the Company's domestic and international
distribution network.

RESULTS OF OPERATIONS

The following table sets forth for the periods indicated the percentage of
net sales represented by certain line items from Ascend's consolidated
statements of income:
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
--------------- ----------------
1996 1995 1995 1994 1993
------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net sales................................ 100% 100% 100% 100% 100%
Cost of sales............................ 35 34 34 34 35
------ ------ --- --- ---
Gross profit............................ 65 66 66 66 65
Operating expenses:
Research and development................ 6 9 6 9 12
Sales and marketing..................... 22 23 23 26 34
General and administrative.............. 3 8 5 8 11
Purchased research and development...... -- -- 2 -- --
------ ------ --- --- ---

Total operating expenses............... 31 40 36 43 57
------ ------ --- --- ---
Operating income......................... 34 26 30 23 8
Interest income, net..................... 3 2 3 2 --
------ ------ --- --- ---
Income before income taxes............... 37 28 33 25 8
Provision for income taxes............... 14 11 13 3 --
------ ------ --- --- ---
Net income............................... 23% 17% 20% 22% 8%
====== ====== === === ===
</TABLE>

Three Months Ended March 31, 1996 Compared With the Three Months Ended March
31, 1995.

Net Sales. Net sales for the first quarter ended March 31, 1996 were $91.1
million, an increase of 347% over net sales of $20.4 million for the first
quarter of 1995. The increase in net sales was primarily due to an increase in
unit shipments of the MAX and Pipeline products and an increase in
international sales. The increase in unit shipments of the MAX family of
products was primarily attributable to the growth in business from ISPs and
increased demand for corporate remote networking applications. For the first
quarter ended March 31, 1996, MAX products accounted for approximately 72% of
net sales compared to approximately 49% of net sales in the first quarter of
1995. Net sales of the Pipeline family of products declined to approximately
19% of net sales in the first quarter of 1996 compared to 22% of net sales in
the first quarter of 1995 but increased in absolute dollars for the same
period. Net sales of Ascend's Multiband products accounted for 8% of net sales
for the first quarter of 1996 compared to 27% for the first quarter of 1995.
The decrease in Multiband net sales as a percentage of total net sales was
primarily due to the rapid increase in sale of Ascend's MAX and Pipeline
products. UUNET, an ISP, accounted for approximately 13% of net sales for the
first quarter of 1996 compared to approximately 12% of net sales for the first
quarter of 1995. International sales accounted for 42% of net sales for the
first quarter of 1996 as compared to 22% of net sales for the first quarter of
1995. This increase was primarily due to the increased sales of Ascend's
products in Asia and the Pacific Basin.

Gross Margin. Gross margin was 65% for the first quarter of 1996, compared
to 66% in the first quarter of 1995. This decrease in gross margin is
primarily attributable to increased shipments of the Pipeline family of
products, which have a lower gross margin than the MAX and Multiband product
families.

Research and Development. Research and development expenses increased 190%
from $1.9 million in the first quarter of 1995 to $5.5 million in the first
quarter of 1996. This increase was primarily due to the addition of
engineering personnel, payments for consulting services in connection with
developing and enhancing

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Ascend's existing and new products, and payments for consulting services
related to filing applications and product testing required to obtain
governmental approvals to resell Ascend's products outside of North America.
Research and development expenses decreased as a percent of net sales from 9%
in the first quarter of 1995 to 6% in the first quarter of 1996. The decrease
was due to increased net sales.

Sales and Marketing. Sales and marketing expenses increased 324% from $4.6
million in the first quarter of 1995 to $19.5 million in the first quarter of
1996. The increase in expenses was primarily due to the addition of sales,
marketing and technical support personnel, increased commissions, marketing
materials and trade shows, expenditures for demonstration and loaner equipment
used by customers and expenses associated with opening additional sales
offices in North America, Europe, Asia and the Pacific Basin. The growth in
sales, marketing and technical support personnel was primarily due to the need
to manage the activities of an increased number of VARs, end-user customers
and new products. Sales and marketing expenses as a percent of net sales
decreased to 22% from 23% when compared to the same quarter of 1995. The
decrease in sales and marketing expenses as a percentage of net sales was due
to increased net sales.

General and Administrative. General and administrative expenses increased
76% from $1.7 million in the first quarter of 1995 to $2.9 million in the
first quarter of 1995. These increases were primarily due to the addition of
finance, information systems and administrative personnel, the cost of
investor relations activities and accruals for performance bonuses. General
and administrative expenses decreased as a percent of net sales from 8% in the
first quarter of 1995 to 3% in the first quarter of 1996. This decrease was
due to increased net sales.

Interest Income, Net. Interest income (net) increased by $2.2 million to
$2.6 million (3% of net sales) in the first quarter of 1996 compared to
$403,000 in the first quarter of 1995. The increase in interest income was due
primarily to the investment of proceeds from Ascend's public offering of
Ascend Common Stock which was completed in August 1995.

Provision for Income Taxes. The provision for income taxes for the quarters
ended March 31, 1996 and 1995 is based on a combined federal and state rate of
38%, which approximates the net effective statutory federal and state rates
adjusted for tax exempt interest income and the tax benefits associated with
Ascend's Foreign Sales Corporation.

Years Ended December 31, 1995, 1994 and 1993

Net Sales. Net sales for 1995 increased 280% to $149.6 million as compared
to $39.3 million in 1994, which increased 143% from $16.2 million in 1993.
International sales (sales outside of North America) increased to $42.8
million in 1995 as compared to $7.7 million in 1994 and to $2.5 million in
1993 and accounted for 29%, 20% and 15% of net sales in 1995, 1994 and 1993,
respectively.

The growth in net sales during 1995 was due to an increase in unit shipments
of MAX and Pipeline products. The increase in unit shipments of the MAX family
of products was primarily attributable to the growth in business from ISPs and
increased demand for corporate wide area network access applications. The MAX
product family accounted for approximately 63% of net sales in 1995 as
compared to approximately 26% in 1994 and approximately 9% in 1993. The
Pipeline product family, introduced in December 1993, accounted for
approximately 20% of net sales in 1995 as compared to approximately 10% of net
sales in 1994. This increase was principally due to growth in Ascend's VAR and
distributor channels and increased demand for remote and Internet access
products by end-user customers. Net sales of Ascend's Multiband products
accounted for approximately 15% of net sales in 1995 compared to approximately
58% of net sales in 1994 and approximately 85% of net sales in 1993. The
decreases in Multiband net sales as a percentage of total net sales were due
to the rapid increase in sales of Ascend's MAX and Pipeline products. The
growth in sales during 1994 and 1993 was attributable primarily to an increase
in unit shipments as a result of market acceptance of Ascend's Multiband and
MAX product families, the expansion of the domestic and international
distribution network and, to a lesser extent, the introduction of the Pipeline
product family in late 1993.

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<PAGE>

In North America, Ascend relies on third party distribution channels,
including VARs and distributors, major telecommunications carriers and
applications equipment manufacturers, for a substantial majority of its net
sales. Sales to these third-party distribution channels accounted for
approximately 48%, 64% and 61% of Ascend's net sales in 1995, 1994 and 1993,
respectively. AT&T, a telecommunications carrier, accounted for approximately
5%, 15% and 18% of net sales in 1995, 1994 and 1993, respectively. Also,
UUNET, an ISP that first commenced volume purchases of Ascend's products in
1995, accounted for approximately 11% of net sales in 1995. International
sales (sales outside of North America) are made through telecommunications
carriers, ISPs, VARs and distributors, and accounted for 29%, 20% and 15% of
net sales in 1995, 1994 and 1993, respectively. There can be no assurance that
sales to these entities or any of Ascend's other customers will remain at or
exceed historical levels in any future period.

Gross Margin. Gross margin remained relatively constant at 66% for each of
the years ended December 31, 1995 and 1994. Gross margin increased to 66% in
1994 as compared to 65% in 1993. The increase in gross margin between 1993 and
1994 was primarily due to increased unit shipments of the MAX family of
products having a slightly higher gross margin than the Multiband and Pipeline
products. In the past, gross margins have been affected by the mix of products
sold and the mix of distribution channels used by Ascend. In the future,
Ascend's gross margins may be affected by several factors, including the mix
of products sold, the price of products sold, the introduction of new products
with lower gross margins, the distribution channels used, price competition,
increases in material costs and changes in other components of cost of sales.

Research and Development. Research and development expenses increased to
$9.6 million in 1995 compared to $3.6 million in 1994 and $2.0 million in
1993. These increases were primarily due to the addition of engineering
personnel, payments for consulting services in connection with developing and
enhancing Ascend's existing and new products and payments for consulting
services related to filing applications and product testing required to obtain
governmental approvals to resell Ascend's products outside of North America.
Research and development expenses as a percent of net sales decreased to 6% in
1995 from 9% in 1994 and 12% in 1993, primarily due to increased net sales.
Ascend expects that spending for research and development will increase in
absolute dollars in 1996 but may continue to vary as a percentage of net
sales.

Sales and Marketing. Sales and marketing expenses were $33.9 million, $10.5
million and $5.5 million for 1995, 1994 and 1993, respectively. These
increases in expenses were primarily due to the addition of sales, marketing
and technical support personnel, increased commissions, expenditures for
demonstration and loaner equipment used by customers and expenses associated
with opening additional sales offices in North America, Europe and Asia and
the Pacific Basin. The growth in sales, marketing and technical support
personnel was primarily due to the need to manage the activities of an
increased number of VARs, distributors, end-user customers and to the
introduction of several new products. Sales and marketing expenses as a
percent of net sales, however, decreased to 23% in 1995 from 26% in 1994 and
34% in 1993, primarily due to increased net sales. Ascend expects that sales
and marketing expenses will increase in absolute dollars in 1996 but may
continue to vary as a percentage of net sales.

General and Administrative. General and administrative expenses increased to
$8.0 million in 1995 as compared to $3.1 million in 1994 and $1.9 million in
1993. These increases were primarily due to the addition of finance and
administrative personnel, bonus compensation paid to Ascend's employees,
increased costs for insurance and contract personnel associated with
information systems service and support and increased costs associated with
being a public company. General and administrative expenses as a percent of
net sales decreased to 5% in 1995 from 8% in 1994 and 11% in 1993, primarily
due to increased net sales. Ascend expects that spending for general and
administrative activities will increase in absolute dollars in 1996 but may
continue to vary as a percentage of net sales.

Purchased Research and Development. Purchased research and development costs
were $3.0 million for the year ended December 31, 1995. These costs were for
the purchase of technology and related assets associated

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<PAGE>

with the DaynaLINK product family from Dayna Communications, Inc. on September
1, 1995. The acquisition provides technology and expertise that Ascend is
using to enhance and expand the functionality of its MAX family of products.

Interest Income. Interest income increased to $5.5 million in 1995 as
compared to $961,000 in 1994 and $144,000 in 1993. The increase in interest
income during 1995 and 1994 is due primarily to the investment of proceeds
from Ascend's public offerings of Ascend Common Stock which were completed in
August 1995 and May 1994.

Provision for Income Taxes. The provision for income taxes for the year
ended December 31, 1995 is based on a combined federal and state rate of 38%
(as compared to 12% for 1994), which approximates the net effective statutory
federal and state rates adjusted for the effects of tax exempt interest income
and the tax benefits associated with Ascend's Foreign Sales Corporation. The
provision for income taxes for 1994 reflects the utilization of net operating
loss carryforwards, which were substantially utilized as of December 31, 1994.
Ascend made no provisions for federal or state income taxes in 1993 due to
cumulative operating losses and the utilization of net operating loss
carryforwards.

FACTORS THAT MAY AFFECT FUTURE RESULTS

Ascend's quarterly and year-to-year operating results are affected by a wide
variety of factors including competition, the mix of products sold, the mix of
distribution channels employed, Ascend's success in developing, introducing
and shipping new products, Ascend's dependence on single or limited source
suppliers for certain components used in its products, price reductions for
Ascend's products, changes in the levels of inventory held by third-party
resellers, the timing of orders from and shipments to customers, seasonality
and general economic conditions. In particular, a substantial portion of
Ascend's sales of MAX and Pipeline products is related to the Internet
industry. There can be no assurance that this industry and its infrastructure
will continue to develop. Ascend believes competition in the Internet industry
will increase significantly in the future and could adversely affect the
Company's business, results of operations and financial condition. Ascend
expects that its gross margins could be adversely affected in future periods
by price adjustments as a result of increased competition. In addition, Ascend
expects that its gross margins could be adversely affected in future periods
by increased sales of its Pipeline products as a percentage of net sales.
These products have lower gross margins than the Company's other products. In
addition, Ascend's use of third parties to distribute its products to other
VARs may adversely affect Ascend's gross margins and Ascend typically operates
with a relatively small backlog. As a result, quarterly sales and operating
results generally depend on the volume of, time of and ability to fulfill
orders received within the quarter, which are difficult to forecast. A
significant portion of Ascend's expense levels is relatively fixed in advance
based in large part on Ascend's forecasts of future sales. If sales are below
expectations in any given quarter, the adverse impact of the shortfall on the
operating results may be magnified by Ascend's inability to adjust spending to
compensate for the shortfall. Ascend may also increase spending in response to
competition or to pursue new market opportunities. Accordingly, there can be
no assurance that Ascend will be able to sustain profitability, particularly
on a period-to-period basis.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1996, Ascend's principal sources of liquidity included $270.7
million of cash and cash equivalents, short-term investments and investments
and an unsecured $15.0 million revolving line of credit which expires in
November 1997. There were no borrowings under the line of credit in the first
quarter of 1996. The increase in cash and cash equivalents, short-term
investments and investments of $8.1 million during the first quarter of 1996
was principally due to proceeds of $10.9 million from the exercise of stock
options and issuance of Ascend Common Stock in connection with Ascend's
employee and outside director stock option plans and $3.1 million of funds
provided by operations, partially offset by $5.6 million of investment
activities. The net cash provided by operating activities for the quarter
ended March 31, 1996 was primarily due to

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<PAGE>

increases in net income, accounts payable and accrued liabilities, partially
offset by increases in inventories and accounts receivable.

Net cash used in investing activities of $5.6 million during the first
quarter of 1996 related primarily to net expenditures for furniture, fixtures
and equipment of $5.9 million. Financing activities provided $10.9 million for
the quarter ended March 31, 1996, primarily due to proceeds from the exercise
of stock options and issuance of Ascend Common Stock in connection with
Ascend's employee and outside director stock option plans.

At March 31, 1996, Ascend had $254.4 million in working capital. Ascend
currently has no significant capital commitments other than commitments under
facilities and operating leases. Ascend believes that its available sources of
funds and anticipated cash flow from operations will be adequate to finance
current operations, anticipated investments and capital expenditures for at
least the next twelve months.

MANAGEMENT

The directors and executive officers of Ascend are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Mory Ejabat........................... 46 President, Chief Executive Officer
and Director
Curtis N. Sanford..................... 37 Senior Vice President,
International Sales
and General Manager of
International Operations
Robert K. Dahl........................ 55 Vice President, Finance, Chief
Financial
Officer, Secretary and Director
Michael Hendren....................... 50 Senior Vice President, North
America Sales
Anthony Stagno........................ 55 Vice President, Manufacturing
Michael J. Johnson.................... 43 Controller and Chief Accounting
Officer
Jeanette Symons....................... 33 Vice President, Engineering and
Chief Technical Officer
Bernard Schneider..................... 39 Vice President, Marketing
Betsy S. Atkins....................... 42 Director
Roger L. Evans........................ 50 Director
C. Richard Kramlich................... 60 Director
James P. Lally........................ 51 Director
Martin Schoffstall.................... 36 Director
</TABLE>

Mr. Ejabat joined Ascend in January 1990 as Vice President, Operations and
he served in this capacity until December 1992. From December 1992 until March
1994, he served as Executive Vice President. From March 1994 until June 1995,
he served as President, Chief Operating Officer and a director of Ascend.
Since June 1995, he has served as President, Chief Executive Officer and a
director of Ascend. From January 1979 to June 1989, Mr. Ejabat was employed by
Micom Systems, Inc., a data communications equipment manufacturer, where he
served in various management capacities, including Vice President for Wide
Area Communications Products and Vice President of Development and Operations.

Mr. Sanford joined Ascend in January 1990 as Vice President, International.
From January 1993 until May 1994, he served as Vice President, Worldwide
Marketing and International Sales. From May 1994 to December 1995, he served
as Vice President, International Sales. Since December 1995, he has served as
Senior Vice President, International Sales and General Manager of
International Operations. From June 1980 to December 1989, Mr. Sanford was
employed by BBN Communications Corporation, a data communications equipment
manufacturer, most recently as Director, Far East Operations.

Mr. Dahl joined Ascend in January 1994 as Vice President, Finance and Chief
Financial Officer. He has served as a director of Ascend since July 1995. From
May 1991 to December 1993, Mr. Dahl was a private investor and a principal in
Dahl-De Vivo Management Co., a private investment firm. From January 1991 to
May 1991, he was employed as Executive Vice President and Chief Financial
Officer for Digital Microwave Corporation. From January 1988 to December 1990,
Mr. Dahl was Senior Vice President, Chief Financial Officer and a member of
the Board of Directors of American President Cos., Ltd., a diversified
transportation company.

68
<PAGE>

From July 1986 to December 1987, he was employed by Ungermann-Bass, Inc., a
networking equipment supplier, as Executive Vice President and Chief Financial
Officer and also served as a member of its Board of Directors. From June 1979
to July 1986, he was employed as Vice President and Chief Financial Officer of
ROLM Corporation, a manufacturer of customer premises communications
equipment.

Mr. Hendren joined Ascend in May 1994 as Vice President, North American
Sales. Since December 1995, he has served as Senior Vice President, North
America Sales. From January 1990 to April 1994, Mr. Hendren was employed by
ACC Corp., a communications equipment manufacturer, most recently as Vice
President of Sales.

Mr. Stagno joined Ascend in January 1992 as Director, Quality Assurance, and
since July 1994 has served as Vice President, Manufacturing. From November
1989 to December 1991, Mr. Stagno was employed by MiniMed Technologies, an
electronic medical instruments manufacturer, most recently as Director,
Quality Assurance.

Mr. Johnson joined Ascend in May 1994 as Controller and Chief Accounting
Officer. From December 1992 to May 1994, Mr. Johnson was Vice President of
Finance and Chief Financial Officer for Skylawn Corporation. From October 1990
to November 1992, he was employed as Controller and Chief Accounting Officer
for Itel Rail Corporation, a rail car leasing, maintenance, and transportation
company. From July 1987 to September 1990, Mr. Johnson was Vice President and
Chief Financial Officer of the Oakland Tribune, Inc., a newspaper publisher.
From May 1981 to June 1987, he was employed as Controller of Baron Data
Systems, Inc., a computer software and equipment manufacturer.

Ms. Symons is a co-founder of Ascend and served as Director of Engineering
from Ascend's inception in 1989 until March 1994. From March 1994 to June
1995, Ms. Symons served as Assistant Vice President, Engineering. Since June
1995, she has served as Vice President, Engineering and Chief Technical
Officer. From October 1983 to December 1988, Ms. Symons was employed as an
engineer by Hayes Microcomputer Products, Inc. a data communications equipment
manufacturer.

Mr. Schneider joined Ascend in June 1995 as Vice President, Marketing. From
July 1990 to June 1995, Mr. Schneider was Director of Data Product Management
of Sprint Corp., a telecommunications equipment provider. From October 1983 to
July 1990, Mr. Schneider was Director, Telecommunications for United
Stationers, an office products company.

Ms. Atkins has served as a director of Ascend since August 1989. Ms. Atkins
was President and Chief Executive Officer of Nellson Candies, Inc. from 1990
to 1993. From August 1989 to January 1990, she was Vice President of Marketing
and Sales of Ascend. From 1987 to 1988, she was Vice President of Marketing
for Unisys Corporation, a computer manufacturer.

Mr. Evans has served as a director of Ascend since April 1989. Mr. Evans has
been a special limited partner of Greylock Capital Limited Partnership, a
venture capital partnership, since 1989, and has been a general partner of
Greylock Management Corporation since 1991. From October 1988 until joining
Greylock, Mr. Evans was a consultant. From 1985 until October 1988, he served
as President and Chief Executive Officer of Micom Systems, Inc., a
manufacturer of data communications equipment. Mr. Evans also serves on the
Board of Directors of HNC Software, Inc.

Mr. Kramlich has served as a director of Ascend since February 1990. Mr.
Kramlich has been a general partner of New Enterprise Associates, a venture
capital firm, since June 1978. Mr. Kramlich also serves on the Board of
Directors of Chalone, Inc., Macromedia, Inc., Neopath, Inc., Silicon Graphics,
Inc., SyQuest Technology, Inc. and Telebit Corporation.

Mr. Lally has served as a director of Ascend since April 1989. Mr. Lally has
been a general partner at Kleiner Perkins Caufield & Byers, a venture capital
firm, since September 1981. Mr. Lally also serves on the Board of Directors of
NetFRAME Systems, Inc.

69
<PAGE>

Mr. Schoffstall has served as a director of Ascend since June 1996. Mr.
Schoffstall is a founder of Epicenter, Inc., an internet gaming company, and
has served as its President and Chairman of the Board of Directors since its
inception in April 1996. Mr. Schoffstall is a co-founder of PSINet Inc.
("PSINet"), an internet access and service provider, and has served as
PSINet's Senior Vice President from February 1995 to April 1996 and as
director and Chief Technical Officer of PSINet from its inception in 1988 to
April 1996. Mr. Schoffstall also served as Vice President and Treasurer of
PSINet from 1988 to February 1995. Prior to forming PSINet, Mr. Schoffstall
was co-founder and, from 1987 to 1989, served as Vice President for Technology
and Marketing, of NYSERNet (New York State Education and Research Network).
Mr. Schoffstall co-authored the national standard network management software,
SNMP.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information, as of May 31, 1996, with
respect to the beneficial ownership of Ascend Common Stock by (i) each
director of Ascend, (ii) the individuals who served as the Chief Executive
Officer of Ascend in 1995, and the four other highest compensated executive
officers of Ascend whose salary and bonus for the year ended December 31, 1995
exceeded $100,000, (iii) all directors and executive officers of Ascend as a
group, and (iv) each person known by Ascend to own more than 5% of Ascend
Common Stock.
<TABLE>
<CAPTION>
SHARES OWNED(1)
------------------------
NUMBER PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL OWNERS OF SHARES OF CLASS
- ------------------------------------- --------- ----------
<S> <C> <C>
DIRECTORS AND EXECUTIVE OFFICERS
Mory Ejabat.......................................... 1,296,077(2) 1.1%
Roger L. Evans....................................... 1,408,279(3) 1.3%
c/o Greylock Capital Limited Partnership
One Federal Street
Boston, MA 02110
Robert K. Dahl....................................... 736,528(4) *
C. Richard Kramlich.................................. 166,626(5) *
c/o New Enterprise Associates
235 Montgomery Street, Suite 1025
San Francisco, CA 94104
Betsy A. Atkins...................................... 108,000(6) *
James P. Lally....................................... 141,816(7) *
c/o Kleiner Perkins Caufield & Byers
2750 Sand Hill Road
Menlo Park, CA 94025
Curtis N. Sanford.................................... 512,531(8) *
Jeanette Symons...................................... 957,765(9) *
Michael Hendren...................................... 535,217(10) *
Directors and executive officers as a group (12
persons)............................................. 6,536,387(11) 5.6%
FORMER EXECUTIVE OFFICER
Robert J. Ryan....................................... 1,736,500(12) 1.5%
5% STOCKHOLDERS
Twentieth Century Companies, Inc..................... 8,800,000(13) 7.8%
4500 Main Street
P.O. Box 418210
Kansas City, MO 64141-9210
Janus Capital Corporation............................ 5,639,000(14) 5.0%
100 Filmore Street, Suite 300
Denver, CO 80206-4923
</TABLE>
- --------
* Less than 1%

70
<PAGE>

(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all shares
of Ascend Common Stock shown as beneficially owned by them, subject to
community property laws, where applicable. Unless otherwise indicated, the
individuals in the table may be contacted c/o Ascend Communications, Inc.,
1275 Harbor Bay Parkway, Alameda, CA 94502.

(2) Mr. Ejabat is the President, Chief Executive Officer and a director of
Ascend. Includes 1,159,957 shares which are subject to options exercisable
within 60 days of May 31, 1996.

(3) Mr. Evans is a director of Ascend. Includes (i) 342,970 shares held as
trustee of the Evans Family Trust, dated March 8, 1989; (ii) 957,309
shares held as trustee of the Roger Evans and Jacqueline Evans Family
Trust, dated March 8, 1989; and (iii) 108,000 shares which are subject to
options exercisable within 60 days of May 31, 1996.

(4) Mr. Dahl is Vice President, Finance, Chief Financial Officer, Secretary
and a director of Ascend. Includes 373,680 shares which are subject to
options exercisable within 60 days of May 31, 1996.

(5) Mr. Kramlich is a director of Ascend. Includes 60,000 shares which are
subject to options exercisable within 60 days of May 31, 1996.

(6) Ms. Atkins is a director of Ascend. Includes 60,000 shares which are
subject to options exercisable within 60 days of May 31, 1996.

(7) Mr. Lally is a director of Ascend. Includes 108,000 shares which are
subject to options exercisable within 60 days of May 31, 1996.

(8) Mr. Sanford is Senior Vice President, International Sales and General
Manager of International Operations of Ascend. Includes 306,687 shares
which are subject to options exercisable within 60 days of May 31, 1996.
Also includes 4,000 shares owned by Mr. Sanford's child.

(9) Ms. Symons is Vice President, Engineering and Chief Technical Officer of
Ascend. Includes 595,093 shares which are subject to options exercisable
within 60 days of May 31, 1996.

(10) Mr. Hendren is Senior Vice President North America Sales of Ascend.
Includes 535,217 shares which are subject to options exercisable within
60 days of May 31, 1996.

(11) Includes 3,980,150 shares which are subject to options exercisable within
60 days of May 31, 1996.

(12) Mr. Ryan resigned as Chief Executive Officer and a director of Ascend in
June 1995. Includes 1,736,500 shares which are subject to options
exercisable within 60 days of May 31, 1996. Does not include shares held
by Mr. Ryan in street-name, if any.

(13) Based on a Schedule 13G filed with the Commission on February 9, 1996 by
Twentieth Century Companies, Inc., on its behalf and on behalf of:
Investors Research Corporation, Twentieth Century Investors, Inc., and
James E. Stowers, Jr. Investors Research Corporation, a registered
investment advisor and a wholly-owned subsidiary of Twentieth Century
Companies, Inc., manages, pursuant to management agreements, the
investments of six registered investment companies, Twentieth Century
Investors, Inc., Twentieth Century World Investors Inc., Twentieth
Century Capital Portfolios, Inc., Twentieth Century Premium Reserves,
Inc., TIC Portfolios, Inc. and Twentieth Century Strategic Asset
Allocations, Inc. It also manages the assets of institutional investor
accounts. The securities that are the subject of this report are owned by
and held for such investment companies and separate institutional
investor accounts.

(14) Based on a Schedule 13G filed jointly with the Commission on February 13,
1996 by Janus Capital Corporation and Thomas H. Bailey. Janus Capital
Corporation furnishes investment advice to several investment companies
and individual and institutional clients (the "Managed Portfolios"). As a
result of its role as investment advisor of the Managed Portfolios, Janus
Capital may be deemed to be the beneficial owner of the shares of Ascend
Common Stock held by the Managed Portfolios. Mr. Bailey owns
approximately 12.2% of Janus Capital and serves as President and Chairman
of the Board of Janus Capital. As a result, Mr. Bailey may be deemed to
have the power to exercise or to direct the exercise of such voting
and/or dispositive power that Janus Capital may have with respect to
Ascend Common Stock held by the Managed Portfolios.

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<PAGE>

INFORMATION CONCERNING NETSTAR

The following Business section contains forward-looking statements which
involve risks and uncertainties. NetStar's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of certain factors, including those factors set forth under "Risk
Factors" and elsewhere in this Proxy Statement/Prospectus.

BUSINESS

NetStar designs, manufacturers, markets and services high-performance
computer networking equipment for organizations whose high-speed, high-volume
information transfer needs cannot be effectively met by their existing
networks. NetStar's principal product, the GigaRouter, is an IP router that
connects multiple high-speed networks. The networking industry has
standardized a number of network technologies that communicate at speeds from
50 million bits per second up to 800 million bits per second. The GigaRouter
can simultaneously route information among more high-speed networks than any
other router known to NetStar. NetStar's strategy, as exemplified by the
GigaRouter, is to provide IP routers with industry leading speed and capacity.

The computer networking industry today is characterized by growth in the
number of network connections, the types of networks, and in the speed of
those networks. These trends increase the demand on the routers that manage
the flow of information through networks. Two current applications of the
GigaRouter serve as examples of this growing demand. The Very High Speed
Backbone Service ("vBNS"), a network designed, built and operated by MCI for
the National Science Foundation ("NSF"), uses GigaRouters to connect several
types of networks onto a single high capacity backbone network. This network
connects the five major NSF supercomputing centers and is intended to be a
platform for research into advanced distributed computing applications. The
German research laboratory Deutsches-Elektronen Synchrotron ("DESY") is
typical of high-performance computing sites that require very large
transmission capacity for each connection. DESY uses a single GigaRouter as
the central routing hub for 16 high capacity network connections. Based on
discussions with potential users, management believes the Internet, a rapidly
growing global network that currently serves approximately 9.5 million host
computers, will require routers with the performance of the GigaRouter. During
1995, the number of computers connected to the Internet grew from 4.8 million
to 9.5 million. NetStar, as well as several of NetStar's customers, have
conducted extensive tests on the GigaRouter and have determined that it is
compatible with the routers most commonly used in the Internet backbone
networks. Due to the large number of users, ISPs require routers that can
handle many simultaneous connections. The NetStar product line meets the
requirements of high capacity networks, whether the demand is created by a
large number of connections, high capacity connections or a combination of
both. However, and as described below, NetStar is currently developing product
features to cause the GigaRouter to be suitable for use with Internet routers
and therefore has not yet sold a GigaRouter to an ISP.

The GigaRouter is designed around a switching system, developed by NetStar,
which is capable of supporting up to 16 simultaneous connections at a speed of
approximately one billion bits per second (Gigabit per second, or Gbit/s) per
connection. (Actual data throughput is dependent upon the actual configuration
and media card type selected by the customer.) The technology is based on what
is known as a non-blocking crossbar switch. The crossbar switch is used as the
connection path for up to 16 network media interface cards that support a
variety of industry standard communication media. Media cards are currently
available for ATM/OC-3c, FDDI and HIPPI. Media cards for ATM/OC-12c and HSSI
are in development. (These terms, as well as other terms used in this Proxy
Statement/Prospectus, are defined in the portion of this Proxy
Statement/Prospectus entitled "Glossary.") A media card for the Institute for
Electrical and Electronic Engineers (IEEE) standard 802.12 (also known as
Ethernet 100 Base T) is also in development. Management believes that it will
have to successfully complete the development of the HSSI media card and
certain other product features before marketing the GigaRouter to Internet
service providers. The beta test phase for the HSSI media card and such
features began in March 1996. NetStar's current cash balances are expected to
be sufficient to complete these projects as well as the other projects
described herein. To achieve optimal performance, each media card runs its own
routing

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<PAGE>

software independent of any shared resources. Centralized management functions
for the GigaRouter system are provided by a UNIX-based Routing Management
System.

The GigaRouter is the only router known to NetStar that uses a crossbar
switch to make network connections. Routers from competing companies use
either a single, shared data path or, in some cases, several shared data
paths. Any sharing of the interconnecting data path means that the
transmission of some of the information must be delayed while waiting for
access to the path. Since the GigaRouter's crossbar switch avoids these
delays, customers are expected to have fewer network congestion problems and
to obtain faster access to needed information. An additional expected benefit
to customers is the cost savings resulting from the GigaRouter's ability to
support a larger number of network connections on a single router.

INDUSTRY BACKGROUND

The computer networking industry has experienced rapid growth during the
1990s, driven by a demand for faster, higher capacity networks that support
many users. Management expects this growth to continue into the future.
NetStar has identified some contributing factors driving this demand, which
are outlined below.

Increasing Demand for Bandwidth. The trend to link computers together
through networks has resulted in network capacity becoming a critical issue
affecting overall system performance. Many existing computer networks are not
fast enough to satisfy the demands for communication between computer systems
at a growing number of user sites. Based on a continuing review of a variety
of industry publications, management has identified the following trends which
it believes indicate the need for networking systems with greater capacity and
faster response times:

. The information processing power of computers of all types is constantly
being increased. In particular, desktop workstations, parallel
processing architectures and supercomputers are rapidly expanding
available computing resources.

. The development of client/server architectures and software applications
is continuing at an accelerating pace.

. Multimedia applications, which include a mixture of data, digitized
voice, still frame graphics and full motion video, add significantly to
the demand for network bandwidth.

. Computer generated graphics images are increasingly being used for
visualization of computer generated simulations of a wide variety of
physical events, such as chemical reactions, fluid flow or atmospheric
phenomena. These images are typically generated at a faster frame rate
and with greater color resolution than in the past because of the
availability of greater computer processing power which also requires
greater network bandwidth to transmit the images.

. Computer users are sharing a greater volume of information with other
users, both within their organizations and externally, thus creating a
demand for more rapid access to data and resulting in the need for
faster transmission times.

Growth of the Internet as a Commercial Enterprise Network. In 1969, the
United States government began a funded project to link together a variety of
government, research and educational institutions onto a national computer
network which was called the ARPANET after the Advanced Research Projects
Agency (ARPA). That original network has evolved into the Internet, which
today is a world-wide, open internetwork consisting of over 94,000 networks in
169 countries serving approximately 9.5 million host computers. These services
are now provided by approximately 3,400 local, national and global ISPs.

Emergence of TCP/IP as the Dominant Internetworking Protocol. The
development of TCP/IP as the standard communications protocol for the Internet
has resulted in the emergence of TCP/IP as the dominant

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internetworking protocol for government, research, educational and commercial
organizations. International Data Corporation ("IDC") states in its report
"The 1995 Network World 500 Study" that "The importance of TCP/IP as an
enterprise network protocol has escalated dramatically over the past few
years, resulting in a concomitant increase in implementation. Future
implementation plans show continued widespread use of TCP/IP." Of the 500
respondents studied by IDC, all of which were leading United States networking
user organizations with annual networking expenditures of over $5 million
each, 96.4% identified TCP/IP as being critical or important to their
enterprise networking strategy.

Standardization of Higher Speed Networking Media. In recent years, in
response to demand for increased bandwidth, the networking industry in
cooperation with various standards organizations has developed and published
specifications for several faster networking media technologies. Some of these
standards are:

. Asynchronous Transfer Mode/Synchronous Optical Network ("ATM/SONET")
with speeds of 155 Mbit/s (OC-3c) and 622 Mb/s (OC-12c).

. HIPPI at a speed of 800 Mbit/s.

. FDDI at a speed of 100 Mbit/s.

. Two competing standards for technology popularly called "Fast Ethernet,"
both of which operate at a speed of 100 Mbit/s.

. Fibre Channel at a speed of 1062 Mbit/s.

. HSSI at speeds of up to 53 Mbit/s.

Increasing Use of Switching Technology for Bandwidth Multiplication. As
communication links, both within a system and between systems, become faster,
the available bandwidth of a "shared media" or "bus- based" channel becomes a
critical bottleneck. Fundamentally, a shared or bus-based channel has a fixed
channel capacity which must be shared by all devices that are using the
channel to communicate with other devices. Examples of network technologies
that use a shared medium are Ethernet and FDDI. An example of a shared
internal system bus is the EISA bus used within most personal computers
currently produced.

There is an increasing use in the computer industry today of switching
technology to avoid the bottleneck of a shared bus by providing a
communication link for each combination of sending and receiving devices. When
a particular device needs to send data, the appropriate link is activated and
the data is sent. The crossbar switch that NetStar uses in its products has
enough communication links available to simultaneously connect all sending
devices (up to 16) to a different receiving device.

Introduction of ATM Cell Switching as an Important Carrier Technology. A
particular form of switching technology, called ATM, has emerged in recent
years as an important technology that offers the ability to transmit voice,
data and video on a common carrier facility. ATM segments data into small,
fixed length "cells" and appends to each cell the addressing information
required to route the cell through a switching matrix. The fixed length of the
cells makes the switching an easier task than with variable length packets.

PRODUCTS

NetStar's GigaRouter is an IP router that to the best of NetStar's knowledge
is unique in the networking industry. The capabilities of the GigaRouter come
from its non-blocking crossbar switch architecture, which management believes
is unique in the router market. This technology gives the GigaRouter a
throughput capacity that is approximately eight times greater than that of the
next highest capacity router known to NetStar. Each media card, in addition to
being connected to the shared communications bus, is connected to the crossbar
switch with a 1.06 Gbit/s sending channel and a similar receiving channel. The
80 Mbit/s shared communications bus interconnects all media cards and also the
common control module. This architecture gives the GigaRouter

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the capacity to support more media cards in a single router than can be
supported by competing routers. The one Gb/s capacity of each media card
connection also gives the GigaRouter the ability to support higher speed
network standards (such as HIPPI or ATM/OC-12c) or to support a larger number
of lower speed standards on a single media card. For example, NetStar's FDDI
media card supports up to four FDDI networks on a single media card. Media
cards are currently available for the ATM/OC-3c, FDDI and HIPPI standards,
with interfaces for HSSI, ATM/OC-12c and Ethernet 100 BaseT in development.
All media cards can be removed and replaced with the remainder of the system
continuing in operation ("Hotswap" capability). The GigaRouter is housed in a
standard 19-inch rack mountable electronic equipment enclosure.

Since its first sale in November 1993, the actual selling prices of
GigaRouters have ranged from $36,000 to $115,000 depending on the number and
type of media cards installed in the system. NetStar's average selling prices
(that is, the prices received by NetStar) have been $79,215 domestically and
$65,926 internationally, including spare parts sold with some systems. The
lower average selling prices for international sales results from discounts
from the United States list price that apply to sales to international
distributors (most international sales to date have been to distributors) and
from the differences in the average number and type of media cards sold with
each system. The average number of GigaRouter media cards has been 4.7 cards
for domestic sales and 3.7 for international sales. The discounts given to
international distributors result in lower gross margins on sales; however,
NetStar's expenses for installation, support, marketing and sales are lower
because these services are provided by the distributors.

NetStar's other product, the ClusterSwitch, is a HIPPI switch product. It
supports up to 12 HIPPI media cards each connected to a crossbar switch
similar in concept to the GigaRouter crossbar switch. NetStar's average
selling price for ClusterSwitch products has been $18,307 domestically and
$18,366 internationally. The range has been from $12,000 to $26,500. For
ClusterSwitches, the average number of media cards has been 6.7 cards for
domestic sales and 4.6 cards for international sales.

EXISTING AND POTENTIAL MARKETS

The subdivisions of the high-speed router market that NetStar believes are
most attractive for its products are, as described below, users of high speed
processor interconnection networks, organizations requiring large scale
backbone networks and ISPs.

High Speed Processor Interconnection Networks. High speed processor
interconnection networks involve using the GigaRouter or ClusterSwitch to
provide a very fast connection network for a group of high-performance
workstations, supercomputers or other high-speed computing devices. NetStar's
products have a competitive advantage when the application requires the
transfer of large amounts of data at a very fast transfer rate. Examples of
such installations are large scientific laboratories, commercial design
automation facilities, or installations doing extensive, high-resolution
graphics work, such as in the film animation industry. In this market segment,
NetStar currently has among its customers two automotive manufacturers, a
major film studio and a major film animation studio.

A prime example of a large research facility that uses the Company's
GigaRouter is DESY in Hamburg, Germany. This particle accelerator research
laboratory uses the GigaRouter to interconnect, via HIPPI interfaces, seven
large Silicon Graphics Challenge machines, which in total house 84 SGI
processors, a large number of workstations using FDDI, and the laboratory's
data collection facility for its particle accelerator. The GigaRouter
installed in this laboratory currently averages a data transfer rate of
approximately 120 million packets per hour (or 32,000 packets per second) per
interface.

Large Scale Backbone Networks. NetStar management believes, based on
discussions with several potential customers, that as the use of the Internet
increases, a growing number of organizations will develop high-capacity,
private networks to link widely dispersed operating units. Although the
Internet provides an excellent vehicle for communication with a large number
of users worldwide, issues such as security and dedicated performance often
dictate the need for a private network. One example of this is the NSFNET. In
1986,

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the NSF funded the creation of a network, the NSFNET, to link together a large
number of academic and research organizations. The NSFNET also served as the
backbone of the Internet until May 1995. The NSF concluded that the ongoing
needs of the research community required a dedicated, high-speed network that
was independent of the Internet. Through a five year, $50 million program, NSF
funded MCI to design, build and operate a new network, dedicated to the
research community, called the vBNS. In April 1995, this network became
operational. MCI chose NetStar's GigaRouter as the primary router at five NSF
supercomputer sites and uses three additional GigaRouters installed at MCI
Network Operating Centers. NetStar believes the principal reasons MCI chose
the GigaRouter were its support of multiple HIPPI, ATM/OC-3c and FDDI
interfaces and its capacity to support multiple ATM/OC-12c interfaces. The
HIPPI, ATM/OC-3c and FDDI interfaces are available now, and NetStar is
currently developing the ATM/OC-12c interface.

Internet Service Providers. Internet services are currently provided by
approximately 3,400 service providers in 169 countries. These organizations
range in size from large telecommunications firms such as MCI, Sprint
Corporation and AT&T Corp. to small local service providers that serve only a
few customers. Until recently, the NSF granted these service providers access
to the NSFNET, without charge, for the purpose of assuring a common point of
connection to anyone in the Internet access business. With the continued
growth in Internet traffic, the NSF has determined that the Internet backbone
network should be a commercially viable enterprise provided by competing
companies. The NSF will continue to take an active role in the overall
guidance of the policies and standards of the Internet but will no longer
provide the backbone network. A number of carriers, including MCI, have
indicated they are or are planning to provide Internet backbone services as
well as direct customer access services. NetStar believes the GigaRouter has
significant potential in this market because of its ability to perform IP
routing across a number of high-speed interfaces. To take advantage of this
opportunity, NetStar is developing media cards for ATM/OC-12c, HSSI and
Ethernet 100 BaseT. Management believes it will have to successfully complete
the development of the HSSI media card and certain other features before
selling the GigaRouter to ISPs. The beta test phase for the HSSI media card
and such features began in March 1996.

SALES AND MARKETING

NetStar sells its products through a program of direct sales domestically
and distributors internationally. The major responsibility for marketing and
sales is assigned to its Vice President of Sales and Marketing. NetStar's
Director of North America Sales reports to the Vice President of Sales and
Marketing. Eight full time direct sales representatives (one of which is
located in each of Colorado, Minnesota, Texas and Georgia and two of which are
located in each of the Washington, D.C. area and California) report to the
Director of North American Sales. In August 1995, NetStar created the position
of Vice President, International, who reports to NetStar's Chief Operating
Officer and is responsible for the management and ongoing development of
NetStar's distribution capabilities outside North America. A full time sales
representative based in the United Kingdom reports to the Vice President,
International and is responsible for distribution activities in Europe.
NetStar currently has 12 direct sales representatives.

NetStar has distribution agreements with distributors who sell in Australia,
the Benelux Countries, Finland, France, Germany, Italy, Japan, Norway, Poland,
Singapore, Sweden, Switzerland and the United Kingdom. In December 1995,
NetStar and E-Systems, Incorporated agreed to form a non-exclusive strategic
alliance in which E-Systems, Incorporated will provide integration services
for NetStar's products to both companies' domestic customers.

NetStar's arrangements with international distributors and domestic
resellers provide for various discounts from the standard list price for end
user customers in the United States. The distributors' and resellers'
responsibilities include marketing, sales, installation, post-sales support
and service. The domestic reseller agreements are not exclusive, while the
international distributor agreements are exclusive if the distributors meet
their agreed upon revenue goals.

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NetStar intends to continue to market directly to customers in the high
speed processor interconnection market and will continue to add direct United
States sales personnel. NetStar also intends to establish cooperative
marketing and/or distribution agreements and OEM arrangements with one or more
companies with large established sales and marketing capabilities in the
networking market. Such arrangements, if any, could possibly include
agreements with other manufacturers of router products. The marketing of
NetStar's products into the Internet market could potentially also include
reselling agreements with larger, more established companies.

CUSTOMERS

As of March 31, 1996, NetStar had sold 75 GigaRouters and 25
ClusterSwitches. Of these 100 systems, 40 were sold in the United States, 45
in Japan and 15 in other countries. For the year ended September 30, 1994,
NetStar recognized revenues of $128,200 for shipments made to two customers in
other countries. For the year ended September 30, 1995, NetStar recognized
revenues of $958,769 for shipments made to Net One and $108,458 for shipments
made to two customers in other countries. For the six months ended March 31,
1996, NetStar recognized revenues of $1,792,759 for shipments made to Net One
and $328,928 for shipments made to four customers in other countries.

NetStar's customers that have purchased more than $20,000 of product since
inception to March 31, 1996 include, but are not limited to, the following:

Chernikeeff Networks, Ltd. (NetStar's United Kingdom distributor)
Deutsches Elektronen - Synchrotron (DESY)
Digital Domain
E-Systems Incorporated
Enforce AG (NetStar's Swiss distributor)
HANIL Telecom (NetStar's Korean Distributor)
HMK Computer Technologies GmbH (NetStar's German distributor)
Integrated Sensors, Inc.
International Business Machines Corporation (IBM)
Knolls Atomic Power Laboratory
Los Alamos National Laboratory (LANL)
MCI Telecommunications Corp.
NASA - Goddard
NASA - Lewis
National Center for Atmospheric Research (NCAR)
Naval Research Laboratory
Net One Systems Co., Ltd. (NetStar's Japanese distributor)
Ohio Advanced Research Network
University of Minnesota
Warner Brothers Imaging Technology

At March 31, 1996, NetStar's backlog of customer orders was not material.
Revenues from trial installations of equipment are generally recognized
immediately upon the receipt of orders from customers at the conclusion of a
successful trial period, and NetStar generally ships equipment shortly after
the receipt of orders for non-trial installations. Accordingly, backlog has
not historically been an important element in NetStar's business. In the past,
NetStar often shipped trial systems so that the customer could evaluate the
product before making a purchasing decision. Recently, NetStar has reduced the
use of trials; however, a number of trial units are still installed at this
time.

CUSTOMER SUPPORT AND SERVICE

NetStar has customer support staff for diagnosing and repairing hardware and
software problems in its equipment installed at customer sites. A central
service center provides "first call" telephone support on a 24-hour basis.
Personnel in this center respond to customer service requests, provide remote
problem diagnosis, and

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<PAGE>

determine whether the dispatch of service personnel for on-site service or
delivery of spare parts is required. NetStar has agreements with Olivetti
North America for on-site hardware maintenance in the United States and with
Sonic Couriers of Arizona, Inc. ("Sonic Air") for storage and dispatching of
spare parts in the United States. NetStar also maintains a supply of spare
parts at its headquarters location, from which it delivers directly to its
customers and/or Sonic Air, as appropriate. NetStar generally provides a
limited 90-day warranty covering parts and service on its products. NetStar's
distributors provide service to their customers and utilize maintenance
training and technical support provided by NetStar.

COMPETITION

The principal competition for the GigaRouter is from companies that
currently compete in the multi-protocol router market. IDC lists the companies
with the greatest market share of the high-end multi-protocol market as, in
order, Cisco, Bay Networks, Inc., Digital Equipment Corporation, and Network
Systems, a division of StorageTek Corp. Together these companies represent
over 80% of the high-end router market, according to IDC. These companies are
more established, have greater financial, marketing and other resources, and
more market recognition than NetStar. In addition to the companies
specifically mentioned, there are companies in other segments of the
networking industry, some of which have extensive financial resources and
development expertise and could be developing, or could in the future develop,
products that would compete with NetStar's products.

Specifically, management has learned that BBN Corp. has received government
funding to develop a high-speed router with a capacity of approximately 50
Gbit/s and that BBN Corp. is scheduled to deliver a prototype of this product
by the end of calendar 1997. NetStar has commenced development of a higher-
capacity router but at this time can make no representations as to whether or
when development will be successfully completed. In addition, management is
aware that Computer Network Technology Corporation ("CNT") acquired the assets
of Ultra Network Technology ("Ultra") in July 1993. Management believes that
Ultra had started the design of a product similar in concept to the
GigaRouter. While NetStar has no knowledge of CNT's activities regarding the
Ultra design, it is not aware of any company manufacturing a product with an
architecture or performance capabilities similar to the GigaRouter.

Management has assessed the competitive positioning of its products using
information derived from a variety of publicly available sources, including
advertising literature, public presentations, and articles published in
various trade journals and other publications. Other companies could have
product plans and developments that could materially alter NetStar's
competitive situation. Although there can be no assurance that NetStar will
compete successfully, management's assessment is that the GigaRouter will
compete effectively based on the product's advantages in transmission
capacity, number of available interface slots, support for a variety of
interface standards and pricing relative to performance and features;
management believes these are the primary competitive factors in the high
performance router market.

There are at least two other companies, Essential Communications, Inc. and
Avaika Networks Corporation, that offer products similar to NetStar's
ClusterSwitch. The market for HIPPI switches is much smaller and more price
competitive than the high-end router market. The ClusterSwitch offers
competitive advantages in the areas of system management and ease of
maintenance and use.

RESEARCH AND DEVELOPMENT

The market for NetStar's products is characterized by rapidly changing
technology, evolving industry standards, and frequent introductions of new
products and enhancements. NetStar's future success will depend in part on its
ability to enhance its existing products and to introduce new products and
enhancements on a timely basis to meet and adapt to changing customer
requirements, evolving industry standards and emerging technologies. NetStar
is also committed to ongoing support of and participation in industry
standards activities which affect the router and switch markets.

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NetStar emphasizes modular software and hardware design to allow reuse of
core components of its key technologies. NetStar believes that this not only
accelerates time to market but also provides greater reliability by using
proven designs in multiple product applications. A variety of design and
development processes and tools are employed to ensure timely product
introductions and that potential problems are detected early in the design and
development cycle.

NetStar's product designs are complex hardware and software systems that
require extensive testing prior to certifying the designs for production.
Because NetStar does not have the resources to duplicate the complex network
configuration of customers' sites, product design problems, particularly
software problems, are in some cases discovered only after systems are
installed. As a result, NetStar must devote a portion of its research and
development resources to diagnosing and correcting such problems. NetStar is
improving its internal testing capability by purchasing additional test
equipment and implementing more extensive test procedures before releasing new
software for production.

NetStar obtains country specific certification to safety and emissions
standards in the United States and certain other countries. To date, NetStar
has successfully certified its products for use in numerous countries,
including all of those into which NetStar sells systems, with ongoing programs
to obtain certification for new products as they are introduced.

There can be no assurance that NetStar will be successful in developing,
manufacturing and marketing new products or product enhancements that respond
to technological changes or evolving industry standards, that NetStar will not
experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products, or that its new
products will adequately meet the requirements of the marketplace and achieve
market acceptance. If NetStar is unable, for technological or other reasons,
to develop new products or enhancements of existing products in a timely
manner in response to changing market conditions or customer requirements,
NetStar's business, results of operations and financial condition would be
materially adversely affected. In addition, there can be no assurance that
services, products or technologies developed by others will not render
NetStar's products or technologies uncompetitive or obsolete. The introduction
of new or enhanced products also requires NetStar to manage the transition
from older products in order to minimize disruption in customer ordering
patterns, avoid excessive levels of older product inventories, and ensure that
adequate supplies of new products can be delivered to meet customer demand.
There can be no assurance that NetStar will successfully manage the transition
to new products. The failure to manage any such transition successfully could
have a material adverse effect on NetStar's business, results of operations
and financial condition.

In the years ended September 30, 1993, 1994 and 1995 and the six months
ended March 31, 1996, NetStar expended $1,108,590, $2,544,371, $2,791,190 and
$2,315,061, respectively, on research and development activities.

MANUFACTURING

The GigaRouter and ClusterSwitch consist of printed circuit card assemblies
housed in fabricated metal enclosures. Production processes include metal
fabrication, printed circuit card assembly, circuit card test and burn-in,
system assembly and configuration, and final system test and burn-in. The
majority of the major subassemblies are custom designed by NetStar's
engineering staff. NetStar has printed circuit cards and other major
subassemblies built by several contract electronics manufacturers. NetStar's
quality assurance program has established various quality control measures,
including inspection and test of incoming raw material and subassemblies,
extended temperature range circuit card and system burn-in procedures, and
final system testing. NetStar believes its quality control procedures are
adequate to assure that delivered hardware operates at acceptable reliability
levels.

NetStar uses integrated circuits and other components from outside sources
in its products. While many of these components are available from alternate
sources, some can be obtained only from one source. An interruption in the
availability of any component could have a material adverse effect on NetStar.

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PATENTS AND PROPRIETARY RIGHTS

NetStar has not applied for and does not own any United States or foreign
patents. Management believes that the timing of the introduction of its
products to the marketplace is more important than patent and other
intellectual property protection in establishing and maintaining a competitive
advantage. Nevertheless, NetStar may attempt to obtain patents when thought to
be advantageous and economically worthwhile. Management currently believes
that the only technology that might be available for patent protection would
be certain engineering details embedded in NetStar's products. There can be no
assurance that any patent obtained would provide substantial protection or be
of commercial benefit to NetStar or that its validity would not be challenged.
In addition, there can be no assurance that the technology used in NetStar's
products will not infringe on other patents, even if NetStar obtains patents
for such technology. If NetStar obtains a patent and it is infringed upon,
NetStar may not have sufficient resources to prosecute a patent suit or to
defend its patent. While NetStar has not sought patent protection, it has
registered the trademarks "GigaRouter" and "ClusterSwitch." In addition,
NetStar claims copyright protection for certain software developments. NetStar
also makes extensive use of Field Programmable Gate Arrays ("FPGAs") in the
hardware design of its products. FPGAs allow NetStar to design custom logic
for its product which management believes would make it extremely difficult
for potential competitors to make use of NetStar's proprietary designs.

EMPLOYEES

As of May 31, 1996, NetStar had 106 employees and one full time
representative. None of NetStar's employees is represented by a labor union or
is covered by a collective bargaining agreement. NetStar has not experienced
any work stoppages and believes that its employee relations are good.

FACILITIES

NetStar currently occupies approximately 38,000 square feet of office,
laboratory and manufacturing space at 10250 Valley View Road, Eden Prairie,
Minnesota 55344. The lease of this facility expires March 31, 1999, with a
two-year option to renew.

SUBSIDIARY

NetStar has one wholly-owned subsidiary, NetStar International, Ltd. The
subsidiary was formed under the laws of the State of Minnesota and currently
is used by NetStar in the management of its European distributors. The
financial information contained in this Proxy Statement/Prospectus is
presented on a fully consolidated basis for NetStar and NetStar International,
Ltd.

EXPORT SALES

NetStar does not own any international operations or subsidiaries. The
following table sets forth certain information regarding NetStar's export
sales as compared to its sales in the United States; NetStar had no export
sales before fiscal 1994:

<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, SEPTEMBER 30,
------------------- -------------------
1996 1995 1995 1994
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
United States........................... $ 492,263 $842,090 $1,947,281 $184,243
Japan................................... 1,792,759 412,469 958,769 --
Europe.................................. 154,188 108,458 108,458 128,200
Korea................................... 174,740 -- -- --
</TABLE>

All sales set forth in the table were to unaffiliated customers, and all sales
to Japan were to Net One, NetStar's Japanese distributor.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial information is qualified by
and should be read in conjunction with NetStar's consolidated financial
statements and notes thereto included elsewhere in this Proxy
Statement/Prospectus. The consolidated statement of operations data set forth
below for the years ended September 30, 1995, 1994 and 1993 and the balance
sheet data set forth below at September 30, 1995 and 1994 are derived from the
consolidated financial statements included elsewhere in this Proxy
Statement/Prospectus. The consolidated statement of operations data set forth
below for the period from March 1, 1992 (inception) to September 30, 1992 and
the consolidated balance sheet data as of September 30, 1993 and 1992 are
derived from the Company's audited consolidated financial statements which are
not included herein. The consolidated statement of operations data set forth
below for the six months ended March 31, 1996 and 1995 and the consolidated
balance sheet data set forth below at March 31, 1996 are derived from
NetStar's unaudited consolidated financial statements included elsewhere in
this Proxy Statement/Prospectus which, in NetStar's opinion, reflect all
adjustments (consisting of normal recurring accruals) necessary for a fair
presentation of results for those periods and as of that date. The results for
the six months ended March 31, 1996 are not necessarily indicative of the
results to be expected for the entire year.

<TABLE>
<CAPTION>
MARCH 1, 1992
SIX MONTHS FISCAL YEAR ENDED (INCEPTION)
ENDED MARCH 31, SEPTEMBER 30, TO
---------------- ------------------------- SEPTEMBER 30,
1996 1995 1995 1994 1993 1992
------- ------- ------- ------- ------- -------------
(UNAUDITED)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Revenues................ $ 2,614 $ 1,363 $ 3,014 $ 312 $ -- $ --
Cost of revenues........ 1,797 900 2,126 182 -- --
Gross profit............ 817 463 888 130 -- --
Expenses, net........... 4,401 2,341 5,785 3,915 1,714 298
Net loss................ (3,587) (1,879) (4,898) (3,785) (1,714) (298)
Net loss per share...... $(0.37) $(0.35) $(0.90) $(0.85) $(0.63) $(0.19)
Weighted average number
of common and common
equivalent shares
outstanding............ 9,691 5,423 5,448 4,433 2,725 1,590
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30,
MARCH 31, ----------------------------
1996 1995 1994 1993 1992
----------- ------- ------ ------ ------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital....................... $25,656 $24,138 $4,858 $2,092 $ 845
Current assets........................ 27,799 29,740 5,397 2,473 894
Total assets.......................... 29,921 31,069 5,949 2,970 1,009
Bridge Notes payable.................. -- 4,176 -- -- --
Other current liabilities............. 2,143 1,426 539 381 49
Long-term debt........................ 58 105 26 26 --
Total stockholders' equity............ 27,720 25,362 5,384 2,562 960
</TABLE>

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. NetStar's actual results could differ materially from
those anticipated in these forward-looking statements as a result of a variety
of factors, including those set forth under "Risk Factors" and elsewhere in
this Proxy Statement/Prospectus.

OVERVIEW

NetStar was incorporated on December 11, 1990 to develop and manufacture,
market and service advanced high-speed networking products for the high
performance computer market. Until fiscal 1995, NetStar was a development
stage company and, as a result, underwent significant changes from period to
period as the focus of NetStar's activities shifted from organization to
product development, manufacturing, and sales and marketing. During the year
ended September 30, 1995, NetStar completed its initial development activities
and commenced its planned principal operations. NetStar's revenues and
expenses for the periods presented are not necessarily indicative of future
results. From inception through March 31, 1996, NetStar incurred cumulative
losses of $14,281,557.

NetStar has historically sold its products through a domestic direct sales
force and international distributors. International distributors receive
discounts from the United States list price; however, certain domestic
customers also receive discounts based on factors such as the volume of
purchases. Average selling prices shown herein vary because of the discounts
given to distributors and other customers and because the number and type of
media cards sold with each system varies.

To become profitable, NetStar must significantly increase revenues by
broadening the market for its products from its traditional customer base in
the high speed processor connection market to include other types of
customers, such as users of large scale backbone networks and ISPs. See
"Information Concerning NetStar--Business--Existing and Potential Markets." To
achieve this, NetStar is developing new media cards and other features that
will allow it to expand into these markets; this has entailed hiring
additional development personnel. As a further means of increasing sales,
NetStar is expanding its sales and marketing capacity by hiring additional
sales and marketing personnel and by engaging domestic resellers and systems
integrators to sell its products. See "Information Concerning NetStar--
Business--Sales and Marketing." A significant portion of NetStar's cash
balances are being used to fund these activities.

RESULTS OF OPERATIONS

Six Months Ended March 31, 1996 and 1995

Total revenues for the 1996 period were $2,613,950 compared to $1,363,017
for the same period in 1995, an increase of 92%. There were sales of 32
GigaRouters and 11 ClusterSwitches in 1996 compared to 18 GigaRouters and four
ClusterSwitches in the 1995 period. The average GigaRouter selling prices were
approximately $72,000 ($88,094 domestic and $70,812 international in 1996) in
each period. The average ClusterSwitch selling prices were $17,502 ($16,333
domestic and $18,906 international) in 1996 and $16,348 in 1995. In 1996, 22
GigaRouters and five ClusterSwitches were sold to Net One, the Company's
Japanese distributor. Sales to Net One were $1,792,759 in 1996 compared to
$412,469 in 1995.

Cost of revenues was $1,796,585, or 68.7% of total revenue, in the 1996
period compared to $899,792, or 66.0%, in the 1995 period. Cost of revenues
includes two principal components--the cost of materials and the costs of
NetStar's internal manufacturing and support operations. Cost of materials
declined to 41.7% of revenues in the 1996 period from 47.4% of total revenues
in the 1995 period due to a sales price increase instituted late in fiscal
1995 and because of lower costs of some component parts. The cost of internal
manufacturing and support operations was 27.1% of sales in 1996 compared to
18.6% in 1995. The percentage increased because the expenses increased.

82
<PAGE>

Total operating expenses increased from $2,402,692 in the 1995 period to
$5,045,346 in the 1996 period. Research and development expenses increased
from $1,294,855 to $2,315,061, market development and selling expenses from
$740,269 to $1,625,791 and general and administrative expenses from $367,568
to $1,104,494. The increases were primarily attributable to an increase in the
number of employees from 38 at March 31, 1995, to 95 at March 31, 1996. For
the 1996 period, compensation and related expenses, including amounts
classified as cost of sales, were $2,816,978 compared to $1,361,553 in 1995.
The 1996 salary amounts were $1,392,199 for research, development and customer
support, $714,204 for market development and selling, $275,671 for
manufacturing and $434,904 for general and administrative. During 1996,
NetStar also incurred significantly higher expenses than in 1995 for such
items as prototype supplies, travel and entertainment, customer advertising
and promotional expenses, public and investor relations and other consulting
fees. These higher expenses were for development of new product features and
in anticipation of a higher level of future business activity and also
resulted from a tripling of the number of employees in the field sales
organization, most of which occurred in the second quarter of fiscal 1996, and
higher expenses associated with being a publicly held company.

Interest expense was $33,072 in 1996 and $3,105 in 1995. The 1996 expense
includes $20,567 for the convertible notes that were issued in June 1995 and
which were repaid or converted to equity in October 1995. Interest income was
$677,573 in 1996 and $65,019 in 1995, the increase resulting from the
investment of the net proceeds of the September 1995 initial public offering
of NetStar Common Stock.

Year Ended September 30, 1995

Revenues for the year ended September 30, 1995 were $3,014,508, compared to
$312,443 for the year ended September 30, 1994. Customers in fiscal 1995
included MCI, Net One, Chernikeeff Networks, Ltd. (NetStar's United Kingdom
distributor), two United States automobile manufacturers, a federal government
systems integrator, two NASA supercomputing sites, two motion picture
animation studios, an atomic power laboratory and several super computer
sites. For the year ended September 30, 1995, NetStar recognized revenues of
$958,769 for shipments made to Net One and $108,458 for shipments made to two
customers in Europe. Revenues during fiscal 1995 resulted from the sale of 41
GigaRouters (22 domestic and 19 international) and seven ClusterSwitches (six
domestic and one international). The average GigaRouter selling prices were
$79,260 domestic and $56,510 international. The average ClusterSwitch selling
prices were $19,557 domestic and $18,729 international. The differences in
average selling prices between 1995 and 1994 are not indicative of any trends
because of the low number of units sold (especially 1994 GigaRouter sales),
differences in configurations and the fact that substantially all 1995
international sales were to distributors.

Cost of revenues was $2,126,196, or 70.5% of revenue for the year ended
September 30, 1995, compared to $181,859, or 58.2% of revenue for the year
ended September 30, 1994. This increase in cost of revenues as a percentage of
revenue for fiscal 1995 resulted from increases in the number and assignment
of personnel and other expenses of NetStar's manufacturing and customer
support departments; these expenses were $796,026, or 26.4% of revenue, in
1995. Increases in these expenses resulted from the expansion of NetStar's
manufacturing and customer support capabilities in anticipation of future
revenue growth.

Expenses for fiscal 1995, including net interest expense, were $5,784,781
($2,791,190 for research and development, $1,536,853 for market development
and selling, $1,085,271 for general and administrative, and $529,310 for
interest expense, less $157,843 interest income), compared to $3,915,178 for
fiscal 1994. This increase was primarily the result of an increase in the
number of employees. For the year ended September 30, 1995, compensation and
related expenses, including amounts classified as cost of sales, totaled
$3,213,466 ($1,571,551 for research, development and customer support,
$835,202 for market development and selling, $354,780 for manufacturing and
$451,933 for general and administrative). Other expenses included $513,265 for
depreciation and amortization and $486,265 for legal, audit and consulting. In
addition, NetStar incurred approximately $400,000 of costs in fiscal 1995,
other than compensation, for the redesign of certain products. Interest
expense included $391,994 of expenses and original issue discount related to
the convertible notes issued in June 1995. Development activities included
completion of the ATM media card, improvement of the packet transmission rate,
and completion of an enhanced serial interface card (one of which is attached
to each media

83
<PAGE>

card) that allows "Hotswap" of all media cards. Development also commenced on
a HSSI media card and a faster version of ATM. Marketing efforts continued
with the addition of a marketing support person and a Director of Sales for
the United States. NetStar participated in the November SuperComputing 94
conference held in Washington, D.C., during which its equipment supported the
show floor network. At September 30, 1995, there were 61 employees (24 in
research and development, 12 in manufacturing, eight in customer support, 11
in sales and marketing and six in administration) and a full time
representative in the United Kingdom.

Year Ended September 30, 1994

During fiscal 1994, NetStar continued its focus on product development and
intensified its focus on manufacturing and sales and marketing activities.
NetStar recorded its first revenue ($93,400) in November 1993, which was from
DESY, a German physics laboratory. In the third quarter of fiscal 1994,
revenues totaled $94,300 and were from sales of product to DESY, a U.S.
atmospheric research center and a manufacturer of supercomputers. In the
fourth quarter of fiscal 1994, revenues were $124,743 and were from sales of
product to three supercomputing sites and a federal government systems
integrator. Revenues for the year totaled $312,443, including $128,200 for
shipments made to two customers in Europe. Revenues during fiscal 1994
resulted from the sale of two GigaRouters (one domestic and one international)
and seven ClusterSwitches (six domestic and one international). The selling
prices of the GigaRouters were $50,711 domestic and $108,000 international.
The ClusterSwitch average selling prices were $19,032 domestic and $15,300
international. Cost of revenues for the year ended September 30, 1994 was
$181,859, or 58.2% of revenues.

Expenses, including net interest income, were $3,915,178 for the year ended
September 30, 1994 ($2,544,371 for research and development, $932,307 for
market development and selling, $515,497 for general and administrative, and
$5,414 for interest expense, less $82,411 of interest income), compared to
$1,713,908 for the year ended September 30, 1993. This increase was primarily
the result of an increase in the number of employees. Fiscal 1994 compensation
and related expenses totaled $1,959,738 ($1,188,500 for research and
development, $485,296 for market development and selling, and $285,942 for
general and administrative). Other expenses included $381,635 for depreciation
and amortization, $251,695 for legal, audit and consulting and $94,596 for
tooling and prototype supplies. Product development activities included
completion of the FDDI media card and the ClusterSwitch and commencing
development of an ATM media card. Four GigaRouters were installed and
demonstrated in November 1993 at the SuperComputing 93 conference in Portland,
Oregon, three full time sales representatives were hired, distributors were
engaged in Japan and several European countries, and initial product selling
efforts were intensified. At September 30, 1994, NetStar had 35 employees (15
in research and development, five in manufacturing, three in customer support,
seven in sales and marketing and five in administration) and one full time
representative in the United Kingdom.

Year Ended September 30, 1993

During fiscal 1993, NetStar focused on product development, and, in
addition, commenced initial manufacturing and marketing activities. Design of
the basic GigaRouter chassis and the HIPPI media card were brought to the
stage of initial beta site testing. NetStar also began development of an FDDI
media card. Marketing activities included a demonstration of a prototype
GigaRouter to attendees of the SuperComputing 92 conference held in November
1992 in Minneapolis, Minnesota, and the development of sales and marketing
materials.

Expenses for the year ended September 30, 1993 were $1,713,908 ($1,108,590
for research and development, $298,411 for market development and selling and
$352,476 for general and administrative, less $45,569 of interest income).
Fiscal 1993 compensation and related expenses totaled $873,544 ($565,959 for
research and development, $145,495 for market development and selling, and
$162,090 for general and administrative). Other expenses included $223,453 for
depreciation and amortization, $152,480 for legal, audit and consulting and
$77,187 for tooling and prototype supplies. At September 30, 1993, there were
22 employees (12 in research and development, one in manufacturing, five in
sales and marketing and four in administration).

84
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents were $23,235,442 at March 31, 1996 compared to
$26,812,544 at September 30, 1995, a decrease of $3,577,102. The net cash used
in operating activities was $3,950,191, principally from the net loss for the
six-month period. Cash used in investing activities was $1,397,538 for
purchases of property, equipment and software. Cash from financing activities
was $1,770,627. During the six months ended March 31, 1996, net proceeds from
the issuance of Common Stock were $3,958,730, principally from the exercise of
the over-allotment option by the underwriter of the initial public offering of
NetStar Common Stock. Convertible notes issued in June 1995 that could not be
or were not converted to NetStar Common Stock were repaid in the amount of
$2,132,099. At March 31, 1996, NetStar did not have any material commitments
that will result in significant cash out-flows other than for the purchase of
inventory in the ordinary course of business.

NetStar expects that it will continue to incur operating losses and negative
cash flows at least through its fiscal year ending September 30, 1997. NetStar
believes that existing cash and cash equivalents will satisfy NetStar's
working capital and capital expenditures requirement at least through that
period. However, the information set forth in the preceding two sentences is
forward-looking information, and actual results may differ materially from
such information. Therefore, if, for any reason (including, without
limitation, those described below), NetStar's planned operations and expansion
require more capital than anticipated, revenues do not increase as planned, or
operating losses are greater than planned or continue beyond the period
anticipated by management, NetStar may need additional financing prior to the
end of fiscal 1997 in order to maintain its operations. There can be no
assurance that NetStar would be able to obtain any required additional
financing when needed or that such financing, if obtained, would be on terms
favorable or acceptable to NetStar. If NetStar was unable to obtain additional
financing when needed and under acceptable conditions, it would be required to
significantly scale back expansion plans and perhaps reduce the scope of its
operations. Factors that may affect NetStar's revenues, use of capital,
expenses and/or operating losses include, but are not limited to, the
introduction of competing products with performance equivalent to or exceeding
that of NetStar's products, a claim (whether or not successfully made) that
NetStar's products infringe a patent held by another company or individual,
any performance problems involving NetStar's products, changes in technology
that could cause NetStar's products to become obsolete, the departure of key
members of management and/or key employees, and general economic conditions.
See "Risk Factors."

RECENT ACCOUNTING PRONOUNCEMENT

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure provisions no later
than fiscal years beginning after December 15, 1995 and adoption of the
recognition and measurement provisions for nonemployee transactions no later
than after December 15, 1995. The new standard defines a fair value method of
accounting for stock options and other equity instruments. Under the fair
value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period, which is
usually the vesting period.

Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employee stock-
based transactions. Companies are also permitted to continue to account for
such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose
in a note to the financial statements pro forma net income (loss) and, if
presented, earnings (loss) per share as if the company had applied the new
method of accounting.

The accounting requirements of the new method are effective for all employee
awards granted after the beginning of the fiscal year of adoption. NetStar has
determined that it will elect not to change to the fair value method for
employee-based stock grants. Adoption of the new standard for non- employee
awards did not affect NetStar's cash flows.

85
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of May 31, 1996, the number of shares of
NetStar Common Stock beneficially owned by: (i) each person known by NetStar
to be the beneficial owner of more than 5% of the outstanding shares of
NetStar Common Stock (of which there were none as of such date); (ii) each
director of NetStar; (iii) the Chief Executive Officer and each executive
officer of NetStar whose salary and bonus for the fiscal year ended September
30, 1995 exceeded $100,000; and (iv) all directors and executive officers of
NetStar as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE OF
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OUTSTANDING SHARES(2)
- ---------------- --------------------- ---------------------
<S> <C> <C>
Douglas M. Pihl(5)................. 306,000(3)(4) 2.9%
Duane S. Carlson(5)................ 245,000(3)(4) 2.4
Gary A. Stoltz(5)(6)............... 45,000(3) *
Thomas S. Bednarik(3).............. 40,000(3) *
James D. Edwards(5)................ 40,000(3) *
Richard Z. Belzer(5)............... 15,000(3) *
All executive officers and
directors as a group (12
individuals, including those named
above)............................ 797,550(7) 7.4
</TABLE>
- --------
* Less than 1%

(1) Each person has sole voting and sole dispositive power with respect to all
outstanding shares, except as noted. Includes shares of NetStar Common
Stock issuable pursuant to currently exercisable NetStar Options and those
which are exercisable within 60 days from May 31, 1996.

(2) Based on 10,304,880 shares outstanding as of May 31, 1996. Does not
include: (i) 2,000,000 shares reserved for issuance under the NetStar
Employee Option Plan (of which 1,524,150 shares were subject to
outstanding options as of May 31, 1996); (ii) 1,195,674 shares issuable
upon exercise of NetStar Warrants; (iii) 250,000 shares reserved for
issuance under the NetStar, Inc. Fiscal 1996 Nonemployee Director Stock
Option Plan (under which no options had been granted as of May 31, 1996);
and (iv) 150,000 shares reserved for issuance under the NetStar Stock
Purchase Plan, under which options to purchase 2,541 shares had been
granted as of May 31, 1996.

(3) Includes 164,000, 134,000, 40,000, 40,000, 40,000 and 15,000 shares
issuable pursuant to exercisable NetStar Options held, respectively, by
Messrs. Pihl, Carlson, Bednarik, Edwards, Stoltz and Belzer. Mr. Stoltz
has indicated to NetStar that any economic benefit he may realize from
options held by him will be transferred to Pathfinder Venture Capital Fund
III ("Pathfinder"), which is a stockholder of NetStar and of which Mr.
Stoltz is a principal.

(4) Excludes, for Mr. Pihl, a total of 10,000 shares owned by his spouse, and,
for Mr. Carlson, a total of 2,000 shares owned by his spouse. Messrs. Pihl
and Carlson disclaim any beneficial ownership of such shares.

(5) The business address of Messrs. Pihl, Carlson, Stoltz, Bednarik, Edwards
and Belzer is NetStar, Inc., 10250 Valley View Road, Suite 113, Eden
Prairie, Minnesota 55344.

(6) Mr. Stoltz is a principal of Pathfinder and disclaims beneficial ownership
of the shares of NetStar Common Stock owned by Pathfinder.

(7) Includes 507,500 shares issuable pursuant to exercisable NetStar Options.

86
<PAGE>

UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS

The unaudited pro forma condensed combining statements of operations combine
Ascend's consolidated statements of income for each of the three years in the
period ended December 31, 1995 and for the three month periods ended March 31,
1996 and 1995 with NetStar's consolidated results of operations for each of
the three years in the period ended September 30, 1995 and for the three month
periods ended March 31, 1996 and 1995, giving effect to the Merger as if it
had occurred at the beginning of each period presented on a pooling of
interests basis. The unaudited pro forma condensed combining balance sheet
combines Ascend's consolidated balance sheet as of March 31, 1996 with
NetStar's consolidated balance sheet as of that date, giving effect to the
Merger as if it had occurred on March 31, 1996 with NetStar's consolidated
balance sheet as of that date. The historical financial information of Ascend
has been derived from the audited consolidated financial statements for each
of the three years in the period ended December 31, 1995 and the unaudited
condensed consolidated financial statements for the three month periods ended
March 31, 1996 and 1995 incorporated by reference herein and should be read in
conjunction with such financial statements and the notes thereto. The
historical financial information of NetStar has been derived from the audited
consolidated financial statements for each of the three years in the period
ended September 30, 1995 which are included elsewhere herein and should be
read in conjunction with such financial statements and the notes thereto and
the unaudited condensed consolidated financial statements for the three month
periods ended March 31, 1996 and 1995 which are not included elsewhere herein.
In the opinion of the managements of Ascend and NetStar, the above mentioned
unaudited interim condensed consolidated financial statements of the
respective companies include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the results for
unaudited interim periods. The pro forma information is presented for
illustrative purposes only and is not necessarily indicative of the
consolidated operating results or financial position that would have occurred
had the Merger been consummated at the beginning of the periods presented, nor
is it necessarily indicative of future operating results or financial
position.

87
<PAGE>

ASCEND AND NETSTAR UNAUDITED PRO FORMA CONDENSED COMBINING CONSOLIDATED BALANCE
SHEETS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------------------
ASCEND NETSTAR ADJUSTMENTS COMBINED
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............ $128,654 $23,235 $ -- $151,889
Short-term investments............... 83,661 -- -- 83,661
Accounts receivable, net............. 41,634 428 -- 42,062
Inventories.......................... 50,024 3,655 -- 53,679
Deferred income taxes................ 5,874 -- -- 5,874
Other current assets................. 5,090 481 -- 5,571
-------- ------- ------- --------
Total current assets............... 314,937 27,799 -- 342,736
Investments............................ 58,405 -- 58,405
Furniture, fixtures and equipment,
net................................... 13,871 1,927 -- 15,798
Other assets........................... 1,269 195 5,427 6,891
-------- ------- ------- --------
Total assets......................... $388,482 $29,921 $ 5,427 $423,830
======== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable..................... $ 28,887 $ 1,158 $ -- $ 30,045
Accrued liabilities.................. 27,173 687 7,500 35,360
Accrued compensation and related
liabilities........................... 4,471 356 -- 4,827
-------- ------- ------- --------
Total current liabilities.......... 60,531 2,201 7,500 70,232
Commitments
Stockholders' equity:
Common stock......................... 111 100 (96) 115
Additional paid-in capital........... 276,775 41,902 96 318,773
Retained earnings.................... 51,065 (14,282) (2,073) 34,710
-------- ------- ------- --------
Total stockholders' equity......... 327,951 27,720 (2,073) 353,598
-------- ------- ------- --------
Total liabilities and stockholders'
equity................................ $388,482 $29,921 $ 5,427 $423,830
======== ======= ======= ========
</TABLE>
- --------
See accompanying notes to Unaudited Pro Forma Condensed Combining Financial
Statements.

88
<PAGE>

ASCEND AND NETSTAR
UNAUDITED PRO FORMA CONDENSED COMBINING CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------
ASCEND NETSTAR ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales............................... $91,078 $ 951 $ -- $92,029
Cost of sales........................... 31,848 718 -- 32,566
------- ------- ----- -------
Gross profit.......................... 59,230 233 -- 59,463
Operating expenses:
Research and development.............. 5,495 1,479 -- 6,974
Sales and marketing................... 19,549 946 -- 20,495
General and administrative............ 2,956 629 -- 3,585
------- ------- ----- -------
Total operating expenses............ 28,000 3,054 -- 31,054
------- ------- ----- -------
Operating income (loss)................. 31,230 (2,821) -- 28,409
Interest income, net.................... 2,557 301 -- 2,858
------- ------- ----- -------
Income (loss) before income taxes....... 33,787 (2,520) -- 31,267
Provision for income taxes.............. 12,839 -- (958) 11,881
------- ------- ----- -------
Net income (loss)....................... $20,948 $(2,520) $ 958 $19,386
======= ======= ===== =======
Net income (loss) per share............. $ 0.17 $ (0.26) $ 0.15
======= ======= =======
Number of shares used in per share
calculation............................ 121,675 9,817 125,947
======= ======= =======
</TABLE>
- --------
See accompanying notes to Unaudited Pro Forma Condensed Combining Financial
Statements.

89
<PAGE>

ASCEND AND NETSTAR UNAUDITED PRO FORMA CONDENSED COMBINING CONSOLIDATED
STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1995
-------------------------------------
ASCEND NETSTAR ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales............................... $20,363 $1,010 $-- $21,373
Cost of sales........................... 6,999 690 -- 7,689
------- ------ ---- -------
Gross profit.......................... 13,364 320 -- 13,684
Operating expenses:
Research and development.............. 1,890 634 -- 2,524
Sales and marketing................... 4,609 381 -- 4,990
General and administrative............ 1,683 184 -- 1,867
------- ------ ---- -------
Total operating expenses............ 8,182 1,199 -- 9,381
------- ------ ---- -------
Operating income (loss)................. 5,182 (879) -- 4,303
Interest income, net.................... 403 21 -- 424
------- ------ ---- -------
Income (loss) before income taxes....... 5,585 (858) -- 4,727
Provision for income taxes.............. 2,120 -- (326) 1,794
------- ------ ---- -------
Net income (loss)....................... $ 3,465 $ (858) $326 $ 2,933
======= ====== ==== =======
Net income (loss) per share............. $ 0.04 $(0.16) $ 0.03
======= ====== =======
Number of shares used in per share
calculation............................ 101,176 5,424 103,473
======= ====== =======
</TABLE>
- --------
See accompanying notes to Unaudited Pro Forma Condensed Combining Financial
Statements.

90
<PAGE>

ASCEND AND NETSTAR UNAUDITED PRO FORMA CONDENSED COMBINING CONSOLIDATED
STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------
ASCEND NETSTAR ADJUSTMENTS COMBINED
-------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales.............................. $149,590 $ 3,014 $ -- $152,604
Cost of sales.......................... 51,170 2,126 -- 53,296
-------- ------- ------ --------
Gross profit......................... 98,420 888 -- 99,308
Operating expenses:
Research and development............. 9,609 2,791 -- 12,400
Sales and marketing.................. 33,910 1,537 -- 35,447
General and administrative........... 8,044 1,085 -- 9,129
Purchased R&D........................ 3,032 -- -- 3,032
-------- ------- ------ --------
Total operating expenses........... 54,595 5,413 -- 60,008
-------- ------- ------ --------
Operating income (loss)................ 43,825 (4,525) -- 39,300
Interest income (expense), net......... 5,493 (371) -- 5,122
-------- ------- ------ --------
Income (loss) before income taxes...... 49,318 (4,896) -- 44,422
Provision for income taxes............. 18,745 2 (1,860) 16,887
-------- ------- ------ --------
Net income (loss)...................... $ 30,573 $(4,898) $1,860 $ 27,535
======== ======= ====== ========
Net income (loss) per share............ $ 0.28 $ (0.90) $ 0.25
======== ======= ========
Number of shares used in per share
calculation........................... 108,976 5,448 111,264
======== ======= ========
</TABLE>
- --------
See accompanying notes to Unaudited Pro Forma Condensed Combining Financial
Statements.

91
<PAGE>

ASCEND AND NETSTAR UNAUDITED PRO FORMA CONDENSED COMBINING CONSOLIDATED
STATEMENTS OF INCOME (AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------
ASCEND NETSTAR ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales............................... $39,343 $ 312 $ -- $39,655
Cost of sales........................... 13,205 182 -- 13,387
------- ------- ------ -------
Gross profit.......................... 26,138 130 -- 26,268
Operating expenses:
Research and development.............. 3,595 2,544 -- 6,139
Sales and marketing................... 10,477 932 -- 11,409
General and administrative............ 3,053 516 -- 3,569
------- ------- ------ -------
Total operating expenses............ 17,125 3,992 -- 21,117
------- ------- ------ -------
Operating income (loss)................. 9,013 (3,862) -- 5,151
Interest income, net.................... 892 77 -- 969
------- ------- ------ -------
Income (loss) before income taxes....... 9,905 (3,785) -- 6,120
Provision (benefit) for income taxes.... 1,206 -- (2,204) (998)
------- ------- ------ -------
Net income (loss)....................... $ 8,699 $(3,785) $2,204 $ 7,118
======= ======= ====== =======
Net income (loss) per share............. $ 0.09 $ (0.85) $ 0.08
======= ======= =======
Number of shares used in per share
calculation............................ 92,800 4,433 94,583
======= ======= =======
</TABLE>
- --------
See accompanying notes to Unaudited Pro Forma Condensed Combining Financial
Statements.

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<PAGE>

ASCEND AND NETSTAR UNAUDITED PRO FORMA CONDENSED COMBINING CONSOLIDATED
STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
-------------------------------------
ASCEND NETSTAR ADJUSTMENTS COMBINED
------- ------- ----------- --------
<S> <C> <C> <C> <C>
Net sales............................... $16,215 $ -- $-- $16,215
Cost of sales........................... 5,587 -- -- 5,587
------- ------- ---- -------
Gross profit.......................... 10,628 -- -- 10,628
Operating expenses:
Research and development.............. 1,983 1,109 -- 3,092
Sales and marketing................... 5,492 298 -- 5,790
General and administrative............ 1,856 352 -- 2,208
------- ------- ---- -------
Total operating expenses............ 9,331 1,759 -- 11,090
------- ------- ---- -------
Operating income (loss)................. 1,297 (1,759) -- (462)
Interest income, net.................... 52 45 -- 97
------- ------- ---- -------
Income (loss) before income taxes....... 1,349 (1,714) -- (365)
Provision for income taxes.............. -- -- -- --
------- ------- ---- -------
Net income (loss)....................... $ 1,349 $(1,714) $-- $ (365)
======= ======= ==== =======
Net income (loss) per share............. $ 0.02 $ (0.63) $ 0.00
======= ======= =======
Number of shares used in per share
calculation............................ 82,152 2,725 83,117
======= ======= =======
</TABLE>
- --------
See accompanying notes to Unaudited Pro Forma Condensed Combining Financial
Statements.

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<PAGE>

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINING FINANCIAL STATEMENTS

NOTE A: The adjustments to the unaudited pro forma condensed combining
consolidated balance sheet give effect to the assumed issuance of 4,161,000
shares of Ascend Common Stock as if the Merger had been consummated as of
March 31, 1996 and an anticipated charge for Merger-related expenses totaling
approximately $7.5 million. Such Merger-related expenses include investment
advisory fees, legal and accounting expenses and other transaction costs. The
unaudited pro forma condensed combining consolidated statements of income do
not reflect these non-recurring charges, which Ascend anticipates will be
recorded during the twelve-month period following consummation of the Merger.
The unaudited pro forma condensed combining consolidated statements of income
also include adjustments to give effect to the recording of the income tax
benefit of net operating losses incurred by NetStar in the period in which
such net operating losses were incurred assuming such net operating losses
could have been used to offset net operating income derived by Ascend. The pro
forma combined per share amounts in the unaudited pro forma condensed
combining consolidated statements of income are based upon the historical
weighted average number of shares of common stock and dilutive common stock
equivalents of Ascend outstanding during each period presented. In addition,
the shares of Ascend Common Stock to be issued in connection with the Merger,
based on the equivalent weighted average shares and the dilutive common share
equivalents of NetStar outstanding during each period presented, are treated
as outstanding during each such period.

NOTE B: The unaudited pro forma condensed combining financial statements do
not include adjustments to conform the accounting policies of NetStar to those
followed by Ascend. The nature and extent of such adjustments, if any, will be
based upon further study and analysis and are not expected to be significant
in relationship to the consolidated financial statements of Ascend.

NOTE C: Certain financial statement balances of NetStar have been
reclassified to conform with the Ascend financial statement presentation.

NOTE D: NetStar has a September 30 fiscal year end and, accordingly, the
NetStar statements of operations for the years ended September 30, 1995, 1994
and 1993 have been combined with Ascend statements of income for the calendar
years ended December 31, 1995, 1994 and 1993. In order to conform NetStar's
fiscal year end to Ascend's calendar fiscal year end, NetStar's first quarter
ended December 31, 1995 has not been presented. Instead, NetStar's second
quarter ended March 31, 1996 has been presented for comparative purposes. The
results of operations for NetStar's first quarter ended December 31, 1995
included net sales of approximately $1.7 million, gross profit of
approximately $585,000, net loss of approximately $1.1 million and net loss
per share of $(0.11).

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COMPARISON OF RIGHTS OF ASCEND STOCKHOLDERS AND NETSTAR STOCKHOLDERS

The following is a summary of certain of the material differences between
the rights of holders of NetStar Common Stock and the rights of holders of
Ascend Common Stock. Since NetStar is organized under the laws of the State of
Minnesota and Ascend is organized under the laws of the State of Delaware,
such differences arise from differences between various provisions of the
charter documents of NetStar and Ascend as well as from the differences
between the MBCA and the Delaware General Corporation Law (the "DGCL").

Cumulative Voting in the Election of Directors. In an election of directors
under cumulative voting, each share of stock normally having one vote is
entitled to a number of votes equal to the number of directors to be elected.
A stockholder may then cast all such votes for a single candidate or may
allocate them among as many candidates as the stockholder may choose. Without
cumulative voting, the holders of a majority of the shares present at a
meeting held to elect directors would have the power to elect all the
directors to be elected at that meeting, and no person could be elected
without the support of holders of a majority of the shares voting at such
meeting.

Under the MBCA, cumulative voting in the election of directors is mandatory
unless the corporation's articles of incorporation provide that there shall be
no cumulative voting. The NetStar Articles of Incorporation, as amended (the
"NetStar Articles"), contain a provision that eliminates cumulative voting.
Under the DGCL, cumulative voting is permitted only if it is specifically
provided for in the corporation's certificate of incorporation. Under the
Ascend Certificate of Incorporation, as amended (the "Ascend Certificate"),
cumulative voting is not permitted.

Stockholder Power to Call Special Meeting. Under the MBCA, a special meeting
of stockholders may be called by certain officers, two or more directors, a
person authorized to do so in the articles or bylaws, or shareholders holding
at least 10% of the voting power of all shares entitled to vote, except that a
special meeting for the purpose of considering an action to effect, directly
or indirectly, a business combination, including any action to change or
otherwise affect the composition of the board of directors for that purpose,
must be called by shareholders holding at least 25% of the voting power of all
shares entitled to vote.

Under the DGCL, a special meeting of stockholders may be called by the board
of directors or any other person authorized to do so in the corporation's
certificate of incorporation or bylaws. Under the Ascend Certificate and
Ascend's Bylaws, a special meeting of stockholders may be called by
stockholders holding 10% of the voting power of all shares entitled to vote at
that meeting.

Dissolution. Subject to certain exceptions, under the MBCA, the approval of
not less than a majority of the voting power of the corporation is required
for the disposition of all or substantially all of the corporation's assets,
other than in the regular course of business, and for voluntary dissolution.

Under the DGCL, a dissolution must be approved by stockholders holding 100%
of the total voting power or the dissolution must be initiated by the board of
directors and approved by the holders of a majority of the outstanding voting
shares of the corporation, unless a greater vote is provided for in the
certificate of incorporation. The Ascend Certificate does not require a
greater vote.

Classified Board of Directors. A classified board is one in which a certain
number, but not all, of the directors are elected on a rotating basis each
year. This method of electing directors makes a change in the composition of
the board of directors, and a potential change in control of a corporation, a
lengthier and more difficult process.

The MBCA permits, but does not require, a classified board of directors. The
NetStar Articles provide for a Board of Directors consisting of three classes,
under which the members of such classes are elected for staggered three-year
terms. The DGCL permits, but does not require, a classified board of directors
with staggered terms under which the directors are elected for terms of two or
three years. Ascend's charter documents do not currently provide for a
classified board.

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<PAGE>

Removal of Directors. Under the MBCA, any director or the entire board of
directors of a Minnesota corporation may be removed, with or without cause, by
the holders of the proportion or number of the voting power of the shares of
the classes or series the director represents sufficient to elect them. In
addition, a director elected to fill a vacancy may be removed, with or without
cause, by the affirmative vote of a majority of the remaining directors, if
the shareholders have not elected directors since the appointment to fill the
vacancy.

Under the DGCL, any director or the entire board of directors of a Delaware
corporation without a classified board of directors may be removed with or
without cause by the holders of a majority of the shares then entitled to vote
at an election of directors.

Actions by Written Consent of Stockholders. Under the MBCA, unless otherwise
provided in the articles of incorporation, any action that may be taken at any
annual or special meeting of stockholders may be taken without a meeting by
written consent of stockholders having the requisite number of votes, subject
to the requirement that 10 days' advance notice of such stockholder approval
of certain types of transactions and matters must be given where all
stockholders' consents are not solicited.

Under the DGCL, stockholders may execute an action by written consent in
lieu of a meeting of stockholders. The DGCL permits a corporation to eliminate
such actions by written consent in its certificate of incorporation. The
Ascend Certificate eliminates the rights of stockholders to act by written
consent.

Advance Notice Requirement for Stockholder Proposals and Director
Nominations. Ascend's Bylaws provide that no matter proposed by Ascend
stockholders will be considered at an annual meeting or special stockholder
meeting unless (i) it is specified in the notice of meeting, (ii) it is
brought by or at the direction of the Board of Directors, or (iii) written
notice of such matter is provided to Ascend no later than the date on which
stockholder proposals to be included in the Ascend proxy statement must be
received under federal securities laws.

Voting Requirements. Under the MBCA, an amendment to the articles of
incorporation generally requires the affirmative vote of the holders of
majority of the shares present and entitled to vote unless a larger
affirmative vote is required by the corporation's articles. Except as
specifically described otherwise herein, the NetStar Articles do not contain
any provisions that require a larger affirmative vote in order to amend the
NetStar Articles. Except as specifically required otherwise, under the NetStar
Articles, NetStar's Bylaws or the MBCA, all matters submitted to the NetStar
stockholders are decided by a majority vote of the shares entitled to vote and
represented at a meeting at which there is a quorum.

Under the DGCL, an amendment to the certificate of incorporation requires
the affirmative vote of the holders of majority of the shares entitled to vote
thereon, unless the corporation's certificate of incorporation requires a
greater or lesser number for approval. The Ascend Certificate requires a vote
of 66 2/3% of the shares entitled to vote generally in the election of
directors to approve the amendment of certain provisions of the Ascend
Certificate, including those regarding the elimination of the stockholders'
right to act by written consent, the calling of special meetings of
stockholders, the number, removal and election of directors, the power of the
board of directors and stockholders to amend Ascend's Bylaws and the
limitation of liability of directors and officers. Furthermore, under the
DGCL, the holders of the outstanding shares of a class are entitled to vote as
a class upon any proposed amendment to the certificate of incorporation,
whether or not they are entitled to vote thereon by the provisions of the
corporation's certificate of incorporation, if the amendment would increase or
decrease the aggregate number of authorized shares of such class, increase or
decrease the par value of the shares of such class, or alter or change the
powers, preferences or special rights of the shares of such class so as to
adversely affect them. Under the Ascend Certificate, the affirmative vote of
the holders of 66 2/3% of the votes which all the stockholders would be
entitled to cast is required to amend certain provisions addressing amendment
of the Ascend Certificate. The effect of such supermajority voting provisions
is to make any of these changes more difficult.

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<PAGE>

Approval of Mergers and Consolidations. Under both the MBCA and the DGCL, an
agreement of merger, exchange or consolidation must be approved by the
directors of each constituent corporation and adopted by the affirmative vote
of the holders of a majority of the outstanding shares entitled to vote
thereon, or by a greater vote as provided in a corporation's charter. Neither
the MBCA nor the DGCL requires the separate vote of any class of shares,
unless any provision of the plan of merger would, if contained in a proposed
amendment to the articles, entitle the class or series to vote as a class or
series. Additionally, both the MBCA and the DGCL provide generally that,
unless its charter provides otherwise, no vote of the stockholders of the
surviving corporation is required to approve the merger if (i) the agreement
of merger does not amend in any respect the corporation's charter, (ii) each
share outstanding immediately prior to the effective date is to be an
identical outstanding share of the surviving corporation after the effective
date, and (iii) the number of shares of the surviving corporation's common
stock to be issued in the merger plus the number of shares of common stock
into which any other securities to be issued in the merger are initially
convertible does not exceed 20% of its common stock outstanding immediately
prior to the effective date of the merger.

The MBCA provides that a corporation may acquire all of the outstanding
shares of one or more classes or series of another corporation pursuant to a
plan of exchange. Unlike a merger in which there is a single surviving
corporation, an exchange results in an acquired company becoming the wholly
owned subsidiary of the acquiring corporation. The DGCL contains no provisions
for statutory exchanges. The DGCL, however, does contain provisions relating
to statutory consolidations in which all of constituent corporations disappear
and a new entity is created to continue the business. The MBCA does not
provide for consolidations.

Preemptive Rights. Under the NetStar Articles, holders of NetStar Common
Stock are expressly denied preemptive rights. The DGCL provides that a
corporation's stockholders have preemptive rights only if such rights are
expressly granted in the corporation's certificate of incorporation. The
Ascend Certificate does not grant preemptive rights.

Rights of Dissenting Stockholders. The MBCA and the DGCL both contain
provisions which entitle certain dissenting stockholders to receive the
appraised value of their ownership in connection with certain transactions.
While the appraisal rights provided by the DGCL and the MBCA are similar, the
specific provisions of the statutes differ, as discussed below.

Under the MBCA, dissenting stockholders are entitled to appraisal rights in
connection with the lease, sale, exchange, transfer or certain other
dispositions of all or substantially all of the assets of a corporation and in
connection with certain amendments to its articles of incorporation which
adversely affect a stockholder's rights. In addition, stockholders of a
Minnesota corporation are entitled, except in limited situations, to appraisal
rights in connection with any merger or with any exchange which requires a
stockholder vote. See "The Special Meeting--Dissenters' Rights." Stockholders
of an acquiring corporation are entitled to appraisal rights in a merger,
combination or majority share acquisition in which such stockholders are
entitled to vote.

Under the DGCL, appraisal rights are available only in connection with
statutory mergers or consolidations. Generally, stockholders of a Delaware
corporation who dissent from a merger or consolidation of the corporation for
which a stockholders' vote is required are entitled to appraisal rights,
requiring the surviving corporation to purchase the dissenting shares at fair
value. There are, however, no statutory rights of appraisal with respect to
stockholders of a Delaware corporation whose shares of stock are either (i)
listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000
stockholders where such stockholders receive only shares of stock of the
corporation surviving or resulting from the merger or consolidation (or cash
in lieu of fractional interests therein).

Dividends and Repurchases of Shares. Under the MBCA, a corporation may pay
dividends and purchase its own shares, provided the board of directors
reasonably determines that such payments would not render the corporation
unable to pay its debts in the ordinary course of business and would not
result in the corporation's total assets being less than the sum of (i) its
total liabilities, plus (ii) the amount that would be needed, if the

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<PAGE>

corporation were to be dissolved, to satisfy the rights of preferred
stockholders. The MBCA also restricts a Minnesota corporation's ability to
repurchase shares from certain stockholders. Specifically, a Minnesota
corporation may not purchase or agree to purchase any voting shares from a
person who owns more than 5% of the corporation's voting power for more than
the fair market value of such shares if the shares have been owned for less
than two years, unless the purchase is approved by stockholders who hold a
majority of the voting power of all shares entitled to vote. The corporation
may also make such a purchase if it makes an offer to purchase shares from all
of its stockholders for at least equal value per share. These provisions may
limit NetStar's ability to purchase shares in opposition to a takeover
attempt.

Subject to any restrictions contained in a corporation's certificate of
incorporation, the DGCL generally provides that a corporation may declare and
pay dividends out of surplus (defined as net assets minus stated capital) or,
when no surplus exists, out of net profits for the fiscal year in which the
dividend is declared and/or for the preceding fiscal year. Dividends may not
be paid out of net profits if the capital of the corporation is less than the
amount of capital represented by the issued and outstanding stock of all
classes having a preference upon the distribution of assets.

Limitations of Liability of Directors and Officers; Indemnification. Under
the MBCA, a corporation may include in its articles of incorporation a
provision which would, subject to the limitations described below, eliminate
or limit directors' liability to the corporation or its stockholders for
monetary damages for breach of fiduciary duty. Under the MBCA, a director's
liability cannot be eliminated or limited for (i) any breach of the director's
duty of loyalty to the corporation or its stockholders; (ii) acts or omissions
not in good faith or that involve intentional misconduct or a knowing
violation of law; (iii) the making of an unlawful distribution under the MBCA;
(iv) certain violations of Minnesota securities laws; (v) any transaction from
which the director derived an improper personal benefit; or (vi) any act or
omission occurring before the date the provision in the corporation's articles
eliminating or limiting liability became effective. The NetStar Articles
include such a provision.

Under the MBCA, Minnesota corporations are required to indemnify persons in
their official capacity (directors, officers, employees and agents) within
prescribed limits as long as they satisfy the five criteria of eligibility set
forth in the MBCA. NetStar's Bylaws provide that NetStar is to indemnify such
persons to the fullest extent permitted by the MBCA.

The MBCA provides that the corporation must make advance payment of expenses
upon the request of a person who is eligible for indemnification, if that
person supplies the corporation with an affidavit stating that the person
honestly believes that he or she has met the criteria for mandatory
indemnification and promises to repay the corporation if it is ultimately
found that the criteria were not met.

Minnesota law further provides specific statutory authority for directors in
discharging their duties to consider factors in addition to the interests of
the corporation's stockholders, such as the interests of the corporation's
employees, suppliers, creditors and customers; the economy of the state and
nation; community and societal considerations; the long-term and short-term
interests of the corporation and its stockholders; and the possibility that
these interests may be best served by the continued independence of the
corporation.

Under the DGCL, a corporation may include in its certificate of
incorporation a provision which would, subject to the limitations described
below, eliminate or limit directors' liability for monetary damage for
breaches of their fiduciary duty of care. Under the DGCL, a director's
liability cannot be eliminated or limited (i) for breaches of duty of loyalty,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for the payment of unlawful
dividends or expenditure of funds for unlawful stock purchases or redemptions,
or (iv) for transactions from which such director derived an improper personal
benefit. The Ascend Certificate includes such a provision. The Ascend Bylaws
provide that subject to certain conditions, Ascend will indemnify any person
in connection with any threatened, pending or completed action, suit or
proceeding by reason of the fact that person is or was or has agreed to become
a director or officer of Ascend, or is or was serving, or has agreed to serve,
at the request of Ascend as a director.

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<PAGE>

Business Combinations and Control Share Acquisitions. NetStar is governed by
Sections 302A.671 and 302A.673 of the MBCA. In general, Section 302A.671
provides that the shares of a corporation acquired in a "control share
acquisition" have no voting rights unless voting rights are approved in a
prescribed manner. A "control share acquisition" is an acquisition, directly
or indirectly, of beneficial ownership of shares that would, when added to all
other shares beneficially owned by the acquiring person, entitle the acquiring
person to have voting power of 20% or more in the election of directors. In
general, Section 302A.673 prohibits a public Minnesota corporation from
engaging in a "business combination" with an "interested shareholder" for a
period of four years after the date of the transaction in which the person
became an interested shareholder, unless the business combination is approved
in a prescribed manner. "Business combination" includes mergers, asset sales
and other transactions resulting in a financial benefit to the interested
stockholder. An "interested shareholder" is a person who is the beneficial
owner, directly or indirectly, of 10% or more of the corporations' voting
stock or who is an affiliate or associate of the corporation and at any time
within four years prior to the date in question was the beneficial owner,
directly or indirectly, of 10% or more of the corporation's voting stock. Such
provisions of Minnesota law could have the effect of delaying, deferring or
preventing a change in control of NetStar.

Section 203 of the DGCL prohibits certain transactions between a Delaware
corporation and an "interested stockholder." For purposes of this provision an
"interested stockholder" is a stockholder that is directly or indirectly a
beneficial owner of 15% or more of the voting power of the outstanding voting
stock of a Delaware corporation (or its affiliate or associate). This
provision prohibits certain business combinations between an interested
stockholder and a corporation for a period of three years after the date the
interested stockholder acquired its stock, unless (i) the business combination
is approved by the corporation's board of directors prior to the stock
acquisition date; (ii) the interested stockholder acquired at least 85% of the
voting stock of the corporation in the transaction in which he became an
interested stockholder; or (iii) the business combination is approved by a
majority of the board of directors and the affirmative vote of two-thirds of
disinterested stockholders.

Delaware law contains no provisions similar to the control share acquisition
provision in the MBCA.

----------------

The foregoing summary does not purport to be a complete statement of the
rights of holders of Ascend Common Stock and NetStar Common Stock under, and
is qualified in its entirety by reference to, the DGCL and the MBCA, the
Ascend Certificate and Ascend Bylaws, and the NetStar Articles and NetStar
Bylaws. See "Description of Ascend Capital Stock" for a summary of certain
other rights relating to the Ascend Common Stock.

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DESCRIPTION OF ASCEND CAPITAL STOCK

The authorized capital stock of Ascend consists of 400,000,000 shares of
Common Stock, $.001 par value per share, and 2,000,000 shares of Preferred
Stock, $.001 par value per share.

COMMON STOCK

As of May 31, 1996, there were approximately 112,111,031 shares of Ascend
Common Stock outstanding held of record by approximately 954 shareholders.

The holders of Ascend Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders.
Accordingly, holders of a majority of the shares of Ascend Common Stock
entitled to vote in any election of directors may elect all of the directors
standing for election. Subject to preferences that may be applicable to any
outstanding Preferred Stock, holders of Common Stock are entitled to receive
ratably such dividends as may be declared by the Ascend Board out of funds
legally available therefor. In the event of a liquidation, dissolution or
winding up of Ascend, holders of Ascend Common Stock are entitled to share
ratably in the assets remaining after payment of liabilities and the
liquidation preference of any outstanding Preferred Stock. Holders of Ascend
Common Stock have no preemptive, conversion or redemption rights. All of the
outstanding shares of Ascend Common Stock are, and the shares to be issued in
connection with the Merger when issued will be, fully paid and non-assessable.

The transfer agent for Ascend Common Stock is The First National Bank of
Boston.

PREFERRED STOCK

Up to 2,000,000 shares of undesignated Ascend Preferred Stock are authorized
for issuance. The Ascend Board has the authority, without further action by
the stockholders, to issue such Preferred Stock in one or more series and to
fix the designations, powers, preferences, privileges and relative
participating, optional or special rights and the qualifications, limitations
or restrictions thereof, including dividend rights, conversion rights, voting
rights, terms of redemption and liquidation preferences, any or all of which
may be greater than the rights of the Ascend Common Stock. The Ascend Board,
without stockholder approval, can issue Preferred Stock with voting,
conversion or other rights that could adversely affect the voting power and
other rights of the holders of Ascend Common Stock. Preferred Stock could thus
be issued quickly with terms calculated to delay or prevent a change in
control of Ascend or make removal of management more difficult. Additionally,
the issuance of Preferred Stock may have the effect of decreasing the market
price of the Ascend Common Stock. At present, Ascend has no plans to issue any
of the Preferred Stock.

LEGAL MATTERS

The validity of the shares of Ascend Common Stock to be issued in connection
with the Merger will be passed upon for Ascend by Gray Cary Ware &
Freidenrich, a Professional Corporation, Palo Alto, California. Attorneys at
Gray Cary Ware & Freidenrich own approximately 17,902 shares of Ascend Common
Stock.

EXPERTS

The consolidated financial statements of Ascend Communications, Inc.
appearing in Ascend's Annual Report (Form 10-K) for the year ended December
31, 1995 have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.

The consolidated financial statements of NetStar as of September 30, 1994
and 1995, and for each of the three years in the period ended September 30,
1995 included in this Proxy Statement/Prospectus have been audited by Deloitte
& Touche LLP, independent auditors, as set forth in their report appearing
elsewhere herein, and have been so included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.

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GLOSSARY

ANALOG

A method of sending voice, video, or data that is "analogous" to the
original signal. Analog transmission is associated with voice and data signals
over conventional telephone lines. (Contrast with digital).

ARPANET

A national network funded by the Advanced Research Projects Agency (ARPA)
and built by Bolt, Beranek and Newman (BBN). The network was used from its
origination in 1969 until 1990 as the basis for early networking research and
also as the central backbone of the early Internet. It was phased out of use
and decommissioned after the introduction of the NSFNET.

ASCEND INVERSE MULTIPLEXING PROTOCOL (AIM)

An in-band protocol used to manage interconnection of two remotely located
inverse multiplexers. AIM is a feature-rich, widely used inverse multiplexing
protocol developed and supported by Ascend.

ASYNCHRONOUS TRANSFER MODE

Usually referred to by its acronym ATM. A communications protocol that
defines a method for dividing a continuous stream of data into fixed length 53
byte groups (called Cells). ATM standards also define methods for switching
cells among a number of input and output communications links. ATM is being
defined or proposed as a standard for communicating across a variety of
underlying physical media.

ATM

See "Asynchronous Transfer Mode."

ATM/OC-3C

The version of ATM defined for communicating across a SONET transmission
link which operates at a speed of approximately 155 Mbit/s.

ATM/OC-12C

The version of ATM defined for communicating across a SONET transmission
link which operates at a speed of approximately 622 Mbit/s.

ATM SWITCHING

The methods defined by ATM standards for switching ATM cells among physical
input and output lines.

BANDWIDTH

A term adopted from radio engineering and used to describe the information
carrying capacity of a communication channel. A channel with higher bandwidth
is capable of transmitting a larger number of bits per second than a lower
bandwidth channel. The term originally was more precisely defined to mean the
capacity of radio bands, but it has been widely adopted and generalized by the
networking community.

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BANDWIDTH ON DEMAND

A term used to describe a communications channel whose bandwidth can be
increased or decreased without terminating and re-establishing the channel.
Typically used with inverse multiplexing. Also referred to as Rubber
Bandwidth.

BACKBONE NETWORK

Backbone is a term used to describe the central communication link of an
organization. A backbone network is generally faster than the networks it
serves, since many connected networks may be sending data through the backbone
simultaneously.

BASIC RATE INTERFACE (BRI)

One of two subscriber "interfaces" in ISDN. BRI has two bearer B-channels at
64 kbit/s and a data D-channel at 16 kbit/s. The B-channels are for voice,
video and data. The D-channel is for signalling between telephone company
switches and for carrying ISDN user-network messages.

BONDING

Bandwidth On Demand Interoperability Group. A consortium of over 40
datacommunications equipment vendors and service providers who joined together
to create a standardized inverse multiplexing protocol so that inverse
multiplexers from different vendors could interoperate. Also refers to the
resultant specification, sometimes known as the BONDING specification.

BUS-BASED

A term used to describe a system in which the major components communicate
by sending information across a shared communication link.

CELL

A packet of data that is fixed in length. The most frequent association is
with ATM. The ATM cell length is 53 bytes.

CHALLENGE HANDSHAKE AUTHENTICATION PROTOCOL (CHAP)

This security protocol allows access between data communications systems
prior to and during data transmission. CHAP uses challenges to verify that a
user has access to a system.

CHANNEL SERVICE UNIT (CSU)

A device used to connect a digital telephone line coming in from the
telephone company to network access equipment located on the customer
premises. A CSU may also be built into the network interface of the network
access equipment.

CLIENT/SERVER

A computer system architecture in which a group of computers (the Clients)
request services from another group of computers (the Servers). Usually
implemented in a system where the various computers are remote from one
another and connected by a network.

102
<PAGE>

CROSSBAR SWITCH

A crossbar switch is an interconnection mechanism in which every input port
has a separate connection path to every output port. A crossbar is a non-
blocking switch.

DIGITAL

A method of sending voice, video, or data that reconstructs the signals
using binary codes (1s and 0s). Digital transmission offers faster speeds,
better accuracy and more flexibility than analog transmission.

DIGITAL MODEM

A system component which allows communication over digital access facilities
with a remotely located system connected to the public network over analog
facilities. Converts an incoming digital data stream containing PCM-encoded
modem waveform into actual data contained in waveform at the data rate
transmitted by the far-end modem; performs inverse function for the outgoing
data stream.

DYNAMIC BANDWITH ALLOCATION

The process of determining current traffic loads over a channel, and
automatically increasing or decreasing the bandwith of the channel to optimize
overall utilization efficiency.

A digital transmission link with a capacity of 2.048 Mbit/s, used outside of
North America. Typically channelized into 30 DSOs, each capable of carrying a
single voice conversation or data stream. Uses two pairs of twisted pair
wires.

EISA BUS

Extended Industry Standard Architecture. The currently most common
interconnection bus for IBM compatible personal computers. EISA is a 32 bit
wide bus.

ETHERNET

A local area network technology standardized by the Institute of Electrical
and Electronic Engineers (IEEE) and which operates over twisted pair or
coaxial cable at 10 Mbits/s (10 BaseT) or 100 Mbits/s (100 BaseT). Used to
connect devices such as computers, printers and terminals.

FDDI

An abbreviation for Fiber Distributed Data Interchange.

FIBER DISTRIBUTED DATA INTERCHANGE (FDDI)

A 100 Mbit/s token ring local area network technology standardized by the
American National Standards Institute (ANSI).

FIBRE CHANNEL

A communications standard that defines protocols, switching mechanisms and
physical specifications for communicating at speeds of up to 1062 Mbit/s.
After subtracting the overhead bits, the true data rate is about 800 Mbit/s,
or about the same as HIPPI. Fibre Channel has the distinct advantage of being
a fiber optic technology that can cover a much larger distance than the copper
cable of HIPPI. Although the HIPPI community has defined a fiber optic based
serial HIPPI, it has yet to become a standard.

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<PAGE>

FRAME RELAY

A form of packet switching, but using smaller packets and less error
checking than traditional forms of packet switching (such as X.25). Now a new
international standard for efficiently handling high-speed, bursty data over
wide area networks.

FULL MOTION VIDEO

Video images transmitted at a rate high enough to cause moving images to
appear to be moving without jerkiness. Usually requires a frame (one full
screen of image) approximately every 30th of a second.

GIGABIT PER SECOND (GBITS/S)

One billion bits per second.

GLOBAND

The name given for a set of European network services which offer digital
dial-up bandwidth in 64 kbit/s increments, accessed from the customer premise
over PRI lines. These services are offered under different names in each
participating country.

HIGH SPEED SERIAL INTERFACE (HSSI)

A serial transmission standard that transmits bits at speeds up to about 53
Mbits/s.

HIPPI

High Performance Parallel Interface. HIPPI is intended as the physical layer
of an efficient simplex point-to-point interface for transmitting data at a
peak rate of 800 or 1600 Mbits/s between data processing devices using
multiple twisted pair copper cables at distances up to 25 meters.

HSSI

See "High Speed Serial Interface."

INTER EXCHANGE CARRIER (IEC)

Common carrier providing communications channels between local telephone
companies (LECs, or Local Exchange Carriers). Also known as long distance
carriers, such as AT&T, MCI, Sprint, WilTel, etc.

INTERNET PROTOCOL

The TCP/IP standard protocol that defines the IP datagram as the unit of
information passed across an internet and provides the basis for
connectionless, best effort packet delivery service. An integral part of IP is
the ICMP control and error message protocol. The entire suite of protocols is
often referred to as TCP/IP because TCP and IP are the two most fundamental
protocols.

INTERNET SERVICE PROVIDERS (ISPS)

A group of companies that provide access to the Internet to a set of
customers. In April 1995, the United States government changed the Internet
from a government funded program to a commercially viable business enterprise,
and as the popularity of the Internet has grown, more and more companies are
announcing their intention to provide Internet access services. ISPs range in
size from large, nationwide or worldwide organizations to small, regional
companies that serve a very local set of clients.

INVERSE MULTIPLEXING

Several combined, lower-speed circuits that make up one circuit for greater
bandwidth. Inverse multiplexing also pulls together and synchronizes multiple
channels at the receiving end of data, voice, or video transmission.

104
<PAGE>

See "Internet Protocol."

IP ROUTING

The process of examining the destination address portion of an inbound IP
packet and determining which of possibly several outbound routes on which the
packet should be sent.

ISDN

Integrated Services Digital Network. A system that provides simultaneous
voice and high-speed data transmission through a single channel to the user's
premises. ISDN is an international standard for end-to-end digital
transmission of voice, data and signaling.

ISDN MULTIRATE

A network-based ISDN service which allows users network access equipment to
dial network channels of bandwidth in increments of 64 kbit/s, up to 1536
kbit/s. Access to ISDN Multirate service is obtained over ISDN PRI lines.

LAYER

A term used to describe the division of a complex data transmission protocol
into a set of manageable functions. The collection of layers is generally
referred to as a "Protocol Stack." Each layer typically receives data or
commands from one of its neighbors in the stack, performs one or more of its
defined functions as a result, and passes the data or result of the command to
its neighbor above or below it. See "OSI Seven Layer Network Protocol Stock."

LAYER 2

Layer 2 of the OSI reference model is called the Data Link Layer. The Data
Link Layer is responsible for error free data transmission over a data link.
It performs such functions as link establishment, error detection and recovery
and flow control.

LAYER 3

Layer 3, the Network Layer, provides a means for network service users to
exchange information without concern about the topology of the network and the
transmission media in each subnetwork. It provides two kinds of services: the
connection-oriented network service and the connectionless network service.
The Network Layer is probably the most complex of the seven layers of the OSI
reference model.

LEC

Local Exchange Carrier. Local telephone company, providing connections
between local points or to long distance carriers for extended connections.
Examples are Pacific Bell in California, Illinois Bell in Illinois, GTE in
Hawaii, etc.

LOCAL AREA NETWORK (LAN)

A data communications network spanning a limited geographical area, usually
within a single facility or campus. It provides communications between
computers and peripherals.

MEDIA

A term used to describe the physical communications link of a network. The
term can be applied to wire, fiber optics or a variety of other means of
transmitting digital data.

MULTICHANNEL POINT-TO-POINT PROTOCOL (MPP)

A protocol similar to PPP (Point-to-Point Protocol) but operable over
multiple network channels in an inverse multiplexed scenario. Developed by
Ascend.

105
<PAGE>

NETWORK LAYER

See "Layer 3."

NON-BLOCKING

The attribute of a switching system that allows any input to be connected to
any output without the delay of finding its path blocked by an internal switch
contention. The term does not apply to the possibility that the requested
destination is unable to answer the request, but only to internal switch
blockages.

NSFNET

A network funded by NSF and which for the period from 1986 to 1995 served as
the backbone of the Internet. The speed of the NSFNET was periodically
increased from its original 56 Kbit/s to a speed of 45 Mbit/s before it was
phased out. The vBNS replaced NSFNET as the backbone for the NSF supercomputer
centers, with commercial organizations such as MCI providing Internet backbone
services.

OSI SEVEN LAYER NETWORK PROTOCOL STACK

In 1978, the International Organization for Standardization (ISO) recognized
that standards for networks of heterogeneous systems were required, and
initiated an activity known as Open Systems Interconnection (OSI). The OSI
reference model provides a layered architecture effectively breaking up the
overall problem of machine-to-machine communication into manageable pieces.
There are seven different layers in the OSI reference model. Each of the
layers provides a defined set of functions to the layers above and below it.
Actual implementations of networking software systems generally do not rigidly
follow the OSI reference model, but it has become a very useful tool for
discussing network designs.

PACKET

A unit of data sent across the network. The term is not precisely defined,
but is generally used to describe how a large block of data is formatted into
smaller segments during the process of sending the block through a network.
Each packet is typically surrounded by information that identifies the source
and destination devices to the network. The analogy is often made to a mailing
envelope containing a letter, a destination address and a return address.

POINT-TO-POINT PROTOCOL (PPP)

A protocol that allows single nodes to access a LAN backbone network
constructed of leased lines and routers. Often used for dial-up remote LAN
access.

PRIMARY RATE INTERFACE (PRI)

An ISDN subscriber line, consisting of twenty-three 64 kbit/s B channels in
North America (thirty 64 kbit/s channels elsewhere) and one 64 kbit/s D
channel, used for signaling purposes.

PRIVATE BRANCH EXCHANGE (PBX)

A private switching system, usually serving an organization, such as a
business or a government agency, and usually located on the customer's
premises.

PROTOCOL

A formal description of message formats and the rules two or more machines
must follow to exchange those messages. In a typical network, several
different protocols are defined in order to implement the exchange of

106
<PAGE>

various messages. For example, a network requires protocols for establishing a
connection between two machines, for exchanging the date to be transferred and
to inform the sender about the success or failure of the transfer. A
collection of such lower level protocols, taken as a set, is usually also
referred to as a protocol.

PUBLIC SWITCHED DIGITAL NETWORK (PSDN)

Term used to describe the set of digital dial-up services offered by carrier
(IECs and LECs).

REMOTE LAN ACCESS

The process of allowing branch offices, telecommuters and traveling computer
users to access the corporate LAN backbone over dedicated or dialed, digital
or analog lines.

ROUTER

Generically, any machine responsible for making decisions about which of
several paths network traffic will follow. When used with TCP/IP, the term
refers specifically to an IP gateway that routes datagrams using IP
destination addresses. Unlike bridges, which logically connect at OSI layer 2,
routers provide logical paths at OSI layer 3. Like bridges, remote sites can
be connected using routers over dedicated or switched lines to create WANs.

ROUTING MANAGEMENT SYSTEM

NetStar's name for its collection of hardware and software that comprises
the central management of its GigaRouter system.

RS-366

An EIA standard for providing dialing commands to network access equipment.
Uses RS-232 electrical specifications but different connector pinouts and
signal functions.

RUBBER BANDWIDTH

See "Bandwidth on demand."

SHARED MEDIA

Generally refers to any transmission system in which the physical medium
over which the data is sent is shared among all sending devices attached to
the transmission system. The physical medium may be a set of conductors, as in
an internal computer system bus, or a single wire or fiber optic cable, as in
a variety of LANs.

SIMPLE NETWORK MANAGEMENT PROTOCOL (SNMP)

A protocol governing network management and monitoring of network devices
and their functions. Originally developed in the TCP/IP environment.

SONET

A United States ANSI standard defining a digital transmission format
hierarchy known as the Synchronous Optical Network protocol. SONET defines a
frame format, based on a 125 microsecond period, which includes overhead and
payload bits and describes how other transmission rate formats are packed into
these SONET frames. SONET is becoming an increasingly important transmission
technology in the data and voice carrier industry.

107
<PAGE>

STILL FRAME GRAPHICS

Graphical images transmitted one at a time at a slow rate. No attempt is
made to merge sequential frames into a moving image.

SWITCHING TECHNOLOGY

A general term used to describe a wide variety of transmission system
designs in which multiple paths exist between input and output ports and a
control mechanism activates the appropriate path in response to requests to
connect a particular input to a particular output. One broad distinction
between switching systems is whether they are blocking or non-blocking.

SYNCHRONOUS OPTICAL NETWORK

See "SONET."

A digital transmission link with a capacity of 1.544 Mbit/s, used in North
America. Typically channelized into 24 DSOs, each capable of carrying a single
voice conversation or data stream. Uses two pairs of twisted pair wires.

TARIFF

Documents filed by a regulated telephone company with a state public utility
commission or the Federal Communications Commission. Document details
services, equipment, and pricing publicly offered by the telephone company.

TELECOMMUTER

A work-at-home computer user who connects to the corporate LAN backbone
using remote access technologies (i.e., using a modem over analog lines, ISDN
TA over ISDN lines, or CSU/DSU over switched 56 lines).

TELNET

Terminal-to-remote host protocol developed for ARPAnet. It is the TCP/IP
protocol governing the exchange of character-oriented terminal data.

TERABYTES

One trillion bytes.

TRANSMISSION CONTROL PROTOCOL/INTERNET PROTOCOL (TCP/IP)

The TCP/IP standard transport level protocol that provides the reliable,
full duplex, stream service on which many applications depend. TCP allows a
process on one machine to send a stream of data to a process on another. It is
connection oriented in the sense that before transmitting data, participants
in the exchange must establish the connection.

UNIX

A multi-user, multi-tasking computer operating system originally developed
at Bell Laboratories in the early 1960s. The use of Unix has grown until,
today, it is the dominant operating system in the high performance computing
world.

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<PAGE>

VERY HIGH SPEED BACKBONE NETWORK SERVICE (VBNS)

A network funded by the NSF and designed, built and operated, under contract
to NSF, by MCI Communications Corp. The network connects the five NSF
supercomputer centers (Cornell Theory Center, Pittsburgh Supercomputer Center,
National Center for Supercomputer Applications, National Center for
Atmospheric Research, and San Diego Supercomputer Center) with a 155 Mbit/s
ATM network. The network is an IP network.

VIDEOCONFERENCING

The use of digital video transmission systems to communicate between sites
using video and voice. Digital video transmission systems typically consist of
camera, codec (coder-decoder), network access equipment, network, and audio
system.

WIDE AREA NETWORK (WAN)

A data network typically extending a LAN outside a building or beyond a
campus, over IXC or LEC lines to link to other LANs at remote sites. Typically
created by using bridges or routers to connect geographically separated LANs.

109
<PAGE>

INDEX TO NETSTAR, INC. CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................... F-2
Consolidated Balance Sheets as of March 31, 1996 (Unaudited)
and September 30, 1995 and 1994........................................... F-3
Consolidated Statements of Operations for the Six Months
Ended March 31, 1996 and 1995 (Unaudited) and the Years Ended
September 30, 1995, 1994, and 1993........................................ F-4
Consolidated Statements of Stockholders' Equity for the Six
Months Ended March 31, 1996 (Unaudited) and for the Years
Ended September 30, 1995, 1994, and 1993.................................. F-5
Consolidated Statements of Cash Flows for the Six Months Ended
March 31, 1996 and 1995 (Unaudited) and the Years Ended
September 30, 1995, 1994, and 1993........................................ F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

Board of Directors NetStar, Inc. Minneapolis, Minnesota

We have audited the accompanying consolidated balance sheets of NetStar,
Inc. and subsidiary (the "Company") as of September 30, 1995 and 1994 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years ended September 30, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of NetStar, Inc. and subsidiary
as of September 30, 1995 and 1994 and the results of their operations and
their cash flows for each of the three years ended September 30, 1995 in
conformity with generally accepted accounting principles.

As discussed in Note 1 to the consolidated financial statements, in 1994 the
Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes.
Deloitte & Touche LLP

Minneapolis, Minnesota November 7, 1995

F-2
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30
-----------------------
MARCH 31
1996 1995 1994
----------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............. $23,235,442 $26,812,544 $4,072,620
Accounts receivable, less allowance for
doubtful accounts of $6,000 at March
31, 1996.............................. 427,672 685,332 125,302
Interest receivable.................... 98,582 44,115 10,864
Inventories (Note 2)................... 3,655,099 2,013,362 1,146,133
Prepaid expenses....................... 382,138 184,436 42,427
----------- ----------- ----------
Total current assets................. 27,798,933 29,739,789 5,397,346
Property and Equipment, net (Note 3)..... 1,926,546 1,176,989 446,122
Other Assets:
Capitalized software, less accumulated
amortization of $27,519, $21,405, and
$9,178, respectively.................. 21,391 27,505 39,732
Purchased software, less accumulated
amortization of $14,100 and $7,665,
respectively.......................... 139,610 89,335
Organization costs and other
intangibles, less accumulated
amortization of $22,646, $19,311, and
$12,018, respectively................. 9,759 13,406 20,699
Deposits............................... 24,388 21,541 45,517
----------- ----------- ----------
195,148 151,787 105,948
----------- ----------- ----------
$29,920,627 $31,068,565 $5,949,416
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable (Note 4)................. $ 4,175,974
Accounts payable....................... $ 1,157,573 708,801 $ 361,789
Accrued expenses....................... 646,441 493,314 155,938
Deferred revenue....................... 254,609 130,332
Current portion of capital lease
obligations (Note 5).................. 84,413 93,478 21,307
----------- ----------- ----------
Total current liabilities............ 2,143,036 5,601,899 539,034
Capital Lease Obligations, less current
portion (Note 5)........................ 57,857 104,746 25,970
Commitments (Note 5)
Stockholders' Equity (Note 6):
Common stock, $.01 par value,
20,000,000 shares authorized,
9,950,961, 8,825,480, and 5,001,480
shares issued and outstanding,
respectively.......................... 99,510 88,254 50,014
Additional paid-in capital............. 41,901,781 35,968,276 11,130,739
Accumulated deficit.................... (14,281,557) (10,694,610) (5,796,341)
----------- ----------- ----------
Total stockholders' equity........... 27,719,734 25,361,920 5,384,412
----------- ----------- ----------
$29,920,627 $31,068,565 $5,949,416
=========== =========== ==========
</TABLE>

See notes to consolidated financial statements.

F-3
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

See notes to consolidated financial statements.

F-4
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
NOTES
RECEIVABLE
ARISING
COMMON STOCK ADDITIONAL FROM SALE OF
----------------- PAID-IN ACCUMULATED COMMON
NUMBER AMOUNT CAPITAL DEFICIT STOCK TOTAL
--------- ------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Balances at September
30, 1992............... 1,483,000 $14,830 $ 1,243,266 $ (297,839) $ 960,257
Exercise of stock
options............... 10,000 100 12,400 12,500
Issuance of common
stock in connection
with sale to outside
members of the
Company's Board of
Directors............. 40,000 400 49,600 $(25,000) 25,000
Issuance of common
stock in connection
with private
placement, less
related costs of
$351,798 (April
1993)................. 1,442,000 14,420 3,238,782 3,253,202
Payment received on
notes receivable...... 25,000 25,000
Net loss............... (1,713,908) (1,713,908)
--------- ------- ----------- ------------ -------- -----------
Balances at September
30, 1993............... 2,975,000 29,750 4,544,048 (2,011,747) 2,562,051
Issuance of common
stock in connection
with private
placement, less
related costs of
$659,105 (January-
April 1994)........... 1,626,480 16,264 4,610,691 4,626,955
Issuance of common
stock less related
costs of $20,000
(September 1994)...... 400,000 4,000 1,976,000 1,980,000
Net loss............... (3,784,594) (3,784,594)
--------- ------- ----------- ------------ -------- -----------
Balances at September
30, 1994............... 5,001,480 50,014 11,130,739 (5,796,341) 5,384,412
Issuance of common
stock................. 4,000 40 19,960 20,000
Issuance of warrants to
purchase 840,000
shares of common
stock................. 134,400 134,400
Exercise of stock
options............... 20,000 200 24,800 25,000
Issuance of common
stock in connection
with initial public
offering, less related
costs of $1,903,623... 3,800,000 38,000 24,658,377 24,696,377
Net loss............... (4,898,269) (4,898,269)
--------- ------- ----------- ------------ -------- -----------
Balances at September
30, 1995............... 8,825,480 88,254 35,968,276 (10,694,610) 25,361,920
Exercise of
overallotment option
in connection with
initial public
offering (unaudited).. 570,000 5,700 3,724,950 3,730,650
Conversion of Bridge
Notes, less related
costs of $26,830
(unaudited)........... 369,268 3,693 1,955,558 1,959,251
Exercise of stock
options (unaudited)... 25,000 250 51,375 51,625
Exercise of warrants
(unaudited)........... 69,044 691 202,594 203,285
Cashless exercise of
underwriter's warrants
(unaudited)........... 92,169 922 (922)
Purchase of fractional
shares (unaudited).... (50) (50)
Net loss (unaudited)... (3,586,947) (3,586,947)
--------- ------- ----------- ------------ -------- -----------
Balances at March 31,
1996 (Unaudited)....... 9,950,961 $99,510 $41,901,781 $(14,281,557) $ $27,719,734
========= ======= =========== ============ ======== ===========
</TABLE>

See notes to consolidated financial statements.

F-5
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31 YEARS ENDED SEPTEMBER 30
------------------------ -------------------------------------
1996 1995 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net loss............... $(3,586,947) $(1,878,553) $(4,898,269) $(3,784,594) $(1,713,908)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation
andamortization...... 607,467 159,833 968,875 381,635 223,453
Changes in assets and
liabilities:
Accounts receivable.. 257,660 (350,044) (560,030) (125,302)
Interest receivable.. (54,467) (7,434) (33,251) (6,445) (2,277)
Inventories.......... (1,641,737) (608,724) (867,229) (497,797) (648,336)
Prepaid expenses..... (255,496) (100,730) (84,214) (31,717) (9,144)
Deposits............. (2,847) 12,631 23,976 (11,728) (21,632)
Accounts payable..... 448,772 13,096 347,012 104,323 218,254
Accrued expenses and
deferred revenues... 277,404 207,860 467,708 43,450 102,696
----------- ----------- ----------- ----------- -----------
Total adjustments... (363,244) (673,512) 262,847 (143,581) (136,986)
----------- ----------- ----------- ----------- -----------
Net cash used in
operating
activities......... (3,950,191) (2,552,065) (4,635,422) (3,928,175) (1,850,894)
Cash Flows From
Investing Activities:
Purchases of property
and equipment......... (1,340,828) (154,864) (1,052,903) (333,716) (529,445)
Capitalized and
purchased software.... (56,710) (97,000) (48,910)
Organization costs and
other intangibles..... (15,000) (12,423)
----------- ----------- ----------- ----------- -----------
Net cash used in
investing
activities......... (1,397,538) (154,864) (1,149,903) (397,626) (541,868)
Cash Flows From
Financing Activities:
Payments of capital
lease obligations..... (55,954) (18,266) (79,713) (17,939) (4,174)
Net proceeds from
issuance of common
stock and warrants to
purchase common
stock................. 3,958,730 45,000 24,875,777 6,606,955 3,290,702
Net proceeds from
issuance of notes
payable............... 3,729,185
Purchase of fractional
shares................ (50)
Payment of notes
payable............... (2,132,099)
Payments on notes
receivable arising
from sale of common
stock................. 25,000
----------- ----------- ----------- ----------- -----------
Net cash provided by
financing
activities......... 1,770,627 26,734 28,525,249 6,589,016 3,311,528
----------- ----------- ----------- ----------- -----------
Net (Decrease) Increase
in Cash and Cash
Equivalents............ (3,577,102) (2,680,195) 22,739,924 2,263,215 918,766
Cash and Cash
Equivalents at
Beginning of Period.... 26,812,544 4,072,620 4,072,620 1,809,405 890,639
----------- ----------- ----------- ----------- -----------
Cash and Cash
Equivalents at End of
Period................. $23,235,442 $ 1,392,425 $26,812,544 $ 4,072,620 $ 1,809,405
=========== =========== =========== =========== ===========
Supplemental Cash Flow
Information:
Cash received for
interest.............. $ 623,106 $ 57,585 $ 124,592 $ 75,966 $ 43,291
Capital lease
obligations entered
into for new
equipment............. 121,443 230,660 27,645 41,745
</TABLE>

Noncash Financing Activity

During the six months ended March 31, 1996, $2,067,901 principal amount of
notes payable were converted into 369,268 shares of the Company's common
stock. Unamortized deferred financing costs of $57,794 reduced the amount of
additional paid-in capital resulting from the conversion.

See notes to consolidated financial statements.

F-6
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1996 AND 1995 (UNAUDITED) AND
YEARS ENDED SEPTEMBER 30, 1995, 1994 AND 1993

1.SIGNIFICANT ACCOUNTING POLICIES

NetStar, Inc. (the "Company") was incorporated on December 11, 1990. The
Company was formed to develop, manufacture, market, and support advanced,
high-speed networking products (the "Product") for the high-performance
computing market. The Company was in the development stage at September 30,
1994; during the year ended September 30, 1995, the Company completed its
initial development activities and commenced its planned principal operations.

Consolidation

The consolidated financial statements include the accounts of NetStar, Inc.
and its subsidiary, NetStar International, Ltd. All significant intercompany
balances and transactions have been eliminated.

Unaudited Consolidated Financial Statements

The consolidated financial statements as of March 31, 1996 and for the six
months ended March 31, 1996 and 1995 are unaudited. In the opinion of
management, such unaudited consolidated financial statements include all
adjustments, consisting of only normal, recurring accruals, necessary for a
fair presentation thereof. The results of operations for any interim period
are not necessarily indicative of the results of operations for the year.

Revenue Recognition and Warranties

Product sales are recorded on shipment. For equipment shipped under
equipment loan agreements, revenue is recognized when equipment evaluation is
completed and accepted by the customer. The Company provides a warranty for
labor and materials on certain products sold. In management's opinion, an
adequate warranty reserve has been provided. Maintenance revenue is deferred
and amortized over the maintenance period. For the six months ended March 31,
1996, the Company recognized revenues of $1,792,759 for shipments to a
customer in Japan, $174,740 to a customer in Korea, and $154,188 to three
customers in Europe. For the six months ended March 31, 1995, the Company
recognized revenue of $412,469 for shipments to a customer in Japan and
$108,458 to two customers in Europe. For the year ended September 30, 1995,
the Company recognized revenues of $958,769 for shipments made to a customer
in Japan and $108,458 for shipments made to two customers in Europe. For the
year ended September 30, 1994, the Company recognized revenues of $128,200 for
shipments made to two customers in Europe. The percentage of total revenue
from sales to customers in excess of 10% of total revenues for the six months
ended March 31, 1996 and 1995 and the years ended September 30, 1995 and 1994
were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEARS ENDED
MARCH 31 SEPTEMBER 30
------------- ---------------
1996 1995 1995 1994
----- ----- ------ ------
<S> <C> <C> <C> <C>
Customer A.................................... 69% 30% 32%
Customer B.................................... 50% 25%
Customer C.................................... 2% 1% 36%
Customer D.................................... 34%
Customer E.................................... 6% 10% 8% 8%
</TABLE>

Cash Equivalents

Cash equivalents consist of highly liquid, short-term investments with an
original maturity of three months or less.

F-7
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Inventories

Inventories are carried at the lower of cost (first-in, first-out method) or
market.

Property and Equipment

Property and equipment are stated at cost and depreciated or amortized using
accelerated methods over estimated useful lives of three to five years. Spare
parts are stated at cost and depreciated using the straight-line method over
estimated useful lives of four years.

Capitalized Software

Capitalized software costs are capitalized when technological feasibility
has been established in accordance with Statement of Financial Accounting
Standards (SFAS) No. 86, Accounting for the Cost of Computer Software to Be
Sold, Leased, or Otherwise Marketed.

The establishment of technological feasibility and the ongoing assessment of
the recovery of capitalized software costs require considerable judgment by
management with respect to certain external factors including, but not limited
to, technological feasibility, anticipated future gross revenues, estimated
economic life, and changes in software and hardware technologies.
Capitalization of software costs ceases when the software is available for
general release to customers, at which time amortization of the costs begin.
These costs are being amortized using the greater of the straight-line method
or the ratio of current gross revenues from a product to the total of current
and anticipated future gross revenues from the product. Amortization expense
was $6,114 for each of the six-month periods ended March 31, 1996 and 1995 and
$12,227, $9,178, and $0 for the years ended September 30, 1995, 1994, and
1993, respectively. Generally, an original estimated useful life of four years
is assigned to capitalized software development costs.

Purchased Software

Purchased software is amortized using the unit of sales method.

Organization Costs

Organization costs are being amortized on a straight-line basis over a 60-
month period.

Impairment of Long-Lived Assets

Management of the Company periodically reviews the carrying value of
capitalized software development, purchased software, and other intangible
assets for potential impairment by comparing the carrying value of these
assets with their expected future net cash flows. Should the sum of the
expected future net cash flows be less than the carrying value, management
would determine whether an impairment loss should be recognized. An impairment
loss would be measured by the amount by which the carrying value of the asset
exceeds the fair value of the asset. To date, management has determined that
no impairment of these assets exists.

Research and Development Costs

Research and development costs are expensed as incurred.

Income Taxes

Effective October 1, 1993, the Company adopted the method of accounting for
income taxes pursuant to SFAS No. 109, Accounting for Income Taxes. The
consolidated financial statements prior to October 1, 1993

F-8
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

reflect income taxes under the provisions of Accounting Principles Board
Opinion No. 11 (APB 11), Accounting for Income Taxes. There was no material
effect of this change on income taxes for the year ended September 30, 1994 or
cumulative effect as of October 1, 1993. Under SFAS No. 109, the utilization
of income tax carryforwards will be recognized as a component of income tax
expense rather than as an extraordinary item as would otherwise be required
under APB 11.

Stock-Based Compensation

The Company grants stock options for a fixed number of shares to employees
with an exercise price not less than 100% of the fair market value of the
common stock at the date of grant. The Company accounts for stock option
grants in accordance with APB 25, Accounting for Stock Issued to Employees,
and accordingly, recognizes no compensation expense for the stock options
grants.

Net Loss Per Common and Common Equivalent Share

The net loss per common and common equivalent share is based on the weighted
average number of common and common equivalent shares outstanding during the
period. Net loss per common and common equivalent share excludes stock options
and warrants as common stock equivalents when the effect of their inclusion
would be antidilutive, except that, in accordance with Securities and Exchange
Commission requirements, common and common equivalent shares issued during the
12 months prior to the Company's filing of the initial registration statement
relating to its initial public offering have been included in the calculation
(using the treasury stock method based on the initial public offering price of
$7.00 per share) as if they were outstanding for all periods presented prior
to the Company's initial public offering.

2.INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30
MARCH 31 ---------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Raw materials.................................. $2,100,743 $ 828,317 $ 428,186
Work-in-process................................ 68,040 19,814 198,177
Finished goods................................. 1,486,316 1,165,231 519,770
---------- ---------- ----------
$3,655,099 $2,013,362 $1,146,133
========== ========== ==========
</TABLE>

3.PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
SEPTEMBER 30
MARCH 31 ---------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Office furniture and equipment............... $ 334,400 $ 154,676 $ 86,213
Machinery and equipment...................... 630,556 266,850 109,021
Data processing equipment.................... 1,902,422 1,231,318 648,670
Product development and management
information systems software................ 295,424 234,707 186,505
Spare parts.................................. 491,998 426,421
---------- ---------- ----------
3,654,800 2,313,972 1,030,409
Less accumulated depreciation and
amortization................................ 1,728,254 1,136,983 584,287
---------- ---------- ----------
$1,926,546 $1,176,989 $ 446,122
========== ========== ==========
</TABLE>

F-9
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Property and equipment includes assets under capital leases as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30
MARCH 31 ----------------
1996 1995 1994
-------- -------- -------
<S> <C> <C> <C>
Data processing equipment............................ $250,572 $250,572 $71,167
Machinery and equipment.............................. 53,342 53,342
-------- -------- -------
303,914 303,914 71,167
Less accumulated amortization........................ 174,308 125,307 42,276
-------- -------- -------
$129,606 $178,607 $28,891
======== ======== =======
</TABLE>

4.NOTES PAYABLE

In June 1995, the Company issued $4,200,000 of convertible notes payable
(the Bridge Notes) in a private placement. In connection with this financing,
the Company also issued warrants to the purchasers of the Bridge Notes to
purchase a total of 840,000 shares of common stock. The value of the warrants,
based on an independent appraisal, has been credited to additional paid-in
capital, resulting in the recognition of a similar amount of original issue
discount. The warrants are exercisable at any time after October 31, 1995 at
$5.60 per share (80% of the price to public of the initial public offering)
and expire on October 31, 1999. At March 31, 1996, there were unexercised
warrants for 828,000 shares.

On October 9, 1995, $2,067,901 principal amount of notes was converted into
369,268 shares of the Company's common stock at a conversion price of $5.60
per share (which represents 80% of the price to the public of the shares sold
in the Company's initial public offering). The remaining $2,132,099, together
with interest at 10% per annum, was repaid on October 24, 1995.

The Company incurred costs of $336,415 and original issue discount of
$134,400 relating to the issuance of the Bridge Notes. These costs and the
original issue discount were amortized using the interest method from the date
of issuance through the repayment date of the notes, resulting in additional
interest expense of $391,994 for the year ended September 30, 1995. The
unamortized portion, $78,821, reduced the amount of additional paid-in capital
resulting from the conversion of the Bridge Notes in October 1995.

5.COMMITMENTS

Leases

The Company leases certain equipment under agreements which substantially
cover the estimated useful lives of the respective assets. The leased
equipment has been capitalized at the present value of the future minimum
lease payments.

The Company also rents office, laboratory, and manufacturing space (the
office lease) and certain office furniture under operating leases. In addition
to minimum lease payments, the office lease requires payments for a
proportionate share of real estate taxes and building operating expenses.
During the six months ended March 31, 1996, the Company entered into a new
office lease which expires on March 31, 1999 and provides for a two year
option to renew. Costs incurred under operating leases are recorded as rent
expense. Total rent expense under operating leases was approximately $153,000
and $149,000 for the six months ended March 31, 1996 and 1995, respectively,
and $283,000, $279,000, and $130,000 for the years ended September 30, 1995,
1994, and 1993, respectively.

F-10
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Future minimum lease payments, as of September 30, 1995, are as follows:

<TABLE>
<CAPTION>
CAPITAL OPERATING
-------- ---------
<S> <C> <C>
Fiscal year ending September 30:
1996....................................................... $110,212 $110,220
1997....................................................... 73,170 29,749
1998....................................................... 31,194 13,907
1999....................................................... 11,862 352
2000....................................................... 7,548
-------- --------
Total minimum lease payments............................... 233,986 $154,228
========
Less amount representing interest.......................... 35,762
--------
Present value of future minimum lease payments............. 198,224
Less current portion....................................... 93,478
--------
Long-term portion.......................................... $104,746
========
</TABLE>

6.STOCKHOLDERS' EQUITY

Initial Public Offering

In September 1995, the Company sold 3,800,000 shares of common stock at
$7.00 per share in an initial public offering of common stock. The Company
incurred issuance costs of $1,903,623 in connection with this sale. In
addition, the Company issued an option to the underwriter to purchase up to
570,000 shares at $7.00 per share solely to cover overallotments; this option
was exercised in October 1995, resulting in additional proceeds of $3,730,650.
In September 1995, the underwriter, under terms of the underwriting agreement,
purchased for nominal consideration a warrant to purchase up to 380,000 shares
of common stock at $10.50 per share. This warrant expires in September 2000.

Private Placements of Common Stock

In September 1994, the Company sold 400,000 shares of common stock at $5.00
per share for gross proceeds of $2,000,000. The Company incurred issuance
costs of $20,000 in connection with this sale of common stock.

During January through April 1994, the Company obtained $5,286,060 of equity
financing through a private placement of 1,626,480 shares of common stock at
$3.25 per share. The Company incurred issuance costs of $659,105 in connection
with the sale of this common stock.

In April 1993, the Company obtained $3,605,000 of equity financing through a
private placement of 1,442,000 shares of common stock at $2.50 per share. The
Company incurred issuance costs of $351,798 in connection with the sale of
this common stock.

Other Issuances of Common Stock

In October 1994, the Company issued 4,000 shares of common stock in
connection with a consulting agreement. This stock was valued at $5.00 per
share. In November 1992, the Company sold 40,000 shares of common stock to two
outside members of its Board of Directors at a fair value of $1.25 per share.
One director paid cash for the shares purchased. The other director issued a
noninterest-bearing promissory note which was paid in full in February 1993.
The fair value of the common stock issued was determined by the Board of
Directors based on equity financing in September 1994 and May-June 1992,
respectively.

F-11
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

Warrants

The Company has issued warrants to various selling agents in consideration
for services performed. The warrants expire at various dates in fiscal years
1997 to 2000. The Company has also issued warrants in connection with the
Bridge Notes; these warrants expire on October 31, 1999. Warrant activity is
summarized as follows:

<TABLE>
<CAPTION>
EXERCISABLE
OUTSTANDING WARRANT SHARES PRICE RANGE
----------- -------------- ------------
<S> <C> <C> <C>
Balances at September 30, 1992......... 108,300 $1.25
Issued............................... 109,000 2.50
Became exercisable................... 217,300 1.25;2.50
--------- --------- ------------
Balances at September 30, 1993......... 217,300 217,300 1.25;2.50
Issued............................... 156,902 3.25
--------- --------- ------------
Balances at September 30, 1994......... 374,202 217,300 1.25;3.25
Issued............................... 1,220,000 5.60;10.50
Became exercisable................... 156,902 3.25
--------- --------- ------------
Balances at September 30, 1995......... 1,594,202 374,202 1.25;10.50
Became exercisable................... 840,000 5.60
Exercised............................ (177,766) (177,766) 1.25;5.60
--------- --------- ------------
Balances at March 31, 1996............. 1,416,436 1,036,436 $1.25;$10.50
========= ========= ============
</TABLE>

Warrants granted in 1995 to purchase 380,000 shares of common stock at
$10.50 per share and all the warrants granted in 1994 and 1993 contain a net
value exercise provision allowing for the issuance of a lesser number of
shares than provided for in the warrant without payment of the cash exercise
price (cashless exercise).

Stock Option Plan

On March 14, 1996, the Company's stock option plan (the "Plan") was amended
to increase the number of shares of common stock for which options may be
granted to 2,000,000 shares.

Under the Plan, incentive stock options and nonqualified stock options may
be granted to key employees, directors, and consultants of the Company at
exercise prices not less than 100% (110% for incentive stock options granted
to individuals owning 10% or more of the Company's common stock at time of
grant) of the fair market value of the common stock at the date of grant. The
Board of Directors establishes all terms and conditions of each grant. The
following summarizes stock option activity:

<TABLE>
<CAPTION>
QUALIFIED NONQUALIFIED TOTAL
---------------------- ---------------------- ---------------------
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
OUTSTANDING PER SHARE OUTSTANDING PER SHARE OUTSTANDING PER SHARE
----------- ---------- ----------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at September
30, 1992............... 311,000 $ 1.25 45,000 $ 1.25 356,000 $1.25
Granted............... 60,000 1.25;2.50 127,000 1.25;2.50 187,000 1.25;2.50
Exercised............. (10,000) 1.25 (10,000) 1.25
------- --------- ------- --------- ------- ---------
Balances at September
30, 1993............... 371,000 1.25;2.50 162,000 1.25;2.50 533,000 1.25;2.50
Granted............... 330,000 3.25 168,000 3.25 498,000 3.25
Expired............... (12,000) 1.25;3.25 (10,000) 1.25 (22,000) 1.25;3.25
------- --------- ------- --------- ------- ---------
</TABLE>

F-12
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

<TABLE>
<CAPTION>
QUALIFIED NONQUALIFIED TOTAL
------------------------ ------------------------ ------------------------
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
OUTSTANDING PER SHARE OUTSTANDING PER SHARE OUTSTANDING PER SHARE
----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Balances at September
30, 1994............... 689,000 1.25;3.25 320,000 1.25;3.25 1,009,000 1.25;3.25
Granted............... 480,000 5.00;7.00 30,000 5.00 510,000 5.00;7.00
Exercised............. (20,000) 1.25 (20,000) 1.25
Expired............... (15,000) 1.25 (15,000) 1.25
--------- ------------ ------- ------------ --------- ------------
Balances at September
30, 1995............... 1,154,000 1.25;7.00 330,000 1.25;5.00 1,484,000 1.25;7.00
Granted............... 159,028 10.375;18.75 11,472 17.00 170,500 10.375;18.75
Exercised............. (25,000) 1.25;5.00 (25,000) 1.25;5.00
Expired............... (20,500) 2.50;7.00 (20,500) 2.50;7.00
--------- ------------ ------- ------------ --------- ------------
Balance at March 31,
1996 .................. 1,267,528 $1.25;$18.75 341,472 $1.25;$17.00 1,609,000 $1.25;$18.75
========= ============ ======= ============ ========= ============
Exercisable at September
30, 1995............... 526,250 $ 1.25;$7.00 214,000 $ 1.25;$5.00 740,250 $ 1.25;$7.00
========= ============ ======= ============ ========= ============
Exercisable at March 31,
1996 .................. 523,250 $ 1.25;$7.00 214,000 $ 1.25;$5.00 737,250 $ 1.25;$7.00
========= ============ ======= ============ ========= ============
</TABLE>

On March 14, 1996, the Fiscal 1996 Employee Stock Purchase Plan and the
Fiscal 1996 Nonemployee Director Stock Option Plan (the "Fiscal 1996 Plans")
were approved by the shareholders. The aggregate number of shares that could
be issued under the Fiscal 1996 Plans are 400,000 shares of common stock. The
Fiscal 1996 Employee Stock Purchase Plan allows participating employees to
purchase shares of the Company's common stock at the lower of 85% of the fair
market value of the common stock on the enrollment date or the end date of the
phase, as defined. The Fiscal 1996 Nonemployee Director Stock Option Plan sets
forth a formula pursuant to which nonqualified stock options are automatically
granted to the Company's non-employee directors.

7.RELATED-PARTY TRANSACTIONS

Until October 31, 1993, the Company had a combination part-time
employment/informal consulting arrangement with one of the Company's founders,
who was also, until October 31, 1993, an officer of the Company. Until March
31, 1993, the Company had a similar arrangement with another of the Company's
founders. The Company paid the following in connection with these
arrangements:

<TABLE>
<CAPTION>
YEARS ENDED
SEPTEMBER 30
--------------
1994 1993
------ -------
<S> <C> <C>
Founder and officer.............................................. $4,367 $43,550
Founder.......................................................... -- 12,033
</TABLE>

Both parties continue to be available to the Company under revised
consulting arrangements as and when requested by the Company.

During the six months ended March 31, 1996 and 1995 and the year ended
September 30, 1995, the Company recorded net revenues of $1,792,759, $412,469,
and $958,769, respectively, from a company which is a shareholder of the
Company. At March 31, 1996 and September 30, 1995, the Company had accounts
receivable of $106,228 and $407,533, respectively, from this company.

F-13
<PAGE>

NETSTAR, INC. AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

8.INCOME TAXES

The provisions for income taxes for the six months ended March 31, 1996 and
1995 and the year ended September 30, 1995 represent certain minimum state
taxes. The benefit for income taxes for the six months ended March 31, 1995
and 1994 and the years ended September 30, 1995, 1994, and 1993 has been
offset by an increase in the valuation allowance because the Company's net
operating losses could not be carried back and future realization of the net
operating losses was uncertain.

At September 30, 1995, the Company had approximately $9,200,000 and $229,000
of net operating loss carryforwards and research and development tax credit
carryforwards, respectively. These carryforwards expire between 2007 and 2010.
The use of these carryforwards is limited to approximately $3,500,000 in any
one year under Internal Revenue Code Section 382 because of significant
ownership changes resulting from the sale of common stock in September 1995.

The tax effect of the temporary differences, tax loss carryforwards, tax
credit carryforwards, and valuation allowances are as follows:

<TABLE>
<CAPTION>
SEPTEMBER 30
MARCH 31 ----------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Current:
Inventory reserve......................... $ 130,000 $ 105,000 $ 96,000
Prepaid expenses and other................ (64,000) (33,000) (6,000)
Accrued expenses.......................... 87,000 156,000 38,000
Valuation allowance....................... (153,000) (228,000) (128,000)
---------- ---------- ----------
Net current tax benefit of temporary
differences............................ $ -- $ -- $ --
========== ========== ==========
Noncurrent:
Excess of book over tax depreciation...... $ 282,000 $ 208,000 $ 113,000
Net operating loss carryforwards.......... 5,100,000 3,717,000 2,186,000
Tax credit carryforwards.................. 342,000 229,000 197,000
Valuation allowance....................... (5,724,000) (4,154,000) (2,496,000)
---------- ---------- ----------
Net noncurrent tax benefit of temporary
differences............................ $ -- $ -- $ --
========== ========== ==========
</TABLE>

9.SUBSEQUENT EVENT -- PROPOSED MERGER (UNAUDITED)

On May 30, 1996, the Company, Ascend Communications, Inc. (Ascend) and
Nebula Acquisition Corporation, a wholly-owned subsidiary of Ascend (Nebula),
entered into a merger agreement whereby Nebula will be merged with and into
the Company with the Company surviving the merger as a wholly-owned subsidiary
of Ascend, and each of the Company's common shares will be converted into
0.35398 of a share of Ascend common stock. The consummation of the merger is
subject to, among other things, the approval of the Company's shareholders.

F-14
<PAGE>

ANNEX A

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER

AMONG

ASCEND COMMUNICATIONS, INC.,
A DELAWARE CORPORATION,
("ASCEND"),

NEBULA ACQUISITION CORPORATION,
A MINNESOTA CORPORATION AND WHOLLY-OWNED
SUBSIDIARY OF ASCEND,

AND

NETSTAR, INC.,
A MINNESOTA CORPORATION

DATED MAY 30, 1996

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I THE MERGER................................................ 1
Section 1.1 Effective Time of the Merger.............................. 1
Section 1.2 Closing................................................... 1
Section 1.3 Effects of the Merger..................................... 1
Section 1.4 Directors and Officers.................................... 2
ARTICLE II CONVERSION OF SECURITIES.................................. 2
Section 2.1 Conversion of Capital Stock............................... 2
Section 2.2 Exchange of Certificates.................................. 3
Section 2.3 Appraisal Rights.......................................... 4
ARTICLE III REPRESENTATIONS AND WARRANTIES OF NETSTAR................. 5
Section 3.1 Organization.............................................. 5
Section 3.2 NetStar Capital Structure................................. 5
Section 3.3 Authority; No Conflict; Required Filings and Consents..... 6
Section 3.4 SEC Filings; Financial Statements......................... 7
Section 3.5 Absence of Undisclosed Liabilities........................ 7
Section 3.6 Absence of Certain Changes or Events...................... 7
Section 3.7 Taxes..................................................... 8
Section 3.8 Properties................................................ 8
Section 3.9 Intellectual Property..................................... 8
Section 3.10 Agreements, Contracts and Commitments..................... 9
Section 3.11 Litigation................................................ 9
Section 3.12 Environmental Matters..................................... 9
Section 3.13 Employee Benefit Plans.................................... 10
Section 3.14 Compliance with Laws...................................... 11
Section 3.15 Pooling of Interests...................................... 11
Section 3.16 Interested Party Transactions............................. 11
Section 3.17 Registration Statement: Proxy Statement/Prospectus........ 11
Section 3.18 Opinion of Financial Advisor.............................. 11
Section 3.19 No Existing Discussions................................... 11
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ASCEND AND SUB.......... 12
Section 4.1 Organization.............................................. 12
Section 4.2 Ascend Capital Structure.................................. 12
Section 4.3 Authority; No Conflict; Required Filings and Consents..... 13
Section 4.4 SEC Filings; Financial Statements......................... 13
Section 4.5 Absence of Undisclosed Liabilities........................ 14
Section 4.6 Absence of Certain Changes or Events...................... 14
Section 4.7 Taxes..................................................... 14
Section 4.8 Properties................................................ 14
Section 4.9 Intellectual Property..................................... 15
Section 4.10 Agreements, Contracts and Commitments..................... 15
Section 4.11 Litigation................................................ 15
Section 4.12 Environmental Matters..................................... 15
Section 4.13 Employee Benefit Plans.................................... 16
Section 4.14 Compliance with Laws...................................... 16
Section 4.15 Pooling of Interests...................................... 17
Section 4.16 Interested Party Transactions............................. 17
Section 4.17 Registration Statement; Proxy Statement/Prospectus........ 17
</TABLE>

i
<PAGE>

<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Section 4.18 Opinion of Financial Advisor............................. 17
Section 4.19 Interim Operations of Sub................................ 17
ARTICLE V CONDUCT OF BUSINESS...................................... 17
Section 5.1 Covenants of NetStar..................................... 17
Section 5.2 Covenants of Ascend...................................... 19
Section 5.3 Cooperation.............................................. 19
ARTICLE VI ADDITIONAL AGREEMENTS.................................... 20
Section 6.1 No Solicitation.......................................... 20
Section 6.2 Proxy Statement/Prospectus; Registration Statement....... 20
Section 6.3 Consents................................................. 21
Section 6.4 Current Nasdaq Quotation................................. 21
Section 6.5 Access to Information.................................... 21
Section 6.6 NetStar Stockholders' Meeting............................ 21
Section 6.7 Legal Conditions to Merger............................... 21
Section 6.8 Public Disclosure........................................ 21
Section 6.9 Tax-Free Organization.................................... 21
Section 6.10 Pooling Accounting....................................... 21
Section 6.11 Affiliate Agreements..................................... 22
Section 6.12 Nasdaq Quotation......................................... 22
Section 6.13 Stock Plans, Options and Warrants........................ 22
Section 6.14 Directors of the Surviving Corporation................... 23
Section 6.15 Brokers or Finders....................................... 23
Section 6.16 Indemnification.......................................... 24
Section 6.17 Additional Agreements; Reasonable Efforts................ 25
ARTICLE VII CONDITIONS TO MERGER..................................... 25
Section 7.1 Conditions to Each Party's Obligation to Effect the
Merger.................................................. 25
Section 7.2 Additional Conditions to Obligations of Ascend and Sub... 26
Section 7.3 Additional Conditions to Obligations of NetStar.......... 26
ARTICLE VIII TERMINATION AND AMENDMENT................................ 27
Section 8.1 Termination.............................................. 27
Section 8.2 Effect of Termination.................................... 27
Section 8.3 Fees and Expenses........................................ 28
Section 8.4 Amendment................................................ 29
Section 8.5 Extension; Waiver........................................ 29
ARTICLE IX MISCELLANEOUS............................................ 29
Section 9.1 Nonsurvival of Representations, Warranties and
Agreements.............................................. 29
Section 9.2 Notices.................................................. 29
Section 9.3 Interpretation........................................... 30
Section 9.4 Counterparts............................................. 30
Section 9.5 Entire Agreement; No Third Party Beneficiaries........... 30
Section 9.6 Governing Law............................................ 30
Section 9.7 Assignment............................................... 30
</TABLE>

ii
<PAGE>

TABLE OF DEFINED TERMS

<TABLE>
<CAPTION>
CROSS REFERENCES
TERMS IN AGREEMENT
- ----- ----------------
<S> <C>
Acquisition Proposal........................................... Section 6.1
Affiliate(s)................................................... Section 6.11
Affiliates Agreement........................................... Section 6.11
Agreement...................................................... Preamble
Alternative Transaction........................................ Section 8.3
Articles of Merger............................................. Section 1.1
Ascend......................................................... Preamble
Ascend Balance Sheet........................................... Section 4.4
Ascend Common Stock............................................ Section 2.1
Ascend Disclosure Schedule..................................... Article IV
Ascend Employee Plans.......................................... Section 4.13
Ascend Intellectual Property Rights............................ Section 4.9
Ascend Material Contracts...................................... Section 4.10
Ascend Option Plans............................................ Section 4.2
Ascend Preferred Stock......................................... Section 4.2
Ascend Purchase Plan........................................... Section 4.2
Ascend SEC Reports............................................. Section 4.4
Ascend Warrants................................................ Section 6.13
Certificate(s)................................................. Section 2.2
Closing........................................................ Section 1.2
Closing Date................................................... Sections 1.2
Code........................................................... Preamble
Confidentiality Agreement...................................... Section 6.1
Constituent Corporations....................................... Section 1.3
Conversion Number.............................................. Section 2.1
Dissenting Shares.............................................. Section 2.3
Dissenting Stockholder......................................... Section 2.3
Effective Time................................................. Section 1.1
Environmental Permits.......................................... Section 3.12
ERISA.......................................................... Section 3.13
ERISA Affiliate................................................ Section 3.13
Exchange Act................................................... Section 3.3
Exchange Agent................................................. Section 2.2
Exchange Fund.................................................. Section 2.2
Final NetStar Purchase Date.................................... Section 6.13
Governmental Entity............................................ Section 3.3
Hazardous Material............................................. Section 3.12
Hazardous Materials Activities................................. Section 3.12
HSR Act........................................................ Section 3.3
Incentive Stock Options........................................ Section 6.13
Indemnified Liabilities........................................ Section 6.16
Indemnified Parties............................................ Section 6.16
IRS............................................................ Section 3.13
Material Lease(s).............................................. Section 3.8
Material Adverse Change........................................ Section 3.6
Material Adverse Effect........................................ Section 3.1
Merger......................................................... Preamble
MBCA........................................................... Section 1.1
</TABLE>

iii
<PAGE>

<TABLE>
<S> <C>
NetStar............................................................ Preamble
NetStar Balance Sheet.............................................. Section 3.4
NetStar Common Stock............................................... Section 2.1
NetStar Director Option Plan....................................... Section 3.2
NetStar Disclosure Schedule........................................ Article III
NetStar Employee Option Plan....................................... Section 2.1
NetStar Employee Plans............................................. Section 3.13
NetStar Intellectual Property Rights............................... Section 3.9
NetStar Material Contracts......................................... Section 3.10
NetStar Option..................................................... Section 6.13
NetStar Purchase Plan.............................................. Section 2.1
NetStar SEC Reports................................................ Section 3.4
NetStar Stockholders' Meeting...................................... Section 3.17
NetStar Third Party Intellectual Property.......................... Section 3.9
NetStar Warrants................................................... Section 2.1
Phase.............................................................. Section 6.13
Proxy Statement.................................................... Section 3.17
Registration Statement............................................. Section 3.17
Returns............................................................ Section 3.7
Rule 145........................................................... Section 6.11
SEC................................................................ Section 3.3
Securities Act..................................................... Section 3.3
Sub................................................................ Preamble
Subsidiary......................................................... Section 2.1
Superior Proposal.................................................. Section 6.1
Surviving Corporation.............................................. Section 1.3
Tax(es)............................................................ Section 3.7
Third Party........................................................ Section 8.3
</TABLE>

iv
<PAGE>

AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger (the "Agreement"), dated as of May 30, 1996 by
and among Ascend Communications, Inc., a Delaware corporation ("Ascend"),
Nebula Acquisition Corporation, a Minnesota corporation and a wholly-owned
subsidiary of Ascend ("Sub"), and NetStar, Inc., a Minnesota corporation
("NetStar").

Whereas, the Boards of Directors of Ascend, Sub and NetStar deem it
advisable and in the best interests of each corporation and its respective
stockholders that Ascend and NetStar combine in order to advance the long-term
business interests of Ascend and NetStar;

Whereas, the combination of Ascend and NetStar shall be effected by the
terms of this Agreement through a transaction in which Sub will merge with and
into NetStar, NetStar will become a wholly-owned subsidiary of Ascend and the
stockholders of NetStar will become stockholders of Ascend (the "Merger");

Whereas, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and

Whereas, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests.

Now, therefore, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:

ARTICLE I

The Merger

Section 1.1 Effective Time of the Merger. Subject to the provisions of this
Agreement, articles of merger in such form as is required by the relevant
provisions of the Minnesota Business Corporations Act (the "MBCA") (the
"Articles of Merger") shall be duly prepared, executed and acknowledged by Sub
and by NetStar as the Surviving Corporation (as defined in Section 1.3) and
thereafter delivered to the Secretary of State of the State of Minnesota for
filing, as provided in the MBCA, as soon as practicable on or after the
Closing Date (as defined in Section 1.2). The Merger shall become effective
upon the filing of the Articles of Merger with the Secretary of State of the
State of Minnesota or at such time thereafter as is provided in the Articles
of Merger (the "Effective Time").

Section 1.2 Closing. The closing of the Merger (the "Closing") will take
place at 11:00 a.m., Central Time, on a date to be specified by Ascend and
NetStar, which shall be (i) no later than the second business day after
satisfaction of the latest to occur of the conditions set forth in Sections
7.1, 7.2(b) (other than the delivery of the officers' certificate referred to
therein) and 7.3(b) (other than the delivery of the officers' certificate
referred to therein) (provided that the other closing conditions set forth in
Article VII have been met or waived as provided in Article VII at or prior to
the Closing) (the "Closing Date"), at the offices of Winthrop & Weinstine,
P.A., 3000 Dain Bosworth Plaza, 60 South Sixth Street, Minneapolis, Minnesota,
unless another date or place is agreed to in writing by Ascend and NetStar.

Section 1.3 Effects of the Merger.

(a) At the Effective Time (i) the separate existence of Sub shall cease and
Sub shall be merged with and into NetStar (Sub and NetStar are sometimes
referred to below as the "Constituent Corporations" and NetStar is sometimes
referred to below as the "Surviving Corporation"), (ii) the Articles of
Incorporation of NetStar shall be amended so that Article III of such Articles
of Incorporation shall read as follows: "The total number of shares of all
classes of stock which the Corporation shall have authority to issue is 1,000,
all of which shall consist of Common Stock, par value $.001 per share," and,
as so amended, such Articles of Incorporation shall

A-1
<PAGE>

be the Articles of Incorporation of the Surviving Corporation, and (iii) the
Bylaws of Sub as in effect immediately prior to the Effective Time shall be
the Bylaws of the Surviving Corporation.

(b) At and after the Effective Time, the Surviving Corporation shall possess
all the rights, privileges, powers and franchises of a public as well as of a
private nature, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations; and all and singular rights,
privileges, powers and franchises of each of the Constituent Corporations, and
all property, real, personal and mixed, and all debts due to either of the
Constituent Corporations on whatever account, as well as for stock
subscriptions and all other things in action or belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation, and
all property, rights, privileges, powers and franchises, and all and every
other interest shall be thereafter as effectually the property of the
Surviving Corporation as they were of the Constituent Corporations, and the
title to any real estate vested by deed or otherwise, in either of the
Constituent Corporations, shall not revert or be in any way impaired; but all
rights of creditors and all liens upon any property of either of the
Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thereafter attach
to the Surviving Corporation, and may be enforced against it to the same
extent as if such debts and liabilities had been incurred by it.

Section 1.4 Directors and Officers. The initial directors of the Surviving
Corporation shall be the three (3) non-employee directors of NetStar as of the
date of this Agreement and four (4) persons to be designated by Ascend prior
to the Closing, each of whom will hold office in accordance with the Articles
of Incorporation and Bylaws of the Surviving Corporation. The officers of
NetStar immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors
are duly elected or appointed.

ARTICLE II

Conversion of Securities

Section 2.1 Conversion of Capital Stock. As of the Effective Time, by virtue
of the Merger and without any action on the part of the holder of any shares
of Common Stock, $.01 par value, of NetStar ("NetStar Common Stock") or
capital stock of Sub:

(a) Capital Stock of Sub. Each issued and outstanding share of the
capital stock of Sub shall be converted into and become one fully paid and
nonassessable share of Common Stock, $.001 par value, of the Surviving
Corporation.

(b) Cancellation of Ascend-Owned Stock. Any shares of NetStar Common
Stock owned by Ascend, Sub or any other wholly-owned Subsidiary (as defined
below) of Ascend shall be cancelled and retired and shall cease to exist
and no stock of Ascend or other consideration shall be delivered in
exchange therefor. All shares of Common Stock, $.001 par value, of Ascend
("Ascend Common Stock") owned by NetStar shall remain unaffected by the
Merger. As used in this Agreement, the word "Subsidiary" means, with
respect to any party, any corporation or other organization, whether
incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships, the
general partnership interests of which held by such party or any Subsidiary
of such party do not have a majority of the voting interest in such
partnership) or (ii) at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority
of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries.

(c) Exchange Ratio for NetStar Common Stock. Subject to Section 2.2, each
issued and outstanding share of NetStar Common Stock (other than shares to
be cancelled in accordance with Section 2.1(b) and any Dissenting Shares as
defined in Section 2.3) shall be converted into the right to receive .35398
(which amount will be adjusted for any stock split or stock dividend
effected between the date of this Agreement

A-2
<PAGE>

and the Effective Time) (the "Conversion Number") fully paid and
nonassessable shares of Ascend Common Stock. All such shares of NetStar
Common Stock, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and each
holder of a certificate representing any such shares shall cease to have
any rights with respect thereto, except the right to receive the shares of
Ascend Common Stock and any cash in lieu of fractional shares of Ascend
Common Stock to be issued or paid in consideration therefor upon the
surrender of such certificate in accordance with Section 2.2, without
interest.

(d) NetStar Stock Options and Employee Stock Purchase Plan. At the
Effective Time, all then outstanding options to purchase NetStar Common
Stock issued under NetStar's Stock Option Incentive Plan-1992, as amended
(the "NetStar Employee Option Plan"), not exercised as of the Effective
Time will be assumed by Ascend in accordance with Section 6.13. Immediately
prior to the Effective Time, all then outstanding rights to acquire shares
of NetStar Common Stock under NetStar's Fiscal 1996 Employee Stock Purchase
Plan (the "NetStar Purchase Plan") will be exercised for the purchase of
shares of NetStar Common Stock, as provided in Section 6.13.

(e) NetStar Warrants. At the Effective Time, all then outstanding
warrants to purchase NetStar Common Stock (the "NetStar Warrants") not
exercised as of the Effective Time will be assumed by Ascend in accordance
with Section 6.13.

Section 2.2 Exchange of Certificates. The procedures for exchanging
outstanding shares of NetStar Common Stock for Ascend Common Stock pursuant to
the Merger are as follows:

(a) Exchange Agent. As of the Effective Time, Ascend shall deposit with a
bank or trust company designated by Ascend (the "Exchange Agent"), for the
benefit of the holders of shares of NetStar Common Stock, for exchange in
accordance with this Section 2.2, through the Exchange Agent, certificates
representing the shares of Ascend Common Stock (such shares of Ascend
Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") issuable
pursuant to Section 2.1 in exchange for outstanding shares of NetStar
Common Stock.

(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of NetStar Common Stock (each a
"Certificate" and, collectively, the "Certificates") whose shares were
converted pursuant to Section 2.1 into the right to receive shares of
Ascend Common Stock (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other provisions as Ascend and
NetStar may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing
shares of Ascend Common Stock. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Ascend, together with such letter of transmittal, duly
executed, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole shares of
Ascend Common Stock which such holder has the right to receive pursuant to
the provisions of this Article II, and the Certificate so surrendered shall
immediately be cancelled. In the event of a transfer of ownership of
NetStar Common Stock which is not registered in the transfer records of
NetStar, a certificate representing the proper number of shares of Ascend
Common Stock may be issued to a transferee if the Certificate representing
such NetStar Common Stock is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by
evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.2, each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Ascend
Common Stock and cash in lieu of any fractional shares of Ascend Common
Stock as contemplated by this Section 2.2.

(c) Distributions with Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect
to Ascend Common Stock with a record date after the

A-3
<PAGE>

Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the shares of Ascend Common Stock represented thereby and
no cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to subsection (e) below until the holder of record of such
Certificate shall surrender such Certificate. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall
be paid to the record holder of the certificates representing whole shares
of Ascend Common Stock issued in exchange therefor, without interest, (i)
at the time of such surrender, the amount of any cash payable in lieu of a
fractional share of Ascend Common Stock to which such holder is entitled
pursuant to subsection (e) below and the amount of dividends or other
distributions with a record date after the Effective Time previously paid
with respect to such whole shares of Ascend Common Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a
payment date subsequent to surrender payable with respect to such whole
shares of Ascend Common Stock.

(d) No Further Ownership Rights in NetStar Common Stock. All shares of
Ascend Common Stock issued upon the surrender for exchange of shares of
NetStar Common Stock in accordance with the terms hereof (including any
cash paid pursuant to subsection (c) or (e) of this Section 2.2) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of NetStar Common Stock, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have
been declared or made by NetStar on such shares of NetStar Common Stock in
accordance with the terms of this Agreement on or prior to the date hereof
and which remain unpaid at the Effective Time, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of NetStar Common Stock which were
outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to the Surviving Corporation for
any reason, they shall be cancelled and exchanged as provided in this
Section 2.2.

(e) No Fractional Shares. No certificate or scrip representing fractional
shares of Ascend Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not
entitle the owner thereof to vote or to any rights of a stockholder of
Ascend. Notwithstanding any other provision of this Agreement, each holder
of shares of NetStar Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of
Ascend Common Stock (after taking into account all Certificates delivered
by such holder) shall receive, in lieu thereof, cash (without interest) in
an amount equal to such fractional part of a share of Ascend Common Stock
multiplied by the average of the last reported sale prices of Ascend Common
Stock, as reported on the Nasdaq National Market, on each of the ten (10)
trading days immediately preceding the date of the Effective Time.

(f) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the stockholders of NetStar for one year after the
Effective Time shall be delivered to Ascend, upon demand, and any
stockholders of NetStar who have not previously complied with this Section
2.2 shall thereafter look only to Ascend for payment of their claim for
Ascend Common Stock, any cash in lieu of fractional shares of Ascend Common
Stock, and any dividends or distributions with respect to Ascend Common
Stock.

(g) No Liability. Neither Ascend nor NetStar shall be liable to any
holder of shares of NetStar Common Stock or Ascend Common Stock, as the
case may be, for such shares (or dividends or distributions with respect
thereto) delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.

Section 2.3 Appraisal Rights. Any shares of NetStar Common Stock held by
stockholders of NetStar who properly exercise and perfect the dissenters'
appraisal rights set forth in Sections 302A.471 and 302A.473 of the MBCA
("Dissenting Shares") shall not be converted into the right to receive Ascend
Common Stock but shall instead be converted into the right to receive such
consideration as may be determined to be due with respect to such Dissenting
Shares pursuant to the provisions of the MBCA. NetStar shall give Ascend
prompt notice of any demand received by NetStar for appraisal of NetStar
Common Stock, and Ascend shall have the right to control all negotiations and
proceedings with respect to such demand. NetStar agrees that, except with

A-4
<PAGE>

the prior written consent of Ascend or as required under the MBCA, it will not
voluntarily make any payment with respect to, or settle or offer to settle,
any such demand for appraisal. Each holder of Dissenting Shares (a "Dissenting
Stockholder") who, pursuant to the provisions of the MBCA, becomes entitled to
payment of the value of shares of NetStar Common Stock shall receive payment
therefor (but only after the value therefor shall have been agreed upon or
finally determined pursuant to the provisions of the MBCA). In the event that
any holder of shares of NetStar Common Stock fails to make an effective demand
for payment or otherwise loses his status as a Dissenting Stockholder, Ascend
shall, as of the later of the Effective Time or the occurrence of such event,
issue and deliver, upon surrender by such Dissenting Shareholder of its
Certificate or Certificates, the shares of Ascend Common Stock and any cash
payment in lieu of fractional shares, in each case without interest thereon,
to which such Dissenting Shareholder would have been entitled to under Section
2.1 of this Agreement and the Articles of Merger.

ARTICLE III

Representations and Warranties of NetStar

NetStar represents and warrants to Ascend and Sub that the statements
contained in this Article III are true and correct, except as set forth in the
disclosure schedule delivered by NetStar to Ascend on or before the date of
this Agreement (the "NetStar Disclosure Schedule"). The NetStar Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered Sections contained in this Article III and the disclosure in any
paragraph shall qualify only the corresponding Section in this Article III.

Section 3.1 Organization. Each of NetStar and its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation, has all requisite corporate
power to own, lease and operate its property and to carry on its business as
now being conducted and as proposed to be conducted, and is duly qualified to
do business and is in good standing as a foreign corporation in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the business, assets (including intangible assets),
financial condition or results of operations ("Material Adverse Effect") of
NetStar and its Subsidiaries, taken as a whole. Neither NetStar nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in, or
any interest convertible into or exchangeable or exercisable for any such
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity, excluding securities of any publicly
traded company held for investment by NetStar and comprising less than five
percent (5%) of the outstanding stock of such company.

Section 3.2 NetStar Capital Structure.

(a) The authorized capital stock of NetStar consists of 20,000,000 shares of
NetStar Common Stock. As of May 23, 1996: (i) 10,279,080 shares of NetStar
Common Stock were issued and outstanding, all of which are validly issued,
fully paid and nonassessable; (ii) no shares of NetStar Common Stock were held
in the treasury of NetStar or by Subsidiaries of NetStar; (iii) 1,820,650
shares of NetStar Common Stock were reserved for issuance under the NetStar
Employee Option Plan, 1,534,150 of which were subject to outstanding options
and 286,500 of which were reserved for future option grants; (iv) 250,000
shares of NetStar Common Stock were reserved for issuance under NetStar's
Fiscal 1996 Nonemployee Director Option Plan (the "NetStar Director Option
Plan"), none of which were subject to outstanding options; (v) 150,000 shares
of NetStar Common Stock were reserved for future issuance pursuant to rights
outstanding under the NetStar Purchase Plan; and (vi) 1,211,474 shares of
NetStar Common Stock were reserved for issuance upon exercise of outstanding
NetStar Warrants. No material change in such capitalization has occurred
between May 23, 1996 and the date of this Agreement. All shares of NetStar
Common Stock subject to issuance as specified above, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall be duly authorized, validly issued, fully paid and
nonassessable. There are no obligations, contingent or otherwise, of NetStar
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
shares of NetStar Common Stock or the capital stock of any NetStar Subsidiary
or make any investment (in the form of a loan, capital contribution or
otherwise) in any such Subsidiary or any other entity other than guarantees of
bank obligations of such Subsidiaries entered

A-5
<PAGE>

into in the ordinary course of business. All of the outstanding shares of
capital stock of each of NetStar's Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable, and all such shares (other than
directors' qualifying shares in the case of foreign Subsidiaries) are owned by
NetStar or another NetStar Subsidiary free and clear of all security
interests, liens, claims, pledges, agreements, limitations on NetStar's voting
rights, charges or other encumbrances of any nature.

(b) Except as set forth in this Section 3.2 or as reserved for future grants
of options under the NetStar Employee Option Plan, the NetStar Director Option
Plan or the NetStar Purchase Plan, there are no equity securities of any class
of NetStar or any of its Subsidiaries, or any security exchangeable into or
exercisable for such equity securities, issued, reserved for issuance or
outstanding. Except as set forth in this Section 3.2 or in Schedule 3.2 of the
NetStar Disclosure Schedule, there are no options, warrants, equity
securities, calls, rights, commitments or agreements of any character to which
NetStar or any of its Subsidiaries is a party or by which it is bound
obligating NetStar or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of
NetStar or any of its Subsidiaries or obligating NetStar or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement.
To the best knowledge of NetStar, there are no voting trusts, proxies or other
agreements or understandings with respect to the shares of capital stock of
NetStar.

Section 3.3 Authority; No Conflict; Required Filings and Consents.

(a) NetStar has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of NetStar, subject only to the
approval of the Merger by NetStar's stockholders under the MBCA. This
Agreement has been duly executed and delivered by NetStar and constitutes the
valid and binding obligation of NetStar, enforceable in accordance with its
terms, except as such enforceability may be limited by (i) bankruptcy laws and
other similar laws affecting creditors' rights generally and (ii) general
principles of equity, regardless of whether asserted in a proceeding in equity
or at law.

(b) The execution and delivery of this Agreement by NetStar does not, and
the consummation of the transactions contemplated by this Agreement will not,
(i) conflict with, or result in any violation or breach of any provision of
the Articles of Incorporation or Bylaws of NetStar, (ii) result in any
violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any benefit) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
contract or other agreement, instrument or obligation to which NetStar or any
of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to NetStar or any of its Subsidiaries
or any of their properties or assets, except in the case of (ii) and (iii) for
any such conflicts, violations, defaults, terminations, cancellations or
accelerations which would not be reasonably likely to have a Material Adverse
Effect on NetStar and its Subsidiaries, taken as a whole, or a material
adverse effect on the ability of NetStar to consummate the transactions
contemplated by this Agreement.

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to NetStar or any of its Subsidiaries in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i) the
filing of a pre-merger notification report under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) the
filing by Ascend of the Registration Statement (as defined in Section 3.17)
with the Securities and Exchange Commission (the "SEC") in accordance with the
Securities Act of 1933, as amended (the "Securities Act"), (iii) the filing of
the Articles of Merger with the Minnesota Secretary of State in accordance
with the MBCA, (iv) the filing of the Proxy Statement (as defined in Section
3.17) and related proxy materials with the SEC in accordance with the
Securities Exchange Act of 1934, as amended (the "Exchange

A-6
<PAGE>

Act"), (v) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable federal and state
securities laws and the laws of any foreign country and (vi) such other
consents, authorizations, filings, approvals and registrations which, if not
obtained or made, would not be reasonably likely to have a Material Adverse
Effect on NetStar and its Subsidiaries, taken as a whole, or a material
adverse effect on the ability of NetStar to consummate the transactions
contemplated by this Agreement.

Section 3.4 SEC Filings; Financial Statements.

(a) NetStar has filed and made available to Ascend all forms, reports and
documents required to be filed by NetStar with the SEC, other than
registration statements on Form S-8 and the unredacted version of documents
for which confidential treatment has been granted by the SEC or for which such
treatment has been applied and such application is pending (collectively, the
"NetStar SEC Reports"). The NetStar SEC Reports (i) at the time filed,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such NetStar SEC Reports or necessary in order to make the
statements in such NetStar SEC Reports, in the light of the circumstances
under which they were made, not misleading. None of NetStar's Subsidiaries is
required to file any forms, reports or other documents with the SEC.

(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the NetStar SEC Reports, including any NetStar
SEC Reports filed after the date of this Agreement until the Closing, complied
or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will
be prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may
be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted by Form 10-Q promulgated by the SEC) and
fairly presented or will present the consolidated financial position of
NetStar and its Subsidiaries as at the respective dates and the consolidated
results of its operations and cash flows for the periods indicated, except
that the unaudited interim financial statements were or are subject to normal
and recurring year-end adjustments which were not or are not expected to be
material in amount. The unaudited consolidated balance sheet of NetStar as of
March 31, 1996 is referred to herein as the "NetStar Balance Sheet."

Section 3.5 Absence of Undisclosed Liabilities. Except as disclosed in
writing to Ascend or as otherwise disclosed in the NetStar SEC Reports,
NetStar and its Subsidiaries do not have any liabilities, either accrued or
contingent (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or
to become due, which individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect on NetStar and its Subsidiaries,
taken as a whole, other than (i) liabilities reflected in the NetStar Balance
Sheet, (ii) liabilities specifically described in this Agreement, or in the
NetStar Disclosure Schedule, and (iii) normal or recurring liabilities
incurred since March 31, 1996 in the ordinary course of business consistent
with past practices.

Section 3.6 Absence of Certain Changes or Events. Since the date of the
NetStar Balance Sheet, NetStar and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been: (i) any material adverse
change in the financial condition, results of operations or business
(together, a "Material Adverse Change") of NetStar and its Subsidiaries, taken
as a whole; (ii) any damage, destruction or loss (whether or not covered by
insurance) with respect to NetStar or any of its Subsidiaries having a
Material Adverse Effect on NetStar and its Subsidiaries, taken as a whole;
(iii) any material change by NetStar in its accounting methods, principles or
practices to which Ascend has not previously consented in writing; (iv) any
revaluation by NetStar of any of its assets having a Material Adverse Effect
on NetStar and its Subsidiaries, taken as a whole, including, without
limitation, writing down the value of capitalized software or inventory or
writing off notes or accounts receivable other than in the ordinary course of
business, unless Ascend has previously consented in writing; or (v) except as
disclosed in the NetStar Disclosure Schedule, any other action or event that
would have required the consent of Ascend pursuant

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to Section 5.1 of this Agreement had such action or event occurred after the
date of this Agreement and that would be reasonably likely to have a Material
Adverse Effect on NetStar and its Subsidiaries, taken as a whole.

Section 3.7 Taxes.

(a) For purposes of this Agreement, a "Tax" or, collectively, "Taxes," means
any and all material federal, state, local and foreign taxes, assessments and
other governmental charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income, profits, sales, use
and occupation, and value added, ad valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and property taxes, together with all
interest, penalties and additions imposed with respect to such amounts and any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.

(b) NetStar has accurately prepared and timely filed all material federal,
state, local and foreign returns, estimates, information statements and
reports required to be filed at or before the Effective Time ("Returns")
relating to any and all Taxes concerning or attributable to NetStar or any of
its Subsidiaries or to their operations, and such Returns are true and correct
in all material respects and have been completed in all material respects in
accordance with applicable law.

(c) NetStar as of the Effective Time: (i) will have paid all Taxes it is
required to pay prior to the Effective Time and (ii) will have withheld with
respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld, except where any failure to make such
payment or withholding would not be reasonably likely to have a Material
Adverse Effect on NetStar and its Subsidiaries, taken as a whole.

(d) There is no Tax deficiency outstanding, proposed or assessed against
NetStar or any of its Subsidiaries that is not reflected as a liability on the
NetStar Balance Sheet nor has NetStar or any of its Subsidiaries executed any
waiver of any statute of limitations on or extending the period for the
assessment or collection of any Tax.

(e) NetStar does not have any material liabilities for unpaid federal,
state, local or foreign Taxes that have not been accrued for or reserved on
the NetStar Balance Sheet, whether asserted or unasserted, contingent or
otherwise.

Section 3.8 Properties. The NetStar Disclosure Schedule contains a true and
complete list of all real property owned by NetStar or its Subsidiaries and
all real property leased by NetStar or its Subsidiaries pursuant to leases
providing for the occupancy, in each case, of not less than 20,000 square feet
("Material Lease(s)"), and the name of the lessor, the date of each Material
Lease and each amendment to such Material Lease and the aggregate annual
rental or other fee payable under each such Material Lease. All such Material
Leases are in good standing, valid and effective in accordance with their
respective terms, and neither NetStar nor its Subsidiaries is in default under
any of such leases, except where the lack of such good standing, validity and
effectiveness or the existence of such default would not be reasonably likely
to have a Material Adverse Effect on NetStar and its Subsidiaries, taken as a
whole.

Section 3.9 Intellectual Property.

(a) NetStar owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and mask works, any applications for and registrations of such patents,
trademarks, trade names, service marks, copyrights and mask works, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are necessary to conduct the business of NetStar
as currently conducted, or planned to be conducted, the absence of which would
be reasonably likely to have a Material Adverse Effect on NetStar and its
Subsidiaries, taken as a whole (the "NetStar Intellectual Property Rights").
Schedule 3.9 of the NetStar Disclosure Schedule lists (i) all patents and
patent applications and all trademarks, registered copyrights, trade names and
service marks which NetStar considers to be material to its business and
included in the NetStar Intellectual Property Rights, including the
jurisdictions in which each such NetStar

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Intellectual Property Right has been issued or registered or in which any such
application for such issuance and registration has been filed, (ii) all
material licenses, sublicenses, distribution agreements and other agreements
as to which NetStar or any of its Subsidiaries is a party and pursuant to
which any person is authorized to use any NetStar Intellectual Property Rights
or has the right to manufacture, reproduce, market or exploit any NetStar
product or any adaptation, translation or derivative work based on a NetStar
product or any portion thereof, (iii) all material licenses, sublicenses and
other agreements as to which NetStar or any of its Subsidiaries is a party and
pursuant to which NetStar or any of its Subsidiaries is authorized to use any
third party patents, trademarks or copyrights, including software ("NetStar
Third Party Intellectual Property Rights") which is used in the manufacture
of, incorporated in, or forms a part of any NetStar product that is material
to the business of NetStar and its Subsidiaries, taken as a whole, and (iv)
all material joint development agreements to which NetStar or any of its
Subsidiaries is a party.

(b) NetStar is not, nor will it be as a result of the execution and delivery
of this Agreement or the performance of its obligations under this Agreement,
in breach of any license, sublicense or other agreement relating to the
NetStar Intellectual Property Rights or NetStar Third Party Intellectual
Property Rights, the breach of which would be reasonably likely to have a
Material Adverse Effect on NetStar and its Subsidiaries, taken as a whole.

(c) To NetStar's knowledge, all patents, registered trademarks, service
marks and copyrights held by NetStar or any of its Subsidiaries are valid and
subsisting. Except as set forth on Schedule 3.9 of the NetStar Disclosure
Schedule, NetStar (i) has not been sued in any suit, action or proceeding
which involves a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right
of any third party; and (ii) has no knowledge that the manufacturing,
marketing, licensing or sale of its products infringes any patent, trademark,
service mark, copyright, trade secret or other proprietary right of any third
party, which infringement would reasonably be expected to have a Material
Adverse Effect on NetStar and its Subsidiaries, taken as a whole.

Section 3.10 Agreements, Contracts and Commitments. NetStar has not
breached, or received in writing any claim or threat that it has breached, any
of the terms or conditions of any material agreement, contract or commitment
filed as an exhibit to the NetStar SEC Reports ("NetStar Material Contracts")
in such a manner as would permit any other party to cancel or terminate the
same or would permit any other party to collect material damages from NetStar
under any NetStar Material Contract. Each NetStar Material Contract that has
not expired or been terminated is in full force and effect and is not subject
to any material default thereunder of which NetStar is aware by any party
obligated to NetStar pursuant to such NetStar Material Contract.

Section 3.11 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against NetStar pending or as to which NetStar
has received any written notice of assertion, which is reasonably likely to
have a Material Adverse Effect on NetStar and its Subsidiaries, taken as a
whole, or a material adverse effect on the ability of NetStar to consummate
the transactions contemplated by this Agreement.

Section 3.12 Environmental Matters.

(a) As of the date hereof, to the knowledge of NetStar, no underground
storage tanks are present under any property that NetStar or any of its
Subsidiaries has at any time owned, operated, occupied or leased. As of the
date hereof, except as set forth in the NetStar Disclosure Schedule, no amount
of any substance that has been designated by any Governmental Entity or by
applicable federal, state or local law to be radioactive, toxic, hazardous or
otherwise a danger to health or the environment, including, without
limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all substances
listed as hazardous substances pursuant to the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended, or defined as a
hazardous waste pursuant to the United States Resource Conservation and
Recovery Act of 1976, as amended, and the regulations promulgated pursuant to
said laws (a "Hazardous Material"), is present as a result of the actions of
NetStar or any of its Subsidiaries, or any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that NetStar or any of its
Subsidiaries has at any

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time owned, operated, occupied or leased, where the presence of such Hazardous
Material is reasonably likely to have a Material Adverse Effect on NetStar and
its Subsidiaries, taken as a whole.

(b) At no time has NetStar or any of its Subsidiaries transported, stored,
used, manufactured, disposed of, released or exposed its employees or others
to Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has NetStar or any of its Subsidiaries disposed of,
transported, sold, or manufactured any product containing a Hazardous Material
(collectively, "Hazardous Materials Activities") in violation of any rule,
regulation, treaty or statute promulgated by any Governmental Entity to
prohibit, regulate or control Hazardous Materials or any Hazardous Material
Activity which has had or is reasonably likely to have a Material Adverse
Effect on NetStar and its Subsidiaries, taken as a whole.

(c) NetStar currently holds all environmental approvals, permits, licenses,
clearances and consents (the "Environmental Permits") necessary for the
conduct of its Hazardous Material Activities and other businesses of NetStar
as such activities and businesses are currently being conducted, the absence
of which would be reasonably likely to have a Material Adverse Effect on
NetStar and its Subsidiaries, taken as a whole.

(d) No action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim is pending or, to the knowledge of NetStar, threatened
concerning any Environmental Permit or any Hazardous Materials Activity of
NetStar or any of its Subsidiaries. NetStar is not aware of any fact or
circumstance which could involve NetStar in any environmental litigation or
impose upon NetStar any environmental liability which would be reasonably
likely to have a Material Adverse Effect on NetStar and its Subsidiaries,
taken as a whole.

Section 3.13 Employee Benefit Plans.

(a) NetStar has set forth on Schedule 3.13 of the NetStar Disclosure
Schedule all employee benefit plans (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and all
bonus, stock option, stock purchase, incentive, deferred compensation,
supplemental retirement, severance and other similar employee benefit plans,
and all unexpired severance agreements, written or otherwise, for the benefit
of, or relating to, any current or former employee of NetStar or any trade or
business (whether or not incorporated) which is a member or which is under
common control with NetStar within the meaning of Section 414 of the Code (an
"ERISA Affiliate") (together, the "NetStar Employee Plans").

(b) With respect to each NetStar Employee Plan, NetStar has made available
to Ascend, a true and correct copy of (i) the most recent annual report (Form
5500) filed with the Internal Revenue Service ("IRS") with respect to a
NetStar Employee Plan subject to such filing requirement, (ii) such NetStar
Employee Plan, (iii) each trust agreement and group annuity contract, if any,
relating to such NetStar Employee Plan and (iv) the most recent actuarial
report or valuation relating to a NetStar Employee Plan subject to Title IV of
ERISA.

(c) With respect to the NetStar Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of NetStar, there
exists no condition or set of circumstances in connection with which NetStar
could be subject to any liability that is reasonably likely to have a Material
Adverse Effect on NetStar and its Subsidiaries, taken as a whole, under ERISA,
the Code or any other applicable law.

(d) With respect to the NetStar Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting
principles, on the financial statements of NetStar, which obligations are
reasonably expected to have a Material Adverse Effect on NetStar and its
Subsidiaries, taken as a whole.

(e) Except as set forth in Schedule 3.13 of the NetStar Disclosure Schedule
or as disclosed in NetStar SEC Reports filed prior to the date of this
Agreement, and except as provided for in this Agreement, neither NetStar nor
any of its Subsidiaries is a party to any oral or written (i) union or
collective bargaining agreement, (ii) agreement with any officer or other key
employee of NetStar or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence
of a transaction involving

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NetStar of the nature contemplated by this Agreement, (iii) agreement with any
officer of NetStar providing any term of employment or compensation guarantee
extending for a period longer than one year from the date hereof or for the
payment of compensation in excess of $100,000 per annum, or (iv) agreement or
plan, including any stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which
will be increased, or the vesting of the benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement.

Section 3.14 Compliance with Laws. NetStar has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for failures to comply or violations which would not be reasonably likely to
have a Material Adverse Effect on NetStar and its Subsidiaries, taken as a
whole.

Section 3.15 Pooling of Interests. To its knowledge, neither NetStar nor any
of its Affiliates (as defined in Section 6.11) has, through the date of this
Agreement, taken or agreed to take any action which would prevent Ascend from
accounting for the business combination to be effected by the Merger as a
pooling of interests.

Section 3.16 Interested Party Transactions. Except as set forth in the
NetStar SEC Reports, since the date of NetStar's last proxy statement to its
stockholders, no event has occurred that would be required to be reported by
NetStar as a Certain Relationship or Related Transaction, pursuant to Item 404
of Regulation S-K promulgated by the SEC.

Section 3.17 Registration Statement: Proxy Statement/Prospectus. The
information supplied by NetStar for inclusion in the registration statement on
Form S-4 pursuant to which shares of Ascend Common Stock issued in the Merger
will be registered with the SEC (the "Registration Statement") shall not at
the time the Registration Statement is declared effective by the SEC contain
any untrue statement of a material fact or omit to state any material fact
required to be stated in the Registration Statement or necessary in order to
make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by NetStar for inclusion in the proxy statement/prospectus (the
"Proxy Statement") to be sent to the stockholders of NetStar in connection
with the meeting of NetStar's stockholders to consider this Agreement and the
Merger (the "NetStar Stockholders' Meeting") shall not, on the date the Proxy
Statement is first mailed to stockholders of NetStar, at the time of the
NetStar Stockholders' Meeting or at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it was made,
is false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Proxy
Statement not false or misleading; or omit to state any material fact
necessary to correct any statement in any earlier communication with respect
to the solicitation of proxies for the NetStar Stockholders' Meetings which
has become false or misleading. If at any time prior to the Effective Time any
event relating to NetStar or any of its Affiliates, officers or directors
should be discovered by NetStar which should be set forth in an amendment to
the Registration Statement or a supplement to the Proxy Statement, NetStar
shall promptly inform Ascend.

Section 3.18 Opinion of Financial Advisor. The financial advisor of NetStar,
Wessels, Arnold & Henderson, L.L.C., has delivered to NetStar an opinion dated
the date of this Agreement to the effect that the Conversion Number is fair
from a financial point of view to the stockholders of NetStar.

Section 3.19 No Existing Discussions. As of the date hereof, NetStar is not
engaged, directly or indirectly, in any negotiations with any other party with
respect to an Acquisition Proposal (as defined in Section 6.1).

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ARTICLE IV

Representations and Warranties of Ascend and Sub

Ascend and Sub represent and warrant to NetStar that the statements
contained in this Article IV are true and correct, except as set forth in the
disclosure schedule delivered by Ascend to NetStar on or before the date of
this Agreement (the "Ascend Disclosure Schedule"). The Ascend Disclosure
Schedule shall be arranged in paragraphs corresponding to the numbered and
lettered Sections contained in this Article IV and the disclosure in any
paragraph shall qualify only the corresponding Section in this Article IV.

Section 4.1 Organization. Each of Ascend and Sub and Ascend's other
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power to own, lease and operate its property and to carry
on its business as now being conducted and as proposed to be conducted, and is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction in which the failure to be so qualified would have a
Material Adverse Effect on Ascend and its Subsidiaries, taken as a whole.
Except as set forth in the Ascend SEC Reports (as defined in Section 4.4) or
the Ascend Disclosure Schedule, neither Ascend nor any of its Subsidiaries
directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation,
partnership, joint venture or other business association or entity, excluding
securities of any publicly traded company held for investment by Ascend and
comprising less than five percent (5%) of the outstanding stock of such
company.

Section 4.2 Ascend Capital Structure.

(a) The authorized capital stock of Ascend consists of 200,000,000 shares of
Ascend Common Stock and 2,000,000 shares of Preferred Stock, $.001 par value
("Ascend Preferred Stock"). As of March 31, 1996: (i) 111,226,319 shares of
Ascend Common Stock were issued and outstanding, all of which are validly
issued, fully paid and nonassessable; (ii) no shares of Ascend Common Stock
were held in the treasury of Ascend or by Subsidiaries of Ascend; (iii)
approximately 22,906,220 shares of Ascend Common Stock were reserved for
future issuance pursuant to stock options granted and outstanding under
Ascend's stock option plans (the "Ascend Option Plans"), and rights
outstanding under Ascend's employee stock purchase plan (the "Ascend Purchase
Plan"). No material change in such capitalization has occurred between March
31, 1996 and the date of this Agreement. As of the date of this Agreement,
none of the shares of Ascend Preferred Stock are issued and outstanding. All
shares of Ascend Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be duly authorized, validly issued, fully paid
and nonassessable. There are no obligations, contingent or otherwise, of
Ascend or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of Ascend Common Stock or the capital stock of any Ascend
Subsidiary or to provide funds to or make any investment (in the form of a
loan, capital contribution or otherwise) in any such Subsidiary or any other
entity other than guarantees of bank obligations of such Subsidiaries entered
into in the ordinary course of business. All of the outstanding shares of
capital stock of each of Ascend's Subsidiaries are duly authorized, validly
issued, fully paid and nonassessable, and all such shares (other than
directors' qualifying shares in the case of foreign Subsidiaries) are owned by
Ascend or another Ascend Subsidiary free and clear of all security interests,
liens, claims, pledges, agreements, limitations on Ascend's voting rights,
charges or other encumbrances of any nature.

(b) Except as set forth in this Section 4.2 or as reserved for future grants
of options under the Ascend Option Plans or the Ascend Purchase Plan, there
are no equity securities of any class of Ascend or any of its Subsidiaries, or
any security exchangeable into or exercisable for such equity securities,
issued, reserved for issuance or outstanding. Except as set forth in this
Section 4.2 or in Schedule 4.2 of the Ascend Disclosure Schedule, there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which Ascend or any of its Subsidiaries is a party or by
which it is bound obligating Ascend or any of its Subsidiaries to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of capital stock of Ascend or any of its Subsidiaries or obligating Ascend or
any of its Subsidiaries to grant, extend, accelerate the vesting of or enter
into any such option, warrant, equity security, call, right, commitment or

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agreement. To the best knowledge of Ascend, there are no voting trusts,
proxies or other agreements or understandings with respect to the shares of
capital stock of Ascend.

Section 4.3 Authority; No Conflict; Required Filings and Consents.

(a) Ascend has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement and the consummation
of the transactions contemplated by this Agreement have been duly authorized
by all necessary corporate action on the part of Ascend. This Agreement has
been duly executed and delivered by Ascend and constitutes the valid and
binding obligation of Ascend, enforceable in accordance with its terms, except
as such enforceability may be limited by (i) bankruptcy laws and other similar
laws affecting creditors' rights generally and (ii) general principles of
equity, regardless of whether asserted in a proceeding in equity or at law.

(b) The execution and delivery of this Agreement by Ascend does not, and the
consummation of the transactions contemplated by this Agreement will not, (i)
conflict with, or result in any violation or breach of any provision of the
Certificate of Incorporation or Bylaws of Ascend, (ii) result in any violation
or breach of, or constitute (with or without notice or lapse of time, or both)
a default (or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any material benefit) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which Ascend
or any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound, or (iii) conflict with or violate any
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Ascend or any of its Subsidiaries
or any of its or their properties or assets, except in the case of (ii) and
(iii) for any such conflicts, violations, defaults, terminations,
cancellations or accelerations which would not be reasonably likely to have a
Material Adverse Effect on Ascend and its Subsidiaries, taken as a whole.

(c) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Ascend or any of its Subsidiaries in connection with the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (i) the filing of a pre-merger notification
report under the HSR Act, (ii) the filing of the Registration Statement with
the SEC in accordance with the Securities Act, (iii) the filing of the
Articles of Merger with the Minnesota Secretary of State in accordance with
the MBCA, (iv) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal and state securities laws and the laws of any foreign country and (v)
such other consents, authorizations, filings, approvals and registrations
which, if not obtained or made, would not be reasonably likely to have a
Material Adverse Effect on Ascend and its Subsidiaries, taken as a whole.

Section 4.4 SEC Filings; Financial Statements.

(a) Ascend has filed and made available to NetStar all forms, reports and
documents required to be filed by Ascend with the SEC since March 31, 1994
other than registration statements on Form S-8 (collectively, the "Ascend SEC
Reports"). The Ascend SEC Reports (i) at the time filed, complied in all
material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and (ii) did not at the time they were
filed (or if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing) contain any untrue statement of a
material fact or omit to state a material fact required to be stated in such
Ascend SEC Reports or necessary in order to make the statements in such Ascend
SEC Reports, in the light of the circumstances under which they were made, not
misleading. None of Ascend's Subsidiaries is required to file any forms,
reports or other documents with the SEC.

(b) Each of the consolidated financial statements (including, in each case,
any related notes) contained in the Ascend SEC Reports, including any Ascend
SEC Reports filed after the date of this Agreement until the Closing, complied
or will comply as to form in all material respects with the applicable
published rules and regulations of the SEC with respect thereto, was or will
be prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved (except as may
be indicated

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in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q promulgated by the SEC) and fairly
presented or will present the consolidated financial position of Ascend and
its Subsidiaries as at the respective dates and the consolidated results of
its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be
material in amount. The unaudited consolidated balance sheet of Ascend as of
March 31, 1996 is referred to herein as the "Ascend Balance Sheet."

Section 4.5 Absence of Undisclosed Liabilities. Except as disclosed in
writing to NetStar or as otherwise disclosed in the Ascend SEC Reports, Ascend
and its Subsidiaries do not have any liabilities, either accrued or contingent
(whether or not required to be reflected in financial statements in accordance
with generally accepted accounting principles), and whether due or to become
due, which individually or in the aggregate would be reasonably likely to have
a Material Adverse Effect on Ascend and its Subsidiaries, taken as a whole,
other than (i) liabilities reflected in the Ascend Balance Sheet, (ii)
liabilities specifically described in this Agreement, or in the Ascend
Disclosure Schedule, and (iii) normal or recurring liabilities incurred since
March 31, 1996 in the ordinary course of business consistent with past
practices.

Section 4.6 Absence of Certain Changes or Events. Since the date of the
Ascend Balance Sheet, Ascend and its Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with past
practice and, since such date, there has not been: (i) any Material Adverse
Change of Ascend and its Subsidiaries, taken as a whole; (ii) any damage,
destruction or loss (whether or not covered by insurance) with respect to
Ascend or any of its Subsidiaries having a Material Adverse Effect on Ascend
and its Subsidiaries, taken as a whole; (iii) any material change by Ascend in
its accounting methods, principles or practices to which NetStar has not
previously consented in writing; (iv) any revaluation by Ascend of any of its
assets having a Material Adverse Effect on Ascend and its Subsidiaries, taken
as a whole, including, without limitation, writing down the value of
capitalized software or inventory or writing off notes or accounts receivable
other than in the ordinary course of business, unless NetStar has previously
consented in writing; or (v) except as disclosed in the Ascend Disclosure
Schedule, any other action or event that would have required the consent of
NetStar pursuant to Section 5.2 of this Agreement had such action or event
occurred after the date of this Agreement and that would be reasonably likely
to have a Material Adverse Effect on Ascend and its Subsidiaries, taken as a
whole.

Section 4.7 Taxes.

(a) Ascend has accurately prepared and timely filed all material required
Returns relating to any and all Taxes concerning or attributable to Ascend or
its operations and such Returns are true and correct in all material respects
and have been completed in all material respects in accordance with applicable
law.

(b) Ascend as of the Effective Time: (i) will have paid all Taxes it is
required to pay prior to the Effective Time and (ii) will have withheld with
respect to its employees all federal and state income taxes, FICA, FUTA and
other Taxes required to be withheld, except where any failure to make such
payment or withholding would not be reasonably likely to have a Material
Adverse Effect on Ascend and its Subsidiaries, take as a whole.

(c) There is no Tax deficiency outstanding, proposed or assessed against
Ascend that is not reflected as a liability on the Ascend Balance Sheet nor
has Ascend executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax.

(d) Ascend does not have any material liabilities for unpaid federal, state,
local and foreign Taxes that have not been accrued for or reserved on Ascend
Balance Sheet, whether asserted or unasserted, contingent or otherwise.

Section 4.8 Properties. All Material Leases under which Ascend leases real
property are in good standing, valid and effective in accordance with their
respective terms, and Ascend is not in default under any of such Material
Leases, except where the lack of such good standing, validity and
effectiveness or the existence of such default would not be reasonably likely
to have a Material Adverse Effect on Ascend and its Subsidiaries, taken as a
whole.

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Section 4.9 Intellectual Property.

(a) Ascend owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights
and mask works, any applications for and registrations of such patents,
trademarks, trade names, service marks, copyrights and mask works, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications, and tangible or intangible proprietary
information or material that are necessary to conduct the business of Ascend
as currently conducted or planned to be conducted, the absence of which would
be reasonably likely to have a Material Adverse Effect on Ascend and its
Subsidiaries, taken as a whole (the "Ascend Intellectual Property Rights").

(b) Ascend is not, nor will it be as a result of the execution and delivery
of this Agreement or the performance of its obligations under this Agreement,
in breach of any license, sublicense or other agreement relating to the Ascend
Intellectual Property Rights or any material license, sublicense or other
agreement pursuant to which Ascend is authorized to use any third party
patents, trademarks or copyrights, including software, which are incorporated
in, are or form a part of any Ascend product that is material to its business,
the breach of which would be reasonably likely to have a Material Adverse
Effect on Ascend and its Subsidiaries, taken as a whole.

(c) To Ascend's knowledge, all patents, registered trademarks, service marks
and copyrights held by Ascend or any of its Subsidiaries which Ascend
considers to be material to its business are valid and subsisting. Ascend has
no knowledge that the manufacturing, marketing, licensing or sale of its
products infringes any patent, trademark, service mark, copyright, trade
secret or other proprietary right of any third party, which infringement would
be reasonably likely to have a Material Adverse Effect on Ascend and its
Subsidiaries, taken as a whole.

Section 4.10 Agreements, Contracts and Commitments. Ascend has not breached,
or received in writing any claim or threat that it has breached, any of the
terms or conditions of any material agreement, contract or commitment filed as
an exhibit to the Ascend SEC Reports ("Ascend Material Contracts") in such a
manner as would permit any other party to cancel or terminate the same or
would permit any other party to seek material damages from Ascend under any
Ascend Material Contract. Each Ascend Material Contract that has not expired
or been terminated is in full force and effect and is not subject to any
material default thereunder of which Ascend is aware by any party obligated to
Ascend pursuant to such Ascend Material Contract.

Section 4.11 Litigation. There is no action, suit or proceeding, claim,
arbitration or investigation against Ascend pending or as to which Ascend has
received any written notice of assertion, which is reasonably likely to have a
Material Adverse Effect on Ascend and its Subsidiaries, taken as a whole, or a
material adverse effect on the ability of Ascend to consummate the
transactions contemplated by this Agreement.

Section 4.12 Environmental Matters.

(a) As of the date hereof, to the knowledge of Ascend, no underground
storage tanks are present under any property that Ascend or any of its
Subsidiaries has at any time owned, operated, occupied or leased. As of the
date hereof, except as set forth in the Ascend Disclosure Schedule, no amount
of any Hazardous Material is present as a result of the actions of Ascend, or,
to Ascend's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water, that Ascend or any of its
Subsidiaries has at any time owned, operated, occupied or leased, where the
presence of such Hazardous Materials is reasonably likely to have a Material
Adverse Effect on Ascend and its Subsidiaries, taken as a whole.

(b) At no time has Ascend or any of its Subsidiaries engaged in Hazardous
Materials Activities in violation of any rule, regulation, treaty or statute
promulgated by any Governmental Entity to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity which has had or is
reasonably likely to have a Material Adverse Effect on Ascend and its
Subsidiaries, taken as a whole.

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(c) Ascend currently holds all Environmental Permits necessary for the
conduct of its Hazardous Material Activities and other businesses of Ascend as
such activities and businesses are currently being conducted, the absence of
which would be reasonably likely to have a Material Adverse Effect on Ascend
and its Subsidiaries, taken as a whole.

(d) No action, proceeding, revocation proceeding, amendment procedure, writ,
injunction or claim is pending or, to the knowledge of Ascend, threatened
concerning any Environmental Permit or any Hazardous Materials Activity of
Ascend. Ascend is not aware of any fact or circumstance which could involve
Ascend in any environmental litigation or impose upon Ascend any environmental
liability, which would be reasonably likely to have a Material Adverse Effect
on Ascend and its Subsidiaries, taken as a whole.

Section 4.13 Employee Benefit Plans.

(a) Ascend has made available to NetStar all employee benefit plans (as
defined in Section 3(3) of ERISA) and all bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
similar employee benefit plans, and all unexpired severance agreements,
written or otherwise, for the benefit of, or relating to, any current or
former employee of Ascend or any ERISA Affiliate of Ascend (together, the
"Ascend Employee Plans").

(b) With respect to each Ascend Employee Plan, Ascend has made available to
NetStar, a true and correct copy of (i) the most recent annual report (Form
5500) filed with the IRS with respect to Ascend Employee Plan subject to such
filing requirement, (ii) such Ascend Employee Plan, (iii) each trust agreement
and group annuity contract, if any, relating to such Ascend Employee Plan and
(iv) the most recent actuarial report or valuation relating to a Ascend
Employee Plan subject to Title IV of ERISA.

(c) With respect to the Ascend Employee Plans, individually and in the
aggregate, no event has occurred, and to the knowledge of Ascend, there exists
no condition or set of circumstances in connection with which Ascend could be
subject to any liability that is reasonably expected to have a Material
Adverse Effect on Ascend and its Subsidiaries, taken as a whole, under ERISA,
the Code or any other applicable law.

(d) With respect to the Ascend Employee Plans, individually and in the
aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting
principles, on the financial statements of Ascend, which obligations are
reasonably expected to have a Material Adverse Effect on Ascend and its
Subsidiaries, taken as a whole.

(e) Except as set forth in Schedule 4.13 of the Ascend Disclosure Schedule
or as disclosed in Ascend SEC Reports filed prior to the date of this
Agreement, and except as provided for in this Agreement, neither Ascend nor
any of its Subsidiaries is a party to any oral or written (i) union or
collective bargaining agreement, (ii) agreement with any officer or other key
employee of Ascend or any of its Subsidiaries, the benefits of which are
contingent, or the terms of which are materially altered, upon the occurrence
of a transaction involving Ascend of the nature contemplated by this
Agreement, (iii) agreement with any officer of Ascend providing any term of
employment or compensation guarantee extending for a period longer than one
year from the date hereof, or (iv) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the
benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.

Section 4.14 Compliance with Laws. Ascend has complied with, is not in
violation of, and has not received any notices of violation with respect to,
any federal, state or local statute, law or regulation with respect to the
conduct of its business, or the ownership or operation of its business, except
for failures to comply or violations which would not be reasonably likely to
have a Material Adverse Effect on Ascend and its Subsidiaries, taken as a
whole.

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Section 4.15 Pooling of Interests. To its knowledge, neither Ascend nor any
of its Affiliates (as defined in Section 6.11) has, through the date of this
Agreement, taken or agreed to take any action which would prevent Ascend from
accounting for the business combination to be effected by the Merger as a
pooling of interests.

Section 4.16 Interested Party Transactions. Except as set forth in the
Ascend SEC Reports, since the date of Ascend's last proxy statement to its
stockholders, no event has occurred that would be required to be reported by
Ascend as a Certain Relationship or Related Transaction, pursuant to Item 404
of Regulation S-K promulgated by the SEC.

Section 4.17 Registration Statement; Proxy Statement/Prospectus. The
information supplied by Ascend for inclusion in the Registration Statement
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information
supplied by Ascend for inclusion in the Proxy Statement shall not, on the date
the Proxy Statement is first mailed to stockholders of NetStar, at the time of
the NetStar Stockholder's Meeting or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
shall be made, is false or misleading with respect to any material fact, or
omit to state any material fact necessary in order to make the statements made
in the Proxy Statement not false or misleading; or omit to state any material
fact necessary to correct any statement in any earlier communication with
respect to the solicitation of proxies for the NetStar Stockholders' Meeting
which has become false or misleading. If at any time prior to the Effective
Time any event relating to Ascend or any of its Affiliates, officers or
directors should be discovered by Ascend which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy
Statement, Ascend shall promptly inform NetStar.

Section 4.18 Opinion of Financial Advisor. The financial advisor of Ascend,
Robertson, Stephens & Company LLC, has delivered to Ascend an opinion dated
the date of this Agreement to the effect that the Conversion Number is fair to
Ascend from a financial point of view.

Section 4.19 Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this Agreement, has
engaged in no other business activities and has conducted its operations only
as contemplated by this Agreement.

ARTICLE V

Conduct of Business

Section 5.1 Covenants of NetStar. During the period from the date of this
Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, NetStar agrees as to itself and its
Subsidiaries (except to the extent that Ascend shall otherwise consent in
writing), to carry on its business in the usual, regular and ordinary course
in substantially the same manner as previously conducted, to pay its debts and
taxes when due, subject to good faith disputes over such debts or taxes, to
pay or perform its other obligations when due, and, to the extent consistent
with such business, to use all reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and key
employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with
it. NetStar shall promptly notify Ascend of any event or occurrence not in the
ordinary course of business of NetStar where such event or occurrence would
result in a breach of any covenant of NetStar set forth in this Agreement or
cause any representation or warranty of NetStar set forth in this Agreement to
be untrue as of the date of, or giving effect to, such event or occurrence.
Except as expressly contemplated by this Agreement, subject to Section 6.1,
NetStar shall not (and shall not permit any of its Subsidiaries to), without
the prior written consent of Ascend:

(a) Accelerate, amend or change the period of exercisability of options
or restricted stock granted under any employee stock plan of NetStar or
authorize cash payments in exchange for any options granted

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under any of such plans except as required by the terms of such plans or
any related agreements in effect as of the date of this Agreement;

(b) Transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the NetStar Intellectual Property Rights
other than in the ordinary course of business consistent with past
practices;

(c) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of its capital stock, or purchase or otherwise
acquire, directly or indirectly, any shares of its capital stock except
from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service by such party;

(d) Issue, deliver or sell or authorize or propose the issuance, delivery
or sale of, any shares of its capital stock or securities convertible into
shares of its capital stock, or subscriptions, rights, warrants or options
to acquire, or other agreements or commitments of any character obligating
it to issue any such shares or other convertible securities, other than (i)
the grant of options consistent with past practices to employees, which
options shall represent in the aggregate the right to acquire no more than
the average number of shares of NetStar Common Stock subject to options
granted in a comparable period of time during the preceding 12-month
period; or (ii) the issuance of (A) rights to purchase shares of NetStar
Common Stock under the NetStar Purchase Plans, or (B) shares of NetStar
Common Stock issuable upon the exercise of options granted under the
NetStar Employee Option Plan or the NetStar Director Option Plan or
pursuant to rights under the NetStar Purchase Plan or (C) shares of NetStar
Common Stock issuable upon exercise of the NetStar Warrants;

(e) Acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership or other business organization or division, or otherwise
acquire or agree to acquire any assets other than acquisitions involving
aggregate consideration of not more than $500,000;

(f) Sell, lease, license or otherwise dispose of any of its properties or
assets which are material, individually or in the aggregate, to the
business of NetStar and its Subsidiaries, taken as a whole, except for
transactions entered into in the ordinary course of business;

(g) Take any action to: (i) increase or agree to increase the
compensation payable or to become payable to its officers or employees,
except for increases in salary or wages of employees in accordance with
past practices, (ii) grant any additional severance or termination pay to,
or enter into any employment or severance agreements with, officers, (iii)
grant any severance or termination pay to, or enter into any employment or
severance agreement, with any employee, except in accordance with past
practices, (iv) enter into any collective bargaining agreement, or (v)
establish, adopt, enter into or amend in any material respect any bonus,
profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;

(h) Revalue any of its assets, including writing down the value of
inventory or writing off notes or accounts receivable other than in the
ordinary course of business;

(i) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities or guarantee any debt securities of others,
other than indebtedness incurred under outstanding lines of credit
consistent with past practice;

(j) Amend or propose to amend its Articles of Incorporation or Bylaws,
except as contemplated by this Agreement;

(k) Incur or commit to incur any individual capital expenditure in excess
of $100,000 or aggregate capital expenditures in excess of $500,000, in
addition to the existing commitments set forth in the NetStar Disclosure
Schedule;

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(l) Enter into or amend any agreements pursuant to which any third party
is granted exclusive marketing or manufacturing rights with respect to any
NetStar product;

(m) Amend or terminate any material contract, agreement or license to
which it is a party except in the ordinary course of business;

(n) Waive or release any material right or claim, except in the ordinary
course of business;

(o) Initiate any litigation or arbitration proceeding;

(p) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (o) above, or any action which is
reasonably likely to make any of NetStar's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on
the date made (to the extent so limited) or as of the Effective Time.

Section 5.2 Covenants of Ascend. During the period from the date of this
Agreement and continuing until the earlier of the termination of the Agreement
or the Effective Time, Ascend agrees as to itself and its Subsidiaries (except
to the extent that NetStar shall otherwise consent in wiring), to carry on its
business in the usual, regular and ordinary course in substantially the same
manner as previously conducted, to pay its debts and taxes when due subject to
good faith disputes over such debts or taxes, to pay or perform its other
obligations when due, and, to the extent consistent with such business, use
all reasonable efforts consistent with past practices and policies to preserve
intact its present business organization, keep available the services of its
present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it. Except as expressly contemplated by this Agreement,
Ascend shall not (and shall not permit any of its Subsidiaries to), without
the prior written consent of NetStar which shall not be unreasonably withheld:

(a) Declare or pay any dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital
stock, or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock (other than stock splits of
its Common Stock or stock dividends payable in shares of Common Stock), or
purchase or otherwise acquire, directly or indirectly, any shares of its
capital stock except from former employees, directors and consultants in
accordance with agreements providing for the repurchase of shares in
connection with any termination of service by such party;

(b) Sell, lease, license or otherwise dispose of any of its properties or
assets which are material, individually or in the aggregate, to the
business of Ascend and its Subsidiaries, taken as a whole, except for
transactions entered into in the ordinary course of business;

(d) Take, or agree in writing or otherwise to take, any of the actions
described in Sections (a) through (c) above, or any action which is
reasonably likely to make any of Ascend's representations or warranties
contained in this Agreement untrue or incorrect in any material respect on
the date made (to the extent so limited) or as of the Effective Time.

Section 5.3 Cooperation. Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Ascend and NetStar shall confer
on a regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status of
ongoing operations and shall promptly provide the other party or its counsel
with copies of all filings made by such party with any Governmental Entity in
connection with this Agreement, the Merger and the transactions contemplated
hereby.

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ARTICLE VI

Additional Agreements

Section 6.1 No Solicitation.

(a) NetStar shall not, directly or indirectly, through any officer,
director, employee, representative or agent, (i) solicit, initiate, or
encourage any inquiries or proposals that constitute, or could reasonably be
expected to lead to, a proposal or offer for a merger, consolidation, business
combination, sale of substantial assets, sale of shares of capital stock
(including without limitation by way of a tender offer) or similar
transactions involving NetStar, other than the transactions contemplated by
this Agreement (any of the foregoing inquiries or proposals being referred to
in this Agreement as an "Acquisition Proposal"), (ii) engage in negotiations
or discussions concerning, or provide any non-public information to any person
or entity relating to, any Acquisition Proposal, or (iii) agree to, approve or
recommend any Acquisition Proposal; provided, however, that nothing contained
in this Agreement shall prevent NetStar or its Board of Directors from (A)
furnishing non-public information to, or entering into discussions or
negotiations with, any person or entity in connection with an unsolicited bona
fide written Acquisition Proposal by such person or entity (including a new
and unsolicited Acquisition Proposal received by NetStar after the execution
of this Agreement from a person or entity whose initial contact with NetStar
may have been solicited by NetStar prior to the execution of this Agreement)
or recommending such an unsolicited bona fide written Acquisition Proposal to
the stockholders of NetStar, if and only to the extent that (1) the Board of
Directors of NetStar believes in good faith (after consultation with and based
upon the advice of its financial advisor) that such Acquisition Proposal
would, if consummated, result in a transaction more favorable to NetStar's
stockholders from a financial point of view than the transaction contemplated
by this Agreement (any such more favorable Acquisition Proposal being referred
to in this Agreement as a "Superior Proposal") and that the party making such
Superior Proposal has the financial means, or the ability to obtain the
necessary financing, to conclude such transaction, (2) the Board of Directors
of NetStar determines in good faith (after consultation with and based upon
the advice of outside legal counsel) that such action is necessary for such
Board of Directors to comply with its fiduciary duties to the NetStar
stockholders under applicable law and (3) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such person
or entity, such Board of Directors receives from such person or entity an
executed confidentiality agreement with terms no less favorable to NetStar
than those contained in the Mutual and Reciprocal Non-Disclosure Agreement
dated May 7, 1996 between Ascend and NetStar (the "Confidentiality
Agreement"); or (B) complying with Rule 14e-2 promulgated under the Exchange
Act with regard to an Acquisition Proposal.

(b) NetStar shall notify Ascend no later than twenty-four (24) hours after
receipt by NetStar (or its advisors) of any Acquisition Proposal or any
request for nonpublic information in connection with an Acquisition Proposal
or for access to the properties, books or records of NetStar by any person or
entity that informs NetStar that it is considering making, or has made, an
Acquisition Proposal. Such notice shall be made orally and in writing and
shall indicate in reasonable detail the identity of the offeror and the terms
and conditions of such proposal, inquiry or contact.

Section 6.2 Proxy Statement/Prospectus; Registration Statement.

(a) As promptly as practicable after the execution of this Agreement, Ascend
and NetStar shall prepare and file with the SEC the Proxy Statement, and
Ascend shall prepare and file with the SEC the Registration Statement, in
which the Proxy Statement will be included as a prospectus. Ascend and NetStar
shall use all reasonable efforts to cause the Registration Statement to become
effective as soon after such filing as practicable. The Proxy Statement shall
include the recommendation of the Board of Directors of NetStar in favor of
this Agreement and the Merger; provided that the Board of Directors of NetStar
may withdraw such recommendation if such Board of Directors believes in good
faith, after consultation with and based upon the advice of its outside legal
counsel, that the withdrawal of such recommendation is necessary to comply
with its fiduciary duties under applicable law.

(b) Ascend and NetStar shall make all necessary filings with respect to the
Merger under the Securities Act and the Exchange Act and applicable state blue
sky laws and the rules and regulations thereunder.

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Section 6.3 Consents. Each of Ascend and NetStar shall use all reasonable
efforts to obtain all necessary consents, waivers and approvals under any of
Ascend's or NetStar's material agreements, contracts, licenses or leases as
may be necessary or advisable to consummate the Merger and the other
transactions contemplated by this Agreement.

Section 6.4 Current Nasdaq Quotation. Each of Ascend and NetStar agrees to
continue the quotation of Ascend Common Stock and NetStar Common Stock,
respectively, on the Nasdaq National Market during the term of this Agreement.

Section 6.5 Access to Information. Upon reasonable notice, NetStar and
Ascend shall each (and shall cause each of its Subsidiaries to) afford to the
officers, employees, accountants, counsel and other representatives of the
other, access, during normal business hours during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, each of NetStar and Ascend shall (and shall
cause each of its Subsidiaries to) furnish promptly to the other (i) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (ii) all other information concerning its business,
properties and personnel as such other party may reasonably request. Unless
otherwise required by law, the parties will hold any such information which is
nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this
Section 6.5 shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the
parties to consummate the Merger.

Section 6.6 NetStar Stockholders' Meeting. NetStar shall call a meeting of
its stockholders to be held as promptly as practicable for the purpose of
voting upon this Agreement and the Merger. Subject to Sections 6.1 and 6.2,
NetStar will, through its Board of Directors, recommend to NetStar's
stockholders approval of such matters and will coordinate and cooperate with
Ascend with respect to the timing of such meeting and shall use its best
efforts to hold such meeting as soon as practicable after the date hereof.
Unless otherwise required to comply with the applicable fiduciary duties of
the directors of NetStar, as determined by such directors in good faith after
consultation with and based upon the advice of its outside legal counsel,
NetStar shall use all reasonable efforts to solicit from its stockholders
proxies in favor of such matters.

Section 6.7 Legal Conditions to Merger. Each of Ascend and NetStar will take
all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on itself with respect to the Merger (which
actions shall include, without limitation, furnishing all information required
under the HSR Act and in connection with approvals of or filings with any
other Governmental Entity) and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed
upon either of them or any of their Subsidiaries in connection with the
Merger. Each of Ascend and NetStar will, and will cause its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity or other third party, required to be
obtained or made by NetStar, Ascend or any of their Subsidiaries in connection
with the Merger or the taking of any action contemplated thereby or by this
Agreement.

Section 6.8 Public Disclosure. Ascend and NetStar shall consult with each
other before issuing any press release or otherwise making any public
statement with respect to the Merger or this Agreement and shall not issue any
such press release or make any such public statement prior to such
consultation, except as may be required by law or by the rules of the NASD.

Section 6.9 Tax-Free Organization. Ascend and NetStar shall each use its
best efforts to cause the Merger to be treated as a reorganization within the
meaning of Section 368(a) of the Code.

Section 6.10 Pooling Accounting. Ascend and NetStar shall each use its best
efforts to cause the business combination to be effected by the Merger to be
accounted for as a pooling of interests. Each of Ascend and NetStar shall use
its best efforts (i) to cause its respective Affiliates (as defined in Section
6.11) not to take any action that would adversely affect the ability of Ascend
to account for the business combination to be

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effected by the Merger as a pooling of interests and (ii) to cause its
respective Affiliates to sign and deliver to Ascend a customary "pooling
letter" in form and substance agreed upon by NetStar and Ascend to the extent
that receipt of such letter is required to assure the availability of pooling
of interests accounting treatment.

Section 6.11 Affiliate Agreements. Within ten (10) days following the
execution of this Agreement, Ascend and NetStar will provide each other with a
list of those persons who are, in Ascend's or NetStar's respective reasonable
judgment, "affiliates" of Ascend or NetStar, respectively, within the meaning
of Rule 145 (each such person who is an "affiliate" of Ascend or NetStar
within the meaning of Rule 145 is referred to herein as an "Affiliate")
promulgated under the Securities Act ("Rule 145"). Ascend and NetStar shall
provide each other such information and documents as NetStar or Ascend shall
reasonably request for purposes of reviewing such list and shall notify the
other party in writing regarding any change in the identity of its Affiliates
prior to the Closing Date. NetStar shall use its best efforts to deliver or
cause to be delivered to Ascend by July 1, 1996 from each of the Affiliates of
NetStar, an executed Affiliate Agreement, in form and substance satisfactory
to Ascend and NetStar, by which such Affiliate of NetStar agrees to comply
with the applicable requirements of Rule 145 ("Affiliates Agreement");
provided, however, that it is understood that Affiliates Agreements are not
likely to be obtainable from stockholders who are institutional investors not
affiliated with any officer or director of NetStar. Ascend shall be entitled
to place appropriate legends on the certificates evidencing any Ascend Common
Stock to be received by such Affiliates of NetStar pursuant to the terms of
this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Ascend Common Stock, consistent with the terms of the
Affiliates Agreements.

Section 6.12 Nasdaq Quotation. Ascend shall use its best efforts to cause
the shares of Ascend Common Stock to be issued in the Merger to be approved
for quotation on the Nasdaq National Market, subject to official notice of
issuance, prior to the Closing Date.

Section 6.13 Stock Plans, Options and Warrants.

(a) NetStar shall provide to each holder of an outstanding option to
purchase NetStar Common Stock (a "NetStar Option") under the NetStar Employee
Option Plan the notice required pursuant to Paragraph 14.c.(ii) of the NetStar
Employee Option Plan.

(b) At the Effective Time, each outstanding NetStar Option shall be deemed
to constitute an option to acquire, on the same terms and conditions as were
applicable under such NetStar Option, the same number of shares of Ascend
Common Stock as the holder of such NetStar Option would have been entitled to
receive pursuant to the Merger had such holder exercised such option in full
immediately prior to the Effective Time (rounded down to the nearest whole
number), at a price per share (rounded up to the nearest whole cent) equal to
(i) the aggregate exercise price for the shares of NetStar Common Stock
otherwise purchasable pursuant to such NetStar Option divided by (ii) the
number of full shares of Ascend Common Stock deemed purchasable pursuant to
such NetStar Option in accordance with the foregoing; provided, however, that
in the case of any NetStar Options to which Section 422 of the Code applies
("incentive stock options"), the option price, the number of shares
purchasable pursuant to such option and the terms and conditions of exercise
of such option shall be determined in order to comply with Section 424(a) of
the Code.

(c) As soon as practicable after the Effective Time, Ascend shall deliver to
the participants in the NetStar Employee Option Plan an appropriate notice
setting forth such participants' rights pursuant thereto and the grants
pursuant to the NetStar Employee Option Plan shall continue in effect on the
same terms and conditions (subject to the adjustments required by this Section
6.13 after giving effect to the Merger). Ascend shall comply with the terms of
the NetStar Employee Option Plan and ensure, to the extent required by, and
subject to the provisions of, such plan, that NetStar Options which qualified
as incentive stock options prior to the Effective Time will continue to
qualify as incentive stock options after the Effective Time.

(d) Ascend shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Ascend Common Stock for delivery upon the
exercise of the NetStar Options assumed in accordance with this

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Section 6.13. As soon as practicable after the Effective Time, and not more
than ten (10) business days thereafter, Ascend shall file a registration
statement on Form S-8 (or any successor or other appropriate form) with
respect to the shares of Ascend Common Stock subject to the NetStar Options
assumed pursuant to this Section 6.13 and shall use its best efforts to
maintain the effectiveness of such registration statement or registration
statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as the NetStar Options remain outstanding. With
respect to those individuals, if any, who subsequent to the Merger will be
subject to the reporting requirements under Section 16(a) of the Exchange Act,
where applicable, Ascend shall administer NetStar Options assumed pursuant to
this Section 6.13 in a manner that complies with Rule 16b-3 promulgated under
the Exchange Act to the extent the NetStar Employee Option Plan complied with
such rule prior to the Merger.

(e) NetStar shall take such action as is necessary to cause the ending date
of the then current "Phase" of the NetStar Purchase Plan (as such term is
defined therein) to be the last trading day on which the NetStar Common Stock
is traded on the Nasdaq National Market immediately prior to the Effective
Time (the "Final NetStar Purchase Date"); provided, that, such change in the
Phase shall be conditioned upon the consummation of the Merger. On the Final
NetStar Purchase Date, NetStar shall apply the funds credited as of such date
under the NetStar Purchase Plan within each participant's payroll withholding
account to the purchase of whole shares of NetStar Common Stock in accordance
with the terms of the NetStar Purchase Plan.

(f) Employees of NetStar as of the Effective Time shall be permitted to
participate in the Ascend Purchase Plan commencing on the first enrollment
date of such plan following the Effective Time, subject to the eligibility
provisions of such plan (with employees receiving credit, for purposes of such
eligibility provisions, for service with NetStar or Ascend).

(g) At the Effective Time, each outstanding NetStar Warrant shall be deemed
to constitute a warrant to acquire, on the same terms and conditions as were
applicable under such NetStar Warrant, the same number of shares of Ascend
Common Stock as the holder of such NetStar Warrant would have been entitled to
receive pursuant to the Merger had such holder exercised such NetStar Warrant
in full immediately prior to the Effective Time (rounded down to the nearest
whole number), at a price per share (rounded up to the nearest whole cent)
equal to (i) the aggregate exercise price for the shares of NetStar Common
Stock otherwise purchasable pursuant to such NetStar Warrant divided by (ii)
the number of full shares of Ascend Common Stock deemed purchasable pursuant
to such NetStar Warrant in accordance with the foregoing. As soon as
practicable after the Effective Time, Ascend shall deliver to the holders of
the NetStar Warrants appropriate notice setting forth such holders' rights
pursuant hereto and shall deliver to such holders, upon surrender of their
NetStar Warrants, new warrants (the "Ascend Warrants") evidencing such
holders' rights pursuant hereto. Ascend shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Ascend
Common Stock for delivery upon the exercise of the Ascend Warrants in
accordance with this Section 16.13. As soon as practicable after the Effective
Time, and not more than ten (10) business days thereafter, Ascend shall file a
registration statement on Form S-3 (or any successor or other appropriate
form) with respect to the shares of Ascend Common Stock subject to the Ascend
Options and shall use its best efforts to maintain the effectiveness of such
registration statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for so long as the
NetStar Warrants remain outstanding.

Section 6.14 Directors of the Surviving Corporation. Ascend will retain the
services of the three current non-employee directors of NetStar as members of
the Board of Directors of the Surviving Corporation for a period of not less
than ninety (90) days following the Effective Time to assist with Post-Merger
transition matters, provided that (i) such individuals will agree to serve in
such capacity without compensation and (ii) Ascend and the Surviving
Corporation shall have the right to remove any such director for cause
pursuant to the MBCA.

Section 6.15 Brokers or Finders. Each of Ascend and NetStar represents, as
to itself, its Subsidiaries and its Affiliates, that no agent, broker,
investment banker, financial advisor or other firm or person is or will be

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entitled to any broker's or finder's fee or any other commission or similar
fee in connection with any of the transactions contemplated by this Agreement
except Wessels, Arnold & Henderson, L.L.C., whose fees and expenses will be
paid by NetStar in accordance with NetStar's agreement with such firm (a copy
of which has been delivered by NetStar to Ascend prior to the date of this
Agreement), and Robertson, Stephens & Company LLC, whose fees and expenses
will be paid by Ascend in accordance with Ascend's agreement with such firm (a
copy of which has been delivered by Ascend to NetStar prior to the date of
this Agreement), and each of Ascend and NetStar agrees to indemnify and hold
the other harmless from and against any and all claims, liabilities or
obligations with respect to any other fees, commissions or expenses asserted
by any person on the basis of any act or statement alleged to have been made
by such party or its Affiliate.

Section 6.16 Indemnification.

(a) NetStar shall and, from and after the Effective Time, Ascend and the
Surviving Corporation shall, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date of this Agreement or who
becomes prior to the Effective Time, an officer, director or employee of
NetStar or any of its Subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such person is or was a
director, officer or employee of NetStar or any of its Subsidiaries, whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the Effective
Time ("Indemnified Liabilities") including, without limitation, all losses,
claims, damages, costs, expenses, liabilities or judgments based in whole or
in part on, or arising in whole or in part out of, or pertaining to this
Agreement or the transactions contemplated hereby, in each case to the full
extent a corporation is permitted under the MBCA to indemnify its own
directors, officers and employees, as the case may be (NetStar, Ascend and the
Surviving Corporation, as the case may be, will pay expenses in advance of the
final disposition of any such action or proceeding to each Indemnified Party
to the full extent permitted by law upon receipt of any undertaking
contemplated by Section 302A.521 of the MBCA). Without limiting the foregoing,
in the event any such claim, action, suit, proceeding or investigation is
brought against any Indemnified Party (whether arising before or after the
Effective Time), (i) the Indemnified Parties may retain counsel satisfactory
to them and NetStar (or them and Ascend and the Surviving Corporation after
the Effective Time), (ii) NetStar (or after the Effective Time, Ascend and the
Surviving Corporation) shall pay all reasonable fees and expenses of such
counsel for the Indemnified Parties promptly as statements therefor are
received, and (iii) NetStar (or after the Effective Time, Ascend and the
Surviving Corporation) will use all reasonable efforts to assist in the
vigorous defense of any such matter, provided that none of NetStar, Ascend or
the Surviving Corporation shall be liable for any settlement of any claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 6.15, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify NetStar, Ascend or the
Surviving Corporation (but the failure so to notify an Indemnifying Party
shall not relieve it from any liability which it may have under this Section
6.15 except to the extent such failure prejudices such party), and shall
deliver to NetStar (or after the Effective Time, Ascend and the Surviving
Corporation) the undertaking contemplated by Section 302A.521 of the MBCA. The
Indemnified Parties as a group may retain only one law firm to represent them
with respect to each such matter unless there is, under applicable standards
of professional conduct, a conflict on any significant issue between the
positions of any two or more Indemnified Parties.

(b) From and after the Effective Time, the Surviving Corporation and Ascend
will fulfill and honor in all respects the obligations of NetStar pursuant to
NetStar's Bylaws, as in effect as of the date hereof and any indemnification
agreement between NetStar and any of NetStar's directors and officers existing
and in force as of the date of this Agreement and filed as an exhibit to the
NetStar SEC Reports.

(c) Ascend shall maintain, or shall cause the Surviving Corporation to
maintain, in effect a policy or policies of directors and officers liability
insurance with coverage substantially comparable to policies in force as of
the date of this Agreement (copies of which have been provided to Ascend)
covering the directors and officers

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of NetStar as of the date of this Agreement for a period of not less than four
(4) years following the Effective Time; provided, however, that should such
comparable coverage be unavailable for aggregate premiums of less than
$300,000, Ascend and/or the Surviving Corporation shall only be required to
obtain such lesser coverage as may be obtained for such amount.

(d) The provisions of this Section 6.16 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party, his or her heirs and
representatives, and may not be amended, altered or repealed without the
written consent of any affected Indemnified Party.

Section 6.17 Additional Agreements; Reasonable Efforts. Subject to the terms
and conditions of this Agreement, each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement, subject to the appropriate vote of
stockholders of NetStar described in Section 6.6, including cooperating fully
with the other party, including by provision of information and making all
necessary filings under the HSR Act. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Constituent Corporations, the proper officers and directors of each party
to this Agreement shall take all such necessary action.

ARTICLE VII

Conditions to Merger

Section 7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the
following conditions:

(a) This Agreement and the Merger shall have been approved and adopted by
the affirmative vote of the holders of a majority of the outstanding shares
of NetStar Common Stock.

(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated.

(c) Other than the filing provided for by Section 1.2, all
authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any
Governmental Entity the failure of which to obtain or comply with would be
reasonably likely to have a Material Adverse Effect on Ascend and its
Subsidiaries or NetStar and its Subsidiaries, in each case taken as a
whole, shall have been filed, occurred or been obtained.

(d) The Registration Statement shall have become effective under the
Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.

(e) No temporary restraining order, preliminary or permanent injunction
or other order issued by any court of competent jurisdiction or other legal
or regulatory restraint or prohibition preventing the consummation of the
Merger or limiting or restricting Ascend's conduct or operation of the
business of Ascend or NetStar after the Merger shall have been issued, nor
shall any proceeding brought by a domestic administrative agency or
commission or other domestic Governmental Entity, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable
to the Merger which makes the consummation of the Merger illegal.

(f) Ascend shall have received a letter from Ernst & Young LLP, dated the
date of the Proxy Statement and confirmed in writing at the Effective Time,
regarding Ernst & Young LLP's concurrence with Ascend's management as to
the appropriateness of pooling of interests accounting for the Merger under
Accounting Principles Board Opinion No. 16, if the Merger is consummated in
accordance with this Agreement.

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(g) NetStar shall have received a letter from Deloitte & Touche LLP,
dated the date of the Proxy Statement and confirmed in writing at the
Effective Time, stating that it knows of nothing with respect to NetStar
that would prohibit Ascend from accounting for the Merger as a pooling of
interests.

(h) The shares of Ascend Common Stock to be issued in the Merger shall
have been approved for quotation on the Nasdaq National Market.

(i) NetStar shall not have received, prior to the NetStar Stockholders'
Meeting, notices of dissent from NetStar stockholders pursuant to Section
302A.473 of the MBCA with respect to an aggregate number of shares of
NetStar Common Stock which (assuming perfection of the dissenters'
appraisal rights of such stockholders) would prevent Ascend from accounting
for the Merger as a pooling of interests.

Section 7.2 Additional Conditions to Obligations of Ascend and Sub. The
obligations of Ascend and Sub to effect the Merger are subject to the
satisfaction of each of the following conditions, any of which may be waived
in writing exclusively by Ascend and Sub:

(a) The representations and warranties of NetStar set forth in this
Agreement shall be true and correct in all material respects as of the date
of this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date, except for (i) changes contemplated by
this Agreement and (ii) where the failure to be true and correct would not
be reasonably likely to have a Material Adverse Effect on NetStar and its
Subsidiaries taken as a whole, or a material adverse effect upon the
consummation of the transactions contemplated hereby; and Ascend shall have
received a certificate signed on behalf of NetStar by the chief executive
officer and the chief financial officer of NetStar to such effect. For
purposes of determining the accuracy of the representations and warranties
set forth in Section 3.6 as of the Closing Date, continuing operating
losses (excluding expenses related to the Merger and the other transactions
contemplated hereby) incurred by NetStar in amounts not exceeding
$4,500,000 for the period from June 1, 1996 through August 31, 1996,
$1,500,000 for September 1996 and $1,000,000 for any calendar month
thereafter (all as reflected in NetStar's consolidated financial statements
prepared in accordance with generally accepted accounting principles
consistently applied) shall not, in and of themselves, be deemed to
constitute a Material Adverse Change.

(b) NetStar shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date; and Ascend shall have received a certificate signed on behalf
of NetStar by the chief executive officer and the chief financial officer
of NetStar to such effect.

(c) Ascend shall have received a written opinion from Gray Cary Ware &
Freidenrich, A Professional Corporation, counsel to Ascend, to the effect
that the Merger will be treated for Federal income tax purposes as a tax-
free reorganization within the meaning of Section 368(a) of the Code.

(d) Ascend shall have received all permits and other authorizations
required under applicable state blue sky laws for the issuance of shares of
Ascend Common Stock pursuant to the Merger.

Section 7.3 Additional Conditions to Obligations of NetStar. The obligation
of NetStar to effect the Merger is subject to the satisfaction of each of the
following conditions, any of which may be waived, in writing, exclusively by
NetStar:

(a) The representations and warranties of Ascend and Sub set forth in
this Agreement shall be true and correct in all material respects as of the
date of this Agreement and (except to the extent such representations speak
as of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except for (i) changes contemplated by this Agreement and
(ii) where the failure to be true and correct would not be reasonably
likely to have a Material Adverse Effect on Ascend and its Subsidiaries,
taken as a whole, or a material adverse effect upon the consummation of the
transactions contemplated hereby; and NetStar shall have received a
certificate signed on behalf of Ascend by the chief executive officer and
the chief financial officer of Ascend to such effect.

(b) Ascend and Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or
prior to the Closing Date; and NetStar shall have received a

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certificate signed on behalf of Ascend by the chief executive officer and
the chief financial officer of Ascend to such effect.

(c) NetStar shall have received the opinion of Hale and Dorr counsel to
NetStar, to the effect that the Merger will be treated for Federal income
tax purposes as a tax-free reorganization within the meaning of Section
368(a) of the Code.

ARTICLE VIII

Termination and Amendment

Section 8.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time (with respect to Sections 8.1(b) through 8.1(f), by
written notice by the terminating party to the other party), whether before or
after approval of the matters presented in connection with the Merger by the
stockholders of NetStar:

(a) by the mutual written consent of Ascend and NetStar;

(b) by either Ascend or NetStar if the Merger shall not have been
consummated by December 31, 1996 (provided that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement has been the
cause of or resulted in the failure of the Merger to occur on or before
such date);

(c) by either Ascend or NetStar if a court of competent jurisdiction or
other Governmental Entity shall have issued a nonappealable final order,
decree or ruling or taken any other action, in each case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger,
except, if the party relying on such order, decree or ruling or other
action has not complied with its obligations under Section 6.7 of this
Agreement;

(d) by Ascend, if at the NetStar Stockholders' Meeting (including any
adjournment or postponement), the requisite vote of the stockholders of
NetStar in favor of this Agreement and the Merger shall not have been
obtained;

(e) by Ascend, if (i) the Board of Directors of NetStar shall have
withdrawn or modified its recommendation of this Agreement or the Merger in
a manner adverse to Ascend or shall have publicly announced or disclosed to
any third party its intention to do any of the foregoing; (ii) an
Alternative Transaction (as defined in Section 8.3(e)) shall have taken
place or the Board of Directors of NetStar shall have recommended to the
stockholders of NetStar an Alternative Transaction; or (iii) a tender offer
or exchange offer for 20% or more of the outstanding shares of NetStar
Common Stock is commenced (other than by Ascend or an Affiliate of Ascend)
and the Board of Directors of NetStar recommends that the stockholders of
NetStar tender their shares in such tender or exchange offer;

(f) by Ascend or NetStar, if there has been a breach of any
representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions
set forth in Section 7.2(a) or (b) (in the case of termination by Ascend)
or 7.3(a) or (b) (in the case of termination by NetStar) not to be
satisfied and (ii) shall not have been cured within ten (10) business days
following receipt by the breaching party of written notice of such breach
from the other party; or

(g) by Ascend or NetStar if the condition specified in Section 7.1(i) is
not satisfied prior to the NetStar Stockholders' Meeting.

Section 8.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.1, there shall be no liability or
obligation on the part of Ascend, NetStar, Sub or their respective officers,
directors, stockholders or Affiliates, except as set forth in Section 8.3 and
further except to the extent that such termination results from the wilful
breach by a party of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of Sections 6.15 and
8.3 of this Agreement and the Confidentiality Agreement shall remain in full
force and effect and survive any termination of this Agreement.

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Section 8.3 Fees and Expenses.

(a) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby
shall be paid by the party incurring such expenses, whether or not the Merger
is consummated; provided, however, that Ascend and NetStar shall share equally
all fees and expenses, other than attorneys' fees, incurred in connection with
the printing and filing of the Proxy Statement (including any related
preliminary materials) and the Registration Statement (including financial
statements and exhibits) and any amendments or supplements.

(b) NetStar shall pay Ascend up to $750,000 as reimbursement for expenses of
Ascend actually incurred relating to the transactions contemplated by this
Agreement prior to termination (including, but not limited to, fees and
expenses of Ascend's counsel, accountants and financial advisors, but
excluding any discretionary fees paid to such financial advisors) upon the
earliest to occur of the following events:

(i) the termination of this Agreement by Ascend pursuant to Section
8.1(d) as a result of the failure to receive the requisite vote for
approval of this Agreement and the Merger by the stockholders of NetStar at
the NetStar Stockholders' Meeting; or

(ii) the termination of this Agreement by Ascend pursuant to Section
8.1(e).

(i) the termination of this Agreement by Ascend pursuant to Section
8.1(e);

(ii) the termination of this Agreement by Ascend pursuant to Section
8.1(d) as a result of the failure to receive the requisite vote for
approval of this Agreement and the Merger by the stockholders of NetStar at
the NetStar Stockholders' Meeting if, at the time of such failure, there
shall have been announced an Alternative Transaction (as hereinafter
defined) which shall not have been absolutely and unconditionally withdrawn
and abandoned; or

(iii) the termination of this Agreement by Ascend pursuant to Section
8.1(f) after a willful and material breach of this Agreement by NetStar.

(d) Ascend shall pay NetStar a termination fee of $10,000,000 upon the
termination of this Agreement by NetStar pursuant to Section 8.1(f) after a
willful and material breach of this Agreement by Ascend.

(e) The expenses and fees, if applicable, payable pursuant to Sections
8.3(b), 8.3(c) or 8.3(d) shall be paid within one business day after the first
to occur of the events described in Section 8.3(b)(i) or (ii), 8.3(c)(i), (ii)
or (iii) or 8.3(d); provided that, in no event shall Ascend or NetStar, as the
case may be, be required to pay any expenses or termination fees, if
applicable, to the other, if, immediately prior to the termination of this
Agreement, the party to receive the expenses and fees, if applicable, was in
breach of any of its material obligations under this Agreement.

(f) As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than
Ascend or its Affiliates (a "Third Party"), acquires more than 20% of the
outstanding shares of NetStar Common Stock, pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving NetStar pursuant to which any Third Party acquires more than 20% of
the outstanding equity securities of NetStar or the entity surviving such
merger or business combination, (iii) any other transaction pursuant to which
any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of NetStar, and the entity
surviving any merger or business combination including any of them) of NetStar
having a fair market value (as determined by the Board of Directors of NetStar
in good faith) equal to more than 20% of the fair market value of all the
assets of NetStar immediately prior to such transaction, or (iv) any public
announcement of a proposal, plan or intention to do any of the foregoing or
any agreement to engage in any of the foregoing.

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Section 8.4 Amendment. This Agreement may be amended by the parties hereto,
by action taken or authorized by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of NetStar, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.

Section 8.5 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.

ARTICLE IX

Miscellaneous

Section 9.1 Nonsurvival of Representations, Warranties and Agreements. None
of the representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Closing and
the Effective Time, except for the agreements contained in Sections 1.3, 1.4,
2.1, 2.2, 2.3, 6.13, 6.14, 6.16, 6.17, the last sentence of Section 8.4 and
Article IX, and the agreements of the Affiliates of NetStar delivered pursuant
to Section 6.11. The Confidentiality Agreement shall survive the execution and
delivery of this Agreement.

Section 9.2 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):

(a)if to Ascend or Sub, to

Ascend Communications, Inc.
1275 Harbor Bay Parkway
Alameda, California 94501
Attention: Vice President--Finance
Fascsimile No.: (510) 337-2638

with a copy to

Gray Cary Ware & Freidenrich
400 Hamilton Avenue
Palo Alto, California 94301
Attention: Dennis C. Sullivan, Esq.

(b)if to NetStar, to

NetStar, Inc.
10250 Valley View Road
Minneapolis, Minnesota 55344
Attention: President
Facsimile No.: (612) 943-8939

with a copy to

Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Peter B. Tarr, Esq.

A-29
<PAGE>

Section 9.3 Interpretation. When a reference is made in this Agreement to an
Article or a Section, such reference shall be to an Article or a Section of
this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement they
shall be deemed to be followed by the words "without limitation." The phrase
"made available" in this Agreement shall mean that the information referred to
has been made available if requested by the party to whom such information is
to be made available. The phrases "the date of this Agreement", "the date
hereof," and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to May 30, 1996.

Section 9.4 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each
of the parties and delivered to the other parties, it being understood that
all parties need not sign the same counterpart.

Section 9.5 Entire Agreement; No Third Party Beneficiaries. This Agreement
(including the documents and the instruments referred to herein) (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, and (b) except as provided in Section 6.16 is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.

Section 9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law, except that the MBCA shall, to the extent
applicable, govern the procedures to be taken hereunder to effect the Merger.

Section 9.7 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.

In Witness Whereof, Ascend, Sub and NetStar have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.

NetStar, Inc. Ascend Communications, Inc.

By: /s/ DOUGLAS M. PIHL By: /s/ ROBERT K. DAHL
---------------------------------- ----------------------------------

Title: President and Chief Executive Title: Vice President Finance and
Officer Chief Financial Officer

Nebula Acquisition Corporation

By: /s/ ROBERT K. DAHL
----------------------------------

Title: Vice President Finance and
Chief Financial Officer

A-30
<PAGE>

ANNEX B

MAY 30, 1996

The Board of Directors
NetStar, Inc.
10250 Valley View Road, Suite 113
Eden Prairie, MN 55344

Attention: Mr. Douglas M. Pihl, President and Chief Executive OfficerMr. Duane
S. Carlson, Executive Vice President and Chief Financial Officer

Gentlemen:

You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock of NetStar, Inc., a Minnesota corporation
(the "Company"), of the consideration to be received by such holders pursuant
to the terms of the Agreement and Plan of Merger (the "Agreement") dated May
30, 1996 by and among the Company, Nebula Acquisition Corporation and Ascend
Communications, Inc. (the "Acquiror"). Capitalized terms used herein shall
have the meaning used in the Agreement unless otherwise defined herein.

Pursuant to the Agreement, each outstanding share of common stock or common
stock equivalent of the Company is proposed to be converted into and represent
the right to receive such number of shares or share equivalents of the
Acquiror's common stock as is equal to the Conversion Number. The Conversion
Number is 0.35398 (subject to adjustment in the event of a stock split or
stock dividend effected between the date hereof and the Effective Time). The
Merger is intended to qualify as a tax-free reorganization for U.S. federal
income tax purposes and to be accounted for as a pooling-of-interests under
applicable accounting principles. The terms and conditions of the Merger are
set forth more fully in the Agreement.

Wessels, Arnold & Henderson, L.L.C. ("Wessels, Arnold & Henderson"), as part
of its investment banking services, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
corporate restructurings, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements and valuations for
corporate and other purposes. In the ordinary course of business, Wessels,
Arnold & Henderson acts as a market maker and broker in the publicly traded
securities of the Acquiror and receives customary compensation in connection
therewith, and also provides research coverage for the Acquiror. In the
ordinary course of business, Wessels, Arnold & Henderson actively trades in
the publicly traded securities of the Acquiror for its own account and for the
accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities. We have acted as financial advisor to the
Board of Directors of the Company in connection with the Merger and will
receive fees for our services, including the rendering of this opinion.

In connection with our review of the Merger, and in arriving at our opinion,
we have: (i) reviewed and analyzed the financial terms of the Agreement; (ii)
reviewed and analyzed certain publicly available financial statements and
other information of the Company and the Acquiror; (iii) reviewed and analyzed
certain internal financial statements and other historical financial and
operating data concerning the Company prepared by the management of the
Company; (iv) reviewed and analyzed certain internal financial statements and
other historical financial and operating data concerning the Acquiror prepared
by the management of the Acquiror; (v) reviewed and analyzed certain financial
projections prepared by the management of the Company; (vi) reviewed and
analyzed certain financial projections prepared by the management of the
Acquiror; (vii) conducted discussions with members of the senior management of
the Company with respect to the business and prospects of the Company; (viii)
conducted discussions with members of the senior management of the Acquiror
with respect to the business and prospects of the Acquiror; (ix) analyzed the
pro forma impact of the Merger on the Acquiror's results of operations; (x)
reviewed the reported prices and trading activity for the Company's Common
Stock and the Acquiror's Common Stock; (xi) compared the financial performance
of the Company

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<PAGE>

and the Acquiror and the prices of the Company's Common Stock and the
Acquiror's Common Stock with that of certain other comparable publicly-traded
companies and their securities; (xii) reviewed the financial terms, to the
extent publicly available, of certain comparable merger transactions; and
(xiii) participated in discussions and negotiations among representatives of
the Company and the Acquiror and their respective financial and legal
advisors. In addition, we have conducted such other analyses and examinations
and considered such other financial, economic and market criteria as we have
deemed necessary in arriving at our opinion.

In rendering our opinion, we have assumed and relied upon the accuracy,
completeness and fairness of the financial, legal, tax, operating and other
information provided to us by the Company and the Acquiror and that was
otherwise reviewed by us, and have not independently verified such
information. Further, our opinion is based on the assumption that the Merger
will qualify as a tax-free reorganization and be accounted for as a pooling-
of-interests. We have not performed an independent evaluation or appraisal of
any of the respective assets or liabilities of the Company or the Acquiror and
we have not been furnished with any such valuations or appraisals. With
respect to the financial forecasts supplied to us, we have assumed that they
have been reasonably prepared on the bases reflecting the best currently
available estimates and judgments of the management of the Company and the
Acquiror, as the case may be, as to the respective future financial
performance of the Company and the Acquiror. We express no view as to such
projections or the assumptions upon which they were based. We made no
independent investigations of any legal matters affecting the Company or the
Acquiror and assumed the correctness of all legal advice given to the Board of
Directors of the Company by its counsel. We express no opinion herein as to
the price at which the Acquiror's Common Stock will actually trade at any
time.

It is understood that this letter is for the information of the Board of
Directors of the Company, and this letter shall not be published or otherwise
used and no public references to Wessels, Arnold & Henderson, L.L.C. shall be
made without our prior written consent, which consent shall not be
unreasonably withheld; provided, however, that this letter may be included in
its entirety in the proxy statement submitted to the stockholders of the
Company for the purpose of approving the Merger. Our opinion is, in any event,
limited to the fairness, from a financial point of view, to the holders of the
Company's Common Stock, of the consideration received pursuant to the
Agreement. Events occurring after the date hereof may materially affect the
assumptions used in preparing this opinion. Further, our opinion speaks only
as of the date hereof and is based on the economic, market, financial and
other conditions as they exist and information which we have been supplied as
of the date hereof. It shall be understood that although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion.

Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date
hereof, the consideration to be received by the holders of the Company's
Common Stock pursuant to the Agreement is fair from a financial point of view
to the holders of the Company's Common Stock. Our opinion does not constitute
a recommendation to any Board member or stockholder of the Company as to how
any such Board member or stockholder should vote on the proposed Merger or
otherwise address the Company's decision to effect the Merger.

Very truly yours,

Wessels, Arnold & Henderson, L.L.C.

/s/ Bryson D. Hollimon
By: _________________________________
Bryson D. Hollimon
Managing Director

B-2
<PAGE>

ANNEX C

MINNESOTA BUSINESS CORPORATION ACT, (S) 302A.471 AND (S) 302A.473
(RIGHTS OF DISSENTING SHAREHOLDERS)

Set forth below are Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act, which provide that shareholders may dissent from, and obtain
payment for the fair value of their shares in the event of, certain corporate
actions, and establish procedures for the exercise of such dissenters' rights.

302A.471. RIGHTS OF DISSENTING SHAREHOLDERS

Subdivision 1. Actions creating rights. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:

(a) An amendment of the articles that materially and adversely affects
the rights or preferences of the shares of the dissenting shareholder in
that it:

(1) alters or abolishes a preferential right of the shares;

(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;

(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;

(4) excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing public
corporation that provides that section 302A.671 does not apply to a
control share acquisition does not give rise to the right to obtain
payment under this section;

(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section
302A.725, subdivision 2, or a disposition pursuant to an order of a court,
or a disposition for cash on terms requiring that all or substantially all
of the net proceeds of disposition be distributed to the shareholders in
accordance with their respective interests within one year after the date
of disposition;

(c) A plan of merger, whether under this chapter or under chapter 322B,
to which the corporation is a party, except as provided in subdivision 3;

(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or

(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the
board directs that dissenting shareholders may obtain payment for their
shares.

SUBD. 2. Beneficial owners. (a) A shareholder shall not assert dissenters'
rights as to less than all of the shares registered in the name of the
shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of
the shareholder and discloses the name and address of each beneficial owner on
whose behalf the shareholder dissents. In that event, the rights of the
dissenter shall be determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of different
shareholders.

(b) The beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of
this section and section 302A.473, if the beneficial owner submits to the
corporation at the time of or before the assertion of the rights a written
consent of the shareholder.

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<PAGE>

SUBD. 3. Rights not to apply. Unless the articles, the bylaws, or a
resolution approved by the board otherwise provide, the right to obtain
payment under this section does not apply to a shareholder of the surviving
corporation in a merger, if the shares of the shareholder are not entitled to
be voted on the merger.

SUBD. 4. Other rights. The shareholders of a corporation who have a right
under this section to obtain payment for their shares do not have a right at
law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.

302A.473. PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS

SUBDIVISION 1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.

(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by merger of that issuer.

(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.

(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.

SUBD. 2. Notice of action. If a corporation calls a shareholder meeting at
which any action described in section 302A.471, subdivision 1 is to be voted
upon, the notice of the meeting shall inform each shareholder of the right to
dissent and shall include a copy of section 302A.471 and this section and a
brief description of the procedure to be followed under these sections.

SUBD. 3. Notice of dissent. If the proposed action must be approved by the
shareholders, a shareholder who wishes to exercise dissenters' rights must
file with the corporation before the vote on the proposed action a written
notice of intent to demand the fair value of the shares owned by the
shareholder and must not vote the shares in favor of the proposed action.

SUBD. 4. Notice of procedure; deposit of shares. (a) After the proposed
action has been approved by the board and, if necessary, the shareholders, the
corporation shall send to all shareholders who have complied with subdivision
3 and to all shareholders entitled to dissent if no shareholder vote was
required, a notice that contains:

(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the date by
which they must be received;

(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;

(3) A form to be used to certify the date on which the shareholder, or
the beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and

(4) A copy of section 302A.471 and this section and a brief description
of the procedures to be followed under these sections.

(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all
other rights of a shareholder until the proposed action takes effect.

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<PAGE>

SUBD. 5. Payment; return of shares. (a) After the corporate action takes
effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation
estimates to be the fair value of the shares, plus interest, accompanied by:

(1) The corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of the
corporate action, together with the latest available interim financial
statements;

(2) An estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and

(3) A copy of section 302A.471 and this section, and a brief description
of the procedure to be followed in demanding supplemental payment.

(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person
who was not a beneficial owner on that date. If the dissenter has complied
with subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for
withholding the remittance, and an offer to pay to the dissenter the amount
listed in the materials if the dissenter agrees to accept that amount in full
satisfaction. The dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only to the amount
offered. If the dissenter makes demand, subdivisions 7 and 8 apply.

(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision
4 and require deposit or restrict transfer at a later time.

SUBD. 6. Supplemental payment; demand. If a dissenter believes that the
amount remitted under subdivision 5 is less than the fair value of the shares
plus interest, the dissenter may give written notice to the corporation of the
dissenter's own estimate of the fair value of the shares, plus interest,
within 30 days after the corporation mails the remittance under subdivision 5,
and demand payment of the difference. Otherwise, a dissenter is entitled only
to the amount remitted by the corporation.

SUBD. 7. Petition; determination. If the corporation receives a demand under
subdivision 6, it shall, within 60 days after receiving the demand, either pay
to the dissenter the amount demanded or agreed to by the dissenter after
discussion with the corporation or file in court a petition requesting that
the court determine the fair value of the shares, plus interest. The petition
shall be filed in the county in which the registered office of the corporation
is located, except that a surviving foreign corporation that receives a demand
relating to the shares of a constituent domestic corporation shall file the
petition in the county in this state in which the last registered office of
the constituent corporation was located. The petition shall name as parties
all dissenters who have demanded payment under subdivision 6 and who have not
reached agreement with the corporation. The corporation shall, after filing
the petition, serve all parties with a summons and copy of the petition under
the rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The
court shall determine whether the shareholder or shareholders in question have
fully complied with the requirements of this section, and shall determine the
fair value of the shares, taking into account any and all factors the court
finds relevant, computed by any method or combination of methods that the
court, in its discretion, sees fit to use, whether or not used by the
corporation or by a dissenter. The fair value of the shares as determined by
the court is binding on all shareholders, wherever located. A dissenter is
entitled to judgment in cash for the amount by which the fair value of the
shares as determined by the court, plus interest, exceeds the amount, if any,
remitted under subdivision 5, but shall not be liable to the corporation for
the amount, if any, by

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<PAGE>

which the amount, if any, remitted to the dissenter under subdivision 5
exceeds the fair value of the shares as determined by the court, plus
interest.

SUBD. 8. Costs; fees; expenses. (a) The court shall determine the costs and
expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.

(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously,
or not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.

(c) The court may award, in its discretion, fees and expenses to an attorney
for the dissenters out of the amount awarded to the dissenters, if any.

C-4
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law (the "DGCL") permits
indemnification of officers, directors and other corporate agents under
certain circumstances and subject to certain limitations. The Registrant's
Certificate of Incorporation and Bylaws provide that the Registrant shall
indemnify its directors, officers, employees and agents to the full extent
permitted by the DGCL, including in circumstances in which indemnification is
otherwise discretionary under such law. In addition, with the approval of the
Board of Directors and the stockholders, the Registrant has entered into
separate indemnification agreements with its directors, officers and certain
employees which require the Registrant, among other things, to indemnify them
against certain liabilities which may arise by reason of their status or
service (other than liabilities arising from willful misconduct of a culpable
nature) and to obtain directors' and officers' insurance, if available on
reasonable terms.

These indemnification provisions may be sufficiently broad to permit
indemnification of the Registrant's officers, directors and other corporate
agents for liabilities (including reimbursement of expenses incurred) arising
under the Securities Act of 1933.

At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant in which
indemnification is being sought nor is the Registrant aware of any threatened
litigation that may result in a claim for indemnification by any director,
officer, employee or other agent of the Registrant.

Ascend has obtained liability insurance for the benefit of its directors and
officers.

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated May 30, 1996 among the Registrant,
Nebula Acquisition Corporation and NetStar, Inc. (included as Annex A
to the Prospectus).
5.1 Opinion of Gray Cary Ware & Freidenrich.
8.1 Opinion of Gray Cary Ware & Freidenrich as to tax matters.
8.2 Opinion of Hale and Dorr as to tax matters.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Deloitte & Touche LLP.
23.3 Consent of Gray Cary Ware & Freidenrich (included in Exhibits 5.1 and
8.1).
23.4 Consent of Hale and Dorr (included in Exhibit 8.2).
23.5 Consent of Wessels, Arnold & Henderson, L.L.C.
24.1 Power of Attorney (See page II-4).
99.1 Opinion of Wessels, Arnold & Henderson, L.L.C. (included as Annex B to
the Prospectus).
99.2 Form of Proxy Card of NetStar.
</TABLE>

ITEM 22. UNDERTAKINGS.

A. The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, as amended (the "Securities Act"),
each filing of the Registrant's annual report pursuant to Section13(a) or
Section 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (and,

II-1
<PAGE>

where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

B. The Registrant hereby undertakes as follows:

1. That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.

2. That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

D. The Registrant hereby undertakes to respond to requests for information
that is incorporated by reference into the prospectus pursuant to Items 4,
10(b), 11, or 13 of this Form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of this Registration Statement through the
date of responding to the request.

E. The Registrant hereby undertakes to supply by means of a post-effective
amendment all information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and included in this
Registration Statement when it became effective.

F. The Registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:

(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represents a fundamental change in the information set forth
in the Registration Statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.

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<PAGE>

Provided however, that the paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed by the Registrant pursuant to Section 13
or Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.

2. That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

3. To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.

II-3
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ALAMEDA, STATE OF
CALIFORNIA, ON THE 11TH DAY OF JULY, 1996.

Ascend Communications, Inc.

/s/ Robert K. Dahl
By: _________________________________
ROBERT K. DAHL
Vice President Finance and Chief
Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mory Ejabat and Robert K. Dahl, or either of
them, as his or her true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he or she might or could do in person, hereby
ratifying and confirming all that said attorney-in-facts and agents, or either
of them, or their or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE

/s/ Mory Ejbat President, Chief July 11, 1996
- ------------------------------------- Executive Officer
(MORY EJABAT) and Director
(Principal
Executive Officer)

/s/ Robert K. Dahl Vice President July 11, 1996
- ------------------------------------- Finance, Chief
(ROBERT K. DAHL) Financial Officer
and Director
(Principal
Financial Officer)

/s/ Michael J. Johnson Controller and Chief July 11, 1996
- ------------------------------------- Accounting Officer
(MICHAEL J. JOHNSON) (Principal
Accounting Officer)

II-4
<PAGE>

SIGNATURE TITLE DATE

/s/ Betsy S. Atkins Director July 11, 1996
- -------------------------------------
(BETSY S. ATKINS)

/s/ Roger L. Evans Director July 11, 1996
- -------------------------------------
(ROGER L. EVANS)

/s/ C. Richard Kramlich Director July 11, 1996
- -------------------------------------
(C. RICHARD KRAMLICH)

/s/ James P. Lally Director July 11, 1996
- -------------------------------------
(JAMES P. LALLY)

/s/ Martin Schoffstall Director July 11, 1996
- -------------------------------------
(MARTIN SCHOFFSTALL)

II-5

<PAGE>

EXHIBIT 5.1

GRAY CARY WARE
& FREIDENRICH
A Professional Corporation

Attorneys at Law
400 Hamilton Avenue
Palo Alto, CA 94301-1825
Tel (415) 328-6561
Fax (415) 327-3699

July 11, 1996

Ascend Communications, Inc.
1275 Harbor Bay Parkway
Alameda, California 94502

Ladies and Gentlemen:

This opinion is furnished to you in connection with the filing of a
Registration Statement (the "Registration Statement") on Form S-4 with the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended, for the registration of 4,160,930 shares of Common Stock
(the "Common Stock") of Ascend Communications, Inc. (the "Company").

We have acted as counsel for the Company in connection with the issuance of
the shares of Common Stock pursuant to an Agreement and Plan of Merger dated May
30, 1996 (the "Merger Agreement") among the Company, Nebula Acquisition
Corporation, a Minnesota corporation and a wholly-owned subsidiary of the
Company, and NetStar, Inc., a Minnesota corporation. We have examined signed
copies of the Registration Statement and all exhibits thereto (including, but
not limited to, the Merger Agreement), all as filed with the Commission. We
have also examined and relied upon the original or copies of minutes of meetings
of the Board of Directors of the Company, the Certificate of Incorporation and
the Bylaws of the Company and such other documents as we have deemed material to
the opinion set forth below.

Based upon the foregoing, we are of the opinion that the shares of Common
Stock to be issued pursuant to the Merger Agreement are duly authorized by the
Company and, when issued in accordance with the terms of the Merger Agreement,
will be validly issued, fully paid and non-assessable.

We hereby consent to the filing of this opinion as part of the Registration
Statement and to the use of our name therein and in the related Prospectus.

San Diego . La Jolla . San Jose . Imperial Valley
Mexico City . Tijuana
<PAGE>

Gray Cary Ware & Freidenrich

Ascend Communications, Inc.
July 11, 1996
Page 2

This opinion is to be used only in connection with the issuance of the
Common Stock while the Registration Statement is in effect.

Very truly yours,

/s/ Gray Cary Ware & Freidenrich
GRAY CARY WARE & FREIDENRICH
A Professional Corporation

<PAGE>

EXHIBIT 8.1

GRAY CARY WARE
& FREIDENRICH
A Professional Corporation

Attorneys at Law Our File No.
400 Hamilton Avenue 1010440-904500
Palo Alto, CA 94301-1825
Tel (415) 328-6561
Fax (415) 327-3699

July 11, 1996

Ascend Communications, Inc.
1275 Harbor Bay Parkway
Alameda, CA 94502

Re: NETSTAR ACQUISITION

Ladies and Gentlemen:

This opinion is being delivered to you in connection with the filing of a
registration statement on Form S-4 of a Proxy Statement/Prospectus of Ascend
Communications, Inc., a Delaware corporation ("Ascend"), Nebula Acquisition
Corporation, a Minnesota corporation and wholly-owned subsidiary of Ascend
("Sub"), and NetStar, Inc., a Minnesota corporation ("NetStar") (the
"Registration Statement"). Pursuant to that certain Agreement and Plan of
Merger dated May 30, 1996, among Ascend, Sub and NetStar (the "Merger
Agreement"), Sub will merge with and into NetStar (the "Merger"), and NetStar
will become a wholly-owned subsidiary of Ascend.

Except as otherwise provided, capitalized terms referred to herein have the
meanings set forth in the Merger Agreement. All section references, unless
otherwise indicated, are to the Internal Revenue Code of 1986, as amended (the
"Code").

We have acted as legal counsel to Ascend and Sub in connection with the
Merger. As such, and for the purpose of rendering this opinion, we have
examined (or will examine on or prior to the Effective Time of the Merger) and
are relying (or will rely) upon (without any independent investigation or review
thereof) the truth and accuracy, at all relevant times, of the statements,
covenants, representations and warranties contained in the following documents:

1. The Merger Agreement (including Exhibits);

2. Representations made to us by Ascend and Sub;

3. Representations made to us by NetStar and certain affiliates of
NetStar;

San Diego . La Jolla . San Jose . Imperial Valley
Mexico City . Tijuana
<PAGE>

Gray Cary Ware & Freidenrich

Ascend Communications, Inc.
July 11, 1996
Page 2

4. The Registration Statement; and

5. Such other instruments and documents related to the formation,
organization and operation of Ascend, NetStar and Sub or to the consummation of
the Merger and the transactions contemplated thereby as we have deemed necessary
or appropriate.

In connection with rendering this opinion, we have assumed or obtained
representations (and are relying thereon, without any independent investigation
or review thereof) that:

1. Original documents (including signatures) are authentic, documents
submitted to us as copies conform to the original documents, and there has been
(or will be by the Effective Time of the Merger) due execution and delivery of
all documents where due execution and delivery are prerequisites to
effectiveness thereof.

2. The Merger will be effective under the applicable state law.

3. The continuity of interest requirement as specified in Treas. Reg.
(S) 1.368-1(b) and as interpreted in certain Internal Revenue Service rulings
and federal judicial decisions will be satisfied.

4. After the Merger, NetStar will hold "substantially all" of its and
Sub's properties within the meaning of Section 368(a)(2)(E)(i) of the Code and
the regulations promulgated thereunder.

5. To the extent any expenses relating to the Merger (or the "plan of
reorganization" within the meaning of Treas. Reg. (S) 1.368-1(c) with respect to
the Merger) are funded directly or indirectly by a party other than the
incurring party, such expenses will be within the guidelines established in
Revenue Ruling 73-54, 1973-1 C.B. 187.

6. No outstanding indebtedness of NetStar, Ascend or Sub has or will
represent equity for tax purposes; no outstanding equity of NetStar, Ascend or
Sub has represented or will represent indebtedness for tax purposes.

7. Any representation or statement made "to the best of knowledge" or
similarly qualified is correct without such qualification.
<PAGE>

Gray Cary Ware & Freidenrich

Ascend Communications, Inc.
July 11, 1996
Page 3

8. An opinion of counsel, addressed to NetStar from Hale and Dorr,
substantially similar in form and substantially identical in substance to this
opinion, has been delivered and not withdrawn.

Based on our examination of the foregoing items and subject to the
assumptions, exceptions, limitations and qualifications set forth herein, we are
of the opinion that for federal income tax purposes, the Merger will constitute
a "reorganization" as defined in Section 368(a) of the Code.

As a result of the Merger qualifying as a "reorganization," and subject to
the assumptions, exceptions, limitations and qualifications set forth herein, we
are also of the opinion that:

1. No gain or loss will be recognized by the holders of NetStar Common
Stock upon the receipt of Ascend Common Stock solely in exchange for NetStar
Common Stock in the Merger (except to the extent of cash received in lieu of
fractional shares);

2. The aggregate tax basis of the Ascend Common Stock to be received by
the NetStar stockholders in the Merger (including any fractional share of Ascend
Common Stock not actually received) will be the same as the basis of the NetStar
Common Stock surrendered in exchange therefor;

3. The holding period of the Ascend Common Stock received by each NetStar
stockholder in the Merger will include the period during which the NetStar
Common Stock surrendered in exchange therefor was held, provided that the
NetStar Common Stock so surrendered is held as a capital asset at the Effective
Time;

4. Cash payments received by NetStar stockholders in lieu of receipt of
fractional shares of Ascend Common Stock will be treated as received in
redemption of such fractional shares, subject to the provisions of Code Section
302, as if such fractional shares had been issued in the Merger and then
redeemed by Ascend for cash;

5. A NetStar stockholder who exercises dissenters' rights with respect to
such stockholder's NetStar Common Stock and receives payment for such shares in
cash will generally recognize gain or loss measured by the difference between
the stockholder's basis in such shares and the amount of cash received if, as a
result of such exercise, the stockholder exercising dissenters' rights owns no
shares of Ascend Common Stock (either actually or constructively within the
meaning of Section 318 of the Code); and
<PAGE>

Gray Cary Ware & Freidenrich

Ascend Communications, Inc.
July 11, 1996
Page 4

6. No gain or loss will be recognized by Ascend, Sub or NetStar as a
result of the Merger.

In addition to the assumptions set forth above, this opinion is subject to
the exceptions, limitations and qualifications set forth below.

1. This opinion represents and is based upon our best judgment regarding
the application of federal income tax laws arising under the Code, existing
judicial decisions, administrative regulations and published rulings and
procedures. Our opinion is not binding upon the Internal Revenue Service or the
courts, and the Internal Revenue Service is not precluded from successfully
asserting a contrary position. Furthermore, no assurance can be given that
future legislative, judicial or administrative changes, on either a prospective
or retroactive basis, would not adversely affect the accuracy of the conclusions
stated herein. Nevertheless, we undertake no responsibility to advise you of
any new developments in the application or interpretation of the federal income
tax laws.

2. This opinion addresses only the specific tax opinions set forth above,
and does not address any other federal, state, local or foreign tax consequences
that may result from the Merger or any other transaction (including any
transaction undertaken in connection with the Merger). In particular, but not
by way of limitation of the previous sentence, we express no opinion regarding
the tax consequences of the Merger (including the opinions set forth above) as
applied to specific stockholders of NetStar and/or holders of options or
warrants for NetStar stock or that may be relevant to particular classes of
NetStar stockholders and/or holders of options or warrants for NetStar stock
including but not limited to dealers in securities, corporate shareholders
subject to the alternative minimum tax, foreign persons, and holders of shares
acquired upon exercise of stock options or warrants or in other compensatory
transactions, including without limitation the tax consequences of the Merger
and Ascend's assumption of outstanding options or warrants for NetStar stock to
holders of options or warrants for NetStar stock.

3. No opinion is expressed as to any transaction other than the Merger as
described in the Merger Agreement or to any transaction whatsoever, including
the Merger, if all the transactions described in the Merger Agreement are not
consummated in accordance with the terms of such Merger Agreement and without
waiver or breach of any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we relied are
not true and accurate at all relevant times. In the event any one of the
statements, representations, warranties or assumptions upon which we have relied
to issue this opinion is incorrect, our opinion might be adversely affected and
should not be relied upon.
<PAGE>

Gray Cary Ware & Freidenrich

Ascend Communications, Inc.
July 11, 1996
Page 5

4. This opinion is rendered solely for the purpose of including it as an
exhibit to the Registration Statement. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to any
other person or entity without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and
further consent to the use of our name wherever appearing in the Registration
Statement.

Very truly yours,

/s/ Gray Cary Ware & Freidenrich
GRAY CARY WARE & FREIDENRICH
A Professional Corporation

<PAGE>

July 11, 1996

NetStar, Inc.
10250 Valley View Road, Suite 113
Eden Prairie, Minnesota 55344

Attn: President

Re: Merger pursuant to Agreement and Plan of Merger among Ascend
Communications, Inc., Nebula Acquisition Corporation and NetStar, Inc.

Ladies and Gentlemen:

This opinion is being delivered to you in connection with the filing of
a registration statement (the "Registration Statement") on Form S-4, which
includes the Joint Proxy Statement and Prospectus relating to he Agreement and
Plan of Merger dated May 30, 1996, (the "Agreement"), by and among Ascend
Communications, Inc., a Delaware corporation ("Ascend"), Nebula Acquisition
Corporation, a Minnesota corporation and wholly-owned subsidiary of Ascend
("Sub") and NetStar, Inc., a Minnesota corporation (the "Company"). Pursuant to
such Agreement, Sub will merge with and into the Company (the "Merger"). Except
as otherwise provided, capitalized terms not defined herein have the meanings
set forth in the Agreement or in the letters delivered to Hale and Dorr by
Ascend and the Company containing certain representations of Ascend and the
Company relevant to this opinion (the "Representation Letters"). All section
references, unless otherwise indicated, are to the Internal Revenue Code of
1986, as amended (the "Code").

In our capacity as counsel to the Company in the Merger, and for
purposes of rendering this opinion, we have examined and relied upon the
Agreement, the Registration Statement, the Representation Letters, and such
other documents as we considered relevant to analysis. In our examination of
documents, we have assumed the authenticity of original documents, the accuracy
of copies, and the genuineness of signatures. We have assumed that all parties
to the Agreement and to any other documents examined by us have acted, and will
act, in accordance with the terms of such Agreement or documents, and that the
Merger will be
<PAGE>

NetStar, Inc.
July 11, 1996
Page 2

consummated at the Effective Time pursuant to the terms and conditions set forth
in the Agreement without the waiver or modification or any such terms and
conditions. Furthermore, we have assumed that all representations contained in
the Agreement, the Registration Statement, as well as those representations
contained in the Representations Letters and other documents are, and at the
Effective Time will be true and complete in all material respects. We have also
assumed that all representations made in any of the documents referred to herein
"to the knowledge of", or similarly qualified, of any person or party are
correct without such qualification. We have also assumed that as to all matters
in which a person or entity making a representation referred to above has
represented that such person or entity either is not a party to, does not have,
or is not aware of, any plan or intention, understanding or agreement, there is
in fact no such plan, intention, understanding or agreement. We have not
attempted to verify independently such representations.

The conclusions expressed herein represent our judgment as to the proper
treatment of certain aspects of the Merger under the income tax laws of the
United States based upon the Code, Treasury Regulations, case law, and rulings
and other pronouncements of the Internal Revenue Service (the "IRS") as in
effect on the date of this opinion. No assurances can be given that such laws
will not be amended or otherwise changed prior to the Effective Time, or at
conclusions expressed herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
income tax laws of the United States.

Our opinions represent our best judgment as to how a court would
decide if presented with the issues addressed herein and are not binding upon
either the IRS or any court. Thus, no assurances can be given that a position
taken in reliance on our opinions will not be challenged by the IRS or rejected
by a court.

This opinion addresses only the specific United States federal income
tax consequences of the Merger set forth below, and does not address any other
federal, state, local or foreign income, estate, gift, transfer, sales, use, or
other tax consequences that may result from the Merger or any other transaction
(including any transaction undertaken in connection with the Merger). We express
no opinion regarding the tax consequences of the Merger to Shareholders of the
Company that are subject to special tax rules, and we express no opinion
regarding the tax consequences of the Merger arising in connection with the
ownership of options or warrants for Company stock.
<PAGE>

NetStar, Inc.
July 11, 1996
Page 3

On the basis of, and subject to the foregoing, and in reliance upon
the representations and assumptions described above, we are of the opinion that:

1. The Merger will constitute a reorganization within the meaning
of Section 368(a).

2. No gain or loss will be recognized by the holders of NetStar
Common Stock upon the receipt of Ascend Common Stock solely in exchange for
NetStar Common Stock in the Merger (except to the extent of cash received in
lieu of fractional shares);

3. The aggregate tax basis of the Ascend Common Stock to be
received by the NetStar stockholders in the Merger (including any fractional
share of Ascend Common Stock not actually received) will be the same as the
basis of the NetStar Common Stock surrendered in exchange therefor;

4. The holding period of the Ascend Common Stock received by each
NetStar stockholder in the Merger will include the period during which the
NetStar Common Stock surrendered in exchange therefor was held, provided that
the NetStar Common Stock so surrendered is held as a capital asset at the
Effective Time;

5. Cash payments received by NetStar stockholders in lieu of
receipt of fractional shares of Ascend Common Stock will be treated as received
in redemption of such fractional shares, subject to the provisions of Section
302, as if such fractional shares had been issued in the Merger and then
redeemed by Ascend for cash;

6. A NetStar stockholder who exercises dissenters' rights with
respect to such stockholder's NetStar Common Stock and receives payment for such
shares in cash will generally recognize gain or loss measured by the difference
between the stockholder's basis in such shares and the amount of cash received
if, as a result of such exercise, the stockholder exercising dissenters' rights
owns no shares of Ascend Common Stock (either actually or constructively within
the meaning of Section 318); and

7. No gain or loss will be recognized by Ascend, Sub or NetStar as
a result of the Merger.

In rendering this opinion, we have assumed that Gray Cary Ware &
Freidenrich has delivered, and has not withdrawn, a tax opinion in similar form
and substantially identical in substance to this opinion. No opinion is
expressed as to any federal income tax consequence of the Merger except as
specifically set forth
<PAGE>

NetStar, Inc.
July 11, 1996
Page 4

herein, and this opinion may not be relied upon except with respect to the
consequences specifically discussed herein.

This opinion is intended solely for the purpose of inclusion as an
exhibit to the Registration Statement. It may not be relied upon for any other
purpose or by any other person or entity, and may not be made available to any
other person or entity without our prior written consent. We hereby consent to
the filing of this opinion as an exhibit to the Registration Statement and
further consent to the use of our name in the Registration Statement in
connection with references to this opinion and the tax consequences of the
Merger. In giving this consent, however, we do not hereby admit that we are in
the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.

Very truly yours,

/s/ Hale and Dorr

HALE AND DORR

<PAGE>

EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Ascend
Communications, Inc. for the registration of approximately 4,160,930 shares of
its common stock and to the incorporation by reference therein of our report
dated January 16, 1996, except for Note 8 as to which the date is March 27,
1996, with respect to the consolidated financial statements and schedule of
Ascend Communications, Inc. included in its Annual Report (Form 10-K) for the
year ended December 31, 1995, filed with the Securities and Exchange
Commission.

/s/ Ernst & Young LLP

Ernst & Young LLP

Walnut Creek, California
July 10, 1996

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Registration Statement of Ascend
Communications, Inc. on Form S-4 of our report dated November 7, 1995, relating
to the financial statements of NetStar, Inc. as of September 30, 1995 and 1994
and for each of the three years in the period ended September 30, 1995,
appearing in the Prospectus, which is part of this Registration Statement, and
to the reference to us under the heading "Experts" in such Prospectus.

/s/ Deloitte & Touche LLP

Deloitte & Touche LLP

Minneapolis, Minnesota
July 10, 1996

<PAGE>

EXHIBIT 23.5

CONSENT OF WESSELS, ARNOLD & HENDERSON, L.L.C.

We hereby consent to the inclusion in the Proxy Statement/Prospectus of NetStar,
Inc. and Ascend Communications, Inc., forming part of this Registration
Statement on Form S-4, of our opinion dated May 30, 1996, to the Board of
Directors of NetStar, Inc. attached as Annex B to such Proxy
Statement/Prospectus and to the references of our opinion under the captions
"Summary--Opinion of Financial Advisor to NetStar" and "The Merger--Opinion of
Financial Advisor to NetStar." In giving such consent we do not admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or under the rules and regulations of the Securities
and Exchange Commission thereunder.

WESSELS, ARNOLD & HENDERSON, L.L.C.

By: /s/ Bryson Hollimon
-------------------
Managing Director

Dated July 11, 1996

<PAGE>

EXHIBIT 99.2

NETSTAR, INC.
A MINNESOTA CORPORATION
10250 VALLEY VIEW ROAD
MINNEAPOLIS, MINNESOTA 55344

PROXY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby constitutes and appoints Douglas M. Pihl and Duane S.
Carlson, and either of them, as proxy or proxies (the "Proxies"), each with
the power to appoint his substitute, to represent and to vote, as designated
below, all shares of common stock of NetStar, Inc. ("NetStar") held of record
by the undersigned on July 5, 1996 at the NetStar Special Meeting of
Stockholders (the "Special Meeting") to be held on August 15, 1996 or any
adjournment thereof.

1. PROPOSAL TO APPROVE THE AGREEMENT AND PLAN OF MERGER ("MERGER AGREEMENT")
BY AND AMONG NETSTAR, ASCEND COMMUNICATIONS, INC. AND NEBULA ACQUISITION
CORPORATION:

[_] For [_] Against [_] Abstain

In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Special Meeting; management is not
presently aware of any such matters to be presented for action at the Special
Meeting.

The undersigned hereby ratifies and confirms all the Proxies shall lawfully do
or cause to be done by virtue hereof and hereby revokes all proxies previously
given to vote such shares.

This Proxy, when properly executed, shall be voted in the manner indicated by
the undersigned stockholder, but if no direction is made, this Proxy will be
voted FOR the Merger Agreement.

Please sign exactly as name appears below. When shares are held jointly, both
should sign. When signing as attorney, executor, administrator, trustee,
guardian, or in some other fiduciary capacity, please give full title as such.

DATED: __________________ , 1996 If a corporation, please sign in full
corporate name by president or other
authorized officer(s). If a
partnership, please sign in
partnership name by authorized
person(s).

______________________________________
Signature

______________________________________
Signature if held jointly

(PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY, USING THE
ENCLOSED ENVELOPE.)