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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 1996.
REGISTRATION NO. 333-______________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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ASCEND COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
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DELAWARE 7373 94-3092033
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Number) Identification No.)
incorporation or
organization)
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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ROBERT K. DAHL
VICE PRESIDENT FINANCE AND
CHIEF FINANCIAL 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)
Copy to:
DENNIS C. SULLIVAN, ESQ.
WILLIAM R. SCHREIBER, ESQ.
Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, CA 94301
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] __________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ] ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock ($.001 par value)...................... 203,272 shares $48.0625 $9,769,761 $3,369
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</TABLE>
(1) Estimated solely for the purpose of computing the registration fee and
based on the average of the high and low prices of the Common Stock of
Ascend Communications, Inc. as reported on The Nasdaq National Market on
August 22, 1996.
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 SUCH SECTION 8(a),
MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION, DATED AUGUST 28, 1996
203,272 SHARES
ASCEND COMMUNICATIONS, INC.
COMMON STOCK
The 203,272 shares of Common Stock of Ascend Communications, Inc.
("Ascend" or the "Company") offered by this Prospectus are shares of Common
Stock issuable under currently exercisable warrants (the "Warrants") assumed by
Ascend in connection with the merger of NetStar, Inc. ("NetStar") with a wholly-
owned subsidiary of Ascend (the "NetStar Merger") which was consummated on
August 15, 1996. The shares of Common Stock issuable upon the exercise of the
Warrants may be sold from time to time by or on behalf of certain
securityholders (the "Selling Securityholders") of the Company described in this
Prospectus under "Selling Securityholders." The Warrants were originally issued
in private offerings made by NetStar in reliance on Regulation D and/or Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act"). The
Company has agreed to register under the Securities Act a number of shares of
Common Stock equal to the number of shares of Common Stock that would be
issuable if all the Warrants were fully exercised (the number of shares of
Common Stock registered are hereinafter collectively referred to as the
"Shares"). The Company has also agreed to use its best efforts to cause the
registration statement covering the Shares to be declared effective and to
remain effective for as long as any Warrants remain outstanding. The Company
will not receive any of the proceeds from the sale of the Shares by the Selling
Securityholders. The Company will receive the proceeds from the cash exercise
of any Warrants. See "Use of Proceeds."
The Company has been advised by the Selling Securityholders that they
intend to sell all or a portion of the Shares from time to time in The Nasdaq
National Market, in negotiated transactions or otherwise, and on terms and at
prices then obtainable. The Selling Securityholders and any broker-dealers,
agents or underwriters that participate with the Selling Securityholders in the
distribution of any of the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act, and any commission received by them and any
profit on the resale of the Shares purchased by them may be deemed to be
underwriting commissions or discounts under the Securities Act. See "Plan of
Distribution."
The Company will bear all costs and expenses incident to the offering and
sale of the Shares to the public, including, without limitation, printers' and
accounting fees, fees and disbursements of counsel for the Company, but
excluding fees and expenses of counsel to the Selling Securityholders and any
underwriting commissions or discounts, filing fees and transfer or other taxes,
which shall be borne by the Selling Securityholders.
THE SHARES HAVE NOT BEEN REGISTERED FOR SALE UNDER THE SECURITIES LAWS OF
ANY STATE OR JURISDICTION AS OF THE DATE OF THIS PROSPECTUS. BROKERS OR DEALERS
EFFECTING TRANSACTIONS IN THE SHARES SHOULD CONFIRM THE REGISTRATION OF THE
SHARES UNDER THE SECURITIES LAWS OF THE STATES IN WHICH SUCH TRANSACTIONS OCCUR,
OR THE EXISTENCE OF ANY EXEMPTIONS FROM SUCH REGISTRATION.
The Company's Common Stock is quoted on The Nasdaq National Market. On
August 27, 1996, the last sales price of the Company's Common Stock as reported
on The Nasdaq National Market was $51.50.
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SEE "RISK FACTORS" BEGINNING ON PAGE 3 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
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THESE SECURITIES 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
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the Commission's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as at the Regional Offices of the Commission
located at Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60611 and 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can also be obtained by mail from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, upon payment of the fees prescribed by the Commission. Ascend's Common
Stock is traded on The Nasdaq National Market. Reports and other information
concerning Ascend 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. Such reports and other information may also be
inspected without charge at a Web site maintained by the Commission. The
address of the site is http:\\www.sec.gov.
The Company has also filed with the Commission a Registration Statement on
Form S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act. This Prospectus does not contain all of
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained from the Public Reference Section of the Commission, 450
Fifth Street, N.W., Washington, D.C. 20549, upon payment of the fees prescribed
by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant
to the Exchange Act are incorporated herein by reference:
1. The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A filed on March 31, 1994;
2. Annual Report on Form 10-K for the year ended December 31, 1995;
3. Current Report on Form 8-K dated June 7, 1996;
4. Quarterly Report on Form 10-Q for the three month period ended June
30, 1996;
5. Registration Statement on Form S-4 filed on July 11, 1996; and
6. Form 10-C dated August 26, 1996.
All documents and reports subsequently filed by the Company pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of filing
of such documents or reports. Any statement contained in a document
incorporated by reference or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this 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 statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus. The Company will provide without charge to each person to
whom this Prospectus is delivered, upon written or oral request, a copy of any
or all of the foregoing documents incorporated by reference in this Prospectus
(other than any exhibits thereto). Requests for such documents should be
directed to Ascend Communications, Inc. at 1275 Harbor Bay Parkway, Alameda,
California 94502 (telephone number (510) 769-6001), Attn: Investor Relations.
2
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THE COMPANY
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 network ("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.
On August 15, 1996, Ascend completed the NetStar Merger whereby NetStar
became a wholly-owned subsidiary of the Company. The Merger was treated as a
pooling of interests for accounting and financial reporting purposes. Upon
consummation of the NetStar Merger, the Company issued approximately 4,160,930
shares of its Common Stock in exchange for the outstanding shares of NetStar's
Common Stock, based on a conversion ratio of 0.35398 of a share of Ascend Common
Stock for each outstanding share of NetStar Common Stock.
The principal executive offices of Ascend are located at 1275 Harbor Bay
Parkway, Alameda, California 94502 and its telephone number at that location is
(510) 769-6001.
RISK FACTORS
The following risk factors should be considered in conjunction with the
other information included and incorporated by reference in this Prospectus
before purchasing the Common Stock offered hereby. This Prospectus contains
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act. Actual results could differ
materially from those projected in these forward-looking statements as a result
of a variety of factors, including those set forth below and elsewhere in this
Prospectus.
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.
3
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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.
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 79% of Ascend's net sales in
1994, 1995 and the first six 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 14% of net sales in 1994, 1995 and
the first six 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.
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 23% of Ascend's net sales in
1995 and the six months ended June 30, 1996, respectively. Sales to one of
these ISPs, UUNET, accounted for approximately 11% and 10% of net sales in 1995
and the six months ended June 30, 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.
Integration of NetStar. Achieving the anticipated benefits of the NetStar
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
4
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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 Ascend. Failure to successfully accomplish the integration of
the two companies' operations could have a material adverse effect on Ascend's
business, financial condition or results of operations.
Transaction and Merger Charges. Ascend anticipates that it will incur an
aggregate of approximately $7.5 million of direct transaction costs in the
Merger. The Company will incur these costs subsequent to March 31, 1996.
New Product Development and Timely Introduction of New and Enhanced
Products. The markets for Ascend's products (including the product lines of
NetStar acquired in the NetStar 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 Ascend 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 Ascend's operating results, particularly on a
quarterly basis.
Competition. The markets for Ascend'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 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 Ascend'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 Ascend's current and potential competitors have substantially
greater financial, marketing and technical resources than Ascend. Many also
have established relationships with current and potential customers for Ascend's
products. Increased competition could result in price reductions, reduced profit
margins or loss of market share, each of which would adversely affect Ascend's
operating results. There can be no assurance that Ascend will be able to
continue to compete successfully against current and future competitors as
bandwidth on demand markets evolve and competition increases.
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.
5
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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.
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.
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.
In addition, 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 on Ascend's
business and results of operations.
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.
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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 foreign 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 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.
International Sales. Ascend's international sales accounted for
approximately 15%, 20%, 29% and 43% of Ascend's net sales in 1993, 1994, 1995
and the six months ended June 30, 1996, respectively, and NetStar's
international sales accounted for approximately 35% and 59% of its net sales in
1995 and the nine months ended June 30, 1996, respectively. International sales
are expected to continue to account for a significant portion of Ascend's net
sales in future periods. International sales are subject to certain 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. Ascend 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 Ascend's business
and results of operations. Although Ascend's sales are denominated in U.S.
dollars, fluctuations in currency exchange rates could cause Ascend'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 Ascend'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 Ascend'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.
7
<PAGE>
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.
8
<PAGE>
SELLING SECURITYHOLDERS
The Selling Securityholders hold Warrants which were assumed by the Company
in connection with the NetStar Merger. The Warrants were originally issued in
private offerings made in reliance on Regulation D and/or Section 4(2) of the
Securities Act. The terms of the Warrants are described below.
Agents' Warrants. From June 1992 to April 1994, NetStar issued warrants to
purchase 374,202 shares of Common Stock of NetStar to selling agents, or their
affiliates, in connection with three private placements of Common Stock by
NetStar (the "Agents' Warrants"). The Agents' Warrants are exercisable at
prices varying from $3.54 per share to $9.19 per share and expire at varying
times through April 1999. Certain Agents' Warrants include provisions entitling
the holder to convert the warrants into shares of Common Stock pursuant to
"cashless" exercise provisions. These provisions allow the holder of the
warrants to apply the difference between the exercise price of the warrants and
the higher fair market value of the Common Stock underlying the warrants to the
payment of the exercise price. As of the date of this Prospectus, Agents'
Warrants to purchase 1,525 shares of Common Stock of the Company are
outstanding.
Bridge Warrants. In June 1995, NetStar completed a bridge financing
consisting of the issuance of Bridge Units. Each Bridge Unit consisted of a
$50,000 principal amount promissory note and warrants to purchase 10,000 shares
of NetStar's Common Stock (the "Bridge Warrants"). The financing resulted in
$4,200,000 of principal amount of notes outstanding and the issuance of Bridge
Warrants to purchase 840,000 shares of NetStar's Common Stock. The Bridge
Warrants are exercisable at $15.83 per share and expire in October 1999. As of
the date of this Prospectus, Bridge Warrants to purchase 67,235 shares of Common
Stock of the Company are outstanding.
Underwriter's Warrants. In connection with a public offering of its Common
Stock in September 1995, NetStar issued warrants to purchase an aggregate of
380,000 shares of Common Stock for a nominal purchase price to the R.J. Steichen
& Company, the underwriter of the offering (the "Underwriter's Warrants"). The
Underwriter's Warrants may be exercised in whole or in part during the four-year
period beginning in September 1996 at $29.67 per share. The Underwriters'
Warrants include "cashless" exercise provisions. As of the date of this
Prospectus, Bridge Warrants to purchase 134,512 shares of Common Stock of the
Company are outstanding.
The following table lists the Selling Securityholders, the number of shares
of the Company's Common Stock which each owned or had the right to acquire upon
the exercise of the Warrants issued to each as of August 15, 1996, the number of
Shares expected to be sold by each, assuming the exercise of all Warrants, and
the number of shares of the Company's Common Stock which each will own or have
the right to acquire after the offering pursuant to the Registration Statement,
assuming the sale of all the Shares expected to be sold.
<TABLE>
<CAPTION>
Shares Owned
Shares Owned Shares To After
Selling Securityholder/(1)/ Before Offering Be Offered Offering
- --------------------------- --------------- ---------- ---------
<S> <C> <C> <C>
R.J. Steichen & Company 134,512/(2)(3)/ 134,512 0
Jack J. Karnowski 7,079/(4)/ 7,079 0
Richard Neslund 7,079/(4)/ 7,079 0
Larry P. Arnold 3,539/(4)/ 3,539 0
Michael W. Diffley 3,539/(4)/ 3,539 0
Robert H. Doerr and Susan C. Doerr, JT TEN 3,539/(4)/ 3,539 0
Jerrold A. Eide 3,539/(4)/ 3,539 0
Stephen Gessner 3,539/(4)/ 3,539 0
Alec Janes 3,539/(4)/ 3,539 0
Dean C. Laurance 3,539/(4)/ 3,539 0
Melvyn W. Townsend, as Trustee of the Melvyn W.
Townsend Revocable Trust 3,539/(4)/ 3,539 0
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Shares
Owned
Shares Owned Shares To After
Selling Securityholder/(1)/ Before Offering Be Offered Offering
- --------------------------- --------------- ---------- ---------
<S> <C> <C> <C>
David A. Dent 2,831/(4)/ 2,831 0
Darrell P. Hart 1,769/(4)/ 1,769 0
Bruce D. Haslerud, as Trustee
of the Independent
Millwork, Inc. Profit
Sharing Plan 1,769/(4)/ 1,769 0
Mac W. Lutz III 1,769/(4)/ 1,769 0
Donald M. Mattsson and
Nora J. Mattsson, JT TEN 1,769/(4)/ 1,769 0
Daniel S. Perkins and Patrice
M. Perkins, JT TEN 1,769/(4)/ 1,769 0
Joan Elizabeth Peters and
James Gregory Peters, as
Trustees of the Joan
Elizabeth Peters Trust
Under Agreement dated
July 25, 1996 1,769/(4)/ 1,769 0
David H. Potter and Lise E. Potter, JT TEN 1,769/(4)/ 1,769 0
D. Kolasch and Jay Slattery,
as Trustees of the D.
Kolasch 401K Trust 1,769/(4)/ 1,769 0
Michael S. Stamer 1,769/(4)/ 1,769 0
S & S Associates 1,769/(4)/ 1,769 0
Oban Capital Assets, Inc. 1,415/(4)/ 1,415 0
Paragon Enterprises, Inc. 1,415/(4)/ 1,415 0
James Wilmot 944/(5)/ 944 0
First Trust National
Association, Trustee, for
the benefit of Dennis Doyle 707/(4)/ 707 0
Arthur Sund Nelson 707/(4)/ 707 0
Terry Stewart 440/(2)(6)/ 440 0
Marty Golden 106/(2)(7)/ 106 0
Terry Nelson 35/(2)(7)/ 35 0
------- ------- -
Totals 203,272 203,272 0
======= ======= =
</TABLE>
/1/ 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.
10
<PAGE>
2 The Warrant contains "cashless" exercise provisions. These provisions
allow the holder of the warrants to apply the difference between the
exercise price of the warrants and the higher fair market value of the
Common Stock underlying the warrants to the payment of the exercise price.
Assuming all of the Selling Securityholders eligible to use a cashless
exercise did so, and assuming a fair market value of the Company's Common
is $51.50, the last sales price of the Company's Common Stock on August 27,
1996 as reported on The Nasdaq National Stock Market, an aggregate of
approximately 125,606 shares of Common Stock would be issued upon the
exercise of all of the Warrants.
3 Represents Underwriter's Warrants exercisable at $29.67 per share.
4 Represents Bridge Warrants exercisable at $15.83 per share.
5 Represents Agents' Warrants, 591 shares of which are exercisable for $9.19
per share and 353 shares which are exercisable at $3.54 per share. The
Agents' Warrant exercisable at $9.19 per share contains a "cashless
exercise" provision.
6 Represents Agents' Warrants exercisable at $7.07 per share.
7 Represents Agents' Warrants exercisable at $9.19 per share.
11
<PAGE>
PLAN OF DISTRIBUTION
Any or all of the Shares may be sold from time to time to purchasers
directly by any of the Selling Securityholders. Alternatively, the Selling
Securityholders may from time to time offer the Shares through underwriters,
dealers or agents who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Securityholders and/or
the purchasers of Shares for whom they may act as agents. The Selling
Securityholders and any such underwriters, dealers or agents that participate in
the distribution of Shares may be deemed to be underwriters, and any profit on
the sale of the Shares by them and any discounts, commissions or concessions
received by them may be deemed to be underwriting discounts and commissions
under the Securities Act. The Shares may be sold from time to time in one or
more transactions at a fixed offering price, which may be changed, or at varying
prices determined at the time of sale or at negotiated prices.
At the time a particular offer of Shares is made, to the extent required, a
supplement to this Prospectus will be distributed which will identify and set
forth the aggregate amount of Shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
the purchase price paid by any underwriter for Shares purchased from the Selling
Securityholders, any discounts, commissions and other items constituting
compensation from the Selling Securityholders and/or the Company, and any
discounts, commissions or concessions allowed or reallowed or paid to dealers,
including the proposed selling price to the public. The Company will not
receive any of the proceeds from the sale by the Selling Securityholders of the
Shares offered hereby. However, and as described in "Use of Proceeds," the
Company could receive up to $5.1 million upon exercise of all of the Warrants
(of which there can be no assurance).
Under applicable rules and regulations under the Exchange Act, any person
engaged in a distribution of the Shares may not simultaneously engage in market
making activities with respect to the Shares for a period of nine business days
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, the Selling Securityholders will be subject to
applicable provisions of the Exchange Act and the rules and regulations
thereunder including, without limitation, Rules 10b-2, 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of the Shares by the
Selling Securityholders.
In order to comply with certain states' securities laws, if applicable, the
Shares will be sold in such jurisdictions only through registered or licensed
brokers or dealers. In certain states the Shares may not be sold unless the
Shares have been registered or qualified for sale in such state, or unless an
exemption from registration or qualification is available and is obtained.
The Company has agreed to use its best efforts to keep the Registration
Statement, of which this Prospectus constitutes a part, effective for as long as
any Warrants remain outstanding.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Securityholders. The Company could receive up to $5.1 million upon
exercise of all of the Warrants (of which there can be no assurance). The
Company intends to use any proceeds received from the exercise of Warrants for
general corporate purposes, including working capital.
LEGAL MATTERS
The legality of the Shares is being passed upon by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements and schedule of Ascend
Communications, Inc. incorporated by reference and appearing in Ascend
Communications, Inc.'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.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
12
<PAGE>
===============================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION
OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES,
OR AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY
OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The Company................................................................ 3
Risk Factors............................................................... 3
Selling Securityholders.................................................... 9
Plan of Distribution....................................................... 12
Use of Proceeds............................................................ 12
Legal Matters.............................................................. 12
Experts.................................................................... 12
</TABLE>
===============================================================================
===============================================================================
203,272 SHARES
ASCEND COMMUNICATIONS, INC.
COMMON STOCK
-------------
PROSPECTUS
-------------
, 1996
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions. All of the amounts shown are estimates
except the Securities and Exchange Commission registration fees and Nasdaq
filing fee.
<TABLE>
<CAPTION>
To be Paid
By The
Registrant
----------
<S> <C>
SEC Registration Fee............................. $ 3,369
Nasdaq filing fee................................ 4,066
Accounting fees and expenses..................... 3,000
Printing......................................... 1,000
Transfer agent and registrar fees and expenses... 0
Blue Sky fees and expenses....................... 0
Legal fees and expenses.......................... 10,000
Miscellaneous expenses........................... 565
-------
Total........................................ $22,000
=======
</TABLE>
The Company will pay all expenses of registration, issuance and
distribution of the shares being sold by the Selling Securityholders, excluding
fees and expenses of counsel to the Selling Securityholders and any underwriting
commissions and discounts, filing fees and transfer or other taxes, which shall
be borne by the Selling Securityholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("Delaware Law")
permits identification of officers, directors, and other corporate agents under
certain circumstances and subject to certain limitations. The Company's
Certificate of Incorporation and By-Laws provide that the Company shall
indemnify its directors, officers, employees, and agents to the full extent
permitted by Delaware Law, including in circumstances in which indemnification
is otherwise discretionary under Delaware law. In addition, the Company entered
into separate indemnification agreements with its directors and officers which
would require the Company, 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
maintain directors' and officers' liability insurance, if available on
reasonable terms.
These indemnification provisions may be sufficiently broad to permit
indemnification of the Registrant's officers and directors for liabilities
(including reimbursement of expenses incurred) arising under the Securities Act
of 1933, as amended (the "Securities Act").
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Company in which
indemnification is being sought.
II-1
<PAGE>
ITEM 16. EXHIBITS.
The following exhibits are filed with this Registration Statement:
EXHIBIT
NUMBER EXHIBIT TITLE
- ------- -------------
4.1* Agreement and Plan of Merger dated May 30, 1996 by and among the Company,
Nebula Acquisition Corporation, a Minnesota corporation, and NetStar,
Inc., a Minnesota corporation
4.2 Form of Warrant Agreements
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Gray Cary Ware & Freidenrich, A Professional Corporation
(included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page contained in Part II of
the Registration Statement).
- ----------------------------
*Filed as an exhibit to the Company's Registration Statement on Form S-4 filed
July 15, 1996 (No. 333-07967) and incorporated herein by reference.
ITEM 17. UNDERTAKINGS.
A. The undersigned 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 of 1933 (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, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(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; provided,
however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if 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 Securities Exchange Act of 1934 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.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to
II-2
<PAGE>
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. The undersigned Registrant hereby undertakes to deliver or cause to
be delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
D. 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.
E. The undersigned Registrant hereby undertakes that:
(1) For the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the
Securities Act, each post-effective amendment that contains a form of prospectus
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.
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 28th day of August, 1996.
ASCEND COMMUNICATIONS, INC.
By: /s/ Robert K. Dahl
-------------------------------------
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 on Form S-
3, 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 Ejabat President, Chief Executive August 28, 1996
- -------------------------- Officer and Director (Principal
(Mory Ejabat) Executive Officer)
/s/ Robert K. Dahl Vice President Finance, Chief August 28, 1996
- -------------------------- Financial Officer and Director
(Robert K. Dahl) (Principal Financial Officer)
/s/ Michael J. Johnson Controller and Chief Accounting August 28, 1996
- -------------------------- Officer (Principal Accounting
(Michael J. Johnson) Officer)
Director August 28, 1996
- --------------------------
(Betsy S. Atkins)
/s/ Roger L. Evans Director August 28, 1996
- --------------------------
(Roger L. Evans)
/s/ C. Richard Kramlich Director August 28, 1996
- --------------------------
(C. Richard Kramlich)
/s/ James P. Lally Director August 28, 1996
- --------------------------
(James P. Lally)
Director August 28, 1996
- --------------------------
(Martin Schoffstall)
II-4
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Page No.
- ----------- --------
4.1* Agreement and Plan of Merger dated May 30, 1996
by and among the Company Nebula Acquisition
Corporation, a Minnesota corporation, and NetStar,
Inc., a Minnesota corporation.
4.2 Form of Warrant Agreements.
5.1 Opinion of Gray Cary Ware & Freidenrich,
A Professional Corporation.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Gray Cary Ware & Freidenrich,
A Professional Corporation (included in Exhibit 5.1).
24.1 Power of Attorney (included in the Signature Page
contained in Part II of the Registration Statement).
- ----------------------------
*Filed as an exhibit to the Company's Registration Statement on Form S-4 filed
July 15, 1996 (No. 333-07967) and incorporated herein by reference.
<PAGE>
EXHIBIT 4.2
ASCEND COMMUNICATIONS
COMMON STOCK PURCHASE WARRANT
Ascend Communications, Inc. , a Delaware corporation (the "Company"),
hereby agrees that, for value received, ____________________________________, or
its assigns, is entitled, subject to the terms set forth below, to purchase from
the Company at any time or from time to time after August 15, 1996, and before
3:00 p.m., California time, on April ___, 1999, ______________ shares of the
$0.001 par value common stock of the Company (the "Common Stock"), at an
exercise price of $3.54 per share, subject to adjustment as provided herein.
1. Exercise of Warrant. The purchase rights granted by this Warrant shall
-------------------
be exercised (in minimum quantities of 50 shares) by the holder surrendering
this Warrant with the form of exercise attached hereto duly executed by such
holder, to the Company at its principal office, accompanied by payment, in cash
or by cashier's check payable to the order of the Company, of the purchase price
payable in respect of the Common Stock being purchased. If less than all of the
Common Stock purchasable hereunder is purchased, the Company will, upon such
exercise, execute and deliver to the holder hereof a new Warrant (dated the date
hereof) evidencing the number of shares of Common Stock not so purchased. As
soon as practicable after the exercise of this Warrant and payment of the
purchase price, the Company will cause to be issued in the name of and delivered
to the holder hereof, or as such holder may direct, a certificate or
certificates representing the shares purchased upon such exercise. The Company
may require that such certificate or certificates contain on the face thereof a
legend substantially as follows:
"The transfer of the shares represented by this certificate is restricted
pursuant to the terms of a Common Stock Purchase Warrant dated August 15,
1996, issued by Ascend Communications, Inc., a copy of which is available
for inspection at the offices of Ascend Communications, Inc. Transfer may
not be made except in accordance with the terms of the Common Stock
Purchase Warrant. In addition, no sale, offer to sell or transfer of the
shares represented by this certificate shall be made unless a Registration
Statement under the Federal Securities Act of 1933, as amended (the "Act"),
with respect to such shares is then in effect or an exemption from the
registration requirements of the Act is then in fact applicable to such
shares."
2. Negotiability and Transfer. This Warrant is issued upon the following
--------------------------
terms, to which each holder hereof consents and agrees:
(a) Until this Warrant is duly transferred on the books of the Company,
the Company may treat the registered holder of this Warrant as absolute owner
hereof for all purposes without being affected by any notice to the contrary.
1
<PAGE>
(b) Each successive holder of this Warrant, or of any portion of the
rights represented thereby, shall be bound by the terms and conditions set forth
herein.
3. Antidilution Adjustments. If the Company shall at any time hereafter
------------------------
divide or combine its outstanding shares of Common Stock, or declare a dividend
payable in Common Stock, the exercise price in effect immediately prior to the
subdivision, combination or record date for such dividend payable in Common
Stock shall forthwith be proportionately increased, in the case of combination,
or proportionately decreased, in the case of subdivision or declaration of a
dividend payable in Common Stock, and each share of Common Stock purchasable
upon exercise of this Warrant, immediately preceding such event, shall be
changed to the number determined by dividing the then current exercise price by
the exercise price as adjusted after such subdivision, combination or dividend
payable in Common Stock.
No fractional shares of Common Stock are to be issued upon the exercise of
the Warrant, but the Company shall pay a cash adjustment in respect of any
fraction of a share which would otherwise be issuable in an amount equal to the
same fraction of the market price per share of Common Stock on the day of
exercise as determined in good faith by the Company.
In case of any capital reorganization or any reclassification of the shares
of Common Stock of the Company, or in the case of any consolidation with or
merger of the Company into or with another corporation, or the sale of all or
substantially all of its assets to another corporation which is effected in such
a manner that the holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
part of such reorganization, reclassification, consolidation, merger or sale, as
the case may be, lawful provision shall be made so that the holder of the
Warrant shall have the right thereafter to receive, upon the exercise hereof,
the kind and amount of shares of stock or other securities or property which the
holder would have been entitled to receive if, immediately prior to such
reorganization, reclassification, consolidation, merger or sale, the holder had
held the number of shares of Common Stock which were then purchasable upon the
exercise of the Warrant. In any such case, appropriate adjustment (as determined
in good faith by the Board of Directors of the Company) shall be made in the
application of the provisions set forth herein with respect to the rights and
interest thereafter of the holder of the Warrant, to the end that the provisions
set forth herein (including provisions with respect to adjustments of the
exercise price) shall thereafter be applicable, as nearly as reasonably may be,
in relation to any shares of stock or other property thereafter deliverable upon
the exercise of the Warrant.
When any adjustment is required to be made in the exercise price, initial
or adjusted, the Company shall forthwith determine the new exercise price, and
2
<PAGE>
(a) prepare and retain on file a statement describing in reasonable
detail the method used in arriving at the new exercise price; and
(b) cause a copy of such statement to be mailed to the holder of the
Warrant as of a date within ten (10) days after the date when the circumstances
giving rise to the adjustment occurred.
4. Registration Rights. Prior to making any disposition of the Warrant
-------------------
or of any Common Stock purchased upon exercise of the Warrant, the holder will
give written notice to the Company describing briefly the manner of any such
proposed disposition. The holder will not make any such disposition until (i)
the Company has notified him that, in the opinion of its counsel, registration
under the Act is not required with respect to such disposition, or (ii) a
Registration Statement covering the proposed distribution has been filed by the
Company and has become effective. The Company agrees that, upon receipt of
written notice from the holder hereof with respect to such proposed
distribution, it will use its best efforts, in the consultation with the
holder's counsel, to ascertain as promptly as possible whether or not
registration is required, and will advise the holder promptly with respect
thereto, and the holder will cooperate in providing the Company with information
necessary to make such determination.
If, at any time prior to April ___, 2000, the Company shall propose to file
any Registration Statement (other than any registration on Forms S-4, S-8 or any
other similarly inappropriate form or Registration Statement with respect to an
initial public offering in which there are no selling shareholders) under the
Securities Act of 1933, as amended, covering a public offering of the Company's
Common Stock, it will notify the holder hereof at least forty-five (45) days
prior to each such filing and will include in the Registration Statement (to the
extent permitted by applicable regulation), but on one occasion only, the Common
Stock purchased by the holder or purchasable by the holder upon the exercise of
the Warrant to the extent requested by the holder hereof. Notwithstanding the
foregoing, the number of shares of the holders of the Warrants proposed to be
registered thereby shall be reduced pro rata with any other selling shareholder
(other than the Company) upon the request of the managing underwriter of such
offering. If the Registration Statement or Offering Statement filed pursuant to
such forty-five (45) day notice has not become effective within six months
following the date such notice is given to the holder hereof, the Company must
again notify such holder in the manner provided above.
At any time prior to April ___, 2000, and provided the Company has
previously had a registration statement on Form S-1 or Form S-18 (or their
equivalent) declared effective by the U.S. Securities and Exchange Commission
and that a registration statement on Form S-3 (or its equivalent) is then
available to the Company, and on a one-time basis only, if the holders of 60% or
more of the Warrants and/or the shares acquired upon exercise of the Warrants
request the registration of the Warrants and the shares on Form S-3 (or its
equivalent), the Company shall promptly thereafter use its best efforts to
effect the registration under the Securities Act of 1933, as amended, of all
such Warrants and/or shares which such holders request in writing to be so
3
<PAGE>
registered, and in a manner corresponding to the methods of distribution
described in such holders' request.
All expenses of any such registrations referred to in this Section 4,
except the fees of counsel to such holders and underwriting commissions or
discounts, filing fees and any transfer or other taxes applicable to such
Warrants and/or shares, shall be borne by the Company.
Upon effectiveness of a Registration Statement which includes shares of
Common Stock purchased or purchasable upon the exercise of this Warrant in
accordance with a valid request under this Section 4, the rights under this
Warrant of all holders to make another such request or election shall terminate.
Each purchaser or transferee of a portion of this Warrant is responsible to
determine whether his rights under this paragraph have been terminated by such
an exercise. Any Warrants issued upon transfers subsequent to such an exercise
shall have all of the provisions under this paragraph deleted.
The Company will mail to each record holder, at the last known post office
address, written notice of any exercise of the rights granted under this
paragraph 4, by certified or registered mail, return receipt requested, and each
holder shall have twenty (20) days from the date of deposit of such notice in
the U.S. Mail to notify the Company in writing whether such holder wishes to
join in such exercise.
The Company will furnish the holder hereof with a reasonable number of
copies of any prospectus included in such filings and will amend or supplement
the same as required during the period of required use thereof; provided, that
the expenses of any amendment or supplement made or filed more than three (3)
months after the effective date of the Registration Statement or Offering
Statement, at the request of any holder, shall be paid by such holder. The
Company will maintain the effectiveness of any Registration Statement or the
Offering Statement filed by the Company, whether or not at the request of the
holder hereof, for at least six (6) months following the effective date thereof.
The holder of the Warrant or the underlying shares shall have no right to
require the Company to initially file any registration statement for the purpose
of registering its shares for sale to the public.
In the case of the filing of any Registration Statement, and to the extent
permissible under the Securities Act of 1933, as amended, and controlling
precedent thereunder, the Company and the holder hereof shall provide cross
indemnification agreements to each other in customary scope covering the
accuracy and completeness of the information furnished by each.
The holder of the Warrant agrees to cooperate with the Company in the
preparation and filing of any such Registration Statement or Offering Statement,
and in the furnishing of information concerning the holder for inclusion
therein, or in any
4
<PAGE>
efforts by the Company to establish that the proposed sale is exempt under the
Act as to any proposed distribution.
5. Notices. The Company shall mail to the registered holder of the
-------
Warrant, at his last known post office address appearing on the books of the
Company, not less than fifteen (15) days prior to the date on which (a) a record
will be taken for the purpose of determining the holders of Common Stock
entitled to dividends (other than cash dividends) or subscription rights, or (b)
a record will be taken (or in lieu thereof, the transfer books will be closed)
for the purpose of determining the holders of Common Stock entitled to notice of
and to vote at a meeting of stockholders at which any capital reorganization,
reclassification of shares of Common Stock, consolidation, merger, dissolution,
liquidation, winding up or sale of substantially all of the Company's assets
shall be considered and acted upon.
6. Reservation of Common Stock. A number of shares of Common Stock
---------------------------
sufficient to provide for the exercise of the Warrant upon the basis herein set
forth shall at all times be reserved for the exercise thereof.
7. Miscellaneous. Whenever reference is made herein to the issue or sale
-------------
of shares of Common Stock, the term "Common Stock" shall include any stock of
any class of the Company other than preferred stock with a fixed limit on
dividends and a fixed amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company.
The Company will not by amendment of its Articles of Incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act or deed, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company, but will, at all times in good faith,
assist, insofar as it is able, in the carrying out of all provisions hereof and
in the taking of all other action which may be necessary in order to protect the
rights of the holder hereof against dilution.
Upon written request of the holder of this Warrant, the Company will
promptly provide such holder with a then current written list of the names and
addresses of all holders of warrants originally issued under the terms of, and
concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. References to the "holder of" include the
immediate holder of shares purchased on the exercise of this Warrant, and the
word "holder" shall include the plural thereof. This Common Stock Purchase
Warrant shall be interpreted under the laws of the State of Minnesota.
All shares of Common Stock or other securities issued upon the exercise of
the Warrant shall be validly issued, fully paid and non-assessable, and the
Company will pay all taxes in respect of the issuer thereof.
5
<PAGE>
Notwithstanding anything contained herein to the contrary, the holder of
this Warrant shall not be deemed a stockholder of the Company for any purpose
whatsoever until and unless this Warrant is duly exercised.
IN WITNESS WHEREOF, this Warrant has been duly executed by Ascend
Communications, Inc., as of this 15th day of August, 1996.
ASCEND COMMUNICATIONS, INC.
By:________________________
Its:_______________________
6
<PAGE>
WARRANT EXERCISE FORM
To be signed only upon exercise of Warrant.
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, of the shares of Common Stock of Ascend Communications,
Inc. to which such Warrant relates and herewith makes payment of
$____________________________ therefor in cash or by certified check, and
requests that such shares be issued and be delivered to,
____________________________, the address for which is set forth below the
signature of the undersigned.
Dated:________________________________
______________________________________ ____________________________________
(Taxpayer's I.D. Number) (Signature)
____________________________________
____________________________________
(Address)
----------------------------
ASSIGNMENT FORM
To be signed only upon authorized transfer of Warrant.
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto the right to purchase shares of Common Stock of Ascend Communications, Inc.
to which the within Warrant relates and appoints, attorney, to transfer said
right on the books of Ascend Communications, Inc. with full power of
substitution in the premises.
Dated:_________________________________
_____________________________________
(Signature)
______________________________________
______________________________________
(Address)
7
<PAGE>
COMMON SHARE WARRANT
To Purchase Common Stock of
Ascend Communications, Inc.
August 15, 1996
THIS CERTIFIES THAT, _______________ assigns is entitled to subscribe for
and purchase from Ascend Communications, Inc., a Delaware corporation (the
"Company") at any time after the date hereof to August 15, 1998, fully paid and
nonassessable shares of the Company's Common Stock (the "Common Stock"), at the
initial exercise price of $7.07 per share, subject to adjustment as hereinafter
provided in Paragraph 4.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Transferability. The rights represented by this Warrant may
-------------------------
be exercised by the holder hereof, in whole or in part (but not as to a
fractional share of Common Stock), by written notice of exercise delivered to
the Company twenty (20) days prior to the intended date of exercise and by the
surrender of this Warrant (properly endorsed, if required) at the principal
office of the Company and upon payment to it by certified or cashier's check of
the purchase price for such shares.
This Warrant may be transferred, or divided into two (2) or more Warrants
of smaller denominations, subject to counsels opinion as provided by paragraph 7
herein, that such transfer is not in violation of federal or state securities
laws.
2. Issuance of Shares. The Company agrees that the shares of Common
------------------
Stock purchased hereby shall be and are deemed to be issued to the record holder
hereof as of the close of business on the date on which this Warrant shall have
been surrendered and the payment made for such shares as aforesaid. Subject to
the provisions of the next succeeding paragraph, certificates for the shares of
Common Stock so purchased shall be delivered to the holder hereof within a
reasonable time, not exceeding ten (10) days after the rights represented by
this Warrant shall have been so exercised, and, unless this Warrant has expired,
a new Warrant date hereof to and including following date of Warrant
representing the number of shares, if any, with respect to which this Warrant
shall not then have been exercised shall also be delivered to the holder hereof
within such time. Certificates issued upon exercise of this Warrant shall bear
appropriate restrictive legends indicating that such shares have not been
registered under the Securities Act of 1933, as amended, or applicable Blue Sky
laws.
Notwithstanding the foregoing, however, the Company shall not be required
to deliver any certificate for shares of stock upon exercise of this Warrant,
except in accordance with the provisions, and subject to the limitations, of
paragraph 7 hereof.
3. Covenants of Company. The Company covenants and agrees that all
--------------------
Common Stock which may be issued upon the exercise of the rights represented by
1
<PAGE>
this Warrant will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants and agrees that it will from time to time take all such action as may
be required to assure that the par value per share of the Common Stock is at all
times equal to or less than the then effective purchase price per share of the
Common Stock issuable pursuant to this Warrant. The Company further covenants
and agrees that during the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized, and
reserved for the purpose of issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of its Common
Stock to provide for the exercise of the rights represented by this Warrant.
4. Anti-dilution Adjustments. The above provisions are, however, subject
-------------------------
to the following:
(a) In case the Company shall at anytime hereafter subdivide or combine
the outstanding shares of Common Stock or declare a dividend payable in Common
Stock, the exercise price of this Warrant in effect immediately prior to the
subdivision, combination or record date for such dividend payable in Common
Stock shall forthwith be proportionately increased, in the case of combination,
or decreased, in the case of subdivision or dividend payable in Common Stock,
and each share of Common Stock purchasable upon exercise of the Warrant shall be
changed to the number determined by dividing the then current exercise price by
the exercise price as adjusted after the subdivision, combination, or dividend
payable in Common Stock.
(b) No fractional shares of Common Stock are to be issued upon the
exercise of the Warrant, but the Company shall pay a cash adjustment in respect
of any fraction of a share which would otherwise be issuable in an amount equal
to the same fraction of the market price per share of Common Stock on the day of
exercise as determined in good faith by the Company.
(c) If any subdivision, capital reorganization or reclassification of
the capital stock of the Company, or consolidation, or merger of the Company
with another corporation, or the sale of all or substantially all of its assets
to another corporation shall be effected in such a way that holders of Common
Stock shall be entitled to receive stock, securities, cash or assets with
respect to or in exchange for Common Stock then, as a condition of such
subdivision, reorganization, reclassification, consolidation, merger or sale,
lawful and adequate provision shall be made whereby the holder hereof shall
hereafter have the right to purchase and receive upon the basis and upon the
terms and conditions specified in this warrant and in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby, such shares of Common Stock,
securities, cash, or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately
2
<PAGE>
theretofore purchasable and receivable upon the exercise of the rights
represented hereby had such subdivision, reorganization, reclassification,
consolidation, merger or sale not taken place, and in any such case appropriate
provisions shall be made with respect to the rights and interests of the holder
of this Warrant to the end that the provisions hereof (including, without
limitation, provisions for adjustments of the Warrant purchase price and of the
number of shares purchasable upon the exercise of this Warrant) shall thereafter
be applicable, as nearly as may be, in relation to any shares of Common Stock,
securities, cash or assets thereafter deliverable upon the exercise hereof. The
Company shall not effect any such subdivision, consolidation, merger or sale,
unless prior to the consummation thereof the successor corporation (if other
than the Company) resulting from such subdivision, consolidation or merger, or
the corporation purchasing such assets shall assume by written instrument
executed and mailed to the registered holder hereof at the last address of such
holder appearing on the books of the Company, the obligation to deliver to such
holder such shares of Common Stock, securities, cash or assets as, in accordance
with the foregoing provisions, to which such holder may be entitled.
Notwithstanding any language to the contrary set forth in this paragraph
4(c), if an occurrence or event described herein shall take place and a
successor corporation or corporation purchasing assets shall survive the
transaction then, at the election of the record holder hereof, such corporation
shall be obligated to purchase this warrant (or the unexercised part hereof)
from the record holder without requiring the holder to exercise all or part of
the Warrant. If such corporation refuses to so purchase this Warrant then the
Company shall purchase the warrant for cash. In either case the purchase price
shall be the amount per share that shareholders of the outstanding common stock
of the Company shall be entitled to receive as a result of the transaction
multiplied by the number of shares covered by the warrant, minus the aggregate
exercise price of the Warrant. Such purchase shall be closed within 60 days
following the election of the holder to sell this Warrant.
(d) Upon any adjustment of the Warrant purchase price, then and in each
such case, the Company shall give written notice thereof, by first class mail,
postage prepaid, addressed to the registered holder of this Warrant at the
address of such holder as shown on the books of the Company, which notice shall
state the Warrant purchase price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
5. Common Stock. As used herein, the term "Common Stock" shall mean and
------------
include the Company's currently authorized shares of Common Stock and shall also
include any capital stock of any class of the Company authorized which shall not
be limited to a fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution, dissolution or
winding up of the Company.
3
<PAGE>
6. No Voting Rights. This Warrant shall not entitle the holder hereof to
----------------
any voting rights or other rights as a stockholder of the Company.
7. Investment Intent; Notice of Transfer of Warrant or Resale of Shares.
--------------------------------------------------------------------
Neither this Warrant nor the shares of Common Stock of the Company issuable upon
exercise of this Warrant have been registered under the Securities Act of 1933,
as amended. The Warrant is issued to the holder on the condition that the
Warrant and any Common Stock purchased upon exercise of the Warrant (excepting
Common Stock for which a notification under Regulation A or a registration
statement has been filed and declared effective) are or will be purchased for
investment purposes and not with an intent to distribute the same. The holder of
this Warrant, by acceptance hereof, agrees to give written notice to the Company
before transferring this Warrant, or transferring any Common Stock issued upon
the exercise hereof, of such holder's intention to do so, describing briefly the
manner of any proposed transfer. Promptly upon receiving such written notice,
the Company shall present copies thereof to the Company's counsel. If in the
opinion of such counsel the proposed transfer may be effected without
registration or qualification (under federal or state law), the Com any, as
promptly as practicable, shall notify such holder of such opinion, whereupon
such holder shall be entitled to transfer this Warrant or to dispose of shares
of Common Stock received upon the previous exercise hereof in accordance with
the notice delivered by such holder to the Company and the opinion of the
Company's counsel; provided, that an appropriate legend may be endorsed on this
Warrant, or the certificates for such shares respecting restrictions upon
transfer thereof necessary or advisable in the opinion of the Company's counsel
to prevent further transfers which would be in violation of Section 5 of the
Securities Act of 1933.
If in the opinion of the counsel referred to in this paragraph 7 hereof,
the proposed transfer or disposition of shares described in the written notice
given pursuant to this paragraph 7 may not be effected without registration or
qualification of this Warrant or the shares of Common Stock issued on the
exercise hereof, the Company shall promptly give written notice thereof to the
holder hereof, and such holder will limit its activities in respect thereto such
as, in the opinion of such counsel, are permitted by law.
8. Registration Rights.
-------------------
(a) If, during the period ending two years after the last exercise of
any of these Warrants the Company proposes to register under the Securities Act
of 1933, as amended, (except by a Form S-8 or S-4 registration statement or any
successor registration statement, or other similar form of limited
applicability) any of its securities it will give written notice to the Warrant
holders of its intention to do so and, on the written request of holders of
Warrants to purchase 50% or more of the securities which may be purchased upon
exercise of Warrants then outstanding, given within twenty days after receipt of
such notice (which request shall specify the Warrants or shares of common stock
intended to be sold or disposed of by such registered holder), the Company will
use its best efforts to cause the Warrants or
4
<PAGE>
underlying securities to be included in such notification or registration
statement proposed to be filed by the Company; provided, that the Warrant
holders agree that their shares or Warrants may be excluded from the offering if
requested by the underwriters of the offering. All expenses of such offering,
except the fees of special counsel to the Warrant holders and selling
commissions shall be borne by the Company. Nothing herein shall prevent the
Company from, at any time, abandoning or delaying any notification or
registration, whether or not such notification or registration statement has
been filed; and, furthermore, nothing herein shall require the Company to take
any action or to refrain from taking any action in respect of any registration,
it being agreed that the Warrant holders shall participate on the terms and the
form of registration proposed by the Company. If any notification or
registration shall be underwritten, in whole or in part, the Company may require
that all Warrants or underlying securities requested for inclusion in such
notification or registration statement be included in the underwriting on the
same terms and conditions as the securities otherwise being sold to the
underwriters.
(b) Further, during the period ending two years after the last exercise
of any of the Warrants, on a one-time basis only, but only after the Company has
completed an initial public offering registered with the SEC, upon request by
holders of Warrants in respect of 50% or more of the underlying securities which
may be purchased upon exercise of these Warrants then outstanding, the Company
will, at the expense of the requesting Warrant holders promptly take all
necessary steps to register or qualify such Warrants or underlying securities
under Section 3(b) or Section 5 of the Securities Act of 1933, as amended, and
such state laws as the requesting Warrant holders may reasonably request, and
will use its best efforts to cause such registrations or qualifications to
become and remain effective for a period of at least 180 days. Expenses borne by
the requesting Warrant holders shall not include the cost of any financial
statements prepared in the normal course of the Company's business, and no
charges shall be made for the services of any officers or employees of the
Company in connection with any such registration.
(c) The Company hereby indemnities the holder of any Common Stock
issued or issuable hereunder, its officers and directors, if any, who control
such holder of Common Stock within the meaning of Section 15 of the Securities
Act of 1933, as amended, against all losses, claims, damages and liabilities
caused by any untrue statement of a material fact contained in any registration
statement, prospectus, notification or offering circular (and as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus or caused by any omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any untrue statement or omission contained
in information furnished in writing to the Company by such holder of Common
Stock, expressly for use therein and each such holder by its acceptance hereof
severally agrees that it will indemnify and hold harmless the Company and each
of its officers, directors and any underwriter and each person, if any, who
controls the Company or any underwriter within the meaning of Section 15 of the
Securities Act of 1933, as amended, with respect to
5
<PAGE>
losses, claims, damages or liabilities which are caused by any untrue statement
or omission contained in information furnished in writing to the Company or any
underwriter by such holder expressly for use therein.
9. Additional Right to Convert Warrant.
-----------------------------------
(a) The holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right") at any time prior to
its expiration into shares of Common Stock as provided for in this Section 9.
Upon exercise of the Conversion Right, the company shall deliver to the holder
(without payment by the holder of any Exercise Price) that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the value of the
Warrant at the time the Conversion Right is exercised (determined by subtracting
the aggregate Exercise Price for the Warrant Shares in effect immediately prior
to the exercise of the Conversion Right from the aggregate Fair Market Value for
the Warrant Shares immediately prior to the exercise of the Conversion Right) by
(y) the Fair Market Value of one share of Common Stock immediately prior to the
exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the holder, at any time or
from time to time, prior to its expiration, on any business day by delivering a
written notice in the form attached hereto (the "Conversion Notice") to the
Company, at the offices of the Company, specifying (i) the total number of
shares of Stock the Warrant holder will purchase pursuant to such conversion and
(ii) a place and date not less than one nor more than 20 business days from the
date of the Conversion Notice for the closing of such purchase.
(c) At any closing under Section 9(b) hereof, (i) the holder will
surrender the Warrant and (ii) the Company will deliver to the holder a
certificate or certificates for the number of shares of Common Stock issuable
upon such conversion, together with cash, in lieu of any fraction of a share,
and (iii) the Company will deliver to the holder a new Warrant representing the
number of shares, if any, with respect to which the Warrant shall not have been
exercised.
(d) Fair Market Value of a share of Common Stock as of a particular
date (the "Determination Date") shall mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System, then the average closing or last
sale prices, respectively, reported for the ten (10) business days immediately
preceding the Determination Date.
(ii) If the Company's Common Stock is not traded on an exchange or
quoted on the NASDAQ National Market System but is traded in the over-the-
counter market, then the average closing bid and asked prices reported for the
ten (10) business days immediately preceding the Determination Date.
6
<PAGE>
IN WITNESS WHEREOF, NetStar, Inc. has caused this Warrant to be signed by
its duly authorized officers and this Warrant to be dated as of August 15, 1996.
NetStar, Inc.
By:___________________________________
Printed Name:_________________________
Its:__________________________________
ATTEST:
By:__________________________
Printed Name:________________
Its:_________________________
7
<PAGE>
RESTRICTION ON TRANSFER
The security evidenced hereby may not be sold, transferred, assigned,
offered, pledged or otherwise distributed for value unless there is an effective
registration statement under such act or laws covering such security or the
Company receives an opinion of counsel for the Company stating that such sale,
transfer, assignment, pledge or distribution is exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933,as amended, and
all applicable state securities laws.
8
<PAGE>
WARRANT EXERCISE
----------------
(To be signed only upon execution of warrant)
The undersigned, the holder of the foregoing warrant, hereby irrevocably
elects to exercise the purchase right represented by such warrant for, and to
purchase thereunder, ____________________________ of the Common Stock of Ascend
Communications, Inc., to which such warrant relates and herewith makes payment
of $____________________________ therefor in cash or by certified or cashier's
check and requests that the certificates for such shares be issued in the name
of, and be delivered to ____________________________, whose address is set forth
below the signature of the undersigned.
Dated:____________________________________________
____________________________________________
(Signature)
____________________________________________
____________________________________________
____________________________________________
(Address)
9
<PAGE>
WARRANT CONVERSION
(To be signed only upon conversion of warrant)
The undersigned, the holder of the foregoing warrant, hereby irrevocably
elects to exercise the conversion right provided in Section 9 of the warrant and
to purchase thereunder, ____________________________ of the Common Stock of
Ascend Communications, Inc., to which such warrant relates and herewith tender
the warrant in full payment of the shares and requests that the certificates for
such shares be issued in the name of, and be delivered to
____________________________, whose address is set forth below the signature of
the undersigned.
Dated:__________________________________________
__________________________________________
(Signature)
__________________________________________
__________________________________________
__________________________________________
(Address)
10
<PAGE>
WARRANT ASSIGNMENT
------------------
(To be signed only upon transfer of warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ____________________________ the right represented by the foregoing warrant
to purchase the Common Stock of Ascend Communications, Inc., to which the
foregoing warrant relates and appoints ____________________________ attorney to
transfer said right on the books of Ascend Communications, Inc., with full power
of substitution in the premises.
Dated:__________________________________________
__________________________________________
(Signature)
__________________________________________
__________________________________________
__________________________________________
(Address)
11
<PAGE>
ASCEND COMMUNICATIONS, INC.
COMMON STOCK PURCHASE WARRANT
Ascend Communications, Inc., a Delaware corporation (the "Company"), hereby
agrees that, for value received, ____________________________________, or its
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time after August 15, 1996, and before 3:00
p.m., California time, on April ___, 1999, ______________ shares of the $0.001
par value common stock of the Company (the "Common Stock"), at an exercise price
of $9.19 per share, subject to adjustment as provided herein.
1. Exercise of Warrant. The purchase rights granted by this Warrant
-------------------
shall be exercised (in minimum quantities of 50 shares) by the holder
surrendering this Warrant with the form of exercise attached hereto duly
executed by such holder, to the Company at its principal office, accompanied by
payment, in cash or by cashier's check payable to the order of the Company, of
the purchase price payable in respect of the Common Stock being purchased. If
less than all of the Common Stock purchasable hereunder is purchased, the
Company will, upon such exercise, execute and deliver to the holder hereof a new
Warrant (dated the date hereof) evidencing the number of shares of Common Stock
not so purchased. As soon as practicable after the exercise of this Warrant and
payment of the purchase price, the Company will cause to be issued in the name
of and delivered to the holder hereof, or as such holder may direct, a
certificate or certificates representing the shares purchased upon such
exercise. The Company may require that such certificate or certificates contain
on the face thereof a legend substantially as follows:
"The transfer of the shares represented by this certificate is restricted
pursuant to the terms of a Common Stock Purchase Warrant dated August 15,
1996, issued by Ascend Communications, Inc., a copy of which is available
for inspection at the offices of Ascend Communications, Inc. Transfer may
not be made except in accordance with the terms of the Common Stock
Purchase Warrant. In addition, no sale, offer to sell or transfer of the
shares represented by this certificate shall be made unless a Registration
Statement under the Federal Securities Act of 1933, as amended (the "Act"),
with respect to such shares is then in effect or an exemption from the
registration requirements of the Act is then in fact applicable to such
shares."
2. Negotiability and Transfer. This Warrant is issued upon the
--------------------------
following, terms, to which each holder hereof consents and agrees:
(a) Until this Warrant is duly transferred on the books of the Company,
the Company may treat the registered holder of this Warrant as absolute owner
hereof for all purposes without being affected by any notice to the contrary.
1
<PAGE>
(b) Each successive holder of this Warrant, or of any portion of the
rights represented thereby, shall be bound by the terms and conditions set forth
herein.
3. Antidilution Adjustments. If the Company shall at any time hereafter
------------------------
subdivide or combine its outstanding shares of Common Stock, or declare a
dividend payable in Common Stock, the exercise price in effect immediately prior
to the subdivision, combination or record date for such dividend payable in
Common Stock shall forthwith be proportionately increased, in the case of
combination, or proportionately decreased, in the case of subdivision or
declaration of a dividend payable in Common Stock, and each share of Common
Stock purchasable upon exercise of this Warrant, immediately preceding such
event, shall be chanced to the number determined by dividing the then current
exercise price by the exercise price as adjusted after such subdivision,
combination or dividend payable in Common Stock.
No fractional shares of Common Stock are to be issued upon the exercise of
the Warrant, but the Company shall pay a cash adjustment in respect of any
fraction of a share which would otherwise be issuable in an amount equal to the
same fraction of the market price per share of Common Stock on the day of
exercise as determined in good faith by the Company.
In case of any capital reorganization or any reclassification of the shares
of Common Stock of the Company, or in the case of any consolidation with or
merger of the Company into or with another corporation, or the sale of all or
substantially all of its assets to another corporation, which is effected in
such a manner that the holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a part of such reorganization, reclassification, consolidation, merger
or sale, as the case may be, lawful provision shall be made so that the holder
of the Warrant shall have the right thereafter to receive, upon the exercise
hereof, the kind and amount of shares of stock or other securities or property
which the holder would have been entitled to receive if, immediately prior to
such reorganization, reclassification, consolidation, merger or sale, the holder
had held the number of shares of Common Stock which were then purchasable upon
the exercise of the Warrant. In any such case, appropriate adjustment (as
determined in good faith by the Board of Directors of the Company) shall be made
in the application of the provisions set forth herein with respect to the rights
and interest thereafter of the holder of the Warrant, to the end that the
provisions set forth herein (including provisions with respect to adjustments of
the exercise price) shall thereafter be applicable, as nearly as reasonably may
be, in relation to any shares of stock or other property thereafter deliverable
upon the exercise of the Warrant.
When any adjustment is required to be made in the exercise price, initial
or adjusted, the Company shall forthwith determine the new exercise price, and
2
<PAGE>
(a) prepare and retain on file a statement describing in reasonable
detail the method used in arriving, at the new exercise price; and
(b) cause a copy of such statement to be mailed to the holder of the
Warrant as of a date within ten (10) days after the date when the circumstances
giving rise to the adjustment occurred.
4. Registration Rights. Prior to making, any disposition of the Warrant
-------------------
or of any Common Stock purchased upon exercise of the Warrant, the holder will
give written notice to the Company describing briefly the manner of any such
proposed disposition. The holder will not make any such disposition until (i)
the Company has notified him that, in the opinion of its counsel registration
under the Act is not required with respect to such disposition, or (ii) a
Registration Statement covering the proposed distribution has been filed by the
Company and has become effective. The holder then will make any disposition only
pursuant to the conditions of such opinion or registration. The Company agrees
that, upon receipt of written notice from the holder hereof with respect to such
proposed distribution, it will use its best efforts, in consultation with the
holder's counsel, to ascertain as promptly as possible whether or not
registration is required, and will advise the holder promptly with respect
thereto, and the holder will cooperate in providing the Company with information
necessary to make such determination.
If, at any time prior to April ___, 2001, the Company shall propose to file
any Registration Statement (other than any registration on Forms S-4, S-8 or any
other similarly inappropriate form or Registration Statement with respect to an
initial public offering in which there are no selling shareholders) under the
Securities Act of 1933, as amended, covering a public offering of the Company's
Common Stock, it will notify the holder hereof at least forty-five (45) days
prior to each such filing and will include in the Registration Statement (to the
extent permitted by applicable regulation) the Common Stock purchased by the
holder or purchasable by the holder upon the exercise of the Warrant to the
extent requested by the holder hereof. Notwithstanding the foregoing. the number
of shares of the holders of the Warrants proposed to be registered thereby shall
be reduced pro rata with any other selling shareholder (other than the Company)
upon the request of the managing underwriter of such offering. If the
Registration Statement or Offering Statement filed pursuant to such forty-five
(45) day notice has not become effective within six months following the date
such notice is given to the holder hereof, the Company must again notify such
holder in the manner provided above.
At any time prior to April ___, 1999, and provided that a registration
statement on Form S-3 (or its equivalent) is then available to the Company, and
on a one-time basis only, if the holders of 60% or more of the warrants and the
shares acquired upon exercise of the Warrants request the registration of the
shares on Form S-3 (or its equivalent), the Company shall promptly thereafter
use its best efforts to effect the registration under the Securities Act of
1933, as amended, of all such shares which such holders request in writing, to
be so registered, and in a manner corresponding to the methods of distribution
described in such holders' request.
3
<PAGE>
All expenses of any such registrations referred to in this Section 4,
except the fees of counsel to such holders and underwriting commissions or
discounts, filing fees and any transfer or other taxes applicable to such
shares, shall be borne by the Company.
Upon effectiveness of a Registration Statement which includes shares of
Common Stock purchased or purchasable upon the exercise of this Warrant in
accordance with a valid demand registration right under this Section 4, the
rights under this Warrant of all holders to make another such demand
registration or election shall terminate. Each purchaser or transferee of a
portion of this Warrant is responsible to determine whether his demand
registration rights under this paragraph have been terminated by such an
exercise. Any Warrants issued upon transfers subsequent to such an exercise
shall have all of the provisions under this paragraph deleted.
The Company will mail to each record holder, at the last known post office
address, written notice of any exercise of the rights granted under this Section
4, by certified or registered mail, return receipt requested, and each holder
shall have twenty (20) days from the date of deposit of such notice in the U.S.
Mail to notify the Company in writing whether such holder wishes to join in such
exercise.
The Company will furnish the holder hereof with a reasonable number of
copies of any prospectus included in such filings and will amend or supplement
the same as required during the period of required use thereof; provided, that
the expenses of any amendment or supplement made or filed more than three (3)
months after the effective date of the Registration Statement or Offering,
Statement, at the request of any holder, shall be paid by such holder. The
Company will maintain the effectiveness of any Registration Statement or the
Offering Statement filed by the Company, whether or not at the request of the
holder hereof, for at least six (6) months following the effective date thereof.
In the case of the filing of any Registration Statement, and to the extent
permissible under the Securities Act of 1933, as amended, and controlling
precedent thereunder, the Company and the holder hereof shall provide cross
indemnification agreements to each other in customary scope covering the
accuracy and completeness of the information furnished by each.
The holder of the Warrant agrees to cooperate with the Company in the
preparation and filing of any such Registration Statement or Offering Statement,
and in the furnishing of information concerning the holder for inclusion
therein, or in any efforts by the Company to establish that the proposed sale is
exempt under the Act as to any proposed distribution.
5. Right to Convert.
----------------
(a) The holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "Conversion Right"), at any time prior to
its
4
<PAGE>
expiration, into shares of Common Stock as provided for in this Section 5. Upon
exercise of the Conversion Right, the Company shall deliver to the holder
(without payment by the holder of any exercise price) that number of shares of
Common Stock equal to the quotient obtained by dividing (x) the value of the
Warrant at the time the Conversion Right is exercised (determined by subtracting
the aggregate exercise price for the Warrant Shares in effect immediately prior
to the exercise of the Conversion Right from the aggregate Fair Market Value (as
determined below) for the Warrant Shares immediately prior to the exercise of
the Conversion Right) by (y) the Fair Market Value of one share of Common Stock
immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the holder, at any time or
from time to time, prior to its expiration, on any business day, by delivering a
written notice (the "CONVERSION NOTICE") to the Company at the offices of the
Company exercising the Conversion Right and specifying (i) the total number of
shares of Stock the Warrantholder will purchase pursuant to such conversion, and
(ii) a place, and a date not less than five (5) nor more than twenty (20)
business days from the date of the Conversion Notice for the closing of such
purchase.
(c) At any closing under Section 5(b) hereof, (i) the holder will
surrender the Warrant, (ii) the Company will deliver to the holder a certificate
or certificates for the number of shares of Common Stock issuable upon such
conversion, together with cash, in lieu of any fraction of a share, and (iii)
the Company will deliver to the holder a new Warrant representing the number of
shares, if any, with respect to which the Warrant shall not have been exercised.
(d) "FAIR MARKET VALUE" of a share of Common Stock as of a particular
date (the "DETERMINATION DATE") shall mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") National Market System, then the average closing or last
sale prices, respectively, reported for the ten (10) business days immediately
preceding the Determination Date.
(ii) If the Company's Common Stock is not traded on an exchange or
on the NASDAQ National Market System, but is traded in the over-the-counter
market, then the average of the closing bid and asked prices reported for the
ten (10) business days immediately preceding the Determination Date.
6. Notices. The Company shall mail to the registered holder of the
-------
Warrant, at his last known post office address appearing on the books of the
Company, not less than fifteen (15) days prior to the date on which (a) a record
will be taken for the purpose of determining the holders of Common Stock
entitled to dividends (other than cash dividends) or subscription rights, or (b)
a record will be taken (or in lieu thereof, the transfer books will be closed)
for the purpose of determining the holders of Common Stock entitled to notice of
and to vote at a
5
<PAGE>
meeting of stockholders at which any capital reorganization, reclassification of
shares of Common Stock, consolidation, merger, dissolution, liquidation, winding
up or sale of substantially all of the Company's assets shall be considered and
acted upon.
7. Reservation of Common Stock. A number of shares of Common Stock
---------------------------
sufficient to provide for the exercise of the Warrant upon the basis herein set
forth shall at all times be reserved for the exercise thereof.
8. Miscellaneous. Whenever reference is made herein to the issue or sale
-------------
of shares of Common Stock, the term "COMMON STOCK" shall include any stock of
any class of the Company other than preferred stock with a fixed limit on
dividends and a fixed amount payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Company.
The Company will not, by amendment of its Articles of Incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act or deed, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company, but will, at all times in good faith,
assist, insofar as it is able, in the carrying out of all provisions hereof and
in the taking of all other action which may be necessary in order to protect the
rights of the holder hereof against dilution.
Upon written request of the holder of this Warrant, the Company will
promptly provide such holder with a then current written list of the names and
addresses of all holders of warrants originally issued under the terms of, and
concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. References to the "holder of" include the
immediate holder of shares purchased on the exercise of this Warrant, and the
word "holder" shall include the plural thereof. This Common Stock Purchase
Warrant shall be interpreted under the laws of the State of Minnesota.
All shares of Common Stock or other securities issued upon the exercise of
the Warrant shall be validly issued, fully paid and non-assessable, and the
Company will pay all taxes in respect of the issuer thereof.
Notwithstanding anything contained herein to the contrary, the holder of
this Warrant shall not be deemed a stockholder of the Company for any purpose
whatsoever until and unless this Warrant is duly exercised.
6
<PAGE>
IN WITNESS WHEREOF, this Warrant has been duly executed by Ascend
Communications, Inc., as of this 15th day of August, 1996.
ASCEND COMMUNICATIONS, INC.
By:________________________
Title:_____________________
7
<PAGE>
WARRANT EXERCISE FORM
---------------------
To be signed only upon exercise of Warrant
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________________ of the Shares of Ascend
Communications, Inc. to which such Warrant relates and herewith makes payment of
$______________ therefor in cash or by certified check, and requests that such
shares be issued and be delivered to, ______________, the address for which is
set forth below the signature of the undersigned.
Dated: ______________
______________________________ _______________________________
(Taxpayer's I.D. Number) (Signature)
_______________________________
_______________________________
(Address)
_________________________________________
ASSIGNMENT FORM
---------------
To be signed only upon authorized transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto ____________________________ the right to purchase Shares of Ascend
Communications, Inc. to which the within Warrant relates and appoints
______________, attorney, to transfer said right on the books of Ascend
Communications, Inc. with full power of substitution in the premises.
Dated:__________________ _______________________________
(Signature)
_______________________________
_______________________________
(Address)
8
<PAGE>
WARRANT NO. ____
WARRANT FOR PURCHASE OF SHARES OF
COMMON STOCK
OF ASCEND COMMUNICATIONS, INC.
AUGUST 15, 1996
FOR VALUE RECEIVED, ____________________________, or registered assigns
(the "Holder"), is entitled to purchase from Ascend Communications, Inc., a
Delaware corporation (the "Company"), commencing on August 15, 1996 and on or
before October 31, 1999, fully paid and nonassessable shares of the Company's
Common Stock, $0.001 par value (such class of stock being hereinafter referred
to as the "Common Stock" and such Common Stock as may be acquired upon exercise
hereof being hereinafter referred to as the "Warrant Stock"), at an exercise
price equal to $15.83 per share (the "Warrant Exercise Price").
This Warrant is subject to the following provisions, terms, and conditions:
1. The rights represented by this Warrant may be exercised by the Holder,
in whole or in part (but not as to a fractional share of Common Stock), by
written notice of exercise substantially in the form attached hereto as Schedule
I, which notice shall be delivered to the Company accompanied by the surrender
of this Warrant (properly endorsed if required) at the principal office of the
Company and upon payment to the Company, by cash, certified check or bank draft,
of the Warrant Exercise Price for such shares. The Company agrees that the
Warrant Stock so purchased shall be and is deemed to be issued as of the close
of business on the date on which this Warrant shall have been surrendered and
payment made for such Warrant Stock as aforesaid. Certificates for the shares of
Warrant Stock so purchased shall be delivered to the Holder within thirty (30)
days after the rights represented by this Warrant shall have been so exercised,
and, unless this Warrant has expired, a new Warrant representing the number of
shares of Warrant Stock, if any, with respect to which this Warrant has not been
exercised shall also be delivered to the Holder within such time.
Notwithstanding the foregoing, however, the Company shall not be required to
deliver any certificates for shares of Warrant Stock, except in accordance with
the provisions and subject to the limitations of Paragraph 5 below.
2. The Company covenants and agrees that all shares of Warrant Stock that
may be issued upon the exercise of this Warrant will, upon issuance, be duly
authorized and issued, fully paid and nonassessable and free from all taxes,
liens, and charges with respect to the issuance thereof. The Company further
covenants and agrees that until expiration of this Warrant, the Company will at
all times have
- ----------------------------
THIS AMOUNT IS SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH AT THE
BOTTOM OF THE LAST PAGE HEREOF.
1
<PAGE>
authorized, and reserved for the purpose of issuance upon exercise of this
Warrant, a sufficient number of shares of Common Stock to provide for the
exercise of this Warrant.
3. The provisions in this Warrant relating to the Warrant Exercise Price
and the number of shares of Warrant Stock to be issued upon exercise of this
Warrant shall be subject to adjustment from time to time as hereinafter
provided.
(a) Upon each adjustment of the Warrant Exercise Price, the Holder of
this Warrant shall thereafter be entitled to purchase, at the Warrant Exercise
Price resulting from such adjustment, the number of shares of Common Stock
obtained by multiplying the Warrant Exercise Price in effect immediately prior
to such adjustment by the number of shares of Common Stock purchasable hereto
immediately prior to such adjustment and dividing the product thereof by the
Warrant Exercise Price resulting from such adjustment.
(b) In case the Company shall at any time subdivide its outstanding
Common Stock into a greater number of shares or declare a dividend payable in
Common Stock, the Warrant Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock purchasable pursuant to this Warrant shall be proportionately increased,
and conversely, in case the Company's outstanding Common Stock shall be combined
into a smaller number of shares, the Warrant Exercise Price in effect
immediately prior to such combination shall be proportionately increased and the
number of shares of Common Stock purchasable upon the exercise of this Warrant
shall be proportionately reduced.
(c) If any capital reorganization or reclassification of the capital
stock of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to another
corporation shall be effected in such a way that holders of Common Stock shall
be entitled to receive stock, securities or assets ("Substituted Property") with
respect to or in exchange for such Common Stock, then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, the Holder
shall have the right to purchase and receive upon the basis and upon the terms
and conditions specified in this Warrant, and in lieu of the Common Stock of the
Company immediately theretofore purchasable and receivable upon the exercise of
the rights represented hereby, such Substituted Property as would have been
issued or delivered to the Holder if it had exercised this Warrant and had
received upon exercise of this Warrant the Common Stock prior to such
reorganization, reclassification, consolidation, merger, or sale. The Company
shall not effect any such consolidation, merger, or sale, unless prior to the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger or the corporation purchasing such
assets shall assume by written instrument executed and mailed to the Holder at
the last address of the Holder appearing on the books of the Company, the
obligation to deliver to the Holder such Substituted Property as, in accordance
with the foregoing provisions, the Holder may be entitled to purchase.
2
<PAGE>
(d) If the Company takes any other action, or if any other event occurs
which does not come within the scope of the provisions of Paragraphs 3 (b) or 3
(c), but which should result in an adjustment in the Warrant Exercise Price
and/or the number of shares subject to the Warrant in order to fairly protect
the purchase rights of the Holder, an appropriate adjustment in such purchase
rights shall be made by the Company.
(e) Upon any adjustment of the Warrant Exercise Price or the number of
shares issuable upon of this Warrant, the Company shall give written notice
thereof, by first class mail, postage prepaid, addressed to the Holder at the
address of the Holder as shown on the books of the Company, which notice shall
state the Warrant Exercise Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
4. This Warrant shall not entitle the Holder to any voting, rights or other
rights as a shareholder of the Company.
5. The Holder, by acceptance hereof, represents and warrants that (a) it is
acquiring this Warrant for its own account for investment purposes only and not
with a view to its resale or distribution and (b) it has no present intention to
resell or otherwise dispose of all or any part of this Warrant. Other than
pursuant to registration under federal and applicable state securities laws or
an exemption from such registration, the availability of which the Company shall
determine in its sole discretion, neither this Warrant nor any shares of Warrant
Stock may be sold, pledged, assigned, or otherwise disposed of (whether
voluntarily or involuntarily). The Company may condition such sale, pledge,
assignment, or other disposition on the receipt from the party to whom this
Warrant is to be so transferred or to whom Warrant Stock is to be issued or so
transferred of any representations and agreements requested by the Company in
order to permit such issuance or transfer to be made pursuant to exemptions from
registration under federal and applicable state securities laws. Each
certificate representing the Warrant (or any part thereof) and any shares of
Warrant Stock shall bear appropriate legends setting, forth these restrictions
on transferability. The Holder, by acceptance hereof, agrees to give written
notice to the Company before transferring this Warrant or any shares of Warrant
Stock of the Holder's intention to do so, describing briefly the manner of any
proposed transfer. Within thirty (30) days after receiving such written notice,
the Company shall notify the Holder as to whether such transfer may be effected
and of the conditions to any such transfer.
6. This Warrant shall be transferable only on the books of the Company by
the Holder in person, or by duly authorized attorney, on surrender of the
Warrant, properly assigned.
7. Neither this Warrant nor any terms hereof may be changed, waived,
discharged, or terminated orally but only by an instrument in writing signed by
the
3
<PAGE>
party against which enforcement of the change, waiver, discharge, or termination
is sought.
IN WITNESS WHEREOF, the Company has caused this Note to be executed on its
behalf by its duly authorized officer on the day and year first above written.
ASCEND COMMUNICATIONS, INC.
By:_______________________
Its:______________________
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, OR APPLICABLE STATE SECURITIES LAW. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR
SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED
OF, AND NO TRANSFER OF THE SECURITIES WELL BE MADE BY THE COMPANY OR ITS
TRANSFER AGENT, IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
4
<PAGE>
ASCEND COMMUNICATIONS, INC.
COMMON STOCK PURCHASE WARRANT
Ascend Communications, Inc., a Delaware corporation (the "Company"), hereby
agrees that, for value received, ____________________________________, or its
assigns, is entitled, subject to the terms set forth below, to purchase from the
Company at any time or from time to time after August 15, 1996, and before 2:30
p.m., California time, on September 19, 2000, One Hundred Thirty Four Thousand
Five Hundred Twelve (134,512) Shares of the Company at an exercise price of
$29.67 per Share (the "Shares").
1. Exercise of Warrant. The purchase rights granted by this Warrant shall
-------------------
be exercised (in minimum quantities of 50 Shares) by the holder surrendering
this Warrant with the form of exercise attached hereto duly executed by such
holder, to the Company at its principal office, accompanied by payment, in cash
or by cashier's check payable to the order of the Company, of the purchase price
payable in respect of the Shares being purchased. If less than all of the Shares
purchasable hereunder are purchased, the Company will, upon such exercise,
execute and deliver to the holder hereof a new Warrant (dated the date hereof)
evidencing the number of Shares not so purchased. As soon as practicable after
the exercise of this Warrant and payment of the purchase price, the Company will
cause to be issued in the name of and delivered to the holder hereof, or as such
holder may direct, a certificate or certificates representing the Shares
purchased upon such exercise. The Company may require that such certificate or
certificates contain on the face thereof a legend substantially as follows:
"The transfer of the Shares represented by this certificate is
restricted pursuant to the terms of a Common Stock Purchase of Warrant
dated August 15, 1996, issued by Ascend Communications, Inc., a copy
which is available for inspection at the offices of Ascend
Communications, Inc.. Transfer may not be made except in accordance
with the terms of the Common Stock Purchase Warrant. In addition, no
sale, offer to sell or transfer of the Shares represented by this
certificate shall be made without (i) the opinion of counsel
satisfactory to Ascend Communications, Inc. that such sale, offer or
transfer may be made without registration or qualification under the
Federal Securities Act of 1933, as amended (the "ACT"), and applicable
state securities laws or (ii) such registration or qualification."
2. Negotiability and Transfer. This Warrant is issued upon the following
--------------------------
terms, to which each holder hereof consents and agrees:
(a) Except where directed by a court of competent jurisdiction
pursuant to the dissolution or liquidation of a corporate holder hereof, for the
period
1
<PAGE>
ending September 19, 1996, title to this Warrant may not be sold, transferred,
assigned or hypothecated, except that within such one-year period, title to this
Warrant may be transferred to (i) a person who is both an officer and a
shareholder of R. J. Steichen & Company (the "Underwriter"), (ii) a successor in
interest to the business of the Underwriter (a "Successor"), (iii) a person who
is both an officer and a shareholder of a Successor, or (iv) a person who is an
employee of the Underwriter or a Successor, but only if such employee is also an
officer of the Underwriter or a Successor; such transfer to be by endorsement
(by the holder hereof executing the form of assignment attached hereto) and
delivery in the same manner as in the case of a negotiable instrument
transferrable by endorsement and delivery.
(b) Until this Warrant is duly transferred on the books of the
Company, the Company may treat the registered holder of this Warrant as absolute
owner hereof for all purposes without being affected by any notice to the
contrary.
(c) Each successive holder of this Warrant, or of any portion of the
rights represented thereby, shall be bound by the terms and conditions set forth
herein.
3. Antidilution Adjustments. If the Company shall at any time hereafter
------------------------
subdivide or combine its outstanding shares of Common Stock, or declare a
dividend payable in Common Stock, the exercise price in effect immediately prior
to the subdivision, combination or record date for such dividend payable in
Common Stock shall forthwith be proportionately increased, in the case of
combination, or proportionately decreased, in the case of subdivision or
declaration of a dividend payable in Common Stock, and the number of Shares
purchasable upon exercise of this Warrant, immediately preceding such event,
shall be changed to the number determined by dividing the then current exercise
price by the exercise price as adjusted after such subdivision, combination or
dividend payable in Common Stock and multiplying the result of such division
against the number of Shares purchasable upon the exercise of this Warrant
immediately preceding such event, so as to achieve an exercise price and number
of Shares purchasable after such event proportional to such exercise price and
number of Shares purchasable immediately preceding such event. All calculations
hereunder shall be made to the nearest cent or to the nearest one-hundredth of a
share, as the case may be.
No fractional Shares are to be issued upon the exercise of this Warrant,
but the Company shall pay a cash adjustment in respect of any fraction of a
Share which would otherwise be issuable in an amount equal to the same fraction
of the market price per share of Shares on the day of exercise as determined in
good faith by the Company.
In case of any capital reorganization or any reclassification of the shares
of Common Stock of the Company, or in the case of any consolidation with or
merger of the Company into or with another corporation, or the sale of all or
substantially all of its assets to another corporation, which is effected in
such a manner that the holders of Common Stock shall be entitled to receive
stock, securities or assets with
2
<PAGE>
respect to or in exchange for Common Stock, then, as a part of such
reorganization, reclassification, consolidation, merger or sale, as the case may
be, lawful provision shall be made so that the holder of the Warrant shall have
the right thereafter to receive, upon the exercise hereof, the kind and amount
of shares of stock or other securities or property which the holder would have
been entitled to receive if, immediately prior to such reorganization,
reclassification, consolidation, merger or sale, the holder had held the number
of Shares which were then purchasable upon the exercise of the Warrant. In any
such case, appropriate adjustment (as determined in good faith by the Board of
Directors of the Company) shall be made in the application of the provisions set
forth herein with respect to the rights and interest thereafter of the holder of
the Warrant, to the end that the provisions set forth herein (including
provisions with respect to adjustments of the exercise price) shall thereafter
be applicable, as nearly as reasonably may be, in relation to any shares of
stock or other property thereafter deliverable upon the exercise of the Warrant.
When any adjustment is required to be made in the exercise price, initial
or adjusted, the Company shall forthwith determine the new exercise price, and
(a) prepare and retain on file a statement describing in reasonable
detail the method used in arriving at the new exercise price; and
(b) cause a copy of such statement to be mailed to the holder of the
Warrant as of a date within ten (10) days after the date when the circumstances
giving rise to the adjustment occurred.
4. Registration Rights. Prior to making any disposition of the Warrant
-------------------
or of any Shares purchased upon exercise of the Warrant, the holder will give
written notice to the Company describing briefly the manner of any such proposed
disposition. The holder will not make any such disposition until (i) the Company
has notified him that, in the opinion of its counsel, registration under the Act
is not required with respect to such disposition, or (ii) a Registration
Statement covering the proposed distribution has been filed by the Company and
has become effective. The Company agrees that, upon receipt of written notice
from the holder hereof with respect to such proposed distribution, it will use
its best efforts, in consultation with the holder's counsel, to ascertain as
promptly as possible whether or not registration is required, and will advise
the holder promptly with respect thereto, and the holder will cooperate in
providing the Company with information necessary to make such determination.
If, at any time prior to September 19, 2002, the Company shall propose to
file any Registration Statement (other than any registration on Forms S-4, S-8
or any other similarly inappropriate form) under the Securities Act of 1933, as
amended, covering a public offering of the Company's Shares or other shares of
Common Stock, it will notify the holder hereof at least thirty (30) days prior
to each such filing and will include in the Registration Statement (to the
extent permitted by applicable regulation), the Shares purchased by the holder
or purchasable by the holder upon the exercise of the Warrant to the extent
requested by the holder hereof.
3
<PAGE>
Notwithstanding the foregoing, the number of Shares of the holders of the
Warrants proposed to be registered thereby shall be reduced pro rata with any
other selling shareholder (other than the Company) upon the reasonable request
of the managing underwriter of such offering.
At any time prior to September 19, 2000, and provided that a registration
statement on Form S-3 (or its equivalent) is then available to the Company, and
on a one-time basis only, if the holders of 50% or more of the Warrants and/or
the Shares acquired upon exercise of the Warrants request the registration of at
least 51% of the Shares on Form S-3 (or its equivalent), the Company shall
promptly thereafter use its best efforts to effect the registration under the
Securities Act of 1933, as amended, of all such shares which such holders
request in writing to be so registered, and in a manner corresponding to the
methods of distribution described in such holders' request (and with respect to
the "demand" registration rights referred to immediately above, on a one-time
basis only).
All expenses of any such registrations referred to in this Section 4,
except the fees of counsel to such holders and underwriting commissions or
discounts, filing fees, and any transfer or other taxes applicable to such
shares, shall become by the Company.
The Company will mail to each record holder, at the last known post office
address, written notice of any exercise of the rights granted under this
paragraph 4, by certified or registered mail, return receipt requested, and each
holder shall have twenty (20) days from the date of deposit of such notice in
the U.S. Mail to notify the Company in writing whether such holder wishes to
join in such exercise.
The Company will furnish the holder hereof with a reasonable number of
copies of any prospectus included in such filings and will amend or supplement
the same as required during the period of required use thereof. The Company will
maintain, at its expense, the effectiveness of any Registration Statement or the
Offering Statement filed by the Company, whether or not at the request of the
holder hereof, for a time sufficient to allow for the disposition of the Shares,
but not to exceed one hundred eighty (180) days, following the effective date
thereof.
In the case of the filing of any Registration Statement, and to the extent
permissible under the Securities Act of 1933, as amended, and controlling
precedent thereunder, the Company and the holder hereof shall provide cross
indemnification agreements to each other in customary scope covering the
accuracy and completeness of the information furnished by each.
The holder of the Warrant agrees to cooperate with the Company in the
preparation and filing of any such Registration Statement or Offering Statement,
and in the furnishing of information concerning the holder for inclusion
therein, or in any efforts by the Company to establish that the proposed sale is
exempt under the Act as to any proposed distribution.
4
<PAGE>
Shares shall cease to be entitled to the registration rights set forth in
this Section 4 when they (i) shall have been disposed of pursuant to an
effective registration statement under the Securities Act, or (ii) they shall
have been distributed to the public pursuant to Rule 144 promulgated under the
Securities Act.
5. Right to Convert.
----------------
(a) The holder of this Warrant shall have the right to require the
Company to convert this Warrant (the "CONVERSION RIGHT"), at any time after
September 16, 1996 and prior to its expiration, into shares of Common Stock as
provided for in this Section 5. Upon exercise of the Conversion Right, the
Company shall deliver to the holder (without payment by the bolder of any
exercise price) that number of shares of Common Stock equal to the number of
shares of Common Stock resulting from multiplying the number of shares requested
to be converted hereunder times the quotient obtained by dividing (x) the value
of the Warrant at the time the Conversion Right is exercised (determined by
subtracting the aggregate exercise price for the Warrant Shares in effect
immediately prior to the exercise of the Conversion Right from the aggregate
Fair Market Value (as determined below) for the Warrant Shares immediately prior
to the exercise of the Conversion Right) by (y) the Fair Market Value of one
share of Common Stock immediately prior to the exercise of the Conversion Right.
(b) The Conversion Right may be exercised by the holder, at any time
or from time to time, prior to its expiration, on any business day, by
delivering a written notice (the "CONVERSION NOTICE") to the Company at the
offices of the Company exercising the Conversion Right and specifying (i) the
total number of shares of Stock the Warrantholder will purchase pursuant to such
conversion, and (ii) a place, and a date not less than five (5) nor more than
twenty (20) business days from the date of the Conversion Notice for the closing
of such purchase.
(c) At any closing under Section 5(b) hereof, (i) the holder will
surrender the Warrant, (ii) the Company will deliver to the holder a certificate
or certificates for the number of shares of Common Stock issuable upon such
conversion, together with cash, in lieu of any fraction of a share, and (iii)
the Company will deliver to the holder a new Warrant representing the number of
shares, if any, with respect to which the Warrant shall not have been converted.
(d) "FAIR MARKET VALUE" of a share of Common Stock as of a particular
date (the "DETERMINATION DATE") shall mean:
(i) If the Company's Common Stock is traded on an exchange or is
quoted on The Nasdaq National Market or Small-Cap Market, then the average
closing or last sale prices, respectively, reported for the ten (10) business
days immediately preceding the Determination Date.
(ii) If the Company's Common Stock is not traded on an exchange or
on The Nasdaq National Market or Small-Cap Market, but is traded in
5
<PAGE>
the over-the-counter market, then the average of the closing bid and asked
prices reported for the ten (10) business days immediately preceding the
Determination Date.
6. Notices. The Company shall mail to the registered holder of the
-------
Warrant, at his or her last known post office address appearing on the books of
the Company, not less than fifteen (15) days prior to the date on which (a) a
record will be taken for the purpose of determining the holders of Shares
entitled to dividends (other than cash dividends) or subscription rights, or (b)
a record will be taken (or in lieu thereof, the transfer books will be closed)
for the purpose of determining the holders of common stock entitled to notice of
and to vote at a meeting of shareholders at which any capital reorganization,
reclassification of common stock, consolidation, merger, dissolution,
liquidation, winding up or sale of substantially all of the Company's assets
shall be considered and acted upon.
7. Reservation of Common Stock. A number of shares of Common Stock
---------------------------
sufficient to provide for the exercise of the Warrant and the Shares included
therein upon the basis herein set forth shall at all times be reserved for the
exercise thereof
8. Miscellaneous. Whenever reference is made herein to the issue or sale
-------------
of shares of Common Stock, the term "Common Stock" shall include any stock of
any class of the Company other than preferred stock that has a fixed limit on
dividends or a payment preference in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company.
The Company will not, by amendment of its articles of incorporation or
through reorganization, consolidation, merger, dissolution or sale of assets, or
by any other voluntary act or deed, avoid or seek to avoid the observance or
performance of any of the covenants, stipulations or conditions to be observed
or performed hereunder by the Company, but will, at all times in good faith,
assist, insofar as it is able, in the carrying out of all provisions hereof and
in the taking of all other action which may be necessary in order to protect the
rights of the holder hereof against dilution.
Upon written request of the holder of this Warrant, the Company will
promptly provide such holder with a then current written list of the names and
addresses of all holders of warrants originally issued under the terms of, and
concurrent with, this Warrant.
The representations, warranties and agreements herein contained shall
survive the exercise of this Warrant. References to the "holder of" include the
immediate holder of shares purchased on the exercise of this Warrant, and the
word "holder" shall include the plural thereof. This Common Stock Purchase
Warrant shall be interpreted under the laws of the State of Minnesota.
6
<PAGE>
All Shares or other securities issued upon the exercise of the Warrant
shall be validly issued, fully paid and non-assessable, and the Company will pay
all taxes in respect of the issuer thereof.
Notwithstanding anything contained herein to the contrary, the holder of
this Warrant shall not be deemed a stockholder of the Company for any purpose
whatsoever until and unless this Warrant is duly exercised.
IN WITNESS WHEREOF, this Warrant has been duly executed by Ascend
Communications, Inc., as of this 15th day of August 1996.
ASCEND COMMUNICATIONS, INC.
By:_______________________
Title:____________________
7
<PAGE>
WARRANT EXERCISE FORM
---------------------
To be signed only upon exercise of Warrant
The undersigned, the holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________________ of the Shares of Ascend
Communications, Inc. to which such Warrant relates and herewith makes payment of
$______________ therefor in cash or by certified check, and requests that such
shares be issued and be delivered to, ______________, the address for which is
set forth below the signature of the undersigned.
Dated:__________________________
________________________________ __________________________________
(Taxpayer's I.D. Number) (Signature)
__________________________________
__________________________________
(Address)
------------------------------------------
ASSIGNMENT FORM
---------------
To be signed only upon authorized transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers
unto ____________________________ the right to purchase Shares of Ascend
Communications, Inc. to which the within Warrant relates and appoints
______________, attorney, to transfer said right on the books of Ascend
Communications, Inc. with full power of substitution in the premises.
Dated:___________________________ __________________________________
(Signature)
__________________________________
__________________________________
(Address)
8
<PAGE>
EXHIBIT 5.1
August 28, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: ASCEND COMMUNICATIONS, INC.
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
As legal counsel for Ascend Communications, Inc., a Delaware corporation
(the "Company"), we are rendering this opinion in connection with the
preparation and filing of a registration statement on Form S-3 (the
"Registration Statement") relating to the registration under the Securities Act
of 1933, as amended, of 203,272 shares of Common Stock, par value $0.001 per
share (the "Common Stock"), issuable by the Company upon the exercise of
warrants issued to the selling securityholders by the Company in connection with
that certain Agreement and Plan of Merger dated May 30, 1996 by and among the
Company, Nebula Acquisition Corporation, a Minnesota corporation, and NetStar,
Inc., a Minnesota corporation.
We have examined such instruments, documents and records as we deemed
relevant and necessary for the basis of our opinion hereinafter expressed. In
such examination, we have assumed the genuineness of all signatures and the
authenticity of all documents submitted to us as originals and the conformity to
the originals of all documents submitted to us as copies.
Based on such examination, we are of the opinion that the 203,272 shares of
Common Stock of the Company being registered pursuant to the Registration
Statement and to be sold by the selling securityholders are duly authorized
shares of Common Stock and, if and when issued upon exercise of the Warrants in
accordance with the respective warrant agreements, will be validly issued, fully
paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement referred to above and the use of our name wherever it
appears in said Registration Statement.
This opinion is to be used only in connection with the issuance of the
Common Stock while the Registration Statement is in effect.
Respectfully submitted,
/s/ Gray Cary Ware & Freidenrich
GRAY CARY WARE & FREIDENRICH
A Professional Corporation
<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-3) and related Prospectus of Ascend
Communications, Inc. for the registration of approximately 203,272 shares of its
common stock and to the incorporation by reference therein of our report dated
January 16, 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
Walnut Creek, California
August 26, 1996
