-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QsjzA+y8RIuZfDUbaoy0aA/nnoCURvfMn5A8dFCZ1Ya++HDLcHuYxbWyqejtBKYE AdyKy9tW69GD9wECfvkpJQ== 0000801448-97-000010.txt : 19971015 0000801448-97-000010.hdr.sgml : 19971015 ACCESSION NUMBER: 0000801448-97-000010 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19971231 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19971014 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ELCOTEL INC CENTRAL INDEX KEY: 0000801448 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 592518405 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-15205 FILM NUMBER: 97695375 BUSINESS ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 BUSINESS PHONE: 8137580389 MAIL ADDRESS: STREET 1: 6428 PARKLAND DR CITY: SARASOTA STATE: FL ZIP: 34243 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of Earliest Event Reported) September 30, 1997 ELCOTEL, INC. (Exact name of registrant as specified in its charter) Delaware 0-15205 59-2518405 ----------------- --------- ------------ (State or other (Commission (IRS Employer jurisdiction File Number) Identification No.) of incorporation) 6428 Parkland Drive, Sarasota, Florida 34243 --------------------------------------------------- (Address of principal executive offices) (Zip Code) (941) 758-0389 --------------------- (Registrant's telephone number, including area code) ITEM 2. Acquisition or Disposition of Assets. On September 30, 1997, Elcotel Direct, Inc. ("Direct"), a wholly owned subsidiary of Elcotel, acquired from Lucent Technologies Inc. ("Lucent") certain assets related to Lucent's payphone manufacturing and component parts business (the "Lucent Acquisition"). The purchase price, which was determined by arms' length negotiations, was approximately $6.0 million, subject to adjustment based upon a final inventory valuation. Direct acquired from Lucent the inventory, machinery, equipment, tooling and certain other assets related to the payphone manufacturing and component parts business conducted by Lucent, and Lucent licensed to Elcotel certain patent and other intellectual property rights related to such business. Direct did not acquire any employees or facilities of Lucent pursuant to such acquisition. As part of the acquisition, Direct is expected to enter into a contract with a Taiwanese manufacturer that had been Lucent's manufacturing source for its payphones. Elcotel borrowed $6,850,000 from NationsBank, N.A. in connection with financing the Lucent Acquisition and the purchase of certain capital equipment. The customers for Lucent's payphones and component parts consisted principally of regional bell operating companies and other regulated telephone companies. Since 1995, Elcotel and Lucent had been involved in a strategic marketing alliance primarily directed to international markets. In addition, Elcotel produced and sold to Lucent a privately labeled Elcotel payphone using Lucent's payphone housing and Elcotel's payphone network management system which Lucent incorporated into its own payphone systems. Both companies marketed that product in international markets. In addition, Lucent and Elcotel jointly marketed their respective products in the United States, including the private labeled Elcotel payphone. In January 1997, Lucent decided to cease its international business and agreed to assign its customer contracts with respect to such international business to Elcotel for completion of those orders, subject to the customer's approval. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits. (a) Financial Statements of businesses acquired Not applicable since the assets acquired did not constitute a business. (b) Pro forma financial information Not applicable since the assets acquired did not constitute a business. (c) Exhibits Exhibit 2.1 Agreement for the Purchase and Sale of Assets dated September 30, 1997 between Elcotel Direct, Inc. and Lucent Technologies Inc. * Exhibit 2.2 Technology Transfer Agreement dated September 30, 1997 between Elcotel, Inc. and Lucent Technologies Inc. * Exhibit 2.3 Patent License Agreement dated September 30, 1997 between Elcotel, Inc. and Lucent Technologies Inc. * Exhibit 99.1 Press Release of Elcotel, Inc. dated October 2, 1997 * Pursuant to Item 601(b)(2) of Regulation S-K, the schedules and similar attachments to this exhibit have been omitted. Elcotel, Inc. agrees to furnish supplementally such schedules and attachments to the Commission upon request. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ELCOTEL, INC. Dated: October 14, 1997 By: /s/ Ronald M. Tobin ------------------------- Ronald M. Tobin Chief Financial Officer INDEX TO EXHIBITS ----------------- Exhibit No. Description Page No. - ----------- ------------ -------- 2.1 Agreement for the Purchase and Sale of Assets dated September 30, 1997 between Elcotel Direct, Inc. and Lucent Technologies Inc.** 2.2 Technology Transfer Agreement dated September 30, 1997 between Elcotel, Inc. and Lucent Technologies Inc.** 2.3 Patent License Agreement dated September 30, 1997 between Elcotel, Inc. and Lucent Technologies Inc.** 99.1 Press Release of Elcotel, Inc. dated October 2, 1997 ** Portions have been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. EX-2.1 2 AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS EXHIBIT 2.1 AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS by and between LUCENT TECHNOLOGIES INC. as Seller and ELCOTEL DIRECT, INC. as Buyer dated as of September 30, 1997 TABLE OF CONTENTS 1. Definitions 1 1.1 Defined Terms 1 1.2 Other Definitional and Interpretive Matters 2. Purchase and Sale of Assets 7 2.1 Purchased Assets 7 2.2 Excluded Assets 8 2.3 Purchase Price 9 2.4 Assumed Liabilities 11 2.5 Excluded Liabilities 11 2.6 Consent of Third Parties; Further Assurances 12 2.7 No Licenses 12 2.8 Bulk Sales Law 13 2.9 Taxes 13 2.10 Employees 13 3. Representations and Warranties of Seller 13 3.1 Organization and Authority 13 3.2 Authorization; Binding Obligations 13 3.3 No Violations 14 3.4 Assets 14 3.5 Personal Property 14 3.6 Permits, Licenses 15 3.7 Compliance With Laws and Litigation 15 3.8 Contracts 15 3.9 Brokers 15 3.10 Historical Financial Information 16 3.11 Products Liability 16 3.12 No Other Representations or Warranties 16 4. Representations and Warranties of Buyer 17 4.1 Organization and Authority 17 4.2 Authorization; Binding Obligations 17 4.3 No Violations 17 4.4 Brokers 18 4.5 Sufficiency of Funds 18 5. Certain Covenants 18 5.1 Information 18 5.2 Preservation of Assets 19 5.3 Sale by Buyer of Inventory Marked With Seller's Name 19 5.4 Collateral Agreements 20 5.5 Regulatory Compliance 20 5.6 Contacts with Suppliers, Employees and Customers 21 5.7 Negotiations 21 5.8 Transition Plan; Interim Operation 21 5.9 Customer Orders. 22 5.10 Non-Compete. 23 6. Confidential Nature of Information 24 6.1 Confidentiality Agreement 24 6.2 Seller's Proprietary Information 24 7. Closing 25 7.1 Documents to be Delivered by Seller 25 7.2 Documents to be Delivered by Buyer 26 7.3 Closing Date 27 7.4 Contemporaneous Effectiveness 27 8. Conditions Precedent to Closing 27 8.1 General Conditions 27 8.2 Conditions Precedent to Buyer's Obligations 27 8.3 Conditions Precedent to Seller's Obligations 28 9. Status of Agreements 29 9.1 Effect of Breach 29 9.2 Survival of Representations and Warranties 29 9.3 General Agreement to Indemnify 29 9.4 Procedures for Indemnification 31 9.5 Arbitration; Choice of Law 32 10. Miscellaneous Provisions 34 10.1 Notices 34 10.2 Expenses 34 10.3 Entire Agreement; Modification 34 10.4 Assignment; Binding Effect; Severability 35 10.5 Governing Law 35 10.6 Execution in Counterparts 35 10.7 Public Announcement 35 10.8 No Third-Party Beneficiaries 35 11. Termination and Waiver 36 11.1 Termination 36 11.2 Effect of Termination 36 11.3 Waiver of Agreement 36 11.4 Amendment of Agreement 37 Schedules Schedule 1.1A Business Locations Schedule 1.1C Supplier Locations Schedule 1.2 Certain Persons Schedule 2.1(a) Principal Equipment Schedule 2.1(b) Inventory Schedule 2.1(c) Contracts Schedule 2.1(d) Licenses Schedule 2.1(f) Governmental Permits Schedule 2.1(h) Additional Excluded Assets Schedule 3.3 Certain Violations Schedule 3.4 Title to Assets; Location of Inventory Schedule 3.5 Personal Property Schedule 3.6 Permits, Licenses Schedule 3.7(a) Compliance With Laws Schedule 3.7(b) Litigation Schedule 3.10 Financial Information Schedule 3.11 Product Liability Claims Schedule 4.3 Certain Violations; Buyer's Consents Schedule 5.2 Seller's Exceptions to Covenant to Operate Business in Ordinary Course Exhibits Exhibit A-1 Form of Technology Transfer Agreement Exhibit A-2 Form of Patent License Agreement Exhibit B Form of Assignment and Assumption Agreement Exhibit C Form of Bill of Sale Exhibit D Use Guidelines AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS THIS AGREEMENT FOR THE PURCHASE AND SALE OF ASSETS (this "Agreement") is made as of September 30, 1997 by and between Lucent Technologies Inc., a Delaware corporation, having a principal office at 600-700 Mountain Avenue, Murray Hill, N.J. 07974- 0636 ("Seller"), and Elcotel Direct, Inc., a Delaware corporation, having a principal office at 6428 Parkland Drive, Sarasota, Florida 34243 ("Buyer"). WHEREAS, Seller is, among other things, engaged through its Network Systems Business Unit in the development, manufacture and sale of Business Products (as hereinafter defined); WHEREAS, Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, certain assets relating to the manufacture and sale of Business Products on the terms and subject to the conditions set forth herein; WHEREAS, Seller wishes to transfer to Buyer, and Buyer is willing to assume, specified Assumed Liabilities (as hereinafter defined) on the terms and subject to the conditions set forth herein; and WHEREAS, Seller and Buyer wish to enter into certain collateral agreements as hereinafter specified, namely a Technology Transfer Agreement and a Patent License Agreement. NOW THEREFORE, in consideration of the mutual agreements and covenants herein contained and intending to be legally bound hereby, the parties agree as follows: 1. Definitions 1.1 Defined Terms For the purposes of this Agreement, the following words and phrases shall have the following meanings: "Accounts Receivable" means all the accounts, notes and finance receivables generated by the Business, including all funds, refunds, receivables, credits, offsets, or reimbursements, claims, debts, obligations and such other rights, together with all accrued interest thereon, in each case existing as of the close of business on the Closing Date. "Additional Excluded Assets" shall mean the assets and equipment described on Schedule 2.1(h) . 1 "Affiliate" of any Person means any Person, directly or indirectly controlled by, controlling or under common control with, such Person. For purposes of this Agreement, "control" means the power to direct the management and policies of a Person, whether through the ownership of voting securities, by agreement or otherwise. "Asset Acquisition Statement" has the meaning assigned in Section 2.3(b). "Assumed Liabilities" has the meaning assigned in Section 2.4. "Assumption Agreement" has the meaning assigned by Section 2.4. "Best Efforts" means that the obligated party is required to make a diligent, reasonable and good faith effort to accomplish the applicable objective. Such obligation, however, does not require an expenditure of funds or the incurrence of a liability on the part of the obligated party, nor does it require that the obligated party act in a manner that would be contrary to normal commercial practices in order to accomplish the objective. The fact that the objective is not actually accomplished is no indication that the obligated party did not in fact utilize its Best Efforts in attempting to accomplish the objective. "Business" means the manufacturing, marketing, selling and repairing Business Products as carried on by Seller immediately prior to the date of this Agreement except for the activities of the Lucent Global Provisioning Centers Public Terminals Refurbishment Operations as currently conducted by Seller. "Business Day" means a day that is not a Saturday, a Sunday or a statutory or civic holiday in the state of New York or any other day on which the principal offices of either Seller or Buyer are closed or become closed prior to 2:00 p.m. local time whether in accordance with established company policy or as a result of unanticipated events, including adverse weather conditions. "Business Locations" means the locations set forth on Schedule 1.1A. "Business Product" means Public Terminals and related components of the type set forth in Schedule 3 of the Technology Transfer Agreement as amended or added to pursuant to the terms of the Technology Transfer Agreement. "Business Records" means all books, files (including customer and supplier files), records, mailing lists, customer lists, vendor data, equipment maintenance records, warranty information, manuals of operation or business procedures, and other similar information, relating primarily to the Business or the Purchased Assets but excludes any Proprietary Information of Seller covered by the Technology Transfer Agreement or the Patent License Agreement, which shall be governed by the terms of such agreements. "Closing" means the closing of the transactions described in Article 7. 2 "Closing Date" means the date of the Closing as determined pursuant to Section 7.3. "Code" means the Internal Revenue Code of 1986, as amended. "Collateral Agreements" means the agreements to be entered into between Buyer and/or its Affiliates and Seller that are listed in Section 5.4. "Contracts" means Third-Party contracts, agreements, leases, supply contracts, purchase orders, sales orders and instruments relating exclusively to the manufacture, marketing, sale or repair of the Business Products, in effect on the Closing Date to which Seller is a party, identified on Schedule 2.1(c), (i) for the lease of machinery and equipment or furniture and office equipment, (ii) for the provision of goods or services, (iii) for the sale of goods or performance of services and (iv) for the sale and distribution of the Business Products but in each case only to the extent assignable. "Counsel for Buyer" means Schnader Harrison Segal & Lewis LLP. "Counsel for Seller" means a Corporate Counsel of Seller. "Encumbrance" means any lien, claim, charge, security interest, mortgage, pledge, easement, conditional sale or other title retention agreement, covenant or other similar restrictions affecting the Purchased Assets. "Environmental Law" means any local, county, state and/or federal law or regulation that governs the existence of or provides a remedy for release of Hazardous Substances, the protection of persons, natural resources or the environment, the management of Hazardous Substances, or other activities involving Hazardous Substances including federal, state, local and/or county laws or regulations, in each case as in effect on or prior to the Closing Date or, with respect to representations and warranties made on the date hereof, on or prior to the date hereof. "Excluded Assets" means the properties and assets of the Business excluded from the Purchased Assets by Section 2.2. "Excluded Liabilities" means the liabilities and obligations that are not assumed by Buyer as provided in Section 2.5. "Governmental Body" means any court, government (foreign, federal, state or local), department, commission, board, agency, bureau, official or other regulatory, administrative or governmental authority. "Governmental Permits" means all the governmental permits and licenses, certificates of inspection, approvals or other authorizations issued to Seller that primarily relate to the Business. 3 "Hazardous Substance" means any substance that is regulated under any Environmental Law or is deemed by any Environmental Law to be "hazardous," "toxic," a "contaminant," "waste," a source of contamination or a pollutant. "Inventory" means all inventory, wherever located, including raw materials, work in process, recycled materials, finished products and inventoriable supplies, and noncapital spare parts owned by Seller and used or held for use exclusively in the conduct of the Business, but specifically including those items of the type and nature of the materials identified in the summary list set forth on Schedule 2.1(b). "IRS" means the U.S. Internal Revenue Service. "Licenses" means all licenses, agreements and other arrangements identified on Schedule 2.1(d) under which Seller has the right to use any Proprietary Information of a Third Party to the extent used or held for use exclusively in the operation of the Principal Equipment or Inventory, but not the Nonassignable Licenses. "Lucent Global Provisioning Centers Public Terminals Refurbishment Operations" means the refurbishment operations of Seller which is currently conducted in Merriam, Kansas. "Losses" has the meaning assigned by Section 9.3(a). "Material Adverse Effect" means any material adverse change or effect (or series of related changes or effects) on the Business or on the use of the Purchased Assets taken as a whole; provided, however, that events, circumstances or conditions resulting from changes, developments or circumstances in worldwide or national political, economic or regulatory conditions that adversely affect a broad group of industries generally, in each case where such events, circumstances or conditions do not adversely affect the Purchased Assets disproportionately, shall not constitute a Material Adverse Effect; and provided further, that the effects of the announcement of or the merger of Buyer and Technology Service Group, Inc. shall not constitute a Material Adverse Effect. "Nonassignable Assets" has the meaning assigned by Section 2.6(b). "Nonassignable Licenses" means licenses of Proprietary Information to which Seller or an Affiliate of Seller is the licensee and that are not assignable to Buyer. "Patent License Agreement" means the agreement between Seller, as licensor, and Elcotel, Inc., as licensee, for the license of certain patents of Seller, in substantially the form set forth as Exhibit A-2. "Permitted Encumbrances" means the (i) statutory liens for taxes not yet due and payable, (ii) statutory liens of landlords, liens of carriers, warehouseman, mechanics and material men incurred in the ordinary course of business, for sums not yet due and payable, and (iii) existing licenses under Seller's Proprietary Information. 4 "Person" means any individual, corporation, partnership, firm, association, joint venture, joint stock company, trust, unincorporated organization or other entity, or any government or regulatory, administrative or political subdivision or agency, department or instrumentality thereof. "Principal Equipment" means the machinery and equipment, fixtures, improvements, motorized lifting or transporting equipment, tooling, supplies, tools, dies and similar capital items identified on Schedule 2.1(a). Principal Equipment includes rights to the warranties received from the manufacturers and distributors of said items and to any related claims, credits, rights of recovery and setoff with respect to said items, but only to the extent such rights are assignable. "Principal Manufacturing Location" means the facility of Taiwan Telecommunications Industry Co., Ltd. located at No. 4, Min Hsian Street, Chung Ho, Taipei Hsein, Taiwan, 23510, ROC and the various manufacturing locations of its suppliers (the names and addresses of which are set forth on Schedule 1.1C) at which certain of the Principal Equipment is located and at which Business Products and/or components are manufactured for Seller. "Proprietary Information" means all information (whether or not protectable by patent, copyright, mask works or trade secret rights) not generally known to the public (except in the case of patents), including, but not limited to, works of authorship, inventions, discoveries, contract terms and conditions (where protected by confidentiality obligations) patentable subject matter, patents, patent applications, industrial models, industrial designs, trade secrets, trade secret rights, software, works, copyrightable subject matters, copyright rights and registrations, mask works, know-how and show-how, trademarks, trade names, service marks, emblems, logos, insignia and related marks and registrations, specifications, technical manuals and data, libraries, blueprints, drawings, proprietary processes, product information and development work-in-process. "Purchased Assets" has the meaning assigned by Section 2.1. "Purchase Price" means the payment to be made by Buyer in consideration for the Purchased Assets as provided in Section 2.3. "Senior Executives" means, in the case of Seller, Robert D.Van Saun, and in the case of Buyer, Tracey Gray. "Technology Transfer Agreement" means the agreement between Seller, as transferor and licensor, and Elcotel, Inc., as transferee and licensee, for the transfer and license of certain intellectual property of Seller, in substantially the form set forth as Exhibit A-1. 5 "Third Party" means any Person not an Affiliate of the other referenced Person or Persons. "Third-Party Claim" has the meaning assigned by Section 9.4(a). 1.2 Other Definitional and Interpretive Matters Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply: Accounting Terms. All accounting terms not specifically defined in this Agreement shall be construed in accordance with U.S. Generally Accepted Accounting Principles. Calculation of Time Period. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day. Gender and Number. Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa. Headings. The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement. All references in this Agreement to any "Section" are to the corresponding Section of this Agreement unless otherwise specified. Herein. The words such as "herein," "hereinafter," "hereof," and "hereunder" refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires. Including. The word "including" or any variation thereof means "including, without limitation" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it. Knowledge and words of similar import shall mean, with respect to any Person, actual knowledge of a particular fact or other matter being possessed by an officer or other individual now or formerly having principal responsibility for the Business or related administrative function or any other individual principally involved in the events and discussions leading up to this Agreement including the persons set forth on Schedule 1.2. 6 Materiality. Any reference to "material" in relation to the Business, irrespective of the context, shall mean material in relation to the Business taken as a whole; any reference to "material" in relation to Seller, irrespective of the context, shall mean material in relation to the business operations of Seller, taken as a whole, and any reference to "material" in relation to Buyer, irrespective of the context, shall similarly mean material in relation to the business operations of Buyer, taken as a whole. Schedules and Exhibits. The Schedules and Exhibits attached to this Agreement shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein. 2. Purchase and Sale of Assets 2.1 Purchased Assets Upon the terms and subject to the conditions of this Agreement and in reliance on the representations and warranties contained herein, on the Closing Date, Seller shall sell, transfer, assign, convey and deliver to Buyer, and Buyer shall purchase, acquire and accept from Seller, all of the right, title and interest in, to and under the Purchased Assets that Seller possesses and has the right to transfer as the same shall exist on the Closing Date. For purposes of this Agreement, "Purchased Assets" shall mean all the assets, properties and rights set forth or described in Sections 2.1(a) through 2.1(g), inclusive (except in each case for the Excluded Assets), whether or not any of such assets, properties or rights have any value for accounting purposes or are carried or reflected on or specifically referred to in Seller's books or financial statements: (a) the Principal Equipment; (b) all Inventory and any rights of Seller to the warranties received from suppliers and any related claims, credits, rights of recovery and setoff with respect to such Inventory, but only to the extent such rights are assignable; (c) all of Seller's rights under the Contracts; (d) all of Seller's rights under the Licenses; (e) the Business Records; (f) the Governmental Permits, but only to the extent that such Governmental Permits are assignable or transferable to the Buyer identified on Schedule 2.1(f); and (g) rights set forth in the Technology Transfer Agreement and Patent License Agreement. 7 The term "Purchased Assets" when used in this Article 2 with respect to any date prior to the Closing Date shall be deemed to refer to the properties and assets of Seller generally described as "Purchased Assets" as the same shall exist at the Closing Date. 2.2 Excluded Assets Notwithstanding the provisions of Section 2.1, it is hereby expressly acknowledged and agreed that the Purchased Assets shall not include, and Seller is not selling, transferring, assigning, conveying or delivering to Buyer, and Buyer is not purchasing, acquiring or accepting from Seller, the following (the rights, properties and assets expressly excluded by this Section 2.2 or otherwise excluded by the terms of Section 2.1 from the Purchased Assets being referred to herein as the "Excluded Assets"): (a) any of Seller's cash, Accounts Receivable, bank deposits or similar cash items; (b) any Proprietary Information of Seller other than the Business Records or as expressly provided under the Technology Transfer Agreement and Patent License Agreement; (c) (i) Seller's personnel records; (ii) any other books and records that Seller is required by law to retain or that Seller determines are necessary or advisable to retain; provided, however, that Buyer shall have the right to make copies, at Seller's expense, of any portions of such retained books and records that relate to the Purchased Assets; and (iii) any information management system of Seller other than those used exclusively with the Purchased Assets or the Business; (d) any claim, right or interest of Seller in or to any refund, rebate, abatement or other recovery for U.S. federal, state, local or foreign net income, franchise, gross income, alternative or add-on minimum, gross income, gross receipts, sales, use, ad valorem, transfer, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, environmental, windfall profit, real or personal property taxes, customs, duties or other taxes, governmental fees or other like assessment or charges of any kind whatsoever, together with any interest due Seller thereon, for any periods prior to the Closing Date; (e) all "AT&T" or "Lucent Technologies" marked sales and marketing or packaging materials, samples, prototypes, other similar AT&T or Lucent Technologies-identified sales and marketing or packaging materials and any marketing studies, except to the extent such materials are sold or used by Buyer in the ordinary course of business in accordance with the terms of Section 5.3; (f) any machinery and equipment, fixtures, improvements, motorized lifting or transporting equipment, tooling, supplies, tools, dies and any other tools and equipment that is not Principal Equipment; 8 (g) all of the Seller's rights, claims or causes of action against Third Parties relating to the assets, properties, business or operations of the Seller arising out of transactions occurring prior to the Closing Date (other than with respect to the warranties described in the definition of Principal Equipment); (h) the Additional Excluded Assets; and (i) all other assets, properties, interests and rights of Seller not identified in Section 2.1. 2.3 Purchase Price (a) In consideration of the sale, transfer, assignment, conveyance and delivery by Seller of the Purchased Assets to Buyer, and in addition to assuming the Assumed Liabilities, Buyer shall pay to Seller: (i) at the Closing two million forty one thousand seventy five Dollars ($2,041,075) in cash (the "Purchase Price") by wire transfer of immediately available funds to the account of Seller designated by Seller's written instructions; and (ii) [ * ] of the Final Inventory Amount (as defined in Section 2.3(c)). With respect to item (ii), Buyer shall pay at the Closing [ * ] of the Estimated Inventory Amount (as defined in Section 2.3(c)) (the "Closing Inventory Payment") by wire transfer of immediately available funds to the account of Seller designated by Seller's written instructions. (b) Buyer and Seller recognize their mutual obligations pursuant to Section 1060 of the Code to timely file IRS Form 8594 (the "Asset Acquisition Statement") with each of their respective federal income tax returns. Accordingly, within 30 days after the Closing Date, Buyer and Seller agree to attempt in good faith to (i) enter into a Purchase Price Allocation Agreement providing for the allocation of the Tax Purchase Price (as defined therein) among the Purchased Assets consistent with the provisions of Section 1060 of the Code and the Treasury Regulations thereunder and (ii) cooperate in the preparation of the Asset Acquisition Statement for timely filing in each of their respective federal income tax returns. (c) Prior to the Closing Date, Seller shall provide Buyer with a good faith estimate of the dollar amount of the Inventory (the "Estimated Inventory Amount"). Within five (5) Business Days after the Closing Date, Seller shall perform a physical inventory of the Inventory in order to determine the total quantity thereof. Seller shall provide Buyer full access to the Inventory in order for Buyer to monitor Seller's physical inventory thereof. Within five (5) Business Days after the end of the aforesaid period of five (5) Business Days (the "Inventory Count Period"), Seller and Buyer shall attempt to agree upon the total quantity of the Inventory. Following the Inventory Count Period, Seller shall have fifteen (15) Business Days to calculate the value of the Inventory and shall within such time period prepare and deliver to Buyer a computation of the value of the Inventory (the "Inventory Value") and either deliver or make available - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 9 to Buyer supporting documentation in sufficient detail to enable Buyer to prepare its own computation of the Inventory Value (the "Inventory Value Calculation"). "Inventory Value" shall mean the quantity of each Inventory item (excluding defective items) multiplied by Seller's standard cost (as determined in accordance with GAAP) for such item. Buyer shall then review Seller's Inventory Value Calculation, and Seller and Buyer shall use their best efforts to attempt to agree upon the Inventory Value. Seller shall make available to Buyer Seller's books and records with respect to the Inventory and provide to each other such assistance as is reasonably necessary in connection with Buyer's review of Seller's determination of the quantity of the Inventory and the Inventory Value. Within ten (10) Business Days after the delivery by Seller to Buyer of the Inventory Value Calculation (the "Inventory Disagreement Period"), Buyer shall notify Seller in writing as to any disagreement it has with respect to all or any portion of the Inventory Value Calculation and shall identify in detail the nature and extent of Buyer's disagreement with the Inventory Value Calculation (called an "Inventory Disagreement") and, to the extent possible, shall indicate Buyer's computation of the Inventory Value and, to the extent not then possible, Buyer shall provide its computation of the Inventory Value within five (5) Business Days thereafter. In the event that Buyer does not notify Seller of an Inventory Disagreement within the Inventory Disagreement Period, Buyer shall be deemed to have agreed with the Inventory Value Calculation ("Final Inventory Amount"). In the event that Buyer does notify Seller of an Inventory Disagreement and the parties are unable to resolve such Inventory Disagreement within fifteen (15) business Days of the receipt of such notice of Inventory Disagreement by Seller, Buyer and Seller shall forthwith jointly retain an individual at an independent accounting firm mutually agreed upon by the parties (the "Arbitrator") to settle the Inventory Disagreement. The Arbitrator shall be directed to use every effort to settle the Inventory Disagreement within fifteen (15) Business Days of being retained and shall, to the extent the Arbitrator feels it is necessary, (i) after hearing any evidence and representations that the parties may submit, make any determination with respect to the Inventory Disagreement within the range determined as the Inventory Value computed by Seller and the Inventory Value computed by Buyer and reduce the same to writing and deliver one copy thereof to each of the parties hereto and (ii) determine any matter of procedure for settling the Inventory Disagreement not specified herein. In making any determination with respect to the Inventory Disagreement within the range determined as the Inventory Value computed by Seller and the Inventory Value computed by Buyer, the Arbitrator shall be governed by the provisions of this Agreement and, where not in conflict with this Agreement, by GAAP. The Arbitrator shall be given full access during normal business hours to, and copies of, the books and records of each party relating to the Inventory and the Inventory Value. Any decision of the Arbitrator with respect to the Inventory Disagreement shall be final and binding upon both parties hereto ("Final Inventory Amount"). The fees and disbursements of the Arbitrator and all other costs incurred by the Arbitrator in settling the Inventory Disagreement shall be shared equally be Seller and Buyer. (d) In the event the Closing Inventory Payment is (i) greater than [ * ] of the Final Inventory Amount, then Seller shall pay Buyer an amount - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 10 equal to such excess and (ii) less than [ * ] of the Final Inventory Amount, then Buyer shall pay Seller an amount equal to such deficit. All payments under this Section 2.3(d) shall be made within Five (5) Business Days after the determination of the Final Inventory Amount (such fifth Business Day shall be referred to as the "Adjustment Payment Date") and any such payments not made by the Adjustment Payment Date shall bear interest at 8% per annum accruing from the Adjustment Payment Date until such time such payment is made. 2.4 Assumed Liabilities On the Closing Date, Buyer and Seller shall execute and deliver an assignment and assumption agreement in substantially the form set forth at Exhibit B (the "Assignment and Assumption Agreement") pursuant to which Seller shall assign to Buyer, and Buyer shall assume and agree to pay, perform or otherwise discharge after the Closing Date, in accordance with the respective terms and subject to the respective conditions thereof, all of the liabilities and obligations of Seller accruing after the Closing Date pursuant to and under the Assumed Liabilities. "Assumed Liabilities" shall mean all liabilities and obligations set forth in this Section 2.4, whether or not any such obligation has a value for accounting purposes or is carried or reflected on or specifically referred to in Seller's books or financial statements: (a) All liabilities and obligations of Seller accruing after the Closing Date under the Contracts, including all warranty and repair obligations thereunder; (b) All liabilities and obligations of Seller accruing after the Closing Date under the Licenses; and (c) All liabilities and obligations of Seller accruing after the Closing Date under the Governmental Permits transferred pursuant to Section 2.1(f). 2.5 Excluded Liabilities Buyer shall not assume or be obligated to pay, perform or otherwise assume or discharge any liabilities or obligations of Seller or any of its Affiliates, whether direct or indirect, known or unknown, or absolute or contingent, except for the Assumed Liabilities (all of such liabilities and obligations not so assumed being referred to herein as the "Excluded Liabilities"), and, notwithstanding the provisions of Section 2.4, the Buyer shall not assume (and each shall be deemed to be an Excluded Liability) any liabilities or obligations in respect of Excluded Assets. Excluded Liabilities shall include (i) any liability for product liability lawsuits or the infringement of any Third Party rights arising from the sale of any Business Products manufactured by Seller before the Closing Date; (ii) any liability for violation of any Environmental Law in connection with the conduct of the business before the Closing Date; and (iii) any liability of Seller not specifically assumed by Buyer. - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 11 2.6 Consent of Third Parties; Further Assurances (a) From time to time following the Closing, Seller shall execute and deliver, or cause to be executed and delivered, to Buyer such additional instruments of conveyance and transfer as Buyer may reasonably request or as may be otherwise necessary to more effectively convey or transfer to, and vest in, Buyer and put Buyer in possession of, any part of the Purchased Assets including any such instruments described in the Transition Plan. (b) Nothing in this Agreement nor the consummation of the transactions contemplated hereby shall be construed as an attempt or agreement to assign any Contract, License or Governmental Permit, which by its terms or by law is not assignable ("Nonassignable Assets") without the consent of third Persons ("Consents") unless and until such consent shall be given. Seller and Buyer shall cooperate to obtain such Consents promptly. (c) To the extent permitted by applicable law, in the event Consents cannot be obtained on or before the Closing Date such Nonassignable Assets shall be held, as and from the Closing Date, by Seller in trust for Buyer and the covenants and obligations thereunder shall be performed by Buyer in Seller's name and all benefits and obligations existing thereunder shall be for Buyer's account. (d) Seller shall take or cause to be taken at Buyer's expense such action in its name or otherwise as Buyer may reasonably request so as to provide Buyer with the benefits of the Nonassignable Assets and to effect collection of money or other consideration to become due and payable under the Nonassignable Assets, and Seller shall promptly pay over to Buyer all money or other consideration received by it in respect to all Nonassignable Assets. (e) As of and from the Closing Date, Seller authorizes Buyer, to the extent permitted by applicable law and the terms of the Nonassignable Assets, at Buyer's expense, to perform all the obligations and receive all the benefits of Seller under the Nonassignable Assets and appoints Buyer its attorney-in-fact to act in its name on its behalf with respect thereto. (f) At or after Closing, Seller shall deliver to Buyer such documentation as Buyer may reasonably request and, at Buyer's expense, take all actions reasonably necessary in order to transfer to Buyer, all the U.L. listings relating to the Business Products and remove Seller from any listing in connection with such U.L. listings. 2.7 No Licenses Unless expressly set forth in the Technology Transfer Agreement or Patent License Agreement, no right or license of any kind is granted to 12 Buyer pursuant to this Agreement with respect to Seller's Proprietary Information (other than Business Records), either directly or indirectly, by implication, by estoppel or otherwise. 2.8 Bulk Sales Law Buyer hereby waives compliance by Seller with the requirements and provisions of any "bulk-transfer" laws of any jurisdiction that may otherwise be applicable with respect to the sale of any or all of the Purchased Assets to Buyer. 2.9 Taxes The Purchase Price shall be exclusive of, and Buyer agrees to pay all, applicable sales, transfer, excise, value added, use or other similar taxes and all recording and filing fees, whether levied on Seller or Buyer, that are payable by reason of the sales, transfers, licenses, and assignments contemplated by this Agreement, except for Seller's income and capital gains taxes or franchise or other taxes based on Seller's income. 2.10 Employees Buyer is not obligated to offer employment to any employee of Seller, but shall have the right to offer employment, on or after the Closing Date, to any or all of the management (i.e., non-represented) personnel of the Business as of the Closing Date, as Buyer deems necessary for its future operations, on terms and conditions of employment established by Buyer. 3. Representations and Warranties of Seller Seller represents and warrants to Buyer that: 3.1 Organization and Authority Seller is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and has full corporate power to carry on the Business as now conducted. 3.2 Authorization; Binding Obligations Seller has all necessary corporate power and authority to execute and deliver this Agreement and the Collateral Agreements and to effect the transactions contemplated hereby and thereby and has duly authorized the execution, delivery and performance of this Agreement and the Collateral Agreements by all necessary corporate action. This Agreement has been, and each of the Collateral Agreements will be as of the Closing Date, duly executed and delivered by Seller and this Agreement is, and the Collateral Agreements, when duly executed and delivered by Seller will be, valid and legally binding obligations of Seller, enforceable against it in accordance with their terms, except to the extent that enforcement of the rights and 13 remedies created hereby and thereby may be affected by bankruptcy, reorganization, insolvency and similar laws of general application affecting the rights and remedies of creditors and by general equity principles. 3.3 No Violations (a) Except as set forth on Schedule 3.3, the execution, delivery and performance of this Agreement and the Collateral Agreements by Seller and the consummation of the transactions contemplated hereby and thereby do not and will not: (i) result in a breach or violation of any provision of Seller's charter or by-laws or in a violation of any statute, rule, regulation or ordinance applicable to Seller, (ii) violate or result in a breach of or constitute an occurrence of default under any provision of, result in the acceleration or cancellation of any obligation under, or give rise to a right by any party to terminate or amend its obligations under, (x) any material mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien, lease, agreement, instrument, order, judgment, decree or other material arrangement or commitment to which Seller is a party or by which it is bound or which relates to the Purchased Assets, or (y) any Contract, License or Governmental Permit, or (iii) violate any order, judgment, decree, rule or regulation of any court or any Governmental Body having jurisdiction over Seller or any of its Purchased Assets. (b) Except as set forth on Schedule 3.3, no consent, approval, order or authorization of, or registration, declaration or filing with, any Person is required by Seller in connection with the execution and delivery of this Agreement and the Collateral Agreements or the consummation of the transactions contemplated hereby or thereby, except for consents of third Persons which are required to transfer or assign to Buyer any Purchased Assets or assign the benefits of or delegate performance with regard thereto. 3.4 Assets (a) Except for leased equipment, if any, listed on Schedule 3.4, Seller has good and marketable title to, all the tangible Purchased Assets free and clear of any Encumbrance, except for Permitted Encumbrances. (b) No Inventory is stored at any location other than at a Business Location, the Principal Manufacturing Location or, on a customer's or potential customer's premises identified on Schedule 3.4. The Inventory was or will be acquired and maintained in accordance with the regular business practices of the Seller and consists or will consist of new and unused items. 3.5 Personal Property The items of personal property set forth in Schedule 3.5 are in reasonable operating condition (subject to normal wear and tear), in light of their respective ages, for the purposes for which they are currently being used. To Seller's knowledge, all other personal property included in 14 the Purchased Assets and used in the operation of the Business within the last 12 months from the date hereof are in reasonable operating condition (subject to normal wear and tear), in light of their respective ages, for the purposes for which they are currently being used. The Principal Equipment includes all of the equipment of the type specified on Schedule 2.1(a) owned by Seller and used to carry on the Business as presently conducted. 3.6 Permits, Licenses Except as set forth on Schedule 3.6, there are no Governmental Permits necessary for or used by Seller in the operation of the Business or to use the Purchased Assets. 3.7 Compliance With Laws and Litigation (a) Except as set forth on Schedule 3.7(a), Seller is in compliance with all laws, rules, regulations, ordinances, decrees, orders, judgments, permits and licenses of or from Governmental Bodies applicable to the Purchased Assets or the Business. (b) Except as set forth on Schedule 3.7(b), there are no actions, suits, proceedings or governmental investigations pending or, to Seller's knowledge, threatened against or relating to the Business or the Purchased Assets or against it that could be reasonably expected to have a Material Adverse Effect on the Purchased Assets. 3.8 Contracts Schedule 2.1(c) contains a complete and accurate list of all outstanding Contracts that would require over the full term thereof cash payments by or to Seller of more than $1,000 or which require Buyer's performance of warranty or repair obligations. Each of such Contracts is valid, binding and enforceable against Seller and, to Seller's knowledge, the other parties, thereto in accordance with its terms. Each such Contract is in full force and effect. Each Contract has been obtained by Seller in the ordinary course of business consistent with past practice. Seller is not, and has received no notice that it is, in default or breach of or is otherwise delinquent in performance under any such Contracts, and, to Seller's knowledge, each of the other parties thereto has performed in all material respects all obligations required to be performed by it under, and is not in default in any material respect under, any of such Contracts. No event has occurred that, with notice or lapse of time, or both, would constitute a default under any such Contract. 3.9 Brokers No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of Seller. 15 3.10 Historical Financial Information The financial information set forth in Schedule 3.10 ("Financial Information") was compiled from the books and records of Seller, which are maintained in accordance with sound accounting practices. The Financial Information fairly presents in all material respects, except as noted therein and subject to the notes thereon, the sales, cost of sales, operating expenses, gross profits, research and development expenses and general and administrative expenses (which expenses may be direct or allocated) with respect to the Business for each of the twelve month periods ended December 31, 1995 and December 31, 1996. 3.11 Products Liability Except as set forth on Schedule 3.11, (i) there is no notice, claim, action, suit, inquiry or investigation of a civil, criminal or administrative nature before any court or governmental or other regulatory or administrative agency, commission or authority, against or involving Seller and any Business Product which is pending or, to Seller's knowledge, threatened, resulting from an alleged defect in design, manufacture, materials or workmanship of any Business Product, or any alleged failure to warn, or from any breach of implied warranties or representations (collectively, "Product Liability Lawsuits"); (ii) since January 1, 1995, there has not been any Occurrence (as hereinafter defined); and (iii) since January 1, 1995, there has not been nor is there under consideration or investigation by the Seller, any Business Product rework or retrofit conducted by or on behalf of the Seller as a result of an Occurrence. For purposes of this Section 3.11, the term "Occurrence" shall mean any accident, happening or event which is caused or allegedly caused by any alleged hazard or alleged defect in manufacture, design, materials or workmanship of any Business Product including, without limitation, any alleged failure to warn or any breach of express or implied warranties or representations with respect thereto, or any such accident, happening or event otherwise involving any Business Product that is likely to result in a claim or loss. 3.12 No Other Representations or Warranties (a) With respect to the Purchased Assets, the Business, or any other rights or obligations to be transferred hereunder or pursuant hereto, Buyer has not been induced by and has not relied upon any representations, warranties or statements, whether express or implied, made by Seller or any agent, employee, attorney or other representative of Seller or by any Person representing or purporting to represent Seller that are not expressly set forth in this Agreement or, the Technology Transfer Agreement or Patent License Agreement (including the Schedules hereto and thereto), whether or not any such representations, warranties or statements were made in writing or orally. It is hereby agreed by Buyer that, except as otherwise expressly provided herein or, in the Technology Transfer Agreement or Patent License Agreement, Seller makes no representations or warranties with respect to the Purchased Assets or the Business. Buyer further acknowledges that Seller has not made any warranty, express or implied, as to the future of the Business and/or its profitability for 16 Buyer, or with respect to any forecasts, projections or business plans prepared by Seller and delivered to Buyer in connection with the offering of the Business by Seller and the negotiation and the execution of this Agreement. 4. Representations and Warranties of Buyer Buyer represents and warrants to Seller that: 4.1 Organization and Authority Buyer is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware and Buyer has full corporate power and authority necessary to carry on its business as now being conducted. 4.2 Authorization; Binding Obligations Buyer has all necessary corporate power to execute and deliver this Agreement and the Collateral Agreements and to effect the transactions contemplated hereby and thereby and has duly authorized the execution, delivery and performance of this Agreement and the Collateral Agreements by all necessary corporate action. This Agreement has been and each of the Collateral Agreements will be as of the Closing Date duly executed and delivered by Buyer and this Agreement is, and the Collateral Agreements when duly executed and delivered by Buyer will be, valid and legally binding obligations of Buyer, enforceable against it in accordance with their terms, except to the extent that enforcement of the rights and remedies created hereby and thereby may be limited by bankruptcy and other similar laws of general application affecting the rights and remedies of creditors and by general equity principles. 4.3 No Violations (a) Except as set forth in Schedule 4.3 the execution, delivery and performance of this Agreement and the Collateral Agreements by Buyer and the consummation of the transactions contemplated hereby and thereby do not and will not (i) result in a breach or violation of any provision of Buyer's charter or by-laws or in a violation of any statute, rule, regulation or ordinance applicable to Buyer or (ii) violate or result in a breach of or constitute an occurrence of default under any provision of, result in acceleration or cancellation of any obligation under, or give rise to a right by any party to terminate or amend its obligations under, any material mortgage, deed of trust, conveyance to secure debt, note, loan, indenture, lien, lease, agreement, instrument, order, judgment, decree or other material arrangement or commitment to which Buyer is a party or by which it or its assets or properties are bound, or (iii) violate any order, judgment, decree, rule or regulation of any court or any Governmental Body having jurisdiction over Buyer or any of its properties. 17 (b) Except as disclosed on Schedule 4.3, no consent, approval, order or authorization of, or registration, declaration or filing with, any Person is required by Buyer in connection with the execution and delivery of this Agreement and the Collateral Agreements or the consummation of the transactions contemplated hereby or thereby, except for such consents, approvals, orders, authorizations, registrations, declarations or filings where failure of compliance would not, individually or in the aggregate, have a material adverse effect on Buyer's ability to consummate the transactions contemplated hereby. 4.4 Brokers No broker, investment banker, financial advisor or other Person, other than Cameron Associates, the fees and expenses of which will be paid by Buyer, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based on arrangements made by or on behalf of Buyer. 4.5 Sufficiency of Funds Buyer (i) has funds available to it to pay the Purchase Price and any expenses incurred by Buyer in connection with the transactions contemplated by this Agreement; and (ii) has the financial resources and capabilities to perform the Assumed Liabilities. 5. Certain Covenants 5.1 Information (a) Seller will give to Buyer and to its officers, employees, accountants, counsel and other representatives reasonable access during Seller's normal business hours throughout the period prior to the Closing to all of Seller's properties, books, contracts, commitments, reports of examination and records (excluding personnel records) directly relating to the Purchased Assets (but excluding the Excluded Assets and Excluded Liabilities and subject to any limitations that are reasonably required to preserve any applicable attorney-client privilege or third-party confidentiality obligation). Buyer will hold, and will cause such representatives to hold, such information in confidence as provided in Article 6. Further, prior to closing, Seller will afford Buyer access during normal business hours to the Business Location and the Seller's environmental books and records (except books and records subject to attorney-client or attorney-work product privileges) so as to afford Buyer full opportunity to make such review, examination and investigation of environmental matters and environmental conditions of the Purchased Assets as Buyer may reasonably desire to make. (b) After the Closing Date, Seller and Buyer will provide to each other and to their respective officers, employees, counsel and other representatives, upon request (subject to any limitations that are reasonably required to preserve any applicable attorney-client privilege or 18 third-party confidentiality obligation), reasonable access for inspection and copying of all Business Records, Governmental Permits, Contracts and any other files, records and information existing as of the Closing Date and relating to the Business, and will make their respective personnel reasonably available for interviews, depositions and testimony in any legal matter concerning transactions, operations or activities, including treatment, storage, transportation, disposal, recycling and handling of Hazardous Substances or compliance with Environmental Laws, relating to the Business or the Purchased Assets prior to the Closing Date, and as otherwise may be necessary or desirable to enable the party requesting such assistance to: (i) comply with reporting, filing or other requirements imposed by any foreign, local, state or federal court, agency or regulatory body; (ii) assert or defend any claims or allegations in any litigation or arbitration or in any administrative or legal proceeding other than claims or allegations that one party to this Agreement has asserted against the other; or (iii) (subject to clause (ii) above), perform its obligations under this Agreement. The party requesting such information or assistance shall reimburse the other party for all out-of-pocket costs and expenses incurred by such party in providing such information and in rendering such assistance. The access to files, books and records contemplated by this Section 5.1(b) shall be during normal business hours and upon not less than two Business Days' prior written request and shall be subject to such reasonable limitations as the party having custody or control thereof may impose to preserve the confidentiality of information contained therein. (c) Each party agrees to preserve all Business Records and Governmental Permits and other files, records and information relating to the Business for at least 6 years after the Closing Date. After this 6 year period and at least 90 days prior to the planned destruction of any Business Records, Governmental Permits, or such files, records or information, the party in possession thereof shall notify the other party in writing and shall make available to the other party, upon its request, such Business Records and Governmental Permits, or files, records or information as applicable. 5.2 Preservation of Assets From and after the date of this Agreement and until the Closing Date, except as set forth on Schedule 5.2 or as otherwise contemplated by this Agreement or the Schedules hereto or as Buyer shall otherwise consent to in writing, Seller, other than in the ordinary course of business or as may be required by law or governmental authority, will not permit all or any of the Purchased Assets (real or personal, tangible or intangible) to be sold, licensed or subjected to any Encumbrance (other than a Permitted Encumbrance). 5.3 Sale by Buyer of Inventory Marked With Seller's Name (a) To the extent that Inventory consists of product or material that is marked with the name or mark "Lucent Technologies" or "AT&T" (or with other indicia of either of them) (the "Marked Inventory"), Buyer shall, consistent with customer requirements, use its Best Efforts to ship such Marked Inventory prior to shipping the same or similar products of Buyer. Except as specifically permitted under Section 5.3(b) below, Buyer 19 shall cease, immediately upon the Closing, to mark, both internally and externally, all Business Products or any other product of Buyer that is not Marked Inventory with the names, marks or other indicia of "Lucent Technologies" or "AT&T". Notwithstanding the foregoing, Buyer shall have the right to make factual reference to the Lucent Technologies Bell Laboratories name in accordance with the Use Guidelines attached hereto as Exhibit D. (b) For a period of 60 days after the Closing Date, Buyer may continue to apply the name "Lucent Technologies" to Business Products manufactured during that 60-day period. At the end of that 60-day period, Buyer agrees to cease all use of "Lucent Technologies" name and to permanently remove the Lucent Technologies name on all molds bearing the Lucent Technologies name. Buyer may sell or otherwise distribute Business Products which display the Lucent Technologies name until such Business Products are depleted or until December 31, 1998, whichever occurs first. In the event Business Products bearing the Lucent Technologies name and manufactured in accordance with this paragraph fall below the standard of quality of Seller's products (as determined in good faith by Seller), Seller retains the right to terminate this grant upon written notice to Buyer. (c) If, after the Closing Date, Buyer desires to use any molds bearing the "AT&T" name to manufacture any Business Product to fulfill a customer's request, and Seller has within 12 months prior to the Closing Date used such mold to manufacture such Business Product, then Seller, at its sole cost and expense, agrees to remove the "AT&T" name on such mold as promptly as practicable. 5.4 Collateral Agreements On or prior to the Closing Date, Buyer shall execute and deliver to Seller and Seller shall execute and deliver to Buyer the following agreements (the "Collateral Agreements"): Technology Transfer Agreement, Patent License Agreement, Assignment and Assumption Agreement and Bill of Sale. 5.5 Regulatory Compliance Each of Buyer and Seller shall use reasonable efforts to obtain, and to cooperate with each other in obtaining, all authorizations, consents, orders and approvals of Governmental Entities that may be or become necessary in connection with the consummation of the transactions contemplated by this Agreement, prior to or following the Closing, and to take all reasonable actions to avoid the entry of any order or decree by any Governmental Entity prohibiting the consummation of the transactions contemplated hereby. 20 5.6 Contacts with Suppliers, Employees and Customers Prior to the Closing Date, without the prior written consent of Seller, which may be withheld for any reason or no reason, Buyer will not contact any suppliers to or customers of the Business. 5.7 Negotiations From and after the date hereof until the Closing Date or termination of this Agreement, neither Seller, nor its officers or directors nor anyone acting on behalf of Seller or such persons shall, directly or indirectly, encourage, solicit, engage in discussions or negotiations with, or provide any information to, any person, firm, or other entity or group (other than the Buyer or its representatives) concerning any sale of substantial assets of the Business or similar transaction involving Seller. Seller shall promptly communicate to Buyer any inquiries or communications concerning any such transaction which it may receive or of which it may become aware. 5.8 Transition Plan; Interim Operations (a) As soon as practicable after the Closing Date, the parties will agree on a "Transition Plan" that will describe how the parties will use their good faith efforts to smoothly transition the Business from Seller after the Closing Date. It will include, among other things: (i) transition plan for intellectual property, inventory, and information related to manufacturing, customers and sales; (ii) schedule for completing the transition; (iii) procedure for resolving disputes during the transition (which procedure shall be resorted to before the procedures set forth in Section 9.5) and (iv) allocation of expenses related to the transition. Notwithstanding any provision contained herein or to be contained in the Transition Plan, the parties acknowledge and agree that each and every obligation to be performed by either party under the Transition Plan shall terminate on December 31, 1997. (b) After the Closing Date, Buyer will have responsibility for decisions relating to the Purchased Assets either directly or through Seller pursuant to arrangements established under the Transition Plan. The Buyer and Seller will cooperate fully to ensure that the Buyer's decisions are communicated within Seller's organization to the appropriate personnel. Notwithstanding the foregoing, but subject to Section 5.8(c) below, it is understood that each party will at all times retain direction and control of, and full responsibility for, and liability to, its own employees or representatives. The parties will consult each other in good faith with respect to any management or operational functions not specifically addressed by the Transition Plan and assign responsibility therefor by mutual agreement. Any disputes between the parties concerning their respective responsibilities or costs incurred therefor which cannot be resolved between them will be resolved pursuant to the escalation procedures set forth in the Transition Plan. 21 (c) Notwithstanding the foregoing, and at the request of Buyer, Seller hereby agrees to operate the Business on Buyer's behalf as Buyer's agent for a period of 30 days after the Closing Date (the "Interim Period"). During the Interim Period, Seller shall serve as the day-to-day operator of the Business and shall operate the Business as such Business was operated by Seller in the ordinary course prior to the Closing Date. All costs and expenses directly incurred by Seller in operating the Business during the Interim Period, including, without limitation, salaries, employee benefits, payments to third party suppliers and vendors, and any other out-of pocket expenses, shall be borne by Buyer (collectively, the "Interim Costs and Expenses"). Notwithstanding any provision contained herein, the term "Interim Costs and Expenses" shall not include the value of any part, inventory or equipment (including the circuit boards referenced in Section 5.11) purchased by Buyer pursuant to this Agreement and which are used to manufacture a Business Product. All cash receipts received by Seller from the Business for products or services sold or rendered after the Closing Date shall be held by Seller for the benefit of Buyer and Seller shall, within forty-five (45) Business Days after the Interim Period, deliver such cash receipts to Buyer net of the Interim Costs and Expenses. Buyer acknowledges and agrees that Seller will operate the Business during the Interim Period as Buyer's agent and accordingly, each and every contractual obligations and other liabilities in respect of the Business that become incurred during the Interim Period shall be the responsibility of Buyer. Seller hereby agrees to operate the Business during the Interim Period in good faith. Seller shall not be liable to Buyer for any error of judgment, loss suffered or liability incurred by Buyer in connection with the operation of the Business by Seller during the Interim Period, except for such losses resulting from Seller's willful misconduct or gross negligence 5.9 Customer Orders For a period of two (2) years from the Closing Date, Buyer shall use good faith efforts to provide Business Products that Buyer deems to be viable ongoing products to any customer of the Business on terms and conditions agreed upon between Buyer and such customer; provided, for a period of nine (9) months after the Closing Date, Buyer agrees to manufacture, produce and maintain all Business Products which were sold by Seller during the 12 month period prior to the Closing Date so long as Buyer is not required to purchase or lease any equipment to comply with the foregoing covenant. During such two (2) year period , if any such customer insists on placing an order for such Business Products with Seller, Buyer and Seller shall enter into such arrangements (including subcontracting) on terms and conditions which would allow Buyer to preserve its historic gross margin on products similar to such Business Product had Buyer made the sale directly so that Seller can satisfy the customer's desire to purchase Business Products from Seller. 22 5.10 Non-Compete (a) Subject to the exceptions set forth in subsection (b) below, for a period of two (2) years following the Closing Date, Seller shall not engage in the public terminals business in North America. (b) Notwithstanding subsection (a) above, Seller shall not be prohibited from competing in the public terminals business as a result of: (a) investing in an entity which is directly or indirectly engaged in the public terminals business, as long as, based upon information available to Seller, less than 20% of the revenues of such entity are attributable to the public terminals business (in which case Seller shall use reasonable efforts to dispose of such public terminals business activities in a financially prudent manner); (b) acquiring through merger, acquisition or other business combination another entity which is directly or indirectly engaged in the public terminals business, as long as the value of such other entity or the assets of such other entity exceeds 5% of the annual revenues of Seller; (c) investing in equity securities of any publicly traded business organization which is directly or indirectly engaged in the public terminals business, as long as the investment in any class of securities does not exceed 5% of the issued and outstanding shares of such class; (d) any activities whereby Seller is a customer of Buyer; (e) fulfilling contractual obligations to customers under contracts which are not or cannot be assigned under this Agreement; and (f) to avoid any possible misunderstanding, the Lucent Global Provisioning Centers Public Terminals Refurbishment Operations as currently conducted by Seller. 5.11 Buy-Back of Circuit Boards On the Closing Date, Buyer will buy back from Seller 1,949 Olympian 5501 Printed Circuit Boards held by Seller for resale to the Entel-Chile for a price of [ * ] dollars ($[*]) per unit (which represents an aggregate purchase price of $[ * ]), by wire transfer of immediately available funds to the account of Seller designated by Seller's written instructions. The Printed Circuit Boards will be sold to Buyer "AS IS" (other than title). Buyer acknowledges that 1,202 Olympian 5501 Printed Circuit Boards have been incorporated into Business Products which have been or are in the process of being delivered to Buyer. Seller acknowledges and agrees that upon receipt by Buyer of such Business Products, Buyer shall be entitled to reduce from the invoiced amount for such Business Products $[*] per each Olympian 5501 Printed Circuit Board incorporated in such Business Product. - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 23 6. Confidential Nature of Information 6.1 Confidentiality Agreement Buyer agrees that the Confidentiality Agreement between Buyer and Seller dated March 31, 1997 shall apply to (a) all documents, materials and other information that it shall have obtained regarding Seller or its Affiliates during the course of the negotiations leading to the consummation of the transactions contemplated hereby (whether obtained before or after the date of this Agreement), any investigations made in connection therewith and the preparation of this Agreement and related documents and (b) all analyses, reports, compilations, evaluations and other materials prepared by Buyer or its counsel, accountants or financial advisors that contain or otherwise reflect or are based upon, in whole or in part, any of the provided information; provided, however, that subject to Section 6.2(a), the Confidentiality Agreement shall terminate as of the Closing and shall be of no further force and effect thereafter with respect to information of Seller transferred to Buyer. 6.2 Seller's Proprietary Information (a) (i) Except as provided in Section 6.2(b) or as otherwise provided in the Technology Transfer Agreement, after the Closing and for a period of five (5) years following the Closing Date, each party will keep confidential all of the other party's and its Affiliates' Proprietary Information (other than with respect to the Business) that is received from, or made available by, such party in the course of the transactions contemplated hereby, including, for purposes of this Section 6.2, information about Seller's and its Affiliates' business plans and strategies, marketing ideas and concepts, especially with respect to unannounced products and services, present and future product plans, pricing, volume estimates, financial data, product enhancement information, business plans, marketing plans, sales strategies, customer information (including customers' applications and environments), market testing information, development plans, specifications, customer requirements, configurations, designs, plans, drawings, apparatus, sketches, software, hardware, data, prototypes, connecting requirements or other technical and business information, except for such Proprietary Information as is conveyed to Buyer as part of the Purchased Assets. (ii) Subsequent to the Closing Date, the Seller will hold, and will instruct its officers, directors, advisors, Affiliates, employees and agents to hold, in confidence and not use in the public terminals business, Business Records, if any, retained by Seller and all documents and information concerning the Business, if any, retained by the Seller under Section 2.2(c). (b) Notwithstanding the foregoing, such Proprietary Information shall not be deemed confidential and the recipient party shall have no obligation with respect to any such Proprietary Information that: (i) was already known to Buyer other than through this transaction; 24 (ii) is or becomes publicly known through publication, inspection of a product, or otherwise, and through no negligence or other wrongful act of the recipient party; (iii) is received by the recipient party from a Third Party without similar restriction and without breach of any agreement; (iv) to the extent it is independently developed by the recipient party after Closing Date; or (v) is, subject to Section 6.2(c), required to be disclosed under applicable law or judicial process. (c) If the recipient party (or any of its Affiliates) is requested or required (by oral question, interrogatory, request for information or documents, subpoena, civil investigative demand or similar process) to disclose any Proprietary Information, the recipient party will promptly notify the other party of such request or requirement and will cooperate with the other party such that the other party may seek an appropriate protective order or other appropriate remedy. If, in the absence of a protective order or the receipt of a waiver hereunder, the recipient party (or any of its Affiliates) is in the written opinion of the recipient party's counsel compelled to disclose the Proprietary Information or else stand liable for contempt or suffer other censure or significant penalty, the recipient party (or its Affiliate) may disclose only so much of the Proprietary Information to the party compelling disclosure as is required by law. The recipient party will exercise its (and will cause its Affiliates to exercise their) Best Efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded to such Proprietary Information. (d) Notwithstanding anything in this Article 6 to the contrary, in the event that any such Proprietary Information is also subject to a limitation on disclosure or use contained in another written agreement between Buyer and Seller that is more restrictive than the limitation contained in this Article 6, then the limitation in such agreement shall supersede this Article 6. 7. Closing At the Closing, the following transactions shall take place: 7.1 Documents to be Delivered by Seller On the Closing Date, Seller shall deliver, or execute and deliver, the following documents and agreements to Buyer: (a) the Collateral Agreements; (b) the Bill of Sale with respect to the Purchased Assets; 25 (c) the Assignment and Assumption Agreement; (d) all consents, waivers or approvals required to be obtained by Seller with respect to the Purchased Assets or the consummation of the transactions contemplated by this Agreement; (e) an opinion or opinions of Counsel for Seller dated the Closing Date with respect to the matters described in Sections 3.1, 3.2 and 3.3 in a form and subject to such exceptions as are customary for transactions similar to those contemplated hereby, which form shall be reasonably acceptable to Buyer; (f) a certificate of an appropriate officer of Seller, dated the Closing Date, certifying to the fulfillment of the conditions set forth in Sections 8.2(a) and (b); (g) to the extent required, updated Schedules revised to reflect changes in the operations or condition of the Business between the date hereof and the Closing Date; and (h) all such other bills of sale, assignments and other instruments of assignment, transfer or conveyance as Buyer may reasonably request or as may be otherwise necessary to evidence and effect the sale, transfer, assignment, conveyance and delivery of the Purchased Assets to Buyer and to put Buyer in actual possession or control of the Purchased Assets. 7.2 Documents to be Delivered by Buyer On the Closing Date, Buyer shall deliver, or execute and deliver, the following funds, documents and agreements to Seller: (a) the Purchase Price as provided in Section 2.3; (b) the Collateral Agreements; (c) the Assignment and Assumption Agreement; (d) an opinion or opinions of Counsel for Buyer dated the Closing Date with respect to the matters described in Sections 4.1, 4.2 and 4.3 in a form and subject to such exceptions as are customary for transactions similar to those contemplated hereby, which form shall be reasonably acceptable to Seller; (e) a certificate of an appropriate officer of Buyer, dated the Closing Date, certifying to the fulfillment of the conditions set forth in Sections 8.3(a), and (b); (f) all such other documents and instruments as Seller may reasonably request or as may be otherwise necessary or desirable to evidence and effect the assumption by Buyer of the Assumed Liabilities. 26 7.3 Closing Date The Closing shall take place at the office of Seller on such date and at such time as Seller and Buyer may agree upon (such date and time being referred to herein as the "Closing Date"), but in no event later than December 31, 1997. Notwithstanding the foregoing, Buyer and Seller hereby agree that the Closing shall take place on or within three (3) days after all the conditions specified in Article 8 have been satisfied or waived. 7.4 Contemporaneous Effectiveness All acts and deliveries prescribed by this Article 7, regardless of chronological sequence, will be deemed to occur contemporaneously and simultaneously on the occurrence of the last act or delivery, and none of such acts or deliveries will be effective until the last of the same has occurred. 8. Conditions Precedent to Closing 8.1 General Conditions The respective obligations of Buyer and Seller to effect the Closing of the transactions contemplated hereby are subject to the fulfillment, prior to or at the Closing, of the following condition: (a) Legal Proceedings. No order of any court or administrative agency shall be in effect that enjoins, restrains, conditions or prohibits consummation of this Agreement, and no litigation, investigation or administrative proceeding that has a substantial chance of success on its merits initiated by any bona fide Third Party shall be pending or threatened that would enjoin, restrain, condition or prohibit consummation of this Agreement. 8.2 Conditions Precedent to Buyer's Obligations The obligations of Buyer to effect the Closing of the transactions contemplated hereby are subject to the fulfillment, prior to or at the Closing, of each of the following conditions, any of which may be waived in writing by Buyer: (a) Representations and Warranties of Seller True at Closing. The representations and warranties of Seller contained in this Agreement or in any schedule, certificate or document delivered pursuant to the provisions hereof or in connection with the transactions contemplated hereby shall be true and correct in all material respects at and as of the Closing Date, as though such representations and warranties were made at and as of the Closing Date, except (i) to the extent of any event, occurrence or condition listed on the updated schedules delivered pursuant to Section 7.1(g) that constitutes a breach of any of such representations and warranties, but that does not constitute a material breach (provided, however, that nothing herein, nor consummation of the Closing, shall be 27 deemed to constitute a waiver of such breach), (ii) as affected by the transactions contemplated hereby, and (iii) to the extent that such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true in all material respects as of the specified date. (b) Performance by Seller. Seller shall have performed in all material respects all obligations and agreements and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing. (c) Consents. Any Third Party and Governmental consents, approvals or authorizations necessary for the conveyance of the Purchased Assets or the consummation of the transactions contemplated hereby shall have been obtained and shall be in full force and effect on the Closing Date. 8.3 Conditions Precedent to Seller's Obligations The obligations of Seller to effect the Closing of the transactions contemplated hereby are subject to the fulfillment, prior to or at the Closing, of each of the following conditions, any of which may be waived in writing by Seller: (a) Representations and Warranties of Buyer True at Closing. The representations and warranties of Buyer contained in this Agreement or in any certificate or document delivered pursuant to the provisions hereof or in connection with the transactions contemplated hereby shall be true in all material respects at and as of the Closing Date as though such representations and warranties were made at and as of the Closing Date, except to the extent that such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true in all material respects as of the specified date. (b) Performance by Buyer. Buyer shall have performed in all material respects all obligations and agreements and complied in all material respects with all covenants and conditions required by this Agreement to be performed or complied with by it prior to or at the Closing including the payment required under Section 5.11. (c) Tax Exemptions. Buyer shall have produced fully executed resale exemption certificates to support any claimed exemption from sales or use taxes. (d) Consents. Subject to Section 2.6, any Third Party and Governmental consents, approvals or authorizations necessary for the conveyance of the Purchased Assets or the consummation of the transactions contemplated hereby shall have been obtained and shall be in full force and effect on the Closing Date. 28 9. Status of Agreements The rights and obligations of Buyer and Seller under this Agreement shall be subject to the following terms and conditions: 9.1 Effect of Breach In the event of a material breach of any representation, certification or warranty, or agreement or covenant of Seller under this Agreement that is discovered by Buyer prior to Closing and that cannot be or is not cured by Seller upon prior notice and the passage of a reasonable period of time, Buyer may elect not to proceed with the closing hereunder, which shall be Buyer's sole remedy for such breach; provided, however, in such event, Buyer may make a claim for reimbursement of reasonable expenses incurred by it in connection with this transaction up to a maximum of twenty five thousand dollars ($25,000). 9.2 Survival of Representations and Warranties The representations and warranties of Buyer and Seller contained in this Agreement shall survive the Closing for twenty-four (24) months, except for (a) the representations and warranties contained in Sections 3.1 and 3.2 and Section 3.3, (only with respect to Seller's charter and by- laws), which shall survive for the applicable statute of limitations, and (b) the representations and warranties contained in Sections 4.1 and 4.2 and Section 4.3 (only with respect to Buyer's charter and by-laws), which shall survive the applicable statute of limitations. Neither Seller nor Buyer shall have any liability whatsoever with respect to any such representations or warranties after the survival period for such representation or warranty expires, except for claims then pending or theretofore asserted in writing by any party in accordance with the terms and conditions of this Agreement. The respective representations and warranties of Buyer and Seller contained in this Agreement or any certificates or other documents delivered prior to or at the Closing shall not be deemed waived or otherwise affected by any investigation made by any party hereto. Any investigation by such party shall be for its own protection only and shall not affect or impair any right or remedy hereunder. 9.3 General Agreement to Indemnify (a) Each party the ("Indemnifying Party") shall indemnify, defend and hold harmless the other party hereto and any employee, director, officer or Affiliate of the other party (each an "Indemnified Party") from and against any and all claims, actions, suits, proceedings, liabilities, obligations, losses, and damages, amounts paid in settlement, interest, costs and expenses (including reasonable attorney's fees, court costs and other out-of-pocket expenses incurred in investigating, preparing or defending the foregoing) (collectively, "Losses") incurred or suffered by any Indemnified Party to the extent that the Losses arise out of, result from or relate to (i) the failure of any representation or warranty of such party contained in this Agreement to have been true, or with respect to the 29 representations or warranties set forth in Section 3.3(a) (ii), 3.3(b), 3.4(b), 3.6, 3.7(a), 3.8 (with respect to the first sentence thereof), 4.3(b), 4.3(a) (ii) and (iii), true in all material respects, when made and as of the Closing Date or such other date as expressly provided otherwise in Section 8.2(a) or 8.3(a) or (ii) the breach by such party of any covenant or agreement of such party contained in this Agreement to the extent not waived by the other party. (b) Buyer further agrees to indemnify and hold harmless Seller from and against any Losses incurred by Seller arising out of, resulting from or relating to: (i) any failure of Buyer to discharge any of the Assumed Liabilities; (ii) any liability arising out of the operation of the Purchased Assets on or after the Closing Date; and (iii) any claim, demand or liability for the taxes referred to in Section 2.9, including interest and penalties thereon. (c) Seller further agrees to indemnify and hold harmless Buyer from and against any Losses incurred by Buyer arising out of, resulting from, or relating to: (i) any failure by Seller to discharge any of the Excluded Liabilities; (ii) any liability arising out of the operation of the Purchased Assets prior to the Closing Date except for the Assumed Liabilities; (iii) any termination, salary continuation or severance pay or benefits payable by Seller to any employee by reason of such employee's termination of employment by Seller; or (iv) Buyer's waiver of any applicable Bulk Sales laws. (d) Amounts payable in respect of the parties' indemnification obligations shall be treated as an adjustment to the Purchase Price. Buyer and Seller agree to cooperate in the preparation of a supplemental Asset Acquisition Statement as required by Section 2.3 and Treasury Reg. paragraph 1.1060-1T(f) and (h)(2)(ii) as a result of any adjustment to the Purchase Price pursuant to the preceding sentence. Whether or not the Indemnifying Party (as defined below) chooses to defend or prosecute any Third-Party Claim (as defined in Section 9.4(a)), both parties hereto shall cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials and appeals, as may be reasonably requested in connection therewith or as provided in Section 5.1. (e) The amount of the Indemnifying Party's liability under this Agreement shall be reduced by any applicable insurance proceeds actually received by, the Indemnified Party as reimbursement of Losses. The indemnification obligations of each party hereto under this Article 9 shall inure to the benefit of the directors, officers, employees and Affiliates of the other party hereto on the same terms as are applicable to such other party. (f) The Indemnifying Party's liability for all claims under Section 9.3(a) shall be subject to the following limitations: (i) the Indemnifying Party shall have no liability for such claims until the aggregate amount of the Losses incurred shall exceed $25,000, in which case the Indemnifying Party shall be liable only for the portion of the Losses exceeding $25,000, and (ii) the Indemnifying Party's aggregate liability for all claims including those made under Section 9.3(a) shall not exceed the Purchase 30 Price. The Indemnified Party may not make a claim for indemnification under Section 9.3(a) for breach by Seller of a particular representation or warranty after the expiration of the survival period specified in Section 9.2 applicable to such representation or warranty. (g) The indemnification provided in this Article 9 shall be the sole and exclusive remedy after the Closing Date for damages available to the parties to this Agreement for breach of any of the terms, conditions, representations or warranties contained herein or any right, claim or action arising from the transactions contemplated by this Agreement; provided however that nothing herein shall be deemed to limit or restrict in any manner any rights or remedies available at law, in equity or otherwise based on fraud by either party. (h) Notwithstanding anything contained in this Agreement to the contrary, no party shall be liable to the other party for indirect, special, punitive or consequential loss or damage (including any loss of revenue or profit) arising out of this Agreement; provided, however, the foregoing shall not be construed to preclude recovery by the Indemnified Party in respect of Losses directly incurred from Third Party claims. Both parties shall use reasonable efforts to mitigate their damages. 9.4 Procedures for Indemnification (a) The Indemnified Party seeking indemnification under this Agreement shall promptly notify the party against whom indemnification is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any action, suit or proceeding by any Third Party, in respect of which indemnity may be sought hereunder and will give the Indemnifying Party such information with respect thereto as the Indemnifying Party may reasonably request, but failure to give such notice shall not relieve the Indemnifying Party of any liability hereunder (unless the Indemnifying Party has suffered material prejudice by such failure). The Indemnifying Party shall have the right, but not the obligation, exercisable by written notice to the Indemnified Party within 30 days of receipt of notice from the Indemnified Party of the commencement of or assertion of any claim, action, suit or proceeding by a Third Party in respect of which indemnity may be sought hereunder (a "Third-Party Claim"), to assume the defense and control the settlement of such Third-Party Claim that (i) involves (and continues to involve) solely money damages or (ii) involves (and continues to involve) claims for both money damages and equitable relief against the Indemnified Party that cannot be severed, where the claims for money damages are the primary claims asserted by the Third Party and the claims for equitable relief are incidental to the claims for money damages, and where the Indemnified Party reasonably determines (and continues to reasonably determine) that defense of the claim by the Indemnifying Party will not have a Material Adverse Effect on the Indemnified Party. (b) The Indemnifying Party or the Indemnified Party, as the case may be, shall have the right to participate in (but not control), at its own expense, the defense of any Third-Party Claim that the other is defending, as provided in this Agreement. 31 (c) The Indemnifying Party, if it has assumed the defense of any Third-Party Claim as provided in this Agreement, shall not consent to a settlement of, or the entry of any judgment arising from, any such Third- Party Claim without the Indemnified Party's prior written consent (which consent shall not be unreasonably withheld) unless such settlement or judgment relates solely to monetary damages which the Indemnifying Party will pay in full. The Indemnifying Party shall not, without the Indemnified Party's prior written consent, which consent shall not be unreasonably withheld, enter into any compromise or settlement that (i) commits the Indemnified Party to take, or to forbear to take, any action or (ii) does not provide for a complete release by such Third Party of the Indemnified Party. The Indemnified Party shall have the sole and exclusive right to settle any Third-Party Claim, on such terms and conditions as it deems reasonably appropriate, to the extent such Third- Party Claim involves equitable or other nonmonetary relief against the Indemnified Party, and shall have the right to settle any Third-Party Claim involving money damages for which Seller has not assumed the defense pursuant to this Section 9.4 with the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. 9.5 Arbitration; Choice of Law (a) Any dispute, controversy or claim, whether based on contract, tort, statute or other legal theory (including, but not limited to, any claim of fraud or misrepresentation), arising out of or related to this Agreement, shall be resolved by arbitration pursuant to this Section 9.5 and the then-current Commercial Rules and supervision of the American Arbitration Association. The duty to arbitrate shall extend to any officer, employee, shareholder, principal, agent, trustee in bankruptcy or otherwise, affiliate, subsidiary, third-party beneficiary or guarantor, of a party hereto making or defending any claim which would otherwise be arbitrable hereunder. (b) Prior to demanding arbitration, the parties shall first in good faith consult among appropriate officers of Buyer and Seller, which shall begin promptly after one party has delivered to the other a written request for consultation. At any time thereafter, either party may request in writing that the dispute be referred to appropriate Senior Executives of Buyer and Seller. Within 10 Business Days after such request, the Senior Executives (and not their designees) shall meet and attempt in good faith to resolve the dispute. (c) Neither party shall file a demand for arbitration until 45 Business Days after a request is made for Senior Executive meetings as provided for in Section 9.5(b). (d) The arbitration shall be held in the headquarters city of the party not initiating the claim before a single arbitrator who is knowledgeable in the subject matter of the dispute. The arbitrator's decisions and award shall be issued within 30 Business Days from the hearing of final arguments of the parties. The decision and award shall be final and binding and may be entered in any court having jurisdiction thereof. The arbitrator shall not have the power to award punitive or exemplary damages, or any damages excluded by, or in excess of any damage limitations expressed in, this Agreement . 32 (e) In order to prevent irreparable harm, the arbitrator may grant temporary or permanent injunctive or other equitable relief for the protection of intellectual property rights. (f) Issues of arbitrability shall be determined in accordance with the federal substantive and procedural laws relating to arbitration; all other aspects of this Agreement shall be interpreted in accordance with, and the arbitrator shall apply and be bound to follow the substantive laws of, the State of New York. Each party shall bear its own attorneys' fees associated with the arbitration and other costs and expenses of the arbitration shall be borne as provided by the rules of the American Arbitration Association. (g) The parties agree not to submit a dispute subject to this Section 9.5 to any federal, state, local or foreign court or arbitration association except as may be necessary to enforce the arbitration procedures of this Section 9.5, or to enforce the award of the arbitrator. If court proceedings to stay litigation or compel arbitration are necessary, the party who unsuccessfully opposes such proceedings shall pay all associated costs, expenses and attorneys' fees which are reasonably incurred by the other party. (h) The arbitrator may order the parties to exchange copies of non- rebuttal exhibits and copies of witness lists in advance of the arbitration hearing. The parties shall be entitled to the exchange in discovery of documents which shall be limited to those documents which are relevant and for which a requesting party has a substantial demonstrable need. However, except as provided in the preceding sentence, the arbitrator shall have no other power to order discovery or depositions unless and then only to the extent that all parties otherwise agree in writing. (i) Neither a party, witness nor the arbitrator may disclose the contents or results of any arbitration hereunder without prior written consent of all parties, unless and then only to the extent required to enforce or challenge the award, as required by law, or as necessary for financial and tax reports and audits. (j) Notwithstanding anything to the contrary in this Section 9.5, in the event of alleged violation of a party's intellectual property rights (including, but not limited to, unauthorized disclosure of confidential information), that party may seek temporary injunctive relief from any court of competent jurisdiction pending appointment of an arbitrator. The party requesting such relief shall simultaneously file a demand for arbitration of the dispute, and shall request the American Arbitration Association to proceed under its rules for expedited hearing. In no event shall any such temporary injunctive relief continue for more than 30 days. (k) If any part of this Section 9.5 is held to be unenforceable, it shall be severed and shall not affect either the duty to arbitrate hereunder or any other part of this Section 9.5. 33 10. Miscellaneous Provisions 10.1 Notices All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given upon receipt if (i) mailed by certified or registered mail, return receipt requested, (ii) sent by Federal Express or other express carrier, fee prepaid, (iii) sent via facsimile with receipt confirmed, or (iv) delivered personally, addressed as follows or to such other address or addresses of which the respective party shall have notified the other. (a) If to Seller, to: 600-700 Mountain Avenue Murray Hill, N.J. 07974-0636 Attention: Sr. V. P., Corporate Development With a copy to: 600-700 Mountain Avenue Murray Hill, N.J. 07974-0636 Attention: V.P. Law, Corporate and Securities Group (b) If to Buyer, to: 6428 Parkland Drive Sarasota, Florida 34243 Attention: President With a copy to: Larry P. Laubach, Esq. Schnader Harrison Segal & Lewis LLP 1600 Market Street, Suite 3600 Philadelphia, PA 19103 10.2 Expenses Except as otherwise provided in this Agreement, each party to this Agreement will bear all the fees, costs and expenses that are incurred by it in connection with the transactions contemplated hereby, whether or not such transactions are consummated. 10.3 Entire Agreement; Modification The agreement of the parties, which is comprised of this Agreement, the Schedules and Exhibits hereto and the documents referred to herein, sets forth the entire agreement and understanding between the parties and supersedes any prior agreement or understanding, written or oral, relating to the subject matter of this Agreement. No amendment, supplement, 34 modification or waiver of this Agreement shall be binding unless executed in writing by the party to be bound thereby. 10.4 Assignment; Binding Effect; Severability This Agreement may not be assigned by either party hereto without the other party's written consent. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the successors, legal representatives and permitted assigns of each party hereto. The provisions of this Agreement are severable, and in the event that any one or more provisions are deemed illegal or unenforceable the remaining provisions shall remain in full force and effect unless the deletion of such provision shall cause this Agreement to become materially adverse to either party, in which event the parties shall use Best Efforts to arrive at an accommodation that best preserves for the parties the benefits and obligations of the offending provision. 10.5 Governing Law This Agreement shall be governed by and construed and enforced in accordance with the laws of the state of New York without regard to its principles of conflicts of law. 10.6 Execution in Counterparts This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.7 Public Announcement Neither Seller nor Buyer, without the approval of the other party, shall make any press release or other announcement concerning the existence of this Agreement or the terms of the transactions contemplated by this Agreement, except as and to the extent that any such party shall be so obligated by law, in which case the other party shall be advised and the parties shall use their Best Efforts to cause a mutually agreeable release or announcement to be issued; provided, however, that the foregoing shall not preclude communications or disclosures necessary to comply with accounting and Securities and Exchange Commission disclosure obligations. 10.8 No Third-Party Beneficiaries Nothing in this Agreement, express or implied, is intended to or shall (a) confer on any Person other than the parties hereto and their respective successors or assigns any rights (including Third-Party beneficiary rights), remedies, obligations or liabilities under or by reason of this Agreement or (b) constitute the parties hereto as partners or as participants in a joint venture. This Agreement shall not provide Third Parties with any remedy, claim, liability, reimbursement, cause of 35 action or other right in excess of those existing without reference to the terms of this Agreement. No Third Party shall have any right, independent of any right that exists irrespective of this Agreement, under or granted by this Agreement, to bring any suit at law or equity for any matter governed by or subject to the provisions of this Agreement. 11. Termination and Waiver 11.1 Termination This Agreement may be terminated at any time prior to the Closing Date by: (a) Mutual Consent. The mutual written consent of Buyer and Seller; (b) Court Order. Buyer or Seller if there shall be in effect a nonappealable order of a court of competent jurisdiction prohibiting the consummation of the transactions contemplated hereby. (c) Delay. The Buyer or Seller if the Closing shall not have occurred within six (6) months following the date hereof, provided that the terminating party is not otherwise in material default or breach of this Agreement. (d) by either the Seller or the Buyer if there has been a material breach by the other party of any representation, warranty, covenant or agreement set forth in this Agreement which material breach has not been cured by such other party within sixty (60) Business Days after notice thereof. 11.2 Effect of Termination In the event of the termination of this Agreement, this Agreement shall become void and have no effect, except as provided in Article 6 and Sections 10.2 and 10.7, without any liability on the part of any party or its directors, officers or stockholders, except for any liability of any party then in breach. 11.3 Waiver of Agreement Any term or condition hereof may be waived at any time prior to the Closing Date by the party hereto which is entitled to the benefits thereof by action taken by its Board of Directors or its duly authorized officer or employee ; provided, however, that such action shall be evidenced by a written instrument duly executed on behalf of such party by its duly authorized officer or employee. The failure of either party to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision nor shall it in any way affect the validity of this Agreement or the right of such party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. 36 11.4 Amendment of Agreement This Agreement may be amended with respect to any provision contained herein at any time prior to the Closing Date by action of the parties hereto taken by their Boards of Directors or by their duly authorized officers or, in the case of Seller, employees, whether before or after such party's action; provided, however, that such amendment shall be evidenced by a written instrument duly executed on behalf of each party by its duly authorized officer or by such employee 37 IN WITNESS WHEREOF, each of Buyer and Seller has caused this Agreement to be duly executed on its behalf by its duly authorized officer as of the date first written above. Lucent Technologies Inc. By: /s/ R. D. Van Saun ------------------------- Name: R. D. Van Saun ------------------------- Title: Special Customer Operations ------------------------- Vice President Elcotel Direct, Inc. By: /s/ C. Shelton James ------------------------- Name: C. Shelton James ------------------------- Title: President ------------------------- 38 Schedule 1.1A Business Locations Schedule 1.1C Supplier Locations Schedule 1.2 Certain Persons Schedule 2.1(a) Principal Equipment Schedule 2.1(b) Inventory Schedule 2.1(c) Contracts Schedule 2.1(d) Licenses Schedule 2.1(f) Governmental Permits Schedule 2.1(h) Additional Excluded Assets Schedule 3.3 Certain Violations Schedule 3.4 Title to Assets; Location of Inventory Schedule 3.5 Personal Property Schedule 3.6 Permits, Licenses Schedule 3.7(a) Compliance With Laws Schedule 3.7(b) Litigation Schedule 3.10 Financial Information Schedule 3.11 Product Liability Claims Schedule 4.3 Certain Violations; Buyer's Consents Schedule 5.2 Seller's Exceptions to Preservation of Assets 39 Exhibit A-1 Form of Technology Transfer Agreement Exhibit A-2 Form of Patent License Agreement Exhibit B Form of Assignment and Assumption Agreement Exhibit C Form of Bill of Sale Exhibit D Use Guidelines 40 EX-2.2 3 TECHNOLOGY TRANSFER AGREEMENT EXHIBIT 2.2 TECHNOLOGY TRANSFER AGREEMENT Effective September 30, 1997 between LUCENT TECHNOLOGIES INC. and ELCOTEL, INC. Relating to Public Terminals TECHNOLOGY TRANSFER AGREEMENT This Agreement (hereinafter sometimes referred to as the "TTA") is made and entered into as of September 30, 1997 (the "Effective Date"), by and between LUCENT TECHNOLOGIES INC., ("LUCENT"), a Delaware corporation with offices at 600 Mountain Avenue, Murray Hill, NJ 07974-0636, and ELCOTEL, INC. ("ELCOTEL"), a Delaware corporation with offices at 6428 Parkland Drive, Sarasota, FL 34243. WHEREAS, the parties have entered into an Agreement for Purchase and Sale of Assets (the "Purchase and Sale of Assets Agreement"), dated as of September 30, 1997 and closing concurrently with the Effective Date, pursuant to which LUCENT is selling and ELCOTEL is acquiring certain Assets; and WHEREAS, under the Purchase and Sale of Assets Agreement ELCOTEL is to acquire certain rights to LUCENT technology used to operate the BUSINESS and the Purchased Assets. NOW THEREFORE, in consideration of the foregoing and the terms hereinafter set forth, the parties agree as follows: ARTICLE I DEFINITIONS 1.01 Any term in capital letters which is defined in Schedule 1 shall have the meaning specified therein. Other terms used herein with initial capitals which are not specifically defined shall, unless otherwise expressly indicated, have the meanings ascribed to them in the Purchase and Sale of Assets Agreement. ARTICLE II INFORMATION FURNISHED 2.01(a) LUCENT will, concurrently with the Effective Date, furnish or make available to ELCOTEL the documents and other information listed in Schedule 2 ("GENERAL TECHNOLOGY"), or such portions thereof requested, or advise ELCOTEL of such additional reasonable period within which 2 LUCENT shall furnish such items to ELCOTEL. With such furnishing, LUCENT shall also provide, to ELCOTEL when feasible, a list which identifies the documents and other information delivered. (b) LUCENT and ELCOTEL shall promptly notify each other of any inaccuracies believed present in the list. All information specified on said list shall be deemed to be a part of the GENERAL TECHNOLOGY with the following qualification: if, within thirty (30) days after receipt of the list, ELCOTEL shall give LUCENT written notice specifying particular information identified therein which was not actually received, such specified information shall be deemed deleted from the list until such information is actually received by ELCOTEL. (c) All technical information with respect to the GENERAL TECHNOLOGY previously furnished by LUCENT or any of its ASSOCIATED COMPANIES to ELCOTEL in contemplation of this TTA shall be deemed to be a part of all information with respect to the GENERAL TECHNOLOGY. (d) LUCENT may maintain archive copies of all documentation furnished to ELCOTEL hereunder. ARTICLE III SERVICES TO BE PROVIDED 3.01 LUCENT, at ELCOTEL's request and upon reasonable notice, and to the extent it does not unreasonably interfere with LUCENT's business, shall furnish to ELCOTEL technical assistance service by employees of LUCENT or its SUBSIDIARIES at locations agreed to by both parties sufficient to reasonably enable ELCOTEL to understand the technical information furnished. Such services when rendered shall be paid for by ELCOTEL as provided in Schedule 4 plus reasonable travel and living expenses. LUCENT shall invoice ELCOTEL at the end of each calendar month for the services performed during that month and ELCOTEL shall pay the invoiced amount within thirty (30) days after the receipt of such invoice. 3.02 LUCENT and ELCOTEL shall at all times retain the administrative supervision of their respective personnel. 3.03 Each parties' personnel shall, while on any location of another party or its SUBSIDIARIES, comply with that party or its SUBSIDIARIES' rules and regulations with regard to safety and security. Each party shall have full control over its personnel and shall be entirely responsible for their complying with the other party's or its SUBSIDIARIES' rules and regulations. Each party agrees to indemnify and save the other party and its SUBSIDIARIES harmless from any claims or demands, including the costs, expenses and reasonable attorney's fees incurred on account thereof, that may be made by (i) anyone for injuries to persons or damage 3 to property to the extent they result from acts or omissions of another party's personnel; or (ii) another party's personnel under Workers' Compensation or similar laws. Each party agrees to defend the other party and its SUBSIDIARIES against any such claim or demand. ARTICLE IV GRANTS OF RIGHTS TO GENERAL TECHNOLOGY 4.01 (a) Subject to all pre-existing agreements of LUCENT granting nonexclusive rights with respect to GENERAL TECHNOLOGY, LUCENT grants to ELCOTEL a personal, exclusive (or with respect to such GENERAL TECHNOLOGY covered by the pre-existing agreements referred to at the beginning of this sentence, nonexclusive), nontransferable, worldwide right to use GENERAL TECHNOLOGY for manufacture, marketing, testing, design, maintenance, repair, sale and importing of LISTED PRODUCTS and ENHANCED PRODUCTS. LUCENT retains the right to license, use and have used GENERAL TECHNOLOGY in connection with any and all products and services other than LISTED PRODUCTS AND ENHANCED PRODUCTS. The rights granted to ELCOTEL under this Section 4.01(a) do not include any rights with respect to wireless or clip-on fraud prevention technology of LUCENT (b) LUCENT shall have a personal, nonexclusive, non- transferable, fee-free right (including patent license rights) for all purposes other than PUBLIC TERMINALS to reproduce, use, and have used inventions which relate to LISTED PRODUCTS that were originated or developed during the BASE PERIOD by ELCOTEL personnel as a result of technical assistance service provided by LUCENT pursuant to Section 3.01 of this Agreement, as well as products (other than PUBLIC TERMINALS or PUBLIC TERMINAL COMPONENTS) incorporating such inventions. (c) The grant of each license hereunder includes the right of each party to grant sublicenses within the scope of such license to their respective SUBSIDIARIES for so long as they remain its SUBSIDIARIES. Any such sublicense may be made effective retroactively, but not prior to the effective date hereof, nor prior to the sublicensee becoming a SUBSIDIARY of such party. 4.02(a) LUCENT grants to ELCOTEL a personal and exclusive right, as an attribute of the rights granted in Section 4.01, to disclose to any supplier or prospective supplier only those portions of the GENERAL TECHNOLOGY which are necessary for the procurement by ELCOTEL of materials, parts and components, for use in manufacture of LISTED PRODUCTS and ENHANCED PRODUCTS in accordance with this Agreement. (b) ELCOTEL agrees that it will not make any part of the GENERAL TECHNOLOGY available to any such supplier or 4 prospective supplier except on the agreement in writing (of which a copy will be furnished to LUCENT promptly upon its request) of such supplier or prospective supplier that it accepts as its own ELCOTEL's commitments under Section 4.03 and the confidentiality obligations of Article IX, that it will use all information received from ELCOTEL only for the purpose of supplying to ELCOTEL items of the type to be procured by ELCOTEL pursuant to this Section 4.02, that it will promptly return or destroy each and every part of such information as directed by ELCOTEL, and that it will not cause or permit the transportation of any such information outside of the United States except in conformity with all export regulations. 4.03 The parties acknowledge that any products, software, and technical information (including, but not limited to, services and training) provided under this Agreement are subject to U.S. export laws and regulations and any use or transfer of such products, software, and technical information must be authorized under those regulations. ELCOTEL agrees that it will not use, distribute, transfer, or transmit the products, software, or technical information (even if incorporated into other products) except in compliance with U.S. export regulations. If requested by LUCENT, ELCOTEL also agrees to sign written assurances and other export-related documents as may be required for LUCENT to comply with U.S. export regulations. ARTICLE V NO GRANT OF RIGHTS TO PATENTS 5.01 The parties agree that no patent licenses are granted by LUCENT under this Agreement and that any and all rights to patents are limited to those in the Patent License Agreement between the parties of even date. ARTICLE VI GRANTS OF RIGHTS TO SOFTWARE 6.01 The provisions of this Article VI shall be applicable to all Licensed Software. Licensed Software means all software furnished by LUCENT as GENERAL TECHNOLOGY hereunder, either in object or source code format or derived therefrom, and intended for use with LISTED PRODUCTS and ENHANCED PRODUCTS manufactured by ELCOTEL and also includes the information in the associated documentation furnished to ELCOTEL for use therewith. 6.02 All Licensed Software (whether or not part of firmware), and all copies thereof made by ELCOTEL, are and shall remain the property of LUCENT; provided, however, that all Licensed Software furnished as an integral part of or comprising a LISTED PRODUCT, including software contained in 5 a PUBLIC TERMINAL comprising a LISTED PRODUCT , and all Licensed Software owned by LUCENT used in the manufacturing or testing of LISTED PRODUCTS or contained in engineering, test or qualification fixtures comprising a Purchased Asset acquired by ELCOTEL pursuant to the Purchase and Sale of Assets Agreement shall be the property of ELCOTEL (the "Owned Software"). 6.03(a) Other than with respect to Owned Software, ELCOTEL shall not make any copies of any Licensed Software except as necessary in connection with the rights granted hereunder, and shall reproduce and include any copyright and proprietary notice of LUCENT on all such necessary copies of the Licensed Software and mark all media containing such copies with a warning that such Licensed Software is subject to restrictions contained in a license agreement between LUCENT and ELCOTEL and that such Licensed Software is the property of LUCENT. ELCOTEL agrees that it shall not, and shall forbid its customers, agents and suppliers to disassemble, reverse assemble or reverse compile the Licensed Software. (b) Other than with respect to LUCENT owned software or Owned Software, no right is granted for the use of Licensed Software directly for any third person, or for any use by any third person of Licensed Software. 6.04 ELCOTEL shall take appropriate action, by instruction, agreement or otherwise, legally obligating all persons permitted access, consistent with these provisions, to any Licensed Software so as to enable ELCOTEL to satisfy its confidentiality and other obligations under this Agreement. ARTICLE VII FEES 7.01 ELCOTEL shall pay to LUCENT, within thirty (30) days after LUCENT renders an invoice therefor, LUCENT's costs for gathering and reproducing the TECHNICAL INFORMATION. Such payment shall not be creditable with respect to any other fees payable pursuant to this agreement nor shall such sum or any portion thereof be refunded to ELCOTEL; provided, however, the total sum payable by ELCOTEL pursuant to this Section 7.01 shall not exceed fifty thousand dollars ($U.S. 50,000.00). 7.02 In part payment for the rights granted under Section 4.01 by LUCENT to ELCOTEL, ELCOTEL shall pay to LUCENT on the Closing Date, the sum of six hundred thousand United States dollars (U.S. $ 600,000.00) Such payment shall not be creditable with respect to any other fees payable pursuant to this agreement nor shall such sum or any portion thereof be refunded to ELCOTEL. 6 (b) In further payment for the rights granted under Section 4.01 by LUCENT, ELCOTEL shall pay to LUCENT a fee on each ITEM SUBJECT TO FEE, prior to the expiration of the BASE PERIOD. Such fee shall be determined by applying to the COST OF GOODS of such ITEM SUBJECT TO FEE the applicable percentage rate as follows: ITEM SUBJECT TO FEE APPLICABLE FEE (in %) PUBLIC TERMINALS [*] PUBLIC TERMINAL COMPONENTS (not part of a substantially complete PUBLIC TERMINAL) [*] ARTICLE VIII RECORDS AND PAYMENTS 8.01 ELCOTEL shall keep full, clear and accurate records with respect to ITEMS SUBJECT TO FEE sold, leased, or put into use. ELCOTEL shall retain such records with respect to each ITEM SUBJECT TO FEE for at least seven (7) years from the sale, lease or putting into use of such ITEM SUBJECT TO FEE. LUCENT shall have the right through its accredited auditing representatives, and at its expense, to make an examination and audit, during normal business hours and in a reasonable manner, not more frequently than annually, of all such records and such other records and accounts as may under recognized accounting practices contain information bearing upon the amounts of fees payable to it under this agreement. Prompt adjustment shall be made by the proper party to compensate for any errors or omissions disclosed by such examination or audit. Neither such right to examine and audit nor the right to receive such adjustment shall be affected by any statement to the contrary, appearing on checks or otherwise, unless such statement appears in a letter, signed by the party having such right and delivered to the other party, expressly waiving such right. 8.02(a) Within sixty (60) days after the end of each semiannual period ending on June 30th or December 31st, commencing with the semiannual period during which this agreement first becomes effective, ELCOTEL shall furnish to LUCENT a statement, in form reasonably acceptable to LUCENT, certified by a responsible official of ELCOTEL, showing all ITEMS SUBJECT TO FEE which were sold, leased or put into use during such semiannual period and the amounts of fees payable thereon (if no such ITEM SUBJECT TO FEE has been so sold, leased or put into use, that fact shall be shown on such statement). - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 7 (b) Within such sixty (60) days ELCOTEL shall, irrespective of its own business and accounting methods, pay to LUCENT the fees payable for such semiannual period as shown in the statement required by Section 8.02(a). ELCOTEL shall furnish whatever additional information LUCENT may reasonably prescribe from time to time to enable LUCENT to ascertain the fees payable hereunder. 8.03 ELCOTEL shall pay for services actually performed pursuant to Article III in accordance with Schedule 4. 8.04 LUCENT shall render invoices for all payments for services referred to in Section 8.03 after such services have been rendered hereunder, and ELCOTEL shall make payment of all amounts so billed within sixty (60) days after receipt of such invoices. 8.05 ELCOTEL shall be solely responsible for its personnel's remuneration and their travel, living and other expenses, including those incurred in visiting any locations of LUCENT or its SUBSIDIARIES. ELCOTEL shall also be solely responsible for any tax or other governmental charge, however designated, which is imposed on ELCOTEL or its personnel by the United States or by any agency or political subdivision thereof as a result of the existence or operation of this Agreement or as the result of the activities of ELCOTEL's personnel. 8.06(a) ELCOTEL shall pay any tax, duty, levy, customs fee, or similar charge ("taxes"), including interest and penalties thereon, however designated, imposed as a result of the operation or existence of this agreement, including taxes which ELCOTEL is required to withhold or deduct from payments to LUCENT, except (i) income taxes imposed upon LUCENT by any governmental entity within the United States (the fifty (50) states and the District of Columbia), and (ii) income taxes imposed upon LUCENT by jurisdictions outside the United States which are allowed as a credit against the United States Federal income tax of LUCENT. In order for the exception in (ii) to be effective, ELCOTEL must furnish to LUCENT evidence sufficient to satisfy the United States taxing authorities that such taxes have been paid. Such evidence must be furnished to LUCENT within a reasonable period following issuance by the local taxing authority. (b) If Buyer is required to bear a tax pursuant to Section 8.06(a) above, ELCOTEL shall pay such taxes and other charges and any additional amounts as are necessary to ensure that the net amounts received by LUCENT after all such payments or withholdings equal the amounts to which LUCENT is otherwise entitled under this Agreement as if such taxes, or other charges, did not exist. 8.07(a) Any notice or other communication hereunder shall be sufficiently given to ELCOTEL when sent by certified mail 8 addressed to ELCOTEL's office above specified), or to LUCENT when sent by certified mail addressed to Contract Administrator, Intellectual Property Division, Lucent Technologies Inc., 2333 Ponce de Leon Boulevard - Suite 511, Coral Gables, Florida 33134, United States of America. Changes in such addresses may be specified by written notice. (b) Payments by ELCOTEL shall be made to Lucent Technologies Inc. at Sun Trust, P.O.Box 913021, Orlando, Florida, 32891- 3021, United States of America. Alternatively, payments to LUCENT may be made by bank wire transfers to LUCENT's account: Lucent Technologies Licensing, Account No. 910-2- 568475, at Chase Manhattan Bank, N.A., 55 Water Street, New York, NY 10041, United States of America. Swift code: CHASUS33; ABA code 021000021., United States of America. Changes in such address or account may be specified by written notice. Any conversion to United States dollars shall be at the prevailing rate for bank cable transfers on New York City as quoted for the last day of such semiannual period by leading banks dealing in the New York City foreign exchange market. (c) Payments to ELCOTEL or LUCENT or one of its SUBSIDIARIES provided for in this agreement shall, when overdue, be subject to a late payment charge calculated at an annual rate of three percent (3%) over the prime rate or successive prime rates in effect in New York City during delinquency; provided, however, that if the amount of such late payment charge exceeds the maximum permitted by law for such late payment charge, such late payment charge shall be reduced to such maximum amount. ARTICLE IX TERMINATION 9.01(a) If ELCOTEL defaults in any material respect in its obligations under this Agreement, the Patent License Agreement, Section 5.3(b) of the Purchase and Sale of Assets Agreement or becomes insolvent, invokes as a debtor any law relating to the relief of debtors' or creditors' rights, or has any such law invoked against it, becomes involved in any liquidation or termination of its PUBLIC TERMINAL and PUBLIC TERMINAL COMPONENTS business, is adjudicated bankrupt, or is involved in any assignment for the benefit of its creditors, LUCENT may upon its election and in addition to any other remedies that it may have, at any time terminate all of LUCENT's obligations hereunder and all of the rights granted by LUCENT hereunder, by not less than two (2) months' written notice to ELCOTEL specifying any such default or event, unless within such two (2) month period such defaults or events specified therein for termination pursuant to this Section 9.01(a) shall have been remedied. Any termination of licenses and rights of a party shall not affect the other party's licenses and rights hereunder. 9 (b) Each party's obligations under Sections 4.01, 4.03, 10.04, and 10.05 and any other of its continuing obligations hereunder, shall survive and continue after such termination. (c) In the event that LUCENT terminates ELCOTEL's rights pursuant to Section 9.01(a), ELCOTEL shall continue to have a nonexclusive right, for reasonable fees to be negotiated, to use GENERAL TECHNOLOGY to maintain LISTED PRODUCTS AND ENHANCED PRODUCTS installed prior to such termination and to install and maintain then current finished goods inventory of such products. ARTICLE X GENERAL PROVISIONS 10.01 This Agreement shall prevail in the event of any conflicting terms or legends which may appear on documents furnished as part of the GENERAL TECHNOLOGY hereunder. 10.02 LUCENT believes the GENERAL TECHNOLOGY to be true and accurate, but LUCENT and its ASSOCIATED COMPANIES will not be held to any liability for errors or omissions therein. 10.03(a) As of the Effective Date, LUCENT is not aware that LISTED PRODUCTS made using the GENERAL TECHNOLOGY infringes any patent, copyright, trade secret, know-how, technology or other intellectual property rights of any third party. (b) EXCEPT AS PROVIDED IN SECTION 10.02 AND 10.03(a); (i) LUCENT AND ITS ASSOCIATED COMPANIES MAKE NO REPRESENTATIONS OR WARRANTIES, EXPRESSLY OR IMPLIEDLY, BY WAY OF EXAMPLE BUT NOT OF LIMITATION, LUCENT AND ITS ASSOCIATED COMPANIES MAKE NO REPRESENTATIONS OR WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE; (ii) LUCENT AND ITS ASSOCIATED COMPANIES MAKE NO REPRESENTATIONS OR WARRANTIES THAT THE USE OF THE GENERAL TECHNOLOGY OR ANY OF IT WILL NOT INFRINGE ANY PATENT, COPYRIGHT, TRADEMARK, TRADE SECRET, KNOW-HOW, TECHNOLOGY OR ANY OTHER INTELLECTUAL PROPERTY RIGHT OF ANY THIRD PARTY, AND IT SHALL BE THE SOLE RESPONSIBILITY OF ELCOTEL TO MAKE SUCH DETERMINATION AS IS NECESSARY WITH RESPECT TO THE ACQUISITION OF LICENSES UNDER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES; and (iii) LUCENT AND ITS ASSOCIATED COMPANIES SHALL NOT BE HELD TO ANY LIABILITY WITH RESPECT TO ANY PATENT INFRINGEMENT OR ANY OTHER CLAIM MADE BY ELCOTEL OR ANY THIRD PARTY ON ACCOUNT OF, OR ARISING FROM, THE USE OF THE GENERAL TECHNOLOGY OR ANY OF IT. 10 (c) ELCOTEL agrees to indemnify and save LUCENT and its SUBSIDIARIES harmless from any claims or demand for personal injury or property damage (including reasonable expense of litigation and settlement of such claims) by third persons to the extent that such claims arise out of or in connection with the furnishing or use of any GENERAL TECHNOLOGY hereunder. 10.04 ELCOTEL agrees: (i) that ELCOTEL will not use the GENERAL TECHNOLOGY other than for the purposes authorized herein; (ii) that subject to any pre-existing agreements relating to GENERAL TECHNOLOGY, ELCOTEL and LUCENT shall hold all of the GENERAL TECHNOLOGY in confidence and shall not make any disclosure of any or all of such GENERAL TECHNOLOGY to anyone, except to employees of ELCOTEL and LUCENT who have a need to know and to any others to whom such disclosure may be expressly authorized hereunder and is necessary to implement the use for which rights are granted hereunder, and that ELCOTEL and LUCENT shall appropriately notify each person to whom any such disclosure is made that such disclosure is made in confidence and shall be kept in confidence by such person; provided that ELCOTEL and LUCENT shall not be required so to do in respect of portions of the GENERAL TECHNOLOGY, if any, (a) which were previously known to ELCOTEL free of any obligations to keep confidential, or (b) which have become generally known to the public, provided that such public knowledge was not the result of any act attributable to ELCOTEL or LUCENT, or (c) which ELCOTEL or LUCENT otherwise explicitly agrees in writing need not be kept confidential; (iii) that ELCOTEL will not, without LUCENT's express written permission, make or have made, or permit to be made, more copies of any of the GENERAL TECHNOLOGY than are reasonably needed for or are incidental to its use hereunder, and that each such copy shall contain the same proprietary notices or legends which appear on the GENERAL TECHNOLOGY; (iv) that except as set out in the Purchase and Sale of Assets Agreement, ELCOTEL will not, without LUCENT's express written permission, (a) use in advertising, publicity, packaging, labeling, or otherwise any identification (such as but not limited to trade names, trademarks, trade devices, service marks, symbols or any other identification or any abbreviation, contraction or simulation thereof) owned or used by LUCENT or any of its ASSOCIATED COMPANIES to identify its products or services, or (b) represent, 11 directly or indirectly, that any product or service produced in whole or in part with the use of any of the GENERAL TECHNOLOGY is a product or service of LUCENT or any of its ASSOCIATED COMPANIES or is made in accordance with or utilizes any information or documentation of LUCENT or any of its ASSOCIATED COMPANIES; and (v) that subject to the provisions of Articles IV and VI, the GENERAL TECHNOLOGY, any software contained in any software-containing medium and all documents furnished hereunder are deemed to be and shall remain the property of LUCENT, and that upon any termination of this Agreement, ELCOTEL shall upon request deliver to LUCENT all documents containing any of the GENERAL TECHNOLOGY and all copies thereof, and render unusable any software furnished hereunder and all copies thereof contained in any software- containing medium, then under ELCOTEL's or its suppliers' control. 10.05 It is recognized that prior to or during the performance of this Agreement, one party's personnel may unavoidably receive or have access to private or confidential information of the other party which relates to the BUSINESS, the Purchased Assets, the LISTED PRODUCTS AND ENHANCED PRODUCTS or to any other product, service or business of the other party and which is not GENERAL TECHNOLOGY. Both parties agree that all such information shall be subject to the provisions of this Article IX and that its personnel will comply with reasonable requirements of the other party, including identification badges and sign-in procedures for any locations, in connection therewith. 10.06 Nothing contained herein shall be construed as conferring by implication, estoppel or otherwise any license or right under any patent, whether or not the exercise of any right herein granted necessarily employs an invention of any existing or later issued patent, except as provided in the Patent License Agreement between the parties of even date. 10.07(a) Neither LUCENT nor ELCOTEL shall be liable for any loss, damage, delay or failure of performance resulting directly or indirectly from any cause which is beyond its reasonable control, including but not limited to acts of God, extraordinary traffic conditions, riots, civil disturbances, wars, states of belligerency or acts of the public enemy, strikes, work stoppages or the laws, regulations, acts or failure to act of any governmental authority. (b) LUCENT AND ITS SUBSIDIARIES SHALL NOT BE LIABLE FOR INCIDENTAL, SPECIAL, INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGES OF ANY NATURE, HOWEVER CAUSED. 10.08 This Agreement, the Purchase and Sale of Assets Agreement and the Collateral Agreements set forth the entire 12 agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions between them. Neither of the parties shall be bound by any conditions, definitions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein, or in any prior or referenced existing written agreement between the parties, or as duly set forth on or subsequent to the Effective Date in writing and signed by a proper and duly authorized representative of the party to be bound thereby. 10.09(a) Neither this Agreement nor any right hereunder, in whole or in part, shall be assignable or otherwise transferable by either party without the prior written consent of the other; provided, however, that LUCENT shall have the right to assign this Agreement to any successor of any portion of its business and to delegate any of its obligations hereunder to any of its ASSOCIATED COMPANIES and ELCOTEL shall be obligated to act in respect of such ASSOCIATED COMPANIES as it would be obligated to act hereunder in respect of LUCENT; provided that LUCENT and such delegate shall be jointly and severally responsible hereunder with respect to the performance of such delegated obligations. (b) Any notice or other communication hereunder shall be sufficiently given to ELCOTEL or LUCENT when sent by certified mail addressed to their respective office above specified. Changes in such addresses may be specified by written notice. 10.10 The parties are familiar with the principles of New York State commercial law, and desire and agree that the law of the State of New York shall apply in any dispute arising with respect to this Agreement. 10.11(a) If a dispute arises out of or relates to this Agreement, or the breach, termination or validity thereof, the parties agree to submit the dispute to a sole mediator selected by the parties or, at any time at the option of a party, to mediation by the American Arbitration Association ("AAA"). If not thus resolved, it shall be referred to a sole arbitrator selected by the parties within thirty (30) days of the mediation, or in the absence of such selection, to AAA arbitration which shall be governed by the United States Arbitration Act. (b) Any award made (i) shall be a bare award limited to a holding for or against a party and affording such remedy as is deemed equitable, just and within the scope of the Agreement; (ii) shall be without findings as to issues (including but not limited to patent validity and/or infringement) or a statement of the reasoning on which the award rests; (iii) may in appropriate circumstances (other than patent disputes) include injunctive relief; (iv) shall be made within four (4) months of the appointment of the arbitrator; and (v) may be entered in any court of competent jurisdiction. 13 (c) The requirement for mediation and arbitration shall not be deemed a waiver of any right of termination under this Agreement and the arbitrator is not empowered to act or make any award other than based solely on the rights and obligations of the parties prior to any such termination. (d) The arbitrator shall be knowledgeable in the legal and technical aspects of this agreement and shall determine issues of arbitrability but may not limit, expand or otherwise modify the terms of the agreement. (e) The Agreement shall be interpreted in accordance with the laws of the State of New York exclusive of its conflict of laws provisions and the place of mediation and arbitration shall be New York City. (f) Each party shall bear its own expenses but those related to the compensation and expenses of the mediator and arbitrator shall be borne equally. (g) A request by a party to a court for interim measures shall not be deemed a waiver of the obligation to mediate and arbitrate. (h) The arbitrator shall not have authority to award punitive or other damages in excess of compensatory damages and each party irrevocably waives any claim thereto. (i) Except as required by law, the parties, their representatives, other participants and the mediator and arbitrator shall hold the existence, content and result of mediation and arbitration in confidence. (j) The parties shall be entitled to exchange in discovery of documents which shall be limited to those documents which are relevant and for which a requesting party has a substantial demonstrable need. 4.09 Except as required by law, the parties agree that the existence and content of this Agreement shall be treated as confidential. 14 IN WITNESS WHEREOF, each of the parties has caused this agreement to be executed in duplicate originals by its duly authorized representatives on the respective dates entered below. LUCENT TECHNOLOGIES INC. By: /s/ M. R. Greene ------------------------------ M. R. Greene Vice President - Law Date: 9/30/97 ------------------------------ ELCOTEL, INC. By: /s/ Tracey L. Gray ------------------------------ Title: President - C.O.O. ------------------------------ Date: 9/30/97 ------------------------------ THIS AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY IN ANY MANNER UNLESS DULY EXECUTED BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES. 15 SCHEDULE 1 DEFINITIONS APPENDIX ASSOCIATED COMPANIES of LUCENT means any SUBSIDIARIES of LUCENT. ASSOCIATED COMPANIES of ELCOTEL means any SUBSIDIARIES of ELCOTEL. BASE PERIOD means for PUBLIC TERMINALS and PUBLIC TERMINAL COMPONENTS ,the two (2) year period commencing on the Effective Date of this Agreement; provided, however, that if in one or more periods of twelve (12) or more consecutive calendar months during such two (2) year period there shall be no sale of at least [ * ] PUBLIC TERMINALS and sale of at least [ * ] dollars ($US [ * ]) of PUBLIC TERMINAL COMPONENTS which are ITEMS SUBJECT TO FEE , such period(s) of no sales shall not be taken into account in determining the expiration of the BASE PERIOD. BUSINESS means the Public Terminal business as carried on by LUCENT immediately prior to the date of this Agreement. COST OF GOODS means for PUBLIC TERMINAL COMPONENTS [*]% of the FAIR MARKET VALUE and [*]% of the FAIR MARKET VALUE for PUBLIC TERMINALS. ENHANCED PRODUCT means any PUBLIC TERMINAL or PUBLIC TERMINAL COMPONENT product which results from a redesign or modification of LISTED PRODUCTS. FAIR MARKET VALUE means, with respect to any ITEM SUBJECT TO FEE sold, leased or put into use, the greater of (i) the selling price which a seller would realize from an unaffiliated buyer in an arm's length sale of an identical product in the same quantity and at the same time and place as such sale, lease or putting into use; or (ii) the selling price actually obtained for such ITEM SUBJECT TO FEE in the form in which it is sold, whether or not assembled (and without excluding therefrom any components or subassemblies thereof which are included in such selling price). In determining "selling price" the following shall be excluded: (a) usual trade discounts actually allowed to unaffiliated persons or entities; (b) packing costs; (c) costs of insurance and transportation; - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 16 (d) import, export, excise, sales and value added taxes, and customs duties, and (e) sales returns. GENERAL TECHNOLOGY means that LUCENT technology including, without limitation, manuals, instructions, directories, tangible know-how, schematics and firmware, relating to the LISTED PRODUCTS that is identified or described in Schedule 2, attached hereto and such other technology as may be identified pursuant to the Transition Plan which, subject to LUCENT's concurrence, shall be deemed added to schedule 2 ITEM SUBJECT TO FEE means any PUBLIC TERMINAL or PUBLIC TERMINAL COMPONENT which is manufactured during the BASE PERIOD by LICENSEE with the use of any of the GENERAL TECHNOLOGY. LISTED PRODUCTS means products of the type listed in Schedule 3 as developed or manufactured by LUCENT in the BUSINESS prior to the Effective Date and such other products as may be identified pursuant to the Transition Plan which shall, subject to LUCENT'S concurrence, be deemed added to Schedule 3 PUBLIC TERMINAL means a telephone station unit in a publicly accessible location for performing the functions of (i) producing electrical signals representative of voice and data signals or (ii) producing voice and data signals representative of electrical signals or (iii) performing any combination of the functions (i) and (ii). PUBLIC TERMINAL COMPONENT means any part, component or subassembly of a PUBLIC TERMINAL. SUBSIDIARY of a company means a corporation or other legal entity (i) the majority of whose shares or other securities entitled to vote for election of directors (or other managing authority) is now or hereafter controlled by such company either directly or indirectly; or (ii) which does not have outstanding shares or securities but the majority of whose ownership interest representing the right to manage such corporation or other legal entity is now or hereafter owned and controlled by such company either directly or indirectly; but any such corporation or other legal entity shall be deemed to be a SUBSIDIARY of such company only as long as such control or ownership and control exists. 17 EX-2.3 4 PATENT LICENSE AGREEMENT EXHIBIT 2.3 PATENT LICENSE AGREEMENT between LUCENT TECHNOLOGIES INC. and ELCOTEL, INC. Effective as of September 30, 1997 Relating to Public Terminals PATENT LICENSE AGREEMENT TABLE OF CONTENTS ARTICLE I - GRANTS OF LICENSES 1.01 Grant 1.02 Duration 1.03 Scope 1.04 Ability to Provide Licenses 1.05 Publicity ARTICLE II - ROYALTY AND PAYMENTS 2.01 Royalty Calculation 2.02 Reductions 2.03 Accrual 2.04 Exclusions 2.05 Records and Adjustments 2.06 Reports and Payments ARTICLE III - TERMINATION 3.01 Breach 3.02 Voluntary Termination 3.03 Survival ARTICLE IV - MISCELLANEOUS PROVISIONS 4.01 Disclaimer 4.02 Nonassignability 4.03 Addresses 4.04 Taxes 4.05 Choice of Law 4.06 Integration 4.07 Outside the United States 4.08 Dispute Resolution DEFINITIONS APPENDIX .i PATENT LICENSE AGREEMENT This Agreement is made and entered into as of September 30, 1997 (the "Effective Date"), by and between LUCENT TECHNOLOGIES INC., ("LUCENT"), a Delaware corporation with offices at 600 Mountain Avenue, Murray Hill, NJ 07974-0636, and ELCOTEL, INC. ("ELCOTEL"), a Delaware corporation with offices at 6428 Parkland Drive, Sarasota, FL 34243. WHEREAS, the parties have entered into an Agreement for Purchase and Sale of Assets (the "Purchase and Sale of Assets Agreement"), dated as of September 30, 1997 and closing concurrently with the Effective Date, pursuant to which LUCENT is selling and ELCOTEL is acquiring certain Assets; and WHEREAS, under the Purchase and Sale of Assets Agreement ELCOTEL is to acquire certain rights to LUCENT patents. NOW THEREFORE, in consideration of the foregoing and the terms hereinafter set forth, the parties agree as follows: ARTICLE I GRANTS OF LICENSES 1.01 Grant LUCENT grants to ELCOTEL under LUCENT's PATENTS personal, nonexclusive and nontransferable, worldwide licenses for: PUBLIC TERMINALS; and PUBLIC TERMINAL COMPONENTS 1.02 Duration All licenses granted herein under any patent shall continue for the entire unexpired term of such patent or for as much of such term as LUCENT has the right to grant. 1.03 Scope (a) The licenses granted herein are licenses to (i) make, have made, use, lease, sell, maintain and import 1 LICENSED PRODUCTS; (ii) make, have made, use and import machines, tools, materials and other instrumentalities, insofar as such machines, tools, materials and other instrumentalities are involved in or incidental to the development, manufacture, testing or repair of LICENSED PRODUCTS which are or have been made, used, leased, owned, sold or imported by ELCOTEL; and (iii) convey to any customer of ELCOTEL with respect to any LICENSED PRODUCT which is sold or leased by ELCOTEL to such customer, rights to use and resell such LICENSED PRODUCT as sold or leased by ELCOTEL (whether or not as part of a larger combination); provided, however, that no rights may be conveyed to customers with respect to any invention which is directed to (1) a combination of such LICENSED PRODUCT (as sold or leased) with any other product which combination infringes LUCENT's PATENTS, (2) a method or process which is other than the inherent use of such LICENSED PRODUCT itself (as sold or leased), or (3) a method or process involving the use of a LICENSED PRODUCT to manufacture (including associated testing) any other product. The parties agree that no other licenses of any kind including, but not limited to, licenses in connection with semiconductor technology (further including, but not limited, to semiconductor circuitry, semiconductor system, semiconductor manufacture, or process therefor), optoelectronics , wireless, clip-on fraud prevention or laser technology are licensed herein. (b) Licenses granted herein are not to be construed either (i) as consent by LUCENT to any act which may be performed by ELCOTEL except to the extent impacted by a patent licensed herein to ELCOTEL, or (ii) to include licenses to contributorily infringe or induce infringement under U.S. law or a foreign equivalent thereof. (c) The grant of each license hereunder includes the right of ELCOTEL to grant sublicenses within the scope of such license to ELCOTEL's SUBSIDIARIES for so long as they remain its SUBSIDIARIES. Any such sublicense may be made effective retroactively, but not prior to the effective date hereof, nor prior to the sublicensee becoming a SUBSIDIARY of ELCOTEL. 1.04 Ability to Provide Licenses LUCENT's failure to meet any obligation hereunder, due to the assignment of title to any invention or patent, or the granting of any licenses, to the United States Government or any agency or designee thereof pursuant to a statute or regulation of, or contract with, such Government or agency, shall not constitute a breach of this agreement. 1.05 Publicity Nothing in this agreement shall be construed as conferring upon ELCOTEL or its SUBSIDIARIES any right to include in 2 advertising, packaging or other commercial activities related to a LICENSED PRODUCT, any reference to LUCENT (or any of its SUBSIDIARIES), its trade names, trademarks or service marks. ARTICLE II ROYALTY AND PAYMENTS 2.01 Royalty Calculation (a) Royalty shall be payable to LUCENT, at the applicable rate specified below, on each REPORTABLE PRODUCT which is made, sold, leased or put into use by ELCOTEL, or any of its SUBSIDIARIES during the BASE PERIOD. Such royalty rate shall be applied to the COST OF GOODS of such REPORTABLE PRODUCT. Applicable Royalty Rate LICENSED PRODUCT (in %) PUBLIC TERMINALS [*] PUBLIC TERMINAL COMPONENTS (not part of a substantially complete PUBLIC TERMINAL) [*] (b) In part payment for the grant of rights hereunder by LUCENT to ELCOTEL, ELCOTEL shall pay to LUCENT on the Closing Date, the sum of six hundred thousand United States dollars (U.S.$600,000.00). Such payment shall not be creditable with respect to any other royalties payable pursuant to this agreement nor shall such sum or any portion thereof be refunded to ELCOTEL. 2.02 Reductions (a) The amount of royalty calculated in accordance with Section 2.01(a) on account of patents in any one country for a specific LICENSED PRODUCT may be reduced by subtracting from such amount the product of such amount and a royalty reduction factor. Such royalty reduction factor is the product of the individual royalty reduction percentages for all patents of such country on account of which the LICENSED PRODUCT is a REPORTABLE PRODUCT. The royalty reduction percentage for each of LUCENT's PATENTS shall be twenty percent (20%) for each LICENSED PRODUCT effective as of the date of issuance of such patent. Upon written request from ELCOTEL identifying a LICENSED PRODUCT and any relevant patent, LUCENT will inform ELCOTEL of the royalty reduction 3 percentage applicable in respect of said LICENSED PRODUCT for such patent and the effective date thereof. (b) If any LICENSED PRODUCT is a REPORTABLE PRODUCT on account of patents of more than one country, the royalty for such LICENSED PRODUCT shall be the highest one of the royalties due thereon on account of the patents of each such country calculated separately (taking into account any reduction afforded by Section 2.02(a)). - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 4 2.03 Accrual (a) Royalty shall accrue on any LICENSED PRODUCT upon its first becoming a REPORTABLE PRODUCT during the BASE PERIOD and shall become payable upon the first sale, lease or putting into use of such REPORTABLE PRODUCT. (Rebuilding or enlarging any product shall be deemed to be a first putting into use of such product). Obligations to pay accrued royalties shall survive termination of the BASE PERIOD, licenses and rights pursuant to Article III and the expiration of any patent. (b) When a company ceases to be a SUBSIDIARY of ELCOTEL, royalties which have accrued with respect to any products of such company, but which have not been paid, shall become payable with ELCOTEL's next scheduled royalty payment. (c) Notwithstanding any other provisions hereunder, royalty shall accrue and be payable only to the extent that enforcement of ELCOTEL's obligation to pay such royalty would not be prohibited by applicable law. 2.04 Exclusions A LICENSED PRODUCT, which is a REPORTABLE PRODUCT on account of one or more of LUCENT's PATENTS, may be treated by ELCOTEL as not licensed and not subject to any royalty hereunder with respect to ELCOTEL'S manufacture, having made, use, sale or importation of such LICENSED PRODUCT, if the seller of the licensed product to ELCOTEL, or the purchaser of the LICENSED PRODUCT from ELCOTEL, is licensed under the same one or more of LUCENT'S PATENTS to manufacture, have made, use, sell, or import the LICENSED PRODUCT, and the seller or purchaser exercises its own license under such one or more patents by written notice to ELCOTEL at or prior to the time of, or within a reasonable time thereafter, such manufacture, having made, use, sale or importation of the LICENSED PRODUCT. 2.05 Records and Adjustments (a) ELCOTEL shall keep full, clear and accurate records with respect to all REPORTABLE PRODUCTS and shall furnish any information which LUCENT may reasonably prescribe from time to time to enable LUCENT to ascertain the proper royalty due hereunder on account of such products sold, leased and put into use by ELCOTEL or any of its SUBSIDIARIES. ELCOTEL shall retain such records with respect to each REPORTABLE PRODUCT for at least seven (7) years from the sale, lease or putting into use of such REPORTABLE PRODUCT on which a royalty may be due. LUCENT shall have the right through its accredited auditors, at its expense, to make an examination, during normal business hours and in a reasonable manner, not 5 more frequently than annually of all records and accounts bearing upon the amount of royalty payable to it hereunder. Prompt adjustment shall be made to compensate for any errors or omissions disclosed by such examination. (b) Independent of any such examination, LUCENT will credit to ELCOTEL the amount of any overpayment of royalties made in error which is identified and explained in a written notice to LUCENT delivered within eighteen (18) months after the due date of the payment which included such alleged overpayment, provided that LUCENT is able to verify, to its own satisfaction, the existence and extent of the overpayment. (c) No refund, credit or other adjustment of royalty payments shall be made by LUCENT except as provided in this Section 2.05. Rights conferred by this Section 2.05 shall not be affected by any statement appearing on any check or other document, except to the extent that any such right is expressly waived or surrendered by a party having such right and signing such statement. 2.06 Reports and Payments (a) Within sixty (60) days after the end of each semiannual period ending on June 30th or December 31st, commencing with the semiannual period during which this agreement first becomes effective and terminating when all accrued royalties have been paid, ELCOTEL shall furnish to LUCENT at the address specified in Section 4.03 a statement certified by a responsible official of ELCOTEL showing in a manner reasonably acceptable to LUCENT: (i) all REPORTABLE PRODUCTS which were sold, leased or put into use during such semiannual period; (ii) the FAIR MARKET VALUES of such REPORTABLE PRODUCTS; (iii) the amount of royalty payable thereon; and (iv) all reductions of royalty and all exclusions from royalty pursuant to Sections 2.02 and 2.04. If no REPORTABLE PRODUCT has been so sold, leased or put into use, the statement shall show that fact. (b) Within such sixty (60) days ELCOTEL shall pay in United States dollars to LUCENT at the address specified in Section 4.03 the royalties payable in accordance with such statement. Any conversion to United States dollars shall be at the prevailing rate for bank cable transfers as quoted for the last day of such semiannual period by leading United States banks in New York City dealing in the foreign exchange market. 6 (c) Overdue payments hereunder shall be subject to a late payment charge calculated at an annual rate of three percentage points (3%) over the prime rate or successive prime rates (as posted in New York City) during delinquency. If the amount of such late payment charge exceeds the maximum permitted by law, such charge shall be reduced to such maximum. ARTICLE III TERMINATION 3.01 Breach If ELCOTEL defaults in any material respect in its obligations under this Agreement, the Technology Transfer Agreement or Section 5.3(b) of the Purchase and Sale of Assets Agreement, LUCENT may, in addition to any other remedies that it may have, at any time terminate all licenses and rights granted by it hereunder by not less than two (2) months' written notice specifying such breach, unless within such two (2) month period such breaches specified therein shall have been remedied. 3.02 Voluntary Termination By written notice to LUCENT, ELCOTEL may voluntarily terminate all or a specified portion of the licenses and rights granted to it hereunder. Such notice shall specify the effective date (not more than six (6) months prior to the giving of said notice) of such termination and shall clearly specify any affected patent, invention or product. 3.03 Survival Any termination of licenses and rights of ELCOTEL under the provisions of this Article III shall not affect ELCOTEL's licenses, rights and obligations with respect to any LICENSED PRODUCT made prior to such termination. ARTICLE IV MISCELLANEOUS PROVISIONS 4.01 Disclaimer (a) Lucent warrants that it has the right to grant the licenses granted hereunder and that the patents and 7 applications specifically enumerated under the definition of Lucent's PATENTS are not subject to the provisions of Section 1.04. (b) Subject to Section 4.01(a), neither LUCENT nor any of its SUBSIDIARIES makes any representations, extends any warranties of any kind, assumes any responsibility or obligations whatever, or confers any right by implication, estoppel or otherwise, other than the licenses and rights herein expressly granted. 4.02 Nonassignability (a) LUCENT has entered into this agreement in contemplation of personal performance by ELCOTEL and it is LUCENT's intention that a transfer of ELCOTEL's licenses or rights shall not occur without LUCENT's express written consent. (b) Neither this agreement nor any licenses or rights hereunder, in whole or in part, shall be assignable or transferable by ELCOTEL (by operation of law or otherwise) without LUCENT's express written consent. (c) Any purported assignment or transfer of this agreement or licenses or rights hereunder by ELCOTEL without LUCENT's necessary consent shall be void (without affecting any other licenses or rights hereunder). 4.03 Addresses (a) Any notice or other communication hereunder shall be sufficiently given to ELCOTEL when sent by certified mail addressed to ELCOTEL's office above specified), or to LUCENT when sent by certified mail addressed to Contract Administrator, Intellectual Property Division, Lucent Technologies Inc., 2333 Ponce de Leon Boulevard - Suite 511, Coral Gables, Florida 33134, United States of America. Changes in such addresses may be specified by written notice. (b) Payments by ELCOTEL shall be made to Lucent Technologies Inc. at Sun Trust, P.O.Box 913021, Orlando, Florida, 32891-3021, United States of America. Alternatively, payments to LUCENT may be made by bank wire transfers to LUCENT's account: Lucent Technologies Licensing, Account No. 910-2-568475, at Chase Manhattan Bank, N.A., 55 Water Street, New York, NY 10041, United States of America. Swift code: CHASUS33; ABA code 021000021. Changes in such address or account may be specified by written notice. 4.04 Taxes (a) ELCOTEL shall pay any tax, duty, levy, customs fee, or similar charge ("taxes"), including interest and penalties thereon, however designated, imposed as a result of the operation or existence of 8 this agreement, including taxes which ELCOTEL is required to withhold or deduct from payments to LUCENT, except (i) income taxes imposed upon LUCENT by any governmental entity within the United States (the fifty (50) states and the District of Columbia), and (ii) income taxes imposed upon LUCENT by jurisdictions outside the United States which are allowed as a credit against the United States Federal income tax of LUCENT. In order for the exception in (ii) to be effective, ELCOTEL must furnish to LUCENT evidence sufficient to satisfy the United States taxing authorities that such taxes have been paid. Such evidence must be furnished to LUCENT within a reasonable period following issuance by the local taxing authority. (b) If ELCOTEL is required to bear a tax pursuant to Section 4.04(a) above, ELCOTEL shall pay such taxes and other charges and any additional amounts as are necessary to ensure that the net amounts received by LUCENT after all such payments or withholdings equal the amounts to which LUCENT is otherwise entitled under this Agreement as if such taxes, or other charges, did not exist. 4.05 Choice of Law The parties are familiar with the principles of New York commercial law, and desire and agree that the law of New York shall apply in any dispute arising with respect to this agreement. 4.06 Integration This Agreement and the Purchase and Sale of Assets Agreement and the Collateral Agreements (as defined therein) set forth the entire agreement and understanding between the parties as to the subject matter hereof and merges all prior discussions between them. Neither of the parties shall be bound by any warranties, understandings or representations with respect to such subject matter other than as expressly provided herein or in a writing signed with or subsequent to execution hereof by an authorized representative of the party to be bound thereby. 4.07 Outside the United States (a) There are countries in which the owner of an invention is entitled to compensation, damages or other monetary award for another's unlicensed manufacture, sale, lease, use or importation involving such invention prior to the date of issuance of a patent for such invention but on or after a certain earlier date, hereinafter referred to as the invention's "protection commencement date" (e.g., the date of publication of allowed claims or the date of publication or "laying open" of the filed patent application). In some instances, other conditions precedent must also be fulfilled (e.g., knowledge or actual notification of the filed patent application). The parties agree that (i) an invention which 9 has a protection commencement date in any such country may be used in such country pursuant to the terms of this agreement on and after any such date, and (ii) all such conditions precedent are deemed satisfied by this agreement. (b) ELCOTEL hereby agrees to register or cause to be registered, to the extent required by applicable law, and without expense to LUCENT or any of its SUBSIDIARIES, any agreements wherein sublicenses are granted by it to its SUBSIDIARIES under LUCENT's PATENTS. ELCOTEL hereby waives any and all claims or defenses, arising by virtue of the absence of such registration, that might otherwise limit or affect its obligations to LUCENT. 4.08 Dispute Resolution (a) If a dispute arises out of or relates to this agreement, or the breach, termination or validity thereof, the parties agree to submit the dispute to a sole mediator selected by the parties or, at any time at the option of a party, to mediation by the American Arbitration Association ("AAA"). If not thus resolved, it shall be referred to a sole arbitrator selected by the parties within thirty (30) days of the mediation, or in the absence of such selection, to AAA arbitration which shall be governed by the United States Arbitration Act. (b) Any award made (i) shall be a bare award limited to a holding for or against a party and affording such remedy as is deemed equitable, just and within the scope of the agreement; (ii) shall be without findings as to issues (including but not limited to patent validity and/or infringement) or a statement of the reasoning on which the award rests; (iii) may in appropriate circumstances (other than patent disputes) include injunctive relief; (iv) shall be made within four (4) months of the appointment of the arbitrator; and (v) may be entered in any court. (c) The requirement for mediation and arbitration shall not be deemed a waiver of any right of termination under this agreement and the arbitrator is not empowered to act or make any award other than based solely on the rights and obligations of the parties prior to any such termination. (d) The arbitrator shall be knowledgeable in the legal and technical aspects of this agreement and shall determine issues of arbitrability but may not limit, expand or otherwise modify the terms of the agreement. (e) The agreement shall be interpreted in accordance with the laws of the State of New York exclusive of its conflict of laws provisions and the place of mediation and arbitration shall be New York City. (f) Each party shall bear its own expenses but those related to the compensation and expenses of the mediator and arbitrator shall be borne equally. 10 (g) A request by a party to a court for interim measures shall not be deemed a waiver of the obligation to mediate and arbitrate. (h) The arbitrator shall not have authority to award punitive or other damages in excess of compensatory damages and each party irrevocably waives any claim thereto. (i) Except as required by law, the parties, their representatives, other participants and the mediator and arbitrator shall hold the existence, content and result of mediation and arbitration in confidence. (j) The parties shall be entitled to exchange in discovery of documents which shall be limited to those documents which are relevant and for which a requesting party has a substantial demonstrable need. 4.09 Except as required by law, the parties agree that the existence and content of this Agreement shall be treated as confidential. 11 IN WITNESS WHEREOF, each of the parties has caused this agreement to be executed in duplicate originals by its duly authorized representatives on the respective dates entered below. LUCENT TECHNOLOGIES INC. By: /s/ M. R. Greene ------------------------- M. R. Greene Vice President - Law Date: 9/30/97 ------------------------- ELCOTEL, INC. By: /s/ Tracey Gray ------------------------- Title: President - C.O.O. ------------------------- Date: 9/30/97 ------------------------- THIS AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY IN ANY MANNER UNLESS DULY EXECUTED BY AUTHORIZED REPRESENTATIVES OF BOTH PARTIES. 12 DEFINITIONS APPENDIX GENERAL DEFINITIONS: BASE PERIOD means for PUBLIC TERMINALS and PUBLIC TERMINAL COMPONENTS ,the two (2) year period commencing on the Effective Date of this Agreement; provided, however, that if in one or more periods of twelve (12) or more consecutive calendar months during such two (2) year period there shall be no sale of at least [ * ] PUBLIC TERMINALS and sale of at least [ * ] dollars ($US [ * ]) of PUBLIC TERMINAL COMPONENTS which are REPORTABLE PRODUCTS, such period(s) of no sales shall not be taken into account in determining the expiration of the BASE PERIOD. COST OF GOODS means for PUBLIC TERMINAL COMPONENTS [*] of the FAIR MARKET VALUE and [*] of the FAIR MARKET VALUE for PUBLIC TERMINALS. FAIR MARKET VALUE means, with respect to any product sold, leased or put into use, the greater of (i) the selling price which a seller would realize from an unaffiliated ELCOTEL in an arm's length sale of an identical product in the same quantity and at the same time and place as such sale, lease or putting into use; or (ii) the selling price actually obtained for such product in the form in which it is sold, whether or not assembled (and without excluding therefrom any components or subassemblies thereof which are included in such selling price). In determining "selling price" the following shall be excluded: (a) usual trade discounts actually allowed to unaffiliated persons or entities; (b) packing costs; (c) costs of insurance and transportation; (d) import, export, excise, sales and value added taxes, and customs duties, and (e) sales returns. LICENSED PRODUCT means any product listed in Section 1.01. LUCENT's PATENTS means all patents required by, used in or directly relating to the GENERAL TECHNOLOGY (as defined in the Technology Transfer Agreement between the parties of even date) issued prior to the effective date hereof in any or all countries of the world - ----------- * The text within the brackets has been omitted and separately filed with the Securities and Exchange Commission pursuant to a Rule 24b-2 request for confidential treatment. 13 (i) which patents are owned or controlled as of the Effective Date hereof by LUCENT or any of its SUBSIDIARIES; or (ii) with respect to which patents LUCENT or any of it SUBSIDIARIES otherwise has, as of the effective date hereof, the right to grant the licenses specified herein. The term also means and includes the following patents: PATENTS 4,124,775 4,182,934 4,224,472 4,277,647 4,284,851 4,323,733 4,361,731 4,518,830 4,567,325 4,590,583 4,625,078 4,674,114 4,726,057 4,782,516 4,794,642 5,007,520 5,027,935 5,043,983 5,046,183 5,088,587 5,222,122 DES. 264,210 DES. 289,284 DES. 289,285 The term also means and includes all patents resulting from the following applications: APPLICATIONS Butts 1-3 Goodrich 6-8 Goodrich 7 14 Goodrich 8 Jackson 6-2-5-11 Wild 9 Wild 10 REPORTABLE PRODUCT means any LICENSED PRODUCT, the manufacture, importation, sale, lease or use of which by ELCOTEL, any of its SUBSIDIARIES or customers of either (other than customers exercising their own licenses for such LICENSED PRODUCT under all applicable ones of LUCENT's PATENTS) would, but for licenses or rights under this agreement, constitute (i) infringement of LUCENT's PATENTS by ELCOTEL, such SUBSIDIARY or such customer or (ii) any other violation of applicable law by ELCOTEL, such SUBSIDIARY or such customer for which LUCENT or any of its SUBSIDIARIES would be entitled to compensation or other remedy on account of one or more of such patents. SUBSIDIARY of a company means a corporation or other legal entity (i) the majority of whose shares or other securities entitled to vote for election of directors (or other managing authority) is now or hereafter controlled by such company either directly or indirectly; or (ii) which does not have outstanding shares or securities but the majority of whose ownership interest representing the right to manage such corporation or other legal entity is now or hereafter owned and controlled by such company either directly or indirectly; but any such corporation or other legal entity shall be deemed to be a SUBSIDIARY of such company only as long as such control or ownership and control exists. TECHNICAL DEFINITIONS: PUBLIC TERMINAL means a telephone station unit in a publicly accessible location for performing the functions of (i) producing electrical signals representative of voice and data signals or (ii) producing voice and data signals representative of electrical signals or (iii) performing any combination of the functions (i) and (ii). PUBLIC TERMINAL COMPONENT means any part, component or subassembly of a PUBLIC TERMINAL. 15 EX-99.1 5 PRESS RELEASE OF ELCOTEL, INC. EXHIBIT 99.1 FOR IMMEDIATE RELEASE October 2, 1997 Contact: Tracey L. Gray Delitha Morrow Coles Frank Petras President & COO Lucent Technologies Investor Relations Elcotel, Inc. (908)-559-6421 SM Berger & Co. (941) 758-0389 (216) 464-6400 Elcotel Acquires Lucent Technologies Public Terminal Assets - ----------------------------------------------------------- Sarasota, Florida -October 2, 1997 - Elcotel, Inc., (Nasdaq:ECTL) today announced that it has acquired certain assets of the public terminal (payphone) business of Lucent Technologies, Inc. (NYSE:LU). The asset acquisition by Elcotel involves the tooling, inventory, and license rights to manufacture, market, and distribute the payphone products for public regulated telephone companies and private operators worldwide. Elcotel has been granted licenses for the patents and technology developed by Lucent Technologies and Bell Laboratories for such payphones. "The acquisition of the Lucent public terminal assets and inventory permits Elcotel to continue with the market development previously initiated by Lucent and Elcotel," said Tracey L. Gray, Elcotel's President and Chief Operating Officer. "We can now provide domestic and international customers for these products with a continuing supply and on-going support from Elcotel." "This acquisition also has a complementary fit with the recently announced merger with TSG (Technology Service Group, Inc.), as both TSG and Lucent are major suppliers to the domestic regulated telephone companies for replacement components and upgrades to the large installed base of payphones in this country," Mr. Gray continued. "There will be a need to supply replacement and reconditioned units to the telephone companies for a number of years. This addition to our company's technology base and to our ability to control manufacturing costs assures us of a strong position in the regulated markets while complementing our business in the private payphone markets. It also enhances our ability to direct the evolution of our basic payphone technology for international applications." "Today's announcement reflects our efforts to focus resources on our core businesses and to expand our efforts in new growth areas, such as software, wireless, data and optical networking," said Bob Van Saun, Lucent Technologies Special Customer Operations Vice President. "We will continue to work with Elcotel during this important transition." 1 Elcotel will absorb the Lucent public terminal business within its current operating structure, assuring customers that they will continue to receive the high quality of service they have come to expect. "We estimate the annual revenues from this acquisition will be in excess of $12 million," Mr. Gray added. "We expect the additional revenues from this acquisition to grow as we expand our international programs and domestic business with the regulated telephone companies through the TSG merger, making Elcotel the largest independent domestic supplier of payphones. Since many of the components utilized by TSG in its refurbishing and replacement business are the same design as the Lucent components, we expect to realize cost savings and overall inventory reductions." Lucent employees who were involved in the payphone business will be transferred to other parts of Lucent's core businesses. For the fiscal year that ended March 30, 1997, Elcotel reported net income of $1.6 million, or $0.20 per share, on revenues of $26.8 million. Lucent Technologies designs, builds and delivers a wide range of public and private networks, communications systems and software, consumer and business telephone systems and microelectronics components. Bell Laboratories is the research and development arm for the company. Elcotel, Inc., based in Sarasota, Florida, designs, develops, manufactures, and markets reliable microprocessor-based public communication products and software that provide service over both domestic and international wireline and wireless telephone networks. Elcotel is the leader in sales of microprocessor-based payphone products to domestic private payphone operators. ===================================================================== Statements contained in this release that are not historical facts may contain forward-looking information with respect to the company's plans, projections, or future performance, which involve certain risks and uncertainties that could cause the company's actual results to differ materially from those expected by the company. These risks and uncertainties include the risk of adverse regulatory action affecting the company's business or the business of the company's customers, the risk of competition, the risk of obsolescence of the company's products, and other uncertainties detailed in the company's filings with the Securities and Exchange Commission. ===================================================================== -----END PRIVACY-ENHANCED MESSAGE-----