EXHIBIT 99.11
CERTIFICATE OF REPRESENTATIONS
OF
PARADYNE NETWORKS, INC.
Reference is hereby made to that certain Agreement and Plan of Merger
(the "Agreement") made and entered into as of _______ __, 2001, by and among
PARADYNE NETWORKS, INC. ("Phoenix"), a corporation organized and existing under
the laws of Delaware, PHOENIX MERGER SUB INC., a corporation organized and
existing under the laws of Delaware, and a wholly owned direct subsidiary of
Phoenix ("Merger Sub"), and EMERALD INC. ("Emerald"), a corporation organized
and existing under the laws of Delaware, which sets forth the terms and
conditions of the merger of Merger Sub with and into Emerald (the "Merger"). All
capitalized terms used herein without definition shall have the meanings
specified in the Agreement, and unless otherwise specified, all section
references herein are to the Internal Revenue Code of 1986, as amended (the
"Code").
Phoenix submits this certificate to be relied upon by Xxxxxx & Bird LLP
and Xxxxxx & Xxxxxxxx in connection with the rendering of opinions with respect
to certain of the tax consequences of the Merger. Xxxxxxx hereby certifies that
each of the following facts and representations is true, correct, and complete
on the date hereof and will be true, correct and complete on the date the Merger
is consummated (the "Effective Time"), unless and until Phoenix notifies Xxxxxx
& Bird LLP and Xxxxxx & Xxxxxxxx to the contrary in writing prior thereto.
Xxxxxxx acknowledges that the tax opinions of Xxxxxx & Bird LLP and Xxxxxx &
Xxxxxxxx may not be relied upon if any of the facts or representations contained
in this certificate should prove to be inaccurate or incomplete in any material
respect.
1. The fair market value of the Phoenix stock and any other
consideration received by each stockholder of Emerald in the Merger will be
approximately equal to the fair market value of the Emerald stock surrendered in
exchange therefor.
2. In the Merger, shares of Emerald stock representing Control of
Emerald will be exchanged solely for voting stock of Phoenix. For purposes of
this certificate, "Control" means ownership of at least eighty percent (80%) of
the total combined voting power of all classes of stock entitled to vote and at
least eighty percent (80%) of the total number of shares of each other
outstanding class of stock. For purpose of this representation, shares of
Emerald stock exchanged for cash or other property originating with Xxxxxxx,
including cash paid to dissenting stockholders, if any, will be treated as
outstanding Emerald stock as of the Effective Time.
3. Prior to the Merger, Phoenix will be in Control of Merger Sub.
4. Immediately following the Merger, Emerald will hold at least
ninety percent (90%) of the fair market value of the net assets and at least
seventy percent (70%) of the fair market value of the gross assets held by
Xxxxxx Sub immediately prior to the Merger, and to Phoenix's knowledge, Emerald
will hold at least ninety percent (90%) of the fair market value of the net
assets and at least seventy percent (70%) of the fair market value of the gross
assets that Emerald held immediately prior to the Merger. For purposes of this
representation, amounts paid by Emerald or Merger Sub to dissenters, if any,
amounts paid by Emerald or Merger Sub to stockholders who receive cash or other
property in the Merger, amounts used by Emerald or
Merger Sub to pay reorganization expenses, and all redemptions and distributions
(except for regular, normal dividends consistent with Emerald's historic
dividend practice) made by Emerald immediately preceding the Merger, or
otherwise in connection with the Merger, will be included as assets of Emerald
or Merger Sub, respectively, held immediately prior the Merger. In addition,
assets disposed of by Emerald in contemplation of the Merger will be considered
assets held by Emerald immediately prior to the Merger.
5. Other than fractional share interests which Phoenix may redeem
for cash, none of (i) Phoenix, (ii) any member of Phoenix's affiliated group as
defined in Section 1504 of the Code without regard to Section 1504(b) of the
Code (including but not limited to Merger Sub) (iii) any corporation in which at
least fifty percent (50%) of the total combined voting power of all classes of
stock entitled to vote or at least fifty percent (50%) of the value of all
classes of stock is owned directly or indirectly by Phoenix, or (iv) any entity
that is treated as a partnership for federal income tax purposes and has as an
owner a corporation described in (i), (ii) or (iii) of this paragraph, has the
intent to, at the time of the Merger, or shall, in a transaction that may be
considered in connection with the Merger, acquire or redeem (directly or
indirectly, actually or constructively) any shares of Phoenix stock issued in
connection with the Merger, except for repurchases pursuant to a stock
repurchase program that meets the following requirements:
(a) the number of shares that may be repurchased pursuant to the stock
repurchase program does not exceed the total number of shares of
Phoenix stock that were issued and outstanding immediately prior to the
Merger;
(b) the repurchases will be made following the Merger and will be made
on the open market through a broker for the then prevailing market
price;
(c) the stock repurchase program is not a matter that was or will be
negotiated with Emerald or the stockholders of Emerald;
(d) there is not and will not be any understanding between the
shareholders of Emerald and Phoenix that the ownership by the
shareholders of Emerald of the Phoenix stock received pursuant to the
Merger would be transitory;
(e) because of the mechanics of an open market purchase, Phoenix will
not know the identity of any seller of Phoenix stock pursuant to the
stock repurchase program, nor will any former Emerald stockholder who
sells Phoenix stock know whether or not Phoenix is the buyer; and
(f) without regard to the stock repurchase program, a market exists for
the Phoenix stock that will be issued pursuant to the Merger.
For purposes hereof, an entity described in (ii), (iii), or (iv) shall be
referred to as a Phoenix Related Party. An entity will be treated as a Phoenix
Related Party if the requisite relationship exists immediately before or
immediately after the acquisition or redemption. In addition, an entity (other
than Emerald or any Emerald Related Party, as defined below) will be treated as
a Phoenix Related Party if the requisite relationship is created in connection
with the Merger. An Emerald Related Party means any corporation in which at
least fifty percent (50%) of the total combined voting power of all classes of
stock entitled to vote or at least fifty percent (50%) of the value all classes
of stock is owned directly or indirectly by Emerald.
6. Phoenix does not have any plan or intention to liquidate
Emerald, to merge Emerald with or into another corporation, to sell or otherwise
dispose of the stock of Emerald, except for transfers of stock to other
corporations in Phoenix's Qualified Group. For purposes hereof, Xxxxxxx's
"Qualified Group" means one or more chains of corporations connected through
stock ownership with Phoenix where Phoenix Controls at least one of the
corporations and Control of each of the corporations is owned by one of the
other corporations.
7. Phoenix does not have any plan or intention to cause Emerald
to sell or otherwise dispose of or transfer any of its assets, except for
dispositions made in the ordinary course of business, and transfers made to
other corporations that are members of Phoenix's Qualified Group.
8. Following the Merger, Emerald or other corporations that are
members of Phoenix's Qualified Group will continue the historic business of
Emerald or use a significant portion of Emerald's historic assets in a business.
9. Phoenix has no plan or intention to cause Emerald to issue
additional shares of its stock that would result in Phoenix losing Control of
Emerald.
10. In connection with the Merger, none of the shares of Emerald
stock has been or will be acquired by Phoenix or a Phoenix Related Party for
consideration other than Phoenix Common Stock, except for (a) cash received in
lieu of fractional shares of Phoenix Common Stock, and (b) cash paid to
dissenting Emerald stockholders pursuant to Section 262 of the General
Corporation Law of the State of Delaware.
11. Phoenix , Merger Sub and Emerald have paid, or will pay, their
respective expenses, if any, incurred in connection with the Merger, except as
provided in Sections 3.6 and 10.3 of the Agreement.
12. There is no indebtedness existing between (a) Emerald or any
subsidiary of Emerald and (b) Phoenix, Merger Sub or any other subsidiary of
Phoenix that was issued was acquired or will be settled at a discount.
13. Merger Sub will have no liabilities assumed by Emerald, and
will not transfer to Emerald any assets subject to liabilities, in the Merger.
14. None of the compensation received by any stockholder-employees
of Emerald will be separate consideration for, or allocable to, any of their
shares of Emerald stock; none of the shares of Phoenix stock received by any
stockholder-employees will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any stockholder-employees of
Emerald will be for services actually rendered and will not exceed amounts paid
to third parties bargaining at arm's length for similar services.
15. Neither Phoenix nor Merger Sub is an investment company. For
purposes hereof, an "investment company" is a corporation that is a regulated
investment company, a real estate investment trust, or a corporation fifty
percent (50%) or more of the value of whose total assets are stock and
securities and eighty percent (80%) or more of the value of whose total assets
are assets held for investment. In making the fifty percent (50%) and eighty
percent (80%) determinations under the preceding sentence, stock and securities
in any subsidiary corporation shall be disregarded and the parent corporation
shall be deemed to own its ratable share of the
subsidiary's assets, and a corporation shall be considered a subsidiary if its
parent owns fifty percent (50%) or more of the combined voting power of all
classes of stock entitled to vote or fifty percent (50%) or more of the total
value of shares of all classes of stock outstanding. In determining total
assets, there shall be excluded cash and cash items (including receivables),
government securities, and assets acquired (through incurring indebtedness or
otherwise) for purposes of ceasing to be an investment company.
16. Neither Phoenix nor any Phoenix Related Party has at any time
owned (directly or indirectly) any Emerald stock during the five (5) year period
ending at the Effective Time.
17. The payment of cash to stockholders of Emerald in lieu of
fractional shares of Phoenix stock will not be separately bargained for
consideration, but will be undertaken solely for the purpose of avoiding the
expense and inconvenience of issuing and transferring fractional shares.
18. The Agreement (including all exhibits and schedules attached
thereto) represents the entire understanding of Merger Sub and Phoenix with
respect to the Merger.
IN WITNESS WHEREOF, Xxxxxxx has caused this Certificate to be duly
executed this __th day of _________, 2001.
PARADYNE NETWORKS, INC.
By:
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Name:
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Title:
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