Filed by: Paradyne Networks, Inc.
Pursuant to Rule 425 under the Securities
Act of 1933 and deemed filed pursuant to
Rule 14a-6(b) under the Securities Exchange Act of 1934
Subject Company: Elastic Networks Inc.
Commission File No.: 333-76814
Date: February 28, 2002
Paradyne Networks, Inc. ("Paradyne") has previously entered into that
certain Agreement and Plan of Merger, dated December 27, 2001, as amended on
January 4, 2002 (the "Merger Agreement"), by and among Paradyne, Phoenix Merger
Sub, Inc., a wholly owned subsidiary of Paradyne ("Merger Sub"), and Elastic
Networks Inc. ("Elastic"), pursuant to which, and subject to the terms and
conditions contained therein, Paradyne will acquire Elastic by means of the
merger of Sub with and into Elastic (the "Merger"). Pursuant to the Merger
Agreement, Elastic stockholders will receive a fraction of a share of Paradyne
common stock (the "Exchange Ratio") in exchange for each share of Elastic common
stock they own that is outstanding at the effective time of the Merger. The
Merger Agreement is incorporated herein by reference to Exhibit 2 to Paradyne's
Current Report on Form 8-K filed on December 31, 2001 and Exhibit 2.1 to
Elastic's Current Report on Form 8-K/A filed on January 8, 2002.
The Exchange Ratio is to be determined based in part on the average
closing price (the "Average Closing Price") of Paradyne common stock on the
Nasdaq National Market for the ten trading days ending the two trading days
prior to closing of the Merger, which is currently expected to be completed on
March 5, 2002 after the Elastic and Paradyne stockholder meetings or as soon
thereafter as possible, and based in part on the amount of Elastic's net
adjusted working capital as of February 15, 2002 (the "Closing Net Adjusted
Working Capital Amount").
On February 28, 2002, Paradyne and Elastic issued a press release
announcing that the Closing Net Adjusted Working Capital Amount was within
$100,000 of the Targeted Net Adjusted Working Capital Amount (as defined in the
Merger Agreement) of $16,820,000. As a result, the Adjustment Factor (as defined
in the Merger Agreement) to be used for purposes of determining the Exchange
Ratio will be 1.0. The Adjustment Factor will be multiplied by a fraction
determined based on the Average Closing Price, all as set forth in more detail
in the Merger Agreement. The text of the press release is filed herewith as
Appendix A and is incorporated herein by reference.
The material contained in this filing contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as
applicable, particularly those statements regarding the effects of the
acquisition of Elastic Networks Inc. ("Elastic") by Paradyne, and those preceded
by, followed by or that otherwise include the words "believes," "expects,"
"anticipates," "intends," "estimates," or similar expressions. For
those statements, Paradyne claims the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995. Forward-looking statements relating to expectations about future
results or events are based upon information available to Paradyne as of today's
date, and Paradyne does not assume any obligation to update any of these
statements. The forward-looking statements are not guarantees of the future
performance of Paradyne or the combined company and actual results may vary
materially from the results and expectations discussed. For instance, while
Paradyne and Elastic have entered into a definitive agreement, there is no
assurance that the parties will complete the transaction. In the event the
companies do not receive necessary stockholder or other approvals or fail to
satisfy conditions to closing, the transaction will terminate. Additional risks
and uncertainties related to the acquisition include, but are not limited to,
conditions in the financial markets relevant to the proposed acquisition, the
successful integration of Elastic into Paradyne's business, and each company's
ability to compete in the highly competitive data communications equipment
industry. The revenues and earnings of Paradyne and the combined company and
their ability to achieve their planned business objectives will be subject to a
number of factors that make estimates of future operating results uncertain.
These factors include: the timing and amount of expense reduction; the
uncertainty of litigation, including putative stockholder class actions; a
reliance on international sales; rapid technological change that could render
Paradyne's or the combined company's products obsolete; the uncertain acceptance
of new telecommunications services based on DSL; substantial dependence on
network service providers who may reduce or discontinue their purchase of
products or services at any time; the timing and amount of, or cancellation or
rescheduling of, orders of Paradyne's or the combined company's products to
existing and new customers; possible inability to sustain revenue growth or
profitability; dependence on only a few customers for a substantial portion of
Paradyne's or the combined company's revenue; highly competitive markets;
reliance on sales of access products to BB Technologies Corporation (a newly
formed subsidiary of SOFTBANK CORP.), Lucent Technologies and Avaya Inc.;
dependence on sole and single-source suppliers and the reliability of the raw
materials supplied by them to manufacture products under customer contracts; a
long and unpredictable sales cycle; the number of DSL lines actually deployed by
BB Technologies Corporation and other DSL customers as compared to forecasts;
Paradyne's or the combined company's ability to manufacture adequate quantities
of products at forecasted costs under customer contracts; Paradyne's or the
combined company's ability to manufacture products in accordance with its
published specifications; and other risks identified from time to time in
Paradyne's and Elastic's SEC reports and public announcements.
The proposed transaction will be submitted to Paradyne's and
Elastic's stockholders for their consideration. Paradyne has filed with the SEC
a registration statement containing a definitive joint proxy
statement-prospectus regarding the proposed transaction, as well as other
relevant documents concerning the proposed transaction. STOCKHOLDERS OF PARADYNE
AND ELASTIC ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT-PROSPECTUS
AND ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS
OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.
THE DEFINITIVE JOINT PROXY STATEMENT-PROSPECTUS HAS BEEN
SENT TO PARADYNE'S AND ELASTIC'S STOCKHOLDERS SEEKING THEIR APPROVAL OF THE
PROPOSED TRANSACTION. YOU CAN OBTAIN FREE COPIES OF THESE DOCUMENTS AT THE SEC'S
INTERNET SITE (HTTP://WWW.SEC.GOV). COPIES OF THE DEFINITIVE JOINT PROXY
STATEMENT-PROSPECTUS AND THE SEC FILINGS THAT ARE INCORPORATED BY REFERENCE IN
THE DEFINITIVE JOINT PROXY STATEMENT-PROSPECTUS CAN ALSO BE OBTAINED, WITHOUT
CHARGE, BY DIRECTING A REQUEST TO: PARADYNE, INVESTOR RELATIONS 727-530-8082.
Paradyne and Elastic and their respective directors and executive
officers may be deemed to be participants in the solicitation of proxies from
the stockholders of Paradyne and Elastic in connection with the acquisition.
Information regarding those participants is included in the proxy statements for
the Paradyne and Elastic annual stockholders' meetings for 2001, which are
available at the SEC's website. Additional information regarding the interests
of those participants may be obtained by reading the definitive joint proxy
statement-prospectus regarding the proposed transaction.
APPENDIX A
FOR MORE INFORMATION, PLEASE CONTACT:
PARADYNE NETWORKS, INC. ELASTIC NETWORKS INC.
Investor Relations Investor Relations
727-530-8082 irinfo@elastic.com
ir@paradyne.com
Press Relations Press Relations
Jennifer Righi Darrell Borne
727-530-2529 678-297-3100
jrighi@paradyne.com dborne@elastic.com
PARADYNE AND ELASTIC ANNOUNCE ADJUSTMENT FACTOR TO BE USED
IN THE ACQUISITION OF ELASTIC
LARGO, FLORIDA AND ATLANTA, GEORGIA - FEBRUARY 28, 2002 - Paradyne Networks,
Inc. (NASDAQ:PDYN) and Elastic Networks Inc. (NASDAQ:ELAS) today announced that
in accordance with the terms of the merger agreement between the companies and
based upon the closing net adjusted working capital amount as defined therein,
the adjustment factor to be used in the final share calculation will be 1.0.
The adjustment factor was determined by comparing Elastic's "closing net
adjusted working capital amount" to Elastic's "targeted net adjusted working
capital amount." Using an adjustment date of February 15, 2002 (based on an
expected closing date of March 5, 2002), the targeted net adjusted working
capital amount was $16,820,000. Elastic's closing net adjusted working capital
amount as of February 15, 2002 was within $100,000 of the targeted amount, and,
as a result, pursuant to the terms of the merger agreement, the adjustment
factor will be 1.0.
ABOUT ELASTIC
Elastic is a broadband leader in first-mile Ethernet access solutions, deploying
its patented EtherLoop technology across a variety of products and high-speed
multi-media applications. With the introduction of the Storm System(TM) family
of intelligent IP-over-Ethernet products, Elastic has successfully addressed the
needs of the carrier, enterprise, MDU/MTU and hospitality markets for high-speed
first-mile access solutions that deliver top quality service to end users while
eliminating costly deployment and complicated support issues for service
providers.
Additionally, Elastic is building strategic relationships with distributor, chip
manufacturing and data networking partners.
The company has offices in Alpharetta, Georgia, and Hong Kong. For more
information about Elastic and its patented EtherLoop technology and products,
contact Elastic's U.S. headquarters in Alpharetta, Georgia at 678-297-3100.
ABOUT PARADYNE
Paradyne is a leading developer of carrier-class, high-speed network access
solutions. A recognized market leader in digital subscriber line (DSL) and
service level management (SLM) solutions, Paradyne markets its award-winning
Hotwire(R) DSL, ReachDSL(TM) and FrameSaver(R) Service Level Management systems
to service providers and busiNess customers. More than 20,100 Hotwire DSL Access
Multiplexers (DSLAMs) have been deployed around the world. Paradyne has shipped
over 296,000 ports of its unique ReachDSL solution, giving carriers the ability
to deliver broadband over almost any copper lines, even those that are very long
or severely impaired. Paradyne's SLM solutions have been deployed into
mission-critical enterprise networks by the leading carriers, including AT&T,
Bell Canada, Broadwing, Intermedia, SBC, Sprint, Verizon, and WorldCom.
Paradyne is headquartered in the Tampa Bay area. More information about Paradyne
is available by calling 1-800-PARADYNE (U.S. and Canada) or 1-727-530-8623
worldwide.
###
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
Statements in this press release regarding Paradyne's and Elastic's business,
which are not historical facts, are "forward-looking statements" that involve
risks and uncertainties. For a discussion of such risks and uncertainties, which
could cause actual results to differ from those contained in the forward-looking
statements as well as other information regarding the proposed acquisition of
Elastic, please refer to Paradyne's and Elastic's joint proxy
statement-prospectus dated January 30, 2002, Paradyne's Current Report on Form
8-K dated January 16, 2002 and Paradyne's and Elastic's other filings with the
Securities and Exchange Commission.