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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 13, 1997
REGISTRATION NO. 333-_____
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ASCEND COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 7373 94-3092033
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Number) Identification No.)
</TABLE>
1701 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.
ONE ASCEND PLAZA
1701 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:
THOMAS W. FURLONG, ESQ. & ROD J. HOWARD, ESQ.
Gray Cary Ware & Freidenrich
A Professional Corporation
400 Hamilton Avenue
Palo Alto, CA 94301
(415) 328-6561
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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>
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER AGGREGATE OFFERING FEE
SHARE(1) PRICE(1)
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<S> <C> <C> <C> <C>
Common Stock ($.001 par value).. 159,997 shares $62.625 $10,019,813 $3,037
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(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
February 10, 1997.
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.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OF 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 FEBRUARY 13, 1997
159,997 SHARES
ASCEND COMMUNICATIONS, INC.
COMMON STOCK
The 159,997 shares (the "Shares") of Common Stock of Ascend
Communications, Inc., a Delaware corporation ("Ascend" or the "Company") offered
by this Prospectus were issued in connection with the merger of Ascend
Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of
Ascend ("Sub") with and into StonyBrook Services Inc., a New York corporation
("StonyBrook"), which was consummated on December 27, 1996 (the "StonyBrook
Merger"), and the exercise of options assumed by Ascend in connection with the
StonyBrook Merger. The Shares may be sold from time to time by or on behalf of
certain former shareholders and option holders of StonyBrook (the "Selling
Stockholders") who are described in this Prospectus under "Selling
Stockholders." As part of the StonyBrook Merger, the Company has agreed to
register the Shares under the Securities Act of 1933, as amended (the
"Securities Act"). The Company has also agreed to use its best efforts to cause
the registration statement covering the Shares to remain effective until the
earlier of (i) December 27, 1998, (ii) the date on which the Selling
Stockholders can sell all the Shares pursuant to Rule 144 of the Securities Act,
or (iii) when all the Shares have been resold pursuant to Rule 144 or an
effective registration statement. The Company will not receive any of the
proceeds from the sale of the Shares by the Selling Stockholders. See "Use of
Proceeds."
The Company has been advised by the Selling Stockholders 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 Stockholders and any broker-dealers, agents or
underwriters that participate with the Selling Stockholders 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. The Company has agreed to
indemnify in certain circumstances the Selling Stockholders against certain
liabilities, including liabilities under the Securities Act. The Selling
Stockholders have agreed to indemnify in certain circumstances the Company
against certain liabilities, including liabilities under the Securities Act.
See "Plan of Distribution."
The Company will bear all out-of-pocket expenses incurred in connection with
the registration of the Shares, including, without limitation, all registration
and filing fees imposed by the Securities and Exchange Commission (the
"Commission"), the National Association of Securities Dealers ("NASD") and blue
sky laws, printing expenses, transfer agents' and registrars' fees, and the
reasonable fees and disbursements of the Company's outside counsel and
independent accountants and a single counsel for all of the Selling
Stockholders, but excluding underwriting discounts and commissions and transfer
or other taxes and other costs and expenses incident to the offering and sale of
the shares to the public which shall be borne by the Selling Stockholders.
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
February 10, 1997, the last sales price of the Company's Common Stock as
reported on The Nasdaq National Market was $62.625.
________________________________
SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
________________________________
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.
________________________________
The date of this Prospectus is February __, 1997.
<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. Quarterly Reports on Form 10-Q for the three month periods ended March 31,
1996, June 30, 1996 and September 30, 1996;
4. Reports on Form 8-K dated June 7, 1996 January 31, 1997;
5. Registration Statement on Form S-4 filed 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 One Ascend Plaza, 1701 Harbor Bay
Parkway, Alameda, California 94502 (telephone number (510) 769-6001), Attn:
Investor Relations.
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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. In addition, Ascend has recently introduced its GRF products family for
high speed IP switching on backbone networks. This wide range of connectivity
and interoperability options significantly increases the number of POP,
corporate and individual sites that can benefit from these products. 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 December 27, 1996, Ascend completed the StonyBrook Merger. As a result
of the StonyBrook Merger, StonyBrook 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 StonyBrook Merger, the
Company issued approximately 290,490 shares of its Common Stock (29,049 of which
are subject to an escrow) and assumed outstanding options which in January 1997
were exercised for an additional 189,501 shares of Ascend Common Stock (18,950
of which are subject to an escrow).
The principal executive offices of Ascend are located at One Ascend Plaza,
1701 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
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Ascend's other products. In addition, Ascend's use of third parties to
distribute its products to certain VARs may adversely affect Ascend's gross
margins. Ascend typically operates with a relatively small backlog. As a
result, quarterly sales and operating results generally depend on the volume and
timing of and ability to fulfill orders received within the quarter, which are
difficult to forecast. A significant portion of Ascend's expense levels is
relatively fixed in advance based in large part on Ascend's forecasts of future
sales. If sales are below expectations in any given quarter, the adverse impact
of the shortfall on Ascend's operating results may be magnified by Ascend's
inability to adjust spending to compensate for the shortfall. Ascend may also
increase spending in response to competition or to pursue new market
opportunities. Accordingly, there can be no assurance that Ascend will be able
to sustain profitability in the future, particularly on a quarter-to-quarter
basis.
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 81% of Ascend's net sales in
1994, 1995 and the first nine 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 13% of net sales in 1994, 1995 and
the first nine 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. In North America, 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 nine months ended September 30, 1996, respectively. Sales
to one of these ISPs, UUNET, accounted for approximately 11% and 10% of net
sales in 1995 and the nine months ended September 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 Recent Acquisitions. Ascend has completed several
acquisitions of businesses, products or technologies since the beginning of
1995. These have included the acquisition of Morning Star Technologies, Inc.,
NetStar, Inc. and Subspace Communications, Incorporated, which were completed in
1996, as well as the StonyBrook Merger, which was completed in December 1996.
Ascend anticipates that it may acquire additional businesses, products or
technologies in the future, although there are currently no agreements with
respect to such transactions. Achieving the anticipated benefits of past and
future acquisition transactions will depend in part upon whether the integration
of
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the acquired companies' businesses with Ascend's businesses is accomplished in
an efficient and effective manner, and there can be no assurance that this will
occur. The combination of Ascend with such acquired companies will require,
among other things, integration of the companies' respective product offerings
and technology and coordination of their research and development, sales and
marketing and financial reporting efforts. There can be no assurance that such
integration will be accomplished smoothly or successfully. If significant
difficulties are encountered in the integration of the existing product lines
and technology, resources could be diverted from new product development,
resulting in delays in new product introductions. The integration of the product
lines could also cause confusion or dissatisfaction among existing customers of
Ascend and the acquired companies. 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 an acquisition 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
operations of Ascend and the acquired companies could have a material adverse
effect on Ascend's business, financial condition or results of operations.
New Product Development and Timely Introduction of New and Enhanced
Products. The markets for Ascend's products 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
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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.
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's regulations. Ascend's products also must be certified by domestic
telecommunications carriers. In countries outside the United States, Ascend's
products are subject to a wide variety of governmental review and certification
requirements. In addition, customers outside the United States typically
require that Ascend's products receive certification from their 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
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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 suppliers outside the Untied States; however, all such
purchases are denominated in U.S. dollars and Ascend believes all such
components or alternate components are available from suppliers within the
United States. Ascend may also be subject to increases in component costs, which
could also have a material adverse effect on its operating results.
Dependence on Proprietary Technology. Ascend's success and ability to
compete depend 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 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 45% of Ascend's net sales in 1993, 1994, 1995
and the nine months ended September 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 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
6
<PAGE>
delaying, deferring or preventing a change in control of Ascend. Furthermore,
such Preferred Stock may have other rights, including economic rights, senior to
the Ascend Common Stock, and as a result, the issuance of such stock could have
a material adverse effect on the market value of the Ascend Common Stock. Ascend
has no present plans to issue shares of Preferred Stock. Ascend may in the
future adopt other measures that may have the effect of delaying, deferring or
preventing a change of control of Ascend. Certain of such measures may be
adopted without any further vote or action by Ascend's stockholders. Ascend is
also afforded the protections of Section 203 of the Delaware General Corporation
Law, which could delay or prevent a change in control of Ascend, impede a
merger, consolidation or other business combination involving Ascend or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of Ascend.
Volatility of Stock Price. Ascend's Common Stock has experienced
significant price volatility and such volatility may occur in the future,
particularly as a result of quarter-to-quarter variations in the actual or
anticipated financial results of Ascend or of other companies in the network
access industry or announcements by Ascend or its competitors regarding new
product introductions or other developments affecting Ascend. In addition, the
market has experienced extreme price and volume fluctuations that have affected
the market price of many technology companies' stocks and that have been
unrelated or disproportionate to the operating performance of these companies.
SELLING STOCKHOLDERS
The Selling Stockholders hold Shares which were issued by the Company in
the StonyBrook Merger or upon exercise of Options assumed by the Company
pursuant to the StonyBrook Merger. The Options were originally granted by
StonyBrook pursuant to StonyBrook's 1992 Stock Option Plan.
The table below lists the Selling Stockholders, the number of shares of
Ascend Common Stock which each owned as of February 7, 1997, the number of
Shares subject to sale pursuant to this Registration Statement, and the number
of the shares of Ascend Common Stock which each would own assuming that such
number of Shares were offered and assuming the sale of all such Shares.
<TABLE>
<CAPTION>
Shares Owned
Shares Owned Shares To After Offering
Selling Stockholder(1) Before Offering Be Offered Such Shares
- --------------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
Ravi Gulati 290,490 96,830 193,660
Ken Packert 48,415 16,138 32,277
Kevin Koenig 48,415 16,138 32,277
Wayne Shu 7,262 2,420 4,842
Scott Shulman 2,904 968 1,936
Donna Hammel 1,210 403 807
Jennifer Guerin 1,210 403 807
Larry Hackett 1,210 403 807
Neophytos Christodoulides 1,210 403 807
Michael Koenig 1,210 403 807
Ashok K. Gupta 242 80 162
Santhosh Kumar 290 96 194
Robert Murray 2,420 806 1,614
Hari Narayanan 169 56 113
Sridher Gopalakrishnan 169 56 113
Peter Eicher 302 100 202
Madan Kumar 242 80 162
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Shares Owned
Shares Owned Shares To After Offering
Selling Stockholder(1) Before Offering Be Offered Such Shares
- --------------------- --------------- ---------------- ----------------
<S> <C> <C> <C>
Janet Gulati 24,207 8,069 16,138
Sheila Gulati 24,207 8,069 16,138
Nicole Gulati 24,207 8,069 16,138
Totals 479,991 159,990 320,001
</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.
In connection with the filing of this Registration Statement, Ravi Gulati
has entered into a Registration and Stock Trading Agreement with the Company, a
copy of which is filed as Exhibit 4.1 hereto. Pursuant to that Registration and
Stock Trading Agreement, Mr. Gulati has agreed not to sell, transfer, pledge, or
otherwise dispose of, or reduce his interest in or risk relating to, any shares
of Ascend Common Stock issued to him pursuant to the Merger or upon exercise of
any Assumed Options until after such time as the Company has published (within
the meaning of SEC Accounting Series Release No. 135, as amended) financial
results covering at least 30 days of combined operations of the Company and
StonyBrook. The Registration and Stock Trading Agreement also provides that
from and after the publication of such results, Mr. Gulati may sell or otherwise
dispose of the shares of Ascend Common Stock registered pursuant to this
Agreement, subject to the following restrictions:
(i) Mr. Gulati shall not offer, sell, exchange, pledge, transfer or
otherwise dispose of or engage in any Sale Equivalent Transaction with
respect to, any of the shares of Ascend Common Stock issued or issuable in
the Merger unless at such time such transaction shall be permitted pursuant
to the provisions of SEC Rule 145 under the Securities Act (including any
applicable limitations on the amount of Ascend Common Stock to be sold as
set forth in Rule 145(d)(1) and the provisions of Rule 144 referred to
therein), or he shall have furnished to Ascend an opinion of counsel,
satisfactory to Ascend, to the effect that no registration under the
Securities Act would be required in connection with the proposed offer,
sale, exchange, pledge, transfer or other disposition or transaction, or a
Registration Statement under the Securities Act covering the proposed
offer, sale, exchange, pledge, transfer or other disposition or Sale
Equivalent Transaction shall be effective under the Securities Act;
(ii) Mr. Gulati shall not offer or sell any of the shares of Ascend
Common Stock issued or issuable to him in the Merger except during such
periods as directors, officers and Affiliates of Ascend
8
<PAGE>
are permitted to purchase and sell Ascend Common Stock pursuant to the
insider trading policies of Ascend (the "Window Periods"); and
--------------
(iii) during the effective period of the Registration Statement, Mr.
Gulati shall (A) offer for sale under the Registration Statement only those
shares of Ascend Common Stock which were issued to him pursuant to the
Merge Agreement and are registered under the Registration Statement;
(B) sell such shares in accordance with and subject to the
terms, conditions and covenants set forth in this Agreement and in the
Registration Statement; (C) to the extent required by applicable law, cause
to be furnished to any purchaser of such shares, and to the broker-dealer,
if any, through whom such shares may be offered, a copy of the final
prospectus contained in the Registration Statement, as supplemented or
amended through the date of the sale (the "Prospectus"); (D) not engage in
----------
any stabilization activity in connection with any Ascend securities other
than as permitted under the Exchange Act; and (E) not bid for or purchase
any securities of Ascend or any rights to acquire Ascend securities, or
attempt to induce any person to purchase any Ascend securities (except for
Mr. Gulati's shares of Ascend Common Stock to be sold to such person by
means of the Prospectus) or any rights to acquire Ascend securities other
than as permitted under the Exchange Act.
The foregoing restrictions set forth in subparagraph (ii) above shall cease
without further action by Mr. Gulati or the Company upon and in the event of the
death of Mr. Gulati and the Company shall amend the Registration Statement to
the extent (if any) necessary to permit Mr. Gulati's estate, personal
representative(s), devisees and heirs, as the case may be to resell Mr. Gulati's
remaining shares pursuant to the Registration Statement.
In addition, each Selling Stockholder (other than Mr. Gulati) has entered
into a Registration and Option Stock Trading Agreement with the Company, the
form of which is filed as Exhibit 4.2 hereto. Pursuant to the Registration and
Option Stock Trading Agreements, each such Selling Stockholder has agreed not to
sell, transfer, pledge, or otherwise dispose of, or reduce such Selling
Stockholder's interest in or risk relating to, any shares of Ascend Common Stock
issued to such Selling Stockholder pursuant to the Merger or upon exercise of
any Assumed Options until after such time as the Company has published (within
the meaning of SEC Accounting Series Release No. 135, as amended) financial
results covering at least 30 days of combined operations of the Company and
StonyBrook. From and after the publication of such results, such Selling
Stockholder may sell or otherwise dispose of the shares of Ascend Common Stock
registered pursuant to this Agreement, subject to the following restrictions:
(i) such Selling Stockholder shall not offer, sell, exchange,
pledge, transfer or otherwise dispose of or engage in any Sale Equivalent
Transaction with respect to, any of the shares of Ascend Common Stock
issued or issuable upon exercise of such Selling Stockholder's Assumed
Options unless at such time such transaction shall be permitted pursuant to
the provisions of SEC Rule 145 under the
9
<PAGE>
Securities Act (including any applicable limitations on the amount of
Ascend Common Stock to be sold as set forth in Rule 145(d)(1) and the
provisions of Rule 144 referred to therein), or such Selling Stockholder
shall have furnished to Ascend an opinion of counsel, satisfactory to
Ascend, to the effect that no registration under the Securities Act would
be required in connection with the proposed offer, sale, exchange, pledge,
transfer or other disposition or Sale Equivalent Transaction, or a
Registration Statement under the Securities Act covering the proposed
offer, sale, exchange, pledge, transfer or other disposition or Sale
Equivalent Transaction shall be effective under the Securities Act;
(ii) such Selling Stockholder shall not offer or sell any of the
shares of Ascend Common Stock issued or issuable upon exercise of such
Selling Stockholder's Assumed Options except during such periods as
directors, officers and Affiliates of Ascend are permitted to purchase and
sell Ascend Common Stock pursuant to the insider trading policies of Ascend
(the "Window Periods"); and
--------------
(iii) during the effective period of the Registration Statement, such
Selling Stockholder shall (A) offer for sale under the Registration
Statement only those shares of Ascend Common Stock which were issued to
such Selling Stockholder upon exercise of the Assumed Options and are
registered under the Registration Statement; (B) sell such shares in
accordance with and subject to the terms, conditions and covenants set
forth in this Agreement and in the Registration Statement; (C) to the
extent required by applicable law, cause to be furnished to any purchaser
of such shares, and to the broker-dealer, if any, through whom such shares
may be offered, a copy of the final prospectus contained in the
Registration Statement, as supplemented or amended through the date of the
sale (the "Prospectus"); (D) not engage in any stabilization activity in
----------
connection with any Ascend securities other than as permitted under the
Exchange Act; and (E) not bid for or purchase any securities of Ascend or
any rights to acquire Ascend securities, or attempt to induce any person to
purchase any Ascend securities (except for such Selling Stockholder's
shares of Ascend Common Stock to be sold to such person by means of the
Prospectus) or any rights to acquire Ascend securities other than as
permitted under the Exchange Act.
The foregoing restrictions set forth in subparagraph (ii) above shall
cease without further action by such Selling Stockholder or the Company upon and
in the event of the death of such Selling Stockholder and the Company shall
amend the Registration Statement to the extent (if any) necessary to permit such
Selling Stockholder's estate, personal representative(s), devisees and heirs, as
the case may be to resell such Selling Stockholder's remaining shares pursuant
to this Registration Statement.
The foregoing is a brief summary of certain provisions of the Registration
and Stock Trading Agreement, a copy of which is filed as Exhibit 4.1 to the
Registration Statement and incorporated herein by reference, and the
Registration and Option Stock Trading Agreements, the form of which is filed as
Exhibit 4.2 to the registration statement and incorporated herein by reference.
The foregoing summary is qualified in all respects by reference to the full text
of each agreement. In case of any conflict between the foregoing summary and
the applicable agreement, the applicable agreement will control.
10
<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 Stockholders. Alternatively, the Selling
Stockholders 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 Stockholders and/or the
purchasers of Shares for whom they may act as agents. The Selling Stockholders
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. The Selling
Stockholders may from time to time enter into hedging transactions with respect
to the Shares.
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
Stockholders, any discounts, commissions and other items constituting
compensation from the Selling Stockholders 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 Stockholders of the
Shares offered hereby.
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 Stockholders 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
Stockholders.
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 indemnify in certain circumstances the Selling
Stockholders and the broker-dealers who may be deemed to be underwriters (if
any) of the securities covered by the Registration Statement against certain
liabilities, including liabilities under the Securities Act. The Selling
Stockholders have agreed to indemnify in certain circumstances the Company
against certain liabilities, including liabilities under the Securities Act.
The Company has agreed to use its best efforts to keep the Registration
Statement, of which this Prospectus constitutes a part, effective until the
earlier of (i) December 27, 1998, (ii) the date on which the Selling
Stockholders can sell all the Shares pursuant to Rule 144 of the Security Act,
or (iii) when all of the Shares have been resold pursuant to Rule 144 or an
effective registration statement.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
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 the Company'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
11
<PAGE>
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.
The consolidated financial statements of NetStar, Inc. as of September 30, 1994
and 1995 and for each of the three years in the period ended September 30, 1995,
incorporated in this Prospectus by reference from Ascend Communications, Inc.'s
Registration Statement on Form S-4 dated July 11, 1996 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given their authority 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, ANY SELLING SHAREHOLDER 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................... 1
Incorporation of Certain
Documents by Reference................ 1
The Company............................. 2
Risk Factors............................ 2
Selling Stockholders.................... 7
Plan of Distribution.................... 11
Use of Proceeds......................... 11
Legal Matters........................... 11
Experts................................. 11
</TABLE>
===============================================================================
===============================================================================
159,997 SHARES
ASCEND COMMUNICATIONS, INC.
COMMON STOCK
---------------------------
PROSPECTUS
---------------------------
February __, 1997
================================================================================
<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..................................... $ 3,037
Nasdaq listing fee....................................... 3,200
Accounting fees and expenses............................. 5,000
Printing................................................. 5,000
Transfer agent and registrar fees and
expenses................................................ 10,000
Legal fees and expenses.................................. 10,000
Miscellaneous expenses................................... 3,763
Total................................................. $40,000
=======
</TABLE>
The Company will pay all expenses of registration, issuance and
distribution of the shares being sold by the Selling Stockholders, excluding
fees and expenses of counsel to the Selling Stockholders and any underwriting
commissions and discounts, filing fees and transfer or other taxes, which shall
be borne by the Selling Stockholders.
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:
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Title
- ------- -------------
<S> <C>
4.1 Registration and Stock Trading Agreement dated as of February 7,
1997 by and between Ascend Communications, Inc. and Ravi Gulati.
4.2 Form of Registration and Stock Trading Agreement dated as of February
7, 1997 by and between Ascend Communications, Inc. and the Selling
Stockholders other than Mr. Ravi Gulati.
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Deloitte & Touche LLP, independent auditors.
23.3 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).
</TABLE>
- -----------------
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.
II-2
<PAGE>
(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 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 13th day of February, 1997.
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Mory Ejabat President, Chief Executive February 13, 1997
- ----------------------------- Officer and Director
(Mory Ejabat) (Principal Executive Officer)
/s/ Robert K. Dahl Vice President Finance, February 13, 1997
- ----------------------------- Chief Financial Officer and
(Robert K. Dahl) Director (Principal
Financial Officer)
/s/ Michael J. Johnson Controller and Chief February 13, 1997
- ----------------------------- Accounting Officer
(Michael J. Johnson) (Principal Accounting
Officer)
/s/ Betsy S. Atkins Director February 13, 1997
- -----------------------------
(Betsy S. Atkins)
/s/ Roger L. Evans Director February 13, 1997
- -----------------------------
(Roger L. Evans)
/s/ C. Richard Kramlich Director February 13, 1997
- -----------------------------
(C. Richard Kramlich)
/s/ James P. Lally Director February 13, 1997
- -----------------------------
(James P. Lally)
/s/ Martin Schoffstall Director February 13, 1997
- -----------------------------
(Martin Schoffstall)
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Page No.
- ---------- -------
<S> <C>
4.1 Registration and Stock Trading Agreement dated as of February 7, 1997
by and between Ascend Communications, Inc. and Ravi Gulati.
4.2 Form of Registration and Stock Trading Agreement dated as of
February 7, 1997 by and between Ascend Communications, Inc. and the
Selling Stockholders other than Mr. Ravi Gulati.
5.1 Opinion of Gray Cary Ware & Freidenrich, A Professional Corporation.
23.1 Consent of Ernst & Young LLP, independent auditors.
23.2 Consent of Deloitte & Touche LLP, independent auditors.
23.3 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).
</TABLE>
II-5
<PAGE>
EXHIBIT 4.1
REGISTRATION AND STOCK TRADING AGREEMENT
This Registration and Stock Trading Agreement (the "Agreement") is made and
---------
entered into as of February 7, 1997 by and between Ascend Communications, Inc.,
a Delaware corporation ("Ascend"), and Ravi Gulati (the "Holder").
------ ------
Recitals
--------
WHEREAS, Ascend and StonyBrook Services, Inc., a New York corporation
("StonyBrook"), have heretofore entered into an Agreement and Plan of Merger
- ------------
dated as of December 26, 1996 (the "Merger Agreement"), by and among Ascend,
----------------
StonyBrook and Ascend Acquisition Corp., a Delaware corporation and a wholly-
owned subsidiary of Ascend ("Sub");
---
WHEREAS, the shares of common stock of StonyBrook ("StonyBrook Common
-----------------
Stock") outstanding at the Effective Time of the Merger have been converted into
the right to receive shares of common stock of Ascend ("Ascend Common Stock"),
-------------------
and the options to acquire StonyBrook Common Stock ("StonyBrook Options")
------------------
outstanding as of the Effective Time have been assumed by Ascend and converted
into options to acquire Ascend Common Stock (the "Assumed Options");
---------------
WHEREAS, the shares of Ascend Common Stock issued in the Merger or upon
exercise of the Assumed Options (the "Shares") have not been registered under
------
the Securities Act of 1933, as amended, in reliance upon the exemption from
registration contained in Section 4(2) of and/or Regulation D under the
Securities Act;
WHEREAS, the Merger Agreement and the Declaration of Registration Rights
set forth in Annex 6.12 thereto (the "Registration Rights Declaration") granted
-------------------------------
certain registration rights to Holder;
WHEREAS, Holder must provide to Ascend certain information necessary for
the preparation of the Registration Statement and must guarantee the accuracy
and completeness of such information;
<PAGE>
NOW THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants, agreements and other provisions herein, the parties
hereto agree as set forth below:
Agreement
---------
Section 1. Definitions. As used in this Agreement:
-----------
(a) "Affiliate" means each person or party deemed to be an "affiliate"
---------
for purposes of paragraphs (c) and (d) of Rule 145 of the SEC, although nothing
contained herein shall be construed as an admission by such Affiliate that such
Affiliate is in fact an "affiliate" of StonyBrook for purposes of Rule 145.
(b) "Escrow" and "Escrow Shares" have the meanings ascribed to such
------ --------------
terms in the Merger Agreement.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
-------------
amended.
(d) "Form S-3" means Form S-3 or such other form under the Securities
--------
Act as in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC which similarly permits inclusion
or incorporation of substantial information by reference to other documents
filed by Ascend with the SEC.
(e) "Governmental Entity" means any (i) nation, state, commonwealth,
-------------------
province, territory, county, municipality, district or other jurisdiction of any
nature; (ii) federal, state, local, municipal, foreign or other government; or
(iii) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, official, organization,
and any court or other tribunal).
(f) "NASD" means the National Association of Securities Dealers.
----
(g) "Sale Equivalent Transaction" means any sale, exchange, transfer
---------------------------
or other disposition, transaction or arrangement, whether by short sale, hedging
or otherwise, that materially increases the risk that the Merger would not
qualify as a "reorganization" under Section 368 of the Code.
(h) "SEC" means the Securities and Exchange Commission.
---
2
<PAGE>
(i) "Securities Act" means the Securities Act of 1933, as amended.
--------------
Capitalized terms not otherwise defined in this Agreement have the meanings
given to them in the Merger Agreement.
Section 2. Representations and Warranties of Holder. Holder represents to
----------------------------------------
Ascend as follows:
(a) Holdings. As of the Effective Time of the Merger, Holder (i) was
--------
the owner of the number of shares of StonyBrook Common Stock set forth on the
signature page hereto, and (ii) owned no other shares of StonyBrook Common Stock
and no StonyBrook Options. Holder acknowledges and agrees that, pursuant to the
Merger Agreement and in exchange for Holder's shares of StonyBrook Common Stock,
Holder has received (or is entitled to receive) the number of shares of Ascend
Common Stock set forth on the signature page hereto. Holder has acquired its
shares of Ascend Common Stock for investment and without a view to resale or
distribution, except as permitted by this Agreement, the Merger Agreement, and
the other agreements and representation letters executed by Holder in connection
therewith.
(b) Validity and Enforceability; Consents. This Agreement has been
-------------------------------------
duly executed and delivered by Holder and constitutes the valid and binding
obligation of Holder, enforceable against Holder in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors' rights
generally, and general principles of equity. The execution and delivery by
Holder of this Agreement does not, and the performance of Holder's obligations
under this Agreement will not, (i) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a material default
under, any material obligation or loss of any material benefit under any
material contract or other agreement or obligation to which Holder is a party or
by which Holder or any of Holder's properties or assets may be bound, or (ii)
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Holder
or any of Holder's properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Holder in connection with the execution
and delivery of this Agreement or the performance of Holder's obligations
hereunder.
(c) Investment Intent. The shares of Ascend Common Stock issued (or
-----------------
issuable) to Holder pursuant to the Merger Agreement were (or will be) acquired
by Holder for investment and without a view to resale or distribution, except as
permitted by this Agreement, the Merger Agreement and the other agreements and
representation letters executed by Holder in connection therewith.
(d) Accredited Investor. Holder is an "accredited investor" as
-------------------
defined in SEC Rule 501 under the Securities Act.
3
<PAGE>
(e) Information Concerning Ascend. Holder (i) has had the opportunity
-----------------------------
to ask questions of, and obtain any additional information reasonably available
to, Ascend with respect to its plans, results of operations, financial
conditions, businesses, properties, assets or business prospects; (ii) has
received all such information as Holder deems necessary and appropriate to
enable Holder to evaluate the risks and merits of the Merger; and (iii) has
received satisfactory and complete information concerning the business and
financial condition of Ascend in response to all inquiries in respect thereof.
(f) Exchange Act Reports. Holder acknowledges that Ascend is a
--------------------
publicly held company that files reports and other information under the
Exchange Act with the SEC and with the NASD. Holder acknowledges that Ascend
has made available to Holder all forms, reports and documents filed by Ascend
with the SEC between December 31, 1994 (other than registration statements on
Form S-8) and the date of the Merger Agreement. Holder further acknowledges the
availability of current information about Ascend through such reports and other
information. Holder also acknowledges receipt of copies of Rules 10b-5, 10b-6
and 10b-7 under the Exchange Act.
(g) Economic Risk. Holder has such knowledge and experience in
-------------
financial and business matters as to be able to evaluate the merits and risks of
an investment in Ascend Common Stock in connection with the Merger. Holder is
able to acquire the shares of Ascend Common Stock issued (or issuable) to Holder
in connection with the Merger without impairing Holder's financial condition, to
hold such shares for an indefinite period of time, and to suffer a complete loss
on Holder's investment.
(h) Information Supplied by Holder. The information about Holder on
------------------------------
the signature page to this Agreement is true, accurate and complete. Holder
understands that such information is being provided to Ascend specifically for
use in, or in connection with, the Registration Statement and the Prospectus,
and has executed this Agreement with such knowledge.
Section 3. Obligations of Ascend.
---------------------
(a) Registration. Promptly after the date of this Agreement, Ascend
------------
shall (i) file with the SEC a registration statement on Form S-3 with respect
to one-third of the shares of Ascend Common Stock issuable to Holder pursuant to
the Merger and shall use its reasonable best efforts to cause the Registration
Statement to become effective as promptly as practicable after filing and to
keep Registration Statement effective until the Termination Date (as hereinafter
defined); (ii) prepare and file with the SEC such amendments and supplements
Registration Statement and the prospectus used in connection therewith as may be
necessary, and to comply with the provisions of the Securities Act with respect
to the sale or other disposition of all securities proposed to be registered in
the Registration Statement until the Termination Date (as hereinafter defined);
(iii) furnish to Holder such number of copies of any prospectus
4
<PAGE>
(including any preliminary prospectus and any amended or supplemented
prospectus) in conformity with the requirements of the Securities Act, and such
other documents, as Holder may reasonably request in order to effect the
offering and sale of the shares of Ascend Common Stock to be offered and sold,
but only while Ascend shall be required under the provisions hereof to cause the
registration statement to remain current; and (iv) use reasonable efforts to
register or qualify the shares of Ascend Common Stock covered by the
Registration Statement under the securities or blue sky laws of such
jurisdictions as Holder shall reasonably request (provided that Ascend shall not
be required in connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
jurisdiction where it has not been qualified). For purposes of this Section
3(a), "Termination Date" means the earlier of (i) December 27, 1998, (ii) the
----------------
date on which Holder can sell all of the shares of Ascend Common Stock issued to
Holder pursuant to the Merger pursuant to Rule 144 of the SEC under the
Securities Act, and (iii) the date on which all such shares of Ascend Common
Stock have been resold pursuant to Rule 144 or an effective registration
statement.
(b) Notification of Certain Events. Ascend shall notify Holder (i)
------------------------------
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to the Registration Statement or any post-
effective amendment, when the same has become effective; (ii) of any request by
the SEC or any other Governmental Entity during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or related prospectus or for additional information relating to the
Registration Statement, (iii) of the issuance by the SEC or any other federal or
state governmental authority of any stop order suspending the effectiveness of
the Registration Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by Ascend of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
shares for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose; or (v) of the happening of any event which makes
any statement made in the Registration Statement or related prospectus or any
document incorporated or deemed to be incorporated therein by reference untrue
in any material respect or which requires the making of any changes in the
Registration Statement or prospectus so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein not misleading, and that in the case of the prospectus,
it will not contain any untrue statement of a material fact or omit to state any
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Ascend may, upon the happening of
any event of the kind described in clauses (iii), (iv) or (v) hereof, suspend
use of the prospectus on written notice to Holder, in which case Holder shall
discontinue disposition of the shares covered by the Registration Statement or
prospectus until copies of a supplemented or amended prospectus are distributed
to Holder or until Holder is advised in writing by Ascend that the use of the
applicable prospectus may be resumed. Ascend shall use its
5
<PAGE>
reasonable best efforts to ensure that the use of the prospectus may be resumed
as soon as practicable. Ascend shall use every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the securities for sale in any jurisdiction, at
the earliest practicable moment. Ascend shall, upon the occurrence of any event
contemplated by clause (iv) or (v) above, prepare a supplement or post-effective
amendment to the Registration Statement or a supplement to the related
prospectus or any document incorporated therein by reference or file any other
required document so that, as thereafter delivered to the purchasers of the
shares being sold thereunder, such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(c) Certificates In connection with any offering of shares of Ascend
------------
Common Stock registered pursuant to this Agreement, Ascend shall, subject to the
limitations set forth in Sections 4, 5 and 6 of this Agreement: (i) furnish
Holder, at Ascend's expense, with unlegended certificates representing ownership
of the shares of Ascend Common Stock being sold in such denominations as Holder
shall request, and (ii) instruct the transfer agent and registrar of such shares
to release any stop transfer orders with respect to such shares.
Section 4. Obligations of Holder.
---------------------
(a) Information. Holder shall provide all information and materials
-----------
to Ascend, and take all action, as may be required in order to permit Ascend to
comply with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of the Registration Statement. The provision
of such information and materials by Holder and by the other holders whose
securities are included in the Registration Statement is a condition precedent
to the obligations of Ascend pursuant to this Agreement.
(b) Certain Limitations. Holder shall not sell, transfer, pledge, or
-------------------
otherwise dispose of, or reduce Holder's interest in or risk relating to, any
shares of Ascend Common Stock issued to Holder pursuant to the Merger or upon
exercise of any Assumed Options until after such time as Ascend has published
(within the meaning of SEC Accounting Series Release No. 135, as amended)
financial results covering at least 30 days of combined operations of Ascend and
StonyBrook. From and after the publication of such results, Holder may sell or
otherwise dispose of the shares of Ascend Common Stock registered pursuant to
this Agreement, subject to the following restrictions:
6
<PAGE>
(i) Holder shall not offer, sell, exchange, pledge, transfer or
otherwise dispose of or engage in any Sale Equivalent Transaction with
respect to, any of the shares of Ascend Common Stock issued or issuable in
the Merger unless at such time such transaction shall be permitted pursuant
to the provisions of SEC Rule 145 under the Securities Act (including any
applicable limitations on the amount of Ascend Common Stock to be sold as
set forth in Rule 145(d)(1) and the provisions of Rule 144 referred to
therein), or Holder shall have furnished to Ascend an opinion of counsel,
satisfactory to Ascend, to the effect that no registration under the
Securities Act would be required in connection with the proposed offer,
sale, exchange, pledge, transfer or other disposition or transaction, or a
Registration Statement under the Securities Act covering the proposed
offer, sale, exchange, pledge, transfer or other disposition or Sale
Equivalent Transaction shall be effective under the Securities Act;
(ii) Holder shall not offer or sell any of the shares of Ascend Common
Stock issued or issuable to Holder in the Merger except during such periods
as directors, officers and Affiliates of Ascend are permitted to purchase
and sell Ascend Common Stock pursuant to the insider trading policies of
Ascend (the "Window Periods"); and
--------------
(iii) during the effective period of the Registration Statement,
Holder shall (A) offer for sale under the Registration Statement only those
shares of Ascend Common Stock which were issued to Holder pursuant to the
Merger Agreement and are registered under the Registration Statement; (B)
sell such shares in accordance with and subject to the terms, conditions
and covenants set forth in this Agreement and in the Registration
Statement; (C) to the extent required by applicable law, cause to be
furnished to any purchaser of such shares, and to the broker-dealer, if
any, through whom such shares may be offered, a copy of the final
prospectus contained in the Registration Statement, as supplemented or
amended through the date of the sale (the "Prospectus"); (D) not engage in
----------
any stabilization activity in connection with any Ascend securities other
than as permitted under the Exchange Act; and (E) not bid for or purchase
any securities of Ascend or any rights to acquire Ascend securities, or
attempt to induce any person to purchase any Ascend securities (except for
Holder's shares of Ascend Common Stock to be sold to
7
<PAGE>
such person by means of the Prospectus) or any rights to acquire Ascend
securities other than as permitted under the Exchange Act.
The restrictions set forth in subparagraph (ii) of this Section 4(b) shall
cease without further action of the parties upon and in the event of the death
of Holder, and Ascend shall amend the Registration Statement to the extent (if
any) necessary to permit Holder's estate, personal representative(s), devisees
and heirs, as the case may be, to resell Holder's remaining shares of Ascend
Common Stock pursuant to this Registration Statement.
(c) Escrow. Holder approves and agrees to be bound by all provisions
------
of Section 2.3 and Article IX of the Merger Agreement (relating to the Escrow).
Without limiting the generality of the foregoing, Holder accepts appointment as
Shareholder Representative and consents and agrees to the appointment of the
Escrow Agents named in the Merger Agreement. In the event of resignation of an
Escrow Agent, Holder consents and agrees to the appointment of a replacement
Escrow Agent by Ascend and Shareholder Representative.
Section 5. Restricted Periods. Ascend shall use its best efforts to keep
------------------
effective the Registration Statement during Window Periods (subject to the right
of Ascend to suspend use of a prospectus pursuant to this Agreement).
Notwithstanding any other provision of this Agreement to the contrary, Ascend
shall not be required to keep the Registration Statement effective at any times
other than during Window Periods. Holder agrees that the right of Holder to
resell the shares of Ascend Common Stock registered pursuant to this Agreement
shall be suspended, unless otherwise agreed by Ascend, whenever Ascend
"insiders" (as defined in the Ascend Insider Trading Policy furnished to Holder
and any amendments thereto hereafter furnished to Holder) are restricted from
trading capital stock of Ascend (a "Restricted Period"). Unless otherwise
-----------------
specified by Ascend by written notice to Holder, Restricted Periods shall
include the period commencing at the opening of trading on the first day of the
third month of each fiscal quarter of Ascend and expiring at the close of
trading on the second full trading day following release of Ascend financial
results for such fiscal quarter (or, in the case of the fourth quarter of each
year, for the fiscal year). If a Restricted Period shall commence or shall
expire or terminate on any other date, Ascend shall provide advance written
notice of such commencement and prompt written notice of such expiration or
termination. Ascend shall have the affirmative right to suspend the
effectiveness of any Registration Statement filed by Ascend pursuant to this
Agreement at any time and from time to
8
<PAGE>
time during a Restricted Period, for the whole of such Restricted Period or any
portion thereof.
Section 6. Legends. Subject to the provisions of Section 3(c) of this
-------
Agreement Ascend may, at its election, cause one or more legends reflecting the
limitations set forth in this Agreement (including the limitations set forth in
Sections 4 and 5 of this Agreement) to be affixed to the certificate or
certificates issued to Holder representing the shares of Ascend Common Stock
issued to Holder in the Merger, including a legend in substantially the form set
forth below:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE OTHER
CONDITIONS SPECIFIED IN A REGISTRATION AND STOCK TRADING AGREEMENT BETWEEN
THE HOLDER OF THIS CERTIFICATE AND ASCEND COMMUNICATIONS, INC., A COPY OF
WHICH AGREEMENT WILL BE FURNISHED BY ASCEND COMMUNICATIONS, INC. TO THE
HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE."
Ascend, in its discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to the certificates for the shares which are
required to bear such legend. Such legend shall be removed in connection with
the sale of any stock at a time that the Registration Statement is effective or
upon a sale pursuant to SEC Rule 144, as provided in Section 3(c) of this
Agreement.
Section 7. Expenses. Ascend shall pay all of the out-of-pocket expenses
--------
incurred, other than underwriting discounts and commissions, in connection with
any registration pursuant to this Agreement, including, without limitation, all
SEC, NASD and blue sky registration and filing fees, printing expenses, transfer
agents' and registrars' fees, and the reasonable fees and disbursements of
Ascend's outside counsel and independent accountants and a single counsel for
all of the holders of securities included in the Registration Statement.
Section 8. Indemnification. In the event of any offering registered
---------------
pursuant to this Agreement:
(a) Ascend will indemnify Holder and each broker-dealer (if any) which
may be deemed to be an underwriter of the shares of Ascend Common Stock covered
by the Registration Statement against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement, or any prospectus, or any
amendment or supplement thereto, incident to any offering registered pursuant to
this Agreement, or based on any omission (or alleged omission) to state therein
a material fact required to be stated
9
<PAGE>
therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading, or any violation by Ascend
of any rule or regulation promulgated under the Securities Act, or state
securities laws applicable to Ascend in connection with any such registration,
and subject to Section 8(c), will reimburse Holder for any legal and any other
out-of-pocket expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that Ascend will not be liable in any such case to the extent that any
such claim, loss, damage, or liability arises out of or is based in any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to Ascend by Holder or
controlling person and stated to be specifically for use therein.
(b) Holder will, if shares held by Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify (i) Ascend, (ii) its directors, officers, legal counsel and
independent accountants, (iii) each underwriter, if any, of Ascend securities
covered by the Registration Statement, (iv) each person who controls Ascend or
such underwriter within the meaning of Section 15 of the Securities Act, (v)
each other holder of shares of Ascend Common Stock included in the Registration
Statement and such holder's legal counsel and independent accountants (each such
person named in clauses (i) through (v), an "Indemnified Party," and
-----------------
collectively, the "Indemnified Parties") against all claims, losses, damages and
-------------------
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement, prospectus, offering circular or other document, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse Ascend, such other holders, such directors, officers, legal
counsel, independent accountants, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in the Registration
Statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to Ascend by Holder and stated
to be specifically for use therein; provided, however, that Holder's obligations
--------
hereunder shall be several with all other holders of securities included in the
Registration Statement and not joint and shall be limited to an amount equal to
the net proceeds before expenses and commissions to Holder of the shares sold as
contemplated herein.
(c) Each Indemnified Party claiming indemnification under Section 8
shall give notice to the party from whom indemnification is sought (the
"Indemnifying Party") promptly after such Indemnified Party receives written
- -------------------
notice of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by such
10
<PAGE>
Indemnified Party (whose approval shall not be unreasonably withheld), and such
Indemnified Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement, except to the extent, but only to the extent, that the
Indemnifying Party's ability to defend against such claim or litigation is
impaired as a result of such failure to give notice. Notwithstanding the
foregoing sentence, an Indemnified Party seeking indemnification hereunder may
retain its own counsel to conduct the defense of any such claim or litigation,
and shall be entitled to be reimbursed by the Indemnifying Party for expenses
incurred by such Indemnified Party in defense of such claim or litigation, in
the event that the Indemnifying Party does not assume the defense of such claim
or litigation within sixty (60) days after the Indemnifying Party receives
notice thereof from such Indemnified Party. Further, an Indemnifying Party
shall be liable for amounts paid in settlement of any such claim or litigation
only if the Indemnifying Party consents in writing to such settlement (which
consent shall not be reasonably withheld). No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party a release from all liability in
respect to such claim or litigation.
(d) The obligations of Ascend and Holder under this Section 8 shall
survive the completion of any offering of stock in a Registration Statement
under this Agreement and otherwise.
Section 9. Miscellaneous.
-------------
(a) Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(i) if to Ascend, to:
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Attention: Vice President - Finance
Fax: (510) 337-2638
11
<PAGE>
with a copy to:
Gray Cary Ware & Freidenrich, A Professional Corporation
400 Hamilton Ave.
Palo Alto, CA 94301
Attention: Thomas W. Furlong, Esq. & Rod J. Howard, Esq.
Fax: (415) 327-3699
(ii) if to Holder, to the address of such Holder as set forth in the stock
transfer books and other applicable records of Ascend.
(b) Interpretation. When a reference is made in this Agreement to a
--------------
section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The phrases "the date of this Agreement," "the date hereof," and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to February 7, 1997. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(d) Severability. In the event that any provision of this Agreement, or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
(e) Entire Agreement. This Agreement (including the documents and the
----------------
instruments referred to herein) constitutes the entire agreement of the parties
with respect to the subject matter of this Agreement and supersedes Section
2(a)(iii) and (iv) of the Registration Rights Declaration. Nothing in this
Agreement shall impair or affect the right of the Holder to request or the
obligation of Ascend to effect the registration of the remaining two-thirds
(2/3) of the shares of Ascend Common Stock issued to Holder in the Merger or
upon exercise of Assumed Options, on the terms and subject to the conditions
and limitations set forth in the Declaration of Registration Rights annexed as
Annex 6.2 to the Merger Agreement which shall remain in full force and effect
- ---------
except as explicitly modified by the immediately preceding sentence.
(f) Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of California without regard to any
applicable conflicts of law.
12
<PAGE>
(h) Assignment. Neither this Agreement nor any of the rights, interests or
----------
obligations hereunder shall be assigned by either party hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Third Party Beneficiary. Nothing contained in this Agreement is
-----------------------
intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies or obligations
under, or by reason of this Agreement.
IN WITNESS WHEREOF, Ascend and Holder have signed or caused this Agreement
to be signed as of the date first written above.
ASCEND COMMUNICATIONS, INC. RAVI GULATI ("HOLDER")
By:_________________________________ ____________________________________
Name:
Title:
Number of shares of StonyBrook Common Stock owned (beneficially and/or of
record) by Holder as of the Effective Time of the Merger: _____________________
Number of shares of Ascend Common Stock owned (beneficially and/or of record) by
Holder as of the date of this Agreement: _______________________________________
13
<PAGE>
EXHIBIT 4.2
REGISTRATION AND OPTION STOCK TRADING AGREEMENT
This Registration and Option Stock Trading Agreement (the "Agreement") is
---------
made and entered into as of February 7, 1997 by and between Ascend
Communications, Inc., a Delaware corporation ("Ascend"), and the former holder
------
of common stock or options to acquire common stock of StonyBrook Services, Inc.,
a New York corporation ("StonyBrook"), named on the signature page hereto (the
----------
"Holder").
- -------
Recitals
--------
WHEREAS, StonyBrook and Ascend have heretofore entered into an Agreement
and Plan of Merger dated as of December 26, 1996 (the "Merger Agreement"), by
----------------
and among Ascend, StonyBrook and Ascend Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Ascend ("Sub");
---
WHEREAS, the shares of common stock of StonyBrook ("StonyBrook Common
-----------------
Stock") outstanding at the Effective Time of the Merger have been converted into
the right to receive shares of common stock of Ascend ("Ascend Common Stock"),
-------------------
and the options to acquire StonyBrook Common Stock ("StonyBrook Options")
------------------
outstanding as of the Effective Time have been assumed by Ascend and converted
into options to acquire Ascend Common Stock (the "Assumed Options");
---------------
WHEREAS, the shares of Ascend Common Stock issuable in the Merger or upon
exercise of the Assumed Options have not been registered under the Securities
Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption
from registration contained in Section 4(2) of and/or Regulation D under the
Securities Act;
WHEREAS, the Merger Agreement and the Declaration of Registration Rights
set forth in Annex 6.12 thereto (the "Registration Rights Declaration") granted
-------------------------------
certain registration rights to Holder;
<PAGE>
WHEREAS, Holder must provide to Ascend certain information necessary for
the preparation of the Registration Statement and must guarantee the accuracy
and completeness of such information;
NOW THEREFORE, in consideration of the foregoing, and the representations,
warranties, covenants, agreements and other provisions herein, the parties
hereto agree as set forth below:
Agreement
---------
Section 1. Definitions. As used in this Agreement:
-----------
(a) "Affiliate" means each person or party deemed to be an "affiliate"
---------
for purposes of paragraphs (c) and (d) of Rule 145 of the SEC, although nothing
contained herein shall be construed as an admission by such Affiliate that such
Affiliate is in fact an "affiliate" of StonyBrook for purposes of Rule 145.
(b) "Escrow Shares" has the meaning ascribed to such term in the
--------------
Merger Agreement.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
-------------
amended.
(d) "Form S-3" means Form S-3 or such other form under the Securities
--------
Act as in effect on the date hereof or any registration form under the
Securities Act subsequently adopted by the SEC which similarly permits inclusion
or incorporation of substantial information by reference to other documents
filed by Ascend with the SEC.
(e) "Governmental Entity" means any (i) nation, state, commonwealth,
-------------------
province, territory, county, municipality, district or other jurisdiction of any
nature; (ii) federal, state, local, municipal, foreign or other government; or
(iii) governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, official, organization,
and any court or other tribunal).
(f) "NASD" means the National Association of Securities Dealers.
----
(g) "Sale Equivalent Transaction" means any sale, exchange, transfer
---------------------------
or other disposition, transaction or arrangement, whether by short sale, hedging
or
2
<PAGE>
otherwise, that materially increases the risk that the Merger would not qualify
as a "reorganization" under Section 368 of the Code.
(h) "SEC" means the Securities and Exchange Commission.
---
(i) "Securities Act" means the Securities Act of 1933, as amended.
--------------
Capitalized terms not otherwise defined in this Agreement have the meanings
given to them in the Merger Agreement.
Section 2. Representations and Warranties of Holder. Holder represents to
----------------------------------------
Ascend as follows:
(a) Holdings. As of the Effective Time of the Merger, Holder (i) was
--------
the owner of the number of StonyBrook Options set forth on the signature page
hereto, and (ii) owned no other StonyBrook Options and no shares of StonyBrook
Common Stock. Holder acknowledges and agrees that, pursuant to the Merger
Agreement, Holder's StonyBrook Options were converted into options to acquire
the number of shares of Ascend Common Stock set forth on the signature page
hereto. Holder has acquired its shares of Ascend Common Stock for investment
and without a view to resale or distribution, except as permitted by this
Agreement, the Merger Agreement, and the other agreements and representation
letters executed by Holder in connection therewith.
(b) Validity and Enforceability; Consents. This Agreement has been
-------------------------------------
duly executed and delivered by Holder and constitutes the valid and binding
obligation of Holder, enforceable against Holder in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting or relating to creditors' rights
generally, and general principles of equity. The execution and delivery by
Holder of this Agreement does not, and the performance of Holder's obligations
under this Agreement will not, (i) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a material default
under, any material obligation or loss of any material benefit under any
material contract or other agreement or obligation to which Holder is a party or
by which Holder or any of Holder's properties or assets may be bound, or (ii)
conflict with or violate any permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Holder
or any of Holder's properties or assets. No consent, approval, order or
authorization of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Holder in connection with the execution
and delivery of this Agreement or the performance of Holder's obligations
hereunder.
(c) Investment Intent. The shares of Ascend Common Stock issued (or
-----------------
issuable) to Holder pursuant to the Merger Agreement or upon exercise of Assumed
Options were (or will be) acquired by Holder for investment and without a
3
<PAGE>
view to resale or distribution, except as permitted by this Agreement and the
Merger Agreement.
(d) Purchaser Representative. If Holder is not an "accredited
------------------------
investor," as defined in Rule 501 under the Securities Act and such Holder,
alone, does not have such knowledge and experience in financial and business
matters that he or she is capable of evaluating the merits and risks of an
investment in shares of Ascend Common Stock in connection with the Merger:
(i) Holder has so indicated by checking the box under his
signature below, and Ravi Gulati is acting or has acted as Holder's
representative (the "Purchaser Representative") in evaluating the merits
------------------------
and risks of the Merger;
(ii) Holder has been informed by Purchaser Representative of all
material relationships between Purchaser Representative and his affiliates,
on the one hand, and Ascend and its affiliates, on the other hand, that
currently exist, or are understood to be contemplated, or have existed at
any time since December 26, 1994, and any compensation received or to be
received as a result of such relationship;
(iii) Holder has, to the extent necessary to evaluate the risks
and merits of an investment in the Shares in connection with the Merger,
relied upon the advice of Purchaser Representative in connection with the
Merger; and
(iv) Holder had an opportunity to meet with Purchaser
Representative to discuss the Merger prior to the consummation of the
Merger.
(e) Information Concerning Ascend. Holder, either alone or together
-----------------------------
with Purchaser Representative, (i) has had the opportunity to ask questions of,
and obtain any additional information reasonably available to, Ascend with
respect to its plans, results of operations, financial conditions, businesses,
properties, assets or business prospects; (ii) has received all such information
as Holder or Purchaser Representative deems necessary and appropriate to enable
Holder, either alone or together with Purchaser Representative, to evaluate the
risks and merits of the Merger; and (iii) has received satisfactory and complete
information concerning the business and financial condition of Ascend in
response to all inquiries in respect thereof.
(f) Exchange Act Reports. Holder acknowledges that Ascend is a
--------------------
publicly held company that files reports and other information under the
Exchange Act with the SEC and with the NASD. Holder acknowledges that Ascend
has made available to Holder all forms, reports and documents filed by Ascend
with the SEC between December 31, 1994 (other than registration statements on
Form S-8) and the date of the Merger Agreement. Holder further acknowledges the
availability of
4
<PAGE>
current information about Ascend through such reports and other information.
Holder also acknowledges receipt of copies of Rules 10b-5, 10b-6 and 10b-7 under
the Exchange Act.
(g) Economic Risk. Holder, either alone or together with Purchaser
-------------
Representative, has such knowledge and experience in financial and business
matters as to be able to evaluate the merits and risks of an investment in
Ascend Common Stock in connection with the Merger. Holder is able to acquire
the shares of Ascend Common Stock issued (or issuable) to Holder in connection
with the Merger or upon exercise of Assumed Options without impairing Holder's
financial condition, to hold such shares for an indefinite period of time, and
to suffer a complete loss on Holder's investment.
(h) Information Supplied by Holder. The information about Holder on
------------------------------
the signature page to this Agreement is true, accurate and complete. Holder
understands that such information is being provided to Ascend specifically for
use in, or in connection with, the Registration Statement and the Prospectus,
and has executed this Agreement with such knowledge.
Section 3. Obligations of Ascend.
---------------------
(a) Registration. Promptly after the date of this Agreement, Ascend
------------
shall (i) file with the SEC a Registration Statement Form S-3 with respect to
one-third of the shares of Ascend Common Stock issuable to Holder pursuant to
the Assumed Options (the "Registration Statement") and shall use its
----------------------
reasonable best efforts to cause the Registration Statement to become effective
as promptly as practicable after filing and to keep the Registration Statement
effective until the Termination Date (as hereinafter defined); (ii) prepare and
file with the SEC such amendments and supplements to the Registration Statement
and the prospectus used in connection therewith as may be necessary, and to
comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities proposed to be registered in the
Registration Statement until the Termination Date (as hereinafter defined);
(iii) furnish to Holder such number of copies of any prospectus (including any
preliminary prospectus and any amended or supplemented prospectus) in conformity
with the requirements of the Securities Act, and such other documents, as Holder
may reasonably request in order to effect the offering and sale of the shares of
Ascend Common Stock to be offered and sold, but only while Ascend shall be
required under the provisions hereof to cause the Registration Statement to
remain current; and (iv) use reasonable efforts to register or qualify the
shares of Ascend Common Stock covered by the Registration Statement under the
securities or blue sky laws of such jurisdictions as Holder shall reasonably
request (provided that Ascend shall not be required in connection therewith or
as a condition thereto to qualify to do business or to file a general consent to
service of process in any such jurisdiction where it has not been qualified).
For purposes of this Section 3(a), "Termination Date" means the earlier of (i)
----------------
December 27, 1998, (ii) the date on which Holder can sell all of the shares of
Ascend Common Stock issued to Holder pursuant to the
5
<PAGE>
Merger or issuable pursuant to the Assumed Options pursuant to Rule 144 of the
SEC under the Securities Act, and (iii) the date on which all such shares of
Ascend Common Stock have been resold pursuant to Rule 144 or an effective
Registration Statement.
(b) Notification of Certain Events. Ascend shall notify Holder (i)
------------------------------
when a prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to the Registration Statement or any post-
effective amendment, when the same has become effective; (ii) of any request by
the SEC or any other Governmental Entity during the period of effectiveness of
the Registration Statement for amendments or supplements to the Registration
Statement or related prospectus or for additional information relating to the
Registration Statement, (iii) of the issuance by the SEC or any other federal or
state Governmental Entity of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose,
(iv) of the receipt by Ascend of any notification with respect to the suspension
of the qualification or exemption from qualification of any of the shares for
sale in any jurisdiction or the initiation or threatening of any proceeding for
such purpose; or (v) of the happening of any event which makes any statement
made in the Registration Statement or related prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or which requires the making of any changes in the Registration
Statement or prospectus so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that in the case of the prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. Ascend may, upon the happening of
any event of the kind described in clauses (iii), (iv) or (v) hereof, suspend
use of the prospectus on written notice to Holder, in which case Holder shall
discontinue disposition of the shares covered by the Registration Statement or
prospectus until copies of a supplemented or amended prospectus are distributed
to Holder or until Holder is advised in writing by Ascend that the use of the
applicable prospectus may be resumed. Ascend shall use its reasonable best
efforts to ensure that the use of the prospectus may be resumed as soon as
practicable. Ascend shall use every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of the Registration Statement, or the
lifting of any suspension of the qualification (or exemption from qualification)
of any of the securities for sale in any jurisdiction, at the earliest
practicable moment. Ascend shall, upon the occurrence of any event contemplated
by clause (iv) or (v) above, prepare a supplement or post-effective amendment to
the Registration Statement or a supplement to the related prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the shares being sold
thereunder, such prospectus will not contain an untrue statement of a material
fact or omit to state a material fact
6
<PAGE>
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(c) Certificates. In connection with any offering of shares of Ascend
------------
Common Stock registered pursuant to this Agreement, Ascend shall, subject to the
limitations set forth in Sections 4, 5 and 6 of this Agreement: (i) furnish
Holder, at Ascend's expense, with unlegended certificates representing ownership
of the shares of Ascend Common Stock being sold in such denominations as Holder
shall request, and (ii) instruct the transfer agent and registrar of such shares
to release any stop transfer orders with respect to such shares.
Section 4. Obligations of Holder.
---------------------
(a) Information. Holder shall provide all information and materials
-----------
to Ascend, and take all action, as may be required in order to permit Ascend to
comply with all applicable requirements of the SEC and to obtain any desired
acceleration of the effective date of such Registration Statement. The
provision of such information and materials by Holder and by the other holders
of securities included in the Registration Statement is a condition precedent to
the obligations of Ascend pursuant to this Agreement.
(b) Certain Limitations. Holder shall not sell, transfer, pledge, or
-------------------
otherwise dispose of, or reduce Holder's interest in or risk relating to, any
shares of Ascend Common Stock issued to Holder pursuant to the Merger or upon
exercise of any Assumed Options until after such time as Ascend has published
(within the meaning of SEC Accounting Series Release No. 135, as amended)
financial results covering at least 30 days of combined operations of Ascend and
StonyBrook. From and after the publication of such results, Holder may sell or
otherwise dispose of the shares of Ascend Common Stock registered pursuant to
this Agreement, subject to the following restrictions:
7
<PAGE>
(i) Holder shall not offer, sell, exchange, pledge, transfer or
otherwise dispose of or engage in any Sale Equivalent Transaction with
respect to, any of the shares of Ascend Common Stock issued or issuable
upon exercise of Holder's Assumed Options unless at such time such
transaction shall be permitted pursuant to the provisions of SEC Rule 145
under the Securities Act (including any applicable limitations on the
amount of Ascend Common Stock to be sold as set forth in Rule 145(d)(1) and
the provisions of Rule 144 referred to therein), or Holder shall have
furnished to Ascend an opinion of counsel, satisfactory to Ascend, to the
effect that no registration under the Securities Act would be required in
connection with the proposed offer, sale, exchange, pledge, transfer or
other disposition or Sale Equivalent Transaction, or a Registration
Statement under the Securities Act covering the proposed offer, sale,
exchange, pledge, transfer or other disposition or Sale Equivalent
Transaction shall be effective under the Securities Act;
(ii) Holder shall not offer or sell any of the shares of Ascend Common
Stock issued or issuable upon exercise of Holder's Assumed Options except
during such periods as directors, officers and Affiliates of Ascend are
permitted to purchase and sell Ascend Common Stock pursuant to the insider
trading policies of Ascend (the "Window Periods"); and
--------------
(iii) during the effective period of the Registration Statement,
Holder shall (A) offer for sale under the Registration Statement only those
shares of Ascend Common Stock which were issued to Holder upon exercise of
the Assumed Options and are registered under the Registration Statement;
(B) sell such shares in accordance with and subject to the terms,
conditions and covenants set forth in this Agreement and in the
Registration Statement; (C) to the extent required by applicable law, cause
to be furnished to any purchaser of such shares, and to the broker-dealer,
if any, through whom such shares may be offered, a copy of the final
prospectus contained in the Registration Statement, as supplemented or
amended through the date of the sale (the "Prospectus"); (D) not engage in
----------
any stabilization activity in connection with any Ascend securities other
than as permitted under the Exchange Act; and (E) not bid for or purchase
any securities of Ascend or any rights to acquire Ascend securities, or
attempt to induce any person to purchase any Ascend securities (except for
Holder's shares of Ascend Common Stock to be sold to such person by means
of the Prospectus) or any rights to acquire Ascend securities other than as
permitted under the Exchange Act.
8
<PAGE>
The restrictions set forth in subparagraph (ii) of this Section 4(b) shall cease
without further action of the parties upon and in the event of the death of
Holder, and Ascend shall amend the Registration Statement to the extent (if any)
necessary to permit Holder's estate, personal representative(s), devisees and
heirs, as the case may be, to resell Holder's remaining shares of Ascend Common
Stock pursuant to this Registration Statement.
(c) Escrow. Holder agrees that: (i) upon exercise of any Assumed
------
Option before the first anniversary of the Closing Date, Ascend will deduct from
the number of shares of Ascend Common Stock issuable upon the exercise of such
Assumed Option pursuant to Section 6.11 of the Merger Agreement, and will
deposit into escrow certificates representing, ten percent of the shares of the
Ascend Common Stock issuable to Holder upon exercise of Holder's Assumed
Options, on a pro rata basis, in accordance with Section 2.3 of the Merger
Agreement; (ii) the shares so deposited into escrow shall be held as collateral
for the indemnification obligations of the persons who were shareholders or
option holders of StonyBrook immediately prior to the Effective Time under
Article IX of the Merger Agreement, in accordance with the terms thereof; and
(iii) for purposes of such indemnification obligations, Holder shall be treated
as if Holder had been a shareholder of StonyBrook immediately prior to the
Effective Time, and shall be subject on a pro rata basis, to the same
obligations as such a shareholder, subject to the same conditions and
limitations. Holder approves and agrees to be bound by all provisions of
Section 2.3 and Article IX of the Merger Agreement (relating to the Escrow).
Without limiting the generality of the foregoing, Holder consents and agrees to
the appointment of Ravi Gulati as Shareholder Representative pursuant to the
Merger Agreement and the appointment of the Escrow Agents named therein. In the
event of resignation of an Escrow Agent, Holder consents and agrees to the
appointment of a replacement Escrow Agent by Ascend and Shareholder
Representative.
Section 5. Restricted Periods. Ascend shall use its best efforts to keep
------------------
effective the Registration Statement during Window Periods (subject to the right
of Ascend to suspend use of a prospectus pursuant to this Agreement).
Notwithstanding any other provision of this Agreement to the contrary, Ascend
shall not be required to keep the Registration Statement effective at any time
other than during Window Periods. Holder agrees that the right of Holder to
resell the shares of Ascend Common Stock registered pursuant to this Agreement
shall be suspended, unless otherwise agreed by Ascend, whenever Ascend
"insiders" (as defined in the Ascend Insider Trading Policy furnished to Holder
and any amendments thereto hereafter furnished to Holder) are restricted from
trading capital stock of Ascend (a "Restricted Period"). Unless otherwise
-----------------
specified by Ascend by written notice to Holder, Restricted Periods shall
include the period commencing at the opening of trading on the first day of the
third month of each fiscal quarter of Ascend and expiring at the close of
trading on the second full trading day following release of Ascend financial
results for such fiscal quarter (or, in the case of the fourth quarter of each
year, for the fiscal year). If a Restricted Period shall commence or shall
expire or terminate on any other date, Ascend shall provide advance written
notice of such
9
<PAGE>
commencement and prompt written notice of such expiration or termination.
Ascend shall have the affirmative right to suspend the effectiveness of any
Registration Statement filed by Ascend pursuant to this Agreement at any time
and from time to time during a Restricted Period, for the whole of such
Restricted Period or any portion thereof.
Section 6. Legends. Subject to the provisions of Section 3(c) of this
-------
Agreement Ascend may, at its election, cause one or more legends reflecting the
limitations set forth in this Agreement (including the limitations set forth in
Sections 4 and 5 of this Agreement) to be affixed to the certificate or
certificates issued to Holder representing the shares of Ascend Common Stock
issued to Holder upon exercise of Assumed Options, including a legend in
substantially the form set forth below:
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED, SOLD,
PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN ACCORDANCE WITH THE
REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE OTHER
CONDITIONS SPECIFIED IN A REGISTRATION AND STOCK TRADING AGREEMENT BETWEEN
THE HOLDER OF THIS CERTIFICATE AND ASCEND COMMUNICATIONS, INC., A COPY OF
WHICH AGREEMENT WILL BE FURNISHED BY ASCEND COMMUNICATIONS, INC. TO THE
HOLDER OF THIS CERTIFICATE UPON WRITTEN REQUEST AND WITHOUT CHARGE."
Ascend, in its discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to the certificates for the shares which are
required to bear such legend. Such legend shall be removed in connection with
the sale of any stock at a time that the Registration Statement is effective or
upon a sale pursuant to SEC Rule 144, as provided in Section 3(c) of this
Agreement.
Section 7. Expenses. Ascend shall pay all of the out-of-pocket expenses
--------
incurred, other than underwriting discounts and commissions, in connection with
any registration pursuant to this Agreement, including, without limitation, all
SEC, NASD and blue sky registration and filing fees, printing expenses, transfer
agents' and registrars' fees, and the reasonable fees and disbursements of
Ascend's outside counsel and independent accountants and a single counsel for
all of the holders of securities included in the Registration Statement.
Section 8. Indemnification. In the event of any offering registered
---------------
pursuant to this Agreement:
(a) Ascend will indemnify Holder and each broker-dealer (if any) which
may be deemed to be an underwriter of the shares of Ascend Common Stock covered
by the Registration Statement against all claims, losses, damages and
liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on any untrue
10
<PAGE>
statement (or alleged untrue statement) of a material fact contained in the
Registration Statement, any prospectus, or any amendment or supplement thereto,
incident to any offering registered pursuant to this Agreement, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they are made, not misleading, or any violation by Ascend
of any rule or regulation promulgated under the Securities Act, or state
securities laws applicable to Ascend in connection with any such registration,
and subject to Section 8(c), will reimburse Holder for any legal and any other
out-of-pocket expenses reasonably incurred in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action,
provided that Ascend will not be liable in any such case to the extent that any
such claim, loss, damage, or liability arises out of or is based in any untrue
statement or omission or alleged untrue statement or omission, made in reliance
upon and in conformity with written information furnished to Ascend by Holder or
controlling person and stated to be specifically for use therein.
(b) Holder will, if shares held by Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify (i) Ascend, its directors, officers, legal counsel and
independent accountants, (iii) each underwriter, if any, of Ascend securities
covered by the Registration Statement, (iv) each person who controls Ascend or
such underwriter within the meaning of Section 15 of the Securities Act, (v)
each other holder of shares of Ascend Common Stock included in the Registration
Statement and such holder's legal counsel and independent accountants (each such
person named in clauses (i) through (v), an "Indemnified Party," and
-----------------
collectively, the "Indemnified Parties") against all claims, losses, damages and
-------------------
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
the Registration Statement, prospectus, offering circular or other document, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
and will reimburse Ascend, such other holders, directors, officers, legal
counsel, independent accountants, underwriters or control persons for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in the Registration
Statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to Ascend by Holder and stated
to be specifically for use therein; provided, however, that Holder's obligations
--------
hereunder shall be several with all other holders of securities included in the
Registration Statement and not joint and shall be limited to an amount equal to
the net proceeds before expenses and commissions to Holder of the shares sold as
contemplated herein.
(c) Each Indemnified Party claiming indemnification under this Section
8 shall give notice to the party from whom indemnification is sought (the
"Indemnifying Party") promptly after such Indemnified Party receives written
- -------------------
notice
11
<PAGE>
of any claim as to which indemnity may be sought, and shall permit the
Indemnifying Party to assume the defense of any such claim or any litigation
resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by such
Indemnified Party (whose approval shall not be unreasonably withheld), and such
Indemnified Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Agreement, except to the extent, but only to the extent, that the
Indemnifying Party's ability to defend against such claim or litigation is
impaired as a result of such failure to give notice. Notwithstanding the
foregoing sentence, an Indemnified Party seeking indemnification hereunder may
retain its own counsel to conduct the defense of any such claim or litigation,
and shall be entitled to be reimbursed by the Indemnifying Party for expenses
incurred by such Indemnified Party in defense of such claim or litigation, in
the event that the Indemnifying Party does not assume the defense of such claim
or litigation within sixty (60) days after the Indemnifying Party receives
notice thereof from such Indemnified Party. Further, an Indemnifying Party
shall be liable for amounts paid in settlement of any such claim or litigation
only if the Indemnifying Party consents in writing to such settlement (which
consent shall not be reasonably withheld). No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party a release from all liability in
respect to such claim or litigation.
(d) The obligations of Ascend and Holder under this Section 8 shall
survive the completion of any offering of stock in a Registration Statement
under this Agreement and otherwise.
Section 9. Miscellaneous.
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(a) Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt) to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice):
(i) if to Ascend, to:
Ascend Communications, Inc.
One Ascend Plaza
1701 Harbor Bay Parkway
Alameda, CA 94502
Attention: Vice President - Finance
Fax: (510) 337-2638
12
<PAGE>
with a copy to:
Gray Cary Ware & Freidenrich, A Professional Corporation
400 Hamilton Ave.
Palo Alto, CA 94301
Attention: Thomas W. Furlong, Esq. & Rod J. Howard, Esq.
Fax: (415) 327-3699
(ii) if to Holder, to the address of such Holder as set forth in the stock
transfer books and other applicable records of Ascend.
(b) Interpretation. When a reference is made in this Agreement to a
--------------
section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The phrases "the date of this Agreement," "the date hereof," and terms of
similar import, unless the context otherwise requires, shall be deemed to refer
to February 7, 1997. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
(d) Severability. In the event that any provision of this Agreement, or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
(e) Entire Agreement. This Agreement (including the documents and the
----------------
instruments referred to herein) constitutes the entire agreement of the parties
with respect to the subject matter of this Agreement and supersedes Section
2(a)(iii) and (iv) of the Registration Rights Declaration. Nothing in this
Agreement shall impair or affect the right of the Holder to request or the
obligation of Ascend to effect registration of the remaining two-thirds (2/3) of
the shares of Ascend Common Stock issued to Holder in the Merger or upon
exercise of Assumed Options, on the terms and subject to the conditions and
limitations set forth in the Declaration of Registration Rights annexed as
Annex 6.2 to the Merger Agreement which shall remain in full force and effect
- ---------
except as explicitly modified by the immediately preceding sentence.
(f) Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of California without regard to any
applicable conflicts of law.
13
<PAGE>
(h) Assignment. Neither this Agreement nor any of the rights, interests or
----------
obligations hereunder shall be assigned by either party hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party. Subject to the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Third Party Beneficiary. Nothing contained in this Agreement is
-----------------------
intended to confer upon any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies or obligations
under, or by reason of this Agreement.
IN WITNESS WHEREOF, Ascend and the undersigned Holder have signed or caused
this Agreement to be signed as of the date first written above.
ASCEND COMMUNICATIONS, INC. HOLDER
By:_________________________________ ____________________________________
Name:
Title:
Number of StonyBrook Options owned by Holder as of the Effective Time of the
Merger. _____________________________
Number of shares of Ascend Common Stock issuable to Holder upon exercise in full
of all Assumed Options of Holder: ____________________________________
[_] Check this box and sign to indicate that you have employed a Purchaser
Representative.
14
<PAGE>
EXHIBIT 5.1
February 13, 1997
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
159,997 shares of Common Stock, par value $0.001 per share (the "Common Stock"),
issued by the Company to the Selling Stockholders in connection with that
certain Agreement and Plan of Merger dated December 26, 1996 by and among the
Company, Ascend Acquisition Corporation, a Delaware corporation, and StonyBrook
Services Inc., a New York 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 159,997 shares of
Common Stock of the Company being registered pursuant to the Registration
Statement and to be sold by the Selling Stockholders are duly authorized shares
of Common Stock and, when sold, 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>
Securities and Exchange Commission
February 12, 1997
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 159,997 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
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Walnut Creek, California
February 12, 1997
<PAGE>
Securities and Exchange Commission
February 12, 1997
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Ascend Communications, Inc. on Form S-3 of our report dated November 7, 1995
relating to the financial statements of NetStar, Inc. as of September 30, 1994
and 1995 and for each of the years in the period ended September 30, 1995
included in the Form S-4 of Ascend Communications, Inc. filed on July 11, 1996.
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ Deloitte & Touche
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Deloitte & Touche LLP
Minneapolis, Minnesota
February 12, 1997
